JSS Newsletter International

（Vol.1 December 2015）

1. The Filing Status of Corporate Governance Reports Reflecting Compliance with the Corporate Governance Code (As of November 30, 2015)

Research was conducted on the filing status of Corporate Governance Reports in compliance with the

Corporate Governance Code.

(1) Filing Status by Market (As of November 30, 2015)

Market Division

Filing CompaniesNumber of

Companies in Full Compliance*

Number of Companies

offering Explanation

Other**

Number of Companies/

Number of Listed Companies***

Filing Rate

Number of Companies

Rate Number of Companies

Rate Number of Companies

Rate

TSE 1st Section

745/1,920 38.8% 160 21.5% 577 77.4% 8 1.1%

TSE 2nd Section

89/540 16.5% 4 4.5% 85 95.5% 0 0.0%

Mothers 41/216 19.0% 40 97.6% 1**** 2.4% 0 0.0%JASDAQ 192/799 24.0% 189 98.4% 1**** 0.5% 2 1.0%

OtherMarkets

22/124 17.7% 12 54.5% 10 45.5% 0 0.0%

Total 1,089/3,599 30.3% 405 37.2% 674 61.9% 10 0.9%* “Companies in Full Compliance” refers to cases where companies state that each principle of the Code (each general

principle of the Code for emerging markets) has been completely implemented.

** “Other” refers to cases where the column for “the reason why each principle of the Code was not implemented” is not

presented.

*** “Number of Listed Companies” does not include foreign companies.****“Companies offering Explanation” under Mothers and JASDAQ offer a voluntary explanation with respect to the

principles and supplementary principles other than the general principles.

(2) Number of Filing Companies by MonthThe number of filing companies significantly increased in November. In this month alone, 718 companies

filed reports in compliance with the Code, which is nearly double the total number of filing companies in the5 months between June and October (371 companies).

(3) Filing Status of Companies with March-end Financial Closing by Market (For TSE listed companies only)As shown in (1), the number of filing companies as of November 30, 2015 exceeds 1,000. Nonetheless, the rate of filing has not yet reached 50% (42.7%) even for companies with March-end financial closing. The majority of the companies, exceeding 1,300 in total, are expected to file in December.

Market Division

Filing CompaniesNumber of Companies/

Number of Listed Companies*

Filing Rate

TSE 1st Section

723/1,426 50.7%

TSE 2nd Section

88/376 23.4%

Mothers 25/73 34.2%JASDAQ 167/472 35.4%

Total 1,003/2,347 42.7%*“Number of Listed Companies” does not include foreign companies.

(4) Monthly Trend of the Number of Companies offering ExplanationSince the Code became effective in June, the ratio of Companies offering Explanation has been increasing.

In November, nearly 90% of the filing companies listed on the TSE 1st Section, TSE 2nd Section, NSE 1st Section and NSE 2nd Section offered an explanation.

Contributing factors can be a facilitated understanding of the Code, the accumulation of disclosure samples from other companies, and release of the “Revision of Practical Guidance on the Preparation of the Corporate Governance Code (FAQ and Answers) and Amendment to Procedures for the Preparation of‘Corporate Governance Reports’” by TSE on October 23, in which it was clarified that even if a company has a fixed policy on future implementation, if it is determined that the policy has not yet been implemented as

June July Aug Sept Oct Nov

TSE 1st

TSE 2nd

Mothers

JASDAQ

Other(than TSE)

52 companiesin total

47 companiesin total

33 companiesin total

63 companiesin total

176 companiesin total

718 companiesin total

of the report filing date, the company has to offer an explanation.

(For the TSE 1st and 2nd Sections, NSE 1st and 2nd Sections only)

*Of those who filed in June and October, two in each month stated that they would update their Corporate Governance

Reports in November to offer an explanation. Therefore the number of companies for June and October are increased by two

respectively compared with the number as of the end of October.

(10 companies*)(10 companies)

(9 companies) (18 companies)

(106 companies*)

(519 companies)

Ratio of Companies offering Explanation

Oct NovSeptAugJulyJune

(5) List of Codes for which Companies Offered an Explanation (From the Top) (More than 100 Companies)Code Description Number of

Companies

Supplementary Principle 4-11(3)

Analysis and evaluation of the effectiveness of the Board of Directors as a whole

469

Supplementary Principle 1-2(4)

The use of the Electronic Voting Platform and English translation of the convening notices of general shareholder meeting

358

Principle 4-8 Effective use of independent directors 296

Supplementary Principle 4-2(1)

Setting appropriate portion of performance-linked remuneration and stock-based remuneration

183

Supplementary Principle 4-10(1)

Involvement and advice from independent directors on matters of nomination and remuneration

171

Principle 3-1(v) Explanation on the reason of the appointments and nominations of senior management and directors

168

Supplementary Principle 3-1(2)

Providing information disclosures in English 124

Supplementary Principle 4-8(2)

Independent directors’ cooperation with the management and kansayaku (corporate auditor)

119

Supplementary Principle 1-2(2)

Early distribution of convening notices for general shareholder meetings and posting the notice on the website prior to distribution by mail

103

Supplementary Principle 4-8(1)

Exchanging information and sharing awareness among independent directors

100

(For the TSE 1st and 2nd Sections, NSE 1st and 2nd Sections only. Provided that it includes two companies in emerging

markets that offer voluntary explanations with respect to the principles and supplementary principles other than the

general principles.)

2. On the establishment of the “Guidelines on Shareholder Meeting Attendance by Global Institutional Investors, etc.,” by the National Kabukon Federation

At present, since global institutional investors (known as actual shareholders) are not shareholders on

registry (nominee shareholders), they cannot attend the shareholder meeting as a shareholder.

On the other hand, the Corporate Governance Code, which became effective on June 1, 2015, states with

respect to global institutional investors’ attending the shareholder meeting, under supplementary principle

1-2-(5), that “in order to prepare for cases where institutional investors who hold shares in street name

express an interest in advance of the general shareholder meeting in attending the general shareholder

meeting or exercising voting rights, companies should work with the trust bank and/or custodial

institutions to consider such possibility.”

Also, the Study Group concerning Promoting Dialogue between Companies and Investors for Sustainable

Growth released a report on April 23, 2015, titled “Report on the Study Group concerning Promoting

Dialogue between Companies and Investors for Sustainable Growth: On Corporate Information Disclosure

toward a Dialogue-Rich Nation and on the General Shareholder Meeting Process,” in which it concluded

that “the preparation of guidance for practical procedures by relevant organizations is desired.” Similarly,

the 2015 Revised Japan Revitalization Strategy, which was approved by the Cabinet on June 30, 2015, states

that “Furthermore, in order to help companies to smoothly create their basic policies for the participation of

global institutional investors, etc. not on the shareholders registry, at shareholders' meetings, the

Government will encourage relevant organizations to establish guidelines by the end of 2015.”

In light of these trends, the National Kabukon Federation has established the “Guidelines on Shareholder

Meeting Attendance by Global Institutional Investors, etc.,” this November, to serve as a reference for listed

companies to develop basic policies on shareholder meeting participation by global institutional investors.

[Fig. 1] How the Guidelines came to be established (Conceptual image)

As a method for global institutional investors to attend the general shareholder meeting, proxy

（政府の政策）

Corporate Governance Code(Securities Exchange)

Report on the Study Group concerning Promoting Dialogue

2015 Revised Japan Revitalization Strategy

Relevant organizations

Listed companies

National Kabukon Federation

Demand consideration of meeting attendance

by “actual shareholders”

Demand guidance preparation

Provide guidance

Expect guidance preparation

participation and voting at the general shareholder meeting is currently considered to be a possibility.

However, a number of listed companies in Japan require a proxy to be a nominee shareholder under their

Articles of Incorporation.

Based on the above, these guidelines explain four ways for global institutional investors to attend the

general shareholder meeting, and illustrates a practical case example and templates for the required

document for reference. The four ways are: (Route A) to become a nominee shareholder by the record date,

(Route B) to observe the general shareholder meeting after accepting the company’s reasonable discretion,

(Route C) to attend the general shareholder meeting as a proxy after proving “exceptional circumstances” to

the issuing company, and (Route D) to attend the general shareholder meeting as a proxy after the company

changes its Articles of Incorporation.

These guidelines were established to serve as a reference for listed companies to develop basic policies on shareholder meeting attendance by global institutional investors, and they are available on the Kabukon website (http://www.kabukon.net/). As the website states that they “are in the process of preparing the outline of these guidelines in English, to serve as a reference along with these guidelines,” the English version of this guidance may be available in the near future.

*: National Kabukon Federation

A voluntary organization of business securities practitioners from Japanese listed companies for the purpose of legal and

practical research and study on securities, as well as for information exchange and interaction.

Actively interacts with the Ministry of Justice, legal academics, securities exchanges, the KEIDANREN (Japan Business

Federation), and lawyers, while it exchanges opinions on legislative aspects such as amendment of the Company’s Act, etc.,

submits feedback to public comments, and makes proposals on the desired securities practices for issuing companies, to

contribute to the facilitation of securities practices for listed companies.