Consolidated Financial Statements
Consolidated Balance Sheets (As of March 31, 2007 and 2008)¥ (thousands)$(thousands)(Note 4)
2008

2007

2008

¥ 2,824,047
3,455,111
154,648
34,715,413
286,80941,436,030¥ 1,816,676
3,072,097
156,655
29,884,895
356,531
35,286,855$ 18,132
30,663
1,564
298,2823,558
352,199

Less: Accumulated depreciation
Total Property and Equipment

823,700
5,481,521
790,457
7,095,680(3,957,153)
3,138,527

1,125,677
9,018,616—
10,144,293(6,262,276)
3,882,017

11,23590,015—
101,250(62,504)
38,746

Intangible Assets, Net:
SoftwareConstruction in progress (Software)
Other intangible assets
Total Intangible Assets

8,816,461
1,915,654
11,676
10,743,792

7,171,014
6,586,807
14,882
13,772,704

71,57465,743
149
137,466

Investment and Other Assets:
Investment securities
Long—term refundable lease deposits
Long—term prepaid expenses
Deferred income taxes (Note 11)
Total Investment and Other Assets—
435,50259,829223,650
718,982336,647
514,775
109,154937,233
1,897,811

3,360
5,138
1,089
9,355
18,942¥ 56,037,333¥ 54, 839,389$ 547,353

ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable — trade
Deferred income taxes (Note 11)
Designated assets for clearing funds (Note 3)
Other current assets
Total Current Assets

Property and Equipment:
Buildings
Tools and furniture
Construction in progress

Total Assets

The accompanying notes are an integral part of these statements.

54 Japan Securities Depository Center, Inc. ANNUAL REPORT 2008¥ (thousands)
2007

2008

$ (thousands)(Note 4)2008

LIABILITIESCurrent Liabilities:
Accounts payable – trade

1,923,856¥ 1,556,483$ 15,535—

2,400,000

23,954

Income taxes payable

938,458

931,071

9,293

Allowance for employees’ bonuses

180,870

178,909

1,786

Allowance for executives’ bonuses

20,30020,300203

Consumption tax payable

6,842

4,030

40

Deposits received for clearing funds (Note 3)

34,715,413

29,884,895

298,282

Other current liabilities

1,399,711

629,274

6,281

39,185,453

35,604,964

355,374

114,409148,155

1,479

48,12041,160411—

827,700

8,261—

320,356

3,197

162,529

1,337,372

13,34839,347,982

36,942,336

368,722

Short—term borrowings (Note 5 and 8)

Total Current Liabilities¥

Long—term Liabilities:
Allowance for employees’ retirement benefits(Note 9)Allowance for executives’ retirement benefits
Allowance for loss on cancellation of agreement for entrusted
operations
Allowance for loss on movement of computer
Facilities
Total Long—term Liabilities
Total Liabilities
NET ASSETS
Shareholders’ Equity:
Common stock
Authorized: 10,000 shares
Issued: 8,500 shares
Capital surplus
Retained earnings
Total Shareholders’ Equity
Total Net Assets
Total Liabilities and Net Assets

4,250,000

4,250,000

42,4194,250,000
8,189,350

4,250,000
9,397,052

42,41993,793

16,689,350

17,897,052

178,631

16,689,350¥ 56,037,333

17,897,052¥ 54,839,389

178,631$ 547,353

The accompanying notes are an integral part of these statements.

Japan Securities Depository Center, Inc. ANNUAL REPORT 200855

Consolidated Financial Statements
Consolidated Statements of Income (For the years ended March 31, 2007 and 2008)

2007

2008

$(thousands)(Note 4)2008

¥ 22,559,853¥ 26,022,586$ 259,732

198,609
1,772,775
62,3974,850
5,087,273
2,623,715
1,645,092
3,871,462
459,776
601,997
1,559,951
17,887,901
4,671,951

206,673
1,822,149
81,945—
6,974,215
2,597,821
1,286,788
5,604,745
509,500
720,881
1,925,132
21,729,855
4,292,730

2,063
18,187818—
69,61025,92912,84355,941
5,085
7,195
19,215
216,886
42,846

125

272

2

38,936——(38,377)(28,500)

111,385
21,375(3,637)(49,391)
—

1,111
213
(36)
(493)
—

(8,876)(45,763)(7,576)(16,041)

(75)
(160)

(185,093)(590,625)(5,895)—(827,700)(8,261)—
113(267,435)
4,404,515(320,356)
3,304(1,678,991)
2,613,739(3,197)
33(16,758)
26,088

1,787,090(34,532)¥ 2,651,958

1,781,626(715,589)¥ 1,547,702

17,782(7,142)$ 15,448¥ (thousands)

Operating Income
Operating Expenses:
Executives’ compensation and bonuses
Salaries and bonuses
Severance costs for employees (Note 9)
Executives’ retirement benefits
Maintenance for systems
Outside services
Registration fees
Depreciation and amortization
Rent
Advertisement
OthersTotal Operating Expenses
Income from Operations
Other Income (Expenses):
Interest income
Operational revenue on the designated assets
for clearing funds
Equity in earnings of the affiliate
Interest expenses (Note 8)
Commitment fees
Commission fees
Fees for fund operation of designated assets
for clearing funds
Loss on disposal of fixed assets
Non—recurring depreciation of property andequipment（Note 10）
Provision for loss on cancellation ofagreement for entrusted operations
Provision for loss on movement of computer
Facilities
Others, net
Total
Income before Income Taxes
Income Taxes (Note 11)
Current
Deferred
Net Income

U.S.Dollars(Note 4)Yen
Per Share (Note 16)
Net income – primary
Dividends
Weighted—average number of common
stock shares outstanding (in shares)¥ 311,995.13
40,000¥ 182,082.62
40,000

8,500

8,500

$

1,817
399

The accompanying notes are an integral part of these statements.

56 Japan Securities Depository Center, Inc. ANNUAL REPORT 2008

Consolidated Statements of Changes in Net Assets (For the years ended March 31, 2007 and 2008)¥ (thousands)
Number ofcommon stock
sharesCommonstock

Capitalsurplus8,500¥ 4,250,000¥ 4,250,000

Cash dividends

—

—

—

(297,500)(297,500)(297,500)

Bonuses to executives

—

—

—

(17,200)(17,200)(17,200)

Net income for the year

—

—

—

2,651,958

2,651,958

2,651,958

Balance as of March 31, 2007

8,500

¥ 4,250,000¥ 4,250,000¥ 8,189,350

Cash dividends

—

—

—

(340,000)(340,000)(340,000)

Net income for the year

—

—

—

1,547,702

1,547,702

1,547,702

Balance as of March 31, 2008

8,500

¥ 4,250,000¥ 4,250,000

Balance as of March 31, 2006

Retainedearnings

Total
shareholders’equityTotal
net assets¥ 5,852,092 ¥ 14,352,092 ¥ 14,352,092¥ 16,689,350 ¥ 16,689,350¥ 9,397,052 ¥ 17,897,052 ¥ 17,897,052$ (thousands) (Note 4)
Number ofcommon stock
sharesCommonstock

CapitalsurplusRetainedearnings

Total
shareholders’equityTotal
net assets

8,500$ 42,419$ 42,419$ 81,738$ 166,576$ 166,576

Cash dividends

—

—

—

(3,393)(3,393)(3,393)

Net income for the year

—

—

—

15,44815,44815,448

Balance as of March 31, 2008

8,500

$ 42,419$ 42,419$ 93,793$ 178,631$ 178,631

Balance as of March 31, 2007

The accompanying notes are an integral part of these statements.

Japan Securities Depository Center, Inc. ANNUAL REPORT 200857

Notes to the Consolidated Financial Statements
1. Basis of Presenting the Consolidated Financial
Statements
The accompanying consolidated financial statements
have been compiled from the accounts maintainedby Japan Securities Depository Center, Inc. (“theCompany”) and its subsidiary in accordance with theprovisions set forth in the Financial Instruments andExchange Act in conformity with accounting principles
and practices generally accepted in Japan, which
are different in certain respects as to the applicationand disclosure requirements of International Finance
Reporting Standards. Certain items presented in
the consolidated financial statements filed with the
Director of the Kanto Local Finance Bureau in Japan
have been reclassified for the convenience of readers
outside Japan.

2. Summary of Significant Accounting Principles(1) Consolidation
The consolidated financial statements include theaccounts of Japan Securities Depository Center,
Inc. and its wholly-owned subsidiary, JASDEC
DVP Clearing Corporation (hereafter, “JDCC”)
which is the only subsidiary of the Company.
JDCC operates under a fiscal year ending on March
31, which is the same as that of the Company.

(2) Cash and cash equivalents
Cash and cash equivalents include all highly liquid
investments, with original maturities of threemonths or less, which are readily convertible to
known amounts of cash and are so near maturity
that they present only an insignificant risk ofchanges in value because of changes in interest
rates. Cash and cash equivalents in the consolidatedbalance sheets and consolidated statements of cash
flows are identical.

(3) Application of equity method
By acquiring 20% of outstanding shares of Tosho
System Services Co., Ltd. (hereafter, “TSS”) on
May 18, 2007, the equity method is applied to TSS.

(4) Property and equipment
Depreciation for buildings, excluding improvements, is computed on the straight-line method.
Depreciation for other capital assets is computed on
the declining-balance method.

The main estimated useful lives are as follows:
Buildings
3-49 years
Tools and furniture
2-15 years(Change in accounting principle)
The Company and its subsidiary have changed thedepreciation method for property and equipment
acquired on or after April 1, 2007 to the method
based on the amended Corporate Tax Law.
As a result of this change, income from operations
and income before income taxes decreased by ¥325
million each, and net income decreased by ¥193
million, from the amounts which would have beenrecorded under the previous method.
(Additional information)
Regarding property and equipment acquired on or
before March 31, 2007, the differences between
their residual values and memorandum values (¥1)
are depreciated in accordance with the amended
Corporate Tax Law. Specifically, when the net
book value of an asset reaches 5% of its acquisition
cost, which was considered to be residual value
before this change, in a certain fiscal year, thedifference between such residual value (5% of theacquisition cost) and the memorandum value ofsuch asset is depreciated in an equal amount over
5 years from the next fiscal year. This change will
have only minor impact on income form operations
and income before taxes.

(5) Intangible assets
Costs of software for internal use are capitalized
and amortized on the straight-line method over theestimated useful life of 5 years. Other intangible
assets are amortized using straight-line method
over the period registered by the Corporate Tax
Law. Software regarding physical stock certificates,
which will become redundant after dematerialization of stock certificates, is estimated to be useful
until January 2009, the date which all interested
parties have set as the target for the commencementof dematerialization.

(6) Allowance for bonuses
Allowance for employees’ bonuses and allowancefor executives’ bonuses are provided for bonuses
to employees and executives attributable to each

Japan Securities Depository Center, Inc. ANNUAL REPORT 200859

fiscal year based on an amount expected to pay,
respectively.

(7) Severance indemnity benefits
The Company has a severance indemnity plan
covering all employees who meet the eligibility
requirements of the Company’s retirement
regulations. The Company records allowancefor employees’ retirement benefits based on
the amount that would be payable if all eligible
employees voluntarily terminated their employment
with the Company at the balance sheet date.
Retirement benefits payable to directors andstatutory auditors are estimated as allowance for
executives’ retirement benefits at the amountcomputed based on the Company’s internal rules
and regulations on these benefits. The executives’retirement benefits plan was abolished on June20, 2006. Allowance for executives’ retirement
benefits was accrued until the plan abolishment as
an amount to be paid to those executives who had
been in service since the plan was introduced.

Statement No.5)”, and “Implementation guidance
for Accounting standards for presentation of Net
Assets in the Balance Sheet (Accounting Standardsof Japan Guidance No.8)” both issued by the
Accounting Standard Board of Japan on December
9, 2005.
The amounts corresponding to the conventional“Shareholders’ equity” in the balance sheet is¥16,689,350 thousand ($166,577 thousand).
“Net assets” in the balance sheets for this year ispresented according to the revision of “Regulations
Concerning the Terminology, Form and
Presentation Methods of Consolidated Financial
Statements” dated on April 25, 2006. Furthermore,
the Company presented its net assets in the balance
sheets using the new presentation as of March 31,
2005 and 2006.

(12) Consumption taxes

Estimated expenses are provided based on loss
on cancellation of entrusted operations due todematerialization of stock certificates.

The consumption taxes withheld by the Company
and its subsidiary on sales and the consumption
taxes paid by the Company and subsidiary on its
purchases of goods and services are not included in
the amounts of the relevant accounts in the accompanying statements of income. The consumption
taxes withheld and paid are recorded as an asset ora liability, as the case may be, and the net balanceis shown in the balance sheets.

(9) Allowance for loss on movement of computer facilities

3. Assets and Liabilities Held for Sound
Settlement System Operation and Management(8) Allowance for loss on cancellation of agreement for entrusted operations

Estimated expenses are provided based on the estimated restoration costs and other related relocation
costs to be paid upon the movement of computer
facilities.

(10) Finance leases
In the normal course of business, the Company
enters into lease agreements. Finance lease agreements, except for those agreements where theownership of the leased assets is transferred to theCompany, are accounted for as operating leases.

(11) Accounting standard for presentationof Net Assets in the Balance Sheet
Effective from the year ended March 31, 2007,
the Company has applied “Accounting standards
for presentation of Net Assets in the Balance
Sheet (Accounting Standards Board of Japan

60 Japan Securities Depository Center, Inc. ANNUAL REPORT 2008

In order to secure the Delivery Versus Payment(“DVP”) for Non-Exchange Transaction Deliveries(“NETDs”) settlement system, JDCC, a consolidated
subsidiary of the Company, receives cash or securities
as collateral from the DVP participants whom JDCC
officially acknowledge as a party who undertakes
securities obligations in accordance with the provisions
set forth in JDCC’s general provisions in accordancewith Article 156, Paragraph 7-1, of the Financial
Instruments and Exchange Act (Law No. 25, 1948).
JDCC manages cash and securities entrusted by the
DVP participants as clearing funds defined in Article
156-11 of the Financial Instruments and Exchange Act
separately from other assets in accordance with JDSS’s
general provisions and Article 7 of the cabinet ordinance related to securities clearing agencies (Cabinet
Ordinance No. 76, 2002).

(1) Participant fund specified assets andparticipant funds under management
Under the DVP for the NETDs settlement system,
when JDCC accepts DVP participants’ obligations
to counterparties, the DVP participants involved in
the transactions shall assume the same obligations
to JDCC.
JDCC requires each DVP participant to establish
a participant fund in excess of the minimum
amount set forth in JDCC’s general provisions
to ensure that the respective obligations of DVP
participants are covered. The aggregate amount ofminimum participant funds required by JDCC’s
general provisions as of March 31, 2007 and 2008was ¥15,000,000 thousand ($149,715 thousand). In
the event a DVP participant defaults on the required
payment obligations of the DVP for the NETDs
settlement system, JDCC shall take deposits fromthe participant fund of this DVP participant tofulfill its obligations to other DVP participants.
The participant funds entrusted to JDCC will be
managed as money trusts, in line with the statedgeneral provisions of JDCC.
These money trusts are evaluated at cost, just as
available-for-sale securities with no market value.
Assets and liabilities pertaining to participant
funds are presented as designated assets for clearing assets and deposits received for clearing funds,
respectively.

(2) Collateral securities
Under the DVP for the NETDs settlement system,
DVP participants are able to entrust marketablesecurities listed in JDCC’s general provisions(hereafter, “collateral securities”) to ensure thatobligations to JDCC are met.
When a DVP participant fails to meet its obligations to JDCC, JDCC is authorized to dispose of
the entrusted collateral securities by selling themin securities markets or through other methods
deemed appropriate by JDCC.
As of March 31, 2007 and 2008, the market valueof collateral securities entrusted to JDCC was¥141,106,397 thousand and ¥235,795,655 thousand($ 2,353,484 thousand), respectively.

¥100.19=U.S. $1, the rate of exchange as of March
31, 2008, has been used in translation. The inclusionof 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 this or any other rate.

5. Commitment Line and Overdraft Contracts
To ensure agile and stable fund-raising, the Company
concludes commitment line agreements (¥12,000,000
thousand ($119,772thousand) in total) and overdraft
contracts (¥5,000,000 thousand ($49,905 thousand) intotal) with three banks. To prepare for a possible deficiency of funds due to a default by DVP participants,
JDCC has concluded commitment line agreements(¥45,000,000 thousand ($449,146 thousand) intotal) with three banks, as part of a liquid fund forcompleting fund settlement on the required day. ¥ nil
and ¥2,400,000 thousand ($23,954 thousand) of thecommitment line were utilized by the Company as ofMarch 31, 2007 and 2008, respectively.

6. Net Assets
The Corporate Law of Japan provides that an amountequal to 10% of the amount to be distributed as
distributions of capital surplus (other than the capitalreserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve andthe legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of
the common stock account. Such distributions can bemade at any time by resolution of the shareholders, orby the Board of Directors if certain conditions are met,
but neither the capital reserve nor the legal reserve isavailable for distributions.

7. Lease Transactions
Finance lease transactions, other than those in which
the ownership of the leased asset is transferred to thelessee, are accounted for as operating leases. The
following table shows the amounts which would havebeen recorded as financial leases as of March 31, 2007
and 2008 and for the years then ended:

4. US Dollar Amounts
Amounts in U.S. dollars are included solely for theconvenience of readers outside Japan. The rate ofJapan Securities Depository Center, Inc. ANNUAL REPORT 200861¥ (thousands)
2007
Tools and furniture:
Acquisition cost
Accumulated
depreciation
Net book value
Software:Acquisition cost
Accumulated
depreciation
Net book value

2008$ (thousands)
2008¥267,272 ¥2,497,402$ 24,926(202,929) (697,698)¥ 64,343 ¥1,799,703(6,964)$ 17,962¥— ¥ 608,081$ 6,069¥—(297,240)— ¥ 310,841(2,967)$ 3,102

Lease obligations
including interest
thereon :Due within one year
Due over one year
Total
Finance leasecharges
Depreciation
expenseInterest portion¥ 50,985 ¥ 565,538
15,261 1,564,035¥ 66,247 ¥2,129,573$ 5,644
15,611$ 21,255¥ 56,377 ¥ 474,604$ 4,737

54,142
1,574

468,042
16,477

4,671
164(Note) Methods applied in computation of the above
data are as follows:
Depreciation: Straight-line method with zero residual
value over the lease contract period
Interest: Computed as the difference between the leaseobligations and the acquisition cost, allocatedover the lease contract period based on theinterest rate method

8. Borrowings
Short-term borrowings comprised loans from bankswith a weighted average interest rate of 1.3% perannum. The Company had short-term borrowings of¥2,400,000 thousand ($23,954 thousand) as of March
31, 2008.

9. Allowance for Severance Indemnities for
Employees
Allowance for employees’ retirement benefits on

62 Japan Securities Depository Center, Inc. ANNUAL REPORT 2008

March 31, 2007 and 2008 represented the amountthat would be payable for the Company if all eligible
employees voluntarily terminated their employment at
the balance sheet dates. Severance costs for employeescharged to income for the years ended March 31, 2007
and 2008 amounted to ¥62,397 thousand and ¥81,945
thousand ($ 817 thousand), respectively.

10. Non-recurring Depreciation of Fixed Assets
Non-recurring depreciation of fixed assets was caused
by depreciation, as a result of the decision to movecomputer sites.
¥ (thousands)

Buildings
Tools and furniture
Software
Long-term prepaid
expenses$ (thousands)

2007¥185,093——

2008¥ 37,956
308,800
243,360

2008
$ 379
3,082
2,429

—
¥ 185,093

507¥ 590,625

5$ 5,895

11. Income Taxes(1) Deferred tax assets

12. Note to the Consolidated Statements of
Changes in Net Assets

The following table shows the breakdown ofdeferred tax assets:¥ (thousands)
2007
2008
Deferred tax assets:
Allowance for
employees’ bonuses

73,433

72,637(1) Outstanding stock$ (thousands)
2008

725

Enterprise tax
payable68,527

71,293712

Accrued social
insurance premiums
Business facility tax

9,171
3,515

8,557
4,166

85
42

Allowance for
employees’ retirement benefits

46,45060,151

600

Allowance for
executives’ retirement benefits

19,536

16,710167

Excess depreciationof fixed assets

Excess amortizationof deferredcharges for tax
purposes
Deferred tax assets

Increase

Ordinary
8,500
—
share
Type of March 31,
stocks2007
Increase
Ordinary
8,500
—
share

Decrease

March 31,
2007

—

8,500

Decrease

March 31,
2008

—

8,500

(2) Treasury Stock
Not applicable.

(3) Stock Subscription Rights and Other
Securities
Not applicable.

1 Payment of the dividends
137,528

377,206

3,765
Resolution—

336,0463,354—

130,064

1,298

Allowance for loss
on movement ofcomputer
facilities

March 31,2006(4) Dividends

Allowance for loss
on cancellation ofagreement
for entrusted
operations

Type ofstocks

20,135

17,053

170¥378,299 ¥1,093,888$10,918(2) Reconciliation between the nominal
statutory income tax rate and the effective
income tax rate
The difference between the statutory tax rate andthe effective tax rate for the years ended March 31,
2007 and 2008 is less than 5% of the statutory tax
rate, thus the note is omitted.

Total of
Revenue Dividends Dividend
Type ofof¥per Share Record Effective
Stocks Dividends (thousands)
¥
Date
Date

Ordinary General
Shareholders Ordinary Retained
March 31, June 22,¥ 340,000 ¥ 40,000
Meeting
Share Earnings
2007
2007
(June 21, 2007)

2 Dividends for which record date belongs to the year
ended March 31, 2008 and for which effective date
will belong to the year ending March 31, 2009

Resolution

Total of
Revenue Dividends Dividend
Type ofof¥per Share Record Effective
Stocks Dividends (thousands)
¥
Date
Date

Ordinary General¥ 340,000¥ 40,000 March 31, June 24,
Shareholders Ordinary Retained($ 3,393
2008
2008
Meeting
Share Earnings($ 399)thousand)(June 23, 2008)

13. Stock Option
Not applicable.

Japan Securities Depository Center, Inc. ANNUAL REPORT 200863

14. Segment Information(1) Business segment
Disclosure is omitted because the Company operates a single business unit, the central securities custody and bookentry transfer system.

(2) Geographic Information
Disclosure is omitted because the Company has neither overseas consolidated subsidiaries nor overseas branches forthe years ended March 31, 2007 and 2008.

(3) Overseas sales
Disclosure is omitted because the Company does not have any overseas sales for the years ended March 31, 2007
and 2008.

15. Related Party Transactions
The material transactions of the Company with related companies or individuals, excluding transactions with the consolidated subsidiary that are eliminated in the consolidation, and those disclosed elsewhere in these financial statements,
for the years ended March 31, 2007 and 2008 are as follows:(1) Directors
As of March 31, 2007
Title

Name

Business

Transactions

Amount¥ (thousands)

Account

Ending Balance¥ (thousands)

Director

Toshitsugu
Shimizu(Note 2 (1))

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

Outsourcing¥622,184

Accounts
payable-trade¥217,764

Director

Kouichiro
Miyahara(Note 2 (2))

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

Outsourcing¥1,776,408

Accounts
payable-trade¥123,113(Note) 1 The transaction amounts above exclude consumption tax. However, the ending balances include consumption tax.
2 Terms and conditions(1) These amounts represent transactions for the period from April 1, 2006 to June 30, 2006 because Toshitsugu Shimizu resigned from the Board of Directors of theCompany on June 20, 2006, and ending balance is the amount as of June 30, 2006.
(2) These amounts represent transactions for the period from July 1, 2006 to March 31, 2007 because Koichiro Miyahara was assigned to the Board of Directors of
the Company on June 23, 2006.
(3) The terms and conditions of the above transactions are on an arm’s-length basis.

As of March 31, 2008
Title

Name

Business

Transactions

Amount¥ (thousands)

Account

Ending Balance¥ (thousands)

Director

Koichiro
Miyahara(Note 2 (1))

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

Outsourcing¥639,952($6,387
thousands)——

Director

Hironaga
Miyama(Note 2 (2))

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

Outsourcing¥1,730,028($17,267
thousands)

Accounts
payable-trade¥33,063($330
thousands)(Note) 1 The transaction amounts above exclude consumption tax. However, the ending balances include consumption tax.
2 Terms and conditions(1) These amounts represent transactions for the period from April 1, 2007 to June 30, 2007 because Koichiro Miyahara resigned from the Board of Directors of theCompany on June 21, 2007, and ending balance is the amount as of June 30, 2007.
(2) These amounts represent transactions for the period from July 1, 2007 to March 31, 2008 because Hironaga Miyama was assigned to the Board of Directors of
the Company on June 25, 2007.
(3) The terms and conditions of the above transactions are on an arm’s-length basis.

64 Japan Securities Depository Center, Inc. ANNUAL REPORT 2008

(2) Principal shareholder and its subsidiaries
As of March 31, 2007

CapitalNames ofcompanies¥
Address (thousands)

Principal
business

RelationshipAmountPercentage(Note 1)of owner- Directors
holdingEndingship with
Descriptions balancevoting concurrent
Business¥
positions relationship Transactions (thousands) (Note 2) ¥(thousands)
rightsTosho System
Design, develService Co.
Koto-ku,
opment andLtd.
¥100,000
Tokyo
Maintenance(Subsidiary ofof softwareother affiliates)—

Japan Securities
Clearing
Chuo-ku,¥1,700,000
Corporation
Tokyo(Subsidiary ofother affiliates)

Clearing
securities—

Custody &¥300,000 settlement of
securities—

Japan Securities
Settlement &Chuo-ku,
Custody, IncTokyo(Subsidiary ofother affiliates)

Accounts
payabletrade¥19,316

Accounts
payableother¥8,221

One

Accounts
Commission Commission¥3,877,255 receivableincome
incometrade¥462,939

One

Outsourcing Outsourcing ¥2,398,593

Accounts
payabletrade¥123,113—

Purchase ofsoftware,Purchase of¥1,456,738
maintenance of softwaresystems, etc.

(Note) 1. These transaction amounts above exclude consumption tax. However, the ending balance includes consumption tax.
2. The terms and conditions of the above transactions are on an arm’s-length basis.

As of March 31, 2008

CapitalNames ofcompanies¥
Address (thousands)

Principal
business

Tokyo Stock¥11,500,000
Exchange, Inc. Chuo-ku,($114,781(Subsidiary of Tokyo
thousands)
other affiliates)

Exchangeof financial
instruments

Japan Securities
Clearing¥1,700,000
Chuo-ku,
Corporation($16,967
Tokyo(Subsidiary of
thousands)
other affiliates)

Clearing
securities

RelationshipAmountPercentage(Note 1)of owner- Directors
holdingEndingship with
Descriptions balancevoting concurrent
Business¥
positions relationship Transactions (thousands) (Note 2) ¥(thousands)
rights—(Note 3)—

One

Secondmentof staffs,
Purchase of ¥315,272
lease ofinvestment($3,146
computer sites, securities thousands)
etc.

One

Commission Commission
incomeincome¥4,154,800($41,469
thousands)——¥384,800
Accounts($3,840
receivablethousands)
tradeJapan Securities Depository Center, Inc. ANNUAL REPORT 2008

65

(Note) 1. These transaction amounts above exclude consumption tax. However, the ending balances include consumption tax.
2. The terms and conditions of the above transactions are on an arm’s-length basis except for the transaction of the investment security. Acquisition cost of the investment security was based on book value of net assets.
3. Tokyo Stock Exchange Group, Inc. succeeded the holding of the Company’s stocks from Tokyo Stock Exchange, Inc. due to reorganization effective October 1, 2007,
and replaced Tokyo Stock Exchange, Inc. as a principal shareholder of the Company. As such, these amounts represent transactions for the period from April 1, 2007
to September 30, 2007. Tokyo Stock Exchange, Inc. held 21.82% of the Company’s outstanding shares on September 30, 2007.

(3) Subsidiaries and affiliates
As of March 31, 2008
Relationship
CapitalNames ofcompanies¥
Address (thousands)

Principal
business

Tosho System¥100,000
Design &Koto-ku,
Service Co. Ltd.
($ 998development ofTokyo(An affiliate)
thousands)
softwareAmountEndingPercentage Directors(Note 1)balanceof owner- holding
Descriptions
ship with concurrent
Business¥¥voting right positions relationship Transactions (thousands) (Note 2) (thousands)
Directly
holds
20%

Two

Purchasing¥1,491,226
softwarePurchase of($14,883
and system
softwarethousands)
maintenanceAccounts
payableother¥240,008($2,395
thousands)(Note) 1. These transaction amounts above exclude consumption tax. However, ending balance includes consumption tax.
2. The terms and conditions of the above transactions are on an arm’s-length basis.

16. Earnings Per Share
The basis for calculating earnings per share for the years ended March 31, 2007 and 2008 is as follows:$ (thousands)¥ (thousands)
2007

2008

2008

Net income as reported in the consolidated statements of income¥2,651,958¥1,547,702$15,448

Net income pertaining to common stock shareholders¥2,651,958¥1,547,702$15,448

8,500

8,500

—

Weighted-average number ofcommon stock shares outstanding (in shares)

66 Japan Securities Depository Center, Inc. ANNUAL REPORT 2008

Consolidated Financial Statements
Consolidated Statements of Cash Flows (For the years ended March 31, 2007 and 2008)$ (thousands)(Note 4)¥(thousands)

Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
Non-recurring depreciation of property and equipment
Increase (decrease) in allowance for employees’ bonuses
Increase in allowance for executives’ bonuses
Increase in allowance for employees’ retirement benefits
Decrease in allowance for executives’ retirement benefits
Increase in allowance for loss on cancellation of agreement for
entrustment of operations
Increase in allowance for loss on movement of computer
facilities
Interest income
Interest expenses
Foreign exchange loss
Equity in earnings of the affiliate
Loss on disposal of property and equipment
Loss on disposal of intangible assets
Decrease in accounts receivable-trade
Increase (decrease) in accounts payable-trade
Increase in other assets
Decrease in other liabilities
Executives’ bonuses
Sub-totalInterest and dividends received
Interest paid
Income taxes paid
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchase of investment securities
Payments for purchase of property and equipment
Proceeds from sales of property and equipment
Payments for purchase of intangible assets
Payments of guarantee money deposits received
Proceeds from refund of guarantee money deposits
Net Cash Flows Used in Investing Activities
Cash Flows from Financing Activities:
Short-term borrowings
Repayment of short-term borrowings
Cash dividends paid
Net Cash Flows (Used in) Provided by Financing Activities
Effect of exchange rate changes on cash and cash equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year

2007

2008

¥4,404,515
3,871,462
185,093
51,316
20,30034,900(12,720)¥ 2,613,739
5,604,745
590,625(1,961)—
33,746( 6,960)$ 26,088
55,941
5,895
(19)
—
336
(69)

—

827,700

8,261

—
(125)
—
91
—
19,273
26,489170,875
52,306(134,823)(253,334)(17,200)
8,418,423
125—(2,377,489)
6,041,058

320,356( 272)
3,637
556(21,375)
9,297
6,744
383,014(367,373)(137,867)(5,311)—
9,853,041
272(3,101)(1,789,007)
8,061,204

3,197
(2)
36
5
(213)
93
67
3,823
(3,666)(1,376)(53)—
98,3442(31)(17,856)
80,459—(1,564,250)
75(3,224,463)(33,578)
62,980(4,759,235)(315,272)(3,975,197)—(6,758,275)(79,273)—(11,128,018)(3,147)(39,676)—(67,455)(791)—(111,069)——(297,500)(297,500)(91)
984,231
1,839,815¥2,824,047

3,360,000(960,000)(340,000)
2,060,000( 556)(1,007,370)
2,824,047¥ 1,816,676

33,536(9,582)(3,393)
20,561(5)(10,054)
28,186$ 18,132

2008

The accompanying notes are an integral part of these statements.

58 Japan Securities Depository Center, Inc. ANNUAL REPORT 2008

Report of Independent Auditors

The Board of Directors and Shareholders ofJapan Securities Depository Center, Inc.
We have audited the accompanying consolidated balance sheets of Japan Securities Depository
Center, Inc. and its subsidiary as of March 31, 2007 and 2008, and the related consolidated
statement of income, changes in net assets, and cash flows for the year in the period ended March
31, 2008, all expressed in yen. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on
our audit. The consolidated financial statements of Japan Securities Depository Center, Inc. andits subsidiary for the year ended March 31, 2007 were audited by other auditor whose report dated
June 21, 2007, expressed an unqualified opinion on those financial statements.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Japan Securities Depository Center, Inc. and its subsidiary at
March 31, 2008, and the consolidated results of their operations and their cash flows for the year
then ended in conformity with accounting principles generally accepted in Japan.
As described in Note 2. (4), effective for the year ended March 31, 2008, Japan Securities
Depository Center, Inc. and its subsidiary changed the method of depreciation.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2008 are presented solely for convenience. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 4.

June 18, 2008

Japan Securities Depository Center, Inc. ANNUAL REPORT 200867