Business Overview
For the the year ended March 31, 2005

BASIC DATA
Participants and Accounts

Participant firms open accounts at JASDEC and deposit the certificates they wish to consign. Suchfirms include securities companies, banks, trust banks, insurance companies, securities finance companies and stock exchanges.
As of the end of March 2005, the number of participants stood at 272, and the number ofaccounts stood at 469.
PARTICIPANTS BY
CATEGORY

Stock exchanges
and others 20(As of March 31, 2005)

NUMBER OF
ACCOUNTS BY
CATEGORY

Stock exchanges
and others 37(As of March 31, 2005)

Life and non-life
insurance companies 7Life and non-life
insurance companies 9Banks41
Securities
companies 204

Securities
Banks 186 companies
237

Total 469

Total 272

Note: Clients of participant firms do not deposit certificates directly with JASDEC. Rather, they utilize JASDEC’s services through theaccounts they establish at participant firms.

Issuing Companies 3,757
As of March 31, 2005, all publicly traded companies in Japan have consented to JASDEC handlingtheir stocks.

Eligible Securities
ELIGIBLE SECURITIES (As of March 31, 2005)
StocksPreferred investment securities
Beneficiary certificates of ETFs
Certificates of REITs
CBs

262,128 million shares

3,758 issues

251,765 units
1,708,097 thousand units
3,449,594 units
2,604,232 million yen

16 issues
18 issues
158 issues

1 issue

Note: JASDEC accepts securities described in the CSD Law. Consent of the issuing company is also a prerequisite. Currently, eligible
securities are domestic securities, including stocks, convertible bonds (corporate bonds with subscription warrants to new shares),beneficiary certificates of exchange-traded funds (ETFs), certificates of real estate investment trusts (REITs), and preferred investment
bonds of financial institutions established by cooperative associations, which are listed on stock exchanges or registered with the JapanSecurities Dealers Association (JSDA).

Corporate Governance
Basic Policy As the central securities depository in Japan, JASDEC strives to fulfill its duty toserve the public through the provision of a highly secure, efficient and convenient clearing and settlement structure. This perspective underlines the Company’s basic policy on business.

14Business Overview

The basic concept for corporate governance at JASDEC hinges on two points: first, we must
undertake activities that address the needs of clients, not only participating firms but a wide range ofother parties, including investors, using the Group’s systems; and second, we must maintain highly
transparent management practices that reinforce our public-service quality and cement a reputationof trust in the market as the organization responsible for the securities clearing and settlement infrastructure in Japan.

REVENUES BY OPERATION
Fiscal 2004 Review

Fiscal 2004, ended March 31, 2005, was characterized by a general feeling of economic recovery inJapan. During the first half, higher exports and capital spending as well as an increase in industrial
output underpinned better business conditions. In the second half, the upward trends evened out,
albeit temporarily, with exports and production holding at par year-on-year. However, a positive
undercurrent in consumer spending and a healthier employment situation supported the overall
recovery tone for the year.
Amid this rosier economic climate, the securities market also gained strength. Stock trading
was active, substantiated by daily trading volume averages at the Tokyo Stock Exchange greatlyexceeding the 1 billion mark in consecutive months, and stock prices were bullish.
The JASDEC Group benefited from this environment as heightened stock-trading activity triggered more account transfers through the Group’s securities depository and book-entry transfer systems and expanded the number of shares in custody. Against this operating backdrop, the Group
achieved the following results.

Book-Entry Transfer Services
for Stock Certificates
Account Transfer Operations The number of shares in the transfer account — that is, combined exchange trade and non-exchange trade deliveries (NETD) — averaged 71.0 billion a month,
primarily a reflection of brisk stock trading. This situation led to another year of energetic accounttransfer activity. Consequently, income related to account transfer services, particularly services forstock certificates, corporate bonds with subscription warrants to new shares and ETF beneficiary certificates, reached ¥12,420.0 million.

Custody Operations Thanks to steady receipt of shares into the special account, the number ofshares in custody was up, as of March 31, 2005, with stock certificates at 262.1 billion shares, corporate bonds with subscription warrants to new shares at ¥2,604.2 billion, and ETF beneficiary certificates at 1,708 million units. As a result, income related to custody operations, particularly services
related to stock certificates, corporate bonds with subscription warrants to new shares and ETF beneficiary certificates, amounted to ¥5,468.8 million.

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Business Overview

Handling of Shares(a) Deposits and withdrawals
The withdrawals to deposits ratio has beenfalling year after year for some years now, settling at 15.1%, as of March 31, 2005.

(Years ended March 31)

Billions of shares%

60

4045303020

15

100

Number of Shares Deposited
Number of Shares Withdrawn
Withdrawals to Deposit Ratio

FY2000FY2001

FY2002

FY2003

FY2004

45.3
12.5
27.6%

53.2
10.5
19.8%

33.7
9.6
28.5%

34.9
7.4
21.4%

45.8
6.9
15.1%

0Note: The ratios above are calculated based on the number of shares deposited, excluding shares deposited by stock splits, and s
hares withdrawn, excluding shares by stock transfer and merger.
Billions of shares(b) Custody
As of March 31, 2005, the number of sharesin JASDEC’s custody stood at 262,128 million
shares and represented 71.7% of all outstanding shares issued by companies listed on stock
exchanges in Japan.

%

280

80

21060

1404070

200Custody Balance
Ratio of Custody Balance to Shares Issued in Japan
Ratio of Immobilized Shares in Custody

FY2000FY2001

FY2002

FY2003

FY2004

157.0
42.3%
46.8%

191.5
53.5%
49.9%

203.1
58.6%
51.9%

228.2
64.1%
56.3%

262.1
71.7%
60.2%

0Note: Immobilized shares are shares in custody that have been replaced by jumbo certificates, based on set criteria, to reduce
administrative costs associated with custody and minimize risks, such as the physical loss of stock certificates.
Billions of shares(c) Book-entry transfer
Of the number of shares transferred between
accounts by book-entry transfer in fiscal
2004, the number of shares pertaining toexchange trade transfers represented 338,607
million and the number of shares pertaining
to NETD accounted for 676,745 million.

%

800

80

600

60

400

40200

200

NETD Transfers
Exchanges Trade Transfers
Ratio of NETD Transfers to Total Transfers

FY2000FY2001

FY2002

FY2003

FY2004279.0205.157.7%

308.9
219.1
58.4%

355.0
225.7
61.1%

442.7
311.9
58.7%

676.7
338.6
66.7%

Million cases(d) Beneficial shareholder notification
In fiscal 2004, beneficial shareholder notification services covered 532,658 million sharesand 73 million cases.

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Billions of shares

80

600

60

450

40300

20150

0

Number of Cases
Number of Shares

0FY2000

FY2001

FY2002

FY2003

FY2004

41.7
307.2

47.8
367.1

54.7
430.2

61.2
448.1

73.9
532.6

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Business Overview

Other Securities Operations An overview of other securities operations conducted during fiscal 2004 is presented below.
(a) Convertible bonds (corporate bonds
with subscription warrants to new shares)(Millions of yen)
Deposits
Withdrawals
CustodyBook-entry transfers
Exchange trade transfers
NETD
Number of issues

286,897
1,985,120
2,604,232
949,391
12,691,752
158(c) Preferred investment securities of financial
institutions(Number of units)
Deposits
Withdrawals
CustodyBook-entry transfers
Exchange trade transfers
NETD
Number of issues

9,604
1,226
251,765
59,50089,4451(b) Exchange-traded funds (ETFs)(Thousands of units)
DepositsWithdrawals
CustodyBook-entry transfers
Exchange trade transfers
NETD
Number of issues

920,846
1,205,868
1,708,097
2,114,709
9,145,555
16(d) Real estate investment trusts (REITs)(Number of units)
Deposits
Withdrawals
CustodyBook-entry transfers
Exchange-trade transfers
NETD
Number of issues

1,149,398
59,184
3,449,594
2,544,588
5,634,093
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Note: Data regarding the number of issues is as of March 31, 2005

DVP Settlement Services for NETDs

Demand for DVP for NETD has far surpassed initial expectations, with the number of DVP bookentries averaging about 60,000 per business day since the DVP for NETD system was launched inMay 2004. As a result, income related to DVP settlement services for NETD amounted to ¥1,039.2
million in fiscal 2004.

Basic Format for DVP for NETD DVP for NETD is a gross-net type DVP settlement systemthat links book-entry transfer of stocks and other securities with payment of funds, based on settlement instruction data produced by the pre-settlement matching system (PSMS). With this type ofsystem, book-entry transfer of securities is processed on a gross-net basis, whereby at the end of theday each participant pays or receives the balance that remains when payable amounts for the receiptof securities and receivable amounts for the delivery of securities are netted out. These procedures,
already adopted by the United States’ Depository Trust & Clearing Corporation, effectively reduce
securities settlement risk and facilitate efficient processing of numerous settlements.
Connecting PSMS and the DVP for NETD represents the last step on the road to achieving
straight-through processing for securities settlement in Japan. PSMS-generated instruction data on
settlements are relayed to the DVP settlement system automatically, obviating the need to input
instructions through a separate process and bringing settlements to their respective quick conclusions. JASDEC DVP Clearing Corp., a JASDEC subsidiary, ensures thorough legal compliance withrules for risk management and netting.
Pre-Settlement Matching System (PSMS) Please refer to page 18.
This system automatically confirms investment instructions, such as trade names and amounts.

Delivery versus Payment (DVP) This system simultaneously attaches specific conditions to the delivery ofand payment for securities. International standards, recommended by the Group of 30 and other organizations,require the application of a DVP settlement system to all securities settlements to eliminate settlement risk

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Business Overview

Book-Entry Transfer Servicesfor Dematerialized Commercial Paper

As of March 31, 2005, book-entry transfer for dematerialized commercial paper (CP) had been
extended to 238 issuers, an increase of 200 companies from a year earlier. The account balancestood at ¥4,863.3 billion, up ¥3,459.1 billion, and the number of transfers reached 11,772, up
9,710. As a result, income related to book-entry transfer services for dematerialized CP reached¥55.6 million.
Dematerialized CP Account Balance (Month-end)
Trillions of yen
20151050

Outstanding amount

Apr. May
2004
1.3
1.3

Jun.

Jul.

Aug. Sept.

Oct.

Nov.

Dec.

1.7

1.8

1.9

1.9

2.3

3.2

2.1

Jan. Feb.
2005
3.5
3.7

Mar.

Apr.

MayJun.

4.8

9.8

13.7

18.2

Pre-Settlement Matching Services

I n fiscal 2004, as in fiscal 2003, stock trading was brisk, spurring use of JASDEC’s PSMS.
Consequently, income related to pre-settlement matching services amounted to ¥1,405.0 million.
The PSMS was connected to the account transfer system to coincide with the May 2004 startof DVP for NETD so that DVP transfer request data will, if requirements have been met, automatically route to the transfer account and bring DVP settlement to a conclusion.
In February 2005, a matching function for domestic government bond repos and futures wasadded to the system in anticipation of the Japan Government Bond Clearing Corporation assuming
the function of a key counterparty.

Other Services

The time limit for receiving requests for securities companies’ special accounts expired on December
31, 2004, prompting a considerable increase in the number of inquiries regarding the Securities
Information Tracing System, known as SITRAS, during the second half of calendar 2004.
More stock certificates in custody and the availability of transfers of title the day after application caused a rise in the number of agencies handling transfers of title. As a result, income related toother services came to ¥3,818.3 million.
In fiscal 2004, the JASDEC Group provided participants with fee refunds amounting to¥4,451.9 million. Consequently, operating income grew 11.0% over fiscal 2003, to ¥19,003.9 million.

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