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August 2009

Update : Aug. 28, 2009

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1. Improvements to the Listing System to Enhance Confidence in Mothers

The Tokyo Stock Exchange (TSE) has decided to revise the listing system of Mothers in light of enhancing confidence in the market.

Mothers was established in 1999 to promote the development of new industries in Japan by providing emerging companies with a venue to raise funds for their growth through the existing market infrastructure. For the past decade, the TSE has accomplished much in line with its initial targets. For example, a total of 250 emerging companies have been newly listed on the market, and more than 10% of them have steadily grown, and been assigned to the First Section.

On the other hand, however, the TSE has received the following opinion; some companies listed on Mothers and other markets for emerging companies face aggravating financial results due to changes in management shortly after listing, and these companies often undermine shareholder interests. As a result, confidence has decreased in markets for emerging companies as a whole, and the markets have been stagnant for many years.

Considering the above opinion, the TSE will reestablish the Mothers' market concept, "a market for companies with growth potential that aim at assignment to the First Section in the near future". At the same time, the TSE will promote the listing of companies with growth potential, in such a way as setting quantitative requirements related to listing examinations.

The revisions highlight the following three points.

First, the TSE will conduct a revision to the requirements related to Mothers listing examinations, such as handling of recommendations. There is a certain image that it is difficult for companies with a long company history and those that are regarded not to have high growth potential to be listed on the Mothers market. In order to dispel that image, the TSE will establish quantitative requirements for companies with high growth potential. Such requirements will replace recommendations regarding high growth potential of a company, which are currently submitted by the company's managing trading participant.

Additionally, the TSE will adopt new delisting criteria. Specifically, the TSE will assign a period of nine months to a Mothers-listed company if its stock price falls to less than 10% of the initial public offering price within three years after listing. At the same time the company is required to develop a business improvement plan. If the stock price does not recover within the nine-month period, the TSE will delist the company. The new criteria require companies wishing to be listed on Mothers to fully recognize responsibility for initial public offering prices and the underlying business plans. In addition, the criteria are aimed to prevent listed companies from greatly disappointing shareholders by changing their management without careful thought soon after listing. Taking these aims into consideration, the TSE will not delist companies immediately after their stock prices fall significantly. Instead, the TSE will allow a period for listed companies to improve their management.

Finally, the TSE will require Mothers listed companies to provide more information on investor relations after listing.

Currently, Mothers-listed companies assure that they will hold IR meetings more than once a year for three years after listing. However, the TSE will alter these conditions to request that companies hold IR meetings twice or more a year, and continue to do so every year after listing. In addition, the companies are requested to submit informational materials they use at IR meetings so that the TSE may make such materials available to investors through its website. Because this may cause a cost increase to Mothers-listed companies, the TSE will provide support, such as approving online IR meetings and joint IR meetings sponsored by the TSE.

This revision is scheduled to be implemented in November 2009 after soliciting suggestions and opinions from the public.

2. Review of Trading Hours of ToSTNeT

The TSE has decided to review the trading hours of the ToSTNeT market.

The ToSTNeT market was established for transactions that are difficult to be executed smoothly in auction trading, such as block trading and basket trading.

The TSE significantly reviewed the trading hours of the market in January 2008 and set them to the current hours of 8:20am to 4:30pm. However, considering requests from main market users for longer trading hours, the TSE will extend the closing time by one hour to 5:30pm.

This review is scheduled to be implemented in November 2009 after allowing a period for comments and suggestions from the public.

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