Book-Entry Transfer System for“Corporate Bonds”

Japan Securities Depository Center, Inc.
JASDEC1

Legal Framework ofBook-Entry Transfer System for “Corporate Bonds”
1.1 Act on Book-Entry Transfer of Company Bonds, Shares, etc.
Book-Entry Transfer System by balance management


Multi-layer Holding Structure

Maintenance of smooth settlement by introduction of Book-Entry Transfer
System which enables right transfers by electronically recording the increase
and the decrease of the balance in the Transfer Account Book.
Multi-layer holding structure shall be composed of Book-Entry TransferInstitution, Account Management Institutions and investors. AccountManagement Institutions can be positioned in multi-layer holding structure inorder to enable flexibility of business development for Account ManagementInstitutions and affiliation among international institutions.

Assurance of Settlement Finality/Investors ProtectionProvision for Investors Protection in case of recording error in Transfer
Account Book by Account Management Institutions, etc. while maintaining
settlement finality by bona fide acquisition.
Write-off and payment obligation by Account Management Institution, etc.,
joint assurance of payment obligation by Account Management Institutions
which investors open account, and Participant Protection Trust.

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1.2 Act on Book-Entry Transfer of Company Bonds, Shares, etc.
Complete Dematerialization
Issuers are able to issue in dematerialized form and investors are not allowed
to request issuance of bond certificates.

Abolition of Recording System for Corporate Bonds, etc.
Corporate Bonds, etc. Registration Act was abolished on January 4, 2008.
Bonds that shall be issued on or after January 4, 2008 shall not be issued inrecorded forms.
Recording System for Corporate Bonds, etc. is still available only foroutstanding recorded bonds.

3Outline of Book-Entry Transfer System for “Corporate Bonds”
2.1 Participants of Book-Entry Transfer System* Issuer shall entrust Issuing and Paying Agent for system connection to JASDEC and daily business operations.

Book-Entry Transfer Institution

Issuer<A>account(JASDEC)

Issuing and Paying Agent<B>accountSelf AccountCustomer AccountParticipants of Book-EntryTransfer System

JASDEC
Participants

Direct Account Management Institution<B>

Participant <A>(Investor)<C>account
SelfAccount<D>accountCustomer
Account

Indirect Account Management Institution<C>
Indirect AccountManagement Institution <X><X> account
SelfAccount<Z> accountParticipant <D>(Investor)

Customer
Account<Y>accountParticipant <Y>(Investor)

Participant <Z>(Investor)
4Issuers••Issuing Agents••



JASDEC shall obtain prior consent on handling of corporate bonds at JASDEC from Issuers.
Issuers shall make use of Issuing Agents and Paying Agents. Issuers shall notify JASDEC of its
agents in advance.

JASDEC, upon receipt of an application from a financial institution, shall designate such an
institution as an “Issuing Agent”, pursuant to the provisions of JASDEC Business Regulations.
Issuing Agents shall undertake to follow the procedure for the issue of corporate bonds requiredby JASDEC, on behalf of Issuers.

Paying Agents••

JASDEC, upon receipt of an application from a financial institution, shall designate such aninstitution as a “Paying Agent”, pursuant to the provisions of JASDEC Business Regulations.
Paying Agents shall undertake to follow the procedure between JASDEC and the Issuer, after theday of the issue to the day of redemption of the relevant corporate bonds, on behalf of issuers.

5Participants•JASDEC Participants•A person for which/whom JASDEC and Account Management Institutions has opened anaccount for the purpose of implementing book-entry transfer of Corporate Bonds.

A participant for which/whom JASDEC has opened a JASDEC Participant Account.

Account Management Institutions•••

Securities companies, banks and other financial institutions, approved by JASDEC, may open
accounts for book-entry transfer for corporate bonds for other institutions, in accordance withthe provisions of JASDEC Business Regulations.
Account Management Institutions shall maintain a Transfer Account Book.
Account Management Institutions shall be classified as follows.
••

Direct Account Management Institutions are:Those for whom JASDEC opened accounts for book-entry transfer for corporate bonds.
Indirect Account Management Institutions are:Those for whom Direct or Indirect Account Management Institutions opened accounts for book-entry
transfer for corporate bonds.

6

Fund Settlement Corporations••

JASDEC, upon request by a financial institution which maintains an account at Bank of Japan(hereinafter called “BOJ”) and utilizes the on-line dealing by BOJ Financial Network System(hereinafter called “BOJ Net”), shall register such a financial institution as a “Fund SettlementCorporation”, pursuant to the provisions of JASDEC Business Regulations.
Fund Settlement Corporations shall undertake the fund settlement arising from the issue,
transfer and redemption of corporate bonds by BOJ Net, on behalf of JASDEC Participants orIssuers.

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2.2 Eligible Corporate Bonds, etc. (1)JASDEC shall handle various types of “Corporate Bonds” regardless of publicoffering, private offering, currency and etc..
Eligible securities are below:(prescribed in Article 2, Paragraph 1 of Act on Book-Entry Transfer of Company Bonds, Shares etc.)Corporate Bonds*1
Municipal Bonds
Investment Company Bonds prescribed in the “Act on Investment Trust and Investment Corporations”
Corporate Bonds issued by mutual companies prescribed in the “Insurance Business Act”
Specified Corporate Bonds prescribed in the “Act on Securitization of Assets” *1
Rights that should be represented by bond certificates issued by companies under a special law

Rights that should be represented by bond certificates issued by any
governments or companies in foreign countries (i.e. Samurai Bonds andShogun Bonds) *1*1 Excluding corporate bonds with subscription rights or excluding securities with the characteristics of bonds with subscription
rights.

JASDEC shall not handle bonds issued outside Japan. (i.e. Euro Bonds)

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2.3 Eligible Corporate Bonds, etc. (2)Book-Entry Bonds shall fulfill following issuing conditions:The value of each corporate bond has to be JPY 1,000 or more with increment of JPY
1,000 and equalized.
Value of each corporate bond = Unit for book-entry transfer
Total issue amount has to be JPY 10 million or more.
Fix date redemption or methods of interest calculation in conformity with JASDEC’s rules
is accepted (mentioned afterwards).
Currencies prescribed by ISO4217 are acceptable.

92.4 Handling of Fix Date Redemption
Fix date redemption is available by maintaining the actual balance calculated
by using “Factor”.
Value of each corporate bond – Total of previously paid fixed date redemption amounts
with respect to value of each corporate bond

Factor =Value of each corporate bond

Example:<Issuance>

Unit for book-entry
transfer(Unchanged)(Unit forbook-entry
transfer =Nominalbalance)

JPY 100million=(ActualBalance)

JPY 100million<First redemption>
Redemption(JPY 10 million)<Second redemption><Third redemption>

Interest
Payment(Unit for bookentry transfer =Nominal Balance)

JPY 100 million
Interest(ActualPaymentBalance)

Redemption(JPY 10 million)

Interest
Payment(Unit for bookentry transfer =Nominal Balance)

JPY 100 million

Interest
Payment

Redemption(JPY 20 million)

Interest
Payment(Unit for bookentry transfer =Nominal Balance)

Interest

JPY 90million

JPY 80 million(Factor)(Factor)

JPY 60 million(Factor)

0.9000000000

0.8000000000

0.6000000000(Actual Balance)JPY 100 million Payment(Actual Balance)

102.5 Redemption and Interest Payment (1)TaxOfficeIssuer

11. Tax Payment(income tax)

1. Payment Request(before income tax)

2. Fund Payment(before income tax)
10. Deletionof Bond
Registry

Corporate bond manager, etc. = Paying Agent

6. Redemption andInterest Payment(via BOJ Net)

4.Payment
Request (afterincome tax)

5. Approval ofPreappointed
Settlement

JASDEC
3. Taxation Information File

9. Notice ofObliteration
Completion

8. Record ofObliteration(DVP)

Account Management Institution
11. TaxPayment(local tax)

7. Redemption and Interest Payment which AccountManagement Inst. received on behalf of Bondholder

Bondholder
112.6 Redemption and Interest Payment (2)Issuer shall make fund payment to Paying Agent.
Redemption and interest payment to bondholders shall be made via multi-layer holding
structure from Paying Agent to bondholders through Account Management Institutions.


Bondholder shall entrust in advance the Account Management Institution to receive theredemption and interest payment on their behalf.
All Account Management Institutions that have relative issue recorded in Transfer
Account Book shall be involved in redemption and interest payment operation.

Payment Request

Issuer

Account Management
Inst.

Bondholder

Paying Agent

Payment Request

JASDEC

Redemption andInterest Payment

Fund Payment

Account Management
Inst.

Bondholder

Account Management
Inst.

Bondholder

122.7 Redemption and Interest Payment (3)Interest shall be calculated by multiplying balance, interest rate and terms of interest
calculation period, etc., not by summing up the amount of interest per bond certificate
done in the procedure for recorded and physical bonds.


Relevant-parties shall pay the redemption and interest, calculated based on balance
mentioned below:

In practice, interest shall be calculated by multiplying balance and “amount of interest per one
denomination” which Issuing and Paying Agent notifies to JASDEC.

From Issuer to Paying Agent;
The total issue amount of the applicable book-entry bonds
From Paying Agent to JASDEC Participants;
The amount of the applicable book-entry bonds in each Classified Account of each JASDEC Participant
in JASDEC’s Transfer Account Book.
From Account Management Institution to Bondholders;
The amount of the applicable book-entry bonds in each account of the bondholder in the Transfer
Account Book maintained by the Account Management Institution.

All fractional numbers are rounded down.
The difference occurred to Participants arising from calculation shall not be adjusted.
There is a possibility that a difference may occur in a case when fractional numbers arise in interest
amount, depending on interest rate or terms of interest calculation period.

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2.8 New Issue
Issuer6. Fund Payment

Corporate bond manager, etc. = Issuing Agent

8. Creation of Bond Registry
2. Confirmation of Application

5. Payment
Confirmation
Notice7. New Record3.
Affirmationof New
Record Info.

Record ofInfo. ofthe Issue

4. FundPayment

1. Application formfor Subscription

JASDECNew Record Info.

Account Management Inst.

Securities CompanyBondholder*The case when New Record is recorded to theself account of underwriting securities company

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2.9 Book-Entry Transfer
Procedures for transfer under book-entry transfer system are as follow:


Investors need to open an account at Account Management Institution (ex.
securities companies/banks) in order to hold book-entry bonds.
Acceptance of collateral shall be made by transfer to recipient’s self account.

<Book-Entry Transfer from Participant C toParticipant E>

JASDEC1.
Account
Management Inst. A

Account
Management Inst. B

2.

Participant C

Participant DParticipant E

3.

4.
Route of information regarding
book-entry transfer

Participant C shall apply for the book-entry transfer of theissue to Account Management Institution A (the nearest upperpositioned institution).
Account Management Institution A shall record the decrease of
the issue in the account of Participant C and report the transfer
application of the issue to JASDEC (the nearest upperpositioned institution), because A is not the upper-positioned
institution of Participant E.
JASDEC shall record the increase of the issue in the customer
account of Account Management Institution B (the nearest
upper-positioned institution of Participant E) and the decreasein the customer account of Account Management Institution A.
Account Management Institution B shall record the increase of
the issue in the account of Participant E.

15Book-Entry Transfer (by DVP)
Trade
1
Trade
Party

JASDEC
Pre-Settlement
Matching System
2
Affirmation of Trade

Affirmation
Disaffirmation

Trade
Party

Trade
Matching

2
Affirmation of Trade

SSI

3
Notice ofSettlement Matching
StatusSettlement
Party

FundSettlement
CompanySettlementMatching

SettlementMatching

3
Notice ofSettlement Matching
StatusBook-Entry Transfer Systemfor Corporate Bonds

Settlement
Party

4
Notice of Recording

Record inTransfer Ledger

4
Notice of Recording

Securities
Settlement

9
Securities Transfer
NoticeSecurity
Transfer

9
Securities Transfer
NoticeLinked8
Settlement
Completion5
Fund
Settlement Data

8
Notice of Receipt
Completion

6
Payment Request
7
Payment Instruction

FundTransfer
Bank of Japan

Fund
Settlement
Company

Fund
Settlement

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Participation Procedures for Issuers
3.1 Submission of Consent Notice to JASDEC by Issuers, etc. (1)Following procedures are necessary for the Issuers to participate BookEntry Transfer System for “Corporate Bonds”:
Submission of Consent Notice on handling of book-entry bonds andnecessary forms to JASDEC by the Issuer.
 Appointment of Issuing and Paying Agent.
- After submission of Consent Notice to JASDEC, all transactions regarding
issuance, interest payment and redemption, etc. of book-entry bonds shall bemade by Issuing and Paying Agent.
Decision for application of the provisions of Act on Book-Entry
Transfer of Company Bonds, Shares, etc..
- For bonds other than corporate bonds issued by Japanese companies (suchas bonds issued by governments and companies in foreign countries, i.e.
Samurai Bonds and Shogun Bonds), the procedure of decision of theapplication of the provisions of the Act will be the same as the procedure ofthat of the new issuance.

173.2 Submission of Consent Notice to JASDEC by Issuers, etc. (2)Issuers with Issuer Code (numbered by Securities Identification CodeCommittee) may submit comprehensive Consent Notice regarding
bonds that shall be issued in the future.
Above condition shall be applied to public companies, local
governments, government corporations that issue public offering
bonds, private companies that issue public offering bonds, foreign
governments and foreign companies.
 Issuers shall notify JASDEC of appointment of Issuing and Paying
Agent with Consent Notice. Issuers are able to appoint more than one
Issuing and Paying Agent.
Issuers with no Issuer Code submit Consent-Appointment Notice forevery issue.
Above condition shall be applied to unlisted Issuers that do not issue
public offering bonds.
 Combined Consent Notice is acceptable for issues with same issuingdate.
18

About JASDEC

EstablishedCompany Name
Head Office
Main Businesses

Paid in Capital
Total of Issued Shares
President and CEOShareholders

HistoryNovember
December
October
September
November
June
January

1984
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1991
2001
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2002
2003

MarchJune
May
January
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2003
2003
2004
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(as of October, 2021)

January 4, 2002
Japan Securities Depository Center, Inc.
KABUTO ONE,7-1,Nihonbashi Kabutocho,Chuo-ku,Tokyo 103-0026,Japan
1. Book-entry transfer for stocks, etc.
2. Book-entry transfer for commercial paper
3. Book-entry transfer for corporate bonds4. Book-entry transfer for investment trusts
5. DVP settlement services for Non-Exchange Transaction Deliveries (NETDs)
6. Pre-settlement matching system
7. Custody services for foreign stocks, etc.
8. Other businesses
4.25 billion Yen (as of March 31, 2021)
8,500
Akio Nakamura
118 (as of March 31, 2021)

The Law Concerning Central Securities Depository and Book-Entry Transfer of Stock Certificates and Other securities was enforced.
Japan Securities Depository Center (JASDEC) was founded as a not-for-profit foundation.
JASDEC began offering its depository services for stocks.
JASDEC implemented the Pre-Settlement Matching System.
JASDEC started handling of corporate convertible bonds.
All central custody and book-entry transfer business were transferred to the new, incorporated entity and the former entity was dissolved.
Act on Book-Entry Transfer of Corporate Bonds, etc. was enforced and JASDEC was designated as a Book-Entry Transfer Institution
under the Act.
JASDEC inaugurated its Short-Term Corporate Bonds (Commercial Paper) Book-Entry Transfer System.
JASDEC established JASDEC DVP Clearing Corporation. (JDCC)
JASDEC commenced DVP Settlement Services for non-exchange transaction deliveries, which JDCC undertakes.
JASDEC inaugurated its Book-Entry Transfer System for “Corporate Bonds.”
JASDEC inaugurated its Book-Entry Transfer System for “Investment Trusts.”
JASDEC inaugurated its Book-Entry Transfer System for “ETFs.”
JASDEC inaugurated its Book-Entry Transfer System for “Stocks.”

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To Contact Us
Japan Securities Depository Center, Inc. (JASDEC)
Book-Entry Transfer Department

URL
E-mailTEL
FAX

http://www.jasdec.com/en/system/sb/
sb@jasdec.com+81-3-3661-7193+81-3-3661-7120

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