BUSINESS OVERVIEW

01
Book-Entry Transfer System
for Stocks, etc.

The Book-entry Transfer System
for Stocks, etc.

IssuerShareholder registry
General Shareholders Notification

JASDEC
Transfer AccountBook

Book-entry transfer

Transfer AccountBook

Direct AccountManagement Institution

Direct AccountManagement Institution( securities companies, banks, etc. )( securities companies, banks, etc. )Indirect AccountManagement Institution( securities companies, banks, etc. )ParticipantsParticipantsParticipants( shareholders )( shareholders )( shareholders )- 15 -

Products / Services
Transfer and rights handling related to the following products:• Listed shares• Exchange Traded Funds ( ETF )• Listed bonds with share options• Listed Beneficial Interest in a trust issuinga beneficiary certificate ( such as JDR )• Listed share options• Qualifying Unlisted stocks• Investment Units of listed Real Estate Investment
Trust ( REIT )• Qualifying Unlisted bonds with share options• Listed investment equity subscription rights• Qualifying Unlisted share options• Preferred Equity Investments
by listed Cooperative Financial Institution
JASDEC launched its Book-entry Transfer System for
Stocks, etc., under the Act on Book-entry of Company
Bonds and Shares ( Book-entry Transfer Act ) in January
2009. Under this system, listed securities are managed in
the accounts opened at JASDEC or Account Management
Institutions ( AMIs ) such as securities companies and banks
by electronic records registered in their computer systems.
The Book-entry Transfer System has a variety of featuresthat contribute to the safety and convenience of securities
settlement.
Only the electronic records determine the vesting of rights
pertaining to stocks, etc.; and the rewriting of those records

transfers those rights. This reduces the cost of printing,storing and transporting securities in physical form, alongwith the risk of loss or theft.
JASDEC provides issuers with all shareholder information
as of the record date ( General Shareholder Notifications ),which is needed to compile shareholder registries. To ensurethat information is supplied efficiently, JASDEC maintains
centralized management of shareholder information. For
example, JASDEC preliminarily obtains and integrates thename, address and other information on shareholders from
AMIs.

JASDEC Participants and Indirect AMIs

( as of March 31, 2016 )JASDEC participants by category

Total

174

companies

Securities companies, etc.

140 ( 80% )Banks, etc.

20 ( 11% )Life & non-life insurance companies

1 ( 1% )Securities finance companies

2 ( 1% )Stock exchanges, etc.

11 ( 6% )Indirect AMIs by category

Total

114

companies

Note:

Foreign indirect AMIs

63 ( 55% )Securities companies, etc.

35 ( 31% )Banks, etc.

16 ( 14% )- 16 -“Banks, etc.”
include The Norinchukin Bank, Tokyo Shoken Shinyou Kumiai,and Japanese Banks’ Payment Clearing Network.

“Stock exchanges, etc.”
include Japan Securities Clearing Corporation,
JASDEC DVP Clearing Corporation,
three securities agents and three Tanshi companies( which offer short-term credit brokerage services )01 Book-Entry Transfer System
for Stocks, etc.

Usage in FY 2015
JASDEC deals with dematerialized forms of securities
such as shares, bonds with share options, share options,investment units of REITs, investment equity subscription
rights, preferred equity investments by cooperative financial
institution, ETFs, and beneficial interest in a trust issuing abeneficiary certificate such as JDRs.
As of March 2016, the total number of issues handled was
3,936, including 3,640 share issues, 30 bonds with shareoptions, 10 share options, 54 investment units, 1 preferredshare issue, 146 ETFs, and 55 JDRs. The number ofcompanies participating in the Book-entry Transfer System,
including JASDEC participants ( direct AMIs ), indirect AMIs,
and fund settlement corporations, etc., was 380. Foreign
institutions designated by the relevant minister are also
allowed to participate in the System as AMIs. As of March
2016, 63 foreign financial institutions are indirect AMIs.

Initiatives Taken in FY 2015
Shortening stock settlement cycle is under discussion at
the “Working Group on Shortening Stock Settlement
Cycle” hosted by Japan Securities Dealers Association( JSDA ). JASDEC participates in the discussion as the key
secretariat of the Customer-side Sub-working Group inwhich we consider issues mainly related to customer-side
transactions.
Issuers of Book-entry transfer shares are required to
notify JASDEC of the details on corporate actions when

they determined to initiate them. JASDEC continues toengage in the promotion of awareness regarding notification
procedures, etc. through meetings for issuers by visiting
local discussion group for laws and practical business onequity securities ( Kabushiki Konwa Kai ).

Book-entry Transfers( Billion shares )( Billion shares )Stock-exchange transfers

Transfers between JASDEC participants
Internal transfers within the same companies

396.7

400
321.0

335.7

1,500

200

1,000

100

500

2011

2012

2013

2014

1,111.3

356.2

300

0

1,241.8

2,000
350.3

2015

0

( FY )- 17 -

1,148.9

797.2
669.4

652.5

2011

656.8

2012

732.4

2013

724.7

2014

767.2

2015

( FY )

Account Balance and Number of Issues
StocksBonds with Share Options( Billion shares )( Issues )

450
406.8

3,561

( Issues )

5,820

6,000

959.7

1,000

2013

0
2015 ( FY )

22

27

0

24

133.4

163.8

2012

2013

2014

2,791
2,339

2,000

346.6

16
2011

30

250
201

3,409

3,000

40
500

2014

4,000

499.6

300

4,384

60

3,400

2012

( Million units )

80

3,600

3,602

300

2011

( Issues )

3,800

3,548

0

ETFs and JDRs

1,500

3,640
3,581

Number of issues ( end of FY )

5,000

404.6

400

( Billion yen )

4,000

438.3

433.9

431.0

350

Account balance ( end of FY )

100

1,000
0
2015 ( FY )

200
150

154

126

111

20

185

50

0

2011

2012

2013

0
2015 ( FY )2014

General Shareholder Notifications
Number of Issues and Total Shareholders

Total shareholders

Number of General Shareholder Notifications

Number of issues* Figures are as of day of notification to issuers.

( Thousand shareholders )( Issues )( Notifications, in billion )150,000

15,0001,200

127,292

125,694

129,258

127,623

127,032

8,723

8,597

9,136

8,771

8,715

6,000

30,000

3,000

2012

2013

2014

2015

947.3

961.8

2011

2012

2013

( FY )

00

Number of notifications( Thousand notifications )( Thousand shareholders )22,5002,800
16,727

17,0632015( FY )

Individual Shareholder Notifications* Number of shareholders (data for shareholder notifications) is integration of participant information notified by AMIs.

18,0002014

200* Figures are as of end of fiscal year.

18,005

1,036.5

400

Number of Shareholders ( Data for shareholder notifications )17,547

1,021.4

600

60,000

2011

972.8

800

9,000

90,0000

1,000

12,000120,000

18,605

2,697

Number of issues( Issues )

2,649

2,428

1,000

2,392

2,279

810

2,100

800
733

720

13,500

600

626
1,400

9,000
700

4,500
0

400

401

2011

2012

2013

2014

2015

0

( FY )

200

2011

2012

2013

2014

2015 ( FY )0

Information Requests ※Number of Notifications

Number of Issues( Total record ) notifications( Total record ) number of issues( Partial record ) notifications( Notifications )( Partial record ) number of issues( Issues )

6,000

5,443
4,969

800
5,216

4,500

600
3,069

3,000

672

114

122

135

2013

2014

2015

482

3,415

3,252

654
580

400

2,688

302

1,857
1,500

200
375

0

2011

521
2012

2013

2014

2015

0

( FY )

77

57

2011

2012

( FY )※ Requests for information (total record) refer to requests for data recorded on Book-entry transfer registries of either JASDEC participants (direct AMIs) or indirect AMIs where shareholders in question have opened accounts.
Requests for information (partial record) refer to requests for data recorded solely on Book-entry registries of JASDEC participants where shareholders in question have opened accounts.

- 18 -

BUSINESS OVERVIEW

02
Book-Entry Transfer System for
CPs, Corporate Bonds andInvestment Trusts

Flowchart for Book-entry Transfer for CP / Corporate Bonds ( DVP )1 TradeSeller

Buyer

JASDEC
2 Trade matching

2 Trade matching

Affirmation
3

Notice of settlement
matching status

Settlement
parties

Settlement matching
Pre-Settlement
Matching System

3

Notice of settlement
matching status

44Notice of settlement status( Awaiting fund settlement )Notice of settlement status( Awaiting fund settlement )9

Notice of securities
transfer completion

Securities transfer
Book-entry Transfer System
for CP / Corporate Bonds

8 Notice of payment completion

Settlement
parties9

Notice of securities
transfer completion

5 Payment instruction
6 Payment request

Fund settlement
corporation

8

Fund settlement
corporation

Bank of Japan

Notice of payment completion

7 Payment instruction- 19 -

Products / Services
Transfer and rights handling related to the following products:• Short-term Corporate Bonds ( dematerialized CPs )• Bonds issued in Japan by foreign entities( Samurai Bonds and Shogun Bonds )• Corporate Bonds• Quasi-bond Beneficial Interests ( J-Sukuk )• Municipal Bonds• Investment Trusts Managed Based on
Instructions from the Settlor• Investment Corporation Bonds• Bonds issued by FILP agencies or
public corporations by local governments
In March 2003, JASDEC launched the Book-entry Transfer
System for Short-Term Corporate Bonds ( dematerializedcommercial papers ( CPs )), which was followed by the launch of
the Book-entry Transfer System for Corporate Bonds andMunicipal Bonds, etc. in January 2006. In January 2007,
JASDEC also started the Book-entry Transfer System for Investment Trusts in which investment trusts managed based on
instructions from settlor defined by “Act on Investment Trusts
and Investment Corporations” were handled.
In each system, settlement procedures - issuance ( subscription ), trading ( transfer ), and cancelation ( redemption ) - areconducted based on the balance electronically recorded in thetransfer account books. In addition, delivery versus payment( DVP ) settlement is available via the linkage between JASDEC’s

Book-entry Transfer System and the Bank of Japan Financial
Network System ( BOJ-NET ). By interfacing the Book-entry
Transfer System with its Pre-Settlement Matching System( PSMS ), JASDEC has realized straight through processing( STP ), which fully automates the entire process from trade
matching to settlement.
As a means of managing participation in JASDEC’s Book-entry
Transfer System, we set up a multilayer holding structure fordirect/indirect account management institutions ( AMIs ) toaddress the diverse needs of investors and financial institutions.
For example, direct AMIs can open an account directly at
JASDEC and indirect participation is possible by opening an
account at a direct AMI. Another option for indirect participationis through the opening of an account at an indirect AMI.

Flowchart for Book-entry Transfer System for Investment Trusts
Flow of funds
Flow of data

Investors( beneficiaries )Private vendor financial network systems / fax(

Fund
distributors( trustors )securities companies,
banks,
insurance companies,
etc.

)
AMIs

JASDEC

Fund settlement
corporations(

BOJ-NET
Fund settlement
corporations

Issuers)

Trustees

Fund settlement
corporations

Bank of Japan
Japanese banks’
payment clearing network- 20 -(

BOJ-NET
Fund settlement
corporations)

02 Book-Entry Transfer System for CPs, Corporate Bonds
and Investment Trusts

Usage in FY 2015
With regard to Book-entry Transfer System for CPs,
against the backdrop of the trend of corporate finance,
3,617 issues were handled through the system and theaccount balance stood at 12.9 trillion yen as of the end of
March 2016. The average transferred amount via theBook-entry Transfer System per day was 5.1 trillion yen in
FY 2015. The number of system users including JASDEC
participants and indirect AMIs was 274 in total.
As to the Book-entry Transfer System for Corporate
Bonds, given the investment environment, 53,825 issues
were handled through the system and the accountbalance was 250.4 trillion yen as of the end of March 2016.
The account balance of U.S. dollar-denominated bonds

CP Account Balance ( nominal value )and Number of Issues

amounted to US $7,643 million in the context of the trend of
foreign-denominated currency funding. Moreover, renminbi( RMB )-denominated bonds were issued for the first time.
The total number of users including JASDEC participants
and indirect AMIs was 856.
Regarding the Book-entry Transfer System for Investment
Trusts, sales values of investment trusts amounted to around
10 trillion yen per month during April to August 2015 basedon the market condition and growing Nippon Individual
Savings Account ( NISA ). While 9,878 issues were handled,
the account balance stood at 160.9 trillion yen as of the end of
March 2016. The total number of users including JASDEC
participants and indirect AMIs was 867.

Corporate Bonds Account Balanceand Number of Issues

Account balance ( end of FY )Number of issues ( end of FY )( Trillion yen )25( Issues )

5,000

4,447
3,926

20

3,552

15

13.7

13.6

3,717
14.2

12.6

4,000

2,000

5

1,000

2011

2012

2013

0
2015 ( FY )2014

( Issues )( Trillion yen )400

75,000200

58,486150
50,000

252.4

252.7

253.2

251.7

250.4

0

2011

2012

2013

0
2015 ( FY )2014

Issuance, Transfer and Redemptionof Corporate Bonds ( Daily average )Redemptions

Redemptions
Transfers

4.0

0.4
5.6

0.4
5.1

1,000
800

119.5
637.0

130.8
585.8

834.8

137.7
134.3

643.4

0

2,000

2011

2012

2013

0
2015 ( FY )

2014

0.4
0.4
2014
2015 ( FY )Principal Values of Investment Trusts forPurchases and Cancellations ( Daily average )Purchases
Cancellations

553.3

487.3

439.1

400

341.5
282.5

470.1

412.6

386.8

326.7

289.6

100
133.9

0

479.2

200

200

1.0
0.4
0.4
2012
2013

4,000

300

400

2.0

0.5

6,000

500

600

2011

115.3

129.4

3.0

0

124.5

( Billion yen )

1,200

7.0

4.0

8,000

141.8

Issuance( Billion yen )

0.4
4.1

112.5

160.9

7,112

50

100

Issuance

0.4
4.1

6,868

25,000Transfers( Trillion yen )0.5

10,000Account balances are calculated by multiplying the principal amounts
for each issue by the number of accounts

Issuance, Transfer andRedemption of CP ( Daily average )5.0( Issues )100* Nominal value is the value at time of issuance( based on the amounts for each bond )

6.0

9,878
8,956
7,940

55,595 54,294 53,825

300

200

10

0

( Trillion yen )

3,000

12.9

Account balance ( end of FY )Number of issues ( end of FY )Account balance ( end of FY )Number of issues ( end of FY )60,701
3,617

Investment Trusts Account Balanceand Number of Issues

2011

136.9

2012

140.5

2013

- 21 -

135.8

2014

127.1

2015 ( FY )

0

2011

2012

2013

2014

2015

( FY )

Initiatives Taken in FY 2015
With regard to Book-entry Transfer System for CPs,JASDEC responded to the “Quantitative and Qualitative
Monetary Easing with a Negative Interest Rate” that the BOJ
decided to introduce at the Monetary Policy Meeting held inJanuary 2016 by revising the Book-entry Transfer System
for CPs so that CPs with negative interest could be issued.
Regarding Book-entry Transfer System for Corporate
Bonds, at the request of the Study Group to Vitalize the
Corporate Bond Market hosted by the Japan Securities
Dealers Association (JSDA ), JASDEC explored ways to createa framework to ensure the efficient transmission of data on
necessary information from issuer to bondholders. This
resulted in the launch of the Bond Information Transmission

Service. A study group consisting of working-level members
was held to apply exemption provision of U.S. withholding
tax on the payment of principal and interest of U.S. Samurai
Bonds issued on and after January 2016. The study groupalso discussed how to respond to the QI system ( obtaining
QI qualification via AMIs and paying agents ), and developed
guidelines on operational procedures.

Participants in
Book-entry Transfer System
for CP( as of March 31, 2016 )Issuers 511
Issuing /paying agents

19

JASDECJASDEC participants( Direct AMIs )Indirect
AMIs

68

46

CP holders

Fund settlement corporations 141

Participants in
Book-entry Transfer System
for Corporate Bonds( as of March 31, 2016 )Issuers 2,709*
Issuing /paying agents

196

JASDECJASDEC participants( Direct AMIs )Indirect
AMIs

86

433

Fund settlement corporations 141

Participants in
Book-entry Transfer System
for Investment Trusts

Issuers 91

Bond holders* Issuers do not include unlisted companies, etc.,that issued private offering bonds only.

Trustees 11( as of March 31, 2016 )JASDECJASDEC participants

172

Designated fund distributors
Indirect AMIs

641
- 22 -

344

BOJ-NET Fund settlement corporations

43

BUSINESS OVERVIEW

03
DVP Settlement System
for NETDs

Reducing Principal Risk by Using the DVP Settlement Method

Delivery of securities

SellerTransfer of securities and payment carried out separately

Buyer

Payment of settlement amount

Use of DVP settlement
Account delivery through JASDEC

Seller’s
account

Securities data

Account of JASDEC
DVP Clearing Corp.

Securities data

Buyer’s
account

Provision / receipt of funds through current accounts at the Bank of Japan

Seller’s
account

Funding data

Account of JASDEC
DVP Clearing Corp.

- 23 -

Funding data

Buyer’s
account

Products / Services

each transaction ( gross ). Meanwhile, the settlement amounts
pass through JDCC’s account within the BOJ-NET funds
transfer system, and settlement is concluded by the appropriate
net calculated amount of funds being paid on each settlement
date ( net ).

Since May 2004, the DVP settlement system for Non-Exchange Transaction Deliveries ( NETDs ) has been administeredby JASDEC’s wholly owned subsidiary, JASDEC DVP Clearing
Corporation ( JDCC ). The system mainly deals with non-exchange transactions of securities handled by JASDEC throughits Book-entry Transfer System for Stocks, etc., such as sharesand bonds with share options, majority of which consist of
settlement of Japanese equities trades by domestic and overseas
institutional investors. In January 2014, we commenced DVP
settlements for stock lending transactions.
Previously, the delivery of securities and the payment of thesettlement amounts for non-exchange transactions were mostly
processed separately, so the transactions were exposed to therisk ( principal risk ) such as that cash payments may not be
executed even though the securities had been delivered. The
use of the DVP settlement system for NETDs links the deliveryof the securities and the cash payment of the settlement
amounts through the system, mitigating the risk and making it
possible for securities settlements to be conducted safely andreliably. To further support reliability, the entire operating process
is handled automatically and electronically enabling straight
through processing ( STP ).
JASDEC participants applying to make use of the system areexamined for their suitability in terms of financial condition,organizational structure and other such factors before receiving
authorization from JDCC. In order to ensure stringent risk
management of all participants, JDCC secures collateral inadvance, comprising assets ( assurance assets ) with theappraisal value that exceeds the net debit ( total payables total receivables ) of each participant, and sets an upper limit on
the value of the liabilities payable ( the net debit cap ) in proportion
to the trading status of each participant.
Settlement within the DVP settlement system for NETDs is
conducted in accordance with the so-called “Gross-Net DVP
model” by which securities pass through the JDCC accountwithin JASDEC and the transfer of the securities from theseller’s into the buyer’s account is conducted separately for

JDCC secures a source of liquidity through deposits received
for Participants Funds as well as a bank credit line provided bycommitment line banks. This is established to ensure sufficientliquidity to cover the default of two DVP participants that would
create the largest net debit.
In FY 2015, based on the PFMI formulated by the BIS/CPMI
and IOSCO, JDCC took action to reinforce its risk management.
As a part of such initiatives, JDCC plans to establish a net
debit cap for each financial group by March 2017 so as to takeappropriate response even in the event that one DVP participant
on a consolidated basis ( including other DVP participants
belonging to the same financial group as such DVP participant )defaults, and reviewed the bank credit line after April 2016
so that JDCC can respond to the insolvency of one of thecommitment line banks.

DVP Settlement for NETD Transactions ( Daily average )DVP Settlement for NETD Fund Settlement ( Daily average )Non-DVP transactions

Usage in FY 2015
As of the end of March 2016, 52 companies ( comprising 12banks and 40 securities companies ) participated in the DVP
settlement system for NETDs. Excluding internal transfers
within the same company, DVP transactions accounted forabout 70% of NETD transactions, this shows the use of thesystem has become firmly established as an importantcustomer-side settlement method.
In FY 2015, the usage of DVP settlements continued to increase.
In consideration of the above, we refunded 256 million yen of
settlement fees in total according to each participant’s usage
level.

Initiatives Taken in FY 2015

DVP transactions

Total payments

Total value of net settlement payments

Rate of reduction ( Total value of net settlement payments / Total payments × 100 )( Transactions )( Billion yen )(%)

180,000

2,500

15

52,591160,000
48,537

46,899

2,000

1,000

80,23540,000

500

0

0

844.2

100.1
2012

12.2

12.8

2013

2014

2015

( FY )

DVP transactions are the number of transfers execute (transfer from DVP participants to JASDEC DVP Clearing
Corporation)

13.0
2,005.6
10

1,498.5

1,500

123,605

98,6892011

12.7

1,687.4
114,555

82,522

11.9

45,570120,000
80,00050,686

2011

876.2

111.3
2012

5

183.5
2013

216.8
2014

259.8
2015

( FY )

0

Securities covered: Stocks, bonds with share options (convertible bonds), ETFs, REITs, share options (sharesubscription warrants), foreign stocks, etc.
Total payments is the total amount used for execution of securities transfers.
Total value of net settlement payments is the total amount used for a net transaction basis.

- 24 -

BUSINESS OVERVIEW

04
Pre-Settlement
Matching System ( PSMS )PSMS for Non-residents’ Transactions
Overseas
Order

Investment
managers

Securities
companies

Notice of execution
Allocation, matching

Settlement instruction

Globalcustodians

Notice ofexecution

Settlement
instruction

Settlement instruction

Japan
Settlement
instruction

Subcustodians
Notice ofmatching status

Pre-Settlement
Matching System*

Settlement
instruction

Linkage with Book-entry Transfer Systems for Stocks, etc., Corporate Bonds and CP( excluding Japanese government bonds )- 25 -

Securities
companies

Notice ofmatching status

Request for DVP transfer* From January 2014, onward, “Tolerance Matching” function is available.

Order

Notice ofexecution

Order

Stock
exchanges

Products / Services
Matching of the transaction and settlement terms of the following products( domestic transactions and non-resident transactions ):• Shares, etc.

• Japanese Government Bonds ( JGB )• Convertible Bonds• Futures / Options• Corporate Bonds, CP

Since the launch of Pre-Settlement Matching System( PSMS ) in September 2001, JASDEC has promoted
Straight Through Processing ( STP ) in the Japanese securi-connectivity, JASDEC was the first company in the global
securities settlement industry to introduce the ISO
20022-based message format that is the new international
standard for financial messaging. The adoption of ISO
20022 will lead to not only enhanced system connectivity but
also improved compatibility of Japanese market practices
with the global ones. JASDEC participates in the discussionof International Organization for Standardization ( ISO ), theSecurities Market Practice Group ( SMPG ), and other suchbodies and contributes to them actively.

ties market, by providing matching function of trade andsettlement information to institutional investors and otherbodies. PSMS, as an intermediary between the transaction
process and the settlement process, has the following
three basic concepts:
1

Rapid post-trade process2

Automatic data linkage to CCP and Book-entry
Transfer System for Delivery Versus Payment ( DVP )settlement

3

Total Number of PSMS input / output Instructions
Using the PSMS system ( Daily average )Implementation of a globally standardized message
format suitable to both domestic and non-residents’transactions( Thousand )

1,930

2,000
1,766

It is crucial for financial institutions to smoothly andsecurely complete the settlement process of huge numberof transactions. While Book-entry Transfer System realizes
secure settlement, PSMS, in addition, helps to achieve asmooth settlement.
Now that more than a half of share transactions are
conducted by non-residents, it is important to facilitate
easy access to the Japanese market from all over theworld. In January 2014, as a measure of enhanced system

1,577
1,500

1,360

1,353

2011

2012

1,000

500

0

2013

2014

2015

( FY )

Usage in FY 2015
PSMS, as a primary matching infrastructure in Japanesemarket, was utilized by 677 users as of the end of March2016. Given the buoyant Japanese stock market, the numberof input /output transactions of PSMS increased to 1,930

thousand on a daily average, which recorded the highest
number since the launch as shown above.
In addition, 53 out of 179 users have already migrated fromthe ISO 15022-based message format to ISO 20022.

- 26 -

04 Pre-Settlement

Matching System ( PSMS )Initiatives Taken in FY 2015
JASDEC has already taken initiatives to contribute to
making the Japanese securities market much more
efficient.
In November 2015, the Japan Securities Dealers Association( JSDA) started a system for disclosing transaction informationon corporate bonds so as to revitalize the Japanese bondmarket. JASDEC implemented functions to provide JSDA
with incoming transaction data on corporate bonds sent to
PSMS in support of the realization of the efficient operationof the system.
Moreover, JASDEC participates in discussions held amongmarket players regarding the shortening the settlement cycleof JGB.
While JASDEC believes a shorter settlement cycle would
contribute to a reduction in settlement risk as a direct
effect, improvement in market liquidity and enhancement incompetitiveness among overseas markets would also be
achieved as an indirect effect. In addition, the balance of
JGB has tended to rise over the years, and the market
is now quite large. Given these situations, shortening thesettlement cycle would contribute greatly to the above-noted
effects. JASDEC is currently prepared to start T+1 settlement( T+0 settlements for GC repo transactions ) for outrighttransactions in JGB in the first half of 2018. System
implementation includes a revision of trade matching functions,linking matched trade data to the Japan Securities Clearing
Corporation ( JSCC ), and the distribution of JSCC notices
to PSMS users. JASDEC also participates in planning anddiscussion of integrated test scheduled in the latter half of2017, which aims to verify system processing among all JGB
market participants and to enhance the level of operational
skill under the new business practice.

PSMS for Domestic Stock Transactions ( Centralized matching for three parties )Stock exchanges
Notice ofexecution

Investment trust
management /investment advisory
companies

Investment instruction

Order

Order
Notice of execution
Allocation

Pre-Settlement Matching System( PSMS )Trade matching

Investment instruction
and trade report

Trade report

Securities
companies

SSI

Trust banks

Trade reportaffirmation

Settlement matching

Request for DVP transfer *Linkage with Book-entry Transfer Systems for Stocks, etc., Corporate Bonds and CP ( excluding Japanese government bonds )* From January 2014 on, DVP settlement for Stock Lending and Borrowing ( SLB ) transactions is available.

- 27 -

BUSINESS OVERVIEW

05
Custody Services for
Foreign Stock Certificates, etc.

Overview of the System Relating to Foreign Stocks

Share-handling service agents ( trust banks )Notice of beneficial
shareholders(

Shareholder notice host

Beneficial
shareholder
reportJapan Securities Clearing Corporation

Dividend
information

handling of information concerning beneficial
shareholders, dividends, etc.

Collateralmatching

Overseas CSDs

Dividend
information

Custodian banks

Stock exchange DVP)

Notice ofbalance

Account transfer host( settlement )Non-DVP
transferfor NETD

DVP transfer
for NETD

AMIs ( Securities companies and banks )Beneficial shareholders of foreign stock certificates, etc.

- 28 -

Local
custody /transfer

Communication
server with foreign
CSDs / banks

05 Custody Services for

Foreign Stock Certificates, etc.

Products / Services
Custody, transfer and rights handling related to the following products:• Beneficiary certificates in a trust issuing a listed
foreign beneficiary certificate• Listed foreign shares• Listed certificates of foreign share options• Listed foreign covered warrants• Listed foreign investment trust beneficiary
certificates• Depository receipts of foreign shares• Listed foreign investment securities

In May 2006, JASDEC commenced services to process
deposits, transfers, and corporate actions for foreign sharecertificates, etc., listed on Japanese stock exchanges.
Although foreign share certificates, etc., are generally
deposited with CSDs or custodians in the same countries
as the issuing companies, settlements of transactions at
Japanese stock exchanges are conducted through Book-entry
transfer in JASDEC. JASDEC entrusts dividend payments torelevant share-handling service agents and dividend-paying
banks. Information on beneficial shareholders at the dividend
record date is transferred from the JASDEC participants tothe share-handling service agents through JASDEC. Based on
this information, the share-handling service agents calculate

the amount of dividends, which are then paid directly to thebeneficial shareholders from the dividend-paying banks.
JASDEC also undertakes the necessary procedures
regarding dividend taxation for tax authorities and othersuch entities, for tax relief under tax treaties with the countries
concerned. Beneficial shareholders can also exercise theirvoting rights at general meetings of shareholders throughinstructions issued to JASDEC.
JASDEC therefore provides the infrastructure and services
necessary for reliable settlement of foreign share certificates,
etc., smooth exercise of shareholder rights, and assured
receipt of dividends and other payments.

Foreign Stocks, etc. Account Balanceand Number of Issues( excluding foreign covered warrants )Account balance

Number of issues( Thousand shares )( Issues )200,000

160,00050

189,208
38

37

39

39

40

36

120,000

30

105,964
88,93086,57792,42280,00020

40,00010

0- 29 -

2011

2012

2013

2014

2015

( FY )

0Usage in FY 2015
At present, there are three types of foreign securities thatare handled by JASDEC: foreign shares; foreign investment
trust beneficiary certificates; and foreign investment securities.

As of March 31, 2016, the total number of issues handled by
JASDEC was 36.

Initiatives Taken in FY 2015
In response to changes in the QI withholding tax system
relating to U.S. shares, JASDEC continued from FY 2014 toprepare for application of reduced tax rate to dividend on
U.S. shares such as revising its format that is submitted or
received to/from JASDEC participants and changing typesof withholding tax. These changes were implemented in
December 2015.

In addition, JASDEC worked to improve services forbeneficial shareholders and participants, including a study
concerning the handling of listed products from various
countries that are likely to be listed on Japanese stock
exchanges.

Number of Shares Deposited / Withdrawn

Book-entry Transfers

Number of shares withdrawn

Number of shares deposited( Thousand shares )( Thousand shares )150,000

400,000

365,437

131,801
302,746

300,000
100,000

Exchange transaction transfers

Non-exchange transaction deliveries

91,672

242,710

236,159

191,488

200,000

71,16759,72750,000249,629

163,944
133,51141,840116,370

115,001

100,000
15,650022,62828,306
16,863
8,432

2011

2012

2013

2014

2015

0

( FY )- 30 -

2011

2012

2013

2014

2015

( FY )