japan market profile...settlement matching by the preceding business day of the settlement date...

MUFG Bank, Ltd. A member of MUFG, a global financial group

AUGUST 2019

Japan Market Profile

August 2019

The information contained herein has been derived from several sources believed to be reliable at the time of publication. Although having made every effort to ensure the accuracy of the contents, MUFG Bank, Ltd. does not assume any liability for losses either direct or consequential caused by the use of this information. Copyright © 2019 MUFG Bank, Ltd.

TABLE OF CONTENTS

Section 1: Japan Market Information ............................................................................................ 1 1.1 A Glance at Japan .......................................................................................................................... 2 1.2 Highlights of Changes in the Market............................................................................................... 3

Section 2: Our JPY Custody Services ........................................................................................... 6

Section 3: Stock Exchange .......................................................................................................... 10 Section 4: Central Securities Depository & Registration ........................................................... 13

4.1 Japan Securities Depository Center – JASDEC ........................................................................... 14 4.2 Bank of Japan – BOJ .................................................................................................................... 16

Section 5: Clearing House ........................................................................................................... 18 5.1 JSCC & JDCC .............................................................................................................................. 19 5.2 Guarantee Fund............................................................................................................................ 19

Section 6: Regulators and Regulations ...................................................................................... 21 6.1 Regulators .................................................................................................................................... 22 6.2 Regulations and Restrictions ........................................................................................................ 22 6.2.1 Foreign Ownership Restrictions, Limits & Disclosure Requirements ........................................ 22 6.2.2 Substantial Shareholding Reporting (5% rule)* ......................................................................... 24 6.2.3 Direct Inward Investment Restriction ......................................................................................... 24 6.2.4 Restrictions on short selling of stocks ....................................................................................... 24 6.2.5 Anti-Money Laundering and Anti-Terrorist Financing ................................................................ 25 6.2.6 Reporting Requirements under OECD-CRS ............................................................................. 25

Section 7: Qualifications of Account Management Institution .................................................. 26 7.1 Outline of Qualifications required for holding Japanese Securities .............................................. 27 7.2 Transfer Account Management Institution (AMI) .......................................................................... 27 7.3 Foreign Indirect Participant (FIP) .................................................................................................. 28 7.4 Foreign Indirect Account Management Institution (FIAMI) ........................................................... 28 7.5 Qualified Foreign Intermediary (QFI) ............................................................................................ 28

Section 8: Securities Settlement ................................................................................................. 30 8.1 Trade Settlements ........................................................................................................................ 31 8.2 Reporting ...................................................................................................................................... 33 8.3 Buy-in procedures......................................................................................................................... 33 8.4 Turnaround trading ....................................................................................................................... 34

Section 9: Corporate Action & Taxation ...................................................................................... 35 9.1 Corporate Action in General ......................................................................................................... 36 9.2 Event details ................................................................................................................................. 36 9.3 Taxation ........................................................................................................................................ 39

Section 10: Cash Clearing ............................................................................................................ 42 10.1 Currency ..................................................................................................................................... 43 10.2 Cash Clearing Systems (External Payment) .............................................................................. 43 10.3 Market Practice ........................................................................................................................... 43

Appendix I – Tax Rates for Countries/Regions under DTT with Japan ..................................... 45

Appendix II – My Number System in Japan ................................................................................ 47

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1 The information contained herein has been derived from several sources believed to be reliable at the time of publication. Although having made every effort to ensure the accuracy of the contents, MUFG Bank, Ltd. does not assume any liability for losses either direct or consequential caused by the use of this information. Copyright © 2019 MUFG Bank, Ltd.

Section 1: Japan Market Information

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1. JAPAN MARKET INFORMATION

1.1 A Glance at Japan

1.1.1 Settlement Cycle1

Financial Instrument On-shore Transactions Off-shore Transactions2

・Japanese Government Bonds T+1

T+2 (out of the scope of T+1)

・Listed Stocks,

・ETFs,

・REITs

T+23 T+2

・Corporate Bonds,

・Municipal Bonds,

・Samurai Bonds

T+3 (shortening to T+2 scheduled in July 2020)

T+3 (out of the scope of scheduled T+2)

CURRENCY ・Japanese Yen (JPY)

LOCAL TIME ・UTC +09:00

REGULATORS

・Japanese Financial Services Agency (JFSA)

・Bank of Japan (BOJ)

STOCK EXCHANGES

・Tokyo Stock Exchange (TSE)

・Nagoya Stock Exchange (NSE)

・Fukuoka Stock Exchange (FSE)

・Sapporo Stock Exchange (SSE)

CENTRAL SECURITIES DEPOSITORY

・Japan Securities Depository Center (JASDEC) for stocks, ETFs, REITs, non-JGB bonds, and Sukuks, etc.

・Bank of Japan (BOJ) for Japanese Government Bonds (JGBs)

CENTRAL COUNTERPARTY CLEARING

・JASDEC DVP Clearing Corporation (JDCC)

・Japan Securities Clearing Corporation (JSCC)

MARKET REGULATIONS & RESTRICTIONS

・Ownership restrictions on foreign Investors

・Reporting of substantial shareholding (5% rule)

・Restrictions on inward foreign direct investment

・Restrictions on short selling of stocks

・OECD-CRS Reporting Obligations

(For details, please see 6.2 “Regulations & Restrictions”.)

1 The table indicates settlement cycles for outright transactions. 2 Off-shore Transactions refer to the transactions with non-residents. Regarding such transactions, due to the fact that there are often multiple parties both from domestic and overseas getting involved along the transaction chains, instead of a single standardized pattern there is a range of settlement cycles existing in practice. The settlement cycle given here indicates the major cases. 3 Settlement cycle for stocks, ETFs and REITs has been shortened to T+2 from T+3 from July 16, 2019 (trade date basis).

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1.2 Highlights of Changes in the Market

1.2.1 INFRASTRUCTURE

1.T+1 JGB Settlement Cycle Implemented on May 1, 2018

The settlement cycle of T+1(trade date basis) started to apply to JGB transactions between residents from May 1, 2018. While cross-border JGB transactions, with or between non-residents, is NOT within the scope of the T+1 JGB Settlement Cycle, the demand to accommodate a shorter (T+2) settlement cycle for cross-border transactions may increase in terms of reducing settlement risks etc. The potential move of cross-border JGB transactions to T+2 may increase settlement failure, thus further cooperation to avoid settlement fails is encouraged. Related news release is as below:

(1) BoJ Commenced New Operational Process for JGB settlement for Foreign Central Banks etc.

(Newsflash: June 14, 2018 / September 28, 2017) Effective June 14 2018 (settlement date basis), BOJ commenced the new operational process using the Pre-Settlement Matching System (PSMS) for settlement matching for the JGB custody services which they provide to overseas institutions (foreign central banks and supranational organizations holding JGB accounts with BOJ). Although cross-border JGB transactions with or between non-residents have not been in scope of T+1 initiative, BoJ is working to enhance its operational capability to accommodate T+2 JGB settlement for foreign central banks etc. Such efforts include introducing the use of PSMS and revising the settlement matching process via telephone to T+2 settlement cycle from T+3.

(2)“ Points to Note for Post-Trade Processing (Settlement Matching) of JGB Transactions” published by JSDA

(Newsflash: December 22, 2017) On December 22, 2017, JSDA published “Points to Note for Post-Trade Processing (Settlement Matching) of JGB Transactions”. Its major purpose is to inform points to note with regards to cross-border JGB transactions for smooth operations of the whole JGB market. Given that the standard settlement cycle of domestic JGB transactions between residents was shortened from T+2 to T+1 (effective May 1st, 2018), further cooperation to avoid settlement fails shall be essential, including cross-border JGB transactions which are not within the scope of the T+1 initiative. Main points are summarized as below:

Send settlement instructions as early as possible so that domestic custodians can complete settlement matching by the preceding business

day of the settlement date (S-1) in Japan. Thoroughly agree on settlement details between

trading counterparties when executing orders, and carefully avoid any discrepancies between the settlement instructions sent to each custodian.

(3) Promoting the Use of Globally Accepted Form of Repurchase Agreement

(Newsflash: January 27, 2015) In view of the demand for JGBs to grow globally, it is necessary that the JGB market develop a globally-accepted transaction framework to enhance its international competitiveness. From such perspective, promoting the use of repurchase agreement (called as “Gensaki” in Japan) along with global standard was also on the T+1 initiative’s agenda. The new GC Repos under the Subsequent Collateral Allocation Method, where JSCC shall allocate collaterals as CCP, will adopt the Gensaki which are traded as the global standard in its standard agreement.

In February 2018, JSDA published the revised format of Gensaki general agreement based on the above points.

According to BOJ’s report “Trends in Market Transactions after Shortening the JGB Settlement Cycle (to T+1)” published on May 30, 2019, after the settlement cycle moved from T+2 to T+1, it has seen increasing use of repurchase agreement (Gensaki). In contrast to the fact that about 30% of the repo market participants had not yet completed establishment of system as of the end of July 2017, one year later, more than 90% of the participants have had the systems in place, including application of the Gensaki general agreement.

2.JGB Retail Trading and Straight Bond Transactions - on the way towards T+2 in 2020

JSDA announced in March 2019 that the shortening of the settlement cycle for JGB retail trading and straight bond transactions to T+2 is scheduled on July 13, 2020 (trade date basis), while transactions with non-residents are out of the scope.

This initiative covers the following transactions.

1.JGB Retail Trading -OTC JGB trading -Redemption before maturity of JGBs for individual investors

2.Straight Bond Transactions*3 -Municipal Bonds -Corporate Bonds -Samurai Bonds, etc.

3.Shortening of the Stock Settlement Cycle (T+2) Implemented on July 16, 2019

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(Newsflash: July 10, 2019) (1) T+2 Stock Settlement Cycle was successfully

implemented on July 16, 2019 (trade date basis) as scheduled.

(2) Instruments within the Scope of Implementation of T+2

Settlement cycle for transactions of listed securities*1 moved to T+2 on July 16, 2019. To be more specific, the transition has impact on the following instruments:

-Listed Stocks*2 -Listed ETF -Listed REITs

(3) Measures to avoid settlement failure

We also recommend reviewing the guideline*3 that was published in September 2017, aiming to avoid increase of settlement failure due to the shortened settlement cycle. In the guideline, the market participants are recommended to: ・confirm settlement information (SSIs) at the trading

stage ・ensure settlement instructions to be issued and sent

for pre-matching as early as possible ・ensure the accuracy of settlement instructions to

promote pre-matches, and promptly resolve unmatched instructions

・determine the course of action on settlement date ・determine the course of action in order to avoid fails

on record date ・establish their operational structure required to meet

the above-mentioned fails. Notes: (*1) JGB is out of the scope. (*2) As for CB, please note that the settlement cycle for market transactions will be shortened from T+3 to T+2, but the settlement date for exercise of stock acquisition rights remains unchanged as X (exercise date) +2. In this regard, investors need to be careful about the date of sending exercise/conversion instruction for CB, especially when selling shares (converted from CB) to market. (*3) The guideline refers to “Points to Note concerning Settlement Failure for Stocks” published by JSDA on September 29, 2017. Website link: Points to Note concerning Settlement Failure for Stocks Practice in line with the guideline is anticipated to foster smooth execution and as it gains more awareness and better understanding among market participants, more of both domestic and foreign market participants are expected to adopt the measures as advised. In the meanwhile, the guideline will not in any way restrict the rights of market participants permitted by law and it is not intended to prevent the use of measures other than those recommended in the guideline in accordance with agreements between both domestic and foreign market participants and trading parties. 4.Ongoing Preparation for Cross-border DVP Link between BOJ-NET JGB Services and HKD CHATS

Bank of Japan (BOJ) has been discussing with Hong

Kong Monetary Authority (HKMA) about introducing framework that enables DVP settlement for cross-border transaction (cross-border DVP link) of Japanese government bonds (JGBs) and Hong Kong dollar (HKD) by linking BOJ-NET (Bank of Japan Financial Network System) JGB Services with HKD CHATS (Hong Kong dollar Clearing House Automated Transfer System).

BOJ and HKMA intend to implement the cross-border DVP link around spring of 2021. In April 2018, BOJ announced that it would start preparing for the implementation within the year. Details such as go-live date will be made public in due course, depending on the progress in the preparatory work of BOJ and HKMA. (Reference: http://www.boj.or.jp/en/announcements/release_2018/rel180410a.pdf)

1.2.2 TAXATION

1.Change of Tax Treatment on Bond relating Repo Transaction

(Newsflash: June 28, 2019) On June 21 2019, Japanese Financial Services Agency (JFSA) held an explanatory meeting for publishing a circular with regard to the change of taxation on interests of bond (JGBs, municipal bonds, corporate bonds, etc.) by the Japan Securities Dealers Association (JSDA) to relevant financial institutions, and on Wednesday, June 25, 2019, the circular was published via the Japanese Bankers Association (JBA).The circular communicates the change of the withholding tax treatment related to the interests of bond paid during the period of Repo, etc*. Prior to the publication of the circular, such withholding tax used to be determined based on the tax status of a borrower/buyer who is a bondholder, having ownership of the bond, on the interest payment date. However, in accordance with the circular, tax status on interest should be determined based on the tax status of a lender/seller) who actually/finally receives the interests(equivalent) on interest payment date based on the applicable contract (e.g. Global Master Repurchase Agreement (GMRA), Global Master Securities Lending Agreement (GMSLA) etc.)

(1) Clients who conducts Repo, etc. need to submit the “Application Form or Special Document for Withholding Tax Exemption on the interests, etc. from Japanese Government Bonds, etc. (J-BIEM)” to our bank, if necessary.

(2) The deadline of the response to the change was decided to the end of December, 2019 at the latest by the agreement between JFSA and the National Tax Agency (NTA).

(Note) (*) Exception: Repo transaction that borrower/buyer receives interest on payment date and the interest (or

http://www.jsda.or.jp/en/activities/research-studies/content/fail_ryuui_eng.pdf

http://www.jsda.or.jp/en/activities/research-studies/content/fail_ryuui_eng.pdf

http://www.boj.or.jp/en/announcements/release_2018/rel180410a.pdf

http://www.boj.or.jp/en/announcements/release_2018/rel180410a.pdf

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equivalent) is not paid to the lender/seller on interest payment date. The interest is adjusted on the end date of Repo transaction as a repurchase price, etc. In such case, tax status as at the interest payment date remains to be the borrower/buyer of the bond. 2.Japan Consumption Tax Rate to Increase to 10% in October 2019

(Newsflash: August 8, 2019) The consumption tax rate in Japan will increase from 8% to 10% effective on October 1, 2019. The new tax rate will be applied to the safe keeping fee and transaction/activity fee, etc. with respect to our custody services.

1.2.3 REGULATIONS & MARKET PRACTICE

1. My Number System

(Effective date: January 1, 2016 / Newsflash: November 16, 2015 / December 28, 2018) My Number Act was enforced in October 2015, and the relevant reporting requirement applies since January 2016. Legal obligations are imposed on each party within custody service chain (My Number holder (beneficial owner of Japanese securities), issuing company, sub-custodian, Foreign Account Management Institution (e.g. global custodians, ICSDs)) to fulfill the reporting requirement before the end of December 2021 (the original 3-year Grace Period was set as January 2016 - December 2018, and the deadline was further extended by 3 years in the 2018 Tax Reform).

To minimize operational costs and burden of our clients, MUFG continuously approached the relevant tax authorities to receive their confirmation in May 2017 for both equities and bonds. My number reporting

requirement applies to all JPY securities (i.e. equities and bonds) held under custody and is based on the existing account structure. The only obligated investors are: (1)shareholder whose name is registered in the shareholder registry of issuing entity/company directly; (2)bondholder who has a segregated account with Sub-custodian under his/her/its own name (More detailed information about My Number System is given in Appendix II.)

2. Alleviation of the Application Procedures for Qualifications Necessary for Foreign Account Management Institutions

(Newsflash: July 2, 2019) It is required for foreign intermediaries to be approved and qualified by the relevant Japanese regulators and depositories prior to holding Japanese securities for third-parties (i.e. your clients) under certain conditions. In order to facilitate the related application processes by reducing cost and burden for our valued clients, MUFG made a proposal to the competent organizations (Financial Services Agency, The Bank of Japan and Japan Securities Depository Center). As a result of our efforts, our proposal was accepted and consequently, documentation requirement has been partially alleviated and some procedures in the application process have been clarified for qualifications, Account Management Institution (AMI), Foreign Indirect Participant (FIP) and Foreign Indirect Account Management Institution (FIAMI).

On July 1, 2019, Bank of Japan (BOJ) released a new set of simplified application form for Approval as FIP (Foreign Indirect Participant) in the JGB Book-Entry System. It is expected that the administrative burden on applicants will be mitigated by the simplification of documentation and the period required for approval as FIP will be shortened.

1.2.4 Others S&P Revised its Outlook on Japan to Positive from Stable.

The Credit Ratings of Japanese Government and Japanese Mega Banks are as below (as of August 19 2019) Rating Agency Category Government of Japan MUFG Bank Mizuho SMBC

Fitch

Long Term A A A- A

Short Term F1+ F1 F1 F1

Outlook Stable Stable Stable Stable

Moody’s

LT Issuer Rating A1 A1 A1 A1

Long Term A1 A1 A1 A1

Short Term P-1 P-1 P-1 P-1

Outlook Stable Stable Stable Stable

S&P

LT Foreign Issuer Credit A+u A A A

ST Foreign Issuer Credit A-1u A-1 A-1 A-1

Outlook Positive Positive Positive Positive

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Section 2: Our JPY Custody Services

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59%18%

23%

Region of Customers

AmericasEuropeMiddle East, Asia and others

2. OUR JPY CUSTODY SERVICES Our Services Having been recognized as a leader in custody services for more than 50 years, our bank provides a full range of custody services to the world’s leading institutional investors, and have been awarded by GC Magazine as “Global Outperformer” for 15 consecutive years (2003-2017).

We have a dual operation (hot/hot BCP) structure with main office in Tokyo and secondary office in Osaka to continue the custody operation without disruption even in case of disaster. Location The second site of custody operations in Osaka is equipped with the same facility and infrastructure as the main site in Tokyo. The on-line connections with the CSDs (BOJ and JASDEC) are also maintained from the both ends. Terminals at the two sites are connected to the same host computer with an emergency back-up system so that operators are able to see transactions being processed at the other end with no time lag by displaying the same screen on their own monitor or over the multiple monitors.

After the Great East Japan Earthquake in 2011, our bank swiftly established a new site in Osaka, approximately 560 km west from Tokyo. Currently, matching and settlement are conducted on a dual hot/hot operation basis at both Tokyo and Osaka. As a result, in case another critical disaster may occur in Tokyo, we would be able to continue operations at the Osaka site in a seamless manner, or vice versa.

Operation Systems As a market leader, our bank devotes ourselves to continuously investing in system enhancements.

JPY Cash Clearing System

Our JPY cash clearing system, “ORCHID”, was launched in August 2014. It has realized high STP ratio by enhance Artificial Intelligence, speeded up processing by paperless operation and widened the scope of our hot/hot dual-operation between Tokyo and Osaka.

Custody System The transaction volume capacity increased by twice in March 2016.The current usage rate is around 30%, well below the full capacity. STP ratios for settlement of DVP and FOP transactions are both maintained at a very high level.

Custody & Cash Clearing Operation

Main Site

Transaction Services Division (Tokyo) -- Relationship Managers (RM) are located Address: 1-3-2, Nihombashi Hongoku-cho, Chuo-ku, Tokyo 103-0021, Japan

Back-up Site

Transaction Services Division (Osaka) -- Hot/Hot dual operation Address: 3-5-6, Fushimimachi, Chuo-ku, Osaka-shi, Osaka 541-8530 Japan

(As of January 2019)

Approx.25%

Japan Custody Market Share

62%24%

11%3%

Type of Customers

Global CustodiansInstitutional InvestorsCSDOthers

Bonds52%

Equities48%

Type of Assets

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We keep working to accommodate the implementation of shortening of the settlement cycle for JGBs and Equities for the

expected volume increase to contribute in reduction of settlement risk in the market, and preparing to be in line with JASDEC IT system enhancement in the year 2020.

An overall system renewal of our custody system is scheduled for the year 2020 to further improve our service levels and operational efficiency.

Business Continuity Plan MUFG bank has a guideline on crisis management and regularly conducts a unit and functional test to verify the feasibility of the safety measures and to simulate a wide range of disasters. The test emphasizes reviews and confirmation of the procedures for responding to a disaster, including the organization and roles of the emergency response, the line of command, etc. EDP audits are performed annually by Deloitte Touche Tohmatsu as part of its annual audit as well as by internal auditors of the bank during internal audit. Recovery and resumption of custody operations from a disaster is given the highest priority within the bank among other business operations. After the dual operation site was established in Osaka in 2011, we have kept making efforts of expanding the area available to dual operations. For custody operations, matching and settlement transactions are currently split into two sites; Tokyo and Osaka. Either of the sites is capable of taking over such transactions from the other end in case of an emergency.

Web-Based Services We provide web-based account monitoring and reporting services to our clients where they can:

- monitor their holding position and settlement status; or obtain information about corporate actions (WEBINQ: custody)

- view / inquire their account history such as daily balances, summary of debits/credits, etc. up to three months dating back (DUO: cash).

Insurance MUFG Bank maintains banker’s blanket bond insurance, which covers all risks normally conceivable in the course of banking business inclusive of custody services covering losses on premises and losses while transit by mail, messengers, armed car and losses due to misplacement. The following cases are excluded from the coverage: willful misconduct, war, seizure, act of any government, nuclear contamination, etc. The coverage is provided by a syndicate of insurance companies managed by the Tokio Marine & Nichido Fire Insurance Co., Ltd and the Sompo Japan NIPPONKOA Insurance Inc. Compliance and Audit Governmental Audit The Banking Act authorizes the Financial Services Agency of Japan (JFSA) to audit banks in Japan. Such audits are conducted with a very short advance notice by officials from the Inspection Bureau of JFSA. Furthermore, the Bank of Japan (BOJ) conducts an on-site examination on banks similar to that undertaken by JFSA. Notice is served to the examiner’s visit, which is conducted for the purpose of checking day-to-day operations and giving pertinent advice. Their reports are shared with the Board of Directors of MUFG Bank. External Audit External auditors perform an audit on MUFG bank every year. In addition to the bank-wide annual audit, an individual SSAE18 audit on our custody operations is also conducted on an annual basis. The external auditor is Deloitte Touche Tohmatsu. Internal Audit Transaction Services Division conducts a system of “Risk Self-Assessment”, which uniformly applies to each division and office of the bank. The area of coverage consists of: 1) physical check, account reconciliation; 2) internal control; 3) information security and 4) priority items. Assessment is regularly carried out by officers assigned by General Manager. For instance where any problem or deflect is detected, a “self-assessment finding response/feedback memo” is prepared and reported to the Chief Manager in charge of the relevant line of business, who is responsible to take remedial action and feed this back to the assessor. This memo is forwarded to the General Manager. The Internal Audit & Credit Examination Division (*1) perform evaluation of this Risk Assessment on each division at least once a year and draws up its annual & 3-year internal audit plans.

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(*1) Internal Audit & Credit Examination division, the division in charge of internal audit within the bank, is organizationally and physically separated from other divisions to secure independency. Vault Audit After the dematerialization of listed shares implemented on January 5th, 2009, most of the physical securities have become dematerialized except for unlisted/delisted shares, etc. Although the remaining small amount of physical securities do not move frequently, our bank conducts a monthly investigation on the movement of physical securities which are in the vault and an annual investigation on the balance of the securities in vault. Electronic Data Processing System access is restricted and sustainability is enhanced by the following controls:

- Physical access: the EDP room and the securities processing room are locked, and only authorized personnel are admitted. Card key access is necessary to enter into these areas. The location of the EDP room is known only to the authorized personnel.

- Password assignment: IDs and Passwords for various terminals are assigned only to the authorized personnel, who are given an individual ID & password. All IDs & passwords are registered and are kept confidential and strictly controlled. Passwords are changed once every three months. Levels of system access: system access levels are segregated according to the authorization levels. System access rights are entitled to the users based on each user’s designated functions, e.g., system administration or processing operations, maker or authorizer, etc., which are strictly separated and controlled.

Notifications on Risks and Fees for Our Custody Services Adverse changes to the operational and/or financial condition of a financial service provider of securities services

could directly result in a potential loss to clients. Custody fees are typically calculated by applying a certain fee rate to the asset balance under custody and a certain

amount to the number of transactions. Other fees apply, in addition, to particular types of transactions. Please contact us for further details.

This notification complies with the Japanese “Financial Instruments and Exchange Law” as of September 30th,

2009.

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Section 3: Stock Exchange

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3. STOCK EXCHANGE There are four stock exchanges in Japan. The largest is the Tokyo Stock Exchange (TSE), which was established in 1878. TSE and Osaka Securities Exchange (OSE) merged and established a new holding company, Japan Exchange Group (JPX) in January 2013. After the merger, Cash equity market of OSE was integrated into TSE. In 2014, OSE renamed Osaka Exchange and integrated TSE derivatives market, serving as the venue for derivatives trading. Currently TSE has more than 90% share of equity and ETF trade. OSE has about 50% share of derivatives trade (futures and options) in the domestic market. All trading is conducted electronically.

Stock Exchanges • Tokyo Stock Exchange (TSE)

• Nagoya Stock Exchange (NSE)

• Fukuoka Stock Exchange (FSE)

• Sapporo Stock Exchange (SSE)

Capital (JPX) JPY 291,450 million as of end of March 2019

Trading Hours (TSE) Monday – Friday • Trading Hours Morning Session 9:00 – 11:30 Afternoon Session 12:30 –15:00 • Order Acceptance period Morning 8:00 – 11:30 Afternoon 12:05 – 15:00

Number of Listings (TSE) 3,675 (3,670 domestic and 5 foreign stocks) (as of July 24, 2019)

(As of March 2019, in JPY billion)

Exchange Ownership Capital Listing Governance Market

Tokyo Stock Exchange, Inc.

Stock Corporation 11.5 N General meeting of shareholders, Board of Directors, Articles of Incorporation, Rules & Regulations

・1st Section, ・2nd Section ・Mothers ・TOKYO PRO ・JASDAQ

Nagoya Stock Exchange, Inc.

Stock Corporation 1.00 N General meeting of shareholders, Board of Directors, Articles of Incorporation, Rules & Regulations

・1st Section ・2nd Section ・Centrex

Fukuoka Stock Exchange

Membership Organization

N/A N General Assembly of Members, Board of Directors, Articles of Incorporation, Rules & Regulations

・Main market ・Q-Board

Sapporo Securities Exchange

Membership Organization

N/A N General Assembly of Members, Board of Directors, Articles of Incorporation, Rules & Regulations

・Main market ・Ambitious

In November 1999, TSE established “Mothers” market, a new market segment for high growth and emerging stocks. In May 2001, NASDAQ Japan was also established for these stocks by alliance with OSE. However, its partnership ceased in October 2002 and NASDAQ Japan suspended its operation, changing its name as “Hercules” effective from December 16th, 2002. As of May 29th, 2009, TOKYO AIM, Inc. (“TOKYO AIM”) obtained license from Japanese Financial Services Agency (“JFSA”) to operate a stock exchange. As a result, it started the operations and began to process formal applications from market participants to become Nominated Advisors (J-Nomads) effective from June 1st, 2009. In April 2010, OSE and JASDAQ were merged. In accordance with this merger, New “JASDAQ” market was newly

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formed with the integration of Hercules of OSE and two emerging markets of JASDAQ and NEO, and began its trading at the Osaka Securities Exchange on October 12th, 2010. TSE acquired the remaining 49% shares of TOKYO AIM currently held by the London Stock Exchange Group Plc, on March 28th, 2012, and integrated TOKYO AIM into the Tokyo Stock Exchange on July 1st, 2012, and re-brand the TOKYO AIM market as ‘TOKYO PRO Market’ to create a new market in TSE. At the same time, TOKYO PRO-BOND Market for professional investors made a new start in TSE. With this integration, TSE became able to provide a risk capital market flexibly tailored for professional investors as well as the existing market for the general investors. The derivatives market integration between TSE and OSE was completed on March 24, 2014.

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Section 4: Central Securities Depository & Registration

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4. CENTRAL SECURITIES DEPOSITORY & REGISTRATION

There are two central securities depositories in Japan: (1) Japan Securities Depository Center Inc. (JASDEC) for equities, CBs and Corporate Bonds, etc., and; (2) Bank of Japan (BOJ) for JGBs.

4.1 Japan Securities Depository Center – JASDEC

As of January 5th, 2009, listed shares have become fully dematerialized and this has brought an end to the market reforms towards the completion of electronic processing of securities in Japan. The JASDEC book-entry transfer system for shares, under The Act on Book-Entry Transfer of Company Bonds, Shares, etc., has eliminated physical share certificates of all listed companies, and the handling of shareholders’ rights – its creation, transfer and elimination – now takes place in non-physical form in accounts opened by JASDEC, custodians as well as brokers in Japan. Other book-entry systems for corporate bonds etc. and for foreign shares are operated similarly by JASDEC. Address Daini Shoken Kaikan Building, 1-1,Nihombashi Kayaba-cho 2-chome, Chuo-ku, Tokyo

Brief history Established and started operations in December 1984 under a permit granted by the Ministry of Finance and Ministry of Justice. Depository services began in 1991.

Governing law The Act on Book-Entry Transfer of Company Bonds, Shares, etc. (The Act)

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

Type of Entity Changed its legal status in 2002 from a non-profit foundation structure to a joint stock company.

JASDEC entrusts part of the clearing operations to Japan Securities Clearing Corporation (JSCC), which is owned mainly by all exchanges in Japan, with JPX being the largest shareholder.

Eligible instruments Exchange listed shares, CBs, foreign securities, etc. (including ETFs, REITS, etc.)

Corporate bonds (including company bonds, municipal bonds, Samurai bonds, etc.);

Short-term corporate bonds (CPs);

Investment trusts

Participation obligation Participation in the securities depository and book-entry transfer system in Japan became mandatory for listed companies upon dematerialization of shares in Japan 2009.

Number of users As of July 2019, 382 users in the Book-Entry Transfer System for Stocks, etc.

Securities held in safekeeping

As of end of March, 2019, JASDEC held the following in safekeeping:

Stocks: 338 billion shares

Convertible Bonds (CBs): JPY 307 billion,;

Corporate Bonds: JPY 262 trillion;

Beneficiary certificates of ETFs, REIT and JDR: 13,639 million units

Dematerialization As of January 5th 2009, listed shares have become fully dematerialized and this has brought an end to the market reforms towards the completion of electronic processing of securities in Japan.

Financial information JPY 44.7 billion net assets as of end of March, 2019

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

Participants’ requirement to segregate client assets

Under the Act, JASDEC keeps the deposited securities for each participant’s account. However, it maintains a register of each participant account in which the shares owned by the participant and its customers are segregated. Each participant is also required to maintain a ledger of customer accounts to keep beneficial shareholders records in house.

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Insurance

JASDEC’s current insurance program covers the loss of securities in the following cases:

Fire, robbery burglary; misplacement, unexplainable disappearance; erroneous transactions; forgery or alternation; dishonest or fraudulent act of employees and/or any insiders; and computer crime. Under this program, loss arising from the following may not be covered: earthquakes and fires following earthquakes; volcanic eruptions, tsunamis and other national disasters; and riots, vandalism, strikes and other labor disputes.

JASDEC maintains comprehensive insurance for a total amount of JPY 11 billion held with Nissay Dowa General Insurance Co.

Guarantee fund JASDEC does not set up specific guarantee funds.

Instead, JSCC manages Default Compensation Reserve Fund. The fund is designed for the purpose of guaranteeing settlement between members of JSCC.

Audit JASDEC conducts internal audit once a month for their vault and once a year for their business procedure.

JASDEC is subject to an external financial audit conducted by Deloitte Touche Tohmatsu LLC.

Equities, CBs and Corporate Bonds in JASDEC Listed shares being dematerialized, most traded equities (except for unlisted/delisted shares) are handled by the “Book-Entry Transfer System for Stocks, etc.” of JASDEC and booked in accounts that shareholders open with Transfer Account Management Institutions (e.g. an account that MUFG opens in favor of a MUFG client). When a Transfer Account Management Institution (e.g. sub-custodian) opens an equities account, the name, address and other information of the account holder will be registered to the Shareholder’s Information System in JASDEC. The account holder becomes the shareholder for shares held in its account. On record dates, Account Management Institutions cascade up the number of shares held per account. With this information, JASDEC draws up a list of holding, which is then forwarded to the issuing company, which in turn completes the list of shareholders. Within MUFG, clients may establish omnibus accounts or segregated accounts per beneficial owner, and can also setup the registration name per account, which can be different from the account name. As transfer of title on a security is executed by account transfer (except for FOL issues), physical re-registration at Transfer Agents will not be required. As for unlisted / delisted shares, the conventional way of registering certificates into the new shareholders name will be followed. Upon completion of registration, new shareholders rights over the shares will be protected.

Request for provision of shareholders’ Information

General Shareholders’ Notice (Individual Shareholder’s Notice)

Account transfer

Dematerialized Book-Entry Transfer Issuing Company

(Shareholder Registry)

JASDEC

Direct AMI (Special Account) Direct AMI

Indirect AMI

Investor Investor Investor Investor Investor

Indirect AMI

Indirect AMI

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4.2 Bank of Japan – BOJ Today, nearly all JGBs are held in the BOJ’s Book-entry System, which was first introduced in 1980 under the Bank of Japan Law in order to streamline the delivery procedures of JGBs and to reduce the operational burden of participants. In January 2003, the Law Concerning Book-Entry Transfer of Corporate Bonds, Etc. came into effect to a new book-entry transfer system, making JGBs paperless. More than 99.9% of outstanding JGBs as well as 100% of new issues have been dematerialized and kept in the BOJ’s Book-entry System. The remaining JGBs are held in either physical or registered form. Address 2-1-1, Nihombashi-Hongokucho Chuo-ku, Tokyo

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

Governing law The Act on Book-Entry Transfer of Company Bonds, Shares, etc. (The Act)

The Bank of Japan Act

Regulator Financial Services Agency with delegated power from the Prime Minister and the Minister of Finance.

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

Eligible instruments Japanese Government Bonds (JGBs), Treasury discount Bill

Participation obligation The use of BOJ is mandatory for JGBs in both registered and book-entry forms. To hold book-entry JGBs, non-resident investors who intermediate the clients’ positions are required to obtain Foreign Indirect Participant (FIP) status from the BOJ, and have custodian institution(s) be designated as a Direct Participant to maintain investors’ accounts in the book-entry system.

Number of participants 271 direct participants, 890 indirect participants and 145 foreign indirect participants (FIPs) are utilizing the JGB book-entry system as of June 28, 2019.

Securities held in safekeeping As of March 2019, JGBs of JPY 142.7 trillion are deposited with BOJ-Net book-entry system on behalf of investors outside Japan.

Dematerialization The Law Concerning Book-Entry Transfer of Corporate Bonds, Etc. came into effect in 2003 to a new book-entry transfer system, making JGBs almost fully paperless. Currently, more than 99.9 % of outstanding JGBs are kept in BOJ-Net book-entry system.

Financial information As of end of March 2019, BOJ has total assets of approximately JPY 557.2 trillion, and maintains JPY 3.22 trillion of internal reserves (legal reserve and special reserve).

Participants’ eligibility Financial institutions (Banks, Brokers, Foreign Institution etc.) conducting transactions using BOJ current account and being engaged in operations of book-entry JGB settlement are qualified for participating in BOJ-Net.

Participants’ requirement to segregate client assets

Participants are required to maintain clients’ assets segregated from their own assets at BOJ level. Clients’ assets are held in a commingled account at BOJ, but the participant needs to maintain a ledger per beneficiary.

Insurance BOJ does not maintain insurance. However, BOJ maintains 3.22 trillion yen of internal reserves (legal reserve and special reserve) at the end of March 2019 and JPY 0.59 trillion of net income (after-tax) for FY2018.

Guarantee fund BOJ does not set up specific guarantee funds.

Audit BOJ’s Executive Auditors inspect the business of BOJ, who are appointed by the Cabinet and shall not be dismissed against their will. BOJ’s internal auditor’s office conducts examinations of the operations under the JGB book-entry system.

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Book-entry JGBs In case of JGBs, they are also held in commingled accounts designated as MUFG’s clients’ assets at Bank of Japan (BOJ). Since there is no registration concept on JGBs, it is the participant’s role and also the Foreign Indirect Participant (FIP)’s role to maintain a ledger per beneficiary so that it is clear that to whom the JGBs belong. Within MUFG, its clients are required to establish a segregated account per beneficial owner.

Dematerialized Book-Entry Transfer System

BOJ

Direct AMI Direct AMI

Investor Investor

Investor Investor

Investor

FIP

Indirect AMI Indirect AMI

Indirect AMI

Japan

Overseas

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Section 5: Clearing House

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5. CLEARING HOUSE 5.1 JSCC & JDCC

There are two securities clearing houses (CCPs) in Japan: ・ Japan Securities Clearing Corporation (JSCC1) ・ JASDEC DVP Clearing Corporation (JDCC) JSCC provides unified, cross-market clearing services for equity and fixed income products traded on all stock markets and derivative markets. The main functions of JSCC are: assumption of obligations from participants, cross-market netting, settlement instruction, and settlement guarantee. Trades cleared by JSCC are settled on a Net-Net DVP basis at JASDEC for stocks and non-JGB bonds, and on a gross-gross DVP basis via RTGS at BOJ for JGBs. As the scope of clearing is for exchange trades, JSCC is not relevant to foreign investor trades. JDCC is relevant for settlement of foreign investors’ trades. JDCC, a JASDEC subsidiary, acts as a central counterparty in the Gross=Net DVP system for non-exchange trades on equities and corporate bonds handled by JASDEC. As a platform for clearing, both clearing houses utilize the Bank of Japan Financial Network System (BOJ-NET), the BOJ’s online system for the transfer of funds and JGBs. Chart: Summary of Clearing Houses in Japan JDCC JSCC

Date of Establishment (Business Commencement)

June 6th, 2003 (May 17th, 2004)

July 1st, 2002 (January 14th, 2003)

Capital (in JPY billion) 1 8.95

Shareholders JASDEC (100%)

Class A shares JPX 99.2%; Nagoya 0.7%; Fukuoka 0.05%; Sapporo 0.05% Class B shares JPX 100.0% Class C shares JPX (60.4%); the others (18 entities, 39.6%) Class D shares JPX (52.9%); the others (26 entities, 47.1%) (as of June 2019)

Securities Handled DVP Model: <Securities=Payment>

Equities, etc. (book-entry) <Gross = Net>

Equities, etc. <Net = Net> JGBs <Gross = Gross (RTGS)>

Under the Financial Instruments and Exchange Act, JFSA, as the authority delegated by the Prime Minister, has been continuing supervisory authority on all clearing organizations in Japan.

5.2 Guarantee Fund

• JSCC

Acting as a unified clearing organization for exchange transactions, JSCC has a settlement guarantee system to ensure completion of settlement even in the event of a clearing participants default. The settlement guarantee system designed on the principle of self-responsibility is used to cover any losses first with the defaulting participant’s posted collaterals and then with other resources secured within a multi-tiered loss compensation scheme.

1 JGBCC commenced operation as a central counterparty for JGB transactions from May 2005, and merged with JSCC by issuing class D shares on October 1st, 2013.

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In the event of the default of a clearing participant, JSCC first suspends the delivery of settlement funds, securities, and posted collateral to the defaulting participant. Then, its positions are settled in accordance with a predetermined loss compensation scheme.

JSCC has set up a Clearing Fund to meet settlement obligations, which is deposited to cover potential losses in the scenario that the top two clearing participants default in extreme but plausible market conditions, and the deposited collaterals of such participants are insufficient. Clearing participants’ contributions to the Clearing Fund are reviewed on a monthly basis. As of March 31, 2019, the Clearing Fund totaled about JPY 343.8 billion.

The Default Compensation Reserve Fund (DCRF), formerly maintained by the domestic stock exchanges, is now reserved to ensure stability of JSCC’s clearing operations, i.e. Settlement Guarantee Reserve for Security Trades and Others, with a total amount of JPY 34.0 billion as of March 31, 2019.

• JDCC

For non-exchange transactions (i.e.one or both counterparties of a transaction is/are not exchange participant(s)), the JDCC has established rules and procedures to fulfill its role as a central counterparty in the event of a participant default and address the replenishment of resources following a default.

When a participant defaults, JDCC takes steps that include the suspension of obligation assumption from the defaulting participant (suspension of obligation assumption, suspension of refund of the settlement progress payments, suspension of refund of the Participants Fund, suspension of refund of the Pledged Securities, and suspension of “completion” of the securities transfer) to prevent new risks increasing and to prevent any reduction in the Assurance Assets.

In response to a fund settlement default, JDCC uses the Participants Fund to complete the day's settlement, which reached an amount of JPY66.6 billion as of March 31, 2019.

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Section 6: Regulators and Regulations

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6. REGULATORS AND REGULATIONS

6.1 Regulators

• JFSA

The Japanese Financial Services Agency (JFSA) ensures regulatory compliance in the securities industry. The stock exchanges are organized according to the Financial Instruments and Exchange Act and are licensed by the Prime Minister of Japan. The JFSA also regulates the JASDEC jointly with the Ministry of Justice. Under the Financial Instruments and Exchange Act, as the authority delegated by the Prime Minister, JFSA has been continuing supervisory authority on all clearing organizations in Japan.

• SESC

Securities and Exchange Surveillance Commission (SESC) conducts daily market surveillance, inspections of financial instruments firms, investigation of market misconduct, disclosure statements inspections and criminal investigations of securities fraud. • BOJ

The Bank of Japan (BOJ) is the central bank of Japan and supervises banks and regulates the foreign exchange and money markets.

6.2 Regulations and Restrictions

6.2.1 Foreign Ownership Restrictions, Limits & Disclosure Requirements

Restriction / Limits: Restrictions on foreign ownership ratios exist on several kinds of industries, such as broadcasting companies, airline companies, etc. Currently there are fifteen descriptions of FOLs and each has a limitation of 20% or 33%. Please refer to the below list and below link for JASDEC. http://www.jasdec.com/en/reading_e/for_pubinfo.php The ratio is calculated based on the number of book-entry stocks of FOL issues owned by foreign investors divided by the total number of book-entry stocks of FOL issues registered on book-entry transfer book in JASDEC. Data will be renewed on a daily basis.

Security Name ISIN QUICK Limit (%)

FUJI MEDIA HOLDINGS, INC. (#1) JP3819400007 4676 20.0

WOWOW INC. JP3990770004 4839 20.0

Japan Airlines Co, Ltd.(#1) JP3705200008 9201 33.3

ANA HOLDINGS INC. JP3429800000 9202 33.3

Star Flyer Inc. JP3399320005 9206 33.3

TOKYO BROADCASTING SYSTEM HOLDINGS, INC. JP3588600001 9401 20.0

CHUBU-NIPPON BROADCASTING CO., LTD. JP3527000008 9402 20.0

Nippon Television Holdings Inc. JP3732200005 9404 20.0

ASAHI BROADCASTING GROUP HOLDINGS CORPORATION JP3116800008 9405 20.0

RKB MAINICHI HOLDINGS CORPORATION JP3100400005 9407 20.0

BROADCASTING SYSTEM OF NIGATA INCORPORATED JP3656400003 9408 20.0

TV Asahi Holdings Corporation JP3429000007 9409 20.0

TV TOKYO Holdings Corporation JP3547060008 9413 20.0

Nippon BS Broadcasting Corporation JP3746000003 9414 20.0

NIPPON TELEGRAPH AND TELEPHONE CORPORATION JP3735400008 9432 33.3

Note(#1): FUJI MEDIA HOLDINGS, INC. and Japan Airlines Co., Ltd. pay their dividends to all foreign shareholders even if the

foreign ownership ratio exceeds FOL limit.

http://www.jasdec.com/en/reading_e/for_pubinfo.php

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If foreign ownership exceeds the limit on the record date, the holdings of foreign investors will be subject to pro-rata allocation in order to determine the entitled position. The allocation will be conducted in a way by comparing the entitled balance of the previous record date and the holding balance of the current record date. Depending on the result of the allocation, there may be cases where your clients possess such shares but on the other hand do not receive entitlement for shareholder rights and also dividend payments. Please refer to the following example of the handling of shares exceeding FOL limit: Sample case - Limit of foreign ownership is 200 shares and there are accounts, A to H.

Accounts at sub-custodians A B C D E F G H Total

Previous Record Date (i) 55 20 10 40 74 0 1 0 200

Current Record Date (ii) 101 15 60 50 29 2 2 1 260

Grandfathering amount (iii)

(i.e. smaller number of (i) and (ii) 55 15 10 40 29 0 1 0 150

Excess amount (iv) (i.e. (ii)-(iii)) 46 0 50 10 0 2 1 1 110

Pro rata allocation of excess amount (v) 20.9 0 22.7 4.5 0 0.9 0.45 0.45 49.9

Rounded to board lot / the rest allocated by lottery(vi) 21 0 22 4 0 1 1 1 50

Final Allocation 76 15 32 44 29 1 2 1 200

The number of entitled shares 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))

Since 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, account A, C, D, F, G and H are to participate in the lottery. In this example, as a result of allocation by lottery, A, F, G, and H obtain one share each. Final allocation is thus determined. On September 25, 2017, the Ministry of Internal Affairs and Communications sent a notification document to

11 broadcasting companies in Japan who are FOL (Foreign Ownership Limited shares) stock-issuing companies. According to the notification, the method for calculating the voting rights of foreign investors was changed with respect to the FOL stocks issued by these broadcasting companies.

Change of the calculation method After the change, shares which are rejected the rights to vote (namely rejected shares) held by foreign investors will be excluded from the basis for the calculation of the total number of voting rights of shareholders. This means that the denominator for the calculation of foreign ownership ratio will be smaller compared to the previous method. As a result, the foreign ownership ratio may increase compared to the previous method, and the number of rejected shares may increase even if the total number of shares held by foreign investors did not change.

Revised method for calculating the foreign ownership ratio

[A] Number of voting rights held by foreigners Foreign ownership ratio [A/B x100] = ------------------------------------------------------------------------- [B] Basis for calculation of total voting rights [B] Basis for calculation of total voting rights Total number of voting rights related to total number of issued shares, excluding the shares which are rejected the rights of vote(namely rejected shares) held by Foreign Investors.

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6.2.2 Substantial Shareholding Reporting (5% rule)*

Non-resident holding exceeding 5% and subsequent changes of 1% of the number of outstanding shares of listed stock must file the report to the regulator via EDINET within 5 business days of trading.

Note* For tax purposes, the minimum holding of “large shareholder” criteria was reduced from 5% to 3%. With this change in the definition, the tax rates applicable to such individual final beneficiaries (both Japanese residents and Non-residents) holding 3% or more of the number of outstanding shares are as follows for dividends received on October 1st, 2011 and afterwards, or for dividends entitled from the end of July 2011 to be paid after October 1st, 2011.

20.42% tax rate (including reconstruction tax) will be applied to all individual large shareholders for dividends from all stocks. Please also note that; - Foreign/Japanese corporate large shareholders are excluded, and, - Reduced tax rate under DTT is applicable to Non-resident large individual shareholders.

6.2.3 Direct Inward Investment Restriction

Direct Inward Investment by a foreign investor in excess of 10 percent of shares is subject to reporting to the authorities after-the-fact. However, prior notification (subject to screening) is required if such investment is deemed to harm national security, prevent maintenance of public order, hinder protection of public safety, or may cause enormous harm to smooth operation of Japan's national economy.

6.2.4 Restrictions on short selling of stocks

Currently, the following permanent measures with respect to the short selling of listed securities are in place:

Uptick rule (in principle, prohibition of short selling at the same or lower price than the most recent price published by the exchange)

Verification and flagging requirement for short selling transactions

In addition, the following temporary measures have been introduced:

Prohibition of naked short selling (short selling without ownership or arrangement to borrow shares at sale) Reporting and public disclosure regime for short positions equal to, or exceeding, 0.25 percent of the issued shares

in principle

Going forward, taking into account the overall regulatory trends in other markets, the following revisions to the short selling regulation have been implemented since November 5th 2013.

Comprehensive Review of the Short Selling Regulation – An Overview Regulation Before Revision After Revision

Revisions to the Uptick Rule Short positions arising from exchange transactions only

Transactions executed in PTS (executed only under the auction method, customer order matching method, or market making method) are included.

The uptick rule applies at all times. The uptick rule is applied only when the price falls below a certain threshold (10 percent fall in price relative to the previous day’s closing price) – Adoption of the Trigger Method.

Prohibition of Naked Short Selling

Temporary measure Permanent measure Short positions arising from exchange transactions only

Transactions executed in PTS (executed only under the auction method, customer order matching method, or market making method) are included

Reporting and Public Disclosure Regime for Short Positions

Temporary measure Permanent measure Short positions arising from exchange transactions only

Sum up arising short positions

Short positions equal to, or exceeding, 0.25 percent of the issued shares in principle

Once the short position reaches 0.2 percent of the issued shares, the short position reporting requirement would be triggered. Once the short position reaches 0.5 percent of the issued shares, the public disclosure requirement would be triggered.

In principle, an amended report would be required whenever short position is revised.

An amended report would be required at every 0.1 percent increments.

Expanding the Scope of Short Selling Regulation Requirements, and Public Offering Related Requirements

Short positions arising from exchange transactions only

Transaction executed in PTS is also subject to short selling regulation requirements such as verification and flagging requirements, and short selling restrictions during public offering.

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6.2.5 Anti-Money Laundering and Anti-Terrorist Financing

Related to anti-money laundering and anti-terrorist financing, Japanese financial institutions are subject to the following AML related laws and regulations:

Foreign Exchange and Foreign Trade Control Law (effective April 1951)

Act Concerning Special Provisions for the Narcotics and Psychotropics Control Act, etc. and Other Matters for the Prevention of Activities Encouraging Illicit Conducts and Other Activities Involving Controlled Substances through International Cooperation (effective July 1992)

Act on Punishment of Organized Crimes and Control of Crime Proceeds (effective February 2000)

Act on Punishment of the Financing of Criminal Activities for the Purpose of Intimidation of the General Public and of Governments (effective July 2002)

Act on Prevention of Transfer of Criminal Proceeds (fully effective March 2008)

Under the “Act on Prevention of Transfer of Criminal Proceeds”, Japanese banks are charged to inform authorities of transactions suspected of crime and/or terrorism. The authorities have the investigation right to review the related records in relevant premises when they judge necessary to fulfill the duty prescribed in the law.

6.2.6 Reporting Requirements under OECD-CRS

In order to prevent international tax evasion and tax avoidance and to implement automatic exchange of information under Common Reporting Standard (CSR) with other participating jurisdictions, mainly OECD member countries, “Act on Special Provisions of the Income Tax Act, the Corporation Tax Act and the Local Tax Act Incidental to Enforcement of Tax Treaties” has been amended with an effective date of January 1, 2017. On or after January 1, 2017, those who open an account with a reporting financial institution in Japan must submit a Self-Certification which indicates jurisdiction of tax residence etc. to the reporting financial institution. As for the account holders whose accounts were opened before January 1, 2017, it is required to report their tax identification information (i.e. TIN) by December 31, 2020.

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Section 7: Qualifications of Account Management Institution

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7. QUALIFICATIONS OF ACCOUNT MANAGEMENT INSTITUTION

7.1 Outline of Qualifications required for holding Japanese Securities It is required that Foreign intermediaries are approved and qualified by the relevant Japanese regulators and depositories prior to holding Japanese securities under certain conditions. The statuses applicable to foreign intermediaries and respective governing laws are shown as below.

Type of Security Status Governing Law Regulatory Body All securities AMI

(Transfer Account Management Institution)

The Act on Transfer of Bonds, Shares, etc.

Japan Financial Services Agency (FSA), Ministry of Justice, Ministry of Finance

JGB, JGS FIP (Foreign Indirect Participant)

Bank of Japan Regulations concerning the JGB Book-Entry System

BOJ

QFI (Qualified Foreign Intermediary)

Special Taxation Measures Law National Tax Agency (NTA)

Non-JGB Bonds FI-AMI (Foreign Indirect Account Management Institution)

Business Regulations Relating to Corporate Bonds, etc. Business Regulations Relating to Short-Term Corporate Bonds(CP)

JASDEC

QFI Special Taxation Measures Law NTA

Equity, Convertible Bonds

FI-AMI Business Regulations Concerning Book-Entry Transfer of Stocks, etc.

JASDEC

7.2 Transfer Account Management Institution (AMI) If a foreign financial institution wishes to become a Transfer Account Management Institution, which may open accounts for the holding and transfer of the right of shares, etc. for its customers, it is required to be designated by competent ministers under the Act on Transfer of Bonds, Shares, etc. AMI is prerequisite status for FIP and FI-AMI. It is AMIs’ legal obligation under Article 5 (1) of Order Regarding Account Management Institutions to report the changes to the relevant authorities without delay.

Reference: http://www.japaneselawtranslation.go.jp/law/detail_main?vm=&id=2661

Order Regarding Account Management Institutions (Notification of Change of Trade Name) Article 5 (1) If there is any change in the matters set forth in the items of paragraph (1) of the preceding Article in relation to the application, a person who has obtained a Designation based on the application (hereinafter referred to as "Foreign Account Management Institution") must notify the Commissioner of the Financial Services Agency, the Minister of Justice, and the Minister of Finance to that effect without delay.

http://www.japaneselawtranslation.go.jp/law/detail_main?vm=&id=2661

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Should AMI fails to notify JFSA of changes in their commercial name, address, CEO and custodian etc. in a timely manner, JFSA will request the AMI to issue an explanation letter to the attention of Commissioner, Financial Services Agency, Minister of Justice and Minister of Finance with the following details. 1.Reason for delay in reporting the changes 2.Applicant’s recognition of the necessity to comply with Japanese relevant law as AMI 3.Preventive measures to avoid reoccurrences

7.3 Foreign Indirect Participant (FIP) The governing law, Bank of Japan Regulations concerning the JGB Book-Entry System, requires foreign financial institutions (including global custodians) to be approved as FIP to hold/record books for Japanese Government Bonds (JGBs) owned by third parties. Bank of Japan (BOJ) receives the applications for its approval. AMI status is pre-requisite.

7.4 Foreign Indirect Account Management Institution (FIAMI) Three types of FIAMI statuses are under Business Regulations Relating to Short-Term Corporate Bonds (CP), Business Regulations Relating to Corporate Bonds, etc., and Business Regulations Concerning Book-entry Transfer of Stocks, etc. respectively. They are required in some cases when foreign financial institutions (including global custodians) hold/record books for non-JGB bonds, shares, etc. owned by third parties.

7.5 Qualified Foreign Intermediary (QFI) Special Taxation Measures Law (Article 5-2, Article 5-3 and Article 41-13-1), the governing law, requires the nearest upper positioned institution (FIP or FIAMI) to be approved as QFI for its underlying tax-exemption eligible investors. In other words, those investors applicable for tax-exemption cannot hold securities on a tax-exemption basis if the nearest upper FIP or FIAMI does not hold this status.

In case of holding its proprietary assets, no qualification is required for a foreign intermediary. Nevertheless, when keeping Japanese securities for a third party, a foreign intermediary is required to obtain qualification(s) in accordance to relevant regulations. The chart in below may be helpful for identifying required qualifications in different cases.

(*) Examples of Account Name registered with JASDEC (i) “MUFG Bank for ABC Bank for DEF shares account” ---------------- FIAMI is not required, AMI is not mandatory but desirable. (ii) “DEF shares account” -------------------------------------------------------- AMI and FIAMI are required.

MUFG Bank: JPY custodian ABC Bank: Foreign intermediary DEF: Third party client (ABC Bank’s client)

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Here are useful links related to application procedures of the said qualifications as below:

AMI

http://www.fsa.go.jp/en/laws_regulations/fami/index.html

FIP

http://www.BoJ.or.jp/en/paym/jgb_bes/fyoryo04.htm/

FIAMI (1)Stocks

(2)Bonds1

http://www.jasdec.com/en/system/less/participation/account/index.html

http://www.jasdec.com/en/system/sb/participation/document01/index.html

QFI

http://www.mof.go.jp/english/jgbs/topics/taxation2016/qfi.html

1 Bonds excluding JGBs.

http://www.fsa.go.jp/en/laws_regulations/fami/index.html

http://www.boj.or.jp/en/paym/jgb_bes/fyoryo04.htm/

http://www.jasdec.com/en/system/less/participation/account/index.html

http://www.jasdec.com/en/system/sb/participation/document01/index.html

http://www.mof.go.jp/english/jgbs/topics/taxation2016/qfi.html

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Section 8: Securities Settlement

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8. SECURITIES SETTLEMENT

8.1 Trade Settlements (Summary) As of January 5th, 2009, due to the implementation of dematerialization of listed shares, most of the securities circulating in the market have become book entry securities for equities/ CBs. Although a small portion of physical form securities remain, most of them are settled in the book-entry transfer system at JASDEC. JGB has been settled almost in book-entry scheme.

Settlement Cycles

As for equities, T+2 settlement cycle has been implemented since July 16, 2019 (trade date basis). JGBs outright transactions* and CP are settled on T+2 in general. Note (*): Non-resident JGBs transactions are out of scope of T+1 settlement cycle.

Overview of the transaction processing cycle

1.Receipt of settlement instructions from clients:

We have a sophisticated stand-alone custody system for computer-read SWIFT messages. The settlement instructions via SWIFT MT54x are automatically fed into the custody system and instruction details can be verified on the workstation. We confirm authenticity of SWIFT messages from clients with SWIFT Authenticator key. Instructions that have errors through validation, or received by non-automated method (such as telex or fax) are manually keyed into our custody system.

2.Pre-matching

Pre-matching of trade instructions is a mandatory practice in Japanese market. Transactions will not be settled without Pre-matching. Pre-matching is done electronically based on trade instructions registered in our custody system against the members of the Pre-Settlement Matching System (PSMS), or, done manually by phone confirmation among non-PSMS-members. For equities/CBs, JASDEC PSMS was implemented on January 28th, 2002 which brought precise Pre-matching using the ISO15022 format. The details to be matched and available are: - Settlement Date - Receipt / Delivery - Description of securities (name and ISIN code) - Quantity of securities (amount of shares) - Settlement amount (JPY) - Settlement Condition – Physical / Book-entry - Counterparty (Delivering Agent / Receiving Agent) - Instructing Party (Buyer / Seller) - (Delivering side) Availability of securities - (Receiving side) Availability of funds Unmatched trade instructions will be advised to our clients via MT548 with the reason, seeking their amendments or confirmations with the trading party, and will be held open until we receive an instruction to amend or cancel them from the clients. Upon receipt of any cancellation / amendment / addition from clients, trades which were unmatched will be matched again.

3.Matching and Settlement

Instructions matched will be processed for internal and external settlement described below. (1) Internal Settlement

Securities movement is reflected on your account in our custody system immediately. In case of delivery of securities: The securities balance in your custody account with us will decrease, and the cash

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balance in your cash account with us will increase. In case of receipt of securities: The cash balance in your cash account with us will decrease, and the securities balance in your custody account with us will increase.

(2) External Settlement

Settlement with counterparties will be executed but methods vary in types of securities. Generally, the securities transactions are settled by book-transfer within CSD' account and cash transactions are settled by book-transfer at BOJ. (i) JASDEC Settlement (Equities and Convertible Bonds) Equities and CBs are settled mainly through JASDEC. Especially for securities in JASDEC, settlement process is automated from the beginning to the end.

until S-1

Pre-matching is done electronically among the members of the JASDEC PSMS, and it reaches to the peak-volume in the afternoon of S-1. We establishes an interface between JASDEC PSMS and our bank’s custody system, so when MUFG receives an instruction from its client (normally SD-2 to SD-1), it is automatically fed-up from its custody system to JASDEC PSMS on a real time basis for PSMS matching. Upon receipt of the result of matching (matched/unmatched) from JASDEC, MUFG will send the matching status to the client via its custody system. When there is discrepancy in the settlement amount between settlement instructions and its difference is within the new tolerance limit of JPY 100, PSMS deems the settlement instructions “matched” and adopts the settlement amount instructed by the securities delivering party for execution of the transaction.

on SD

- The market deadline for settlement matching is 12:20 (JST) on SD. - Instructions that are matched will proceed for settlement in JASDEC. - Upon receiving settlement confirmation from JASDEC, transaction will be automatically executed in MUFG’s

system, and a settlement confirmation MT54x is sent to the client. - JASDEC closes settlement activities at 15:30. - In case of DVP transaction under DVP for NETD system (Non Exchange Transaction Deliveries), settlement

is completed automatically by the system once the instructions are matched in PSMS. DVP book-entry instruction is automatically transmitted from PSMS to JDCC.

(ii) Securities in physical form In case the securities are in physical form (i.e. unlisted/delisted shares), which is rare, the following process will be taken:

Into the vault When the settlement is executed, the entry slip is automatically generated. Upon receipt of securities from the counterparty at the counter, the securities are reconciled with the data of the slip and are kept into the vault by our designated officers.

Out of the vault When the settlement is executed, the entry slip is automatically generated. Outgoing securities are reconciled with the withdrawal slip and are moved to the counter. When the counterparty arrives to receive the securities, our designated officers will respond and ask them to sign the receipt on the copy of withdrawal slip. (iii) JGBs JGBs are settled almost in book-entry and rarely in registered form nowadays.

until S-1

-JGBs are pre-matched by PSMS as far as the counterparty participates in PSMS for JGBs. (MUFG is the most prepared sub-custodian for the system.)

-Otherwise, JGBs are pre-matched by phone and the pre-matching starts from three business days prior to the settlement date.

on SD

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-JGBs in book-entry form are settled via transfer within BOJ-Net book-entry system. BOJ-Net book entry system is a Real Time Gross Settlement system.

-As soon as confirmation of settlement is received from the depositary, i.e. BOJ, MUFG updates the status of the instruction to settle sending clients a settlement confirmation MT54x automatically.

8.2 Reporting

Confirmations of settlement via SWIFT MT54x are automatically generated & dispatched on the settlement date. Communication Method: We have an automatic interface with SWIFT whereby all the settlement instructions via authenticated MT54X are automatically processed for pre-matching and reporting. Follow up procedure: Unmatched / failed trade instructions will be held open until we receive amended or cancellation instructions from the client. We notify our clients of the trade settlement status via MT548 (daily or real time) or MT537 (daily) depending on the set-up instructed at account opening. Daily MT548s will be sent daily regardless of the change to the status. Meanwhile, real time MT548s will be sent only upon update to the status, i.e. they will not be sent unless the status changes. Pro-active follow up by telephone, email or MT599 is provided at our discretion. Our system has an ability to list all pending trades per account at a glance on the screen as well as to print-out. This enables our account administrators to monitor failed trades on a real-time basis.

8.3 Buy-in procedures Equity trades that are not settled by SD+3 may be subject to buy-in, while it is not so frequent in Japanese market. Followings are the fail rule and buy-in system in JSCC rule which is applied to the participants of JSCC. It is our understanding that the cost may or may not be claimed to the client side, depending on the relationship between the client (investor) and the market side executing broker.

1. Buy-in system

Equity trades that are not settled by SD+3 (Settlement Day+3) may be subject to buy-in. It is our understanding that buy-ins rarely happen in the Japanese market. Fail-affected member of JSCC may file a request for a buy-in: the purchase and deliver of the failed securities. JSCC will implement the buy-in if the failed position is not cleared within 2 working days of the date of their buy-in request. The failed member with the longest-standing position will be charged for the costs of the buy-in. If the failed member incurring a fail position is not resolved within 2 working days of the date of their buy-in request, the JSCC will execute the buy-in. JSCC will charge the costs involved in the buy-in to the failed member with the longest-standing position. In this case, buy-in will be done in following method at JSCC. Method: competitive offering (trade execution will be made at the highest price) Qualified seller (offerer): all members of JSCC Buyer: failed member (who will be charged the buy-in cost) Offering order entry hours: 15:30 - 16:00 Trade execution time: 16:00 Offering price limitation: maximum +10% of the last traded price in the TSE Settlement: the following day (applies to seller, buyer and requesting members)

2. Buy-in cost

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

3. Steps to avoid buy-ins

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

8.4 Turnaround trading

Same-day turnaround trades are possible, as long as the receipt is pre-matched in time for its counter delivery transaction.

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Section 9: Corporate Action & Taxation

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9. CORPORATE ACTION & TAXATION

9.1 Corporate Action in General Entitlement: For the corporate action in Japan, the eligibility for the entitlement is fixed on the record date. For shares held in JASDEC, the Beneficial Shareholders List will be compiled by the custodian based on the balance of holdings as of the record date. All entitlements are processed on an actual settlement basis. Accordingly, in case of a settlement failure over the record date, the claim is to be dealt with between the trade counterparties. As for entitlement of FOL shares, if the limitation is exceeded as of the record date, the entitlement for shareholder rights and dividend payment will be subject to pro-rata allocation.

Information source MUFG obtains information of Corporate Action Events including incomes from multiple sources such as Nikkei (electronic form), Japan Information Processing (electronic form), Shoho (stock exchange bulletin), Kampo (official government gazette), TMI (Tokyo Market Information Service provided by Tokyo Stock Exchange), newspapers and individual notifications from issuing companies. Of the above sources, information from Nikkei and JIP are automatically fed and updated in our custody system. The net amount credited to each client’s account is automatically calculated by our custody system.

Response Monitoring for Voluntary Corporate Action Events A default action is indicated on an MT564 under Sequence E / Field 17B for each corporate action. In case of no response from our clients, even if the default action is indicated, MUFG sends the relevant clients a reminder through MT564 stating that the default action will be taken place unless any instruction provided from you.

9.2 Event details

1. Dividend Payment Dividend payment is distribution of cash to the shareholders out of the company’s current or retained earnings in proportion to their equity holding. Dividends are usually paid twice a year. Final dividends are paid upon the approval of shareholders’ meeting (please see the Note) and interim dividends are paid upon the resolution of board meeting (if an effective date is specified regarding the resolution, that effective date). Note: the listed companies are able to pay dividends more frequently than twice a year (without approval of shareholders’ meeting). 2. Interest Payment Interest payment is payment of income generated by bonds, notes, bills or other fixed income instruments according to the interest rate. 3. Redemption Redemption is a repayment of principal in such investments as bonds, notes, bills or other fixed income instruments. 4. Stock Split Stock Split is a free distribution of new shares by the issuer to the shareholders in proportion to their holdings. It is conducted without capitalization. If a company wishes to conduct a capitalization, it will be able to transfer its legal reserves to the capital accounts by obtaining the approval of a general shareholders' meeting. In practice, the central depository JASDEC books "Stock Split" only by crediting participants' accounts with additional distributed shares. 5. Reverse Stock Split Reverse Stock Split is a decrease in the number of the outstanding shares normally without change of the total capitalization of the company. As an exception, however, any proceeds are paid to shareholders as capital repayment.

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6. Merger / Share Transfer / Share Exchange Merger: Merger, for which the event code of MRGR is used, is a type of integration of two or more companies where the shareholders of the dissolving company / companies are to receive the shares of the surviving company. The merger requires approval by special resolution at the shareholder’s meeting of all the companies involved with the exception for the surviving company absorbing small company / companies in accordance with the criteria provided for in the Corporation Law. The balance of dissolving company’s shares that are subject to the merger is fixed one day prior to the effective date, which is notified as the record date. In some cases surviving companies pay a merger subsidy to the shareholders of the dissolving company / companies in order to compensate for the dividend or in relation to the merger ratio. The merger subsidy is paid by the company mostly in the same way as that for dividends and notified by MUFG with the event code DVCA.

Share Transfer & Share Exchange: These two events, which are other forms of company integration, are also notified by MUFG with the event code MRGR. Approval by special resolution at the shareholders meeting is required in principle for both acquiring and acquired companies.

Share Transfer: Shares of the acquired company are transferred to the newly established parent company. The parent company’s shares are given to the shareholders of the acquired company. Share Exchange: Shares of the acquiring company will be given in exchange for the shares of the acquired company. As the result, the acquiring company becomes the wholly owning parent company. The special resolution at the shareholder’s meeting of the acquiring company is not necessary in acquiring small company / companies in accordance with the criteria provided in the Company Law.

7. Compulsory Acquisition of Shares from Remaining Minor Shareholders Background: If a company (A) wishes to obtain 100% shares of another company (B), it normally first conducts a tender offer to the shareholders of (B). The Financial Instruments and Exchange Law, which was amended in December 2006, stipulates that an offerer (A) is obliged to acquire all existing shares, when (A) intends to purchase more than 2/3 of existing shares of (B). However, 100% of the shares of (B) are not able to be obtained by the tender offer in normal cases, because some shareholders of (B) have not subscribed to the offer and are still remaining as a shareholder. In order for the company (A) to obtain the shares held by those remaining shareholders, these shares have to be purchased compulsorily. 8. Rights Issue Rights Issue refers to allotment of the rights to the shareholders by the issuer in proportion to their holdings. With the rights, shareholders are entitled to buy additional shares of the company at a certain price. The options available for the shareholders are: to exercise the rights and purchase the additional shares, or/ to take no action. The rights become worthless after the exercise period. The sale of rights is not possible, But the new shares are often tradable in the market.

9. Allotment of New Share Subscription Rights The New Share Subscription Rights (hereinafter “NSSR”) were brought into the market with the revised Commercial Code in 2001, which was replaced by the Corporation Law as mentioned earlier. NSSRs are allotted to the shareholders by the issuer in proportion to their holdings, either for free or against payment depending on each case. The rights entitle the holders to purchase the shares of the company at a certain price. Nowadays NSSRs are listed at stock exchanges and transferable in some cases. Otherwise, transfer of NSSRs is restricted by the issuer and accordingly the rights are not tradable in the market. There are often exercise conditions set on the NSSRs. For example, the holder is entitled to exercise the rights just once and no partial exercise is allowed, which may cause a problem with the rights held in an omnibus account of the nominee. The issuers sometimes offer a solution to secure the exercise opportunity for each beneficial owner under the nominal shareholder, though only after contacted individually by the nominal shareholders/ custodians. MUFG proactively obtain the information and notify to the clients. Foreign investors are often requested by the issuing companies to confirm in writing that the exercise of NSSR does not violate any Securities Trading Law in their resident country.

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10. Tender Offers (Take Over Bid & Buyback Offer) Take Over Bid / Buyback Offer are an offer made by a company (offerer) to shareholders, requesting to sell their shares at a certain price outside the market.

Take Over Bid: The offerer (purchaser) is a third party company whose objective is to take control of the target company. Offers are mostly friendly ones in relation to business reorganization but there may also be hostile takeovers. Buyback Offer: The offerer (purchaser) is the issuing company whose objective is mainly to reduce the number of outstanding shares. The companies are allowed to buy back shares only with the resolution at the board meeting and the approval at the shareholder’s meeting is not required, provided that their articles of incorporation have been revised accordingly. 11. Conversion of Convertible Bonds In Japan, Convertible Bond is legally defined as a Bond with New Share Subscription Rights, and the conversion of Convertible Bond means the exercise of the New Share Subscription Rights attached to the Convertible Bond. Convertible Bonds were dematerialized in January 2009, and now the conversion is handled by JASDEC. Once Conversion application is sent to JASDEC, the Bonds are debited from MUFG’s account and the application is passed on to the issuing company’s agent. The derived shares are credited to MUFG’s account with JASDEC 2 business days after the conversion application. Under the Corporation Law, no fractional shares are issued. If there are any odd lot shares resulting from conversion, it is possible to request the sale of the odd lot shares simultaneously with conversion application. In this case, MUFG changes the status of the odd lots to ‘BLOCKED’ (BLCA) in the client’s account. The sales details are notified by JASDEC already on the date of share credit. The odd lots are debited and the proceeds are credited to the client’s account 4 business days after the conversion application.

12. Buy Back Request of Odd Lot Shares to Issuing Company Listed companies are allowed to apply ‘Unit Share System’ by prescribing this on their Articles of Corporation. As the odd lot shares (smaller than 1 unit share) are not entitled to voting rights, etc., it is possible for the shareholders to request the issuing company to buy back the odd lot shares. The sales are processed by sending an application to JASDEC. The sales details data are provided by JASDEC 2 business days after the application to JASDEC, and shares are debited and proceeds are credited four business days after the application. 13. Proxy Voting Japanese companies are legally obliged to hold a general shareholders’ meeting within three months after their fiscal year end. About 70% of the listed companies have the fiscal closing on the end of March, and most of them have their annual shareholders’ meeting on a day close to the last business day of June. Accordingly, the month of June is the busiest season in Japan due to the proxy voting and its related events (or activities). In addition to the annual general meetings, extraordinary shareholders’ meetings are held as the occasion arises.

MUFG provides its clients with proxy voting services (including both notification of the agenda and the voting) on request basis. If you need the proxy voting services but do not currently receive them, please contact MUFG’s Relationship Manager for your institution. E-Voting: Electronic proxy voting platform (E-Voting) was launched by ICJ Inc. in December 2005. ICJ was established as a joint venture by the Tokyo Stock Exchange (TSE), Japan Securities Dealers Association (JSDA) and Broadridge Financial Solutions, Inc. (ex-Automatic Data Processing Inc.). This platform enables foreign investors to access to meeting materials with expanded voting deadlines. However, the number of issuing companies that participate in the platform is still limited (1,009 issuing companies as of Jun 4, 2019)

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9.3 Taxation Capital Gains Tax There is no Capital gains tax applicable to foreign investors, unless they have a permanent establishment in Japan and they own at least 25 percent of the total shares of a company or sell at least 5% of the total issued shares during the year. Tax on Interests and Dividends Income tax is withheld from dividends and interests at source. The tax rates indicated in the below chart are applied.

Individual Corporate Non-resident *2 Japanese Non-resident *2 Japanese

Dividends Listed Stocks National Tax: 15.315%

National Tax:15.315% Local Tax: 5%

National Tax: 15.315% Held by Large

Shareholder *1 National Tax: 20.42%

Unlisted Stocks National Tax: 20.42% National Tax: 20.42%

Interests in general National Tax: 15.315%

National Tax:15.315% Local Tax: 5%

National Tax *3 15.315%

National Tax:15.315%

Notes: *1. In case an investor holds 3% or more of the company’s issued stocks *2.Non-resident investors are eligible to enjoy reduced tax rate or tax exemption in accordance with Double Taxation Treaty between Japan and the investor’s resident country, if any. *3.Interest on JGBs held in BOJ-Net book-entry system and municipal bonds, corporate bonds, convertible bonds and commercial papers held at JASDEC through FIP/FIAMI with Qualified Foreign Intermediary (QFI) can be eligible for tax-exemption. (‘Japanese Bond Income Tax Exemption Scheme (J-BIEM)’)

The National Tax includes 2.1% surtax called “Special Income Tax for Reconstruction”, which was implemented as an important revenue-raising measure for the reconstruction after Great East Japan Earthquake. (Applied from Jan. 1st, 2013 through Dec. 31st, 2037) Changes in Taxation on Profit from Redemption on Discount Bonds (as from 1 Jan 2016) Under the 2015 Tax Reform, the scheme of income tax withheld at the time of issuance was abolished, and a new rule was established instead, where an income tax (and a local tax on individual residents) on profits from redemptions on Discount JGBs and STRIPS is withheld at source at the time of redemption. Final beneficial owners are eligible for income tax exemption or reduction if applied for J-BIEM or DTT by a certain deadline. Japanese Bond Income Tax Exemption Scheme (J-BIEM) If a foreign investor without a permanent establishment (“PE”) in Japan invests in JGBs (including T-Bills and STRIPS), local government bonds, and/or certain book-entry Japanese corporate bonds; and receives interest or profits form redemptions on such bonds in a transfer account(s) at a financial institution(s) as an Account Management Institution or a Qualified Financial Institution, the foreign investor can be eligible for income tax exemption if applied for tax exemption by a certain deadline. Double Taxation Treaty (DTT) If a foreign investor resides in a country with which Japan has a double tax treaty, the tax rates on investment income (dividends, interest, etc.) are complying with applicable tax rates stipulated in corresponding conventions. (For details, please refer to Appendix I)

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Type of DTT applicable for profit from redemption on discount bonds: [TYPE 1] Tax Exempt: *Spain, Finland, *Belgium Note*: After the agreement enters into force, the category will be changed to TYPE 3. For Belgium, the agreement already entered into force in Jan. 2019, but it will be applicable from Jan. 2020. [TYPE 2] Full Tax (15.315%) Egypt, Sri Lanka, Brazil, Guernsey, Cayman Islands, Samoa, Jersey, Bahamas, Bermuda, British Virgin Islands, Fiji, Macao, Isle of Man, Liechtenstein. [TYPE 3] Tax Rate Same as the Interest Rate on Bonds Countries other than those mentioned above.

Tax Information Exchange Agreements (TIEAs) TIEA is in place with the following countries. -Bermuda (Aug. 2010) -Bahamas (Aug. 2011) -Isle of Man (Sep. 2011) -Cayman Islands (Nov. 2011) -Lichtenstein (Dec. 2012) -Samoa (Jul. 2013) -Guernsey (Jan. 2014) -Jersey (Jan. 2014) -Macau (May 2014) -British Virgin Islands (Oct.2014) -Panama (Feb. 2017)

Current Status of Negotiations on Tax Conventions (As of August 21, 2019) (1)Signed but not yet entered into force -U.S. (signed Jan. 2013) [amendment] -*Belgium (signed Oct.2016) [amendment] (Note*: The agreement already entered into force in Jan. 2019, but it will be applicable from Jan. 2020. -Spain (signed Oct. 2018) [amendment] -Colombia (signed Dec. 2018) [first] -Croatia (signed Dec. 2018) [first] -Ecuador (signed Jan. 2019) [first]

(2)Agreed in principle but not yet signed -Argentina (agreed Dec. 2018) [first] -Jamaica (agreed Dec. 2018) [first] -Uruguay (agreed Apr. 2019) [first]

(3)Currently under official negotiations -Peru (negotiation started from May. 2018) [first] -Morocco (negotiation started from Feb. 2019) [first] -Tunisia (negotiation started from May. 2019) [first] -Greece (negotiation started from May. 2019) [first] -Finland (negotiation started from May.2019) [amendment]

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Notes: 1. [amendment]: The amendment of the current Convention

2. [first]: Convention concluded for the first time..

Note for DTT between UAE and Japan According to tax office, please be reminded that withholding tax rate 10% on dividends and 0% (tax exemption) on interest are applicable for governmental entities in UAE at this stage, including the below entities.

(a) Central Bank of the United Arab Emirates; (b) Abu Dhabi Investment Authority; (c) International Petroleum Investment Company; (d) Abu Dhabi Investment Council; (e) Investment Corporation of Dubai; and (f) Mubadala Development Company.

Other residents in UAE are not applicable to DTT, thus 15.315% will be applied.

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Section 10: Cash Clearing

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10. CASH CLEARING 10.1 Currency

The Japanese yen is the unit of currency in the markets. Exchange rate between US dollar and Japanese yen is USD/JPY=106.62, as of August 21, 2019, sourced by Bloomberg.

10.2 Cash Clearing Systems (External Payment)

The electronic clearing process of funds is performed by three systems in Japan: Foreign Exchange Yen Clearing System (FXYCS), Zengin System, and BOJ-Net System. The first two systems are managed and supervised by Japanese Bankers Association and the third one by BOJ.

10.2.1 FXYCS (Foreign Exchange Yen Clearing System)

The FXYCS was established in 1980 to facilitate the clearing of cross-border yen payments. The FXYCS is owned and operated by the Japanese Bankers Association, who has delegated the operation of the IT system to the Bank of Japan and the processing of instructions takes place on the BOJ-NET system. All FXYCS payments are settlement on a RTGS (Real Time Gross Settlement) basis in the BOJ-NET FTS (fund transfer system). In 2018, the system handled daily average volume of 29.3 thousand transactions, while the daily clearing value averaged JPY 17.2 trillion.

10.2.2 BOJ-NET:

The clearing system is managed and operated by the Bank of Japan. Its primary function is to provide inter-bank settlements including ultimate finality for settlements and also support typically large-value transfers on a RTGS basis. Instructions are processed between members’ current accounts held at the Bank of Japan. The daily volume and value of transactions settled through the BOJ-NET averaged 69,314 transactions and JPY 146.9 trillion in 2018. Both the first and second phases of the New BOJ-NET project successfully implemented in October 2015 and February 2016, respectively. Through the project, the Bank of Japan made several improvements in the area of foreign exchange yen clearing services. Key features are noted below.

- Extension of Operating Hours: Core hours have been set for foreign exchange yen clearing services that are 9:00 to 15:00 (JST). During the core hours, all participants are required to remain connected to the BOJ-NET.

- Standardization of Message Format: The format of all BOJ-NET messages has been changed to Extensible Markup Language (XML), which is ISO20022 compliant.

- Advancement of Message Format: Customer transfer format has been adopted for funds transfer on foreign central bank’s accounts with the BOJ, in addition to the bank transfer format.

10.2.3 Zengin System:

The Zengin System is an interbank clearing system for domestic retail credit transfers. With the completion of the Next-Generation RTGS Project in November 2011, large-value payments (defined as payments equal to or larger than JPY 100 million) in the Zengin System are settled on an RTGS basis in BOJ-NET FTS. Payments smaller than JPY 100 million continue to be settlement on an DNS (deferred net settlement) basis, with participants’ net positions calculated by the Zengin System and settled across the accounts that participants hold with the Bank of Japan. In 2018, the system handled a daily average volume of 6,589 thousand transactions, while the daily clearing value average JPY 11.8 trillion.

10.3 Market Practice

Double Charging “Double Charging Practice” is a market practice in Japan. All the banks in the payment chain will deduct their own fees. Usually, the standard bank fees in Japan are lifting charges without any cap. The charges are levied and deducted from the proceeds. However, there may be an arrangement between the beneficiary bank and the beneficiary to claim a separate charge rather than deducting from the proceeds.

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Negative Interest Rates The Bank of Japan introduced negative interest rates to excess reserves that financial institutions place at the bank, effective February 16. In practice, the BOJ has adopted a three-tier system where excess reserves parked in current accounts are divided into three tiers; a positive, zero or a negative interest rate is applied to each one. For Loan Support Program, Funds-Supplying Operation to Support Financial Institutions in Disaster Areas and Funds-Supplying Operations against Pooled Collateral, a zero interest rate has been applied.

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Appendix I – Tax Rates for Countries/Regions under DTT with Japan Country Tax Rate on Dividend Tax Rate on Interest

Armenia 15% 10% ・ 0% (gov)

Australia 10%

・0% (direct holding ratio is 80% or more ) ・ 5% (direct holding ratio is 10% or more

10% ・ 0% (gov & financial inst)

Austria 10% ・ 0% (holding ratio is 10% or more) 0% Exemption in principle

Azerbaijan 15% 10%

Bangladesh 15% ・10% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Belarus 15% 10% ・ 0% (gov)

Belgium 15% ・10% (direct holding ratio is 25% or more) 10%

Brazil 12.5%

12.5%

・ 0% (gov)

Brunei 10% ・ 5% (direct holding ratio is 10% or more) 10% ・ 0% (gov)

Bulgaria 15% ・ 10% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Canada 15% ・ 5% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Chile 15% ・ 5%(direct holding ratio is 25% or more ) ・ 0%(pension fund)

10%

・ 4% (bank, insurance)

China 10% 10% ・ 0% (gov)

Czech Republic 15% ・10% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Denmark 15% ・0% (direct holding ratio is 10% or more) 0% Exemption in principle

Egypt 15% -

Estonia 10% ・0% (holding ratio is 10% or more) *DTT is not applicable in case of immovable security

10% ・ 0% (gov, central bank )

Finland 15% ・10% (direct holding ratio is 25% or more) 10%

France 10% ・ 0% (direct holding ratio is 15% or more or direct/indirect holding ratio is 25% or more)

・ 5% (direct/indirect holding ratio of at least 10%)

10% ・0% (gov, financial inst & pension)

Georgia 15% 10% ・ 0% (gov)

Germany 15% ・ 5%(direct holding ratio is 10% or more) ・ 0% (direct holding ratio is 25% or more)

0% Exemption in principle

Hong Kong 10% ・ 5% ( holding ratio is 10% or more) 10% ・ 0% (central bank)

Hungary 10% 10% ・ 0% (gov)

Iceland 15% ・ 0% (holding ratio is 25% or more, or pension fund) ・ 5% (holding ratio is 10% or more)


India 10% 10% ・ 0% (central bank)

Indonesia 15% ・10% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Ireland 15% ・10% (direct holding ratio is 25% or more) 10%

Israel 15% ・ 5% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Italy 15% ・10% (direct holding ratio is 25% or more) 10%

Kazakhstan 15% ・ 5% (holding ratio is 10% or more) 10% ・ 0% (gov)

Kyrgyz Stan 15% 10% ・ 0% (gov)

Kuwait 10% ・ 5% (holding ratio is 10% or more) 10% ・ 0% (gov, central bank )

Latvia 10％・ 0% (other than individuals) 10％・ 0% (other than individuals)

Lithuania 10％・ 0% (other than individuals) 10％・ 0% (other than individuals)

Luxembourg 15% ・ 5% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Malaysia 15% ・ 5% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Mexico

15% ・0% (direct holding ratio is 25% or more and when the

shares issued by such Beneficial Owner is ordinary traded at the official stock exchanges of the contracting state and the issuing shares is more than 50%, and held by gov. or local gov., related organizations, individuals or corporations (more than 50% of the shares are ordinary traded at the official stock exchanges and over 50% of the shares are held by the

15% ・ 10% (bank) ・ 0% (gov)

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Country Tax Rate on Dividend Tax Rate on Interest

relevant country’s residents)). ・ 5% (direct holding ratio is 25% or more)

Moldova 15% 10% ・ 0% (gov)

Netherlands 10% ・0% (direct holding ratio is more than 50% or pension) ・5% (direct holding ratio is 10% or more)

10% ・ 0% (gov, financial inst & pension)

New Zealand 15% ・0% (direct holding ratio is more than 10% ) 10% ・ 0% (gov, financial inst)

Norway 15% ・ 5% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Oman 10% ・ 5% (direct holding ratio is at least 10%) 10% ・ 0% (gov)

Pakistan 10% ・ 5% (holding ratio is 50% or more) ・ 7.5% (holding ratio is 25% or more)

10% ・ 0% (gov)

Philippines 15% ・ 10% (direct holding ratio for 6 consecutive months is 10% or more)

10% ・ 0% (gov)

Poland 10% 10% ・ 0% (gov) Portugal 10% ・5% (direct holding ratio is 10% or more) 10% ・ 0% (government, etc.)

・ 5% (banks) Qatar 10% ・5% (direct holding ratio is 10% or more) 10% ・ 0% (gov, bank, insurance,

sec dealer, pension)

Republic of Korea 15% ・5% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Romania 10% 10% ・ 0% (gov)

Russia 10% ・15% (immovable security) ・5% (direct holding ratio for one year is 15% or more) ・0%(pension fund)


Saudi Arabia 10% ・5% (direct holding ratio is 10% or more) 10% ・ 0% (gov)

Singapore 15% ・ 5% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Slovakia 15% ・10% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Slovenia 5% 5% ・ 0% (gov)

South Africa 15% ・ 5% (direct holding ratio is 25% or more) 10% ・ 0% (gov)

Spain 15% ・10% (direct holding ratio is 25% or more) 10%

Sri Lanka 20% - ・ 0% (bank)

Sweden 10% ・ 0% (holding ratio is at least 10%) 0% Exemption in principle

Switzerland 10 % ・0% (direct holding ratio is more than 50% or pension fund/pension scheme) ・5% (direct holding ratio is 10% or more)

10% ・ 0% (gov, financial inst & pension fund / pension scheme)

Tajikistan 15% 10% ・ 0% (gov)

Taiwan 10% 10% ・0% (administration, central bank)

Thailand - ・20% or 15% (direct holding ratio is 25% or more) 25% ・10% (bank) ・ 0% (gov)

Turkey 15% ・10% (direct holding ratio is 25% or more) 15% ・10% (bank) ・ 0% (gov)

Turkmenistan 15% 10% ・ 0% (gov)

Ukraine 15% 10% ・ 0% (gov)

United Arab Emirates (UAE)

10% ・ 5% (holding ratio is at 10%) 10% ・ 0% (Governments, etc.)

United Kingdom 10% ・ 0% (holding ratio is more than 10% or pension)


United States 10% ・ 0% (holding ratio is more than 50% or pension) ・ 5% (holding ratio is10~50%)

10% ・ 0% (gov, bank, insurance, sec dealer or pension)

Uzbekistan 15% 10% ・ 0% (gov)

Vietnam 10% 10% ・ 0% (gov)

Zambia 0% 10% ・ 0% (gov)

| August 2019


Appendix II – My Number System in Japan The Social Security and Tax Number System so-called My Number system is a social structure to improve administrative efficiently, enhance public convenience and realize a fairer and more just society. The My Number system has assigned a 12-digit number to all individuals registered as residents in Japan and a 13-digit number to corporate entities, to be used for administrative procedures related to social security, taxation and disaster responses. In accordance with the enforcement of Act on the Use of Numbers to Identify a Specific Individual in the Administrative Procedure (the “My Number Act”) effective January 1, 2016, the Income Tax Law was partially amended to impose upon a person who receives payment of interest, dividends, redemption proceeds or the like in Japan and holds the Individual/Corporate Number (“Number Holding Person”) an obligation to report their own Individual/Corporate Number to a payment agent institution, as well as to impose upon the payment agent institution an obligation to fill in the Individual/Corporate Number of its customers in such documents as required to be submitted to the tax authority. In connection with such amendment of the relevant laws, MUFG is required to request Number Holing Persons who use MUFG’s custodian system through their Foreign Account Management Institute for provision of their Individual/Corporate Number to MUFG. Legislation and Obligations

• My Number Holder

All Number Holding Persons are required to comply with the following laws: - Article 224 of the Income Tax Act requires Number Holding Persons to provide their Individual / Corporate Number to their payment agent institution in Japan. - Article 22 of the My Number Act requires Number Holding Person to provide special personal information, including Individual/Corporate Number if the request of such information is made in the circumstances listed in the items of Article 19, such as where it is necessary to process tax related and social insurance/labor insurance related affairs.

• Sub-custodian (Payment Agent Institution in Japan)

All sub-custodians are required to comply with the following laws: - Article 225 of the Income Tax Act requires payment agent institutions to fill the Individual/Corporate Number in the payment related legal records in addition to name, address, etc. and submit to the tax authority. - Article 14 and 15 of the My Number Act stipulate request for provision (of the Individual/Corporate Number) and restriction on request of provision (of the Individual/Corporate Number). - Article 224 of the Income Tax Act and Article 16 of the My Number Act require payment agent institutions to verify the identity of Number Holding Persons with certain identification documents - Article 19 of the My Number Act requires financial institutions that process affairs related to the Individual/Corporate Number and financial institutions that are entrusted with all or part of affairs related to the Individual/Corporate Number to take strict controls over personal information including the Individual/Corporate Number.

| August 2019


• Foreign Account Management Institution (FAMI)

- Under the My Number Act, obligations that are imposed on Sub-custodians are not applicable to FAMIs except in the case where a FAMI gets involved in the management of information of Individual / Corporate Numbers of its clients. - If a FAMI is entrusted from its paying agent institution for handling the Individual / Corporate Numbers, it is required to ensure strict controls over such personal/confidential information in accordance with Article 19 of the My Number Act. Please note that a person who violates rules related to personal information protection on the Individual / Corporate Number outside Japan is subject to the Penalty Provisions (Article 67 - 72) of the My Number Act. For the reporting requirement, MUFG has been continuously approaching the relevant tax authorities to minimize operational costs and burden of our clients, such as obtaining FIAMI status for holding equities. Consequently, we received confirmation from the tax authority in April 2017 about alternative options. Based on the above, the requirements of reporting My Number are summarized as follows, depending on each type of account: <Equities>

Type of Account for Japanese Residents Example of name of accounts with MUFG Reporting My

Number

Segregated Account (FIAMI) for an Individual / Corporation Mr. DEF / XYZ Ltd. Y

Segregated Customer Account (Non-FIAMI) for an Individual /

Corporation ABC Bank for Mr. DEF / XYZ Ltd. N

Omnibus Account per Prefecture of Residency for Individuals ABC Bank sub account for Tokyo Residents N

Full-Tax Omnibus Account for Corporations*1 ABC Bank Customers’ account N

<Bonds>

Type of Account for Japanese Residents Example of name of accounts with MUFG Reporting

My Number

Segregated Account for an Individual / Corporation Mr. DEF / XYZ Ltd. Y

Segregated Customer Account (Non-FIAMI) for an Individual /

Corporation

ABC Bank for Mr./Ms. DEF

ABC Bank for XYZ Ltd. N

Omnibus Account per Prefecture of Residency for Individuals ABC Bank sub Account for Tokyo Residents N

Full-Tax Omnibus Account for Corporations*1 ABC Bank Customers’ account N

Note (*1): A full tax rate of 15.315% for Japanese corporation is applied to assets managed under this account.

| August 2019


Corporate Name: MUFG Bank, Ltd.

Registration Number: Director General of the Kanto Local Finance Bureau Registration Number 5

Head Office: 7-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo 100-8388 Japan

Main business areas: Banking business, Registered financial institution business

Member of Japan Securities dealers Association, The Financial Futures Association of Japan,

Type II Financial Instruments Firms

【Disclaimer】 The information herein is provided for information purposes only, and is not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for any services, transactions, securities or other financial instruments. Neither this nor any other communication prepared by MUFG Bank, Ltd. (collectively with its various offices and affiliates, "MUFG Bank") is or should be construed as investment advice, a recommendation to enter into a particular transaction or pursue a particular strategy, or any a warranty, guarantee or statement as to the likelihood that a particular transaction or strategy will be effective in light of your business objectives or operations. Before entering into any particular transaction, you are advised to obtain such independent financial, legal, accounting and other advice as may be appropriate under the circumstances. In any event, any decision to enter into a transaction will be yours alone, not based on information prepared or provided by MUFG Bank. MUFG Bank hereby disclaims any responsibility to you concerning the characterization or identification of terms, conditions, and legal or accounting or other issues or risks that may arise in connection with any particular transaction or business strategy. Note that MUFG Bank will require to apply to our credit division to establish credit facilities for the pooling arrangement in accordance with MUFG Bank’s credit procedures. Note that MUFG Bank may have issued, and may in the future issue, other reports that are inconsistent with or that reach conclusions different from the information set forth herein. Such other reports, if any, reflect the different assumptions, views and / or analytical methods of the analysts who prepared them, and MUFG Bank is under no obligation to ensure that such other reports are brought to your attention. Copyright©2019 MUFG Bank, Ltd. All rights reserved. 2-7-1 Marunouchi, Chiyoda-ku, Tokyo 100-8388 Japan. Transaction Services Division, MUFG Bank, Ltd.

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