Easy-to-use Internet

MELCO INC.
BUSINESS REPORT
2003
Interim report

A leading company in the broadband era

MELCO INC.

Easy-to-use Internet
The Internet is now commonplace and familiar to us all.
People can now log on not only at home and in the office,but also increasingly in public places such as railway stations,airports, restaurants and hotels.
Today, broadband bringing great changes to the way we use the Internet,
and MELCO INC. intends to lead the way in the
broadband era by continually strengthening its technology
and offering innovative solutions.

1Strategy Direction of our company

Aiming to lead the broadband era

President and CEO Makoto Maki

Rapid popularization and growth of broadband
Day by day, the Internet has steadily pervaded our per-which are increasingly providing easy Internet access forsonal and business lives. In particular, the use ofbroadband services (such as high-speed Internet lines

their customers.
The huge increase in the speed and capacity of datacomprising a wide band of frequencies: ADSL,CATV, FTTH and so on) allowing extremely quicktransfer brought about by broadband makes it much
simpler for users to handle the massive amounts ofand smooth web access has risen dramatically sincelast year, with no sign of decline in sight.

data required for video and audio.

Along with the spread of broadband, the Internet isThis new way of using the Internet is likely to generate
yet another wave of innovative ideas, taking us

being brought out of the home and office and into public
places such as hotels, restaurants and coffee shops,

beyond the limits of the Web and computers of today,
and ultimately forming a vital pillar in our social lives.

2

Strategy

Forming a business structure with both profitability and growth potential
MELCO INC. has achieved a significant income

profit increase, with reduced costs from tighter inventory

increase through strict cost reduction and retrenchment aswell as devoted sales efforts, and the continuing refor-

control and prompt material procurement outweighing
the dip in product prices. We have also succeeded inmation of income structure started in the latter half of lastcreating additional demand for our storage products,

year. The purpose of this income structure change is to
respond to the rapid expansion of network-related markets,

cutting the cost of production while introducing new
and extremely popular portable hard disk drives.

especially wireless LAN products, and to ensure profitability in memory and storage products.

Meanwhile, offering solutions such as wireless Internet
access points in public places to target the expanding

The IT industry is in another slump as computer sales havefallen since last year. This means tough times forbroadband market has lifted sales of our networking
products.

peripheral device manufacturers too, due to reduced

These results have enabled MELCO INC. to build thedemand and lower product prices. In spite of these circumstances, MELCO INC. has achieved a significant

platform for a business structure that provides both
growth potential and stable profitability.

A leading company in the broadband era
Since November 1st 2002 MELCO INC. has recon-

The future will see the emergence of the so-called

structed its business domain to be able to implement“ubiquitous network society”, in which everyone willmore marketable strategies.
What this actually means is the integration of producthave access to any network wherever they are. The
spread of broadband will increase not only access points

families directly related to computers, such as memory,storage and LAN cards, into one “computer-related

and information categories but also new types of connecting devices. As the means of connecting thesebusiness”, the goal being to create an organization

devices to communication lines, wireless LAN will take onshowing stable profitability even under severe competition.
Meanwhile, wireless LAN is at the heart of our “broad-an increasingly vital role.
As a leading company in the broadband era, MELCO

band-related business” sector, where our solutions anticipating social change are playing a role in the formation of

INC. will strive to elevate the corporate value of theentire MELCO INC. Group by constantly proposing

the broadband community, and where we are building

new solutions and contributing to the establishment of

the platform for our next leap forward into the future.

the broadband community.

3

Eye Tomorrow's society
Broadband will change society
A society where you can use networks anywhere
Broadband (using high-speed Internet lines: ADSL,CATV, optical fiber and so on) is quickly expanding. The

nal data in their offices. People will enjoy the same
information environment whether they are in a remote

number of households with a broadband Internet connection is expected to increase from 3.7 million at the end

destination, on the move, or back at their desk, and this isbound to have a positive effect on efficiency. As systemsof March, 2002 to nearly 20 million by the end ofand technology to ensure privacy and security of infor-

March, 2006 (Ministry of Public Management, Home
Affairs, Posts and Telecommunications: National

mation are being improved day by day, wireless LANs
will soon be the most effective method of using broad-

Broadband Concept).
Wireless LANs are also spreading fast, being the mostband.
The broadband era is coming, when people will be able toeffective method for broadband connection due toaccess any network from anywhere in the world.

reduced wiring labor and lower construction costs.
As wireless LAN users increase, new wireless LAN
services called “FREESPOT” have become popularthroughout Japan. Now the Internet can be more easily
accessed in public places such as hotels, restaurants
and coffee shops. With so many people wanting to log on
without the restriction of cables, wireless LANs havebecome indispensable.
In addition to simple Internet connection, public■Estimated number of wireless LAN users(Unit:Tens of thousands)
Number of broadband agreements
3,000

3,135.4
2,784.1

Number of wireless LAN users

2,093.9

2,246.2

2,972.5

2,000
1,446.1
1,000

1,399.4

909.1
654.8
215.6

0
2002

2003

2004

2005

2006 (Year)

Source:EC RESEARCH CORP.

FREESPOT will also provide users with access to origi-

A society where everything is on a network
In the broadband community, it is not only computers

video-on-demand distribution service, home videos

that will rely on wireless LANs. People will use their liv-

edited on their computer, or past TV programs thating room TV, for example, to watch movies via athey missed. They will also be able to operate their air

4

Eye

conditioners remotely from their cellular phone before

office, cellular phone outside the office, and free IP

arriving home. If the extension telephones in theiroffices are replaced with portable IP telephones (digital

telephone in FREESPOT.
In people's homes alone, there is likely to be a rapid tran-

telephones using Internet technology), they will beable to answer their extension calls even when away

sition towards wireless LANs accompanying thegreater use of laptop computers and increased connection

from their desk. Once these work phones are com-

to other appliances. Some studies report that the number

bined with cellular phones, telephone communication
will be possible whether in or out of the office.

of broadband users will be approaching 30 million by
2006, and most of them will be using a wireless LAN.

The superiority of wireless communication will
become clear once people begin to use these various

When we imagine a world built around broadband,
more and more massive possibilities emerge. By pro-services. It is so inconvenient to have to connect lots ofcables and carry around a number of dedicated devices inviding the sophisticated technology required, in suchan era, for products and services that enable anyone toorder to use various services. The combined cellular

log on from anywhere, MELCO INC. will contributeand IP telephone described above will be able to automatically switch between extension telephone in thegreatly to the development of the network society.

Company
CompanBranc office
BranchHotel

Sales
officeAirport
Bro
ad
ba
nd

Restaurant

INTERNET
nd
dba
Broa

Station/
Train

Bro

adb

and

and
BroadbOverseas

Public area
Underground
shoppingmall

Apartment

House

Home

5

An environment is taking form in which
the Internet can be used more easily,
not only in the home and office but also in
public places such as stations andrestaurants. Wireless LAN communications technology that ensures security,and standardized communication designations that can be used anywhere in
the world, are creating a more convenient and comfortable networking society. Such ready access to the Internet isbound to enrich our lives.

Publicfacility*VPN (Virtual Private Network)
Security technology that enables secure communication by connecting terminals using commonlines as dedicated lines.

R&D Research and Development
MELCO INC.'s origins lie in the creation of solutions
and the technical strength to implement them
Reliable technology recognized worldwide
As a leading company of peripheral devices for computers,
MELCO INC. has always focused on the technologicaltrends in computers, and been quick to participate in thedevelopment of the latest memory and the establishment ofstandard specifications.
One of MELCO INC.’s specialist engineers, Kazuyoshi
Tsukada, recently received the “Chairman’s Award”
from JEDEC1, an international organization for the standardization of electronic components, for his achievements in the design of memory modules2. Tsukada had thehonor of becoming only the third person in the history of
JEDEC to be recognized by the Memory Module SubCommittee.
This prize was awarded in recognition of Tsukada's out-

standing contribution to the establishment of standards,
and his highly valued technological achievements. His
designs of DDR SDRAM*3) memory modules including the
172 pin MicroDIMM and the 200 pin S. O. DIMM havebeen adopted as standard specifications.
Notes*1) JEDECThis is the acronym for the "Joint Electron Device Engineering Council", the international
industry association promoting the standardization of electronic components. JEDEC hasover 260 member companies, and is a global leader in the electronic component field as
the standardization body of the EIA (Electronic Industries Association). MELCO INC. is aparticipating member of JEDEC in its memory module and wireless LAN categories.

*2) Memory module
To actually use memory in a computer and so on, a component called a memory module,
which is a DRAM positioned on the motherboard, is required. Various types of modules
are available, described according to the number of signal pins and their shape, for example, "172 pin MicroDIMM".

*3) DDR SDRAM
The is an abbreviation of "Double Data Rate SDRAM", a type of DRAM using technologythat doubles the data rate of conventional SDRAM.

Contributing to the establishment of global standards
The principle type of memory has shifted from SDRAM to
DDR. In the standardization of DDR S. O. DIMM, MELCO
INC. participated in the establishment of the JEDEC common Gerber standard specification, sharing the role with twoleading DRAM manufacturers. Within this group, MELCO
INC. assumed a wide range of tasks, including the developmentof the 200 pin S. O. DIMM for x16-1BANK, adjustment oftiming and load for x8-1BANK and x16-2BANK developed by
DRAM manufacturers, simulation at the prototype stage,
operational evaluation in collaboration with various motherboard manufacturers, and verification with measurements

using high-performance testers. The results are alreadybeing taken to the next level, helping us to participate in theestablishment of standards for DDR II 533 S. O. DIMM andothers. MELCO INC. is one of
the top brands in the memory
field, and we aim to spread theadoption of global standards
for next-generation memory
among worldwide PC manufacturers.
Memory modules based on the JEDEC common Gerber standard
whose establishment we are participating in

6

Accumulation of technologies
In 1993, MELCO INC. received the top prize in theanalog category of the PCB Technology LeadershipAwards, a global awards program for print-circuitboard designers. This prize was awarded to us in recognition of our layout design with high-level noise countermeasures. Winners in other categories were HewlettPackard, AT&T, Motorola and Sony, and MELCO
INC. was the first Japanese winner along with Sony.
Digital technology was just entering the limelight at thetime, and the transition of electronic components todigital circuits allowing easy logic designs was underway.
However, we believed that the higher frequencies of thecoming digital circuits would enhance the importanceof layout design due to problems with signal delaycaused by differences in wiring length or changed noisecharacteristics because of interference between signallines. In order to speed up digital circuits, the backup of
analog technology is essential.
MELCO INC.’s accumulated technologies bore fruit in1999, when we were the first Japanese vendor toacquire Intel's "system validation", and had the greatest
number of certifications in Japan in 2000 by adding one
certified item after another,such as Direct Rambus
DRAM-mounted
RIMM
modules. We are proud ofthese achievements, evidenceof our world-leading technological strength.
PCB Technorogy Award

Project D launched, aiming for even greater technological strength
The technological strength we are so proud of is not

was MELCO INC.’s third annual Good Design Award inlimited to memory products. An important point about

succession.

MELCO INC.’s portable hard disk drives, which areselling very well in 2002, is their power saving design

We launched Project D with the aim of enriching ourdevelopers training program. D represents bothtechnology that lets them run on atiny amount of electric power sup-DESIGN and DEVELOPMENT, and means we try toreinforce their abilities in the fields of technical andplied through a USB interface.

chassis design and development. We intend to reform our

We have also tried to improve ourchassis designs, and worked

in-house system to generate future Tsukadas fromamong our current 18 expert engineers, as well as to train

together for a while with theworld-famous Italian car designera lot of new expert engineers.
As mentioned earlier in the section Eye, the Internet

Gandini in the pursuit of design

society is expected to drastically change in the future intofunctionality. This result of thisan ubiquitous networking community, with the use of
Good Design Award7

broadband. We believe there will be sweeping technological innovation during this period, and it is important
to constantly reinforce our technological strength inorder to provide new solutions that meet user needs.

1985年
Standalone
1995年
LAN
2000年

Internet

2005年

2010年

Track record of our technological power

Ubiquitous

Developed a high-end tester for ourmemory modules in collaboration
with Advantest. Advanced evaluation
technology is essential for the development of cutting-edge technology.

Year

Prize / acquisition

1989

3rd "Best Product Prize" awarded
by Japan System House Association

EMJ memory board

First to adopt EMS method in Japan,which became
mainstream in memory extension

7th "Best Product Prize" awarded
by Japan System House Association

WBS peer-to-peer LAN

LAN system allowing sharing of data and peripherals
without a dedicated server"PCB Technology Award"
by Mentor Graphics

16M-RJF flush memory card-dedicated board

Highly evaluated noise countermeasure design

8th "Best Product Prize" awarded
by Japan System House Association

NMB multimedia box

Realized three functions of window accelerator, PCM
sound and CD-ROM in one unit

Minister of International
Trade and Industry Award.

NMB multimedia box

Awarded prize for Best Information Processing System
at Japanese government-sponsored programcommemorating Information Technology Month9th "Best Product Prize" awarded
by Japan System House Association

Hyper-memory CPU

Original product integrating CPU and memory
technologies

10th "Best Product Prize" awarded
by Japan System House Association

LBR-64 ISDN brouter

Realized shared TA function, which had not beenachieved before

Minister of International
Trade and Industry Award.

Information technology promoting company

Awarded at Japanese government-sponsored programcommemorating Information Technology Month11th "Best Product Prize" awarded
by Japan System House Association

FTD liquid crystal display

Overall evaluation of performance, user-friendliness,
design and guarantee system

Intel System Validation

Direct Rambus DRAM-mounted RIMM

Most acquisitions in Japan,evidence of our top-levelglobal technological power"Best of Show Award"
by Net World+Interop 2000 Tokyo

AirStation wireless LAN

Awarded for our infrastructure builder product for
private companies

Wi-Fi, WECA
international certification

AirStation wireless LAN

Quickly acquired international certification ensuringcommunication compatibility in a multi-vendor environment

Good Design Award 2000 by Japan
Industrial Design Promotion Organization

AirStation wireless LAN

Interior decoration-focused design targeting in-home
introduction"Best of Show Award" by
Net World+Interop 2001 Tokyo

AirP's LPV-WL11wireless print server

Special prize in peripheral and server category

Good Design Award 2001 by Japan
Industrial Design Promotion Organization

MCR card reader and
CRWU-PB88 CD-R/RW

Fresh design adopting a curvilinear form with improved
usability"Chairman's Award" by JEDECStandardization of memory modules

Contributed to global standardization

Good Design Award 2002 by Japan
Industrial Design Promotion Organization

AirStation wireless LAN(WLA-S11, WLI-USB-S11)

Space-saving and familiar design, with functionality
increasing wireless LAN application

1993

1994

1995

1996

1997

2000

2001

2002

Prizewinning product / item

BroadbandContents

8

Topics

Received JEDEC Chairman's Award Contributing
to the global standardization of memory

Won Good Design Award three years in succession
Design extends wireless LAN function

JEDEC is an American industry association that promotes the global standardization of electronic device
components. MELCO INC. has joined JEDEC in
order to be involved in the establishment of global
standards for memory modules. Now JEDEC has recognized our contribution to the development of memory
modules, by making Kazuyoshi Tsukada, one of ourexpert engineers, only the third member ever toreceive the Chairman’s Award from the Memory
Module Committee.
MELCO INC. is working hard towards the standardization of memory modules, including the development of a global standard for high-speed memory
DDR SDRAM. With a constant eye on the latest technology trends, we have been quick to incorporate cuttingedge technology in various product proposals adopted by
JEDEC. We are extremely proud of this award, which isevidence of the recognition of our achievements. As
the IT revolution continues to move forward throughout
the world, standardization technology is essential.
MELCO INC. will continue to make tireless efforts intechnological innovationand promote the development of next-generation
memory modules.

MELCO INC.’s AirStation wireless LAN was given
the Good Design Award 2002 by the Japan Industrial
Design Promotion Organization. This was the thirdyear in a row that we received this prize, following the
success of our card reader and CD-RW drive last year
and wireless LAN the year before that.
The prizewinning AirStation’s WLA-S11 access point
and WLI-USB-S11 USB port adapter enabled us tocreate a compact and space-saving design with aheight of 12 cm, while its softly curved shape gives it an
attractive and friendly appearance ideal for the home.
Another remarkable feature is its versatility, the number
one requirement for a wireless LAN, achieved byusing a wall-hanging kit and attachment holder. This
provides outstanding functionality, allowing not only
desktop installation but also attachment to a wall surface
or the back of a laptop computer display. MELCO
INC. will continue to develop products with such
sophisticated designs and high functionality.

WLA-S11

9

WLI-USB-S11

Proposing wireless spot services
aimed at handy Internet access
The information society is dramatically changing with the
spread of the Internet. This Internet society, whichallows public and private offices and even individuals totransfer all kinds of information to each other, is making
our lives richer and more convenient.
Amid this social change, MELCO INC. is proposing
Internet wireless spot services, or FREESPOT, thegoal being a society where anyone can easily log on to
the Internet anywhere. FREESPOT will allow people touse broadband Internet anywhere, in remote destinations as well as their homes and offices. In order topromote this service nationwide, MELCO INC.
launched the FREESPOT Conference with the participation of Sharp, Matsushita Electric Industrial co.,Ltd. and others, and released a FREESPOTInstallation Kit. This facilitates Internet access in public
places like hotels and shops, helping to build an environment that will allow anyone to log on anywhere
and anytime. We will continue to propose this kind ofsolution, broadening the horizons of Internet users andproviders and contributing to the realization of theubiquitous networking community.

Gained top share of PC peripheral sales
in 12 categories in first half of 2002
According to the BCN Rankings, the sales statistics ofcomputer peripheral devices provided by ComputerNews, Inc. MELCO INC. gained the top share in 12 categories in the initial half of 2002.
These statistics indicate the sales share of different models
through a system of sales data collection from large
stores nationwide. The actual categories in which
MELCO INC. won the top share were: wireless LANs,
hubs, LAN cards, print servers, MO drives, CD-R/RW
drives, external hard disk drives, internal hard disk drives, card readers, memory, CPU accelerators and printerbuffers. This is the result of our firm commitment to thedevelopment and market release of products that meetcustomer needs, and we feel it proves just how muchtrust and support we are receiving from users. We willcontinue to deliver new products that satisfy all kinds of customer needs, and will redouble our efforts to reinforce thebusiness system that supports our dealers.
Others
5.6%

Wireless LAN
Apple

Others
22.2% MELCO

Logitec
18.3%

48.2%

External HDD

MELCO
47.2%

8.6%
NEC
10.0%

I-O DATA
28.9%

I-O DATA
11.0%

Internet wireless spot

Others
9.4%
PLANEX

MemoryMELCOOthers
46.4%

Hub
9.7%

29.4%
I-O DATA
17.4%

MELCO
48.4%

corega32.5%

Princeton
6.8%

Data from the first half of 2002, provided by Computer News, Inc.

10

Outline Summary of business
Under the motto "Easy-to-use Internet", MELCO INC. is working tocreate an online environment that is comfortable and convenient for all.
Consolidated sales per product from April 2001 to March 2002
OthersMemoryInternet setup/installation on-call service

Memory module(BUFFALO Service Alliance)

Liquid crystal
display

Flash memory
Others7.3%
Memory26.7%
Network

31.5%

Component
ratio of consolidated
sales for the March
2002 term

Card reader/
writerStorage

34.5%

DVD-ROM/CD-RW
combo-drive

Wireless LAN

Portable harddisk drive

Network
11

Network
cameraStorageGroup Companies MELCO INC.Group*1 BUFFALO TECHNOLOGY (U.S.A.), INC. has been liquidated as of December 31, 2001.
*2 The ratio of shareholdings for TechWorks (Delaware), Inc. increased from 98.4% to 100% as of December 18, 2001.
The company was renamed BUFFALO TECHNOLOGY (USA), INC. as of February 28, 2002.
*3 The capital was increased to US $ 5.728 million for BUFFALO TECHNOLOGY UK LIMITED. on December 18, 2001.

MELCO INC.Group Affiliation Chart（Consolidated subsidiaries）●Sales company
Products

Products

CFD SALES INC.
(Capital : ￥ 98 million Ratio of shareholdings : 100%)

Products

Customers in Japan

Japan

Products
TaiwanProducts●Manufacturing and sales company

Parts(Capital : TWN $ 100 million Ratio of shareholdings : 100%)BUFFALO TECHNOLOGY (TAIWAN)INC.

Products

EUROPE
U.S.A.
Overseas customers

MELCO INC.

JAPANTAIWANU.S.A. *1
Products●Sales and Manufacturing company *2

Parts(Capital : US $ 6,000 Ratio of shareholdings : 100%)BUFFALO TECHNOLOGY(USA),INC.

Products

Europe●Sales company *3
Products

Products

BUFFALO TECHNOLOGY UK LIMITED(Capital : US $ 5.728 million Ratio of shareholdings : 100%)●Manufacturing company
Parts

BUFFALO TECHNOLOGY IRELAND LIMITED(Capital :452,000 Ratio of shareholdings : 100%)

Other operations in Japan●Distribution company (Packing and shipping company)●Computer technology school

BUFFALO LOGISTICS INC.

MELCO TECHNO SCHOOL INC.

MELCO FINANCE INC.

(Capital : ￥ 70 million Ratio of shareholdings : 100%)(Capital : ￥ 20 million Ratio of shareholdings : 100%)(Capital : ￥ 20 million Ratio of shareholdings : 100%)●Securities management company

12

Financial Report Consolidated Statement■ Consolidated sales
100,000(unit:¥million)

88,865

Network

79,424

79,1006,886

80,00066,121

8,602

59,90760,00069,967

Others
3,900
11,10019,047
5,125

10,980
10,586
8,625

5,455

27,011

5,358

40,00026,00019,00022,051

Broadband

29,751
24,292

20,770Storage
27,50024,00024,11820,00025,15435,92030,09025,787

Memory22,00021,50018,671

023rd term('98/3)

24th term('99/3)

25th term('00/3)

26th term('01/3)

27th term('02/3) 28th term('03/3 projected)

Note:After March in 2003, networking products except for those related with broadband are moved to the category of "others".

■ Consolidated net
income and % of sales■ Consolidated ordinary
income and % of sales(unit:¥million)(unit:%)

5,000

4,000

(unit:¥million)

25

2,500

20

2,000

■Consolidated shareholder'sequity and return on equity (ROE)(unit:%)

10

30,0002,800 15

27,45420,000

2,000

10

1,000

5

500

0

0

944

1,448
832 3.5
2.5
1.2
024th term 25th term 26th term 27th term 28th term('99/3) ('00/3) ('01/3) ('02/3) ('03/3 projected)

12

337
0.5

8

7.1

4

869

2.4
4.4

26,514 26,430

1,480 6

1,500

2,252

13

16

25,4033,000

2.2(unit:%)

8

1,868

3,473

1,000

(unit:¥million)

40,0001.9
1.1 1.2

24th term 25th term 26th term 27th term 28th term('99/3) ('00/3) ('01/3) ('02/3) ('03/3 projected)

3.5

10,000
2

0

3.3

4

1.3
0
24th term('99/3)25th term('00/3)26th term('01/3)27th term('02/3)0■ Interim consolidated balance sheet
Fiscal year
Item

as of Sep. 30, 2002

(Assets)
Current assets
Tangible fixed assets
Intangible fixed assets
Investments, etc.
Total Fixed assets
Total assets(Liabilities)
Current liabilities
Long-term liabilities
Total liabilities(Capital)
CapitalCapital surplus
Profit surplus
Capital reserve
Consolidated surplus
Balance of other profits on securities
Exchange adjustment
Treasury stock
Total capital
Total liabilities and capital(unit:¥million)

as of Sep. 30, 2001 as of March 31, 2002

26,1222,674
130
11,787
14,592
40,71530,759
2,917
203
3,086
6,207
36,96728,022
2,777
156
11,121
14,05542,077

13,104729
13,834

10,764749
11,514

14,968678
15,646

6,400
7,593
13,285
−
−
41
▲223
▲215
26,88040,715

6,400
−
−
7,593
11,50738▲17▲68
25,45336,967

6,400
−
−
7,593
12,74170▲160▲213
26,43042,077■ Interim consolidated statement of surplus
Fiscal year
Item
Capital surplus opening balance
Capital surplus interim closing (closing) balance
Profit surplus opening balance
Interim (current term) net income
Reduction of profit surplus
Profit surplus interim closing (closing) balance
Consolidated surplus opening balance
Reduction of consolidated surplus
Interim (current term) net income
Consolidated surplus interim closing (closing) balance■ Interim consolidated statement of income(unit:¥million)

Current
Previous
Previousinterim term interim term fiscal year
(April 1, 2002 to
Sep. 30, 2002)(April 1, 2001 to
Sep. 30, 2001)(April 1, 2001 to
March 31, 2002)

7,593
7,593
12,741705
161
13,285
−
−
−
−

−
−
−
−
−
−
12,801
768▲525
11,507−−−−−−
12,801929
869
12,741(unit:¥million)

Current
Previous
Previous
Fiscal year
interim term interim term fiscal year

Current
Previous
Previousinterim term interim term fiscal year

Item
Sales
Cost of sales
Selling, general and administrative expenses
Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary income
Extraordinary loss
Interim (current term) net income
before taxes and other adjustments

Corporation, resident and enterprise taxes
Adjustment for corporation tax, etc.
Interim (current term) net income(April 1, 2002 to
Sep. 30, 2002)(April 1, 2001 to
Sep. 30, 2001)(April 1, 2001 to
March 31, 2002)

39,08934,155
3,617
1,316
171
152
1,336
167
146
1,357
767
▲114
705

30,43026,940
4,195
▲705
267
123
▲562
22
17
▲557
48
▲80
▲525

69,967
61,389
7,922
655
421
244
832
54
222
664
397
▲603
869

■Interim consolidated cash flow statement
Fiscal year
Item
Operating activity cash flow
Investment activity cash flow
Financial activity cash flow
Balance of cash/cash-equivalent conversions
Increase of cash/cash-equivalents
Cash/cash-equivalent opening balance
Cash/cash-equivalent interim
closing (closing) balance(unit:¥million)

Current
Previous
Previousinterim term interim term fiscal year
(April 1, 2002 to
Sep. 30, 2002)(April 1, 2001 to
Sep. 30, 2001)(April 1, 2001 to
March 31, 2002)

7,411
▲819
134
▲57
6,669
2,030

4,542
128
▲761
51
3,961
6,775

3,422
▲7,444▲765
43▲4,744
6,775

8,700

10,7362,030

14

Financial Report Unconsolidated Statement■ Sales
100,000(unit:¥million)

Network

80,00060,00074,60871,561
59,391

54,334

4,249

5,282

18,343

2,901

8,094
5,357

5,315
5,111

Broadband
18,00021,13827,307

19,439Others
8,500

10,55340,00073,00063,031

24,125Storage

23,676

26,50022,36320,00028,417

24,46822,26223rd term('98/3)

24th term('99/3)

27,888

Memory20,00016,6280
25th term('00/3)

26th term('01/3)

27th term('02/3) 28th term('03/3 projected)

Note:After March in 2003, networking products except for those related with broadband are moved to the category of "others".

■ Ordinary income and % of
sales■Net income and % of
sales

(unit:¥million)(unit:¥million)(unit:%)

25

5,000

■ Shareholder's equity andreturn on equity (ROE)(unit:%)

2,500

10

(unit:¥million)(unit:%)

16

40,000

2,009
2,000

8

20

4,000

3,540

1,544

2,700 15

3,000

2.8

2,390
10

2,000

1,000

3.7

0
24th term 25th term 26th term 27th term 28th term('99/3) ('00/3) ('01/3) ('02/3) ('03/3 projected)

15

2.1

1.9

10,000

0

3.9

4

2
0

5
-500

8

0

0

0

2.3

12

5.5

4

-0.7

1,463
4.9 4.5
4.0

500

1.7

26,611
7.3

20,000

1,026
1,000

28,310 28,166
26,3651,400 6

1,500

3,351

30,000

-409

-2

-1.5
-10,000-4-4-1,00024th term 25th term 26th term 27th term 28th term('99/3) ('00/3) ('01/3) ('02/3) ('03/3 projected)

24th term('99/3)25th term('00/3)26th term('01/3)27th term('02/3)

■ Interim balance sheet
Fiscal year
Item
(Assets)
Current assets
Tangible fixed assets
Intangible fixed assets
Investments, etc.
Total Fixed assets
Total assets(Liabilities)(unit:¥million)■ Interim statement of income

as of Sep. 30, 2002

as of Sep. 30, 2001 as of March 31, 2002

35,501
1,972
113
3,145
5,231
40,732

29,377
2,113
171
6,070
8,355
37,73337,021
2,027
139
3,215
5.382
42,404Current liabilities
Long-term liabilities
Total liabilities(Capital)

12,876684
13,5619,800
680
10,481

15,163629
15,793

CapitalCapital surplus
Profit surplus
Legal reserve
Retained earnings
Balance of other profits on securities
Treasury stock
Total capital
Total liabilities and capital

6,400
7,593
13,351−−
41▲215
27,17140,732

6,400
−
−
9,193
11,61938−
27,25137,733

6,400
−
−
9,193
11,16170▲213
26,61142,404(unit:¥million)

Current
Previous
Previous
Fiscal year
interim term interim term fiscal year

Current
Previous
Previousinterim term interim term fiscal year
Item

Sales
Cost of sales
Selling, general and administrative expenses
Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary income
Extraordinary loss
Interim (current term) net income before taxes
Corporation, resident and enterprise taxes
Adjustment for corporation tax, etc.
Interim (current term) net income
Profit carried over from previous term
Earnings allocated to retirement of treasury stock
Interim dividends
Unappropriated profit interim (current term)(April 1, 2002 to
Sep. 30, 2002)(April 1, 2001 to
Sep. 30, 2001)(April 1, 2001 to
March 31, 2002)

35,84031,451
2,985
1,403
70
76
1,396
133
143
1,386
746
▲110
750
12,601−−
13,351

26,31723,538
3,204
▲425
260
95
▲259
27
13
▲244
8
▲141
▲112
5,301
▲569
−
4,619

63,031
55,773
6,147
1,110
529
176
1,463
56
2,506
▲986
333
▲909
▲409
5,301
▲569
160
4,161

16

Company Data Company Profile/Investor Information
Company Profile (As of September 30, 2002)

Board of Directors (As of June 27, 2002)

Company Name: MELCO INC.

President and CEO Makoto Maki

Headquarters:

11-50, Ohsu 4-chome, Naka-ku, Nagoya, Aichi Prefecture, Japan

Senior Managing Director Kuniaki Saiki

Founded:May 1, 1975

Director

Hiromi Maki

Incorporated:

August 5, 1978

Director

Hiromichi Maki

Director

Harumi Maekawa

Director

Seishi Toyooka

Director

Takayuki Nishioka

Director

Hidetoshi Yamaguchi

President and CEO: Makoto Maki
Capital:¥6.4 billion

Sales:¥69.967 billion consolidated¥63.031 billion unconsolidated(at end of March 2002)

Business content: Development, manufacture and sales of Internet
equipment and related services

Senior Corporate Auditor Yozo Ueda
Corporate Auditor

Toshio Nishikawa

No. of employees: 635 consolidated, 381 unconsolidated

Corporate Auditor

Yuzuru Kawashima

Group affiliates: 8 companies (4 in Japan and 4 overseas)

Corporate Auditor

Iwao Tsusaka

Banks:

UFJ, Nagoya, Iyo, Tokyo-Mitsubishi, UFJ Trust Bank

Investor Information(As of September 30,2002)
Accounts closed:

March 31

Scheduled shareholder's meeting: June
Dates to determine stock ownership: Shareholders entitled to voteMarch 31
Shareholders entitled to year-end dividend
March 31
Shareholders entitled to interim dividend
September 30
Listed Stock Exchanges: First Section of Tokyo Stock Exchange andFirst Section of Nagoya Stock Exchange
Stock code:

6913

Number of shares issued: 26,841,136
Number of treasury stocks: 128,600
Number of shareholders: 15,255
Number of shares per unit: 100

17

Newspaper with
notice to shareholders: Nihon Keizai Shimbun
Transfer agent:

UFJ Trust Bank Limited
4-3, Marunouchi 1-chome,
Chiyoda-ku, Tokyo

Handling office:

UFJ Trust Bank Limited
Security Agent Department
10-11, Higashi-suna, 7-chome,
Koto-ku, Tokyo 137-8081
Tel: 81-3-5683-5111

Managing underwriters: (main) Nomura Securities(others) Daiwa Securities SMBC
Mizuho Investors Securities
Nikko Cordial Securities

Evolution of the MELCO INC. GROUP

History

Business/Others
1978

Incorporated for the purpose of manufacturing and selling audio equipment Aug

Aug Began marketing a string-driven turntable

1980
Opened Tokyo Branch Office (now the Tokyo Head Office) Oct
Established BUFFALO LOGISTICS INC. Sep

1981
1982
1986
1988

Jul Entered the personal computer peripherals market in earnest
Nov Began marketing an internal printer buffer
Oct Began marketing Japan’s first EMS board

1990

1991
Opened Osaka Sales Office (now the Osaka Branch Office) Sep
Registered with JASDAQ Oct
1992
Jul Began marketing CPU accelerator products
Opened High-Tech Center Jan
Aug Began marketing LAN products
Established BAPILU PRODUCTS INC. Jun
1993
May Began marketing window accelerators;[now BUFFALO TECHNOLOGY (TAIWAN) INC.]
entered the multimedia market in earnest
Oct Received Prize for Excellence at PCB Technology Awards
Feb Began marketing hard disks; shifted emphasis to1994
manufacture of computer peripheral devices
Listed in second section of Nagoya Stock Exchange Jan
Sep Obtained ISO 9001 certification
Listed in second section of Tokyo Stock Exchange Aug
Nov Began marketing DOS/V component PCs;
shifted emphasis from manufacture of computer
Opened agencies in Sendai and Fukuoka (now the Sendai and Fukuoka sales Offices) Dec
peripheral devices to manufacture of PC components
MELCO TECHNO SCHOOL INC. commenced operations at its computer technology school Jul
1996
Listed in the first sections of the Tokyo and Nagoya Stock Exchanges Sep
Oct Began marketing LCD monitors
Made CFD SALES INC. a subsidiary Oct
Introduced divisional organization Oct
1997
Made TechWorks (Delaware), Inc.(now BUFFALO TECHNOLOGY(USA),INC.) a subsidiary Jan
1998
Made TechWorks (UK) Limited and TechWorks (Ireland) Limited Dec(now BUFFALO TECHNOLOGY UK LIMITED. and BUFFALO TECHNOLOGY IRELAND LIMITED.)subsidiaries
Jan Entered the wireless LAN market; released "AIRCONNECT"1999
Nov Began marketing memory for Rambus devices
MELCO FINANCE INC. commenced operations in securities management and related areas Aug

1995

Apr Began marketing the wireless LAN "AirStation"2000 Oct
Received Good Design Award for AirStation wireless LAN
Developed worldwide standard specification of DDR memory for notebook computers

Opened BUFFALO Solution Square (formerly Akihabara Customer Support Center) Dec
Formed BUFFALO Service Alliance Jan
Established joint venture company, Digital Reuse Inc. Mar

Began Internet service business2001 Jan Obtained
Environmental Management System ISO14001 Certification
Oct Received Good Design Awards for card reader and CD-RW drive

Reorganized business department into broadband business and computer business Nov

Proposed FreeSpot to promote Internet wireless spot service
2002 Jul Received
Good Design Award for AirStation wireless LAN
Oct18

Easy-to-use Internet

MELCO INC.
11-50, Ohsu 4-chome, Naka-ku, Nagoya, 460-0011, Japan
Tel: 81-52-251-6891 FAX: 81-52-241-7979

http://www.melcoinc.co.jp/

Offices
Headquarters

Kamiya Bldg., 11-50, Ohsu 4-chome, Naka-ku, Nagoya, 460-0011, Japan

Tel:81-52-251-6891 Fax:81-52-241-7979

Tokyo Head Office

1-2-5 Eitaro Bldg. Nihonbashi Chuo-ku Tokyo 100-0027, Japan

Tel:81-3-3242-7777 Fax:81-3-5203-8551■Subsidiaries Japan
CFD SALES INC.

Kamiya Bldg., 11-50, Ohsu 4-chome, Naka-ku, Nagoya, 460-0011, Japan

Tel:81-52-261-7771 Fax:81-52-261-7775

BUFFALO LOGISTICS INC.

1-3, Mutsuno 2-chome, Atsuta-ku, Nagoya, 456-0023, Japan

Tel:81-52-883-3035 Fax:81-52-883-3042

MELCO TECHNO SCHOOL INC.

15, Shibata hondori 4-chome, Minami-ku, Nagoya, 457-8520, Japan

Tel:81-52-619-7727 Fax:81-52-619-2027

MELCO FINANCE INC.

Kamiya Bldg., 11-50, Ohsu 4-chome, Naka-ku, Nagoya, 460-0011, Japan

Tel:81-52-251-6891 Fax:81-52-241-7979■Subsidiaries Overseas
BUFFALO TECHNOLOGY (TAIWAN) INC.

4F, NO.18, LANE609, SEC.5, CHUNG HSIN RD., SANCHUNG CITY, TAIPEI HSIEN, TAIWAN

Tel:886-2-2999-9860 Fax:886-2-2999-2264

BUFFALO TECHNOLOGY (USA) , INC.

4030 West Braker Lane, Suite 350, Austin, TEXAS 78759-5319 U.S.A.

Tel:1-512-794-8533 Fax:1-512-794-8606

BUFFALO TECHNOLOGY UK LIMITED

176 Buckingham Avenue, Slough, Berkshire SL1 4RD, United Kingdom

Tel:44-1753-555-000 Fax:44-1753-535-420

BUFFALO TECHNOLOGY IRELAND LIMITED

Unit 14B, Shannon Industrial Estate, Shannon, Co. Clare Ireland

Tel:353-61-474711

This booklet was made from recycled paper.

Fax:353-61-474770