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March 2005

Update : May 02, 2005

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Establishment of the new Mid-term Management Plan

TSE has established the new mid-term management plan for FY2005 to FY2007. Over this period TSE believes that the steady recovery of the economy is set to continue as economic reforms take place. However, to respond to issues such as an aging society and increasing globalization, a shift in the financial system from savings to investment is needed to ensure the recovery and development of the Japanese economy.
In a new financial system centered on investment the fundamental functions of a stock exchange are essential. TSE will fulfill its role as Japan's central market for securities trading by improving and strengthening market functions and adding new values. In doing so, TSE will pursue it's own sustainable growth together with contributing to the expansion of Japan's financial market's.

The improving and strengthening of market functions is based on the following three main themes: 1. Enhancing trust in the market. 2. Establishing an Efficient and Reliable Market Infrastructure. 3. Promoting securities market knowledge.

  Through these main themes, we shall strengthen the foundations of the securities market which is an asset to the public. Whilst responding to increased competition between markets, we will aim for continual growth together with maintaining a balance between profits and our public responsibilities, and strive to realize our goal of becoming one of the leading stock exchanges in the world.

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Corporate Philosophy


TSE has established the following corporate philosophy:
"We will make every effort to maintain a sound market with high levels of trust and convenience from the standpoint of investors and all market users, thus contributing to the prosperity of the wider society."
This corporate philosophy represents the goals aims and values that the Tokyo Stock Exchange and the TSE Group aspire to in conducting corporate activities. It is also a base for TSE's management plan as well as a cornerstone for board members and employees to carry out their activities.

Basic Management Strategy


TSE has developed the following Basic Management Strategy based on the corporate philosophy.


1. To consolidate its international position as Japan's central market, TSE's top priority shall be strengthening the functions of its market and increasing its international competitive advantage in Japanese stocks, the core products of its cash market, and long-term Japanese Government Bond futures and TOPIX futures, which form the cornerstone of its derivatives market.


2. To provide a more efficient and more convenient market infrastructure by consistently reviewing its regulatory frameworks and practices and by positively employing advanced information technology in order to establish TSE's "trustworthiness and attractiveness," qualities befitting a global market.


3. To accelerate the shift from a savings focus to an investment focus in order to establish liquid securities markets.


4. To enhance TSE's international presence and brand image, and to consolidate its position as one of the world's major exchanges while promoting a wide range of networks especially within the Asian/Oceanic region.


5. To list various investment products in response to demand from market users by making full use of TSE's market infrastructure. Also, TSE will extend its business into fields where TSE has a competitive advantage and undertake structural reforms to build a corporation with sound earnings. TSE will also take swift, appropriate action for non-performing products, thereby constantly renewing its line of products.

Management Objectives


As "Financial Objectives" to provide stable management as a market provider, we are aiming for consolidated results for FY2007 of over 54.1 billion yen in operating revenue, below 40.6 billion yen in operating expenses and over 13.5 billion yen in operating profits.

Business Strategy


Our Business Strategy is as based on the following 5 points:
1. Enhancing the Attractiveness of Listed Stocks and Facilitating the Listing of Attractive, High Quality Companies
2. Establishing an Efficient and Reliable Market Infrastructure
3. Promoting Securities Market knowledge and Increasing Investment by Individuals -Shift from Savings to Investments-
4. Establishing TSE's position as one of the major exchanges in Asia
5. Reform of Organizational Structure


Under the 5 sections of the business strategy, "Enhancing the Attractiveness of Listed Stocks and Facilitating the Listing of Attractive, High Quality Companies" will cover disclosure issues that arose last year together with aiming to improve corporate governance and disclosure. "Establishing an efficient and reliable market infrastructure" will respond to the recent increase in activity and orders in the market, this has been updated from the previous "Establishing a fair and Reliable Market Infrastructure". Aside from some partial changes the strategy will follow the same lines as last year's.

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Revisions to Estimated Performance Figures

TSE has decided to revise the expected business performance results that were announced with TSE's third quarter results. Operating revenue will be revised from 51.5 billion yen to 52.5 billion yen. Ordinary income will be revised from 10.4 billion yen to 11 billion yen. Net profits will be revised from 6.6 billion yen to 4 billion yen.
The reasons for the revisions are as follows. TSE has a long term lease on a building used to house the computer system. As computers have rapidly downsized, large amounts of space have become available which TSE has been utilizing by sub-letting to other companies. However, in this quarter, the number of tenants expressing their intentions to move out has continued and a large loss in rent subletting is clearly foreseen. As a rational expectation, a loss of 4.6 billion yen is expected which shall be classed as an extraordinary loss.
As a guarantee for the exchange's futures trading, we currently keep deposit securities and they are recorded both on the balance sheet as assets and liabilities. However, we are going to adopt the "off balance" method and from now onwards they shall not be recorded. As a result of this, both assets and liabilities will decrease.

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Interim report on the project between TSE and the Japanese Association of Public Certified Accountants

In November last year, in order to maintain the fairness of the securities market, TSE President & CEO Mr. Tsurushima and the Chairman of the Japanese Association of Public Certified Accountants (JAPCA) Mr. Fujinuma, reached an agreement to begin a project to encourage the discussion and exchange opinions about numerous issues, and to cooperate on various research issues common to both parties. TSE has included details of the issues that will be swiftly implemented and details of future plans in the interim report.
With regard to content, firstly, to ensure the accuracy of required information on securities reports, JAPCA will collect and analyze amended self-regulatory reports that were submitted to the Financial Services Agency. JAPCA will draw attention to its members of the findings of from the analysis. As well as this, JAPCA will consider its future responses regarding nominee shareholders.
Secondly, to ensure levels trust in disclosure documents, the establishment of a joint hotline between TSE and JSPCA is being considered. TSE already has an information desk to deal disclosure information which has proved very beneficial in the management of issues listed on TSE. We are considering developing this further by placing an information desk for auditors at JSPCA to enable auditors to mutually discuss matters which do not fall into confidentiality issues. This will help the management of listed companies of TSE and help JSPCA to develop a framework of information auditors can use.
As sole issues for TSE, firstly, TSE aims to improve disclosure of information when an auditor of a listed company changes. In recent years, where the possibility of manipulation has become apparent, often a change in auditor is seen. In such cases, there is a concern that an accurate reason for the change of auditor will not be disclosed to investors. TSE is considering possibilities of ways in which to improve the supply of information such as making the detailed disclosure of reasons to the change in auditor a requirement, as well as conducting a hearing into the former auditor and disclosing details of the hearing.
Secondly, is the analysis of the oath regarding timely disclosure. TSE has already received written oaths as well as the attached documents from listed companies. By analyzing companies policies toward timely disclosure, and based on those results, TSE is considering things such as summarizing case studies, and will consider policies to develop effective disclosure of corporate information.
As projects conducted by JAPCA, the publication of consideration points for auditors of information service related companies, and the establishment of a helpline regarding ethics for associates have been raised.
It is hoped that the above issues will be finalized no later than the end of this year. This is a long term project and we will respond to new issues as they arise from the exchange of information.

Disclosure seminar for listed companies.

The policies of listed companies with regard to the disclosure of corporate information are receiving attention from investors to society as a whole, and the importance of the disclosure operations of listed companies is set to continually increase. However, it is said that there is a lack in the numbers of people that have the specialized knowledge required for disclosure operations.
In response to this situation, TSE Academy will hold seminars on disclosure for listed companies. By using case studies and explaining key points to those working in disclosure related fields, TSE will provide listed companies with support for their disclosure operations.

Partial revision of listing examination criteria following the re-definition of "False Statements" within the listing rules.

Amendments based on announcements made on February 15 of this year regarding "The revision of the listing system regarding "False Statements" following the revision of securities and trading law", are planned to be introduced from April 1 of this year.

Revision of the Customer Agreement on Entrustment following the change in the regulations on the Establishment of Foreign Securities Trading Account.

As announced on February 15 of this year revision is based on "The change in the regulations on the Establishment of Foreign Securities Trading Accounts". The changes are planned to come into effect from April 1, this year.

Review of sections of the regulations regarding trust money.

As announced on February 15 of this year there will be a review of sections of the regulations regarding trust money. The review shall come into effect from April 1, this year. Caution: With regard to TSE's own IPO, under the Securities Exchange Law, solicitation before the filing of a security registration statement is made is forbidden. Therefore, TSE shall withhold reports that could be considered acts of solicitation such as details of the listing of securities, the offering and selling period, as well as forecasted results and dividends until the securities registration statements are submitted. We thank you for your understanding.

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