global securities services division japan market profile · 2020-01-28 · (2,118 domestic and 36...

The Bank of Tokyo-Mitsubishi, Ltd. Global Securities Services Division

JJaappaann MMaarrkkeett PPrrooffiillee

Table of Contents

1. Market Information – Japan • Japan Market Summary & Highlights 2. Subcustodian Information – Bank of Tokyo-Mitsubishi (BTM) • BTM Profile • BTM Financial Highlights • Compliance – Insurance, Audit 3. Market Instruments • Stock Exchanges • Registrars • Regulators • Investor Protection Funds 4. Central Depositories • JASDEC • BOJ 5. Securities Settlements • Instruments • Trade Settlement • Market Discipline 6. Registration & Restrictions • Registration • Foreign Ownership Restrictions, Limits & Disclosure Requirements • Restriction on TB/FB 7. Corporate Actions & Taxation • Corporate Actions • Income Collection • Taxation 8. Proxy Voting • Voting Procedures • Notifications 9. Cash Management • Currency • Restrictions & Repatriation

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Please note that although we have made every effort to ensure the accuracy of the informationprovided here, we do not assume responsibility for any actions taken based on this information.

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BTM Financial Highlights As of Fiscal Year-end March 31,2002: (US GAAP) (BTM)

JPY (billions) USD (millions) Total Assets 76,631 577,477 Total Shareholders’ Equity 2,250 16,957

(US$=JPY132.70) (MTFG)

JPY (billions) USD (millions) Total Assets 94,365 711,116 Total Shareholders’ Equity 3,464 22,951

(US$=JPY132.70) Insurance BTM maintains a Bankers Blanket Bond, which provides a maximum coverage of JPY 16 billion per claim. The following are Providers of Coverage:

The Tokio Marine and Fire Insurance Co., Ltd. • • • • • •

The Nissan Fire and Marine Insurance Co., Ltd. Mitsui Marine and Fire Insurance Co., Ltd. The Nippon Fire and Marine Insurance Co., Ltd. The Sumitomo Marine and Fire Insurance Co., Ltd. The Yasuda Fire and Marine Insurance Co., Ltd.

Exclusion: Willful misconduct, war, seizure, acts of any government, nuclear contamination, computer crime etc. BTM Compliance

Governmental Audit: Japanese bank law authorizes the Financial Services Agency (FSA) to audit banks in Japan at any time with any frequency. In practice, audits are usually conducted every two to three years. The Bank of Japan (BOJ) also conducts an examination of the. Such examination is normally conducted once every two to three years. Notice is served regarding the examiner’s visit, which is conducted for the purpose of checking day-to-day operations and giving pertinent advice.

External Audit: BTM appoints the following external auditor to review its custody operation.

Deloitte Touche Tohmatsu PCPM building, 11-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-6221, Japan

External audit that is dedicated to custody operations is performed every December, and report is issued on annual basis. Internal Audit: The BTM’s Inspection Office is composed of more than 200 members. The individual members of the audit team have over 10 years of experience in the banking business. The internal audit division is independent and is not allowed to disclose information on their activities to its employees. The internal audit report is shared with the Board of Directors who may from time to time instruct the general manager of custody operations to ensure corrective actions.

Reconciliation: Auditor of the BTM’s Global Securities Services Division conducts the inspection for process and control of the securities kept in the vault every two months. For shares deposited at JASDEC, reconciliation is made daily. When physical share certificates are sent for registration, BTM keeps track of the securities. Tickets are received from the registrar as evidence. The affected shares are accounted for as “under registration” in the system. A periodic review is undertaken to monitor share certificates, which are taking longer than usual for registration.

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1. Market Information - Japan

Japan Market Summary & Highlights

Settlement Cycle T+3 Cash Japanese yen (JPY) Local Time 9 hours ahead of GMT Regulator Financial Services Agency (FSA)

Bank of Japan (BOJ) Depositories Clearing & Safekeeping

Japan Securities Depository Center (JASDEC) Bank of Japan (BOJ)

Investment Restriction Foreign ownership is limited to 33.3% for airline companies and telecommunication company, 20% for broadcasting companies. Further registration shall be rejected beyond this limit. Non-resident holding exceeding 5% and subsequent changes of 1% must be disclosed to the regulator within 5 business days of trading.

G-30 COMPLIANCE TABLE

1. T+1 matching with broker Yes 2. T+2 affirmation No 3. Central depository Yes 4. Net settlement Yes 5. DVP/RVP No (*) 6. Payment in same day funds Yes 7. Settlement on T+3 Yes 8. Securities lending Yes 9. ISIN numbering system Yes

(*) Except for JGBs in BOJ Net Book-entry System

2. Subcustodian Information - BTM BTM Profile The Bank of Tokyo Mitsubishi, Ltd. (BTM) 3-2, NIhombashi Hongokucho 1-chome, Chuo-ku, Tokyo 103-0021, Japan

BTM was formed on April 1, 1996, as a result of a merger between the Bank of Tokyo and Mitsubishi Bank Limited. The combined institution ranks among the largest corporate entities in the world and engages in a wide range of retail banking, corporate banking, project finance, trust services and securities. It maintains approximately 300 branches, sub-branches and agencies within Japan and over 100 offices, subsidiaries and associated institutions in 38 countries, including the United States. In April 2001, Mitsubishi Tokyo Financial Group, Inc., a holding company was established to oversee the operations of BTM, the Mitsubishi Trust and Banking Corporation (MTBC), and their subsidiaries. Its primary responsibilities center on facilitating business synergies among the entities of the Mitsubishi Tokyo Financial Group, on setting the Group’s overall strategic directions, and on managing the Group’s risk globally. Shares of MTFG trade on the Tokyo, Osaka, New York (NYSE ticker: MTF), and London stock exchanges. MTFG owns 100% share of The Bank of Tokyo-Mitsubishi, Ltd as well as 100% share of Mitsubishi Trust Bank.

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3. Market Instruments

Exchanges There are 5 stock exchanges in Japan, the Tokyo Stock Exchange (TSE), which was established in 1878, is the largest and accounts for 95.9 % of total turnover in Japan. TSE has become a stock company as from November 1, 2001 and is regulated by the Financial Services Agency (FSA). All trading is conducted electronically. The TSE lists stocks, bonds and derivative products.

Exchanges Tokyo Stock Exchange(TSE) Osaka Securities Exchange (OSE) Nagoya Stock Exchange Fukuoka Stock Exchange Sapporo Stock Exchange

Capitalization (TSE) JPY 331,450 billion (USD 2,685 billion; @123.45) as of May 2002

Trading Hours Monday - Friday 9:00 a.m. - 11:00 a.m. 12:30 p.m. - 3:00 p.m.

Number of Listings 2,154 (as of May 2002) (2,118 domestic and 36 foreign stocks)

Companies that do not meet the listing criteria on exchanges can be traded in the OTC market through Japan Securities Dealers Association Quotations (JASDAQ). In November 1999, TSE established “Mothers” market, a new market segment for high growth and emerging stocks. In May 2001, Nasdaq Japan was established also for these stocks by the alliance with OSE. However, its partnership is to be ceased in October 2002 and Nasdaq Japan is going to suspend its operation, changing its name as “Heracles” effective from 16th December 2002. Statistics of TSE (as of November 2002 unless otherwise stated) 1) Market capitalization: JPY 254,409Bio. for the 1st sec., 4,342Bio. for the 2nd sec. as of 29th November 2002. 2) Members: 109 3) Average daily turnover (Average of Oct. 2002, unit: Tho. shs.): 769,961(1st sec.), 20,103 (2nd sec.) 4) Average daily trades (Average of Oct. 2002, unit: Mio. JPY): 644,280 (1st sec.), 4,336 (2nd sec.) 5) Listed companies: 1,496(1st sec.), 571(2nd sec.), 38(MOTHERS) As of Nov. 29th, total assets of top 53 or 54 of listed companies account for 50% of the total assets of the 1st sec. of TSE. Statistics of JASDAQ market (as of November 2002 unless otherwise stated) 1) Number of listed companies: 938 2) The total turnover of 2001: JPY 5,013Bio., whichi decreased from JPY 12,194Bio. in 1999. However, JASDAQ introduces "Market Maker System" to keep high level of liquidity, where brokers, called "Market Makers", always present indication of sell and buy to realize more and more trades. Statistics of ex-Nasdaq Japan – Heracles market As of Nov., 2002, 104 companies are listed. The number is gradually increasing from 82 as of Dec. 2001, or from 40 as of Dec., 2000. Listing Requirements for “Mothers” market There were several changes to the criteria for listing in May 2002. The details of modification are as follows; Criteria for Listing: (1) Companies must possess potentials for high growth. (requirement of being new business companies was removed

from the criteria), (2) At the time of listing, there must be made a primary offering, or a combination of a primary offering and a secondary

offering, of minimum 1,000 trading units of shs, at least 500 units of which need be in a primary offering (before the modification, a secondary offering was not counted into that 1,000 shs.),

(3) At the time of listing, minimum market capitalization is 1Bio. (it was 500Mio.)

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Criteria for delisting: (1) Sales record for a last business year is less than JPY 100Mio. (new criteria), (2) Market capitalization for past 3 months is less than JPY 500 Mio. There will be another 6 months to be given,

however, during which time the company shall recover the required level of market capitalization, provided the company submits to the Exchange documents that contains information such as current business performance, immediate business plan, improvement on business outlook, and so on.

Inter-market transfer: When listed companies apply to transfer to the 1st or 2nd section, their disclosure record at Mothers will be duly considered with regard the listing criteria of the 1st and 2nd sec. Clearinghouse: The Japan Securities Depository Center (JASDEC) acts as the clearing system and central depository for equities and convertible bonds. The BOJ-Net is the book-entry system for clearing Japanese Government Bonds. The Japan Securities Clearing Corporation (JSCC) is the clearing agent for the five Stock Exchanges and JASDAQ. Registrar: For physical certificates there is no central registrar but several trust banks works as a registrar in Japan. Most issuers appoint a registration agent while the others perform registrar functions by themselves. The majority of traded equities are held at and registered in the name of JASDEC. FX Market The daily average turnover in the FX market during November 2002 was: US$/JPY: US$ 7,729Mio./day / Euro/US$: Euro 3,161Mio./day (average turnover of spot basis) Regulators The Financial Services Agency (FSA) ensures regulatory compliance in the securities industry. The stock exchanges are organized according to the Securities Exchange Law and licensed by the FSA. The FSA also regulates the JASDEC jointly with the Ministry of Justice. The Bank of Japan (BOJ) is the central bank of Japan and supervises banks and regulates the foreign exchange and money markets. Investor Protection Funds There were 2 investor protection funds in Japan in the past – Japan Investors Protection Fund and the Securities Investors Protection Fund, but Securities Investors Protection Fund was liquidated as of 1st July, 2002, and was absorbed into Japan Investors Protection Fund (JIPF). The balance of JIPF is JPY 4903Bio. as of Sep. 2002.

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4. Central Depositories

Japan Securities Depository Center (JASDEC)

1. Address

Daini Shoken Kaikan Building, 1-1,Nihombashi Kayaba-cho 2-chome, Chuo-ku, Tokyo

2. Brief history

Established and started operations in December 1984 under a permit granted by the Ministry of Finance and Ministry of Justice.

3. Governing law The Law Concerning Central Securities Depository (CSD Law)

4. Regulator Minister of Justice and the Prime Minister, who delegates most of its regulatory powers to the Commissioner of Financial Services Agency.

5. Type of Entity: Currently a non-profit foundation, which decided to move to a joint stock company effective from June 17th, 2002. JASDEC entrusts part of the depository operations to Japan Securities Clearing Corporation (JSCC), which is a wholly owned subsidiary of Tokyo Stock Exchange.

6. Eligible instruments: Equities listed on stock exchanges and OTC market s and convertible bonds.

7. Participation obligation The use of JASDEC is not compulsory but voluntary for settlement and safekeeping. 8. Number of participants 290 as of March 2002, consisting of securities companies, stock exchanges, banks,

trust banks etc. 9. Safekept securities 191 billion shares, approximately 53% of total shares issued in Japan are safekept in

JASDEC as of March 2002. JPY 8,885 billion, 86% of convertible bonds (CBs) are deposited into JASDEC as of end of February 2002

10. Dematerialization Approximately 46% of securities held at JASDEC were in sctipless form. 11. Financial information JPY 3.02 billion Net Assets as of March 31, 2001. 12. Participants’ eligibility By the CSD Law, securities companies, banks, securities finance companies and

other entities, which have been designated by the Competent Ministers, are eligible to apply for participation in JASDEC. At present designated entities include Norin Chuo Kinko, Shoko Kumiai Chuo Kinko, credit unions, Rodo Kinko, insurance companies, stock exchanges and Japan securities Clearing Corporation, etc.

13. Participants’ requirement to segregate client assets

A participant may maintain 99 sub-accounts for various purposes depending on the needs.

14. Insurance

JASDEC maintains comprehensive insurance held with Nissay General Insurance Co., Ltd. For a total amount of JPY 5.5 billion.

15. Guarantee fund JASDEC does not set up specific guarantee funds. Instead, the Penalty Loss Compensation Reserve Fund exists for the purpose of compensating any loss incurred by a Tokyo Stock Exchange member as a result of default by another member. Approximately JPY 6.5 billion of this fund is designed for the purpose of guaranteeing settlement between members of the TSE and is, therefore, not accessible to either local or foreign investors..

16. Audit JASDEC conducts internal audit once a month for their vault and once a year for their business procedure. With effect from 2000, JASDEC is subject to an external audit conducted by Chuo Aoyama Audit Corporation.

(*) There are eleven share identifications, including six over-the-counter registered securities that are not placed on JASDEC without consent of the issuing companies. These shares are sagekept separately in the BTM’s vault.

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Bank of Japan (BOJ)

1. Address 2-2-1, NIhombashi Hongokucho, Chuo-ku, Tokyo 2. Brief history

Founded in October 1882, and started JGB book-entry system in February 1980, BOJ-Net JGB service (online system for JGB book-entry system) in May 1990.

3. Governing law The Bank of Japan Law 4. Regulator The Prime Minister and the Minister of Finance

5. Type of Entity: A central bank in Japan, which is jointly owned by the government (55%) and private sector (45%).

6. Eligible instruments: Japanese Government Bonds (JGBs), Treasury Bills and Financial Bills (*)

7. Participation obligation The use of BOJ is not compulsory but voluntary for settlement and safekeeping.. As from April 2001, non-resident investors may only hold JGBs in the BOJ-Net system via a Foreign Indirect Participant (FIP) of the BOJ, and many continue to hold JGBs in registered form via Letter of Transfer.

8. Number of participants 399 financial institutions which are utilizing BOJ-Net book-entry system. 9. Safekept securities JPY 456 trillion, which represents 98.9% of total Japanese government securities are

deposited with BOJ-Net book-entry system at the end of December 2001. 10. Dematerialization JGBs held in BOJ-Net book-entry systems are dematerialized and immobilized. 11. Financial information Total paid up capital and reserves of JPY 2.3 trillion as at March 31, 2001 12. Participants’ eligibility Financial institutions (Banks, Brokers, Foreign Institution etc.) conducting

transactions using BOJ current account, performing operations related to JGB registration, and being engaged in operations of book-entry JGB settlement are qualified for participating in BOJ-Net.

13. Participants’ requirement to segregate client assets

Participants are not permitted to maintain more than one account, but can segregate by sub-accounts within a single participant account.

14. Insurance BOJ does not maintain insurance. However, BOJ maintains 2.3 trillion yen of internal reserves (legal reserve and special reserve) at the end of March 2001 and 1.3 trillion yen of net income for fiscal 2001.

15. Guarantee fund BOJ does not set up specific guarantee funds. 16. Audit BOJ’s Executive Auditors inspect the business of BOJ, who are appointed by the

Cabinet and shall not be dismissed against their will. BOJ’s internal auditor’s office conducts examinations of the operations under the JGB book-entry system.

(*) Foreign investors are not allowed to hold Treasury bills/Financing bills (TBs/FBs) other than the account with the seller (primary dealer as auction participant) due to market restrictions. Buyers must hold their TBs/FBs in their accounts with the sellers throughout the period of holding (“Restriction on Depository”), and buyers may sell TBs/FBs only to auction participants (“Restriction on Resale”).

Please refer to Section 6: Restrictions.

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5. Securities Settlements

Trade Settlement

Settlement Cycles: Settlement of equities and Japanese government bonds takes place on T+3. (Outline of Settlement Procedures) 1) Receive client's instruction for settlement on from T to T+2, or T+3 in some cases. 2) Instruction goes to PSMS (Pre-Settlement Matching System) automatically for matching with the counter instruction. 3) Receives the result from PSMS if it's matched or not on real time basis. 4) Inform the client of the result on real time basis or once a day after batch processing according to client's selection. 5) Settle the transaction on settlement date of which instruction was matched. 6) If unmatched, inform the client of the reason of failure by MT548. If amend instruction is sent to us, send the revised

instruction to PSMS for matching. See if there is any missing in the results of matching process everyday. Equities Settlement - Pre-Settlement Matching System (PSMS) at JASDEC: Equities are settled through JASDEC or by delivery of physical certificates. JASDEC’s Pre-settlement Matching System (PSMS), the new settlement matching system, was implemented on January 28, 2001 for non-resident’s transactions. The PSMS was developed as a platform for realizing T+1 and replaces the NTT Data Matching system as of today. PSMS is ISO15022 compliant and functions in accordance with the usage guidelines of the ISO15022 MTs. The implementation of PSMS is an infrastructure change, which in nature should not affect our clients. We have well prepared and will be doing our utmost to prevent any inconvenience to our clients. Though PSMS runs on ISO15022 (MT54x), we have created a mapping algorithm that converts ISO7775 (MT532x) instructions into ISO15022 to communicate with PSMS. The returned matching statuses are converted back to ISO7775 format and sent to the clients. For clients already using ISO15022, this conversion is unnecessary and the messages going back and forth require minimal mapping. The market deadline for settlement matching remains unchanged before and after the implementation of PSMS, 11:00 a.m. on SD. BTM does not set up any unique cut off time/deadline but follows this market deadline. When we receive instructions from our clients (normally SD-2 to SD-1), we transfer the instruction to JASDEC PSMS on a real time basis. Upon receipt of the result of matching (matched/unmatched) from JASDEC, we will send the matching status to our clients. Bonds Settlement: JGBs are settled either in bearer, registered or book-entry form, though it is seldom that it is traded in bearer form. JGBs that are in physical form are settled by delivery of physical certificates. JGBs that are registered are settled via delivery of Letters of Transfer. JGBs in book-entry form are settled via transfer within BOJ-Net book-entry system. Corporate bonds that are registered are settled through JASDEC (for convertible bonds), JB Net (for straight bonds) or by delivery of physical certificates. Pre-matching: Pre-matching is a market practice in Japan. BTM matches every securities transaction usually one business day before settlement except for JGBs. In the afternoon of one day before settlement date, custodians pre-match instructions by telephone or the JASDEC’s Pre-Settlement Matching System (PSMS). JGBs transactions are pre-matched two business days prior to settlement date, and its Letter of Transfer is exchanged one day prior to settlement date. Free of payment trades are also pre-matched with the counterparty before settlement date, which is normally conducted on SD-1. After pre-matched, the trade settlement can be cancelled upon mutual agreement between the delivering agent and receiving agent. Market dead line is 11:00AM on SD but practically desirable to receive 9:00AM on SD. Buy-in Procedure Equity trades that are not settled by SD+4 may be subject to buy-in, while it is not so frequent in Japanese market. Followings are the fail rule and buy-in system in TSE rule which is applied to the participants of TSE. It is our

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understanding that the cost may or may not be claimed to the client side, depending on the relationship between the client (investor) and the market side executing broker. (1) BUY-IN SYSTEM

Equity trades that are not settled by S+4 (Settlement Day+4) may be subject to buy-in. It is our understanding that buy-ins rarely happen in the Japanese market. Members of TSE incurring a fail may file a request for a buy-in: the purchase and deliver of the failed securities. TSE will implement the buy-in if the failed position is not cleared within 3 working days of the date of their buy-in request. The failed member with the longest-standing position will be charged for the costs of the buy-in. If the failed member incurring a fails position is not resolved within 3 working days of the date of their buy in request, the TSE will execute the buy-in. TSE will charge the costs involved in the buy-in to the failed member with the longest-standing position . In this case, buy in will be done in following method at TSE. Method: competitive offering (matching will be made at the highest price) Qualified seller (offerers): all members of TSE Buyer: failed member (who will be charged the buy-in cost) Offering order entry hours: 15:00 to 15:30 Matching time: 15:30 Offering price limitation: maximum +10% of the last traded price in the TSE Settlement: following day (applies to seller, buyer and requesting members)

(2) BUY-IN COST

If the trade is not settled on SD, the selling broker will be subject to a daily delay compensation fee payable to the buyer via TSE at JPY0.04 per JPY100 of the settlement amount. Also if a member fails to clear a fail within 4 working days of the original date of settlement(S+4), the TSE will collect a penalty at JPY 0.02 per JPY100. (JPY 0.08 per JPY100 for the day before record date).

(3) STEPS TO AVOID BUY-INS

The buy-in rule is applied to TSE members only, but the party may claim the costs to the client. Apart from the automatic fail notifications (MT548) of our custody system, if BTM receives notification of a possible buy-in, BTM immediately informs its clients involved of the details, given by the counterparty, and will assist in any possible manner so as to avoid financial losses as a result of the buy-ins.

Turnaround Trading: Same-day turnaround trades are possible, so long as the receipt is prematched in time for its counter delivery transaction.

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6. Registration & Restrictions

Registration

Equities: Securities in JASDEC are registered in the name of JASDEC. Ownership is automatically transferred upon settlement. For physical shares, it has to be re-registered prior to the record date to protect entitlements. Registration usually takes 2-3 weeks to be completed, and may take longer around record dates, during when the shares will be unavailable for delivery. . JGBs: Japanese government bonds (JGBs) are registered in the name of the account holder on the books of the BOJ. Ownership is transferred by submitting a “Letters of Transfer” (LT) for name registration. The BOJ acts as registrar and keeps the record of changes in ownership. The registration process takes two business days. BOJ also operates the clearing system, BOJ-Net book-entry system, for book-entry JGBs. Within this clearing system, BOJ serves as a central depository, and effects the transfer of securities in its system. Non-residents can be accessible to BOJ-Net only through direct participant or Foreign Indirect Participant (FIP). Corporate Bonds: Banks are designated as registrars for corporate bonds. A confirmation of registration is issued to the investors as a proof of registration. It takes one to two business days for the registration to be completed.

Foreign Ownership Restrictions, Limits & Disclosure Requirements

Restriction / Limits: By law, the percentage of foreign ownership is limited for the share names mentioned below. With these shares, BTM does not apply the standard procedure of depositing in JASDEC; instead, the shares held at JASDEC will have to be withdrawn from JASDEC and sent for registration and held physically to secure the foreign shareholder’s rights.

Security Name ISIN

QUICK Limit (%)

Nippon Broadcasting System JP3749600007 4660 20.0

Fuji Television Network Inc. JP3819400007 4676 20.0

SKY Perfect Communications Inc.

JP3395900008 4795 20.0

Space Shower Networks Inc. JP3400070003 4838 20.0

Wowow Inc. JP3990770004 4839 20.0

Usen Corp. JP3946700006 4842 20.0

All Nippon Airways Co., Ltd. JP3429800000 9202 33.3

Skymark Airlines JP3396000006 9204 33.3

Tokyo Broadcasting System, Inc.

JP3588600001 9401 20.0

Chubu-Nippon Broadcasting Co., Ltd.

JP3527000008 9402 20.0

Security Name ISIN

QUICK Limit (%)

Nippon Television Network Corp.

JP3732200005 9404 33.3

Asahi Broadcasting Corp. JP3116800008 9405 20.0

RKB Mainichi Broadcasting Corp.

JP3100400005 9407 20.0

Broadcasting System of Niigata Inc.

JP3656400003 9408 20.0

Asahi National Broadcasting Co Ltd.

JP3429000007 9409 20.0

Nippon Telegraph and Telephone Corp.

JP3735400008 9432 33.3

JSAT Corporation JP3386150001 9442 33.3

If a security’s foreign ownership limit has been reached, the registrar will return the shares in street name. The holder will not be entitled to dividend payments or other corporate actions. Shares returned in street name may be re-sent at any time upon instructions from the client. Shares re-sent will be unavailable for sale or delivery until returned from the registrar. This process will take around two weeks.

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Restrictions on Treasury Bills (TBs) and Financing Bills (FBs) Small changes will take place after enforcement of Transfer of Corporate Debt Securities Law effective from 6th January 2003. According to MOF, primary dealers will no longer be required to submit Letter of Confirmation* to MOF. In addition, the restriction** on depository will be eased a little so that it will be possible to deposit TB/FB directly with Japanese financial institutions. However, it will not be possible to deposit with foreign global custodians. * Letter of Confirmation is to certify that,

(1) An auction participant will hold TB/FBs in Book-Entry form in BOJ-Net, (2) When an auction participant sells TB/FBs to a third party (other than auction participants):

1. The buyer must hold his TB/FBs in his account with the seller throughout the period of holding. ( "Restriction on Depository" )

2. Buyers must sell TB/FBs only to auction participants. ( "Restriction on Resale" )

** Restriction: (1)+(2) of the above This change will apply to new issues after the enforcement of the new law.

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7. Corporate Action & Taxation

Corporate Actions in General Ex Date and Record Date Ex Date is the date in which eligibility is determined based on the traded position, which is 3 business days prior to record date. Buyers who purchases shares on and after the ex date are not eligible for the dividend entitlement. Record Date is the date in which entitlement is computed based on the settled position. For physical securities, investors who wish to receive their entitlements must make sure that the securities are duly sent for re-registration prior to record date. Entitlement: In Japan, entitlement is strictly based on the closing balance as of the Record date, regardless of ex-date or trade date position. Even if the investor trades on a cum basis, should the trade fails to be settled by record date and thus the securities are not credited into the investor's account, he will not be able to receive his dividend entitlement. Blocking: There is no blocking system in Japan Income Collection Entitlement: Record date determines entitlements in the Japanese market, regardless of ex-date or trade date. Interest on bearer bonds is payable upon the presentation of the corresponding coupons at the paying agent by one day prior to the pay date. Interest on registered bonds is payable to the beneficial owner. Entitlement is fixed (i.e. further registration has been suspended) as of 7 business days prior to the pay date for registered JGB in LT form and 2 business days prior to the pay date for JGB in BOJ-Net Book-entry form. Dividend rates are decided by the Board of Director of the company which is usually held around 2 months after the record date, and paid around 3 months after the record date. Companies in most cases pay dividends, semi-annually. Overview of dividend collection cycle

<Model schedule of dividend payment> (For the companies whose fiscal year terminate at the end of March)

• 31 March - Record date • 29 June - General Shareholders’ Meeting • 30 June - Dividend payment

(Given that the dividend payment plan is approved at the Shareholder’s Meeting.) • 30 September - Interim record date (for interim dividend) • Mid-December - Interim dividend payment

end of March end of June end of September end of December

Record date AGM Interim R/D Interim Dividend Payment Dividend payment

(1) (2) (3) (4) (5)(6)

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(1) Record date (R/D hereafter): Shareholders will be entitled to dividends by having their stocks registered by R/D. In the case of holding stocks in JASDEC, a Beneficial Shareholders List will be compiled by custodians, based on the data as of R/D. The list will be submitted to the registrar ( = the agent of the issuing company) via JASDEC. In Japan, ex-date is theoretically R/D-3. However, it is the market practice to process all entitlements on an actual settlement basis as of R/D on a registered balance, Not contractual settlement basis as of ex-date. In other words, ex-date has no significance in processing dividends and corporate actions. be submitted to the registrar ( = the agent of the issuing company) via JASDEC.

(2) R/D + 2 to 3 days: Final registration results will be advised from the registrar / transfer agent / JASDEC. Quantity of entitled shares will then be finalised. (Manual amendment, if any, will be input to the custody system.)

(3) R/D + 20 days: Deadline of the application form for the reduced tax rate under the double taxation treaty, to be submitted to the registrar, so tax relief is given at source.

(4) From Payable Date(P/D) - 1 1/2 month to P/D - 1 week: P/D and the expected dividend rate will be announced. Upon receipt of information from the vendor, the information is automatically updated in our system, and the correct dividend amounts (gross, tax, and net amounts) are calculated. BTM will provide MT 551 / 554 pre-advices automatically.

(5) P/D-1: Dividend payment plan is approved at the Shareholder’s Meeting (6) P/D (=the day after the Shareholder’s Meeting): Issuing companies pay dividends to shareholders. BTM credits

dividends (net amount after tax) into clients' cash account with due value date.

Income Monitoring (1） Prior to P/D: When we submit to the registrar the application form for the reduced tax rate under the double

taxation treaty, we send the data electronically to the registrars. This data will then be used by the registrars when they pay dividends to us for electronic matching of the amounts paid.

(2） P/D or P/D + 1: BTM checks the actual receipt of dividend payments from issuing companies. The majority (approx. 90%) can be matched electronically by our system.

(3） From P/D + 1 day and onwards: As for dividends that were not electronically matched, BTM reconciles each and individual dividends received and paid, issue by issue, manually.

Taxation For Non-resident Investors Standard Rate Treaty Rate (*)

Equities 20% 15% Fixed Income 15% 10% (*) There are some other rates, as shown in below matrix. (**) Interest on JGBs held in BOJ-Net book-entry system through Qualified Foreign Intermediary (QFI) can be eligible for tax-exemption

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Tax Rates on Dividend and Interest (For countries that has a double taxation treaty with Japan)

Country Tax Rate on

Dividend

Tax Rate on Interest

Armenia 15% 10% Australia 15% 10% Austria 20% 10% Bangladesh 15% 10%

Belgium 15% 10%

Byelorussia 15% 10% Brazil 12.5% 12.5% Bulgaria 15% 10% Canada 15% 10% China 10% 10% Czech Republic 15% 10% Denmark 15% 10% Egypt 15% Fiji 15% 10% Finland 15% 10% France 15% 10% Georgia 15% 10% Germany 15% 10% Hungary 10% 10% India 15% 10%(banks

etc) 15% (others)

Indonesia 15% 10% Ireland 15% 10% Israel 15% 10% Italy 15% 10% Korea (Rep. Of) 15% 10% Kyrgyz Stan 15% 10% Malaysia 15% 10% Mexico 15% 10%(banks

etc) 15%(others)

Moldova 15% 10% Netherlands 15% 10% New Zealand 15% Norway 15% 10%

Country Tax Rate on

Dividend

Tax Rate on Interest

Pakistan 30% Philippines 25% 15% Poland 10% 10% Romania 10% 10% Russia 15% 10% Singapore 15% 10% Slovakia 15% 10% South Africa 15% 10% Spain 15% 10% Sri Lanka 20% 20% Sweden 15% 10% Switzerland 15% 10% Tajikistan 15% 10% Thailand 20% 10% (bank) /

25% (other) Turkey 15% 10% (bank) /

15% (other) Turkmenistan 15% 10% United Kingdom ** 15% 10% United States 15% 10% Ukraine 15% 10% Uzbekistan 15% 10% Vietnam 10% 10% Zambia 0% 10%

**Application to British Virgin Islands and Montserrat was

terminated as from January 1 2001.

Capital Gains Tax: There is no Capital gains tax applicable to foreign investors, unless they have a permanent establishment in Japan and they own at least 25 percent of the total shares of a company or sell at least five percent of the total issued shares during the year.

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8. Proxy Voting

Overview of Proxy Voting Cycle

<Model schedule>

(For companies whose fiscal year terminate at the end of March) • 31 March - Record date • 12 June - Notice of Agenda released by companies • 21 June - Instruction Deadline for clients (Meeting Date 27 June) • (Proxy voting procedure) • 25 June - Final Deadline for Voting Cards to be presented to registrar • 27 June - Annual General Shareholders’ Meeting Date

31 March 12 June 21 June 25 June 27 June

Record date Release of Agenda Inst. Deadline Registrar Deadline AGM <voting period>

(For Year 2002) (1） May 8-10: To Ask each Registrar to provide us Notice of Agenda.

Normally Notice of Agenda is mailed from each registrar. → Special request for individual receipt. (Written notification is required with each company’s name)

(2） May 31-June 5: To Submit Pre-Notification for Split Voting to Registrar.

For possible clients who will vote in split, sending a pre-notice of its client’s (shareholder’s) name to each registrar. ← Legal Requirement under the Commercial Law.

(3） June 5-6: To Send “Voting Privilege Statement” to Client.

Send the form via courier. → Client uses this form for voting instruction.

(4） June 11-12: To Receive “Notice of Agenda” from each Registrar.

One notice of agenda: direct receipt from each registrar per company. The rest voting cards (per each shareholder): mailed from the registrar.

(5） June 11-13: To Advice “Notice of Agenda” to Client.

1) Cording 2) Manual Inputting 3) Production of List 4) Check for Error 5) Advice to Client via Fax

(6） June 13-18: To Arrange Voting Cards for Voting. Thousands of Voting Cards to be arranged in order of “Voting Privilege Statement” → Prepare to be ready for Voting Procedure. → Sorting and Classification per client, per security.

(7） June 20-24: To Fill out Voting Cards and Mail to Registrar.

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Proxy Voting Requirement

In order to execute voting rights, shareholder are required to register their shares in their name / their nominee name by the record date, to receive a voting card from the issuing company. A voting card is provided per registered shareholder, clearly marked with the quantity of entitled shares, and mailed to the custodian approximately 2 weeks before the meeting.

A voting card is provided per account, i.e. per registration name, which cannot be divided. Voting instructions must be manually written down on the voting cards per line of stock per account, and mailed to the issuing companies’ registrars.

It is not common for custodians or other agents to attend any company meetings on behalf of the shareholders, because it is physically difficult to attend meetings due to the fact that most of shareholders meetings concentrate on a certain day and time in Japan.

Response Monitoring As it proxy voting is voluntary action by shareholders, we will rely and act simply on instructions from our clients. That is, we will take no action without receiving an instruction from our clients to vote.

Communication of Outcome/Decision It is not included in our proxy voting service to report the outcome/decision of proxy voting by return.

9. Cash Management

Currency The Japanese yen is the currency in the market. As of August 30, 2002, the exchange rate against the U.S. dollar was USD 1.00 = JPY 117.95 The electronic clearing of funds is managed by three systems in Japan: Foreign Exchange Yen Clearing System (FEYCS), BOJ System and Zengin System. The three systems are managed and supervised by Tokyo Bankers Association, the Bank of Japan and the Federation of Bankers Associations of Japan, respectively. Cash movements on behalf of foreign investors are most frequently conveyed via FEYCS, with the other systems used secondarily. BTM Automatic Overnight Investment Program The Bank of Tokyo-Mitsubishi, Ltd. is pleased to introduce an investment program for the automatic investment of the balance in your Yen settlement account, which works as follows; 1)

2)

3) 4)

5) 6) 7)

A Euro yen call account will be opened with our London Branch in your name (hereafter called a “call account”) for the automatic transfer program only and will yield an interest rate at the Tokyo collateral call rate minus our spread, 0.25%. The Tokyo call rate fluctuates somewhat like the Federal Fund Rate in the USA. The long balance beyond the agreed figure in your settlement account with us (hereafter called “Tokyo account”) will be automatically transferred to the call account, with a transfer unit of the agreed figure with the value of the same day. (Please note that the interest mentioned above would be applied only to the amount actually transferred to your London call account. The remaining balance in your Tokyo account earns no interest.) All investments are made through our London Branch. Investments for your account are made in Euro yen deposits. Your account is debited for the principal amount, representing excess funds, at the end of the business day. All overnight investments, principal only, are credited to your account at the beginning of the following business day. Credit interest is calculated daily on a 360 day basis, as it is Euro yen, and actual interest earned on your investments is credited to your account on the 7th business day of the following month. Please note that back valuation transactions are not possible with this service. We would like to review the above terms whenever necessary. This program requires a pre-agreement.

P.S. The applicable rate is ‘Tokyo collateral call rate minus 0.25%’ which is currently negative, and therefore this service is not currently available.

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global securities services division japan market profile · 2020-01-28 · (2,118 domestic and 36...

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