DAIICHIKOSHO

CO.,

LTD.

FY 2004, the year ended March 31, 2005

Flash Report on the Consolidated Results for the Year Ended March 31, 2005
May 16, 2005
Company Name: DAIICHIKOSHO CO., LTD.
Code Number: 7458
(URL http://www.dkkaraoke.co.jp)
Stock Exchange Listing: JASDAQ
Location of Head Office (Prefecture): Metropolis of Tokyo
Representative: Tatsuyoshi Yoneda, President
Contact: Eiji Hata, Director and Corporate officer; and Executive Director, Administration Headquarters
Phone: (03) 3280-2151
Date of the Board of Directors Meeting on the Closing of Accounts: May 16, 2005
Adoption of U.S. GAAP: No
1. Consolidated Performance for FY2004, the Year Ended March 31, 2005 (from April 1, 2004, to March 31, 2005)(1) Consolidated operating results
Note: Amounts below one million yen are truncated.
Net sales
Operating income
Ordinary income¥ Million%¥ Million%¥ Million%
Year ended March 2005
122,085
2.3
10,383(20.9)
9,932(19.5)
Year ended March 2004
119,335
1.9
13,126
5.1
12,331
13.8
Net income
Year ended March 2005
Year ended March 2004

¥ Million
5,118
4,898

Net income per share%
4.5(29.4)¥
139.83132.54

Fully diluted net income
per share¥―
126.11Return of Equity (ROE)

Ratio of ordinary income
Ratio of ordinary income
to total capitalto net sales%%%
Year ended March 2005
8.3
7.3
8.1
Year ended March 2004
8.4
9.1
10.3
Notes: 1. Average number of shares outstanding during the year (consolidated):
Year ended March 2005: 35,745,780 sharesYear ended March 2004: 35,958,418 shares
The Company conducted a two-for-one stock split on May 20, 2004. For comparison, “Net income pershare” and “Fully diluted net income per share” are stated in the table above as if the stock split had
occurred as of April 1, 2003.
“Fully diluted net income per share” for the year ended March 2005 is not stated because no residual
securities existed as convertible bonds were redeemed at maturity as of March 31, 2005.
2. Change in accounting method: None
3. Percentages for net sales, operating income, ordinary income and net income show respective
year-over-year changes from the previous fiscal year.
(2) Consolidated financial position
Total assets

Shareholders’Equity ratio
Shareholders’equityequity per share¥ Million¥ Million%¥
Year ended March 2005
131,996
62,19447.1
1,783.56
Year ended March 2004
138,453
60,85644.0
1,689.46
Note: Number of shares outstanding at the end of the year (consolidated):
34,804,216 shares at March 31, 2005
35,942,520 shares at March 31, 2004
The Company conducted a two-for-one stock split on May 20, 2004. For comparison, “Shareholders’ equity
per share” is stated in the table above as if the stock split had occurred as of April 1, 2003.

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DAIICHIKOSHO(3) Consolidated cash flows
Cash flows fromoperating activities
Year ended March 2005
Year ended March 2004

¥ Million
24,221
27,200CO.,

LTD.

Cash flows frominvesting activities

Cash flows fromfinancing activities¥ Million(10,999)(26,056)¥ Million(11,106)(3,606)

Cash and cash
equivalents at end ofyear¥ Million
22,42820,300(4) Scope of consolidation and application of the equity method
Number of consolidated subsidiaries: 37
Number of unconsolidated subsidiaries accounted for by the equity method: —Number of affiliates accounted for by the equity method: —(5) Change in the scope of consolidation and application of the equity method
Consolidation (newly included): 1 (excluded): 2
Equity method (newly applied): — (excluded): —2. Forecast Consolidated Performance for FY2005, the Year Ending March 31, 2006 (from April 1, 2005, to March
31, 2006)
Net sales
Ordinary income
Net income¥ Million¥ Million¥ Million
Interim period ending
64,1005,300
900
September 30, 2005
Year ending March 31,
129,400
10,5003,600
2006 (full year)(Reference) Forecast net income per share (full year): ¥100.00
Note: These projected performance figures are based on information available to the Company’s management at
the time of preparing this report. There are many uncertain factors inherent in forecasting, and there might becases in which actual results differ from forecast values. See page 11 of the Attachment for further information on forecasts.

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(Attachment)

1. Corporate GroupThe Daiichikosho Group (“DKG”) consists of Daiichikosho Co., Ltd. (“DK” or “the Company”), and37 consolidated subsidiaries. The major group companies engage in the commercial karaoke business,
the karaoke cabin business, the content business and the music software business.
Business segment

Business line

Commercial
karaoke business

Sales and rental of commercial-use
karaoke equipment

Karaoke cabin
business

Operation of karaoke cabins, as well as
the supply of food and beverages in thecabinsContent businessSupply of music content, etc. via satellite broadcasting and mobile phones

Music software
business

Production and sales of music andvideo software products

Other business

Real estate lease and rental business,
restaurant business, Gateway business,
etc.

Domestic
Daiichikosho Co., Ltd.
Hokkaido Daiichikosho Co., Ltd.
Tohoku Daiichikosho Co., Ltd.
Taito Daiichikosho Co., Ltd.
Niigata Daiichikosho Co., Ltd.
Tokai Daiichikosho Co., Ltd.
Daiichikosho Kinki Co., Ltd.
Kyushu Daiichikosho Co., Ltd.
and 14 other subsidiaries

Daiichikosho Co., Ltd.
Gauss Entertainment Co., Ltd.
Nippon Crown Co., Ltd.
Tokuma Japan Communications Co.,Ltd.
First Distribution Co., Ltd.
Tri-M, Inc.
Daiichikosho Co., Ltd.
DK Finance, Co., Ltd.
DK Music Publishing Co., Ltd.
Maruhagi Yoshu Kogyo, Co., Ltd.

3

Overseas
DK KOREA
Co., Ltd.
Daiichikosho(Shanghai), Ltd.
and two othersubsidiaries
ShanghaiZong-Yi Music& Entertainment
Co., Ltd.
Saha Daiichi
Kosho Co., Ltd.
BIG ECHO(SHANGHAI)
Co., Ltd.

D.K. Enterprises(Guam), Inc.

DAIICHIKOSHO

CO.,

LTD.

The following diagram schematically shows the relationships of the respective group companies
and businesses.

(Intermediary services related to
installment sales and loans for
DK and group companies)
DK Finance, Co., Ltd.
(Production and sales of music
and video software products)
Gauss Entertainment Co., Ltd.
Nippon Crown Co., Ltd.
Tokuma Japan Communications
Co., Ltd.
First Distribution Co., Ltd.
Tri-M, Inc.
(Acquisition and management of
copyrights)(Operation of karaoke cabins)
Shanghai Zong-Yi Music & Entertainment Co., Ltd.*4
Saha Daiichi Kosho Co., Ltd.
BIG ECHO (SHANGHAI) Co.,
Ltd.*3

Overseas users

DK KOREA Co., Ltd.
Daiichikosho (Shanghai), Ltd.
Daiichikosho (Hong Kong), Ltd.*2
Daiichi Kosho (Singapore), Pte
Ltd.*1DAIICHIKOSHO CO., LTD. (Reporting company)

Domestic users(Overseas subsidiaries)(Domestic sales subsidiaries)
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.
and 14 other companies(Operation and management ofrecreation facilities)
D.K. Enterprises (Guam), Inc.

(Unconsolidated subsidiaries)

DK Music Publishing Co., Ltd.

Union Eiga Co., Ltd.
and 9 other companies(Related Party)
Hoshi Create Co., Ltd.

(Production and sale of fruitwines)
Maruhagi Yoshu Kogyo, Co.,Ltd.
Sales and rentals of merchandise and products

Operation of karaoke cabins

Provision of services

Notes:
1. *1 indicates a dormant company.
2. *2 indicates a company that is under liquidation proceedings.
3. *3 has been newly included in consolidation as it was newly established in April 2004.
4. *4 Shanghai Zong-Yi Music & Entertainment Co., Ltd. was renamed in July 2004.
5. Liquidation procedures for H.K. Elektronik und Musik GmbH were completed in April 2004 and for World Wide Top Co., Ltd., in January 2005.
6. As a result of the reorganization of domestic subsidiaries in April 2005, Kita-Tohoku Daiichikosho Co., Ltd., Fukushima Daiichikosho Co., Ltd., Tochigi
Daiichikosho Co., Ltd., Hokuriku Daiichikosho Co., Ltd., and Okinawa Daiichikosho Co., Ltd., were newly established, whereas Kita-Kanto Daiichikosho Co.,
Ltd., Cosmo Daiichikosho Co., Ltd., and Daiichikosho Sales Co., Ltd., were renamed Saitama Daiichikosho Co., Ltd., Shizuoka Daiichikosho Co., Ltd., andJosai Daiichikosho Co., Ltd., respectively.

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2. Management Policies(1) Basic management policy
Based on the corporate philosophy of “More music to the world, more service to the world,” DKG’s basic management policy is “to promote music culture through karaoke and provide people with many places of pleasantcommunications.” To that end, DKG believes it must provide karaoke equipment and an attractive range of karaoke
content that meet users’ needs, as well as karaoke cabins where people can easily gather to enjoy singing karaokesongs. DKG is proud that this objective has been well completed.
Building on the know-how and entertainment content it has accumulated to date, DKG aims to satisfy the expectations and trust not only of investors but also of all the group’s stakeholders by ensuring continued business growthand higher earnings around the core karaoke business.

(2) Basic policy on profit distribution
DK attaches a high priority to ensuring stable, long-term profit distribution to shareholders and follows this basic
dividend policy with due regard to the consolidated performance level, the payout ratio and other factors. Retained
earnings not distributed to shareholders will be systematically and effectively reinvested in the development of new
products and operating assets to improve DKG’s market share and reinforce its profit-enhancing foundation.

(3) Basic views on the reduction of the minimum investment lot of shares
DK intends to flexibly address this issue by taking into account the increasing liquidity of its shares, past performance and market conditions while focusing on the shareholders’ interests.

(4) Target management indicator
As a priority indicator, DKG aims to achieve consolidated return on equity (ROE) of 12% or more.

(5) Medium- and long-term management strategies
For the ongoing growth of DKG around the mainstay karaoke business, DKG’s basic management strategies are toa) create new customer-oriented, value-added products and services leveraging off of the latest information technology (IT) and the expanded karaoke telecommunications network; b) encourage reforms of the karaoke businessenvironment and the revitalization of the karaoke market; and c) establish an integrated music entertainment
business in which “music, karaoke and entertainment” are harmoniously intertwined.

(6) DKG’s tasks ahead
DKG needs to proactively address the following groupwide issues: ①further extending its karaoke telecommunications network and increasing revenue from the network, ② improving profitability in the karaoke cabin business,③expanding operating performance of the satellite broadcasting business, ④ reinforcing the business foundationsof the music software business and improving revenue from the business and ⑤ steadily commercializing the new“Gateway Business.”① DKG has established a business model to earn the fee revenue from the provision of the karaoke-streaming
service in the karaoke telecommunications network. As of March 31, 2005, the market share of the operating“DAM” karaoke equipment had increased to above 50% of the telecommunications karaoke market. To further
expand the network, DKG will focus on increasing the sales and rental contracts of “DAM” karaoke equipment
to improve profits including the fee revenue from the provision of the karaoke-streaming service.
② As of March 31, 2005, DKG operated 210“BIG ECHO” karaoke cabin stores, including those overseas. DKG
intends to focus on raising the capacity operating rate via differentiation of its stores and enhanced investment
efficiency in pursuit of an improved operating margin.
③ With the multichannel direct broadcast satellite provider, Sky PerfecTV, as its platform, DKG now offers two
television channels and 100 radio channels. As the targeted consistent surplus in the satellite broadcasting
business seems to have been achieved, DKG aims to increase operating performance in the future.
④ In view of the harsh business environment in the music recording industry, in which DK’s subsidiaries mainly
engage, DK will reinforce the management foundation of the music software business and improve profitability
by increasing synergies with DKG’s mainstay karaoke business.
⑤ Effective from the year ended March 31, 2005, DKG substantially began supplying a new, broadband-based
interactive service that combines the “Broadband Cyber DAM (DAM-G100)” equipment with the information terminal “DAM Station.” DKG will endeavor to commercialize this new “Gateway Business.”

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(7) Basic views on corporate governance and the implementation of related measures① Basic views on corporate governance“Shareholders first” corporate governance has become a predominant view among corporations given recent
stock market pressures. Shareholders who shoulder the burden of monetary risk should be the most respectedamong a corporation’s various stakeholders, which also include employees and business partners, etc. DK believes its corporate governance should be carried out and improved in the direction of maximizing shareholder
value while meeting the requirements of the different stakeholders.
② Current status of corporate governance implemented
a. Board of Directors and Executive Board
Meetings of the Board of Directors and the Executive Board are held periodically according to the “Board of
Directors Rules” and the “Executive Board Rules,” respectively. The proposals at these meetings are carefully
discussed and decisions are made after requesting opinions of all the member attendees. Transparency inmanagerial decisions is emphasized and respected by allowing responsible staff from the related departments toattend these meetings, and complicated subjects are thoroughly reviewed on the spot to ensure quicker decision
making. Although DK currently does not intend to introduce the outside director system, its implementation
will be examined as business activities develop in the future.
b. Corporate officer system
Based on the basic concept of corporate governance, DK reduced the number of directors to eight in FY2001
from a high of 25 in FY1997 to achieve swifter managerial decision making. Along with the reduction in thenumber of directors, DK introduced the corporate officer system in June 2001, in which the responsibility ofeach corporate officer in each significant department has been clarified with regard to his/her duties, and these
corporate officers are currently in place.
c. Managerial Liaison Conference
The Managerial Liaison Conference is held once every week, in principle. Although the conference is not adecision-making organ, directors and statutory auditors attend meetings and responsible persons at related
departments report the progress of the basic policies and plans that were approved by the Board of Directors, aswell as other important subjects. DK therefore positions the Managerial Liaison Conference as the third important internal organ after the Board of Directors and the Executive Board.
d. Board of Statutory Auditors and internal audit
DK adopts the statutory auditor system. The Board of Statutory Auditors consists of four statutory auditors, ofwhich three are outside auditors. They carry out stringent audits by attending the meetings of the Board of
Directors and other important meetings, such as the Managerial Liaison Conference, examine important authorized documents and receive reports and explanations on business operations directly from the Directors, theinternal audit department and the staff in charge, as required.
Two of the three outside auditors, Juichi Ishikawa (12,000 shares) and Hiroshi Kakegawa (200 shares), held theCompany’s shares as of March 31, 2005. However, as these two outside auditors having DK’s shares have no
specific interest such as that in human relations other than the interest of having shares in DKG, the Board of
Statutory Auditors may be deemed to conduct its functions from an objective viewpoint.
DK also has an Audit Dept. as an internal control organization under the direct control of the President. The
department consists of eight dedicated staff members who conduct an internal audit of the overall operations ofboth DK and DKG, and quickly report the audit results to the President.
e. Audit of accounts
DK has appointed Ernst & Young ShinNihon as its auditing firm. The names and continuous service years of
the relevant staff who served as Certified Public Accountants for the year in the accountancy services, as well as
the composition of the supporting staff related to the accountancy services, are as follows:! Names and continuous service years as Certified Public Accountants for the Company:
Michiko Tomonaga, Designated partner and executive partner; 17 years
Takayoshi Ono, Designated partner and executive partner; 13 years
Yasuo Matsuura, Designated partner and executive partner! Composition of the supporting staff related to the Company’s accountancy services:
Certified Public Accountants:
6 persons
Assistant Certified Public Accountants: 10 persons

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③ Actions implemented in the year under review toward enhanced corporate governance
DK believes management oversight organs such as the Board of Directors and the Board of Statutory Auditors
should be streamlined to solidify corporate governance while seeking guidance from specialists. At the sametime, management executives such as directors and corporate officers, as well as all managerial staff and employees, must maintain a high sense of ethics and risk management in carrying out their respective duties.
Based on the above policy on corporate governance, DK has upgraded the audit and legal affairs departments toreinforce the internal control function, and reviewed the substance and operating procedures of all internal
regulations. In addition, DK formulated and distributed the “Daiichi Kosho Code of Conducts” to its employees
to help raise their consciousness.
Meanwhile, DK believes it is most efficient and rational for DK as the parent company to take the initiative inreinforcing the corporate governance of its subsidiaries. Therefore, to integrate and share an overall understanding as a powerful corporate group, DK places corporate governance-related matters on the agenda, as
required, at the Subsidiary Presidents’ Conference and the Sales Promotion Strategy Conference, which are held
periodically by convening the presidents and major management executives of the subsidiaries. DK’s ideas on
corporate governance are communicated there so that each subsidiary can carry out its respective corporate
activities under a unified groupwide understanding.

(8) Matters related to the parent company, etc.
None applicable.

(9) Streamlining and operation of internal management systems① Current status of streamlined and operated internal management systems
At present, DK endeavors to review its Ringi & Final Decision Authority Standards and reinforce its internalmanagement systems so that its internal controls can be more appropriately and rationally operated. Furthermore, an internal audit by the Audit Dept. is under way regarding DK and its group subsidiaries to investigate
whether the internal management systems are properly operated under the reviewed standards.
If any change to the provisions of a law or a regulation, or an organization or an operation, occurs, the relevant
departments around the central General Affairs Dept. will immediately check and review the relevant internal
regulations. In case of any problematic operation of the internal regulations, the substance of the management
systems is reviewed every time an objection or an opinion is raised, as required.
②Actions implemented in the year under review to enhance the internal management systems
DK is reviewing all the internal regulations of DK and its group subsidiaries to reinforce the groupwide internalmanagement systems, and the review for DK has been completed. As for the internal audit, the audit items werereconsidered and the Audit Dept. conducted its periodic audit with an increased number of staff.

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3. Operating Results and Financial Position(1) Overview for the Year
① Operating results
During the year ended March 31, 2005, the Japanese economy showed a steady undertone of recovery in thefirst half, supported by constant increases in exports and capital investment together with an improved employment situation and corporate profits. In the second half, however, the Japanese economy was uncertain due
to a rise in crude oil prices and the progress of yen appreciation.
The decline in product and service prices continued in the karaoke industry. In the nighttime market, karaoke
operators, along with bars and clubs, experienced a harsh business environment on the whole. In the daytime
market, several karaoke cabin operators adjusted the scale and timing of store openings in view of the decreased
number of customers affected by home TV viewing of the Olympic Games and such unusual meteorologicalphenomena as record hot temperatures in the summer and the effects of several typhoons, although large-scale
karaoke cabin operators continued to open new stores. Meanwhile, karaoke equipment in the commercial
karaoke market was being shifted from conventional models to broadband-compliant models, which led several
equipment manufacturers to launch new products.
In these circumstances, DKG actively concentrated its promotional efforts on the sales and rental of karaokeequipment to raise its top market share, achieving more than 50% on an operating equipment basis in thecommercial-use karaoke telecommunications market. The mainstay “Broadband Cyber DAM (DAM-G100)”
equipment gained high acclaim in the market, and approximately 50,000 units (an increase of 23,200 units year
over year) of the more than 200,000 “DAM” series units in operation were shifted from conventional models to
broadband-compliant models. In the “BIG ECHO” karaoke cabin business, DKG opened 20 new stores,
principally large ones, at prime locations in the Tokyo metropolitan area and regional core cities to expand thebusiness scale, and unprofitable stores were closed as promptly as possible.
In the content business, DKG successfully increased business-use service contracts for its satellite broadcasting
service, despite weak growth in subscribers for the mobile phone ringtone service. In the music software
businesses, DKG actively promoted sales to expand operations through the group-owned media despite a harshbusiness environment. DKG started a new “Gateway Business” during the year, and focused on establishing“DAM Station” information terminals and preparing attractive content menus to develop the business. With
this product line, DKG intends to innovate the karaoke business environment and revitalize the karaoke market.
As described above, DKG aggressively undertook these measures to realize the ideal of integrating the musicentertainment business such that “music, karaoke and entertainment” are intertwined in an effort to respondflexibly to rapid environmental changes in the existing businesses.
Consequently, consolidated net sales for the year under review increased 2.3% year over year to ¥122,085
million. Consolidated operating income decreased 20.9% to ¥10,383 million and consolidated ordinary income
fell 19.5% to ¥9.932 million, reflecting an increase in store opening expense due to active openings of “BIGECHO” karaoke cabins, the burden of anticipatory investment for new businesses and harsh music software
business performance, which were partly offset by revenue from the steady performance in the commercial
karaoke business. As a result of eliminating the provision for reserve for directors’ retirement allowances forprior years, which had been recorded for the previous fiscal year, consolidated net income for the year ended
March 31, 2005, increased 4.5% to ¥5,118 million, despite a ¥4,547 million loss on disposal of fixed assets
recorded as an extraordinary loss item, which resulted from an advanced measure to maintain the soundness oftangible fixed assets such as land and buildings in view of the implementation of impairment accounting.
Operating results by business segment are summarized as follows (with year-over-year percentagechanges from the previous fiscal year):
Commercial karaoke businessNet sales: ¥68,678 million (+3.3%)
Operating income: ¥12,210 million (+14.3%)
In this segment, given the progress of lower-priced products and the multifunctionality in the market, DKG’s“DAM” brand still achieved high acclaim. In addition, with the help of a user-oriented, enhanced after-sales
maintenance system, DKG had record shipments of 36,740 units including 29,620 “Broadband Cyber DAM(DAM-G100),” our mainstay product, in the karaoke telecommunications business. As for the rental of
karaoke equipment, the recent decline in the monthly rental fee was more than offset by a firm rise of 5,470
rental contracts. In addition, the number of contracts on the karaoke-streaming service with music content andimages increased by 16,360 annually in line with increases in equipment sold and the number of equipment

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rental contracts. As a consequence, our market share in the karaoke telecommunications market exceeded
50%, leading to a year-over-year rise of 3.3% in segment net sale and a 14.3% increase in operating income.

Karaoke cabin businessNet sales: ¥26,532 million (+5.5 %)Operating income: ¥769 million (–69.2%)
In the operation of karaoke cabin stores with the “BIG ECHO” brand, DKG actively pushed ahead withstore openings to expand the business. DKG closed 11 unprofitable stores but opened 20 new stores in prime
locations in the Tokyo metropolitan area and regional core cities during the year. Accordingly, the karaokecabin stores directly operated by DKG totaled 210 as of March 31, 2005 (208 domestically and two overseas),
and the number of karaoke cabins totaled 6,224, up 862 compared with March 31, 2004. As a result, net sales
at existing stores fell 6.1% mainly affected by increased home TV viewing of the Olympic Games in summer,
unusual meteorological phenomena such as the violent heat and the effects of sequential typhoons and intensified competition in several areas. Nevertheless, segment net sales increased 5.5% year over year. Operating income plummeted 69.2%, due principally to increases in store opening expense for aggressive store
openings and the provision for allowance for doubtful accounts to compensate for guarantee money for leased
buildings to cope with the deteriorated financial position of store renters, as well as the adverse effects of
unseasonable weather conditions.
Content businessNet sales: ¥9,188million (–11.0%)
Operating income: ¥839 million (–48.9%)
In this segment, DKG engages in two business fields: satellite broadcasting using Sky PerfecTV as its
platform and e-business principally with the mobile phone ringtone service. Despite a gradual decline in thenumber of household-use subscribers, subscribers of the “Stardam” commercial-use satellite broadcasting
service, which offers content menus similar to those supplied for household-use subscribers, increased
steadily and profitability remained steady through stringent cost-cutting efforts. In the e-business, DKG
strove to minimize the adverse effect of a decline in the number of subscribers with extended services to copewith a decline in subscribers. However, the decrease of subscribers in the e-business market was overwhelming. As a result, segment net sales declined 11.0% and operating income fell 48.9% year over year.
Music software businessNet sales: ¥11,672 million (–3.5%)
Operating loss: ¥750 million (down ¥1,093 million from the previous fiscal year)
In this segment, DKG actively promoted effective promotional activities through the group-owned media inlight of the continuously shrinking market volume of the music CD market. Segment net sales, however,decreased 3.5% year over year owing to fewer hit items in the year under review. The operating loss
amounted to ¥750 million after taking into account temporary increases in operating expenses such as the costof sales.
Other businessNet sales: ¥6,013 million (+14.5%)
Operating income: ¥162 million (–66.5%)
This segment mainly consists of the restaurant business and the real estate lease and rental business. Effectivefrom the year ended March 31, 2005, DKG started new businesses including the “Gateway Business.” In thisnew business, DKG actively installed the “DAM Station” information terminals and focused on the development of new content menus, which should enhance recognition of the service. As a result, segment net
sales increased 14.5 % year over year, owing to increased revenues for the favorable existing restaurant andthe real estate lease and rental businesses. However, operating income declined 66.5% year over year reflecting capital investment in the “DAM Station” and other anticipatory investments in new businesses.
② Financial position(Cash flows)
Consolidated cash and cash equivalents as of March 31, 2005, totaled ¥22,428 million, up ¥2,127 million
compared with March 31, 2004.
The following describes the respective consolidated cash flow conditions for the year ended March 31,
2005, and their major factors.

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(Cash flows from operating activities)
Net cash provided by operating activities decreased ¥2,978 million year over year to ¥24,221 million. This
amount reflected ¥6,499 million in income before income taxes and minority interests and ¥14,561 million in
depreciation expense.
(Cash flows from investing activities)
Net cash used in investing activities decreased ¥15,057 million year over year to ¥10,999 million. This decline was primarily attributable to ¥8,943 million in proceeds from repayment of time and saving deposits and¥16,071 million in payments for acquisition of tangible fixed assets.
(Cash flows from financing activities)
Net cash used in financing activities increased ¥7,499 million year over year to ¥11,106 million. This reflected ¥14,576 million in proceeds from long-term borrowings, ¥12,159 million in payments for repaymentof long-term borrowings and ¥9,955 million in payments for redemption of convertible bonds.
The trends of DKG’s several cash flow indicators are as follows:
As of March 31, 2005
As of March 31, 2003
As of March 31, 2004
Equity ratio (%)
42.1
44.0
47.1
Market value–based equity ratio (%)
47.7
87.5
72.8
Debt redemption (years)
2.6
1.8
1.7
Interest coverage ratio (times)
31.6
47.6
43.8
Notes:
Equity ratio: Shareholders’ equity/Total assets
Market value–based equity ratio: Total market capitalization/Total assets
Debt redemption: Interest-bearing debt/Operating cash flow
Interest coverage ratio: Operating cash flow/Interest payment
1. All of the above indicators are calculated for their respective values on a consolidated basis.
2. Total market capitalization is calculated by multiplying the closing stock price at the end of the year by
the number of shares outstanding at the end of the year (after deducting the treasury stock).
3. Operating cash flow is the value stated as “Cash flows from operating activities” in the consolidated
statements of cash flows.
4. Interest-bearing debt indicates the liabilities for which interest is paid on all the liabilities posted in the
consolidated balance sheets. Interest payment corresponds to the amount of interest paid in the consolidated statements of cash flows.

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(2) Future Outlook
Although a gradual recovery is expected to continue, ongoing geopolitical and economic uncertainties persist especially relative to the United States and China.
Although the overall business environment surrounding the karaoke industry remains difficult, replacement demand for broadband-compliant models is expected to expand as the nighttime and daytime markets have entered arenewal period for conventional equipment models. As a result, new broadband-based services including the supplyof various content menus are expected to expand.
Given such a business environment, DKG aims to proactively launch “DAM Station (DS II),” a new information
terminal that allows users to enjoy extended content and higher convenience, to restructure the karaoke businessenvironment and revitalize the karaoke market. Concurrently, DKG will steadily commercialize the “Gateway
Business” services through effective sales promotion and advertising activities. Moreover, DKG’s future-oriented
commitment to solidify its top share in the commercial karaoke market and create business opportunities in the
broadband-enhanced market includes improving the DAM brand value with further differentiated services andenhanced quality for continued shipments of ambitious products. Furthermore, in the karaoke cabin business, DKG
will strive to improve the profitability of each store by raising the capacity operating rate via store-differentiating
measures and an emphasis on investment efficiency. In the satellite broadcasting content business, DKG will
pursue expanded performance as its preceding target of a firm surplus seems assured. Meanwhile, in the e-business,the supply of superior and effective content service and a reduction in operating expenses will be keys for DKG to
improve profitability.
DKG’s subsidiaries engage in the music software business, and DKG will reorganize these to improve efficiency
and strengthen sales capability. Furthermore, DKG will devote itself to scouting new artists using the group network and the production of hit songs.
Despite the increased burden expected due to the anticipated investment and business development of the new“Gateway Business,” DK and DKG plan to achieve net sales of ¥129.4 billion, ordinary income of ¥10.5 billion andnet income of ¥3.6 billion for FY2005, the year ending March 31, 2006, on a consolidated basis by carrying out theabove measures and absorbing the investment burden.

(Business risks)
The following describes potential risk factors in DKG’s business development. The descriptions may not necessarily refer to risk factors but mention matters deemed material for the convenience of investors’ judgment from theviewpoint of active information disclosure. In recognition of the possibility of being exposed to these risk factors,
DKG endeavors to avoid them and to properly handle them should they occur.
The projections in this section are based on information available to DK’s management as of March 31, 2005.
There might be cases in which actual results differ from forecast values due to the many uncertain factors inherent
in forecasting.
(1) Risk factors that might change performance in each business segment
DKG’s businesses are categorized into five segments: 1) Commercial karaoke business, 2) Karaoke cabin
business, 3) Content business, 4) Music software business and 5) Other business. DKG’s operating performanceand business deployment could be influenced by the following factors.
1) Commercial karaoke business:
a. Sales from the commercial karaoke business might decline owing to possible decreases in shipments andthe number of operational units of commercial karaoke equipment, affected by the shrinkage of market
size if many bars, clubs and karaoke cabin stores are closed.
b. Sales from the commercial karaoke business might be influenced by variations in shipments and thenumber of commercial karaoke equipment in operation, depending on the release of new models and thelevel of support in the karaoke cabin market. :c. Sales from the commercial karaoke business might decline due to intensified competition and falling
selling prices of products.
2) Karaoke cabin business:
a. Sales from the karaoke cabin business might be influenced by a variable number of new store openings,
depending on the number of good candidate sites in the new store-opening plan.
b. Sales from the karaoke cabin business might vary depending on the extent of support by customers in the
karaoke cabin market, which is linked with changes in user needs.
c. Sales from the karaoke cabin business might decline due to a decrease in the number of customers and areduction in the per-customer transaction along with intensified competition.

11

DAIICHIKOSHO

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3) Content business:
a. Sales from the content business might be influenced by a variable number of paid subscribers, etc., depending on the extent of market support for the content menus supplied by DKG.
b. The sales and income summary from the content business might vary owing to the suspension of businessor any change to business policies with regard to broadcasting and/or telecommunications carriers.
c. Sales from the content business might decline due to a decrease in the number of subscribers and a reduction of audiovisual service fees through intensifying competition with similar services such as grounddigital broadcasting.
4) Music software business:
a. Sales from the music software business might be influenced by variable sales volume, which would depend on the support of newly released music CDs and DVD by the market.
b. The sales and income summary from the music software business might vary due to a possible decline insales volume of music CDs and DVDs via media shifting, and a possible increase in sales volume via othermedia such as the Internet.
5) Other business:
a. Sales from the other business and segment business policies might vary depending on the market support
for DKG’s new businesses.
b. Sales from the restaurant business might decline due to a decrease in the number of customers and a reduction of per-customer transactions along with intensified competition among restaurants.

(2) Legal restrictions
At present, there is no specific legal restriction through which DKG might be directly controlled within its
industry. However, DKG’s operating results and financial position might be influenced by future revisions orchanges to the provisions of laws, regulations and ordinances by local governments, such as the Copyright Act,
the Food Sanitation Law, the Broadcast Law and the Telecommunications Business Law, if business operations
are restricted by such a revision or a change.
(3) Competition
DKG has solidified the top share in the commercial karaoke business owing to strong support in the market for
relevant products and services. There is no guarantee that the market will continuously accept DKG’s products
and services in the future. Moreover, DKG’s operating results and financial position might be affected if DKG
cannot maintain an advantageous position in its increasingly competitive business environment.
(4) Quality control
DK’s products and merchandise are manufactured and supplied in compliance with certain rigorous quality
control standards. However, there is no guarantee that all the products and merchandise are without defect. Even
DK’s products and completed operation liability insurance will not always cover 100% of a claim. In the eventthat a large claim and/or indemnity is pursued in conjunction with any product/merchandise defect, DK’s
products and merchandise would lose considerable consumer trust and DKG’s operating results and financial
position might be affected.
(5) Supply of new products and services
In the karaoke industry, technological innovations are occurring rapidly, thereby requiring the development andswift supply of corresponding new products and services. However, the success of such new products andservices involves various risks such as the following.
! There is no guarantee that funds and resources required to develop and supply new products or services can be fully appropriated in the future.
! There is no guarantee that long-term investment and the use of significant resources will always
result in successful products or services.
! In response to diversifying or changing user needs, DKG’s new products or services might fail toreceive high acclaim in the market.
! There is no guarantee that a newly developed product or technology is protected as a proprietary
intellectual property.
! The delayed commercialization of a new product might fail to match well with market needs. Or, if acompetitor commercializes a similar product sooner than DKG, the DKG product might not be able
to gain sufficient market share.

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DAIICHIKOSHO

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Apart from the above risks, DKG’s operating results and financial position might be affected by stagnant
growth and profitability if it cannot appropriately predict changes in the industry and the market and/or
cannot supply attractive products or services.

(6) Dependency on outside corporations
DK planned and developed the commercial “DAM” karaoke equipment sold by DKG. Its production is entrusted to outside corporations such as YAMAHA CORPORATION based on the OEM agreement. DK
therefore has entered into contracts regarding “technological” and “purchase” alliances with several outside
corporations on a one-year renewal basis. DKG’s operating results and financial position may be affected byrevisions to any contractual conditions or the termination of these contracts in the future.
(7) Intellectual property rights
Various intellectual property rights have been acquired for the merchandise supplied by DKG. Moreover, DKG
strives not to infringe on the intellectual property rights of any third parties. There is no guarantee that suchinvestigations are appropriately carried out for a sufficient and reasonable range. In case DK infringes anyone’s
intellectual property rights, the infringed party may bring a suit to appeal a claim for damage and/or an injunction relief, in addition to a request for payment of a consideration for the intellectual property rights inquestion. Moreover, a third party might infringe DK’s intellectual property rights. In these cases, DKG’s operating results and financial position might be affected.
(8) System failure
DKG’s services distribute or transmit various content menus such as music, videos and data through a variety of
networks such as fixed lines, mobile phones, the Internet and satellite broadcasting. As a result, if a network is
down due to a natural disaster or a grave accident, temporary service suspension might occur. System failure
accompanying the suspended normal transmission of data might be also caused by a possible hardware/software
defect, any unauthorized and improper access into the computer or any erroneous operation by the staff incharge. In these cases, DKG’s operating results and financial position might be affected by a decline in the reliability of the related DKG service.
(9) Information management
DK keeps a large amount of data and information, including personal information on customers and a variety ofmusic and musical composition information used for the karaoke telecommunications service. Moreover, several DK businesses use personal information–dependent services. As DK has paid special attention to the strict
management of important information, no leakage problems have occurred in the past. However, should such an
information leakage incident occur for whatever reason, DK’s social responsibility would be criticized andpossibly management’s involvement as well, which would involve the risk of losing social trust. In such cases,
DKG’s operating results and financial position might be affected.
(10) Securing and nurturing excellent human resources
Consistent future growth will require DKG to maintain and nurture good human resources along with its scale
expansion. Unless such talented people can be maintained and nurtured internally, DKG’s operating results andfinancial position might be affected.
(11) Impairment accounting
As for the fixed assets owned by DKG, the “Accounting Standard on the Impairment of Fixed Assets” isscheduled to be compulsorily adopted, effective from the year ending March 31, 2006. Currently, management
anticipates recording an impairment loss of approximately ¥2.0 billion, but this amount might vary dependingon fluctuation in DKG’s income.
(12) Lending of trademarks, etc.
DK owns several trademarks such as the karaoke cabin “BIG ECHO” and endeavors to raise its brand power
and the protection of brand values. If any corporation other than DK wishes to use the trademarks for any
purpose, DK authorizes their utilization by entering into a “Trademark License Contract,” even with any its
subsidiaries, in principle. For example, a business partner with which DK has a long business relationship uses
the company name “Daiichikosho Co., Ltd.” Also, DK authorizes several business partners to use the “BIGECHO” trademark based on previous transaction results and under an agreement with certain conditions. If any
contingency takes place at such a business partner, DKG’s operating results and financial position might beaffected.

13

DAIICHIKOSHO

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(13) Recommendation issued by the Japan Fair Trade Commission
DK has received an admonition from the Japan Fair Trade Commission for allegedly violating the provision of
the Anti-Monopoly Law with regard to the licensing of musical compositions owned by its music software
subsidiaries. DK has forwarded a notice of non-acceptance to the Commission, and an appeal is under way. DK
believes the admonition is unfair and inadequate. However, the results and the effects of the appeal cannot be
forecast at this time.
(14) Lawsuits
ASIA COPYRIGHT ASSOCIATION has filed a suit requesting a claim for damages against DK to the Tokyo
District Court for alleged unauthorized use of Korean musical compositions it controls in DKG’s communications karaoke songs. DK considers the Association’s complaint to be unreasonable.

14

DAIICHIKOSHO

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4. Consolidated Financial Statements(1) Consolidated Balance Sheets
Fiscal year
Account item
(Assets)
Current assets
Cash and bank deposits
Notes and accounts receivable―
tradeMarketable securities
Inventories
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings and structures
Karaoke equipment for rental
Karaoke cabin facilities
Land
Construction in progress
Other
Total tangible fixed assets
Intangible assets
Other
Total intangible assets
Investments and other assets
Investments in securities
Long-term loans receivable
Deferred tax assets
Leasehold deposits and guarantee money
Other
Allowance for doubtful accounts
Total investments and otherassetsTotal fixed assets
Total Assets

FY 2003 (As of March 31, 2004)
AmountComposition ratio(%)(Millions of yen)
FY 2004 (As of March 31, 2005)
Year-overyear
AmountComposichangetion ratio(%)

29,28014,011

23,094
12,241(6,185)(1,770)

131
5,907
3,613
3,131
(1,432)54,644

39.5

―
6,843
3,102
4,706
(1,075)
48,913

37.1

(131)
936
(510)
1,575
356
(5,730)

9,094
9,392
10,813
16,626398
2,020
48,345

34.9

7,036
9,998
12,89015,463
179
2,683
48,25236.5(2,057)605
2,077(1,163)
(218)
663
(93)

8,950
8,950

6.5

8,665
8,665

6.6

(284)
(284)

7,214
2,985
2,193
12,604

6,971
1,294
2,494
13,418(243)(1,691)
300
814

4,001
(2,486)
26,51319.1

4,331(2,345)
26,165

19.8

330
141
(347)

83,808138,453

60.5
100.0

83,083
131,996

62.9
100.0

(725)
(6,456)

15

DAIICHIKOSHOFiscal year
Account item
(Liabilities)
Current liabilities
Notes and accounts payable―
trade
Short-term borrowings
Convertible bonds redeemablewithin one year
Accounts payable―other
Income taxes payable
Reserve for bonuses
Unrealized profit on installment
sales
Other
Total current liabilities
Long-term liabilities
Long-term borrowings
Deferred tax liabilities
Reserve for employees’ retirement benefits
Reserve for directors’ retirement
allowances
Consolidation adjustments account
Other
Total long-term liabilities
Total LiabilitiesCO.,

FY 2003 (As of March 31, 2004)
AmountComposition ratio
(%)

LTD.

(Millions of yen)
FY 2004 (As of March 31, 2005)
Year-overyear
AmountComposichangetion ratio
(%)

7,249

7,672

423

19,418
10,79921,107―

1,689(10,799)

6,705
1,125
998
667

7,067
907
1,035
463

361
(217)
36
(203)

2,576
49,54135.8

2,660
40,91431.0

83(8,626)

18,935
226
2,662

20,492
226
2,764

1,557
―
101

3,141

2,959

(182)

1,016

818

(198)

1,161
27,144
76,685

19.6
55.4

1,096
28,35869,272

21.5
52.5

(64)
1,213
(7,412)(Minority Interests)
Minority interests

910

0.6

528

0.4

(381)

(Shareholders’ Equity)
Capital stock
Capital surplus

12,34924,001

8.9
17.3

12,35024,002

9.4
18.2

0
1

29,716(5,761)
1,286

21.5
(4.1)
0.9

30,050(1,794)
1,113

22.8
(1.4)
0.8

334
3,966
(173)

31

0.0

101

0.1

70

(767)
60,856
138,453

(0.5)
44.0
100.0

(3,629)62,194
131,996

(2.8)
47.1
100.0

(2,861)
1,338(6,456)

Retained earnings
Land revaluation difference
Net unrealized gains or losses onavailable-for-sale securities
Foreign currency translation
adjustments
Treasury stock
Total Shareholders’ Equity
Total Liabilities, Minority Interests and Shareholders’ Equity

16

DAIICHIKOSHO

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(2) Consolidated Statements of Income
Fiscal year
Account item
Net sales
Cost of sales
Gross profit before adjustment for
unrealized profit on installment
sales
Unrealized profit on installment
sales─reversal (+)
Unrealized profit on installment
sales─deferred (–)
Gross profit on sales
Selling, general and administrative
expenses
Operating income
Nonoperating income
Interest income
Fees and commissions received
Amortization of consolidation adjustments accountForeign exchange gain
Other
Nonoperating expenses
Interest expense
Loss on disposal of inventories
Loss on valuation of inventories
Provision for allowance for doubtful
accounts
Other
Ordinary income
Extraordinary gains
Gain on sales of fixed assets
Gain on sales of investments in securities
Reversal of allowance for doubtful
accounts
Reversal of reserve for directors’
retirement allowances
Indemnity on relocation of warehouse
Extraordinary losses
Loss on disposal of fixed assets
Loss on sales of investments in securities
Loss on valuation of investments insecurities
Provision for reserve for directors’
retirement allowances for prioryears
Loss on arrangement of subsidiaries
and affiliates
Income before income taxes andminority interests
Income taxes―current
Income taxes―deferred
Minority interests in income (loss) ofconsolidated subsidiaries
Net income

FY 2003 (From April 1, 2003, to
March 31, 2004)
AmountPercentage(%)
119,335
100.0
68,85557.7
50,479
42.3
219
127

250
92

0.1

202

0.2

219.0

50,57237,44542.4
31.4

48,41938,035

39.7
31.2

95.7
101.6

13,12611.0

10,383

8.5

79.1

1,743

1.4

97.3

2,195
9,932

1.8
8.1

84.8
80.5

1,150

0.9

269.9

4,583

3.7

94.4

6,499

5.3

82.2

1,672
(291)

1.3
(0.2)

55.8
(3,303.5)

5,118

4.2

104.5

511
275
283
―
721

(Millions of yen)
FY 2004 (From April 1, 2004, toYear-overMarch 31, 2005)year
AmountPercentage change(%)
122,085
100.0
102.3
73,86860.5
107.3
48,216
39.5
95.5

48

410
241
230
1,792

1.5

191
670

570
729

551
96

519
102

1,203
25

665

2,587
12,331

2.2
10.3

318

16
208

54
757

201

71

―

139

―

426

0.4

128

1,843
―

4,547
6

82

29

2,921

―

5

1,975
1,021

4,853

4.1

7,904

6.6

2,996
8

2.5
0.0

4,898

4.1

17

―

1,342
330

DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated Statements of Retained Earnings
Account item
(Capital surplus)
Capital surplus at beginning of year
Increase in capital surplus
Conversion of convertible bonds
Gain from purchase and redemption of treasury stock
Capital surplus at end of year

FY 2003 (From April 1, 2003,
to March 31, 2004)
Amount(Millions of yen)
FY 2004 (From April 1, 2004,
to March 31, 2005)
Amount24,00024,0010
0(Retained earnings)
Retained earnings at beginning of year
Increase in retained earnings
Net income
Decrease in retained earnings
Cash dividends
Bonuses to directors and statutory auditors
Reversal of land revaluation difference
Retained earnings at end of year0
24,0010029,879
4,898
683
134
4,243

18

4,898

5,062
29,7161
24,002
29,716

5,118
682
134
3,966

5,118

4,783
30,050DAIICHIKOSHO

CO.,

LTD.

(4) Consolidated Statements of Cash Flows
Fiscal year
Account item
Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation expense
Amortization of video license fees
Amortization of consolidated adjustments account
Increase in allowance for doubtful accounts
Increase (decrease) in reserve for directors’ retirement allowances
Dividend and interest income
Gain or loss on sales of investments in securities
Gain or loss on investments in investment businessassociations
Interest expense
Gain or loss on disposal of fixed assets
Loss on valuation of investments in securities
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Transfer of cost of sales on karaoke equipment forrentalIncrease in trade payables
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Income taxes refunded
Net cash provided by operating activities
Cash flows from investing activities:
Increase in time and saving deposits
Proceeds from decrease in time and saving deposits
Payments for acquisition of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for acquisition of intangible assets
Payments for acquisition of video licenses
Payments for purchase of investments in securities
Proceeds from sales of investments in securities
Payments for purchase of subsidiaries’ stocks
Payments for loans
Proceeds from collection of loans receivable
Payments for leasehold deposits and guarantee
money
Proceeds from repayment of leasehold deposits andguarantee money
Other
Net cash used in investing activities
Cash flows from financing activities:
Net increase in short-term borrowings
Increase in long-term borrowings
Payments for repayment of long-term borrowings
Payments for retirement of convertible bonds
Payments for redemption of convertible bonds
Cash dividends paid
Payments for purchase of treasury stock
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(Millions of yen)
Year-over-year change

FY 2003 (From April 1,
2003, to March 31,
2004)
AmountFY 2004 (From April 1,
2004, to March 31,
2005)
Amount7,904
12,884
―
(283)
504
3,141

6,499
14,561
292
(230)
23
(182)

(540)
(208)
18

(447)
(751)
(2)

570
1,827
82
(353)
820
943

551
4,493
29
1,707
(1,717)
1,293

625
295
28,232541(571)(2,004)
1,002
27,20085(148)
26,059448(552)(1,821)
89
24,221(9,008)
3,275(11,684)
46(6,064)―(2,093)
223
(265)
(495)
1,101
(1,405)

(630)
8,943
(16,071)
1,477(4,269)(1,057)
(358)
1,628
(45)
(395)
1,129
(1,709)

241

220

70
(26,056)

139(10,999)

15,057

618
9,391(11,481)(1,373)
―
(684)
(67)
(9)
(3,606)(66)

829
14,576(12,159)(845)(9,955)(683)(2,862)(7)(11,106)
11(7,499)77(2,530)22,831
20,3002,127
20,30022,4284,657(2,530)2,127

19(2,978)DAIICHIKOSHO

CO.,

LTD.

Basis of Presenting the Consolidated Financial Statements
1. Scope of Consolidation(1) Consolidated subsidiaries: 37
The names of the consolidated subsidiaries are omitted as they are stated in “1. Corporate Group.”(2) Major unconsolidated subsidiaries
Major unconsolidated subsidiaries are Union Eiga Co., Ltd., Crown Music Enterprise Co., Ltd., and Zoom Republic.
(Reason for exclusion from consolidation)
The unconsolidated subsidiaries above are excluded from consolidation because they are small-scale corporations
and their respective sums of total assets, net sales and others have no significant impact on DKG’s consolidated
financial position and operating results for the year.

2. Application of the Equity Method(1) Unconsolidated companies accounted for by the equity method: None
(2) Unconsolidated companies not accounted for by the equity method:
Unconsolidated subsidiaries that are not accounted for by the equity method (e.g., Union Eiga Co., Ltd., Crown
Music Enterprise Co., Ltd., and Zoom Republic) are excluded from the application of the equity method because therespective sums of net income (loss) and retained earnings have no significant impact on these account items in the
consolidated financial statements for the year, and they are immaterial on the whole.

3. Closing Date for the Settlement of Accounts of Consolidated Subsidiaries
Of the consolidated subsidiaries, the closing date of the following companies is different from the consolidated closing
date, which is March 31. In preparing the consolidated financial statements, the financial statements for the respective
years are used for those that have a closing date that differs from the consolidated closing date, provided that necessary
adjustments are made for consolidation purposes with regard to material transactions that might take place in the period
between their respective closing dates and the consolidated closing date.
Closing date is December 31
Shanghai Zong-Yi Music & Entertainment Co., Ltd., Saha Daiichi Kosho Co., Ltd., Daiichikosho (Shanghai), Ltd.,and BIG ECHO (SHANGHAI) Co., Ltd.
Closing date is March 20:
Nippon Crown Co., Ltd., Tokuma Japan Communications Co., Ltd., and Tri-M, Inc.

4. Summary of Significant Accounting Policies(1) Valuation basis and method for important assets① Marketable securities and investments in securities
Held-to-maturity debt securities:
Carried at amortized cost using the straight-line method.
Other securities primarily designated as available-for-sale securities for which the fair values are readily
determinable:
Carried at fair value as of the balance-sheet date with changes in net unrealized holding gain or loss, net ofthe applicable income taxes, included directly in shareholders’ equity. The cost of securities sold is determined by the moving-average method.
Other securities primarily designated as available-for-sale securities for which the fair values are notreadily determinable:
Carried at cost determined by the moving-average method.

② Inventories
Principally stated at cost determined by the moving-average method.
(2) Depreciation method of major depreciable assets① Tangible fixed assets
Depreciation is principally computed by the declining-balance method at rates based on the estimated useful
lives of the assets as shown below. However, the straight-line method is adopted for buildings (excluding
building improvements) acquired on or after April 1, 1998.
Buildings and structures: 3–50 years
Karaoke equipment for rental: 5–6 years
Karaoke cabin facilities: 3–19 years

20

DAIICHIKOSHO

CO.,

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② Intangible assets
Amortization of intangible assets is computed by the straight-line method.
(3) Accounting standard for important reserves① Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount of possible losses from uncollectible receivables
based on the actual rate of losses from bad debt for ordinary receivables, and on the estimated recoverability forspecific doubtful receivables.
② Reserve for bonuses
The reserve for bonuses is provided at an estimated amount based on the internal payment prediction standard.
③ Reserve for employees’ retirement benefits
The reserve for employees’ retirement benefits is provided at an amount recognized to have accrued as of thebalance-sheet date, based on the projected benefit obligations and plan assets as of March 31, 2005.
Actuarial differences are amortized on a pro rata basis by the straight-line method over a certain period (10years), which is shorter than the average remaining service years for employees at the time of their recognition,from the following fiscal year of recognition.
④ Reserve for directors’ retirement allowances
The reserve for directors’ retirement allowances of DK and its domestic consolidated subsidiaries is provided at
amounts that would be required to be paid in accordance with their respective internal rules concerning directors’
retirement allowances if all eligible directors and statutory auditors were to resign their positions as of the respective balance-sheet dates.
(4) Translation of important assets and liabilities denominated in foreign currencies into yen
Monetary receivables and payables denominated in foreign currencies are translated into yen at the spot exchange
rate in effect at the balance-sheet date. The resulting exchange differences are charged or credited to income. Thebalance sheet accounts, as well as the revenue and expense accounts, of the overseas subsidiaries are translated into
yen at the spot exchange rate in effect at their respective balance-sheet dates. The resulting translation differences
have been recorded and presented as a component of minority interests and as “Foreign currency translation adjustments” in shareholders’ equity.
(5) Accounting for important leases
Finance leases that do not transfer ownership of leased property to the lessee are accounted for as rental transactions.
(6) Hedge accounting
DKG hedges against risks of interest rate fluctuations for its variable-rate borrowings using interest rate swaps. The
preferential treatment is applied to these interest rate swaps.
(7) Other important matters in preparing the consolidated financial statements① Accounting for installment sales
Unrealized profit on installment sales is deferred for the amount corresponding to the portion of installment
receivables for which the due date has not expired based on DKG’s installment standards.
② Accounting for consumption taxes
Consumption taxes are accounted for using the tax exclusion method.

5. Valuation of Assets and Liabilities of Consolidated Subsidiaries
The assets and liabilities of consolidated subsidiaries are fully valued at their market value as of the respective dates
when the subsidiaries were initially consolidated.

6. Amortization of the Consolidation Adjustments Account
The amount of the consolidation adjustments account is equally amortized over five or 15 years on a straight-line basis.

7. Treatment of Appropriation of Profit Items
The consolidated statements of retained earnings are based on the distribution of profit finalized during the consolidation fiscal year at the consolidated subsidiaries.

8. Cash and Cash Equivalents in the Consolidated Statements of Cash Flows
Cash and cash equivalents in the consolidated statements of cash flows include cash on hand, demand deposits andshort-term investments due within three months from the acquired date, which are easily convertible into cash with little
risk of value fluctuation.

21

DAIICHIKOSHO

CO.,

LTD.

Additional Information:
Presentation of Pro Forma Taxation Components of Corporate Income Tax on the Consolidated Statements of Income:Pursuant to the public announcement of the Practical Compliance Report No. 12, “Practical Treatment of the Presentationof Pro Forma Taxation Components of Corporate Income Tax on the Statement of Income” (by the Accounting Standards
Board of Japan, February 13, 2004), DK treats the values of corporate income tax divided by the value added and by capitalstock as components of selling, general and administrative expenses, based on the practical compliance report, effectivefrom the year ended March 31, 2005.
As a result, selling, general and administrative expenses increased ¥172 million year over year, and operating income,ordinary income and income before income taxes and minority interests each decreased by the same amount.

22

DAIICHIKOSHO

CO.,

LTD.

Notes to Consolidated Financial Statements(Consolidated Balance Sheets)(Millions of yen)

As of March 31, As of March 31,
2004
2005
49,52747,971

1. Accumulated depreciation for tangible fixed assets
2. Liabilities for guarantee
3. Assets pledged as collateral
Notes and accounts receivable―trade
Other current assets
Buildings and structures
Karaoke equipment for rental
Land
Other tangible fixed assets
Long-term loans receivable
Leasehold deposits and guarantee money
Total
Debt corresponding to the above:
Short-term borrowings
Long-term borrowings
Total

899

919

3,282
3,311
28
7,576
897
1,634
155
16,886

2,255
553
3,058
8
7,294
1,141
552
155
15,020

6,000
6,993
12,994

5,755
7,732
13,487―339,203 shares
1,817,082 shares
4. Treasury stock
5. DK revalued the land used for its business based on the provisions prescribed in the Law Concerning Revaluation of Land (1998 Law No. 34). The resulting revaluation difference is included in shareholders’ equity
as “Land revaluation difference.”(1) Date of revaluation: March 31, 2001
(2) Revaluation method:
The value of land is calculated by reasonably adjusting the “land prices calculated under the method determinedand publicly announced by the Director-General of the National Tax Administration Agency for calculating thevalue of land as the basis of calculating taxable prices of land value tax set forth in Article 16 of the Land Price
Tax Law,” as stipulated in Article 2, Item 4, of the Ordinance Implementing the Law Concerning Revaluation ofLand (1998 Government Ordinance No. 119).
(3) The difference between the total market values of the land for business use as of March 31, 2005, and thetotal carrying amounts after the revaluation:(¥167 million)(Consolidated Statements of Cash Flows)
Relations between the year-end balance of cash and cash equivalents and the accounts listed in the
consolidated balance sheets(Millions of yen)

Cash and bank deposits
Time and saving deposits for which the deposit period exceeds threemonthsCash and cash equivalents

23

As of March 31, As of March 31,
2004
2005
29,28023,094(8,979)(666)
20,30022,428DAIICHIKOSHO

CO.,

LTD.

(Leases)
1. Finance lease contracts that do not transfer ownership of leased property to the lessee(1) Assumed data as to acquisition cost, accumulated depreciation and net book value of leased assets as ofMarch 31, 2004 and 2005

Karaoke cabin facilities
Other tangible fixed assets
Total

FY 2003(From April 1, 2003, to March 31,
2004)
AcquisiAccuNet booktion cost
mulatedvalue
depreciation
476
319
157
1,534
964
569
2,010
1,283
726

(Millions of yen)
FY 2004(From April 1, 2004, to March 31,
2005)
AcquisiAccuNet booktion cost
mulatedvalue
depreciation
285
194
90
914
489
425
1,200
684
516

(2) Assumed future lease payments as of March 31, 2004 and 2005, under finance leases

Due within one year
Due after one year
Total

As of March 31,
2004
444
292
736

(Millions of yen)
As of March 31,
2005
246
274
520

(3) Lease payments, and assumed depreciation expense and interest expense

Lease payments
Assumed depreciation expense
Assumed interest expense

As of March 31,
2004
654
635
11

(Millions of yen)
As of March 31,
2005
442
431
6

(4) Computation method of assumed depreciation expense
Depreciation expense is computed by the straight-line method, assuming the lease period as the useful life and noresidual value.
(5) Computation method of assumed interest expense
The difference between the total lease contract amount and the assumed acquisition cost is assumed to be interest,and interest expense is computed by the interest method.

2. Operating lease contracts
Future lease payments under operating leases

Due within one year
Due after one year
Total

As of March 31,
2004
422
2,495
2,918

24

(Millions of yen)
As of March 31,
2005
378
2,030
2,409

DAIICHIKOSHO

CO.,

LTD.

(Securities)
1. Other securities primarily designated as available-for-sale securities for which fair values are readily
determinable
FY 2003(As of March 31, 2004)
Acquisition Book value
Unrealized
cost
per congain (loss)
solidatedbalancesheets
848
2,837
1,989
822
1,016
194
1,670
3,854
2,183
334
329
(4)
122
121
(0)
456
451
(5)
2,127
4,305
2,178

Category

Securities with the bookvalue exceeding the acquisition cost
Securities with the bookvalue not exceeding theacquisition cost
Total

StocksOther
Subtotal
StocksOther
Subtotal(Millions of yen)
FY 2004(As of March 31, 2005)
Acquisition Book value
Unrealized
cost
per congain (loss)
solidatedbalancesheets
881
2,766
1,884
―
―
―
881
2,766
1,884
―
―
―
―
―
―
―
―
―
881
2,766
1,884

2. Available-for-sale securities sold in the years ended March 31, 2004 and 2005
(Millions of yen)
FY 2004 (As of March 31, 2005)
Proceeds from sales Gross realized gains
Gross realized
losses
1,631
757
6

FY 2003 (As of March 31, 2004)
Proceeds from sales Gross realized gains
Gross realized
losses223
208―

3. Held-to-maturity debt securities and Other securities primarily designated as available-for-sale securities for which values were not readily determinable at March 31, 2004 and 2005
FY 2003 (As of March
31, 2004)
Book value per consolidated balance sheets
Held-to-maturity debt securities:
Discount bank debentures
Available-for-sale securities:
Unlisted stocks (excluding OTC issues)
Other(Millions of yen)
FY 2004 (As of March
31, 2005)
Book value per consolidated balance sheets

9

―

2,313
―

2,866
623

4. Future repayment schedule of available-for-sale securities with maturities and held-to-maturity debt
securities(Millions of yen)
FY 2004 (As of March 31, 2005)

FY 2003 (As of March 31, 2004)
Within 1
year

Bonds and debentures
Others
Other
Total

9
121
131

Above
1year andwithin 5
years

―
1,016
1,016

Above 10
years

Above
5years andwithin 10
years

―
―
―

―
―
―

(Derivative Transactions)
FY 2003, the year ended March 31, 2004:
Relevant information is omitted as hedge accounting is applied.

FY 2004, the year ended March 31, 2005:
Relevant information is omitted as hedge accounting is applied.

25

Within 1
year

Above
1year andwithin 5
years

―
―
―

―
123
123

Above
5years andwithin 10
years

―
500
500

Above 10
years

―
―
―

DAIICHIKOSHO

CO.,

LTD.

(Retirement Benefits)
1. Summary of DKG’s retirement benefit plans
DK and its five consolidated domestic subsidiaries have defined-benefit retirement plans that consist of qualified pension plans and lump-sum retirement payment plans, whereas other consolidated subsidiaries have lump-sum retirement
payment plans. DK and certain consolidated subsidiaries may also pay extra retirement benefits upon the resignation of
their employees that are not considered subject to the retirement benefit obligations by the actuarial calculation based on
the retirement benefit accounting standards.

2. Balance and details of the retirement benefit obligations as of March 31, 2005
FY 2003(As of March 31, 2004)(4,596)2,205(2,391)(131)
875(1,646)(Millions of yen)
FY 2004(As of March 31, 2005)(4,931)
2,548(2,383)(265)
926(1,722)(1) Projected benefit obligations(2) Fair value of plan assets(3) Unfunded benefit obligations (1) + (2)(4) Unrecognized plan assets(5) Unrecognized actuarial differences(6) Net amount recorded in the consolidated balance sheets(3) + (4) + (5)(7) Prepaid plan assets(1,015)(1,041)(8) Reserve for employees’ retirement benefits(2,662)(2,764)
Note: Consolidated subsidiaries adopt a simplified method in calculating their projected benefit obligations.

3. Retirement benefit expenses(Millions of yen)
FY 2003
FY 2004(From April 1, 2003, to(From April 1, 2004, to
March 31, 2004)
March 31, 2005)(1) Service cost
467526(2) Interest expense
4446(3) Expected return on plan assets (subtraction)
(32)
(40)
(4) Amortization of actuarial differences
109110(5) Extra retirement benefits―
8(6) Retirement benefit expenses (1) + (2) + (3) + (4) + (5)587651
Note: The retirement benefit expenses of certain consolidated subsidiaries that adopt the simplified method areincluded in “(1) Service cost.”

4. Assumptions in the computation of retirement benefit obligations and others
FY 2003(As of March 31, 2004)
1.7%
2.0%
Straight-line basis(1) Discount rate(2) Expected rate of return on plan assets(3) Interperiod allocation method of estimated retirement
benefits(4) Number of years for amortization of actuarial differences 10 years from the following fiscal year of recognition

26

FY 2004(As of March 31, 2005)
1.7%
2.0%
Straight-line basis
10 years from the following fiscal year of recognition

DAIICHIKOSHO

CO.,

LTD.

(Tax-Effect Accounting)
1. Breakdown by cause of deferred tax assets and liabilities
FY 2003 (as of March 31, 2004)
Deferred tax assets:
Loss brought forward
Depreciation expense
Allowance for doubtful accounts
Reserve for employees’ retirement
benefits
Reserve for directors’ retirement allowances
Loss on valuation of investments insecurities
Inventories
Reserve for bonuses
OthersDeferred tax assets subtotal
Valuation reserve
Total deferred tax assets
Deferred tax liabilities:
Net unrealized gains or losses on available-for-sale securities
Prepaid plan expense
Unrealized gain or loss
Net deferred tax assets

4,535
585
1,083
953

(Millions of yen)
FY 2004 (as of March 31, 2005)
Deferred tax assets:
Loss brought forward
5,100
Depreciation expense
339
Allowance for doubtful accounts
1,110
Reserve for employees’ retirement benefits
1,031

1,301

Reserve for directors’ retirement allowances

1,199

Loss on valuation of investments in securities
689
Inventories
407
Reserve for bonuses
738
Others
11,209Deferred tax assets subtotal(4,112)
Valuation reserve
7,097
Total deferred tax assets
Deferred tax liabilities:(878)
Net unrealized gains or losses on available-for-sale securities(411)
Prepaid plan expense(226)
Unrealized gain or loss
5,580
Net deferred tax assets

541

913

706
421
620
11,071(4,294)
6,776
(757)
(421)
(226)
5,370

2. Reconciliation between the statutory income tax rate and the effective income tax rate after the adoption of tax-effect accounting
FY 2003 (as of March 31, 2004)
Statutory income tax rate
Reconciliation items:
Reversal of land revaluation difference
unrecognized as deferred tax assets
Entertainment expenses and others, which
are permanently nondeductible
Per capita inhabitant’s tax
Valuation reserve
Others
Effective income tax rate after the adoption of tax-effect accounting% FY 2004 (as of March 31, 2005)
42.0
Statutory income tax rate
Reconciliation items:(22.6)
Reversal of land revaluation difference unrecognized as deferred tax assets
2.8Entertainment expenses and others, which
are permanently nondeductible
1.5
Per capita inhabitant’s tax
13.1
Valuation reserve
1.1
Others37.9
Effective income tax rate after the adoption oftax-effect accounting

27

%
40.5
(24.8)
3.2
2.2
4.1
0.5
25.7

DAIICHIKOSHO

CO.,

LTD.

(Segment Information)
The business and geographical segments of DK and its consolidated subsidiaries for the years ended March 31,
2004 and 2005, are summarized as follows:
1. Business segments
FY2003 (From April 1, 2003, to March 31, 2004)
CommerKaraoke
Content
Itemcial karacabin
oke
Sales and operating income
Sales
Sales to third par66,505
25,156
10,324ties
Intersegment sales
164――
and transfers
Total
66,67025,156
10,324
Operating expenses
55,98622,656
8,682
Operating income
10,6832,499
1,642(loss)
Assets, depreciation expense and capital expenditures
Assets64,29025,775
6,245
Depreciation
8,758
2,077
1,075
expenseCapital expenditures
10,683
5,279
1,598

Music
software

Other(Millions of yen)
ConsoliEliminadated
tions andcorporate

Total

12,098

5,249

119,335―

119,335

248

340

753

(753)

―

12,347
12,004
342

5,590
5,105
485

120,088
104,434
15,653(753)
1,773(2,527)

119,335
106,208
13,126

10,13628

11,377
659

117,825
12,59920,627
79

138,453
12,67935

736

18,33353

18,387

FY2004 (From April 1, 2004, to March 31, 2005)
CommerKaraoke
Content
Itemcial karacabin
oke
Sales and operating income
Sales
Sales to third par68,678
26,532
9,188
ties
Intersegment sales
210――
and transfers
Total
68,88826,532
9,188
Operating expenses
56,67825,763
8,348
Operating income
12,210769
839(loss)
Assets, depreciation expense and capital expenditures
Assets59,111
29,8285,820
Depreciation
9,501
2,568
1,255
expenseCapital expenditures
10,334
7,342
1,348

Music
software

Other

Total

(Millions of yen)
ConsoliEliminadated
tions andcorporate

11,672

6,013

122,085―

122,085

141

693

1,045

(1,045)―

11,814
12,564
(750)

6,706
6,543
162

123,130
109,899
13,231(1,045)1,802(2,847)122,085
111,701
10,3839,775
25

14,499932

119,035
14,283

12,961
60

131,996
14,34417

1,334

20,37857

20,436

Notes: 1. Segmentation method
According to the DKG’s sales tabulation categories.
2. Major products and/or services of each business segment
Business segment
Commercial karaoke businessKaraoke cabin business
Content business
Music software business
Other business

Major products and/or services
Sales and rental of commercial-use karaoke equipment and software
Operation of karaoke cabins, as well as the supply of food and beverages in the cabins
Supply of music content, etc., via satellite broadcasting and mobile phones
Production and sales of music and video software products
Real estate lease and rental business, restaurant business, Gateway business, etc.

28

DAIICHIKOSHO

CO.,

LTD.

3. Amounts and major items included in “Elimination and corporate”
Amounts of unabsorbed operating expenses included in“Elimination and corporate”
Amount of corporate assets
included in “Eliminations andcorporate”

FY 2003¥2,527FY 2004¥2,847¥21,026¥13,390(Millions of yen)
Major items
Expenses required for operations by administrative departments such as General Affairs
Dept.
Surplus funds operated by the Company (cashand bank deposits, and securities), long-term
investment funds (investments in securities)
and properties related to administrative departments.

2. Geographical segments(Years ended March 31, 2004 and 2005)
As sales in Japan account for more than 90% of the sum of sales in each region of the respective geographical segments, the segment information by geographical region is omitted.

3. Overseas sales(Years ended March 31, 2004 and 2005)
As sales overseas account for less than 10% of consolidated net sales, overseas sales related information is omitted.

29

DAIICHIKOSHO

CO.,

LTD.

(Transactions with Related Parties)
FY 2003 (From April 1, 2003, to March 31, 2004)
Directors and major individual shareholders, etc.
(Millions of yen)

Attribute

A company in which a majority of the voting rights are held by DK’s director and his/her relative(s)Company name
Wakahara Co., Ltd.
Location
Kawaguchi, Saitama
Capital stock or investment in capital3
Principal business or profession
Operation of karaoke cabins
Ownership percentage of voting rights, etc. The relatives of DK’s statutory auditor Kumiko Takahashi directly hold100% of its shares.
Relationship Directors’ posts held con—with thecurrently
Company
Business relationship
Lending of trademark, etc.
Description of transactions
Lending of trade
Charges forward for management expense, etc.
mark
Transaction amount0
1
Account item——
Year-end balance——(Millions of yen)

Attribute

A company in which a majority of the voting rights are held by DK’s director and his/her relative(s)Company nameHoshi Create Co., Ltd.
Location
Minato-ku, Tokyo
Capital stock or investment in capital
941
Principal business or profession
Lease and rental of real estate
Ownership percentage of voting rights, etc. The Chairman of DK, Tadahiko Hoshi, and his relatives directly hold 100%of its shares.
Relationship Directors’ posts held conThree posts concurrently held (1 officer and 2 employees)with thecurrently
Company
Business relationship
Lease of stores
Description of transactions
Payment of rents
Depositing of guarantee money
Transaction amount7
85
Account item
Other current assets
Leasehold deposits and guarantee money(prepaid expenses)
Year-end balance
385
Notes:
1. The transactions between Wakahara Co., Ltd., and DK are so-called arm’s length transactions and were determined by reference to the selling prices and payment conditions for unrelated entities with regard to the terms andconditions and the decision policy thereon.
2. The transactions for store lease between Hoshi Create Co., Ltd. and DK were determined via a third party throughconsultations by reference to rent quotations in the neighborhood with regard to the terms and conditions and thedecision policy thereon.
3. “Transaction amount” does not include consumption taxes.

30

DAIICHIKOSHO

CO.,

LTD.

FY 2004 (From April 1, 2004, to March 31, 2005)
Directors and major individual shareholders, etc.
(Millions of yen)

Attribute

A company in which a majority of the voting rights are held by DK’s director and his/her relative(s)Company nameHoshi Create Co., Ltd.
Location
Minato-ku, Tokyo
Capital stock or investment in capital
941
Principal business or profession
Lease and rental of real estate
Ownership percentage of voting rights, etc. The Chairman of DK, Tadahiko Hoshi , and his relatives directly hold 100%of its shares.
Relationship Directors’ posts held conOne post concurrently heldwith thecurrently
Company
Business relationship
Lease of stores
Description of transactions
Payment of rents
Depositing of guarantee money
Transaction amount81—
Account item
Other current assets
Leasehold deposits and guarantee money(prepaid expenses)
Year-end balance
785
Note: The transactions for store lease between Hoshi Create Co., Ltd. and DK were determined via a third party
through consultations by reference to rent quotations in the neighborhood with regard to the terms and conditions and the decision policy thereon. “Transaction amount” does not include consumption taxes.

31

DAIICHIKOSHO

CO.,

LTD.

(Per Share Data)
Item
Shareholders’ equity per share

FY 2003

FY 2004(From April 1, 2003, to March 31, 2004)(From April 1, 2004, to March 31, 2005)¥3,378.93¥1,783.56

Net income per share¥265.08¥139.83

Fully diluted net income per share¥252.21—

Notes:
1. The Company conducted a two-for-one stock split on May 20, 2004. The per share data for FY2003, the year
ended March 31, 2004, supposing that the stock split was conducted as of April 1, 2003, was as follows:
Shareholders’ equity per share
Net income per share
Fully diluted net income per share¥1,689.46¥132.54¥126.11

2. “Fully diluted net income per share” for FY2004, the year ended March 31, 2005, is not stated above because
no residual securities existed as convertible bonds were redeemed at maturity as of March 31, 2005.
3. Assumptions in the computation of net income per share and fully diluted net income per share are as follows:
FY 2003

FY 2004(From April 1, 2003, to March 31, 2004)(From April 1, 2004, to March 31, 2005)

Net income per share:
Net income (Millions of yen)Amount not belonging to commonshareholders (Millions of yen)
(Bonuses to directors through profit
appropriation included therein)
Net income related to common sharesof the Company (Millions of yen)
Average number of shares during theyear (Thousand shares)

4,898

5,118

133

119

(133)

(119)

4,765

4,998

17,97935,745

46

―

(43)

(―)

1,101

―

(1,101)(―)

Fully diluted net income per share:
Adjustment to net income (Millions ofyen)(Interest expense included therein (after
excluding an amount corresponding to
the tax))
Increase in the number of commonshares (Thousand shares)(Convertible bonds included therein)
Summary of residual securities not included in the calculation of fully diluted
net income per share because they haveno dilutive effect

None

32

---------------DAIICHIKOSHO

CO.,

LTD.

(Significant Subsequent Events)
FY 2003

FY 2004(From April 1, 2003, to March 31, 2004)
1. The meeting of the Board of Directors held on March 22, 2004,
adopted a resolution to the effect that the land and buildings at
six sales office buildings be sold to an affiliated company (DK
Finance, Co., Ltd.). The sales procedure completed on April
27, 2004, resulted in a ¥1,234 million loss on sales of fixed
assets and caused a ¥(3,834) million reversal of land revaluation difference.

(From April 1, 2004, to March 31, 2005)-----------------------

2. Pursuant to a resolution adopted by the Board of Directors
on February 23, 2004, the Company shall issue new shares
via a stock split in the following manner:(1) Two-for-one stock split for common shares on May 20,
20041) Number of shares increased via the stock split:
18,310,463 common shares2) Splitting method:
The Company’s common shares shall be split at the rateof two-for-one for the shares owned by shareholders
whose names are registered or recorded in the last recordof shareholders and the last record of beneficiaryshareholders as of March 31, 2004.
2) Initial date of reckoning for dividends
April 1, 2004
The per share data for the year ended March 31, 2003,
supposing that the stock split was conducted as of April
1, 2002, and those for the year ended March 31, 2004,
supposing that the stock split was conducted as of April
1, 2003, are as follows:-----------------------FY 2002 (From April 1,
2002, to March 31, 2003)
Shareholders’ equity per
share

FY 2003 (From April 1,
2003, to March 31, 2004)
Shareholders’ equity per
share¥1,540.67¥1,689.46

Net income per share¥187.95
Fully diluted net income
per share¥177.12Net income per share¥132.54
Fully diluted net income
per share¥126.1133

DAIICHIKOSHO

CO.,

LTD.

5. Production, Orders Received and Sales Performance(1) Production(Millions of yen)Segment

FY 2003

FY 2004(From April 1, 2003, to March 31, 2004)
Year-over-yearchange (%)(From April 1, 2004, to March 31, 2005)
Year-over-yearchange (%)

Commercial karaoke business:
Telecommunication-type karaoke software
Disk-type karaoke software
SubtotalContent business:
Sound delivery/video software for satellite broadcastingMusic software business:
Music and video software
Total

3,610

159.6

1,998

55.4

1,032
4,642

84.2
133.1

―
1,998

―
43.1

972

205.0

836

86.1

3,474
9,089

127.8
136.1

3,766
6,601

108.4
72.6

Note: The above amounts indicate manufacturing costs and software production output.

(2) Orders received
Inapplicable as DKG follows a policy of project production.

(3) Sales performance(Millions of yen)Segment
Commercial karaoke business:
Sales volume of merchandise and products
Revenue from rental of karaoke equipment
Fee revenue from the provision of karaoke-streaming service
Subtotal
Karaoke cabin business:
Content business:
Satellite broadcasting
e-business
Subtotal
Music software business:
Other business:
Total

FY 2003

FY 2004(From April 1, 2003, to March 31, 2004)
Composition Year-over-year
ratio (%)
change (%)(From April 1, 2004, to March 31, 2005)
Composition Year-over-year
ratio (%)
change (%)

28,421

23.8

104.4

26,72321.9

94.0

18,062

15.1

106.6

19,050

15.6

105.5

20,020

16.8

115.6

22,904

18.8

114.4

66,50525,156

55.7
21.1

108.1
106.0

68,67826,532

56.3
21.7

103.3
105.5

4,592
5,731
10,324
12,098
5,249
119,335

3.9
4.8
8.7
10.1
4.4
100.0

100.2
100.1
100.2
72.7
107.6
101.9

4,521
4,667
9,188
11,672
6,013
122,085

3.7
3.8
7.5
9.6
4.9
100.0

98.4
81.4
89.0
96.5
114.5
102.3

34