President’s Message

SEEKING TO BUILD
A MARKET INFRASTRUCTURE
TO THE WORLD’S HIGHEST
STANDARD
Fiscal 2003 Review

It is our ongoing objective to provide users with an expedient securities
clearing and settlement system. Therefore, in fiscal 2003, ended March 31,
2004, we maintained our focus on four goals. They are: 1) to promote securities clearing and settlement reform; 2) to encourage greater use of securities
depository and book-entry transfer services; 3) to reinforce operating systems
and ensure security; and 4) to reduce the cost burden on participants.
A notable development during the fiscal year in review was the fullscale implementation of a book-entry transfer system for commercial paper(CP) — Japan’s first dematerialization for marketable securities — that totally
dematerializes CP, from its issuance and transfer through to redemption.
In May 2003, we put the third and final phase of the first stage of thepre-settlement matching system (PSMS) online and added a matching function for government bonds and exchange-traded futures and options. Thenin June 2003, we established JASDEC DVP Clearing Corp., a wholly owned
subsidiary, to undertake clearing services related to DVP settlement system
for non-exchange transaction deliveries (NETD), and pushed ahead withpreparations, including systems development, geared to the start of the delivery
versus payment (DVP) system for NETD in May 2004.
We also launched an advertising campaign, using newspapers, television and other media, to encourage investors andissuers to utilize our services. As a result, the number of sharesin custody reached 228.2 billion as of March 31, 2004, andexpanded our custody ratio to 64.1% of all outstanding sharesin Japan.
As part of our efforts to reinforce ties with international organizations,in August 2003, we signed a memorandum of understanding with The
Depository Trust & Clearing Corporation in the United States to foster businesscooperation mutually beneficial to both companies and promote an exchangeof information.

228.2

billion

NUMBER OF SHARESIN CUSTODY3

President’s Message

Yoshinobu Takeuchi, President & Chief Executive Officer

2OO3

HIGHLIGHTS OF THE YEAR

Fiscal

May 2003

Implemented third phase of first stage ofpre-settlement matching system.
June 2003

Established JASDEC DVP Clearing Corp.,
a wholly owned subsidiary.
August 2003

Signed a memorandum of understanding
with The Depository Trust & Clearing Corp.
of the United States.

4President’s Message

Operations Reflecting Social Demands

J ASDEC utilized its June 2002 transformation into a stock company toenhance its governance function, thereby enhancing the transparency ofoperations and strengthening its financial position. The Company also
appointed a Board of Directors on which 10 members are representatives
from participant companies and established the Committee for Business
Operations to ensure that business activities properly reflect the needs andfeedback of users.
We have always maintained a trend toward reduced fees for users andremain committed to lessening the cost burden on users by achieving greater
operating efficiency to minimize costs.
Our management direction is guided by three principles:1) to ensure highly transparent business activities that put users before anything else;2) to provide capacity on a par with overseas central securities depositories; and3) to extend exceedingly reliable and cost-effective services.
These principles underpin ongoing efforts to identify user needs with greater
accuracy, elicit a more user-friendly infrastructure for clearing and settlement,
and polish our capabilities still further, all of which will lead to a higher
deposit ratio and pave the way for securities clearing and settlement system
reform in Japan.
On behalf of the Board and employees of JASDEC, I sincerely ask forthe continued support of all parties, including participants, shareholders,issuers, and investors.
June 2004

Yoshinobu Takeuchi
President and Chief Executive Officer

Pre-Settlement Matching System (PSMS) A system that automatically matches various information, including the name andvalue of trades and settlements. Please refer to page 10.
Delivery versus payment (DVP) Please refer to page 10.

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