Corporate Governance Reform in Japan
Japan Corporate Governance Forum

Hitoshi HIROKAWA
Director, Corporate Accounting and Financial Disclosure Division

金融庁
Financial Services Agency, the Japanese Government

June 2023

History of Corporate Governance Reform in Japan✓ Since 2013
Joint efforts by Financial Services Agency,
Ministry of Economy, Trade and Industry,
Ministry of Justice and Tokyo Stock Exchange (Japan Exchange)

To achieve sustainable growth and to increase corporate value oflisted companies over the mid-long term
Through effective board oversight and shareholder engagement✓ 2 codes as catalysts
Stewardship Code since 2014
signed up by 324 institutional investors as of April 30th, 2023
Corporate Governance Code since 2015
mandatory to all listed companies on “comply or explain” basis-1-

Achievements and Challenges✓ Improvement of governance structure
Independent directors
Over 90% of “Prime market” listed companies have 1/3 or more
independent directors (March, 2023)
Nomination Committee and Remuneration Committee
Over 80% of “Prime market” listed companies have Nomination
Committee and Remuneration Committee (incl. non-statutory) (2022)✓ Sustainable growth and corporate value,
still in progress
TOPIX500 increased 2.43 times since 2013 (vs S&P500 2.95 times)
43% of TOPIX500 have PBRs below 1.0 (vs only 5% of S&P500)

Need to move our focus from “Form to Substance”-2-

Action Program for Accelerating Corporate Governance Reform (April 26th,2023)✓ Thanks to overseas investors
Japan Corporate Governance Forum
Meetings with ACGA, ICGN and US investors since fall, 2022

✓ Top priorities: Profit-making and Sustainability✓ Keys: Board effectiveness and Stewardship activities-3-Action (1) : Profit making✓ Improving profitability of listed companies
TSE requested “Prime and Standard markets” listed companies
to analyze their own costs of capital and stock prices andto make plans for improvement (March 31st, 2023)“Action to Implement Management that is Conscious of Cost of Capital and Stock Price”
https://www.jpx.co.jp/english/news/1020/e20230414-01.html

Cross-shareholdings should also be addressed.

Please give feedback about the analyses and plans
disclosed by listed companies!

-4-Action (2) : Sustainability✓Statutory disclosure of sustainability information
Annual disclosure of sustainability information in“Annual Securities Reports” has been legally required forlisted companies since the FY ended March 2023.
Listed companies are required to submit “Annual Securities Reports” in accordance with Financial
Instruments and Exchange Act. It is similar to a Form 10-K.

✓Set the target for female representation“Prime market” listed companies are to make efforts to achieve- 30% target of female representation at board or executive levelby 2030- at least 1 female representation at board or executive level by 2025

“Prime market” listed companies are encouraged to make action plans.
-5-Action (3) : Board effectiveness✓Educational activities for board directors
Promote various private-sector educational activities
for independent directors.

✓Disclosure of board activities
Annual disclosure of the activities ofboards and nomination, remuneration and audit committees in“Annual Securities Reports” has been legally required forlisted companies since the FY ending March 2023.

-6-

Action (4) : Stewardship activities✓Corporate disclosure to facilitate engagement
Disclosure in English, disclosure ahead of Annual General Meetings,
and timely disclosure are strongly called for by global investors.

As a new initiative, TSE requested “Prime market” listed companies todisclose summarized information related to dialogue withshareholders (March 2023).

✓Encouraging stewardship activities
Discuss, among the investment community,
the issue of lack of engagement resources,
and appropriate incentives for engagement.
Review the governance of asset managers and asset owners.
Review the legal framework of large shareholding reporting, etc.
-7-Action (5) : Dialogue with global investors✓List of “the companies” to be publishedA list of the companies that respond to the expectations of global
investors in terms of corporate governance will be published.

what should be the criteria?
- Board composition- Board diversity- Disclosure for global investors
E.g. disclosure in English, disclosure ahead of AGM,
adoption of IFRS
- Cross-shareholdings
E.g. disclosure of voting policy and individual voting results-8-Thank you for your attention.
We hear from you at
jcgf.secretariat@fsa.go.jp

Public Relations Magazine

ACCESS FSA

Reference Material : Corporate Governance Reform in Japan
Japan Corporate Governance Forum

Hitoshi HIROKAWA
Director, Corporate Accounting and Financial Disclosure Division

金融庁
Financial Services Agency, the Japanese Government

June 2023

Issues for corporate governance reforms
In order to realize sustainable corporate growth and increased corporate value over the mid- to long-term through corporate
governance reforms, it is vital for management, the board, investors, and various other stakeholders to cooperate appropriately.
The following is a diagram of cooperation among stakeholders and a summary of issues pointed out in the previous meeting of theCouncil, JCGF, and the survey of institutional investors.

Stewardship CodeCorporate Governance CodeCooperate appropriately

ListedCompanies
Management
Mid- to long-term
issuesCurrent issues

Proxyadvisors

Stakeholder otherthan shareholders
ReturnEffective
Oversight

ProvideRecommendation

Return

Board
Out
side

Out
side

・・・

Constructive dialogues based on
the mid- to long- term viewSupportRisk-taking

Investors（shareholders）

Nominationcommittee

Assetmanager

Remunerationcommittee

Investment

I s su e sProfit-making
and growth
based on thecost of capital

Initiatives onsustainability,
including humancapitalEffectiveness of
independent
directors
Accelerating
governance

Go a lSustainable corporate growthand increased corporate value
over the mid- to long-term

Asset
owner

Enhancing thedisclosure

Promotingdialogues with
global investors

LegalissuesInvestment

Effective implementation of
stewardship activities

Effective stewardship activities
Improve mid- to long-term
returns-1-

Action Program
The Council published recommendations regarding "Action Program" as of April 26. The Council will review the
implementation status from time to time and consider whether additional measures are needed.
Action Program for Accelerating Corporate Governance Reform: From Form to SubstanceA ppr o ac h to f u t u re in i ti at ive•
I t i s vi t al to m o ve t h e f o cu s of re f o rm f ro m f orm t o s u bst an c e i n res o lvi ng t he is s ue s . T o th is end , it is n e ce s s a ry t o
c r e ate a n e nv ir onm en t t hat p r om o te s se lf -m o ti va t e d cha nge s i n t he m in d se ts o f co m pan ie s an d i nv es t o rs, a s w el l as
t o m ak e t h e d ia lo gu es be twe en c om p a nie s a nd in ves t or s m o re p rod u ct i ve an d m or e e f f e cti ve .
•I t i s app r op ri ate t o ex am i ne th e ti m i ng of t he re vis i o n o f e ac h Co de in a t im ely m a n ner ba s e d o n th e s t a tu s ofp ro g res s f r om th e view po in t o f t h e e f f e c tive i m p le m en t at io n of c orp o rat e go ver n an ce re f orm , n o t nec e s s a ri ly f oll ow in g
t h e re vi ew c ycl e in t he pa st ye a rs.

１．Issues for seeking sustainable corporate growth andincreased corporate value over the mid- to long-term
Cooperate
appropriately

ListedCompanies
Management
Mid- to long-term
issuesCurrent issues

I s s u es

Profit-making
and growth
based on costof capital

Stakeholder otherthan shareholders

Effective
Oversight

SupportRisk-taking

Board
Out
side

Nominationcommittee

Initiatives onsustainability,
including humancapital

Out
side

・・・

Remunerationcommittee

Effectiveness of
independent
directors

Specific measuresA) Encouraging the management with an awareness of profitmaking and growth
E n co u rag e t he m a nag em e nt wit h an aw are n es s of p r of i tm a k in g a n d g ro wt h bas e d o n t he c os t o f ca pi ta l (s u c h a s th ep ro p er al lo c a t ion of m ana gem e n t re so urc e s t ow ard ri s k t a k in g, i nc lu d ing a bus i ne s s po r tf ol i o revie w an d i nv es t m ent s
i n h u m an c ap it a l, i nt ell ec tua l pr op e rti es a n d R &D)
B) Encouraging the management with an awareness ofsustainability issues
E nc oura ge c om pa nie s t o tak e ac t ion s on s u s t ai nab i lit yt h rou g h pub li c at io n o f c o m pan i es ’ goo d di s c lo su re p ra ct ic es .
Co ns id er m e a su r es t o im p rov e t h e di ve rs i ty of th e b oa rd andc o re hum a n re s ou rce s , s uc h as in c rea si ng t he pe rc e nt a ge off e m al e exe c ut iv es ( t a rge t of 30 % o r m o r e b y 2 030 ).
C) Improving the effectiveness of independent directors
P ro m o te f u r ther i m pr ov em en t of t he ef f ec ti ven e ss ofin de p end en t d ir ec tor s t h rou g h c o m pi l ati on a nd pu b lic at io n o f
t h e a ct ual s t at u s an d exa m pl es o f a boa rd , n om i nat i onc o m m i tt ee an d r em u ne ra ti on c o m m it te e , an d e du c at i ona la c ti vit ie s t o pr om ot e u n der s t a nd in g o f th e r ol es e xpe c t ed ofin de p end en t d ir ec tor s-2-Action Program (cont.)
Action Program for Accelerating Corporate Governance Reform: From Form to Substance
2. Issues related to dialogue between companies and investors

Proxyadvisors

Listed companies

ReturnProvideRecommendation

Constructive dialogues
based onthe mid- to long- term view

Enhancing thedisclosure
Promoting dialogues
with global investors

Investment

LegalissuesSpecific measuresA) Effective implementation of stewardship activities

Investors（shareholders）
ReturnPr om ote t he ef fo rts o f a s s e t m an age rs an d a s s et o wn er s t ode al w i th th e is su es re la ti ng t o t he s te wa rd s hi p ac t ivit ie s
(i nc l udi ng al lo c at in g s uf fi c ie n t re s ou rc es , pr o vi di ng
in c ent ives f o r s tew ar d s hi p a ct ivit ie s , es ta bl is hi ng
go ve rna n ce s t r uct ur es o f a ss et o wn ers ).

B) Enhancing the disclosure as a basis for dialogue

Asset
manager

Asset
owner

Investment

Effective implementation of
stewardship activities

Re q ues t to di s cl os e t h e s t a tu s o f d ia log ues a nd m a k e c le ars u f f i ci en t a nd ins uf f ic i en t ca se s of “E x pl ain ”.
Co n si der m e as ure s t o p r ovid e i nve s to rs wit h th e i nf orm atio n
t h ey n eed p ri or to t h e ge n era l sh ar e hol de r m eet in g a nd t op ro m o te ti m e ly di sc lo s u re of c o rp ora t e in f o rm a ti on.

C) Promoting dialogues with global investors
P ro m ot e d i al ogu es be t wee n c om p ani es a nd g lob al i nves to rs
by “ vis ual iz i ng ” c om p a nie s tha t wi ll in gl y a nd a c t iv ely r es po ndt o t h e ex pe c t at io ns of g lo bal in ve st ors a n d f u rth er exp a nd
t he c o ve r ag e o f E ngl is h d is cl os u re .

D) Resolving legal issues
C on si de r c lar if ic ati o n o f "ac t of m a ki ng i m po rt a nt
s ug ges ti on s " a n d " jo in t ho lde rs " u nde r t he lar g e s ha r eh ol di ng
r e po rti ng r ul e, t r ans pa ren c y o f be n ef i c ia l s h ar e hol de rs , andh o w t o p rot ec t m i nor it y s hare ho ld ers i n th e c a s e of a p a rti al
t a k eo ver bi d .

E) Resolving market environment issues
Co ns i der t h e di s c l os ur e a n d c or p or ate g o ver n anc e is s u es
wit h reg ard t o q ua s i -c on t rol l ed lis t e d com pa n ie s, f oll ow up
on t he pr o gre s s o f red u c ti on of c r o ss -sh are ho ldi n g s an dc o ns i der wh et he r f urt h er m e as u re s are c all ed f o r .
-3-Japan Corporate Governance ForumTo accelerate and strengthen corporate governance reforms, JFSA established the Japan Corporate Governance
Forum (hereinafter the “JCGF”) to hear a wide range of opinions from stakeholders, including overseas investors.
In JCGF, while some praised the improvements in corporate governance, the following issues were pointed out: (1)management issues, such as encouraging management with an awareness of profit-making and growth based on
the cost of capital and promoting initiatives relating to sustainability, including human capital; (2) issues related tothe effectiveness of independent directors; and (3) issues related to dialogues between companies and investors.
Prime Minister Kishida’s Remarks at the New York Stock
Exchange (NYSE) September 22, 2022

JCGF event history

One very important policy is corporate governance reform. […]We will accelerate and further strengthen corporate governancereforms in Japan, such as establishing a forum in the near
future to hear from investors from around the world.

・ 1st Forum held on Tuesday, September 27, 2022, with Asian
Corporate Governance Association
・ 2nd Forum held on Monday, October 3, 2022, with International
Corporate Governance Network
・ 3rd Forum held on Thursday, January 12, 2023, with U.S.
investors, etc.

GeneralM a i n o p i n i on s i n J CGF

Issues related to
management andeffectiveness of
independent
directors• Corporate governance reform, including corporate mindset, has begun to make substantial progress. Although
there are still some issues, we look forward to further progress.
• The importance of capital efficiency is being recognized, but it is not recognized by all companies. Issues include
accumulation of cash, low ROE, and a large number of companies with PBR below 1.
• Board diversity, including gender perspective, and disclosure on human capital are needed.
• Effectiveness of independent directors, such as strengthening the roles of the nomination / remuneration committee
and ensuring the independence of the board are needed.
• Fiduciary responsibilities in index investment have not been fully fulfilled, and it is necessary to improve the treatment ofinvestment personnel.

Issues related todialogue
betweencompanies andinvestors• It is necessary to enhance disclosure, such as submission of Annual Securities Reports prior to general shareholders
meetings.
• It would be useful to enhance English disclosure and make visible companies with good corporate governance.
• It is necessary to review the legal system from the perspective of promoting and substantiating engagement andprotecting minority shareholders.
• There are concerns that listed subsidiaries may harm the interests of minority shareholders and that there is a large-4number of cross-shareholdings.

Survey on Stewardship Activities (1)In order to promote more effective implementation of stewardship activities, JFSA commissioned Mizuho Research &Technologies to conduct a survey of actual stewardship activities by institutional investors, analyze issues, and makerecommendations based on these results. From January to March 2023, the survey, in the form of a questionnaire survey of
136 institutional investors and an interview survey of 16 companies, was conducted.
As a result of the survey, the following issues were pointed out: (1) Lack of resources (human resources and time) for
engagement, (2) Insufficient behavioral changes and attitudes at investee companies, (3) Room for improvement in processdevelopment (PDCA cycle), (4) Lack of incentives to allocate costs and budgets to activities. In addition, the individual effortsof each asset manager to address these issues were aggregated.
1

There is a shortage of human resources with the necessary skills and capabilities to conduct effective
stewardship activities at each asset management firm and in the industry as a whole.

Issues pointed out as a result of the survey

Lack of resources(human resources
and time)
for engagement

In cases where it is difficult to secure and develop sufficient human resources in-house, it is expected that external
knowledge will be utilized through collaboration with other asset managers, including collaborative engagement.
However, the interpretation of "joint holders" under the large shareholding reporting rule is unclear, and theburden of the collaboration is concentrated in some asset managers, so resources may not be sufficiently
supplemented through the collaboration.
As a result of the selection of companies for engagement, small and medium-sized companies tend to be
excluded.

2
Insufficient
behavioral changes
and attitudes atinvestee companies
Room forimprovement inprocess development(PDCA cycle)

Engagement (dialogue) and exercise of voting rights by asset managers may be perceived by companies asformalistic and may not lead to behavioral changes because companies are not convinced by them.

There is a possibility that in-depth engagement has not been conducted because the interpretation of "act of making
important suggestions" is unclear under the large shareholding reporting rule. reporting system

3

4 Lack of incentives toallocate costs andbudgets to activities

Asset owners may not have sufficient evaluation and monitoring resources.

Stewardship activities by asset managers may not be appropriately reflected in the selection andcompensation of asset managers.
-5-

Survey on Stewardship Activities (2)Based on the results of the survey, the following recommendations were made: (1) in order to promote more substantial
stewardship activities (i) wide-ranging collaborative efforts among asset managers, (ii) efforts between asset managers andasset owners, (iii) wide-ranging collaborative efforts among asset owners should be promoted; and (2) administrative
authorities should appropriately follow up on these efforts so that all concerned parties can work together to improve theeffective implementation of stewardship activities.
1

Wide-ranging
collaborative
efforts among
asset
managers

Initiatives to Resolve Issues

2

Efforts
betweenasset
managers andasset owners

3

Wide-ranging
collaborative
efforts amongasset owners
4

Follow-up bytheadministrative
authorities

Based on the self-assessment of each asset manager’s individual issues, it is worth considering the establishment of aforum in which asset managers can widely cooperate to exchange views on the appropriateness of the issues
recognized by each asset manager and the effectiveness of efforts to resolve them, and to examine specificmeasures.
As an issue for the whole asset management industry, an appropriate framework should be established to avoid asituation in which some asset managers are forced to bear an excessive burden in terms of collaboration with otherasset managers, including collaborative engagements. It is also expected that the asset management industry as awhole will cooperate in efforts to attract new talent.
Asset managers should report to asset owners on their own issues and efforts to resolve them, as well as
appropriately reflecting evaluations received from asset owners in future efforts.
Asset owners should appropriately evaluate the appropriateness of the asset manager's recognition of issues andthe effectiveness of efforts to resolve them based on the above reports, and appropriately monitor future efforts. It isalso expected that the results of evaluation and monitoring will be reflected in the selection of the asset manager
and the setting of compensation.

It is important for asset owners to have sufficient knowledge and operational resources for assessment and monitoring.
In cases where it is difficult for each asset owner to secure sufficient knowledge and operational resources
independently, it is worth considering taking measures such as evaluating and monitoring asset managers incollaboration with asset owners who have sufficient knowledge and operational resources as needed.

The administrative authorities should appropriately follow up on the effectiveness of each of the above initiatives and, if
necessary, take further measures to promote them.
Regarding the ambiguity of the interpretation of "joint holders" and "important suggestions" under the large
shareholding reporting rule, efforts should be made to resolve the issues. At the same time, the transparency ofbeneficial shareholders should be improved so that companies that are not subject to engagement by asset managers
can themselves ask for dialogue with asset managers.

-6-

Review of the tender offer rule &the large shareholding reporting rule
Japan Corporate Governance Forum

Hitoshi HIROKAWA
Director, Corporate Accounting and Financial Disclosure Division

金融庁
Financial Services Agency, the Japanese Government

June 2023

Review of the tender offer rule & the large shareholding reporting rule

✓As a part of Action Program for
Accelerating Corporate Governance Reform✓Issues for discussion
Tender offer rule:(i) Should transactions in which more than 1 / 3 of the voting rights
are acquired through market trades, be subject to tender offer rule?
(ii) Should the scope of the partial tender offer be limited?
Large shareholding reporting rule:
Should the scope of the “material proposal” and “joint holders” belimited or clarified in order to promote effective engagement,
including collective or collaborative engagement?
Beneficial Shareholders
Should the transparency of beneficial shareholders be improvedin order to promote dialogue between companies and investors?
-1-Review of the tender offer rule & the large shareholding reporting rule
At a joint session of the general meeting of Financial System Council and the meeting of Sectional Committee held in March
2023, the following consultation was delivered: in light of securing transparency and fairness of the market andpromoting constructive dialogue between companies and investors, the tender offer rule and the large
shareholding rule should be reviewed.
A working group was established to consider the following main issues based on recent changes in circumstances onJune 5, 2023.

Recent Changes in Circumstances

Tender offer
rule

Large
shareholding
reportingrule

Beneficial
shareholders
transparency

Main Issues• Increase in cases of unsolicited
M&A through on-market
transactions

Review of the scope of application of the tender offer
rule (market trades, thresholds)• Diversification of M&A

Flexibility in tender offer rule

Measures against coercive tender offers

Clarification of eligibility to use special reporting
Clarification of the scope of joint holders• Increase in passive investment• Expansion of collaborative
engagement• Growing importance ofconstructive dialogues between
companies and investors

Clarification of treatment of cash-settled equity
derivatives

Measures to ensure transparency of beneficial
shareholders-2-Overview of the Tender Offer Rule
The tender offer rule forces a tender offer for the following transactions, and requires (i) priorinformation disclosure and (ii) equal treatment of shareholders in order to ensure the "transparency
and fairness" of securities transactions that may have an impact on corporate control.
Voting rights ratio after transaction
Over 5%Off-market trades(more than 10 persons
in 60 days)

Off-market trades

Over 1 / 3Majority

2 / 3 or more

5%rule1 / 3 Rule

(A tender
offer isrequired)(A tender offer is required.
Partial tender offer is allowed.)

2 / 3 rule(Partial tender offers
is not allowed)

Exemptions(up to 10 persons
in 60 days)

Market trades

In principle, not subject to rules.

The main regulations on the implementation of a tender offer are as follows:
Disclosure
regulations

The offeror must disclose the volume to be purchased, the tender offer price and tender offer period
in advance.
The target company must disclose the opinion with respect to the tender offer.

Other
regulations

A minimum tender offer period of 20 business days (a maximum of 60 business days) must be set.
The tender offer price shall be the same for all shareholders.
During the tender offer period, the offeror must not purchase shares other than through a tender offer.
The offeror must not change the terms and conditions to the disadvantage of shareholders.
-3-Issues to consider
It has been pointed out that (i) transactions in which more than 1 / 3 of the voting rights are
acquired through market trades should also be subject to tender offer rule and (ii) the scopeof the partial tender offer should be limited referring to the European tender offer rules.
Voting rights ratio after transaction
Over 5%Off-market trades(more than 10 persons
in 60 days)

Over 1 / 3Majority

2 / 3 or more

5%rule1 / 3 Rule

(A tender
offer isrequired)(A tender offer is required.
Partial tender offer is allowed.)

Off-market trades

2 / 3 rule(Partial tender offers
is not allowed)

Exemptions(up to 10 persons
in 60 days)

Market trades

In principle, not subject to rules.

Japan

EuropeTransactions in which more than 1 / 3 of thevoting rights are acquired through market
trades are not subject to tender offer rule.

Regardless of the type of transaction, atender offer is required when a certain
threshold is exceeded.

Partial tender offer is allowed if the ratio ofvoting rights after the tender offer isless than 2 / 3.

In principle, partial tender offer is not allowed.

A offeror is required to initiate a tender offer for
acquiring shares which would exceed thethreshold (ex-ante approach).

A offeror is required to initiate a tender offer after
acquiring shares exceeding the threshold(ex-post approach).

-4-Overview of the large shareholding reporting rule
The large shareholding reporting rule requires large shareholders to disclose the status of shareholdings in order toimprove the transparency and fairness of the market by promptly providing the information.
This rule is divided into “general reporting,” which is a basic disclosure type (cf. Regulation 13D in US), and“special reporting,” which allows special measures for institutional investors (cf. Regulation 13G in US).
General Reporting
Obligations of
Large
Shareholders

1. If an investor becomes a large shareholder (more than a 5% stake):- The investor must submit a large shareholding report within five business days of acquiring more than a 5%
in a company.
2. If there are any significant changes such as a 1% or greater increase/decrease in the percentage ofshareholdings following the submission of the large shareholding report :- The investor must submit a change report within five business days of the change.

Special Reporting

Outline of theSpecialReportingRule

The rule allows institutional investors who repeatedly and continuously execute buy/sell transactions of shares in their
daily operations to report under relaxed frequency of and deadline for submissions.
<Details of the relaxation>
Only to submit a "large shareholding report" and "change report" on the pre-registered bi-monthly
reference date and submit the report within five business days of the reference date.
< Eligibility to use special reporting>
1. The investor’s ownership ratio does not exceed 10%.
2. The investor is not committing to the Act of Material Proposal.
3. It is necessary to register the reference date to the authority.

Joint Holders

Outline of
Joint Holders
Rule

A shareholder is required to calculate its shareholding ratio by including the shareholding of a person that
corresponds to any one of the following (“Joint Holder”) .
1. A person that has agreed to obtain or assign shares in cooperation with the shareholder
2. A person that has agreed with the shareholder to jointly exercise voting rights and other shareholder rights.
3. A person that has a special relationship with the shareholder, such as a certain capital relationship or a family
relationship.

-5-

Issues to consider
From the viewpoint of promoting effective engagement with companies by investors, it has been pointed out that thescope of "material proposal" should be limited or clarified.
It has been pointed out that the scope of "joint holders" should be limited or clarified from the viewpoint ofpromoting collective or collaborative engagement..
General Reporting
Obligations of
Large
Shareholders

1. If an investor becomes a large shareholder (more than a 5% stake):- The investor must submit a large shareholding report within five business days of acquiring more than a 5% in acompany.
2. If there are any significant changes such as a 1% or greater increase/decrease in the percentage of shareholdings
following the submission of the large shareholding report :- The investor must submit a change report within five business days of the change.

Special Reporting

Outline of theSpecialReportingRule

The rule allows institutional investors who repeatedly and continuously execute buy/sell transactions of shares in their
daily operations to report under relaxed frequency of and deadline for submissions.
<Details of the relaxation>
Only to submit a "large shareholding report" and "change report" on the pre-registered bi-monthly reference dateand submit the report within five business days of the reference date.
< Eligibility to use special reporting>
1. The investor’s ownership ratio does not exceed 10%.
2. The investor is not committing to the Act of Material Proposal.
3. It is necessary to register the reference date to the authority.

Joint Holders

Outline of
Joint Holders
Rule

A shareholder is required to calculate its shareholding ratio by including the shareholding of a person that corresponds
to any one of the following (“Joint Holder”) .
1. A person that has agreed to obtain or assign shares in cooperation with the shareholder
2. A person that has agreed with the shareholder to jointly exercise voting rights and other shareholder
rights.
3. A person that has a special relationship with the shareholder, such as a certain capital relationship or a family-6relationship.

Transparency of beneficial shareholders
It has been pointed out that the transparency of beneficial shareholders should be improved
with reference to systems in other countries in order to promote dialogue between companies
and investors.
(*)The term "Beneficial shareholder" here means a person who is not a shareholder on the shareholder register(nominee shareholder) but who has the authority to give instructions on voting right and investment.
Japan

As for nominee shareholders, there is a system for companies and other shareholders to identify throughshareholder register or disclosure of major shareholders in annual securities reports.
On the other hand, as for beneficial shareholders, there is no system for companies or other shareholders
to identify unless they are subject to the large shareholding reporting rule (more than 5%).
Many companies outsource (at cost) the search for beneficial shareholders to research firm.

Systems in other countries
USAn institutional investment manager that exercises investment discretion over $100 million or more in
Section 13(f) securities such as equity securities that trade on a national securities exchange must report its
holdings including the name of the issuer and class, the CUSIP number, the number of shares and the total
market value quarterly on Form 13F with SEC. Form 13F fillings are publicly disclosed on EDGAR database.

UKA public company may give notice to any person whom the company knows or has reasonable cause tobelieve to be interested (or to have been interested in previous 3 years) in the company's voting sharesThose who received such notice are required to confirm whether or not it is the case, and if he or she holds
or has held any such interest, to give further information including the number of shares and the identity of
persons interested in the shares in question within such reasonable time as may be specified in the notice.

-7-