Steven M. Dickinson ^*
& Takeo Kosugi ^{* *}

Appendix C

CONCRETE PROPOSAL FOR THE DOMESTIC CP MARKET (Kokunai CP Shijo no Gutaian ni Tsuite), approved by the Securities and Exchange Council and the Board of Investigation of the Financial System of the Ministry of Finance on May 20, 1987, reprinted in Koizumi & Kawakita, Kokunai CP Shijo Sosetsu no Gaiyo(An Outline of the Establishment of the Domestic CP Market), KIN'YO HOMU JIJU, June 15, 1987, at 23, 24

I. Basic Parameters

In order to create an effective CP market as soon as possible,

(1) CP shall be legally construed as a promissory note and its transactions shall be made within the framework of laws and regulations now in force.

(2) Those dealing in CPs shall be financial institutions and securities companies.

II. Dealing Guidelines

- Shaping CP as a commodity

1. Basic status: A means for a leading enterprise to obtain unsecured, short-term funds from institutional investors.

2. Legal status: A promissory note.

3. Term: One month or more, and six months or less.

4. Mode of paying interest: By means of discounting the CP.

spf5. Par value: More than ¥100,000,000.

- Issuance and Circulation of CP

6. Enterprises eligible for issuance, backup line and guarantee:

(1) Enterprises eligible for issuance shall be those eligible for issuing unsecured straight bonds (about 170 in number).

(2) In principle, it shall be necessary to establish backup lines or to obtain guarantees by financial institutions. However, the setting of backup lines shall not be compulsory as against enterprises which have satisfied certain criteria.

(Note 1) A rough estimate is that the number of such enterprises will be thirty, plus ten electric power companies.

(Note 2) We shall consider relying on rating services in the future if companies specializing therein are well established.

7. Method of issuance: To be issued through dealers.

8. Dealers: Financial institutions and securities companies.

9. Purchasers: Institutional investors, etc.

10. Disclosure: Disclosure under Securities and Exchange Law shall not be required, but it shall be necessary to prepare a brief prospectus.

11. Distribution: By financial institutions, securities companies and short-term broker/dealers.

- Legal classification of CP transactions

12. Classification under relevant law: Incidental business under the Banking Law, and approved other business under the Securities and Exchange Law.

- The above framework shall be reviewed one year after establishing the CP market, taking into consideration the market trend then prevailing.

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