Corporate Governance Forum

1. Corporate Governance Forum May 9th, 2012 New Listings Dept. Tokyo Stock Exchange, Inc.

2. Contents Section 1 What is Corporate Governance?2 Section 2 Legal Structure in Japan8 Section 3 Listing Examination13 Section 4 Introduction of Tokyo Stock Exchange17

3. Section 1 What is Corporate Governance?

4. What is Corporate Governance?

5. Basic Idea • Managerial goal of stock companies is “maximization of profit (enterprise value) for stakeholders” • Who are “Stakeholders”? • Shareholders, Creditors, Employees, Government, Customers, Suppliers, Local communities and others who have an interest (stake) in the company.

6. Before 1990s Era characterized by military demand,postwar reconstruction and high economic growth Banks Economic Growth Funds Enterprises Capital Market Main-bank system Controlled capital markets Company unions Lifetime employment & Seniority wage system Human resources Economic growth

7. After 1990s Foreign capital Banks Funds Enterprise Value Improvement Enterprises Capital Market Monitoring system Promote shift from savings to investment Deregulation of capital markets Company unions Mobility of human resources & Meritocratic wage system Human resources Mature economy Declining Birth Rate and Aging Population

8. What is required of management? Relationship between corporate management and capital markets Strategy structuring Information disclosure Capital Markets Accountability toward the market Infrastructure development Funding Enterprise Utilization of capital market and profit return <Fund manager> Business performance Corporate governance <Fund raising venue> Discipline in capital markets

9. Section 2 Legal Structure in Japan

10. Legal Structure in Japan Tokyo Stock Exchange’s Rules No. of listed companies: 3,592 companies • Designation of Independent Directors/Auditors Financial Instruments and Exchange Act Companies conducting public offering • Disclosure of annual report, audit by certified public accountants etc. Companies Act No. of stock companies: about 920,000 • Definition of company structure(companies with committees, companies with board of company’s auditors, companies with company’s auditors etc.)

11. Authorities Ministry of Justice • Companies Act Financial Services Agency Tokyo Stock Exchange • Listing Regulations • Enforcement Rules for Listing Regulations • Guidelines Concerning Listing Examination, etc. • Guidelines Concerning Listed Company Compliance, etc. • Financial Instruments and Exchange Act

12. Legal Structurein Japan • Companies Act • Fundamental framework of stock companies • Structure of stock companies (general shareholders meetings, board of directors, board of auditors, etc.） • Financial Instruments and Exchange Act • Rules for public companies in terms of investor protection • Disclosure of corporate information • Registration • Continuous Disclosure • Rules of Tokyo Stock Exchange as a self-regulatory body • Listing examination, Listed company compliance • Timely disclosure • Code of Corporate Conduct

13. Efforts by TSE to improve Corporate Governance

14. Section 3 Listing Examination

15. Main Listing Criteria (Single Listing)

16. Main Listing Criteria (Multiple Listing)

17. Overview of Listing Examination for Main Board TSE examines the following items regarding an initial listing applicant and its corporate group. Corporate Continuity and Profitability • The applicant company must conduct its business continuously and have a stable profit base. Soundness of Corporate Management • The applicant company must conduct its business in a fair and faithful manner. Effectiveness of Corporate Governance of Enterprises and Internal Management System • The applicant company has developed appropriate systems for corporate governance and internal control. Appropriateness of Disclosure of Corporate Information, etc. • The applicant company is capable of appropriately disclosing corporate information, etc. Other Matters deemed necessary in light of Public Interest and Investor Protection a) Shareholders’ rights and exercise of such rights are not unduly restricted. b) Relationship with its parent company is deemed appropriate. c) Other matters are deemed appropriate in light of public interest and investor protection. 1 2 3 4 5

18. Section 4 Introduction of Tokyo Stock Exchange

19. Global Comparison of GDP and per capita GDP Japan is a top global economy with world-class GDP and per capita GDP. // per capita GDP (USD) GDP: 5,459 billion USD per capita GDP: 42,831 USD // GDP (USD bn.) Source: World Bank, 2010 Note: Circle size indicates relative GDP.

20. Global Position of TSE The world’s largest exchange outside the U.S. Ranked among Asia’s top 5 by market cap Ranked among world’s top 5 by market cap (US$ bn, as of Dec. 2011) (US$ bn, as of Dec. 2011) No.1 in Asia No.3 in the world Ranked among world’s top 5 by trading value Ranked among Asia’s top 5 by trading value (US$ bn, during Jan-Dec. 2011) (US$ bn, during Jan-Dec. 2011) No.1 in Asia No.3 in the world Source: WFE Note: Domestic companies only

21. TSE Market Structure TSE offers markets with different concepts to allow companies to make an optimal choice. Professional-oriented market Only available toprofessional investors Available to both individual and professional investors TOKYO PRO Market TSE 1st Section - Large-sized companies - TOKYO PRO-BOND Market TSE 2nd Section - Growth companies - - Medium-sized companies -

22. IPOs in Japan IPOs figures showed a significant increase to 37 in 2011 from 22 in 2010, confirming a full-fledged recovery in the Japanese IPO market. The number of IPOs is expected to increase from 2012 onward. TSE aims to attract more than 60 companies to market in FY2013. No. of IPOs Estimated Actual

23. Recent IPO of 2 Korean Companies on TSE Nexon was listed in 14th Dec 2011, W Scope was listed in 16th Dec 2011 on TSE. Nexon was the largest IPO in 2011. Transition of Financial Data Transition of Financial Data

24. Reference • Disclosure (Timely Disclosure): http://www.tse.or.jp/english/rules/td/index.html • Code of Corporate Conduct: http://www.tse.or.jp/english/listing/code/index.html • Corporate Governance (Principles of Corporate Governance and TSE-Listed Companies White Paper of Corporate Governance): http://www.tse.or.jp/english/listing/cg/index.html • Search for Corporate Governance Information (Report on Corporate Governance): http://www.tse.or.jp/tseHpFront/HPCGDS0701E.do?method=init&callJorEFlg=1

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