When dividends, new stock or subscription warrant, etc., are given to the issues eligible for loans for standardized margin transactions, JSF will receive the rights from securities companies which use stock lending (hereinafter referred to as "sell side"), and transfer the rights to securities companies which use money lending (hereinafter referred to as "buy side").

JSF reports as a beneficial shareholder based on the securities custody and book-entry transfer system, and then secures the rights on collateral stock for money lending, which has not been appropriated to stock lending on the last day with rights. However, the rights on the part of collateral stock for money lending already appropriated to stock lending cannot be secured. So dividends and rights on new stocks or warrants are dealt with as follows in Loans for Margin Transactions:

JSF will receive from sell side the amount regarded as manufactured dividends, which is calculated by deducting withholding tax from dividends paid by issuing corporations, and pay it to buy side.

JSF adjusts LMT outstanding balance (number of stocks) of such an issue as of record date by multiplying the number by allocation ratio + 1 at the ex-record date.
(Note) For investors who keep open positions of such an issue in margin transactions, new stocks will be added to the contracted share of margin transactions, while the price of the issue will be drawn from the contracted price at securities companies for both margin buying and selling customers, corresponding to allocation ratio.

It will be dealt with by converting the rights to cash.
In the event that new stocks and other rights remain after receiving applications from buy side for subscribing new stocks, JSF will sell remaining new stock allocated to JSF in a competitive bidding (Bidding for Rights).

The rights value is obtained by the average accepted bidding price (the total value dealt in the bidding divided by the number of stocks successfully accepted) multiplied by the new stock allocation ratio.

JSF receives, from sell side, the value calculated by multiplying the rights value by the number of stocks in the open selling position, and pays it to buy side. When no new stock and other rights remain in the subscription, the same handling applies by using the price calculated based on the closing price on the last day with rights as the price of subscription.

For investors who keep open positions of such an issue in margin transactions, corresponding value will be deducted from the contracted price at securities companies for both margin buying and selling customers.

JSF handles Bidding for Rights in stock split as follows.

• Shareholder’s rights of proceeds are kept under JSF name, where outstanding LMT money lending balance is larger than that of stock lending balance.


• Supposing stock split with a ratio of 1: 1.5 is taken place, 4,000 stocks are allocated to JSF corresponding to 8,000 proceed stocks of which shareholder’s rights are kept under JSF name.

• JSF, prior to Bidding for Rights, accepts application from buy side securities companies for subscribing new stocks by the record date. The amount of subscription may not exceed outstanding number of stocks for money lending of the securities company.


• Suppose receiving 3,000 stocks subscribing application of new stocks, JSF organizes rights auction for the rest of 1,000 stocks on ex-rights date.

• Specifying bidding price and amount, customers may send subscription application of new stocks through securities companies for 1,000 stocks which shall be dealt by rights auction (Customers who don’t have margin transactions position for the issue are also allowed to participate in the auction through the securities companies).

• After calculating the price of rights based on the formula below, JSF receives from sell side the amount in cash calculated by multiplying the number of outstanding short position (stocks) by rights value, then pays it to buy side on ex-rights day.