Leading
Way
Futuretheto theMessage from the President

8 - 9

Special Feature
The Dematerialization of Stock Certificates

10 - 13

Corporate Governance

14 - 17

Business Overview

Book-Entry Transfer System for Stocks, etc.

18 - 21

Book-Entry Transfer System forCommercial Papers and Corporate Bonds

22 - 27

Contents

Book-Entry Transfer System for
Investment Trusts

28 - 31

Japan Securities Depository Center, Inc.
Annual Report 2009

DVP* Settlement Services for NETDs**

32 - 35

Pre-Settlement Matching System (PSMS)***

36 - 39

Custody Services for Foreign Stocks, etc.

40 - 43

International Relationships

44 - 47

Analysis of Business Performance andFinancial Results

48 - 49

Financial Section

Consolidated Financial Statements

50 - 62

Report of Independent Auditors

63

History

64 - 65

Corporate Data

66 - 67*	DVP: Delivery versus Payment. This system simultaneously attaches
specific conditions to the delivery of and payment for securities.
** NETDs: non-exchange transaction deliveries***	Pre-Settlement Matching System (PSMS): This central matching system
automatically confirms the contents of trade and settlement, such as trade
names/amounts, counterparties and account numbers.

Leading the Way

A strengthened settlement
infrastructure and greater globalization:

as Infrastructure

JASDEC’s securities clearing and settlement infrastructure serves as a solid
foundation for the capital markets in Japan. We are committed to improving
certainty and efficiency in our services and further reducing the cost for issuers andfinancial intermediaries. In January 2009, the dematerialization of stock certificates
was successfully launched, enabling the entire process for securities transactions
from trading to settlement to be conducted electronically and seamlessly, without
any manual intervention. JASDEC also fully understands its public responsibility
and focuses on providing more reliable and secure clearing and settlement services.
Dematerialization not only eliminates the risk of loss or theft of stock certificates,
but also reduces the risk of clerical or administrative errors. JASDEC has realized asafe and secure transaction system to meet investors’ needs and protect their assets.
In addition, JASDEC has begun initiatives to address the growing trend
towards cross-border consolidation of capital markets. To offer functional
excellence in services to meet the operational demands of a more global market,

JASDEC is expanding its services for
greater efficiency and reliability
JASDEC is working to achieve rapid improvements in operational processes anddevelop new businesses in a flexible manner. In May 2006, JASDEC launched acustody and book-entry transfer system for foreign stocks. Keeping a close eye on
current trends in the standardization of securities clearing and settlement systems for
major markets, JASDEC is making steady progress in the internationalization of its
systems. We believe these efforts will help strengthen the competitive position ofJapanese securities markets. In the field of external activities, JASDEC is also working
to enhance communication with central securities depositories (CSDs) around theworld. In addition to information and personnel exchanges, we have signed
memorandums of understanding to develop cooperative relationships with overseas
CSDs. In line with fundamental changes in the market environment both in Japan andoverseas, as well as in the market’s structure, JASDEC is committed to promoting
further reform of its securities clearing and settlement system through the adoption of
global standards in Japan.

as Globalization

Ceaseless efforts with clear vision bring about agreat progress in human life.
In previous times, human beings generated
safety and convenience of the public byconstruction of urban infrastructure.
Furthermore, they opened up new possibilitiesof human life by explorating new lands anddeveloping urban areas.
Japan Securities Depository Center, Inc.

to the Future(JASDEC), as the organization responsible forthe reform of Japan’sJapan s securities clearing andsettlement infrastructure, is working to realize
more reliable and secure clearing andsettlement services to meet the diverse needs ofinvestors, issuing companies, and financial
intermediaries. At the same time, we are
keeping a close eye on developments in major
overseas markets, with the goal of modifying
our system for high compatibility with global
standards.
We will make sustain efforts incontributing to improvement of function incapital markets and development of the society
as a whole, and leading the way to the brighter
future.

JASDEC Works
Toward Further
Stabilization and
Globalization of
the Japan’s
Settlement
Infrastructure

In January 2009, thanks to the efforts of all related parties,
JASDEC accomplished dematerialization of stock certificatesissued by all listed companies as the final step in theimmediate reform of Japan’s securities settlement systems.
JASDEC had already implemented full dematerialization forcommercial papers, corporate bonds, and investment trusts, butwith this dematerialization of stocks, our new Book-entry
Transfer System has been fully established. We will continue
efforts to facilitate the new system as a crucial element ofsocial infrastructure that underpins the growth of the Japanese
economy.
During the fiscal year from April 1, 2008 to March 31,
2009, in preparation for the dematerialization of stock
certificates, in August we formulated business regulations forthe new Book-entry Transfer System of Stocks, etc. followingt h e d e m a t e r i a l i z a t i o n . I n S e p t e m b e r, w e c o n d u c t e d n a m eidentification for shareholders and began operation ofParticipants Information System* 1 to manage shareholder
information. In addition, to ensure a smooth transition to thedematerialized stock system, we conducted a mass media
advertising campaign in cooperation with related parties top u b l i c i z e t h e n ew s y s t e m a n d avo i d p r o b l e m s c a u s e d b yshareholders rushing to deposit stock certificates at the lastminute prior to the new system’s enforcement date. After
dematerialization of stocks, we initiated General Shareholders
Notification* 2 to provide issuing companies with shareholder
information managed by Participants Information System.
Focusing on globalization, in April 2008 the first Interim
Meet i n g * 3 o f C en t r al S ecu r i ti es D ep o si t o r i es was held inTokyo. Subsequently, several memorandums of understanding
were concluded for information exchange and cooperative
relationships: in April with Central Depository Company ofPakistan Limited (CDC); in May with the two CSDs in India C e n t r a l D e p o s i t o r y S e r v i c e s ( I n d i a ) L i m i t e d (CDSL) andNational Securities Depository Ltd. (NSDL); in July with

*1: A new system to manage shareholder name identification andparticipant(shareholder) information after name identification (Pleasesee p.20 for more detail)*2 : Shareholders information as of record date notified by JASDEC to issuers*3 : A CSD meeting which is held in addition to the biennial CSD general
meetings

8

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn ual R e p ort 2 0 0 9

M e ssage from t he Pre side n t

Thailand Securities Depository Co., Ltd. (TSD); in March2009 with the CSD in Egypt, Misr for Central Clearing,
Depository and Registry (MCDR); and in April 2009 with the
CSD in Mongolia, Mongolian Securities Clearing House &Central Depository Co., Ltd(MSCH&CD). In addition, we
launched JASDEC Newsletter, a quarterly publication for the
distribution of timely information on our business activities.
During the current business term (from April 1, 2009 to
March 31, 2010), we will continue efforts to ensure secure andreliable operation of the new Book-entry Transfer Systeminaugurated in January 2009, while also strengthening
cooperation with overseas CSDs to address the ongoing
globalization of settlement systems.
In 2008, the failure of major U.S. financial institutions
caused turmoil in the Japanese capital markets, and we learned
a number of lessons from this financial crisis. JASDEC fullyrecognizes its public role as the central organization withresponsibility for the market’s infrastructure, and we arec o n t i n u i n g t o m a k e e ff o r t s t o e n s u r e t h a t t h e s e c u r i t i e ssettlement infrastructure enables highly reliable, convenient,and efficient securities settlement. Moreover, in response to
the structural and environmental changes occurring in thedomestic and foreign capital markets, we will work ceaselessly
to improve the system to meet the ongoing needs andr e q u i r e m e n t s o f a l l u s e r s , i n c l u d i n g i nv e s t o r s , i s s u i n gcompanies, and market intermediaries.
Lastly, we would like to thank all related parties for theircontinued support and cooperation.

Yoshinobu Takeuchi
President & CEO
Japan Securities Depository Center, Inc.

9

Special Feature
The Dematerialization of Stock Certificates

A New Era Begins
for Stock Trading

2009.1
Leading the Way to the Future

10

In January 2009, a new Book-entry Transfer System for Stocks,
etc. (hereinafter referred as to “the new system”) started. Under
the new system, stock certificates of all outstanding shares
listed on Japanese stock exchanges were dematerialized andconverted to electronic records. It replaced the depository andbook-entry transfer system (hereinafter referred as to “theformer system”) that has supported the settlement of securities
transactions in Japan since 1991. This change is referred to as
the dematerialization of stock certificates.
It is now approximately five years since the promulgation of“the Law for Partial Amendments to the Law Concerning BookEntry Transfer for Corporate Bonds and Other Securities for the
Purpose of Streamlining the Settlement for Trades of Stocks
and Other Securities” in 2004, which required the replacementof paper stock certificates with electronic records. During theseyears, JASDEC promoted the preparation of an orderlytransition to the new system in cooperation with related parties.
We continued to upgrade our business functions, including
improved efficiency of administrative work and service
enhancements in the former system. Meanwhile, theSubcommittee for Dematerialization of Stock Certificates was
set up to review practical transition procedures to the new
system, and JASDEC formulated plans for the new system, set
up procedures for administrative transactions, conducted systemdevelopment as well as operational tests, and requested
shareholders to promptly deposit their stock certificates withJASDEC. As a result of these efforts, a smooth transition to the
new system was successfully accomplished.
The dematerialization of stock certificates will help bringgreater security, usability and efficiency to the Japanese stock
market. In addition, with recent increased cross-border trading,it will make the market more attractive and reliable for overseas
investors and participants to invest in, and strengthen Japan’sinternational competitive position.
In this special-feature article, we give an overview of the
new system, and explain the benefits of the electronic recordkeeping system.

An Overview of Dematerialized Book-Entry Transfer System for Stocks, etc.
Under the new dematerialized Book-entry Transfer System for
Stocks, etc., paper stock certificates issued by all Japanesecompanies listed on Japanese stock exchanges were abolished andbecame invalid. They have been replaced by electronic records
registered and managed by computer systems within accounts
opened at JASDEC or account management institutions (AMIs)
such as securities companies and banks. Instead of stock certificates,
records in computer systems represent share ownership. Transfer ofshareholders’ rights is also processed electronically based on therecords in the accounts. This dematerialization system applies not
only to stock certificates, but also to share options, bonds with shareoption, investment units, preferred equity investments, andExchange Traded Funds (ETFs).
When starting the new system on January 5, 2009 (hereinafterreferred to as the “enforcement date”), the total number of issues
handled was 3,986.* The number of companies participating in the
new system, including JASDEC participants, indirect AMIs andfund settlement corporations, was 420. Under the new system,
foreign financial institutions designated by competent ministers canalso take part in the system. As of the enforcement date, 21 foreign
financial institutions were participating as indirect AMIs.

* Excluding Exchange Traded Funds (ETFs) for which JASDEC’s Book-entry Transfer System was implemented in January 2008.

Former Depository and Book-Entry
Transfer System

New Dematerialized Book-Entry
Transfer System

Issuing company

Issuing company

Book of shareholders

Book of shareholders

Request for registration ofname transfer

Book ofbeneficial
shareholders

General Shareholders Notification

Notice of beneficial shareholders

Request for registration of
title transfer

JASDEC
Ledger of Account transfer
participants’accounts

Stocks(deposits)

JASDEC
Ledger ofparticipants’accounts

Request forwithdrawal

Stocks(deliveries)

Transfer
Account

Transfer AccountDirect AccountManagement Institution(securities companies, banks, etc.)

Stocks(Hold own stock
certificates or
entrusts them tosecurities companies)

Shareholders outside
the depository
and book-entry
transfer system

Shareholders outside
the depository
and book-entry
transfer system
Stocks(deposits)

Customers(beneficial shareholders)

Transfer
Account

Direct AccountManagement Institution(securities companies, banks, etc.)

Customers(beneficial shareholders)
Indirect AccountManagement Institution
Request forwithdrawal

Stocks(deliveries)

Customers(beneficial shareholders)(Indirect AMI)

Participants(Shareholders)Participants(Shareholders)Participants(Shareholders)

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

11S pe c i a l Featur e

The Dema ter ializ at ion of St ock Ce rt ificat e s

The Main Benefits of Dematerialization
Elimination of Paper Certificates Reduces Costs and Risks
The dematerialization of stock certificates, etc. offers a numberof benefits for all related parties, including issuing companies,
shareholders, securities companies and banks. Firstly, it reduces
costs and risks associated with paper certificates. Issuing
companies no longer have to bear costs of issuance as well as
management of paper certificates, and shareholders will have norisks of loss and theft. Additionally, the risk of trading forgedcertificates is removed. Dematerialization also eliminates theneed to deliver paper certificates for securities traded, leading todramatic reductions in effort, time, and cost for securities
transactions.

Centralized Management of Shareholder Data Brings Greater Processing Efficiency for Issuing Companies
Secondly, under the new system, JASDEC centralizes
management of shareholder information to streamline issuing
companies’ clerical workload. For instance, when a shareholder
utilizes two or more AMIs, under the former system, theadministrator of the shareholder registry of each issuing
company had to conduct name identification for the purpose of
making correct entries in the shareholder registry and registryof beneficial shareholders. Under the new system, JASDEC
carries out name identification of shareholders for all issuing
companies, and based on the results, provides General
Shareholders Notification to issuing companies (oradministrators of the shareholder registry) for entry in theshareholder registry. Furthermore, the time taken by JASDEC
under the new system to send notifications to issuing companies
is reduced by half to three business days from the record date.
This greatly contributes to administrative efficiency and cost
reduction for issuing companies. In addition, under the new

system, issuing companies are able to request JASDEC to send
shareholder information at any time subject to reasonablegrounds, and to utilize up-to-date shareholder data for effective
IR activities such as special benefit programs for shareholders
on a quarterly basis.
For shareholders, meanwhile, in the event that they intend topresent proposals at a general shareholders’ meeting, they areentitled to exercise their rights as minority shareholders byrequesting JASDEC through their AMIs which maintain theregistry of their data to notify the issuing company of thenumber of shares they hold. The exercise of rights as minority
shareholders is possible, even if they are not recorded in theshareholder registry of the issuing company. Issuing companies,
for their part, can request JASDEC to provide information on
specific shareholders to determine whether or not they areshareholders.

Diversification in Services for Dividend Receipt
Thirdly, services for dividend receipt have been diversified.
Before the dematerialization, shareholders had to designatebank accounts to receive dividends for each issue, or submit
dividend warrants mailed from issuing companies to financial
institutions or post offices within a specified period. However,under the new system, once shareholders inform securities
companies of their designated bank account before dividend

12

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn ual R e p ort 2 0 0 9

payment, all dividends payable on shares they hold will betransferred to the designated account. Additionally, dependingon the balance of the accounts at securities companies as of therecord date, shareholders can receive dividends through suchsecurities companies. The same dividend services are available
for beneficial rights of Exchange Traded Funds (ETFs)
beneficiaries.

Sp e cial Fe at ure

The De mat e rializat ion of St ock Ce rt ificat e s

Urging Investors to Deposit Certificates with JASDEC to
Achieve Full Dematerialization
Smooth and efficient depositing of stock certificates in JASDEC was a
critical issue for the dematerialization of stock certificates. However, asof the end of March 2008, the number of shares in JASDEC’s custodystood at 84.3% of all outstanding shares listed on Japanese stock
exchanges, and approximately 46 billion shares of stock certificateswere yet to be deposited with JASDEC, of which approximately 13
billion shares were kept by individual investors on hand, and 12 billion
shares were held by business corporations. Leading up to
dematerialization, there were concerns that these stock certificates would
not be deposited.
To encourage shareholders to promptly deposit certificates, adematerialization campaign had been conducted, primarily by the
Reform Promotion Center for Securities Clearing and Settlement System(a body set up jointly by JASDEC, the Tokyo Stock Exchange, Inc., andthe Japan Securities Dealers Association). In the campaign, newspaper
advertisements, television commercials, posters, pamphlets and so on
were used to publicize the issue of dematerialization among shareholders.
To avoid trouble caused by shareholders rushing to deposit their stock

certificates at the last minute before dematerialization, as well as apossible overload of clerical work for JASDEC and related parties,
JASDEC strengthened cooperation in ensuring the prompt deposit ofstock certificates with securities companies and banks that would be
acting as deposit intermediaries for JASDEC.
As a result of these efforts, the percentage of shares in custody at theend of December 2008 rose to 91.1% of all outstanding shares, and theratio (excluding immobilized shares) reached 94.9%. Thus, JASDEC
managed to introduce dematerialization without major problems.
Stock certificates kept in hand without being deposited with JASDEC
became invalid by dematerialization, but the management of stock
ownership of the certificates is transferred to special accounts opened byissuing companies for these shareholders, primarily throughadministrators of shareholder registry, and their ownership rights areprotected. However, with certain exceptions such as requests for thepurchase of shares representing less than one unit, transactions of theshares held in the special accounts are not permitted. Shareholders arealso required to follow certain procedures for the transfer of the stocks toordinary accounts opened at AMIs.

Seeking Further Reform to Enhance Functions of System
In April 2009, JASDEC reorganized two subcommittees — theSubcommittee for Existing Business to review improving operational
processes of the former system, and the Subcommittee for
Dematerialization of Stock Certificates to study operational practices fordematerialization of stock certificates — into three subcommittees for
specific products to examine further improvement of the new system: theSubcommittee for Stocks, the Subcommittee for Bonds with Stock
Options and the Subcommittee for ETFs.
Dematerialization of stock certificates promises greater security,
usability, and efficiency for the securities markets. Under the new

system, JASDEC is committed to the provision of a stable and reliable
operational environment. JASDEC will carry out further improvement of
the system reform in cooperation with related parties including
shareholders, issuing companies, and AMIs while focusing on businessinitiatives to meet the ongoing needs and requirements of users. In
addition, JASDEC is accelerating efforts to enhance its ability to perform
as the world’s most advanced and user-friendly central securities
depository. JASDEC will contribute to revitalizing Japan’s securities
market and further enhancing its international status.

Outline of Greneral Shareholders Notification

Issuing company
Book ofshareholders
Comparison by shareholder
reference code

Notification
data after
nameidentification

Stock balancedata after
nameidentification

Data transfer

JASDEC
Notification
dataInterlink

Data edit

Name
identification

Participant
information

Account Management
Institution (AMI)

Participant
information

Account Management
Institution (AMI)

Participant
information

Account Management
Institution (AMI)

Information of the
Number of Shares

Paper document

Participants(Shareholders)Information of the
Number of Shares
Information of the
Number of Shares

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

13

Cor p or a t e G ove rnanc e
Our Basic Policy on Corporate Governance
JASDEC fully recognizes its social obligation as the central bodyfor the provision of the infrastructure for securities clearing andsettlement, which is an important base of the capital markets.
Accordingly, JASDEC has determined a basic management policyof providing a highly secure, convenient and efficient service. To
this end, we ensure that our system meets the needs of users,
including investors, issuing companies and market intermediaries.

We a l s o m a k e s u r e t h a t o u r a c t i v i t i e s p r o m o t e c o r p o r a t etransparency and that our business operates with fairness andaccountability, in line with the public needs of our function. Ourcommitment on corporate governance is to earn and maintain as o l i d r e p u t a t i o n f o r r e l i a b i l i t y a s t h e c e n t r a l o rg a n i z a t i o n
responsible for creating and operating the infrastructure forsecurities clearing and settlement in Japan.

Overview of implementation of corporate governance practices
Framework for management structure and corporate governance to exercise business judgments, manage operations and implement audits

Corporate Structure
Board of Directors

Business Operations Committee

The Board of Directors is composed of 19 members, and is basicallystructured to achieve a balanced approach to business with useroriented views, as well as business-oriented ideas on maintaining
operational neutrality and fairness. To fully reflect the opinions ofusers in our operations, nine of the 14 external directors are selectedfrom JASDEC participants. The remaining five external directors
belong to an issuing company and a related organization, or to theJapan Securities Dealers’Association, academia and the legal
profession, enabling the Board to conduct vigorous discussions
from a broad perspective in consideration of the public good. In
principle, the Board meets once a month to decide basic
management policies and discuss other key issues.

Separately from the Board of Directors and the Board of Auditors,
JASDEC has set up the Business Operational Committee to fullyreflect the needs of system users in our operations. The Committee
examines important issues related to the business of JASDEC, basedon queries from the Board of Directors, and has nine subcommittees
under its control. Each subcommittee is responsible for a specificsegment of operations, and is composed of members who are
actually involved in the field. JASDEC applies the opinions provided
by each subcommittee to various operational issues. JASDEC postssummaries of discussions and other information by the committees
on its website to foster greater operational transparency.
As the provider of key infrastructure elements for the securities
market, we are required to operate the system with an extremely
high level of fairness and accountability. To achieve this end, we
have established the Advisory Committee, which is composed ofexperts in financial and securities systems. The committee advises
JASDEC’s president from a broad perspective about wide-ranging
issues relating to securities clearing and settlement system
operations.
JASDEC DVP Clearing Corporation (JDCC), JASDEC’s
wholly-owned subsidiary, operates in accordance with a businessphilosophy similar to that of JASDEC. JDCC has also set up acommittee for reviewing important issues regarding DVP operations
to reflect the needs of users of the DVP settlement system for nonexchange transaction deliveries(NETDs). In addition, JASDEC’s
Board of Directors receives reports regarding issues decided by
JDCC’s Board of Directors to ensure consistency in the activities of
the two companies.
An outline of JASDEC’s management structure and corporate
governance systems is presented on the next page.

Board of Auditors
JASDEC employs the corporate auditor system for corporate
governance instead of the committee system, as provided in the
Companies Act. The Board of Auditors is made up of three auditors,
two of whom are selected from eligible participants (one each froma securities company and a bank) and all three (including an auditor
who is serving on a full-time basis) are external auditors.
In principle, the Board of Auditors holds a regular meeting eachmonth. In line with auditing plans and the basic policies establishedby the Board of Auditors, auditors attend important meetings,
including those of the Board of Directors and assess the status ofservices and assets to perform audits of directors. To ensure that
audits are effective, auditors work closely with directors andconduct regular exchanges of opinions, including through meetings
with the representative directors.

14

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn ual R e p ort 2 0 0 9

Overview of JASDEC’s Management Structure and Corporate Governance Framework
General Shareholders’ Meeting
Appointments/Dismissals

Appointments/Dismissals

Board of Auditors

Appointments/Dismissals(Five full-time, fourteen external)

Subcommittees
Consultation

Opinions, reports

ETF
Foreign stock
Corporate bondPresident & CEO

Investment trust

CP
PSMS (Domestic Trade)

Accounting auditors
Auditing

Stock
Bond with share option

Appointment/
Supervision

Opinions, reports

Auditors Offce

Board of Directors

Audit on operation(Three including one auditor
serving on a full-time basis)
Auditing

Business Operations Committee

Risk Management Committee
Monitoring

Conveying
information

Compliance Office

PSMS (Non-Residents’ Trade)

Internal audit

Departments

Risk Management System
JASDEC has set up the Risk Management Committee, chaired by
the president. It takes measures to strengthen overall risk
management, and regularly monitors internal control systems forvarious risks.
Internal Audits, Corporate Audits, and Accounting Audits
JASDEC has established the Compliance Office, and internal auditing
accomplished primarily through onsite surveys based on the audit
plan, to assess the effectiveness of operational procedures. For
corporate audits, an auditor serving on a full-time basis routinely
attends important meetings, such as those of the Board of Directors
and the Executive Committee (comprised of managing directors
serving on a full-time basis) and examines circulars intended toobtain approvals of decisions by persons in charge. The full-time
auditor performs audits in accordance with the auditing plansestablished by the Board of Auditors, and provides the other
Corporate Auditors with updates on the progress of auditing activities
at the meeting of Corporate Auditors, which takes place monthly.
Auditors serving on a part-time basis attend meetings of theBoard of Directors and monitor the directors’ execution of theirduties. They also assess the legality of business operations byreviewing reports on auditing activities from the full-time auditor.
JASDEC assigns staff specifically to assist corporate auditors intheir audits.
Corporate Auditors perform audits in close cooperation with theCompany’s accounting auditors. This includes hearing reports fromthe accounting auditors on auditing plans and the results of theaudits.
JASDEC has two certified public accountants who perform
accounting audits for JASDEC in the capacity of accounting auditor

AdviceAdvisory Committee

under the Companies Act: Yohei Kishi and Naoto Saito (designatedmembers of a limited liability partnership under Article 34,
Paragraph 10-5 of the Certified Public Accountants Law).
They are employed by Ernst & Young ShinNihon LLC, amember firm of Ernst & Young Global, and execute accounting
audits, including checks of financial documents, based on the
Companies Act. Mr. Kishi and Mr. Saito are assisted in theiraccounting audits by five certified public accountants and twelve
other staff (junior accountants and other assistants).
We recognize that no items of particular regard, such as serious
irregularities or instances of illegal behavior, have been foundthrough the execution of accounting audits.
Directors’ and Corporate Auditors’ Limit of Liability
We expect directors and Corporate Auditors to fully demonstrate theskills involved in successfully executing their responsibilities.
Additionally, to retain top-level professionals, we have set limits on
liability for damages incurred by directors and Corporate Auditors.
Resolutions on Election/Dismissal of Directors
The election of directors by resolution at the general meeting ofshareholders is conducted in the presence of shareholders
representing no less than one-third of voting rights held by eligible
shareholders, and directors are elected by a majority vote of said
shareholders.
The dismissal of directors by resolution at a general meeting ofshareholders is conducted in the presence of shareholders
representing no less than one-third of voting rights held by eligible
shareholders, and directors are dismissed on a vote of no less than
two-thirds of voting rights held by said shareholders.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

15

Boa r d Me mbe r s and Au d i to rs (As of July , 2009)16

Senior Managing Director

Managing Director

Director

Shigeru Omae

Yoshinori Seyama

Moriyuki Iwanaga

Director

Ritsuro Koza

Managing Director,
JASDEC DVP Clearing
Corporation

Managing Director,
JASDEC DVP Clearing Corporation
Director, Tosho System Service Co., Ltd.

Executive Officer,
Tokyo Stock Exchange, Inc.

Senior Managing Director,
Nomura Securities Co., Ltd.

Managing Director

Director

Director

Seikichi Ihara

Junichi Kitamura

Masahiko Koyanagi

Managing Director,
JASDEC DVP Clearing
Corporation

Managing Director,
Head of Operations
Nikko Citigroup Limited

Senior Executive Officer,
Japan Securities Dealers Association

Director

Senior Managing Director

President & CEO

Director

Shoji Murata

Yoshinobu Takeuchi

Yukihiro Kitano

Masakazu Kubota

Managing Director,
JASDEC DVP Clearing
Corporation

President, JASDEC DVP
Clearing Corporation

Executive Officer& Deputy Division President of
Fiduciary Business Division
The Sumitomo Trust & Banking Co., Ltd.

Managing Director,
Japan Business Federation

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn ual R e p ort 2 0 0 9

B oard M e mbe rs an d Audit ors

Director

Director

Kunihisa Hama

Kenichi Miki

Tetsuo Oguchi

LawyerSenior Executive Officer,
Daiwa Securities SMBC Co., Ltd.

Auditor, JASDEC DVP Clearing
Corporation
Auditor, Tosho System Service Co., Ltd.

Standing Auditor

Director

Director

Director

Atsushi Shigeta

Shigeyuki Maeda

Taihei Yuki

Yasuo TakamatsuManaging Executive Officer,
Mizuho Corporate Bank, Ltd.

Professor of Law,
Professional School of Law(Law school),
Professional Course in Law
Gakushuin University

Managing Director,
Mitsubishi UFJ Trustand Banking Corporation

Director and Senior Executive Officer,
Senior Managing Director,
Tokai Tokyo Securities Co., Ltd.

Director

AuditorDirector
Director

Masaru Takei

Takehiko Nemoto

Managing Director,
Tokyo ElectricPower Company

Managing Director,
Chief Executive Information System& Operations,
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

AuditorEiko Morita

Jun Ohta

Director,
Head of Operation
Deutsche Securities Inc.

Director and General Manager,
Sumitomo Mitsui Banking Corporation

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

17

Custody Services for Foreign Stocks, etc.

︵ PSMS︶
Pre-Settlement Matching System

18

DVP Settlement Services for NETDs

Book-Entry
Transfer System
for Stocks, etc.

Book-Entry Transfer System for Investment Trusts

Book-Entry Transfer System for Commercial Papers and Corporate Bonds

Business Overview 1Under the New System, Ownership of Stocks is Determined by Electronic Records
page 10 “Dematerialization of Stock Certificates”), a new
Book-entry Transfer System for Stocks, etc. (hereinafterreferred to as “new system”) was inaugurated, replacing theformer system. Under the new system, stock certificates are
no longer deposited, held in custody, or withdrawn. Instead,ownership of stocks is determined by electronic records
maintained in the computer system of JASDEC and accountmanagement institutions (AMIs).

Under the former “depository and book-entry transfer system"(hereinafter referred to as “the former system”), in whichp a p e r s t o c k c e r t i f i c a t e s a r e e m p l o y e d , JA S D E C h o l d s
securities in custody, and settlement of securities transactions
is processed through the book-entry transfer in accounts atsecurities companies or JASDEC, without delivery of physicalcertificates.
Wi t h t h e s t a r t o f t h e d e m a t e r i a l i z a t i o n o f s t o c kcertificates, etc. in January 2009, (see the Special Feature on

Number of issues and account balance under the former system (depository and book-entry transfer system)
Number of issues(Issues)

2,654 2,804 2,977

4,000

3,616

3,498

3,366

3,287

3,116 3,228

3,666

3,626

3,838

3,758

3,952

3,948

3,892

2,000
0
(Million shares)

Custody balance

400,000

Number of uncertificated shares
Custody ratio (%)

129,774 157,074

300,000

46,91921,908 30,444

100,000

68(FY) 1993

1994

0

61,747 84,443 108,064

13
6,663

1995

29

23

17

42

34

73,58544,059 54,226
17,961 30,581

1996

1997

1998

1999

2000

95,557 105,490

2001

2002

128,577

2003

281,914 303,382 320,090
77

72

64

58

54

Uncertificatedpart of sharesin custody
14.2%

200,000

191,562 203,181

228,201 262,128

84

81

344,842
91

(%)

100
80

157,756

173,456

192,117

211,037 228,158 60

Uncertificatedpart of sharesin custody
65.9%

2004

2005

2006

2007

Uncertificated shares in custody are ones that JASDEC has offered not to possess shares certificates to issuing companies.

Uncertificatedpart of sharesin custody
66.2%

2008

40
20
0

(Apr-Dec)

Deposits and Withdrawals
Number of shares deposited(Million shares)

Number of shares withdrawn

60,000Withdrawals to deposit ratio (%)

40,00036,23440.1
14,52420,000047,32545,380(FY) 1999

56,21553,217

(%)

69.0

80

49,84031,52545,838 40,557
37,49460
37,34851.2
34,41535,91247.0
42.3
33,786
34,97631,982
38.6
30,77525,875
40.2
31.9
27.6
40
21,727 28.5
33.0
20,771
20,025
18,331
24,611
28.0
21.6
19.8
15,913
21.4
16.7
14,81715.1
9,663 20
14,445
12,51012,328
10,524
9,649
20.8
6,907
7,491
5,135
5,321
3,820
1,944

2000

2001

2002

2003

2004

2005

2006

2007

2008

Note: The number of shares indicated by the dotted line excludes the amount in shares deposited primarily because of a stock split, stocks for transfer, share exchanges, or as a result of a merger.
(Not available prior to fiscal 1999.)

(Dec)

0

Number of inquiries to the Securities Information Tracing System (SITRAS) (daily average)(Shares)

180,000

160,572
114,818 114,000

114,210120,000

69,04067,81770,731

2005

2006

2007

74,13765,86773,5472008.45

6

141,092 135,689

161,573 151,861

60,0000 (FY)

2004

2008

7

8

9

10

11

12

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 919

B us i n e ss O v er v iew 1

Book- Entr y Tran sfe r Syst e m for St ocks, e t c.

Promoting Infrastructure Development for a Smooth Transition to the New System
In fiscal 2008, along with reliable operations of the formers y s t e m , JA S D E C f u r t h e r s t r e n g t h e n e d t h e o p e r a t i o n a linfrastructure to facilitate a smooth transition to the new
system in January 2009. As a part of the efforts, JASDEC,
a d m i n i s t r a t o r s o f s h a r e h o l d e r r e g i s t r y, a n d a c c o u n t
management institutions (AMIs) cooperated in the
management of shareholder information and then launched theParticipant Information System in September 2008 ahead of
the implementation of the dematerialization.
The Participant Information System facilitates nameidentification when shareholders have accounts at more thanone AMI and manages shareholder information after the nameidentification. Under the former system, name identification
for the purpose of entry in the shareholder registry was carriedout separately by each administrator of shareholder registry
appointed by individual issuing companies. In the new system,
to further streamline administrative work related toshareholders, JASDEC receives all essential information forshareholders of all listed companies, including the names andaddresses, from the AMIs, and identifies the shareholders.
JASDEC then delivers the shareholder information to theadministrators of the shareholder registry. This new system ofnotice, referred to as “General Shareholders Notification”,
formally commenced in January 2009 with the start of the new
Book-entry Transfer System. Prior to the formal start, theParticipant Information System was partially introduced forbeneficial shareholder notification applied for record dates on
and after October 27, 2008.
In addition, we took various steps to urge shareholders todeposit their certificates with JASDEC at an early date to
avoid problems caused by shareholders rushing to deposit
their certificates at the last minute prior to the dematerialization.
We also conducted test runs of preliminary operations fors m o o t h t r a n s i t i o n t o t h e n ew s y s t e m . A f t e r a n o r d e r l ytransition to the new system was accomplished, we werecommitted to secure and reliable operations of the system.

JASDEC participants and indirect AMIs (as of March 31, 2009)
JASDEC Participants by Category

Indirect AMIs by Category

Securities finance companies
3 (1%)
Stock exchanges, etc.
12 (5%)
Securities companies, etc.
16 (28%)Life & non-life
insurance companies
2 (1%)
Banks, etc.
26 (10%)Stock exchanges, etc.
1 (2%)

Total

Total

258

57

Securities companies, etc.
215 (83%)

companies

Foreign indirect
AMIs
22 (38%)companies

Banks, etc.
18 (32%)
Note: “Banks, etc.” include The Norinchukin Bank, Tokyo Shoken Shinyou Kumiai, and Tokyo Bankers Association.
“Stock exchanges, etc.” include Japan Securities Dealers Association, Japan Securities Clearing Corporation, JASDEC DVP Clearing Corporation, three securities agents and three tanshi companies(which offer short-term credit brokerage services)

Number of issues and account balanceBook-entry transfers
under the current system (Book-entry Transfer System)
Stock exchange transaction

Balance in custody(Million shares)

Number of issues

400,000

3,870(Issues)

3,855

394,620

3,839

394,558

390,000

391,800

3,900(Billion shares)

1,100
600

3,800

400

Non-exchange transaction deliveries (NETDs)

1,099
364

615
484
279

0

20

Jan. 31, 2009

Feb. 28, 2009

Mar. 31, 20090

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

0

231
84

200
2008. 4~2009. 3(Full year)

2008. 4~12

(Former system)

2009. 1~3

(Current system)

25

1

139
112
27
31

2

3

Bus iness Ove rvie w 1

B ook-E n t ry Tran sfe r Syst e m for St ocks, e t c.

Bond with Share Option account balance and number of issues
Balance in custody (end of FY or month)(Billion yen)

(Issues)Number of issues (end of FY or month)

2,604

3,000

1,540
1,408 1,154
146
117
1,689
96

1,407 1,383 1,377 1,377 1,376 1,261 1,243 1,293 1,317

158

2,000

96

70

90

150

88

88

200

1,267 1,266 1,154

88

77

76

76

75

71

70

100

70

1,000
0

50
2004 2005 2006 2007 2008

(FY)

2008. 4

5

6

7

8

9

10

11

12

2009. 12

30

Exchange Traded Fund (ETF) account balance and number of issues
Account unit balance (end of FY or month)(Billion yen)

66

201

300

188

187

2004 2005 2006 2007 20082008. 4

162

16

100
(FY)

190
39

170

200
0

(Issues)Number of issues (end of FY or month)

400

38

192

14

173
39

39

59

59

64

65

65

65

65

66

66

178

179

191

198

196

195

197

196

187

7

8

9

10

11

12

2009. 1

2

3

80
60
40

14

20
5

6

0

Real Estate Investment Trusts (REITs) account balance and number of issues
Account unit balance (end of FY or month)
Number of issues (end of FY or month)(Billion yen)

43

1,200

34

345

900

18

600

517

678

(Issues)

44

43

44

44

44

44

44

44

44

44

43

43

43

43

760

804

758

764

782

785

793

797

797

797

790

800

801

804

2008. 4

5

6

7

8

9

10

11

12

2009. 1

2

3

50
40
30
20
10
0

300
0

2004 2005 2006 2007 2008

(FY)

Shareholders Notification (1)Participant information
Data for Shareholders
Notification (approx.)

Participant accountinformation (approx.)23,555 thousand

General shareholder notification(Notification,in thousand)

4,000

14,935 thousand

Number of general shareholder
notification (approx.)

3,000* As of March 31, 2009

2,000
1,000
0

34

Number of issues (approx.)
Total of shareholders (approx.)

18
4 59
3

2,802
135

1,233
69

2009. 1

(Issues/Billion shares)

2

40
30
20
10
0

3

* Figures are as of day of notification to issuers* Regarding general shareholder notifications relating to stocks with shareholder date of record at
the end of March 2009, the total of shareholders stood at 45,283,000, issues at 2,867 andnumber of shares whose ownership was notified using the general shareholder notification system
at 359.9 billion. Notification was made to issuers in April 2009.

Shareholders Notification (2)Individual shareholder notification

Information requests

Number of notices(Notification)

Number of issues

296

300
42

200
100
0

25
5

58

2009. 12

5(Issues)(Notification)

60

80

40
20

3

0

(Total record) notification(Partial record) notification

19

60
40

(Total record) number of issues(Partial record) number of issues

61 11

13

65

9

3
6

20

20

4
53

0

2009. 1

2

3

(Issues)

15
10
5
0

* 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.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

21

Custody Services for Foreign Stocks, etc.

︵ PSMS︶
Pre-Settlement Matching System

Book-Entry
Transfer System
for Commercial Papers
and Corporate Bonds

DVP Settlement Services for NETDs

22

Book-Entry Transfer System for Investment Trusts

Book-Entry Transfer System for Stocks, etc.

Business Overview 2

For seamless and secure settlement of CP and corporate bonds,
which play crucial roles in business fund procurement
In March 2003 JASDEC launched the Book-entry Transfer
System for Short-Term Corporate Bonds (dematerialized CP),the first dematerialized Book-entry Transfer System in Japan,
and for Corporate Bonds in January 2006. In each system,
custody procedures – issuance, transfer (trading), andredemption – are conducted based on the balance recorded in
the transfer account books. In addition, all transactions related
to issuance, transfer and redemption of CP and corporate
bonds can be processed by the DVP settlement link with the
Bank of Japan’s Financial Network System. By linking theBook-entry Transfer System with our PSMS (Pre-Settlement
M a t c h i n g S y s t e m ; s e e p a g e 3 6 ) , JA S D E C h a s r e a l i z e dstraight-through processing (STP), which fully automates theentire process, including trade matching and fund/securities
settlement.
Regarding participation in JASDEC’s Book-entry Transfer
System, JASDEC set up a multilayer holding structure foraccount management institutions (AMIs) to address thed iv e r s e n e e d s o f p a r t i c i p a t i n g i nv e s t o r s a n d f i n a n c i a linstitutions. Direct AMI can open an account directly at
JASDEC, and indirect participation is possible by opening an
account at an AMI. Another option for indirect participation isthrough the opening of an account at an indirect AMI.
Redemption is made for and interest is paid to bondholders
by paying agents via AMIs, in accordance with the multilayered
structure.

Flowchart for Book-Entry Transfer for CP/Corporate Bonds (in the case of DVP)
Trade

Seller

Buyer

JASDEC
Affirmation of trade

Affirmation of trade

Affirmation

Notice of settlement
matching status

Settlement
parties

Notice of settlement
status(Awaiting fundsettlement)

Settlement matching
Pre-Settlement Matching
SystemSecurities transfers
Book-entry Transfer System
for CP/Corporate Bonds

Notice of transfer
completion

Notice of settlement
status(Awaiting fundsettlement)

Payment instruction
Payment request

Notice of receipt
completion

Settlement
parties

Notice of transfer
completion
Notice of receipt
completion

Fund
settlementcompany

Notice of settlement
matching status

Bank of Japan
Payment instruction

Fund
settlementcompany

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

23B us i n e ss O v er v iew 2

Book- Entr y Tran sfe r Syst e m for Comme rcial Pap e rs

Working to upgrade settlement statistics data to enhance transparency of CP transactions
CP market, including direct CP purchases by the Bank ofJapan and other measures as part of a strategy for supporting
the provision of funds to business companies. As a result, theCP balance at the beginning of January 2009 had surpassed¥20 trillion, roughly the same level as at the end of March
2008. As of March 31, 2009, however, the total amount of CP
using the system and the balance for the CP declined to ¥18
trillion (the record was ¥23 trillion at the end of 2007) and
5,869 issues, respectively.
To i m p r ove m a r k e t t r a n s p a r e n cy, JA S D E C a c t ive l ydiscloses information on settlement figures. In January 2008,
JASDEC began issuing weekly reports on the CP balance byissuer category. Moreover, on JASDEC’s website in October
2009, daily reports on average issuance rates of CP, classified
by maturity, industry and credit rating, will be provided for
public use in line with an agreement with the Bank of Japan.
These new services will promote a fairer and more transparent
CP market in Japan.

Commercial paper (CP) currently refers to short-term bonds
in a dematerialized form issued by business companies as ameans of procuring short-term funds. As commercial paper
was previously drawn as a promissory note in a physical form,
risks involved in the transfer and deposit of notes for large
amounts were not always avoidable, not to mention the needto pay documentary stamp tax. Accordingly, requests wereraised for an electronic book-entry system that would
eliminate the need for paper certificates. The result was thecreation of our first fully electronic book-entry transfer
system for dematerialized CP. Since the launch of the system
six years ago, almost all CP issued in Japan has been handled
by this system.
The world financial crisis triggered by the bankruptcies offinancial institutions in the autumn of 2008 brought a sharp
deterioration in the environment for the issuance of CP, andcaused its balance to decline sharply. Subsequently, theauthorities took steps to restore the proper functioning of theParticipants of Book-Entry Transfer for CP (as of the end of March 2009)

Issuers

Issuing/
paying agents

490

JASDECJASDEC
Participants(Direct AMIs)

Indirect
AMIs

68

12

19

companies

Fund settlement corporations

Participants(CP holders)148

CP Account balance and number of issues
Account balance (end of FY or month)
Number of issues (end of FY or month)(Trillion yen)

30

5,848

20

6,129

18.6

(Issues)

5,759 5,869

18.9

20.2

18.7

6,063 6,067 5,938
5,820 5,926 6,012
22.4

22.3

20.9

20.8

22.5

5,430 5,505

5,853 6,057 6,061 5,869

21.2
18.4

18.4

7,000
6,000

19.4

20.4

20.0

18.7

5,000
4,000
3,000

10

1,314

2,000
4.8

0

24

(FY)

1,000

2004 2005 2006 2007 20082008. 4

5

6

7

8

9

10

11

12 2009. 1

2

Issuance, transfer and redemption of CP (daily average)

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9
Redemption(Trillion yen)Transfer

Total: over
¥5 trillion

Transfer: ¥4.3 trillion(Annual total: over ¥1,000 trillion)

Impact of U.S. financial crisis(particularly on issuance)

30Participants of Book-Entry Transfer for CP (as of the end of March 2009)

Issuers

JASDEC

Issuing/
paying agents Bus ines s O v er vie w 2
JASDEC

490(Direct AMIs)

19

companies

Indirect

Participants
B ook-En t ry Tran sfe r Syste m for Comme rcial
Pap e rs
Participants
AMIs

68

(CP holders)

12

148

Fund settlement corporations

CP Account balance and number of issues
Account balance (end of FY or month)
Number of issues (end of FY or month)(Trillion yen)

30

5,848

20

6,129

18.6

(Issues)

5,759 5,869

18.9

20.2

18.7

6,063 6,067 5,938
5,820 5,926 6,012
22.4

22.3

20.9

20.8

22.5

5,430 5,505

5,853 6,057 6,061 5,869

21.2
18.4

18.4

7,000
6,000

19.4

20.4

20.0

18.7

5,000
4,000
3,000

10

1,314

2,000
4.8

0

(FY)

1,000

2004 2005 2006 2007 20082008. 4

5

6

7

8

9

10

11

12 2009. 1

2

0

3

Issuance, transfer and redemption of CP (daily average)
Redemption(Trillion yen)Transfer

6.0

Issuance

0.7

4.0

0.6

0.6

0.6

0.6

0.6

0.7

0.6

0.5

0.5

0.5

0.5

0.5

3.9

4.1

4.5

0.6

0.5

0.5

0.5

0.5
3.7

4.1

4.3

4.2

4.5

4.4

4.4

4.4

4.3

0.7

0.7

0.6

0.6

0.6

0.7

0.6

0.6

0.7

4.7

4.4

4.1

2.5

2.0

0.6

0

0.7

Impact of U.S. financial crisis(particularly on issuance)

Transfer: ¥4.3 trillion(Annual total: over ¥1,000 trillion)

Total: over
¥5 trillion(FY)2005 2006 2007 20082008. 4 5

6

7

8

9

0.5

0.4

10

11

12 2009. 1

2

0.5

3

Continually adapting to CP market needs
The settlement amount of issuance, transfer, and redemptionof CP handled by JASDEC’s Book-entry Transfer System
exceeds ¥5 trillion per day, and the more than ¥10 trillion at
the end of each month surpassed the trading value per day at
the Tokyo Stock Exchange. In fiscal 2008, the aggregate
settlement amount passed the ¥1,000 trillion mark for the firsttime, setting a record for active trading since the start of thesystem. This huge settlement amount reflects the importanceof CP, which plays a crucial role in fund procurement bybusiness entities in Japan. As the sole provider of
infrastructure for the settlement of securities transactions,
JASDEC fully recognizes its responsibility to secure a highlevel of reliability in the book-entry transfer system. We will
make further efforts to improve the Book-entry Transfer
System for CP to promptly reflect changes in market needs
for CP transactions.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 925

B us i n e ss O v er v iew 2

Book- Entr y Tran sfe r Syst e m for Corp orat e B on ds

Further expansion of Book-entry Transfer System functions,for the convenience of participants
conversion of bonds that had been issued prior to the system’s
inauguration (referred to as “existing bonds”) for the inclusionof these bonds in the current Book-entry Transfer System, wascompleted by the end of 2007, and thus the transferred“existing bonds” were successively reaching their redemptiondate.
In fiscal 2008, a number of cases emerged of default on
obligations relating to publicly-offered bonds, as a result of
the business downturn. To ensure the smooth progress of civil
rehabilitation proceedings in these cases, JASDEC contacted
the parties concerned at an early stage, and worked together
with them to ensure that all parties concerned were kept fully
informed of the state of play. We also collaborated closelywith the parties concerned to organize meetings of bondholders, and we published the “Guidelines for the Holding ofBondholders’ Meetings”.
As recent new legislation has opened up the way to aconsiderable diversification of product types in this market,
we have developed ways for the Book-entry Transfer System
to handle such new products as trust bonds and exchangeablebonds.

JASDEC’s Book-entry Transfer System for Corporate Bonds
handles various types of bonds, both through public offeringsand private placements. These include corporate bonds,
municipal bonds, bonds issued by investment firms, specified
bonds issued by special purpose companies (SPCs) and others,
bonds of special corporations, such as quasi-government andlocal government bodies, and Samurai bonds (yendenominated bonds issued in Japan by non-Japanesecompanies or foreign governments).
As in the case of the CP market, the corporate bondmarket was hit hard by the aftereffects of the worldwide
financial crisis in the latter half of 2008. However, the firsthalf of fiscal 2008 saw active issuance of industrial bonds,
Samurai bonds, and others, and the issue value of corporate
bonds for individual investors set a record. As of the end of
March 2009, the number of bonds using the system was
73,298 issues, and the issue balance stood at ¥240 trillion. In
mid-March, the highest balance of bonds since the start of the
B o o k - e n t r y Tr a n s f e r S y s t e m f o r C o r p o r a t e B o n d s w a s
recorded, at ¥244 trillion. There was an increase in the valueof redemptions during fiscal 2008, at ¥36.5 trillion, threetimes the level in fiscal 2007. This was because the process ofParticipants of Book-Entry Transfer for Corporate Bonds (as of the end of March 2009)
Issuing/
paying agents

Issuers

2,390

companies andorganizations

JASDECJASDEC
Participants(Direct AMIs)

Indirect
AMIs

Indirect
AMIs

86

407

13

208
Fund settlement corporations

Participants(Bond holders)148

Outstanding balance of corporate bonds and number of issues
Outstanding balance (end of FY or month)
Number of issues (end of FY or month)(Trillion yen)

72,817 73,298

300

72,790 72,295 72,408 72,704 72,922 73,959 73,924 73,967 74,168 74,353 74,460 73,298

65,456
241.0

240.2

242.5

242.2

242.3

241.5

241.3

240.9

241.9

242.0

242.1

243.6

242.4

(Issues)

80,000240.2

60,000200

181.3

40,000100
20,000
0

26

(FY)

2006

2007

2008

2008. 45

6

7

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

8

9

10

11

12

2009. 12

30

Participants of Book-Entry Transfer for Corporate Bonds (as of the end of March 2009)
JASDEC

Issuing/
paying agents

Issuers

2,390

companies andorganizations

Indirect

Indirect407

13

Bus ines s O v e rvieParticipantsw 2
B ook-E n t ry
Tran sfe r SystAMIse m for Corp orat e B on ds
AMIs

JASDEC

Participants(Bond holders)(Direct AMIs)

208

86
148

Fund settlement corporations

Outstanding balance of corporate bonds and number of issues
Outstanding balance (end of FY or month)
Number of issues (end of FY or month)(Trillion yen)

72,817 73,298

300

72,790 72,295 72,408 72,704 72,922 73,959 73,924 73,967 74,168 74,353 74,460 73,298

65,456
241.0

240.2

242.5

242.2

242.3

241.5

241.3

240.9

241.9

242.0

242.1

243.6

242.4

(Issues)

80,000240.2

60,000200

181.3

40,000100
20,000
0

(FY)

2006

2007

2008

2008. 4

5

6

7

8

9

10

11

12

2009. 12

30Further steps to promote investments in Japanese bonds by nonresidents
Investments in domestic securities by nonresidents alreadyoccupy a very large proportion of the total investment inJapan’s securities market. To raise the position of Japan’s
capital markets in the world, however, market functions must
be upgraded so as to attract more foreign investors. In January
2008, a system for tax exemption for nonresidents on theinterest accrued on municipal bonds was inaugurated,f o l l ow i n g a s y s t e m s i m i l a r t o t h a t u s e d f o r B o o k - e n t r yTransfer of Japanese government bonds. In response, we tookappropriate measures to include municipal bonds under ourBook-entry System for taxation purposes. To promote theg l o b a l i z a t i o n o f J a p a n ’s c a p i t a l m a r ke t s , w e w i l l m a ke
p r e p a r a t i o n s f o r a f u t u r e ex p a n s i o n i n t h e s c o p e o f t a x
exemptions for nonresidents.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

27

Custody Services for Foreign Stocks, etc.

︵ PSMS︶
Pre-Settlement Matching System

Book-Entry
Transfer System
for Investment Trusts

DVP Settlement Services for NETDs

28

Book-Entry Transfer System for Commercial Papers and Corporate Bonds

Book-Entry Transfer System for Stocks, etc.

Business Overview 3

A faster, safer approach to investment trusts
The Book-entry Transfer System for Investment Trusts is acomputer system for managing beneficial rights of investment
trusts. Under the system, beneficial certificates aredematerialized, and beneficial rights are recorded
electronically in the transfer account books. This facilitates
the prompt creation, extinction and transfer of beneficial
rights, and lowers costs of issue and custody of physicalcertificates as well as risks of loss, theft or fraud.
The system covers investment trusts managed by trustors( h e r e i n a f t e r, s i m p l y c a l l e d “ i nve s t m e n t t r u s t s ” ) . T h e s einvestment trusts are contract-type investment trusts with thei nvol ve m e n t of three parties – a trus tor, a trus tee and ab e n e fi c i a r y w h o i s a n i nve s t o r i n t h e i nve s t m e n t t r u s t .
(Exchange traded funds (ETFs) and investment trusts of the
non-trustor instruction type are outside the scope of thesystem.) Since the system was launched on January 4, 2007,

all trustors and trustees involved in investment trusts haveparticipated in the system, and thus almost all investment
trusts issued in Japan have been dematerialized.
T h e p a r t i c i p a n t s a r e d ive r s e , c o n s i s t i n g o f n o t o n l ysecurities companies but also banks, insurance companies,
shinkin banks, credit cooperatives, agricultural cooperatives,
investment trust management companies in direct marketing,etc. The number of AMIs or JASDEC participants has reached
897 companies.
The Book-entry Transfer System for Investment Trusts
enables the direct or indirect connection among trustors,
trustees, account management institutions, and JASDEC. This
ensures greater security, accuracy, and speed of processing
through the electronic management of the accounts ofinvestment trust beneficiaries.

Basic Model of Book-Entry Transfer System for Investment Trusts

Investors

Flow of funds
Flow of data

(Beneficiary)

Private vendor financial network systems/Fax

Fund
distributors

Issuers(Trustors)(securities companies,
banks,
insurance companies,
etc.)

AMIs

Fund settlement
corporations（BOJ Net Fund
settlement
corporations）

JASDECBank of Japan
Japanese Bankers
Association financial
network system

Trustees
Fund settlement
corporations（BOJ Net Fund
settlement
corporations）

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 929

B us i n e ss O v er v iew 3

Book- Entr y Tran sfe r Syst e m for In ve st me n t Trust s

Strong support from users
investment trusts), a slight decline of ¥261 billion.
Fund settlement systems in the Book-entry Transfer
System for Investment Trusts include DVP settlement (using
the Bank of Japan financial network system) and non-DVP
settlement (using the Japanese Bankers Association financial
network system for online fund settlement among financial
institutions). The use of DVP settlement, which involves lesssettlement risk, has been increasing steadily among systemu s e r s . I n fi s c a l 2 0 0 8 , 2 6 % o f t r a n s a c t i o n s u s e d DV P
settlement. By value, the percentage slightly declined to 58%.

The total number of investment trusts handled by JASDEC at theend of fiscal year 2008 (ended March 31, 2009) rose to 5,906(3,323 publicly-offered and 2,583 privately-placed investment
trusts), increased by 303 from the end of the previous fiscal
year. On the other hand, reflecting weak stock prices, theprincipal value of new registration (purchase) and elimination(cancellation and redemption) was decreased. The decline in
the principal value of new registration was particularly
dominant, and as a result, the account balance of principal
decreased to ¥105 trillion (¥74 trillion in publicly-offeredi nv e s t m e n t t r u s t s a n d ¥ 3 1 t r i l l i o n i n p r i v a t e l y - p l a c e dBook-Entry Transfer System for Investment Trusts – account balance and number of Issues
Account balance (end of FY or month)
Number of issues (end of FY or month)(Trillion yen)

200
150

(Issues)

5,603

5,906

5,658

5,704

5,764

5,816

5,845

5,873

5,888

5,877

5,864

5,902

5,915

5,906

105.8

105.5

106.7

107.4

107.6

107.9

108.3

107.8

106.5

106.4

106.1

106.3

106.3

105.5

8,000
6,000

100

4,000

50

2,000

0 (FY) 2007
2008
Account balance is sum of principal

2008. 4

5

6

7

8

9

10

11

12

2009. 12

0

3

Purchase and Redemption Transaction (Daily average)
Purchase(Transactions)

Redemption

8,000

5,275

6,000

4,972

5,130

4,769

4,509

5,396

5,111

5,045

4,901

5,323
6,118

4,967

4,969

5,087

4,709

4,838

5

6

7

8

9

4,637
6,171
5,171
4,934
4,328

4,835
4,589

4,781

4,759

4,288
4,365

4,709

4,000
2,000
0

(FY)

2007

2008

2008. 4

10

11

12

2009. 1

2

3

Principal Values of Investment Trusts for Purchase and Redemption (Daily average)
Purchase
Redemption(Billion yen)

600
312

400

261

364
260

261

279

259

220
296

291

274

249

248

291

284

231

352

305

212

263

242

237

226

300

210

220

265

211

200
0

30

(FY)

2007

2008

2008. 45

6

7

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

8

9

10

11

12

2009. 1

2

3

Bus ines s O v ervie w 3

B ook-E n t ry Tran sfe r Syst e m for In ve st me n t Trust s

Participants of Book-Entry Transfer System for Investment Trusts(as of March 31, 2009: Numbers in parenthesis show the numbers as of March 31, 2008)

Trustees 12(12)Issuers 85(78)JASDECJASDEC Participants 191(186)

BOJ Net Fund settlement
corporations 45 (45)

Designated fund distributors 386(383)
Indirect AMIs 706(701)Indirect AMIs

JASDEC Participants

Investment
trust management
2companies

Life & non-life
insurance companies

Financial institutions
for small businesses*

Securities
companies
92

Banks

Others706

Others

8

2

Total

102

6

8

11

Life & non-life
insurance companies

Financial
institutions
for smallbusinesses*
497

Investment
trust
managementcompanies 17
Banks

37

Total

191
Securities
companies
115*Sinkin banks, Credit cooperatives, Agricultural cooperatives, Labor banks, etc.

Further improvement of the system
By the amendment of the Law Concerning Book-entry
Tr a n s f e r o f C o r p o r a t e B o n d s a n d S t o c k s , e t c . , JA S D E C
launched services to make the split and merger of beneficial
rights available in January 2009. For example, a 2-for-1 splitof beneficial rights will reduce the amount required forpurchasing by half. In this way, the System will providet r u s t o r s a n d t r u s t e e s w i t h a c o nve n i e n t m e t h o d f o r t h e
reduction of unit prices.
JASDEC continues to make further efforts to respond torequests made by participants through questionnaires
conducted at the end of fiscal 2007.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

31

Custody Services for Foreign Stocks, etc.

︵ PSMS︶
Pre-Settlement Matching System

32

Book-Entry Transfer System for Investment Trusts

DVP
Settlement Services
for NETDs

Book-Entry Transfer System for Commercial Papers and Corporate Bonds

Book-Entry Transfer System for Stocks, etc.

Business Overview 4

Secure and reliable securities trading has come to realization
participants who prefer the DVP settlement must apply to JDCC
for approval of participation in the DVP system, following ascreening process covering primarily the financial positionand operational capability of the applicant.
To manage participants’ risks rigorously, JDCC requests
participants to provide, as collateral, assets with carrying
value exceeding the total amount of accounts payable (assured
assets), and sets a limit for the total of accounts payablereflecting the trading records of each participant (Net Debit
Cap).
DVP settlements for NETDs are conducted by the grossnet type DVP model. Securities are transferred on a grossbasis from the seller’s account to the buyer’s account through
JDCC’s accounts. Meanwhile, payment is performed in lumpsum on a net transaction basis on each settlement day, througha current account held with JDCC under the Bank of Japanfinancial network system.

There are two types of settlement services for non-exchangetransaction deliveries (NTEDs) — DVP and non-DVP. Usersof the DVP settlement services for NTEDs consist primarilyof domestic and overseas institutional investors trading inJapanese stocks and other securities.
U p t o n ow, i n m a n y c a s e s o f n o n - e x c h a n g e t r a d e s ,transfers and fund settlement were separately processed, andwere exposed to principal risk — the risk that a counterparty
who delivers securities may not receive payment, and viceversa. The DVP settlement system for NETDs reduces theserisks by linking securities transfers with payments on thesystem, thereby ensuring secure and reliable settlement.
JASDEC also facilitates STP (Straight-Through Processing),
which electronically automates all the processes related toadministrative procedures.
The DVP settlement system for NETDs has been operateds i n c e M a y 2 0 0 4 b y JA S D E C DV P C l e a r i n g C o r p o r a t i o n(JDCC), a wholly-owned subsidiary of JASDEC. JASDEC

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 JDCC

Seller’s
account

Securities
data

Account of JASDEC
DVP Clearing Corp.

Stocks data transfer and payments are linked on

Securities
data

Buyer’s
account

the system, enabling secure and reliable settlement

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

Seller’s
account

Funding data

Account of JASDEC
DVP Clearing Corp.

Funding data

Buyer’s
account

DVP system is a system that links the delivery of stocks with payments, enabling secure settlement.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 933

B us i n e ss O v er v iew 4

DVP Settleme n t Se rvice s for NE TD s

As DVP system becomes more convenient for participants, number of
DVP settlements for NETDs increases
year-over-year. As JDCC achieved economies of scale, ¥10
out of the ¥25 fee charged per DVP transfer was returned toparticipants as rebates from the fee revenues in fiscal 2008. In
April 2009, fee per transaction using the DVP settlement wasdetermined as ¥20, reduced by ¥5.
To fine-tune the system to improve the efficiency ofutilization of collateral money deposited with JDCC
(participants’ funds), from January 2009 DVP participants areable to use deposited money as collateral right from the dayon which the money is deposited rather than from the nextday, as was the case previously. Restoration of depositedmoney is also now implemented on the day of receipt of such
request from the participant.

T h e DV P s e t t l e m e n t s e r v i c e s f o r N E T D s m a i n l y c o v e r
securities handled by JASDEC under its Book-entry Transfer
System for Stocks, etc. such as Japanese stocks, bonds withshare options, etc. The scope of securities handled by JDCC
h a s ex p a n d e d eve r y y e a r. I n J a n u a r y 2 0 0 9 , a r eg u l a t o r yframework was set up to enable JDCC to handle foreign
stocks, etc. listed on Japanese stock exchanges in the DVP
settlement system for NETDs.
At the end of fiscal year 2008 (ended March 31, 2009),
participants in the DVP service totaled 61 companies (16banks and 45 securities companies). As the system became
widely available, the average daily volume of transfers under
the system in fiscal 2008 stood at 96,301 increased by 9,116

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

DVP transactions

202,218

300,000
92,670100,411200,000

71,70567,25572,231

71,366

68,78067,432087,185(FY)

2007

96,301

2008

88,98988,572

2008. 4

5

91,292

88,34472,3536

7

8

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

34

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

118,947
96,67490,55487,2189

173,427

81,93777,061
122,494

100,000

166,525

10

11

12

102,604

86,4072009. 1

2

94,7803

B usin e ss Ove rvie w 4

DVP Se t t le me n t Se rvice s for NE TD s

DVP Settlement for NETD Fund Settlement (Daily average)
Total of payments
Total value of net settlement payments(Billion yen)(%)

Rate of reduction (Total value of net settlement payments/Total of payments × 100)

2,500

1,804

2,000

1,600

1,751

1,637

40
1,492

1,294

1,500

50

1,475

1,336

1,444

30

1,188
958

1,000

10.4

500
0

187
(FY)

2007

12.8

12.9

166

207

2008

2008.4

10.5

12.2

10.9

10.8

12.3

12.7

13.7

183

199

162

143

181

184

163

5

6

7

8

9

10

11

900

884

776

15.1

16.4

16.6

16.5

144

127

146

148

12

2009.1

2

3

20
10
0

Securities covered: Stocks, Share options (Share subscription warrants), Foreign stocks, Bonds with share options (Convertible bonds), REIT investment certificates, Preferred securities, Beneficiary certificates of investment trusts
Total of payments is the total amount used for execution of securities transfers
Total value of net settlement payments is the total amount used for account settlement on a net transaction basis

Working to further enhance convenience on basis of secureand reliable operation of the system
To p r o v i d e a bu ff e r i n t h e ev e n t o f t h e d e f a u l t o f DV P
participants, JDCC ensures a sufficient level of cash liquidity,
by utilizing participants’ funds and bank commitment lines.
Additionally, JDCC sets a limit for net accounts payable (netdebit cap) for each participant to minimize the risk within therange of cash liquidity. JDCC monitors the framework of thesystem on an ongoing basis to maintain an appropriate levelof capital for risk management.
JDCC will continue examining a wide range of possible
steps to further increase the user convenience of this system.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 935

Custody Services for Foreign Stocks, etc.

DVP Settlement Services for NETDs

36

Book-Entry Transfer System for Investment Trusts

Pre-Settlement
Matching
System (PSMS)

Book-Entry Transfer System for Commercial Papers and Corporate Bonds

Book-Entry Transfer System for Stocks, etc.

Business Overview 5

Input/output transactions hit record high for the second consecutive year
Matching services are needed for institutional investors’transactions as a wide range of organizations are involved,
including investment trust management companies, securities
companies, trust banks and custody banks, and as a hugeamount of transaction data is exchanged between them. In thepast, matching was done manually by faxes or telephone calls.
Now, the process is being computerized and automated.
JASDEC provides centralized matching services using highly
advanced computer systems.
Since launching the system in September 2001, JASDEC
has been increasing the range of asset classes and services thes y s t e m c ove r s . I n O c t o b e r 2 0 0 7 , w e l a u n c h e d m a t c h i n gservices for stock lending/borrowing transactions. We have

expanded this service making it available not only toinstitutional investors but also to other investors who meets p e c i fi c “ D e s i g n a t e d I nve s t o r ” q u a l i fi c a t i o n s u n d e r t h eFinancial Instruments and Exchange Act. As of the end of
March 2009, 17 Designated Investors use these services.
In line with this expansion, the number of users has also
been increasing annually. In fiscal 2008, the number of input/
output transactions (daily average basis) rose by 141,935 torecord a new high of 1,503,366. As of March 31, 2009 users
increased by 111 to 637, primarily as a result of increases in
the number of credit unions and life and non-life insurancecompanies.

PSMS (for non-resident transactions)

Overseas
GlobalcustodiansJapan

Settlement
instruction

Investment
managers

Settlement
instruction

Order
Notice ofexecution
Allocation,
matching

Securities
companies

Settlement
instruction

Settlement
instruction

Subcustodians
Notice ofmatching status

Pre-settlement
matching
systemSettlement
instruction
Notice ofmatching status

Notice ofOrderexecution

Securities
companies
Notice ofexecution

Request for DVP transfer
Linkage with book-entry transfer systems for stocks and CBs, corporate bonds
and CP (excluding Japanese government bonds)

Order

Stock
exchanges

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 937B us i n e ss O v er v iew 5

Pr e- S ettlement M at chin g Syst e m ( PSM S)

Steady progress in international system standardization
The securities market is becoming more internationalized. Our
computer systems, however, have not yet fully conformed torecent developments in this field. For example, although wehave adopted ISO15022, an international standard for message
f o r m a t , w e h av e m o d i fi e d i t i n o r d e r t o s a t i s f y u n i q u erequirements from Japanese market community. However we
recognize the need to promote convenience for users byachieving greater awareness of harmonization withinternational standards and system connectivity with overseas.
From the point of view mentioned above, JASDEC has
been pursuing a project to achieve full conformity withinternational standards since fiscal 2007. With regard tomessage formats, JASDEC became a member of ISO20022
Standards Evaluation Group for Securities under TC 68 of theInternational Organization for Standardization. ISO20022 is
the next-generation message format designed to replace the38

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

current ISO15022, and as such we are making efforts to ensurethat the conditions prevailing in Japan will be reflected in it.
JASDEC is discussing with the PSMS Subcommittee
member users the practical issues of adopting ISO20022 in linewith the discussion at ISO20022 Securities SEG.
Wi t h r eg a r d t o t h e c o m p u t e r n e t wo r k , o u r a i m i s t ointroduce the SWIFT network which is widely used overseas
while running existing computer network in parallel, enablingusers to choose between them. Introduction of the SWIFT
network will, we believe, enable smooth overseas connectivity,
further increasing user convenience and the number of theparticipants.
By expanding the range of asset classes and services
handled by PSMS, and by steadily building conformity withinternational standards, we are contributing to still greater
efficiency in Japan’s securities markets.

Busin e ss Ove rvie w 5

Pre -Se t t le me n t M at chin g Syst e m ( PSM S)

Centralized matching method for three parties (domestic transactions)

Stock exchanges
Notice of execution

Investment trust
management/
advisory
companies

Order

Order
Notice of execution
Allocation

Pre-settlement
matching system
Investment instruction

Trade report

Trade matching

Notice of matching status

Notice of matching status

Investment instruction andtrade report

Securities
companies

Affirmation/
Disaffirmation

Trade reportaffirmation

Notice of trade reportaffirming status

SSI

Trust banks

Settlement
matching

Notice of matching status

Notice of matching status

Request for DVP transfer

Linkage with book-entry transfer systems for stocks and CBs, corporate bonds and CP(excluding Japanese government bonds)

Total number of PSMS input/output instructions using the PSMS system (Daily average)(Thousand)

1,947

2,000
1,362

1,500

1,503

1,408

1,390

1,404

1,449

2008. 4

5

6

7

1,665

1,560
1,343

1,568

1,424

1,396

12

2009. 1

1,478

1,000
500
0

(FY)

2007

2008

8

9

10

11

2

3

Note: Total of the number of inputs of contract-type matching data and PSMS data relayed by the user and the number of transactions of data (outputs) reported to the user as a result of matching processes.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

39

Custody Services
for Foreign Stocks, etc.

︵ PSMS︶
Pre-Settlement Matching System

DVP Settlement Services for NETDs

Book-Entry Transfer System for Investment Trusts

40

Book-Entry Transfer System for Commercial Papers and Corporate Bonds

Book-Entry Transfer System for Stocks, etc.

Business Overview 6

Improving the convenience of custody services through new systems and services
In addition to Japanese securities such as stock certificateslisted on the domestic stock exchanges, in April 2006
JASDEC inaugurated services involving the processing ofdeposit, transfer and ownership rights for foreign stocks, etc.
In January 2009 we introduced new systems and services
including a highly convenient system for foreign stocks, etc.,
w h i c h e n a b l e s DV P s e t t l e m e n t f o r N E T D s , a s w e l l a s
providing dividend payment data to JASDEC participants.
Although foreign share certificates, etc. are generally
deposited with central securities depositories or custodians in
the countries where the issuing companies are located,settlements of transactions at the stock exchanges in Japan are
conducted through book-entry transfers in JASDEC. JASDEC
entrusts dividend payments to relevant share-handling serviceo rg a n i z a t i o n s . I n f o r m a t i o n o n s h a r e h o l d e r s ( b e n e fi c i a lshareholders) at the record date for dividend is transferred tothe share-handling service organizations by the JASDEC
participants through JASDEC. Based on this information, theshare-handling service organizations calculate the amount ofdividends, which are then paid directly to the beneficial
shareholders from the dividend-payment handling bank.
JASDEC also undertakes the necessary procedures regarding
dividend taxation for local tax authorities, etc. to ensure
reduced tax rates under tax treaties with the countries
concerned. Voting rights at general meetings of shareholders
can also be exercised by beneficial shareholders throughinstructions issued to JASDEC.
JASDEC thus provides the infrastructure and services
necessary for reliable settlement of trading activities inforeign stocks, etc., smooth exercise of shareholder rights,
and error-free receipt of dividends and other payments.

Overview of the new system relating to foreign stocks (effective in January 2009)

Share-handling services organization (trust banks)

Japan Securities Clearing Corporation

Notice ofDividend
beneficial
shareholders information

Stockexchange
DVP

Shareholder notice host

Account transfer host(settlement)(handling of information concerning beneficial
shareholders, dividends etc.)

Collateral Beneficial
Dividend Notice ofshareholder
matching
information
balancereportStandard
non-DVP
transfer

Standard
DVP
transfer

Overseas CSDs/
custodian banks

Communication serverwith foreign CSDs/banks

Localcustody/transfer

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

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 941

B us i n e ss O v er v iew 6

C us tody S er v ice s for Fore ign St ocks, e t c.

Custody services for foreign covered warrants were inaugurated
In recent years, foreign companies have come to regard Japanas a major market for their financing needs. There have beenlistings only on the Tokyo Stock Exchange or the Osaka
Securities Exchange (no listing in home countries), and also
continuous listings in Japan of overseas ETFs (ExchangeTraded Funds) or foreign covered warrants.
Responding to these developments, JASDEC commenced
custody services for ETFs linked to movements in a South
Korean stock index in November 2007. In addition, in March
2008, we made amendments to rules to enable custodys e r v i c e s f o r ove r s e a s c o m m o d i t y E T F s a n d c o m m e n c e dcustody services for ETFs linked to gold prices and ETFs

linked to commodity indexes.
JASDEC began the handling of foreign covered warrants
in September 2008 following the listing of such warrants on
the Osaka Securities Exchange in the same month. As a result,Book-entry Transfer System for foreign stocks, etc. came toinclude the four categories of foreign stocks, etc. (including
ADRs), overseas ETFs, country funds, and foreign covered
warrants. At the end of March 2009, the number of different
issues handled by JASDEC in the three categories of overseas
shares, overseas ETFs, and country funds stood at 25, while
the number of foreign covered warrants handled stood at 106.

Foreign stocks – number of issues/balance in accounts(excluding foreign covered warrants)
Balance in accounts (end of month)
Number of issues (end of month)(Thousand shares)

30(Issues)

150,000

25

25

25
113,373

106,851

105,116

100,000

25

30
130,692

100,02120

50,0000

10

2008. 1112

2009. 1

2

15

3

10

5

0

Foreign covered warrants – number of issues/balance in accounts
Balance in accounts (end of month)40

Number of issues (end of month)(Thousand warrants)

106

400,000
300,000
200,000

96
76

76
181,30076
181,300

281,300
181,300

42

371,300

120

30

90

20

60

10

30

100,000
0(Issues)2008. 1112

2009. 1

2

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

30

Bus in e ss Ove rvie w 6

Cust ody Se rvice s for Fore ign St ocks, e t c.

Number of shares deposite/withdrawal
Number of shares deposite
Number of shares withdrawal(Thousand shares)

931,198
539,187

1,000,000

67,346
16,49880,000309,466
195,625
282,941

405,874

121,270

18,488

7,447

6,855
3,480

4,000

2,940

2,576

2,000

1,879
1,312

1,006
212

0

105,077

(FY)

2008

2007

147

2008. 4

1,205

703

387

5

381

6

7

8

9

598

308

197

10

11

12

2009. 1

2

3

Note: Transactions of less than 1 thousand shares are rounded up/down to the nearest thousand shares.

Account transfer
Non-exchange transaction transfer
Exchange transaction transfer(Thousand shares)

486,660

500,000

38,34749,995100,000

302,585

171,468

16,00013,37412,000

9,977

7,092

4,000
0

14,814

7,348
9,265

8,000
2,244
(FY)

2007

2008

2008. 4

5

6

7

11,591

6,472
4,460

3,366
1,913
2,997

23,187 74,965
105,556
38,216

8

2,956
3,580
4,392
3,352
2,425
1,991

9

10

11

12

2009. 1

2

3

Note: Transactions of less than 1 thousand shares are rounded up/down to the nearest thousand shares.

Providing investors with new opportunities
through the expansion of the scope of investment vehicles
Thanks to the introduction of new systems and services inJanuary 2009, the Custody and Book-entry Transfer Systemf o r Fo r e i g n S t o c k s , e t c . h a s i n c r e a s e d c o nve n i e n c e f o r
investors. Following the introduction of overseas ETFs andforeign covered warrants, JASDEC will aggressively expand

the scope of its handling of investment vehicles with different
features to domestic securities. In this way, we will provide
J a p a n e s e i n v e s t o r s w i t h n e w, a t t r a c t i v e i n v e s t m e n topportunities in the future.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 943

Business Overview 7International
Relationships
Asian Bond Markets Initiative(ABMI)
Background

Custody Services for Foreign Stocks, etc.

︵ PSMS︶
Pre-Settlement Matching System

DVP Settlement Services for NETDs

Book-Entry Transfer System for Investment Trusts

Book-Entry Transfer System for Commercial Papers and Corporate Bonds

Book-Entry Transfer System for Stocks, etc.

44

The Asian Bond Markets Initiative (ABMI) was adopted by the
ASEAN+3(ASEAN plus Japan, South Korea and China)
Finance Ministers’ Meeting as a measure to tackle the 1997
Asian financial crisis. Asian countries have been facing
common difficulties in the fund procurement required for
medium- to long-term investments within the region. Althoughsavings rates are high in the region, capital markets are not yet
fully developed. In these circumstances, the region had
depended heavily on short-term bank borrowings for long-term
investments on a foreign currency-denominated basis from
Western financial institutions. This caused maturity andcurrency mismatches in financing, which were primary factors
in generating the Asian financial crisis.
The financial authorities of the countries participating in the
ABMI have been endeavoring to develop bond markets within
the region to enhance financial intermediary functions and allow
savings to be used for investment in the region. The successful
procurement of funds for long-term investments in the region
would significantly reduce currency and maturity mismatches inregional financing.

B usin e ss Ove rvie w 7

In t e rn at ion al R e lat ion ship s

JASDEC engagement
Under the supervision of the Finance Ministries and theCentral Banks of the ASEAN+3 countries, four Task Forces
have been established with the common goal of the further
development of well-functioning bond markets with
sufficient liquidity in the region.
Since April 2008, JASDEC has been taking part (as therepresentative of Japan) in the Group of Experts (GOE),
which was established by Task Force 4 (whose responsibility
is to improve the bond market infrastructure) to discuss key
issues related to cross-border bond transaction andsettlement systems.
In its turn, the GOE has set up two subcommittees: one
to conduct feasibility studies on proposals for the creationof settlement systems for the region (Subcommittee A), andone to examine possible barriers to cross-border transactions
in ASEAN+3 Bond Markets (Subcommittee B). These two
subcommittees – comprising national and international
central securities depositories and major private-sector
players such as custodian banks and securities companies,
who have extensive expertise in the field of securities
transactions in Asia, are carrying out intense discussions ofthese questions. As the representative of Japan, JASDEC isacting as the leader of Subcommittee B in pushing forwardwith the project agenda.
In April 2009 the 5th meeting of the GOE was held inTokyo with the participation of 15 institutions, including thecentral securities depositories, custodian banks for crossborder transactions, and the International Central Securities
Depositories (ICSDs). Issues that were the subject of intense
examination and discussion included analyses of crossborder transaction costs, settlement administration models,and issues selected from surveys (by questionnaire orinterview) of market participants’ views, such as thestandardization of electronic message formats, tax systems,
foreign exchange controls, capital controls, and othermatters likely to present problems.
Subcommittee A will continue to conduct feasibility studies
on the legal and regulatory aspects of the cross-border settlement
models, as well as a feasibility study from the practical businessstandpoint. Subcommittee B plans to examine measures toremove barriers, and to prepare its roadmap with the aim of
putting together GOE recommendations by the spring of 2010.

ASEAN+3 Finance Ministers’ Meeting
ABMI steering Group(coordination of efforts made by each Task Force)

Task Force 1

Task Force 2（Promoting the Issuance ofLocal Currency-DenominatedBonds (supply-side))(Facilitating the Demand for
Local Currency-DenominatedBonds (demand-side))

Task Force 3(Improving theRegulatory Framework)

Task Force 4(Improving the Related
Infrastructure for theBond Markets)

GOE (Group of Experts)
Chair: Korea, Vice-Chairs: Singapore, Thailand
Members: Representatives of Asian countries(Japanese representatives: JASDEC, etc.) and international players

Subcommittee A
Studies on establishment of regional settlement intermediary
Leader: Korea
Members: Representatives of Asian countries and international players

Subcommittee B
Identify settlement barriers in the Asian regional market(from practical and legal perspectives)
Leader: Japan
Members: Representatives of Asian countries and international players

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 945

B us i n e ss O v er v iew 7

I nter nationa l R e lat ion ship s

Enhancing JASDEC’s Global Presence
JASDEC signs Memorandums of Understanding on information exchange and collaborates with overseas CSDs
JASDEC has been following a policy of signing MOUs on
the exchange of information and the undertaking ofcollaborative projects with the worldwide CSDs. The
relationship between JASDEC and the overseas CSDs
involves not simply their role as the local depository
institutions of foreign securities listed on Japan’s exchanges,
but also their vital role in exchanging information andopinions on common securities settlement issues, collecting
example cases and sharing know-how on new business andsecurities issues. This relationship also plays an importantrole in promoting the exchange of background information(business practices, legal restrictions, etc.) which is acontributing factor in the differences in the handling ofoperations between JASDEC and its MOU signing partners.
In 2008, JASDEC signed an MOU with the CDC (Central
Depository Company of Pakistan) in April, with CDSL

46

(Central Depository Services (India) Limited) and NSDL(National Securities Depository Ltd.) of India in May, andwith TSD (Thailand Securities Depository Co., Ltd.) ofThailand in July. In 2009 JASDEC signed an MOU with
Misr for Central Clearing, Depository and Registry (MCDR)of Egypt in March, and with MSCH&CD (Mongolian
Securities Clearing House & Central Depository Co., Ltd)of Mongolia in April. JASDEC at last count had signed
MOUs with 10 CSDs, and plans for collaboration withthem, such as holding regular consultative meetings, will bedrawn up in the near future.

CDC (Central Depository Company ofPakistan Limited)

CDSL (Central Depository Services (India)
Limited)NSDL (National Securities Depository Ltd.)TSD (Thailand Securities Depository Co.,Ltd.)MCDR (Misr for Central Clearing, Depository
and Registry)

MSCH&CD (Mongolian Securities Clearing
House & Central Depository Co., Ltd)J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

B usin e ss Ove rvie w 7

In t e rn at ion al R e lat ion ship s

Participation in International Forums
In order to provide appropriate information on Japan’s
securities markets infrastructure to overseas CSDs on atimely basis as well as to enhance JASDEC’s internationalpresence, JASDEC actively attends general CSD meetings,
regional CSD meetings (general meetings of Asia-Pacific
CSD Group), seminars, and other meetings.
In June 2008 an ACG (Asia-Pacific CSD Group) Cross
Training seminar was held by the ACG’s task force in Bali,
Indonesia. It was hosted by KSEI (the Indonesian Central
Securities Depository) and KPEI (the Indonesian Clearing
and Guarantee Corporation), and jointly supported by the
Information Exchange Task Force (chaired by JASDEC)
and the New Businesses Task Force (chaired by Korea
Securities Depository).
In September, JASDEC attended the Sibos international
financial services industry conference sponsored by SWIFT,

Participants at the ACG Cross Training Seminar in Bali, Indonesia

JASDECNEWSLET TER

which operates a worldwide settlement network utilized byapproximately 8,700 financial institutions among 209
countries. At this event, Yoshinobu Takeuchi, President &CEO of JASDEC, took part as a panelist and engaged invigorous discussion with representatives of the CSDs on
the issue of “who will be the next major market?”
In November, at the 12th General Meeting of the AsiaPacific CSD Group (ACG12) held in Singapore, JASDEC
proposed a structural change in the ACG, aiming to activate
its organizational operation. The proposal gained acceptancefrom ACG members, and detailed studies will be conductedin the near future. JASDEC also sent staff to deliver lectures
on Japan’s securities settlement system at seminars held for
related parties of overseas securities markets, and toparticipate in activities on reform of the securities taxation
system, with the aim of facilitating cross-border transactions.

Participants at the 12th General Meeting of ACG

JASDEC has begun publishing a quarterly newsletter containing information about businessactivities and related developments in Japan and overseas, to raise awareness about the role of
JASDEC within domestic and international securities markets.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

47

A n a ly s is of B u s i ne s s Pe rfo rm a nc e a nd
Fina n cia l R e s u l ts
Business Overview
Fiscal 2008 Review

During the reporting period ended March 31, 2009, theJapanese economy faced severe headwinds. The firsthalf brought a fall in exports as the global economy
decelerated under the weight of the subprime crisisand soaring oil and raw material prices. The situation
became worse in the second half, when the economy
slowed down significantly after the bankruptcy ofmajor financial institutions in the United States andthe dramatic rise in the yen.
In securities markets, the Nikkei Average dippedb e l ow t h e ¥ 7 , 0 0 0 m a r k i n t h e s e c o n d h a l f , a s t h efinancial crisis that began in the United States
deepened and became protracted.
Ye t w i t h a n ave r a g e d a i l y t r a d i n g vo l u m e o f 2
b i l l i o n s h a r e s o n t h e To k y o S t o c k E x c h a n g e ,transaction activity remained lively, and the number ofshares handled by JASDEC’s depository and bookentry transfer system maintained momentum.
Furthermore, in January 2009, the dematerializationof the listed stock certificates was implemented, andthe new Book-entry Transfer System for Stocks, etc.
came on stream.

Financial Results
Operating Income

Against this backdrop, JASDEC booked a combined
total of ¥19,585 million in (1) income from custodyand book-entry transfer of stocks, comprising ¥10,282
million in commissions on book-entry transfer, and¥4,534 million in income from custody operations, and(2) the new book-entry transfer services (launched
January 5, 2009), comprising ¥3,005 million incommissions on book-entry transfer, ¥724 million inaccount management fees, and ¥1,039 million intransfer system usage fees).
This compares with previous-term income from
custody and book-entry transfer of stocks of ¥19,384
million (¥13,603 million in commissions on bookentry transfer, and ¥5,781 million in income from
custody operations), for an increase of ¥200 million(up 1.0% year-over-year).
Operating income prior to commission rebates
amounted to ¥28,625 million (up 2.1% year-over-year)
and commission rebates to ¥1,461 million (up 27.1%).
As a result, operating income totaled ¥27,163 million(up 4.4%).
Operating Expenses

O p e r a t i n g ex p e n s e s f o r fi s c a l 2 0 0 8 a m o u n t e d t o¥24,454 million (up 12.5% year-over-year), due to anincrease in costs on upgrading computer systems forthe dematerialization of stock certificates.
Net Income

Net income for fiscal 2008 amounted to ¥1,333 million(down 13.8% year-over-year).
Earnings per share was ¥156,934.33.

48

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

Financial Condition
Total assets as of March 31, 2009 were up by ¥6,775
million from the previous year-end to ¥61,615 million.
This was mainly due to increased value of software
following investments required for dematerializationof stock certificates, and system upgrades.
Net assets at the fiscal year-end increased ¥994
million year-over-year to ¥18,890 million, due
primarily to an increase in retained earnings.
Net cash provided by operating activities during
this financial year came to ¥6,411 million, which
includes income before income taxes of ¥2,331
million, depre ciation and amortization of ¥6 , 3 6 2
million, and income tax payments of ¥1,788 million.
Net cash used in investing activities amounted to¥11,523 million, mainly as a result of capital
investment in a system for dematerialization for stock
certificates.
Net cash provided by financing activities amounted
to ¥5,652 million, as cash outflow on dividend
payments was more than offset by short-term bankborrowings.
As a result of the foregoing, cash and cash equivalents
as of the fiscal year-end stood at ¥2,355 million, up by¥539 million from the previous year-end.
As Japan’s central securities depository, JASDEC iscommitted to stable financial management with asound financial position and adequate operating cash
flow as it goes about its public mission of providing
reliable and error-free infrastructure for securities
clearing and settlement.

Financial results (on a consolidated basis)
Operating income
Income from operation(Million yen)

30,00027,16326,022
22,55921,74520,00010,000

4,777

0

5th

4,635

6th

4,368

7th

2,617

8th

(business term)

Net income
Net income per share(Million yen)

(Yen)

4,000 365,197.98

400,000

311,995.13

3,000

3,121

182,082.62

2,000

300,000

156,934.33

2,651

200,000

1,547

1,333

1,000
0

100,000
5th

6th

7th

8th

0

(business term)

Total assets(Million yen)

80,000Net assets

68,51756,03760,00061,61554,83940,00020,000014,352

16,68917,897

5th

6th

7th

18,8908th(business term)

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

49

Consolidated Financial Statements
Consolidated Balance Sheets (As of March 31, 2008 and 2009)¥ (thousands)$ (thousands)(Note 5)
2009

2008

2009

¥ 1,816,676
3,072,097
156,655
29,884,895
356,531—
35,286,855¥ 2,355,978
3,161,085
561,386
31,531,872
519,023(6,895)
38,122,450$ 23,984
32,1805,715
321,000
5,284(70)
388,093

Less: Accumulated depreciation
		 Total Property and Equipment

1,125,677
9,018,616—
10,144,293(6,262,276)
3,882,017

1,062,907
5,560,074
56,023
6,679,004(4,170,881)
2,508,121

10,82056,603570
67,993(42,460)
25,533

Intangible Assets, Net:
SoftwareConstruction in progress (Software)
Lease assets
Other intangible assets
		 Total Intangible Assets

7,171,014
6,586,807—
14,882
13,772,704

19,759,147
67,821
9,517
18,15419,854,639

201,152
690
97
184
202,123

Investment and Other Assets:
Investment securities
Long-term prepaid expenses
Deferred income taxes (Note 12)Long-term refundable lease deposits
Claims provable in bankruptcy, rehabilitation and other
Allowance for doubtful accounts
		 Total Investment and Other Assets

336,647
109,154937,233
514,775——
1,897,811

308,418
86,770
194,434
514,775
41,394(15,878)
1,129,914

3,140
883
1,979
5,240
421
(161)
11,502¥54,839,389¥61,615,125$627,253ASSETS
Current Assets:
Cash and deposits
Accounts receivable – trade
Deferred income taxes (Note 12)
Designated assets for clearing funds (Note 4)
Other current assets
Allowance for doubtful accounts
		 Total Current Assets

Property and Equipment:
Buildings and structures
Tools and furniture
Lease assets

		 Total Assets

The accompanying notes are an integral part of these statements.

50

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

$ (thousands)(Note 5)2009

¥ (thousands)
2009

2008
LIABILITIESCurrent Liabilities:
Accounts payable – trade¥ 1,556,483¥

868,426$8,841

2,400,000

8,400,000

85,514—

13,842

141

Income taxes payable

931,071——

Allowance for employees’ bonuses

178,909

185,102

1,884

Allowance for executives’ bonuses

20,30020,300207

Consumption taxes payable

4,030

—

—

29,884,895

31,531,872

321,000

Allowance for loss of business trust agreement Cancellation—

940,103

9,570

Allowance for loss of computer center transfer—

242,379

2,467

Other current liabilities

629,274

235,7362,400

		 Total Current Liabilities

35,604,964

42,437,763

432,024—

45,785466

Allowance for employees’ retirement benefits (Note 10)

148,155

199,422

2,030

Allowance for executives’ retirement benefits

41,16041,160419

Allowance for loss of business trust agreement cancellation

827,700——

Allowance for loss of computer center transfer

320,356——

1,337,372

286,367

2,915

36,942,336

42,724,131

434,939

42,724,131

434,940

Short-term borrowings (Note 6 and 9)
Lease obligations (Note 9)

Deposits received for clearing funds (Note 4)Long-term Liabilities:
Lease obligations (Note 9)

Total Long-term Liabilities
		 Total Liabilities
NET ASSETS
Shareholders’ Equity:
Common stock
Authorized: 10,000 shares
Issued: 8,500 shares

4,250,000

4,250,000

43,266

Capital surplus

4,250,000

4,250,000

43,266

Retained earnings

9,397,052

10,390,994

105,781		 Total Shareholders’ Equity

17,897,052

18,890,994

192,313

		 Total Net Assets

17,897,052

18,890,994

192,313

		 Total Liabilities and Net Assets¥54,839,389¥61,615,125$627,253

The accompanying notes are an integral part of these statements.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 951

Consolidated Financial Statements
Consolidated Statements of Income (For the years ended March 31, 2008 and 2009)
2008

2009

$ (thousands)(Note 5)
2009

¥26,022,586¥27,163,871$276,533

206,673
1,822,149
81,945
6,974,215
2,597,821
1,286,788
5,604,745
509,500
720,881
1,925,132
21,729,855
4,292,730

206,738
1,972,209
97,3208,424,000
2,463,436
1,523,801
6,362,311
525,941
668,434
2,210,250
24,454,444
2,709,427

2,105
20,077991
85,75825,077
15,51364,7695,354
6,805
22,501
248,950
27,582

272

212

2

111,385
21,375(3,637)(49,391)

75,684(28,229)(93,932)(43,011)

770
(287)
(956)
(438)

(7,576)(16,041)(7,558)(43,350)

(77)
(441)

(590,625)(827,700)(320,356)—
3,304(1,678,991)
2,613,739(78,430)(112,402)(35,835)(15,878)4,978(377,755)
2,331,672(798)(1,144)
(364)
(161)
50
(3,845)23,737

1,781,626(715,589)¥ 1,547,702

659,662
338,068¥ 1,333,941

6,715
3,442
$ 13,579¥ (thousands)

Operating Income
Operating Expenses:
Executives’ compensation and bonuses
Salaries and bonuses
Severance costs for employees (Note 10)
Maintenance for systems
Outside services
Registration fees
Depreciation and amortization
Rent
Advertisement
Others		 Total Operating Expenses
		 Income from Operations
Other Income (Expenses):
Interest income
Operational revenue on the designated assets
for clearing funds
Equity in earnings (losses) of the affiliate
Interest expenses (Note 9)
Commitment fees
Fees for fund operation of designated assets
for clearing funds
Loss on disposal of fixed assets
Non-recurring depreciation of property andequipment (Note 11)
Allowance for loss of business trust agreement cancellation
Allowance for loss of computer center transfer
Provision of allowance for doubtful account
Others, net
Total
		 Income before Income Taxes
Income Taxes (Note 12)
Current
Deferred		 Net Income

U.S.Dollars(Note 5)Yen
Per Share (Note 17)
Net income – primary
Dividends
Weighted-average number of common
stock shares outstanding (in shares)¥182,082.62
40,000¥156,934.33
40,000

8,500

8,500

$1,598407—

The accompanying notes are an integral part of these statements.

52

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

Consolidated Statements of Changes in Net Assets (For the years ended March 31, 2008 and 2009)¥ (thousands)
Number ofcommon stock
sharesCommonstock

CapitalsurplusRetainedearnings

Total
shareholders’equityTotal
net assets

8,500¥4,250,000¥4,250,000¥ 8,189,350¥16,689,350¥16,689,350

Cash dividends

—

—

—

Net income for the year

—

—

—

(340,000)
9,397,052
1,547,702
10,390,994(340,000)
17,897,052
1,547,702
18,890,994(340,000)
17,897,052
1,547,702
18,890,994

Balance as of March 31, 2008

8,500

¥4,250,000¥4,250,000¥ 9,397,052¥17,897,052¥17,897,052

Cash dividends

—

—

—

(340,000)(340,000)(340,000)

Net income for the year

—

—

—

1,333,941

1,333,941

1,333,941

Balance as of March 31, 2009

8,500

¥4,250,000¥4,250,000¥10,390,994¥18,890,994¥18,890,994

Balance as of March 31, 2007

$ (thousands) (Note 5)
Number ofcommon stock
sharesCommonstock

CapitalsurplusRetainedearnings

Total
shareholders’equityTotal
net assets

8,500$42,419$42,419$ 95,663$182,195$182,195

Cash dividends

—

—

—

(3,461)(3,461)(3,461)

Net income for the year

—

—

—

13,58013,57913,579Balance as of March 31, 2009

8,500

$42,419$42,419$105,781$192,313$192,313

Balance as of March 31, 2008

The accompanying notes are an integral part of these statements.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

53

Consolidated Financial Statements
Consolidated Statements of Cash Flows (For the years ended March 31, 2008 and 2009)$ (thousands)(Note 5)¥ (thousands)

Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
Non-recurring depreciation of property and equipment
Increase in allowance for doubtful accounts
Increase (decrease) in allowance for employees’ bonuses
Increase in allowance for employees’ retirement benefits
Decrease in allowance for executives’ retirement benefits
Increase in allowance for loss on cancellation ofagreement for entrustment of operations
Increase (decrease) allowance for loss of computer centertransfer
Interest income
Interest expenses
Equity in losses (earnings) of the affiliate
Foreign exchange loss
Loss on disposal of property and equipment
Loss on disposal of intangible assets
Decrease (increase) in accounts receivable-trade
Decrease in accounts payable-trade
Decrease (increase) in other assets
Decrease in other liabilities
		 Sub-total
Interest and dividends received
Interest paid
Income taxes paid
		 Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchase of investment securities
Payments for purchase of property and equipment
Payments for purchase of intangible assets
Payments of guarantee money deposits received
		 Net Cash Flows Used in Investing Activities
Cash Flows from Financing Activities:
Short-term borrowings
Repayment of short-term borrowings
Repayment of lease obligations
Cash dividends paid
		 Net Cash Flows Provided by Financing Activities
		 Effect of exchange rate changes on cash and cash equivalents
Net Increase (decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year

2008

2009

2009

¥ 2,613,739
5,604,745
590,625—(1,961)
33,746(6,960)¥ 2,331,672
6,362,311
78,43022,774
6,193
51,267—$ 23,737
64,769
798
232
63
522
—

827,700

112,402

1,144

320,356(77,977)

(794)

(272)
3,637
(21,375)
556
9,297
6,744
383,014(367,373)(137,867)(5,311)
9,853,041
272(3,101)(1,789,007)
8,061,204(212)
93,932
28,229666
9,998
33,352(130,383)(688,057)
52,137(20,677)
8,266,061
212(66,543)(1,788,073)
6,411,657

(2)
956
287
7
102
339
(1,327)(7,004)531(210)
84,1502(678)(18,203)65,271(315,272)(3,975,197)(6,758,275)(79,273)(11,128,018)—(370,597)(11,153,312)—(11,523,909)—(3,772)(113,543)—(117,315)

3,360,000(960,000)—(340,000)
2,060,000(556)(1,007,370)
2,824,047¥ 1,816,676

20,400,000(14,400,000)(7,779)(340,000)
5,652,220(666)
539,301
1,816,676¥ 2,355,978207,675(146,595)(79)(3,461)57,540(6)
5,490
18,494$ 23,984

The accompanying notes are an integral part of these statements.

54

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

Notes to the Consolidated Financial Statements
1. Basis of Presenting the Consolidated Financial
Statements
The accompanying consolidated financial statements
have been compiled from the accounts maintainedby Japan Securities Depository Center, Inc. (“theCompany”) and its subsidiary in accordance with theprovisions set forth in the Financial Instruments andExchange Act in conformity with accounting principles
and practices generally accepted in Japan, which
are different in certain respects as to the applicationand disclosure requirements of International Finance
Reporting Standards.

2. Summary of Significant Accounting Principles(1) Consolidation
The consolidated financial statements include theaccounts of Japan Securities Depository Center,
Inc. and its wholly-owned subsidiary, JASDEC
DVP Clearing Corporation (hereafter, “JDCC”)
which is the only subsidiary of the Company.
JDCC operates under a fiscal year ending March
31, which is the same as that of the Company.

(2) Cash and deposits
Cash and cash equivalents include all highly liquid
investments, with original maturities of threemonths or less, which are readily convertible to
known amounts of cash and are so near maturity
that they present only an insignificant risk ofchanges in value because of changes in interest
rates. Cash and deposits in the consolidated balance
sheets and consolidated statements of cash flows
are identical.

(3) Application of equity method
The equity method is applied to shares of Tokyo
System Services Co., Ltd. (hereafter, “TSS”).

(4) Property and equipment(Except Lease assets)
Depreciation for buildings, excluding improvements, is computed on the straight-line method.
Depreciation for other capital assets is computed on
the declining-balance method.
The main estimated useful lives are as follows:		
Buildings and structures 3-49 years
		
Tools and furniture
2-15 years(5) Intangible assets (Except Lease assets)
Costs of software for internal use are capitalized
and amortized on the straight-line method over theestimated useful life of 5 years. Other intangible
assets are amortized using the straight-line method
over the period registered by the Corporate Taxes
Law. Software regarding physical stock certificates,
which became redundant after dematerialization ofstock certificates, was useful until January 2009,
the date which all interested parties had set as thetarget for the commencement of dematerialization.

(6) Lease assets
The straight-line method is applied to leased assetsof finance lease without ownership transfer andthe residual value is zero. The company applies
accounting principle for general methods for
operating lease without ownership transfer if thetransaction commenced prior to the adoption of the
new standards.

(7) Allowance for doubtful accounts
The allowance for doubtful accounts is provided
at an amount determined based on the Company’s
historical average charge-off ratio for ordinary
receivables, and estimate of uncollectible amounts
determined by reference to specific doubtfulreceivables from customers which are experiencing
financial difficulties.

(8) Allowance for bonuses
Allowance for employees’ bonuses and allowancefor executives’ bonuses are provided for bonuses
to employees and executives attributable to eachfiscal year based on an amount expected to pay,
respectively.

(9) Allowance for loss of business trust
agreement cancelation
Allowance is provided for a loss on cancellationof entrusted operations due to dematerialization ofstock certificates.

(10) Allowance for loss ofcomputer center transfer
Allowance is provided for estimated restoration
costs and other related relocation costs to be paid
upon the movement of computer facilities.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 955

(11) Consumption taxes
The consumption taxes withheld by the Company
and its subsidiary on sales and the consumption
taxes paid by the Company and its subsidiary onpurchases of goods and services are not included in
the amounts of the relevant accounts in the accompanying statements of income. The consumption
taxes withheld and paid are recorded as an asset ora liability, as the case may be, and the net balanceis shown in the balance sheets.

3. Changes in Basis of Presenting theConsolidated Financial Statements
Accounting Standards for Lease Transactions
Previously the Company treated finance leasetransactions without ownership transfer to lessee asan ordinary method for operational lease. However,since application of “Accounting Standard forLease transactions” (ASBJ, Accounting Standards
Board of Japan-statement No. 13, revised on March
30th, 2007) and “Guidance on Accounting Standard
for Lease Transaction (ASBJ Guidance No. 16,
revised on March 30th, 2007) from the beginningof reporting term, such leases are accounted for as
general sale and purchase.
Depreciation of lease assets is based on zero
residual value over the lease contract term.
Meanwhile, for finance lease transactions without ownership transfer, the Company continues toapply accounting principles for ordinary method for
operational lease if such transactions commenced
prior to the adoption of the new standards.
The impact of this change on the statement ofincome is immaterial.

4. Assets and Liabilities Held for Sound
Settlement System Operation and Management
In order to secure the Delivery Versus Payment(“DVP”) for Non-Exchange Transaction Deliveries(“NETDs”) settlement system, JDCC, a consolidated
subsidiary of the Company, receives cash or securities
as collateral from the DVP participants whom JDCC
officially acknowledge as a party who undertakes
securities obligations in accordance with the provisions
set forth in JDCC’s general provisions in accordancewith Article 156, Paragraph 7-1, of the Financial
Instruments and Exchange Act (Law No. 25, 1948).
JDCC manages cash and securities entrusted by the
DVP participants as clearing funds defined in Article

56

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

156-11 of the Financial Instruments and Exchange
Act separately from other assets in accordance with
JDSS’s general provisions and Article 7 of the Cabinet
Office Ordinance on Financial Instruments Clearing
Organization. (Cabinet Office Ordinance No. 76,
2002).

(1) Participant fund specified assets andparticipant funds under management
Under the DVP for the NETDs settlement system,
when JDCC accepts DVP participants’ obligations
to counterparties, the DVP participants involved in
the transactions shall assume the same obligations
to JDCC.
JDCC requires each DVP participant to establish
a participant fund in excess of the minimum
amount set forth in JDCC’s general provisions
to ensure that the respective obligations of DVP
participants are covered. The aggregate amount ofminimum participant funds required by JDCC’s
general provisions as of March 31, 2008 and 2009was ¥15,000,000 thousand ($152,703 thousand). In
the event a DVP participant defaults on the required
payment obligations of the DVP for the NETDs
settlement system, JDCC shall take deposits fromthe participant fund of this DVP participant tofulfill its obligations to other DVP participants.
The participant funds entrusted to JDCC will be
managed as money trusts, in line with the statedgeneral provisions of JDCC.
These money trusts are evaluated at cost, just as
available-for-sale securities with no market value.
Assets and liabilities pertaining to participant
funds are presented as designated assets for clearing assets and deposits received for clearing funds,
respectively.

(2) Collateral securities
Under the DVP for the NETDs settlement system,
DVP participants are able to entrust marketablesecurities listed in JDCC’s general provisions(hereafter, “collateral securities”) to ensure thatobligations to JDCC are met.
When a DVP participant fails to meet its obligations to JDCC, JDCC is authorized to dispose of
the entrusted collateral securities by selling themin securities markets or through other methods
deemed appropriate by JDCC.
As of March 31, 2008 and 2009, the market value

of collateral securities entrusted to JDCC was¥235,795,655 thousand and ¥99,489,867 thousand($1,012,826 thousand), respectively.

have been recorded as finance leases as of March 31,
2008 and 2009 and for the years then ended:¥ (thousands)

5. U.S. Dollar Amounts
Amounts in U.S. dollars are included solely for theconvenience of readers outside Japan. The rate of¥98.23=U.S. $1, the rate of exchange as of March 31,
2009, has been used in translation. The inclusion ofsuch amounts is not intended to imply that Japanese
yen have been or could be readily converted, realized
or settled in U.S. dollars at this or any other rate.

6. Commitment Line and Overdraft Contracts
To ensure agile and stable fund-raising, the Company
concludes commitment line agreements (¥12,000,000
thousand ($122,162 thousand) in total) and overdraft
contracts (¥5,000,000 thousand ($50,900 thousand) intotal) with three banks. To prepare for a possible deficiency of funds due to a default by DVP participants,
JDCC has concluded commitment line agreements(¥45,000,000 thousand ($458,108 thousand) in total)
with three banks, as part of a liquid fund for completing fund settlement on the required day. ¥2,400,000
thousand and ¥8,400,000 thousand ($85,513 thousand)of the commitment line were utilized by the Company
as of March 31, 2008 and 2009, respectively.

7. Net Assets
The Companies Act of Japan provides that an amountequal to 10% of the amount to be distributed as
distributions of capital surplus (other than the capitalreserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve andthe legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of
the common stock account. Such distributions can bemade at any time by resolution of the shareholders orby the Board of Directors if certain conditions are met,
but neither the capital reserve nor the legal reserve isavailable for distributions.

2008$ (thousands)

2009

Tools and furniture:
Acquisition cost ¥2,497,402 ¥1,882,666
Accumulated(697,698) (558,663)
		 depreciation
Net book value ¥1,799,703 ¥1,324,003
Software:Acquisition cost ¥ 608,081 ¥ 216,774
Accumulated(297,240)(65,029)		 depreciation
Net book value ¥ 310,841 ¥ 151,744

2009$19,165(5,687)$13,478$ 2,206(662)$ 1,544

Lease obligations
including interest
thereon:Due within one year ¥ 565,538 ¥ 422,218
1,564,035 1,067,833
Due over one year
			
Total
¥2,129,573 ¥1,490,052$ 4,298
10,870$15,169

Finance leasecharges¥ 474,604 ¥ 557,408$ 5,674

550,187
11,876

5,601
120

Depreciation
expenseInterest portion

468,042
16,477(Note) 1. Methods applied in computation of the above data are as follows:		 Depreciation: S traight-line method with zero residual value over the lease
contract period
		 Interest: C omputed as the difference between the lease obligations andthe acquisition cost, allocated over the lease term based on theinterest rate method.
2. Finance lease transactions
		 aLease assets: P roperty and Equipment; Hardware of back up system
Intangible assets; Software of back up system		 bDepreciation: Based on zero residual value over the lease term

8. Lease Transactions
Finance lease transactions, other than those in which
the ownership of the leased asset is transferred to thelessee, that commenced before the first fiscal year inwhich the new accounting standard is applied, continues to be accounted for as operating lease transactions.
The following table shows the amounts which would

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 957

9. Borrowings
Short-term borrowings comprised loans from bankswith a weighted average interest rate of 1.2% perannum. The Company had short-term borrowingsof ¥8,400,000 thousand ($85,513 thousand). The
Company has current portion of lease obligations of¥13,842 thousand ($140 thousand) and long-term leaseobligations of ¥45,785 thousand ($466 thousand).
Weighted average interest rate of lease obligations is
2.5% per annum. Total borrowings are ¥8,456,650
thousand ($86,090 thousand) as of March 31, 2009.

10. Allowance for Severance Indemnities for
Employees
Allowance for employees’ retirement benefits on
March 31, 2008 and 2009 represented the amountthat would be payable for the Company if all eligible
employees voluntarily terminated their employment at
the balance sheet dates. Severance costs for employeescharged to income for the years ended March 31, 2008
and 2009 amounted to ¥81,945 thousand and ¥97,320
thousand ($991 thousand), respectively.

11. Non-recurring Depreciation of Property andEquipment
Non-recurring depreciation of fixed assets was due tothe decision to move computer sites and dematerialization for stock certificates.
¥ (thousands)

Buildings
Tools and furniture
Software
Long-term prepaid
expensesTotal$ (thousands)

2008¥ 37,956
308,800
243,360

2009¥19,32258,685
421

2009
$197
597
4

507
¥590,625—¥78,430—$798

12. Income Taxes(1) Deferred tax assets
The following table shows the breakdown ofdeferred tax assets:¥ (thousands)
2008
2009

$ (thousands)
2009

Deferred tax assets:
Allowance for
employees’ bonuses ¥¥ 75,151$ 765

Enterprise taxes payable
Business facility taxes

72,637
71,293
4,166

4,212

43

Accrued social
insurance premiums

8,557

10,489107

Allowance forloss ofbusiness trust
agreement cancelation

336,046

381,6813,885

130,064

98,405

1,002

—

2,799

28

60,15180,965824

Allowance for
executives’retirement benefits

16,710——

Excess depreciationof fixed assets

377,206

113,468

1,155

Excess amortizationof deferred charges
for tax purposes

17,053—--—¥1,093,888¥767,175$7,579Enterprise taxes
payable11,354115

Net deferred tax
assets¥755,820$7,694

Allowance forloss of computer
center transfer
Allowance for
doubtfulaccounts
Allowance for
employees’
retirement benefits

Total Deferred tax
assetsDeferred tax
liabilities:

58

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

(2) Reconciliation between the nominal
statutory income tax rate and the effective
income tax rate

2 Dividends for which record date belongs to the year
ended March 31, 2009 and for which effective date
will belong to the year ending March 31, 2010

The difference between the statutory tax rate andthe effective tax rate for the years ended March 31,
2008 and 2009 is less than 5% of the statutory tax
rate, thus the note is omitted.

Total of
Revenue Dividends Dividend
Type ofof¥per Share Record Effective
Stocks Dividends (thousands)
¥
Date
Date

Resolution

Ordinary General¥340,000¥ 40,000 March 31, June 23,
Shareholders Ordinary Retained($3,461
2009
2009
Meeting
Share Earnings($407)
thousand)(June 22, 2009)

13. Note to the Consolidated Statements of
Changes in Net Assets(1) Outstanding stock

14. Stock Option
Type ofstocksMarch 31,
2007

Increase

Ordinary
8,500
—
share
Type of March 31,
2008
IncreasestocksOrdinary
8,500
—
share

Decrease

March 31,
2008

—

8,500

Decrease

March 31,
2009

—

8,500

(2) Treasury Stock
Not applicable.

(3) Stock Subscription Rights and Other
Securities
Not applicable.

(4) Dividends
1 Payment of the dividends

Resolution

Not applicable.

15. Segment Information(1) Business segment
Disclosure is omitted because the Company operates a single business unit, the central securities
custody and book-entry transfer system.

(2) Geographic information
Disclosure is omitted because the Company has
neither overseas consolidated subsidiaries nor
overseas branches for the years ended March 31,
2008 and 2009.

(3) Overseas sales
Disclosure is omitted because the Company does
not have any overseas sales for the years ended
March 31, 2008 and 2009.

Total of
Revenue Dividends Dividend
Type ofof¥per Share Record Effective
Stocks Dividends (thousands)
¥
Date
Date

Ordinary General
Shareholders Ordinary Retained
March 31, June 24,¥340,000 ¥40,000
Meeting
Share Earnings
2008
2008
(June 23, 2008)

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 959

16. Related Party Transactions
The material transactions of the Company with related companies or individuals, excluding transactions with the consolidated subsidiary that are eliminated in the consolidation and those disclosed elsewhere in these financial statements,
for the years ended March 31, 2008 and 2009 are as follows:

For the year ended March 31, 2008
(1) Directors
Title

Name

Business

Transactions

Amount¥ (thousands)

Account

Ending Balance¥ (thousands)

Director

Koichiro
Miyahara(Note 2 (1))

Director of the Company
President and CEO of Japan
Securities Settlement &Custody, Inc.

Outsourcing¥639,952($6,514thousands)——

Director

Hironaga
Miyama(Note 2 (2))

Director of the Company
President and CEO of Japan
Securities Settlement &Custody, Inc.

Outsourcing¥1,730,028($17,612
thousands)

Accounts
payable-trade¥33,063($336
thousands)(Note) 1. The transaction amounts above exclude consumption taxes. However, the ending balances include consumption taxes.
2. Terms and conditions(1) These amounts represent transactions for the period from April 1, 2007 to June 30, 2007 because Koichiro Miyahara resigned from the Board of Directors of theCompany on June 21, 2007, and ending balance is the amount as of June 30, 2007.
(2) These amounts represent transactions for the period from July 1, 2007 to March 31, 2008 because Hironaga Miyama was assigned to the Board of Directors of
the Company on June 25, 2007.
(3) The terms and conditions of the above transactions are on an arm’s-length basis.

(2) Principal shareholder and its subsidiaries
Relationship

CapitalNames ofcompanies¥
Address (thousands)

Principal
business

Tokyo Stock¥11,500,000
Exchange
Exchange, Inc. Chuo-ku,
of financial(Subsidiary of Tokyo ($117,072
instruments
other affiliates)
thousands)
Japan Securities¥1,700,000
Clearing
Chuo-ku,($17,306
CorporationTokyo
thousands)(Subsidiary ofother affiliates)

Clearing
securities

AmountEnding(Note 1)
Balance
Percentage Directorsof owner- holding
Descriptions¥
ship with concurrent
Business¥voting right positions relationship Transactions (thousands) (Note 2) (thousands)—(Note 3)—

One

Secondment¥315,272of staffs,
Purchase oflease ofinvestment($3,214computer sites, securities
thousands)
etc.

One

Commission Commission
incomeincome——¥4,154,800 Accounts ¥384,800($42,205 receivable- ($3,917
thousands)
trade
thousands)(Note) 1. These transaction amounts above exclude consumption taxes. However, the ending balances include consumption taxes.
2. The terms and conditions of the above transactions are on an arm’s-length basis except for the transaction of the investment securities. Acquisition cost of the investment security was based on book value of net assets.
3. Tokyo Stock Exchange Group, Inc. succeeded the holding of the Company’s stocks from Tokyo Stock Exchange, Inc. due to reorganization effective October 1, 2007,
and replaced Tokyo Stock Exchange, Inc. as a principal shareholder of the Company. As such, these amounts represent transactions for the period from April 1, 2007
to September 30, 2007. Tokyo Stock Exchange, Inc. held 21.82% of the Company’s outstanding shares on September 30, 2007.

60

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

(3) Subsidiaries and affiliates
Relationship
CapitalNames ofcompanies¥
Address (thousands)

Principal
business

Tosho System¥100,000
Design &Koto-ku,
Service Co. Ltd.
($1,018 development ofTokyo(An affiliate)
thousands)
softwareAmountEndingPercentage Directors(Note 1)
Balanceof owner- holding
Descriptions
ship with concurrent
Business¥¥voting right positions relationship Transaction (thousands) (Note 2) (thousands)
Directly
holds
20%

Two

Purchasing¥1,491,226
softwarePurchase of($15,180and system
softwarethousands)
maintenanceAccounts
payableother¥240,008($2,443
thousands)(Note) 1. These transaction amounts above exclude consumption taxes. However, ending balance includes consumption taxes.
2. The terms and conditions of the above transactions are on an arm’s-length basis.

For the year ended March 31, 2009
(Additional Information)
Commencing with the current fiscal year, the consolidated financial statements confirm to (ASBJ Statement 11)
Accounting Standard for Related Party Disclosures and (ASBJ Guidance No.13) Guidance on Accounting Standard for
Related Party Disclosures. There are no additional matters to disclose.

(1) Principal shareholder and its subsidiaries
Relationship

CapitalNames ofcompanies¥
Address (thousands)

Principal
business

Japan Securities¥1,700,000
Clearing
Chuo-ku,
Corporation
Tokyo ($17,306(Subsidiary of
thousands)
other affiliates)

Clearing
securities

AmountEnding(Note 1)
Balance
Percentage Directorsof owner- holding
Descriptions¥
ship with concurrent
Business¥voting right positions relationship Transactions (thousands) (Note 2) (thousands)—Two

Commission Commission
incomeincome¥3,645,891($37,115
thousands)¥297,755
Accounts($3,031
receivablethousands)
trade(Note) 1. These transaction amounts above exclude consumption taxes. However, the ending balances include consumption taxes.
2. The terms and conditions of the above transactions are on an arm’s-length basis.

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 961

(2) Subsidiaries and affiliate
Relationship

CapitalNames ofcompanies¥
Address (thousands)

Principal
businessAmountEnding(Note 1)
Balance
Percentage Directorsof owner- holding
Descriptions¥
ship with concurrent
Business¥voting right positions relationship Transaction (thousands) (Note 2) (thousands)

Tosho System¥100,000
Design &Koto-ku,
Service Co. Ltd.
($1,018 development ofTokyo(An affiliate)
thousands)
softwareDirectly
holds
20%

Two

Purchasing¥6,188,427
softwarePurchase of($62,999and system
softwarethousands)
maintenance——(Note) 1. These transaction amounts above exclude consumption taxes. However, ending balance includes consumption taxes.
2. The terms and conditions of the above transactions are on an arm’s-length basis.

17. Earnings Per Share
The basis for calculating earnings per share for the years ended March 31, 2008 and 2009 is as follows:$ (thousands)¥ (thousands)
2008

2009

2009

Net income as reported in the consolidated statements of income¥1,547,702¥1,333,941$13,579

Net income pertaining to common stock shareholders¥1,547,702¥1,333,941$13,579

8,500

8,500

—

Weighted-average number ofcommon stock shares outstanding (in shares)

62

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

Report of Independent Auditors
The Board of Directors and Shareholders ofJapan Securities Depository Center, Inc.
We have audited the accompanying consolidated balance sheets of Japan Securities Depository
Center, Inc. and its consolidated subsidiary as of March 31, 2009 and 2008, and the related
consolidated statements of income, changes in net assets, and cash flows for the years thenended, all expressed in yen. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Japan Securities Depository Center, Inc. and its consolidated
subsidiary at March 31, 2009 and 2008, and the consolidated results of their operations and their
cash flows for the years then ended in conformity with accounting principles generally accepted inJapan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2009 are presented solely for convenience. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 5.

June 17, 2009

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

63

History (as of March 2009)1984

Relevant
Legislation

Organizationof JASDEC
and its
Subsidiaries

1985

1991

1992

2000

2001

June 27th

May 15th

The Law for Partial
Amendments to the Law
Concerning Book-Entry Transfer
of Stock Certificates, etc. waspromulgated (thoroughly
effective on April 1st, 2002)

Law Concerning Central
Securities Depository andBook-Entry Transfer of Stock
Certificates and Other
Securities (CSD Law) was
promulgated (effective on
November 14th)

Dec. 6th

May 27th

Nov. 2nd

Japan Securities Depository
Center (JASDEC), wasestablished as a foundation

JASDEC was designated as thedepository organization under
the CSD Law

Detailed plan for conversion of
JASDEC to a joint-stockcompany was announced

Operation of
the System

Sept. 10th
Pre-Settlement
Matching System (PSMS)
started64

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

Oct. 9th

Oct. 9th

Nov. 26th

Depository and book-entry transfer
business started (initially for 50
listed stocks on the TSE)

Full-scale depository andbook-entry transfer
business started

Handling of convertible
bonds started

Oct. 9th

May 8th

May 1stComputer system fordepository and book-entry
transfer began operation

New depository andbook-entry transfer
system launched

JASDEC launched
proprietary system for
DVP settlement of
exchange trades

2002

2003

2004

2005

2006

2007

2008

2009

June 9th

Jan. 5th

The Law for Partial Amendments to the Law
Concerning Book-entry Transfer of Corporate Bonds
and Other Securities for the Purpose of Streamlining
the Settlement for Trades of Stocks and Other
Securities (Securities Trade Settlement Streamlining
Law) was promulgated

The Securities Trade
Settlement Streamlining Law
was enacted

Jan. 4th

Jan. 10th

Japan Securities
Depository Center, Inc.
was established

JASDEC received official designation as
Book-Entry Transfer Institution under the
stipulations of the Law Concerning Book-Entry
Transfer of Corporate Bonds, etc.

June 17th
Japan Securities Depository
Center, Inc. took over all
depository and book-entry
transfer operations from the
JASDEC Foundation, which is
dissolved

June 6th

April 6th

JASDEC DVP
Clearing Corporation(JDCC) wasestablishedJDCC obtained a license forsecurities obligation assumption
business to act as a securities
clearing agency

March 31st

Jan. 10th

JASDEC inaugurated Short-Term
Corporate Bonds (Commercial
Papers) Book-entry Transfer System

JASDEC inaugurated
Book-entry Transfer System for
Corporate Bonds

May 17th
DVP settlement system for
Non-Exchange Transaction
Deliveries (NETDs) started

Jan. 4th
JASDEC inaugurated
Book-entry Transfer System
for Investment Trusts

Feb. 14th
JGB repo and gensaki (transactions
with repurchase agreement) wereadded to the list of targets of PSMS

May 1stJASDEC inaugurated Custody
services for Foreign Stocks

Jan. 4th

Jan. 5th

JASDEC inaugurated Book-entry
Transfer System for Investment
Ttrusts listed on the stock exchanges,
i.e. for Exchange-Traded Funds (ETFs).

JASDEC inaugurated
Book-entry Transfer
System for Stocks, etc.

Jan. 4th

Jan. 4th

JASDEC launched Securities
Information Tracing System(SITRAS) for lost stocks

Operations of SITRAS
were terminated

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 9

65

Cor p or a t e D a t aProfile of the company (as of June 30, 2009)
Registered Head Office
Address
Established
Representative
Major Businesses

Operational Office
Consolidated Subsidiary
Number of Employees

Japan Securities Depository Center, Inc.
1-1 Nihombashi-Kayaba-cho, 2-chome, Chuo-ku, Tokyo, Japan
January 4, 2002
President and CEO Yoshinobu Takeuchi(1) Book-entry transfer for stocks, etc.
(2) Book-entry transfer for commercial paper(3) Book-entry transfer for corporate bonds(4) Book-entry transfer for investment trusts(5) DVP settlement services for NETDs(6) Pre-settlement matching system(7) Custody services for foreign stocks, etc.
(8) Other businesses
Tokyo
JASDEC DVP Clearing Corporation (Chuo-ku, Tokyo)
203

Shares (as of March 31, 2009)
Total of shares approved for issue

10,000Total of issued shares

8,500

Paid-in capital¥4,250,000,000

Shareholders

178

Major shareholders (as of March 31, 2009)
Number of shares
held

66

Stake inCompany(%)

Tokyo Stock Exchange Group, Inc.

1,900

22.35

Japan Securities Dealers Association

1,035

12.17

Nomura Holdings, Inc.

485

5.70

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

425

5.00

Mizuho Corporate Bank, Ltd.

425

5.00

Mitsubishi UFJ Trust and Banking Corporation

424

4.98

Nikko Citigroup Limited

321

3.77

Japan Trustee Services Bank, Ltd.

320

3.76

Trust & Custody Services Bank, Ltd.

284

3.34

Daiwa Securities SMBC Co., Ltd.

230

2.70

J a p a n Securi ti es Depo si to ry C enter, Inc. A nn u al R e p ort 2 0 0 9

Organization Structure (as of June 30, 2009)
Meeting of Shareholders
Board of Auditors
Auditors Office
Board of Directors
President & CEO
Compliance Office
General Administration Department
Corporate Planning Department
Equity Department
Shareholders Notification Office
Fixed Income and Investment Trust Department
International Department
Business Planning Department
Post–trade Services Department
Information Services Department
First Systems Department
Second Systems Department
Tokyo Operational Office

J ap an S e c urit ie s De p os it ory C e nt e r, I nc . A nnu al R e p ort 2 0 0 967

Japan Securities Depository Center, Inc.
Daini-Shoken Kaikan Bldg, 1-1,
Nihombashi-Kayabacho 2-chome
Chuo-ku, Tokyo 103-0025, JAPANTEL +81-3-3661-0139

www. jasdec.com / e n /