CABINET ORDER RELATING TO DIRECT INWARD INVESTMENTS, ETC. COPYRIGHT RODERICK SEEMAN

CHAPTER II DIRECT INWARD INVESTMENTS, ETC.

Article 2 (Report of Direct Inward Investments, etc.)

1. The number of stock or the amount of investment in capital of a company which are determined by Cabinet Order as being owned indirectly via another company, as provided for in Article 26, Paragraph 1, Item 3 of the Law shall be the number of stock or the amount of investment in capital calculated by multiplying the number of stock or amount of investment in capital which the other company (limited to those where the investment ratio of those listed in Item 1 or Item 2 of the same paragraph (hereinafter in this paragraph and the following paragraph referred to as "foreign corporations, etc.") is 50% or more. Hereinafter in this paragraph, the same), which is the shareholder of or investor in the said company, holds directly by the investment ratio of the foreign corporations, etc., in the said other company. In those situations, when the said other companies are 2 or more, the said number of stock or amount of equity interest shall be the total of the calculations for each of the said 2 or more other companies added together.

2. The "investment ratio" of the preceding paragraph shall mean the number of stock or amount of equity interest in the company directly held by the foreign corporations, etc., to the total issued and outstanding stock or investment in capital in the said company.

3. The shares which shall be designated by Cabinet Order as provided for in Article 26, Paragraph 2, Item 1 of the Law, shall be the stock which is registered or designated as those whose trading price concerning over-the-counter sales are to be announced based on the provisions of the rules of the Securities Industry Association (meaning the Securities Industry Association as provided for in Article 67, Paragraph 1 of the Securities Exchange Law (Law No. 25 of 1948)).

4.Nonresident individuals, corporations or other organizations (limited to those classifiable as falling under Item 2 through 4 of Article 26, Paragraph 1. Hereinafter in this Paragraph and Paragraph 10, called "corporations, etc.") determined by Cabinet Order to be in a special relationship through stock holding, permanent economic relationship, familial relationship, other similar ways as provided for in Article 26, Paragraph 2, Item 3, with the acquisitor of the stock (hereinafter in this Paragraph referred to as "stock acquisitor") of listed companies, etc. (meaning the listed companies, etc., as provided for in Article 26, Paragraph 2, Item 1 of the Law. Hereinafter the same), shall be as listed hereunder.

(1) Corporations, etc., in which the total amount of issued and outstanding shares or the amount of investment in capital (hereinafter in this Paragraph referred to as "issued and outstanding shares") held directly by the stock acquisitor exceeds 50% or more of the total number of issued and outstanding shares or investment in capital (hereinafter in this paragraph referred to as "shares, etc.")

(2) Corporations, etc., in which all of the issued and outstanding shares, etc., are directly held by corporations, etc., listed in the preceding item;

(3) Corporations, etc., in which stock, etc., corresponding to 50% or more but less than 100% of the issued and outstanding shares, etc., is directly held by corporations, etc., listed in Item 1 (limited to those in which all of the issued and outstanding shares, etc., are held directly by the stock acquisitor);

(4) In those situations where the stock acquisitor is a corporation, etc., corporations which hold directly stock, etc., corresponding to 50% or more of the issued shares, etc. of the said stock acquisitor;

(5) Corporations, etc. which hold directly all of the issued shares, etc., of the corporations, etc., listed in the preceding item;

(6) Corporations, etc., which hold shares, etc, directly corresponding to 50% or more but less than 100% of the issued and outstanding shares, etc., of the corporation, etc., listed in Item 4 (limited to those which hold directly all of the issued and outstanding shares, etc. of the stock acquisitor);

(7) Corporations, etc. in which stock, etc., corresponding to 50% or more of the issued shares, etc., is held directly by corporations, etc., listed in Item 4;

(8) Corporations, etc., in which all of the issued shares, etc., are held directly by any of the corporations, etc., listed in the preceding 3 items;

(9) Executives (meaning directors, and those corresponding to that. Hereinafter in this Paragraph, the same) of the stock acquisitor (limited to corporations, etc.) and executives of corporations, etc which are listed in prior items.

(10) Corporations in which the majority of the directors are parties listed in the previous item.

(11) The spouse of the stock acquisitor

(12) A direct blood relative of the stock acquisitor.

(13) In those situations where the stock acquisitor is a governmental institution or public organizations or similar entity of a nation (including a region which is a part thereof. hereinafter in this item, the same) other than Japan, the said nation's other governmental institutions or public organizations, or similar entities.

5. The ratio to be designated by Cabinet Order as provided for in Article 26, Paragraph 2, Item 3 of the Law shall be 10%.

6. The establishment or alteration to be designated by Cabinet Order as provided for in Article 26, Paragraph 2, Item 5 of the Law shall be the establishment of a branch, factory or other place of business (hereinafter referred to as "branch, etc.") in Japan, or the substantial alteration other than the establishment of a branch, etc., in Japan engaging in the business listed below, or the substantial alteration of the type or the business objective of such branch, etc., existing in Japan:

(1) The banking business provided for in the provisions of Article 2 of the Banking Law (Law No. 21 of 1927);

(2) The business of foreign insurers subject to the provisions of Article 2, Paragraph 7 of the Law Concerning Foreign Insurers (Law No. 184 of 1949);

(3) The gas business as provided for in Article 2, Paragraph 8 of the Gas Business Law (Law No. 51 of 1954);

(4) The electricity business as provided for in Article 2 paragraph 1, Item 7 of the Electricity Business Law (Law No. 170 of 1964);

(5) The business of foreign securities companies as provided for in Article 2, Item 2 of the Law Concerning Foreign Securities Companies (Law No. 5 of 1971).

7. The amount of money to be determined by Cabinet Order as provided for in Article 26, Paragraph 2, Item 6 of the Law shall be an amount not falling below 100 million yen as shall be determined by the Ordinance of the Competent Ministry.

8. Financial institutions to be designated by Cabinet Order as provided for in Article 26, Paragraph 2, Item 6 of the Law shall be the financial institutions listed in the following;

(1) Parties conducting business in the banking industry, the trust industry, the insurance industry, or the securities industry;

(2) The International Reconstruction & Development Bank and the U.S. Export-Import Bank;

(3) Other than parties listed in the preceding two items, parties who primarily loan money as their business (excluding those parties whose business is the sale, transport, storage, or intermediary for sales, of goods, or transactions peripherally related to such transactions);

(4) Parties to be designated by Ordinance of Competent Minister as similar to any of those listed in the preceding 3 items.

9. The acts to be designated by Cabinet Order as provided for in Article 26, Paragraph 2, Item 7 of the Law shall be the following:

(1) The acquisition of debentures (excluding those which are issued or solicited for subscription in foreign countries and for which payment can be received in foreign countries) solicitation for subscription to which is made to specific parties among those listed in each item of Article 26, Paragraph 1 of the Law. Provided, however, that the acquisition of debentures falling under any of the following shall be excluded:

(a) The acquisition of debentures denominated in the currency of Japan by parties listed in Item 2 or Item 4 of Article 26, Paragraph 1 of the Law;

(b) The acquisition of debentures for which the period from the date of acquisition to redemption of the principal is one year or less;

(c) The acquisition of debentures for which the amount of money in the acquisition is below a sum of money not falling below 100 million yen as designated by Ordinance of the Competent Ministry;

(d) Other acquisitions of debentures as designated by the Ordinance of the Competent Ministry

(2) The acquisition of investment securities which are issued by corporations established under special statutes.

10. The report pursuant to the provisions of Article 26, Paragraph 3 of the Law must be made based on the procedures designated by the Ordinance of the Competent Ministry within 15 days calculated from the date when the direct domestic investment, etc., as provided for in Paragraph 2 of the same article (hereinafter referred to as "direct inward investments, etc.,") is made.

11. In those situations where the foreign investor who must give report based on the provisions of Article 26, Paragraph 3 of the Law falls under one of the parties listed in Paragraph 1, Item 1 or Item 2 of the same article, the said foreign investor must make the said report through a resident agent.

12. The direct domestic investments, etc which are to be designated by Cabinet Order as provided for in Article 26, Paragraph 3 of the Law shall be the direct domestic investments, etc. listed below:

(1) Acquisitions based on inheritance or bequest of shares or equity interest in a company.

(2) Situations where a corporation, which continues in existence, or which is newly established, after the merger of a corporation which holds shares of or equity interest in companies not listed on a stock exchange (in the next Item, "non-listed companies), acquires the said shares or interest;

(3) Acquisitions of shares or equity interests in nonlisted companies

(excluding acquisitions where the ratio of the number of shares of the nonlisted companies or the amount of investment in capital in the nonlisted company (hereinafter in this Item, called "shares, etc." related to the said acquisition, as to the total number of issued and outstanding shares or the total investment in capital (hereinafter in the Item called "issued and outstanding shares") in the said nonlisted company, or, the ratio of the total of the number of shares, etc of the number of shares of the nonlisted company, held by the party making the acquisition after the said acquisition, where the said party making the acquisition is regarded as an acquisitor of shares of Paragraph 4, added to the number shares of the nonlisted company held by the individuals or corporations, etc. who are the nonresidents classifiable as falling under any of the items of the same paragraph,

as to the total number of issued and outstanding shares of the nonlisted company, exceeds 10%), other than the acquisition of shares or equity interests of nonlisted companies classifiable as direct domestic investments for which a notification must be made based on the provisions of Article 27, Paragraph 1 of the Law (excluding the acquisition of shares as determined by the ordinance of the Competent Ministry to be corresponding to the shares of nonlisted companies)

(4) Acquisitions of new shares based on a stock-split, amalgamation, or conversion of shares;

(5) Acquisitions in a foreign country of shares of listed companies, etc., issued or solicited for subscription in a foreign country;

(6) The acquisition of new shares based on the conversion of convertible bonds related to issues or public offerings of listed companies, etc. in foreign countries.

(7) The acquisition of new shares exercise of warrant rights related to warrant bonds (limited to those pursuant to the issue of warrant rights certificates) or warrant rights certificates related to issues or public offerings of listed companies, etc. in foreign countries.

(8) Other than those situations listed in each of the preceding items, those situations as designated by the Ordinance of the Competent Ministry.