Fiscal Year 2007
A n n u a l

R e p o r tTABLE OF CONTENTS

To Our Shareholders

1

Major Initiatives in Fiscal Year 20072

Market Data

5

Mid-Term Business Plan

6

Challenges in Fiscal Year 2008

9Financial Outlook

10

Financial Statements

11

Corporate Profile

12

TO OUR SHAREHOLDERS

We would first like to express our sincere gratitude
for your continued support of our operations andbusiness.

Trading in Fiscal Year 2007
In Japan, business recovery continued until the
middle of 2007 due to steady production and strong
exports. However, in the second half of the year, a riskof economic slowdown was perceived as a result of
the U.S. sub-prime mortgage crisis, which worsenedbusiness confidence.
Under these circumstances, trading volumes for
Three-month Euroyen Futures were solid in the firsthalf of the year thanks to TFX s aggressive marketing
efforts and investor relations activities targeted atforeign investors. However, trading volumes havegrown at a sluggish pace since the Autumn due to a

Mid-Term Business Planlack of movement in short-term interest rates.
On the other hand, trading volumes for CLICK 365(Exchange FX Margin Contracts) increased 2.2 times

In light of world affairs, the outlook for thecompared with the previous fiscal year. This was due

Japanese s domestic economy, changes in theto the growth of the forex margin contract market andoperational environment due to the enforcement of thethe improvement of CLICK 365 s public recognition

Financial Instruments and Exchange Act, and in order

following promotional efforts.

to enhance TFX s presence, we have drawn up a MidTerm Business Plan effective from fiscal year 2008.

As a result, overall trading volume on TFX in fiscal

Under the plan, we will aim to be a comprehensive

year 2007 was 74 million contracts.

exchange for financial derivatives, and will strive to
make great strides forward, taking into consideration

Two Successive Years of Record Breaking Profits

the planned listing of TFX on a stock exchange after
completion of the plan.

Based upon the business conditions described
We are looking forward to your continued support

above, TFX s operating and ordinary profits in fiscal

and cooperation.

year 2007 were 7.6 billion and 7.7 billion Japanese yen
respectively. This means that TFX has achieved its

June, 2008

highest profits since its establishment for two

Jiro Saito, President & CEO

successive years.

1

MAJOR INITIATIVES IN FISCAL YEAR 2007

1Change of Corporate Name

Previously, TFX was an exchange where only financial futures were traded.

However, financial instruments which can be listed on TFX were expanded from financial
futures to any and all kinds of financial instruments as a result of the enforcement of the
Financial Instruments and Exchange Act. In accordance with this expansion, ourcorporate name was changed from Tokyo Financial Futures Exchange to Tokyo
Financial Exchange in September 2007.
The Financial Futures Trading Law, on the basis of which TFX was established, wasincorporated into the Securities and Exchange Law, and the latter law was renamed
Financial Instruments and Exchange Act. Consequently, financial instruments which
can be listed on TFX have been expanded to securities and derivatives, and are no longer
limited to financial futures.
Going forward, both cash securities and derivatives can be listed on TFX.

2

Listing of Over-Night Interest Rate Futures
In December 2007, TFX listed Over-Night Call Rate

Futures and Spot-Next Repo Rate Futures, both of which areover-night interest rate futures.
These products are effective tools for avoiding risks
which may arise from the fluctuation of short-term interest
rates by anticipating financial policies which will be adopted
by the Bank of Japan in the future.
Over-night index swaps (OIS) were the only over-night
financial instruments available until this listing. Over-nightinterest rate futures are expected to be traded by Japanese
investors as financial instruments which have similarfunctions to OIS but involve no counterparty risks. Similar

When any change in the Bank of Japan s financial

instruments have already been listed on the Chicago

policies is anticipated, domestic and foreign investors are

Mercantile Exchange.

likely to actively sell and/or purchase these products making

・ Advantage of Over-Night Call Rate Futures:

allowance for future fluctuation in interest rates.

This product reflects the Bank of Japan s financial

Unlike Three-month Euroyen Futures, these products

policies and is accordingly straightforward.

cover average interest rates for one month. For this reason,

・ Advantage of Spot-Next Repo Rate Futures:the trading unit for each of these products is 300 million

Underlying assets are large-scaled and demand for thisJapanese yen so that tick values for both products are theproduct is expected from a variety of investors.

same.

Major Specifications For These Products

Underlying asset
Trading unit
Tick size & ValueContract month
Last trading day
Final settlement day

Final settlement price
Close-time for thecontraction on its last
trading day(JST)Over-Night Call Rate Futures(Call Rate Futures)

Spot-Next Repo Rate Futures(Repo Rate Futures)

The monthly average of Uncollateralized OverNight Call Rate(final results) released by
the Bank of Japan (BoJ)

The monthly average of GC Spot-Next Repo Rate
(Tokyo Repo Rate) released by the Bank ofJapan (BoJ)￥ 300,000,000(Notional principal amount)
0.005(0.005%)￥ 1,250 (￥300,000,000×0.005%×30 / 360 = ￥ 1,250)
First 12 calendar months
Two business days prior to the last
The last business day of the contract monthbusiness day of the contract month
The second business day following the
The first business day following thelast trading day
last trading day
100 minus the monthly average of Uncollateralized
100 minus the monthly average of GC Spot-Next
Over-Night Call Rate (final results)
Repo Rate in the contract month released byin the contract month released by BoJ,
BoJ, rounded to the nearest 3rd decimal placerounded to the nearest 3rd decimal place
15：30

11：00

2

3 Upgrading of TFX s Financial Futures Trading System(1)Expansion of Trading Platform Capacity

TFX s financial futures trading system has been
upgraded to the most cutting edge version available.
After developing and testing in fiscal year 2007, TFX s
operation of the new system started smoothly in April 2008.
In anticipation of increased participation from both
domestic and foreign investors, increased trading volumes
from algorithmic traders, and the planned listing of additional
products on TFX, capacity of the new trading platform has
been significantly increased as follows:・maximum number of orders per day: 6 million(30,000 orders via the previous system); and・maximum number of contracts per day: 1 million(10,000 contracts via the previous system)(2)Highest Processing Speed Worldwide
Through significant reduction of the main server s
processing time and expansion of the network s bandwidth
the execution processing time has been reduced to a few
milliseconds.
Highest Processing Speed World Wide: (highest
speed measured at 3.8 milliseconds)(3)Adoption of Pro-Rata Algorithm
TFX has changed its order matching algorithm from aprice and time priority algorithm to a pro-rata one.
The pro-rata algorithm is the prevalent one used in the
global short-term interest rate futures market and has been
adopted in exchanges such as NYSE-Euronext and CME.

(4)Establishment of Disaster Recovery Center asa Part of TFX s BCP Efforts
As part of TFX s BCP (Business Continuity Plan) efforts,
TFX has established a disaster recovery center in a location
which will not be affected by any disaster which might
damage TFX s main center. Operation of the disasterrecovery center started in April 2008.

4 Remote Membership Program(1)Adoption of Remote Membership Program

the financial market in Tokyo.

The Remote Membership Program is designed to enable
overseas investors who do not have any business facilities inJapan to directly access TFX s Interest Rate Futures markets,as remote trading members, for the purpose of trading Threemonth Euroyen Futures, Options on Three-month Euroyen
Futures and over-night interest rate futures.
TFX is the first exchange in Japan to adopt
such a program.

(3)Qualification Requirements for Remote
Trading Members
In line with other exchanges around the world， TFX is
endeavoring to make the qualification requirements as open
as possible.
More specifically, financial requirements (such as therequired amount of capital) for TFX s remote trading
members are limited to requirements for the second financial
instrument firms as set forth in the Financial Instruments andExchange Act.

(2)Purpose of Establishment
Establishment of the Remote Membership Program will
facilitate overseas investors access to TFX s trading system
and is expected to increase the vitality of the market.
As such, the Remote Membership Program willcontribute to both the vitalization and internationalization of（4）Fee for Registration as a Remote Trading Member
Free of charge (in line with foreignexchanges)

35 Organization of Overseas Seminars and Seminar-Related Activities(1)Organization of Investor Relations Seminar in
LondonIn September 2007, TFX held an investor relations
seminar and a reception in London. Mr. Saito, President &CEO of TFX, and other management attended the seminarand the reception.
Participants in the seminar and the reception included
institutional investors and other local customers, exchanges,
and members of embassies. TFX spoke of business activities
and strategies going forward.

(2)Obtainment of No-Action Lettersystem for purchasing or selling TFX s products.

TFX obtained a no-(3)Active Participation in Overseas Expositions
and Seminars

action letter from the
U.S. Commodity Futures
Commission

・Participation in futures industry expositions held inThis has given TFX s・Participation in the 2007 FIA Asia Derivatives Conference

trading members locatedin Taipei and the FIA Annual General Meeting in Boca

Trading

London and Chicago;(CFTC).

Raton; andin the U.S.A. direct・Active commitment to the FIA Japan Chapter.

access to TFX s trading

6

Other Measures
Currently 8 ISVs including GL Trade and(1)Improvement of Availability of Financial
Futures Contracts

Patsystems connect with TFX thus increasing theavailability of opportunities for financial futures trading(i) Trading Member Registration Fee Reduction

on TFX.

The fee for registration as a TFX Euroyen(2)Usability Improvement for CLICK 365

Futures Trading Member has been reduced(i) Improvement of usability

from 50 million Japanese yen to 20 million

・Increase of the volume limit of each order.

Japanese yen (or from 50 million Japanese yen to 30
million Japanese yen if such trading member is also

・Enabling of log-in after 8:00 p.m. on Sunday.

admitted as a TFX Interest Rate Futures clearing(ii) Launching of Mobile Web Site for CLICK 365
On the mobile web site, TFX provides current pricemember), enabling a wider range of investors to

information, TFX s trading members, financial news,

participate as trading members at low cost.

seminar information etc.

(ii) Seminars for Local Banks(iii)Enhancement of Chart Functions for CLICK 365 s

In response toincreased interest

web sitefrom local financial

・Addition of 4 technical charts including a moving
average chart.

institutions in Three-・Uploading of historical data (including open interest

month Euroyen Futurescontracts, TFX held

movement on both buyer s and seller s side) in theseminars in order toform of diagrams.

(3)Establishment of Self-Regulatory Committee

meet their tradingneeds.

In order to comply with the Financial Instruments and(iii)Expansion of ISVs

Exchange Act, which came into force in September 2007, TFX

In March, 2008,
TFX

and

established a Self-Regulatory Committee consisting of 3

Trading

directors (2 of whom are external directors) to ensure due

Technologies International, Inc. (TT), the largest

performance of TFX s self-regulatory operations.

independent software vendor (ISV) in the world,

At the same time, TFX has established a Self-Regulation

mutually agreed that TT would make connections with

Bureau, which is responsible for implementing self-regulatory

TFX and would supply TT s trading software to TFX s

operations and providing secretarial support to the Self-

trading members.

Regulatory Committee.

4MARKET DATA
Options on Three-month
Euroyen Futures

Three-month Euroyen Futures
Average Daily Trading Volume

Trading Volume(in thousands)
40,000200,000

36,28435,000147,496 144,146

150,000

Trading Volume35,31550,0002,500

20,00010,0000
FY2004

FY2005

FY20062,000

15,01515,00030,985

1,500
7,591

1,000

5,000

500

0

0

FY2007

3,454

3,000

25,00061,040

4,234

4,000
3,500

30,000100,000(in thousands)
4,500

FY2004

FY2005 FY2006

FY2007576
2
FY2004

FY2005

FY2006 FY2007

Total Trading Volume of

CLICK 365 (Exchange FX Margin contracts)*Listed from July, 2005 Listed Products
Average Daily Trading Volume

Trading Volume(in thousands)
40,000200,000

35,28235,000150,000

135,701

100,000
61,564
19,60530,00060,00025,00050,000030,00010,00020,000
3,822

10,0000
FY2005

FY2006

FY200756,47240,00015,94515,0005,000

74,05770,00020,00050,000

Trading Volume(in thousands)
80,00019,4657,900

0FY2005

FY2006

FY2007

FY2004

FY2005 FY2006 FY2007

Trading in Fiscal Year 2007
(1)Three-month Euroyen Futures
Volume of trading of Three-month Euroyen Futures on TFX increased until the summer of 2007 due to
speculation that the Bank of Japan would raise interest rates. However volumes went slack in the latter half ofthe fiscal year due to the U.S. sub-prime mortgage crisis, which came to the fore in mid-August. This prompted
investors concern about a possible business recession in the U.S.A. and Japan and the prospects that the Bankof Japan would raise interest rates became unlikely.
As a result, the annual total trading volume was 35,315 thousand contracts, a 2.7% decrease from theprevious fiscal year.

(2)CLICK 365
The U.S. dollar-yen exchange rate was in favor of U.S. dollar against Japanese yen until July 2007, but the
yen suddenly gained strength in August due to effect of the U.S. sub-prime mortgage crisis. Thereafter, the ratecontinued to fluctuate. On March 13, 2008, the U.S. dollar fell below 100 yen for the first time since 1995
triggered by the Bear Stearns crisis, and further fell reaching the 95-yen level on March 17.
In response to such exchange rate movements, CLICK 365 was very active: trading volume in fiscal year
2007 was 35,282 thousand contracts, a 121.2% increase from the previous fiscal year.

5MID-TERM BUSINESS PLAN
By a resolution of the Board of Directors passed on May 23 2008, TFX adopted a Mid-TermBusiness Plan for the first time.
Based upon changes in the economic environment which are quite likely to occur in the future,
the plan clarifies TFX s future prospects and management targets, from the viewpoint of how TFX isto establish its position in Japan and the world. The plan is set forth below.

Introduction
It has been four years since Tokyo Financial Exchange (TFX) was demutualized, during which time
we have steadily grown under two main operations: Interest Rate Futures contracts and Exchange FX
Margin contracts. In fiscal year 2007, we achieved a record Ordinary Profit of JPY7.7 billion.
We have also enjoyed a reputation as an advanced and global exchange both domestically andinternationally.
In order to establish complete and total management foundations, and further enhance our presencein the future, we have drawn up a Mid-Term Business Plan for the next three years commencing in fiscal
year 2008, which will help us achieve further growth.
The economic environment which is to be the premise of this Mid-Term Business Plan for the next
three years is recognized to be as follows.

1 The outlook of Japan s domestic economy

Although two years have passed since the removal of the quantitative monetary easing
policy, the economy has entered a sluggish phase due to the U.S. sub-prime mortgage crisis
exposed last summer in the midst of normalization of interest rates, along with theincreasing risk of further slowdown for fiscal year 2008.
With a view to the aging society, there is a trend of policies advocating investments
rather than savings and these investments are expected to be actively made in various
financial assets.
Additionally, on the background of an increasing balance of Japan s government s
bonds, potential needs for hedging against the rise of interest rates are growing, which hasbrought high expectations in the medium term for products dealt with at TFX.

in the operational environment due to the2 Changes
enforcement of the Financial Instruments andExchange Act
In the financial sector, restrictions on products listed on the exchanges have been
removed, and the era of exchanges competing with each other has begun, which will
enhance user-friendliness and enforce investor protection.
Moreover, the government s plan for enhancing competitiveness in the financial andcapital markets has included the concept of a comprehensive exchange and the proposal to
make the Tokyo financial market into the center of the world s finance.

3 World Affairs

Looking at developments overseas, needs for derivatives transactions are growing
larger compared to spot transactions against a backdrop of uncertainty about the future.
With this background, competition, restructuring and reorganization focusing onderivatives transactions are dynamically progressing among major exchanges in Europe andthe United States.
This trend is thought likely to spread to Asia and Japan in the future.

Based on such conditions, this Mid-Term Business Plan clarifies:

How Tokyo Financial Exchange is to establish its positionin Japan and the world.

6

Future Prospects
In light of our experiences and past results as a financial futures exchange, we aim to be acomprehensive exchange for financial derivatives.

Management Targets

1

The operating foundation that covers all

three major sectors infinancial derivatives, which are interest rates, foreignexchange, and stocks, is to be established by 2010 in order to establish

TFX as the comprehensive exchange for financial derivatives.
As a result, in 2010, the final fiscal year of the Mid-Term Business Plan, the following is
to be achieved :2 - Amount of annual transactions- ROE

150 million contracts or more; andApproximately 25%

3 The stock exchange listing

is to be achieved as swiftly as possible
after the completion of the Mid-Term Business Plan (2011).

Basic Strategies
1. Establish highly convenient and reliable markets
2. Realize a global market attractive to overseas investors
3. Build a state-of-the-art trading system
4. Maintain fairness and credibility of the markets
5. Achieve transparency and efficiency in organizational operations

7

Business Strategies
1. Establish highly convenient and reliable markets(1) Enhancement of the convenience of existing products by reflecting needs of market participants andinvestors-1 Interest rate futures contracts
a. Change of the matching method to the pro-rata (proportional distribution) method, and theintroduction of block trade in strategy trades (2008)
b. Extension of trading hours based on market needsc. Listing of mid-curve options (2009)-2 CLICK 365 (Exchange FX Margin contracts)
a. Addition of ten or more currencies and the introduction of cross-currency trading (2008)
b. Introduction of the function to simultaneously hold both selling and buying positions, and thefunction to choose which position to settle (2008)(2) Introduction of Stock Index Futures (2008)(3) Development of new products and new business

2. Realize a global market attractive to overseas investors(1) Introduction of the remote membership program (2008) and an increase in number of the remote members-1 Free acquisition of remote membership-2 English versions of applications and notifications related to remote membership-3 Building of the global network(2) Introduction of the liquidity provider scheme (2008)(3) Addition of leading ISVs (Independent software vendor)

3. Build a state-of-the-art trading system(1) Improvement of platform capacity (2008)-1 The highest speed of order processing in the national exchanges
Achieve ten milliseconds or less (New Interest Rate Futures platform)-2 Significant expansion of order processing capacity
Twelve times or more of the current capacity (New Exchange FX Margin platform)(2) Introduction of collocation services (2008)(3) Completion of BCP (Business Continuity Plan) efforts
Establishment of the backup centers
New Interest Rate Futures platform (2008)
New Exchange FX Margin platform (2009)

4. Maintain fairness and credibility of the markets(1) Reinforcement of self-regulatory function-1 Enhancement of monitoring systems for transactions of various new products-2 Reinforcement of inspection contents for diversified trading members(2) Further improvement of clearing and settlement functions-1 Establishment of clearing members pre-trade risk management system on remote trading members-2 Improvement of efficiency in give-up operations such as the development of a calculation tool for giveup commission charges (2009)

5. Achieve transparency and efficiency in organizational operations(1) Further rationalization of management based on a streamlined and efficient organization (100 staff members)(2) Enhancement of internal management through more thorough compliance(3) Enhancement of investor relations and public relations capacity at home and abroad(4) Establishment of Japanese-SOX (the Financial Instruments and Exchange Act) handlings (2010)

This document contains certain projections or forward-looking statements with respect to goals and expectations relating to future events or
future performances that involve a number of risks and uncertainties and are based upon certain beliefs and premises derived from theextrapolation of currently available information.
Such projections or forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual
results or performance by us to differ materially from those contained in the projections or forward-looking statements for any reason.
None of the information contained in this document constitutes a solicitation or offer to provide any investment or asset management advice orservice.

8

CHALLENGES IN FISCAL YEAR 2008
1

5

Listing of Stock Index Futures
As a result of the Financial Instruments
and Exchange Act coming into force,
securities derivatives are now permitted to belisted on TFX. As a comprehensive exchange
for financial derivatives , TFX is striving to list
stock index futures in 2008.

2

In order to improve public recognition of
CLICK 365, which has been listed on TFX
since July 2005, TFX has assigned Ms. Ayako
Hatta, a television personality who is rapidly
gaining popularity, to appear on televisioncommercials and other advertisements for
CLICK 365.

Promotion of Remote
Membership and Adoption of
Liquidity Provider Scheme
In addition to the remote membershipprogram, a liquidity provider scheme will also
be adopted.
The liquidity provider scheme is intended
to further improve liquidity of the market byoffering incentives to market participants who
actively participate in trading.
Such programs are prevailing in overseas
exchanges.

36Upgrading of Exchange FX
Margin Trading System(1)In order to improve the usability of CLICK
365, TFX s existing trading system will be
upgraded to the next-generation version
which will be the most advanced in Japan.
(2)Improvement of Usability(i)In order to allow for the expected
increase in trading volumes, orderprocessing speed will be increased.
Maximum order processing capacity:
approximately 1,250 or more
contracts per second (approximately
12 times as fast as the current level)(ii)Addition of new functions
a. Increase of currency-related
products (to 25 or more products)
Increase of currencies with which
Japanese yen is exchanged (from 7
to 18 currencies), and listing of 7
new pairs of currencies to becovered in cross-currency contractsb. Introduction of a function ofchoosing positions for settlement(i.e., positions for closing transactions)(3)As is the case with TFX s Interest Rate
Futures trading system, TFX will establish a
disaster recovery center for the Exchange
FX Margin trading system, as a part of
TFX s BCP efforts.

Measures Relating toInterest Rate Futures Trading(1)Promotion of over-night interest rate futures
trading(2)Adoption of collocation services

4

Assigning a Poster Person
for CLICK 365

Reduction of TFX s Fee andAddition of Market Makers
for CLICK 365(1)Reduction of TFX s per contract exchangefee for CLICK 365
TFX s per contract exchange fee foreach CLICK 365 contract was reduced by
30 yen to 70 yen effective from May. (Thefee will be further reduced to 35 yen
effective from the end of October.)This reduction aims to expand trading volumes
for the fair and transparent CLICK 365 market.
(2)Addition of Market Makers
After upgrading Exchange FX Margin
trading system at the end of October (seeSection 6), market makers for CLICK 365
will double (from 3 to 6). This addition will
enable rates to be presented in a stablemanner at relevant events such as theannouncement of economic indicators.

7

9

Other Measures(1)Strengthening of overseas investors
relations(2)Implementation
andexpansion/
improvement of seminars

FINANCIAL OUTLOOK
Financial Results for the Current Year
FY 2004

FY 2005

FY 2006

Change fromFY 2006

FY 2007

Operating Revenues（in millions yen）

2,000

4,106

10,774

12,123

12.5%

Operating Profit（in millions yen）

△152

1,034

7,021

7,565

7.7%

Ordinary Profit（in millions yen）

△103

1,093

7,166

7,731

7.9%

Current Term Net Profit（in millions yen）

△107

772

7,188

5,228

△27.3%

Cur. Term Net Pft. per Share（in yen）

△159.77859.62

8,296.63

6,060.24△27.0%

Total Assets（in millions yen）

24,60457,391

108,110

174,955

61.8%

Net Assets（in millions yen）

11,947

12,71919,717

19,554△0.8%

10,263.64

11,158.76

19,269.90

22,665.33

17.6%

Net Assets per Share（in yen）

The yen amounts shown in this financial statement have been rounded down.

Financial Highlights(1)Profit■ Dividend Increase
In light of TFX s realization of the largest profit in
its history, TFX will pay a dividend for fiscal year 2007
in the amount of 1,000 Japanese yen per share, twice
the amount paid by TFX for the previous fiscal year(500 Japanese yen).

■Realization of the Largest Profit in TFX s History
By virtue of the expansion of trading volumes on
TFX (31.1% increase over the previous fiscal year),
TFX s Per Contract Exchange Fees income for fiscal
year 2007 increased by 12.2% and as a result, TFX s
Operating Revenues increased by 1,348 million
Japanese yen to 12,123 million Japanese yen. For
fiscal year 2007, TFX Operating Profit and Ordinary
Profit were 7,565 million and 7,731 million Japanese
yen respectively, the largest figures in TFX s history.
■ Incurrence of Income Tax Liabilities
In fiscal year 2007, TFX s accumulated loss fortax purposes was offset by the current term profit for
tax purposes. As a result, TFX incurred income tax
liabilities and TFX s Current Term Net Profit was
5,228 million Japanese yen, a decrease from theprevious fiscal year.

Operating Profit and Ordinary Profit（in millions yen）
9,000
7,731
7,166 7,565
8,000
7,021
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
△ 1,000

△ 103
△ 152

1,093
1,034

FY2005

FY2004

Operating Profit(2)Assets

FY2006

FY2007

Ordinary Profit

from an increase of assets (such as margins) received
as deposit from trading members, due to growth of
trading volume of CLICK 365.
■ Retirement of Preferred Stock
For the purpose of qualitative improvement of
TFX s capital structure, in the first half of fiscal year
2007, TFX purchased all of 306,180 shares of its
preferred stock which were issued when TFX wasdemutualized in April 2004, and fully retired thoseshares by appropriating TFX s Retained Earnings.

■ Inclusion of Deferred Tax Assets
Commencing with fiscal year 2007, TFX has
applied tax effect accounting as a result of the offset
of TFX s accumulated loss, as mentioned above. For
fiscal year 2007, TFX included Deferred Tax Assets inthe amount of 505 million Japanese yen in its
financial statements.
■Inclusion of New Trading System Development
Cost
In connection with the development of TFX s
Interest Rate Futures and Exchange FX Margin
trading systems, cost of purchase of related
equipment and development of related software in a
total amount of 4,096 million Japanese yen was
included in the Construction in progress andSoftware development in progress accounts.
■ Increase of Assets on Deposit
TFX s Total Assets were 174,955 million
Japanese yen, a significant increase of 61.8% overthe previous fiscal year. Most of this increase arose

Net Assets per Share（in yen）
25,00022,665.33
19,269.90

20,00015,00010,00010,263.64

11,158.76

5,000
0FY200410

FY2005

FY2006

FY2007

FINANCIAL STATEMENTS
Balance Sheet

Profit and Loss Statement（in millions yen）

Account Titles

FY2007

FY2006

As of March 31, As of March 31,
2008
2007

（ASSETS）（in millions yen）

（in millions yen）

FY2007

Account Titles

FY2006

FY2007

As of March 31, As of March 31,
2008
2007

Account Titles

FY2006

From 4/1/2007 From 4/1/2006（LIABILITIES）

to 3/31/2008

to 3/31/2007

980

9,666

8,521

Current Liabilities

Cash and bank deposits

81

5,349

93

94

Operating Revenues

12,123

10,774

Accounts receivable trade

Accounts payable trade

994

1,123

Accounts payable - other

330

539

Monthly exchange fees

41

40

8,203

1,999

Income taxes payable

2,948

52

Per-cotract exchange fees

11,637

10,374

Accounts receivable other34

42

Consumption taxes
payable-122

Income relating tosystem equipment

110

81

Advance payments

20Advances received-

9

Prepaid expenses

15

7

Deposits received

9

8

337

-

Allowance fordirectors' bonuses

1

2

Current Assets

Securities

Deferred tax assets
OthersAllowance for doubtful
accounts
Fixed Assets△2△3

165,288

99,589Property and Equipment

1,454

298

Buildings and fixed
equipment

119

95

Furniture and fixtures

169

170

Construction in progress

1,165

32

Intangible Fixed Assets

3,285

1,844

346

1,461

2,930

377

Software
Software developmentin progress
Others

5

9

3,703

Allowance for bonuses
Allowance for losses
arising from change to
trading systems
Fixed Liabilities

151,697

87,413
212

206

177

64

22

Income from information
services

270

256

Operating Expenses

4,558

3,752

Personnel expenses

1,246

957

Marketing expenses
Facility-related expenses
Administrative expenses

Allowance for retirement
benefits for employees
Allowance for losses
arising from change to
trading systems
Deposits received
from trading members
Exchange margins

10,431

310

134

3

2

1

-

Deferred tax assets

168-

Capital surplus

Others293-

Capital surplus reserve

△4

△0

94
2,189

473

510
7,021

Non-Operating Revenues

178

144

Interest Income

141

114

-

30

168

112

151,339

86,878Contract cancellation
charges received-

29

146,829

83,254

Miscellaneous income

9

2

400

404

Non-Operating Expenses

11

0

4,110

3,220

155,401

88,393Market entry deposits

8,435

4
2,834

7,565

Operating Profit

Investment in securities

Clearing deposits

Miscellaneous loss

11

0

7,731

7,166

Extraordinary Profits

9

56

5,844

Compensation fordamages received

-

56

6,045

6,045

Reversal of allowancefor directors' bonuses

9

-

6,045

6,045

Extraordinary Losses

92

30

Retained earnings

7,663

7,826

Other retained earnings

7,663

7,826

92

30

Reserve for compensation
for losses from default

164

164

Provision for allowance forlosses arising from change
to trading systems
Current Term Net Profit
before Tax

7,648

7,192

7,662

Income taxes - current

2,925

3

Total Liabilities

Ordinary Profit（NET ASSETS）
Shareholders' Equity

19,717

19,554

Common stock

5,844

151,339

86,878146,829

83,254400

404

Retained earnings
brought forward

7,499

4,110

3,220

19,717

Income taxes - defferred

△ 505

-

108,110

Total Net Assets
Total Liabilities and Net
Assets

19,554

174,955

174,955

108,110

Current Term Net Profit

5,228

7,188

Market entry deposits
received
Clearing deposits received-

9

10,568

Total Assets

122

Allowance for retirement
benefits for directors

9,209

Allowance for doubtful
accounts
Assets received forguarantee from trading
members
Exchange margins received

45
107

Long-term accounts
payableInvestments and Other
AssetsGuarantee money
deposits
Long-term loan
receivable
Long-term prepaid
expenses

60
137

Trading registration fees

Statement of Changes in Shareholders Equity
Fiscal Year 2007(from 4/1/2007 to 3/31/2008)
Account Titles
Balance as of Mar 31, '07（in millions yen）

Shareholders' Equity
Common stock Capital surplus Retained earnings Treasury stock Total shareholders'equity
5,844

6,045

7,826

Dividend from surplus paid--

Current Term Net Profit--

Acquisition of treasury stock-

Retirement of treasury stock
Appropriation of retained earnings
to retirement of treasury stock

Total Net
Assets-

19,717

19,717

△461

-

△461

△461

5,228

-

5,228

5,228

-

-

△4,929△4,929△4,929-△4,929

-

4,929

-

-

-

4,929

△4,929

-

-

-

-

-

△163

-

△163

△163

5,844

6,045

7,663

-

19,554

19,554

Changes during the term

Total amount changed during the term
Balance as of Mar 31, '08

The Japanese yen amounts shown in these financial statements have been rounded down to the nearest million yen.

This English translation is solely for reference purpose only and not a legally definitive translation of the original Japanese text. In the event a
difference arises regarding the meaning herein, the original Japanese version will prevail as the official authoritative version.

11

CORPORATE PROFILE
1. Corporate Profile
Company Name

： Tokyo Financial Exchange Inc.

Founded： April 1989

Address： 21 Ichiban-cho, Chiyoda-ku, Tokyo 102-0082

Capital： ￥5,844,650,000

No. of Employees： 94 (as of April 1, 2008)

Fiscal Term

： March 31

Management： President & CEO(as of March 31, 2008)

Jiro Saito

Senior Managing Director & COO

Shozo Ohta

Managing Director

Takashi Murakami

Member of the Board

Keimei Kaizuka

Member of the Board

Tetsuo Seki

Member of the Board

Takeshi Kunibe

Member of the Board

Toshihiko Nakane

Standing Statutory Auditor

Yoshio Hayakawa

Statutory Auditor

Kazuo Tezuka

Statutory Auditor

Mitsunori Kanesaka

No. of TFX Members ： 48(Interest Rate Futures Trading and Clearing Members)(as of May 31, 2008)

7(Interest Rate Futures Trading Members)
17(FX Margin Trading and Clearing Members)* One of the above companies is also Interest Rate Futures Trading members

U

R

L

： http://www.tfx.co.jp/en

2. Organizational Chart (as of April 1, 2008)
Board of Auditors

Statutory Auditor

General Affair Group
General Administration
Department

Human Resource OfficePlanning OfficeMarket Group

Market Department
Shareholders Meeting

Board of Directors

Research Office

President & CEO
Promotion Department

Promotion Group
Clearing and Settlement Group

Self-Regulatory
Committee

Business Operation
Department

Market Surveillance Group
Market Surveillance Group of
Forex Margin Contracts

Expert Committee
・Discipline Committee

System Office
System Department

Advisory Committee
・Interest Rate Futures etc.
Market Operation Committee
・Exchange Forex Margin Contracts
Market Operation Committee

System office of Forex Margin
Contracts
Compliance OfficeSelf-Regulation
Bureau12

Self-Regulation Office

The copyright of this document is held by the Tokyo Financial Exchange Inc.(TFX).
The original text of this document has been prepared in the Japanese language and only the Japanese version will apply to and govern therights and obligations for all purposes whatsoever hereunder. Accordingly, the Japanese version of this document shall apply in the event of any
disagreement over the meaning or construction of any provisions in this document.
Although we undertook with reasonable care to ensure the accuracy of the translation of this document, no liability for such translation isassumed by TFX under any circumstances whatsoever.