Japan Asia Investment Co., Ltd.
Summary of Consolidated Financial Statements For the Year Ended March 31, 2006
May 9, 2006
Company name: Listed on: Head office: (URL: http://www.jaic-vc.co.jp/) Representative: Contact: Japan Asia Investment Co., Ltd. JASDAQ (Securities code: 8518) Tokyo Toyoji Tatsuoka, President and CEO Tsuneo Kumada, Managing Director Tel: +81-3-3504-8518
Date of Board of Directors’ meeting for approval of consolidated accounts: May 9, 2006 Application of U.S. GAAP: No
1. Business results for the fiscal year ended March 31, 2006 (April 1, 2005, to March 31, 2006) (1) Results of operations (Throughout this report, fractional amounts have been rounded down to the nearest whole unit.) Operating revenues Operating profit Recurring profit Millions of Millions of Millions of yen % change % change % change yen yen For the year ended 16,675 45.5 5,824 116.4 5,709 116.4 March 31, 2006 For the year ended 11,462 (4.7) 2,692 158.2 2,638 164.1 March 31, 2005 Net income per share Diluted net income per share Yen Return on equity Recurring profit to total assets % 6.7 3.2 Recurring profit to operating revenues % 34.2 23.0
Net income Millions of yen For the year ended March 31, 2006 For the year ended March 31, 2005 2,906 (3,161)
% change -
Yen 25.99 (29.51)
% 6.0 (7.0)
Notes: 1. Equity in earnings (loss) of affiliates For the year ended March 31, 2006: (¥17 million) For the year ended March 31, 2005: (¥2 million) 2. Average number of shares outstanding (consolidated) For the year ended March 31, 2006: 109,231,155 For the year ended March 31, 2005: 107,127,321 3. Change in accounting policy: No 4. In operating revenues, operating profit, recurring profit, and net income above, the percentages represent the changes from the prior fiscal year.
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Japan Asia Investment Co., Ltd.
(2) Financial position Total assets Millions of yen At March 31, 2006 At March 31, 2005 Note: 84,078 86,864 Shareholders’ equity Shareholders’ equity Shareholders’ equity ratio per share Millions of yen % Yen 51,413 44,739 61.2 51.5 467.20 415.35
Number of shares outstanding at year-end (consolidated) Fiscal year ended March 31, 2006: 109,901,827 Fiscal year ended March 31, 2005: 107,715,021
(3) Cash flows Cash flow from operating activities Millions of yen For the year ended March 31, 2006 For the year ended March 31, 2005 1,533 (4,631) Cash flow from investing activities Millions of yen (1,696) (387) Cash flow from financing activities Millions of yen (1,548) 1,891 Cash and cash equivalents at year-end Millions of yen 5,837 7,365
(4) Scope of consolidation and application of equity method Number of consolidated subsidiaries: 12 Number of unconsolidated subsidiaries accounted for by equity method: 0 Number of affiliates accounted for by equity method: 2 Number of operational investment subsidiaries accounted for by equity method: 1
(5) Changes to scope of consolidation and application of equity method Consolidated companies Equity method companies Added: 2 Excluded: 1 Added: 1 Excluded: 0
2. Outlook for the fiscal year ending March 31, 2007 (April 1, 2006, to March 31, 2007) Operating revenues Millions of yen First half Full year 9,000 17,000 Recurring profit Millions of yen 4,500 7,000 Net income Millions of yen 2,600 4,000
Reference: Forecast net income per share for the full year: ¥36.40
Note: The forecasts above are based on available information and estimates at the date of release of this report. It is possible that various factors that may arise in the future will cause actual future performance to differ significantly from these forecasts.
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Japan Asia Investment Co., Ltd. Management Policy
(1) Basic Management Policy The Japan Asia Investment Co., Ltd. (JAIC) Group is an independent venture capital group that serves as a bridge between financial and industrial capital, contributing to the creation of a new industrial structure through the nurturing and development of venture businesses and new industries. The Group's core business is venture capital investment. In this it deploys its advanced specialist expertise and its wealth of experience to invest in unlisted companies with abundant potential, enhances their corporate value by supporting and nurturing them, and maximizes capital gain and fund performance by listing their shares and other means. In addition, the JAIC Group uses its organizational strength and comprehensive capabilities to engage actively in a variety of business activities derived from venture capital investment business. In the private equity field it is committed to perfecting a structure that will permit it to meet the diverse needs of companies across a broader range at each company stage. It will also generate powerful synergies by creating a structure characterized by global linkages pivoting on its investment activities in the United States and encompassing its extensive experience and track record in Asia together with its own reputation and network. In ways such as these the JAIC Group intends to achieve strong performances as a unique financial group centered on venture capital, returning profit to all its stakeholders. (2) Basic Policy on Distribution of Profits JAIC endeavors to strengthen its earnings capacity and attaches great importance to maintaining inner reserves necessary for investment to increase future earnings, while also regarding the maintenance of stable and continuous dividend payouts as fundamental to its management. It considers the distribution of profit as one of the most important aspects of corporate management, and is committed to increasing the level of dividends so as to maintain a payout ratio of at least 30% in principle, and at the 50% level in the medium to long term. In line with this policy, for the year ended March 31, 2006, the Company intends to submit a proposal to its ordinary general meeting of shareholders to increase its year-end dividend to ¥10 per share, up from ¥5 yen the previous year, supplemented by a commemorative dividend of ¥2.5 to mark the Company's 25th anniversary, for a total of ¥12.5 per share. With respect to the payment of dividends after the new Corporation Law comes into effect, the Company is studying the amendment of the provisions in its articles of incorporation concerning the distribution of retained earnings by resolution of the board of directors. (3) Rationale and Policy for Lowering the Size of Investment Units JAIC believes that to ensure the proper formation of share prices in the market it is essential to ensure adequate liquidity for shares and the participation of large numbers of investors in the market. With respect to the lowering of the size of its investment units, Company policy is to give careful study to factors such as future market trends, cost-effectiveness, and the interests of shareholders. (4) Targeted Management Indicators JAIC Group business is by its very nature easily impacted by economic conditions within Japan and overseas and by the stock markets, and its earnings undergo substantial fluctuations, making it difficult to set up numerical targets. However, importance is given to profitability, growth capacity, risk dispersal, and financial soundness in the structuring of its business portfolio, and in consequence the Company gives maximum emphasis to management indicators such as ROE and earnings per share, and also DOE, a hybrid of ROE and the payout ratio.
Japan Asia Investment Co., Ltd. (5) Medium- to Long-term Management Strategy Medium- to long-term policy is to enhance the capabilities of each unit, to combine the linkages between units and between Group companies and the partnerships with domestic and overseas companies and institutional investors with the management resources built up hitherto, achieving synergies therefrom, and in that way to enhance Group value still further. In addition, the Company will endeavor to maintain stable business performance by means of the further enhancement of earnings capacity and diversification of business risk. Specifically, the following steps will be taken. [1] Further enhancement of investment performance and dispersal of business risk The optimum allocation of management resources will be implemented after ascertaining the optimum investment targets and investment opportunities in light of the economic environment, market trends, and regional characteristics, and individual investments will be made by placing emphasis on investment return, so as to enhance investment performance still further. In addition to our core venture capital investment business we will strengthen the earnings capacity of private equity investment, and through our powerful synergistic structure under which effective use is made of individual Group companies with their specialist skills, we will do our utmost to pursue business opportunities that are derived from venture capital activities. In doing so we will diversify business risk and at the same time expand earnings opportunities. [2] Alliance strategy One of the JAIC Group's strengths is its network encompassing Japan, other parts of Asia, and the United States. Utilizing this gives us organizational strength and comprehensive capabilities, and by taking advantage of our independent status we will strengthen our partnerships with companies both within Japan and overseas, creating potent synergistic effects through the formation of alliances. [3] Enhancement of investment fund pipeline We will strengthen our network directed at pension funds and other institutional investors with the aim of securing a continuous flow of investment monies through the formation of funds. [4] Building of new business model for venture capital in Japan We aim to develop a structure and human resource system for nurturing highly competent venture capitalists and the next generation of entrepreneurs and managers, and to build a new business model for venture capital in Japan. (6) Issues to Be Addressed The following are the principal issues to be addressed by the JAIC Group. [1] Enhancement of the Group's comprehensive strength The Group has adhered to a unit system since 1999, through which it has improved the quality of its investments. Additionally, by such means as expanding the scope of its business activities through the establishment of a securities subsidiary in the year ended March 31, 2006, and the transformation of its investment advisory subsidiary into a joint venture, it has built a framework for the provision of higher-value-added services as a group. We are committed to increasing the synergies that arise from the powerful linkages between units, between local bases, and between Group companies, thereby enhancing our comprehensive strength as a group.
[2] Further enhancement of investment performance 1) Strengthening of human resource development capability To nurture and maintain excellent venture capitalists, who are the wellspring of the earnings capacity of venture capital investment, we will take steps to further strengthen our human resource development capability and make
Japan Asia Investment Co., Ltd. enhancements in other areas, such as in our incentive system. 2) Thorough diversification of investment The Company is committed to continuing to ensure the thorough diversification of its investment portfolio. From the perspective of company stage, in order to maintain and enhance future investment performance the profitability of investment will be given greater importance than hitherto, and to that end we will strengthen our marketing capability so as to enable us to access good prospects at the earliest possible stage. From the perspective of region, Japan, other parts of Asia, and the United States will form an axis on which we will expand cross-border business by identifying the optimum investment targets and investment opportunities in each region and making maximum use of the JAIC Group's global linkage structure. [3] Stabilization of performance through the dispersal of business risk The profitability of venture capital investment is highly susceptible to market conditions, but outside the sphere of venture capital investment such activities as buyouts, corporate restructuring and secondary investments in the field of private equity investment are relatively impervious to changes in market conditions. We believe that by combining these two areas skillfully it will be possible to build an earnings model that will enable us to achieve stable business results. We will devote our energies to the building of that model and hence the stabilization of Group business performance. [4] Strengthening of corporate governance Developments such as the enforcement of the new Corporation Law and the future transfer to the Investment Services Law (Financial Instruments and Exchange Law) illustrate how companies are being required to create more transparent management structures and internal control systems. For our part we will seek out and strengthen the optimal corporate governance for a venture capital company, persist with our measures to enhance the stability and soundness of our financial condition, and continue to increase the value of the "JAIC brand" in a way that meets the expectations of all our stakeholders. (7) Matters concerning Relationships with the Parent Company, Etc., and Basic Policy concerning Relationships with Related Parties (Parent Company, Etc.) There are no such matters to report. (8) State of Development and Operation of Internal Management Structure As part of its steps to enhance corporate governance, the JAIC Group is creating internal organizations and formulating rules for the purpose of strengthening its internal management structure. For details, please refer to the corporate governance report due to be issued separately, entitled "Basic Thinking on Internal Control Systems and the Status of Their Development."
Japan Asia Investment Co., Ltd.
Business Performance and Financial Condition (1) Business Performance [1] Overview of the fiscal year ended March 31, 2006 During the year there were continued rises in crude-oil prices globally and upward pressure on interest rates caused by the ending of the quantitative easing that had characterized monetary policy in Japan. Nevertheless, there were improvements in the employment and business environments accompanying strong corporate earnings performances, and Japan was impacted by the high growth rates being sustained in Asian economies and by the robustness of the U.S. economy. As a result, the steady recovery continued. The operating environment for the Company has been showing an all-round turn for the better, reflected in the fact that in the stock market the Nikkei Stock Average achieved a strong recovery from the 11,000 point range in April 2005, to the 17,000 point range by March 2006, and that share prices elsewhere in the Asian region also recovered strongly. With regard to venture capital investment in Japan, cash flowed in as new funds continued to be established at a brisk pace, and the amount of funds newly invested in venture companies exceeded its year-earlier level. In spite of some temporary system problems in the securities markets, in the emerging markets there was a favorable increase in the number of companies conducting IPOs. Against this backdrop, the JAIC Group continued to develop its venture capital investment business—its core business—together with associated peripheral business, in Japan, other parts of Asia, and the United States. During the year we further enhanced the profitability of that core business, exemplified by our achievement of an increased capital gain from operational investment securities, and a substantial increase in contingency fees as a result of improved fund performance. In addition, we made steady progress in establishing an earnings base in the private equity field, encompassing a broad range of areas such as buyouts, corporate restructuring and secondary investments, and were able to post the largest profit since our establishment. The following is an overview of operations by segment during the year.
Segment Information Investment segment The investment segment generated revenues of ¥15,138 million, up by 65.1% year-on-year, and operating profit of ¥6,225 million, up by 153.7%. The following business activities were the principal sources of this revenue. 1) Revenue from management of investment funds At the end of the year under review the Group was responsible for the management of, and the provision of essential management information to, 71 investment funds ("funds") with a total of ¥133,118 million under management. This compares with 62 funds with ¥95,776 million under management at the end of the previous year. This business generated revenues totaling ¥2,854 million, up by 30.1% year-on-year, which included ¥1,163 million of contingency fees from the funds, representing a substantial 76.0% increase from the previous year. During the year the Group established or increased the assets of 19 funds totaling ¥36,613 million in value, compared with 16 funds with an aggregate value of ¥27,713 million in the previous year. These are primarily venture capital investment funds that were established in Japan in conjunction with business enterprises or financial institutions and that specialize in specific regions or industries, together with a number of overseas funds that invest in the Asian region, reflecting the vigor of economic activity in Asia. Outside the sphere of venture capital investment, robust progress was made in the establishment of funds in the private equity investment field.
Japan Asia Investment Co., Ltd. 2) Revenue from investment business Revenue from investment business totaled ¥11,949 million, up by 78.1% from the previous year. This included proceeds of sales of operational investment securities totaling ¥10,894 million, up by 94.5%, producing a capital gain of ¥6,634 million, up by 94.9%. However, severe declines in market prices and marked deteriorations in the financial condition of invested companies gave rise to a valuation loss on operational investment securities of ¥357 million, up by 42.0% from the previous year, while the provision for allowance for possible investment losses fell by 38.1%, to ¥486 million. As a result, investment income increased by 144.7%, to ¥5,790 million, representing a sharp increase in the profit ratio. The number of invested companies that achieved listings during the year totaled 11 within Japan (17 in the previous year) and 11 overseas (12), for a total of 22 companies (29). These companies comprised both companies listing for the first time and previously listed companies whose shares were acquired by such means as share exchanges. Unrealized gains on quoted operational investment securities totaled ¥5,382 million, representing a significant increase from ¥1,906 million at the previous year-end.
For the year ended March 31, 2006 (April 1, 2005, to March 31, 2006)
(Millions of yen) For the year ended March 31, 2005 (April 1, 2004, to March 31, 2005) 5,601 2,449 2,197 251 786
Proceeds of sales of operational investment securities (A) Cost of sales of operational investment securities Cost of securities sold (B) Investment write-offs (C) Provision for allowance for possible investment losses (D) Realized capital gains (A) - (B) Investment income (A) - (B) - (C) - (D) Financing segment
10,894 4,617 4,259 357 486
6,634 5,790
3,404 2,366
In the financing segment, as a result of accounting procedures necessitated by our complete withdrawal from commercial lending to consumer loan companies, revenues fell by 32.9%, to ¥1,540 million, and we recorded an operating loss of ¥401 million, compared with an operating profit of ¥238 million in the previous year. Apart from commercial lending to consumer loan companies we will continue other businesses such as financing for corporate restructuring, including debtor-in-possession (DIP) finance.
1) Revenue from financing business The balance of commercial loans at the end of the year under review stood at ¥10,058 million, compared with ¥25,051 million at the previous year-end, generating loan interest income of ¥638 million, down by 51.3% year-on-year. Within the loan balance the amount accounted for by DIP finance and other commercial lending for corporate restructuring totaled ¥5,507 million, compared with ¥4,477 million at the end of the previous year, and this generated revenue totaling ¥291 million, up by 34.3%. As a result of these developments, operating revenues totaled ¥16,675 million, up by 45.5% from the previous year, recurring profit rose by 116.4%, to ¥5,709 million, and we achieved net income of ¥2,906 million, after incurring a net loss of ¥3,161 million in the previous year.
Japan Asia Investment Co., Ltd. [2] Outlook for the fiscal year ending March 31, 2007 In Japan the economic recovery remains robust, in spite of some uncertainties that have arisen, and the environment for the JAIC Group continues to improve. Of particular note is that our core investment business is accumulating excellent assets and has been performing well. Depending on stock-market conditions, gains from the sale of operational investment securities may fluctuate substantially in the future. However, premised on current levels of stock prices we are forecasting operating revenues in the next fiscal year of ¥17,000 million, recurring profit of ¥7,000 million, and net income of ¥4,000 million. The forecasts above are based on available information and estimates at the date of release of this report. It is possible that various factors that may arise in the future will cause actual future performance to differ significantly from these forecasts.
(2) Financial Condition Cash Flows In the year ended March 31, 2006, net cash provided by operating activities totaled ¥1,533 million, compared with net cash of ¥4,631 million used in the previous year. This was primarily because in spite of an increase in cash outflows to increase operational investment securities and for payments to investment funds, which resulted from the brisk pace at which new funds were established and the increase in investments, there was an inflow of income arising from the increase in income before income taxes and other adjustments and from the reduction of commercial loans resulting from our withdrawal from commercial lending to consumer loan companies. Net cash used in investing activities totaled ¥1,696 million, compared with ¥387 million in the previous year, resulting primarily from expenditure for the acquisition of investment securities. Net cash used in financing activities totaled ¥1,548 million, compared with net cash of ¥1,891 million provided in the previous year, the principal factors being income from the issuance of corporate bonds and sale of treasury stock, offset by outflows for the repayment of long-term borrowings. As a result, cash and cash equivalents declined by ¥1,451 million during the year, and including the decrease in cash and cash equivalents due to exclusion from consolidation, cash and cash equivalents at the end of the year totaled ¥5,837 million. Financial indicators Indicator FY ended Mar.31, 2002 FY ended Mar.31, 2003 FY ended Mar.31, 2004 FY ended Mar.31, 2005 FY ended Mar.31, 2006
Equity ratio (%) 58.5 59.6 58.6 51.5 61.2 Fair value equity ratio (%) 24.3 15.5 61.9 58.7 121.6 Debt repayment period (Years) 12.3 16.1 19.0 Interest coverage ratio 3.3 2.6 1.8 Notes: Equity ratio: Shareholders' equity/Total assets Fair value equity ratio: Gross market capitalization/Total assets Debt repayment period: Interest-bearing debt/ Cash flow from operating activities Interest coverage ratio: Cash flow from operating activities/Interest payments 1. All indicators are calculated on the basis of consolidated figures. 2. Gross market capitalization is calculated by multiplying the closing price of the Company's shares at the year-end by the number of shares issued and outstanding (after excluding treasury stock) at the year-end. 3. "Cash flow from operating activities" refers to cash flow from operating activities in the consolidated statement of cash flows. Interest-bearing debt refers to all liabilities stated in the consolidated balance sheets on which interest is payable. 4. In the fiscal years ended March 31, 2002, and March 31, 2005, cash flow from operating activities was negative, and consequently no figures for debt repayment period or interest coverage ratio are included in the table for those years.
Japan Asia Investment Co., Ltd.
Business Position
1. Management of Investment Funds (1) Funds for which the Company and the JAIC Group are responsible for management and provision of essential information As of March 31, 2006 As of March 31, 2005 Total value of funds (¥ millions) 133,118 95,776 (Debt funds included) 25,249 (9,203) No. of funds 71 62 (Debt funds included) ( ) ( ) Note: Given that their character differs from that of long-term closed-end private equity funds that invest in securities, the open-end debt funds included in the fund totals are stated separately. Funds being wound up that are not included in (1) above As of March 31, 2006 Total value of funds (¥ millions) 10,503
As of March 31, 2005 20,219
No. of funds 6 8 Note: Funds being wound up are funds that are in the course of being wound up at their expiration and funds otherwise being wound up with the agreement of fund members. (2) Funds newly established or whose assets were increased For the year ended March 31, 2006 (April 1, 2005, to March 31, 2006) Newly established Total value of funds (¥ millions) No. of funds Assets increased Increase in fund value (¥ millions) (Of debt funds) No. of funds (Debt funds included) 18,654 (15,182) 8 (1)
17,959 11
For the year ended March 31, 2005 (April 1, 2004, to March 31, 2005) Newly established Total value of funds (¥ millions) No. of funds Assets increased Increase in fund value (¥ millions) (Of debt funds) No. of funds (Debt funds included) 7,622 (6,787) 3 (1)
20,091 13
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Principal funds newly established during the fiscal year ended March 31, 2006 Fund name JAIC-CROSBY Greater China Investment Fund Ltd Growth Enterprise Fund Co., Ltd. DG New Context Venture Capital Investment, L.P. JAIC-Miyazaki Taiyo No.1 Venture Capital Investment, L.P. Bokwang-Dasan Venture Fund (DVF No.8) Partnership JSPF No.2 Venture Capital Investment, L.P. JAIC-PE No.1 Parallel Venture Capital Investment, L.P. Establishment date April 29, 2005 June 1, 2005 October 20, 2005 October 31, 2005 November 15, 2005 November 30, 2005 November 30, 2006 Total funds invested US$11.0 million €6.1 million ¥1,620 million ¥300 million KW13,000 million ¥6,000 million ¥2,000 million
Japan Asia Investment Co., Ltd.
JAIC-Atop Venture Capital Investment , L.P. JAIC-HENSON MedFocus Accelerator Fund, LLC Osaka-JSEED Digital Content Fosterage No.1 Investment, L.P. MAYBAN-JAIC ASEAN FUND LTD.P.
January 1, 2006 January 10, 2006 March 27, 2006 March 31, 2006
¥600 million US$8.8 million ¥310 million US$20.0 million
The following funds were newly established during the period from the end of the year under review to the date of release of this report. Total funds Fund name Establishment date invested CA-JAIC China Internet Fund April 3, 2006 US$5.2 million
4
Funds due to be wound up within three years of the fiscal year-end For the year ended March For the year ended March 31, 2007 31, 2008 (April 1, 2006, to March (April 1, 2007, to March 31, 2007) 31, 2008) Total value of funds 23,236 4,884 (¥ millions) No. of funds 16 5
For the year ended March 31, 2009 (April 1, 2008, to March 31, 2009) 6,697 4
Notes to tables (1) to (4) above: 1. The amounts stated for funds denominated in foreign currencies are calculated on the basis of the exchange rate prevailing on the final day of each accounting period. Therefore, changes in assets under management include the amount affected by exchange rates. 2. The figures for the total value of funds are stated on a commitment basis.
Japan Asia Investment Co., Ltd. 2. Investment activities and IPOs (1) Investment activities (JAIC+Funds) 1) New investments For the year ended March 31, 2006 (April 1, 2005, to March 31, 2006) Number of Companies 176 117 130 22 198 Amount (Millions of yen) 11,532 5,310 6,222 6,549 18,081 For the year ended March 31, 2005 (April 1, 2004, to March 31, 2005) Number of Companies 130 87 99 18 148 Amount (Millions of yen) 8,050 4,132 3,918 9,012 17,062
VC investments JAIC Funds Other PE investments Total 2) Balance of investments
As of March 31, 2006 Number of Companies 721 501 516 41 762 Amount (Millions of yen) 49,849 23,610 26,238 17,176 67,025
As of March 31, 2005 Number of Companies 699 460 515 28 727 Amount (Millions of yen) 46,259 20,306 25,953 12,218 58,478
VC investments JAIC Funds Other PE investments Total
Note: 1 Foreign-currency-denominated investments are computed at the exchange rates prevailing on the final day of each fiscal year. 2. The JAIC portion does not include the Company's investments in funds managed by the JAIC Group. 3. Investments in company-type funds managed by the JAIC Group, and investments in funds managed by third parties other than the Company in which the JAIC Group is not involved in the management, are not included. 4. In cases of parallel investments in the same company in both the JAIC and Funds portions, the company is counted in each, and owing to this duplication these numbers do not match the total number of companies. 5 Other PE investments includes restructuring finances (equity), buyout investments and secondary investments. 6 On the secondary investments, the number of companies represents the number of deals
Japan Asia Investment Co., Ltd.
(2) Breakdown of VC investments 1) New VC investments
JAIC+Funds
For the year ended March 31, 2006 (April 1, 2005, to March 31, 2006) Number of Companies Country Japan Taiwan Hong Kong Korea China USA Other Asian countries Others Method Equity Bond Others Industry QOL(Quality of Life) Related IT/Internet Material/Chemical Machinery/Automobile Consumer related Construction/Real estate Retail/Restaurant Service Others Total 164 12 5 10,360 806 364 123 8 2 7 8 21 6 1 6,588 424 97 1,037 853 2,014 455 61 Amount (Millions of yen)
For the year ended March 31, 2005 (April 1, 2004, to March 31, 2005) Number of Companies 90 7 4 3 24 2 118 13 4 Amount (Millions of yen) 5,014 418 368 403 1,699 145 7,487 504 58
48 58 3 13 4 6 11 25 8 176
4,261 3,552 180 678 130 176 873 1,294 385 11,532
41 47 4 8 3 5 4 14 4 130
3,006 2,781 302 582 152 195 151 539 339 8,050
Japan Asia Investment Co., Ltd. 2) Balance of VC investment As of March 31, 2006 Number of Companies Country Japan Taiwan Hong Kong Korea China USA Other Asian countries Others Method Equity Bond Others Industry QOL(Quality of Life) Related IT/Internet Material/Chemical Machinery/Automobile Consumer related Construction/Real estate Retail/Restaurant Service Others Total 653 77 45 46,061 3,020 767 599 101 58 42,470 2,931 856 547 40 5 17 15 67 25 5 33,697 2,886 215 2,686 1,308 6,999 1,757 297 532 37 4 17 13 66 26 4 32,192 3,089 190 2,131 1,270 5,414 1,864 106 Amount (Millions of yen) As of March 31, 2005 Number of Companies Amount (Millions of yen)
140 268 22 45 22 27 63 97 37 721
12,047 16,109 1,196 2,921 1,096 6,577 3,886 3,620 2,394 49,849
118 271 23 42 21 29 70 88 37 699
8,580 16,465 1,184 2,806 1,065 6,527 3,554 3,610 2,465 46,259
Note: 1. Foreign-currency-denominated investments are computed at the exchange rates prevailing on the final day of each fiscal year. 2. The JAIC portion does not include the Company's investments in funds managed by the JAIC Group. 3. Investments in company-type funds managed by the JAIC Group, and investments in funds managed by third parties other than the Company in which the JAIC Group is not involved in the management, are not included. 4. In cases of parallel investments in the same company in both the JAIC and Funds portions, the company is counted in each, and owing to this duplication these numbers do not match the total number of companies. 5. QOL(Quality of Life) Related; Biotechnology, Medical Service, Welfare Service, Medical Device, Drug Medicine, etc.
Japan Asia Investment Co., Ltd. (3) JAIC-Backed IPOs (JAIC+Funds) (Number of Companies) For the year ended March 31, 2006 For the year ended March 31, 2005 (April 1, 2005, to March 31, 2006) (April 1, 2004, to March 31, 2005) Japan 11 17 Overseas 11 12 Total 22 29 Note: Included in the above are 2 companies in Japan and 4 companies overseas whose listed shares the Group acquired as a result of equity swaps between its invested companies and previously listed companies for the year ended March 31, 2006, and 1 company overseas whose listed shares the Group acquired by such means for the previous fiscal year.
2) Current consolidated fiscal period (From April 1, 2005 to March 31, 2006) Company Date of IPO Market Business Name Domestic A photographic technology Asukanet Co., Ltd. 14-Apr-05 TSE Mothers 9 service firm Overseas Management of real estate 24-May-05 Hercules 7 REICOF CO.,LTD. investment fund
Total 16 Micrus Endovascular Corporation ONLY corporation 16-Jun-05 NASDAQ 8-Jul-05 Manufacture and sales of medical device Manufacture and sales of men's Hercules wear KOSDAQ Contents delivery service Outsourcing business of house TSE Mothers management JASDAQ Retail of drugs and cosmetics Financial and management MAI consulting Semiconductor packaging business Manufacture and sales of lenses for mobile phones Manufacture of leather products for cars
Headquarters Japan Japan U.S.A. Japan Korea Japan Japan Thailand Taiwan Taiwan Thailand
CDNetworks Co., Ltd. 29-Jul-05 Japan Corporate Housing 2-Sep-05 Service Co., Ltd. YAKUODO. Co., Ltd. 15-Sep-05 ACAP Advisory Public Company Limited Taiwan IC Packaging Corporation 14-Dec-05
16-Dec-05 Taiwan OTC
Genius Electronic Optical 20-Dec-05 Taiwan TSE Co., Ltd. Interhides Public Co., Ltd. FueTrek Co., Ltd. 22-Dec-05 SET
Sound source IP (design data for 27-Dec-05 TSE Mothers sound source LSIs for mobile Japan phones) development and sales Development and commercialization of gene-based ViroMed Co., Ltd. 29-Dec-05 KOSDAQ Korea therapeutic products and related technologies Development and sales of software packages for family ND Software co., Ltd. 8-Feb-06 JASDAQ care companies; Internet-based Japan e-invoicing service for remuneration for family care Real estate agency business and Housefreedom Co.,Ltd. 10-Feb-06 FSE-Q Japan sales of detached houses Personnel outsourcing, primarily S-Pool, Inc. 10-Feb-06 Hercules Japan for distribution and sales fields Note: In addition to the above, four overseas companies and two domestic companies were listed during April 1, 2005-December 31, 2005, due to shares acquired through equity swaps between a listed company.
Japan Asia Investment Co., Ltd. 3) Previous consolidated period (From April 1, 2005 to March 31, 2006) Company Date of IPO Market Business Headquarters Name Domestic Nursing services for the elderly TSUKUI CORPORATION 8-Apr-04 JASDAQ Japan 17 and patients Overseas Operation of Job offering web DIP corporation 27-May-04 TSE Mothers Japan 11 site Total 28 Development and sales of supply Frameworx, Inc. 4-Jun-04 TSE Mothers chain management software and Japan related consulting services Medical business relating to Plasmagene Biosciences Hong Kong 18-Jun-04 diagnosis of cancerous, prenatal Hong Kong Limited GEM and other major diseases Manufacture and sales of ASAHI INTECC CO., 1-Jul-04 JASDAQ ultrathin stainless wire rope and Japan LTD. terminal processed goods, etc. Manufacture and sales of safety SHOEI CO., Ltd. 6-Jul-04 JASDAQ Japan helmets for motorcycles Sales of various merchandise Netprice, ltd. 8-Jul-04 TSE Mothers using group-buying method Japan through Internet Sosei Co. Ltd 29-Jul-04 TSE Mothers Development of medical supplies Japan Optodisc Technology Manufacture and sales of DVD 30-Jul-04 TAIWAN TSE Taiwan Corporation disk T. Krungthai Industries Production of automobile and 29-Sep-04 SET Thailand Public Co., Ltd. home appliance plastic molds Operation of Hoken Square Bang WebCrew Inc. 21-Sep-04 TSE Mothers (a portal site for the insurance Japan industry) Offering of comprehensive TSE Mothers financial information service Xinhua Finance Limited 28-Oct-04 Hong Kong (foreign) provider focusing on Chinese financial market COSMOS Pharmaceutical A drug store chain also handling 11-Nov-04 TSE Mothers Japan Corporation general merchandise A company marketing Medical Ikkou Co., Ltd. 26-Nov-04 JASDAQ prescription and other Japan pharmaceuticals Manufacture and sales of Tapaco Public Co., Ltd. 2-Dec-04 MAI injection molding automobile Thailand plastic parts Ninetowns Digital World Design, development and sales of 3-Dec-04 NASDAQ China Trade Holdings Limited software Research and development of gene remedy and manufacturer of TAKARA BIO INC. 7-Dec-04 TSE Mothers biotechnological test reagent (the Japan biotech subsidiary of Takara Holdings Inc.) Mobile contents and solution Aeria Inc. 15-Dec-04 Hercules Japan provider Logistics network consulting, WORLD LOGI, Co., Ltd. 17-Dec-04 Hercules 3PL business, and system Japan consulting services Manufacture and sales of TAIWAN Health & Life Co., Ltd. 24-Dec-04 electronic blood pressure Taiwan OTC monitors Yeu Hwan Technology Sub-contractor of print board 11-Jan-05 TAIWAN TSE Taiwan Corp., Ltd. production and verification
Japan Asia Investment Co., Ltd.
Company Name Yarnapund Public Co., Ltd. Thunder Tiger Corp.
Date of IPO 13-Jan-05 19-Jan-05
Market SET TAIWAN OTC TAIWAN OTC FSE-Q
Business Manufacture and sales of motor vehicle emission parts Manufacture and sales of radio-controlled models and parts Manufacture and sales of switching device for power supply Sales of Industrial package for food
Headquarters Thailand Taiwan Taiwan Japan Japan
Channel Well Technology 31-Jan-05 Co., Ltd. TAISEI CO., LTD. 16-Feb-05
The First Energy Service 4-Mar-05 Company, Limited Riskmonster.com 23-Mar-05
TSE Mothers Total energy service Hercules
An Internet-based credit analysis Japan firm A biotechnology / biopharmaceutical company Effector Cell Institute, Inc. 29-Mar-05 NSE Centrex Japan applying chemotactic regulation analysis of effector cells Note: In addition to the above, one overseas company was listed during April 1, 2004-March 31, 2005, due to shares acquired through equity swaps between a listed company.
Consolidated Financial Statement
Consolidated Balance Sheets
Thousands of yen) Period Account Assets Current Assets Cash and deposits Marketable securities Operational investment securities Allowance for possible investment losses Commercial loans Accounts receivable Deferred tax assets Other current assets Allowance for doubtful accounts Fixed assets Property and equipment Buildings Vehicles and delivery equipment Land Intangible fixed assets Other Investments and assets Investment securities Defective credit Deferred tax assets Other investments Allowance for doubtful accounts Total Assets As of March 31, 2006
Amount Percentage of total
As of March 31, 2005
Amount Percentage of total
76,858,249 9,223,825 1,270,307 56,854,655 (2,650,408) 10,058,511 800,517 14,530 1,345,662 (59,352) 7,220,467 949,212 114,514 109,176 725,521 12,814 6,258,439 4,587,069 877,552 1,065,256 404,938 (676,376) 84,078,716
% 91.4
79,461,697 9,284,088 1,161,768 45,295,328 (2,877,331) 25,051,933 665,608 4,098 1,018,333 (142,129) 7,402,884 1,000,381 110,954 88,526 800,900 16,171 6,386,331 1,681,805 603,417 4,341,544 344,509 (584,944) 86,864,582
% 91.5
8.6 1.1
8.5 1.1
0.0 7.5
0.0 7.4
100.0
100.0
17
Thousands of yen) Period Account Liabilities Current liabilities Short-term borrowings Current portion of bonds Accrued expenses Accrued income taxes Accrued consumption tax Deferred tax liabilities Accrued bonuses for employees Other current liabilities Fixed liabilities Bonds Long-term borrowings Deferred tax liabilities Accrued Retirement Benefits for employees Accrued Retirement Benefits for directors
Provision for Possible Losses on Withdrawal from the Commercial Lending Business
As of March 31, 2006
Amount Percentage of total
As of March 31, 2005
Amount Percentage of total
17,239,980 12,455,283 1,696,000 339,941 186,956 14,277 852,340 69,000 1,626,180 15,332,667 4,648,000 10,248,496 919 245,853 105,500 83,897 32,572,647 92,477 24,293,848 20,599,020 2,777,751 4,257,020 (102,838) (411,211) 51,413,591 84,078,716
% 20.5
16,991,317 13,482,926 1,590,000 288,191 371,299 21,530 84,561 1,152,807
% 19.6
18.2
25,067,298 3,744,000 12,390,530 1,374 205,018 114,875 8,500,000 111,500
28.8
Other fixed liabilities Total Liabilities Minority interest Minority interest Shareholders' equity: Common stock Capital surplus Retained earnings Unrealized net gain (loss) on investments Foreign currency translation adjustment Treasury stock Total shareholders' equity Total Liabilities, Minority interest and Shareholders' equity
38.7 0.1 28.9 24.5 3.3 5.1 (0.1) (0.5) 61.2 100.0
42,058,616 66,642 24,293,848 24,437,031 (4,183,396) 1,519,462 (492,968) (834,654) 44,739,323 86,864,582
48.4 0.1 28.0 28.1 (4.8) 1.8 (0.6) (1.0) 51.5 100.0
18
Consolidated Statement of Income
Period Account Operating Revenues Operating Costs Gross profit (loss) Selling, General and Administrative Operating profit (loss) Non-operating income Interest income Dividends income Exchange gain Other Non-operating expenses Interest expense Stock issue expenses Bond-issuing expenses Equity in losses of affiliates Exchange loss Other Ordinary profit (loss) Extraordinary gains Gain on reversal of allowance for doubtful accounts Gain on change of the score of consolidation Gain on sale of non-operational investments Extraordinary losses Loss on sales of fixed assets Loss on withdrawal from the commercial lending business Loss on sale of non-operational investments Provision for possible losses on withdrawal from the commercial lending business Impairment loss on fixed assets Income (loss) before income taxes Income taxes - current Income taxes - deferred Minority interest in earnings of consolidated subsidiary Net income (loss) 5,292,995 250,697 2,112,905 22,785 2,906,606 488,211 58,279 429,932 10,052 For the year ended March 31, 2006
Amount Percentage of total
Thousands of yen) For the year ended March 31, 2005
Amount Percentage of total
16,675,421 6,634,301 10,041,120 4,216,598 5,824,521 151,623 45,582 28,985 60,682 16,372 266,482 225,832 6,655 8,824 17,298 7,870 5,709,663 71,543 70,394 1,149 -
% 100.0 39.8 60.2 25.3 34.9 0.9
11,462,830 5,015,684 6,447,146 3,755,096 2,692,049 87,879 31,333 27,862 28,683 141,528 64,122 4,648 32,775 2,891 21,570 15,521 2,638,400 56,500 56,500
% 100.0 43.8 56.2 32.8 23.4 0.8
1.6
1.2
34.2 0.4
23.0 0.5
2.9
8,920,617 -
77.8
31.7 1.5 12.7 0.1 17.4
8,500,000 410,565 (6,225,717) 295,835 (3,356,311) (3,630) (3,161,610) (54.3) 2.6 (29.3) 0.0 (27.6)
19
Consolidated Statements of Capital Surplus & Retained Earning
Thousands of yen) Period Account For the year ended March 31, 2006 Amount Capital Surplus Balance of capital surplus at the beginning of year Increase in capital surplus Increase by the exercise of convertible notes 1. 2. Increase by disposal of treasury stock Decrease in capital surplus 1. Dividends 2. Transfer to retained earnings Balance of capital surplus at the end of year 24,437,031 755,105 755,105 4,593,116 538,575 4,054,541 20,599,020 23,659,413 777,618 777,618 24,437,031 For the year ended March 31, 2005 Amount
Retained earnings Balance of retained earnings at the beginning of year Increase in retained earnings 1. Net income 2. Transfer from capital surplus Decrease in retained earnings 1. Dividends 2. Bonus for director and auditor 3. Reversal of reserve for revaluation of land 4. Net loss Balance of retained earnings at the end of year (4,183,396) 6,961,148 2,906,606 4,054,541 2,777,751 797,688 4,981,085 514,963 31,500 1,273,012 3,161,610 (4,183,396)
20
Consolidated Statement of Cash Flows
Thousands of yen) Period Account Cash Flows from Operating Activities Net income (loss) before income taxes Depreciation and amortization Impairment loss on fixed assets
Increase(decrease) in allowance for possible investment losses Increase(decrease) in allowance for doubtful accounts Accrued Bonuses for employees Increase in provision for employees'accrued retirement benefits Increase in provision for directors' accrued retirement benefits Increase in allowance for possible losses on withdrawal from the commercial lending business For the year ended March 31, 2006 For the year ended March 31, 2005
Amount
Amount
5,292,995 23,536 0 (235,148) 51,697 69,000 40,637 (9,375) (8,500,000) (74,568) 225,832 17,298 58,279 (1,149) 295,144 (5,841,589) 14,954,922 (7,648,190) 3,575,903 0 35,371 2,330,597 77,058 (260,511) (613,642) 0 1,533,501
(6,225,717) 30,418 410,565 317,943 (75,619) 23,364 (754) 8,500,000 (59,196) 64,122 2,891 (46,447) 10,946 (5,874,389) (69,910) (5,016,444) 2,434,574 (31,500) 1,038,827 (4,566,326) 57,849 (74,624) (89,609) 41,606 (4,631,104)
Interest and dividend income Interest expenses Equity in losses (earnings) of affiliate Loss on sales of fixed assets Loss (gain) on sales of non-operational investment Gain on change of the score of consolidation Loss on devaluation of operational investment securities (Increase) decrease in operational investment securities Decrease (increase) in commercial loans Payment for purchase of investment fund Dividends from investment funds Bonus for directors and auditor Other Subtotal Interest and dividend income received Interest paid Income taxes paid Income taxes refunded Net cash provided by (used in) operating activities
21
Thousands of yen) Period Account Cash Flows from Investing Activities Proceeds from sales of marketable securities Payment for purchase of property and equipmen Proceeds from sales of property and equipmen Payment for purchase of intangible fixed asset Payment for purchase of non-operational investment Proceeds from sales of non-operational investment (Increase) decrease in time deposits, net
Proceeds from repayment of deposits for office rental For the year ended March 31, 2006 For the year ended March 31, 2005
Amount
Amount
Payment for deposits for office renta Increase in other investments and other assets Net cash used in investing activities Cash Flows from Financing Activitie Decrease in short-term borrowings, net Increase in long-term borrowings Repayment of long-term borrowings Proceeds from issuance of bonds Payment for redemption of bonds Cash dividends paid Cash dividends paid to minority Payment for acquisition of treasury stock Proceeds from disposal of treasury stock Net cash provided by financing activities Effect of Exchange Rate Change on Cash and Cash Equivalen Net Increase(Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of year
Decrease in cash and cash equivalents due to exclusion of previously consolidated entities
2,140 (54,432) 32,539 (3,742) (1,679,262) 183,919 (65,824) 19,101 (63,233) (67,471) (1,696,264)
(76,702) (1,578) (498,170) 165,388 8,365 112,859 (108,216) 10,885 (387,169)
(399,404) 11,020,000 (13,809,676) 2,591,175 (1,590,000) (538,399) (945) (1,839) 1,180,410 (1,548,679) 260,343 (1,451,098) 7,365,430 (76,744) 5,837,587
(3,750,496) 16,323,200 (14,349,836) 4,817,225 (504,000) (546,787) (5,033) (92,547) 1,891,723 (29,960) (3,156,511) 10,521,941 7,365,430
Cash and Cash Equivalents at End of year
22
Japan Asia Investment Co., Ltd.
Segment Information
Industrial Segment Information For the year ended March 31, 2006 (April 1, 2005, to March 31, 2006) Investment Operating revenues and operating profit Operating revenues (1) Sales to outside customers (2) Inter-segment sales and transfers Total Operating expenses Operating profit Assets, depreciation and capital expenditures Assets Depreciation Capital expenditures Financing Total (Thousands of yen) Elimination of Consolidate common assets d total
15,135,183 3,755 15,138,938 8,913,766 6,225,172
1,540,238 1,540,238 1,941,460 (401,222)
16,675,421 3,755 16,679,177 10,855,227 5,823,950
(3,755) (3,755) (4,327) 571
16,675,421 16,675,421 10,850,900 5,824,521
68,793,513 18,011 56,134
12,032,232 5,524 2,015
80,825,745 23,536 58,149
3,252,970
84,078,716 23,536 58,149
For the year ended March 31, 2005(April 1, 2004, to March 31, 2005) Investment Operating revenues and operating profit Operating revenues (1) Sales to outside customers (2) Inter-segment sales and transfers Total Operating expenses Operating profit Assets, depreciation and capital expenditures Assets Depreciation Capital expenditures Financing Total (Thousands of yen) Elimination of Consolidate common assets d total
9,166,656 2,080 9,168,736 6,714,780 2,453,956 54,541,064 24,406 52,537
2,296,173 2,296,173 2,058,080 238,093 27,078,929 6,011 26,168
11,462,830 2,080 11,464,910 8,772,860 2,692,049 81,619,994 30,418 78,706
(2,080) (2,080) (2,080)
11,462,830 11,462,830 8,770,780 2,692,049
5,244,587
86,864,582 30,418 78,706
Notes: 1. Segmentation of business As a group engaging in venture capital business, the JAIC Group structures its management organization in a way designed to address the needs of the companies in which it invests, and its business segments are also based on the actual state of the business activities concerned. 2. Principal business in each segment (1) Investment segment: Management of investment funds and investment of their assets, and management consulting, intermediary services for invested companies, and investment advisory service (2) Financing segment: Commercial loans and other financing business
Japan Asia Investment Co., Ltd.
Securities
Fiscal year ended March 31, 2006 Other securities for which market quotations are available Carrying value on consolidated balance sheet (Securities whose carrying value exceeds their acquisition cost) (1) Shares 5,949,473 12,610,299 (2) Bonds (3) Others 886,609 1,167,608 Subtotal 6,836,083 13,777,907 (Securities whose carrying value does not exceed their acquisition cost) (1) Shares 974,422 851,623 (2) Bonds (3) Others 912,176 905,210 Subtotal 1,886,598 1,756,834 Total 8,722,682 15,534,741 Type Acquisition cost (Thousands of yen) Difference
6,660,825 280,999 6,941,824 (122,799) (6,965) (129,764) 6,812,059
Fiscal year ended March 31, 2005 Other securities for which market quotations are available Carrying value on consolidated balance sheet (Securities whose carrying value exceeds their acquisition cost) (1) Shares 858,990 (2) Bonds (3) Others 951,933 Subtotal 1,810,924 (Securities whose carrying value does not exceed their acquisition cost) (1) Shares 1,086,682 (2) Bonds (3) Others 391,696 Subtotal 1,478,378 Total 3,289,303 2,884,595 1,095,831 3,980,426 896,760 389,117 1,285,877 5,266,304 Type Acquisition cost (Thousands of yen) Difference
2,025,604 143,897 2,169,502 (189,922) (2,578) (192,501) 1,977,001