Business Overview

Participants and Accounts
The domestic securities depository and book-entry transfer system involves JASDEC, its participants, participants’ clients and issuing companies.
Entities eligible to become JASDEC participants are stipulated in the CSD Law, and include
securities companies, banks, clearing agencies, insurance companies, securities finance companies, stock exchanges and the Japan Securities Dealers Association (JSDA). Investors participate
in the system via client accounts opened on their behalf by participants. Participants may openup to 99 subaccounts with JASDEC.
As of March 31, 2003, accounts with JASDEC numbered 453, held by 272 participants.
Compared with fiscal 2001, these figures represent losses of 18 in the number of participants and24 in the number of accounts opened, mainly due to mergers between participants.

Issuing Companies
P articipation in the JASDEC system is voluntary at most domestic stock and securities
exchanges, so JASDEC is generally required to have the consent of issuing companies to handle
their shares. However, issuing companies whose shares are listed on the Tokyo Stock Exchange
are required to participate in the JASDEC system according to that exchange’s listing requirements.
As of March 31, 2003, 3,626 public companies in Japan had lodged their consent withJASDEC. During fiscal 2002, a further 143 issuers lodged their consent with JASDEC while 127
withdrew theirs, leading to a rise of 16 companies from the previous fiscal year.

Handling of Shares
Deposits and Withdrawals

Participants may deposit their own shares and those of their clients (with their consent) withJASDEC. Clients may deposit shares with JASDEC only through participants.
Deposited share certificates are taken into custody and a record of all deposits is enteredinto the participants’ accounts at JASDEC as well as into the accounts set up for clients by participants. The deposit of shares with JASDEC is entirely voluntary, and participants and clients may
withdraw their shares any time. Like deposit requests, clients’ withdrawal requests must be filed
through participants.
In fiscal 2002, a total of 37,494 million shares were deposited, a decrease of 18,721 million shares, or 33.3%, from the previous fiscal year. Shares withdrawn totaled 25,875 million, an
increase of 4,148 million shares, or 19.1%.

Custody

Shares deposited by participants are kept collectively by JASDEC and are not categorized by participant or by client. In accordance with the CSD Law, participants and their clients are legally
regarded as having co-ownership of the shares in the proportions stated in their JASDEC
accounts or participant accounts, respectively.
The re-registration of share certificates in the name of JASDEC is nominal, and JASDEC’srights are limited to conducting administrative procedures. Shareholders’ rights, such as the rightto claim dividends and residual assets, vote and request the resignation of directors or auditors
rest with the beneficial shareholders (see the section on Beneficial Shareholder Notification onpage 16).
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Business Overview

Although deposited shares are kept collectively by JASDEC, the Company provides separate accounting for shares owned by participants (i.e their own shares) and shares they receivefrom clients for safekeeping. This provides legal protection for the shares held on behalf of clientsin the event of participant bankruptcy.
As of March 31, 2003, shares held in custody totaled 203,181 million, an increase of11,619 million shares, or 6.1 %, over the previous fiscal year. The ratio of shares held in custodyto total domestic shares outstanding increased 5.6 percentage points, to 59.1%. Compared withcountries in which securities depository systems have been fully accepted, Japan is still lagging
behind. To hasten an increase in the proportion of shares held in custody in the domestic market,
we will further reduce costs and fees applicable to participants, and vigorously pursue wide-ranging promotional activities.

Uncertification of Certificates

In Japan, shareholders may request issuers to replace their shares in an uncertificated form.
As a nominal shareholder, under the CSD Law JASDEC is also entitled to request this procedure. By exercising this right, we are able to rationalize administrative procedures and save
space, while reducing the risk of losing physical share certificates.
Elimination of physical share certificates also offers advantages for issuing companies, particularly the opportunity to cut issuing costs for new share certificates and administrative costsrelated to stock splits or changes of corporate name.
In fiscal 2002, JASDEC had requested issuing companies to replace 105,490 million sharesin uncertificated form, an increase of 9,933 million shares over the previous fiscal year, representing 51.9% of all shares kept in custody with JASDEC, up 2.0 percentage points.

Book-Entry Transfer

When a participant or client trades the shares held in custody by JASDEC, or transfers suchshares for collateral or other purposes, delivery of shares is effected by book-entry transfer
between accounts. JASDEC offers two types of book-entry transfer between accounts: exchange
trade transfers and non-exchange trade transfers.
Exchange trade transfers are transfers of shares between participants as a result of trades
executed on stock exchanges or in the over-the-counter market (JASDAQ). Book-entry transfersfor other purposes are non-exchange trade transfers. Regulations set by stock exchanges andJSDA require that trades of JASDEC-eligible issues executed in their respective markets be settled
by book-entry transfers between participant accounts held with JASDEC.
The Japan Securities Clearing Corporation (JSCC), which is the body responsible for clearing all trades in the stock exchanges and JASDAQ, sends transfer instructions directly to JASDEC
for settlement purposes. In the case of non-exchange trade transfers, the seller sends transfer
instructions to JASDEC. Non-exchange trade transfers are most commonly used by institutional
investors and non-resident investors, who keep shares in their accounts with custodian bank participants. In order to settle their trades in the stock exchanges or in the JASDAQ market, sharesare transferred by book-entry between the custodian bank participant and the securities company
participant.
In fiscal 2002, exchange trade transfers totaled 225.7 billion shares, down 5.9% from theprevious year. Non-exchange trade transfers rose 5.3%, to 355.0 billion shares, and accounted for
61.1% of aggregate domestic book-entry transfers.

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Business Overview

The number of exchange trade transfers in fiscal 2002 was 20.1 million, down 6.5%, whilethat of non-exchange trade transfers, which generally involve transfers of large amounts of shares,
was 14.9 million, up 2.1%.

Beneficial Shareholder Notification

Under the securities custody and book-entry transfer system in Japan, issuers are informed of
the names of beneficial shareholders to facilitate the direct distribution of dividends and anyother rights to beneficial shareholders, and beneficial shareholders exercise their rights directly tothe issuers. Accordingly, JASDEC prepares and provides issuers with beneficial shareholder data.
Our beneficial shareholder notification service includes collection of information on beneficial shareholders as of the record date in accordance with reports from participants, and notification of this information to issuers. Issuers draw up beneficial shareholder lists based on thisdata and send notices of shareholder meetings and other information directly to the beneficial
shareholders. Beneficial shareholders thus receive dividends directly from issuers, and exercise
voting rights directly to issuers.
When new shares are distributed to beneficial shareholders, such as through stock splits,
such stock allocation is also processed by book-entry in the accounts of concerned participants
maintained with JASDEC as well as in the accounts of customers maintained with the participants.
JASDEC issued 54.7 million such notifications in fiscal 2002, up 2.1% from fiscal 2001.
These notifications represented 430.2 billion shares, up 17.2%. Reflecting an increase in shares incustody, notifications to beneficial shareholders on record as of March 31, 2003, rose 2.3 million,or 11.1%, to 23.2 million notifications. These notifications represented 185.7 billion shares, anincrease of 10.0 billion shares, or 5.7%, from the year before. These are the highest figures JASDEC has ever recorded.

Other Securities Operations
Year ended March 31, 2003

Convertible Bonds(Millions of yen)
Deposits
WithdrawalsCustodyBook-entry transfer
Exchange trade transfer
Non-exchange trade transfer
Number of issues

Exchange Traded Funds (ETFs)(Thousands of units)
Deposits
Withdrawals
CustodyBook-entry transfer
Exchange trade transfer
Non-exchange trade transfer
Number of issues

Real Estate Investment Trusts (REITs)(Number of units)
Deposits
687,055
Withdrawals
100,419
Custody
1,346,318
Book-entry transfer
Exchange trade transfer
917,114
Non-exchange trade transfer
1,312,682
Number of issues
7794,755
2,228,492
6,651,418
2,102,721
10,537,845
379

Preferred Investment Securities of FinancialInstitutions Established by CooperativeAssociations(Number of units)
Deposits
34,359Withdrawals
7,449
Custody
237,438
Book-entry transfer
Exchange trade transfer
36,532Non-exchange trade transfer
52,975
Number of issues
12,247,915
372,8622,567,313
1,555,507
7,482,2411916