Dematerialization of the listed shares

Transcription

1 Dear Clients, 11th June 2008 The Bank of Tokyo-Mitsubishi UFJ, Ltd. Transaction Services Division Dematerialization of the listed shares The settlement reforms in Japanese market are making progress as originally scheduled and dematerialization of share certificates of the listed shares based on the Law Concerning Book-Entry Transfer of Corporate Bonds, etc. (Law No.75 of 2001, hereinafter called the Law ) is scheduled on 5 January 2009 (*) ( ) As the market consensus, 5 January 2009 is agreed as the target date to implement dematerialization. Legally, the date of implementation will be finally designated by the governmental ordinance among the dates before 8 Jun We herewith show introductory information and overview of the new Book-Entry Transfer System ( New System ) and upcoming schedules. In the series of events in the market concerning dematerialization, we appreciate if you could extend us your kind cooperation for smooth transition of all of your listed shares to New System. 1. OUTLINE OF THE CHANGE AND ACTIONS TO BE TAKEN... 2 (1) SCHEDULES AND ACTIONS TO BE TAKEN... 2 (2) CHANGE OF THE LEGAL FRAMEWORK... 3 (3) GRAPHIC IMAGE OF THE RELEVANT PARTIES (SOURCE: JASDEC HOMEPAGE) CONVERSION OF SECURITIES, REGISTRATION PROCESS AND ENTITLEMENTS... 5 (1) CONVERSION OF THE SECURITIES TO ELECTRONIC FORM... 5 (2) ENTITLEMENTS AND REGISTRATION NAME ON THE LIST OF SHAREHOLDERS... 5 (3) FOREIGN INDIRECT ACCOUNT MANAGEMENT INSTITUTION( FIAMI ) BOOK-ENTRY TRANSFER SYSTEM... 8 NEW FRAMEWORK TO ALLOCATE THE OWNERSHIPS OF FOREIGN OWNERSHIP LIMIT ( FOL )... 8 (1) HOW TO FIX THE ENTITLED SHARES FOR FOREIGN SHAREHOLDERS... 8 (2) EXAMPLE OF HANDLING OF SHARES EXCEEDING FOL LIMIT... 9 (3) HOW TO CONFIRM THE UPDATED FOL RATIO HELD BY FOREIGN INVESTORS RELATED LINKS: APPENDIX 1 : SPECIAL ACCOUNT...11 APPENDIX 2 : NAYOSE (AGGREGATION) AT JASDEC

2 1. Outline of the change and actions to be taken (1) Schedules and actions to be taken Events Actions to be taken by clients May 2008 Request of information on shareholders domiciled in Japan in case they request Name Identification ( Nayose ) at Japan Securities In case there are any applicable shareholders, our direct clients are requested to submit relevant information of shareholders. (Details are explained in the later page.) Depository Center, Inc. ( JASDEC ) for their holdings. Jul ~ Details of the application procedures of applying for Indirect Account Management Institution ( Indirect AMI ) to be announced by JASDEC BTMU will contact clients who request application for the Indirect AMI (mostly the clients who have Japanese shareholders requesting Nayose) with detailed application procedures Aug ~ Encourage clients to deposit physical BTMU will contact the clients to ask for the shares except for FOL issues to JASDEC instructions to deposit listed physical shares to JASDEC, before a deadline to be specified by JASDEC Submission of the consent letter for dematerialization BTMU will ask the clients to consent on the letter for dematerialization Oct ~ Encourage clients to deposit FOL shares to JASDEC BTMU will contact the clients to ask for the instructions to deposit FOL shares to JASDEC, within a period specified by JASDEC. Dec ~ Fix the list of the physical shares to be transferred to the Special Accounts(*) BTMU will contact the clients with the details of the outstanding listed physical shares to confirm they will be transferred to Special Accounts after Jan ~ Enforcement of dematerialization (Expected) Listed shares, convertible bonds and other applicable securities will be dematerialized. (*) Please refer to the Appendix 1 for the meaning of Special Account. 2

3 (2) Change of the Legal Framework Current Name of the Law concerning safekeeping law and transfer of the shares etc. After January 2009 (after dematerialization) Law Concerning Book-Entry Transfer of Corporate Bonds, equity, etc. (Law No.75 of 2001) Explanation Underlying concept of the law is the issuance of physical certificates. Although shares are deposited with JASDEC, withdrawal of shares is possible upon request. The account book represents the shareholders rights of the securities. Japanese Government Bonds, ETF, corporate bonds and some of the other securities are already dematerialized under this Law. Stock, convertible bonds, etc. will be newly handled under this Law. 3

4 (3) Graphic image of the relevant parties (Source: JASDEC homepage) <Current System> <New System> Depository and Book-entry Transfer System Book-Entry Transfer System( Dematerialized System) Issuer Issuer Register of shareholders Register of beneficial shareholders Notice of beneficial shareholders Re-registration request JASDEC Register of shareholders Notice of all shareholders All securities to be routed via JASDEC JASDEC Name Identification of shareholders Participant Withdrawal possible Participant *AMI =Account Management Institution Direct AMI Indirect AMI Indirect AMI Indirect AMI Direct AMI Share certificate holder Shareholder Shareholder Shareholder Shareholder Shareholder Shareholder Shareholder Shareholder Account Transfer Account Transfer How to register the name of shareholders Physical Certificates Multitiered Structure Current System There are two types of registration of securities: A register of shareholders by directly requesting to transfer agent ( TA ) and a register of beneficial shareholders via JASDEC The depository and book-entry transfer system is established in an environment of the existence of physical share certificates. There are two types for holding share certificates: certificates deposited with JASDEC and certificates not deposited with JASDEC. Shareholders have a choice between the two. JASDEC opens participants account for financial firms such as securities companies, and participants open customer accounts. Participants are positioned under JASDEC and customers are positioned under participants. (single tiered structure) As from Jan (after dematerialization) There is only one process of registration of securities: The list of shareholders will be created as the result of JASDEC s name identification system. Transfers of the title of the securities and registration are executed by account transfer(except for FOL issues). There will be no more Individual re-registration process to TAs which exists in the current system. There are no physical share certificates in the book-entry transfer system. All certificates are registered in the transfer account book. Shareholders do not have a choice. * In New System, only electrical records in transfer account book will represent ownership of securities. An Account Management Institution ( AMI ) can open other AMI accounts. Direct AMIs are positioned under JASDEC and Indirect AMIs are positioned under direct AMIs or other Indirect AMIs. (Multitiered Structure) 4

5 2. Conversion of securities, registration process and entitlements (1) Conversion of the securities to electronic form Current System As from Jan (after dematerialization) Listed shares, convertible bonds, etc now deposited with JASDEC Handled as JASDEC dematerialized securities. (almost the same handling as now in JASDEC) Physical Shares (listed shares) In case deposited before the end of 2008 In case the shares kept in physical form Handled as JASDEC dematerialized securities. (almost the same handling as now in JASDEC) Transferred to Special Account. Securities at Special Account firstly need to be transferred to the shareholders own account then later it can be delivered to the third parties. Fractional shares (share representing less than one share) No more fractional shares to exist after Proposed measure of transition: Fractional shares currently possessed by shareholders will be transferred to Special Account (*) after the issuer takes some measures such as share split to eliminate fractional shares. Odd-lot share (Less than one unit share) currently registered in the list of Transferred to Special Account (*). Odd lot shares now handled in JASDEC will be dematerialized. shareholders Unlisted shares Not to be dematerialized unless the issuer resolves no-issuance of the physical shares. Unlisted shares are not eligible in JASDEC even after dematerialization. Foreign shares Not to be dematerialized. Current depository and settlement system for foreign shares, etc. run by JASDEC will be effective continuously. Other securities (such as JGB, corporate bonds, ETF, etc) They have already been dematerialized in the past, therefore there will be no effect. (*)As for the shares transferred to Special Account, it cannot be directly transferred to the third parties and special procedure will be required. Please refer to the Appendix 1 for further explanation of Special Account. (2) Entitlements and registration name on the list of shareholders Currently, the registration to the list of shareholders is processed as follows; - Physical shares: Request for re-registration is declared to the transfer agents ( TA ) directly. - JASDEC shares: When the investors purchase the shares, beneficial shareholder cards are submitted to TA. On the next record date, JASDEC reports holding list of balances of shareholders to TA and TA registers them to the list of beneficial shareholders. After dematerialization, name, address and etc of the shareholders are firstly registered to the Shareholder s Information System in JASDEC after purchase of the securities. Then, on the record date, AMI sends the notice of all shareholders to JASDEC and JASDEC put in additional information to it. The data completed in JASDEC will be transferred to the issuer (via TA) and it is 5

6 registered to the list of shareholders. Nayose (Name Identification over the holdings possessed via multiple AMIs), which has been done by TA, will be administrated by Shareholder s Information System in JASDEC. Please refer to the following chart regarding the relation of shareholder, proxy and Nayose (Name Identification) process. Shareholder type As from Jan (after dematerialization) When shareholder is Non-resident of Japan BTMU will act as standing proxy for non-resident shareholders holding and process entitlements on behalf of them. The registration names of your accounts will be reported to JASDEC as the Shareholders Information and BTMU will be registered as proxy. There will be no shares in BTMU s clients accounts which BTMU will not act proxy, as is currently done for street name shares. When shareholder is Japanese resident Securities are now deposited in JASDEC BTMU will act as proxy for the holdings of resident shareholders, processing entitlements on behalf of them. The registration names of your accounts will be reported to JASDEC as the Shareholders Information and BTMU will be reported as proxy. Securities are now in physical form In principle, BTMU deposit physical shares to JASDEC before dematerialization and will act as proxy for resident client s holdings, processing entitlements except for the ones which have been transferred to Special Account. The registration names of your accounts will be reported to JASDEC as the shareholders information. However, if shareholder requests BTMU not to act as proxy, such application is possible requesting Nayose (**) process with JASDEC. (*) Handling shares of non-resident shareholders Since non-resident shareholders are requested to appoint standing proxy in Japan, the physical shares currently in street name will be deposited to JASDEC and BTMU will be appointed as proxy unless otherwise requested by BTMU clients. As for the shares held by non-residents, if the shares are held via multiple custodians (AMIs), the shares are recognized as the positions of the separate shareholders on the list of shareholders regardless of the registration name submitted by shareholders and entitlements will be processed via each custodian. (Nayose process, which is later explained, will not be applied to non-resident holdings) (**)Nayose, Name Identification process for Japanese shareholders After dematerialization, Information of shareholders domiciled in Japan will be administered in Shareholder s Information System in JASDEC. In case Japanese resident shareholders request Nayose (shares held via multiple custodians (AMIs) to be aggregated and identified as that of a single shareholder on the shareholders list) or request BTMU not to act as proxy for their positions, such arrangement is possible upon several documentation process. However, please note that even if the shareholders request Nayose, BTMU will not know whether Nayose is achieved over the positions via multiple custodians since JASDEC will not revert to BTMU for such inquiry to confirm Nayose to have 6

7 been achieved or not. As for the obligation and influences on our direct clients and shareholders, please refer to the Appendix 2. (3) Foreign Indirect Account Management Institution( FIAMI ) In case there is a shareholder who requests Nayose, all the intermediary banks between BTMU and shareholders are obliged to apply for FIAMI. It is currently announced by JASDEC that FIAMI status obtained for bonds cannot be used for equities and separate application need to be filed. As for the details of the application process and application forms will be disclosed by JASDEC after July. 7

8 3. Book-entry transfer system New framework to allocate the ownerships of foreign ownership limit ( FOL ) (1) How to fix the entitled shares for foreign shareholders Current After January 2009 (after dematerialization) (The tentative plan to handle FOL issues) Administration by Physical shares: Positions on the previous record date( R/D ) Although FOL shares could be deposited with Entitled position as of previous R/D will have JASDEC, Beneficial Shareholder Notification priority to receive rights on the next R/D up to Service is not provided by JASDEC for FOL the number of shares registered in its own name. issues. In other words, even though foreign New positions acquired after the previous investors deposit the FOL issues with JASDEC record date they would not be entitled as shareholders. In case the FOL is exceeded, entitlements on Re-registration of FOL shares: positions newly acquired from the previous R/D As most foreign investors request to be entitled as will be allocated on a pro rata basis. shareholder, it is market practice for sub custodians Odd lot share: not to deposit FOL shares with JASDEC, but to If odd lot shares are generated as a result of pro hold them in physical form in order to submit these rata allocation, such shares will be rounded up or shares to the issuing companies (=to TAs)for down to a board lot by lottery. Shareholders, direct registration along with shareholders who are entitled to only less than minimum information cards prior to the record date. In this board lot, will be entitled to the minimum board way, as long as the limitation has not been lot in priority in principle. exceeded, the name of foreign investors could be Laws and regulations to administrate FOL limit listed on the shareholders book so that Relevant laws and regulations are currently shareholders rights could be secured. under discussion and the drafts of legislations Shares rejected for registration have not been released yet. (Between record dates ( R/D s)) Report of the entitled shares on R/D If it has exceeded limit and there is no room for In case the limit of FOL is exceeded as of R/D, registration before R/D, the registration of shares the issuer reports the number of the (un)entitled would be rejected by the issuing company (TA) and registered shares after allocation. BTMU notify the shares would be held in physical form under our clients by MT 568 with details of breakdown street name by the sub-custodian. of the entitled and rejected shares. 8

9 (2) Example of handling of shares exceeding FOL limit Foreign Investors A B C D E F G H Total Previous Record Date (i) Current Record Date (ii) Grandfathering amount (iii) (i.e. smaller number of (i) and (ii) Excess amount (iv) (i.e. (ii)-(iii)) Pro rata allocation of excess amount (v) Rounded to board lot / the rest allocated by lottery(vi) Final Allocation Sample case: Limit of foreign ownership is 200 shares and there are foreign investors, A to H. The number of shares registered as of previous Record Date --- (i) The number of shares held as of current Record Date --- (ii) The maximum number of shares held as of current Record Date, which is not over the number of shares registered as of previous Record Date = The smaller of (i) and (ii) --- (iii) (grandfathering amount) Excess amount as of current Record Date --- (iv) (calculated by (ii) minus (iii)) In case the total of excess amount as of current Record Date amounts to 110 and the total of grandfathering amount is 150, pro rata allocation takes place in order to divide entitlements of 50 shares (200 minus 150) to 110 shares ((iv) multiplied by 50/110). Odd lot portions are to be rounded up or down to board lots by lottery. In this case, Investor A, C, D, F, G and H are to participate in the lottery. As a result, A, F, G, and H obtain one share each. Final allocation is thus determined. (3) How to confirm the updated FOL ratio held by foreign investors Current After January 2009 (after dematerialization) The following procedures will be conducted on a daily basis: The issuers or TAs announce the updated ratio of foreign To JASDEC: AMIs report the aggregate number of book-entry shares ownership without any specific directly held by foreign investors per each issue. Issuing rules. BTMU regularly inquire to the issuers or TAs the current holding ratio possessed by the foreign investors and announces it to BTMU s clients. company reports the number of outstanding shares. From JASDEC: Based on the information from issuing company (or TA) and AMI, JASDEC will calculate and announce direct shareholding ratio by foreign investors for each FOL issue. 9

10 4. Related Links: (1) Electronic Share Certificate System (Paperless Share System) FAQ (2) Outline of Stock Dematerialization 10

11 Appendix 1 : Special Account 1. What will happen to the physical shares after the end of 2008? The rights of ownership of physical shares which are not deposited to JASDEC before the end of this year will be automatically recorded to the Special Accounts and physical shares cannot be used as the certificates to represent the ownership of the shares any more. 2. Who opens Special Account? It is the issuer who opens its Special Account with Special Account Management Institutions (most probably Transfer Agent the issuer currently designates) for recording rights of the shareholders, whom the issuer could not locate the accounts for recording rights prior to dematerialization. 3. How shareholder transfer the shares registered to Special Account? In order for the shareholders to transfer the securities out from this Special Account, it takes some specific procedures and the shares cannot be directly transferred to the third parities. In case the collateral rights to be set, it cannot be easily executed either. 4. How shareholders know whether their shares will be registered to Special Account? As for the shareholders who have the physical shares, which will be dematerialized in January 2009, the issuers will send notice before the end of November to the registered address to ask the shareholders to deposit the shares with JASDEC. BTMU will also inform its clients to deposit physical shares by checking applicable clients who have listed shares in physical form. 5. In case the shares are in street name, how the owner can claim the rights? In case the shares are in street name and transferred to Special Account, the special documentation process to determine the rights of real shareholder will be required. Details such as its procedures and handling fees under Special Account have not been decided yet. 11

12 Appendix 2 : Nayose (aggregation) at JASDEC Below chart is the comparative table of the two cases where standing proxy information is contained and is not contained in the Shareholder s Information standing proxy s name NOT to be listed in the Shareholder s Information standing proxy s name to be listed in the Shareholder s Information Whether the shareholders positions to be aggregated by JASDEC or not The same shareholder s securities via multiple AMI WILL BE aggregated (Nayose conducted) The same shareholder s securities via multiple AMI WILL NOT BE aggregated (Nayose not conducted) Names on the list of Basically the name of individual or each Registration name designated by global shareholder s list company will be on the list of the custodians will be on the list of shareholders shareholders (As JASDEC compares the Shareholder s Information reported from multiple AMIs, the information submitted via separate AMIs need to be identical.) Assumed customers/types of holding of securities Such as stocks received from owner company, pledged securities of which account name and security registration name are currently different An investor who does not stick to name of security to be registered and opts for the omnibus account under the name of global custodian Requirements to final Items to be notified to JASDEC are as No change from current obligation investors( Japanese residents) follows. (1) If the shareholder is an individual - Full name in KANJI and KATAKANA - Postal code - Address in KANJI - Date of Birth in Western calendar (2) If the shareholder is a legal entity - Name of the entity in KANJI and KATAKANA - Postal code - Address in KANJI - Title of the representative in KANJI - Full name of the representative in KANJI and KATAKANA Influences on final investors names on the list of shareholders the final investor s name to be specified on the list of shareholders the name designated by global custodian to be on the list of shareholders notification concerning receive entitlements not via BTMU (As for receive entitlements via BTMU entitlements including dividends receipt of dividend payments, BTMU s account can be designated ) Exercise of entitlements BTMU will intermediate the process of entitlements (*) which involve the change of All entitlements and actions to be exercised via BTMU accounts transfer book. Voting cards A voting card issued in the name of final investor will be directly sent to the final The voting cards will be sent to BTMU. BTMU can execute the voting rights only by requests. investor (in Japan). Attendance to the General meeting Possible. For omnibus account, participating in the general meeting is not allowed as the voting and cannot be issued in the name of a specific investor. 12

13 Submission of attribute The information must be submitted before No need to submit. information including individual information the deadline and the information needs to be identical even if it is submitted via multiple AMIs. The Handling of the Information on the List of Shareholders in case the Securities are held via Securities positions are aggregated and administered based on the Shareholder s Information declared. (Nayose to be conducted) Securities positions held by each AMI are administered as securities holdings of the other investors, and not aggregated. (Nayose not conducted) multiple AMIs. Influences on and Requirements to Global Custodians (Direct customers of BTMU) Global custodians who intermediate positions of Japanese residents applicable to Law Concerning Book-Entry Transfer of Corporate Bonds, etc. are subject to the Japanese laws and required to obtain the license of FIAMI. Obtaining FIAMI and its Needed (Submission of documents including Not needed. maintenance registration fee of 315, 000 (inc. Consumption tax) is required.) Services to Investors who request Nayose, aggregation of positions per investor Possible Impossible. (*)Corporate Action events which require the alteration of the account transfer book, BTMU will intermediate such requests to JASDEC even if BTMU is not appointed as a proxy. For example, requests for odd lot shares, bonus issues are the applicable cases. As for tender offer bids, BTMU cannot intermediate it since it requires authorized attorney to act on behalf of the shareholders. BTMU Profile Corporate Name: The Bank of Tokyo-Mitsubishi UFJ, Ltd. Registration Number: Director General of the Kanto Local Finance Bureau Registration Number 5 Head Office: 7-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo Japan Main business areas: Banking business, Registered financial institution business 13