© 2012 tokyo stock exchange, inc. all rights reserved. corporate governance forum may 9 th, 2012...
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© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
Corporate Governance Forum
May 9th, 2012
New Listings Dept.
Tokyo Stock Exchange, Inc.
© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
2
Contents
Section 1 What is Corporate Governance? 2
Section 2 Legal Structure in Japan 8
Section 3 Listing Examination 13
Section 4 Introduction of Tokyo Stock Exchange 17
© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
5
Basic Idea Managerial goal of stock companies is “maximization
of profit (enterprise value) for stakeholders”
Who are “Stakeholders”? Shareholders, Creditors, Employees, Government,
Customers, Suppliers, Local communities and others who have an interest (stake) in the company.
© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
6
Before 1990s
Era characterized by military demand, postwar reconstruction and high economic growth
Economic growth
Main-bank system
EconomicGrowth
Enterprises
Banks
Capital Market
Fu
nd
s
Company unions
Lifetime employment & Seniority wage system
Human resources
Controlled capital markets
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After 1990s
Enterprise Value Improvement
Company unions
Mobility of human resources& Meritocratic wage system
Human resources
Enterprises
Monitoring system
Banks
Capital Market
Fu
nd
s
Deregulation of capital markets
For
eig
n
cap
ital
Pro
mot
e sh
ift
from
sa
vin
gs t
o in
vest
men
t
Declining Birth Rate and Aging Population Mature economy
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What is required of management?
Relationship between corporate management and capital markets
Enterprise
Strategy structuring
Infrastructure development
Business performance
Funding
CapitalMarkets
Information disclosure
Corporate governance
Accountability toward the market
Utilization of capital market and profit return
Discipline in capital markets
<Fund manager>
<Fund raising venue>
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10
Legal Structure in Japan
No. of stock companies:
about 920,000
No. of listed companies:3,592 companies
Companies Act
Financial Instruments and Exchange Act
Tokyo Stock Exchange’s Rules
Companies conductingpublic offering
Definition of company structure (companies with committees, companies with board of company’s auditors, companies with company’s auditors etc.)
Designation of Independent Directors/Auditors
Disclosure of annual report, audit by certified public accountants etc.
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Authorities
Companies Act
Financial Instruments and Exchange Act
Listing Regulations Enforcement Rules for Listing
Regulations Guidelines Concerning Listing
Examination, etc. Guidelines Concerning Listed
Company Compliance, etc.
Ministry of Justice
Financial Services Agency Tokyo Stock Exchange
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Legal Structure in Japan
Companies Act Fundamental framework of stock companies Structure of stock companies (general shareholders meetings, board of directors,
board of auditors, etc. )
Financial Instruments and Exchange Act Rules for public companies in terms of investor protection
Disclosure of corporate information Registration Continuous Disclosure
Rules of Tokyo Stock Exchange as a self-regulatory body Listing examination, Listed company compliance Timely disclosure Code of Corporate Conduct
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Efforts by TSE to improve Corporate Governance
2004 Principles of Corporate Governance
2006Introduction of Report on Corporate Governance To make it easier for investors to compare the corporate governance systems
of listed companies.
2007 Introduction of Code of Corporate Conduct
2007, 2009, and 2011
TSE Listed Companies White Paper on Corporate Governance Analysis of corporate governance systems implemented by listed companies.
Aug 2009Review of Listing Rules to address issues including third-party allotments with large dilution
Dec 2009 Review of Listing Rules for securing Independent Director(s)/Auditor(s)
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Main Listing Criteria (Single Listing)1st section 2nd section Mothers
Number of shareholders 2,200 or more 800 or more 300 or more
Number of tradable shares 20,000 units or more 4,000 units or more 2,000 units or more
Market capitalization of tradable shares
JPY 1 billion or more JPY 500 million or more
Ratio of tradable shares to listed shares
35% or more 30% or more 25% or more
Market capitalization of listed shares JPY 25 billion or more JPY 2 billion or more JPY 1 billion
* Public offering: 500 trading units or more
Number of years of business operation No less than 3 years under a board of directors At least 1 year under a board of directors
Shareholders‘ equityJPY 1 billion or more as of the end of the fiscal year immediately preceding the current fiscal year
None
Pre-tax profit or total market capitalization
[Profit during the last 2 fiscal years]
Total amount of JPY500 mil. or more in the last 2 fiscal years
[Exemption for companies whose profit is less than JPY 500 million during the last 2 fiscal years]
Market cap.: Minimum JPY 50 billionSales: Minimum JPY 10 billion
None
False statements or unfair representations
Unqualified opinion and no false statements for the last 2 fiscal years
Unqualified opinion for the latest fiscal year
2 fiscal years (Unqualified opinion and no false statements. Audit opinions must be “unqualified” for the latest fiscal year.)
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16
Main Listing Criteria (Multiple Listing)
1st section 2nd section Mothers
Number of shareholders 2,200 or more 800 or more 300 or more
Number of tradable shares 20,000 units or more 4,000 units or more 2,000 units or more
Market capitalization of listed shares JPY 25 billion or more JPY 2 billion or more JPY 1 billion
* Public offering: 500 trading units or more
Number of years of business operation No less than 3 years under a board of directors At least 1 year under a board of directors
Shareholders‘ equityJPY 1 billion or more as of the end of the fiscal year immediately preceding the current fiscal year
None
Pre-tax profit or total market capitalization
[Profit during the last 2 fiscal years]
Total amount of JPY 500 mil. or more in the last 2 fiscal years
[Exemption for companies whose profit is less than JPY 500 million during the last 2 fiscal years]
Market cap.: Minimum JPY 50 billion Sales: Minimum JPY 10 billion
None
False statements or unfair representations
Unqualified opinion and no false statements for the last 2 fiscal years
Unqualified opinion for the latest fiscal year
2 fiscal years (Unqualified opinions and no false statements. Audit opinions must be “unqualified” for the latest fiscal year.)
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17
Overview of Listing Examination for Main Board
Corporate Continuity and Profitability
The applicant company must conduct its business continuously and have a stable profit base.
Soundness of Corporate Management
The applicant company must conduct its business in a fair and faithful manner.
Effectiveness of Corporate Governance of Enterprises and Internal Management System
The applicant company has developed appropriate systems for corporate governance and internal control.
Appropriateness of Disclosure of Corporate Information, etc.
The applicant company is capable of appropriately disclosing corporate information, etc.
Other Matters deemed necessary in light of Public Interest and Investor Protection
a) Shareholders’ rights and exercise of such rights are not unduly restricted.
b) Relationship with its parent company is deemed appropriate.
c) Other matters are deemed appropriate in light of public interest and investor protection.
TSE examines the following items regarding an initial listing applicant and its corporate group.
1
2
3
4
5
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Section 4
Introduction of Tokyo Stock Exchange
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Global Comparison of GDP and per capita GDP
0
10,000
20,000
30,000
40,000
50,000
60,000
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
GDP/
USD
人(
)
0
10,000
20,000
30,000
40,000
50,000
60,000
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
//
//0
10,000
20,000
30,000
40,000
50,000
60,000
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000GDP bn USD( )
Japan is a top global economy with world-class GDP and per capita GDP.
Source: World Bank, 2010Note: Circle size indicates relative GDP.
per
cap
ita
GD
P (
US
D)
GDP (USD bn.)
GDP: 5,459 billion USDper capita GDP: 42,831 USD
© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
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3,845 3,325 3,2662,447
11,796
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
NYSEEuronext (US)
NASDAQ OMX Tokyo SEGroup
London SEGroup
NYSEEuronext(Europe)
Source: WFE
Note: Domestic companies only
Ranked among world’s top 5 by market cap Ranked among Asia’s top 5 by market cap
Ranked among world’s top 5 by trading value Ranked among Asia’s top 5 by trading value
The world’s largest exchange outside the U.S.
Global Position of TSE
3,658
2,838
2,029
1,445
3,972
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Tokyo SEGroup
Shanghai SE Shenzhen SE KoreaExchange
Hong KongExchanges
12,724
3,972 3,658 2,838
18,027
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
NYSEEuronext (US)
NASDAQ OMX Tokyo SEGroup
Shanghai SE Shenzhen SE
(US$ bn, during Jan-Dec. 2011) (US$ bn, during Jan-Dec. 2011)
No.1in AsiaNo.3
in the world
2,357 2,258
1,198 1,055
3,325
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Tokyo SEGroup
Shanghai SE Hong KongExchanges
Australian SE Shenzhen SE
(US$ bn, as of Dec. 2011) (US$ bn, as of Dec. 2011)
No.1in AsiaNo.3
in the world
© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
21
TSE Market Structure
TSE offers markets with different concepts to allow companies to make an optimal choice.
Available to both individual and professional investors Professional-oriented market Only available to
professional investors
TSE 1st Section
- Large-sized companies -
TSE 2nd Section
- Medium-sized companies - - Growth companies -
TOKYO PRO
Market
TOKYO PRO-
BOND Market
© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
22
1922
37
0
10
20
30
40
50
60
70
2009 2010 2011 2012 2013
IPO社
数
実績 予想
IPOs in JapanIPOs figures showed a significant increase to 37 in 2011 from 22 in 2010, confirming a full-fledged recovery in the Japanese IPO market. The number of IPOs is expected to increase from 2012 onward. TSE aims to attract more than 60 companies to market in FY2013.
Actual Estimated
No.
of
IPO
s
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Recent IPO of 2 Korean Companies on TSENexon was listed in 14th Dec 2011, W Scope was listed in 16th Dec 2011 on TSE. Nexon was the largest IPO in 2011.
Name of Corporation
Nexon ( 3659 )
Description of Business
Creation, development, and distribution of online gamesDungeon & Fighter, Maple Story, etc.
CEO Mr. Seung-woo Choi
Date of Incorporation 18th Dec 2002
Listing on TSE 14th Dec 2011
Market Section Tokyo Stock Exchange 1st Section
Name of Corporation
W Scope ( 6619 )
Description of Business
Manufacture and sales operations for plastic film and sheets. *Image of separator is shown below.
CEO Won-Kun Choi
Date of Incorporation 14th October 2005
Listing on TSE 16th December 2011
Market Section Tokyo Stock Exchange Mothers
Transition of Financial Data Transition of Financial Data
40,219
51,572
69,781
87,613
12,019
22,35128,479
36,905
8,29017,659
21,63825,755
0
20,000
40,000
60,000
80,000
100,000
2008 2009 2010 2011
Rev
enue
s (in
Mill
ion
JPY)
0
10,000
20,000
30,000
40,000
50,000
Ord
inar
y in
com
e, N
et inc
ome
(in
Mill
ion
JPY)
Revenues Ordinary income Net income
1,244
1,686
3,382
61 124
1,232
3 255
1,205
0
1,000
2,000
3,000
4,000
2009 2010 2011
Am
ount
of
Sale
s(in
Mill
ion
JPY)
0
500
1,000
1,500
2,000
Am
ount
of
Sale
s, C
urre
ntPr
ofits
(in M
illio
n JP
Y)
Amount of Sales Current Profits Current Net Earnings
© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
24
Reference
Disclosure (Timely Disclosure):
http://www.tse.or.jp/english/rules/td/index.html
Code of Corporate Conduct:
http://www.tse.or.jp/english/listing/code/index.html
Corporate Governance (Principles of Corporate Governance and TSE-Listed Companies White Paper of Corporate Governance):
http://www.tse.or.jp/english/listing/cg/index.html
Search for Corporate Governance Information (Report on Corporate Governance):
http://www.tse.or.jp/tseHpFront/HPCGDS0701E.do?method=init&callJorEFlg=1
© 2012 Tokyo Stock Exchange, Inc. All Rights Reserved.
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