DAIICHIKOSHO

CO.,

LTD.

Financial Results in the Year ended March 2001

May 21, 2001

DAIICHIKOSHO CO., LTD.
Company code number: 7458
Shares traded: OTC
Location of headquarters: 5-5-26, Kita-Shinagawa, Shinagawa-ku, Tokyo
Please address all communications to: Tomio Suzuki, Senior Managing Director
Administration Division
Phone: (03) 3280-2151
Date of Board of Directors’ meeting for approval of financial results: May 21, 2001
Adoption of system of interim dividends: Yes
Date of Regular General Meeting of Shareholders: June 27, 2001
Adoption of U.S. accounting standards : No

Financial highlights
Years ended March 31; Millions of yen

1997

1998

1999

2000

2001

Consolidated
Net sales

116,778

105,116

94,681

88,39786,730Ordinary profit

7,122

3,222

5,998

9,240

8,430

Net income

3,375

1,007

2,307

3,131

3,079

Shareholders' equity

62,48462,89064,481

71,79848,678

Total assets

196,064

174,921

168,135

159,159

123,775

Shareholders' equity per share (Yen)

4,165.61

3,354.27

3,439.13

3,829.25

2,596.50

Net income per share (Yen)

225.0455.20

123.09167.01

164.28Net income per share, fully diluted (Yen)

200.1251.67

111.91152.73

153.37

Net cash used in operating activities

-

-

-

14,70914,835

Net cash used in investment activities

-

-

-

(416)

(7,350)Net cash provided by financing activities

-

-

-

(15,358)(13,682)

Cash and cash equivalents at end of period--

28,71827,653

21,499Non consolidated
Net sales

84,54675,39563,302

59,884

61,200Ordinary profit

5,502

4,185

2,870

4,449

4,683

Net income

3,646

2,438

909

1,078

1,157

Shareholders' equity

61,97563,86564,08067,14542,011

Total assets

145,029

125,422

120,088

112,651

78,376

Shareholders' equity per share (Yen)4,131.63

3,406.10

3,417.56

3,581.05

2,240.57

243.10133.66

48.53

57.50

61.71

Equity ratio (%)

42.7

50.9

53.4

59.6

53.6

Return on equity (%)

6.0

3.9

1.4

1.6

2.1

PER

17.2

13.5

29.1

51.7

32.6

Net income per share (Yen)1Consolidated
Years ended March 31
Net sales
Ordinary profit
Net income

1997
116,778
7,122
3,375

1998
105,116
3,222
1,007

1999
94,681
5,998
2,307

2000
88,397
9,240
3,131

2001
86,730
8,430
3,079

2000
59,884
4,449
1,078

2001
61,200
4,683
1,157

million of yen

Net sales
120,000
100,000
80,00060,00040,00020,000
0

1997

1998

1999

1998

1999

2000

2001

Ordinary profit
Net income
million of yen

10,000
8,000
6,000
4,000
2,000
0

1997

Non consolidated
Years ended March 31
Net sales
Ordinary profit
Net income

1997
84,546
5,502
3,646

1998
75,395
4,185
2,438

2000

2001

1999
63,302
2,870
909

million of yen

Net sales
100,000
80,00060,00040,00020,000
0

1997

1998

1999

2000

1999

2000

2001

Ordinary profit
Net income
million of yen

6,000
5,000
4,000
3,000
2,000
1,000
0

1997

1998

1-2

2001

DAIICHIKOSHO

CO.,

LTD.

Group organization
The Company's corporate group comprises the Company, 36 subsidiaries, and 2 affiliated companies.
Its principal business is the selling and renting of karaoke products, the operating of karaoke cabin
facilities, and the broadcasting of programs as an outside service provider over satellite channels.
The following is a graphic presentation of the group’s operations.

Hokkaido Daiichikosho Co., Ltd.
Tohoku Daiichikosho Co., Ltd.
Niigata Daiichikosho Co., Ltd.
Taito Daiichikosho Co., Ltd.
Tokai Daiichikosho Co., Ltd.
Daiichikosho Kinki Co., Ltd.
Kyushu Daiichikosho Co., Ltd.
18 other companies[Factoring of the Company’s and its subsidiaries’
installment sales receivables; personal loans]
DK Finance, Ltd.

(Production and sale of software
for music and video)
Gauss Entertainment Co., Ltd.
(Acquisition and management of copyrights)
DK Music Publishing Co., Ltd.
(Manufacture and sale of fruit wines)
Maruhagi Yoshu Kogyo, Inc.

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

(Other overseas subsidiaries)
Shinsho (Hong Kong) Co., Ltd.

(Non consolidated subsidiaries)(Affiliate accounted for by the equity method)
Nippon Crown Co., Ltd.

Daiichi Kosho Europe GmbH *2
H. K. Electronik und Musik GmbH *2
Taiwan Daiichikosho Co., Ltd. *2(Affiliate not accounted for by the equity method)
Union Eiga Co., Ltd.

Sale and rental of merchandise and products(Overseas subsidiaries)
Shanghai Sogei Ongaku
Goraku Co., Ltd.
Saha Daiichi Kosho Co., Ltd.

Operation of karaoke cabins(Notes) 1. *1 indicates companies in dormancy.
2. *2 indicates companies that are now being liquidated.

2

Provision of services

Overseas users(Overseas subsidiaries)
Daiichikosho (Hong Kong), Inc.
Kankoku Daiichikosho Co., Ltd. *1
Daiichikosho (Singapore), Inc. *1

DAIICHIKISHO CO., LTD. (Reporting company)

Domestic users(Domestic sales subsidiaries)

DAIICHIKOSHO

CO.,

LTD.

1. Management policy(1) Basic management policy
The Daiichikosho group has adopted the corporate credo 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 content that we have accumulated todate, the goal will be to create companies capable of responding to the expectations of all of our
stakeholders. We will accomplish this through the continued expansion of business centering on
karaoke and through the generation of high rates of return.
(2) Basic policy on dividends
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) Targeted performance indicesWe believe that an important index of management performance is return on equity. The groupwill aim to achieve an ROE of above 9.5 percent in the year to March 2003 and above 12
percent in the year to March 2005.
(4) Outstanding issues facing the group{1} Expansion of telecommunications-based karaoke 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} Improvement of profit margins in karaoke cabin business
By continuing to close inefficient and unprofitable karaoke cabins of less than 20 rooms per
facility, and simultaneously opening large facilities of around 50 rooms per outlet, the groupwill seek to improve the profitability of its karaoke cabin operations.

3

DAIICHIKOSHO

CO.,

LTD.

{3} Reducing losses in the broadcasting business
The group currently uses the digital satellite broadcaster, Sky PerfecTV, as a platform forprogramming which is delivered over two television channels and 100 radio channels. By
increasing the number of subscribers to this service hereafter, it will aim to reverse thedivision’s operating losses and achieve profitability at the earliest possible date.
{4} Reducing total assets
By revaluing its land assets and establishing credit commitment line agreements with its
major banks, the group made progress in reducing its outstanding debt and in systematicallyshrinking its asset base. It will also begin a systematic effort to reduce outstanding debt at its
subsidiaries hereafter.

2. Financial Performance(1) Results for the year ended March 2001
During the year to March 2001, the Japanese economy continued to falter amid worsening
deflationary trends.
In the karaoke industry, replacement demand for new products weakened, spurring an increasing
number of equity-based and operational alliances among industry participants.
Under these conditions the Daiichikosho group sought to increase its market share by launchinga new “Cyber DAM” product in October.
In the karaoke cabin division, the group continued to close unprofitable outlets and to open newlarge-scale facilities.
The group also took steps to increase its subscriber base in the satellite broadcasting business,and to expand the scope of services in this division by launching a customized ring-tone
operation targeting users of cellular phones.
The group took steps to strengthen itself financially by recognizing valuation losses such items
as unlisted shares, entering into credit commitment lines with major banks, and revaluing landholdings.

4

DAIICHIKOSHO

CO.,

LTD.

(2) Segment-related information (percentage changes, year-on-year)
Sales and rental of merchandise and products
Sales: 53,680 million yen (-3.5%)
Operating profit: 7,882 million yen (+0.7%)
In this segment the group sells and rents karaoke equipment, and provides karaoke streaming
services for telecommunications-based systems.
The group’s launch of its new “Cyber DAM” product in October 2000 resulted in an increase in
number of units shipped in this segment. Sales nevertheless declined, because of weaker prices
for such equipment. Rental income also declined, reflecting lower rental rates, while revenues inkaraoke streaming services increased sharply.
Karaoke cabin operations
Sales: 23,041 million yen (-6.1%)
Operating profit: 2,193 million yen (+52.7%)
In this segment the group rents karaoke cabin on an hourly basis and provides light food anddrinks.
During the term, the group opened seven new facilities and closed 16 unprofitable outlets. Sales
declined because closures outpaced new openings, but operating profit increased as a result of
improved profit margins.
Satellite broadcasting operations
Sales: 4,083 million yen (-34.4%)
Operating deficit: 1,091 million yen (improvement of 41.0%)
In this segment the group uses the digital satellite broadcaster, Sky PerfecTV, as a platform forproviding services over two television channels and 100 radio channels.
During the term, the commencement of BS digital broadcasting dampened growth of thissegment’s subscription contracts in the second half. However, sales increased because newcontract growth registered during the term exceeded the number of new contracts added lastterm. This enabled the group to report a smaller operating loss.

5

DAIICHIKOSHO

CO.,

LTD.

Other operations
Sales: 5,924 million yen (+14.3%)
Operating profit: 1,608 million yen (+171.7%)
The group’s businesses in this segment span sky sports, real estate rentals, food service, andcustomized ring tones for users of cellular phones.
The latter was added during the term as a new e-business venture, and contributed significantly
to growth in sales and operating profit.
(3) Forecasts for the year to March 2002
Our forecasts assume that genuine economic recovery is still a while away, and that the businessenvironment for the industry will remain treacherous.
The Company is committed to dealing with the significant issues highlighted by its
medium-term management plan. Specifically, it will take vigorous steps to reform its operations
into a content-based business by expanding its telecommunications-based karaoke network, andwill place customer service more squarely in the center of its marketing program. It will continue
to press forward aggressively in opening new karaoke cabin facilities. And, in the area of
e-businesses, it will endeavor to develop new services that utilize the net environment.
Based on the foregoing, the group is forecasting the following results for the year to March
2002: sales, 88,000 million yen; ordinary profit, 8,600 million yen; and net income, 3,300
million yen.

6

DAIICHIKOSHO

CO.,

LTD.

Consolidated balance sheet
Years ended March 31; Millions of yen

2000

%

2001

%

Year-on-yearchangeCurrent assets
Cash31,01324,227(6,785)Trade notes and accounts receivable - total

12,056

12,736679

Marketable securities

4,156

312

(3,844)Inventories

5,667

4,290

(1,376)

Deferred tax assets

1,645

1,582

(62)

Others

2,300

2,298

(1)

Allowance for doubtful accounts

(428)

(644)

(216)

56,41135.5

44,80436.2(11,606)

Fixed assets
Tangible fixed assets
Buildings and structures

14,456

12,505(1,950)

Karaoke equipment for rental

6,225

6,554

329

Karaoke-cabin facilities

10,198

9,424

(773)

Land

43,82016,142(27,677)

390

302

(87)

1,530

1,639

108

Construction in progress
OthersIntangible fixed assets

76,621

48.1

46,57037.6(30,050)

4,205

2.6

5,283

4.3

1,078

Investments and other assets
Investments in securities

2,761

5,152

2,391

Long-term loans

3,951

4,007

55

Deferred tax assets

2,586

1,794

(791)

-

2,251

2,251

Leasehold deposits

11,351

12,5801,228

Other investments and other assets

5,111

4,771

(339)

Allowance for doubtful accounts(3,841)(3,441)

400

Deferred tax assets arising from revaluation

21,92013.8

27,116

21.9

5,196

Total fixed assets

102,747

64.5

78,97063.8(23,776)

Total assets

159,159 100.0

123,775 100.0(35,383)7

DAIICHIKOSHO

Years ended March 31; Millions of yen

CO.,

LTD.

2000

%

2001

%

Year-on-yearchangeCurrent liabilities
Trade notes and accounts payable - total

5,796

5,513

(283)

Short-term loans - total

29,69922,490(7,208)

Accounts payable - other

4,024

3,718

(305)

Income taxes payable

960

2,048

1,087

Reserve for bonuses

1,071

1,031

(39)

Unrealized profit on installment sales

1,038

976

(62)

Others

2,409

2,525

116

45,00028.3

38,30431.0(6,695)Long-term liabilities
Convertible bonds

20,80016,850(3,950)Long-term loans

17,077

14,991(2,085)Reserve for employees' retirement benefits

1,089

1,552

463

259

288

29

1,040

984

(56)

Consolidation adjustments
Others40,265

25.3

34,66628.0(5,599)

53

0.0

-

-

(53)

85,31953.6

72,971

59.0(12,348)

2,041

1.3

2,125

1.7

84

Common stock

12,3487.7

12,34810.0-

Additional paid-in capital

24,00015.1

24,000

19.4

-

-

-

(25,431) (20.6)(25,431)35,45022.3

37,782

30.5

2,332

Unrealized gains or losses on securities

-

-

(175)

(0.1)

(175)

Foreign currency conversion adjustments

-

-

159

0.1

159

71,79945.1

48,683

39.3(23,115)

(0)

(0.0)

(5)

(0.0)

(4)

Total shareholders' equity

71,79845.1

48,67839.3(23,120)

Total liabilities and shareholders' equity

159,159 100.0

123,775 100.0(35,383)

Foreign currency conversion adjustments

Minority interests in consolidated subsidiaries

Shareholders' equity

Unrealized gains or losses on land valuation
Consolidated retained earnings

Treasury stock

8

DAIICHIKOSHO

CO.,

LTD.

Consolidated statement of income
Years ended March 31; Millions of yen

2000

%

2001

%

Year-on-yearchange (%)

Net sales

88,397 100.0

86,730 100.0

98.1

Cost of sales

52,01958.8

48,98056.5

94.2

Gross profit before adjustment for unrealized profit on
installment sales
Unrealized profit on installment sales - reversal

36,37741.2

37,749

43.5

103.8

Unrealized profit on installment sales - deferred

179

185

42

123

137

0.1

62

0.1

45.2

Gross profit on sales

36,51441.3

37,811

43.6

103.6

Selling, general and administrative expenses

30,78734.8

29,356

33.9

95.4

Operating income

5,727

6.5

8,454

9.7

147.6

3.1

38.6

Non operating income
Interest and dividend income

1,152

1,040

Profit on retirement of convertible bonds

862

285

Interest in profit of investment partnerships

3,733

263

Amortization of consolidated adjustments

67

21

Gain on sales of marketable securities

189-

Others

914

1,057

6,919

7.8

2,668

Non operating expenses
Interest expenses

1,117

913

Loss on disposal of inventories

198

156

Loss on valuation of inventories

668

611

Provision for allowance for doubtful accounts-

450

Loss on valuation of marketable securities

258

-

1,163

560

OthersOrdinary profit

3,406

3.8

2,692

3.1

79.0

9,240

10.5

8,430

9.7

91.2

1.9

895.1

Extraordinary gain
Gain on sales of fixed assets

11

73

Reversal of allowance for doubtful accounts

175

151

Gain on sales of investment securites

-

1,253

Gain resulting from change in retirement benefit
accounting standards

-

197

187

9

0.2

1,675

DAIICHIKOSHO

Years ended March 31; Millions of yen

CO.,

LTD.

2000

%

2001

%

Year-on-yearchange (%)

Extraordinary loss
Loss on disposal of fixed assets

2,674

970

Provision for doubtful accounts-

429

Loss on sales of investment securities-

276

Loss on valuation of investment securites

-

1,046

Loss on valuation of memberships in leisure facilities

-

173

777

92

Directors' retirement allowances

3,452

3.9

2,989

3.4

86.6

5,975
1,952

6.8
2.2

7,116
2,835

8.2
3.3

119.1
145.2

Deferred taxes

744

0.9

981

1.1

131.8

Minority interest in consolidated subsidiaries

146

0.2

220

0.2

149.9

3,131

3.5

3,079

3.6

98.4

Net income before taxes for the period
Corporate, inhabitant and enterprises taxes

Net income for the period

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

2000

2001

28,13435,4504,901-

33,03535,450

Dividends - total

656

656

Directors' bonuses

59

91

716

747

Net Income

3,131

3,079

Retained earnings, end of period

35,45037,782

Consolidated retained earnings, beginning of period
Adjustment for tax effect in prior years

Consolidated deductions from retained earnings

10DAIICHIKOSHO

CO.,

LTD.

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

2000

2001

Net cash used in operating activities
Net income before taxes and other adjustments

5,975

7,116

Depreciation

10,321

9,582

(738)

681

(1,152)(1,040)

(862)

(285)

-

(975)

Interest in profit of investment partnerships(3,733)(263)

Interest expenses

1,117

913

Loss (gain) on disposal of fixed assets

2,830

1,037

Loss on valuation of investment securities

-

1,220

Decrease (increase) in trade receivables

2,150

(679)

Increase (decrease) in trade payables

272

(15)

Others343(832)

16,522

16,459Interest and dividend income

1,131

1,032

Interest payments(1,102)(909)

Income tax and others(1,842)(1,747)

14,70914,835

Increase in time deposits(2,864)(2,149)Proceeds from decrease in time deposits

4,606

2,931

Payments for purchase of marketable securities

(533)

(100)

Proceeds from sales of marketable securities

1,321

-

Payments for acquisition of tangible fixed assets(6,160)(8,513)

388

2,213

-

(1,299)(718)(2,878)-

3,719

Payments for loans(610)(1,432)

Proceeds from collection of loans

1,339

1,190

Payments of leasehold deposits(287)(1,877)

Proceeds from repayments of leasehold deposits

1,018

357

Dividend from business and investment
partnerships

2,168

488

(85)

1

(416)

(7,350)

Increase (decrease) in allowance for doubtful
accounts
Interest and dividend income
Profit on retirement of convertible bonds
Loss (gain) on sales of investment securities

Net cash used in investment activities

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

Others11

DAIICHIKOSHO

Years ended March 31; Millions of yen

CO.,

LTD.

2000

2001

Net decrease in short-term borrowings(2,425)(6,659)Proceeds from long-term debt

9,200

11,011

Payments for long-term debt

(16,116)(13,696)

Payments for retirement of convertible bonds(5,357)(3,664)

Dividends

(655)

(657)

Others(2)(15)(15,358)(13,682)-

43

Cash and cash equivalents(1,065)(6,153)

Cash and cash equivalents at beginning of period

28,71827,653

Cash and cash equivalents at end of period

27,653

21,499Net cash provided by financing activities

Effect of exchange rate changes on cash and cash
equivalents

12

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, Taiwan Daiichikosho Co., Ltd. andDaiichi Kosho Europe GmbH have been excluded from consolidation on the groundsof lack of materiality

2. Item relating toapplication of the equity
method(1) Affiliate accounted for by the equity method: Nippon Crown Co., Ltd.
(2) Affiliate not accounted for by the equity method:
Because of its small impact on profits, Union Eiga Co., Ltd. has not been consolidated
under the equity method on the grounds of lack of materiality

3. Items related toaccounting standards(1) Standards and methods of valuation for important assets{1} Marketable and investment securities
Bonds held to maturity: cost amortization method
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

4. Amortization of
consolidated
adjustment account

Amortized in equal installments over a five-year period

5. Scope of funds in the
consolidated statement ofcash flow

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

13

DAIICHIKOSHO

CO.,

LTD.

Notes
(Consolidated balance sheet-related)
Millions of yen

2000

2001

1. Aggregate amount of depreciation on fixed assets

47,72849,551

2. Guarantee liabilities

2,673

2,113

3. Assets provided as collateral

33,99823,90323,19618,925

Secured liabilities

4. The Company (Daiichikosho Co., Ltd.) revalued its land holdings as provided for underthe “Law Relating to the Revaluation of Land.” Differences resulting from thisrevaluation 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) Book value prior to revaluation: 33,732 million yen(4) Book value after revaluation: 6,049 million yen

14

DAIICHIKOSHO

CO.,

LTD.

Segment information
Segment information by type of business

M illions of yen

Sales and rentals
of m erchandiseand products

Karaoke-cabin
operations

Satellite
broadcasting
operations

Other
operations

Total

Elim inations

Consolidated

53,68023,041

4,083

5,924

86,730-86,730

175

-

-

352

527

(527)

-

2001

Sales
Outside custom er sales
Intersegment transactions andelim inations

53,85523,041

4,083

6,276

87,257(527)

86,730Operating expenses

45,973

20,847

5,174

4,667

76,663

1,611

78,275

Operating income

7,882

2,193

(1,091)

1,608

10,593(2,139)8,454

Identifiable assets

67,68823,7682,653

10,964

105,075

18,700123,775

Depreciation

6,025

1,925

869

548

9,368

74

9,443

Capital expenditures

7,466

1,918

629

1,277

11,292

49

11,342

55,63824,538

3,037

5,183

88,397-88,397

218

-

-

211

429

(429)

-

55,857

24,538

3,037

5,394

88,827(429)

88,397

Operating expenses

48,032

23,102

4,885

4,801

80,821

1,847

82,669Operating income

7,825

1,436

(1,848)

592

8,005

(2,277)

5,727

Identifiable assets

76,41723,896

2,927

29,229132,471

26,687

159,159

Depreciation

6,088

2,288

1,026

476

9,879

67

9,946

Capital expenditures

5,431

1,167

617

725

7,941

23

7,965

2000

Sales
Outside custom er sales
Intersegment transactions andelim inations

Segment-related businesses
1. Sales and rentals of merchandise and products
In this segment the group sells and rents karaoke equipment and karaoke software, and provides
karaoke streaming services for telecommunications-based systems.
2. Karaoke cabin operations
In this segment the group rents karaoke cabins on an hourly basis and provides light food anddrinks.
3. Satellite broadcasting operations
In this segment the group uses the digital satellite broadcaster, Sky PerfecTV, as a platform toprovide services over two television channels and 100 radio channels.
4. Other operations
In this segment the group’s businesses include sky sports, real estate rentals, food service, andcustomized ring tones for users of cellular phones.

15

DAIICHIKOSHO

CO.,

LTD.

Non consolidated balance sheet
Years ended March 31; Millions of yen

2000

%

2001

%

Year-on-yearchangeCurrent assets
Cash

18,14913,003(5,146)

Notes receivable - trade

1,872

1,834

(37)

Accounts receivable - trade

4,498

5,511

1,013

Marketable securities

4,123

-

(4,123)Merchandise

3,059

1,997

(1,061)Finished products

336

190

(146)

Work in process

1,265

1,343

78

Prepaid expenses

789

768

(21)

Deferred tax assets

873

894

21

1,416

732

(683)

Others

613

644

30

Allowance for doubtful accounts

(218)

(456)

(238)

Long-term loans to affiliated companies due within one
year

36,78032.6

26,46533.8(10,315)

Fixed assets
Tangible fixed assets
Buildings

7,429

5,768

(1,660)

Structures

733

604

(128)

Tools, furniture and fixtures

905

792

(113)

Karaoke equipment for rental

2,223

2,407

184

Karaoke-cabin facilities

5,962

5,754

(208)

Land

33,4796,049(27,429)

Others

286

154

(131)

51,01945.3

21,531

27.4(29,488)

Intangible fixed assets
Leaseholds

44

44

-

Trademarks

20

15

(5)

Software

1,497

2,447

949

Audio-visual software

1,846

1,979

132

204

203

(1)

Others

3,614

16

3.2

4,689

6.0

1,075

DAIICHIKOSHO

Years ended March 31; Millions of yen

CO.,

LTD.

2000

%

2001

%

Year-on-yearchangeInvestments and other assets
Investment in securities

2,711

5,105

2,394

Capital stock of affiliated companies

3,347

3,024

(322)

Investments other than securities

843

805

(38)

Long-term loans

7,637

6,233

(1,403)

Reorganization, bankruptcy and other claims

1,708

977

(731)

131

134

3

1,132

454

(677)

Deffered tax assets arising from revaluation

-

2,251

2,251

Prepaid penshon assets

-

849

849

Leasehold deposits

8,106

9,565

1,458

Others

1,288

944

(344)

Allowance for doubtful accounts(5,671)(4,656)

1,015

Long-term prepaid expenses
Deferred tax assets

21,23618.9

25,690

32.8

4,453

Total fixed assets

75,87067.4

51,911

66.2(23,959)

Total assets

112,651 100.0

78,376 100.0(34,274)

17

DAIICHIKOSHO

Years ended March 31; Millions of yen

CO.,

LTD.

2000

%

2001

%

Year-on-yearchangeCurrent liabilities
Notes payable - trade

3,575

2,958

(616)

Accounts payable - trade

1,981

2,367

385

Short-term loans

5,420

1,964

(3,455)Current portion of long-term loans

3,964

3,247

(717)

Accounts payable - other

3,335

3,163

(172)

Accrued expenses

85

79

(6)

Income taxes payable

428

1,322

894

Consumption taxes payable

290

242

(47)

Reserve for bonuses

683

671

(12)

Unrealized profit on installment sales

173

173

0

Others

288

256

(32)

20,22718.0

16,44721.0(3,780)Long-term liabilities
Convertible bonds

20,80016,850(3,950)Long-term loans

3,490

1,788

(1,702)

Reserve for employees' retirement benefits

582

896

314

Others

405

383

(22)

25,27822.4

19,91725.4(5,360)45,50540.4

36,36546.4(9,140)Common stock

12,34811.0

12,34815.7-

Additional paid-in capital

24,00021.3

24,000

30.6

-

345

0.3

415

0.5

70

-

-

(25,431) (32.4)(25,431)

Total current liabilities

Shareholders' equity

Legal reserves
Unrealized gains or losses on land valuation
Retained earnings
Unappropriated retained earnings

26,00029,000

3,000

4,451

1,850

(2,601)30,45127.0

30,850

39.4

398

-

-

(172)

(0.2)

(172)

Total shareholders' equity

67,145

59.6

42,011

53.6(25,134)

Total liabilities and shareholders' equity

112,651 100.0

78,376 100.0(34,274)

Unrealized gains or losses on securities

18

DAIICHIKOSHO

CO.,

LTD.

Non consolidated statement of income
Years ended March 31; Millions of yen

2000

%

2001

%

Year-on-yearchange (%)

Net sales

59,884 100.0

61,200 100.0

102.2

Cost of sales

38,18863.8

38,224

62.5

100.1

Gross profit before adjustment for unrealized profit on
installment sales
Unrealized profit on installment sales - reversal

21,69636.2

22,976

37.5

105.9

196

135

Unrealized profit on installment sales - deferred

120

135

75

0.2

(0)

(0.0)

(0.5)

Gross profit on sales

21,772

36.4

22,976

37.5

105.5

Selling, general and administrative expenses

18,62731.1

18,42930.1

98.9

Operating income

3,144

5.3

4,546

7.4

144.6

2.9

47.2

Non operating income
Interest and dividend income

346

512

Profit on retirement of convertible bonds

862

285

Interest in profit of investment partnerships

1,847

263

Gain on sales of marketable securities

184-

Others

557

730

3,798

6.3

1,791

Non operating expenses
Interest expenses

416

303

Loss on disposal of inventories

133

104

Loss on valuation of inventories

657

535

Provision for allowance for doubtful accounts

170

431

Loss on valuation of marketable securities

255-

Loss on valuation of securities of affiliated companies

413-

Others446

280

Ordinary profit

19

2,493

4.2

1,654

2.7

66.4

4,449

7.4

4,683

7.6

105.2

DAIICHIKOSHO

Years ended March 31; Millions of yen

CO.,

LTD.

2000

2001

-

4

145

320

Gain on sales of investment securities

-

1,250

Gain resulting from change in retirement benefit
accounting standards-

312

Year-on-yearchange (%)

Extraordinary gain
Gain on sales of fixed assets
Reversal of allowance for doubtful accounts

145

0.3

1,888

3.1

1,301.4

Extraordinary loss
Loss on sales and disposal of fixed assets

1,099

658

310

347

Loss on sales of investment securities-

276

Loss on valuation of investement securities

-

1,046

Loss on valuation of securities of affiliated companies-

420

Loss on valuation of membership in leisure facilities-

142

Directors' retirement allowances

418-

Loss on disposal of affiliated companies

82-

Provision for doubtful accounts

Net income before taxes and special reserves for theperiodCorporate, inhabitant and enterprises taxes
Deferred taxes
Net income for the period
Retained earnings brought forward from previous period

1,910

3.2

2,891

4.7

151.3

2,684

4.5

3,680

6.0

137.1

935

1.6

1,742

2.8

186.3

670

1.1

781

1.3

116.5

1,078

1.8

1,157

1.9

107.3

696

693

Adjustment for tax effect in prior years

2,676

-

Unappropriated retained earnings

4,451

1,850

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

2000

2001

Unappropriated retained earnings

4,451

1,850

Appropriation of retained earnings

3,758

1,206

Legal reserves

70

70

Dividends - total

656

656

Directors' bonuses

32

30

3,000

450

693

644

Voluntary reserves - total
Special reserves
Retained earnings carried forward to next period

20

DAIICHIKOSHO

CO.,

LTD.

Important accounting policies
Item

Accounting policies

1. Methods of valuation formarketable andinvestment securities(1) Shares in subsidiaries and affiliated companies: valued at cost using the moving(2) Other securities:
Quoted securities: market value method, based on market prices etc.
Unquoted securities: valued at cost using the moving average method

2. Methods of valuation forInventories(1) Merchandise and finished goods: valued at cost, using the moving average(2) Work in process: valued at cost, using the specific identification method

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
Financing leases are treated as ordinary rental transactions

5. Accounting for significant
lease transactions
6. Accounting for installment
sales

Profits on installment sales are deferred

7. Accounting for
consumption taxes

Tax-exclusion method

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

2000

2001

1. Aggregate amount of depreciation on fixed assets

22,887

23,254

2. Guarantee liabilities

8,816

8,285

3. Assets provided as collateral

14,752

5,536

6,434

4,657

Secured liabilities

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 reasonable adjustments
were made(3) Book value prior to revaluation: 33,732 million yen(4) Book value after revaluation: 6,049 million yen

21

DAIICHIKOSHO

CO.,

LTD.

Management
President
Senior Managing Director
Senior Managing Director
Managing Director
Managing Director
Managing Director
Managing Director

Tadahiko Hoshi
Tatsuyoshi Yoneda
Tomio Suzuki
Shinichi Koshimizu
Yoshihiro Saito
Shinichi Matsukawa
Hiroshi Mino

Director

Masuo FukumotoStanding Statutory Auditor
Standing Statutory Auditor
Statutory Auditor
Statutory Auditor

Juichi Ishikawa
Haruhiko Tamura
Kumiko Takahashi
Masumi Arichika

Executive Director
Executive Director
Executive Director

Shinji Arima
Takachika Narahara
Yukio Hoshi

General Manager, Auditing Department
General Manager, Corporate Sales Department
General Manager, Satellite Broadcasting Department

Executive Director
Executive Director
Executive Director
Executive Director
Executive Director
Executive Director

Saburo Hayashi
Tomohiro Midorikawa
Yasuyuki Suzuki
Hirotsune Tahara
Eiji Hata
Shunichi Sadasue

General Manager, Corporate Facility Sales Department
General Manager, Subsidiary Sales Department
General Manager, Accounting Department
General Manager, General Affairs Department
General Manager, Finance Department
General Manager, Sound Source Production Department

General Manager, Sales Administration Division
General Manager, Administration Division
Assistant General Manager, Sales Administration Division
General Manager, Production Division
Assistant General Manager, Sales Administration Division
General Manager, Development Division
and Intellectual Property Department(Representative Director, DK Finance Co., Ltd.)

22