Consolidated Balance SheetJapan Securities Depository Center, Inc.
As of March 31, 2004ASSETS

Current Assets:
Cash and cash equivalents
Accounts receivable—trade
Deferred income taxes (Note 7)
Other current assets
Total current assets
Property and Equipment
Buildings
Tools and furniture
Less: Accumulated depreciation
Total property and equipment
Intangible Assets, Net
SoftwareConstruction in progress (Software)
Other intangible assets
Total intangible assets
Investment and Other Assets
Long-term refundable lease deposits
Long-term prepaid expenses
Deferred income taxes (Note 7)
Total investment and other assets
Total assets

LIABILITIES AND Current Liabilities:
SHAREHOLDERS’
Short-term debt (Note 5)
EQUITY
Accounts payable—trade

Income tax payable
Accrued employees’ bonuses
Consumption tax payable
Other current liabilities
Total current liabilities
Long-term Liabilities
Accrued employees’ retirement benefits (Note 6)
Accrued executives’ retirement benefits
Total long-term liabilities
Total liabilities
Shareholders’ Equity
Common stock
Authorized: 10,000 shares
Issued, 8,500 shares
Capital surplus
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity¥ (thousands)
2004$ (thousands)(Note 3)2004

¥ 1,733,337
3,803,049
129,490
190,5715,856,447$ 16,400
35,983
1,225
1,803
55,411

149,075
4,017,025
4,166,100(2,164,535)
2,001,565

1,410
38,00739,417(20,479)
18,9383,625,338
6,912,863
9,755
10,547,956

34,30265,40792
99,801

424,619
42,92730,869498,415¥18,904,383

4,018
406
292
4,716
$178,866¥ 5,000,000
1,846,861
644,945
100,675
77,617
521,687
8,191,785$ 47,308
17,474
6,102
953
734
4,936
77,50732,86343,17076,033
8,267,818

311
409
720
78,2274,250,000
4,250,000
2,136,565
10,636,565¥18,904,383

40,212
40,212
20,215
100,639$178,866

The accompanying notes are an integral part of these statements.

17

Consolidated Statement of Income
Japan Securities Depository Center, Inc.
For the year ended March 31, 2004
¥ (thousands)
2004$ (thousands)(Note 3)
2004

Operating Income¥17,124,010$ 162,021

Operating Expense
Executives’ compensations
Salaries and payable
Severance costs for employees
Executives’ retirement benefits
Maintenance for systems
Outside service
Registration fees
Depreciation
Rent
Advertisement
OthersTotal operating expense
Income from operation

117,438
1,139,758
13,35024,8104,314,280
2,543,018
1,866,472
2,838,420
237,525
264,327
1,164,279
14,523,677
2,600,333

1,111
10,784126
235
40,82024,061
17,66026,856
2,248
2,501
11,016
137,418
24,603

Other Income (Expenses):
Interest income
Interest expense
Loss on disposal of property and equipment
Other, net
Total
Income before income taxes

19(30,439)(4,557)
1,524(33,453)
2,566,880

0(288)(43)
15(316)24,287

963,539(47,288)¥ 1,650,629

9,116(447)$ 15,618

YenU.S. Dollars(Note 3)

¥192,579.99
25,000$1,822.12
236.548,500—

Income Taxes (Note 7)
Current
Deferred
Net income

Per Share (Note 10)
Net income—primaryDividends
Weighted Average Number ofCommon Stock Shares Outstanding (in shares)
The accompanying notes are an integral part of these statements.

18

Consolidated Statement of Shareholders’ Equity
Japan Securities Depository Center, Inc.
For the year ended March 31, 2004
¥ (thousands)
Number ofcommon stock Commonsharesstock

Balance as of March 31, 2003
Net income for the year
Cash dividends
Bonus to executives
Balance as of March 31, 2004

8,500
—
—
—
8,500

¥4,250,000———¥4,250,000

Capitalsurplus¥4,250,000———¥4,250,000

Retainedearnings

Total
shareholders’equity¥ 711,036 ¥ 9,211,036
1,650,629
1,650,629(212,500)(212,500)(12,600)(12,600)¥2,136,565 ¥10,636,565$ (thousands) (Note 3)

Balance as of March 31, 2003
Net income for the year
Cash dividends
Bonus to executives
Balance as of March 31, 2004

Number ofcommon stock
sharesCommonstock

CapitalsurplusRetainedearnings

Total
shareholders’equity

8,500
—
—
—
8,500

$40,212———$40,212$40,212———$40,212$ 6,727
15,618(2,011)(119)$20,215$ 87,151
15,618(2,011)(119)$100,639

The accompanying notes are an integral part of these statements.

19

Consolidated Statement of Cash Flows
Japan Securities Depository Center, Inc.
For the year ended March 31, 2004
¥ (thousands)
2004$ (thousands)(Note 3)
2004

Cash Flows from Operating Activities:
Income before income taxesDepreciation
Increase in accrued employees’ bonuses
Increase in accrued employees’ retirement benefits
Increase in accrued executives’ retirement benefits
Interest income
Interest expense
Loss on sales of property and equipment
Loss on disposal of property and equipment
Increase in accounts receivable—trade
Increase in accounts payable—trade
Decrease in other assets
Increase in other liabilities
Other, net
Sub-totalInterests and dividends received
Interest paid
Income tax paid
Net cash provided by operating activities¥ 2,566,880
2,838,420
12,613
10,291
24,810(19)30,43969
4,487(703,543)
556,142
334,505
41,020(12,597)
5,703,517
19(33,260)(961,297)
4,708,979$ 24,287
26,856
119
97
235
(0)
288
0
43
(6,657)
5,262
3,165
388
(119)
53,9640(314)(9,095)44,555

Cash Flows from Investing Activities:
Payments for purchase of property, plantand equipment
Payments for purchase of intangible assets
Procedures from sales of property and equipment
Net cash flows used in investing activities(435,224)(4,656,346)
546(5,091,024)(4,118)(44,056)
5(48,169)

Cash Flows from Financing Activities:
Proceeds from short-term debt
Repayment of short-term debt
Cash dividends paid
Net cash flows provided by financing activities

5,000,000(3,100,000)( 212,500)
1,687,500

47,308(29,331)(2,011)
15,966Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year

1,305,455
427,882¥ 1,733,337

12,352
4,048$ 16,400

The accompanying notes are an integral part of these statements.

20Notes to the Consolidated Financial Statements
Japan Securities Depository Center, Inc.

1.
Basis ofPresenting theConsolidated
Financial
Statements

The accompanying consolidated financial statements have been prepared from the accounts maintained by Japan Securities Depository Center, Inc (“the Company”) and its subsidiary in accordance with the provisions set forth in the Securities and Exchange Law and in conformity withaccounting principles and practices generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Finance Reporting Standards.
Certain items presented in the consolidated financial statements filed with the Director of theKanto Local Finance Bureau in Japan have been reclassified for the convenience of readers outsideJapan.

2.
Summary ofSignificant
AccountingPrinciples(1) Consolidation
The consolidated financial statements include the accounts of Japan Securities Depository
Center, Inc. and its wholly-owned subsidiary, JASDEC DVP Clearing Corporation (JDCC)
which is the only subsidiary of the Company. JDCC was newly established during the current
fiscal year. JDCC uses a fiscal year ended on March 31, which is the same as that of theCompany.
(2) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, with original maturities ofthree months or less, those are readily convertible to known amounts of cash and are so near
maturity that they present only an insignificant risk of changes in value because of changes ininterest rates.
(3) Property and equipment
Depreciation for buildings, excluding improvements, is computed on the straight-line method
using estimated useful lives prescribed by Japanese Corporate Tax Laws. Depreciation forother capital assets is computed on the declining-balance method at the rates based on theestimated useful lives prescribed by such laws.
(4) Software costs
Costs of software for internal use are amortized on the straight-line method computed overthe estimated useful life of capitalized and 5 years.
(5) Accrued bonuses
Accrued employees’ bonuses represent liabilities estimated as of the balance sheet date.
Bonuses to directors, which are subject to approval at the shareholders’ meeting, areaccounted for as an appropriation of retained earnings.
(6) Severance indemnity benefits
The Company has a severance indemnity plan covering all employees who meet eligibility
requirements of the Company’s retirement regulations. The Company records accrued
employees’ retirement benefit costs based on the amount that would be payable if all eligible
employees voluntarily terminated their employment with the Company at the balance sheetdate.
Retirement benefits payable to directors and statutory auditors are accrued as accrued
executives’ retirement benefits at the amount computed on the Company’s internal rules andregulations for the benefits.
(7) Finance leases
In the normal course of business, the Company enters into lease agreements. Finance leaseagreements, except for those agreements where ownership of the leased assets is transferred tothe Company, are accounted for as operating leases.
(8) Accounting standard for impairment of non-current assets
On August 9, 2002, the Business Accounting Council in Japan issued “Accounting Standard
for Impairment of Non-current Assets”. The standard requires that non-current assets bereviewed for impairment whenever events or changes in circumstances indicate that the carrying21

Notes to the Consolidated Financial Statements

amount of an asset may not be recoverable. An impairment loss shall be recognized in theincome statement by reducing the carrying amount of impaired assets or a group of assets tothe recoverable amount to be measured as the higher of net selling price and value in use. Thestandard shall be effective for fiscal years beginning April 1, 2005. However, an earlier adoption is permitted for fiscal years beginning April 1, 2004 and for fiscal years ending between
March 31, 2004 and March 30, 2005. The Company has not yet applied this new standard
nor has determined the effect of applying it on the Company's consolidated financial statements.
(9) Consumption taxes
The consumption taxes withheld by the Company and its subsidiary on sales and the consumption taxes paid by the Company and its subsidiary on its purchases of goods and services are not included in the amounts of relevant accounts in the accompanying statements ofincome. The consumption taxes withheld and paid is recorded as an asset or a liability, as thecase may be, and the net balance is shown in the balance sheets.
(10) Appropriation of retained earnings
Under the Japanese Commercial Code and the Articles of Incorporation of the Company, theappropriation of retained earnings (including year-end cash dividend payments proposed by
the Board of Directors) must be approved at the shareholders’ meeting, which must be held
within three months after the end of each financial year. The appropriation of retained earnings reflected in the accompanying consolidated financial statements represents the results ofappropriations which were applicable to the immediately preceding financial year andapproved at the shareholders’ meeting and disposed of during that year. Year-end cash dividends are paid to shareholders on the shareholders’ register at the end of each financial year.
The payment of bonuses to directors and statutory auditors is made out of retained earnings, instead being charged to income for the year, and constitutes a part of the appropriations cited above.

3.
US Dollar
Amounts

Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rateof ¥105.69=U.S. $1, the rate of exchange as of March 31, 2004, has been used in translation. The
inclusion of such amounts is not intended to imply that Japanese yen have been or could be readily converted, realized or settled in U.S. dollars at the rate or any other rates.

4.
Lease
Transactions

Finance lease transactions, other than those of which the ownership of the leased asset transferredto the lessee, are accounted for as operating leases. Certain key information (in equivalent data)on such lease contracts of the Company for the periods ended March 31, 2004 is as follows:
As of March 31, 2004

Tools and furniture:
Acquisition cost
Accumulated depreciation
Net book value¥ (thousands)$ (thousands)¥268,933(48,108)¥220,825$ 2,544(455)$(2,089)

The scheduled maturities of future lease payments, which includes the portion of interest thereon,on such lease contracts as of March 31, 2004 is as follows:
As of March 31, 2004

Due within one year
Due over one year
Total

22

¥ (thousands)$ (thousands)¥ 52,660
169,597¥222,257

$ 498
1,605
$2,103

Notes to the Consolidated Financial Statements

Finance lease charges as well as depreciation and interest amounts (in equivalent data) for
the year ended March 31, 2004 is as follows:
For the year ended March 31, 2004

Finance lease chargesDepreciation (in equivalent data)
Interest (in equivalent data)¥ (thousands)$ (thousands)¥31,697

$300
288
20

30,4352,135(Note) Methods applied in computation of the equivalent data are as follow:
Depreciation: Straight-line method with zero residual value over the lease contract period
Interest:
Computed as the difference between the lease obligations and the acquisition cost and allocated forthe period based on the interest rate method.

5.
Short-Term
Debts

Short-term debts at March 31, 2004 are comprised of loans from banks with weighted averageinterest rates of 1.675% per annum.

6.
AccruedSeverance
Indemnities forEmployees

Accrued employees’ retirement benefits at March 31, 2004 represented the amount that would bepayable for the Company if all eligible employees voluntarily terminated their employment at thebalance sheet date. Severance costs for employees charged to income for the year ended March 31,
2004 amounted 13,350 thousand yen (126 thousand U.S. dollars).

7.
Income Taxes

The Company and its subsidiary are subject to a number of different income taxes which, in theaggregate, indicate a nominal statutory tax rate in Japan of approximately 42.0% for the period
ended March 31, 2004. A reconciliation between the nominal statutory income tax rate to theeffective income tax rate in the accompanying consolidated statement of income for the year ended
March 31, 2004 is as follows:
2004

Nominal statutory income tax rate
Adjustments:
Permanent non-deductible difference
Equal proportion of inhabitant taxes
Income tax credit on investment in IT
Other, net
Effective income tax rate

42.0%
0.2
0.2(6.8)
0.1
35.7%

The significant components of deferred tax assets at March 31, 2004 are as follows:

Deferred tax assets:
Accrued bonuses
Enterprise tax payable
Unpaid social insurance premium
Business facility tax
Tax loss carried forwards
Accrued retirement benefits to employees
Accrued retirement benefits to executives
Deferred tax assets¥ (thousands)$ (thousands)

2004

2004

¥ 41,175
72,408
5,465
2,334
8,108
13,342
17,527¥160,359

$ 390
685
51
2277
126
166
$1,51723

Notes to the Consolidated Financial Statements

8.
Segment
Information(1) Business Segment
The Company operates a single business unit, the central securities custody and book-entry
transfer system, only.
(2) Geographic Information
The Company has no overseas consolidation subsidiaries and no overseas branches for theyear ended March 31, 2004.
(3) Overseas sales
The Company does not have any sales overseas for the year ended March 31, 2004.

9.
Related PartyTransactions

Material transactions of the Company with related companies or individuals, excluding transactions with the consolidated subsidiary that are excluded in the consolidated financial statement,
and other than those disclosed elsewhere in this financial statement, for the year ended March 31,
2004 are as follows:(1) Directors(in thousand yen)
TitlesNameBusinessTransactions

AmountAccount

Director

Toshitsugu Shimizu(*) 1

Director of the Company
President of Japan Securities
Settlement & Custody, Inc

Outsourcing(*) 1

1,728,381

Account
payable-trade65,113Use ofequipment(*) 1
Repayment ofborrowings
Interest on
borrowings(*) 2
Short term
borrowing
Interest
(*) 2

51

——

1,330,000——

10,302——2,140,000

Short-term
deptPrepaidinterest

2,140,000

Director

Masayuki Tanaka

Director of the Company
Senior Managing
Director of The Bank ofTokyo–Mitsubishi, Ltd2,749

Ending balance

6,383(*) 1. Those transaction amounts mentioned above excluded consumption tax. however, ending balance include consumption tax.
2. Terms and Conditions(1) Those amounts include transaction with Japan Securities Settlement & Custody, Inc (JSSC) for the nine months period from July 2003
because Toshiji Shimizu has been appointed representative director of JSSC at June 19, 2003. JASDEC outsources to JSSC its operation asneeded.
(2) The terms and conditions of the above transactions are on an arms-length basis(3) Interests on borrowing are determined based on the market interest rate from bank24

Notes to the Consolidated Financial Statements(2) Principle shareholder and its subsidiaries(in thousand yen)

Names of companies

Address

Capital

Tosho System
Koto-ku,
Service Co.
Tokyo(Subsidiary ofprincipal shareholder)Principal
business

100,000 Design,development,& development ofsoftware

Relationship
Percentage
Directors Businessof ownership holding
relationshipwith voting
concurrent
right
positions——

Transactions

EndingbalanceAmountDescriptions

1,359,083

Account
payabletrade148,426

Purchase ofsoftware

1,626,653

Account
payableother67,200

Purchase of Outside
softwareservice

Japan Securities
Chuo-ku, 1,700,000 Clearing
Clearing Corporation Tokyo
securities(Subsidiary ofprincipal shareholder)—

ThreeCommission Commission
incomeincome2,845,288

Account
556,184
receivabletrade

Japan Securities
Chuo-ku,
Settlement &Tokyo
Custody, Inc(Subsidiary ofprincipal shareholder)—One

Outsourcing Outsideservice

1,728,321

Account
payabletrade65,113——300,000 Custody &settlementof securities

Using
equipments

51(*) 1. Those transaction amounts mentioned above excluded consumption tax. however, ending balance include consumption tax.
2. The terms and conditions of the above transactions are on an arms-length basis

10.
Net Incomeper Share

Basis for calculating earnings per share for the year ended March 31, 2004 is as follows:

Net income as reported in the consolidated statement of income
Directors bonus by appropriation of retained earning
Net income pertaining to common stock shareholders
Weighted average number of common stock shares
outstanding (in shares)¥ (thousands)$ (thousands)

2004

2004

¥1,650,629$15,618130
15,48813,7001,636,929
8,500

11.
Subsequent
Events(1) Launch business of a subsidiary:
A consolidated subsidiary, JDCC was granted a license of securities obligation undertaking
business by the Prime Minister on April 6, 2003. The license enabled JDCC to launch its business from May 6, 2004 and JDCC has started delivery versus payment settlement service fornon-exchange transaction deliveries from May 17, 2004
(2) Appropriations of retained earnings:
Appropriations of retained earnings are recorded in the accounts only after shareholders’approval has been obtained. The following appropriation of retained earnings of the Company
for the year ended March 31, 2004 was approved at the Ordinary General Shareholders
Meeting have held on June 22, 2004:
Cash dividends
Bonuses to executives¥ (thousands)$ (thousands)¥212,500
13,700$2,011
129(Including bonuses to statutory auditors amounting to 2,700 thousands yen (25 thousand U.S. dollars))

25