DAIICHIKOSHO

CO.,

LTD.

Financial Results in the Year ended March 2002

May 20, 2002

DAIICHIKOSHO CO., LTD.
Company code number: 7458
(URL http://www.dkkaraoke.co.jp)
Shares traded: JASDAQ
Location of headquarters: Tokyo
Please address all communications to: Tomio Suzuki, Senior Managing Director
Administration Headquarters
Phone: (03) 3280-2151
Date of Board of Directors’ meeting for approval of financial results: May 20, 2002
Adoption of U.S. accounting standards : No

Financial highlights
Years ended March 31; Millions of yen

1998

1999

2000

2001

2002

105,116

94,681

88,39786,73098,591

Ordinary income

3,222

5,998

9,240

8,430

8,447

Net income

1,007

2,307

3,131

3,079

3,304

Shareholders' equity

62,89064,481

71,79848,67849,914

Total assets

174,921

168,135

159,159

123,775

131,075

Shareholders' equity per share (Yen)

3,354.27

3,439.13

3,829.25

2,596.50

2,726.97

Net income per share (Yen)

55.20

123.09167.01

164.28176.39Equity ratio (%)

36.0

38.4

45.1

39.3

38.1

Return on equity (%)

1.6

3.6

4.6

5.1

6.7

PER

32.8

11.5

17.8

12.2

11.2

Net sales

75,39563,302

59,884

61,20065,489Ordinary income

4,185

2,870

4,449

4,683

5,332

Net income

2,438

909

1,078

1,157

2,019

Shareholders' equity

63,86564,08067,14542,011

42,314

Total assets

125,422

120,088

112,651

78,37681,459

Shareholders' equity per share (Yen)

3,406.10

3,417.56

3,581.05

2,240.57

2,311.78

133.66

48.53

57.50

61.71

107.82Equity ratio (%)

50.9

53.4

59.6

53.6

52.0

Return on equity (%)

3.9

1.4

1.6

2.1

4.8

PER

13.5

29.1

51.7

32.6

18.4

Consolidated
Net sales

Non consolidated

Net income per share (Yen)1

DAIICHIKOSHO

CO.,

LTD.

Group organization
The Daiichikosho group consists of Daiichikosho and 36 subsidiaries. Its main business is:commercial karaoke operations (the sale and rental of karaoke products); the operation of karaokecabins; the provision of contents; and the production and sale of music software.
The following is a graphic presentation of the group’s operations.

(Overseas subsidiaries)[Factoring of the Company’s andits subsidiaries’ installment salesreceivables; personal loans]
DK Finance, Co., Ltd.
(Production and sale of software
for music and video)
Gauss Entertainment Co., Ltd.
Nippon Crown Co., Ltd.
Tokuma Japan Communications
Co., Ltd.
(Acquisition and management of
copyrights)
DK Music Publishing Co., Ltd.

Daiichikosho (Hong Kong), Ltd.
DK KOREA Co., Ltd.
Daiichi Kosho (Singapore), Pte Ltd.
*1(Operation of karaoke cabins)
Shanghai Zong-Yi Music &Entertainment Co., Ltd.
Saha Daiichi Kosho Co., Ltd.

Overseas users

Hokkaido Daiichikosho Co., Ltd.
Tohoku Daiichikosho Co., Ltd.
Niigata Daiichikosho Co., Ltd.
Kyushu Daiichikosho Co., Ltd.
Taito Daiichikosho Co., Ltd.
Tokai Daiichikosho Co., Ltd.
Daiichikosho Kinki Co., Ltd.
16 other companies

DAIICHIKOSHO CO., LTD. (Reporting company)

Domestic users(Domestic sales subsidiaries)(Operation and management of
employee leisure facility)
D.K. Enterprises (Guam), Inc.

(Other overseas subsidiaries)
World Wide Top Co., Ltd.

(Non consolidated subsidiaries)
Daiichi Kosho Europe GmbH *2
H. K. Electronik und Musik GmbH *2(Manufacture and sale of fruit wines)

Union Eiga Co., Ltd.

Maruhagi Yoshu Kogyo, Co., Ltd.

9 other companies

Sale and rental of merchandise and products(Notes)Operation of karaoke cabins

1. *1 indicates companies in dormancy.
2. *2 indicates companies that are now being liquidated.

2

Provision of services

DAIICHIKOSHO

CO.,

LTD.

1. Management policy(1) Basic management policy
The Daiichikosho group has adopted the corporate principle of “greater music and service to theworld.” In managing its operations, its basic policy is “to promote musical culture throughkaraoke, and to provide places of pleasant and enjoyable communication.”
Toward this end, the group will be required to provide both karaoke equipment that suits users’
needs and an abundant and attractive range of karaoke software; karaoke cabins, where people
gather to enjoy karaoke, will also have to be further developed.
Building on the “know-how” and entertainment-related contents that we have accumulated todate, the goal will be to create companies capable of responding to the expectations of all of ourpersons concerned. We will accomplish this through the continued expansion of businesscentering on karaoke and through the generation of high rates of return.
(2) Basic policy on the distribution of profits
Our basic policy will be to maintain the long-term stability of our pay out while increasing
dividends to match profit growth. Retained earnings will be invested systematically into productdevelopment and operating assets.
(3) Medium-to-long-term management strategy
The goal of the Daiichikosho group is to become a new kind of service enterprise involved inmusic and information. Toward this end, it is expanding and enriching its karaoke-streaming
network, and developing new customer-oriented services.
(4) Measures for improvement of corporate management organizations
In this fiscal year, the Company introduced the corporate executive officer system. The goal of
the new system is an ability to cope quickly with a continually and severely changing operating
environment.
(5) Issues requiring action{1} Expanding a telecommunications network
The group will invest maximal efforts into increasing sales and rental income from theCompany’s “DAM” telecommunications product, with the aim of expanding the businessmodel in which revenues of sound delivery services are derived from acommunications-based karaoke network.
{2} Improving the profitability of karaoke-cabin operations
The Company will aim to achieve an operating-profit ratio of 15%, by opening large-scale
karaoke stores while closing unprofitable stores.
{3} Reducing loss on satellite-broadcasting operations
The Company uses the direct-broadcast-satellite provider, Sky PerfecTV, as its platform forbroadcasting programs via over television channels and 100 radio channels. Its goal will beto achieve breakeven in these operations at the earliest possible date through a dedicatedeffort to increase subscribers.

3

DAIICHIKOSHO

CO.,

LTD.

{4} Strengthening the foundations of music software business
The Company has added Music Software business to its operations through the acquisitionof two music-recording companies as subsidiaries. Its goal will be to increase synergies
between this new business and its karaoke operations by quickly enacting measures torebuild management and strengthen the operating foundations of these two companies.
(6) Target performance indicators
The Company’s target is to achieve an ROE of over 12% in the year to March 2005.
2. Results of operations and financial condition(1) Summary of the fiscal year to March 2002
{1} Results of operations
During the year to March 2002, the Japanese economy continued to perform poorly in theface of sluggish personal consumption.
In the karaoke industry, prospects for an improvement in demand remained bleak,price-cutting intensified, and mergers and equity-based alliances among companies became
increasingly common.
In response, one initiative was introduced by the Daiichikosho group. It was an electronicsong-title catalogue called Denmoku, which integrates title-search capabilities andremote-control functions into a single device.
In its karaoke cabin operation, the Company continued to open large new karaoke stores
while closing unprofitable stores.
In the area of satellite broadcasting, it focused on increasing subscription contracts withcommercial users. In its e-business operations, which include distributing customized ringtones to users of cellular phones, it increased its stock of melodies and improved the qualityof their sound as a way of expanding its base of subscribers.
The Company also added two subsidiaries that own large libraries of music to its group:
Tokuma Japan Communications Co., Ltd. and Nippon Crown Co., Ltd. This paves the way
for other steps hereafter that will be aimed at building a multifaceted music business.
Accordingly, the Company reported higher sales and profits during the last fiscal year.
Segment-related information (percentage changes, year-on-year)
Commercial karaoke business
Sales: 53,745 million yen (+0.1%)
Operating income: 8,400 million yen (+6.6%)
In this segment, the group sells and rents karaoke equipment and software, and also
provides karaoke-streaming service.
Although rental sales declined as a result of lower equipment-rental rates, revenues fromproviding karaoke-streaming service increased tolerable due to an increase in the number ofrental contracts.

4

DAIICHIKOSHO

CO.,

LTD.

Karaoke cabin business
Sales: 21,980 million yen (-4.6%)
Operating income: 1,423 million yen (-35.1%)
In this segment the group rents karaoke cabin on an hourly basis and provides food anddrink.
Although the closure of 10 unprofitable stores and the opening of 7 large karaoke stores toimprove profitability, sales and income decreased as a result of a falloff in customer traffic
and a decrease in average amounts spent per customer in the face of industry-wide
price-cutting.
Contents business
Sales: 9,097 million yen (+62.3%)
Operating income: 1,262 million yen (an improvement of 1,696 million yen)
As noted above, in this segment the Company distributes customized ring tones for cellular
phones (e-business division) and provides programming over two television and 100 radio
channels via the direct-broadcast-satellite provider, Sky PerfecTV (satellite broadcasting
division).
In its e-business operations, the Company registered higher sales and profits on the back ofa vast increase in contracts.
In satellite broadcasting, the rate of growth in subscriptions for private use, declined. On theother hand, subscriptions for commercial services grew at a favorable rate. This resulted in a
sharp increase in sales and a decline in losses at the operating-profit level.
Music software business
Sales: 9,109 million yen
Operating income: -332 million yen
The Company added this segment to its operations this fiscal year by incorporating Tokuma
Japan Communications Co., Ltd. and Nippon Crown Co., Ltd. into its group as subsidiaries.
In this segment, the Company produces and sells music and video software. This segment
reported an operating loss because of extremely difficult conditions in the recording
industry, sales were slow and not sufficient to cover operating costs.
Other business
Sales: 4,658 million yen (+5.8%)
Operating income: 696 million yen (-26.9%)
This segment is involved in real estate rentals, restaurants and other operations. Althoughsales in both businesses increased, operating income declined due to an increase in selling,
general and administrative expenses.

5DAIICHIKOSHO

CO.,

LTD.

{2} Cash flow
On a consolidated basis, cash flow declined by 1,182 million yen year-on-year to 20,317
million yen, because of a 4.7% decrease as compared to last year in pretax net profit to
6,779 million yen, an increase in cash outlays for the acquisition of intangible fixed assets,
and a decrease in proceeds from the sale of tangible fixed assets.
The following is a summary and analysis of cash flow for this fiscal year.
(Net cash used in operating activities)
Cash provided by operations amounted to 14,810 million yen, a 25 million yen decreaseyear-on-year. This decline is attributable primarily to a larger amount of corporate income
taxes paid.
(Net cash used in investing activities)
Cash used in investing activities amounted to 11,206 million yen, a 3,855 million yen
increase year-on-year. This increase is attributable primarily to an increase in payments forthe acquisition of intangible fixed assets.
(Net cash provided by financing activities)
Cash used in financing activities amounted to 5,638 million yen, an 8,043 million yen
decrease year-on-year. This decrease is attributable primarily to an increase in short andlong-term borrowings.
(2) Outlook for the next fiscal year
With no easy solutions in sight for sluggish personal consumption, there appears to be a little
hope for a sustained economic recovery.
The Daiichikosho’s strategy will be to sustain and increase its dominant position in the area of
karaoke streaming services, while competing and differentiating itself on the basis of richer andmore varied services, rather than price competition.
In its karaoke cabin business, the group will endeavor to improve the profitability of existing
stores while carefully developing large new stores that emphasize investment efficiency.
In the contents business, the Company will aim to achieve surplus operation in satellite
broadcasting division at the earliest possible date, while efforting to expand sales and profits in
its e-businesses division. Fully aware of the possibilities of the broadband age, the Company will
try to create new services that maximize the value of contents that our group holds.
The Company will also take measures to rebuild the management of its two new subsidiaries,
Tokuma Japan Communications Co., Ltd. and Nippon Crown Co., Ltd., while endeavoring toincrease synergies between music software business and the commercial karaoke business.
Based on these plans the Company is aiming to achieve net sales of 109.0 billion yen, ordinary
profit of 9.4 billion yen, and net income of 4.0 billion yen for the fiscal year to March 2003.

6

DAIICHIKOSHO

CO.,

LTD.

Consolidated balance sheet
Years ended March 31; Millions of yen

2001

%

2002

36.2

22,11014,740
9
7,376
1,194
4,219
(1,400)48,25037.6

11,924
7,208
10,04017,054
84
1,765
48,077

4.3

1,336
6,811
8,148

21.9
63.8
100.0

4,337
3,816
2,038
2,251
12,312
5,204(3,363)
26,59982,825131,075%

Year-on-yearchange36.8(2,117)
2,003
(302)
3,085
(388)
1,920
(755)
3,445

36.7

(581)
654
615
911
(218)
125
1,506

6.2

1,336
1,528
2,864

20.3
63.2
100.0

(814)
(190)
244
(268)
433
78
(516)
3,854
7,300

Current assets
Cash and deposits
Trade notes and accounts receivable - total
Marketable securities
Inventories
Deferred income taxes
Other current assets
Allowance for doubtful accounts

24,227
12,736
312
4,290
1,582
2,298
(644)
44,804

Fixed assets
Property, plant and equipment
Buildings and structures
Karaoke equipment for rental
Karaoke-cabin facilities
Land
Construction in progress
Other property, plant and equipment

12,505
6,554
9,424
16,142302
1,639
46,570Intangible fixed assets
Consolidation adjustments account
Other intangible fixed assets
Investments and other assets
Investments in securities
Long-term loans
Deferred income taxes
Deferred income taxes arising from revaluation
Leasehold deposits
Other investments and other assets
Allowance for doubtful accounts
Total fixed assets
Total assets

5,283
5,283
5,152
4,007
1,794
2,251
12,5804,771(3,441)
27,11678,970123,775

7

DAIICHIKOSHO

CO.,

LTD.

%

Year-on-yearchange

33.7

2,183
644
2,152
545
48
(106)
440
5,908

28.0
59.0
1.7

14,30016,404
249
2,642
1,182
34,77878,992
2,169

26.5
60.2
1.7

(2,550)
1,412
249
1,089
(288)
198
111
6,020
43

12,34824,000(25,431)37,782(175)
159
48,683(5)
48,67810.0
19.4(20.6)
30.5
(0.1)
0.1
39.3
(0.0)
39.3

12,34824,000(25,189)
38,889(352)
233
49,929(15)
49,914

9.4
18.3(19.2)
29.7
(0.3)
0.2
38.1
(0.0)
38.1

241
1,107
(176)
73
1,245
(9)
1,235

123,775100.0

131,075

100.0

7,300

Years ended March 31; Millions of yen

2001

%

2002

31.0

7,697
23,135
5,871
2,593
1,080
869
2,966
44,213

16,85014,991
1,552
288
984
34,666
72,971
2,125

Current liabilities
Trade notes and accounts payable - total
Short-term borrowings - total
Accounts payable - other
Income taxes payable
Allowance for bonuses
Unrealized profit on installment sales
Other current liabilities

5,513
22,490
3,718
2,048
1,031
976
2,525
38,304Long-term liabilities
Convertible bonds
Long-term borrowings
Deferred income taxes
Allowance for retirement benefits
Consolidation adjustments account
Other long-term liabilities
Total liabilities

Minority interest in consolidated
subsidiaries
Shareholders' equity
Common stock
Additional paid-in capital
Unrealized gains or losses on land valuation
Consolidated retained earnings
Unrealized gains or losses on securities
Foreign currency conversion adjustments
Treasury stock
Total liabilities, minority interests and shareholders'equity8

DAIICHIKOSHO

CO.,

LTD.

Consolidated statement of income
2001

%

2002

%

Year-on-yearchange (%)

Net sales
Cost of sales
Gross profit before adjustment for unrealized profit
on installment sales

86,73048,98037,749

100.0
56.5
43.5

98,591
55,71042,880

100.0
56.5
43.5

113.7
113.7
113.6

Unrealized profit on installment sales - reversal
Unrealized profit on installment sales - deferred

185
123
62
37,811
29,356
8,454

0.1
43.6
33.9
9.7

269
162
106
42,98733,478
9,508

0.1
43.6
34.0
9.6

113.7
114.0
112.5

3.1

685
41
961
1,688

1.7

63.3

3.1
9.7

707
654
398
410
103
475
2,749
8,447

2.7
8.6

102.1
100.2

Years ended March 31; Millions of yen

Gross profit on sales
Selling, general and administrative expenses
Operating income
Non operating income
Interest and dividend income
Profit on retirement of convertible bonds
Interest in profit of investment partnerships
Amortization of consolidated adjustments
Other non operating income

1,040
285
263
21
1,057
2,668

Non operating expenses
Interest expenses
Loss on disposal of inventories
Loss on valuation of inventories
Provision for allowance for doubtful accounts
Equity in loss of affiliated companies
Other non operating expenses

913
156
611
450
560
2,692
8,430

Ordinary income
Extraordinary gain
Gain on sales of fixed assets
Gain on sales of investment securities
Reversal of allowance for doubtful accounts
Gain resulting from change in retirement benefit
accounting standards

73
1,253
151
197
1,675

Extraordinary loss
Loss on disposal of fixed assets
Loss on valuation of investment securities
Loss on valuation of memberships in leisure facilities
Directors' retirement allowances
Provision for doubtful accounts
Loss on sales of investment securities
Income before income taxes and minority interestin consolidated subsidiaries
Income taxes - current
Income taxes - deferred
Minority interest in consolidated subsidiaries
Net income

9

4
532
50
1.9

588

0.6

35.1

970
1,046
173
92
429
276
2,989

3.4

704
1,036
17
498
2,256

2.3

75.5

7,116

8.2

6,779

6.9

95.3

2,835
981
220
3,079

3.3
1.1
0.2
3.6

3,515
97
(138)
3,304

3.6
0.1
(0.1)
3.3

124.0
10.0
(62.8)
107.3

DAIICHIKOSHO

CO.,

LTD.

Consolidated statement of retained earnings
Years ended March 31; Millions of yen

Retained earnings at beginning of year
Decrease in retained earnings
Dividends
Bonuses to directors and corporate auditors
Disposition of unrealized gains or losses on valuation
Retirement of treasury stock
Decrease due to merger of consolidated subsidiaries
Net income
Retained earnings at end of year

10

2001

2002

35,45037,782

656
91
747
3,079
37,782

656
88
241
836
375
2,197
3,304
38,889DAIICHIKOSHO

CO.,

LTD.

Consolidated statement of cash flow
Years ended March 31; Millions of yen

Cash flows from operating activities
Income before income taxes and minority interest inconsolidated subsidiaries
Depreciation
Increase (decrease) in allowance for doubtful accounts
Interest and dividend income
Profit on retirement of convertible bonds
Loss (gain) on sales of investment securities
Interest in profit of investment partnerships
Interest expenses
Loss (gain) on disposal of fixed assets
Loss on valuation of investment securities
Decrease (increase) in trade receivables
Increase (decrease) in trade payables
OthersSubtotalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Increase in time deposits
Proceeds from decrease in time deposits
Payments for purchase of marketable securities
Proceeds from sales of marketable securities
Payments for acquisition of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for acquisition of intangible fixed assets
Payments for purchase of investment securities
Proceeds from sales of investment securities
Payments for acquisition of subsidiary's capital
Payments for loans
Proceeds from collection of loans
Payments of leasehold deposits
Proceeds from repayments of leasehold deposits
Dividend from business and investment partnerships
OthersNet cash used in investing activities
Cash flows from financing activities
Net decrease in short-term borrowings
Proceeds from long-term debt
Payments for long-term debt
Payments for retirement of convertible bonds
Dividends
Payments for purchase of treasury stock
OthersNet cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents due to increase in number of
newly consolidated subsidiaries
Cash and cash equivalents at end of year

11

2001

2002

7,116

6,779

9,582
681
(1,040)
(285)
(975)
(263)
913
1,037
1,220
(679)
(15)
(832)
16,4591,032(909)(1,747)
14,835

10,262
926
(685)
(41)
(532)
31
707
699
1,053
412
(834)
(675)
18,103679(731)(3,241)
14,810(2,149)2,931(100)(8,513)
2,213(1,299)(2,878)3,719(60)(1,432)
1,190(1,877)357
488
62(7,350)(1,787)2,823
101(8,774)388(4,235)(1,340)2,466(779)(1,125)
1,193(1,230)
891
221
(21)
(11,206)(6,659)11,011(13,696)(3,664)
(657)
(18)
3
(13,682)43(6,153)27,653-444
12,649(14,777)(2,508)
(652)
(865)
71
(5,638)11(2,022)
21,499839

21,49920,317DAIICHIKOSHO

CO.,

LTD.

Assumptions underlying preparation of consolidated financial statements
Item

Assumptions underlying preparation of consolidated financial statements

1. Item relating to scope of
consolidation(1) Number of consolidated subsidiaries: 36(2) Names of major non consolidated subsidiaries:
Because of the small size of their operations, Union Eiga Co., Ltd., Crown MusicEnterprise Co., Ltd. and Zoom Republic have been excluded from consolidation on the
grounds of lack of materiality(1) Affiliate accounted for by the equity method: None
(2) Affiliate not accounted for by the equity method:
Because of its small impact on profits, Union Eiga Co., Ltd., Crown Music EnterpriseCo., Ltd. and Zoom Republic have not been consolidated under the equity method on
the grounds of lack of materiality

2. Item relating toapplication of the equity
method3. Item relating to the fiscal
years of subsidiaries

4. Items related toaccounting standards

The following consolidated subsidiaries have fiscal-year ends that differ from that of thereporting company. In preparing the consolidated financial statements, the Company used
the financial statements prepared by these subsidiaries as of their respective year-end
dates. In the event that an important transaction occurs between the year-end dates andthe date of consolidated closing, the Company makes the necessary adjustments forpurposes of consolidation.
Companies with December 31 year-ends: Shanghai Sogei Ongaku Goraku Co., Ltd.;
Saha Daiichi Kosho Co., Ltd.
Companies with March 20 year-ends: Nippon Crown Co., Ltd.; Tokuma Japan
Communications(1) Standards and methods of valuation for important assets{1} Marketable and investment securities
Bonds held to maturity: cost amortization method (straight line)
Other securities:
Quoted securities: market value method, based on market prices etc.
Unquoted securities: valued at cost using the moving average method{2} Inventories
Valued at cost, using the moving average method(2) Depreciable assets and methods of depreciation{1} Tangible fixed assets: declining-balance method (certain buildings, however, aredepreciated on a straight-line basis){2} Intangible fixed assets: straight-line method(3) Standards for important allowances{1} Allowance for doubtful accounts: allowance recognized on the basis of a statutory
deduction ratio{2} Reserve for bonuses: estimated-payment standard{3} Reserve for employees' retirement benefits: amounts based on retirement-benefit
liabilities and estimated pension assets as of the end of the fiscal year(4) Standard for converting foreign currency-denominated assets and liabilities
Foreign currency-denominated assets and liabilities are converted into yen at market
rates on the day of the closing of accounts, with any gains or losses from conversion
recognized on the income statement. Any gains or losses resulting from theconversion at current market rates of assets, liabilities, revenues or expenses ofoverseas subsidiaries etc. are debited or credited to the foreign currency adjustment
account of the shareholders’ equity section of the balance sheet.
(5) Accounting for significant lease transactions
Financing leases are treated as ordinary rental transactions(6) Hedge accounting methods
The Company hedges against risks of interest rate fluctuations by engaging in interest
rate swap transactions(7) Others{1} Accounting for installment sales: profits on installment sales are deferred{2} Accounting for consumption taxes: tax-exclusion method

12

DAIICHIKOSHO

CO.,

LTD.

Item

Assumptions underlying preparation of consolidated financial statements

5. Amortization of
consolidated adjustment
account
6. Scope of funds in the
consolidated statement ofcash flow

Amortized in equal installments over a 5 or 15 years period

Funds are defined as cash on hand, readily withdrawable deposits, and short-term
investments with maturities of less than three months from date of purchase

Notes(Consolidated balance sheet-related)
Millions of yen

2001

2002

1. Aggregate amount of depreciation on fixed assets
49,55150,716
2. Guarantee liabilities
2,113
1,329
3. Assets provided as collateral
23,90322,550
Secured liabilities
18,925
21,271
4. The Company (Daiichikosho Co., Ltd.) revalued its land holdings as provided for under the “Law Relating to the
Revaluation of Land.” Differences resulting from this revaluation were debited to (decreased) the shareholders’ equity
section of the balance sheet.
(1) Date of revaluation of land: March 31, 2001
(2) Method of revaluation: revaluations based on land tax-related
appraisals, to which reasonable adjustments were made(3) Difference between the total market value of revalued land as of theend of last fiscal year and the total book value of such land after
revaluation

13

(532)

-

DAIICHIKOSHO

CO.,

LTD.

Segment information
Segment information by business category
Commercial
karaokebusiness

Karaokecabin
business

Contents
businessMusicsoftwarebusiness

Otherbusiness

Total

Sales
External customer sales
Intersegment transactions
and eliminations

53,745
149

21,980
-

9,097
-

9,109
108

4,658
392

98,591651(651)

98,591-

Total
Operating expenses
Operating income

53,89545,4948,400

21,98020,557
1,423

9,097
7,835
1,262

9,218
9,550
(332)

5,051
4,355
696

99,242
87,792
11,449(651)
1,290(1,941)

98,591
89,082
9,508

AssetsDepreciation
Capital expenditure

65,206
6,371
8,209

24,037
1,957
2,958

4,964
859
941

14,581
54
6

9,647
655
1,022

118,436
9,898
13,138

12,63961
23131,075
9,960
13,161

Commercial
karaokebusiness

Karaokecabin
business

Contents
business

Otherbusiness

Total

Eliminations

Consolidated

Sales
External customer sales
Intersegment transactions
and eliminations

53,680175

23,041
-

5,604
-

4,403
352

86,730527(527)

86,730-Total
Operating expenses
Operating income

53,85545,973
7,882

23,041
20,847
2,193

5,604
6,038
(434)

4,755
3,803
952

87,25776,663
10,593(527)
1,611(2,139)86,73078,275
8,454

AssetsDepreciation
Capital expenditure

67,6886,025
7,466

23,768
1,925
1,918

3,870
873
716

9,747
544
1,190

105,075
9,368
11,292

18,70074
49

123,775
9,443
11,342Millions of yen
2002

Millions of yen

Eliminations Consolidated

2001

Changes in business categories
1. Operations previously categorized under “Sales and rental of merchandise and products” are now
included under “Commercial karaoke business.”
2. The Company now classifies as “Contents business” both its customized ring tone operations (theprincipal component of “e-business”), which it had previously included under “Other business,”and its “Satellite broadcasting business.”
3. The Company has added “Music software business” as a new business classification.
The segment information that is shown above for the consolidated fiscal year to March 2001 has
been adjusted to conform to the new classifications.
Segment-related businesses
1. Commercial karaoke businessIn this segment the group sells and rents karaoke equipment and karaoke software, and provides
karaoke streaming services for telecommunications-based systems.
2. Karaoke cabin businessIn this segment the group rents karaoke cabins on an hourly basis and provides food and drink.

14

DAIICHIKOSHO

CO.,

LTD.

3. Contents businessIn the area of e-business division, the Company distributes customized ring tones to users ofcellular phones, while in the area of satellite broadcasting division, it uses the
direct-broadcast-satellite provider, Sky PerfecTV, as a platform for broadcasting programs over
two television channels and 100 radio channels.
4. Music software businessIn this segment, the Company produces and sells software for music and video.
5. Other business
Other operations include a real estate rental operation, restaurants and other activities.

15

DAIICHIKOSHO

CO.,

LTD.

2001

%

2002

33.8

9,043
2,058
6,160
3,359
108
1,230
347
822
698
626
198
(525)
24,128

27.4

5,279
510
673
2,656
6,065
6,051
87
21,324

6.0

44
11
3,503
2,432
211
6,204

32.8
66.2
100.0

3,376
7,857
833
7,067
1,207
133
592
2,251
951
9,233
693
(4,395)29,80257,33181,459Non consolidated balance sheet
Years ended March 31; Millions of yen%

Year-on-yearchange29.6(3,959)
223
648
1,361
(81)
(112)
309
53
(196)
(106)
(408)
(68)
(2,336)

26.2

(489)
(93)
(118)
248
310
1
(66)
(206)

7.6

(4)
1,056
453
8
1,514

36.6
70.4
100.0

(1,729)
4,832
27
833
230
(1)
137
102
(331)
(250)
260
4,111
5,419
3,083

Current assets
Cash and deposits
Trade notes receivable
Trade accounts receivable
Merchandise
Finished products
Work in process
Advances paid
Prepaid expenses
Deferred income taxes
Current portion of long-term loans
Other current assets
Allowance for doubtful accounts

13,003
1,834
5,511
1,997
190
1,343
37
768
894
732
606
(456)
26,465

Fixed assets
Property, plant and equipment
Buildings
Structures
Tools, furniture and fixtures
Karaoke equipment for rental
Karaoke-cabin facilities
Land
Other property, plant and equipment

5,768
604
792
2,407
5,754
6,049
154
21,531Intangible fixed assets
Leaseholds
Trademarks
Software
Audio-visual software
Other intangible fixed assets

44
15
2,447
1,979
203
4,689

Investments and other assets
Investment in securities
Capital stock of affiliated companies
Investments other than securities
Long-term loans
Reorganization, bankruptcy and other claims
Long-term prepaid expenses
Deferred income taxes
Deferred Income taxes arising from revaluation
Prepaid pension assets
Deposits and guarantee money
OthersAllowance for doubtful accounts

5,105
3,024
805
6,233
977
134
454
2,251
849
9,565
944
(4,656)
25,69051,911
78,376

Total fixed assets
Total assets

16

DAIICHIKOSHO

Years ended March 31; Millions of yen

CO.,

LTD.

2001

%

2002

21.0

3,152
1,938
4,321
2,467
4,530
89
1,423
87
309
665
332
19,31825.4
46.4

14,300
4,176
959
390
19,82639,145%Year-on-yearchange

23.7

193
(428)
2,357
(780)
1,366
10
100
(155)
135
(5)
76
2,870

24.3
48.0

(2,550)
2,388
63
7
(91)
2,779

Current liabilities
Notes payable - trade
Accounts payable - trade
Short-term borrowings
Current portion of long-term borrowings
Accounts payable – otherAccrued expenses
Income taxes payable
Consumption taxes payable
Unrealized profit on installment sales
Allowance for bonuses
Other current liabilities

2,958
2,367
1,964
3,247
3,163
79
1,322
242
173
671
256
16,447Long-term liabilities
Convertible bonds
Long-term borrowings
Allowance for retirement benefits
Other long-term liabilities

16,850
1,788
896
383
19,91736,365

Total liabilities

Shareholders' equity
Common stock
Additional paid-in capital
Legal reserves
Unrealized gains or losses on land valuation
Retained earnings
Unappropriated retained earnings

12,34824,000415(25,431)
29,0001,850
30,850(172)
42,011
78,376

Unrealized gains or losses on securities
Treasury stock
Total liabilities and shareholders' equity

17

15.7
30.6
0.5
(32.4)

39.4
(0.2)
53.6
100.0

12,34824,000485(25,189)
29,4501,586
31,036(351)(15)
42,31481,459

15.1
29.5
0.6
(30.9)

38.1
(0.4)
(0.0)
52.0
100.0

70
241
450
(263)
186
(179)
(15)
303
3,083

DAIICHIKOSHO

CO.,

LTD.

Non consolidated statement of income
2001

%

2002

%

Year-on-yearchange (%)

Net sales
Cost of sales
Gross profit before adjustment for unrealized profit
on installment sales

61,20038,22422,976

100.0
62.5
37.5

65,48940,877
24,611

100.0
62.4
37.6

107.0
106.9
107.1

Unrealized profit on installment sales - reversal
Unrealized profit on installment sales - deferred

135
135
(0)
22,976
18,429
4,546

(0.0)
37.5
30.1
7.4

108
243
(135)
24,475
18,583
5,892

(0.2)
37.4
28.4
9.0

106.5
100.8
129.6

2.9

277
41
148
406
873

1.3

48.8

2.7
7.6

215
202
280
404
331
1,434
5,332

2.2
8.1

86.7
113.9

0.9

29.0

2.5
6.5
3.1
0.3
3.1

56.5
115.3
116.9
24.2
174.6

Years ended March 31; Millions of yen

Gross profit on sales
Selling, general and administrative expenses
Operating income
Non operating income
Interest and dividend income
Profit on retirement of convertible bonds
Commissions and fees
Interest in profit of investment partnerships
Other non operating income

512
285
194
263
536
1,791

Non operating expenses
Interest expenses
Loss on disposal of inventories
Loss on valuation of inventories
Provision for allowance for doubtful accounts
Other non operating expenses

303
104
535
431
280
1,654
4,683

Ordinary income
Extraordinary gain
Gain on sales of fixed assets
Gain on sales of investment securities
Reversal of allowance for doubtful accounts
Gain resulting from change in retirement benefit
accounting standards

4
1,250
320
312
1,888

Extraordinary loss
Loss on sales and disposal of fixed assets
Loss on valuation of investment securities
Loss on valuation of membership in leisure facilities
Directors' retirement allowances
Provision for doubtful accounts
Loss on sales of investment securities
Valuation loss on shares in affiliates

658
1,046
142
347
276
420
2,891
3,680
1,742
781
1,157
693
-

Income before income taxes
Income taxes – current
Income taxes – deferred
Net income
Unappropriated retained earnings brought forward
Disposition of unrealized gains or losses on
valuation
Retirement of treasury stock
Unappropriated retained earnings at end of year

1,850

18

4
488
53
3.1

4.7
6.0
2.8
1.3
1.9

546
467
1,018
10
137
1,634
4,244
2,036
188
2,019
644
241
836
1,586

DAIICHIKOSHO

CO.,

LTD.

Proposal for appropriation of retained earnings
Years ended March 31; Millions of yen

2001

2002

Unappropriated retained earnings at end of year
Appropriation of retained earnings
Legal reserves
Dividends
Bonuses to directors and corporate auditors
General reserves
Unappropriated retained earnings to be carried forward

1,850
1,206
70
656
30
450
644

1,586
988
658
30
300
598

Important accounting policies
Item

Accounting policies

1. Methods of valuation formarketable and investment
securities(1) Shares in subsidiaries and affiliated companies: valued at cost using the moving
average method(2) Other securities:
Quoted securities: market value method, based on market prices etc.
Unquoted securities: valued at cost using the moving average method(1) Merchandise and finished goods: valued at cost, using the moving averagemethod(2) Work in process: valued at cost, using the specific identification method

2. Methods of valuation forInventories
3. Depreciable assets andmethods of depreciation(1) Tangible fixed assets: declining-balance method (certain buildings, however, aredepreciated on a straight-line basis)(2) Intangible fixed assets: straight-line method

4. Standards for important
allowances(1) Allowance for doubtful accounts: allowance recognized on the basis of a statutory
deduction ratio(2) Reserve for bonuses: estimated-payment standard(3) Reserve for employees' retirement benefits: amounts based on retirement-benefit
liabilities and estimated pension assets as of the end of the fiscal year

5. Accounting for significant
lease transactions
6. Accounting for installment
sales
7. Accounting for
consumption taxes

Financing leases are treated as ordinary rental transactions
Profits on installment sales are deferred
Tax-exclusion method

19

DAIICHIKOSHO

CO.,

LTD.

Notes
(Non consolidated balance sheet-related)
Millions of yen

2001

2002

1. Aggregate amount of depreciation on fixed assets
23,254
23,5202. Guarantee liabilities
8,285
6,624
3. Assets provided as collateral
5,536
4,505
Secured liabilities
4,657
5,482
4. The Company (Daiichikosho Co., Ltd.) revalued its land holdings as provided for under the “Law Relating to the
Revaluation of Land.” Differences resulting from this revaluation were debited to (decreased) the shareholders’ equity
section of the balance sheet(1) Date of revaluation of land: March 31, 2001
(2) Revaluations based on land tax-related appraisals, to which reasonableadjustments were made(3) Difference between the total market value of revalued land as of theend of last fiscal year and the total book value of such land after
revaluation

20

(532)

-

DAIICHIKOSHO

CO.,

LTD.

Management
President
Senior Managing Director andSenior Executive Corporate Officer

Tadahiko Hoshi
Tatsuyoshi Yoneda

Senior Managing Director andSenior Executive Corporate Officer

Tomio Suzuki

Executive Director,
Administration Headquarters

Managing Director andSenior Executive Corporate Officer

Shinichi Koshimizu

Vice Executive Director,
Sales Management Headquarters

Managing Director andSenior Executive Corporate Officer

Shinichi Matsukawa

Vice Executive Director,
Sales Management Headquarters

Managing Director andSenior Executive Corporate Officer

Hiroshi Mino

Executive Director,
Development Headquarters

Standing Statutory Auditor
Standing Statutory Auditor
Statutory Auditor
Statutory Auditor

Juichi Ishikawa
Haruhiko Tamura
Kumiko Takahashi
Masumi Arichika

Corporate officer

Shinji Arima

General Manager,
Auditing Department

Corporate Officer

Takachika Narahara

General Manager,
Corporate Sales Department

Corporate Officer

Yukio Hoshi

General Manager,
Satellite Broadcasting DivisionCorporate Officer

Saburo Hayashi

General Manager,
Branch Sales Department

Corporate Officer

Tomohiro Midorikawa

General Manager,
Subsidiary Sales Department

Corporate Officer

Yasuyuki Suzuki

General Manager,
Accounting Department

Corporate Officer

Hirotsune Tahara

Vice Executive Director,
Administration Headquarters, andGeneral Manager, General Affairs Dept.

Corporate Officer

Eiji Hata

Corporate Officer (Newly appointed)

Yuji Yamamoto

Corporate Officer

Shunichi Sadasue

General Manager,
Finance Department
Executive Director,
Production Headquarter
General Manager,
Sound Source Production Department

21

Executive Director,
Sales Management Headquarters