Annual Report 2004 - daiwa-inv.co.jp · Take a hands-on approach to spur growth in portfolio companies Maxims for Employees “Ever Forward” 1. Boldly rise to the challenge of innovation

Annual Report 2004Year ended March 31 , 2004

Profile

Corporate MissionThe mission of NIF Ventures Co., Ltd. is to contribute to the global New Economy through its private equity business.

Management Policies1. Focus on the private equity business2. Invest globally and build a worldwide network3. Take a hands-on approach to spur growth in portfolio companies

Maxims for Employees“Ever Forward”1. Boldly rise to the challenge of innovation 2. Practice true venture capitalism

NIF Ventures, a member of Daiwa Securities Group mainly engaged in venture capital investment, pro-vides equity financing and a broad array of other services to assist venture companies in maximizingtheir corporate value as they boldly meet the challenge of the future. In addition, NIF Ventures providesinvestment opportunities to corporate and individual investors through the Investment EnterprisePartnerships it manages.NIF Ventures has amassed a wealth of experience in global perspectives and technical assessments inthe 20 years since its founding, and the Company has readily available integrated supports of theDaiwa Securities Group. Not satisfied to rest on our laurels, NIF Ventures is committed to enhancing these advantages in theyears to come.

“Ever Forward,” our guiding precept, expresses our mission of advancing ever forward with start-ups asthey fulfill significant roles in the success of Japan’s industrial restructuring.

Forward-Looking Statements

This annual report contains forward-looking statements related to management’s projections about future business conditions. Actual businessconditions may differ significantly from management’s expectations and accordingly affect our sales and profitability. Actual results may differ as aresult of factors over which we have no control, including unexpected changes in competitive and economic conditions, government regulations,technology and other factors.

Contents

Financial Highlights ................................................................

To Our Shareholders ..............................................................

Year in Review ........................................................................

Management’s Discussion and Analysis .................................

Consolidated Financial Statements ........................................

Corporate Data and Board of Directors .................................

Investors Information ..............................................................

1

2

4

5

10

24

25

Financial HighlightsNIF Ventures Co., Ltd. and its Consolidated Subsidiaries (Years Ended March 31, 2001 through 2004).

Year ended March 31:

Total net sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total cost of sales ・・・・・・・・・・・・・・・・・・・・・・・・・

Gross profit・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Operating profit (loss) ・・・・・・・・・・・・・・・・・・・・・

Net income (loss) ・・・・・・・・・・・・・・・・・・・・・・・・・・

As of March 31:

Total assets ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total Shareholders’ equity ・・・・・・・・・・・・・・・・

Per share data:

Net income (loss)* ・・・・・・・・・・・・・・・・・・・・・・・・・

Cash dividends applicable to the year・・・・

Shareholders’ equity*・・・・・・・・・・・・・・・・・・・・・・

Other data:

Number of employees**・・・・・・・・・・・・・・・・・・・

15,636,00

10,912,00

4,724,00

558,00

554,00

80,595,00

22,195,00

1,849.92

500,00

76,732.96

163,00

¥

¥

¥

11,50000,,

10,74400,,

75600,,

(3,344)00,

(9,635)00,

101,17500,,

20,45700,,

(33,339.75)

- ,

70,784.92,

16600,,

¥

¥

¥

17,22600,

9,34900,

7,87700,

3,31300,

3,26400,

112,84700,

33,86500,

12,304.40

1,00000,

117,182.72

16200,

¥

¥

¥

20,58600,

10,52100,

10,06500,

4,97000,

2,66800,

125,10100,

24,74600,

11,374.77

7,50000,

93,736.82

14900,

¥

¥

¥

147,509

102,943

44,566

5,264

5,226

760,330

209,387

$

$

$ 17.45

4.72

723.90

0 0

(Notes) 1 . Unless indicated otherwise, all dollar figures herein refer to U.S. currency. Dollar amounts represent translations at the rate of ¥106=U.S.$1, the rate prevailing on March 31, 2004.

2 . Net income (loss) and shareholders’ equity per share are computed based on the average number of shares outstanding during the year.3 . Cash dividends per share presented in the consolidated statement of operations represent the cash dividends applicable to each respective

year.* . On August 1, 2001, the Company made a stock split at the ratio of 10 shares of stock (with par value of ¥5,000) for each share of stock (with par

value of ¥50,000) held. The amounts per share for 2001 were computed based on the effect of the stock split on the beginning balance of the year. And per share data of 2001 is adjusted retroactively to reflect the stock split.

**. Figures are the sum of NIF Ventures Co., Ltd. and its consolidated subsidiaries.

Millions of YenThousands of U.S. Dollars

Yen U.S. Dollars

2004 2003 2002 2001 2004

Millions of Yen Millions of Yen

Millions of Yen Millions of Yen

Millions of Yen

Total net sales Operating profit (loss) Net income (loss)

Total assets Total shareholders’ equity

17,226

20,586

11,500

15,636

558

2001.3 2002.3 2003.3 2004.3 2001.3 2002.3 2003.3 2004.3 2001.3 2002.3 2003.3 2004.3

2001.3 2002.3 2003.3 2004.32001.3 2002.3 2003.3 2004.3

(3,344)

3,313

4,970

33,865

24,746

20,45722,195

112,847125,101

101,175

80,595

554

(9,635)

3,2642,668

1

Annual Report 2004

To Our Shareholders

2

To Our Shareholders

We would like to take this opportunity to express

our gratitude for your continuing support. In

presenting you with the business report for our

21st business term, I would like to offer some

brief comments.

The Japanese economy has not quite

completely pulled itself out of the clutches of

deflation yet, but we are beginning to observe

some definite signs of recovery as the stock

market has rebounded sharply since hitting

bottom in April 2003 due in part to improvements

in the financial system and the recovery in

corporate capital investment. Elsewhere, the

corporate disposition of Japanese companies is

being strengthened further with the acceleration

of corporate restructuring and business

reorganization. The academia-industry

cooperation and regional revitalization programs

aimed at creation of new industries and

businesses have also grown more active while

generating concrete positive results.

Under these economic conditions, our

company is more proactively focusing on venture

investments targeting venture companies that

offer innovative technologies and business

models, while simultaneously striving to develop,

as another corporate pillar of our business,

successful buyout investments aimed at

business reconstruction of companies

possessing superior management resources.

With respect to venture investments during the

fiscal year under review in Japan, we introduced

Annual Report 2004

To Our Shareholders

3

our investment division by business category of

the IT and biotechnology sectors, as part of our

commitments to build a more specialized

investment capability. Concurrently, we also

enhanced our ability to evaluate sophisticated

technologies by adding more technical advisors

from the ranks of university professors, etc.

With respect to venture investments abroad,

we refrained from making new investments as

the IPO markets overseas remained sluggish

during the fiscal year under review. However, in

view of the definite signs of business recovery in

the U.S. and some other markets, we proceeded

with the strengthening of our international

business network by creating business alliances

with Sofinova Ventures, Inc., a U.S.

biotechnology venture capital company. For our

business activities in China during the fiscal year,

we are considering the establishment of bases of

operations and building a local investment

system as we watch developments in

deregulation and possible investment exits.

With respect to buyout investments, we

expanded our specialized units during the fiscal

year under review, and formed a fund dedicated

to buyout investments with PAMA Group Inc.

(who has a solid global track record in buyout

investments) as our advisor. This fund combines

our corporate resources for private equity

business that we have cultivated over a period of

more than 20 years, as well as the network and

know-how of PAMA Group.

Success or failure in the private equity

business depends significantly upon the

existence of high-quality intelligence gathering

capabilities, including the identification of

investment opportunities, hands-on management

support systems that enhance the corporate

value of target corporations, and the ability to

create investment funds. During the fiscal year

under review, we focused our efforts on

enhancing our overall corporate system, in

particular by establishing new units for

expanding the search network and strengthening

the hands-on system, as well as by expanding

the research/planning unit devoted to promoting

the formation of funds that reflect the needs of

our investors.

We hope to contribute to economic growth not

only in Japan but worldwide by serving to create

new companies and industries, as well as

regenerating and revitalizing the existing

enterprises and businesses through the private

equity business. We shall continue to raise the

quality level of our business operations, striving to

become the most productive organization in the

industry, thereby improving our shareholder value.

We earnestly request the continued support of

our shareholders.

Shin-ichi Yamamura, President & CEO

Annual Report 2004

Year in Review

4

Year in Review

Apr 11, 2003

Jun 12, 2003

Jul 16, 2003

Jul 2, 2003

Aug 8, 2003

Sep 18, 2003

Dec 17, 2003

Nov 7, 2003

Jan 29, 2004

Feb 27, 2004M

ar 18, 2004

Apr 21, 2003

Apr 24, 2003

Jul 8, 2003

Jul 28, 2003Aug 19, 2003Sep 3, 2003

Oct 14, 2003

Nov 19, 2003Dec 15, 2003

Jan 15, 2004

Feb 26, 2004

Mar 1, 2004

Mar 31, 2004

2003

2004

Apr 11

Apr 21

Apr 24

Jun 12

Jun 12

Jul 2

Jul 8

Jul 16

Jul 28

Aug 8

Aug 19

Sep 3

Sep 18

Oct 14

Nov 7

Nov 19

Dec 15

Dec 17

Jan 15

Jan 29

Feb 26

Feb 27

Mar 1

Mar 18

Mar 31

FORMOSA EPITAXY INC. listed on Taiwan Stock Exchange

OHT Inc. listed on Tokyo Stock Exchange Mothers

WACOM Co., Ltd. listed on JASDAQ

Mutual Corporation listed on JASDAQ

Venture Capital Investment Limited Partnership NIF Japan Fund established

MODEC, Inc. listed on 2nd Section of Tokyo Stock Exchange

Business alliance with Sofinova Ventures, Inc., a U.S. biotechnology venture capital

J-Three International Holding Co., Ltd. listed on Taiwan OTC market

CyberTAN Technology Inc. listed on Taiwan Stock Exchange

Artist House, Inc. listed on Tokyo Stock Exchange Mothers

Wistron Corporation listed on Taiwan Stock Exchange

Taipei Multipower Electronics Co., Ltd. listed on Taiwan OTC market

MediBic listed on Tokyo Stock Exchange Mothers

C.P. Seven Eleven Public Company Limited listed on The Stock Exchange of Thailand

SCINEX CO., LTD. listed on Hercules

VeriSign Japan K.K. listed on Tokyo Stock Exchange Mothers

Musashino Enterprise Development Fund Venture Capital Investment Limited Partnership established

Aplix Corporation listed on Tokyo Stock Exchange Mothers

Announced take-over bid for shares of Sotoh Co., Ltd.

KEIOZU COMPANY listed on Tokyo Stock Exchange Mothers

SEGAMI MEDICS CO., LTD. listed on JASDAQ

NEXUS CO., LTD. listed on JASDAQ

Allied Material Technology Corp. listed on Taiwan OTC market

RISA Partners, Inc. listed on Tokyo Stock Exchange Mothers

NIF-PAMA Japan Private Equity Parallel (A) L.P. established

Annual Report 2004

Management’sDiscussion

and Analysis

5

Management’s Discussionand Analysis

Business climate

At the beginning of the fiscal year under review,

uncertainties were mounting in the Japanese

economy due to the Iraqi conflict and the SARS

epidemic. However, general business conditions

began to show more definite signs of recovery as

corporate capital expenditures and exports turned

around to increase towards the latter half of the year,

while the U.S. economy started to recover. In the

stock market, the Nikkei Stock Average recovered

substantially from the bottom of ¥7,600 level in April

to ¥11,715 at the end of the fiscal year.

IPOs in the three emerging domestic stock markets

(JASDAQ, Tokyo Stock Exchange Mothers and

Hercules) totaled 103. While the number of IPOs was

two less than 105 in the previous fiscal year, the

number of IPOs during the second half reached 68,

reflecting substantially more active IPO activities than

in the first half that marked only 35 cases.

Business results for the fiscal yearunder review

In this business climate, revenues from venture capital

investment securities amounted to ¥11,916 million,

representing a year-on-year increase of 66.0%, net

sales rose to ¥15,636 million, up 36.0% from a year

earlier, and capital gains reached ¥4,445 million,

marking a year-on-year increase of 34.5%, reflecting

increased sales of IPO issues. Valuation loss of

venture capital investment securities dropped 66.4%

from previous fiscal year to ¥700 million and

provisions for possible investment losses declined

49.6%, year on year, to ¥1,944 million, mirroring the

stock market recovery. As a result, gross profit

jumped 524.8% to ¥4,724 million.

Selling, general and administrative expenses rose

1.6% from a year earlier to ¥4,166 million. Operating

profit therefore was ¥558 million (in contrast to the

operating loss of ¥3,344 million for the previous fiscal

year).

As part of our drive to strengthen the company’s

financial disposition, we promoted sales of investment

securities and disposal of long-term loans receivable.

Thus, the gains of ¥1,303 million on sales of investment

securities was reported as part of the extraordinary

profit, while the amount of ¥248 million transferred to

the provision for doubtful accounts and the loss of

¥557 million on sales of long-term loans receivable

were both reported as part of the extraordinary loss.

Consequently, net income for the fiscal year under

review was ¥554 million (in contrast to the net loss of

¥9,635 million for the previous year).

Proceeds from sales of venture capital investment securities/capital gain

5,273

6,697

6,312

5,519

3,875

3,305

7,471

4,445

11,831

7,180

11,970 11,916

2001.3 2002.3 2003.3 2004.3

Cost of sales

Capital gains

(Millions of Yen)

17,226

11,500

20,586

Sales breakdown

15,636

581

2,737

4,631

12,637

565

1,586

2,629

12,446

377

1,127

2,590

7,406

285

754

2,476

12,121

2001.3 2002.3 2003.3 2004.3

Other

Interest income from loans

Investment management fees

Revenues from venture capital investment securities

(Millions of Yen)

Annual Report 2004


and Analysis

6

Portfolio

by Region by Business category

60%

9%

13%

18%

18%

14%

14%

6%

3%

7%

12%

12%

6%8%

Japan

Asia

North America

Investmentbalance

Services

Machinery, autos

OtherMaterials,chemistryEurope,

other

¥77.1billion

Investmentbalance

¥77.1billion

Computers

Electronics

Excluding buyout investment※

Telecommunications

Consumables

Bio-relatedInternet

sectors. In particular, our investments in the

biotechnology-related sectors increased 28.8% from

the previous fiscal year to ¥3,108 million.

We had not yet produced concrete results in our

buyout investment segment during the fiscal year under

review, but are currently reviewing several projects.

As a result, venture capital investments as of the

closing of the fiscal year under review has been made

with a total of 596 companies for a total value of

¥77,132 million, representing a year-on-year decrease

of 2.9%, while our buyout investments with two

corporations amounted to ¥4,391 million. Thus, the

total investments outstanding as at the closing of the

fiscal year under review amounted to ¥81,523 million,

down 2.8% from those of the previous fiscal year.

Turning to our future investment activities, we shall

continue to focus on investing in new technology

sectors such as IT, biotechnology and

nanotechnology, and shall further emphasize

academia-industry cooperation and regional

revitalization. With respect to our investments

abroad, we hope to promote new investments in the

U.S. where the IPO markets and venture capital

investments are on a recovering trend, and to build

our investment systems in China bearing in mind a

suitable exit strategy there. With respect to buyout

investments, we are striving to strengthen our

dedicated investment teams and step up our

investing activities.

Investment activities during thefiscal year under review

With respect to investment activities during the fiscal

year under review, we concentrated on conducting

investment on the basis of close examination and

selection of prospective venture companies, as well

as on discovering and analyzing investment targets

by expanding our dedicated teams for buyout

investments.

With respect to venture capital investments, we

curbed the number of new investments abroad where

IPO markets remained sluggish, and concentrated on

Japan so as to capitalize on the favorable investment

climate. Accordingly, our domestic investments rose

65.3%, year on year, to ¥9,219 million, while our

overseas investments dropped 52.9% from the

preceding fiscal year to ¥4,748 million reflecting

sharp declines in investments towards North America

and Asia. The aggregate venture capital investments

at home and abroad were made to a total number of

83 companies for a value of ¥13,966 million, down

10.8%, year on year.

Investments executed according to business sector

show approximately 80% going to IT-related

(computers, electronics, telecommunication and

Internet) and biotechnology-related (biotechnology,

health and medical) sectors on which our company

currently is placing high priority as strategic business

Amount of investment

by Region by Business category

66%13%

7%

14% 13%

27%

11%22%

19%

3%

5%

Asia

North America

Japan

Services

Bio-related

Other

Annualinvestment

¥14.0billion

Annualinvestment

¥14.0billion

Europe,other

Computers

Electronics

Telecommunications

Excluding buyout investment※

Internet

Annual Report 2004


and Analysis

7

Overseas

Japan

Number of investee companieswhich went public

43

24

17

24

16

27

8

16

3

14

10

14

2001.3 2002.3 2003.3 2004.3

IPOs by companies we haveinvested in

Our investees making IPO totaled 24 (14 in

domestically and 10 overseas) during the fiscal year

under review. When comparing this with the number

in the previous fiscal year, there was no increase or

decrease at home, but the number of investees that

IPO abroad increased by seven due to an increase in

IPOs in Taiwan.

On a cumulative basis, of a total of 1,533

companies that we had invested in by the end of the

fiscal year under review, 466 corporations have

completed their IPOs.

Funds formed

We faced fund subscription climate during the fiscal

year under review, but concluded the creation of five

new funds to be operated by the company and its

consolidated subsidiaries with total commitments of

¥16,700 million. The total value of the fund formed

during the fiscal year under review amounted to

¥16,834 million as there was an additional investment

of ¥134 million in the existing funds.

Investment management fees from venture capital

investment funds were ¥2,476 million, down 4.4%,

year on year, of which administrative fees accounted

for ¥2,473 million, down 4.4% from a year earlier, and

success fees for ¥3 million, down 18.9%, year on

year.

Provision for possible investmentlosses

Bearing in mind the conditions of some of the

investee companies, we are recording an estimated

provision for possible investment losses in order to

prepare against possible future losses of our venture

capital investment securities as of the end of each

fiscal year. Also in the fiscal year under review, we

performed re-assessment of our investees, and

booked a new provision for possible investment

losses of ¥1,944 million (as compared to ¥3,853

million for the previous fiscal year) with respect to

certain investees in IT-related sectors. As a result,

the balance of provisions for possible investment

losses as at the closing of the fiscal year under

review totaled ¥5,854 million (as compared to ¥5,477

million for the previous fiscal year), with the

percentage of provisions for possible investment

losses to unlisted venture capital investment

securities (totaling ¥39,429 million) standing at 14.8%

(as compared to 13.0% for the previous fiscal year).

Establishment of funds

(Billions of Yen)

22.6 22.520.7

16.8

2001.3 2002.3 2003.3 2004.3

Annual Report 2004


and Analysis

8

(%)

Shareholders' equity ratio

2001.3 2002.3 2003.3 2004.3

19.8

30.0

20.2

27.5

Strengthening of corporate financialposition

We regard the issue to strengthen our financial

position as one of the most important corporate

agenda items, and are working diligently to concentrate

our corporate resources toward our investment

operations as our core business. During the fiscal

year under review, we continued our efforts as in the

previous fiscal years to scale down our loan operations

from which we are planning to withdraw entirely, and

to reduce interest-bearing debts. As a result of our

efforts to redeem investment and to sell certain loans

and claims, loans receivable outstanding decreased

31.6% from the preceding fiscal year to ¥9,415

million, and the balance of long-term loans receivable

after deducting an allowance for doubtful accounts

(¥8,530 million) decreased 42.0%, year on year, to

¥9,725 million. The total loans receivable and long-

term loans receivable thus decreased by ¥11,394

million.

Efforts were also made to sell off some of the

investment securities held for long-term investment

purposes, and these investments dropped 7.5% from

the preceding fiscal year to ¥7,374 million.

With respect to interest-bearing debts, the total

outstanding amount of short-term and long-term

borrowings decreased sharply by 28.6% from the

previous fiscal year to ¥56,420 million.

Shareholders’ equity increased 8.5%, year on year,

to ¥22,195 million, as a result of net income

appropriated for the fiscal year under review and an

increase (in net unrealized gain on securities) due to

the stock market recovery. As a result, shareholders’

equity accounted for 27.5% (compared to 20.2% for

the previous fiscal year) of total assets at the closing

of the fiscal year under review.

Cash Flows

Cash flows from operating activities increased by

¥15,620 million, compared with an increase of ¥5,345

million for the previous fiscal year. This was primarily

due to efforts to sell venture capital investment

securities and recover loans receivable and long-

term loans receivable.

Cash flows from investing activities increased by

¥3,633 million, compared with a decrease of ¥372


due to proceeds from sales and maturity of

investment securities.

Cash flows from financing activities decreased by

¥22,559 million, compared with an increase of ¥3,099


due to decrease in short-term borrowings.

As a result, cash and cash equivalents decreased

by ¥3,345 million, compared with an increase of

¥8,049 million for the previous year. The closing

Amount of allowance for possible investment losses

(Millions of Yen)

2001.3 2002.3 2003.3 2004.3

36,61739,695

42,15839,429

36,617

1,227

3.4

39,695

1,922

4.8

42,158

5,477

13.0

39,429

5,854

14.8

Un-listed venture capital investment securities

Balance of allowance for possible investment losses

Rate of allowance for possible investment losses (%)

Annual Report 2004


and Analysis

9

balance totaled ¥7,816 million, compared with

¥11,161 million for the previous year.

Primary management objectives

We have identified the primary management

objectives of NIF Ventures and its consolidated

subsidiaries as follows. We will steadily address

these objectives with the aim of becoming a

company that boasts the highest level of productivity

in the industry.

(1) Expansion of sources for finding investment deals

The expansion of sources for finding investment

deals is an important objective that could well be

described as an “everlasting theme” for the business

we are engaged in. In fiscal 2003, we established a

dedicated division to bolster our capabilities for

finding investee companies in our venture investment

and buyout investment businesses. In the future, we

will endeavor to raise quality and effectiveness even

further by expanding our network.

(2) Strengthening of hands-on (management

support) capacity

When investing in seeds and early-stage ventures

generated by university campuses, it is important to

extend “hands-on support” in terms of management

control and sales in addition to supplying capital.

Management participation through buyout investment

is synonymous with “hands-on” support, and in fiscal

2003 we established a department that specializes in

hands-on support to expand this capacity. We will

seek to strengthen our system even further to

sufficiently meet existing needs.

(3) Strengthening of investment fund raise that

meets market needs

The creation of venture companies and corporate

restructuring holds an important key to reviving the

Japanese economy. And in these times of low

interest rates, we anticipate high potential needs for

venture funds and buyout funds as products for asset

management. In fiscal 2003, we established

dedicated divisions for both marketing and product

planning for composing full-scale buyout funds. We

will further bolster our marketing activities and fund

product development capabilities to accurately grasp

investor needs and respond to them through fund

formation.

(4) Reinforcement of global investment structure

Amid signs of recovery in overseas economies led by

the United States, we will promote strategic

diversified investments to further strengthen global

investment - our forte. We will seek to overhaul and

strengthen the structure of overseas bases we have

established to date, and concurrently renew our

efforts to forge closer relations with leading local

partners and expand our networks to enhance the

global structure that gives us the edge.

(5) Strengthening of financial position

To improve our capital adequacy ratio and current

ratio, NIF Ventures will strive to apply even more

stringent checks on investment portfolios whose exit

outlook is uncertain, and promote collection and

disposal of loan claims aimed at liquidating

“living-dead assets” at the earliest timing and

reducing assets, while also seeking to further

reduce interest-bearing debt.

10

Assets:

Current assets

Cash and time deposits (Note 3)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Venture capital investment securities (Notes 4 and 6)・・・・・・・・・・・・・

Venture capital investment funds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Loans receivable ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other current assets (Note 7)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less: Allowance for doubtful accounts・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total current assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Property and equipment (Note 8)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Intangible assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Investment securities (Notes 5 and 6)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Long-term loans receivable (net of allowance of ¥8,530million

($80,472 thousand) in 2004 and ¥13,111 million in 2003)・・・・・・・・

Other investments and other assets (Note 9)・・・・・・・・・・・・・・・・・・・・・・・・

9,508)

36,740)

405)

9,415)

5,125)

(28)

61,165)

1,540)

135)

7,374)

9,725)

656)

80,595)

¥

¥

12,411)

41,206)

700)

13,767)

5,613)

(40)

73,657)

1,796)

179)

7,968)

)

16,767)

808)

101,175)

¥

¥

89,698)

346,604)

3,821)

88,820)

48,349)

(264)

577,028)

14,529)

1,273)

69,566)

91,745)

6,189

760,330)

$

$

See accompanying notes.

Millions of Yen Thousands of U.S.Dollars (Note1)

2004 2003 2004

CONSOLIDATED BALANCE SHEETSNIF Ventures Co., Ltd. and Consolidated Subsidiaries

March 31, 2004 and 2003

11

Liabilities:

Current liabilities

Short-term borrowings (Note 10)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Long-term borrowings due within one year (Note 10)・・・・・・・・・・・・・・

Income taxes payable (Note 13)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Deferred tax liabilities (Note 13)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Accrued bonuses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Accrued expenses and other liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total current liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Long-term borrowings (Note 10)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Long-term deferred tax liabilities (Note 13)・・・・・・・・・・・・・・・・・・・・・・・・・・・

Retirement benefits (Note 11)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other long-term liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total liabilities ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Shareholders’ equity (Note14):

Common stock:

Authorized - 1,056,000 shares

Issued - 289,000 shares ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Capital surplus・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Retained earnings (deficit)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net unrealized gain (loss) on securities, net of tax effect ・・・・・・・・・・・

Foreign currency translation adjustment ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total shareholders’ equity ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

16,000)

11,611)

41)

7)

245)

611)

28,515)

28,809)

702)

370)

4)

58,400)

11,267)

9,925)

970)

46)

(13)

22,195)

80,595)

¥

¥

48,500)

12,809)

32)

8)

84)

1,055)

62,488)

17,671)

-)

364)

195)

80,718)

11,267)

13,914)

(3,573)

(1,180)

29)

20,457)

101,175)

¥

¥

150,944)

109,537)

387)

66)

2,311)

5,764)

269,009)

271,783)

6,623)

3,490)

38)

550,943)

106,293)

93,632)

9,151)

434)

(123)

209,387)

760,330)

$

$


2004 2003 2004

12

Net sales:

Revenues from venture capital investment securities (Note 4) ・・・・

Investment management fees (Note 12)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Interest income from loans・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total net sales (Note 15)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cost of sales:

Cost of venture capital investment securities (Note 4)・・・・・・・・・・・・・・

Interest expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total cost of sales ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Gross profit ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Selling, general and administrative expenses (Note 16)・・・・・・・・・・

Operating profit (loss) (Note 15)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other income (expenses) (Note 17) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Income (loss) before income taxes・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Income taxes (Note 13 ):

Current・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Refunds of income taxes・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Deferred・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net income (loss)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Per share data:

Net income (loss) (Note 14) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cash dividends applicable to the year (Note 18)・・・・・・・・・・・・・・・・・・・・

12,121)

2,476)

754)

285)

15,636)

10,115)

769)

28)

10,912)

4,724)

4,166)

558)

46)

604)

52)

(1)

(1)

50)

554)

1,849.92

500

¥

¥

¥

7,406)

2,590)

1,127)

377)

11,500)

9,815)

846)

83)

10,744)

756)

4,100)

(3,344)

(6,246)

(9,590)

45)

(3)

3)

45)

(9,635)

(33,339.75)

-555

¥

¥

¥

114,349)

23,358)

7,113)

2,689)

147,509)

95,424)

7,255)

264)

102,943)

44,566)

39,302)

5,264)

434)

5,698)

490)

(9)

(9)

472)

5,226)

17.45

4.72

$

$

$


2004

Yen U.S. Dollars (Note 1)

2003 2004

2004 2003 2004


CONSOLIDATED STATEMENTS OF OPERATIONSNIF Ventures Co., Ltd. and Consolidated Subsidiaries

Years ended March 31, 2004 and 2003

11,267

11,267

11,267

289,000

289,000

289,000

13,914)

13,914)

(3,989)

9,925)

6,371)

(9,635)

(289)

(20)

(3,573)

3,989)

554)

970)

2,242)

(3,422)

(1,180)

1,226)

46)

71)

(42)

29)

(42)

(13)

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

13

Balance at March 31, 2002・・・・・・・・・・・・・・・・

Net loss・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cash dividends・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Directors’ bonuses・・・・・・・・・・・・・・・・・・・・・・・・・

Net unrealized loss on securities,

net of tax effect ・・・・・・・・・・・・・・・・・・・・・・・・

Foreign currency translation adjustment・・

Balance at March 31, 2003・・・・・・・・・・・・・・・・

Reversal of capital surplus (Note 14)・・・・・

Net income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net unrealized gain on securities,

net of tax effect・・・・・・・・・・・・・・・・・・・・・・・・・・

Foreign currency translation adjustment・・

Balance at March 31, 2004 ・・・・・・・・・・・・・・・

Balance at March 31, 2003・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Reversal of capital surplus (Note 14)・・・・・・・・・・・・・・・・・・・・・・・・

Net income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net unrealized gain on securities,

net of tax effect ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Foreign currency translation adjustment・・・・・・・・・・・・・・・・・・・・

Balance at March 31, 2004・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Number ofshares ofcommon

stock

Commonstock

Capitalsurplus

Retainedearnings(deficit)

Net unrealizedgain (loss) on

securities, net of tax effect

Foreign currency

translation adjustment

Commonstock

Capitalsurplus

Retainedearnings(deficit)

Net unrealizedgain (loss) on

securities, net of tax effect

Foreign currency

translationadjustment

106,293

106,293

131,264)

(37,632)

93,632)

(33,707)

37,632)

5,226)

9,151)

(11,132)

11,566)

434)

273)

(396)

(123)

Millions of Yen

Thousands of U.S. Dollars (Note1)


NIF Ventures Co., Ltd. and Consolidated Subsidiaries


$

$

$

$

$

$

$

$

$

$

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

14

Cash flows from operating activities:

Income (loss) before income taxes・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Adjustments to reconcile net income (loss) to net cash providedby operating activities:

Depreciation・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Decrease in allowance for doubtful accounts ・・・・・・・・・・・・・・・・・・・・・・・・・・・

Increase in allowance for possible investment losses・・・・・・・・・・・・・・・・・・

Increase (decrease) in accrued bonuses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Increase in retirement benefits・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Interest and dividend income ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Interest expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Equity in net losses (gains) on investments of anon-consolidated subsidiary and an affiliated company・・・・・・・・・・・・・

Valuation losses on investment securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Gain on sales of investment securities, net ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Loss (gain) on disposal and sales of fixed assets, net ・・・・・・・・・・・・・・・・・

Valuation losses related to fixed assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Decrease (increase) in venture capital investment securities・・・・・・・・・・

Decrease in loans receivable and long-term loans receivable・・・・・・・・・・

Directors’ bonuses paid ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Interest and dividends received・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Interest paid・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Income taxes paid・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other, net ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total adjustments・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net cash provided by operating activities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cash flows from investing activities:

Payments for purchases of property and equipment・・・・・・・・・・・・・・・・・・・・

Proceeds from sales of property and equipment ・・・・・・・・・・・・・・・・・・・・・・・

Payments for purchases of investment securities ・・・・・・・・・・・・・・・・・・・・・・

Proceeds from sales and maturity of investment securities・・・・・・・・・・・・

Other, net・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net cash provided by (used in) investing activities・・・・・・・・・・・・・・・・・・・

Cash flows from financing activities:

Decrease in short-term borrowings, net ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Proceeds from long-term borrowings・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Repayments of long-term borrowings ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cash dividends paid ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net cash provided by (used in) financing activities ・・・・・・・・・・・・・・・・・・

Effect of exchange rate changes on cash and cash equivalents・・・・・・

Net change in cash and cash equivalents・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cash and cash equivalents at beginning of year・・・・・・・・・・・・・・・・・・・・・・・

Cash and cash equivalents at end of year ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

604)

125)

(12)

376)

161)

7)

(1,066)

958)

20)

52)

(1,133)

21)

-)

4,170)

11,398)

-)

1,088)

(964)

(42)

(143)

15,016)

15,620)

(22)

186)

(807)

4,292)

(16)

3,633)

(32,500)

23,000)

(13,059)

-)

(22,559)

(39)

(3,345)

11,161)

7,816)

¥

¥

(9,590)

134)

-)

3,555)

(89)

95)

(1,652)

1,028)

(4)

3,968)

(479)

(11)

168)

(1,467)

8,512)

(20)

1,619)

(1,010)

(35)

623)

14,935)

5,345)

(24)

-)

(2,775)

2,494)

(67)

(372)

(3,300)

17,760)

(11,072)

(289)

3,099)

(23)

8,049)

3,112)

11,161)

¥

¥

5,698)

1,179)

(113)

3,547)

1,519)

66)

(10,057)

9,038)

189)

491)

(10,689)

198)

-)

39,339)

107,528)

-)

10,264)

(9,094)

(396)

(1,349)

141,660)

147,358)

(207)

1,754)

(7,613)

40,490)

(151)

34,273)

(306,603)

216,981)

(123,198)

-)

(212,820)

(367)

(31,556)

105,292)

73,736)

$

$

CONSOLIDATED STATEMENTS OF CASH FLOWSNIF Ventures Co., Ltd. and Consolidated Subsidiaries



2004 2003 2004


15

1. Basis of consolidated1. financial statements

2. Significant accounting policies

NIF Ventures Co., Ltd. (the “Company”) is a consolidated subsidiary

of Daiwa Securities Group Inc. As of March 31, 2004, the total of

direct and indirect share holdings of the Company by Daiwa

Securities Group Inc. was 79.2%. The Company‘s core business is

venture capital investments.

The Company and its consolidated domestic subsidiaries maintain

their official accounting records in Japanese yen. The accompanying

consolidated financial statements have been prepared in accordance

with the provisions set forth in the Japanese Securities and Exchange

Law and its related accounting regulations, and in conformity with

accounting principles generally accepted in Japan (“Japanese

GAAP”), which are different in certain respects as to application and

disclosure requirements of International Financial Reporting

Standards. The accounts of overseas subsidiaries are maintained in

conformity with generally accepted accounting principles and

practices prevailing in the respective countries of domicile.

The accompanying financial statements have been restructured and

translated into English (with some expanded descriptions and the

inclusion of statements of shareholders‘ equity) from the

consolidated financial statements of the Company prepared in

accordance with Japanese GAAP and filed with the appropriate Local

Finance Bureau of the Ministry of Finance as required by the

Securities and Exchange Law. Some supplementary information

included in the statutory Japanese language consolidated financial

statements, but not required for fair presentation, is not presented in

the accompanying financial statements.

The translations of the Japanese yen amounts into U.S. dollars are

included solely for the convenience of the reader, using the

prevailing exchange rate at March 31, 2004, which was ¥106 to U.S.

$1. The convenience translations should not be construed as

representations that the Japanese yen amounts have been, could

have been, or could in the future be, converted into U.S. dollars at

this or any other rate of exchange.

Consolidation

The consolidated financial statements include the accounts of the

Company and its seven significant subsidiaries (four domestic

subsidiaries and three overseas subsidiaries) which are controlled by

the Company through substantial ownership of more than 50% of

the voting rights or through ownership of high percentage of the

voting rights and the existence of certain conditions evidencing

control by the Company of the decision-making body of such

companies.

Investments in an unconsolidated subsidiary and an affiliated

company over which the Company has the ability to exercise

significant influence in operation and financial policies of the

investees are accounted for by the equity method.

Significant intercompany balances and transactions and profits have

been eliminated in consolidation.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, readily-available

deposits, and short-term investments with original maturities not

exceeding three months, which are highly liquid and virtually risk-

free with respect to change in value.

Securities

The Company and its consolidated domestic subsidiaries classify all

their securities (the venture capital investment securities and

investment securities), except for investments in subsidiaries and

affiliated companies, as available-for-sale securities.

The available-for-sale securities, which have readily available

market value are stated at quoted market value prevailing as of

year-end, and net unrealized gains and losses are reported, net of

applicable income taxes, as a separate component of the

shareholders’ equity. Realized gains and losses on sale of such

securities are computed using moving-average cost.

Securities for which a market value is not available are stated at

moving-average cost.

Venture capital investment securities represent shares and bonds

which are expected to go public in the future, as well as those which

have been successful in going public. Venture capital investments

may be made by the direct method and the indirect method. Under

the direct method, investments are made directly to private

companies. On the other hand, under the indirect method,

investments are made to private companies through investment

partnerships. Allowance for possible investment losses of venture

capital investment securities is provided in amounts determined by

management, taking into consideration the financial conditions of

investee companies.

Investments in investment partnerships

Venture capital investments made through investment partnerships,

are reported under the proportionate consolidation method, i.e. the

assets, liabilities, profits and losses of the investment partnerships are

recorded in the Company’s financial statements in proportion to the

Company’s share of the investment partnerships. Investments in

investment partnerships whose financial statements are not available,

are included in “Venture capital investment funds” in current asset.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNIF Ventures Co., Ltd. and Consolidated Subsidiaries

March 31, 2004 and 2003

16

Derivative financial instruments

The Company uses derivative financial instruments to manage its

exposure to interest rate fluctuation risks on borrowings, and not for

trading nor speculative purposes. The derivative transactions used by

the Company qualify for hedge accounting because of high

correlation and effectiveness between the hedging instruments and

the hedged items except for those accounted for special hedge

accounting method as noted below. Deferred hedge accounting

method is applied for derivative financial instruments, which are used

as hedges and meet certain hedging criteria. Under this accounting

method, unrealized gains or losses resulting from changes in fair

value are deferred as liabilities or assets until the related gains or

losses on the hedged items are recognized.

Special hedge accounting method is applied for interest rate swap

contracts, which are used as hedges and meet certain hedging

criteria. Under this accounting method, net amount of interests on

the swap contracts are added to or deducted from the interests.

Change in accounting policy - Early application of accountingstandards for impairment of fixed assets -

Effective from the year ended March 31, 2004, the Company and its

domestic consolidated subsidiaries made an early application of the

new Japanese accounting standard for impairment of fixed assets

(“Opinion Concerning Establishment of Accounting Standard for

Impairment of Fixed Assets” issued by the Business Accounting

Deliberation Council of Japan on August 9, 2002) and the

Implementation Guidance for Accounting Standard for Impairment of

Fixed Assets (the Financial Accounting Standard Implementation

Guidance No.6 issued by the Accounting Standards Board of Japan

on October 31, 2003).

The adoption of these new accounting standards had no impact

on net income.

Property and equipment

Property and equipment are stated at cost less accumulated

depreciation. The Company and its consolidated domestic

subsidiaries compute depreciation generally by the declining-balance

method, while the straight-line method is applied to buildings

acquired after April 1, 1998. The useful lives for depreciation are

generally stipulated by the Corporation Tax Law. The useful lives of

buildings acquired before March 31, 1998 are also stipulated by the

Corporation Tax Law prior to the 1998 amendments. Consolidated

overseas subsidiaries use the straight-line method based on local

accounting standards.

Intangible assets

Intangible assets are stated at cost less accumulated amortization,

computed by the straight-line method.

Allowance for doubtful accounts

Allowance for doubtful accounts of the Company and its

consolidated domestic subsidiaries are provided on the estimated

historical deterioration rate for normal loans, while allowance for

defective loans (i.e. long-term loans receivable) are specifically

provided. Allowance for doubtful accounts for consolidated overseas

subsidiaries are also specifically provided.

Bonuses

The Company and its consolidated domestic subsidiaries follow the

Japanese practice of paying bonuses to employees in June and

December. Accrued employees’ bonuses represent liabilities

estimated as of the balance sheet date. Bonuses to directors, which

are subject to approval of the shareholders’ meeting, are accounted

for as an appropriation of retained earnings.

Retirement benefits

The Company provides an unfunded retirement benefits plan to its

employees in return for services rendered each year, where the

amount to be contributed to the individual employees’ account is

defined by the plan. Contributions by the Company and most of its

domestic consolidated subsidiaries under the unfunded defined

contribution plan are accumulated on an annual basis and earn a

guaranteed hypothetical return at the rate of which the Company

predetermines each year.

Income taxes

Income taxes consist of corporate, enterprise and inhabitants taxes.

The provision for income taxes is computed based on the pretax

income of the Company and its consolidated subsidiaries with certain

adjustments required for tax purposes.

Deferred tax assets and liabilities are recorded for the expected

future tax consequences of temporary differences between the

financial reporting and the tax bases of the assets and liabilities

based upon enacted tax laws and rates. The Company recognizes

deferred tax assets to the extent they are expected to be realized.

Deferred tax assets and liabilities are reported as “deferred tax

liabilities” and “long-term deferred tax liabilities” in the

accompanying consolidated balance sheets. Deferred tax expense or

benefits are recognized in the consolidated statements of operations

for the changes in deferred tax assets and liabilities between years.

Interest expenses

Interest expenses are divided into those associated with operational

assets and those unrelated to operational assets. Allocation of

interest expense is based on the average operational asset balances.

Those associated with operational assets are included in “Cost of

sales” and those unrelated to operational assets are included in

“Other expenses” in the accompanying consolidated statements of

operations.

Translation of foreign currency

The Company and its consolidated domestic subsidiaries translate

assets and liabilities denominated in foreign currencies into yen at

the year-end exchange rate.

17

Reconciliations of cash and time deposits shown in the consolidated

balance sheets and cash and cash equivalents shown in the

consolidated statements of cash flows as of March 31, 2004 and

2003 were as follows:

Venture capital investment securities as of March 31, 2004 and 2003,

consisted of the following:

Information of revenues from venture capital investment securities and

its related costs are shown below:

Stocks・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less : Allowance for possible investment losses・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・・

35,992)

2,193)

4,409)

(5,854)

36,740)

¥

¥

2004

339,547)

20,689)

41,594)

(55,226)

346,604)

$

$

2004

40,006)

2,666)

4,011)

(5,477)

41,206)

¥

¥

2003

Millions of Yen Thousands ofU.S. Dollars

Revenues from venture capitalinvestment securities:

Proceeds from sales of securities・・・・・・・・・・・・・・・・・・・・・

Dividend and interest income・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cost of venture capital investment securities:

Cost of securities sold・・・・・・・・

Valuation loss of securities・・・・・・・・・・・・・・・・・・・・・

Provision for possible investment losses・・・・・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・・

11,916

205

12,121

7,471

700

1,944

10,115

¥

¥

¥

¥

2004

112,415

1,934

114,349

70,481

6,604

18,339

95,424

$

$

$

$

2004

7,180

226

7,406

3,875

2,087

3,853

9,815

¥

¥

¥

¥

2003


Cash and time deposits・・・・・・・・

Add: Short-term loans

receivable ・・・・・・・・・・・・・・

Short-term highly liquid investments withmaturities notexceeding three months・

Less : Short-term highly liquid investments withmaturities exceeding three months ・・・・・・・・・・・

Share of cash and time deposits held by investment partnerships・・

Cash and cash equivalents・・・・

9,508)

-)

21)

(20)

(1,693)

7,816)

¥

¥

2004

89,698)

-)

198)

(189)

(15,971)

73,736)

$

$

2004

12,411)

1,000)

1)

-)

(2,251)

11,161)

¥

¥

2003


3. Cash and cash equivalentsFinancial statements of overseas subsidiaries are translated into yen

at the year-end exchange rates for assets and liabilities, except for

retained earnings, which are translated at historical rates. Income

and expenses are translated at the average exchange rates of the

applicable years. The resulting differences are reported as translation

adjustment in shareholders’ equity section of the accompanying

consolidated balance sheets.

Treasury stock and reversal of statutory reserves

Effective April 1, 2002, the Company adopted the new accounting

standard for treasury stock and reversal of statutory reserves

(Accounting Standards Board Statement No.1, “Accounting Standard

for Treasury Stock and Reversal of Statutory Reserves”, issued by the

Accounting Standards Board of Japan on February 21, 2002). The

adoption of this new accounting standard had no impact on net income.

Per share data

Net income per share is computed based on the weighted average

number of shares, less treasury stock, outstanding during each year.

Diluted net income is not presented since securities with dilutive

effect have not been issued. Cash dividends per share are stated for

the period to which they are attributable.

Effective April 1, 2002, the Company adopted the new accounting

standard for earnings per share and related guidance (Accounting

Standards Board Statements No.2, “Accounting Standard for

Earnings Per Share” and Financial Standards Implementation

Guidance No.4, “Implementation Guidance for Accounting Standard

for Earnings Per Share”, issued by the Accounting Standards Board

of Japan on September 25, 2002). The adoption of this new

accounting standard had no impact on net income per share.

Cash dividends per share presented in the consolidated statements of

operations represent the cash dividends applicable to each respective

year.

4. Venture capital investment securities

18

Investment securities as of March 31, 2004 and 2003, consisted of the

following:

Stocks of affiliated companies of ¥158 million ($1,491 thousand) and

¥181 million as of March 31, 2004 and 2003, respectively, are included

in the above table.

A bond of an affiliated company of ¥20 million ($189 thousand)

and ¥20 million as of March 31, 2004 and 2003, respectively, are

included in the above table.

Acquisition cost and market value of venture capital investment

securities and investment securities, which have quoted market value as

of March 31, 2004 and 2003, consisted of the following:

Securities which have no readily available market value as of March 31,

2004 and 2003, consisted of the following:

The amounts of un-listed stocks presented within investment securities

in the above table does not include stocks of non-consolidated

subsidiaries and affiliated companies, which amounted to ¥158 million

($1,491 thousand) and ¥181 million as of March 31, 2004 and 2003,

respectively.

Proceeds from sales of venture capital investment securities and

investment securities for the years ended March 31, 2004 and 2003, are

shown below:

Venture capital investmentsecurities:

Un-listed stocks (excluding over-the-counter stock)・・・・・

Un-listed domestic andforeign bonds・・・・・・・・・・・・・・・・

Other ・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total ・・・・・・・・・・・・・・・・・・・・・・・・・

Investment securities:

Un-listed stocks (excluding over-the-counter stock)・・・・・

Un-listed domestic andforeign bonds・・・・・・・・・・・・・・・・

Total ・・・・・・・・・・・・・・・・・・・・・・・・・・

32,827

2,193

4,409

39,429

749

20

769

¥

¥

¥

¥

2004

309,688

20,689

41,594

371,971

7,066

189

7,255

$

$

$

$

2004

35,481

2,666

4,011

42,158

922

20

942

¥

¥

¥

¥

2003


Venture capital investmentsecurities:

Proceed from sales ofsecurities ・・・・・・・・・・・・・・・・・・・

Gross realized gains ・・・・・・・・・

Gross realized losses ・・・・・・・・


Proceed from sales ofsecurities ・・・・・・・・・・・・・・・・・・・

Gross realized gains・・・・・・・・・・

Gross realized losses・・・・・・・・・

11,916)

5,457)

(1,012)

4,301)

1,303)

(170)

¥

2004

112,415)

51,482)

(9,547)

40,575)

12,293)

(1,604)

$

2004

7,180)

4,307)

(1,002)

2,497)

489)

(10)

¥

2003


March 31, 2004:

Venture capital invest-ment securities:

Stocks・・・・・・・・・・・・・・・


Stocks・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・

23,942

44,633

6,122

50,755

$

$

$

Acquisition cost

29,849

55,727

5,094

60,821

$

$

$

Market value

(1,169)

(1,019)

(1,028)

(2,047)

$

$

$

Unrealized losses

7,076

12,113

-

12,113

$

$

$

Unrealized gains

Thousands of U.S. Dollars

March 31, 2004:


Stocks・・・・・・・・・・・・・・・

Investmentsecurities:

Stocks・・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・

March 31, 2003:


Stocks・・・・・・・・・・・・・・・

Investmentsecurities:

Stocks・・・・・・・・・・・・・・

Bonds・・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・

2,538

4,731

649

5,380

4,900

6,157

19

1,456

7,632

¥

¥

¥

¥

¥

¥

Acquisition cost

3,164

5,907

540

6,447

4,525

5,783

20

1,042

6,845

¥

¥

¥

¥

¥

¥

Market value

(124)

(108)

(109)

(217)

(725)

(471)

-)

(414)

(885)

¥

¥

¥

¥

¥

¥

Unrealized losses

750

1,284

-

1,284

350

97

1

-

98

¥

¥

¥

¥

¥

¥

Unrealized gains

Millions of Yen

6. Market value information of5. securities

Stocks・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・・・

6,813

20

541

7,374

¥

¥

2004

64,273

189

5,104

69,566

$

$

2004

6,886

40

1,042

7,968

¥

¥

2003


5. Investment securities

Other current assets as of March 31, 2004 and 2003, consisted of the

following:

Property and equipment as of March 31, 2004 and 2003, consisted of

the following:

Other investments and other assets as of March 31, 2004 and 2003,

consisted of the following:

Short-term borrowings from banks are mainly overdrafts maturing

within three months. The average annual interest rates applicable to

short-term borrowings as of March 31, 2004 and 2003 were 0.92% and

0.80%, respectively.

The average annual interest rates applicable to long-term borrowings

as of March 31, 2004 and 2003 were 1.28% and 1.33%, respectively.

19

Money management fund・・・・・・

Short-term loans receivable・・・

Accrued revenue・・・・・・・・・・・・・・・・

Others・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・・・

3,831

-

977

317

5,125

¥

¥

2004

36,142

-

9,217

2,990

48,349

$

$

2004

4,014

1,000

-

599

5,613

¥

¥

2003


Cost:

Land・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Buildings and structures・・・・・・

Other ・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less: Accumulateddepreciation・・・・・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・

1,210)

517)

840)

2,567)

(1,027)

1,540)

¥

¥

2004

11,415)

4,877)

7,925)

24,217)

(9,688)

14,529)

$

$

2004

1,347)

619)

1,121)

3,087)

(1,291)

1,796)

¥

¥

2003


Investments incommodity funds・・・・・・・・・・・・・

Long-term guarantee deposits・・・・・・・・・・・・・・・・・・・・・・・

Others・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less: Allowance for doubtful accounts ・・・・・・・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・

242)

502)

27)

(115)

656)

¥

¥

2004

2,283)

4,736)

254)

(1,084)

6,189)

$

$

2004

227)

527)

172)

(118)

808)

¥

¥

2003


Long-term borrowings as of March 31, 2004 and 2003, consisted of the

following:

The aggregate annual maturities of long-term borrowings were as follows:

Accumulated contributions by the Company regarding the unfunded

retirement benefit plan included in“Retirement benefits” in the

accompanying consolidated balance sheets as of March 31, 2004 and 2003

were ¥268 million ($2,528 thousand) and ¥231 million yen, respectively.

Benefit expenses recorded in the accompanying consolidated statements

of operations for the years ended March 31, 2004 and 2003 were ¥142

million ($1,340 thousand) and ¥123 million, respectively.”

In addition to the unfunded retirement benefit plan, the retirement

benefits for directors and statutory auditors of ¥102 million ($962 thousand)

and ¥133 million were also included in “Retirement benefits” in the

accompanying consolidated balance sheets as of March 31, 2004 and

2003, respectively.

Investment management fees earned for the years ended March 31,

2004 and 2003, were as follows:

2005・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

2006 ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

2007 ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

2008 ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

109,537

185,509

69,982

16,292

381,320

$

$

11,611

19,664

7,418

1,727

40,420

¥

¥

Millions of YenYear ending March 31

Thousands ofU.S. Dollars

7. Other current assets

10. Short-term borrowings and10. long-term borrowings

11. Retirement benefits

8. Property and equipment

9. Other investments and other assets

Unsecured borrowings from banks, insurance companies and other financial institutions ・・・・・・

Less current portion・・・・・・・・・・・・・・

Long-term borrowing,less current portion・・・・・・・・・・・・

40,420)

(11,611)

28,809)

¥

¥

2004

381,320)

(109,537)

271,783)

$

$

2004

30,480)

(12,809)

17,671)

¥

¥

2003


Administrative fees・・・・・・・・・・・・・

Success fees・・・・・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・・

2,473

3

2,476

¥

¥

2004

23,330

28

23,358

$

$

2004

2,586

4

2,590

¥

¥

2003


12. Investment management fees

20

The normal effective statutory income tax rate in Japan, which is

comprised of corporate, enterprise and inhabitants taxes was

approximately 42.1% for 2004, and 2003.

The income tax rates for the overseas subsidiaries are based on the

rates of the countries in which they operate. The aggregate statutory

income tax rate will decrease for the years commencing on April 1, 2004

or later due to the revised local tax law. At March 31, 2004 and 2003, the

Company and consolidated domestic subsidiaries applied the reduced

aggregate statutory income tax rate of 40.7% for calculating their deferred

tax assets and liabilities that are expected to be realized in the years

commencing on April 1, 2004 or later.

Details of deferred tax assets and liabilities as of March 31, 2004 and

2003, were as follows:

Reconciliation of the difference between the statutory income tax rate

and the effective tax rate reflected in the accompanying consolidated

statements of operations for the year ended March 31, 2004, was as

follows:

Reconciliation for the difference between the statutory tax rate and

effective tax rate is not presented for the year ended March 31, 2003,

since net losses are reported in the consolidated statements of

operations.

Under the Commercial Code of Japan (the “Code”), the entire amounts

of the issue price of shares is required to be accounted for as capital,

although a company may, by the resolution of its board of directors,

accounts for an amount not exceeding one-half of the issue price of the

new shares as additional paid-in capital, which is included in capital

surplus.

The Code provides that an amount equal to at least 10% of cash

dividends and other cash appropriations shall be appropriated and set

aside as a legal earnings reserve until the total amount of legal earnings

reserve and additional paid-in capital equals 25% of common stock.

The legal earnings reserve and additional paid-in capital may be used to

eliminate or reduce a deficit by the resolution of the shareholders’

meeting or may be capitalized by the resolution of the board of

directors. On condition that the total amount of legal earnings reserve

and additional paid-in capital remains being equal to or exceeding 25%

of common stock, they are available for distribution by the resolution of

shareholders’ meeting. Legal earnings reserve is included in retained

earnings in the accompanying financial statements.

The maximum amount that the Company can distribute as dividends is

calculated based on the non-consolidated financial statements of the

Company in accordance with the Code.

The shareholders’ meeting of the Company held on June 27, 2003

approved to reverse legal earnings reserve in the amount of ¥22 million

and additional paid-in capital in the amount of ¥3,989 million, which are

both included in capital surplus in the total amount of ¥4,011 million, in

order to eliminate the Company’s deficit.


approved a stock incentive plan. The plan provides for the issuance of

up to 2,100 shares in the form of options to directors and employees.

The stock purchase rights can be exercised at a price of ¥308,000 per

share during the period from June 28, 2004 to June 27, 2006, and a

total of 1,953 shares of common stock may be issued by the exercise of

these rights. The exercise price of stock purchase rights would be

adjusted, if the Company issues new shares at a price below the market

price.


approved a stock incentive plan. The plan provides for granting options

to directors and employees to purchase up to 450 shares of the

Company’s common stock during the period from July 1, 2006 to June

30, 2014. The issue price of the options will be zero and the exercise

price per share will be decided at 105 percent of the greater of the

average closing price during the month before issuance or the latest

closing price before issuance. In the event of a stock split or merger, the

number of options will be adjusted accordingly.

Statutory tax rate・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Valuation allowance for deferred income tax assets・・・・・・・・・

Expenses permanently not deductiblefrom taxable income ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Non-taxable dividend income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other, net・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Effective tax rate・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

40.7%)

(21.4)%

2.6%)

(16.0)%

2.3%)

8.2%)

2004

14. Shareholders’ equity

Deferred tax assets:

Net operating losses・・・・・・・・・・

Allowance for possibleinvestment losses・・・・・・・・・・・

Accrued bonuses・・・・・・・・・・・・・・

Allowance for doubtfulaccounts ・・・・・・・・・・・・・・・・・・・・・

Retirement benefits・・・・・・・・・・・

Valuation losses of land・・・・・・

Other・・・・・・・・・・・・・・・・・・・・・・・・・・・

Gross deferred tax assets・・・・

Less: Valuation allowance・・・

Total deferred tax assets・・・・・

Deferred tax liabilities:

Net unrealized gain onsecurities・・・・・・・・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total deferred taxliabilities・・・・・・・・・・・・・・・・・・・・

Net deferred tax liabilities・・・・・

7,719

2,381

100

530

144

238

98

11,210

11,208

2

701

8

709

707

¥

¥

2004

72,821

22,462

943

5,000

1,358

2,245

924

105,753

105,735

18

6,613

76

6,689

6,671

$

$

2004

7,694

2,218

22

1,436

136

236

108

11,850

11,846

4

-

12

12

8

¥

¥

2003


( )( ) ( )

13. Income taxes

21

Year ended March 31, 2004:

Sales:

Sales to outside customers・・・・・・・・・・・・・・・・・・・

Inter-segment ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Operating expenses・・・・・・・・・・・・・・・・・・・・・・・・・・

Operating profits・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

At March 31, 2004:

Assets ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Depreciation・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Capital expenditures・・・・・・・・・・・・・・・・・・・・・・・・・・


Sales:

Sales to outside customers・・・・・・・・・・・・・・・・・・

Inter-segment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Operating expenses・・・・・・・・・・・・・・・・・・・・・・・・・・

Operating profits (losses)・・・・・・・・・・・・・・・・・・・・・

At March 31, 2003:

Assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Depreciation・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Capital expenditures・・・・・・・・・・・・・・・・・・・・・・・・・・

14,842)

-)

14,842)

14,716)

126)

53,734)

104)

32)

10,314)

-)

10,314)

14,318)

(4,004)

60,701)

90)

97)

794

-

794

362

432

19,452

21

1

1,186

-

1,186

526

660

31,052

44

1

15,636)

-)

15,636)

15,078)

558)

73,186)

125)

33)

11,500)

-)

11,500)

14,844)

(3,344)

91,753)

134)

98)

-

-

-

-

-

7,409

-

-

-

-

-

-

-

9,422

-

-

15,636)

-)

15,636)

15,078)

558)

80,595)

125)

33)

11,500)

-)

11,500)

14,844)

(3,344)

101,175)

134)

98)

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

Investment Finance Total Elimination or corporate Consolidated


Investment Finance Total Elimination or corporate Consolidated

Millions of Yen


Sales:

Sales to outside customers・・・・・・・・・・・・・・・・・・・

Inter-segment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Operating expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・

Operating profits・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

At March 31, 2004:

Assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Depreciation・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Capital expenditures・・・・・・・・・・・・・・・・・・・・・・・・・・・

140,019

-

140,019

138,830

1,189

506,925

981

302

7,490

-

7,490

3,415

4,075

183,509

198

9

147,509

-

147,509

142,245

5,264

690,434

1,179

311

-

-

-

-

-

69,896

-

-

147,509

-

147,509

142,245

5,264

760,330

1,179

311

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

Business segments are defined for internal management purposes. “Investment” represents investments in venture business of domestic

and foreign companies, and establishment, operation and management of assets of investment partnerships etc. “Finance” represents

loan, leasing and other financial business etc.

Corporate assets, not identifiable to each segment, in “Elimination or corporate” column as of March 31, 2004 and 2003, amounted to

¥7,409 million ($69,896 thousand) and ¥9,422, respectively, which mainly consisted of cash and cash deposits of the Company.

Since sales and assets in Japan exceeded 90% of total sales and assets of all geographic segments respectively for the years ended March

31, 2004 and 2003, geographic segment information is not presented.

Business segment information for the years ended March 31, 2004 and 2003, were as follows:

15. Segment information

22

Major elements of selling, general and administrative expenses for the

years ended March 31, 2004 and 2003, were as follows:

Details of other income (expenses) for the years ended March 31, 2004

and 2003, were as follows:


Overseas sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total sales ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

% of total sales ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

11,216

7.6%

2,028

1.4%

1,830

1.2%

15,074

147,509

10.2%

$ $ $ $

Salaries and bonuses ・・・・・・・・・・

Accrual of bonuses ・・・・・・・・・・・・・

Provision for retirementbenefits of directors・・・・・・・・・・・

Retirement benefits expenses・・

Commissions・・・・・・・・・・・・・・・・・・・・

Expenses related toinvestment partnerships・・・・・・

Rent expense・・・・・・・・・・・・・・・・・・・・

Depreciation・・・・・・・・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

1,344

245

29

142

246

460

348

106

1,246

4,166

¥

¥

2004

12,679

2,311

274

1,340

2,321

4,340

3,283

1,000

11,754

39,302

$

$

2004

1,362

84

36

123

356

473

356

95

1,215

4,100

¥

¥

2003


Gain on sales of investment securities・・・・・・・・・・・・・・・・・・・・・・

Valuation losses ofinvestment securities・・・・・・・・・

Loss on sales of long-termloans receivable ・・・・・・・・・・・・・・

Interest expenses・・・・・・・・・・・・・・・

Interest income・・・・・・・・・・・・・・・・・・

Dividend income・・・・・・・・・・・・・・・・

Valuation losses relatedto fixed assets ・・・・・・・・・・・・・・・

Provision fordoubtful accounts・・・・・・・・・・・・・

Loss on refund of success feereceived・・・・・・・・・・・・・・・・・・・・・・・・

Other, net・・・・・・・・・・・・・・・・・・・・・・・・

1,303)

(52)

(557)

(189)

13)

94)

-)

(248)

(153)

(165)

46)

¥

¥

2004

12,293)

(491)

(5,255)

(1,783)

123)

887)

-)

(2,340)

(1,443)

(1,557)

434)

$

$

2004

489)

(3,968)

-)

(182)

24)

275)

(168)

(2,859)

-)

143)

(6,246)

¥

¥

2003


16. Selling, general16. and administrative expenses

18. Subsequent events

17. Other income (expenses)


Overseas sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

% of total sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・


Overseas sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

% of total sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

1,189

7.6%

354

3.1%

215

1.4%

557

4.8%

194

1.2%

507

4.4%

1,598

15,636

10.2%

1,418

11,500

12.3%

¥

¥

¥

¥

¥

¥

¥

¥

Asia America Europe & other areas Total

Millions of Yen

Asia America Europe & other areas Total


Overseas sales for the years ended March 31, 2004 and 2003, were as follows:

Appropriation of retained earnings - under the Code, a plan for

appropriation of retained earnings proposed by the board of directors

must be approved at a shareholders’ meeting to be held within three

months after the end of the fiscal year. Cash dividends (¥500 ($4.72)

per share) amounting to ¥144 million ($1,358 thousand) and directors’

bonuses in the amount of ¥20 million ($189 thousand) were approved

by the shareholders’ meeting held on June 24, 2004, as an

appropriation of retained earnings for the year ended March 31, 2004.

To the Shareholders and Board of Directors of

NIF Ventures Co., Ltd.:

Independent Auditors’ Report

We have audited the accompanying consolidated balance sheets of NIF Ventures Co., Ltd. and

subsidiaries as of March 31, 2004 and 2003, and the related consolidated statements of operations,

shareholders’ equity and cash flows for the years then ended, expressed in Japanese yen. These

consolidated financial statements are the responsibility of the Company’s management. Our

responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those

standards 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 audits provide

a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material

respects, the consolidated financial position of NIF Ventures Co., Ltd. and subsidiaries as of March

31, 2004 and 2003, and the consolidated results of their operations and their cash flows for the years

then ended, in conformity with accounting principles generally accepted in Japan.

Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements.

As discussed in Note 2 to the consolidated financial statements, NIF Ventures Co., Ltd. and domestic

subsidiaries made an early application of the new Japanese accounting standards for impairment of

fixed assets in the year ended March 31, 2004.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the

year ended March 31, 2004 are presented solely for convenience. Our audit also included the

translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been

made on the basis described in Note 1 to the consolidated financial statements.

Tokyo, JapanJune 24, 2004

23

Corporate Data

Head Office

Establishment

Common Stock

President & CEO

Number of Employees

Business Domain

Overseas Subsidiaries

Daiwa Yaesu Building, 1-2-1, Kyobashi, Chuo-ku,

Tokyo 104-0031, Japan

October 20, 1983

¥11,267 million

Shin-ichi Yamamura

163 (consolidated figure)

Private equity business and management of Investment Enterprise

Partnerships business

Finance business

NIF Management Singapore Pte. Ltd.

6 Shenton Way #21-11, DBS Building Tower Two, Singapore 068809

TEL: +65-6227-8121 FAX: +65-6224-6153

[email protected]

NIF Ventures USA, Inc.

5 Palo Alto Square 3000 El Camino Real, 9th Floor,

Palo Alto, CA 94306-2155, USA

TEL: +1-650-461-5000 FAX: +1-650-858-0892

[email protected]

Annual Report 2004

Corporate Dataand

Board of Directors

24

Board of Directors

Deputy PresidentMasaki Hirabayashi

Senior Managing DirectorMamoru Ohtani

President & CEO Shin-ichi Yamamura

Senior Managing DirectorTetsuya Ikeda

Managing DirectorYuzo Shikata

(As of March 31, 2004)

(As of June 27, 2004)

Annual Report 2004

25

Daiwa Securities Group Inc.

Daiwa Institute of Research Ltd.

Daiwa Asset Management Co. Ltd.

Kissei Pharmaceutical Co., Ltd.

Daiwa Securities SMBC Hong Kong Limited

The Master Trust Bank of Japan, Ltd.

The Chase Manhattan Bank N.A. London

Matsui Securities Co., Ltd.

NIF Ventures Employee Holdings

Mitsui Sumitomo Insurance Co., Ltd.

Investors InformationStock Listing JASDAQ

Code Number 8458

Authorized 1,056,000 shares

Issued and Outstanding 289,000 shares

Number of Shareholders 10,779

Voting rights,as % of total

Major Shareholders

212,125

11,010

5,800

4,643

1,877

1,152

793

599

517

480

73.40

3.81

2.01

1.61

0.65

0.40

0.27

0.21

0.18

0.17Investors

Information

350,000

250,000

150,000

50,000

4

2002

5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 30

10,000

20,000

30,000

2003 2004

(Yen)Stock price

(shares)Monthly trading volume

Stock price range and trading volume

(As of March 31, 2004)

Shares

Printed in Japan on recycled paper.

Daiwa Yaesu Building,1-2-1, Kyobashi, Chuo-ku, Tokyo 104-0031, JapanTEL: +81-3-5201-1570 FAX: +81-3-5201-1518URL: http://www.nif.co.jp E-mail: [email protected]

Documents

Annual Report 2004 - daiwa-inv.co.jp · Take a hands-on approach to spur growth in portfolio companies Maxims for Employees “Ever Forward” 1. Boldly rise to the challenge of innovation