Notes on Media Briefing by Akira Kiyota, Director and Representative Executive Officer, Group CEO, Japan Exchange Group, Inc., on June 16, 2017 There were responses from 19,974 out of all 52,560 shareholders, including those who were not present but submitted voting forms, for a total of 4,745,580 out of 5,410,072 voting rights exercised. 2,038 shareholders attended the AGM, 992 more than the previous year. Many questions came up, and the meeting closed at 12:42 p.m. I would also like to report that at the AGM, proposals such as on the election of directors were approved in their original form. [Q&A] Q: The AGM season for listed companies will be in full swing next week. TSE has worked on spreading out dates for AGMs. The concentration rate on the most concentrated date this year was less than 30%, which one could see as a change in the right direction. Could you share your comments on this? And, as FSA provided guidance, trust banks have started to make details public about how voting rights were exercised for each proposal. I would also like to hear your views on that matter. A: Dates for annual general shareholders meetings were spread further. The concentration rate of the most concentrated date was down in the 29% level. The number of companies that held AGMs on the most concentrated date was 696. The rate declined considerably, although there is still concentration to some extent. This change was realized as the introduction of Japan's Stewardship Code (2014) and Corporate Governance Code (2015) has affected institutional investors and corporate managers. I understand that more corporate managers now seriously consider how their AGMs should be to realize shareholder-centric management or management to enhance corporate value. The concentration rate may go down a little further, but we should 1 still appreciate the achievement as significant. As you pointed out in the latter part, more institutional investors individually disclosed proxy voting results as their behavior is changing based on the revised Stewardship Code or discussion on fiduciary duty. Some media outlets reported that an institutional investor of Mitsubishi UFJ Financial Group voted against management appointments of Mitsubishi Motors. This is read as a sign that institutional investors increasingly express their judgment as true investors by exercising their votes, regardless of whether they will fall into the same group or have a shared sense of fraternity. Still, there may be some investors who feel a little hesitant. But, I hope this will improve dialogue about how to increase corporate value of Japanese companies between investors and corporate managers. Q: I would like to ask about the investigation of Toshiba on the cancellation of the designation as a Security on Alert. In a previous media briefing, you mentioned that the decision could not be made until the company submitted its securities report. Now, the submission deadline of the end of June is approaching, and the company may delay its submission. As of now, what is your presumed schedule for the investigation of Toshiba? A: As you said, Toshiba announced that the company would not be able to report formal financial figures at its general shareholders meeting on June 28. Some media outlets also reported lately that Toshiba might not meet the statutory deadline of the end of June to submit its securities report. We still hope that Toshiba will continue devoting its utmost efforts to meet the statutory deadline for submitting the securities report with an audit opinion while improving its internal management system. However, Westinghouse filed for Chapter 11, and various issues remain uncertain. A number of reports have indicated that proposals have emerged and been shut down in reference to whether Toshiba would sell its memory division to eliminate its excess liabilities. The investigation to determine whether the designation as a Security on Alert is to be cancelled or whether the stock will be delisted 2 continues based on the second written confirmation of internal management system submitted by Toshiba on March 15. Many events have unfolded after the submission of the written confirmation. To determine whether or not Toshiba’s stock as of now should remain listed, facts that arose after the submission should be included in the investigation. As such, it will be quite difficult to make a unilateral decision without the securities report. Still, this case is being examined by JPX-R. I am not in a position to give directions, but surmising from an objective standpoint, the aforementioned situations seem to make it hard to just draw a conclusion. In addition, we can see whether the company has learned to have good communication with its audit firm by looking at how the company submits its securities report. In this respect, we have to keep our eyes on the developments. Q: The government announced Investments for the Future Strategy 2017, which includes a system to disclose information on soudanyaku/komon (advisors/consultants). The strategy says that this system will be established by TSE. I would like to know what TSE will do, including the timeline, if any. There are also some views that the positions of advisors/consultants should be abolished. Could you also tell us when or how you think advisors/consultants exert their roles from your own knowledge and experience? A: There are various opinions about advisors/consultants. While some media outlets critically report that advisors/consultants are unfairly remunerated too highly considering their roles, companies that employ them may say that advisers/consultants are substantially contributing to their organizations. I personally agree that it is not necessarily desirable for those who were executives, or have experience in top management, in particular, to cast an influence on corporate management after handing over their responsibilities to successors. Meanwhile, some large companies have a broad range of external contacts. For instance, they contact trade associations such as 3 Keidanren (Japan Business Federation) or Keizai Doyukai (Japan Association of Corporate Executives), or associations according to the type of business such as bankers associations, or Japan Securities Dealers Association (JSDA). Advisors/consultants can play their part in such associations. I, myself, have been involved with Keidanren and Keizai Doyukai. From my experience, I understand that some people say they need advisors/consultants, because those who have no influential connection with no such title may have little influence on associations even though they are members of those associations. As such, I do not think we should create a rule to abolish the system of advisors/consultants without exception. Each company has different circumstances. Thus, some of them may say they need such a system. This is not a "comply-or-explain" approach, but I think it is important to leave the advisor/consultant system for companies that have already employed the system and to have them explain why they need it. I think rules in this area should be designed. Job descriptions and working conditions of advisors/consultants should be disclosed to a certain extent. Thus, if such disclosure allows advisors/consultants to work with confidence, then, the system will not have any problems. It is important that companies take this opportunity to thoroughly review the system. Q: Trading in shares of Takata Corp was suspended. Did the company inform you of what the media reported? A: We knew what had been going on to date but had no information about the fact that the company was trying to restore its finances by filing for bankruptcy protection as the media reported. TSE has suspended trading of the stock since said media reports. The company has yet to disclose the matter, but we requested Takata to provide information based on today's media reports. I believe the company is trying hard to handle the matter, but it has yet to provide facts to us. We will improve communication with Takata while closely looking at the matter. 4 Q: At today's AGM, a question was raised on whether TSE gives special consideration, in terms of criteria for determining whether or not a stock remains listed, to large companies like Toshiba or whether the criteria is being tweaked, since we have not seen delisting of large companies lately. What are your views on this? A: First, with respect to whether TSE gives special consideration to large companies, it does not do such a thing at all. There is no doubt about that. As you know, JPX-R, as prescribed in the Financial Instruments and Exchange Act, is independent from JPX. In terms of listing examination and listed company compliance, it is a completely separate organization from profit-oriented JPX. JPX-R does not directly consider any opinions from anyone at JPX, including myself, or from outside, political, or business/economic factions. Thus, I have to clarify that there is no special consideration whatsoever. The second point is that there are not many cases of delisting large companies, which is unusual. When scandals occurred in the past, there were only two options, maintaining listing or delisting. TSE reviewed the system to solve the problem. Since Securities on Alert, a system to provide listed companies with opportunities for improvement by giving a grace period for delisting, has been used, you may have the impression that the number of delisted companies decreased. Naturally, some companies were delisted since there were no sufficient improvements in their internal management systems. In this respect, we have not given special consideration to large companies just because of their size. We also do not treat small businesses coldly. JPX-R makes level-headed decisions about whether or not to delist a specific stock.