October 8, 2020Engagement Agenda “Issues Concerning Corporate Governance of ParentSubsidiary Listings”
Request for Engagement Meetings on Issues Concerning Corporate Governance ofParent-Subsidiary Listings

The Institutional Investors Collective Engagement Forum (hereinafter referred to as “IICEF”) together
with the seven companies participating in the Collective Engagement Program, namely The Dai-ichi
Life Insurance Company, Limited, Meiji Yasuda Asset Management Company, Ltd., Mitsubishi UJF
Trust and Banking Corporation, Pension Fund Association, Resona Asset Management Co., Ltd.,
Sumitomo Mitsui DS Asset Management Company, Limited, and Sumitomo Mitsui Trust AssetManagement Co., Ltd. (in alphabetical order) will send letters to multiple listed companies requestingcollective engagement meetings on issues concerning parent-subsidiary listings.
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1. Overview of the Agenda
There are some positive views on so-called parent-subsidiary listings (Note 1) in Japan in terms ofbringing various benefits to management including benefits in fund-raising and securing humanresources while also stressing the function of incubating companies inherent in the process oflisting subsidiaries, etc. From the investors’ perspective, however, disadvantages have beenpointed out, including the risk of certain “distortions” arising in the evaluation of stock prices aswell as the propensity for the risk of conflicts of interest (especially among shareholders). In recentyears, there has been a marked tendency among certain major corporate groups to significantly
reduce the number of their listed subsidiaries, etc., while at the same time, cases have come tolight of companies newly taking their operating subsidiaries public and disagreements coming to ahead on the problem of directors election at listed subsidiaries, etc. The announcement by theMinistry of Economy, Trade and Industry (“METI”) in June 2019 of the “Group Guidelines” (Note 2)
has also been attracting attention. Furthermore, there has been an increasing number ofinstitutional investors who are working to revise their proxy voting guidelines for listed subsidiaries,etc. with controlling shareholders. As indicated above, the problem of parent-subsidiary listings
has continued to be one of the topics of high interest among market participants.
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In many cases, passive investors and other major institutional investors participating in IICEF’sCollective Engagement Program continue to hold both the shares of the parent and thesubsidiaries, etc., in principle due to the nature of their investments. As shareholders of the parent,
they have a keen interest in whether maintaining a parent-subsidiary listing is really the most valid
option from the perspective of long-term management and value enhancement of the group as awhole. Additionally, as shareholders of the subsidiaries, etc., they cannot help but be concerned
about the possibility of unfair impairment of the interests of minority shareholders of listed
subsidiaries, etc. IICEF believes that having members of management of both the parent and thesubsidiaries, etc. become aware of these perspectives and concerns of the investors, consider
corporate governance measures to alleviate such concerns, and disclose relevant information as
well as improve their explanations to the investors, will be immensely productive as its program’scollective engagement agenda.
(Note 1) A study group of the Tokyo Stock Exchange (Study Group to review Minority

Shareholder Protection and other Framework of Quasi-Controlled Listed Companies) defined“quasi-controlled listed companies” as “listed companies with shareholders who havesubstantial control based on the holdings of voting rights of listed companies” but thereafter
we use the terms “parent-subsidiary listing” and “(listed) subsidiaries, etc.,” regardless of theaccuracy of such terms.
(Note 2) Ministry of Economy, Trade and Industry, Practical Guidelines for Group Governance

Systems (Group Guidelines), published on June 28, 2019

2. Awareness of the issues among investors
Investors’ awareness of the issues and primary concerns that should be re-acknowledged bymembers of management of listed companies facing the problem of parent-subsidiary listings aredescribed below. We are aware that they include issues that require discussions not only withmembers of management of the individual parent or the listed subsidiaries, etc., but also withmembers of management of both the parent and the listed subsidiaries, etc. taken together. Whenrequesting the engagement dialogues, IICEF intends to hold dialogues concurrently with themembers of management of both parent and the subsidiaries, etc. as much as possible.
⚫ Wouldn’t it cause some sort of disadvantage to the minority shareholders of the listed
subsidiaries, etc.? Furthermore, wouldn’t there be a risk that this fact is having an adverse
effect on the evaluation of either the parent or the subsidiaries, etc. or both on the stock
market?
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⚫ Are the advantages of the reality of a parent-subsidiary listing great enough in terms of therespective managements and the value enhancement of the parent and the subsidiaries, etc.?
Even if there were no problems in the past, couldn’t a potential conflict of interests beexposed in the event of a “contingency”?
⚫ Wouldn’t the emergence of minority shareholders as a result of the listing of thesubsidiaries, etc. become an obstacle for the optimum management strategies of the entire
group?
⚫ Some argue, “Parent-subsidiary listings are publicly well-known facts and the investor withnegative views on them can simply avoid investing.” However, for example, such arguments
cannot be applied to passive investors.
3. Specific questions
Questions for members of management and outside directors are listed below. In order to alleviate
the concerns voiced by investors described above, IICEF asks for the opportunity to have dialogues
with the members of management and outside directors in addition to further improvement ofdisclosures regarding these matters in the corporate governance reports and other documents.
[Questions for the parent company]
1. Is the reality of a parent-subsidiary listing consistent with the basic direction of the entire
group? Is the parent-subsidiary listing an optimal situation in terms of the management
strategy of the entire group? For example, why has the group chosen to maintain the listed
subsidiaries, etc. rather than making them wholly-owned subsidiaries or disposing of theirshares to third parties?
2. How does the parent recognize the risk of conflict of interests emerging between thecontrolling shareholders and the minority shareholders of the listed subsidiaries, etc.? Has it
articulated a group governance philosophy or system which also takes into account theinterests of the minority shareholders of the listed subsidiaries, etc.? What specific option
does the parent consider valid in alleviating the investors’ concerns?
3. What kind of discussions is being held at the board meetings regarding the issues describedabove? In particular, how are the independent outside directors recognizing this issue andthe discussions at the board meetings?
[Questions for the listed subsidiaries, etc.]
1. How does the subsidiary, etc. feel about the risk of conflict of interests between thecontrolling shareholders and the minority shareholders? What specific option does thesubsidiary, etc. consider valid in alleviating the investors’ concerns?
32. How does the subsidiary, etc. feel about the options outlined in “the Group Guidelines” ofMETI? For example, raising the percentage of independent outside directors on the board;establishing committees comprising mainly of independent outside directors to deal with therisk of conflict of interests; appropriately designing organs for nominating members ofmanagement and determining their remuneration, etc.
3. Is the reality of a parent-subsidiary listing consistent with the basic direction of the entire
group? Is the parent-subsidiary listing an optimal situation in terms of the management
strategy of the entire group?
4. What kind of discussions is being held at the board meetings regarding the arguments
described above? In particular, how are the independent outside directors recognizing thisissue and the discussions at the board meetings?
***Contact information:
Institutional Investors Collective Engagement Forum
Directors in charge: Yuki Kimura, Chairman; Naomi Yamazaki, Administration Manager; and Ryusuke
Ohori, 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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