JASDAQ Tokyo Stock Exchange · Introduction - 1 - Introduction JASDAQ, which took over the over-the-counter registration system launched by the Japan Securities Dealers Association

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JASDAQ

New Listing GuidebookTokyo Stock Exchange

Table of ContentsIntroduction

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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 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································································· 12

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

(3) Listing Application ··············································································· 15

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

(5) After TSE’s Listing Approval ·································································· 21

(6) Follow-ups after Listing ········································································ 22

II Formal Requirements (relating to Rule 216-3 and Rule 216-6 of the Regulations)···26

Criteria for JASDAQ Standard ············································································· 29

1. Share Distribution ······················································································· 29

2. Market Capitalization of Tradable Shares ························································· 34

3. Net Asset Value ························································································· 40

4. Profits or Market Capitalization ······································································ 42

5. False Statement or Adverse Opinion and Audit by a Listed Company Audit Firm ········ 45

6. Establishment of a Shareholder Services Agent ················································· 49

7. Share Unit and Classes of Stock ···································································· 50

8. Restrictions on Transfer of Shares ·································································· 53

9. Handling by the Designated Book-Entry Transfer Institution ·································· 54

Criteria for JASDAQ Growth················································································ 55

III Listing Examination (relating to Rule 216-5 and Rule 216-8 of the Regulations) ·····56

1. Business Continuity and Prospects for Corporate Growth (Rule 216-5, 1 (1) of the

Regulations, Rule 216-8, 1 (1) of the Regulations) ·············································· 65

2. Establishment of Sound Corporate Governance and Internal Management System

Corresponding to Stage of Growth (Rule 216-5, 1 (2), Rule 216-8, 1 (2) of the

Regulations) ······························································································ 79


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3. Reliability of Corporate Actions (Rule 216-5, 1 (3) of the Regulations, Rule 216-8,1 (3)

of the Regulations) ······················································································ 93

4. Appropriateness of Disclosure of Corporate Details, etc. (Rule 216-5, 1 (4) of the

Regulations, Rule 216-8, 1 (4) of the Regulations) ············································ 120

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

Interest or Investor Protection (Rule 216-5, 1 (5) of the Regulations, Rule 216-8, 1 (5) of

the Regulations) ······················································································· 140

IV Checklists Before Applying for Listing on JASDAQ··········································· 170

JASDAQ Standard ·························································································· 170

1. Has the Business Plan been Reasonably Developed in Consideration of Future

Business Developments? ··········································································· 170

2. Have Business Management Organizations Effectively Functioned?····················· 172

(1) Board of Directors ············································································· 172

(2) Company Auditors ············································································ 173

(3) Independent Directors / Auditors ·························································· 173

(4) Accounting Advisors ·········································································· 174

(5) Internal Audits ·················································································· 174

(6) Internal Managements and Regulations ················································· 175

(7) Operating Results Management ··························································· 176

(8) Other Considerations for the Management·············································· 176

3. Have you Prepared Yourself for Timely and Appropriate Disclosures of Corporate

Information? ···························································································· 177

(1) Internal Systems··············································································· 177

(2) Disclosure Documents ······································································· 178

(3) Disclosure of Operating Results ··························································· 179

(4) Accounting Processing······································································· 179

(5) Change of Business Year (Accounting Period and Balance Sheet Date) ········ 180

(6) Management of Company Information ··················································· 180

4. Has not the Soundness of Corporate Management been Impaired due to Transactions

with Company Related Parties, etc.? ····························································· 181

5. Have You Properly Addressed Other Considerations in Filing a Listing Application? · 183

(1) Parent Company, etc. ········································································ 183

(2) Other ····························································································· 184

6. Have You Completed Necessary Preparations for Interviews with JPXR or Answers to

Questions Made by JPXR in Writing? ···························································· 185

(1) Reasons Why the Applicant Decided to List its Stock································· 185

(2) Business Lines················································································· 185

(3) Status and Conditions of the Industry where the Applicant Operates ············· 185

(4) Growth Plan Going Forward ································································ 186

(5) Details of the Business Lines ······························································· 186

(6) Business Plan ·················································································· 186

(7) Use of Proceeds from Public Offering at Listing ······································· 187


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(8) Announcement of Future Forecast Information such as Prospectus for Operating

results for the Period in which the Listing Applicant is Filed ························ 187

(9) Design and Implementation of Management Control System and Internal Audit

System ·························································································· 187

(10) Design and Implementation of Timely Disclosure System, etc.····················· 188

(11) Relationship with Parent Company, etc., and Status of Corporate Group········ 188

(12) Transactions, etc. with Related Parties, etc. ············································ 189

(13) Legal Actions, Disputes and Violation of Laws and Regulations ··················· 189

(14) Other ····························································································· 190

JASDAQ Growth ···························································································· 191

1. Has the Business Plan been Reasonably Developed in Consideration of Future

Business Developments? ··········································································· 191

2. Have Management Control Organizations Effectively Functioned? ······················· 192

(1) Board of Directors ············································································· 192

(2) Company Auditors ············································································ 193

(3) Independent Directors/Auditors ···························································· 193

(4) Accounting Advisors ·········································································· 194

(5) Internal Audits ·················································································· 194

(6) Internal Managements and Regulations ················································· 195

(7) Operating Results Management ··························································· 196

(8) Other Considerations for the Management·············································· 196

3. Have you Prepared Yourself for Timely and Appropriate Disclosures of Corporate

Information? ···························································································· 197

(1) Internal Systems··············································································· 197

(2) Disclosure Documents ······································································· 200

(3) Disclosure of Operating Results ··························································· 201

(4) Accounting Processing······································································· 201

(5) Change of Business Year (Accounting Period and Balance Sheet Date) ········ 202

(6) Management of Company Information ··················································· 202

4. Has not the Soundness of Corporate Management been Impaired due to Transactions

with Company Related Parties, etc.? ····························································· 203

5. Have You Properly Addressed Other Considerations in Filing a Listing Application? · 202

(1) Parent Company, etc. ········································································ 202

(2) Other ····························································································· 203

6. Have You Completed Necessary Preparations for Interviews with JPXR or Answers to

Questions Made by JPXR in Writing? ···························································· 204

(1) Reasons why the Applicant Decided to List its Stock ································· 204

(2) Business Lines················································································· 205

(3) Status and Conditions of the Industry where the Applicant Operates ············· 205

(4) Business Plan which Demonstrates Growth Potential ································ 206

(5) Details of the Business Lines ······························································· 206

(6) Business Plan ·················································································· 206


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(7) Use of Proceeds from Public Offering at Listing ······································· 207

(8) Announcement of Future Forecast Information such as Prospectus for Operating

Results for the Period in which the Listing Applicant is Filed ······················· 207

(9) Design and Implementation of Management Control System and Internal Audit

System ·························································································· 207

(10) Design and Implementation of Timely Disclosure System, etc.····················· 208

(11) Relationship with Parent Company, etc., and Status of Corporate Group········ 208

(12) Transactions, etc. with Related Parties, etc. ············································ 209

(13) Legal Actions, Disputes and Violation of Laws and Regulations ··················· 209

(14) Other ····························································································· 209

V Listing Examination Q&A ··············································································· 210

1. Relating to “Corporate Continuity of Domestic Companies” Listed on JASDAQ Standard

············································································································ 210

(1) Items for which Profit Level is Assessed ················································· 210

(2) Confirmation of Progress of Performance during the Period Pertaining to the

Listing Application ·············································································211

(3) Application of “Accounting Standards for Accounting Changes and Correction of

Errors”····························································································211

2. Relating to Checklists Before Applying for Listing on JASDAQ ···························· 213

(1) Business Plan (Checklists No.1)··························································· 213

(2) Board of Directors (Checklists No. 2(1) ) ················································ 214

(3) Company Auditors (Checklists No. 2(2) ) ················································ 217

(4) Independent Directors/Auditors (Checklists No. 2 (3) ) ······························· 218

(5) Accounting Advisors (Checklists No. 2 (4) ) ············································· 219

(6) Internal Audits (Checklists No. 2 (5) )····················································· 219

(7) Internal Managements and Regulations (Checklists No. 2 (6) ) ···················· 220

(8) Operating Results Management (Checklists No. 2 (7) ) ······························ 221

(9) Other Considerations for the Management (Checklists No. 2 (8) ) ················ 222

(10) Internal Systems (Checklists No. 3 (1) ) ················································· 224

(11) Disclosure of Operating Results (Checklists No. 3 (2) ) ······························ 225

(12) Disclosure of Operating Results (Checklists No. 3 (3) ) ······························ 225

(13) Change of Business Year (Accounting Period and Balance Sheet Date)

(Checklists No. 3 (5) )12） ································································· 229

(14) Transactions with Company Related Parties, etc. (Checklists No. 4) ············· 231

(15) Parent Company, etc. (Checklists No. 5 (1)) ············································ 237

(16) Change in shareholders before the listing ··············································· 237

(17) Examination of Business Plan (Checklists No. 6 (6) ) ································ 239

(18) Other ····························································································· 241

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

Stocks Through Third Party Allotment ····························································· 243

1. Receipt or Transfer of Shares, etc. before Listing ············································· 244

(1) Descriptions Concerning the Status of Changes in Shares before Listing ······· 244


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

Listing ··························································································· 245

2. Allotment of Offered Stocks by Third Party Allotment, etc. Before Listing ················ 246

(1) Regulations on Allotment of Offered Stocks by Third-Party Allotment, etc. ······ 246

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

Party Allotment, etc.·········································································· 255

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

···································································································· 258

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

Allotment ······················································································· 264

VII Public Offering or Secondary Offering before Listing ······································· 266

(1) Submission of Scheduled Plan for Public Offering or Secondary Offering ······· 266

(2) Procedures for Public Offering, etc. Before Listing ···································· 266

(3) Determination of Offering Price ···························································· 267

(4) Allocation Pertaining to Public Offering, etc. Before Listing ························· 269

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

···································································································· 270

(6) Other ····························································································· 271

VIII Handling of Corporate Reorganization Event················································· 273

a. Handling of corporate reorganization for the purpose of examination ······················· 274

1. Merger ··································································································· 274

2. Becoming a Holding Company····································································· 276

3. Stock Swap ····························································································· 278

4. Company Split-up, Receipt of Business ························································· 280

b. Documents required to be submitted when a significant effect is given ····················· 283

IX Listing Fees ································································································ 286

1. Listing Examination Fees ··········································································· 286

2. Initial Listing Fees····················································································· 287

3. Fees to be Paid by Listed Companies ··························································· 288

(1) Annual Fees for Maintaining Listing······················································· 288

(2) Fees for Listing of Shares of New Stock ················································· 291

(3) Fees for Merger, etc. ········································································· 292

X IPO Center (Support Given to Prospective Issuers) ·········································· 293

1. Assistance Activities through Visits to Individual Companies and Consultation········· 293

2. Seminars for Prospective Issuers ································································· 293

3. Mail Magazine ························································································· 293

A Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks) ······ 294

1. List of Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks)··· 294

(1) Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks)···· 294

(2) Securities Report for Initial Listing························································· 319

(3) JASDAQ Listing Application Report ······················································· 321

2. Guide to Completing the “JASDAQ Listing Application Report” ···························· 322

Introduction

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Introduction

JASDAQ, which took over the over-the-counter registration system launched by the Japan

Securities Dealers Association (JSDA) in 1963, was turned into a market operated by Osaka

Securities Exchange (OSE) under the brand of OSE JASDAQ, when the Nippon New Market

“Herclues” operated by OSE and “JASDAQ” and “NEO” operated by JASDAQ were

consolidated in October 2010. On July 16, 2013, then, Tokyo Stock Exchange and Osaka

Securities Exchange conducted a business combination and Tokyo Stock Exchange took over

the operation of JASDAQ from OSE and the market was newly emerged as “TSE JASDAQ.”

A company can benefit from listing its stock on TSE JASDAQ as it can gain access to smooth

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

hand, listing of stock 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 criteria for listing of its stock from the perspective of investors’ protection, and will

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

examination.

Any company which considers listing its stock on TSE JASDAQ 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 stock on TSE

JASDAQ 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 the listing of your shares on TSE JASDAQ. If any

regulations and rules are revised after this booklet is issued, we will update the “Guidelines for

Listing on TSE JASDAQ” with comparison table between previous and revised regulations on

our website (http://www.jpx.co.jp/equities/listing-on-tse/new/guide/02.html).

October 2019

Tokyo Stock Exchange, Inc.

Legend

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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. 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

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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 JASDAQ, your company will have a direct access to financing and capital

increase by issuing shares of stock at a market price through publicly offered stock or issuing

subscription warrants, corporate bonds with subscription warrants, etc. Our highly liquid market

can offer more efficient and diverse fund-raising capacity for your company to develop and grow

further.

(2) Enhance Corporate Value

A company can enhance its social recognition and establish its status as a company with future

growth potential by becoming a listed company. Coverage by media, including market news of

newspapers, will allow your company to enhance its corporate reputation in Japan. The

company will also be able to retain and attract excellent human resources as well.

(3) Improve its Internal Management System and Enhance 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 control. Becoming a public company

will also help boost the morale of the officers and employees of the company.

Please keep in mind that since securities 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 information 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

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(2) Composition of Market

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

TOKYO PRO Market.

1) First Section and Second Section

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

second tier Japanese and foreign companies are listed. Especially the First Section is viewed

as one of the top rank markets in terms of the size and liquidity, as foreign investors account for

a large portion of equity trading. The First and Second Sections are collectively referred to as

the “Main Markets.”

2) Mothers

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

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

potential. Whether an applicant has growth potential or not shall be assessed and determined

by lead underwriters on the basis of its business model or business environment. As the

objective of Mothers is to offer financing opportunities for many companies with growth potential,

Mothers has no restrictions on the size or business category of applicants. After successfully

listing their stock on Mothers, many have satisfied the criteria for reassignment 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 “Guidebook for Initial Listing on First and Section Second” for listing on the

First and Second Sections and the “Guidebook for Initial Listing on Mothers” for initial listing

on Mothers.

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

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Ⅰ About Listing

- 7 -

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

information of the applicant to determine whether the securities company can perform the

required listing procedures and underwrite the public offering or secondary offering

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

offering or 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 relations or IR

activities.

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

procedures are called “underwriters” (If the securities company is a TSE 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 applicant’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 control.

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 I)

“hereinafter referred to as “Part I” documents) as prescribed in the Financial Instruments and

Exchange Act.

Ⅰ About Listing

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(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 services agent or to receive preliminary consent to the

acceptance of services provided to shareholders from a shareholder services agent by the date

when the listing application is filed (please refer to section 6 “Establishment of a Shareholder

Services Agent” at II Formal Requirements.

Ⅰ About Listing

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4. Steps to be Taken Before Listing

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

The following outlines the steps to be taken at each stage from the application to approval of

listing.

[Model schedule from listing application entry to listing approval]

<First part>

Ⅰ About Listing

- 10 -

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 Third presentation of questions

Receipt of answers to the second questions

Interview

Physical inspection

Preliminary review related to listing

application

Second presentation of questions

Listing application entry

Holiday

Receipt of answers to the first questions

Interview

First presentation of questions

Month X One month after month X

Listing application, Receipt of “Part I”

documents and JQ Report

Interview, Schedule coordination

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Ap

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ate

ly

two

we

eks

On

e w

ee

k

Ⅰ About Listing

- 11 -

<Second part>

1 Sat

2 Sun

3 Mon

4 Tue

5 Wed

6 Thu

7 Fri

8 Sat

9 Sun

10 Mon

11 Tue

12 Wed

13 Thu

14 Fri

15 Sat

16 Sun

17 Mon

18 Tue

19 Wed

20 Thu

21 Fri

22 Sat

23 Sun

24 Mon

25 Tue

26 Wed

27 Thu

28 Fri

29 Sat

30 Sun

Listing approval

Presentation by president

Acceptance of sponsor's letter of

recommendation

Holiday

Interview with CPAs (Note 1)

Meeting with president

Meeting with statutory auditors

Receipt of answers to the third questions

Interview

Two months after month X

At

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sin

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ays i

nte

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t th

ree

bu

sin

ess d

ays i

nte

rva

l

Note: 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 its 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.

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 1).

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 2).

Note 1: 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 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 2: 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 forces, and (3) listing schedule, JPXR will accept the application for listing on

JASDAQ. 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) JASDAQ (“Standard” and “Growth”)

JPXR will confirm which market an applicant intends to list its stock on, Standard or Growth.

In practice JASDAQ Standard is suitable for companies with a certain size and business

performance, which are expected to further expand its business, while JASDAQ Growth is for

companies with stronger future growth potential and unique technologies or business models.

2) Report related to the contents of instructions on going public and underwriting examination

The lead underwriter reviews any matters considered during the process of instructions on

going public or underwriting examination carried out by the lead underwriter 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 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 treatment, existence of material breach of laws and regulations)

on the basis of the descriptions included in this report.

JPXR may request the lead underwriter 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).

3) Ties with anti-social forces

In evaluating any ties with any anti-social forces, JPXR will review the following points on the

basis of the “Sponsor’s Letter of Confirmation,” as attached (draft permissible) including the

descriptions of items to be investigated and the method of investigations, and the “Draft of

Declaration of No Association with Anti-Social Forces” to the effect that the applicant has no ties

with any anti-social forces (attached separately).

Ⅰ About Listing

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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)

4) Review of listing schedule

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

propose the examination schedule from the listing application to listing approval.

The lead underwriter is encouraged to appropriately develop and coordinate a schedule which

will not lead to any irrational schedule in consideration of the routine and ordinary business of

the applicant.

Note 1: The two month period is usually defined 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 subject to the examination may change. In

addition, the standard examination period has been determined under the assumption

that no specific issues would be identified in the due course of examination. If any

issues or problems are identified during the examination process or any fact which

was not known is revealed by some news or information provided by external media,

the examination period may be extended.

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 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

Ⅰ About Listing

- 15 -

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: Should you have any questions or uncertainty concerning examination schedule,

including cases of Notes 1 and 2 above, please contact JPXR via your lead

underwriter following the consultation with it.

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

pages in “JASDAQ Listing Application Report responding to the questions made at the time of

acceptance of application before interviews at the time of listing application. In practice, the lead

underwriter will submit such draft.

(3) Listing Application

At the meeting for the purpose of listing application, JPXR will accept the 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 application, lines of businesses,

business environment, and business model. For actual questions, please refer to “Questions at

Interview (at the time of Listing Application)” at section 6 of IV Checklists Before Applying for

Listing on JASDAQ.

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

for the previous year. Presidents (CEO), 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.

[Questions Concerning Listing Application]

Q1: Consistent with the application for listing on the First and Second Sections, and Mothers,

can we make listing application before the accounts for the immediate preceding year

are finalized and settled as the general meeting of shareholders completes?

A1: You may file the application before the accounts for the previous year are finalized and

settled (hereinafter referred to as “Preliminary Application”). However, as “Part I”

documents will be made available for the public inspection when TSE approves the listing

and publicly announces the approval thereof and they include the presentation of financial

statements for the previous year, the approval of listing (and public announcement) by

TSE will be after the completion of general meeting of shareholders where financial

statements are finalized and fair opinion on the financial statements is expressed by the

Ⅰ About Listing

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relevant audit firm in the audit report.

In case of listing on JASDAQ, JPXR will carry out the examination on the basis of “Part I”

documents and “JASDAQ Listing Application Report.” So if you file a Preliminary

Application, the examination will be made based on the documents submitted for the

Preliminary Application (Preliminary Security Listing Application Form for Securities

Listing, and draft documents commonly required for the listing application).

When you file a Preliminary Application, you will be required to reapply for the listing when

all the documents necessary for listing application (financial statements authorized at the

general meeting of shareholders, Part I documents with audit report attached, and so on)

are prepared.

Ⅰ About Listing

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Q2: What is the timing of filing an application for listing on JASDAQ?

A2: JPXR requests an applicant to file an application for listing so that the listing would be

made within application year, consistent with the First and Second Sections, and Mothers.

However an expected application may be made when the end of the business year

approaches due to the underwriter’s examination of revenue trend.

Therefore, if in light of JASDAQ concepts, the applicant may determine the listing

schedule which may allow the listing date to be before the completion of general meeting

of shareholders by considering the following, JPXR may accept the listing application.

1) Listing application does not straddle the end of business year (the listing application is

made within the year described in the listing application);

2) Accounts information for application year is additionally included in Part I documents;

and

3) Movements of monthly operating results assure that the applicant will not meet any

delisting criteria in the business year following the application year.

In the meantime, in the event that the listing proves not to be made at latest by the date

preceding the general meeting of shareholders, the applicant is required to make the

reapplication for listing.

Ⅰ About Listing

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(4) Listing Examination

Actual listing examination will be implemented as follows:

a. Interviews

The examiners will assess the degree of satisfaction of requirements of the standards for listing

examination (II Formal Requirements (those relating to Rule 216, 3 of Regulations or Rule 216,

6 of Regulations) on the basis of the documents submitted at the time of listing application.

Then the examiners will conduct interviews mainly based on “Part I” documents or “JASDAQ

Listing Application Report” in order to examine the contents described in “III Listing Examination

(relating to Rule 216-5 and Rule 216-8 of the Regulations).”

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

When an applicant possesses factories or other facilities, the examiners actually visit on-site to

more thoroughly understand the substance of the applicant.

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 reasons for entering into audit engagement, degree of

communication with management, company auditors and so on, status of design and

implementation of internal management systems, as well as accounting and disclosure systems.

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

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

Ⅰ About Listing

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e. Meeting with the president (CEO),the company auditors and independent

directors/auditors

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 a manager have for 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 directors/auditors, 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

directors/auditors 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 three business day interval will be provided between the interview (final round) and the

meetings with the president,company auditors and independent directors/auditors.

f. Presentation by the president

Ⅰ About Listing

- 20 -

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. As issues to be considered and requested to

address may include those related to disclosure system, etc., JPXR will request the chief

information officer (*) of applicant to attend the presentation.

* Listed companies are required to select and appoint the chief information officers from

directors, executives or those in similar capacity and register them with TSE.

The chief information officer shall be responsible for reports in response to inquiries by TSE

and other communication in relation to the disclosure of corporate information. In practice, the

chief information officer will be the person TSE will communicate with and also be responsible

for internal management and disclosures of material information.

f. Internal discussions in TSE

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 necessary procedures are implemented, TSE will inform the applicant of TSE’s approval

and explain the subsequent procedures to be followed.

Ⅰ About Listing

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(5) After TSE’s Listing Approval

a. Announcements to the media, etc.

TSE will announce the approval of listing of the applicant to the press and other media. If any

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

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

on another financial instruments 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

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 officers

responsible for the information management and those responsible for communications with

TSE in relation to timely disclosure, etc. following listing and explain various procedures in

terms of timely disclosures and earnings announcements.

In order to prevent any insider trading, the 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). Alisting ceremony will also be held where TSE will present

the company with a memorial token of listing.

Ⅰ About Listing

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(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 (three years in case of Growth Market). 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 TSE to be addressed during the process of listing 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 medium-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.

Ⅰ About Listing

- 23 -

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 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]

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

Holiday

Meeting of the Board of Directors to

determine provisional terms and

conditions (payment amounts for the

purpose of the Companies Act)

Filing of (Primary) Amended Registration

Statement (filing with the Financial

Services Agency by the applicant)

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)

Pre

-ma

rke

tin

g p

eri

od

(9 b

usin

ess d

ays)

15

da

ys o

r o

ve

r

Bo

ok

bu

ild

ing

pe

rio

d

(5 b

usin

ess d

ays)

Su

bscri

pti

on

pe

rio

d

(4 b

usin

ess d

ays)

Ⅰ About Listing

- 25 -

Note: The above 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.

II Formal Requirements (relating to Rule 216-3 and Rule 216-6 of the Regulations)

- 26 -

II Formal Requirements (relating to Rule 216-3 and

Rule 216-6 of the Regulations)

Since JASDAQ Market is composed of JASDAQ Standard and JASDAQ Growth and each has

different concepts, each has different formal requirements.

JPXR will assess the degree of satisfaction of these requirements on the basis of materials

submitted by an applicant at the time of listing application.

When an applicant files an application for listing on JASDAQ Standard, the applicant is required

to meet the formal requirements specified in Rule 216-3 of the Regulations, while for listing on

JASDAQ Growth, the applicant is required to meet those specified in Rule 216-6 of the

Regulations.

List of Formal Requirements

Item Requirements

Standard Growth

1) Share distribution

a. During the period from the initial application day to the day

preceding the listing day, a public offering or secondary offering

shall be conducted for at least the higher of either 1,000 units or

10% of the number of listed shares, etc. expected at the time of

listing.

b. The number of shareholders is expected to reach at least 200 by

the time of listing.

2) Market capitalization of

tradable shares

(by the time of listing)

At least ¥500 million (in principle, the value derived by multiplying

expected price for public offering related to initial listing by the number

of tradable shares by the time of listing)

3) Net Asset Value

(expected at the time of

listing)

The net asset value is expected

to reach at least ¥200 million by


Net asset value is expected to be

positive on the day of listing.

4) Profits or Market

Capitalization

(for the amount of profit,

consolidated ordinary

income and for market

capitalization, the value

by the time of listing)

a. Profits during the most recent

year are at least ¥100 million.

b. Market capitalization is

expected to reach ¥5 billion by


There are no such requirements

for JASDAQ Growth.

5) False statement or a. The audit report attached to a "Securities Report for Initial Listing


- 27 -

adverse opinion, etc.

and audit by a listed

company audit firm

Application" (excluding an audit report attached to financial

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

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

a "qualified opinion with exceptions" of certified public accountants,

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

where the Enforcement Rules specify otherwise;

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

Application" (limited to the audit opinion attached to financial

statements, etc. for the business year and consolidated accounting

year which ended during the last year) shall contain an "unqualified

opinion" or an“opinion to the effect that interim financial statements,

etc. present useful information,”or “unqualified conclusion.”

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

containing or making reference to financial statements, etc., interim

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

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

quarterly review report.

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) or (b) below:

(a) The internal control report for the business year which ended

during the last year contains the statement that “assessment

results will be refrained from being expressed.”

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

during the last year contains the statement that “no opinion will be

expressed.”

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 Rule

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).


- 28 -

6) 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 (hereinafter referred to as a "shareholder services agent

approved by TSE"), or an informal consent of the 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.

7) 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

8) 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.

9) 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 following elaborates on the requirements of each item under the formal requirements.

For seven requirements common to “JASDAQ Standard” and “JASDAQ Growth,” that is, 1)

Distribution of ownership of shares, 2) Market capitalization of tradable shares, 5) False

statement or adverse opinion, etc. and audit by listed company audit firm , 6) Appointment of a

shareholder services agent, 7) Number of shares comprising one trading unit and classes of

shares, 8) Restriction on transfer of shares and 9) Handling by the designated book-entry

transfer institution, please refer to the requirements of criteria for JASDAQ Standard.


- 29 -

Criteria for JASDAQ Standard

1. Share Distribution

The requirements of criteria are designed to require a certain degree of liquidity with a view to

ensuring the smooth distribution and fair price formation of shares following listing. In practice,

an applicant is required to meet the requirements of both (1) and (2) below.

(1) During the period from the initial application day to the day preceding the listing day, a public

offering or secondary offering shall be conducted for at least the higher of either 1,000 units

or 10% of the number of listed shares, etc. expected at the time of listing. (Notes 1 and 2)

（Rule 216-3 (1) a of the Regulations）

Note 1: The application of this criterion is not required in case of the following:

- The applicant is listed on another financial instruments exchange in Japan.

- A company which succeeds to the business of a listed company, the issuer of stock, etc.

listed on another financial instruments exchange in Japan or the issuer of domestic

stock, etc. listed or continuously traded on a foreign financial instruments exchange,

through a shareholder-oriented spin off, and the company is an applicant who intends

to apply for listing before the shareholder- oriented spin off.

Note 2: Any movements of the number arising from the secondary offering due to overallotment

and any matters related thereto (syndicated covered trading, green shoe option) will not

be taken into consideration.


- 30 -

(2) The number of shareholders is expected to reach at least 200 by the time of listing. (It

represents the number of shareholders holding share unit (Note 1); the same shall apply

hereinafter).

（Rule 216-3 (1) b of the Regulations）

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. The objective of this criterion is to ensure

smooth distribution and fair price formation of shares. 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: When Depository Receipts (DRs) representing the rights, etc. attached to shares are

issued, shareholders who hold DRs representing rights attached to the number of

shares comprising the one trading unit or more can be included in the number of

shareholders.

Note 3: “Record date” represents the record date as prescribed in the Companies Act or

Preferred Equity Contribution Act or the date when a depository institution prescribed in

Rule 2, Paragraph 2 of the Law Concerning Central Securities Depository and

Book-Entry Transfer of Corporate Bonds and Share Certificates (hereinafter referred to

as the “Book-Entry Transfer Law”) (including cases where the Rule applies mutatis

mutandis to Rule 235) issues the notice to all the shareholders in accordance with

Rule 151, Paragraph 1 or Paragraph 8 of the same law.

Note 4: When an applicant does not understand the status of shareholders, etc. as of the record

date, the number of shareholders will be determined based on the conditions of

shareholders as of the last record date when the applicant has understood the status of

shareholders, etc.

When an applicant purchases its own stocks after the last record date under the resolution at

the Board of Directors to authorize the purchaser an applicant resolves at the Board of Directors

to authorize the disposal of its treasury stock, the number of shareholders will be determined in

the following manner.

1) An applicant Purchases its Own Stocks

The number of shareholders reduced as a result of such purchase will be deducted from the

number of shareholders as of the last record date.


- 31 -

<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.

Practically the counting is conducted as follows.

The number of shareholders to be reduced is determined by dividing the number of

acquired treasury shares 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 treasury shares bought back 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). 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.


- 32 -

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

compris

ing 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.

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.


- 33 -

(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 treasury shares are acquired based on a

resolution to acquire treasury shares

+ ) 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


- 34 -

2. Market Capitalization of Tradable Shares

The market capitalization of tradable shares is expected to reach at least ¥ 500 million by the

time of listing.

（Rule 216-3 (2) of the Regulations）

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

etc. and treasury shares 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, 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.

Total value of market capitalization of tradable shares will be determined by the number of

tradable shares, multiplied by the stock price. The following illustrates the calculation method

and prices of the number of tradable shares used for the determination of total value of market

capitalization of tradable shares.

► Calculation of the number of tradable shares

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

shares of the stock, etc. of the applicant as of the latest record date and the aggregated number

of stocks which are not traded actively.

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

shares of its treasury stock held, the number of shares would be deducted from the

number of shares pertaining to the listing application as they were retired even though

they are not retired as of the record date.

<Number of shares which are not actively traded>

The applicant aggregates the numbers of stocks which TSE determines are not traded actively.

In practice, the numbers of shares 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)


- 35 -

- Applicant (treasury shares 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)

- 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 Article 8, Paragraph 8 of

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

Statements (hereinafter referred to as the “Financial Statements, etc. Rules”)

- 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.”]

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

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

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

acquisition of treasury stocks (including cases where the Rule 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 stocks.

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

treasury stocks held by the applicant (*), the number of stocks subject to the resolution

authorizing the disposal, etc. of treasury stocks would be treated as if the applicant did

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

subject to the resolution from the number of treasury stocks held.

* 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 stocks in exchange for cash, etc.

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


- 36 -

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 stock swap (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 TSE 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.

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


- 37 -

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

- 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

► Share price used for the calculation of market capitalization

“Expected public offering prices” are used in determining the market capitalization of tradable

shares.

“Expected public offering prices” represent the prices used as the basis for the determination

of the total amounts for issue value (so-called prospective offer prices, prospective selling

prices) of stock certificates described in the Securities Registration Statement.


- 38 -

(Reference) Method of calculation of number of tradable shares (example)

(1) Number of shares pertaining to the listing application

Total number of shares of stocks, etc. as of the last record date, etc. = 12,325,000 shares

(A) (100 share unit)

(2) Number of shares which are not traded actively

1) Number of treasury shares owned

Number of treasury shares

100,000

2) Large shareholders holding 10% or more of the total number of shares (the number held

by the underlined party is not added) (In share)

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%)

*Documents certifying that they are held in investment trust units are required to be submitted

separately.

3) In addition to securities in 2) above, those defined as securities not actively traded by the

Enforcement Rules (*)

(In share)

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%)


- 39 -

*For details concerning shareholders, etc., please refer to the section <Number of shares which

are not traded actively>

= (1) 100,000 shares + (2) 3,327,750 shares + (3) 1,725,500 shares = (B) 5,153,250

(3) Calculation of number of tradable shares

・Number of tradable shares ……(A) – (B)

(A) 12,325,000 shares – (B) 5,153,250 shares = 7,171,750 shares


- 40 -

3. Net Asset Value

The net asset value is expected to reach at least ¥ 200 million by the time of listing.

（Rule 216-3 (3) of the Regulations）

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 the applicant year, JPXR will

examine the amount of net assets at the end of the last 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 amount of net assets determined on the basis of the

quarterly balance sheet (on a separate basis) (Note 2).

b. In cases other than a. above, JPXR will examine the amount of net assets as of the end

of the latest business 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 amount of net assets determined on the basis of the

balance sheet (on a separate basis) (Note 4).

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 JPXR 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 latest quarterly period or latest fiscal year,”

“expected cash inflows arising from public offering” and “amount of net assets pertaining to the

examination.”

Note 1: This amount represents the value determined by deducting the values of subscription

warrants and non-controlling interests stated in the section of Net Assets from 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.


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


- 41 -

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 voluntarily adopts IFRS, the amount equivalent to the amount of net

assets determined based on the quarterly consolidated balance sheet or consolidated

balance sheet.

► 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 of the Regulations,

Rule 717 of Enforcement Rules).


- 42 -

4. Profits or Market Capitalization

The following a. or b. must be satisfied:

a. Profits during the most recent year are at least ¥ 100 million;

b. Market capitalization is expected to reach ¥ 5 billion by the time of listing.

(Hereinafter referred to as the “market capitalization criterion”)

(Rule 216-3 (4) of the Regulations)

<Application of profit criterion>

(Reproduced)

a. The total amount of profits (Note 1) for the last year stands at ¥100 million or more

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 for which the examination will be made as 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 Rule 65, 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 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 1: The “recent” fiscal year starts from the end of the previous year on a retrospective basis.

For example, for a company where the previous year ends March 31, 2018, the “last

year” would be one year from April 1, 2017 through March 31, 2018. The same

definition of “recent” will be applied hereinafter.

Note 2: If a company voluntarily applies IFRS, the amount of profit should be the one equivalent

to the amount of profit determined based on the consolidated income statement.

Note 3: 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 of accounting standards.

Note 4: When the amount of profit for the period subject to the examination cannot be

determined simply as the applicant has changed the period (balance sheet date) of the

fiscal year during the last year, the amount of profit for the period subject to the


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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 comprising

the period.

► 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 of the Regulations,

Rule 717 of Enforcement Rules).

<Application of market capitalization criterion>

(Reproduced)

b. Market capitalization is expected to reach at least ¥5,000 million

Method of calculation of market capitalization

The market capitalization will be determined by adding the market capitalization of all other

shares issued by the applicant (limited to those listed on another financial instruments

exchange in Japan or those continuously traded on foreign financial instruments exchange,

etc.) to the amount derived by multiplying the number of listed shares expected at the time of

listing by the share price. The following share prices will be used for the purpose of calculation.

<An applicant is a non-listed company>

When an applicant makes public offering or secondary offering for listing application, its

expected issue price will be used. The expected issue price for the public offering or secondary

offering represents the price (that is, expected offering price or expected secondary offering

price) on which the determination of total value of issuance value of shares described in the

Securities Registration Report or the total value of secondary offering (expected value) is

based.

<An applicant is a listed company>

When an applicant makes public offering or secondary offering for listing application, the lower

of “expected issue price for public offering or secondary offering” or “the lowest share price

(Note 1) During one month (Note 2) before the day before the previous day of listing approval

will be used. When an applicant does not make public offering or secondary offering for listing

application, the lowest share price during one month preceding the day prior to two days before

the day on which the TSE approves the listing will be used.

Note 1: 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,


- 44 -

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 Japan where

the applicant’s shares are listed. Therefore, any indicative prices, off-auction session

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

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 212-1 (2) of the Rules).


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5. False Statement or Adverse Opinion and Audit by a Listed

Company Audit Firm

(1) 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. (Notes 1 and 2)

(Rule 216-3 (5) a of the Regulations;

mutatis mutandis application of Rule 212 (6) a of the Regulations)

(2) The audit report attached to a "Securities Report for Initial Listing Application" (limited to the

audit opinion attached to financial statements, etc. for the business year and consolidated

accounting year which ended during the last year) shall contain an "unqualified opinion" or

an“opinion to the effect that interim financial statements, etc. present useful information,”or

“unqualified conclusion.” (Note 3)


mutatis mutandis application of Rule 212 (6) b of the Regulations)

Meanwhile, if additional information in the audit report indicates that there is a serious doubt on

a corporate continuity though an audit opinion represents an “unqualified opinion,” Rule 216-5

of the Regulations for JASDAQ Standard requires “corporate continuity of company” to be

included in the examination items and Rule 216-8 of the Regulations for JASDAQ Growth

requires “growth potential of a company” to be included in the examination items. Thus for the

purpose of examination, an applicant is required to eliminate any serious event, etc. giving rise

to any concern with a corporate continuity by the time of listing, such as removal of additional

information leading to the concern in the quarterly review report, etc.

Note 1: For example, since an audit engagement letter was entered into after the beginning 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 with exceptive items.

Even in such cases, a listing application can be made.

Example: Successful listing in case of a “qualified opinion” expressed in the audit report, etc. for

the year before the previous year


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Engagement letter　　　　　　　▲

Period subject to audit

March 31, 201X March 31, 201X+1 March 31, 201X+2 March 31, 201X+3The year before the The 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, the applicant may file the

listing application.

Note 3: If certified public accountants express a “qualified opinion with exceptions” or “qualified

conclusion with exceptions” limited to comparative information, the applicant may file

the listing application.

Note 4: Even if any “adverse opinion” etc. is included in the audit report due to a reason

associated with a corporate continuity (including “qualified opinion with exceptive

items in case of (2) ), the filing of listing application is possible (when any interim audit

report or quarterly review report is not attached to the “Securities Report for Initial

Listing application, excluding audit reports attached to financial statements, etc. for the

last business year and consolidated accounting year). In such cases, TSE will review

the background, etc. for the inclusion of such adverse opinion during the course of

examination.


- 47 -

(3) 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 (Note 2).


mutatis mutandis application of Rule212 (6) c of the Regulations)

Note 1: Securities report comprises:

− Securities registration statement and attached documents, as well as reference documents

therefor;

− Shelf registration statement and attached documents, as well as reference documents

therefor;

− Attached documents to Shelf Registration Statement and reference documents therefor;

− Securities Report and attached documents

− Interim report;

− Quarterly financial statements; and

− Registration prospectus

Note 2: When Prime Minister or other competent authority issues an order for the payment of

penalty or accusation with respect to securities report, etc., or an applicant issues an

amended registration statement, and if some contents corrected are deemed to be

material, the contents meet “False statement.”

(4) 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) or (b) below;

(a) The internal control report for the business year which ended during the last year

contains the statement that “assessment results will be refrained from being expressed.”

(b) The internal control audit report for the business year which ended during the last year

contains the statement that “no opinion will be expressed.”(*)


mutatis mutandis application of Rule212 (6) d of the Regulations)

* 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 on the internal

control report.

(5) 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 Rule

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


- 48 -

undergone quality control reviews by The Japanese Institute of Certified Public Accountants))

(excluding those deemed inappropriate by TSE).


mutatis mutandis application of Rule212 (6), 2 of the Regulations)

Globalization of capital markets and business activities, sophistication of IT used by companies,

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 firm, etc.


- 49 -

6. 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 (hereinafter referred to as a "shareholder services

agent approved by TSE"), or an informal consent of assurance the entrustment of such

shareholder services from the shareholder services agent has been received.

(Rule 216-3 (5) b of the Regulations;

mutatis mutandis application of Rule205 (8) of the Regulations)

The applicant is required to entrust services related to shareholders with a shareholder services

agent authorized by TSE or to receive the preliminary consent to the acceptance of services

provided to shareholders from a shareholder services agent authorized by TSE by the date

when the listing application is filed.

Note: Shareholder services agents authorized by TSE include trust and banking companies,

Tokyo Securities Transfer Co., Ltd., Japan Securities Agent, Inc., and IR Japan, Inc.


- 50 -

7. Share Unit and Classes of Stock

(1) 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 to

eventually align the number of shares comprising one trading unit for all the listed companies

(Note 2) to 100 shares. In this regard, TSE encourages initial listing applicants to initially set the

unit (the number of share per Share Unit) at 100 shares.

In practice, at the time of listing application, JPXR will check the adoption of the number of

shares unit per Share Unit and the number 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, TSE 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 shares on other financial instruments exchanges 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.

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 cases of companies

which have adopted a trading unit system, while it is one share in cases of those which

have not adopted the system.

Note 3: The applicant is required to amend documents associated with the listing application

including the Articles of Incorporation, certificates of registered items, various internal

rules and “Part I” documents with respect to the adoption of a trading unit system and

submit them during the period for the listing examination.


- 51 -

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

Handling of the

number of

shares per Share

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 stock

have been

issued

Special resolution

at the general

shareholders’

meeting

Two or more

classes of stock

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


- 52 -

(2) In the case that a stock, etc. pertaining to the initial listing application, such stock, etc. shall

be, as a general rule, any of stocks referenced in the following a. through c. In this case, the

initial listing applicant for the stock referenced in b. shall not have securities other than said

stock as to which the applicant makes initial listing application.

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


mutatis mutandis application of Rule205 (9) 2 of the Regulations)


- 53 -

8. Restrictions 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.



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 with 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 the time of listing.

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 shares 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.


- 54 -

9. 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.



The stock of the applicant will be handled by a designated depository institution under the

Book-Entry Transfer Act. The designated depository 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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Criteria for JASDAQ Growth

Since formal requirements for JASDAQ Growth mentioned from 1), 2) and 5) through 9) above

are basically the same as those for JASDAQ Standard, please refer to the requirements of

criteria for JASDAQ Standard.

The following discusses two requirements for 4) Amount of net assets and 4) Amount of profit

and market capitalization, which differ from those for JASDAQ Standard.

Net asset value

Net asset value is expected to be positive on the day of listing.

(Rule 216-6 (1) of the Regulations)

For the purpose of listing on JASDAQ Growth, the value of net assets is expected to be positive

as of listing date. The method of calculation of the value of net assets is the same as that for

JASDAQ Standard.

Profits or Market Capitalization

There are no requirements for JASDAQ Growth.

Unlike JASDAQ Standard, TSE places more weight on future growth potential than historical

level of profit. Therefore TSE has not established any standard for examination of amount profit

and a company generating loss could be subject to the listing examination irrespective of the

size of market capitalization.

However, the applicant is required to have developed appropriate business plan demonstrating

future growth potential as “future growth potential of company” subject to the examination and

to have designed and implemented organizational systems to promote the business plan.

III Listing Examination (relating to Rule 216-5 and Rule 216-8 of the Regulations)

- 56 -

III Listing Examination (relating to Rule 216-5 and

Rule 216-8 of the Regulations)

The examination will be made for the corporate group of an applicant (Note) which meets the

formal requirements (Rule 216-3 of the Regulations and Rule 216-6 of the Regulations) based

on the items prescribed in Rule 216-5 and Rule 216-8 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 for Listing Examination, etc.” (Hereinafter referred to as the

“Guidelines”).

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 information 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.

(1) JASDAQ Standard

JASDAQ Standard provides a market for a certain size of company with certain performance

achievements and future growth potential. So JPXR will examine the listing application with

focus placed on “whether the applicant is not in a position to hamper the continuity of business

activities” and “whether the applicant has in place corporate governance and internal control

practices which operate effectively.”

The criteria specified in Rule 216-6 of the Regulations establishes five requirements as

eligibility required for listing on JASDAQ Standard, that is, “corporate continuity of company,”

“development of sound corporate governance or items TSE deems necessary from the

viewpoint of investor protection,” “fairness of disclosure of the corporate information, etc.” and


- 57 -

“such other items TSE deems necessary for the purpose of public interest or investor

protection.” Actual requirements of eligibility are discussed in Guidelines.

For the purpose of listing examination, JPXR places an focus on whether stock of an applicant

is relevant as a listed company on exchange traded financial instruments which a large number

of general investors trade, from the perspective of public interest or investor protection.

In assessing the degree of satisfaction of each criterion mentioned later, JPXR will

comprehensively determine it in consideration of conditions specific to each applicant such as

the size and lines of business thereof.

List of Criteria for Substantive Examination (Standard)

Rule 216-5 of the Regulations

Guidelines for Listing Examination III-2 2 to 6 (Summary)

1. Business Continuity

There are no obstacles to

continuity of business

activities.

(1) Outlook for business performance and financial condition of

the corporate group of an initial listing applicant do not hinder

the corporate continuity of the applicant in the future.

(2) Management activities of the applicant are deemed to be able

to be carried out stably and continuously.

2. Establishment of Sound

Corporate Governance

and Internal

Management System

Corporate governance and

internal management

system have been

established in accordance

with corporate scale and

function effectively.

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

officers of the corporate group of an initial listing applicant is

recognized to be appropriately prepared and operated.

(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 or hinder the

implementation of effective audit.

(3) An applicant adopts accounting treatment standards adaptable

to its actual situation and in addition, necessary accounting

body is recognized as being prepared and operated

appropriately.

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

etc. concerning management activities and other matters in

the applicant is deemed to be established and operated

appropriately.

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

established and appropriately operated so that an applicant

and its corporate group carry out effective management

activities.

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


- 58 -

carry out stable and continuous execution of management

activities and maintenance of the internal management

system of the applicant.

3. Reliability of Corporate

Actions

Corporate actions which

cause market disorder are

not expected.

(1) An applicant is deemed, as a general rule, to not unfairly grant

or enjoy benefits through a transaction or any other

management activities with relevant parties or other specific

entities in light of matters.

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

activities of the applicant are deemed to be independent of

such parent company, etc.

(3) The management of an applicant has insight into the

responsibilities and significance of being listed on a financial

instruments market.

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

c..

a. Where a merger, demergers, making another company a

subsidiary or making a subsidiary a non-subsidiary, or

transfer of business from or to other entity is scheduled to be

carried out on or after the initial listing application day and

within three years from the end of the most recent business

year before such day and, in addition, where the Exchange

deems that the applicant will cease to be a substantial

surviving company due to such action.

b. Where a merger in which the applicant becomes a dissolved

company, a stock swap or stock transfer whereby it becomes

a wholly-owned subsidiary of another company is planned to

be carried out within three (3) years from the end of the

business year immediately prior to the initial listing application

day (excluding cases where such actions are scheduled to be

carried out before the listing day).

c. Where a delisting by whole acquisition of shares by a major

shareholder, corporate manager, employee, or other specific

person of the initial listing applicant or other method is

planned to be carried out within three years from the end of

the business year immediately prior to the initial listing

application day.

(5) Where an applicant has introduced a takeover defense

measure, it shall comply with matters enumerated in each

item of Rule 440 of the Regulations.


- 59 -

(6) An applicant has developed a corporate structure to prevent

anti-social forces from intervening in management activities

and is making efforts to prevent such intervention, and such

efforts are deemed appropriate in light of the public interest or

investor protection.

(7) An applicant has not recently committed material violations of

laws and regulations or acts against the public interest.

4. Appropriateness of

Disclosure of Corporate

Details, etc.

The company is capable of

appropriately disclosing

corporate details, etc.

(1) An applicant is deemed to be able to properly manage

corporate information of facts, etc. which will have a material

effect on management and to disclose it 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.

(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 items which may have an important effect on

investment decisions of investors, the items to be considered

as risk factors and the premises of main business activities in

an understandable manner.

(3) An 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 specific entity or adjusting share ownership ratios,

etc.

(4) Where an applicant has a company that substantially holds the

majority of its voting rights, the applicant can appropriately

grasp company information such as facts concerning the

parent company, etc. and the applicant is a status to disclose

the information concerning the parent company, etc., to

investors in an appropriate and timely manner.

5. Other Matters Deemed

Necessary by the

Exchange from the

Viewpoint of the Public

Interest or Investor

Protection.

(1) The details of the rights of shareholders, etc. and the state of

their exercise are deemed not to be unfairly restricted from

the view points of the public interest or the protection of

investors.

(2) An applicant does not have an ongoing lawsuit or dispute, etc.

which would have a material impact on management activities

and business performance.

(3) When domestic stocks pertaining to initial listing application


- 60 -

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 III-2. 6. (3).


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 the Guidelines III-2 6 (4).

(5) It is deemed appropriate from the viewpoints of the public

interest or the protection of investors.


- 61 -

(2) JASDAQ Growth

JASDAQ Growth provides market for a group of companies of unique technologies or business

models with future growth potential. So JPXR will examine the listing application with focus

placed on “whether the applicant has growth potential” and “whether corporate governance or

internal management systems responsive to their stage of growth have been established and

operated effectively.”

The criteria specified in Rule 216-8 of the Regulations establishes five requirements as

eligibility required for listing on JASDAQ Growth, that is, “growth potential of company,”

“development of sound corporate governance and effective internal management systems

responsive to the stage of growth,” “fairness of disclosure of the corporate information, etc.” and

“such other items as TSE deems necessary for the purpose of public interest or investor

protection.” The requirements are especially characterized by the “growth potential of

company.”

Consistent with Standard, for the purpose of listing examination, JPXR places an focus on

whether stock of an applicant is relevant as a listed company on exchange traded financial

instruments which a large number of general investors trade, from the perspective of public

interest or investor protection. However, the degree of satisfaction of requirements for Growth

will be evaluated in consideration of the growth stage of the applicant.

List of Criteria for Substantive Examination (Growth)

Rule 216-8 of the Regulations

Guidelines for Listing Examination III-3 2 to 6 (Summary)

1. Corporate growth

potential

The company has growth

potential

(1) The profit/loss situation or financial condition of the corporate

group of the initial listing applicant is expected to rise.

(2) There are reasonable grounds for the competitive edge and

business environment on which the business plan is based.

(3) There are no questions regarding the current state or the basis

for plans for staff allocation in the company and construction

of facilities to achieve the business plan.

(4) There are no factors which may hinder the continuity of items

underlying major business activities.

2. Establishment of sound

corporate governance

and internal management

systems in

accordance with the stage

of growth

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

officers of the corporate group of an initial listing applicant is

recognized to be properly developed and appropriately

operated

(2) The mutual relative relationship among officers of an initial

listing applicant, its composition, the actual working situation


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Corporate governance and

internal management

systems have been

established in accordance

with the company's stage of

growth and function

effectively.

or the state of concurrent positions as officers and employees,

etc. at another company, etc. are deemed not to impair the

fair, faithful, and proper execution of officer duties or effective

audit of such initial listing applicant.

(3) An applicant is deemed to adopt accounting standards suited

to its actual situation and, in addition, a necessary accounting

structure is deemed to be established and operated

appropriately.

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

and regulations, etc. concerning management activities and

other matters in the corporate group of an initial listing

applicant is prepared and operated appropriately.

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

properly and operated appropriately so that an initial listing

applicant and its corporate group carry out effective

management activities.

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

carry out stable and continuous execution of management

activities and maintain the internal management system of the

applicant.

3. Reliability of Corporate

Actions

Corporate actions which

cause market disorder are

not expected.

(1) An applicant is deemed, as a general rule, to not unfairly grant

to or enjoy benefits from relevant parties or other specific

entities through a transaction or any other management

activities.

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

activities of the corporate group of an initial listing applicant

are deemed to be independent of such parent company, etc.

(3) The management of the applicant has insight into the

responsibilities and significance of being listed on a financial

instruments market.

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

c.

a. Where a merger, demerger, making another company a

subsidiary or making a subsidiary a non-subsidiary, or

transfer of business from or to other entity is scheduled to

be carried out on or after the initial listing application day

within three years from the end of the most recent business

year before such day and, in addition, where the Exchange

deems that the initial listing applicant will cease to be a


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substantial surviving company due to such action.

b. Where a merger in which an initial listing applicant

becomes a dissolved company, a stock swap or a stock

transfer whereby it becomes a wholly-owned subsidiary of

another company is planned to be carried out within three

(3) years from the end of the business year immediately

prior to the initial listing application day (excluding cases

where such actions are scheduled to be carried out before

the listing day).

c. Where a delisting by whole acquisition of shares by a major

shareholder, corporate manager, employee, or other

specific person of an initial listing applicant or other method

is planned to be carried out within three (3) years from the

end of the business year immediately prior to the initial

listing application day.

(5) Where an applicant has introduced a takeover defense

measure, it shall comply with matters enumerated in each

item of Rule 440 of the Regulations.

(6) The applicant has developed a corporate structure to prevent

anti-social forces from intervening in corporate activities, is

making efforts to prevent such intervention, and such efforts

are deemed appropriate in light of the public interest or


(7) An applicant has not recently committed material violations of

laws and regulations or acts against the public interest.

4. Appropriateness of

disclosure of corporate

details, etc.

The company is capable of

appropriately disclosing

corporate details, etc.

(1) An applicant is deemed to be able to properly manage

corporate information of facts, etc. which will have a material

impact on management and to disclose it to investors in a

timely and appropriate manner.

Moreover, its system for the preemptive prevention of insider

trading is deemed to be developed and operated appropriately

(2) Documents pertaining to disclosure of corporate information,

out of initial listing application documents, are deemed to be

prepared in compliance with laws, regulations, etc., and

appropriately contain the matters enumerated in the following

a. to c. and other matters in consideration of the state of the

business line and the business condition of an initial listing

applicant and its corporate group

(3) An applicant is able to appropriately develop a medium-term


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management plan and hold briefings and other sessions for

investors.

(4) An 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 specific entity or adjusting share ownership ratios,

etc.

(5) Where an applicant has a majority shareholding company

(excluding where it will cease to have a parent company, etc.

by the end date of a business year which ends first after

listing), the applicant can appropriately grasp company

information such as facts concerning the a majority

shareholding company, etc. which has a material effect on its

management, and the initial listing applicant pledges in writing

that such majority shareholding company, etc. agrees to its

disclosure of company information which has a material effect

on its management, out of such company information

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

appropriate manner.

5. Other matters deemed

necessary by the

Exchange from the

viewpoint of the public

interest or investor

protection.

(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 operating results


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 III-3, 6. (3).


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 III-3, 6. (4).

(5) It is deemed appropriate from the viewpoints of the public

interest or the protection of investors.


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1. Business Continuity and Prospects for Corporate Growth (Rule

216-5, 1 (1) of the Regulations, Rule 216-8, 1 (1) of the

Regulations)

List of Substantive Examination Criteria

Standard Growth

(1)

Outlook for business performance and

financial condition of the corporate group

of an initial listing applicant do not hinder

the corporate continuity of the applicant

in the future. In this case, when falling

under the following a. or b., the outlook

for business performance and financial

condition shall be deemed to not hinder

corporate continuity.

(Guidelines III-2, 2. (1) )

(1)

The profit/loss situation or financial

condition of the corporate group of the

initial listing applicant is expected to rise.

An initial listing applicant that falls under

the following a or b shall be handled as

being in a situation where its profit/loss

situation or financial condition is

expected to rise.


a

Maintenance of the levels of recent

business performance and financial

condition of the corporate group of an

initial listing applicant is reasonably

expected.

a

From the business plan, it can

reasonably be expected to achieve

sustainable growth from the fiscal

year of the application

b

In the case of a company that is an

anticipatory investment prospect

expected to achieve sustainable

growth in the future, from the

business plan, it is expected to

achieve net income within five (5)

years counting from the fiscal year of

the application. b

In cases where the business

performance or financial condition of

the corporate group of an initial listing

applicant is deteriorating or poor,

such situation is deemed to improve

in such way as the levels of such

performance and conditions are

expected to recover or improve in the

future based on an objective fact(s).

(2)

There are reasonable grounds for the

competitive edge and business

environment on which the business plan

is based.



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(2)

Management activities of the corporate

group of an initial listing applicant are

deemed to be able to be carried out

stably and continuously in light of matters

including those enumerated in the

following a. to d.


(3)

There are no questions regarding the

current state or the basis for plans for

staff allocation in the company and

construction of facilities to achieve the

business plan.


a

Business activities of the corporate

group of an initial listing applicant can

be conducted stably and

continuously in light of purchases,

production, sales, and actual results

of transactions with customers and

suppliers, as well as characteristics

and demand trends for manufactured

products and services and the state

of performance of any other business

b

Investment activities such as capital

investment and business investment,

etc. of the corporate group of the

initial listing applicant do not hinder

the continuity of management

activities in light of the trend and

future outlook, etc. for its investment

c

Financial activities such as

fund-raising, etc. of the corporate

group of the initial listing applicant do

not hinder the continuity of

management activities in light of the

trend and future outlook, etc. of its

financial state

d

With respect to the matters which are

the basis of the main business

activities of the corporate group of

the initial listing applicant, there are

no issues that will hinder the

continuity of such business activities.

(4)

There are no factors, regarding matters

which are the premises of the main

business activities of the corporate group

of the initial listing applicant, will hinder

the continuity of such matters.



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Criteria for Listing on Standard

Corporate Continuity of Domestic Companies (Rule 216-5, 1 (1) of the Regulations)

(1) Outlook for business performance and financial condition of the corporate group of an initial

listing applicant do not hinder the corporate continuity of the applicant in the future. In this

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

financial condition shall be deemed to not hinder corporate continuity.


a. Maintenance of the levels of recent business performance and financial condition of the

corporate group of an initial listing applicant is reasonably expected.

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

initial listing applicant is deteriorating or poor, such situation is deemed to improve in such

way as the levels of such performance and conditions are expected to recover or improve in

the future based on an objective fact(s).

Requirements of criterion and focus of examination

In examination on the basis of these criteria, JPXR will assess whether the business plan of the

applicant which is filed with JPXR has been prepared in due process.

In practice, the examiners will gain in-depth understanding of the characteristics (strength and

weakness) of the 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 one another.

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.

Next JPXR will assess whether the outlook for income and financial position will not impair the

corporate continuity of company on the basis of business plan, etc. of the corporate group.


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The reference to “outlook” for the purpose of this paragraph basically represents a two year

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 (e.g., expected revision of laws and regulations or an expected plan for

large scale of capital expenditures, etc.), 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 ordinary income.

In evaluating “whether outlook for income and financial position of the corporate group of the

initial listing applicant will certainly not impair the corporate continuity of company,” JPXR will

make examination responsive to changes in performance of the corporate group of the initial

listing applicant as mentioned in a and b below.

a. Performance, revenue, and profit improve on a stable basis

When the performance, revenue and profit of the corporate group of the 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 this will be made).

However, if the value of profit of the corporate group of the initial listing applicant is small, JPXR

will assess the basis for continuous recognition of profit following listing. In practice, JPXR will

evaluate the break-even point for profit and loss and basis for clearing such 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.

b. Performance declines as revenue and profit are decreasing

When the performance of the corporate group of the initial listing applicant declines as its

revenue and profit decrease, JPXR will examine the basis for continuously recognizing profit

after listing. In practice, JPXR will evaluate the break-even point for profit and loss and basis for

clearing such 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 value of profit is small, the corporate group of the initial listing applicant

may be 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

an evaluation including consideration of such events.


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(2) Management activities of the corporate group of an initial listing applicant are deemed to be

able to be carried out stably and continuously in light of matters including those enumerated

in the following a. to d.


a. Business activities of the corporate group of an initial listing applicant can be conducted

stably and continuously in light of purchases, production, sales, and actual results of

transactions with customers and suppliers, as well as characteristics and demand trends for

manufactured products and services and the state of performance of any other business


The examination on the basis of criterion above will focus on actual status of the corporate

management including the evaluation as to whether the management activities of the corporate

group of the 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 the

applicant, represented by procurement, production and sales (in this paragraph, the

manufacturing industry is referred to as an example; naturally items to be examined will differ,

depending on the category and lines of business).

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 so that continuous sales activities are

unhampered and in quality which will 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 proper 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 the 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.


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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 the 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 prospect 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.

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 the initial listing applicant do not hinder the continuity of management

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

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

applicant do not hinder the continuity of management activities in light of the trend and future

outlook, etc. of its financial state


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In examining the continuity 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 competitive 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 prospect for necessary

funds to realize business expansion and business expansion on the basis of the financial

conditions of the corporate group of the applicant.

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 prospect for the

recovery of such investments.

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

corporate group of the initial listing applicant, there are no issues that will hinder the

continuity of such 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.”


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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.

In addition, JPXR requests the applicant to submit the “JASDAQ Listing Application Report”

which describes the following and assesses the matters which become the premise of the 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 contracts;

- 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 the 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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Criteria for Listing on Growth

Prospectus for Corporate Growth (Rule 216-8, 1 (1) of the Regulations)

(1) The profit/loss situation or financial condition of the corporate group of the initial listing

applicant is expected to rise. An initial listing applicant that falls under the following a or b

shall be handled as being in a situation where its profit/loss situation or financial condition is

expected to rise.


a. From the business plan, it can reasonably be expected to achieve sustainable growth from

the fiscal year of the application.

b. In the case of a company that is an anticipatory investment prospect expected to achieve

sustainable growth in the future, from the business plan, it is expected to achieve net

income within five (5) years counting from the fiscal year of the application.

(2) There are reasonable grounds for the competitive edge and business environment on which

the business plan is based.



1) Examination as to whether the profit and loss situation or financial conditions are expected

rise.

In examination on the basis of these criteria, JPXR will assess whether the business plan of the

applicant which is filed with JPXR has been prepared in due course of process.

The business plan is required to be highly reasonable. 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,


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rather than a plan which merely shows internal target goals based on the sole determination of

specific management, departments or divisions. When the applicant meets either of a or b

below, the outlook for income or financial position will be treated as expected to improve.

a. Management plan assures that sustainable growth will be expected to be achieved following

application year.

As JASDAQ Growth expects the listing of a variety of business categories, it does not set any

specific quantitative threshold for listing such as “sales of 10% increase compared to the

previous year” or “continuous increase in revenue and profit for five consecutive years.”

However, JPXR will confirm that the outlook of the applicant for income and financial position

will continue to improve and the applicant has reasonable basis for its growth plan.

b. For a company expected to grow over the long term and which makes advance investments,

it is expected in its management plan that the current income could be recognized within 5

years counting from application year.

A “company which makes advance investments” represents the ones which require a vast

amount of initial investments like drug candidate discovery and development companies

(research and development expenses) and where the time until the determination of success

is made will be relatively long.

Requirements for JASDAQ Growth do not always require the applicant to recognize profit

over a short time of period. However, it would be necessary for the applicant to recognize the

current income within five years counting from application year. So the applicant is required to

submit a business plan covering six years following the listing applicant year. If the applicant

reduces the loss amount by curtailing the R&D expenditures, we cannot determine that it

proves that the applicant has growth potential. JPXR will assess this point by

comprehensively considering the expansion plan of sales, reasonableness of plan for cost of

sales and general selling and administrative expenses, and prospect for free cash flows, etc .

The following outlines how TSE examines these issues. JPXR will assess whether

- The applicant has an objective business plan reflecting an appropriate analysis of

competitive advantages and external and internal environments including business

environments, etc.;

- For companies with advance investments, the conditions precedent to the business plan are

reasonable (development schedule, selling prices, demand outlook, etc.);

- When the applicant carries out other businesses than those dependent on new technologies

or business model, such other businesses are deemed to be factor hindering the growth of

company or are likely to hinder the growth of company; and


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- The applicant does not encounter difficulties in fundraising included in the short- and

long-term financing plan.

2) Examination concerning the basis for competitive advantages and business environments

During the examination based on this criterion, JPXR will assess that “an applicant has a

reasonable basis for competitive advantages and business environments underlying the

management plan.”

With respect to core products, goods and services or development projects expected to lead to

core projects of the corporate group of the applicant, which may drive its growth potential, JPXR

will determine the competitive advantages of the group by comparing and analyzing the

characteristics (products, business development, recent trends, ranks in the industry, market

share, etc.) of peer competitors by segment (business category) and by considering the status

in the industry, market share and competition with others.

The following outlines how JPXR examines these issues.

- Whether an applicant has appropriately carried out analysis, etc. concerning competitive

advantages, for example, in consideration of industry trends, market size, and comparison

with similar products and services.

- Whether an applicant has a robust basis for maintaining a certain status in the industry

judging from the positioning in the industry (ranks in the industry, current market share and

expected changes in market share, comparison with peer companies, etc.)

- Whether an applicant has a reasonable basis for production and sales plan, which could be

evidenced by historical sales, terms and conditions of contracts with business partners ,

evaluation by customers and suppliers, etc.

- As a company making advance investments, whether an applicant can practically

demonstrate that it could create new markets with new effect, which was not achieved by

other existing companies because of scarcity, uniqueness or special characteristics, or it

could advance into and break through the closed nature of existing market.

With respect to some companies leveraging the advance investments to develop projects and

achieve their success, it is often observed that technologies which drive and underlie the

projects do not necessarily result in positive operating results at the time of listing. So JPXR

may request the applicant to submit the “Assessment Documents” so that JPXR could confirm

the reasonable basis for their growth potential and competitive advantages.

During the process of listing examination, JPXR will implement relevant researches by third

party specialists, if appropriate, on the basis of the Assessment Documents. The research

results will be not be published as the contents of listing examination are not published.


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In the meantime, if some expenses are incurred for the purpose of listing examination, JPXR

will charge the amount equivalent thereto to the applicant in addition to the Listing Examination

Fees.

3) Assessment Documents

a. Independence required of Assessment Documents

Assessment Documents will be required to be prepared by any third party independent of the

applicant after the third party analyzes and assesses necessary issues. The applicant is

required to submit them at the time of listing application.

For the purpose of Assessment Documents, there should be no financial relationship and

other legal rights and obligations between the person preparing the documents and

institutions the person belongs to, and the applicant in order to ensure the independence of

the applicant from the assessing entity. Any spouse, relatives by blood within the second

degree of kinship or family members of the persons preparing Assessment Documents are

also required to have not special interests with the applicant.

b. Matters to be Described in Assessment Documents

I Relationship between the applicant and the person making assessment

(Note for description) Please describe precisely that there are no special interests between

the person to be assessed and the person making assessment, and the background for

becoming the person making assessment.

II Research areas in which the person making assessment is involved

(Note for description) Please describe precisely the nature of areas for which the person

making the assessment carries out researches. Please attach relevant materials for

reference.

III Assessment

(Note for description) Please describe the assessment results for each of the following items.

a. Overview and use of projects with advance investments made;

b. Major R&D entity and its internal systems for projects with advance investments made;

c. Progress of developments and innovation of projects with advance investments made up to

date (including collaboration with external research institutions and acquisition of

subsidies);

d. Existing challenges to project areas for which advance investments are made and the

nature of resolutions thereof and the basis for such resolutions;

e. Existence of similar or alternative products and goods of other companies (if so, any

differences from such existing products of other companies);

f. Progress of developments of projects with advance investments made and future

challenges to be addressed and measures to address them

g. Other characteristics necessary for commercialization of projects with advance investments

made


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c. Assessment Documents are not required

Assessment Documents are meant to carry out the research of practicability of

technologies, etc. underlying projects with advance investments made at the time of listing.

Therefore, when actual operating results or effect of such technologies can be evidenced

and the technologies have already been commercialized, Assessment Documents are not

required to be submitted.

*Examples of cases where Assessment Documents are not required to be submitted

Example 1: Technologies have been commercialized (excluding samples and trials) and

continuously sold to third parties.

However, this will not apply to cases where objective assessments by third

parties have not be obtained and the actual operating results or effect thereof

have not been verified objectively as products have only been sold to special

interested parties or products have been shipped to third parties as sample

products.

Example 2: An applicant has obtained a permit to manufacture and sell the products from

relevant government authorities or has been under the process of preparing for

sales. The reference to “under the process of preparing for sales” indicates cases

where plans for manufacturing (manufacturing plant and quantity) and sales

(quantity and amount) including actual timing thereof have been established and

are supported by reasonable evidences,

d. Prior consultation as to whether Assessment Documents are required or not

JPXR will eventually determine that Assessment Documents are required to be submitted.

Therefore the applicant is required to consult JPXR in advance concerning the requirement

to submit the Assessment Documents for technologies, etc. concerning any projects with

advance investments made.


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(3) There are no questions regarding the current state or the basis for plans for staff allocation

in the company and construction of facilities to achieve the business plan.



For the purpose of examination based on this criterion, JPXR will confirm that the income or

financial position of the corporate group is expected to improve by assessing the actual

conditions of design and implementation of business infrastructure.

For the purpose of examination based on this criterion, JPXR will assess the degree of design

and implementation of business infrastructure necessary for executing the business plan of the

corporate group of the applicant. In practice, JPXR will determine whether the corporate group

has provided for various management resources necessary for executing the business plan,

including human resources such as sales people and R&D personnel, physical resources such

as business bases and facilities equipment and monetary resources for necessary investments,

on the basis of the conditions at the time of listing, as well as future prospect.

If the provision of business infrastructure is not sufficient at the time of examination, JPXR will

determine that it is reasonable expected that the business infrastructure would be provided and

improved if the applicant has developed practical plan for capital expenditures using proceeds

gained from listing to meet business expansion requirements and plan for employment of

necessary personnel.

However, if the applicant cannot provide reasonable explanations for any insufficient business

infrastructure at the time of examination, JPXR may not determine that there would be

reasonable likelihood that business infrastructure would improve.

(4) There are no factors, regarding matters which are the premises of the main business

activities of the corporate group of the initial listing applicant, will hinder the continuity of

such matters.



Where the applicant is required to acquire any licenses or permits for its business, in making the

examination based on this criterion, JPXR will assess whether the applicant would be able to

continue its business by renewing such licenses or permits, consistent with the examination for

listing on JASDAQ Standard (Guidelines III-2, 2. (2) d).


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2. Establishment of Sound Corporate Governance and Internal

Management System Corresponding to Stage of Growth

(Rule 216-5, 1 (2), Rule 216-8, 1 (2) of the Regulations)


Standard Growth

(1)

The system to ensure the appropriate

execution of duties of officers of the

corporate group of an initial listing

applicant is recognized to be

appropriately prepared and operated in

light of matters including those

enumerated in the following a. and b.

(Guidelines III-2, 3 (1) )

(1)

(Same as the left)


a

An initial listing applicant has an

organizational structure and an

officer composition which allow for

effective checking and audit of the

execution of duties by officers of

the corporate group of an initial

listing applicant. The listing

examination in such case shall be

conducted in consideration of the

state of compliance with matters

prescribed in the provisions of

Rules 436-2 through 439 of the

Regulations.

a (Same as the left) (Note)

b

Checking and audit of the

execution of officer duties are

carried out and function effectively

toward the efficient management of

the corporate group of an initial

listing applicant.

b (Same as the left)


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Note: In case of listing on JASDAQ Growth, TSE has developed criteria different from those for

listing on JASDAQ Standard with respect to the establishment and arrangement of

corporate organs (corporate code of conduct) specified in Rules 436-2 to 439, considering

that the applicant is still in a growth stage. For details, please refer to the criteria for listing

on JASDAQ Growth mentioned below.

(2)

The mutual relationship between

relatives of officers of an initial listing

applicant, its composition, the actual

working situation or the state of

concurrent positions as officers and

employees, etc. at another company, etc.

are deemed to not impair the fair, faithful,

and proper execution of officer duties or

effective audit of such initial listing

applicant. In this case, where a spouse,

blood relative within the second degree of

kinship, and relations by affinity of

directors, accounting advisors, executive

officers, or persons equivalent thereto

assume a position as an auditor, a

member of an audit committee, or

persons equivalent thereto, it shall be

deemed to impair effective audit;.


(2)

(Same as the left)


(3)

The corporate group of an initial listing

applicant is deemed to adopt accounting

treatment standards suited to its actual

situation and, in addition, a necessary

accounting structure is deemed to be

established and operated appropriately


(3)

(Same as the left)


(4)

An effective system for compliance with

laws and regulations, etc. concerning

management activities and other matters

in the corporate group of an initial listing

applicant is deemed to be established

and operated appropriately


(4)

(Same as the left)



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Irrespective of whether it is an application for Standard or Growth, JPXR will basically determine

that the corporate group of the initial listing applicant has established sound corporate

governance and effective internal management systems from the similar perspectives.

However for Growth Applicants, JPXR will determine whether they meet relevant requirements

considering their growth stage.

(5)

The internal management system is

deemed to be properly established and

appropriately operated so that an initial

listing applicant and its corporate group

carry out effective management activities


(5)

(Same as the left)


a

A necessary managerial and

administrative system is properly

established and appropriately

operated to ensure efficiency of

management activities and internal

check-and-balance functions of the


applicant.

a

(Same as the left)

b

An internal audit system of the


applicant is properly established

and appropriately operated

b

(Same as the left)

(6)

Necessary personnel are deemed to be

secured in order to carry out stable and

continuous execution of management

activities and maintenance of the internal

management system of the corporate

group of an initial listing applicant.


(6)

(Same as the left)



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

of an initial listing applicant is recognized to be 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

allow for effective checking and audit of the execution of duties by officers of the corporate

group of an initial listing applicant. The listing examination in such case shall be conducted

in consideration of the state of compliance with matters prescribed in the provisions of

Rules 436-2 through 439 of the Regulations; and

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

toward the efficient management of the corporate group of an initial listing applicant.


Appropriate corporate governance systems are required to be established so that a listed

company can appropriately and effectively carry out its management activities after becoming a

public company via listing on JASDAQ Standard.

In this regard, for the purpose of examination, JPXR will assess the basic concepts of corporate

governance, organization design and composition of executives and the background why the

applicant has adopted the current systems (Note 1).

Note 1: For the purpose of examination concerning the corporate governance of the applicant,

JPXR will ask the applicant to submit the “Corporate Governance Report”(draft) (Note

1) and assess the descriptions included in the report. For the procedures for describing

relevant matters in the report, please refer to TSE’s homepage “Download of

Documents Submitted by Initial Listing Applicant.”

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

During the course of examination, JPXR will assess the establishment of a Board of Directors

and Board of Company Auditors, engagement of independent accounting auditors, duties of

each executive and mutual check and balance functions, and determine that each executive

could execute their duties and supervisions in their relevant capacity by confirming that the

applicant is not under circumstances in which organizational decision making would be

hampered as decision makings on management activities are made only by a part of

executives.

In addition, with respect to the Board ofAuditors (,Audit Committee or Audit and Supervisory

Committee) and Independent Directors, given the importance of the roles they play in terms of


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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 a corporate governance system suitable for publicly traded companies.

Securities Listing Regulations on “Corporate Code of Conduct” specify the code of conduct

which with listed companies should comply. An applicant company is also required to establish

organs mentioned in Rules 436-2 to 439 of the Securities Listing Regulations and conduct its

efforts for the establishment. (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 a listed company does 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 Report. In particular, in

cases (i) where there is a parent company, etc. with a strong relationship with the applicant

company, or (ii) where the board is family-controlled, such applicant is required to specify a plan

to secure an independent director(s).

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 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

various principles of the Code or the reasons if they do not intend to do so in the report on the

corporate governance (Rule 436-3 of the Listing Regulations). During the course of listing

examination, the examiners examine the descriptions in the Corporate Governance Report

(draft), submitted at the time of the listing application.

Note 2: Requirements prescribed in Rule 436-2 to 439 of the Regulations are as follows:

Rule 436-2: 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


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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. TSE 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 commitment to

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,


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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.

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);

(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);


- 86 -

(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).


- 87 -

(2) The mutual relationship between relatives of officers of an initial listing applicant, its

composition, the actual working situation or the state of concurrent positions as officers and

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

proper execution of officer duties or effective audit of such initial listing applicant. In this

case, where a spouse, blood relative within the second degree of kinship, and relations by

affinity of directors, accounting advisors, executive officers, or persons equivalent thereto

assume a position as an auditor, a member of an audit committee, or persons equivalent

thereto, it shall be deemed to impair effective audit;.



For the purpose of examination based on this criterion, JPXR will assess whether the status of

officers (directors, accounting advisors (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), company auditors or executive officers (including governor, auditor, and a person

who can be regarded as equivalent thereto)) would not impair the fair, faithful and sufficient

execution of duties and effective audit practices. In practice, this criterion would not be met if the

decision making of the applicant is likely to be distorted as some decisions favorable to specific

group are made since the composition of officers is biased (family members account for the

majority of positions), or flexible and fair decision making on holding of meetings of Board of

Directors and daily businesses are hindered as some officers of the applicant concurrently hold

positions as officers at another company.

It would be desirable to avoid any assignment of relatives or family members to the positions of

company auditors or a member of committee of company auditors given the functions

performed by them. Especially if spouse or blood relatives within the second degree of kinship

or family members of directors, executives or accounting advisors hold the position of company

auditors or a member of committee of company auditors, the audit practices would be deemed

a self-audit and JPXR will determine that effective audit would be hindered.

Next, when an officer, etc. of the applicant concurrently holds a position as officer or etc. of

another company, JPXR will assess whether the officer sufficiently execute the duties by

checking the attendance at the meetings of the Board of Directors and whether the flexibility of

execution of duties of full time executives is not impaired.

If such another company has any business relationship with the applicant, JPXR will assess

whether appropriate governance systems to implement relevant checks on such relationship

have been provided and any decisions onerous to the applicant are not made in consideration

of procedures for entering into contractual terms and conditions on business relationship during

the course of examination, and if JPXR determines that the systems are appropriate, it may

accept such concurrent holding of position as officers at another company.


- 88 -

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

standards suited to its actual situation and, in addition, a necessary accounting structure is

deemed to be established and operated appropriately



For the purpose of examination based on this criterion, JPXR will confirm the effectiveness of

corporate governance systems of the applicant by assessing whether the applicant can

implement appropriate accounting treatment.

First JPXR will confirm that accounting standards adopted by the applicant including the basis

for the recognition of sales reflect the actual conditions of the applicant and the implementation

thereof is not arbitrary by considering the accounting standards prescribed in the code of

accounting regulations and referring to the views expressed by accounting auditors of the

applicant.

In addition JPXR will check whether accounting practices have been implemented appropriately

in accordance with the accounting standards and internal regulations and rules by reviewing

some samples including accounting books used in practices.

Furthermore, JPXR may carry out some interviews with accounting advisors in order to ensure

that a company with committee of accounting advisors is not excessively dependent on

accounting advisors for the design and implementation of accounting organizations. In addition

to interviews with the applicant, JPXR may interview accounting auditors of the applicant to

confirm the design and implementation of accounting organizations of the applicant.

The applicant is required to develop internal control report systems over financial reporting

which is required to be applied following the listing. The applicant should develop a preparation

plan in consideration of the size, the lines of business and the timing of listing application, so

that the applicant could develop systems which enable the applicant to submit the internal

control report after the listing.


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

activities and other matters in the corporate group of an initial listing applicant is deemed to

be established and operated appropriately



For the purpose of examination based on this criterion, JPXR will confirm the effectiveness of

corporate governance systems of the applicant in order to assess whether the applicant has in

place systems to ensure compliance with laws and regulations.

For the aspects of compliance, JPXR will review legal regulations and existence of

administrative instructions concerning management activities of the corporate group of the

applicant. On the basis of the review results, JPXR will assess that the applicant appropriately

incorporates legal regulations, etc. concerning management activities into the audit items

relevant to internal audits and audits by company auditors, etc.

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

operated so that an initial listing applicant and its corporate group carry out effective

management activities.


a. A necessary managerial and administrative system is properly established and appropriately

operated to ensure efficiency of management activities and internal check-and-balance

functions of the corporate group of an initial listing applicant.

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

established and appropriately operated


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.

In practice, JPXR will assess that actual approaches for management control, the management

conditions and the provisions of various internal rules are relevant in consideration of the size,

the lines of business and growth stage of the applicant. In addition, the applicant has designed


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and implemented organizations and regulations to ensure that internal check functions to

prevent any fraud and error could be prevented in advance.

Furthermore, JPXR will assess that internal audit functions to review the operation of such

organizations and compliance with various internal rules are appropriate in consideration of the

size, etc. of the applicant. JPXR will especially pay attention to the point that the applicant has

developed the systems which enable the internal audit to be implemented on a fair and

independent basis. When the applicant has an organization specialized in internal audit, JPXR

will confirm that the organization is not a part of any specific departments or divisions. When the

applicant does not have an organization specialized in internal audit and assigns any personnel

responsible for internal audit practices, JPXR will confirm that the applicant has designed and

implemented systems so that the internal audit would not constitute a self-audit.

On the other hand, when the internal control practices are outsourced to any third 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 control practices as the president is fully aware of the

importance of such internal control 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

control 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

control 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.

Moreover, the focus point of the examination based on this criterion includes the assessment as

to whether the applicant could organizationally develop business plans, not dependent on the

observations or speculations of the president or other specific management members.

In practice, JPXR will assess on the basis of documents and books used for the development of

plans that the applicant has appropriately designed and implemented internal systems to

develop reasonable business plans (including internal regulations, etc.) including the staff

formation of departments responsible for the development plan (personnel, segregation of

duties, etc.), the collection and compilation of various information underlying the plan, the

reflection thereof into the plan, the coordination among persons involved including the

management and the method thereof, in consideration of the size and growth stage of the

corporate group.


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(6) Necessary personnel are deemed to be secured in order to carry out stable and continuous

execution of management activities and maintenance of the internal management system of

the corporate group of an initial listing applicant.



For the purpose of the examination on the basis of this criterion, JPXR will assess the

effectiveness of the internal corporate systems of the applicant to confirm that the applicant can

employ necessary personnel to maintain and manage the management organization of the

applicant.

For the aspect of personnel, JPXR will determine whether the applicant has employed

necessary personnel to operate businesses on its own, not dependent on third parties and has

in place systems to maintain management organizations on a stable basis by assessing the

number of employees, the changes in employees (status of employment through recruitment of

new employees and retirement) and the acceptance of secondment (relationship with entity

seconding personnel and degree of dependence on seconded persons).

In this case, if a large number of managers and officers are seconded people, JPXR will assess

that they could be replaced reasonably from the perspective of corporate continuity of the

corporate group of the applicant.


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As mentioned above, JPXR will make listing examinations from the perspectives similar to both

Standard and Growth. So please refer to the criteria for listing on JASDAQ Standard. However,

for the examination of listing on JASDAQ Growth, JPXR will consider the satisfaction of

respective requirements in consideration of the growth stage of the applicant.

In addition the requirements concerning the "Corporate Code of Conduct" required of a

company applying for listing on Growth differ from those included in criteria for listing on

Standard.

In practice, any Growth applicant is exempted from applying the requirements in 1) to 4) below

until the completion of the regular general meeting of shareholders held for the first time after

one year passes from the listing date (for the requirements in 1), the business year first ended

after the listing date)

1) Appointment of independent directors /auditors (Notes 1 and 2);

2) Establishment of Board of Directors, Board or Committee of Company Auditors and

appointment of accounting auditors;

3) Appointment of accounting auditors as CPAs conducting audit certification; and

4) Decisions on the design and implementation of systems necessary to ensure the

fairness of businesses

Note 1: 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 2: If a Growth applicant does not elect independent directors/auditors as of listing, the

applicant is not required to include the descriptions concerning independent

directors/auditors in the “Corporate Governance Report.” However the applicant is

required to include the description concerning independent directors/auditors in

“Corporate Governance Report” submitted for the first time after the election of

independent directors/auditors after listing. (Rule 226, 4 (6) of the Regulations).


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3. Reliability of Corporate Actions (Rule 216-5, 1 (3) of the

Regulations, Rule 216-8,1 (3) of the Regulations)


Standard Growth

(1)


applicant is deemed, as a general rule, to

not unfairly grant or enjoy benefits

through a transaction or any other

management activities with relevant

parties or other specific entities in light of

matters including those enumerated in

the following a. and b.:


(1)

(Same as the left)


a

Where a transaction has occurred

between the corporate group of an

initial listing applicant and relevant

parties or other specific entities, and

such transaction has reasonability of

continuance, and its terms including

the transaction price are appropriate;

and

a

Where a transaction has occurred

between the corporate group of an

initial listing applicant and relevant

parties or other specific entities, and

continuance of such transaction is

reasonable and its terms and

conditions including the transaction

price are not clearly

disadvantageous for the corporate

group of an initial listing applicant.

b

The interests of the corporate group

of an initial listing applicant are not

unfairly undermined due to relevant

parties or other specific entities of the


applicant giving priority to their own

interests.

b

(Same as the left)

(2)

Where an initial listing applicant has a

parent company, etc. (excluding cases

where such applicant is expected to

cease to have a parent company, etc. by

the end of the first business year after

listing), management activities of the

(2)

(Same as the left)


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applicant are deemed to be independent

of such parent company, etc. in light of

matters including those enumerated in

the following a. to c.



a

In light of the relationship between the

business line of the corporate group

of the initial listing applicant and that

of the corporate group of the parent

company, etc., the state and

possibility of business line adjustment

made by the corporate group of the

parent company, etc. and any other

matters, the initial listing applicant is

not deemed to be substantially a

business division of such parent

company, etc.

a

(Same as the left)

b

The corporate group of an initial

listing applicant or that of a parent

company, etc., as a general rule, has

not been coercing or inducing

transactions which will undermine the

interests of such parent company,

etc. or the corporate group of such

initial listing applicant, such as

transactions that have markedly

different terms from those of normal

transactions; and

b

(Same as the left)

c

The state of receiving seconded

persons of the corporate group of an

initial listing applicant is deemed not

to excessively depend on the parent

company, etc. and not hinder

continuous management activities.

c

(Same as the left)

(3)

The management of the corporate group

of an initial listing applicant has insight

into the responsibilities and significance

of being listed on a financial instruments

market

(3)

(Same as the left)


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(Guidelines III-2, 4 (3) ) (Guidelines III-3, 4 (3) )

(4)

An initial listing applicant shall not fall

under any of the following a. through c:


(4)

(Same as the left)


a

Where a merger (excluding mergers

between an initial listing applicant and

its subsidiary, mergers between

subsidiaries of an initial listing

applicant, and mergers falling under

Rule 208, Item 1 or 2), demergers

(excluding demergers between an

initial listing applicant and its

subsidiary and demergers between

subsidiaries of an initial listing

applicant), making another company

a subsidiary or making a subsidiary a

non-subsidiary, or transfer of

business from or to other entity

(excluding transfers of businesses

between an initial listing applicant and

its subsidiary or between subsidiaries

of an initial listing applicant) is

scheduled to be carried out on or

after the initial listing application day

and within three (3) years from the

end of the most recent business year

before such day (including cases

where a subsidiary of an initial listing

applicant plans to carry out a merger,

demerger or transfer of a business to

or from other entity) and, in addition,

where the Exchange deems that the

initial listing applicant will cease to be

a substantial surviving company due

to such action. However, the same

shall not apply to cases where the

merger (limited to cases where the

merger was conducted) is deemed to

result in a company without

substance as a surviving company

and where the demerger is deemed

to be a shareholder-directed spin-off

a

(Same as the left)


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to succeed business from a listed

company (limited to the case where

the main business of the initial listing

applicant will be succeeded).

b

Where a merger in which the initial

listing applicant becomes a dissolved

company, a stock swap or stock

transfer whereby it becomes a

wholly-owned subsidiary of another

company is planned to be carried out

within three (3) years from the end of

the business year immediately prior

to the initial listing application day

(excluding cases where such actions

are scheduled to be carried out

before the listing day).

b

(Same as the left)

c

Where a delisting by whole

acquisition of shares by a major

shareholder, corporate manager,

employee, or other specific person of

the initial listing applicant or other

method is planned to be carried out

within three (3) years from the end of

the business year immediately prior

to the initial listing application day.

c

(Same as the left)

(5)

Where an initial listing applicant has

introduced a takeover defense measure,

it shall comply with matters enumerated

in each item of Rule 440 of the

Regulations.


(5)

(Same as the left)


(6)


applicant has developed a corporate

structure to prevent anti-social forces

from intervening in management

activities and is making efforts to prevent

such intervention, and such efforts are

deemed appropriate in light of the public

interest or investor protection.


(6)

(Same as the left)



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(7)


applicant has not recently committed

material violations of laws and

regulations or acts against the public

interest, and furthermore is deemed not

to conduct acts which are likely to

become a material violation of laws and

regulations or work against the public

interest in the future.


(7)

(Same as the left)



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(1) The corporate group of an initial listing applicant is deemed, as a general rule, to not unfairly

grant or enjoy benefits through a transaction or any other management activities with

relevant parties or other specific entities in light of matters including those enumerated in the

following a. and b.:


a. Where a transaction has occurred between the corporate group of an initial listing applicant

and relevant parties or other specific entities, and such transaction has reasonability of

continuance, and its terms including the transaction price are appropriate.

b. The interests of the corporate group of an initial listing applicant are not unfairly undermined

due to relevant parties or other specific entities of the corporate group of an initial listing

applicant giving priority to their own interests.

* As JASDAQ comprises JASDAQ Standard and JASDAQ Growth to which different concepts

apply, some criteria and interpretations allied to Standard applicants differ from those applied to

Growth applicants (details will be discussed later).

Note 1: “Related party” represents “related parties” prescribed in Rule 8, Paragraph 17 of the

Financial Statements, etc. Rules.

Note 2: “Other specified entity” refers to any person which 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 (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.

Note 4: They refer to operating activities, investing activities and financial activities.


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 distorted.

Therefore such transactions could be alleged to represent transactions for which the applicant

is required to exercise a high degree of caution.

III Listing Examination (relating to Rule 216-5 and Rule 216-8 of the Regulat ions)

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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 the applicant and related party,

etc. is carried out under the terms favorable to the corporate group of the 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 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 the 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


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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

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.


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► An initial listing applicant has a parent company, etc. (Note)

(2) Where an initial listing applicant has a parent company, etc. (excluding cases where such

applicant is expected to cease to have a parent company, etc. by the end of the first

business year after listing), management activities of the corporate group of an initial listing

applicant are deemed to be independent of such parent company, etc. in light of matters

including those enumerated in the following a. to c.:



apply, some criteria and interpretations differ from each other (details will be discussed later).

Note: “Parent company” represents the parent companies of the applicants as prescribed in

Rule 8, Paragraph 3 of Financial Statements, etc. Rules while “parent company, etc.”

means other related companies and the parent companies thereof as prescribed in Rule

17, Paragraph 4 of Financial Statements, etc. Rules; provided, however, that this will

exclude cases where the applicant is expected not to have any “parent company, etc.”

through the public offering or secondary offering before listing by the end of business year

ended first after listing.


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 TSE 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.


- 102 -

During the course of examination of so called “subsidiary listing,” JPXR will confirm with the

parent company with respect of the purpose, meaning and future policies for subsidiary listing.

Practical criteria are as required in a to c below.

a. In light of the relationship between the business line of the corporate group of the initial

listing applicant and that of the corporate group of the parent company, etc., the state and

possibility of business line adjustment made by the corporate group of the parent company,

etc. and any other matters, the initial listing applicant is not deemed to be substantially a

business division of such parent company, etc.



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., where 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 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.;

- There are no rules or procedures which require the prior approval of the parent company,

etc. on the decision making of the applicant;


- 103 -

- 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 the

earnings 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 susceptible 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.


- 104 -

b. The corporate group of an initial listing applicant or that of a parent company, etc., as a

general rule, has not been coercing or inducing transactions which will undermine the

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

such as transactions that have markedly different terms from those of normal transactions;

and



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 regular transactions 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 regular transactions, 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 regular transactions.

In evaluating the “terms and conditions similar to regular transactions,” 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 rates 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.


- 105 -

c. The state of receiving seconded persons of the corporate group of an initial listing applicant

is deemed not to excessively depend on the parent company, etc. and not hinder

continuous management activities.



For the purpose of examination on the basis of this criterion, JPXR will assess whether the

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, TSE may conclude that such

situations may not adversely affect the continuation of businesses.

Even in cases where the independence of management of the corporate group of the applicant

has been determined not to be impaired on the basis of examination results of matters

mentioned in a to c above, the applicant is required to disclose actual business and

transactional relationships between the applicant and the parent, etc. in an understandable in

the “Part I” documents.


- 106 -

(3) The management of the corporate group of an initial listing applicant has insight into the

responsibilities and significance of being listed on a financial instruments market



The objective of this criterion is to confirm that the management of the corporate group of the

applicant has insight into the responsibility for and meaning of listing its stock on a financial

instruments exchange.

Since the securities issued by a listed company are certainly viewed as investment choice of a

large number of general investors, listing would give rise to new social responsibility and

obligations of the listed company from the perspective of investor protection. Therefore the

listed company as a member of financial instruments market must comply with related laws and

regulations including the Companies Act and Financial Instruments Exchange Act and various

regulations and rules of TSE and is also required to fulfill the obligations of listed company in

consideration of protection of shareholders and general investors. For the purpose of listing

application, the president of the applicant (representative of chief executive) must describe its

views and policies over corporate code of conduct in “JASDAQ Listing Application Report” by

using their own languages.

JPXR will assess the insight of management into the responsibility for and meaning of listing its

stock on a financial instruments exchange through the interview therewith. For example, JPXR

will assess the following points.

- Purpose of listing stock on a financial instruments exchange;

- Responsibilities the applicant should discharge and roles the applicant should play as a

listed company following listing (corporate code of conduct, compliance with timely

disclosure rules); and

- Views on corporate governance and compliance with laws and regulations


- 107 -

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

a. Where a merger (excluding mergers between an initial listing applicant and its subsidiary,

mergers between subsidiaries of an initial listing applicant, and mergers falling under Rule

208, Item 1 or 2), demergers (excluding demergers between an initial listing applicant and

its subsidiary and demergers between subsidiaries of an initial listing applicant), making

another company a subsidiary or making a subsidiary a non-subsidiary, or transfer of

business from or to other entity (excluding transfers of businesses between an initial

listing applicant and its subsidiary or between subsidiaries of an initial listing applicant) is

scheduled to be carried out on or after the initial listing application day and within three (3)

years from the end of the most recent business year before such day (including cases

where a subsidiary of an initial listing applicant plans to carry out a merger, demerger or

transfer of a business to or from other entity) and, in addition, where the Exchange deems

that the initial listing applicant will cease to be a substantial surviving company due to

such action. However, the same shall not apply to cases where the merger (limited to

cases where the merger was conducted) is deemed to result in a company without

substance as a surviving company and where the demerger is deemed to be a

shareholder-directed spin-off to succeed business from a listed company (limited to the

case where the main business of the initial listing applicant will be succeeded).

b. Where a merger in which the initial listing applicant becomes a dissolved company, a

stock swap or stock transfer whereby it becomes a wholly-owned subsidiary of another

company is planned to be carried out within three (3) years from the end of the business

year immediately prior to the initial listing application day (excluding cases where such

actions are scheduled to be carried out before the listing day)

c. Where a delisting by whole acquisition of shares by a major shareholder, corporate

manager, employee, or other specific person of the initial listing applicant or other method

is planned to be carried out within three (3) years from the end of the business year

immediately prior to the initial listing application day.


This criterion provides that the applicant should not be allowed to carry out any act which may

cause the corporate group of the applicant to lose its substantive corporate continuity or result

in delisting for a certain time of period following listing.

a. Merger, demerger, making another company a subsidiary or making a subsidiary a

non-subsidiary, or transfer of business from or to other entity

If it is expected that a merger (Note 1) will take place within three 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.


- 108 -

In such cases, JPXR 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 three 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: A spin-off of business does not include any shareholder-directed spin-off where the

applicant succeeds to a business of a listed company (limited to cases where a

business taken over from the listed company constitutes a main business of the

applicant).

Even when a merger, etc. effected by an applicant would not meet any one of the above

requirements, the applicant is required to submit additional data when JPXR determines that

such merger, etc. would give rise to significant influence. For more information, please refer to

“VIII 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, JPXR 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.

Note: However, if the applicant intends to reorganize the company before the listing date, the

listing application would be possible.

c. Other acts leading to delisting

If an applicant intends to delist its stock through the acquisition of all the shares by large

shareholders, management, employees or other specified entities of the initial listing applicant

within three years from end of business year preceding the listing date, the applicant is

determined to not be eligible for listing.


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(5) Where an initial listing applicant has introduced a takeover defense measure, it shall comply

with matters enumerated in each item of Rule 440 of the Regulations.



With respect to the adoption of any takeover defense measures, JPXR will assess the following

issues.

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 to become a listed company.

► Introduction of rights plans 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 significantly 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.


- 110 -

On the other hand, with respect to trust rights plans, 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 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 plans

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 to become a listed company.


- 111 -

► 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 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 to become a listed company, in

principle.

However, if JPXR 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

issue 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) Matters to be Observed for 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.

► 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.


- 113 -

► 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 methods to change the

structure of voting rights of shareholders including acquirer or methods to impair property rights

other than voting rights. Thus the applicant has to consider and respect the rights of

shareholders and their exercise in introducing any takeover defense measures.

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 discontinue 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.


- 114 -

* The title of disclosure of takeover defense measures must include the term “takeover defense

measure.”

► 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 criteria 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 (including 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 JPXR 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

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.


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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 allocation 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).

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.


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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 a 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.

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.


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(6) An applicant has developed a corporate structure to prevent anti-social forces from

intervening in management activities and is making efforts to prevent such intervention, and

such efforts are deemed appropriate in light of the public interest or investor protection.



This criterion provides that the corporate group of the initial listing applicant has designed and

implemented internal systems to prevent any involvement of anti-social forces into its

management activities and has strived to prevent such involvement.

If any anti-social organization including organized anti-social forces or a group of equivalent

persons (hereinafter “organized anti-social forces, etc.”) are 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 organized anti-social forces,

etc. are directly involved in the management activities of the corporate group of the applicant.

This includes cases where it is 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 anti-social force, when the applicant group company and related

persons cooperates or contributes to the survival and operation of an anti-social entity by

providing financing, when an applicant group company and related persons intentionally

maintains contact with an anti-social force. In such cases the applicant is not qualified for listing.

In assessing any existence of involvement of any organized anti-social forces, JPXR will base

the assessment on the “Confirmation Statement that the applicant has no relationship with any

organized anti-social forces (hereinafter referred to as the “Confirmation Statement”) and the

form of Confirmation Statement has been designed to enable JPXR to confirm each relevant

mater. This does not mean that any matter unrelated to this assessment will automatically be

excluded from the examination. Rather during the course of examination process JPXR may

assess any matter in the context of involvement of organized anti-social forces.

In order to prevent any involvement of anti-social forces, the applicant is required to develop

and provide systems necessary to preclude any anti-social force by itself. For that purpose, the

applicant must regularly monitor 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 in consideration of “Guideline

as to How Companies Prevent Damage from Anti-Social Forces” (Cabinet Meeting on

Anti-Crime Measures on June 19, 2007).


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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 in consideration of 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 investor 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.

(7) An applicant has not recently committed material violations of laws and regulations or acts

against the public interest, and furthermore is deemed not to conduct acts which are likely

to become a material violation of laws and regulations or work against the public interest in

the future.



The corporate group of the applicant is required not to have committed significant breach of

laws and regulations or public interest. If the corporate group has committed or is likely to

commit significant breach, according to the seriousness JPXR will assess carefully the design

and implementation of systems to remedy legal defects arising from such breach or prevent any

reoccurrence thereof. (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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As mentioned above, JPXR will make listing examinations from the perspectives similar to both

Standard and Growth. So please refer to the criteria for listing on JASDAQ Standard. However,

the requirements of Guidelines III-3, 4 (1) differ from criteria and interpretations applicable to

JASDAQ Standard as JASDAQ Growth offers opportunities for emerging companies with

growth potential to list their stock.

In practice if the applicant has entered into any arrangement for operations, real estate leases

or financing with a related party, etc., the arrangement might be determined to be made for the

purpose of assistance to the applicant if the applicant does not excessively depend on it. For

the examination of listing on JASDAQ Growth, JPXR will consider the satisfaction of respective

requirements in consideration of growth stage of the applicant.

When any transaction for the purpose of assistance to the applicant has taken place, JPXR

assess the reasonableness of transaction (necessity for the business), adequacy of

transactional terms and future policies for transactions during the course of examination.

If some transactions for the purpose of assistance have taken place under the terms and

conditions favorable to the applicant, the applicant is required to disclose the nature of

transactions appropriately.

If the corporate group of assistance considerably benefits from the transactions and the related

party increases its ability to influence the applicant, please note that such benefit may be

considered undue.


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4. Appropriateness of Disclosure of Corporate Details, etc.

(Rule 216-5, 1 (4) of the Regulations, Rule 216-8, 1 (4) of the

Regulations)


Standard Growth

(1)


applicant is deemed to be able to

properly manage corporate information

of facts, etc. which will have a material

impact on management and to disclose it

to investors in a timely and appropriate

manner.

Moreover, its system for the preemptive

prevention of insider trading is deemed

to be developed and operated

appropriately.


(1)

(Same as the left)


(2)

Documents pertaining to disclosure of

corporate information, out of initial listing

application documents, are deemed to

be prepared in compliance with laws and

regulations, and contain the matters

enumerated in the following a to c and

other matters appropriately in

consideration of the state of the business

line and the business condition of an

initial listing applicant and its corporate

group


(2)

(Same as the left)


a

Useful matters for investment

decisions of investors such as

analysis and explanation pertaining

to the state of financial condition,

management performance, and

receipt and disbursement of funds,

a

Analysis and explanation pertaining

to the state of technologies or

characteristics of business model

with growth potential, business

environments, process to

substantive business development,


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the state of related companies, the

state of research and development

activities, the state of major

shareholders, the state of officers

and employees, dividend policy, and

purposes of funds raised for capital

increase through a public offering

with respect to an initial listing

applicant and its corporate group;

progress up to date, financial

position, operating results, and cash

flows of the initial listing applicant

and its corporate group, and useful

matters for investment decisions of

investors such as analysis and

explanation pertaining to the state of

financial conditions, management

performance & receipt and

disbursement of funds, the state of

the related companies, the state of

R&D activities, the state of major

shareholders, the state of officers &

employees, dividend policy,

purposes of funds of an increase in

paid-in capital through a public

offering concerning an initial listing

applicant and its corporate group;

b

Matters that should be considered as

risk factors of an initial listing

applicant when investors make

investment decisions, such as the

small number of years in business

operation, the state of cumulative

losses or business losses,

dependence on a specific officer, the

state of competition for business with

other companies, uncertainties of

markets and technologies, and the

state of support for the purpose of

the administration of business from a

specific entity, etc., concerning an

initial listing applicant; and

b

(Same as the left)

c

Matters enumerated in the following

(a) to (d) with respect to matters

which are the premises of the main

business activities of an initial listing

applicant and its corporate group: c

(Same as the left)

(a)

Details of the matters which are

the premises of the main

business activities of an initial

(a) (Same as the left)


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listing applicant and its

corporate group;

(b)

Where the validity period of

permission and authorization,

etc. and any other time limit is

specified by laws and

regulations or a contract, etc.,

such time limit;

(b) (Same as the left)

(c)

Where cancellation, rescission,

and any other event of

permission, authorization, etc.

are stipulated by laws and

regulations or a contract, etc.,

such fact; and

(c) (Same as the left)

(d)

The effect that there is no factor

which hinders 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 effect that it will

have a material effect on

business activities

(d) (Same as the left)

－ (3)

An initial listing applicant is able to

appropriately develop a medium-term

management plan and hold briefings and

other sessions for investors;


(3)


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

specific entity or adjusting share

ownership ratios, etc.;


(4)

(Same as the left)



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(4)

Where an initial listing applicant has a

company that substantially holds the

majority of its voting rights (hereinafter

referred to as "majority shareholding

company") (excluding voting rights of

shares that do not allow voting on some

matters subject to resolutions at general

shareholders meetings; however,

including voting rights of shares that are

deemed to come with voting rights as

prescribed by the provisions of Article

879, Paragraph 3 of the Companies Act)

(excluding cases where it is expected to

cease to have a majority shareholding

company by the end of the first business

year after listing), any of the following a

or b shall be met on the premise that

disclosure of such majority shareholding

company is valid. However, the same

shall not apply to cases where the

business relationship between the initial

listing applicant and such majority

shareholding company is weak and, in

addition, it is clear that the ownership of

the stock of the initial listing applicant by

such majority shareholding company is

for the purpose of encouraging

investment and nurturing, and not for the

substantial control of business activities

of the initial listing applicant:


(5)

(Same as the left)


a

A stock, etc. issued by a majority

shareholding company of an initial

listing applicant (where there are

multiple majority shareholding

companies, a company which is

deemed to have the greatest

influence on the initial listing

applicant, or where their influence is

deemed to be the same, one of such

companies; the same shall apply

a (Same as the left)


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apply, some matters required to be disclosed by Standard applicants differ from those Growth

Applicants. Especially for Growth applicants, as they have unique technologies and business

models, and the information related to future growth areas, they are required to publish the

characteristics of business models, the disclosure of business environments and medium-term

management plan to investors.

hereinafter in these a and b.) is listed

on a domestic financial instruments

exchange (including cases where a

stock, etc. issued by such majority

shareholding company is listed or

continuously traded on a foreign

financial instruments exchange, etc.

and the state of disclosure of

corporate information in a country in

which such majority shareholding

company or such foreign financial

instruments exchange, etc. is

located is not deemed to be

significantly lacking in terms of

investor protection); and

b

An initial listing applicant can

appropriately grasp company

information such as facts concerning

the majority shareholding company

which have material impact on its

management (excluding a majority

shareholding company which falls

under the preceding a.), and the

initial listing applicant pledges in

writing that such majority

shareholding company agrees to the

disclosure of company information

which has a material impact on such

applicant's management, out of such

company information concerning the

majority shareholding company, to

investors in an appropriate manner.



- 125 -


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

corporate information of facts, etc. which will have a material impact on management and to

disclose it to investors in a timely and appropriate manner. Moreover, its system for the

preemptive prevention of insider trading is deemed to be developed and operated

appropriately.



For the purpose of the examination on the basis of this criterion, JPXR will assess whether 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, and information dissemination, and trade recommendation

practices (hereinafter “insider trading, etc.”).

The following outlines how JPXR will assess these issues.

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.

The management method and the 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 outlook 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 sound financial instruments exchanges and the applicant strives to perform

operations with integrity by making thorough disclosures of accurate and fair company

information. 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 systems to prevent insider trading, etc., JPXR will assess the following:

- 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


- 126 -

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.

Meanwhile, during the process of examination based on this criterion, JPXR will also assess the

status of information security in conjunction with the publications on homepages before the

expected time of official announcement of corporate information.

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

documents, are deemed to be prepared in compliance with laws and regulations, and

contain the matters enumerated in the following a to c and other matters appropriately in

consideration of the state of the business line and the business condition of an initial listing

applicant and its corporate group.


a Useful matters for investment decisions of investors such as analysis and explanation

pertaining to the state of financial condition, management performance, and receipt and

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

development activities, the state of major shareholders, the state of officers and

employees, dividend policy, and purposes of funds raised for capital increase through a

public offering with respect to an initial listing applicant and its corporate group;

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

investors make investment decisions, such as the small number of years in business

operation, the state of cumulative losses or business losses, dependence on a specific

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

markets and technologies, and the state of support for the purpose of the administration of

business from a specific entity, etc., concerning an initial listing applicant; and


- 127 -

c Matters enumerated in the following (a) to (d) with respect to matters which are the

premises of the main business activities of an initial listing applicant and its corporate

group:

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

listing applicant and its corporate group;

(b) Where the validity period of permission and authorization, etc. and any other time limit is

specified by laws and regulations or a contract, etc., such time limit;

(c) Where cancellation, rescission, and any other event of permission, authorization, etc. are

stipulated by laws and regulations or a contract, etc., such fact; and

(d) The effect that there is no factor which hinders their continuity concerning the matters

which are the premises of the main business activities of the corporate group of an initial

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

business activities

* The requirements at a above apply only to JASDAQ Standard. For JASDAQ Growth, please

refer to (2) a at Criteria for Listing on JASDAQ Growth.

Note: The following represents the matters underlying the core business activities of the

applicant.

(a) Nature of business underlying the business activities of the corporate group of the

initial listing applicant;

(b) When validity and other effective period of permits, etc. are regulated by laws and

regulations or contracts, the validity and other effective period;

(c) When the events leading to cancellation, removal and other similar incidents are

regulated by laws and regulations or contracts, the event; and

(d) For any matters underlying the major business activities of the corporate group of the

initial listing applicant, the statement that no factors which may hinder the

continuation of business activities have taken place and that if they took place, they

would have significant effect on the business activities


For the purpose of the examination on the basis of this criterion, JPXR will assess whether the

applicant has fairly prepared disclosure documents on which investors base their investment

decision in accordance with 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.



- 128 -

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).”

First, JPXR will evaluate whether Part I documents have 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.

Information identified as risk information in “Part I” documents represents information to be

addressed as risk factors of the applicant in making investment decisions, including:

- Small number of operating years;

- Cumulative losses or backgrounds for the occurrence of operating losses;

- Dependence of the management on specific officers;

- Competition with other companies;

- Uncertainties over markets and technologies;

- Support by specific persons of the business operation; or

- Matters underling the major business activities of the corporate group of the applicant.

In addition, the applicant is required to include the descriptions of the following in the sections of

“Nature of Businesses” and “Risks Associated with Businesses, etc.” to be included in “Part I”

documents:

- Nature of such matters when there exist any matters underlying the major business

activities of the corporate group of the applicant (for example, permits, authorization, license,

registration, dealership arrangements or production outsourcing arrangements, which are

required for major businesses or products or goods);

- Validity or effective period of permits, etc. when it is regulated by laws and regulations or

contracts;

- Relevant events for the cancellation of permits, etc. when they are regulated by laws and

regulations, etc.;

- Statement that no events which may compromise the matters underlying the major business

activities of the corporate group have taken place; and

- Statement that if such events take place, they would have a significant impact on the

business activities.

As it is supposed that the descriptions concerning risk information contain a significantly wide

variety of topics, an applicant is required to make relevant disclosures in consideration actual

conditions of the applicant. For reference, some examples of descriptions will be illustrated.


- 129 -

Please keep in mind, however, that they represent only samples and do not exhaustively cover

all the topics. The applicant is recommended to undertake innovative efforts to describe the

nature of relevant businesses and facts on a precise and timely basis.

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.

When an applicant has a parent company (excluding cases where the applicant is expected to

cease to have any parent company by the end of business year which ends first after listing) 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

information 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 assess whether the applicant has described the relationship with the parent

company in the sections of “Status of Related Companies” and “Risks Associated with

Businesses, etc.” in “Part I” documents in an understandable manner. During the due course of

examination, JPXR will assess whether business relationships with the parent company, etc.

have been described in an understandable manner. In actual examination, JPXR will examine

the following issues:

- 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; and

- Meanwhile, if there is any company in the corporate group of the applicant which carries out

businesses similar to those carried out by the applicant, JPXR will assess whether the roles

and position of the applicant have clearly been described in an understandable manner.

Naturally it is important that the applicant actively prepares disclosure documents in depth and

JPXR will assess such point during the course of examination.


- 130 -

(Reference) Examples of descriptions at the section of “Risks Associated with

Businesses, etc.) in “Part I” documents

For example, an applicant would be required to describe the following events, conditions or

other matters which might have a significant impact on the management of the corporate group

of the applicant in an understandable and concise manner.

► Risks associated with the shortness of company and business history

・Only a short period of time has passed since its foundation and financial guarantee of its

president, etc. is required;

・Businesses which have been commercialized have not yet been growing on a stable basis

► Risks associated with financial position, operating results and cash flows

・The applicant has not generated profit or has incurred cumulative losses;

・It is unlikely that no profit will be generated according to the business plan;

・The applicant is highly dependent on borrowings (including contingent liabilities)

► Risks associated with the likelihood that historical trends of businesses would not be useful

or would be less useful for investment decisions

・Financial information for sufficient years of operations will not be available to compare the

operating results among operating years because of shortness of operation years;

・The past operating results of the applicant did not result in profit due to some reason or

event;

・The applicant intends to significantly change its businesses going forward

► Risks associated with significantly evolving business environments, etc.

・The industry where an applicant operates is likely to drastically change due to new entrants

or changes in business environments surrounding the applicant

► Risks associated with excessive dependence on specific persons or people with high skills

・An applicant where the number of officers and employees is small excessively depends its

management or specific technologies on specific persons and replacement of such

persons with others would be difficult.

► Risks associated with longer period required for commercialization and launch into market

of new products and technologies

・An applicant has been developing new products and technologies, commercialization or

launch into market of such products and technologies is likely to take longer time or full

operation of plants or factories therefor would require several years

► Risks associated with excessive dependence on specific products or technologies with

uncertain future profitability;


- 131 -

・Though an applicant has been operating based on the sales of specific products or

development of special technologies, some new entrants are expected as the applicant

has not protected the products or technologies by patent registration or it has made sales

through some license arrangements with specific companies;

・As an applicant is totally dependent on only a certain product, it cannot provide stable

supply responsive to changes in environments surrounding the business or changes in

contracts with suppliers

► Risks associated with excessive dependence on certain customers and suppliers subject to

unstable business relationships

・As an applicant excessively depends its procurements, sales, etc. on certain business

partners, the applicant may find the continuous business relationship challenging or find it

difficult to seek alternative business partners

► Risks associated with specific legal regulations or business practices or conventions

・Businesses are regulated, or are expected to be regulated, by specific laws and regulations.

► Risks associated with matters underlying major business activities

・As major businesses or products of an applicant are subject to permits, authorization,

licenses, registration, dealership arrangements or production outsourcing arrangements

(hereinafter referred to as “permits, etc.”), the revocation or cancellation of permits, etc.

may adversely affect the business activities of the applicant

► Risks associated with occurrence of significant legal cases

・Significant legal cases have taken place which may have significant impact on the operating

results of the applicant;

・Though currently no legal cases have occurred, an applicant may be subject to some legal

actions arising from changes in environments surrounding its businesses.

► Risks associated with business relationship between an applicant and related party or other

specified entity

・Any officer of the applicant has financially guaranteed the applicant and the amount or the

timing of its extinguishment may have impact on the operations of the applicant

► Risks associated with relationship with large shareholders

・Any involvement of large shareholders in the management of the applicant may have some

impact on business developments of the applicant going forward;

・An applicant depends its management on large shareholders and may not be able to

continue its business relationship with large shareholders due to some reasons or events


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► Risks associated with current or future development of businesses

・An applicant has entered into partnership arrangements with business partners playing

important roles in the business development of the applicant, for example, for procurement,

production or sales;

・Where of businesses which an applicant has operated or expects to operate going forward,

there are some businesses an applicant intends to focus on or expand, some business or

legal risks are likely to arise associated with such businesses.

► Other risks associated with matters likely to significantly influence the decisions of investors

・As an applicant has allotted share options, the price formation of its shares might be

affected due to the dilution of price per share or disequilibrium of demand and supply on a

short term basis if such options are exercised.

・An applicant has entered into an arrangement with shareholders whereby the shareholders

have promised not to sell their shares for a certain period of time following listing.


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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 specific entity or adjusting share

ownership ratios, etc.;



For the purpose of the examination on the basis of this criterion, JPXR will assess whether no

transactions with or equity contributions to any company under the auspices of the corporate

group have taken place such that the company information of the applicant (i.e., the

descriptions in disclosures of corporate information 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 holds a majority holding company

(4) Where an initial listing applicant has a company that substantially holds the majority of its

voting rights (hereinafter referred to as "majority shareholding company") (excluding voting

rights of shares that do not allow voting on some matters subject to resolutions at general

shareholders meetings; however, including voting rights of shares that are deemed to

come with voting rights as prescribed by the provisions of Article 879, Paragraph 3 of the

Companies Act) (excluding cases where it is expected to cease to have a majority

shareholding company by the end of the first business year after listing), any of the

following a or b shall be met on the premise that disclosure of such majority shareholding

company is valid. However, the same shall not apply to cases where the business

relationship between the initial listing applicant and such majority shareholding company is

weak and, in addition, it is clear that the ownership of the stock of the initial listing applicant

by such majority shareholding company is for the purpose of encouraging investment and

nurturing, and not for the substantial control of business activities of the initial listing

applicant

a. A stock, etc. issued by a majority shareholding company of an initial listing applicant

(where there are multiple majority shareholding companies, a company which is deemed

to have the greatest influence on the initial listing applicant, or where their influence is

deemed to be the same, one of such companies; the same shall apply hereinafter in

these a and b.) is listed on a domestic financial instruments exchange (including cases

where a stock, etc. issued by such majority shareholding company is listed or

continuously traded on a foreign financial instruments exchange, etc. and the state of

disclosure of corporate information in a country in which such majority shareholding

company or such foreign financial instruments exchange, etc. is located is not deemed to

be significantly lacking in terms of investor protection); and

b. An initial listing applicant can appropriately grasp company information such as facts

concerning the majority shareholding company which have material impact on its

management (excluding a majority shareholding company which falls under the preceding

a.), and the initial listing applicant pledges in writing that such majority shareholding

company agrees to the disclosure of company information which has a material impact on

such applicant's management, out of such company information concerning the majority

shareholding company, to investors in an appropriate manner.



It is likely that the applicant will be influenced by the majority holding company through the

business relationship with it in various ways after listing. Thus in addition to the corporate

information of the applicant, information on majority holding company would be useful for

investment decisions made by investors who invest in the applicant.


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This criterion requires that the applicant be in a position to disclose information of the majority

holding company in the listing of the applicant.

The majority holding company 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 majority

holding 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 majority holding

companies in the corporate group, and relationships between the applicant and majority holding

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 majority holding company, controlling shareholders (excluding majority

holding 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 majority holding 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 majority holding company” 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 majority

holding companies at the end of the business year first coming after the listing, the applicant is

not required to submit any of them. For formats and matters to be described in “Matters related

to controlling shareholders,” and “Financial information of a non-listed majority holding

company” please refer to “A4 Matters Related to Controlling Shareholders, etc. and Financial

Information of a Non-Listed Majority Holding Company”

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 majority holding company 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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For the requirements of Guidelines III-3 5.(1), (2) b and c, (4) and (5), please refer to Criteria for

Listing on Standard (Guidelines III-2 5.(1), (2) b and c, (3) and (4)).

The following discusses the focus points of examination in relation to the requirements of

criteria for listing on JASDAQ Growth which differs from those for listing on JASDAQ Standard.

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

documents, are deemed to be prepared in compliance with laws and regulations, and

contain the matters enumerated in the following a to c and other matters appropriately in

consideration of the state of the business line and the business condition of an initial listing

applicant and its corporate group


a. Analysis and explanation pertaining to the state of technologies or characteristics of

business model with growth potential, business environments, process to substantive

business development, progress up to date, financial position, operating results, and

cash flows of the initial listing applicant and its corporate group, and useful matters for

investment decisions of investors such as analysis and explanation pertaining to the

state of financial conditions, management performance & receipt and disbursement of

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

shareholders, the state of officers & employees, dividend policy, purposes of funds of an

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

and its corporate group;


Basically the requirements are the same as those for listing on JASDAQ Standard. However, as

companies aiming at listing their stock on JASDAQ Growth have unique technologies and

business models with future growth potential, information related to business fields would be

material. Thus the requirements require applicants to disclose information concerning the

outlines of technologies owned by applicants, characteristics of business models, business

environments surrounding applicants, schedule for the substantial development of businesses

to investors through the descriptions in “Part I” documents.


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(3) An initial listing applicant is able to appropriately develop a medium-term management plan

and hold briefings and other sessions for investors;



This criterion requires a Growth applicant to be prepared for appropriately developing the

medium-term management plan and making the presentation, etc. thereof to investors.

JASDAQ Growth offers a board for companies with future growth potential where future

information of the corporate group of the applicant is material to investors. Thus, the

requirements the applicant to publish the medium-term management plan and the presentation

to investors based thereon, in addition to single year performance outlooks required in the

timely disclosure.

Thus during the due course of the examination, JPXR will assess whether an applicant has in

place the systems to appropriately review and develop a plan underlying the medium-term

management plan and manage the progress of the plan and could meet those requirements

after listing. In practice, JPXR will assess the following:

・Whether the applicant has reasonably developed the medium-term management plan in

consideration of the analysis of the business environment;

・Whether the applicant has appropriately recognized the conditions underlying the

mid-management plan and has been able to present it in an understandable manner;

・Whether the applicant has designed and implemented to review the progress of the

medium-term management plan periodically and appropriately analyze factors giving rise

to any differences between the plan and actual results, if any.

Development of medium-term management plan

Growth companies are required to make the medium-term management plan available for

public inspection within two weeks from the final settlements of accounts of respective

consolidated accounting year (in case of listed companies not required to prepare

consolidated financial statements, respective business year) through TDnet. They must

include the descriptions of the following in the medium-term management plan.

・Progress of business plan for the previous consolidated accounting year as of the

submission of the medium-term management plan;

・Contents of and conditions underlying the business plans for respective consolidated

accounting year which are prospectively prepared for three consolidated years or more

following the next of consolidated application year;


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・Progress of business plans for respective consolidated accounting year and factors leading

to possible future achievement and failure of plans on the basis of comparison with the

conditions underlying the plan

The applicant is also required to develop one or more medium-term management plans for

one consolidated accounting year since the consolidated accounting application year;

provided, however, that when there are some amendments to the medium-term

management plan submitted, the applicant is required to newly make the document including

the amendments available for the public inspection through TDnet.

Holding of presentations for investors

Growth companies are required to hold the presentation sessions for the medium-term

management plan for investors (*) or implement activities equivalent to them once or more at

least during one consolidated accounting year.

“Holding of presentations for investors” means that the listed companies hold the

presentations concerning the investment in securities by inviting all or part of investors.

“Activities equivalent to them” mean that the listed companies publish the medium-term

management plan or electronic films related to the presentation materials on their

homepages so that a large number of general investors could browse them. In this case the

listed companies are required to publish any amendments to presentation materials of

medium-term management plan, if any.

* Investors represent individual investors and institutional investors (accredited institutional

investors and the like as prescribed in Rule 2, Paragraph 3, Item 1 of Financial

Instruments Act), financial analysts or shareholders.


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5. Other Matters Deemed Necessary by the Exchange from the

Viewpoint of the Public Interest or Investor Protection (Rule

216-5, 1 (5) of the Regulations, Rule 216-8, 1 (5) of the

Regulations)


Standard Growth

(1)

The details of the rights of shareholders

or holders of foreign stock depositary

receipts, etc. and the state of their

exercise are not unfairly restricted.


(1)

(Same as the left)


(2)


applicant does not have an ongoing

lawsuit or dispute, etc. which would have

a material impact on management

activities and business performance.


(2)

(Same as the left)


(3)

When the domestic stocks pertaining to

an initial listing applicant are shares 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, all of the following a. to h.

shall be met.

(Guidelines III-2, 6 (3) ) (3)

(Same as the left)


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

a (Same as the left)


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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.

(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..

(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;

(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 are

transferred, they will in principle be

converted to stocks with less voting

rights shall be appropriately included

in the Articles of Incorporation.

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



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applicant or a takeover defense

measure.

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.

c (Same as the left)

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.

(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.

(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)

d (Same as the left)

e

Where conflicts of interest arise

between shareholders of different

classes, it is deemed that protection

measures can be taken so that

shareholders of a domestic stock, etc.

e (Same as the left)


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pertaining to such initial listing

applicant are not unfairly damaged.

f

Where the issuer of the domestic

stock, etc. pertaining to such initial

listing application carries out a

transaction with an entity enumerated

in the following (a) to (c) (including

transactions, out of transactions

carried out between an entity

enumerated in the following (a) to (c)

and such issuer on behalf of a third

party and those between such issuer

and a third party, where an entity

enumerated in the following (a) to (c)

has a material impact on such issuer

concerning such transactions), it is

deemed that measures to protect

minority shareholders are expected to

be able to be taken.

f

(Same as the left)

(a) A parent company (Same as the left)

(b)

The controlling shareholders

(excluding a parent company)

and their close relatives

(Same as the left)

(c)

The company, etc. whose

majority of voting rights are held

by the entities enumerated in the

preceding (b) for their own

account that holds the majority

of the voting rights on its own

account and a subsidiary of

such company, etc.;

(Same as the left)

g

Where the domestic stock, etc.

pertaining to such initial listing

application has preferential contents

concerning dividends from retained

earnings, as a general rule, estimated

profits for two (2) years after the end

of the business year immediately prior

to the listing application date and a

distributable amount as of the end of

g (Same as the left)


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JPXR will assess the status of shares issued by an initial listing applicant, existence of legal

cases or disputes which may have a significant impact on management activities or operating

results from the perspectives of public interest and investor protection. Basically the

examinations of listing on Standard and Growth will be made from similar perspectives.

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 record enough profits to carry out

dividends from retained earnings

pertaining to such domestic stock,

etc.

h

The interests of shareholders and

investors are deemed to be highly

unlikely to be undermined.

h (Same as the left)

(4)

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 the Guidelines III-2 6 (4).


(4)

(Same as the left)


(5)

It is deemed appropriate from the

viewpoints of the public interest or



(4)

(Same as the left)



- 145 -

Criteria for Listing on Standard and Growth

(1) The details of the rights of shareholders or holders of foreign stock depositary receipts, etc.

and the state of their exercise are not unfairly restricted.

(Guidelines III-2, 6 (1) and Guidelines III-3, 6 (1) )


If an applicant has issued class shares 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 class shares and any expected effect thereof on the rights of equity holders of common

shares and the status of disclosures thereof.

(2) The corporate group of an initial listing applicant does not have an ongoing lawsuit or

dispute, etc. which would have a material impact on management activities and business

performance.



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 significantly adverse effect on

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.


- 146 -

(3) When the domestic stocks pertaining to an initial listing applicant are shares 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, 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, TSE 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

examination 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.


- 147 -

(1) Shares of class stock with voting rights eligible for listing

JPXR 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, JPXR 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

Single listing

Listing concurrent

with common

shares

Shares with less voting rights

× ○ ×

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 III-2, 6.(4).


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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 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) 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;



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, TSE 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 and


- 150 -

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.



- 151 -

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;

(Guidelines III-2, 6 (3) and Guidelines III-3, 6 (3) ) (Guidelines II 6.(4) )

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 dissolve the scheme) could be considered.


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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 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, JPXR 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.


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In addition, JPXR will examine that the purposes and policies of the exercise of voting

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 III 2, (2)

and III 4, (2) for the purpose of ensuring independence of the subsidiary.

Typically, the management of parent company, etc. is required to fulfill its stewardship in

order to increase the profitability of a parent company, etc. As such, compared to the

control held by individual shareholders, a conflict of interest would be more likely to take


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place in such a situation. Therefore, this criterion requires the strict independence 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 resolution 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, 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.


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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. 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.


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► What is a controlling shareholder?

Controlling shareholders refer to major shareholders who account for the majority 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 voting 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 represent mean 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

Article 115 of the Companies Act), JPXR 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?


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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.

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


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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, 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


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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 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.


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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?

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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(4) It is deemed appropriate from the viewpoint of the public interest or investor protection.



When the purposes or lines of business of an applicant conflict with the public interest and good

morals, 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 the 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 as 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 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


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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.

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.


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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 Checklists Before Applying for Listing on JASDAQ

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IV Checklists Before Applying for Listing on

JASDAQ

Checklists included in this chapter have been developed such that a prospective applicant may

smoothly prepare itself for listing on JASDAQ.

Checklists address general issues which should be checked and confirmed by the applicant at

the stage of preparation for listing in consideration of the design and implementation of systems

suitable for JASDAQ companies. The design and implantation of systems may vary depending

on the size, category and lines of business of prospective applicants. Thus, a prospective

applicant is encouraged to consult the lead underwriter and audit firm.

If a prospective listing applicant has any subsidiary and affiliated company, keep in mind that

appropriate systems concerning management control including subsidiary, etc. and disclosures

of consolidated information must be designed and implemented.

JASDAQ Standard

1. Has the Business Plan been Reasonably Developed in

Consideration of Future Business Developments?

The examination for listing on JASDAQ Standard requires that there would be no concern over

the corporate continuity of the applicant. Therefore the point of examination is that the business

plan of a company expecting to file a listing application has appropriately been prepared.

The business plan represents basic materials which underlie “Part I” documents comprising the

disclosure documents containing investment information before listing and various information

included in disclosures made available to investors after listing. Therefore the business plan

(including the use of expected proceeds from listing and recovery plan of investments) must be

developed on the basis of objective analysis of internal and external circumstances surrounding

the operation of the prospective applicant.

It is also necessary that the business infrastructure required to perform the business plan has

been designed and implemented.


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1) Has the business plan been reasonably developed in consideration of various factors to

be considered in the development of business, including characteristics of its own

business (strong points and weak points), current status of the industry, developments

of peers, size and growth of the market in which the applicant operates, demand

trends for new products and services, trends for raw materials market, etc., status of

major trading partners and status of legal regulations?

□

2) Can you clearly discuss risk factors to be addressed in realizing the business plan? □

3) Have you appropriately designed and implemented the business infrastructure

(including human resources such sales people and R&D staff, physical resources such

business bases and facilities, etc., and various management resources including capital

resources for investment) necessary to perform the business plan?

□


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2. Have Business Management Organizations Effectively

Functioned?

(1) Board of Directors

If no sufficient discussions and considerations are made at the Board of Directors which

represents the highest level of decision making organ on business execution, it is deemed to

exist merely in form. In such cases the supervisory function of the Board of Directors over the

performance of businesses will not operate properly and the decision making of the applicant as

a company will substantively be biased to specified entities, thereby giving rise to the danger of

preferring the interests of specified entities to the interests of shareholders. Thus the Board of

Directors is required to comply with due process represented by sufficient discussion and

consideration on the basis of agenda and monthly operating results and to make decision and

supervision in compliance with such due process.

1) Do you regularly hold the meetings of the Board of Directors? Can you flexibly hold

them as appropriate to make prompt decisions? □

2) Have you determined agenda to be deliberated at the Board of Directors after sufficient

discussions and considerations? Have you prepared sufficient discussion papers and

other materials for the purpose of the Board of Directors? In addition, have you

prepared the minutes of meeting of the Board of Directors as required by laws and

regulations?

□

3) Have you reported important information for the purpose of business operation

properly? □

4) Has the supervision of the Board of Directors over the executive officers operated

effectively? □

5) Have not you made any decision biased to the interests of specified entities? □

6) Has not any concurrent holding of positions at another company impeded the decision

making or business performance of the company? □

7) Does the method of resolution at the Board of Directors constitute an appropriate

method from the perspective of corporate governance? □


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(2) Company Auditors

Company auditors are required to demonstrate competence to audit the execution of duties of

directors, accounting advisors and the Board of Directors. In order to fulfill the requirement,

company auditors must attend the meetings of the Board of Directors, in addition to audits over

daily businesses.

1) Have the check and balance functions of company auditors over the execution of duties

of directors and accounting advisors been implemented appropriately? □

2) Have company auditors worked together with relevant audit firms or internal auditors to

appropriately perform auditing practices? □

3) Have company auditors attended the meetings of the Board of Directors? □

(3) Independent Directors / Auditors

TSE requires listed companies to appoint one or more independent directors / auditors (outside

director or outside auditor who is unlikely to cause any conflict of interests with general

shareholders) for the purpose of the protection of general investors. TSE has defined this

requirement as the “Covenants to be Complied with” in the Corporate Code of Conduct. Thus

any company which intends to prospectively file the listing application is required to appoint the

independent director and submit to TSE the “Registration Statement of Independent Directors”

with the description of the status of the appointment of independent directors by the date of

listing.

1) Have you appointed one or more outside directors or outside auditors as independent

directors/auditors to be registered? □

2) Are expected outside directors or outside auditors who will be registered as

independent directors/auditors to be the persons to be unlikely to cause any conflict of

interests with general shareholders? Do you believe that they do not meet any event

mentioned in Guidelines III 5, (3)-2?

□


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(4) Accounting Advisors

Accounting advisors are obliged to prepare the financial statements, etc. jointly with directors

and executives. For the examination of listing of a company with the committee of accounting

advisors, the company is required to develop and provide internal systems to make statutory

disclosures and timely disclosures in a timely, appropriate and consistent manner without

excessively depending on accounting advisors.

1) In case of a company with the committee of accounting advisors, do you believe that

the internal system in terms of statutory disclosures and timely disclosures does not

excessively depend on accounting advisors?

□

(5) Internal Audits

Internal audits shall be performed so that the management can ensure the preservation of the

company assets and the execution of lawful and efficient business operations. Basically the

internal audits should be desirably designed to be implemented by independent departments

which are not influenced by any specific departments or divisions. However depending on the

size, lines of business, or category of business, the internal audits implemented by independent

departments may not always be efficient. In such cases, the applicant is encouraged to

consider the actual status of the operation of the company and develop the internal audit

function responsive to the actual status

1) Have you implemented effective internal audit practices (plan, execution and reporting)

in consideration of the size, lines of business, category of business? □

2) Have audited departments of the company appropriately addressed matters identified

during the internal audit practices? □

3) Have you adopted any alternative approach in the case where the company has not

established any internal audit departments? □


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(6) Internal Managements and Regulations

The framework for internal check and balance function necessary for the preservation of

corporate assets and lawful and efficient business operations shall be based on the

development and appropriate implementation of internal regulations. Thus it is required that

internal regulations have appropriately been developed in consideration of the size, lines and

category of business of the company and businesses are operated in compliance with such

regulations. These internal regulations include, for example, regulations on the management of

organizations (Regulations on the Board of Directors, Regulations on the Board of Company

auditors, Regulations on the Segregation of Duties, Regulations on Authorizations attached to

Respective Duties, etc.), regulations on business management (regulations on budget control,

regulations on share handling, regulations on the management of related companies,

regulations on sales management, regulations on procurement management, regulations on

company information control, etc.) and regulations on accounting and financing (accounting

regulations, cost accounting regulations, etc.). In addition to the regulations enumerated above,

other regulations may have to be developed in consideration of the size, and lines and category

of business of the company.

Meanwhile, the Companies Act clearly provides for the design and implementation of the

internal management system. The Financial Instruments and Exchange Act requires the

implementation of an internal control reporting system over financial reporting. When an

applicant becomes a listed company, the applicant is required to develop and provide the

internal control system in consideration of these laws and regulation.

1) Have you developed and provided necessary internal regulations in consideration of

the size, lines and category of business? □

2) Have the internal regulations provided for inter- and intra-departmental mutual check

and balance functions? □

3) Have you periodically amended and updated internal regulations in line with the

changes in size and business of the company? □

4) Have the company businesses been operated in compliance with the internal

regulations? □

5) Have you designed and implemented the systems to develop business plans through

due process including coordination among departments and divisions and performed

the systems appropriately?

□

6) Have you designed and implemented an internal management system with reference to

laws and regulations? □


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(7) Operating Results Management

In order for the management (including executive officers) to make appropriate management

judgments, it is inevitable that they accurately understand the status of the company (including

relevant departments and divisions) and the company is required to develop a system which

enables the management to understand and analyze the monthly operating results and status

of business at an early point. In order to make appropriate analysis of monthly operating results

and status of businesses, the comparison between the reasonably developed budget and

actual results is deemed to be effective. The early understanding and analysis of the monthly

operating results and status of business are also essential for the timely and appropriate

information disclosures (performance outlook and revisions thereto) after listing.

1) Does the management accurately understand the status of the company? □

2) Is the management able to understand the monthly operating results and status of

businesses at an early point? □

3) Is the management able to make timely and appropriate management judgments on

the basis of the comparative analysis of budgets and actual results and other

management information?

□

(8) Other Considerations for the Management

1) Have you appropriately produced and kept material documents including statutory

documents and various contracts and agreements? □

2) Do you have the ability to obtain patents for important and essential technologies

associated with the management? □

3) Even when the company has outsourced a part of the management control functions

(general affairs department and accounting and financing departments), is the company

able to perform appropriate management, information analysis and explanation

concerning the outsourced businesses under its responsibility?

□


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3. Have you Prepared Yourself for Timely and Appropriate

Disclosures of Corporate Information?

(1) Internal Systems

Rule 401 of the Regulations of TSE requires that “A listed company shall make efforts to carry

out such faithful execution of business as strengthening prompt, accurate and fair disclosure of

corporate information at all times from the viewpoint of investors with full recognition that timely

and appropriate disclosure of corporate information to investors is the basis of a sound market

for financial instruments.” Since the listed companies are required to consistently provide timely

and appropriate disclosures to investors, they must design and implement suitable systems for

the purpose. That is, if the information disclosures rely too much on specified entities, they

cannot preclude the possibility that information disclosures might be impeded. In order to avoid

such circumstances the listed companies are required to design and implement the

company-level systems.

1) Have you designed and implemented appropriate systems to make statutory

disclosures, timely disclosures and IR activities on a timely, accurate and consistent

basis?

□

2) Have you designed and implemented appropriate systems to make communications

with the parent company at any time? □

3) Have you designed and implemented appropriate security systems and procedures for

publication when you intend to publish any materials for timely disclosure of corporate

information and make them available to outside persons on your proprietary website

earlier than the expected time?

□


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(2) Disclosure Documents

JPXR will examine “Part I” documents in terms of disclosure documents as materials providing

investment information. Therefore an applicant is required to describe the required matters

exhaustively and also to proactively and prominently highlight information which the applicant

deems useful for the investment decisions in an understandable manner. Since the descriptions

are required to be consistently made after listing, the applicant should design and implement

appropriate systems to meet the requirements for the descriptions.

1) Have you made necessary preparations for the production of “Part I” documents in

compliance with laws and regulations? □

2) Have you made necessary preparations for the descriptions of “Part I” documents such

that general investors can easily understand information useful for investment decisions

including the commentary and analysis of lines of business, financial position, operating

results and status of cash flows; status of related companies, R&D activities, major

shareholders and officers and employees, dividend policy and use of proceeds from

capital increase through public offering?

□

3) Have you designed and implemented the systems to exhaustively describe information

concerning risks in nature for the investment decisions in “Part I” documents such that

general investors can easily understand them? Such information relates to the

shortness of operations, accumulated deficits or losses on businesses, dependence of

management on specified officers, competition with peers, uncertainties over markets

and technologies, business support from the specified entities, premises underlying

major businesses and other information to be considered as risk factors for investment

decisions.

□

4) Have you not distorted the disclosure of actual conditions of the corporate group as you

have made undue adjustments for equity contributions as a percentage of shareholders’

equity of a lower ranking company in terms of equity contributions?

□


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(3) Disclosure of Operating Results

When an applicant becomes a JASDAQ company, the applicant is required to consistently

disclose its full-year and quarterly operating results and performance outlook. The operating

results disclosed must be useful as investment information. To meet this requirement, they must

be disclosed on a quick and accurate basis. For the disclosure of the performance outlook, the

company may have to revise information on future outlook, including information on operating

results, to ensure that the outlook faithfully depicts the company’s progress of operations. When

these revisions are necessary, the company must also make them on a timely and appropriate

basis. For this purpose, the company must perform an appropriate comparison between its

budget and actual results on a monthly basis.

1) Have you made the necessary preparations to disclose your preliminary release of

operating results for the full business year at least within 45 days after the end of the

year? And in a similar vein, have you been preparing preliminary release of quarterly

information within the same time frame you have used for the full-year disclosures, or

within a shorter time frame?

□

2) Have you designed and implemented systems to disclose future outlook information

(including appropriate performance outlook) and made timely and accurate revisions to

future outlook information?

□

(4) Accounting Processing

Financial statements (including consolidated financial statements; the same shall apply

hereinafter) represent statements to faithfully depict the financial position and operating results

of the prospective listing applicant, which are especially important among disclosure information.

Therefore, the applicant is required to consult the audit firm with respect to the decisions on and

revisions to the contents thereof in advance in consideration of lines and category of business.

1) Are the accounting procedures and practices appropriate in light of accounting

standards, accounting convention, lines and category of business? □

2) Is accounting records and database produced and kept in an appropriate manner? □


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Disclosure documents such as “Part I” documents require the inclusion of financial statements

for the last two preceding business years. This disclosure of the two-year results is considered

potentially useful as investment information, as the preceding years can be compared with the

current year. Year-to-year comparison can be difficult, however, if an applicant has changed its

business year. Hence, a change of the business year would basically be undesirable.

1) If you made any change to the business year (period or balance sheet date) during the

last two years, can you reasonably explain why the change was required? □


last two years, have you undertaken necessary procedures to disclose supplementary

information to ensure comparability?

□

(6) Management of Company Information

Company information, especially management of material information as required by the

Financial Instruments and Exchange Act and timely and appropriate disclosure thereof requires

company-level information management systems as it is very important to prevent any insider

trading, thus contributing to enhancing confidence in financial instrument markets.

Recently, the number of insider trading scandals involving officers and employees has been

increasing and they are naturally subject to legal accusation and payment of penalties.

Companies are encouraged to further improve the systems to avoid such incidences.

1) Can you appropriately manage company information in compliance with internal

regulations on company information management? □

2) Can you disclose material information on a timely and appropriate basis? □

3) Do you intend to provide education and training sessions for the purpose of preventing

any insider trading? □


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4. Has not the Soundness of Corporate Management been

Impaired due to Transactions with Company Related Parties,

etc.?

Transactions carried out by a company require the reasonableness (necessity for the purpose

of business) of the transactions and regular terms and conditions as well. Lacking in either of

such elements may give rise to doubt of undue grant of benefits to specified entities. Thus such

situations are certainly concerned from the perspective of soundness of corporate

management.




applied, which may result in some frauds. Therefore, it is necessary to ensure that an



that any transaction involving the management which was actually carried out is not an

inappropriate one.

(Transactions with related parties, etc.)

1) Can you demonstrate any reasonableness (necessity for the purpose of business) for

carrying out such transactions? □

2) Are the terms and conditions of transactions adequate compared to regular

transactions, except for transactions made with a view to supporting the applicant? □

3) Do you have any rules to periodically consider and review the reasonableness of

continuation of transactions (necessity for the purpose of business) and the terms and

conditions thereof?

□

4) Have you included the transactions within the scope of audits (audits by company

auditors and internal audits)? □

5) Do you have in place systems to appropriately disclose the nature of transactions in the

disclosure documents? □

(Irrespective of existence of transactions)

6) Can you accurately understand the existence and nature of transactions with related

parties? □

7) Do you have in place any systems to appropriately check the transactions with related

parties? □


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(When there is any transaction involving the management)

1) Is such transaction inappropriate? □


2) Can you accurately understand the existence of any transaction involving the

management? □

3) Do you have in place any systems to consider any transaction involving the

management at the corporate level and apply the check and balance functions

appropriately?

□


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5. Have You Properly Addressed Other Considerations in Filing a

Listing Application?

(1) Parent Company, etc. When a prospective listing applicant has a parent company, etc. (excluding cases where the

parent company, etc. does not intend to control the prospective listing applicant), it is likely that

many aspects of the business activities of the prospective listing applicant would be influenced

by the parent company, etc. in conjunction with equity contributions, human resources,

financing or transactions, etc. Thus when the prospective applicant has a parent company, etc.,

the applicant is required to issue the representation that free business activities of the

prospective applicant would not be impeded by the intention of the parent company, etc. and

the parent company, etc. agrees to disclose certain information as the information on the parent

company, etc. could be material as investment information of the prospective applicant.

1) Are free business activities or management judgments unlikely to be impeded when

there is any company in the corporate group of the parent company, etc. which carries

out the similar lines of business as the applicant?

□

2) Are there any situations where free management activities of the applicant might be

impeded as the total number of directors concurrently holding positions at a parent

company, etc. or those seconded from a parent company, etc. account for the majority

of the board members (including respective committee in case of a company with

committees system)?

□

3) Are there any circumstances where the business activities of the prospective applicant

depend on the parent, etc. in nature as the applicant carries out its business activities at

the instructions of the parent company, etc., rather than at the discretion of the

applicant?

□

4) Are there no excessive constraints imposed by the parent company, etc. on the

decision making in carrying out management activities of the prospective applicant? □

5) Have not you received any equity contributions from directors or officers of the parent

company, etc. or grant of subscription warrants to them, which cannot be explained

reasonably in implementing business operations independent of the parent company,

etc.?

□

6) When the applicant has business relationships with the parent company, etc. such as

operational transactions and real estate leasing, has either of you or parent company,

etc. not forced or induced any transactions which could be onerous to any of the parties

to transactions?

□

7) Can you demonstrate the reasonableness and necessity of transactions with the parent

company, etc.? Do you believe that the terms and conditions of transactions with the □


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parent company, etc. are appropriately consistent with regular transactions?

8) When you have a majority holding company, can you submit to TSE a relevant

“Undertaking Statement” at the time of listing application? □

9) When you have a majority holding company, have you prepared yourself for submitting

to TSE its “Financial Information of Majority Holding Company” at the time of listing

application and has the majority holding company has agreed to make relevant

disclosures of company information, etc. as required by TSE?

□

(2) Other

1) Do not your business activities violate the public interest and good morals? □

2) Do not your company, its related parties and other specified entities have any relations

with any anti-social force including organized criminal entity? □

3) Do not you have any material legal actions, cases, disputes and violation of laws and

regulations? □

4) If any restrictions are imposed on the transfer of stock for which the listing application is

filed, do you intend to amend the Articles of Incorporation and remove the constraints

on the transfer by the listing date?

□

5) Have the shares of your stock been handled by the designated book-entry transfer

institution or are they expected to be handled by the institution by the time of listing? □

6) If you have not entrusted any share handling services to a shareholder services agent

designated by TSE, have you received the consent from the agent to the effect that it

would accept the outsourced services?

□

7) Is the public announcement required by the Articles of Incorporation available on the

nation-wide daily newspaper or via any electronic announcement? If not, have you

undertaken appropriate measures such that the matters to be publicly announced are

widely disseminated as they are posted on your website (without any differences in the

degree of dissemination depending on areas or regions)?

□

8) Have you complied with various rules set forth by TSE in terms of allotment of new

shares to third parties or changes of hands of shareholding? □

9) If there is any recent change in the audit firm or lead underwriter, can you explain the

reasons for such change reasonably? □

10) Are you appropriately addressing any instructions given by the audit firm or lead

underwriter? □

11)Does the management understand the corporate code of conduct and fully recognize

the meaning of listing its stock and responsibilities arising therefrom? □

12) Would no future merger, etc. (merger, divesture, turning the company into a subsidiary

or non-subsidiary) or delisting by the management take place, which may give rise to

doubts over the corporate continuity of a prospective applicant?

□


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6. Have You Completed Necessary Preparations for Interviews

with JPXR or Answers to Questions Made by JPXR in Writing?

The following discusses major items to be assessed by JPXR in the interviews of JPXR made

with or written questions given to the JASDAQ Standard applicant. If you address these items

in advance, the listing examination could be implemented more smoothly. JPXR may spare

some items in consideration of the size, lines and category of business of the applicant.

[Questions asked at the time of acceptance of listing application]

(1) Reasons Why the Applicant Decided to List its Stock

a. Please discuss actual reasons for filing the application for listing (including purpose and

expected effect).

b. Please discuss the amount and use of proceeds expected to arise at the time of listing

(outline will suffice).

(2) Business Lines

a. Please discuss actual lines of business and business models. In discussing them, you are

encouraged to apply presentation materials, IR documents, company brochures and physical

products, which you may use in order to present your products and services from time to time.

b. Please discuss the background, purpose and history up to date for commencing the current

businesses (including the explanation of background as to how the business models were

developed). Please use IR materials and “Part I” documents as appropriate in making the

explanations.

(3) Status and Conditions of the Industry where the Applicant Operates

a. Please discuss the market size (if possible), market conditions and recent developments and

future outlook of the industry.

b. Please discuss the characteristics of the applicant compared to peers (if any).


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(4) Growth Plan Going Forward

Please concisely discuss the outlook of growth plan going forward (actual budgetary

information) on the basis of medium-term management plan.

[Typical questions asked by JPXR (after the filing of listing application)]

(5) Details of the Business Lines

a. Please discuss the current status of the development of business infrastructure (human

resources, facilities and equipment, capital, know-how and intellectual property, etc.) required

for the business development.

b. Please discuss the contents of contracts if there are material contracts in relation to the

business operations.

c. Please identify business risk exposure and discuss how to address them in developing

businesses on the basis of the expected descriptions included in “Business Risks, etc.” of “Part

I” documents.

d. Please discuss the outline of legal regulations and administrative instruction and the

existence of competent regulatory agencies for the industry.

(6) Business Plan

a. Please discuss the nature of medium-term business plan (management policies, future

business development, growth plan going forward (actual budgets and basis for the compilation

of budgets).

b. Please practically discuss how various factors to be considered (internal and external

circumstances surrounding the applicant and other items) in developing businesses are

reflected in the business plan.

c. Please discuss the current status and future plan of design and development of business

infrastructure (human resources, facilities and equipment, know-how, intellectual properties,

etc.) required for the implementation of business plan.


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(7) Use of Proceeds from Public Offering at Listing

Please discuss the use of proceeds generated from the public offering at listing and the

recovery plan of the investments (for the use of proceeds, please discuss the nature of use of

proceeds and actual amounts by classifying the use thereof based on capital investments,

working capital, R&D activities, repayment of borrowings, acquisition of securities, and equity

contributions or loans to related companies).

(8) Announcement of Future Forecast Information such as Prospectus for Operating results for the Period in which the Listing Applicant is

Filed

Please discuss future outlook information such as forecast for operating results. The applicant

is encouraged to announce the future forecast information effective from the time of listing.

(9) Design and Implementation of Management Control System and Internal Audit System

a. Please discuss the major flow of businesses from procurements to sales for the major

products, goods and services. In holding the discussion, you do not have to use any flowcharts

etc.

b. In implementing the design of the management control system, please discuss how you

would address any matters identified by the audit firm or lead underwriter for their improvement.

c. For internal audits, please discuss the audit departments and divisions, officers, nature of

internal audit (scope and items), procedures and recent incidents where internal audits were

implemented. If you have not established any independent department for the purpose of

internal audits, please state that you have designed and implemented alternative approaches

and implemented procedures equivalent to the internal audits.

d. Please discuss how you have prepared yourself for addressing the internal control reporting

system over financial reporting.

e. Please discuss the status of internal systems to develop business plan (responsible

departments and divisions and assignments, flow of staff works, development of the

Regulations and other rules).


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(10) Design and Implementation of Timely Disclosure System, etc.

a. Please discuss the following points in the context of design and implementation of timely

disclosure systems in consideration of company size:

・The number of responsible officers at departments or divisions in charge of timely

disclosures and improvement and expansion plan after the listing;

・Systems to prepare preliminary release of full-year earnings (consolidated and separate)

and quarterly preliminary release of earnings (consolidated and separate) and the number

of days required for preparation;

・Method to manage material information of company (especially when the company has

outsourced a part of accounting works, please explain the matters to which the company

pays special attention in order to avoid any leak of material facts to the outside);

・Measures to prevent outsiders from browsing any timely disclosure documents concerning

company information before the expected time of publication (system security measures);

・Corporate group level communication and liaison systems;

・Officers responsible for managing material information of the company and measures to

address the absence of the officers primarily responsible therefore; and

・Method to manage and analyze the budgets and actual results with a view to accurately

understanding the trends in performance of the corporate group (determination of whether

any revisions are required for the announced performance forecast and the system to

identify the matters to be revised)

b. Please discuss basic policies for IR activities and future efforts to improve them.

c. Please discuss the efforts to prevent any insider trading.

(11) Relationship with Parent Company, etc., and Status of Corporate Group

a. When the applicant has a parent company, etc., please discuss the roles and responsibilities

of the applicant within the corporate group of the applicant where the parent company, etc.

plays key roles.

b. When the applicant enters into any transactions with the parent company, etc., please

discuss the nature of such transactions (amounts, terms and conditions, etc.).


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(12) Transactions, etc. with Related Parties, etc.

a. Please explain the background and reasons for the equity investments by large

shareholders.

b. When the applicant enters into any transactions with related parties, etc., please discuss the

nature of such transactions (amounts, terms and conditions, etc.)Please discuss method to

identify the existence of transactions with related parties, etc. Please discuss how the applicant

determines that the transactions or revisions are reasonable (necessary for the purpose of

business) when entering into transactions with the related parties, etc. or revising the terms and

conditions thereof.

c. Please describe the nature of transactions involving the management, if any (amount and

contractual terms for the transaction)

d. Please discuss method to identify the existence of transactions involving the management.

Also, please explain how to assess such transactions or to apply check and balance functions.

(13) Legal Actions, Disputes and Violation of Laws and Regulations

a. Please discuss the background and nature of solved and pending cases which have

occurred for the recent two years and application year. Especially discuss legal cases which

might have effect on business models involving patents and industrial new design in

consideration of views expressed by legal advisor or patent attorney.

b. Please discuss any penalties and fines imposed on the declared income taxes and nature of

administrative instructions and disposition imposed by competent agencies with respect to

violation of anti-monopoly law and other laws and regulations for the recent two years and

application year and the remedial measures to address such violation of laws and regulations

(design and implantation of systems to prevent re-occurrence of such incidents).


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(14) Other

a. If the applicant experiences a changing of the lead underwriter or audit firms, please discuss

the experiences and reasons for such change (Note).

b. Please discuss the contents of the agreement among shareholders, if any.

c. Please discuss the design and implementation of systems to preclude the relationships with

any anti-social force including organized criminal entities.

Note: There is no specific restriction on change of lead underwriter or audit firm. However, if

such change occurs after entering into the preparation for listing, JPXR will assess the

background and reason for such change.


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JASDAQ Growth

1. Has the Business Plan been Reasonably Developed in

Consideration of Future Business Developments?

For the purpose of examination for listing on JASDAQ Growth, JPXR will focus on “growth

potential of company”. JPXR will certainly assess whether an applicant has developed a

business plan demonstrating growth potential.

The business plan represents basic materials which underlie “Part I” documents comprising the

disclosure documents containing investment information before listing and various information

included in disclosures made available to investors after listing. Therefore the business plan

(including the use of expected proceeds from listing and recovery plan of investments) must be

developed on the basis of objective analysis of internal and external circumstances surrounding

the operation of the prospective applicant.

It is also necessary that the business infrastructure required to perform the business plan has

been designed and implemented (if it is not provided at the time of listing application, it must

reasonably be expected to be provided after listing).

1) Have you made sufficient deliberations on the business plan underlying the business

model from the perspective of economic reasonableness? □

2) Has the business plan been reasonably developed in consideration of various factors to

be considered in the development of business, including characteristics of its own

business (strong points and weak points), current status of the industry, developments

of peers, size and growth of the market in which the applicant operates, demand trends

for new products and services, trends for raw materials market, etc., status of major

trading partners and status of legal regulations?

□

3) Can you demonstrate reasonable basis for competitive advantages underlying the

business plan? If you are an applicant who requires investments long before the plan is

realized, have you consulted the lead manager on the necessity of submission of

assessment documents?

□

4) Can you clearly discuss risk factors to be addressed in realizing the business plan? □

5) Have you appropriately designed and implemented the business infrastructure

(including human resources such sales people and R&D staff, physical resources such

business bases and facilities, etc., and various management resources including capital

resources for investment) necessary to perform the business plan? Unless it has not

been provided at the stage of preparation, is it reasonably likely that it would be

provided after listing (using the proceeds generated from listing)?

□


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2. Have Management Control Organizations Effectively

Functioned?

For applicants for listing on JASDAQ Growth, JPXR allows certain grace period for them to

develop the requirements for “appointment of independent directors,” “establishment of board of

directors, board or committee of company auditors and appointment of independent accounting

auditors” “election of certify ed public accountants performing audit attestation to

independent accounting auditors” and “decisions on design and implementation of systems

necessary to ensure fairness of businesses,” in their corporate code of conduct. On the other

hand, it is naturally important that an applicant has understood the requirements of corporate

code of conduct required to be complied with during the process of listing application

preparation. Thus the applicant for listing on JASDAQ Growth is required to prepare the

application with reference to the following checklists.

(1) Board of Directors

If no sufficient discussions and considerations are made at the Board of Directors which

represents the highest level of decision making organ on business execution, it is deemed to

exist merely in form. In such cases the supervisory function of the Board of Directors over the

performance of businesses will not operate properly and the decision making of the applicant as

a company will substantively be biased to specified entities, thereby giving rise to the danger of

preferring the interests of specified entities to the interests of shareholders. Thus the Board of

Directors is required to comply with due process represented by sufficient discussion and

consideration on the basis of agenda and monthly operating results and to make decision and

supervision in compliance with such due process.

1) Do you regularly hold the meetings of the Board of Directors? Can you flexibly hold

them as appropriate to make prompt decisions? □

2) Have you determined agenda to be deliberated at the Board of Directors after sufficient

discussions and considerations? Have you prepared sufficient discussion papers and

other materials for the purpose of the Board of Directors? In addition, have you

prepared the minutes of meeting of the Board of Directors as required by laws and

regulations?

□

3) Have you reported important information for the purpose of business operation

properly? □

4) Has the supervision of the Board of Directors over the executive officers operated

effectively? □

5) Have not you made any decision biased to the interests of specified entities? □


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6) Has not any concurrent holding of positions at another company impeded the decision

making or business performance of the company? □

7) Does the method of resolution at the Board of Directors constitute an appropriate

method from the perspective of corporate governance? □

(2) Company Auditors

Company auditors are required to demonstrate competence to audit the execution of duties of

directors, accounting advisors and the Board of Directors. In order to fulfill the requirement,

company auditors must attend the meetings of the Board of Directors, in addition to audits over

daily businesses.

1) Have the check and balance functions of company auditors over the execution of duties

of directors and accounting advisors been implemented appropriately? □

2) Have company auditors worked together with relevant audit firms or internal auditors to

appropriately perform auditing practices? □

3) Have company auditors attended the meetings of the Board of Directors? □

(3) Independent Directors/Auditors

TSE requires listed companies to appoint one or more independent directors/auditors (outside

director or outside auditor who is unlikely to cause any conflict of interests with general

shareholders) for the purpose of the protection of general investors. TSE has defined this

requirement as the “Covenants to be Complied with” in the Corporate Code of Conduct. Thus

any company which intends to prospectively file the listing application is required to appoint the

independent directors/auditors and submit to TSE the “Registration Statement of Independent

Directors/Auditors” with the description of the status of the appointment of independent

directors/auditors by the date of listing.

1) Have you appointed one or more outside directors or outside auditors as independent

directors/auditors to be registered? □

2) Are expected outside directors or outside auditors to be the persons to be unlikely to

cause any conflict of interests with general shareholders? Do you believe that they do

not meet any event mentioned in Guidelines III 5, (3)-2?

□


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(4) Accounting Advisors

Accounting advisors are obliged to prepare the financial statements, etc. jointly with directors

and executives. For the examination of listing of a company with the committee of accounting

advisors, the company is required to develop and provide internal systems to make statutory

disclosures and timely disclosures in a timely, appropriate and consistent manner without

excessively depending on accounting advisors.

1) In case of a company with the committee of accounting advisors, do you believe that

the internal system in terms of statutory disclosures and timely disclosures does not

excessively depend on accounting advisors?

□

(5) Internal Audits

Internal audits shall be performed so that the management could ensure the preservation of the

company assets and the execution of lawful and efficient business operations. Basically the

internal audits should be desirably designed to be implemented by independent departments

which are not influenced by any specific departments or divisions. However depending on the

size, lines of business, category of business or level of growth, the internal audits implemented

by independent departments may not always be efficient. In such cases, the applicant is

encouraged to consider the actual status of the operation of the company and develop the

internal audit function responsive to the actual status.

1) Have you implemented effective internal audit practices (plan, execution and reporting)

in consideration of the size, lines of business, category of business and growth level? □

2) Have audited departments of the company appropriately addressed matters identified

during the internal audit practices? □

3) Have you adopted any alternative approach in the case where the company has not

established any internal audit departments? □


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(6) Internal Managements and Regulations

The framework for internal check and balance function necessary for the preservation of

corporate assets and lawful and efficient business operations shall be based on the

development and appropriate implementation of internal regulations. Thus it is required that

internal regulations have appropriately been developed in consideration of the size, lines and

category of business of the company and businesses are operated in compliance with such

regulations. These internal regulations include, for example, regulations on the management of

organizations (Regulations on the Board of Directors, Regulations on the Board of Company

auditors, Regulations on the Segregation of Duties, Regulations on Authorizations attached to

Respective Duties, etc.), regulations on business management (regulations on budget control,

regulations on share handling, regulations on the management of related companies,

regulations on sales management, regulations on procurement management, regulations on

company information control, etc.) and regulations on accounting and financing (accounting

regulations, cost accounting regulations, etc.). In addition to regulations enumerated above,

other regulations may have to be developed in consideration of the size, lines and category of

business and growth level of the company.

Meanwhile, the Companies Act clearly provides for the design and implementation of the

internal management system. The Financial Instruments and Exchange Act requires the

implementation of the internal control reporting system over financial reporting. When an

applicant becomes a listed company, the applicant is required to develop and provide the

internal control system in consideration of these laws and regulation.

1) Have you developed and provided necessary internal regulations in consideration of

the size, lines and category of business and growth level? □

2) Have the internal regulations provided for inter- and intra-departmental mutual check

and balance functions? □

3) Have you periodically amended and updated internal regulations in line with the

changes in size, business and growth level of the company? □

4) Have the company businesses been operated in compliance with the internal

regulations? □

5) Have you designed and implemented the systems to develop business plans through

due process including coordination among departments and divisions and performed

the systems appropriately?

□

6) Have you designed and implemented the internal management system with reference

to laws and regulations? □


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(7) Operating Results Management

In order for the management (including executive officers) to make appropriate management

judgments, it is inevitable that they accurately understand the status of the company (including

relevant departments and divisions) and the company is required to develop the system which

enables the management to understand and analyze the monthly operating results and status

of business at an early point. In order to make appropriate analysis of monthly operating results

and status of businesses, the comparison between the reasonably developed budget and

actual results is deemed to be effective. The early understanding and analysis of the monthly

operating results and status of business are also essential for the timely and appropriate

information disclosures (performance outlook and revisions thereto) after listing.

1) Does the management accurately understand the status of the company? □

2) Is the management able to understand the monthly operating results and status of

businesses at an early point? □

3) Is the management able to make timely and appropriate management judgments on

the basis of the comparative analysis of budgets and actual results and other

management information?

□

(8) Other Considerations for the Management

1) Have you appropriately produced and kept material documents including statutory

documents and various contracts and agreements? □

2) Do you have the ability to obtain patents for important and essential technologies

associated with the management? □

3) Even when the company has outsourced a part of the management control functions

(general affairs department and accounting and financing departments), is the company

able to perform appropriate management, information analysis and explanation

concerning the outsourced businesses under its responsibility?

□


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3. Have you Prepared Yourself for Timely and Appropriate

Disclosures of Corporate Information?

(1) Internal Systems

Rule 401 of the Regulations of TSE requires that ““A listed company shall make efforts to carry

out such faithful execution of business as strengthening prompt, accurate and fair disclosure of

corporate information at all times from the viewpoint of investors with full recognition that timely

and appropriate disclosure of corporate information to investors is the basis of a sound market

for financial instruments.” Since the listed companies are required to consistently provide timely

and appropriate disclosures to investors, they must design and implement suitable systems for

such purpose. That is, if the information disclosures rely too much on specified entities, they

cannot preclude the possibility that information disclosures might be impeded. In order to avoid

such circumstances the listed companies are required to design and implement the

company-level systems.

1) Have you designed and implemented appropriate systems to make statutory

disclosures, timely disclosures and IR activities on a timely, accurate and consistent

basis?

□

2) Have you designed and implemented appropriate systems to make communications

with the parent company at any time? □

3) Have you designed and implemented appropriate security systems and procedures for

publication when you intend to publish any corporate information and make them

available to outside persons on your proprietary website earlier than the expected time?

□


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(2) Disclosure Documents

JPXR will examine “Part I” documents in terms of disclosure documents as the materials

providing investment information. Therefore an applicant is required to describe the required

matters exhaustively and also to proactively and prominently highlight information which the

applicant deems useful for the investment decisions in an understandable manner. Since the

descriptions are required to be consistently made after listing, the applicant should design and

implement appropriate systems to meet the requirements for the descriptions.

1) Have you made necessary preparations for the production of “Part I” documents in

compliance with laws and regulations? □

2) Have you made necessary preparations for the descriptions of “Part I” documents such

that general investors can easily understand information useful for investment decisions

including the commentary and analysis of lines of business, characteristics of

technologies or business models with growth potential, business environments,

milestones and current progress of substantive business development, financial

position, operating results and status of cash flows; status of related companies, R&D

activities, major shareholders and officers and employees, dividend policy and use of

proceeds from capital increase through public offering?

□

3) Have you designed and implemented the systems to exhaustively describe information

concerning risks in nature for the investment decisions in “Part I” documents such that

general investors can easily understand them? Such information relates to the

shortness of operations, accumulated deficits or losses on businesses, dependence of

management on specified officers, competition with peers, uncertainties over markets

and technologies, business support from the specified entities, premises underlying

major businesses and other information to be considered as risk factors for investment

decisions.

□

4) Have you not distorted the disclosure of actual conditions of the corporate group as you

have made undue adjustments for equity contributions as a percentage of shareholders’

equity of a lower ranking company in terms of equity contributions?

□


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(3) Disclosure of Operating Results

When an applicant becomes a JASDAQ company, the applicant is required to consistently

disclose its full-year and quarterly operating results and performance forecast. The operating

results disclosed must be useful as investment information. To meet this requirement, they must

be disclosed on a quick and accurate basis. For the disclosure of the performance forecast, the

company may have to revise information on future outlook, including information on operating

results, to ensure that the outlook faithfully depicts the company’s progress of operations. When

these revisions are necessary, the company must also make them on a timely and appropriate

basis. For this purpose, the company must perform an appropriate comparison between its

budget and actual results on a monthly basis.

In the meantime, for Growth applicants, they are required to publish the medium-term

management plan and perform presentations and other sessions using the plan, in addition to

publication of performance forecast for a respective business year to be made in timely

disclosures.

1) Have you made the necessary preparations to disclose your preliminary release of

operating results for the full business year at least within 45 days after the end of the

year? And in a similar vein, have you been preparing preliminary release of quarterly

information within the same time frame you have used for the full-year disclosures, or

within a shorter time frame?

□

2) Have you designed and implemented systems to disclose future outlook information

(including appropriate performance outlook) and made timely and accurate revisions to

future outlook information?

□

3) Have you made necessary preparations to implement presentations and other sessions

for investors using the medium-term management plan? □

(4) Accounting Processing

Financial statements (including consolidated financial statements; the same shall apply

hereinafter) represent statements to faithfully depict the financial position and operating results

of the prospective listing applicant, which are especially important among disclosure information.

Therefore, the applicant is required to consult the audit firm with respect to the decisions on and

revisions to the contents thereof in advance in consideration of lines and category of business.

1) Are the accounting procedures and practices appropriate in light of accounting

standards, accounting convention, lines and category of business? □

2) Is accounting records and database produced and kept in an appropriate manner? □


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Disclosure documents such as “Part I” documents require the inclusion of financial statements

for the last two preceding business years. This disclosure of the two-year results is considered

potentially useful as investment information, as the preceding years can be compared with the

current year. Year-to-year comparison can be difficult, however, if an applicant has changed its

business year. Hence, a change of the business year would basically be undesirable.


last two years, can you reasonably explain why the change was required? □


last two years, have you undertaken necessary procedures to disclose supplementary

information to ensure comparability?

□

(6) Management of Company Information

Company information, especially management of material information as required by the

Financial Instruments and Exchange Act and timely and appropriate disclosure thereof requires

company-level information management systems as it is very important to prevent any insider

trading, thus contributing to enhancing confidence in financial instrument markets.

Recently, the number of insider trading scandals involving officers and employees has been

increasing and they are naturally subject to legal accusation and payment of penalties.

Companies are encouraged to further improve the systems to avoid such incidences.

1) Can you appropriately manage company information in compliance with internal

regulations on company information management? □

2) Can you disclose material information on a timely and appropriate basis? □

3) Do you intend to provide education and training sessions for the purpose of preventing

any insider trading? □


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4. Has not the Soundness of Corporate Management been

Impaired due to Transactions with Company Related Parties,

etc.?

Transactions carried out by a company require reasonableness (necessity for the purpose of

business) of the transactions and regular terms and conditions as well. Lacking in either of

such elements may give rise to doubt of undue grant of benefits to specified entities. Thus such

situations are certainly concerned from the perspective of soundness of corporate management.

Meanwhile, there are cases where some transactions with the terms favorable to a prospective

applicant are entered into with a view to assisting the applicant in further growing. In these

cases, such transactions might be permitted under the conditions that the nature of transactions

would be disclosed.




applied, which may result in some frauds. Therefore, it is necessary to ensure that an



that any transaction involving the management which was actually carried out is not an

inappropriate one.

(Transactions with related parties, etc.)

1) Can you demonstrate any reasonableness (necessity for the purpose of business) for

carrying out such transactions? □

2) Are the terms and conditions of transactions adequate compared to regular

transactions, except for transactions made with a view to supporting the applicant? □

3) Do you have any rules to periodically consider and review the reasonableness of

continuation of transactions (necessity for the purpose of business) and the terms and

conditions thereof?

□

4) Have you included the transactions within the scope of audits (audits by company

auditors and internal audits)? □

5) Do you have in place systems to appropriately disclose the nature of transactions in the

disclosure documents? □


6) Can you accurately understand the existence and nature of transactions with related □


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parties?

7) Do you have in place any systems to appropriately check the transactions with related

parties? □

(When there is any transaction involving the management)

1) Is such transaction inappropriate? □


2) Can you accurately understand the existence of any transaction involving the

management? □

3) Do you have in place any systems to consider any transaction involving the

management at the corporate level and apply the check and balance functions

appropriately?

□

5. Have You Properly Addressed Other Considerations in Filing a

Listing Application?

(1) Parent Company, etc. When a prospective listing applicant has a parent company, etc. (excluding cases where the

parent company, etc. does not intend to control the prospective listing applicant), it is likely that

many aspects of the business activities of the prospective listing applicant would be influenced

by the parent company, etc. in conjunction with equity contributions, human resources,

financing or transactions, etc. Thus when the prospective applicant has a parent company, etc.,

the applicant is required to issue the representation that free business activities of the

prospective applicant would not be impeded by the intention of the parent company, etc. and

the parent company, etc. agrees to disclose certain information as the information on the parent

company, etc. could be material as investment information of the prospective applicant.

1) Are free business activities or management judgments unlikely to be impeded when

there is any company in the corporate group of the parent company, etc. which carries

out the similar lines of business as the applicant?

□

2) Are there any situations where free management activities of the applicant might be

impeded as the total number of directors concurrently holding positions at a parent

company, etc. or those seconded from a parent company, etc. account for the majority

of the board members (including respective committee in case of a company with

committees system)?

□

3) Are there any circumstances where the business activities of the prospective applicant □


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depend on the parent, etc. in nature as the applicant carries out its business activities at

the instructions of the parent company, etc., rather than at the discretion of the

applicant?

4) Are there no excessive constraints imposed by the parent company, etc. on the

decision making in carrying out management activities of the prospective applicant? □

5) Have not you received any equity contributions from directors or officers of the parent

company, etc. or grant of subscription warrants to them, which cannot be explained

reasonably in implementing business operations independent of the parent company,

etc.?

□

6) When the applicant has business relationships with the parent company, etc. such as

operational transactions, real estate leasing or financing arrangements, has either of

you or parent company, etc. not forced or induced any transactions which could be

onerous to any of the parties to transactions, except for any transactions which are to

be carried out for the purpose of assisting the applicant in further growing?

□

7) Can you demonstrate the reasonableness and necessity of transactions with the parent

company, etc.? Do you believe that the terms and conditions of transactions with the

parent company, etc. are appropriately consistent with regular transactions?

□

8) When you have a majority holding company, can you submit to TSE a relevant

“Undertaking Statement” at the time of listing application? □

9) When you have a majority holding company, have you prepared yourself for submitting

to TSE its “Financial Information of Majority Holding Company” at the time of listing

application and has the majority holding company has agreed to make relevant

disclosures of company information, etc. as required by TSE?

□

(2) Other

1) Do not your business activities violate the public interest and good morals? □

2) Do not your company, its related parties and other specified entities have any relations

with any anti-social force including organized criminal entity? □

3) Do not you have any material legal actions, cases, disputes and violation of laws and

regulations? □

4) If any restrictions are imposed on the transfer of stock for which the listing application is

filed, do you intend to amend the Articles of Incorporation and remove the constraints

on the transfer by the listing date?

□

5) Have the shares of your stock been handled by the designated book-entry transfer

institution or are they expected to be handled by the institution by the time of listing? □

6) If you have not outsourced any share handling services to a shareholder services agent

designated by TSE, have you received the consent from the agent to the effect that it

would accept the outsourced services?

□


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7) Is the public announcement required by the Articles of Incorporation available on the

nation-wide daily newspaper or via any electronic announcement? If not, have you

undertaken appropriate measures such that the matters to be publicly announced are

widely disseminated as they are posted on your website (without any differences in the

degree of dissemination depending on areas or regions)?

□

8) Have you complied with various rules set forth by TSE in terms of allotment of new

shares to third parties or changes of hands of shareholding? □

9) If there is any recent change in the audit firm or lead underwriter, can you explain the

reasons for such change reasonably? □

10) Are you appropriately addressing any instructions given by the audit firm or lead

underwriter? □

11) Does the management understand the corporate code of conduct and fully recognize

the meaning of listing its stock and responsibilities arising therefrom? □

12) Would no future merger, etc. (merger, divesture, turning the company into a subsidiary

or non-subsidiary) or delisting by the management take place, which may give rise to

doubts over the corporate continuity of a prospective applicant?

□

6. Have You Completed Necessary Preparations for Interviews

with JPXR or Answers to Questions Made by JPXR in

Writing?

The following discusses major items to be assessed by JPXR in the interviews of JPXR made

with or written questions given to the JASDAQ Growth applicant. If you address these items in

advance, the listing examination could be implemented more smoothly. JPXR may spare

some items in consideration of the size, lines and category of business of the applicant.

[Questions asked at the time of acceptance of listing application]

(1) Reasons why the Applicant Decided to List its Stock

a. Please discuss actual reasons for filing the application for listing (including purpose and

expected effect).

b. Please discuss the amount and use of proceeds expected to arise at the time of listing

(outline will suffice).


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(2) Business Lines

a. Please discuss actual lines of business and business models. In discussing them, you are

encouraged to apply presentation materials, IR documents, company brochures and

physical products, which you may use in order to present your products and services from

time to time.

b. Please discuss the background, purpose and history up to date for commencing the

current businesses (including the explanation of background as to how the business

models were developed). Please use IR materials and “Part I” documents as appropriate

in making the explanations.

(3) Status and Conditions of the Industry where the Applicant Operates

a. Please discuss the market size (if possible), market conditions and recent developments

and future outlook of the industry.

b. Please discuss the characteristics of the applicant compared to peers (if any).


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(4) Business Plan which Demonstrates Growth Potential

Please concisely discuss the contents of business plan which demonstrates growth potential

(including budgetary quantitative information) on the basis of medium-term management

plan.

[Typical questions asked by JPXR (after the filing of listing application)]

(5) Details of the Business Lines

a. Please discuss the current status of the development of business infrastructure (human

resources, facilities and equipment, capital, know-how and intellectual property, etc.)

required for the business development.

b. Please discuss the contents of contracts if there are material contracts in relation to the

business operations.

c. Please identify business risk exposure and discuss how to address them in developing

businesses on the basis of the expected descriptions included in “Business Risks, etc.” of

“Part I” documents.

d. Please discuss the outline of legal regulations and administrative instruction and the

existence of competent regulatory agencies for the industry.

(6) Business Plan

a. Please discuss the nature of medium-term business plan (management policies, future

business development, growth plan going forward (actual budgets and basis for the

compilation of budgets).

b. Please practically discuss how various factors to be considered (internal and external

circumstances surrounding the applicant and other items) in developing businesses are

reflected in the business plan.

c. Please discuss the future plan (actual approach to design and implement infrastructure

currently not provided and the timing of thereof) of design and development of business

infrastructure (human resources, facilities and equipment, know-how, intellectual properties,

etc.) required for the implementation of business plan in consideration of the use of

proceeds generated from listing.


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(7) Use of Proceeds from Public Offering at Listing

Please discuss the use of proceeds generated from the public offering at listing and the

recovery plan of the investments (for the use of proceeds, please discuss the nature of use of

proceeds and actual amounts by classifying the use thereof based on capital investments,

working capital, R&D activities, repayment of borrowings, acquisition of securities, and equity

contributions or loans to related companies).

(8) Announcement of Future Forecast Information such as Prospectus for Operating Results for the Period in which the Listing Applicant is

Filed

Please discuss future outlook information such as forecast for operating results. The applicant

is encouraged to announce the future forecast information effective from the time of listing.

(9) Design and Implementation of Management Control System and Internal Audit System

a. Please discuss the major flow of businesses from procurements to sales for the major

products, goods and services. In holding the discussion, you do not have to use any

flowcharts etc.

b. In implementing the design of the management control system, please discuss how you

would address any matters identified by the audit firm or lead underwriter for their

improvement.

c. For internal audits, please discuss the audit departments and divisions, officers, nature of

internal audit (scope and items), procedures and recent incidents where internal audits were

implemented. If you have not established any independent department for the purpose of

internal audits, please state that you have designed and implemented alternative

approaches and implemented procedures equivalent to the internal audits.

d. Please discuss how you have prepared yourself for addressing the internal control reporting

system over financial reporting.

e. Please discuss the status of internal systems to develop business plan (responsible

departments and divisions and assignments, flow of staff works, development of the

Regulations and other rules).


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(10) Design and Implementation of Timely Disclosure System, etc.

a. Please discuss the following points in the context of design and implementation of timely

disclosure systems in consideration of the company size:

・The number of responsible officers at departments or divisions in charge of timely

disclosures and improvement and expansion plan after the listing;

・Systems to prepare preliminary release of full-year earnings (consolidated and separate)

and quarterly preliminary release of earnings (consolidated and separate) and the number

of days required for the preparation;

・Method to manage material information of company (especially when the company has

outsourced a part of accounting works, please explain the matters to which the company

pays special attention in order to avoid any leak of material facts to the outside);

・Measures to prevent outsiders from browsing any timely disclosure documents concerning

company information before the expected time of publication (system security measures);

・Corporate group level communication and liaison systems;

・Officers responsible for managing material information of the company and measures to

address the absence of the officers primarily responsible therefore; and

・Method to manage and analyze the budgets and actual results with a view to accurately

understanding the trends in performance of the corporate group (determination of whether

any revisions are required for the announced performance forecast and the system to

identify the matters to be revised)

・Basic policy for the implementation of presentations and other sessions for investors using

the medium-term management plan and the efforts to achieve it going forward

b. Please discuss basic policies for IR activities and future efforts to improve them.

c. Please discuss the efforts to prevent any insider trading.

(11) Relationship with Parent Company, etc., and Status of Corporate Group

a. When the applicant has a parent company, etc., please discuss the roles and

responsibilities of the applicant within the corporate group of the applicant where the parent

company, etc. plays key roles.

b. When the applicant enters into any transactions with the parent company, etc., please

discuss the nature of such transactions (amounts, terms and conditions, etc.).

c. When an applicant has been supported by the corporate group of the parent company, etc.,

please explain the nature of support.


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(12) Transactions, etc. with Related Parties, etc.

a. Please explain the background and reasons for the equity investments by large

shareholders.

b. When the applicant enters into any transactions with related parties, etc., please discuss the

nature of such transactions (amounts, terms and conditions, etc.)

c. Please discuss method to identify the existence of transactions with related parties, etc.

Please discuss how the applicant determines that the transactions or revisions are

reasonable (necessary for the purpose of business) when entering into transactions with the

related parties, etc. or revising the terms and conditions thereof.

d. Please describe the nature of transactions involving the management, if any (amount and

contractual terms for the transaction).

e. Please discuss method to identify the existence of transactions involving the management.

Also, please explain how to assess such transactions or to apply check and balance

functions.

(13) Legal Actions, Disputes and Violation of Laws and Regulations

a. Please discuss the background and nature of solved and pending cases which have

occurred for the recent two years and application year. Especially discuss legal cases which

might have effect on business models involving patents and industrial new design in

consideration of views expressed by legal advisor or patent attorney.

b. Please discuss any penalties and fines imposed on the declared income taxes and nature of

administrative instructions and disposition imposed by competent agencies with respect to

violation of anti-monopoly law and other laws and regulations for the recent two years and

application year and the remedial measures to address such violation of laws and

regulations (design and implantation of systems to prevent re-occurrence of such incidents).

(14) Other

a. If the applicant has experiences of changing the lead underwriter or audit firms, please

discuss the experiences and reasons for such change (Note).

b. Please discuss the contents of the agreement among shareholders, if any.

c. Please discuss the design and implementation of systems to preclude the relationships with

any anti-social force including organized criminal entity.

Note: There is no specific restriction on change of lead underwriter or audit firm. However, if

such change occurs after entering into the preparation for listing, JPXR will assess the

background and reason for such change.

V Listing Examination Q&A

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This Q&A addresses practical items to be confirmed with respect to the examination for listing

on JASDAQ.

1. Relating to “Corporate Continuity of Domestic Companies”

Listed on JASDAQ Standard

(1) Items for which Profit Level is Assessed

Q1: In principle, we use ordinary income when we assess the level of profitability for the

purpose of applying for listing on JASDAQ Standard. Though ordinary income is

recognized, how does JPXR treat the situations where other items than ordinary income

incur losses?

A1: For the purpose of examination for corporate continuity assumptions of JASDAQ

Standard companies, JPXR will assess whether the outlook for income and financial

position of an applicant would not compromise the continuity of business activities. Thus

in certain cases JPXR may determine that the applicant would not meet the criterion for

the corporate continuity though it recognizes ordinary income.

For example, 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) Confirmation of Progress of Performance during the Period Pertaining to the Listing Application

Q2: During the course of the examination for listing on JASDAQ Standard, it is assumed that

when performance declines, JPXR will evaluate whether the performance has bottomed

out with reference to the actual progress of performance for application year. Does this

mean that JPXR will not assess the actual progress of performance for the business year

for other cases than the evaluation of bottoming out of the performance?

A2: 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 outlook is necessary and the

timing thereof by using actual data during interviews, etc.

(3) Application of “Accounting Standards for Accounting Changes and Correction of Errors”

Q3: When 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 for listing

on JASDAQ Standard.

A3: For the purpose of the examination concerning “Corporate Continuity of Domestic

Companies” of criteria for listing on JASDAQ Standard, JPXR will determine the

expected revenue generated by the applicant by assessing “whether the outlook for

income and financial position of an applicant would not compromise the continuity of

business activities.”

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.

(4) In cases where a large amount of goodwill or borrowings has been recognized


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Q4: 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?

A4: 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.”

Q5: 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?

A5: 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

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. Relating to Checklists Before Applying for Listing on JASDAQ

(1) Business Plan (Checklists No.1)

Q6: The Checklist (JASDAQ Growth) 1-1) states that “Has the business plan been

reasonably developed in consideration of various factors to be considered in the

development of business?” In practice what considerations do we have to make?

A6: A JASDAQ Growth company is permitted to list its stock under the premise that it could

demonstrate growth potential. In addition in certain cases where there are no historical

data, it would be challenging to assess whether such business models would improve

income and financial position in future on the basis of the past experiences.

The prospective JASDAQ Growth applicant is required to sufficiently evaluate whether

the business model will improve income and financial position in future. In practice, the

applicant is required to sufficiently evaluate whether the business model has been

developed in full consideration of competitive advantages and business environments

underlying the growth potential and has incorporated prospective relevant costs.

In actual examination, JPXR will assess whether the business area where the JASDAQ

Growth applicant operates has a sufficient market size and how it estimates the

expansion of the market size going forward with reference to the items described in the

section of “[Typical questions asked by JPXR (after the filing of listing application)] (6)

Business plan at IV Preliminary Checklists for JASDAQ Listing.” On the basis thereof,

JPXR focus its examination on whether the applicant has a reasonable basis for

competitive advantages underlying the business plan which could demonstrate the

growth potential of the applicant. In practice, concerning the competitive advantages

underlying the business plan which could demonstrate the growth potential of the

applicant, JPXR will assess whether the following differentiating factors could

continuously contribute to the development of businesses:

- Status in the market;

- Market share;

- Technological advantages;

- Products or services already launched or with value added;

- Development projects resulting in the launch of major products and advantages of

development systems;

- Know how on efficient business operations; and

- Securing of exclusive rights to use under the maintenance of patents or contracts.


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In addition, JPXR will assess whether the applicant has developed reasonable plans for

capital expenditures, human resources or financing with respect to the business

infrastructure necessary to perform the business plan.

(2) Board of Directors (Checklists No. 2(1) )

Q7: The item at 2(1) 1) of the Checklists states that “Do you regularly hold the meetings of the

Board of Directors? Can you flexibly hold them as appropriate to make prompt

decisions?” How frequently should the meeting of the Board of Directors be held to meet

the notion of “regularly”? In addition with respect to the reference to “flexibly hold the

meeting on an ad hoc basis to make a prompt decision making” how can we meet the

requirement?

A7: The Companies Act requires that the meeting of the Board of Directors should be held

once every three months. However, the Board of Directors should decide a wide variety

of matters on a regular basis, especially as to the matters on monthly operating results

and business conditions have to be reported to the Board of Directors in general. Given

these factors, it is desirable that the meeting of the Board of Directors would be held

once or more a month.

Prompt decision making by flexibly holding the meeting depends on whether the matters

in issue should be decided by the Board of Directors. Though some issues requiring the

decision of the Board of Directors arise, timely decisions will not be made because the

meeting of the Board of Directors is not held due to some reasons or is not held on a

timely basis. Such situations do not represent circumstances where prompt decisions will

be made on an ad hoc basis by flexibly holding the meeting.

If any board members including outside directors and auditors are working at some

places far from the intended venue of the meetings of the Board of Directors and cannot

physically attend the meetings on a timely basis to make prompt decisions, the use of TV

conference systems or others can be considered.


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Q8: The item at 2 (1) 3) of the Checklists states that “Have you reported important information

for the purpose of business operation properly?” In practice what constitutes reporting of

important information?

A8: In developing the operation reporting system as a part of the management control

systems, the applicant must evaluate the degree of materiality of items to be reported in

consideration of the size, lines and category of businesses. The applicant is then

required to develop internal regulations specifying that especially material matters

should be reported to the Board of Directors. Thus the degree of materiality may vary

widely depending on the size, lines and category of businesses of companies. For

example material items to be reported include the monthly operating results, business

conditions and progress of execution of matters resolved at the Board of Directors in the

past.

Q9: The items in 2 (1) 5) of the Checklists state that “Have not you made any decision biased

to the interests of specified entities?” What decisions would constitute the decisions

biased to the interests of specified entities?

A9: As required by the Preliminary Checklists No. 4, the reasonableness and fairness of

regular terms and conditions shall be required of any transactions implemented by a

company (including any resolution for the purpose at the Board of Directors; the same

shall apply hereinafter). On the basis of such notions, if any resolution to prefer specified

entities including officers to the shareholders in terms of conveniences and interests

granted, for example, financial guarantee by the company of personal debts of president,

such resolution may represent the one to place preference on the interests of specified

entities.

Q10: The items in 2 (1) 6) of the Checklists state that “Has not any concurrent holding of

positions at another company impeded the decision making or business performance of

the company?” What circumstances constitute any situations where the concurrent

holding of positions by directors at another company may impede the decision making or

performance of operations of the company?

A10: As required by the items in 2(1)1) of the preliminary checklists, meetings of the Board of

Directors must be flexibly held as appropriate. For example, as a director concurrently

holds a position at another company outside the corporate group, the director cannot

attend the board meeting (due to time restrictions). Such situation may be deemed to

impede the prompt decision making of the company.

In addition, if an executive officer concurrently holds the office of executive officer at

another company outside the corporate group, such holding may be considered to

impede the smooth execution of businesses of the company.


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Q11: The items in 2 (1) 7) of the Checklists state that “Does the method of resolution at the

Board of Directors constitute an appropriate resolution method from the perspective of

corporate governance?” What notion should we adopt with respect to the resolutions at

the Board of Directors?

A11: It is desirable that the resolutions at the Board of Directions should be made after

sufficient discussions with the attendance of all the directors and company auditors.

On the other hand, Rule 370 of the Companies Act permits the resolution in writing or by

electronic means if certain conditions are met (hereinafter referred to the “written

resolutions, etc.”

However, while the written resolutions, etc. may facilitate the decision making concerning

the management at the Board of Directors, they may lead to resolutions of material items

without substantive discussions. In some cases the written resolutions, etc. may be

deemed inappropriate in that the corporate governance should function properly.

So for the purpose of the listing examination, the written resolutions, etc. may not be

automatically denied, but JPXR will assess separately whether the corporate

governance practices have been implemented appropriately.


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(3) Company Auditors (Checklists No. 2(2) )

Q12: The items in 2 (2) 1) of the Checklists state that “Have the check and balance functions

of company auditors over the execution of duties of directors and accounting advisors

been implemented appropriately?” In practice what situations constitute the effective

implementation of the check and balance practices?

A12: Check and balance practices are deemed to effectively be implemented when company

auditors evaluate the attendance of directors and accounting advisors at the meetings of

the Board of Directors from time to time through interviews with them and receive the

report and explanation concerning the nature and execution of their duties. In addition it

is required that they have checked all the requests for decisions on material matters and

assessed whether they would not give rise to any issues in consideration of laws and

regulations and the Articles of Incorporation.

Q13: The items in 2 (2) 1) of the checklists states “Have the check and balance functions of

company auditors over the execution of duties of directors and accounting advisors

been implemented appropriately?”, however, we currently do not have a board of

auditors. When is the latest date by which we must establish a board of auditors?

A13: 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.

Q14: The items in 2 (2) 2) of the Checklists state that “Have company auditors worked

together with relevant audit firms or internal audit to appropriately perform auditing

practices?” In practice what situations could be considered to meet this requirement?

A14: For example, company auditors have meetings with the independent auditors as

appropriate and understand any company’s issues identified by the independent auditors.

Or company auditors receive the reports on internal audit results, issues identified by the

internal audits and the correction of such issues. If company auditors notice any issues

at the meetings or on the basis of the reports, they are required to assess the nature of

such issues, including the correction thereof.


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(4) Independent Directors/Auditors (Checklists No. 2 (3) )

Q15: By when does the applicant have to appoint an independent director?

A15: In the case of listing application on JASDAQ Standard applicant, the applicant is

required to appoint the independent director by the listing date. Therefore JPXR will

confirm the status of appointment of the independent director during the listing

examination.

In the case of JASDAQ Growth, the applicant is required to appoint the independent

director by the date of general meeting of shareholders for the business year ended first

following listing.

Q16: The items in 2 (3) 2) of the Checklists state that “Are expected outside directors or

outside auditors who will be registered as independent directors/auditors to be the

persons to be unlikely to cause any conflict of interests with general shareholders? ”

What issues do we have to consider when electing any person to be registered as an

independent director/auditor?

A16: The election of an independent director/auditor is, in principle, required to meet each

item described at III 5. (3) of the Guidelines for the Listing Management.

Please refer to “Practical Considerations When Appointing Independent

director/auditor” in “Guidebook on Timely Disclosure of Company Information” issued

by TSE. This section is available on TSE’s website

（http://www.jpx.co.jp/equities/listing/ind-executive/）

If you are concerned with the requirements for independent director/auditor

independent directors/auditors, please consult JPXR in advance via the lead

underwriter, etc.

Q17: We have no candidates of independent directors because we have not found anyone

qualified. For the purpose of examination, how will JPXR assess the situation?

A17: 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.


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(5) Accounting Advisors (Checklists No. 2 (4) )

Q18: The items in 2 (4) 1) of the Checklists state that “In case of a company with the

committee of accounting advisors, do you believe that the internal system in terms of

statutory disclosures and timely disclosures does not excessively depend on

accounting advisors?” What systems would be deemed to be appropriate?

A18: For example where accounting advisors principally prepare data underlying statutory

disclosure and timely disclosures, if the accounting advisors retire due to the expiry of

their terms of office, the appropriate and timely as well as consistent preparation

thereof would face difficulties. So the applicant must design and implement the

systems to prepare data underlying statutory and timely disclosures at the company

level such that those other than accounting advisors can be involved in the work.

If accounting advisors constitute a legal person, JPXR will assess the situation by

focusing on the employees responsible for the work.

(6) Internal Audits (Checklists No. 2 (5) )

Q19: The company has only a small number of employees operating only at one location.

Thus we do not have any independent internal audit departments or divisions. The

Checklists 2 (5) states that “Have you adopted any alternative approach in case where

the company has not established any internal audit departments?” What constitutes

such alternative approach in practice?

A19: In general, you may appoint a person who could be suitable as an internal auditor and

require the person to perform the duties of internal auditor; provided that another

person should be appointed for the audit of the department to which the person

belongs and perform the auditing of the department. In addition the outsourcing of the

internal audit practices could be considered. In such cases JPXR assesses whether

the company has not delegated all aspects of the internal audit practices to the

outsourcer and the president, etc. has principally been involved in the internal audit

practices by fully recognizing the importance of internal audit practices.


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(7) Internal Managements and Regulations (Checklists No. 2 (6) )

Q20: The items in 2 (6) 2) of the Checklists state that “Have the internal regulations provided

for inter- and intra-departmental mutual check and balance function?” In case of a

company with a small number of employees, the number of employees assigned to

such functions may be limited. In such case how can we address the check and

balance functions?

A20: For example, suppose that the number of employees is 10 or more and all are working

on the same office floor. In this case, the president is expected to understand the work

of each employee and have an authority to make the decisions on everything.

In such cases, in handling of cash, the department which prepares vouchers for

payment must at least be different from the department which disburses or receives

cash.

In the following cases, check and balance functions indicate that some concerns with

the execution of duties may arise.

- The representative director and president, etc. is responsible for a specific

department or division and no checking functions work substantively.

- The representative director and president, etc. is responsible for multiple

departments or divisions and such responsibility may impede the execution of

primary duties of the president.

Q21: The items in 2 (6) 5) of the Checklists state that “Have you designed and implemented

the systems to develop business plans through due process including coordination

among departments and divisions and performed the systems appropriately?” In this

case what does the development by due process mean?

A21: The situations where the business plan has been developed by due process reflect the

circumstances where the applicant has prepared various data which are referred to in

reflecting various factors to be considered (business environments, status of

competitors, size of markets and growth thereof, trends in demands for goods,

products and services, trends for raw materials markets and status of major customers

and trading partners) in the business plan and the business plans have been

developed on the basis of such data after the coordination among departments and

divisions. It is also required that the applicant has designed and implemented internal

procedures appropriately such as inclusion of the above requirements for the

development of the business plan development in the internal procedures (budget

control regulations).


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the internal management system with reference to laws and regulations?” What

preparations do we have to make?

A22: The Corporate Code of Conduct (Rule 439 of the Securities Listing Regulations)

requires companies, irrespective of whether they are large or small, to design and

implement the systems necessary to ensure that the executions of duties of directors,

executives or counselors shall comply with laws and regulations and the Articles of

Incorporation and the systems to ensure the fairness of the execution of duties.

The applicant is also required to make necessary preparations for the internal control

reporting system to be applied after the listing. The applicant must develop the

preparation plans in consideration of size, lines of business and the timing of listing

application and have the system in place to submit the internal control reports after the

listing.

(8) Operating Results Management (Checklists No. 2 (7) )

Q23: The items in 2 (7) 2) of the Checklists state that “Is the management able to understand

the monthly operating results and status of businesses at an early point?” In order to

meet the requirements for the understanding at an early point, how soon should we be

able to understand monthly operating results and the status of businesses?

A23: The applicant is encouraged to understand the monthly operating results and the status

of businesses at the earliest time in the following month. TSE believes that the

preliminary release of earnings report for the full year should be submitted within 45

days from the balance sheet date and the publication of quarterly earnings report is

encouraged to be submitted within shorter time frame than the annual report. Thus the

applicant is required to understand and analyze the monthly operating results and

status of businesses within the number of days which may not impede the preparation

or disclosures of the preliminary releases of earnings.


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(9) Other Considerations for the Management (Checklists No. 2 (8) )

Q24: The items in 2 (8) 3) of the Checklists state that “Even when the company has

outsourced a part of the management control functions (general affairs department

and accounting and financing departments), is the company able to perform

appropriate management, information analysis and explanation concerning the

outsourced businesses under its responsibility?” Does JPXR find any problems in our

outsourcing businesses to a third party?

A24: 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 number of companies which use outsourcing is now increasing. 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 chief information 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.

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

making and strategy developments. It is naturally assumed that the applicant is

able to understand and analyze the contents of outsourced works and data


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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 consistently.

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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(10) Internal Systems (Checklists No. 3 (1) )


appropriate systems to make statutory disclosures, timely disclosures and IR activities

on a timely, accurate and consistent basis?” In practice, what do continuous statutory

disclosures, timely disclosures and IR activities require the company to implement?

A25: A listed company is required to implement consistent disclosures of company

information (statutory disclosures), including the preparation of securities reports for

each year and quarterly reports according to the Financial Instruments and Exchange

Act. JPXR also requires the listed companies to publish timely disclosures no matter

when any event which may influence the decision making of investors takes place. In

addition, JPXR requires the Mothers companies to perform IR activities twice or more

in a year:

Thus listed companies shall implant relevant timely disclosures whenever consistent

disclosures of company information with focus on the financial information are made or

other material information takes place.

Q26: We intend to hire experienced and talented staff, who will prepare and verify financial

statements, as well as prepare statutory disclosure data and timely disclosure data.

We leave all of such work to the staff. Does this give rise to any problems?

A26: The items in 3 (1) 1) of the preliminary checklists state that “Have you designed and

implemented appropriate systems to make statutory disclosures, timely disclosures

and IR activities on a timely, accurate and consistent basis?” and require listed

companies to have in place the applicant shall have the systems in place to systems to

make disclosures and IR activities consistently at a company level. Therefore

excessive dependence of such activities on specified entities can be concerned.


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(11) Disclosure of Operating Results (Checklists No. 3 (2) )

Q27: 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)?

A27: 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.

(12) Disclosure of Operating Results (Checklists No. 3 (3) )

Q28: The items in 3 (3) 1) of the Checklists state that “Have you made the necessary

preparations to disclose your preliminary release of operating results for the full

business year at least within 45 days after the end of the year?” In practice what are

we to be required to do and when should we do so? What is the reason why TSE has

required the preliminary release of quarterly operating results to be disclosed within

the same time frame as the disclosures for the full year or within a shorter period?

A28: TSE has encouraged listed companies to publish the operating results for the full year

and quarterly period at the earliest point from the end of respective period. We

illustrate the status of releases of operating results made by TSE listed companies for

your reference.

[Reference: Average days required for the release of operating results by listed

companies]

Note: The survey targeted TSE listed companies which released earning results for the

Full year earnings Q1 Q2 Q3

38.4 days 34.0 days 34.7 days 35.4 days


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year ended March 31, 2011 and quarterly earnings results for the second quarter of the

same year.

In general, information disclosures require promptness and accuracy.

Therefore, releases of full year and quarterly earnings should be disclosed at the

earliest point from the end of respective period.

In consideration of days required for the announcement of earnings results of all the

listed companies on the 1st and 2nd sections, TSE has requested the disclosures to be

made within a time frame of 45 days. Given that disclosures of quarterly earnings

information are required more promptly than the full year disclosures, the forms and

procedures for preparing preliminary releases of quarterly earnings results have

limited the disclosed items to those which should be communicated with investors

more promptly compared to the preliminary release of full year earnings results. So the

releases of quarterly earnings results should be disclosed within a shorter time frame

than those at the year end.

Q29: What issues should we consider when we publish earnings results during the period

from the listing approval date to the listing date, which is referred to as the “financing

period?”

A29: When any material company information arises in the context of timely disclosures,

listed companies are required to disclose it promptly. However when a listed company

publishes any information which may influence the investment decision during the

finance period, including earnings results information, the listed company is requested

to disclose the information by the time of filing the Amended Securities Registration

Statement (first amendment) concerning tentative decision on the terms and

conditions in order to achieve thorough dissemination of information among investors.

Therefore if any material company information is likely to arise between the period

from the submission of Amended Securities Registration Statement (first amendment)

concerning tentative decision on the terms and conditions and the day preceding the

listing date, the applicant is required to re-consider the financing schedule or listing

schedule.


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Q30: The items in 3 (3) 2) of the Checklists state that “ Have you designed and implemented

systems to disclose future forecast information (including appropriate performance

forecast) and made timely and accurate revisions to future forecast information?”

Consistent with the 1st and 2nd sections, does Mothers require Mothers companies to

disclose future outlook information including earnings outlook?

A30: As future forecast information such as earning forecast represents material information

for investment decisions, JASDAQ companies are required to disclose the future

forecast information including expected earnings.

In order to publish future forecast information such as earning forecast, listed companies

are required to appropriately implement the procedures for developing such information

with sufficient company-level discussions relying on reasonable basis and analysis of

progress of the performance. In other words such forecast must be developed based on

the external factors and demand forecast in compliance with the internal regulations

(including budget and actual results control regulations) in order to avoid any optimistic

expectations or arbitrary intentions of specified entities or to avoid misleading investors.

Furthermore, as the performance progresses during the period, some discrepancies

arise from the future forecast information. In such cases listed companies are required

to promptly consider the revisions to the future forecast information. For the purpose,

they must have in place systems to carry out company-level analysis of quarterly

operating results.

Startup companies or those expanding businesses are eligible for listing on JASDAQ.

So they may find it difficult to reasonably develop such future forecast information.

However despite such circumstances Mothers companies are encouraged to disclose

future forecast information such as earnings forecast by designing and implementing

relevant systems at the earliest point.


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Q31: The items in 3 (3) 3) of the Checklists (JASDAQ Growth) state that “Have you made

necessary preparations to implement presentations and other sessions for investors

using the medium-term management plan?” Does the development or change of the

medium-term management plan require the resolution at the Board of Directors? In

addition does the medium-term management plan have to include actual quantitative

descriptions of profit?

A31: An applicant needs to fully consider evolving external environments surrounding

JASDAQ Growth companies and develop the medium-term management plan.

Naturally it will be decided by the Board of Directors and the like. As in some cases it

may be difficult to develop an actual profit plan, it may voluntarily be included in the

plan. However when it is expected that the operating income in the plan will be

negative and the total sale will be less than ¥100 million, the applicant is required to

include the quantitative descriptions of profit, in principle.

In addition, though there are no requirements that could automatically apply to any

change in the medium-term management plan, the applicant is encouraged to submit

documents including the description of such changes when you determine that such

changes will affect investment decisions. Please keep in mind that any item to be

required for the purpose of timely disclosure should be disclosed on a timely basis

through TDnet.


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(13) Change of Business Year (Accounting Period and Balance Sheet Date) (Checklists No. 3 (5) )12）

Q32: The items in 3 (5) 1) of the Checklists state that “ If you made any change to the

business year (period or balance sheet date) during the last two years, can you

reasonably explain why the change was required?” If there is a reasonable reason in

terms of business operation, will any change be permitted?

A32: When any change is made to the period of business year (balance sheet date), the

contents of disclosure information may not be sufficient in terms of the comparability

when compared to operating results for full 12 month period. Especially for an

extremely short period of business year, the information for the period may

considerably lack adequate value associated with investment information. In addition

JPXR will not be able to assess whether the applicant designs and implements a

system to perform timely and appropriate disclosures after listing during the listing

examination.

Listing criteria has not provided for practical numerical threshold for the change of

period of business year (balance sheet date). However, the applicant is encouraged to

carefully discuss the change of period of business year with the lead underwriter from

the perspective of usefulness of disclosure information for investment decisions and

design and implementation of systems for disclosure information after listing.

Q33: The items in 3 (5) 1) of the Checklists state that “If you made any change to the


reasonably explain why the change was required?” The balance sheet date of our

company is December 31. Effective from the current fiscal year, we will be audited by

certified public accountants as required by the Financial Instruments and Exchange

Act. We will change the business year (balance sheet date) in June followed by

another change of business year (balance sheet date) in December. Though the

period of the business year comprises only six months, can we file the listing

application if we receive an audit for two periods?

A33: As discussed below at A34, the change of business year (balance sheet date) is not

desirable in itself and a reasonable reason for such change is required. Changes of

business years for two consecutive periods would not be deemed to have the

reasonable reason and the filing of the application after such changes in the previous

year would not be permitted except for cases with special events.


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Q34: The items in 3 (5) 1) of the Checklists state that “If you made any change to the


reasonably explain why the change was required?” We have closed accounts on

September 30 (balance sheet date) each year. We have been audited by the certified

public accountants as required by the Financial Instruments and Exchange Act

effective from the previous year. Since we wish to list our stock on Mothers as soon as

possible, we are now considering filing the listing application by changing the end of

the business year (balance sheet date) to March 31 and receiving another audit for the

second term. Does this give rise to any concerns?

A34: Disclosure data provided to investors by “Part I” documents fundamentally require the

disclosure of financial statements for the preceding two years. This is because the

comparison of past two year information with the current period would provide useful

information for investment decisions.

However although the comparison of previous two years would provide useful

information, if the length of business year is changed, the adequate comparison would

not be achieved as the number of months comprising one business year would differ

from that of previous two years and the value associated with investment information

would be impaired.

Therefore, the change of business year (balance sheet date) during the periods for

which relevant disclosures are required would not be desirable; provided that this will

not apply to cases where there are reasonable basis for the change for the purpose of

operations of the applicant, including the timing of change. In such cases, the

applicant is required to include the reasons for the change and supplementary

information to ensure the usefulness of information in disclosure package including

“Part I” documents and disclose them to investors in an understandable manner.


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(14) Transactions with Company Related Parties, etc. (Checklists No. 4)

Q35: How does JPXR assess any trading or real estate transactions with related parties, etc.,

if any, for the purpose of listing examination?

A35: When an applicant has entered into any transactions with a related party, etc., JPXR will

assess the adequacy of the terms and conditions of transactions and fairness of

disclosure of transaction information. If there is any deficiency in these aspects, the

judgment for the purpose of the listing examination would be stricter.

Deficiencies may include:

(Cases where the reasonableness of entering into transaction (necessity for the

transaction) with a related party is not acknowledged)

・The applicant leases any property (e.g., shop continuously making losses for a retailer)

inconsistent with business plan or operational strategy;

・Though the applicant has involved a related party in a sales transaction (procurements),

there is no reasonableness for such involvement (necessity for the transactions);

・The applicant has entered into loan and borrowing transactions in a large amount with a

related party

(Cases where the adequacy of entering into transaction with a related party is not

acknowledged)

・The applicant has made free rent of any vacant space in a building, etc. owned by the

applicant for the purpose of personal business of any person belonging to a related

party.

・When the applicant sells a property to a related party, there is a large difference between

the market value and book value (the market value largely exceeds the book value).

Despite the fact, the applicant sells the property to the related party at a large discount to

market value.

・The applicant has not made sufficient verification on the adequacy of the terms and

conditions including the request for quotation (sales transactions) or assessment of

lease terms (real estate transactions) at the commencement or renovation of

transactions

(Cases where there are concerns with the fairness of disclosures)

・Despite the fact that the applicant has leased a property from a related person, the

applicant has designated the real estate broker as the direct counterparty and strived to

circumvent the disclosure.


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In addition, even though an act does not meet any transactions, with respect to the cases

mentioned below it is likely to be acknowledged that the applicant unduly grants

interests to a related party through any activities other than transactions. In such cases

JPXR’s assessment would be stricter for the purpose of the listing examination.

・It is alleged that a company has purchased a large value of artistic paintings or Rule s on

the basis of personal hobbies or appetites of related parties including officers.

・Any properties (e.g., real estate, company car, airplane, golf membership, etc.) purchased

by a company are used for the personal purposes of related parties including specific

officers.

Q36: The applicant has entered into an advisor agreement with a related party and paid the

advisor fees to them. How does JPXR assess such situations for the purpose of the

listing examination?

A36: When assessing a transaction with a related party, the most important point is whether

such transaction is truly adequate when placing the first priority on the interests of the

company.

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

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


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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.


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Q37: The applicant must design and implement the systems to appropriately check and

balance transactions with related parties. How does JPXR assess these aspects for

the purpose of the listing examination?

A37: The level of design and implementation of systems may vary in consideration of

policies of the applicant for transactions with related parties and existence of existing

related party transactions and the status of related parties. JPXR will assess the

adequacy of related party transactions by comprehensively considering the method to

identify and evaluate them and the follow-up approaches.

For example, when the applicant has developed policies to permit related party

transactions and has already entered into and maintained related party transactions,

the applicant is encouraged to address the issues mentioned below:

・Can the applicant identify any related party transaction before entering into it?

・Has the applicant verified the adequacy of transaction or the terms and conditions of

transaction by means of the resolution at the Board of Directors or reporting thereto or

by the checks of independent directors/auditors or company auditors before entering

into such transactions?

・Has the applicant periodically verified the adequacy (necessity) and the terms and

conditions of continuous transactions with related parties as the Board of Directors

discusses the adequacy thereof at the meeting for closing of accounts or the applicant

include them within the scope of audits by company auditors?

・Has the applicant ensured that such procedures could be applicable consistently after

listing as the regulations and manuals (Regulations on the Board of Directors,

Regulations on the Committee of Company Auditors, Regulations on Request for

Approval, Compliance Regulations and other sub-manuals) provide for necessary

procedures?

On the other hand, if any transaction with a related party, etc. is deemed to be a

transaction which could take place in conjunction with ordinary consumers or a

transaction with major shareholders which have carried out a large number of similar

transactions, subsequent verification as mentioned in Q33 would suffice.

These are only for reference. For other cases, if it is ensured that the relevant

checking function would be operative, such cases would not give rise to any concerns.

So an applicant is encouraged to have in place relevant systems in consideration of its

circumstances.


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Q38: We have established policies not to enter into related party transactions. In this case,

do we have to have in place the systems mentioned above?

A38: A listed company has established policies not to enter into any related party

transactions and has not actually entered into such transactions. No such transactions

are likely to take place in consideration of the conditions of related parties, etc. In such

cases, the listed company may not find any issues in this respect if it maintains the

procedures to verify the items to be described in securities report (respective inquiry to

officers, check of the list of related party transactions with the customers and suppliers

and others). This would be deemed sufficient approach to identify related party

transactions. Since it is possible that the results of such procedures may reveal that

there would have been some related party transactions, the listed company must

undertake appropriate measures such as reporting to the Board of Directors and audit

by the company auditors.

Q39: 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

mean?

A39: 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


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,


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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.


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(15) Parent Company, etc. (Checklists No. 5 (1))

Q40: If there is any entity in the corporate group of the parent company, etc. which performs

the businesses similar to those performed by us, how does JPXR assess such a

situation?

A40: Since a parent company, etc. is expected to restrict or coordinate the business activities

of the applicant by applying its controlling position, JPXR will evaluate backgrounds for

the existence of competition with the parent company, etc. reasons for necessitating the

management independent of the parent company, etc., the nature of business

coordination of the parent company as well as the status of management of

subsidiaries by the parent, etc. and possible events which may impede the

independence of the applicant in future, and assess whether the applicant will not be

subjected to undue restriction on or coordination of business activities by the parent

company, etc.

If any line has been drawn with respect to the distinction of products or sales areas

among companies which perform similar businesses, it is unlikely that the business

activities of the applicant will be restricted or coordinated in future.

If there is any competition between the parent company, etc. and the applicant, JPXR

will meet the independent director/auditor independent directors/auditors to confirm

what concept the applicant has adopted in entering into any competition or encourages

the applicant to disclose the nature of such competition.


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Q41: Q34 states that “JPXR will evaluate backgrounds for the existence of competition with

the parent company, etc. reasons for necessitating the management independent of

the parent company, etc., the nature of business coordination of the parent company

as well as the status of management of subsidiaries by the parent, etc. and possible

events which may impede the independence of the applicant in future, and assess

whether the applicant will not be subjected to undue restriction on or coordination of

business activities by the parent company, etc.”. For example what situations will give

rise to some problems?

A41: Cases where the business activities of the applicant are restricted or coordinated and

the independence of the applicant is denied may include the following:

・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.

Q42: Focus points of the examination at “2. Soundness of Corporate Management (Rule 214,

Paragraph 1, Item 2 of the Securities Listing Regulations)” states that if the seconded

persons are assigned to the positions of officers or general managers who manage

departments susceptible to the influence of the parent company, etc. from the

perspective of independence, JPXR will be concerned with such situations from the

perspective of independence.” In practice who meets the definitions of officers or

general managers who manage departments susceptible to the influence of the parent

company, etc.?

A42 For departments or divisions which recognize a large amount of sales from the parent

company, etc. the seconded officers or general managers who manage them may

determine the selling prices or transaction prices jointly with the parent company, etc. So

they are considered to be susceptible to the influences of the parent company, etc. This

is true of officers and managers who manage departments or divisions with significant

influence over any decision on the management.


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Q43: Managers (general managers authorized to make decisions) responsible for the critical

departments or divisions (accounting and finance departments or sales departments

having business relationships with large customers and suppliers) are seconded from

external entities (financial institutions or large customers or suppliers). How will JPXR

assess these situations?

A43: When managers for critical departments or divisions are seconded from an external

entity, JPXR will assess whether the applicant may replace the seconded management

with internal employees or by elevating internal employees as appropriate, in addition to

whether the applicant is not forced to accept the seconded persons (internal proprietary

systems have not been impeded). When JPXR deems the situations appropriate, it may

permit such secondment for the purpose of listing examination.

(16) Change in shareholders before the listing

Q44: 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?

A44: 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.”

(17) Examination of Business Plan (Checklists No. 6 (6) )

Q45: With respect to the explanation of “business plan” mentioned at 6 (6) of the Checklists,

could you illustrate materials on which we base our explanations and the extent of our

explanations?

A45: In discussing business plans, JPXR has not formalized any materials to be used. Please

explain them on the basis of materials which you currently hold.

You are encouraged to discuss business plans from 3 to 5 years going forward on the

basis of key management indicators as you present medium-term management visions.


- 240 -

Q46: With respect to “future forecast information such as outlook for operating results” at 6

(8) the preliminary checklists, what materials should we use for the discussion thereof?

A46: For example, in discussing future forecast, you may use data related to the progress of

the plan to generate profits for the period in which the listing was achieved (including

monthly earnings data).


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(18) Others

Q47: There is a contract of pre-approval of a large capital investment or provision of rights to

select the board members between specific major stockholders. How does JPXR assess

such situations for the purpose of the listing examination?

A47: There needs to be cancellation of the contract before the application basically because

of the high capability of for the other stockholders to loss the right.

Q48: What internal systems do we have to have in place after listing?

A48: Timely disclosure of material corporate information has an extremely important meaning

to investors as they are required to enter into trades on financial markets under their

own responsibility. Therefore listed companies are required to design and implement

internal systems to effect truly appropriate timely disclosures.

Important points in appropriately design and implementing timely disclosure systems are:

1. The management understands the significance of timely disclosures and shows its clear

commitment to and policies for the implementation of timely disclosures and train and

educate its employees.

2. The listed companies must clarify the important points in appropriately implementing

timely disclosures.

3. The listed companies must effectively implement monitoring over timely disclosure

practices by the Board of Directors and company auditors (Board or Committee of

Company auditors in case of companies with relevant committees) in order to

appropriately maintain internal systems in place.

The outlines of timely disclosure systems of listed companies have been widely provided

as examples of descriptions included in “Corporate Governance Report “TSE’s

homepage (sections relating to corporate governance information services, etc.).”


- 242 -

Q49: What matters are listed companies required to comply with after listing?

A49: Listed companies are required to be fully aware that they are the members of financial

markets and improve their transparency by further improving the disclosures of

corporate information. In addition, they are also required to carry out appropriate

corporate activities to fully contribute to the investor protection and appropriate

maintenance of market functions and the listing regulations have provided for the

corporate code of conduct.

The corporate code of conducts comprises “minimum matters for listed companies to

comply with” and “desirable matters” for listed companies, which clearly illustrate the

requirements for them to strive to improve. If a listed company contravenes any

“minimum matters for listed companies to comply with,” JPXR may address such

situations by taking relevant measures such as the publication of such fact, charge of

penalties, requirement for the submission of report on improvement or reassignment to

specific market to which investors and market participants are required to pay special

attention.

For the details of the corporate code of conduct, please refer to “Guidebook for Timely

Disclosure of Corporate Information” issued by TSE.

VI Receipt or Transfer of Stocks, etc. Before Listing and Allotment, etc. of Offered Stocks Through Third Party

Allotment

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VI 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,

JPXR 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＞

These requirements shall apply to all the applicants except for any entity which falls within the

category of the following (the same shall apply to “VIII Public Offering or Secondary Offering”)

(1) An issuer of a domestic stock, etc. listed on any other domestic financial instruments

exchange;

(2) An applicant to which Technical Listing Regulations apply;

(3) An issuer of domestic stock listed or continuously traded on a foreign financial instruments

exchange;

(4) A company which succeeds to the business of a listed company, the issuer of stock, etc.

listed on another financial instruments exchange in Japan or the issuer of domestic stock, etc.

listed or continuously traded on a foreign financial instruments exchange, through a

shareholder-oriented spin off, and the company is an applicant who intends to apply for

listing before the shareholder- oriented spin off

(Rule 217 of the Regulations, Rule 231 of the Rules)


Allotment

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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 a special interest party, etc. (Note 1) receives or transfers 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 JPXR 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 Relating 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)

Note 3: Documents JPXR 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)".



Allotment

- 245 -

(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 JPXR as necessary with

respect to the record

In cases where an applicant refuses to respond to the request for submission JPXR may

publicize the corporate name of such applicant and the fact that the initial listing

applicant refuses to respond to such request for submission.

In cases where JPXR 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, JPXR 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.


VI Receipt or Transfer of Stocks, etc. Before Listing and A llotment, etc. of Offered Stocks Through Third Party

Allotment

- 246 -

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 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.


Allotment

- 247 -

(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

(hereinafter referred to as the “allotted stocks”) since the day on which the stocks are

allotted until the day on which six (6) months have passed since the listing day (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). 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 continue to hold such newly

acquired stocks or subscription warrants (hereinafter referred to as the "newly

acquired stocks, etc. pertaining to the allotted stocks" ) until the same day;

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 stock acquisition rights in exchange for such acquisition while with respect to

stock acquisition rights, a company acquires stock acquisition rights issued by the

company and at the same time delivers other shares or stock acquisition rights in

exchange for the acquisition.

(Rule 255, Paragraph 1, Item 1 of the Rules)

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 applicant of the intended transfer in

advance in writing and report the result of the actual transfer to the applicant after the

fact;


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 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

VI Receipt or Transfer of Stocks, etc. Before Listing and Allotment , etc. of Offered Stocks Through Third Party

Allotment

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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 TSE makes an inquiry about the ownership status of the allotted

stocks or newly acquired stocks, etc. pertaining to the allotted stocks as TSE deems it

necessary, the applicant shall report the ownership status of the allotted stocks or

newly acquired stocks, etc. pertaining to the allotted stocks to TSE without delay after

confirming, as necessary, the ownership status of the allotted 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 applicant a request for confirmation

concerning the ownership status of the allotted stocks or newly acquired stocks, etc.

pertaining to the allotted stocks shall report such ownership status to the applicant

immediately;


vi Agreement with Availability for Public Inspection

An allotted person shall agree that the contents of the confirmation letter pertaining to

the continuous holding 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 TSE


(b) Timing of Submission of Documents Certifying Assurance

i Where the applicant carried out an allotment of offered stocks before the initial listing

application day:

The applicant shall submit the document on the initial listing application day

ii Where the applicant carried out an allotment of offered stocks 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.



Allotment

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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.”

b. In the event that the applicant fails to submit the document prescribed in the preceding

paragraph, TSE shall either refuse to accept or cancel the acceptance of the initial listing

application of such applicant.


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 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; or


(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 specified in the assurance, the applicant

shall submit to TSE 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 after

the initial listing application day, and agree that such document will be made available for

public inspection by TSE..


d. In cases where TSE 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

applicant shall report the ownership status of the offered stocks to TSE without delay after

confirming, as necessary, the ownership status of the allotted stocks or newly acquired

stocks, etc. pertaining to the allotted stocks with the allotted person.


An 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.


VI Receipt or Transfer of Stocks, etc. Before Listing and Allotment, etc. o f Offered Stocks Through Third Party

Allotment

- 250 -

Q1: Is any disposal of treasury stocks through third party allotment during the period to which

relevant restrictions 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 stocks shall be subject to the procedures similar to those of issuance of new

shares, the disposal of treasury stocks 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.

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 stock 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.


Allotment

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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.

VI Receipt or Transfer of Stocks, etc. Before Listing and Allotment, etc. of Offere d Stocks Through Third Party

Allotment

- 252 -

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 allotted 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

<Conditions>




Allotment

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► 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>








► 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

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>




Allotment

- 254 -

► 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 by 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 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.


Allotment

- 255 -

(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 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

third party allotment 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.


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


Allotment

- 256 -

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.

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 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 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)


applicationdate


approval dateListing date

End of the applicationyear

(~201X.3.31) 201X.4.1 201X+1.3.31 201X+1.12.1


Allotment

- 257 -

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.

VI Receipt or Transfer of Stocks, etc. Before Listing and Allotment, etc. of Offered Stocks Through Third P arty

Allotment

- 258 -

(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 executive share ownership plan, 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) 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.


(a) The applicant has entered into a written assurance 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.

Other matters deemed necessary by TSE are following:

(i) Continuous Holding

A person who has received the subscription warrants as stock option shall, in principle, continue

to hold them until the date preceding the listing date from the allotment of the subscription

warrants or the exercise date of subscription warrants, whichever is earlier.


Allotment

- 259 -

(ii) Report to the Applicant when Transferring the Allotted Subscription Warrants

If a person who receives the allotment of subscription warrants as stock option transfers them,

the applicant is required to submit to TSE a statement describing the names and addresses of

the person who made the transfer as well as the person who received the transfer, the number

thereof, the date of transfer, prices and reasons for the transfer and other necessary matters at

the time of listing application when the transfer is effected before the listing application date and

immediately after the transfer when it is effected after the listing application date.

(iii) Report by Applicant to TSE in Response to Inquiry of TSE about Ownership Status

When TSE makes inquiries about the status of ownership of subscription warrants as stock

option as appropriate, the applicant confirms the status of ownership thereof with the person

who has received the allotment and makes the report thereof to TSE.

(iv) Report to Applicant by Allotted Person in Response to Inquiry by TSE about Ownership

Status

When a person who has received the allotment of subscription warrants as stock option

receives the confirmation about inquiry on the status of ownership thereof from the applicant, as

prescribed in iii above, the person will immediately report the contents thereof to the applicant.

(v) Agreement with Availability for Public Inspection

An allotted person shall agree that the contents of the assurance statement pertaining to the

continuous holding and the result of transfer of the subscription warrants as stock option, if

applicable, will be available for public inspection.

(vi) Other matters as TSE deems necessary

(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


Allotment

- 260 -

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)

(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.



Allotment

- 261 -

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 most recent business year.


(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.



Allotment

- 262 -

(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 initial listing

application.


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.



Allotment

- 263 -

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)


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 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.


Allotment

- 264 -

(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. (hereinafter referred to as “allotment of

offered stocks, etc.”) during a period 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..


The 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.


Meanwhile, in describing the basis for price calculation, the applicant must consider that the

descriptions would easily be understandable to investors with reference to “Appendix 7

“Descriptions of the Basis for Price Calculation” of Enforcement Rules for the Securities Listing

Regulations”.

b. Retention, etc. of the Record of Allotment Status of Offered Stocks, etc. by Third Party

Allotment

The 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 and retain such record.

The applicant shall respond to request for submission made by TSE as necessary with respect

to the record.


Allotment

- 265 -

In cases where an initial listing applicant refuses to respond to the request for submission, TSE

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 TSE 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, TSE 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.


VII Public Offering or Secondary Offering before Listing

- 266 -

VII 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 Offering"

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:

a. Book-building (research on the demand status of investors relating to public offering, etc.

before listing, carried out in accordance with the Rules); or

b. 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.

・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.


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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.


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.



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(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 the

Exchange and, where deemed necessary by the Exchange, notify TSE 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 Distribution" to TSE after the expiration of the subscription period for

the public offering, etc. before listing (excluding holidays) within three (3) days (see Note 2

below) from the ending date of the subscription period for the public offering, etc. before

listing, and notify the i applicant of the result of said public offering, etc. before listing.

If there are two (2) or more principal underwriting trading participants, the "Notice of

Execution of Public Offering or Secondary Distribution" 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 Distribution" submitted to TSE shall

be prepared based on entities to whom the calculation is substantially attributable regardless

of the actual name of the account.



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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 (foreign financial instruments companies or foreign banks operating financial

instruments business) 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 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 TSE 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 TSE 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.


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.


- 272 -


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.


VIII 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 JPXR 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 JPXR requires

the applicant to submit the documents mentioned in “b. Documents Required to be Submitted

When Significant Influence Arises,” and makes them available for the public inspection.

Note: “Significant influence” relates to cases where any of the total assets, value 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

The previous

yearApplication year

Surviving company

Extinguished

company

Timing of merger (Note 2) The previous

year Application year

Handling for the

purpose of

examination

“Amount of profit”

For the amount of profits before the application

year, the examination applies to the amount of

profit determined on the basis of consolidated

income statements, etc. of principal entity of

merger (Note 3) (Rule 212-6 (9) of the Rules)

“Amount of net

assets”

(Consistent with

II Formal

Requirements)

The examination applies to

the amount of profit

determined on the basis of

quarterly consolidated

balance sheet or

consolidated balance sheet

of the principal entity of

merger (Rule 212-5 (1) of

the Rules, Rule 212-5 (6) 2a

of the Rules)

Documents to be

submitted, etc.

Documents to be

submitted

Financial statements, etc. of all the entities

involved in the merger for respective business

years and respective consolidated accounting

years ended during the period

Audit opinion, etc. Required (limited to main merging companies)

Availability for the

public inspection Required


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Note 1: "Main merging company" means the company with the largest business scale among

merging companies (if an initial listing applicant or a subsidiary of a listed company is a

party to a merger, merging companies (excluding subsidiaries of the initial listing

applicant or the listed company) and the initial listing applicant or the listed company).

In this case, the business scale shall be determined in consideration of such factors as

the amounts of total assets, net assets, sales, earnings, etc. (Rule 2-3 (3) of the Rules).

Note 2: 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 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

The previous


Applicant: A

Subsidiary: C

Subsidiary: B

(principal entity)

Ａ

ＣＢ

Ａ

ＣＢ

Timing of becoming a holding company (Notes

1, 2 and 3)

The previous


Handling for the

purpose of

examination


For the amount of profits before business years

in which the application becomes a holding

company, the examination applies to the

amount of profit determined on the basis of

consolidated income statements, etc. of a

subsidiary (in case where there are several

subsidiaries, the amount of profit determined

on the basis of the income statement

combining all the income statements of such

subsidiaries) for respective consolidated

accounting year. (Rule 212-6 (10) of the Rules)

“Amount of net assets”

(Consistent with

II Formal

Requirements)


the amount of net assets



of the subsidiary (in case

where there are several

subsidiaries, the amount of

net assets determined on

the basis of the income

VIII Handling of Corporate Reorganizat ion Event

- 277 -

statement combining all the

income statements of such

subsidiaries) (Rule 212-5

(7) of the Rules) (Note 5)

Documents to be

submitted, etc.

Documents to be

submitted

Income statement combining the consolidated

income statements of several subsidiaries for

the periods before the applicant became a

holding company, and the balance sheet

combining consolidated balance sheets

Audit opinion, etc. Required



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).


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3. Stock Swap

The previous


Parent: A

Subsidiary: B

Ｂ

Ａ

Ｂ

Ａ

Timing of stock swap (Note 2) The previous


Handling for the

purpose of

examination


For the amount of profits before the stock

swap, the examination applies to the amount of

profit determined on the basis of consolidated

income statements, etc. of principal companies

involved in the stock swap (Note 3). (Rule 212,

6 (9) of the Rules)

“Amount of net assets”

(Consistent with

II Formal

Requirements)


the amount of net assets


quarterly consolidated

balance sheet or


of principal companies

involved in the stock swap.

(Rule 212-5 (1) of the

Rules, Rule 212-5 (6) 2b)

Documents to be

submitted, etc.

Documents to be

submitted

Financial statements, etc. of all the parties

involved in the stock swap for respective

business years and respective consolidated

accounting years ended during the period

Audit opinion, etc. Required (limited to main stock swap

companies)




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Note 1: "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 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 2: 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 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

The year before the

previous yearThe previous year

Application

year

Receiving company

(applicant)

Business taken over or

received through a

company split-up

Timing of company split-up and transfer

of business

The year

before the

previous year

The

previous

year

Application year

Handling for the

purpose of

examination

“Amount of profit” -

For the period before the takeover or

receipt of business, the examination

applies to the amount of profit

described in the documents related

to financial statements concerning

business which the applicant takes

over or receives. (Rule 212-6 (11) of

the Rules)

Note 1

“Distribution

of

ownership

of shares”

(Consistent with II Formal

Requirements)

The examination

applies to the

distribution of

ownership of the

applicant shares as

of the listing

date.(Rule 212-1 (9)

of the Rules)

“Amount of

net assets”

(Consistent with II Formal

Requirements)

The examination

applies to the amount

of net assets

described in the

documents related to

financial statements

concerning business

taken over or

received from a

listing company.


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(Rule 212-5 (8) of the

Rules)

Documents to

be submitted,

etc.

Documents to be

submitted

(The last two year period includes the period before

the takeover or receipt)

Documents relating to financial statements

concerning a business taken over or received from

another company during the recent two years (Note

2). (Rule 204-1 (14) and (16) )

(The last two year period includes the period before

the takeover or receipt)

Financial statements, etc. of such another company

for the period before the takeover or receipt (Rule

204, 1 (15) and (17) )

-

Copy of documents

prescribed in Rule

794, Paragraph 1 or

Rule 803,

Paragraph 1 of the

Companies Act

concerning the

divesture of business

(Rule 204, 1 (25) of

the Rules)

Audit opinion, etc. Required (Note 3, 4)



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 applicant is filed before

the divesture. For the amount of net assets, it is the same as 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 229-8,

(2) and (4) )


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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.


- 283 -

b. Documents required to be submitted when a significant effect is given

Timing of corporate reorganization The previous year Application year

Documents to

be submitted,

etc.

Merger (Note 1)

Financial statements, etc. for

the business year in which

the merger takes place (if the

consolidated accounting

period for the year in which

the merger takes place is

less than 6 months, including

the financial statements for

the consolidated accounting

year immediately preceding

the consolidated accounting

year in which the merger

takes place) (Rule 229-3, 1

(2) a – (a) of the Rules)

Financial statements,

etc. of the entities

involved in the

merger for the

consolidated

accounting year in

which the merger

takes place and the

accounting year

immediately

preceding (Rule

229-3, 1 (2) a – (b) of

the Rules)

Outline documents of merged companies, etc. for the

purpose of the initial listing application (Rule 229, 1

(3) a of the Rules)

Turning another

company into a

subsidiary or turning

a subsidiary into a

non-subsidiary (Note

2)

Financial statements, etc. for

the period which TSE

determines to be relevant in

relation to the period until the

previous day of the date

when the applicant turns

another company into a

subsidiary or turns a

subsidiary into a

non-subsidiary (if the period

which TSE determines to be

relevant in relation to the

period until the previous day

of the date when the

applicant turns another

company into a subsidiary or

turns a subsidiary into a

non-subsidiary is less than 6

moths, including the financial

statements for the period


etc. for the period

which TSE

determines to be

relevant in relation to

the period until the

previous day of the

date when the

applicant turns

another company

into a subsidiary or

turns a subsidiary

into a non-subsidiary

and the consolidated

accounting year, etc.

immediately

preceding the period

which TSE

determines to be

relevant


- 284 -

which TSE determines to be

relevant in relation to the

consolidated accounting year

immediately preceding the

previous day) (Rule 229-3, 1

(2) b – (a) of the Rules)

“Outline Document Concerning Changes in

Subsidiaries for Initial Listing Application” designated

by TSE which describes changes in subsidiaries

arising from turning another company into a

subsidiary or turning a subsidiary into a

non-subsidiary and the reasons thereof (Rule 229-3,

1 (3) c of the Rules)

Company split-up,

takeover or receipt of

business (Note 3)

Financial documents for business taken over through

a divesture of business (limited to those for business

year immediately before the divesture) (if the

consolidated accounting period for the year in which

the divesture takes place is less than 6 months,

including the financial statements for the

consolidated accounting year immediately preceding

the consolidated accounting year in which the

divesture takes place)

(Rule 229-3, 1(3)b-(a) of the Rules)

“Statement Outlining Company Split-up for Initial

Listing Application” designated by TSE which

describes the overview of business taken over

through a divesture of business and the reasons

therefor (Rule 229-3, 1(3)b-(b) of the Rules)

Financial documents for departments to be received

or transferred (limited to those for business year in

which business was received or transferred) (if the

consolidated accounting period for the year in which

the business was received or transferred is less than

6 months, including the financial statements for the

consolidated accounting year immediately preceding

the consolidated accounting year in which the

business was received or transferred)

(Rule 229-3, 1(3)d-(a) of the Rules)


- 285 -

“Statement Outlining Receipt (or Transfer) of

Business for Initial Listing Application” designated by

TSE which describes the overview of business to be

received or transferred, the reasons therefore, and

their consideration

(Rule 229-3, 1(3)d-(b) of the Rules)

Audit opinion, etc. Required



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


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


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.

IX Listing Fees

- 286 -

IX 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.

Fee Amount Payment date

Listing examination fees: ¥2 million

The last day of the month

following the month to which

the listing application date

belongs

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 halved.

Note 2: When an applicant files a preliminary application, the applicant will be charged the

preliminary examination fees equivalent to the amount of listing examination fees. When

the applicant makes a preliminary application and files a listing application during the

business year which includes the expected date of listing application described in the

preliminary application for securities listing, the applicant is not required to pay the listing

examination fees.

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 the expenses

actually incurred.

IX Listing Fees

- 287 -

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 ¥ 6 million

By the end of the month

following the month to which

listing date pertains

(Note) When a company makes a public offering or secondary distribution by over-allotment for

the application for initial listing of shares on the JASDAQ market and subsequently

conducts a third-party allotment of shares through green shoe option after the listing

thereof, the company shall pay “fees for the listing of new shares” (as listed later), pro

rata to the number of shares allotted pursuant to such third-party allotment.

IX Listing Fees

- 288 -

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 ¥85,000 for the use of TDnet.

Market capitalization Value Payment date

¥100,000 million or less ¥ 1 million 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 ¥100,000 million ¥ 1.2 million

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.

Note 2: Annual fees for maintaining listing for the initial listing year will differ depending on the

month in which the listing is made (see the table below).

IX Listing Fees

- 289 -

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

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

IX Listing Fees

- 290 -

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 market


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 market


May Four twelfths of annual fees for maintaining listing on the basis of market


June Three twelfths of annual fees for maintaining listing on the basis of market


July Two twelfths of annual fees for maintaining listing on the basis of market


August No payment of annual fees for maintaining listing is required

IX Listing Fees

- 291 -

(2) Fees for Listing of Shares of New Stock

If a listing company issues new shares, etc., the amounts mentioned below will be charged.

Fees Amount Payment date

Fees for listing new shares

(Note 1)

Issue price per share (Note

2)× number of shares newly

issued (Note 3) × 8/10,000

(Note 4)


following the month in which

new shares were issued (Note

5)

Note 1: The maximum fees for shares newly issued will be ¥60 million.

Note 2: 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 by

regarding 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 by regarding the amount equivalent to the price per share

determined using the formula below as the issuance price per share.

[Issuance price of each subscription warrant 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 by regarding the

amount equivalent to the price per share calculated as follows as the issuance price per

share.

[Issuance price of each subscription warrant 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)]

Note 3: New shares to be listed by virtue of Rule 303 of the Regulations shall be excluded.

Note 4: For shares newly listed through the conversion of shares which can be converted to

another class of shares and exercise of subscription warrants, the rate used for

determining the amount is 1/10,000.

Note 5: 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.

IX Listing Fees

- 292 -

(3) Fees for Merger, etc.

If a listed company effects a merger and acquisition (merger, divesture or stock swap), the fees

mentioned below shall be paid.


Fees for merger, etc.

Capitalization per share ×

number of shares newly

issued at the event of merger,

etc. × 8/10,000


following the month in which

new shares were issued

Note: The maximum fees for the merger, etc. will be ¥10 million.

X IPO Center (Support Given to Prospective Issuers)

- 293 -

X 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 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]

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

- 294 -

A Documents, etc. to be Filed for Initial Listing

Application (Japanese Stocks)

1. List of Documents, etc. to be Filed for Initial Listing

Application (Japanese Stocks)

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 document filed on a

draft basis 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).

(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.


- 295 -

(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.


- 296 -

(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 required to 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

【ST】、【GR】 Documents specific to respective market of JASDAQ

Regulations: Securities Listing Regulations

Rules: Enforcement Rules for the Securities Listing Regulations

Guidelines: Guidelines for Listing Examination, etc.

Time Documents Remarks Number Basis

Documents required to be filed by all the applicants

Listing

application

date

Security initial listing

application form※◆■

Preliminary

security initial

listing application

form ※

One Rule 216-2, 1 of

the Regulations

Same as

above

Minutes of the meeting of

the Board of Directors’

meeting at which a

resolution authorizing on

initial listing application

was passed (copy)

One copy

Rule 204, 1 (1) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Same as

above

A certified copy of the

commercial register of the

initial listing applicant◆■

One

Rule 204, 1 (2) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Same as

above

Articles of Incorporation◆

One

Rule 204, 1 (3) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Same as Securities Report for Audit report■ Two Rule 204, 1 (4)


- 297 -

above Listing Application (Part

I)◇

attached b-2 of the Rules

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.

Same as

above

JASDAQ Listing

Application Report◇

Hereinafter “JQ

Report” Two

Rule 2229-3, 1 (2)

of the Rules

Same as

above

Written confirmation

certifying that the applicant

has no ties to any

anti-social forces※◆■

One

Rule 204, 1 (6) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Same as

above

Written confirmation※◎◆

■ One

Rule 204, 1（7）b

of the Rules

Rule 229-3, 1 (1)

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 204, 1（7）c

of the Rules

Rule 229-3, 1 (1)

of the Rules

Same as

above

Minutes of the general

shareholders’ meeting and

the meetings of the Board

of Directors’ meeting on or

after the beginning of the

application year (copy)

Submission at

every meeting

after the listing

application date;

provided that if

the documents

are provided via

EDINET, the

One ,

respectivel

y

Rule 206(1) of the

Rules

Rule 229-5 of the

Rules


- 298 -

submission

thereof is not

required

Same as

above

Summary audit report◇■ For each

consolidated

accounting year

which ends during

the recent two

years


the Regulations

The most recent

audit summary

must accompany

the statements

required by Rule

229-7, 2 (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.

Rule 229-7, 2 (3)

of the Rules

Same as

above

Written oath concerning

application for initial

listing※◆■


the Regulations

Same as

above

Book of regulations and

rules (copy)◆

Including

regulations on

handling of

shareholder

services (copy)

One

Rule 204, 1 (10) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Same as

above

A copy of notice of general

shareholders meeting for

the business year ending

within the latest year and

copies of documents

One

Rule 204, 1 (11) of

the Rules

Rule 229-3, 1 (1)

of the Rules


- 299 -

attached◇

Same as

above

Written documents stating

the matters of the

assumption of the principal

business activities (copy)◆

One

Rule 204, 1 (23) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Same as

above

Written oath concerning

matters relevant to the

applicant◇

Documents

attached to JQ

Report

One

JQ Report

【ST】 27 (1)

【GR】21 (1)

Same as

above

Financial statements and

supplementary schedules

for each business year

ended in the last five

years for which the

application did not prepare

consolidated financial

statements and

non-consolidated financial

statements (copy)

JQ Report

【ST】27 (2)

Same as

above

List of meetings of Board of

Directors for the last two

years and the year in which

the application is filed【ST】

Documents

attached to JQ

Report

One JQ Report

【ST】27 (3)

Same as

above


Directors for the latest

year and the year in

which the application is

filed 【GR】

Documents

attached to JQ

Report

One JQ Report

【GR】21 (3)

Same as

above

Minutes of meetings of

Board of Directors for the

latest year and the year

in which the application is

filed (copy) ◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (3)

【GR】21 (3)

Same as

above


Company Auditors for the

last two years and the year

in which the application is

filed 【ST】

Documents

attached to JQ

Report

One JQ Report

【ST】27 (4)


- 300 -

Same as

above


Company Auditors for the

year preceding the

application year and the

year in which the

application is filed 【GR】

Documents

attached to JQ

Report

One JQ Report

【ST】27 (4)

Same as

above

Minutes of meetings of

Board of Company

Auditors (Audit Committee)

for the latest year and the

year in which the

application is filed 【GR】

Documents

attached to JQ

Report

One JQ Report

【GR】21 (4)

Same as

above

A series of materials

concerning the Board of

Auditors (Audit

Committee ) for the year

preceding the application

year and the year in

which the application is

filed (copy) ◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (5)

【GR】21 (5)

Same as

above

Corporate tax return and

the scheduled detail of

accounts attached thereto

for the last two years

(copy)◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (6)

【GR】21 (6)

Same as

above

Monthly performance

management data for the

year preceding the

application year and the

year in which the

application is filed (copy)◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (7)

【GR】21 (7)

Same as

above

A series of internal data

used to develop annual

budget plan and to develop

medium-term management

plan for the application

year and thereafter

(copy) ◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (8)

【GR】21 (8)


- 301 -

Same as

above

Significant contracts for the

purpose of the

management (copy) ◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (9)

【GR】21 (9)

Same as

above

Management organization

chart and assignment plan

as of the listing application

date

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (10)

【GR】21 (10)

Same as

above

Catalogs and pamphlets

for products, goods, and

services, etc. ◆

Documents

attached to JQ

Report

One each

JQ Report

【ST】27 (11)

【GR】21 (11)

Same as

above

Flow chart (related to

procurement and sales

procedures) ◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (12)

【GR】21 (12)

Same as

above

Independent officer

registration statement

(draft)※◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (13)

【GR】21 (13)

Same as

above

Corporate Governance

Report (draft) ※◆

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (14)

【GR】21 (14)

Same as

above

Data regarding internal

audit for the year

preceding the application

year and the year in which

application is filed (copy)

◆【GR】

Documents

attached to JQ

Report

One

JQ Report

【GR】21 (15)

Same as

above


business report or

corporate tax return of

related parties of the

corporate group of the

applicant for each of the

last two years ◆【GR】

Documents

attached to JQ

Report

One JQ Report

【GR】21 (16)

Same as

above

Documented materials

describing measures to

address issues in the

Procedures for

Descriptions JQ Report”

(internal rules, manuals,

Documents

attached to JQ

Report

One

JQ Report

【ST】27 (15)

【GR】21 (17)


- 302 -

By listing Written recommendation

※◎■ One

Rule 204①(7) a of

the Rules

Rule 229-3①(1) of

the Rules

Same as

above

Written Confirmation

Regarding Compliance

with TSE Rules and

Regulations ※■

One Rule 216-2⑪ (1)

of the Regulations

Same as

above

Written Confirmation

Regarding the

Appropriateness and

Accuracy of the Securities

Report of Initial Listing

Application (Part I) and of

Quarterly Report for Initial

Listing Application ■

One Rule 216-2⑪ (2)

of the Regulations

Same as

above

Report concerning

corporate governance ※

Submission by

listing approval

date and

registration via

TDnet on the

listing date

One Rule 216-2⑫of

the Regulations

Same as

above Listing agreement※■ One

Rule 203①of the

Regulations

Same as

above

Securities Report for Initial

Listing Application (Part I)

Audit report must

be attached (for

public inspection)

■

One Rule 229-9,①(2)

of the Rules

Same as

above

Quarterly Report for Initial

Listing Application

Quarterly reports

for the period

immediately

preceding the

listing approval in

the year in the

listing application

is filed■

; Provided that the

documents will

not be required to

be submitted if

One Rule 229-9③(3) of

the Rules


- 303 -

electronic

disclosure

procedures

(EDINET) have

applied.

Same as

above

Computation document for

market capitalization One

Rule 216-3 (2) of

the Regulations

Rule 216-3 (4) b

of the Regulations

Same as

above

Disclosures on the listing

date (draft) Only for Growth One －

Listing date Articles of Incorporation

Registration via

TDnet on the

listing date

One Rule 229-9① (1)

of the Rules

Same as

above

Independent officer

registration statement※ One

Rule 436-2① of

the 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 for the business

year ended in the most recent

year and documents attached

to thereto (copy)

One Rule 229-3①(1) of the

Rules

Same as above

Documents prescribed in

Article 87, Paragraph 1 of the

Insurance Business Act

(copy)

One copy Rule 229-3①(1) of the

Rules


- 304 -

Submission

time Documents to be submitted Remarks Number Basis

“Amount of net assets” required by Formal Requirements will be met through public offering

By listing

approval Net assets statement※ One

Rule 212 , 5 (12)

of the Rules

Rule 229-11, 4 of

the Rules

When an applicant is a company with nominating committee, etc. / audit and supervisory

committee

Listing

application

date

Minutes of each

nominating committee, etc. /

audit and supervisory

committee and statement

concerning decisions of

executives (copy)

Excluding those

concerning routine

works

One

each

Rule 206 (1) of the

Rules

Rule 229-5 of the

Rules

Submission is

required at every

holding of relevant

committee after

the listing

application date;

provided that the

statements will not

be required to be

submitted if

electronic

disclosure

procedures

(EDINET) have

applied.

Same as

above

【In cases of a company

with nominating committee,

etc.】

Documents certifying the

contents of the resolutions at

the Board of Directors as

prescribed by Rule 416,

Paragraph 4 of Companies

Act (matters delegated to

executives for the decisions

on businesses)

One

Rule 204, 1 (27) of

the Rules

Rule 229-3, 1 (1)

of the Rules


- 305 -

Same as

above

【In cases of a company

with audit and supervisory

committee】

Documents certifying the

contents of the resolutions at

the Board of Directors as

prescribed by Rule 399-13,

Paragraph 5 of Companies

Act (matters delegated to

executives for the decisions

on businesses)

One

Rule 204, 1 (27) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Accounting for “net assets” is applied when accounting for retirement benefits is adopted.

Listing

application

date

Documents describing the

value of net assets and its

calculation basis when

accounting for “net assets” is

applied when accounting for

retirement benefits is

adopted ◇

One Rule 705 of the

Regulations

Material facts, etc., arise for the purpose of management

Immediately

after

occurrence

Report on such event One

Rule 206 (2) of the

Rules

Rule 229-5 of the

Rules

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.

One

Rule 204① (30) of

the Rules

Rule 229-3① (1)

of the Rules

An applicant has a majority holding company

Listing

application

date

Written statement of

assurance ■ One

Rule 229-3, 1 (5)

of the Rules

An applicant has a non-listed majority holding company


- 306 -

Listing

application

date


assurance of parent

company’s concerning

timely disclosure, etc. of

parent company, etc.

One

【ST】Guidelines

III-2, 5, (4) b

【GR】Guidelines

III-3, 5 (5) b

Same as

above

Statement of account for

non-listed majority holding

company, etc.◇

When a non-listed

majority holding

company, etc.

prepares quarterly

financial

statements and if

financial

information is

amended during

the examination

period, it must be

updated and

re-submitted.

One Rule 229-3, 1 (4)

of the Rules

Same as

above


assurance■ One

Rule 229-3, 1 (5)

of the Rules

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

resolutions

Minutes of general

shareholders’ meeting or the

meeting of the Board of

Directors concerning the

acquisition of treasury stocks

(copy)

In case of

company with

committee

system, including

statements

concerning the

decisions of

executives

One

copy

Rule 204, 1 (5) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Resolution to acquire treasury shares 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 treasury shares 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 demerger agreement

or stock swap agreement) )


- 307 -

Documents to be submitted in relation to third party allotment or grant of stock option,

etc.

Listing

application

date or

without any

delay after

resolutions

Minutes of general

shareholders’ meeting or the

meeting of the Board of


disposal of treasury stocks

(copy)

In case of

company with

committee

system, including

statements

concerning the

decisions of

executives

One

copy

Rule 204, 1 (5) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Resolution to retire treasury shares is made on or after the beginning of application year

(resolution by Rule 178, Paragraph 2 of Companies Act)

Listing

application

date or

without any

delay after

resolutions

Minutes of the meeting of the

Board of Directors

concerning the cancellation

of treasury stocks (copy)

In case of

company with

committee

system, including

statements

concerning the

decisions of

executives

One

copy

Rule 204, 1 (5) of

the Rules

Rule 229-3, 1 (1)

of the Rules

Submission


A direct listed company has effected the allotment of offered shares and stock acquisition rights

through third party allotment (limited to the allotment on or after the following date of one year ago

corresponding to the end of previous year; excluding subscription warrants granted as stock

option)

Listing

application

date (if it is

on or after

the listing

application

date, without

any delay)


assurance (concerning

continuous holding) (copy)

One

copy

Rule 255,1 of the

Rules

Rule 257, 1 of the

Rules

A person who received the allotment transfers the allotted shares or subscription warrants

Listing

application

Notification of transfer of

newly acquired stocks One

Rule 255, 1 (3) of

the Rules


- 308 -

date (if it is

on or after

the listing

application

date,

immediately

after transfer

through third-party

allotment, etc. and the

allotted subscription

warrants

Rule 257, 1 (3) of

the Rules

There are subscription warrants to be granted as stock option (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

any delay)




One

copy

Rule 259, 1 (2) a

of the Rules

Same as

above

Minutes of meeting of Board

of Directors concerning the

allotment of subscription

warrants (copy)

In case of

company with

committee

system, including

statements

concerning the

decisions of

executives

One

copy

Rule 259, 1 (2) b

of the Rules

Same as

above

Document certifying that a

contract not allowing

transfer of such subscription

warrants or restriction on

transfer of such subscription

warrants

One Rule 259, 1 (2) c of

the Rules

Shares or subscription warrants are delivered associated with the exercise or conversion of

subscription warrants as stock option (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




One

copy

Rule 260, 2 (1) of

the Rules


- 309 -

Same as

above

Minutes of general

shareholders’ meeting and

the meeting of Board of


allotment of subscription

warrants (copy)

In case of

company with

committee

system, including

statements

concerning the

decisions of

executives

One

each

Rule 260, 3 (1) of

the Rules

Same as

above

Document certifying the

terms of the contract

concerning the allotment of

subscription warrants

One Rule 260, 3 (2) of

the Rules

Shares or subscription warrants are delivered associated with the exercise or conversion thereof

on or after the listing application date

Without

delay after

acquisition

of shares




One

copy

Rule 260, 2 (2) of

the Rules


- 310 -

Documents to be submitted in relation to public offering and secondary offering,

determination of offering prices, etc.

(However, the following documents are not required to be submitted when they are submitted

via EDINT (electronic disclosure system) )

Submission time Documents to be

submitted Remarks Number Basis

Public offering and secondary offering for securities are effected (common to other markets and

directly listed stock)

Without delay

after listing

application

Scheduled plan for public

offering or secondary

offering※◎■

One

Rule 212,1 (6) of

the Rules

Rule 229-11, 2

of the Rules

Immediately

after submitting

to the

Director-General

of Financial

Bureau, etc.

Securities registration

statement and attached

document (copy)

Including

amendments Two

Rule 206 (3) a of

the Rules

Rule 229-5 of

the Rules

Same as above

Notice on effectiveness of

securities registration

statement (copy)

One copy

Rule 206 (3) b of

the Rules

Rule 229-5 of

the Rules

Same as above

Securities notification and

attached document (copy)

Including

statement

notifying changes

Two

copies

Rule 206 (3) c of

the Rules

Rule 229-5 of

the Rules

By the second

business day

following the

end of

application

period

(excluding a

holiday)

Notice on effectiveness of

public offering or

secondary offering※◎■

One Rule 237-, 1 of

the Rules

Book building made by a non-listed company which effects public offering or secondary offering in


- 311 -

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 235, 2 of

the Rules

Same as above

Application form for the

entrustment of

administrative work

related to forming

syndicate◎■

Including

attachments One

Rule 236, 2 of

the Rules

Immediately

after decision

Notice of the

determination of offering

prices and the reasons,

etc.

Press release

One Rule 234, 2 of

the Rules

Same as above Guidance concerning

book-building Method◎

One

Rule 242, 2 of

the Rules

Same as above

Notice of the tentatively

set price range and the

reasons, etc.

Press release

One Rule 243, 2 of

the Rules

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

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 related

parties One

Rule 204, 1 (20)

a of the Rules

Rule 229-3, 1 (1)

of the Rules

Same as above

List of subsidiaries and

affiliated companies and

list of officers of these

companies

One

Rule 204, 1 (20)

b of the Rules

Rule 229-3, 1 (1)

of the Rules

Same as above

List of employees

One

Rule 204, 1 (20)

c of the Rules

Rule 229-3, 1 (1)

of the Rules


- 312 -

By listing

approval

Guidelines of allocation

pertaining to a public

offering, etc. before

listing◎

Limited to

non-submitted

prime trading

participants

One Rule 235, 2 of

the Rules


- 313 -

Same as above

Contract for the

entrustment of

administrative work

related to competitive

bidding◎■

One Rule 247, 1 of

the Rules

Immediately

after decision

Notice of offering price

and secondary offer price

after bidding

Press release

One Rule 234, 2 of

the Rules

Same as above

Document describing

calculated comparable

price of similar companies

One Rule 246, 2 (3)

of the Rules

Same as above Notice of minimum bid

price

Press release One

Rule 246, 2 (4)

of the Rules

Within two

business days

following the

notice date of

bid award

Successful bidder

registry◎

One Rule 251, 2 of

the Rules

Company listed on another market which effects public offering and secondary offering in listing

Immediately

after

decision

Computation document for

offering price and secondary

offer price

Press release

One －

Another exchange listed company which effects off-session distribution in listing

Without

delay after

listing

application

Scheduled plan for

distribution with a

quantitative limit of

stocks※◎■

One

Rule 212, 1 (6) b

(a) of the Rules

Rule 229-11, 2

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 212, 1 (6) b

(c) of the Rules

Rule 229-11, 2

of the Rules


- 314 -

Other data to be submitted

(However, the following documents are not required to be submitted when they are submitted

via EDINT (electronic disclosure system) )

Submission


An applicant effects or withdraws public offering of securities or shelf registration of secondary

offering of securities during the period between the beginning date of application year and the

listing date, or effects public offering or secondary offering

Immediately

after

effecting

Shelf registration statement,

attached document

and reference document

(copy)

Including

amendments Two

copies

each

Rule 206, (4) a of

the Rules

Rule 229-5 of the

Rules

Same as

above

Notice of effectiveness of

shelf registration (copy)

One copy

Rule 206, (4) b of

the Rules

Rule 229-5 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

Rule 229-5 of the

Rules

Same as above

Prospectus for shelf registration

(including preliminary prospectus)

and supplementary prospectus for

shelf registration (copy)

Two each

Same as

above

Registration for withdrawal

of shelf registration (copy)

Two

copies

Rule 206, (4) d of

the Rules

Rule 229-5 of the

Rules

The following documents are filed to the Prime Minister of Japan, etc. between the beginning of

application year and the listing date.

Immediately

after filing

with the

General

Director of

Securities report (copy) and

attached document

Including

amendments Two

copies

Rule 206, (5) a of

the Rules

Rule 229-5 of the

Rules


- 315 -

Finance

Bureau


- 316 -

Same as

above

Interim report (copy) Including

amendments Two

copies

Rule 206, (5) b of

the Rules

Rule 229-5 of the

Rules

Same as

above

Quarterly financial

statements (copy)

Including

amendments Two

copies

Rule 206, (5) c of

the Rules

Rule 229-5 of the

Rules

Same as

above

Extraordinary report (copy) Including

amendments Two

copies

Rule 206, (5) d of

the Rules

Rule 229-5 of the

Rules

Same as

above

Report on purchase of own

stocks (copy)

Including

amendments Two

copies

Rule 206, (5) e of

the Rules

Rule 229-5 of the

Rules

Same as

above

Tender offer notification

(copy)

Including

amendments Two

copies

Rule 206, (5) f of

the Rules

Rule 229-5 of the

Rules

Same as

above

Written withdrawal

thereof(copy)/ written

cancellation thereof

(copy)

Two

copies

Rule 206, (5) f of

the Rules

Rule 229-5 of the

Rules

Same as

above


(copy)

Including

amendments Two

copies

Rule 206, (5) f of

the Rules

Rule 229-5 of the

Rules

Same as

above

Subject company’s position

pertaining to tender offer

(copy)

Including

amendments Two

copies

Rule 206, (5) g of

the Rules

Rule 229-5 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

Rule 229-5 of the

Rules

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

- 317 -

Same as

above

Internal control report (copy) Including

amendments Two

copies

Rule 206, (5) i of

the Rules

Rule 229-5 of the

Rules

An applicant receives the sending of following documents concerning securities issued by the

applicant

Immediately

after

receiving


(copy)

Including

amendments One copy

Rule 206, (6) a of

the Rules

Rule 229-5 of the

Rules

Same as

above

Written withdrawal

thereof(copy) / written

cancellation thereof

One copy

Rule 206, (6) a of

the Rules

Rule 229-5 of the

Rules

Same as

above


(copy)

Including

amendments One copy

Rule 206, (6) a of

the Rules

Rule 229-5 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

respective

amendments One copy

Rule 206, (6) b of

the Rules

Rule 229-5 of the

Rules

Same as

above

Subject company’s position

statement pertaining to

tender offer (copy)

Including

amendments One copy

Rule 206, (7) of

the Rules

Rule 229-5 of the

Rules

Listing date is after the elapse of three months following the beginning of application year, but six

months have not passed.

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

Rule 229-5 of the

Rules

Listing date is after the elapse of six months following the beginning of application year, but nine

months have not passed.


- 318 -

(Note1) Submission is not required if such quarterly financial statements, etc. are included in

Securities Reports for Initial Listing Application (Part I). In addition, if you are submitting

documents relating to the second quarter, those relating to the first quarter will not be

required, and if you are submitting documents relating to the third quarter, those relating

to the first and second quarters will not be required.

Without

delay


listing application

Report relating to

the first and

second quarters

of application

year, with

quarterly review

attached. ■

Two

Rule 206, (9) b of

the Rules

Rule 229-5 of the

Rules

Listing date is after the elapse of nine months following the beginning of application year

Without

delay


listing application

Report relating to

the first, second

and third quarters

of application

year, with

quarterly review

attached. ■

Two

Rule 206, (9) c of

the Rules

Rule 229-5 of the

Rules


- 319 -

(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 corporate information, 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 via the TSE Information Terrace.

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, 1 (4) b-2 of the

Rules).


- 320 -

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 report consistently for one year or more as of

the listing application date (Note 2) (Note 3)

Part I Form in Item 2-2 (additional information)

Part II Form in Item 2-2 (Part 4) (embedded information)

Part III Form in Item 2 (Part 4) (special information)

Part IV Form in 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

report consistently for one year or more (Note 2) (Note 3)

Part I Form in Item 2-2 (Part 3) (additional information)

Part II Form in Item 2-2 (Part 4) (embedded information)

Part III Form in 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)

Part I Form in Item 2 (Part 2) (company information)

Part II Form in Item 3 (Part 2) (information on guarantee company of filing company)

Part III Form in Item 2 (Part 4) (special information)

4. Person who has not met the requirements of 1. to 3. above

Part I Form in Item 2-4 (Part 2) (company information)

Part II Form in Item 3 (Part 2) (information on guarantee company of filing company)

Part III Form in Item 2-4 (Part 3) (special information)

Part IV Form in 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” includes 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: When the requirements of 1 to 3 above are met, consistently with the case of IPO, the

number of business years presented in the financial statements for the purpose of

“Special Information” could be reduced to two years from five years.


- 321 -

(3) JASDAQ Listing Application Report

A company which wishes to list its stock on JASDAQ is required to submit a JASDAQ Listing

Application Report in addition to the Securities Report for Initial Listing Application (Part I).

The JASDAQ Listing Application Report would constitute main materials used for the purpose

of examination as TSE gains the understanding of the nature of business, organizational

conditions, etc. on the basis of the report, in addition to Part I documents. However, in

consistent with Part I documents, the report will not need to be available for the public

inspection as it is used only for the purpose of examination.

The company is required to prepare the report in accordance for the “Procedures for

Descriptions in JASDAQ Listing Application Report.” As noted above, the report includes the

wide range of descriptions from the nature of business to the organizational conditions.

Depending on application for listing on Standard or Growth, some descriptions required to be

made may differ. If the procedures for descriptions are not well fit because of the nature of

business, the company is allowed to change forms of descriptions at its discretion.

Since the examiners tries to gain the understanding of the nature of business on the basis of the

JASDAQ Listing Application Report, the company is required to faithfully depict the strong and

weak points of the company so that the examiners could carry out the examination smoothly. In

that way the examiners could gain quick understanding of the nature of the applicant company,

and as a result, they could effectively carry out the examination as the time required for it may

be shortened.


- 322 -

2. Guide to Completing the “JASDAQ Listing Application

Report”

Guide to Completing the “JASDAQ Listing Application Report” (Standard)

The JASDAQ Listing Application Report (hereinafter the “JQ Report”) is a free-format document. While the basic

paper size of the JQ Report is set at A4 (it may be submitted by electronic means (e.g., CD)), the report may be

prepared in a different size depending on the contents provided. You are free to choose your report layout, vertical or

horizontal, in file, or ring binder.

(Points to note in completing your report)

(1) Unless otherwise specified, as a general rule, provide information regarding the “Applicant Corporate

Group.” Indicate figures representing the consolidated financial position and operating results unless

otherwise specified. If your company does not prepare consolidated financial statements, provide

non-consolidated figures. If the Applicant Company is voluntarily adopting IFRS, IFRS -based information can be reported regardless of the specifications in this Guide.

(2) Figures should be presented in the units indicated on the “Securit ies Report for Init ial Listing Application

(Part I),” i.e., in millions of yen or thousands of yen (while “thousands of yen” is indicated on the charts, etc. of the main text for convenience, please change the unit to “millions of yen” as appropriate).

(3) If the Applicant Company is not in the position to prepare consolidated financial statements, or the

Applicant Corporate Group is a single segment or need not indicate segments, please provide information by

business division instead of by segment. If the business is not categorized into divisions or is difficult to

categorize into divisions, provide information by arbitrary category (e.g., by product or goods) that reflects

the operating status of the Applicant Corporate Group (provided, however, that if the Applicant Corporate

Group engages in a single type of business and it is extremely d ifficult to categorize, the information may be

provided on the whole without segmentation). When providing information by business division or by

arbitrary category (e.g., by product or goods), the items required under the segment in formation of this Guide shall be applied mutatis mutandis.

(4) If, as a consequence of following the reporting format specified in the Guide, any piece of information is to

be duplicated, you may omit presentation in duplicate by indicating a reference.

(5) If a need to change or add contents arises after submitt ing the report, immediately submit a document as a supplement regarding the contents subject to the change or addition.

(6) When using any quotes from other sources in completing this report based on the reporting format specified in the Guide, indicate the title of the material and source.

(7) If there is difficulty in prov iding information on any item(s) or period(s) specified under the reporting format

of the Guide, presentation of such item(s) and period(s) may be omitted by indicating the reason thereof.

(8) When you are not sure whether or not to report an item based on the judgment of “important,” “principal,” “major,” “or so,” and such like, report the item.

(9) If you have similar material prepared for listing on another market, you may submit the material alon g with an attachment of items that should be added based on the reporting format of the Guide.

(10) For ease of preparation, phrases used in the main text may d iffer from the Securities Listing Regulations, etc.

The main text is structured on assumption that a fiscal year is a period of 12 months. If otherwise, please define the fiscal year.

(11) For figures relating to the applicat ion year, please provide figures fo r the appropriate term or period, e.g., as

of the most recent month-end or quarter-end from the application date, or from the initial date of the fiscal

year of the application year to the most recent month-end or quarter-end, etc.


- 323 -

(Definitions of terms)

The definitions of terms used in the reporting format specified in the Guide are as follows.

(1) “Applicant Corporate Group”: The Applicant Company and its subsidiaries and affiliated companies.

(2) “application year”: The business year in which the listing application date falls.

(3) “previous year”: The business year preceding the application year.

(4) “two years before”: The business year preceding the previous year.

(5) “year following application”: The business year following the application year.

(6) “last”: Calculating retroactively from the final day of the previous year.

(7) “total net assets”: The total amount of net assets on the consolidated balance sheet prepared based on the provisions of the Consolidated Financial Statements, etc. Rules.

(8) “net assets”: The amount obtained by deducting the values of subscription warrants and non-controlling

interests in the section of “Net assets” from the sum of total net assets and reserves, etc. prescribed in Art icle 45-2, Paragraph 1 of the Consolidated Financial Statements, etc. Rules.

(9) “amount of profits”: Operating income or loss, ordinary income or loss, income or loss before income taxes.

(10) “officers”: Directors, accounting advisors (if an accounting advisor is a corporation, employees of the

accounting advisor who are in charge of providing accounting advice), corporate auditors and executive

officers (including a governor, controller, and any other person equivalent thereto).

(11) “officer, etc.”: An officer, executive officer, advisor, counselor, and any other person equivalent to an officer.

(12) “parent company, etc.”: Parent company prescribed in Art icle 2 , Paragraph 1, Item 3 of the Securities Listing

Regulations, other related companies or parent companies thereof prescribed in Article 8, Paragraph 17, Item

4 of the Financial Statements, etc. Rules.

(13) “related companies”: Companies prescribed in Article 8, Paragraph 8 of the Financial Statements, etc. Rules

(14) “subsidiaries to be reported”: Subsidiaries for which the ratios of total assets, net assets and amount of

profits on the Applicant Company’s consolidated financial statements for the previous year (if co nsolidated

financial statements are not prepared, the financial statements) and those (the amounts of such items prior to

the consolidation procedure) on the consolidated financial statements of a subsidiary (including a company

scheduled to be made a subsidiary) (if consolidated financial statements are not prepared or the preparation

of consolidated financial statements is extremely d ifficu lt, the financial statements) calculated using the

following formula are no less than 20% for one or more items (including subsidiaries for which the ratio is

expected to be no less than 20% for one or more items based on the earnings forecast for the future).

(Calculation formula)

|Total assets (net assets, net sales, amount of profits) on the consolidated financial

statements of subsidiaries| × 100%

|Total Assets (net assets, net sales, amount of profits) on the consolidated financial

statements of the Applicant Company|

(15) “investment fund”: Anonymous partnership, special purpose company, voluntary partnership, investment

limited partnership, and other funds equivalent thereto that are in conformity to a foreign law.

(16) “company, etc.”: Corporat ions, various types of juridical persons, organizations, and other entities (including investment funds.)

(17) “relatives”: Spouse, blood relatives in the second degree and in-laws.

(18) “related parties”: Parties prescribed in Art icle 8, Paragraph 17 of the Financial Statements, etc. Rules or in

Article 15-4 of the Consolidated Financial Statements, etc. Rules.