October 31, 2022
Institutional Investors Collective Engagement Forum

Comments Concerning the Follow-up of Market Restructuring

We, The Institutional Investors Collective Engagement Forum (IICEF), have submitted the following
opinions in response to the “Call for Comments Concerning the Follow-up of Market Restructuring”
by Tokyo Stock Exchange, Inc.

Call for comments on 1. Prime Market
We would like to see the Prime Market, as the face of the Japanese market, aim for the criteriathat satisfy “high liquidity and governance standards as well as constructive dialogue with globalinvestors.” Specifically, the criteria should include:(1) market capitalization and liquidity suitable for investment by numerous institutional investors,(2) ensuring a higher level of corporate governance, and(3) encouraging constructive dialogue with investors and proactive initiatives to the medium- tolong-term improvement of corporate value.
The following are examples of representative opinions and suggestions by the Participating
Investors of IICEF on the Prime Market.
(1) Market capitalization and liquidity Review of the criteria of tradable share market capitalization
From the perspective of a global investor, the standard should be market capitalization of atleast ¥200 billion or more and tradable share market capitalization of ¥100 billion or more.
 Raising the criteria of tradable share ratio
Regardless of the size of market capitalization, from the perspective of the formation of an
appropriate share price and the exercise of market discipline, it is preferable that more thanhalf of the shares issued be tradable.
(2) Ensuring a higher level of corporate governance Outside directors should account for one-third or more of the board
In the long term, we expect the majority of the board to comprise outside directors but for
the time being, we request that outside directors account for one-third or more of the board,1
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as stipulated in the Corporate Governance Code.
 Diversity of the board including at least one female director and mandatory disclosure of theboard’s skills matrix
 Mandatory appointment of a majority of independent outside directors at so-called listed
subsidiaries(3) Encouraging constructive dialogue with investors and incentives to improve corporate value
We believe that listed companies’ sincere engagement with the capital market and promotionof constructive dialogue with investors both in Japan and abroad will lead to the efforts toimprove their medium- to long-term corporate value.
 Mandatory participation in the electronic voting rights exercise platform
 Mandatory English disclosures (especially the annual securities report)
 Enhancing the disclosure of the Corporate Governance Report
Especially disclosures of basic capital policies, specific plans and results of reducing crossshareholdings, and the policy to not prevent sales when a cross-shareholder indicates theintent to dispose of the shares, etc.
Call for comments on 4. Transitional Measures
We request that transitional measures/plans to meet the continued listing criteria clarify theeffective period of about three years as a target.
Call for comments on 5. Others
We make the following four requests to all listed companies.
 Encouraging dialogue between outside directors/corporate auditors and investors
For example, recommending that outside directors, etc., participate in the dialogue withinvestors, and the selection of outside directors as contacts for dialogue with investors. Theseinitiatives should become mandatory especially for companies listed on the Prime Market,
which are expected to engage in dialogue with global investors.
 Disclosures of the status of dialogue with investors (Separate disclosures of the status ofdialogue with outside directors, etc.)
Engaging in dialogue with investors will provide outside directors, etc. with an opportunity todeepen their knowledge of the company concerned, which leads to better exercise of theirfunctions at the board of directors meetings. Also, improving skills and capabilities of theoutside directors, etc. through the dialogue with investors are expected to greatly contributeto the enhancement of corporate value and sustained growth of Japanese companies as awhole.
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 Including the email address of the IR contact in the kessan tanshin reports or company websites
We request better access for investors when contacting the persons in charge of IR.
 Including the PBR data in the kessan tanshin reports
We believe that the PBR is appropriate as a simple indicator to see whether a company isgenerating positive corporate value and we ask companies with PBRs of 1x or less to draw up
improvement plans. Especially with regard to companies listed on the Prime Market, wesuggest making such improvement plans mandatory.

<Reference> Interim Report (June 13, 2022, p.15) of the Committee on New Direction of Economic
and Industrial Policies, Industrial Structure Council“Companies with PBRs of 1x or less are required to formulate and disclose concrete andrational plans for a certain period (e.g. 5 years) in order to exceed 1x (i.e. their corporate value
exceeds their net assets).”(Note) To eliminate the effects of short-term share price fluctuations, the average PBR for acertain period (e.g. 5 years) is observed. For industries that tend to have PBRs below 1x froma global perspective, companies in such industries are not bound to aim to uniformly exceed
1x but aim to overtake global competitors.
EndContact information:
Institutional Investors Collective Engagement Forum
Directors in charge: Yuki Kimura, Representative Executive Director and Chairman; Naomi Yamazaki,
Representative Executive Director and Administration Manager; Ryusuke Ohori, ExecutiveDirector; and Hiromitsu Kamata, Executive Director
Address: Tokyo Entre Salon, Shinmaki-chou Building Annex 1, 3-2-14, Nihonbashi, Chuo-ku, Tokyo
103-0027 JAPANE-mail: info@iicef.jp

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