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July 2005

Update : Jun. 01, 2006

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1. Summary of Performance Results for First Quarter of Fiscal Year Ending March, 2005

Consolidated performance results for the first quarter of the fiscal year ending March, 2006 were as follows: operating revenue decreased 517 million yen from last quarter to 13.375 billion yen, operating profit decreased 633 million yen to 3.433 billion yen, ordinary profit decreased 597 million yen from last quarter to 3.85 billion yen, and net profit decreased 776 million yen to 2.128 billion yen.


The main breakdown of profit/loss is as follows:


For operating revenue, although the on-session trading value of domestic stocks during this quarter last year was extremely active, averaging 1.5118 trillion yen a day, the daily average this semester failed to match that amount, reaching only 1.2655 trillion yen. As such, trading participant fees decreased by 583 million yen from last quarter. Listing-related income and information-related income increased by 413 million yen and 200 million yen respectively. This is due to things such as an increase in the amount of listed shares resulting from convertible bonds and preferred stock converting to normal shares, and an increase in Market Information System real-time individual computer terminal fees. On the other hand, securities settlement-related income decreased by 172 million yen from last quarter with the decrease in trading value. System development and operation-related income dropped by 104 million yen due to factors such as the purchase of a large scale system (general DVP stock transfer system) by the Japan Securities Depository Center, Inc. last quarter from Tosho System Service (TSS below). Other operating revenue decreased due to factors such as new General Trading Participants last quarter.


On the other hand, operating expenses increased by 116 million yen from the same quarter last year to 9.941 billion yen. Although payroll expenses were reduced from the same quarter last year by 154 million yen, system maintenance and operation as well as other operating expenses increased due to factors such as parallel operation of both the new and old systems with the replacement of the equities trading system, and costs incurred by TSS with development of systems for TSE and Japan Securities Settlement & Custody, Inc.


As a result, operating profit was 3.433 billion yen, ordinary profit was 3.85 billion yen, and net profit for the quarter was 2.128 billion yen.

2. Adjustments to Foreign Stock Transfer and Settlement System Regulations In Consideration of the Diversification of Issues Listed on the Market for Foreign Stocks

TSE has been making efforts in promoting the listing of foreign companies, particularly those from neighboring Asian countries, through institutional improvement and listing attraction activities. Diversification of listed issues is anticipated in the future through listing of securities such as equities or depository receipts (DR) of companies that have not been listed in their own countries or regions. As such, TSE plans to make regulatory adjustments to respond to this situation.


Specifically, TSE will 1) clarify in which areas rule application differs between financial products such as foreign stocks, beneficiary certificates of foreign investment trusts, and DRs, whose rights processing methods have until now been summarily regulated under the heading "foreign securities", 2) for countries and regions where sending remittances to Japan in the local currency is difficult, create rules for conversion to yen in countries other than Japan, 3) create rules that enable flexible response, under the assumption that there will be some countries where non-uniform exercise of voting rights is not permitted due to government ordinance, etc. of said country, and/or countries that have a legal system that permits actual shareholders to exercise voting rights even though their names do not appear on the list of shareholders, and 4) specifically state that there may be some cases in which conversion into cash of subscription right sales is not possible.

3. Augmentation of the Trading System for Equities

The post-replacement equities trading system has been operational since May of this year, however, in response to the number of orders made yesterday and in order to meet the connection needs of trading participants, TSE has determined to make further augmentations to the system.


Recently, the daily number of orders in the equities market has continuously exceeded 3 million. Although predicting the number of orders in the future is extremely difficult, we assume that this number will continue to increase. Since augmentation of system capacity will require about 7 months, we determined that it is necessary to begin the process soon.


With this next augmentation, processing capacity of the system will be expanded to 9 million orders a day from the current 6.2 million orders a day. Capacity for processing order receptions will also be improved by 1.3 times the current status.


We anticipate that the amount required will be 1.2 billion yen, and activation of the new system is scheduled for February of next year.

4. Partial Revision of Stock Delisting Criteria, etc., for the Promotion of Lowering of Investment Units

Regulations will be revised based on the outline for "Review of Delisting Criteria to Promote Reduction in Investment Units" announced on June 22 of this year. Implementation is scheduled for August 8 of this year.

5. Partial Revision of Regulations of Initial Listing Fees Accompanying Clarification of Calculation Methods for Issue Fees for Warrants Whose Purpose is to Defend Against Hostile Takeovers

Regulations will be revised based on the outline for "Calculation Methods for Fees, Etc. Accompanying the Issue of Warrants Whose Purpose is to Defend Against Hostile Takeovers" announced on June 22 of this year. Implementation is scheduled for July 27 of this year.

6. Partial Revision of the Business Regulations of Tokyo Stock Exchange, Inc. Stating that the Effective Date for Share Splits Will be the Day Following the Base Date

Regulations will be revised based on the outline for "Adjustment of Listing System, Etc. for Making the Effective Date for Stock Splits the Day Following the Base Date" announced on June 22 of this year. Implementation is scheduled for August 8 of this year.

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