Securities on Alert

Designation of Securities on Alert

Update : May 01, 2013

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• Securities on Alert System

Issue Name	OLYMPUS CORPORATION stock
Code	7733
Designation Date	Jan. 21, 2012
Reasons for the Designation	OLYMPUS CORPORATION (hereinafter "the Company") disclosed that it would submit amendment reports to Securities Reports, etc. in light of the contents of the investigation report received from the third-party committee on December 6, 2011. In response to this, TSE determined that there is substantial reason that the amended content has a significant impact and that there is a likelihood of falling under the delisting criteria pertaining to false statements. On the same date, TSE conducted an additional designation (*Note) as Securities under Supervision (Examination). Following such, the Company submitted the amendment reports for Securities Reports, etc. on December 14, 2011 for the periods from the fiscal year ended March 2007 to the first quarter of the fiscal year ending March 2012. This case involves the concealment of large unrealized losses caused by the management of financial assets using methods including the use of multiple funds outside the scope of consolidated accounts, regardless of the fact that they should be included in financial statements, and the continued excessive inclusion of net assets over a long period of time. Furthermore, it has been deemed that the Company used the opportunity of corporation acquisition to make excessive payments for the acquisition value of stocks and fees to intermediaries. In addition to sending such payments to funds to hide losses, losses were cancelled on financial statements through the writing off of "goodwill (noren)". These actions were conducted under the knowledge of past representative directors, with the participation of directors responsible for accounting/financial affairs and/or corporate strategy, and using devious methods with the cooperation of multiple outside parties under the direction of certain members in supervisory positions. As a result, improper accounting was continued and the amendment to consolidated net profits was identified to be JPY 12.35 million. However, though some of the actions have been deemed to be those of the company organization, the losses from which this situation originated and the subsequent concealing actions were the sole work of a number of participants. Additionally, these actions had no direct relation to the core business of the Company and were conducted in a form that had no effect on the management conditions of such business. The improper accounting practices had generally no effect on sales or operating profit. Regarding the contents of the false statements, though the impact on the financial statements continued over a long period of time, such cannot be deemed to have caused continuing significant misinterpretation of profit levels or performance trends in consideration of the Company's scale. TSE is unable to deem that the market valuation, upon which forms the basis for the management performance for the Company's primary business, was considerably distorted. As such, TSE cannot deem that investor judgment was considerably distorted to the extent of warranting delisting. In comprehensive consideration of the significance of the false statements effects as stated above, because TSE cannot deem that delisting is warranted, it has removed the designation as a Security under Supervision (Examination). However, given that multiple directors, including representative directors, participated in false explanations in order to avoid detection of the concealment of losses when indicated by auditors, and as a result caused a situation requiring large amended figures, etc., TSE deems that investor confidence in the TSE market has been damaged and shall require the Company to pay a listing agreement violation penalty. Additionally, TSE deems that the board of directors, in its role of supervising the business execution of managers, and the board of auditors, in its role of monitoring, did not function effectively and that there are insufficiencies in corporate governance, including that adequate discussion was not conducted regarding the necessity and propriety of transactions, etc. pertaining to corporate acquisition. Furthermore, in addition to a considerable deficiency in awareness of compliance in a portion of the supervisory positions, insufficiencies have been recognized in the structure and operation of supervisory operations for important assets. As such, TSE has deemed that improvement of the Company's internal control systems is highly necessary and has designated the stock of the Company as a Security on Alert. (*Note) Because it was disclosed that the Company's submission of quarterly reports by the statutory deadline was unlikely on November 10, 2011, the stock of the Company was designated as a Security under Supervision (Confirmation) on such date. Due to this designation, the above case resulted in additional designation as a Security under Supervision (Examination). Furthermore, because the Company submitted its quarterly reports on December 14, 2011, designation as a Security under Supervision (Confirmation) was removed on December 15, 2011.

Issue Name	KEIOZU HOLDINGS COMPANY stock
Code	3731
Designation Date	January 18, 2012
Reasons for the Designation	KEIOZU HOLDINGS COMPANY (hereinafter "the Company") disclosed on October 4, 2011, that it is scheduled to submit amendments to securities reports, etc. Based on this disclosure, TSE determined that there was substantial reason to deem that the content of such amendments would be material and that there is the likelihood of the stock of the Company falling under the delisting criteria regarding false statements. As such, TSE designated such stock as Securities Under Supervision (Examination) on the same day. Subsequently, on December 22, 2011, the Company submitted amendments to securities reports, etc. for the period from the fiscal year ended October 2006 to the third quarter of the fiscal year ended October 2011. At the Company, under the instruction of the Representative Director, the standing statutory auditor assumed an executive position, and performed inappropriate fund outflows from around May 2001. In connection with the discovery at the end of the second quarter of the fiscal year ended October 2010 that the large fund outflow amounted to 399 million yen, the Company retrospectively stated this amount as allowance for doubtful accounts. The funds were supposedly used by the Representative Director in his name for activities including long-term stock investments and personal business investments. This series of activities was an extremely inappropriate lack of awareness of the legal obligation to segregate company assets and personal assets. In addition, with regard to the General Managing Director, it was deemed that a simple accounting judgment was made with a lack of knowledge regarding the accounting process and without sufficient awareness of the duties and responsibilities as a director, leading to the situation where the sales performance due to incentives was overstated. Due to such inappropriate fund outflows and overstated sales performance for the fiscal years ended October 2007 and October 2008 the stated operating profits before amendment became operating losses after amendment. The content of the false statements span a long period and might have been significant to the extent of having a possible effect on its market valuation regarding the operating results of the Company. However, it was not deemed to have the effect to the extent of causing a continued large misjudgment of its business performance trend or business scale. In addition, it was deemed that, with regard to the background to the amendment, the involvement by the management was seen, and with regard to the reasons behind the amendment, the statement of allowance for doubtful accounts pertains to newly revealed loans and a lack of knowledge and awareness regarding the accounting process. As such, in comprehensive consideration of the impact of the false statements, the significance of such impact was not deemed to be material or fall under a delisting. As a result, TSE cancels the designation of the stock of the Company as Securities Under Supervision (Examination). However, the false statements were deemed to have occurred due to long-term and significant deficiencies in the internal management system and framework such as the inadequacy of directors' supervisory functions and statutory auditors' monitoring functions at the Company, as well as not appropriately improving and operating the accounting organization. Therefore, TSE deems that the improvement of the internal management system, etc. of such listed company is highly necessary, and designates the stock of the Company as Securities on Alert. Furthermore, TSE deems that the Company is in violation of matters to be observed regarding disclosure, and will take the public announcement measure.
Date of Decision to Continue Designation	Apr. 30, 2013
Reason to Continue Designation	On December 22, 2011, KEIOZU HOLDINGS COMPANY (hereinafter "the Company") submitted amendment reports pertaining to securities reports, etc. for the period from the fiscal year ended October 2006 to the third quarter of the fiscal year ended October 2011. Subsequently, TSE deemed that improvement of the internal management system, etc. of the Company was highly necessary and designated its stock as Securities on Alert on January 18, 2012. The Company submitted the "Written Confirmation of Internal Management System" as required after one (1) year elapses following designation as Securities on Alert. Based on the substance, etc. of the written confirmation, it was deemed that the internal management system, etc. of the Company has not sufficiently improved. As such, TSE has decided not to remove the designation as Securities on Alert. In the case where three (3) years elapse since the date of designation as Securities on Alert (January 18, 2012) and TSE deems that problems continue to exist in its internal management system, etc., the stock of the Company shall be delisted.