New Listing Guidebook

Transcription

1 New Listing Guidebook 2017 JASDAQ Tokyo Stock Exchange

2 Table of ContentsIntroduction 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 and Rule of the Regulations) 26 Criteria for JASDAQ Standard Share Distribution Market Capitalization of Tradable Shares Net Asset Value Profits or Market Capitalization False Statement or Adverse Opinion and Audit by a Listed Company Audit Firm Establishment of a Shareholder Services Agent Share Unit and Classes of Stock Restrictions on Transfer of Shares Handling by the Designated Book-Entry Transfer Institution 54 Criteria for JASDAQ Growth 55 III Listing Examination (relating to Rule and Rule of the Regulations) Business Continuity and Prospects for Corporate Growth (Rule 216-5, 1 (1) of the Regulations, Rule 216-8, 1 (1) of the Regulations) 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)

3 Table of ContentsIntroduction 3. Reliability of Corporate Actions (Rule 216-5, 1 (3) of the Regulations, Rule 216-8,1 (3) of the Regulations) Appropriateness of Disclosure of Corporate Details, etc. (Rule 216-5, 1 (4) of the Regulations, Rule 216-8, 1 (4) of the Regulations) 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) 141 IV Checklists Before Applying for Listing on JASDAQ 171 JASDAQ Standard Has the Business Plan been Reasonably Developed in Consideration of Future Business Developments? Have Business Management Organizations Effectively Functioned? 173 (1) Board of Directors 173 (2) Company Auditors 174 (3) Independent Directors / Auditors 174 (4) Accounting Advisors 175 (5) Internal Audits 175 (6) Internal Managements and Regulations 176 (7) Operating Results Management 177 (8) Other Considerations for the Management Have you Prepared Yourself for Timely and Appropriate Disclosures of Corporate Information? 178 (1) Internal Systems 178 (2) Disclosure Documents 179 (3) Disclosure of Operating Results 180 (4) Accounting Processing 180 (5) Change of Business Year (Accounting Period and Balance Sheet Date) 181 (6) Management of Company Information Has not the Soundness of Corporate Management been Impaired due to Transactions with Company Related Parties, etc.? Have You Properly Addressed Other Considerations in Filing a Listing Application? 184 (1) Parent Company, etc. 184 (2) Other Have You Completed Necessary Preparations for Interviews with JPXR or Answers to Questions Made by JPXR in Writing? 186 (1) Reasons Why the Applicant Decided to List its Stock 186 (2) Business Lines 186 (3) Status and Conditions of the Industry where the Applicant Operates 186 (4) Growth Plan Going Forward 187 (5) Details of the Business Lines 187 (6) Business Plan 187 (7) Use of Proceeds from Public Offering at Listing

4 Table of ContentsIntroduction (8) Announcement of Future Forecast Information such as Prospectus for Operating results for the Period in which the Listing Applicant is Filed 188 (9) Design and Implementation of Management Control System and Internal Audit System 188 (10) Design and Implementation of Timely Disclosure System, etc. 189 (11) Relationship with Parent Company, etc., and Status of Corporate Group 189 (12) Transactions, etc. with Related Parties, etc. 190 (13) Legal Actions, Disputes and Violation of Laws and Regulations 190 (14) Other 191 JASDAQ Growth Has the Business Plan been Reasonably Developed in Consideration of Future Business Developments? Have Management Control Organizations Effectively Functioned? 193 (1) Board of Directors 193 (2) Company Auditors 194 (3) Independent Directors/Auditors 194 (4) Accounting Advisors 195 (5) Internal Audits 195 (6) Internal Managements and Regulations 196 (7) Operating Results Management 197 (8) Other Considerations for the Management Have you Prepared Yourself for Timely and Appropriate Disclosures of Corporate Information? 198 (1) Internal Systems 198 (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 Has not the Soundness of Corporate Management been Impaired due to Transactions with Company Related Parties, etc.? Have You Properly Addressed Other Considerations in Filing a Listing Application? 203 (1) Parent Company, etc. 203 (2) Other Have You Completed Necessary Preparations for Interviews with JPXR or Answers to Questions Made by JPXR in Writing? 205 (1) Reasons why the Applicant Decided to List its Stock 205 (2) Business Lines 206 (3) Status and Conditions of the Industry where the Applicant Operates 206 (4) Business Plan which Demonstrates Growth Potential 207 (5) Details of the Business Lines 207 (6) Business Plan

5 Table of ContentsIntroduction (7) Use of Proceeds from Public Offering at Listing 208 (8) Announcement of Future Forecast Information such as Prospectus for Operating Results for the Period in which the Listing Applicant is Filed 208 (9) Design and Implementation of Management Control System and Internal Audit System 208 (10) Design and Implementation of Timely Disclosure System, etc. 209 (11) Relationship with Parent Company, etc., and Status of Corporate Group 209 (12) Transactions, etc. with Related Parties, etc. 210 (13) Legal Actions, Disputes and Violation of Laws and Regulations 210 (14) Other 210 V Listing Examination Q&A Relating to Corporate Continuity of Domestic Companies Listed on JASDAQ Standard 211 (1) Items for which Profit Level is Assessed 211 (2) Confirmation of Progress of Performance during the Period Pertaining to the Listing Application 212 (3) Application of Accounting Standards for Accounting Changes and Correction of Errors Relating to Checklists Before Applying for Listing on JASDAQ 214 (1) Business Plan (Checklists No.1) 214 (2) Board of Directors (Checklists No. 2(1) ) 215 (3) Company Auditors (Checklists No. 2(2) ) 218 (4) Independent Directors/Auditors (Checklists No. 2 (3) ) 219 (5) Accounting Advisors (Checklists No. 2 (4) ) 220 (6) Internal Audits (Checklists No. 2 (5) ) 220 (7) Internal Managements and Regulations (Checklists No. 2 (6) ) 221 (8) Operating Results Management (Checklists No. 2 (7) ) 222 (9) Other Considerations for the Management (Checklists No. 2 (8) ) 223 (10) Internal Systems (Checklists No. 3 (1) ) 225 (11) Disclosure of Operating Results (Checklists No. 3 (2) ) 226 (12) Disclosure of Operating Results (Checklists No. 3 (3) ) 226 (13) Change of Business Year (Accounting Period and Balance Sheet Date) (Checklists No. 3 (5) )12) 230 (14) Transactions with Company Related Parties, etc. (Checklists No. 4) 232 (15) Parent Company, etc. (Checklists No. 5 (1)) 238 (16) Change in shareholders before the listing 238 (17) Examination of Business Plan (Checklists No. 6 (6) ) 240 (18) Other 242 VI Receipt or Transfer of Stocks, etc. Before Listing and Allotment, etc. of Offered Stocks Through Third Party Allotment Receipt or Transfer of Shares, etc. before Listing 245 (1) Descriptions Concerning the Status of Changes in Shares before Listing

6 Table of ContentsIntroduction (2) Retention, etc. of the Record of Changes in Ownership of Stocks, etc. Before Listing Allotment of Offered Stocks by Third Party Allotment, etc. Before Listing 247 (1) Regulations on Allotment of Offered Stocks by Third-Party Allotment, etc. 247 (2) Regulations on Allotment and Holding of Offered Subscription Warrants by Third Party Allotment, etc. 256 (3) Regulations on Allotment and Holding of Subscription Warrants as Stock Option 259 (4) Descriptions of the Status of Offered Allotment of Shares, etc. by Third Party Allotment 265 VII Public Offering or Secondary Offering before Listing 267 (1) Submission of Scheduled Plan for Public Offering or Secondary Offering 267 (2) Procedures for Public Offering, etc. Before Listing 267 (3) Determination of Offering Price 268 (4) Allocation Pertaining to Public Offering, etc. Before Listing 270 (5) Submission of Notice of Execution of Public Offering or Secondary Offering, etc. 271 (6) Other 272 VIII Handling of Corporate Reorganization Event 274 a. Handling of corporate reorganization for the purpose of examination Merger Becoming a Holding Company Stock Swap Company Split-up, Receipt of Business 281 b. Documents required to be submitted when a significant effect is given 284 IX Listing Fees Listing Examination Fees Initial Listing Fees Fees to be Paid by Listed Companies 289 (1) Annual Fees for Maintaining Listing 289 (2) Fees for Listing of Shares of New Stock 292 (3) Fees for Merger, etc. 293 X IPO Center (Support Given to Prospective Issuers) Assistance Activities through Visits to Individual Companies and Consultation Seminars for Prospective Issuers Mail Magazine 294 A Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks) List of Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks) 295 (1) Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks) 295 (2) Securities Report for Initial Listing 318 (3) JASDAQ Listing Application Report Guide to Completing the JASDAQ Listing Application Report

7 Introduction 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 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 ( August 2017 Tokyo Stock Exchange, Inc

8 Legend Legend TSE: JPXR: Regulations: Rules: Guidelines: Tokyo Stock Exchange Japan Exchange Regulation Securities Listing Regulations Enforcement Rules for Securities Listing Regulations Guidelines for Listing Examination, etc. Copyright 2017, 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

9 Ⅰ About Listing 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

10 Ⅰ About Listing 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

11 Ⅰ About Listing (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

12 Ⅰ About Listing - 6 -

13 Ⅰ About Listing 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

14 Ⅰ About Listing (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

15 Ⅰ About Listing 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> - 9 -

16 One week Approximately two weeks At eight business days interval At four business days interval Ⅰ About Listing Month X 1 Sun 1 Wed 2 Mon 2 Thu One month after month X Listing application, Receipt of Part I documents and JQ Report Interview, Schedule coordination 3 Tue 3 Fri 4 Wed 4 Sat 5 Thu 5 Sun 6 Fri 6 Mon 7 Sat 7 Tue First presentation of questions 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 Receipt of answers to the first questions Interview 15 Sun 15 Wed Holiday 16 Mon 16 Thu 17 Tue 17 Fri Listing application entry 18 Wed 18 Sat 19 Thu 19 Sun 20 Fri 20 Mon Second presentation of questions 21 Sat 21 Tue 22 Sun 22 Wed 23 Mon 23 Thu 24 Tue 24 Fri Preliminary review related to listing application 25 Wed 25 Sat 26 Thu 26 Sun 27 Fri 27 Mon 28 Sat 28 Tue 29 Sun 29 Wed 30 Mon 30 Thu Receipt of answers to the second questions Interview Physical inspection 31 Tue 31 Fri Third presentation of questions <Second part>

17 At three business days interval At five business days interval Ⅰ About Listing Two months after month X 1 Sat 2 Sun 3 Mon 4 Tue 5 Wed 6 Thu 7 Fri Receipt of answers to the third questions Interview 8 Sat 9 Sun 10 Mon 11 Tue 12 Wed 13 Thu Interview with CPAs (Note 1) Meeting with president Meeting with statutory auditors 14 Fri 15 Sat 16 Sun 17 Mon 18 Tue 19 Wed Holiday 20 Thu 21 Fri 22 Sat 23 Sun 24 Mon Presentation by president 25 Tue Acceptance of sponsor's letter of recommendation 26 Wed 27 Thu 28 Fri 29 Sat 30 Sun Listing approval Note 1: Interview CPAs may be carried out during the first part of examination process depending on nature and category of businesses of applicants. Note 2: The Sponsor s Letter of Recommendation (prepared by lead underwriter) shall be submitted at least three business days prior to the listing approval

18 Ⅰ About Listing (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 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

19 Ⅰ About Listing (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)

20 Ⅰ About Listing 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 with a period of two months 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,

21 Ⅰ About Listing - Applicants with an expected market capitalization of 100 billion yen or more at the time of listing. For such applicants, a large number of issues must be discussed and assessed during listing examination. Therefore TSE would request the applicants to allow for one month or more in addition to the standard listing examination period. Note 3: 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. 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

22 Ⅰ About Listing statements are finalized and fair opinion on the financial statements is expressed by the 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

23 Ⅰ About Listing 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

24 Ⅰ About Listing (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 and Rule 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, 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. Though the interviews with the CPAs will, in general, be conducted at the final stage of examination, they may be held at the initial stage of the examination depending on the industry and lines of business of the applicant

25 Ⅰ About Listing 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); 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; - 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 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

26 Ⅰ About Listing 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

27 Ⅰ About Listing (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

28 Ⅰ About Listing (6) Follow-ups after Listing Given that a newly listed company is required to continuously carry out appropriate business activities after listing, TSE will continue to follow up the business activities of the listed company for approximately one year after listing (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

29 Ⅰ About Listing 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

30 Book building period (5 business days) Pre-marketing period (9 business days) 15 days or over Subscription period (4 business days) Ⅰ About Listing [Model schedule form the listing approval to the listing] Month Y 1 Sun 1 Wed 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) 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 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) 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 Determination of issue prices and underwriting prices Filing of (Secondary) Amended Registration Statement (filing with the Financial Services Agency by the applicant) 26 Thu 26 Sun 27 Fri 27 Mon 28 Sat 28 Tue 29 Sun 29 Wed Date when the registration statements take effect 30 Mon 30 Thu 31 Tue 31 Fri One month after month Y Payment date and date when new shares take effect Listing date

31 Ⅰ About Listing 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

32 II Formal Requirements (relating to Rule and Rule of the Regulations) II Formal Requirements (relating to Rule and Rule 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 of the Regulations, while for listing on JASDAQ Growth, the applicant is required to meet those specified in Rule of the Regulations. List of Formal Requirements Item Standard Requirements Growth 1) Share distribution 2) Market capitalization of tradable shares (by the time of listing) 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. 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) 4) Profits or Market Capitalization (for the amount of profit, consolidated ordinary income and for market capitalization, the value by the time of listing) The net asset value is expected to reach at least 200 million 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 the time of listing. Net asset value is expected to be positive on the day of listing. There are no such requirements for JASDAQ Growth. 5) False statement or a. The audit report attached to a "Securities Report for Initial Listing