FORM 6-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
Commission File Number: 333-10486
For the Month of August 2001
Trend Micro Incorporated
(Translation of registrant's name into English)
Odakyu Southern Tower, 10th Floor, 2-1, Yoyogi 2-chome,
Sibuya-ku, Tokyo 151-8583, Japan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
----- ----
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-
-------------
Information furnished on this form:
Table of Contents
1. Trend Micro Report of Half-Year Results (Consolidated) For Fiscal Year
Ending December 31, 2001.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Trend Micro Incorporated
Date: August 7, 2001 By: /s/ Chang Ming-Jang
-------------------
Chang Ming-Jang
Representative Director;
President, Chief Executive
Officer and Chairman of the
Board
August 3, 2001
Report of First Half Results (Consolidated)
For Fiscal Year Ending December 31, 2001
Company: Trend Micro Incorporated Tokyo Stock Exchange 1st Section
Code: 4704 Location : Tokyo
Address: Odakyu Southern Tower, 10F 2-2-1 Yoyogi Shibuya-ku Tokyo, 151-8583 Japan
Contact: Title Director, Chief Financial Officer
Name Mahendra Negi (Phone: 81-3-5334-3600)
Date of the board of directors meeting
authorizing the first-half results: August 3, 2001
US accounting standard is not adopted for preparing the consolidated
financial statements for the first half of current fiscal year.
1. Financial Highlights for the first half of FY 2001 (January 1, 2001 through
June 30, 2001)
(1) Consolidated Results of Operations
(All figures except for per share information are rounded down to millions of yen.)
------------------------ -------------------- --------------- ----------------- -------------- ----------------- ----------------
Sales Growth Operating Growth Ordinary Growth
rate income rate Income rate
------------------------ -------------------- --------------- ----------------- -------------- ----------------- ----------------
Millions of yen % Millions of yen % Millions of yen %
The first half of FY 01 12,939 34.8 2,898 (3.9) 3,004 1.1
The first half of FY 00 9,600 70.5 3,016 66.3 2,972 55.1
------------------------ -------------------- --------------- ----------------- -------------- ----------------- ----------------
FY 00 (annual) 21,834 7,443 7,322
------------------------ -------------------- --------------- ----------------- -------------- ----------------- ----------------
------------------------ -------------------- --------------- ----------------- -------------- ----------------- ----------------
Net Growth Net income Net income
Income rate per share per share (diluted)
------------------------- ----------------- --------------- ---------------------------------- ----------------------------------
Millions of yen % yen yen
The first half of FY01 (1,376) - (10.48) -
The first half of FY00 2,474 160.7 38.06 36.99
------------------------- ----------------- --------------- ---------------------------------- ----------------------------------
FY 00 (annual) 4,722 72.44 70.78
------------------------- ----------------- --------------- ---------------------------------- ----------------------------------
(Note)
1. Equity in loss of affiliated companies: - 104 million yen (- 23 million yen in the first half of FY 2000, - 87 million
yen in FY 2000)
2. The average number of stock: 131,339,944 stocks (65,005,579 stocks in the first half of FY 2000, 65,194,481
(consolidated) stocks in FY 2000)
3. Change in accounting principle: Yes
4. The percentage of sales, operating income, ordinary income and net income are comparisons to the first half of prior fiscal
year.
(2) Consolidated Financial Position
------------------------- ------------------------ ------------------------- ------------------------ -------------------------
Total assets Shareholders' equity Shareholders' equity Shareholders' equity
ratio per share
------------------------- ------------------------ ------------------------- ------------------------ -------------------------
As of Millions of yen Millions of yen % Yen
June 30, 2001 53,413 26,914 50.4 204.39
June 30, 2000 37,675 21,439 56.9 328.95
------------------------- ------------------------ ------------------------- ------------------------ -------------------------
December 31, 2000 43,802 26,236 59.9 400.20
------------------------- ------------------------ ------------------------- ------------------------ -------------------------
(Note)
Number of the stocks issued (consolidated): 131,681,887 stocks in the first half
of current fiscal year
(65,172,669 stocks in the first half of FY 2000, 65,560,421 stocks in the
FY 2000)
(3) Consolidated Cash Flow Position
------------------------- ------------------------ ------------------------- ------------------------ ---------------------------
Operating Cash Flow Investing Cash Flow Financing Cash Flow Ending balance of Cash
and Cash equivalents
------------------------- ------------------------ ------------------------- ------------------------ ---------------------------
As of Millions of yen Millions of yen Millions of yen Millions of yen
June 30, 2001 4,650 (1,363) 6,503 34,553
June 30, 2000 - - - -
------------------------- ------------------------ ------------------------- ------------------------ ---------------------------
December 31, 2000 7,776 (4,141) 4,804 24,435
------------------------- ------------------------ ------------------------- ------------------------ ---------------------------
(4) Basis of consolidation and application of equity method:
The number of consolidated subsidiaries ..... 18
The number of unconsolidated subsidiaries ..... -
The number of affiliated companies ..... 4
(5) Change in the basis of consolidation and application of equity method:
The number of additional consolidated subsidiaries ........ 2
The number of excluded consolidated subsidiaries .......... -
The number of additional consolidated affiliated companies ... 1
The number of excluded consolidated affiliated companies ..... -
2 Earning projections for the current fiscal year (January 1, 2001 through December 31, 2001)
------------------------- --------------------------------- --------------------------------- ---------------------------------
Sales Ordinary income Net income
------------------------- --------------------------------- --------------------------------- ---------------------------------
Millions of yen Millions of yen Millions of yen
For the year ending 29,000 8,200 1,800
December 31, 2001
------------------------- --------------------------------- --------------------------------- ---------------------------------
(Note)
1. Projected consolidated net income per share for the current fiscal year : 13.69 yen
Supplementary information on the results (January 1, 2001 through June 30, 2001)
The Company's sales revenues are mainly derived from licensing of its
products, upgrading of its products and patterns files and post-contract support
including customer support. Until the end of FY 2000, the Company and Trend
Micro Incorporated (Taiwan) had recognized sales revenues from customer support
(which was included in post-contract support) at the beginning of the relevant
support period. Effective from FY 2001, the method of the revenue recognition
has been changed and sales revenues from customer support are deferred through
Deferred revenue under Current liabilities and Non-current liabilities over the
relevant support period.
For convenience of comparison, the results for the year ending June 30,
2001, are presented in two ways. Results based on the accounting policies
applied from the first half of consolidated fiscal year, assumed results based
on the accounting policies applied until the previous consolidated fiscal year
and its differential are stated in the table below.
(Millions of yen except for per share information)
----------------------------- --------------------------- ------------------------------- ------------------------
Result of the first Assumed result of the first
half of consolidated half of consolidated FY 2001 Increace (Decrease)
FY 2001 (based on Accounting policies
applied until previous
fiscal year)
----------------------------- --------------------------- ------------------------------- ------------------------
Sales 12,939 13,432 (492)
Ordinary income 3,004 3,496 (492)
Net income (loss) (1,376) 679 (2,055)
Net income (loss)
per share (Yen) (10.48) 5.17 (15.65)
----------------------------- --------------------------- ------------------------------- ------------------------
[Information on net income per share and shareholders' equity per share]
For periodic comparison of net income per share and shareholders' equity per
share, restated per share information reflecting the effect of stock split on
March 31, 2001 is as follows:
------------------------------------------------------------------------------
Net income (loss) Shareholders' equity
per share (Yen) per share (Yen)
------------------------------------------------------------------------------
The first half of FY 01 (10.48) 204.39
The first half of FY 00 19.03 164.47
FY 00 (annual) 36.22 200.10
------------------------------------------------------------------------------
Attachment to the Report
1. Condition of corporate group
----------------------------
(1) Overview of corporate group
---------------------------
Trend Micro Group consists of Trend Micro Inc., its 18 subsidiaries which
develop and sell anti-virus products and offer other related services
(ipTrend Incorporated offers Internet infrastructure-related
products/services) and 4 affiliated companies. NTT Data Security Corporation,
which offers total net-work security service, Soft Trend Capital Corporation,
which manages capital funds to be invested into Internet-related ventures in
Japan, JCN Co.,Ltd, which develops and offers the security system against
unlawful access, and NetSTAR Inc. which develops and offers the products of
URL filtering are affiliates accounted by equity method. The business related
to anti-virus is described below:
The products related to anti-virus:
PC client products
LAN server products
Internet server products
Other products
Trend Micro Inc. develops and sells the products. Some parts of the research and
development activities are entrusted to Trend Micro Incorporated (Taiwan), Trend
Micro Inc. (U.S.A.) and Trend Micro Deutschland GmbH (Germany) and Trend Micro
(UK) Limited (UK). Trend Micro Incorporated (Taiwan) operates manufacturing and
sales of the products too, part of which are purchased by Trend Micro Inc
(Japan), Trend Micro Inc. (U.S.A.), Trend Korea Inc. (Korea), Trend Micro
Deutschland GmbH (Germany), Trend Micro South Europe Srl (Italy), Trend Micro
Australia Pty. Ltd. (Australia), Trend Micro do Brasil Ltda. (Brazil), Trend
Micro France (France), Trend Micro Hong Kong Limited (Hong Kong), Trend Micro
Incorporated Sdn. Bhd. (Malaysia), Trend Micro (UK) Limited (UK), Trend Micro
Latinoamerica S.A.de C.V (Mexico), ipTrend Incorporated (Tokyo Chuo-ku) and
ipTrend Incorporated (Taiwan).
In addition, Trend Micro Inc. owns software copyrights and receives from its
overseas subsidiaries royalties based on the respective sales of products to
such subsidiaries.
[FLOW CHART]
2. Management Policy and Business Results
Trend Micro Group's Basic Management Policy
-------------------------------------------
Since its founding, Trend Micro has provided "peace of mind" to all users of
computer networks and the Internet by offering anti-virus and Internet content
security solutions. Upholding the slogan "Your Internet VirusWall," we have
become a reliable partner to both corporate users and individual customers,
working to block computer viruses, SPAM (unwanted e-mail) and malicious codes
(harmful programs created in such programs as JAVA and Active X), as well as to
protect users from offensive URLs. We continue to contribute to the development
of the networked society in Japan and globally by offering network security
solutions and devices. We believe that our ongoing efforts to protect users'
computer systems and expand our global client base will lead to an increase in
shareholders' value.
Basic Policy on the Distribution of Profits
-------------------------------------------
Although Trend Micro has steadily increased its profits in the past few
years, we believe that the Internet security market has only begun its
full-fledged expansion and that our market share has not stabilized in relation
to our U.S. competitors. Our larger rivals may well concentrate their management
resources to further enlarge their market share. Since our business areas are
more concentrated on anti-virus solutions than other competitors with
diversified Internet security solutions, we also face the possibility of larger
profit fluctuations in the short term.
In this business environment the most critical management challenges are to
strengthen our financial structure and management foundation and aggressively
develop new business operations in order to maintain our competitiveness in the
market. Our priority, therefore, is to accumulate reserves, which means
withholding dividends for the time being. These reserves will be continuously
invested in research and development, an area that needs to be further
strengthened.
Medium and Long-Term Management Strategy
----------------------------------------
Corporate IT investment has plateaued with the slowdown in the U.S. and
European economies. Chilled by this decrease in IT investment, the business
climate surrounding Trend Micro is not bright. However, we expect network
security solutions, including anti-virus measures, to continue gaining in
importance, as more and more corporate users become dependent on using networks,
and their systems' problems consequently subject them to huge losses, both in
financial terms and opportunity costs. Thus the network security market is
expected to grow steadily in the medium-to-long term. To take advantage of this
opportunity, we are focusing on maintaining our competitive edge against major
U.S. rival companies and expanding our global market share. Utilizing our global
resources and networks spanning the United States, Europe and Taiwan, we will
continue to strengthen our sales channels, improve brand awareness and corporate
image and accelerate the development of products that meet customer needs.
The IT industry is evolving rapidly in conjunction with its constantly
changing technology. The next generation of Internet-related technologies,
including broadband, mobile communications and open platforms such as Linux,
will likely bring about dramatic changes in the network environment. We must
seize the opportunities afforded by this high-paced technological evolution, in
advance of our major U.S. competitors, while strengthening our management
structure and further increasing our operational efficiency.
Summary of Consolidated Financial Results for the First Half of FY2001
----------------------------------------------------------------------
The six-month period under review saw a slowdown in demand within the IT
industry, primarily the result of declining corporate IT spending in Japan,
Europe and the United States. The corporate spending cuts also put the damper on
demand for network security solutions, which have been positioned as a high
priority in IT investment. Although the business environment has been harsh and
we expect some ups and downs in the short term, we believe the network security
market will enjoy steady growth over the medium and long term, as corporations
continue to increase IT investment in advanced networks and the renewal of core
business systems.
The demand for sophisticated, specialized security solutions has risen as
corporations combat the disturbing spread of computer viruses and unauthorized
access tools programmed by hackers. Last year malicious viruses, including MTX,
HYBRIS and MAGISTR, reportedly infected many systems, while such harmful
programs as Worm and Trojan Horse were also deployed to wreak damage. At the
same time, we have begun seeing more cases in which hackers have gained access
to systems by using computerviruses. As the line begins to blur between
antidotes to viruses and protection against unauthorized access, demand is
growing for more comprehensive security measures.
During the first half of FY2001, Trend Micro significantly increased
contracts for its Virus Buster Corporate Edition (Office Scan), winning not only
large companies but also medium and small companies. Sales of InterScan, our
anti-virus software for Internet servers, rose steadily, in response to the more
frequent virus infections spread via e-mail.
As a highly specialized anti-virus solutions provider, we have pioneered
post-contract support services, called "Premium Support," introducing them
before our major competitors in the industry. This service is in response to the
trend among large corporate users to select a vendor based not only on the
performance of its anti-virus software but also on the quality of support the
vendor offers during the license period to swiftly alert customers to new
viruses. In our outsourced Internet service operations, we were able to team up
with additional ISPs (internet service providers) to expand our client base for
anti-virus solutions, despite the inhospitable business environment for ISPs and
the entire telecommunications industry.
We made a crucial strategic move in reorganizing our security appliance server
operations, which had been handled by our subsidiary ipTrend Incorporated. This
unit faced fundamental problems in building a solid client base of small- and
medium-sized companies for its Linux- and Unix-based security appliance servers,
as these smaller companies have been hit the hardest by Japan's economic slump.
IpTrend's Linux and Unix hardware-related technology has played an important
role in the development of our next-generation anti-virus product for consumers,
Gatelock, and continues to be a crucial part of our group. However, the
company's ipStax security appliance server business for small- and medium-sized
companies urgently needed a restructuring review. We decided to dissolve ipTrend
and integrate its operations into Trend Micro, while strategically reorganizing
its operations and utilizing its technology in our anti-virus products. This
integration and reorganization resulted in our writing off the entire goodwill
of 2,000 million yen as a one-time amortization charge during the first half of
FY2001. This goodwill had been recognized as a portion of the purchase price
when we acquired ipTrend (formery Nippon Unisoft).
Starting with the first quarter of FY2001, Trend Micro (Japan) and Trend Micro
Incorporated (Taiwan) changed their accounting method for revenues from
post-contract support services. Sales revenues for these services had been
booked at the beginning of the support period; the new method defers the
recognition of sales revenues from support services and recognizes as revenue
over the support period. This new accounting treatment will reflect these
transactions more accurately, and has been applied to all our financial filings
with the Securities and Exchange Commission (SEC), including our Form 20-F
filing, which was submitted on June 29, 2001. The conversion to deferred revenue
recognition resulted in an extraordinary loss of 3,009 million yen for our
half-year results.
During the first half of FY2001, Trend Micro posted consolidated sales of 12,939
million yen, an increase of 34.8 percent over the same period last year.
Consolidated ordinary income increased 1.1 percent to 3,004 million yen, while
net loss resulted 1,376 million yen.
Sales in all geographical areas grew steadily during the first half of FY2001.
Sales in Japan posted an increase of 66.1 percent to 7,540 million yen, while
operating income from these sales rose to 4,725 million yen, up 92.7 percent
from the comparable period in FY2000. U.S. sales increased 37.3 percent to 4,899
million yen, with operating income totaling 302 million yen, a 76.9 percent
decrease. In Europe, sales increased 49.6 percent to 2,804 million yen, and
operating loss resulted 46 million yen. Taiwan sales increased 61.2 percent to
1,963 million yen, with operating losses of 28 million yen. Other areas posted
combined sales of 789 million yen, a 48.1 percent increase, and operating income
of 17 million yen, down 85.6 percent.
Prospects for FY2001
--------------------
We expect the economies of Japan, Europe and the United States to continue
their sluggish performance in 2001, further restraining corporate spending on
IT. While the near-term business environment is expected to be bleak, we believe
corporate investment in network security solutions will continue to expand over
the medium and long term. The earnings estimates for FY2001 that follow are
based on a steady upward demand for network security despite the harsh economic
environment.
Consolidated sales: 29,000 million yen(+ 32.8 %)
Consolidated ordinary income: 8,200 million yen(+ 12.0 %)
Consolidated net income: 1,800 million (- 61.9 %)
Earnings projections are calculated based on estimated major currency exchange
rates of $1 = 115 yen and 1 EUR = 105 yen.
3 Consolidated Semi-annual Financial Statements
----------------------------------------------
(1) Consolidated semi-annual balance sheets
(Thousands of yen)
---------------------------------- --------------------------------- ------------------------------ -------------------------------
Condensed balance sheet at
Period At the end of the first half of At the end of the first half the end of the
the current fiscal year of the current fiscal year previous fiscal year
Account (As of June 30, 2001) (As of June 30, 2000) (As of December 31, 2000)
---------------------------------- --------------------- ----------- ------------------- ---------- ------------------- -----------
Amount Percentage Amount Percentage Amount Percentage
---------------------------------- --------------------- ----------- ------------------- ---------- ------------------- -----------
% % %
I (Assets)
Current assets
1. Cash and bank deposits 34,618,745 20,901,829 24,435,471
2. Notes and accounts
receivable,trade 7,667,480 7,232,046 8,780,266
3. Marketable securities *2 - 2,324,285 1,872,520
4. Inventories 206,945 101,777 318,187
5. Deferred tax assets 2,798,031 811,973 1,562,172
6. Others 994,108 1,761,403 607,143
7. Allowance for doubtful
accounts (205,200) (108,744) (137,398)
-------------
--------------- --------------
Total curent assets 46,080,110 86.3 33,024,571 87.7 37,438,364 85.5
II Non current assets
1. Property and equipment *1
(1) Building *3 372,291 218,464 302,722
(2) Furniture and equipment 1,132,468 745,714 909,075
(3) Others 13,890 34,908 10,849
--------------- -------------- -------------
Total property
and equipment 1,518,650 2.8 999,086 2.6 1,222,648 2.8
2. Intangibles
(1) Software *3 415,635 148,762 241,385
(2) Software in progress 493,220 26,420 163,629
(3)Consolidated goodwill - 1,345,528 2,253,559
(4) Others 70,671 111,868 82,252
--------------- -------------- -------------
Total intangibles 979,528 1.8 1,632,579 4.3 2,740,827 6.2
3. Investments and other
non-current assets
(1) Investments in
securities *2 2,943,721 266,622 600,198
(2) Investments in capital 928,119 960,806 928,119
funds
(3) Deferred tax assets 167,531 298,756 301,123
(4) Others 810,338 493,445 586,276
--------------- -------------- -------------
(5) Allowance for bad debt (14,617) - (15,534)
--------------- -------------- -------------
Total investments and other
non-current assets 4,835,092 9.1 2,019,631 5.4 2,400,183 5.5
--------------- -------------- -------------
Total non-current assets 7,333,271 13.7 4,651,296 12.3 6,363,659 14.5
--------------- -------------- -------------
Total assets 53,413,382 100.0 37,675,868 100.0 43,802,023 100.0
=============== ============== =============
(Thousands of yen)
-----------------------------------------------------------------------------------------------------------------------------------
Condensed balance sheet at
Period At the end of the first half of At the end of the first half of the end of the
the current fiscal year the current fiscal year previous fiscal year
Account (As of June 30, 2001) (As of June 30, 2000) (As of December 31, 2000)
-----------------------------------------------------------------------------------------------------------------------------------
Amount Percentage Amount Percentage Amount Percentage
-----------------------------------------------------------------------------------------------------------------------------------
% % %
(Liabilities)
I Current liabilities
1. Notes and accounts
payable,
trade 708,687 620,254 929,280
2. Current portion of *3 57,200 - 57,200
long-term debt
3. Accrued corporate
taxes and
others 476,052 880,766 1,877,631
4. Deferred revenue 6,311,197 1,590,076 2,350,813
5. Allowance for
sales 403,481 311,031 509,168
return
6. Others 2,148,569 1,612,864 1,715,783
------------------ --------------- --------------
Total current 10,105,186 18.9 5,014,993 13.3 7,439,877 17.0
liabilities
II Long-term liabilities
1. Bond payable *3 15,400,000 10,700,000 9,700,000
2. Long-term borrowing 71,300 - 99,900
3. Deferred revenue 655,291 135,153 239,439
4. Accrued severance -
indemnities 78,564 85,896
5. Allowance for 266,651 - -
retirement benefits
6. Others - 165,760 -
------------------ --------------- --------------
Total
long-term
liabilities 16,393,242 30.7 11,079,477 29.4 10,125,236 23.1
------------------ --------------- --------------
Total liabilities 26,498,429 49.6 16,094,471 42.7 17,565,113 40.1
(Minority interests)
Minority interests - - 141,450 0.4 - -
(Shareholders' equity)
I Common stock 6,799,373 12.7 5,618,852 14.9 6,182,838 14.1
II Advance received for
newly issued
stock - - 1,340 0.0 427 0.0
III Additional paid-in
capital 11,401,742 21.3 9,159,832 24.3 10,842,946 24.8
IV Consolidated
retained earnings 8,180,496 15.3 7,308,909 19.4 9,557,084 21.8
V Valuation difference
on other securities 293,456 0.6 - - - -
V Cumulative translation
adjustment 244,405 0.5 (626,566) (1.6) (324,477) (0.7)
------------------ --------------- --------------
26,919,476 50.4 21,462,367 57.0 26,258,818 60.0
VI Treasury stock (4,523) (0.0) (22,421) (0.1) (21,908) (0.1)
------------------ --------------- --------------
Total shareholders'
equity 26,914,952 50.4 21,439,946 56.9 26,236,910 59.9
------------------ --------------- --------------
Total liabilities,
minority interests
and shareholders'
equity 53,413,382 100.0 37,675,868 100.0 43,802,023 100.0
================== =============== ==============
------------------------------------------------------------------------------------------------------------------------------------
8
(2)Consolidated semi-annual income statements
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------------------
Period For the first half of the For the first half of the Consolidated
current fiscal year previous fiscal year income statement
for the previous fiscal
Account year
(From January 1, 2001 (From January 1, 2000 (From January 1, 2000
to June 30, 2001) to June 30, 2000) to December 31, 2000)
------------------------------------------------------------------------------------------------------------------------------
Amount Percentage Amount Percentage Amount Percentage
------------------------------------------------------------------------------------------------------------------------------
% % %
I Sales 12,939,355 100.0 9,600,341 100.0 21,834,797 100.0
II Cost of sales 732,229 5.7 603,879 6.3 1,474,689 6.8
--------------- -------------- ----------------
Gross profit 12,207,125 94.3 8,996,462 93.7 20,360,107 93.2
III Selling, general and
administrative
expenses *1 9,308,645 71.9 5,979,797 62.3 12,916,789 59.1
--------------- -------------- ----------------
Operating income 2,898,479 22.4 3,016,664 31.4 7,443,318 34.1
IV Non-operating 529,037 4.1
income *2 185,318 2.0 660,295 3.0
V Non-operating 423,369 3.3
expenses *3 229,762 2.4 780,900 3.6
--------------- -------------- ----------------
Ordinary income 3,004,147 23.2 2,972,220 31.0 7,322,712 33.5
VI Unusual gains *4 - - 1,033,129 10.7 1,035,812 4.7
VII Unusual losses *5 5,128,883 39.6 3,429 0.0 7,805 0.0
--------------- -------------- ----------------
Income or (losses) (2,124,735) (16.4) 4,001,920 41.7 8,350,719 38.2
before taxes
Corporate,inhabitant
and enterprise tax 474,050 3.7 1,686,077 17.6 4,560,562 20.9
Income tax-deferred (1,222,199) (9.5) (221,428) (2.3) (939,507) (4.3)
Minority interests
in subsidiaries - - 62,627 0.6 6,845 0.0
--------------- -------------- ----------------
Net income or
(losses) (1,376,587) (10.6) 2,474,644 25.8 4,722,818 21.6
=============== ============== ================
(3) Consolidated semi-annual statement of retained earnings
(Thousands of yen)
-------------------------------------------------------------------------------------------------------------------------------
Condensed consolidated
Period For the first half of the For the first half of the statement of retained
current fiscal year previous fiscal year earnings for the
Account previous year
(From January 1, 2001 (From January 1, 2000 (From January 1, 2000
to June 30, 2001) to June 30, 2000) to December 31, 2000)
-------------------------------------------------------------------------------------------------------------------------------
Amounts Amounts Amounts
-------------------------------------------------------------------------------------------------------------------------------
I Beginning
balance of
consolidated
retained earnings 9,557,084 4,834,265 4,834,265
--------------- --------------
II Increase in
consolidated
retained earnings - - -
III Decrease in
consolidated
retained earnings
1. Dividends - - -
--------------- --------------- ---------------
IV Net income or
(losses) (1,376,587) 2,474,644 4,722,818
--------------- --------------- ---------------
V Ending balance of
consolidated
retained earnings 8,180,496 7,308,909 9,557,084
=============== =============== ===============
------------------------------------------------------------------------------------------------------------------------------------
9
(4) Consolidated semi-annual cash flow statements
Consolidate Cash Flow Statements
------------------------------------
(Thousands of yen)
------------------------------------------------------------------------------- ----------------------- -----------------------
----------------------- -----------------------
Period
Account
(From January 1, (From January 1,
2001 2000
To June 30, 2001) To June 30, 2000)
----------------------- -----------------------
------------------------------------------------------------------------------- ----------------------- -----------------------
I Operating Cash Flow
------------------------------------------------------------------------------- ----------------------- -----------------------
1 . Earnings (losses) before tax (2,124,735) 8,350,719
------------------------------------------------------------------------------- ----------------------- -----------------------
2. Depreciation 475,025 737,996
------------------------------------------------------------------------------- ----------------------- -----------------------
3. Amortization for Consolidation goodwill 2,253,559 276,285
------------------------------------------------------------------------------- ----------------------- -----------------------
4. Investment loss due to equity method accounting 104,849 87,671
------------------------------------------------------------------------------- ----------------------- -----------------------
5. Increase (Decrease) in allowance for bad debt 64,744 (90,173)
------------------------------------------------------------------------------- ----------------------- -----------------------
6. Decrease in accrued severance indemnities (85,896) -
------------------------------------------------------------------------------- ----------------------- -----------------------
7. Increase in allowance for retirement benefits 265,508 -
------------------------------------------------------------------------------- ----------------------- -----------------------
8. (Decrease) Increase in allowance for sales returns (105,687) 355,870
------------------------------------------------------------------------------- ----------------------- -----------------------
9. Interest Income (202,266) (241,132)
------------------------------------------------------------------------------- ----------------------- -----------------------
10. Interest Cost 135,172 214,209
------------------------------------------------------------------------------- ----------------------- -----------------------
11. Bond-issuing expense 34,180 -
------------------------------------------------------------------------------- ----------------------- -----------------------
12. Gain on sales of marketable securities - (119,649)
------------------------------------------------------------------------------- ----------------------- -----------------------
13. Evaluation loss on marketable securities - 245,124
------------------------------------------------------------------------------- ----------------------- -----------------------
14. Unusual gain from settlement of lawsuit - (1,019,734)
------------------------------------------------------------------------------- ----------------------- -----------------------
15. Decrease (Increase) in accounts receivables 1,364,910 (2,115,338)
------------------------------------------------------------------------------- ----------------------- -----------------------
16. Decrease (Increase) in inventories 113,719 (234,841)
------------------------------------------------------------------------------- ----------------------- -----------------------
17. (Decrease) Increase in account payables (261,766) 51,234
------------------------------------------------------------------------------- ----------------------- -----------------------
18. Increase in deferred revenue 4,228,466 1,205,982
------------------------------------------------------------------------------- ----------------------- -----------------------
19. (Increase) Decrease in others current assets (148,294) 451,305
------------------------------------------------------------------------------- ----------------------- -----------------------
20. Others 83,146 444,431
------------------------------------------------------------------------------- ----------------------- -----------------------
Sub-total 6,194,634 8,599,961
------------------------------------------------------------------------------- ----------------------- -----------------------
21. Receipts of interest 197,610 202,547
------------------------------------------------------------------------------- ----------------------- -----------------------
22. Payments for interest (122,592) (217,921)
------------------------------------------------------------------------------- ----------------------- -----------------------
23. Receipts of lawsuit settlement - 1,019,734
------------------------------------------------------------------------------- ----------------------- -----------------------
24. Payments for corporate taxes (1,618,951) (1,827,638)
------------------------------------------------------------------------------- ----------------------- -----------------------
Operating Cash Flow 4,650,700 7,776,684
------------------------------------------------------------------------------- ----------------------- -----------------------
------------------------------------------------------------------------------- ----------------------- -----------------------
II Investing Cash Flow
------------------------------------------------------------------------------- ----------------------- -----------------------
1. Payments for time-deposit (65,511) -
------------------------------------------------------------------------------- ----------------------- -----------------------
2. Proceeds from sales of marketable securities - 239,486
------------------------------------------------------------------------------- ----------------------- -----------------------
3. Proceeds from matured bond - 100,000
------------------------------------------------------------------------------- ----------------------- -----------------------
4. Payments for acquired tangible and intangible fixed assets (1,228,759) (1,365,540)
------------------------------------------------------------------------------- ----------------------- -----------------------
5. Payments for investment in securities (2,680,926) (597,730)
------------------------------------------------------------------------------- ----------------------- -----------------------
6. Proceeds from sale of investment in securities 2,611,426 -
------------------------------------------------------------------------------- ----------------------- -----------------------
7. Payments for investment in subsidiaries affected to consolidation - (1,308,248)
------------------------------------------------------------------------------- ----------------------- -----------------------
8. Payments for additional acquisition of consolidated subsidiary's
stock - (1,200,000)
------------------------------------------------------------------------------- ----------------------- -----------------------
9. Others - (9,034)
------------------------------------------------------------------------------- ----------------------- -----------------------
Investing Cash Flow (1,363,770) (4,141,067)
------------------------------------------------------------------------------- ----------------------- -----------------------
------------------------------------------------------------------------------- ----------------------- -----------------------
III Financing Cash Flow
------------------------------------------------------------------------------- ----------------------- -----------------------
1. Payments for short-term borrowings - (226,000)
------------------------------------------------------------------------------- ----------------------- -----------------------
2. Payments for long-term borrowings (28,600) (127,685)
------------------------------------------------------------------------------- ----------------------- -----------------------
3. Proceeds from bond with detachable warrants 6,500,000 5,000,000
------------------------------------------------------------------------------- ----------------------- -----------------------
4. Payments for bond-issuing expense (34,180) -
------------------------------------------------------------------------------- ----------------------- -----------------------
5. Payments for bonds maturing (800,000) (1,300,000)
------------------------------------------------------------------------------- ----------------------- -----------------------
6. Proceeds from marketable securities issuing 890,508 1,536,784
7.
------------------------------------------------------------------------------- ----------------------- -----------------------
8. Proceeds (Payments) for treasury stocks, net 9,524 (78,618)
------------------------------------------------------------------------------- ----------------------- -----------------------
9. Others (34,012) -
------------------------------------------------------------------------------- ----------------------- -----------------------
Financing Cash Flow 6,503,240 4,804,481
------------------------------------------------------------------------------- ----------------------- -----------------------
------------------------------------------------------------------------------- ----------------------- -----------------------
IV Translation difference with Cash 327,561 346,523
------------------------------------------------------------------------------- ----------------------- -----------------------
V Increase (Decrease) in Cash and Cash Equivalents 10,117,731 8,786,621
------------------------------------------------------------------------------- ----------------------- -----------------------
VI Beginning balance of Cash and Cash Equivalents 24,435,502 15,648,880
------------------------------------------------------------------------------- ----------------------- -----------------------
VII Ending balance of Cash and Cash Equivalents (as of June 30, 2001) 34,553,234 24,435,502
------------------------------------------------------------------------------- ======================= =======================
10
Significant accounting policies and practices for preparing consolidated semi-
annual financial statements.
------------------------------------------------- --------------------------------------------------------------------------
1. Basis of consolidation (1) For the first half of the current fiscal year
All subsidiaries are consolidated.
The subsidiaries are the following 18 companies:
Trend Micro Incorporated (Taiwan)
Trend Micro Inc. (USA)
Trend Korea Inc.(Korea)
Trend Micro South Europe Srl (Italy)
Trend Micro Deutschland GmbH(Germany)
Trend Micro Australia Pty. Ltd.(Australia)
Trend Micro do Brasil Ltda. (Brazil)
Trend Micro France (France)
Trend Micro Hong Kong Limited (Hong Kong)
Trend Micro Incorporated Sdn.Bhd.(Malaysia)
Trend Micro (UK) Limited (United Kingdom)
Trend Micro Latinoamerica S.A. de C.V. (Mexico)
Wells Antivirus Research Laboratory,Inc.(U.S.A.)
Trend Micro (NZ) Limited (New Zealand)
ipTrend Incorporated (Tokyo, Shibuya-ku)
ipTrend Incorporated (Tokyo-,Chuo-ku)
ipTrend Incorporated (Taiwan)
Trend Micro (Shanghai) Inc. (China)
Trend Micro Incorporated Sdn.Bhd.(Malaysia) and ipTrend Incorporated (Tokyo,
Shibuya-ku) are on the process of the liquidation. Additionaly, Wells
Antivirus Research Laboratory,Inc.(U.S.A.) has been dissolved in June 2001.
(2) For the first half of the previous fiscal year
All subsidiaries are consolidated.
The subsidiaries are the following 15 companies:
Trend Micro Incorporated (Taiwan)
Trend Micro Inc. (USA)
Trend Korea Inc.(Korea)
Trend Micro South Europe Srl (Italy)
Trend Micro Deutschland GmbH(Germany)
Trend Micro Australia Pty. Ltd.(Australia)
Trend Micro do Brasil Ltda. (Brazil)
Trend Micro France (France)
Trend Micro Hong Kong Limited (Hong Kong)
Trend Micro Incorporated Sdn.Bhd. (Malaysia)
Trend Micro (UK) Limited (United Kingdom)
Trend Micro Latinoamerica S.A. de C.V. (Mexico)
Wells Antivirus Research Laboratory,Inc.(U.S.A.)
IpTrend Incorporated
Nihon Unisoft Incorporated (Japan)
---------------------------------------------------------------------------------------------------------------------------
2. Basis of applying equity method (1) For the first half of the current fiscal year Equity method is
applied to investment in affiliated companies.
The affiliated companies are the following 4 companies.
NTT Data Security Corporation (Japan)
Soft Trend Capital Corporation (Japan)
JCN Co., Ltd. (Japan)
NetSTAR.Inc. (Japan)
There is no unconsolidated subsidiary and affiliate, which equity
method is not applied.
(2) For the first half of the previous fiscal year Equity method is
applied to investment in affiliated companies.
The affiliated companies are the following 3 companies.
NTT Data Security Corporation (Japan)
Soft Trend Capital Corporation (Japan)
JCN Co., Ltd. (Japan)
There is no unconsolidated subsidiary and affiliate, which equity
method is not applied.
---------------------------------------------------------------------------------------------------------------------------
3. Fiscal year of consolidated subsidiaries All financial statements included in a set of consolidated financial
statements are prepared as of the same date.
---------------------------------------------------------------------------------------------------------------------------
12
------------------------------------------------- --------------------------------------------------------------------------
4. Accounting policies and practices (1) Securities:
(1)Valuation of significant assets Other securities:
Other securities with fair market value:
The securities are stated at the market value method based on the value at
the end of the period (valuated differences are recognized in equity
directly, not to reflect to net earnings and cost of selling is determined by
the weighted average method.
Other securities without a market value:
The securities are stated at the weighted average cost.
(Additional information)
Effective January 1, 2001, the company began to apply "Accounting Standard for
financial instruments" ((Argument of establishment for "Accounting Standard
for Financial Instruments") Business Accounting Deliberation Council, January
22, 1999)) for the financial instruments. Cumulative effect of change in this
accounting principle are resulted in increase of ordinary income by 77,483
thousand yen and in decrease of losses before taxes by 77,483 thousand yen.
In addition, the other securities, which were classified as "Marketable
securities" until previouse fiscal year, are classified as "Investment in
securities" effective January 1, 2001. The change of classification resulted
in increase of other securities in "Investment in securities" by 473,027
thousand yen and "Deferred tax liabilities" of 198,907 thousand yen was
recognised. As a result, 274,119 thousand yen of "Valuated difference on other
securities" is recognised under Shareholders equity (The difference from
293,456 thousand yen disclosed on the consolidated balance sheet is caused by
the translation of security in foreign currencies).
Finally, the company evaluated Other securities owned for holding purposes at
the beginning of fiscal year. The company changed classification of such
securities included in Current assets to Investment in securities.
This change in classification resulted in decrease of Marketable securities
under Current assets by 1,872,475 thousand yen and in increase of Investment
in securities by 1,872,475 thousand yen.
(2) The transaction of derivatives
The market value method
(Additional information)
For the financial instruments, "Accounting Standard for financial instruments"
((Argument of establishment for Accounting Standard for Financial
Instruments") Business Accounting Deliberation Council, January 22, 1999)), is
applied from the first half of current consolidated fiscal year.
This change has resulted in increase of "Ordinary income" by 13,768 thousand
yen and "Income or losses before tax"
13
------------------------------------------------- --------------------------------------------------------------------------
(3) Inventories
Finished goods.Raw materials.Supplies
Finished goods, raw materials and supplies are stated at
the weighted average cost.
In Trend Micro Incorporated (Taiwan) and Trend Micro Inc.
(U.S.A), such inventories are stated at the cost being
determined by the first-in-first-out method.
Work in process
Work in process is stated at the cost being determined by accumulated
production and development cost for individual projects
------------------------------------------------- --------------------------------------------------------------------------
(2) Depreciation and amortization (1) Property and equipment
method for fixed assets
Parent company and domestic consolidated subsidiaries -
Depreciation is computed by declining-balance method.
Foreign consolidated subsidiaries -
Depreciation is computed by a straight-line method.
(2) Intangibles
Parent company and domestic consolidated subsidiaries
[Software for sale]
Straight-line method over the
estimated useful lives. (mainly, for 12 months)
[Software for internal use]
Straight-line method over the
estimated useful lives (5 years).
[Other intangibles]
Straight-line method
*Foreign consolidated subsidiaries
Straight-line method over the estimated economic
useful lives.
(3) Long-term prepaid expense
Amortization is computed by a straight-line method.
------------------------------------------------- --------------------------------------------------------------------------
(3) Accounting for significant Issuing costs of stocks and bonds are charged to expense when incurred.
deferred assets
------------------------------------------------- --------------------------------------------------------------------------
14
---------------------------------------------------------------------------------------------------------------------------
(4) Accounting policies for significant (1) Allowance for doubtful accounts
provisions
As contingency against losses from default of note and account
receivable, the allowance for doubtful accounts is provided. The
amount is determined using a percentage based on own actual
doubtful account loss against total of debts and an amount, which
takes into consideration the possibility of recovering specific
liabilities.
(Additional information)
For the financial instruments, from the first half of current
consolidated fiscal year, pursuant to "Accounting Standards for
financial instruments" (Arugument of establishment for Accounting
Standard for Financial Instruments") Business Accounting
Deliberation Council, January 22,1999)), the basis of the
accounting of Allowance for doubtful accounts is changed (it is
determined at a percentage based on own actual doubtful account
loss against total of debts instead of a statutory prescribed
percentage). The adoption had no significant effect.
(2) Allowance for sales return
In order to reserve future losses from sales return
subsequent to the fiscal year-end, allowance for sales return
is provided based on the past experience in the sales
return.
(3) Allowance for retirement benefits
In order to reserve future losses from retirement of employees,
allowance for retirement benefits are provided based on
retirement benefit liabilities and pension assets at the end of
the period under reviewing. The difference caused by change in
accounting principle (119,077 thousand yen) is recognised as an
expense under Unusual losses.
(Additional information)
From the current consolidated fiscal year, pursuant to
"Accounting Standards for Retirement Benefits Obligation"
(("Argument of establishment for Accounting Standard for
Retirement Benefits Obligation") Business Accounting Deliberation
Council, June 16, 1998), allowance is provided. The adoption
resulted in increase of retirement benefits' expense by 139,064
thousand yen, in decrease of Ordinary income by 18,338 thousand
yen and in increase of losses before taxes by 137,415 thousand
yen. Amount of Accrued severance indemnities, which was
recognised until previouse fisical year, is included and
disclosed in Allowance for retirement benefits.
The effect on segment information is discribed in (Segment
information).
---------------------------------------------------------------------------------------------------------------------------
15
---------------------------------------------------------------------------------------------------------------------------
(5) Translation of major foreign-currency Foreign-currency financial receivables and liabilities are translated
assets and liabilities into Yen. into yen at the spot rate effective at the end of the period. Exchange
differential is treated as a profit/loss. Foreign-currency assets and
liabilities held by overseas subsidiaries are translated into yen at the
spot rate effective at the end of the period. Revenues and expenses of
overseas subsidiaries are translated into yen at the average rate during
the period. Exchange differential is included in: Cumulative
translation adjustment" under Shareholders' equity.
(Additional information)
From the first half of current consolidated fiscal year, the company adopted
revised accounting standards for foreign currency transactions (Views on Revision
of Accounting Standards for Foreign Currency Transactions, etc., issued by
Business Accounting Deliberation Council on October 22, 1999). The adoption had no
significant effects on profits and losses.
---------------------------------------------------------------------------------------------------------------------------
(6) Accounting for leased assets Finance leases without transfer of ownership of the leased assets
are accounted for in the same manner as applied to operating
leases.
---------------------------------------------------------------------------------------------------------------------------
(7) Other important matters for (1) Consumption tax
preparing consolidated
semi-annual financial statements Transactions subject to consumption tax are stated at the amount
net of the related consumption tax.
(2) Accounting treatment for stock warrants and stock options granted to
directors and certain employees under the Company's incentive plan
The total compensation cost under the stock option plan is measured
by taking into account the difference between the quoted market
price of the parent company shares at the measurement date (the
first date on which both the number of shares that an individual
employee is entitled to receive and the exercise price are known:
normally the grant date of warrants or stock options) and the
exercise price of the warrant or option and is recognized as expense
over the exercisable period.
---------------------------------------------------------------------------------------------------------------------------
16
---------------------------------------------------------------------------------------------------------------------------
(3) Change in revenue recognition method for Post Contract Customer Support
Service (PCS)
Basically, The product license agreement, which the parent company and its
subsidiaries contract with the end-user, states the article for PCS (customer
support and upgrading of products and its pattern files).
Until previous consolidated fiscal year, whole revenue of the parent company
and Trend Micro Incorporated (Taiwan) applied to each product license
agreement including a portion of PCS revenue had been recognized when the
license is delivered to user. Effective current consolidated fiscal year, the
revenue recognition method for portion of PCS has changed as follows. Portion
of PCS revenue is recognized separately from total revenue and it is deferred
as Deferred revenues under Current liabilities and Non-current liabilities
based on contracted period. Deferred revenue is finally recognized for the
contracted period evenly.
As per the tendency of the parent company and Trend Micro Incorporated
(Taiwan) that the ratio of site license products revenue (to corporation user)
is getting larger than as before compare with package products revenue (to
private user), the ratio of a portion of PCS revenue is increased. As the
result of the above, the companies adopt new revenue recognition policy on
PCS, in order to recognize proper periodic profits and losses accurately. On
the other hand, there is no change for the recognition by the subsidiaries in
USA and Europe, the policy has been applied in the past and carried it over
for those subsidiaries.
According to the above change, PCS revenue (3,009,009 thousand yen), which
should be deferred by the parent company and Taiwan subsidiary as of the
beginning of the current fiscal year applied to the prior year's revenues, is
stated as Losses on prior year adjustment under Unusual losses at the first
half of current consolidated period. Effect of change in method resulted in
decrease of Sales, Operating income and Ordinary income by 492,660 thousand
yen and in increase of losses before taxes by 3,501,670 thousand yen.
The effect on segment information is described in (Segment Information).
---------------------------------------------------------------------------------------------------------------------------
5. Definition of cash and cash equivalent Cash in hands, cash on demand and short-term investments (on Cash Flow
in the consolidated cash flow statement Statement for first half of fiscal year) which will be matured less
for the first half of current fiscal year than 90 days after acquisition and highly liquidated.
---------------------------------------------------------------------------------------------------------------------------
17
Notes
-------
(Consolidated semi-annual balance sheets) (Thousands of yen)
--------------------------------------------------------------------------------------------------------------------------
At the end of the first half of the At the end of the first half of the At the end of the previous
current fiscal year previous fiscal year fiscal year
(As of June 30, 2001) (As of June 30, 2000) (As of December 31, 2000)
--------------------------------------------------------------------------------------------------------------------------
* 1 Accumulated depreciation of ? 1 Accumulated depreciation of * 1 Accumulated depreciation of
property and equipment property and equipment property and equipment
999,549 667,127 756,897
--------------------------------------------------------------------------------------------------------------------------
* 2 Major intercompany assets * 2 Major intercompany assets
Investments in securities Investments in securities
109,623 --------- 182,472
--------------------------------------------------------------------------------------------------------------------------
* 3 Additional information * 3 Additional information
[Pledged assets] [Pledged assets]
Software 21,410 --------- Software 32,449
Buildings 24,733
------------------------------
[Liability applied to the above] Total 57,182
Current portion of [Liability applied to the above]
Long-term debt 57,200
Long-term Current portion of
Borrowing 71,300 Long-term debt 57,200
------------------------------
Total 128,500 Long-term
Borrowing 99,900
------------------------------
Total 157,100
---------------------------------------------------------------------------------------------------------------------------
18
Consolidated semi-annual income statements
(Thousands of yen)
-----------------------------------------------------------------------------------------------------------------------------
For the first half of the current fiscal For the first half of the previous For the previous fiscal year
year fiscal year
( From January 1, 2001 ) ( From January 1, 2000 ) ( From January 1, 2000 )
To June 30, 2001 To June 30, 2000 To December 31, 2000
-----------------------------------------------------------------------------------------------------------------------------
* 1.Major components of selling, * 1.Major components of selling, * 1.Major components of selling,
general and administrative general and administrative general and administrative
expenses are as follows. expenses are as follows. expenses are as follows.
Advertising and sales Advertising and sales Advertising and sales
promotions 1,141,450 promotions 1,068,154 promotions 2,575,951
Salaries and bonuses 2,539,854 Salaries and bonuses 1,710,926 Salaries and bonuses 3,748,978
Depreciation expense 198,818 Depreciation expense 107,132 Service charge 910,394
Research and Research and Depreciation expense 343,992
Development costs 1,246,142 Development costs 850,857 Research and
Amortization of Amortization of development costs 974,689
consolidated goodwill 252,763 consolidated goodwill 95,796 Amortization of
Software maintenance fee 325,115 consolidated goodwill 276,285
Out-side service fee 789,749 Software maintenance fee 966,591
-----------------------------------------------------------------------------------------------------------------------------
* 2.Major components of * 2.Major components of * 2.Major components of
non-operating income non-operating income non-operating income
Interest income 202,266 Interest income 76,560 Interest income 241,132
Foreign exchange gain 307,532 Foreign exchange gain 30,218 Foreign exchange gain 277,983
Gain on sales of Gain on sales of
marketable securities 65,376 marketable securities 119,649
-----------------------------------------------------------------------------------------------------------------------------
* 3.Major components of * 3.Major components of * 3.Major components of
non-operating expense non-operating expense non-operating expense
Interest expense 135,172 Interest expense 85,520 Interest expense 214,209
Bond issue costs 34,180 Bond issue costs 44,295 Loss on evaluation of
Equity in loss of Loss on sales of Marketable securities 245,124
affiliated companies 104,849 treasury stocks 22,270 Equity in loss of
Loss on disposal of Loss on sales of affiliated companies 87,671
products 49,328 marketable securities 30,081
Equity in loss of
affiliated companies 23,516
-----------------------------------------------------------------------------------------------------------------------------
* 4.Major components of * 4.Major components of
unusual gains unusual gains
--------- Gain from Gain from
lawsuit settlement 1,030,785 lawsuit settlement 1,019,734
-----------------------------------------------------------------------------------------------------------------------------
* 5.Major components of * 5.Major components of * 5.Major components of
unusual losses unusual losses unusual losses
Amortization of Loss on disposal of Loss on sales of
Consolidated goodwill fixed assets 2,739 fixed assets 5,571
(the component of
Unusual losses) 2,000,795
Loss on prior year
Adjustment (due to
change in revenue
recognition) 3,009,009
Retirement benefit
expense 119,077
---------------------------------------------------------------------------------------------------------------------------
19
(Consolidated cash flow statement)
(Thousands of yen)
---------------------------------------------------------------------------------------------------------------------------
For the first half of the current fiscal year For the previous fiscal year
( From January 1, 2001 ) ( From January 1, 2000 )
To June 30, 2001 To December 31, 2000
---------------------------------------------------------------------------------------------------------------------------
1. The ending balance of cash and cash equivalents 1. The ending balance of cash and cash equivalents
and accounts in the consolidated balance sheet and accounts in the consolidated balance sheet
Cash and deposits 34,618,745 Cash and deposits 24,435,471
Time deposit matured Marketable securities 31
over 3 months (excluded
from Cash and deposit) (65,511)
---------------------------------------------------------------------------------------------------------------------------
Cash and Cash and
Cash equivalents 34,553,234 Cash equivalents 24,435,502
===========================================================================================================================
2. The breakdown of assets and liabilities of the
consolidated subsidiaries which Trend acquired newly
--------- through acquisition of its stocks the breakdown of
assets and liabilities at the date of the acquisition,
acquisition cost and some other expenses incurred through
acquisition process are as follows.
Nihon Unisoft Incorporated (Tokyo Chuo-ku)
(As of Feb. 29, 2000) (*)
Current assets 812,085
Non-current assets 101,532
Consolidated 1,422,899
reconciliation accounts
Current liabilities (362,294)
Non-current liabilities (285,805)
Minority interest (88,417)
----------------------------
Acquisition cost for Nihon
Unisoft Incorporated 1,600,000
Cash and cash equivalents of
Nihon Unisoft Incorporated 291,751
----------------------------
Net: Actual payment for
acquisition 1,308,248
============================
(*) Present corporate name is ipTrend Incorporated
(Tokyo-Chuo-ku).
---------------------------------------------------------------------------------------------------------------------------
20
4. Segment Information
----------------------
1. Industry segment information
The company and its subsidiaries operate principally in two industry
segments: "Security software business" and "Internet infrastructure-related
products/service business". However, industry segment information is not
currently disclosed since more than 90% of sales and operating income in all
segments are from the "security software business" in accordance with
Ordinance on Consolidated Financial Statements.
2. Geographic segment information
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------------------------
For the first-half of the current fiscal year ( From January 1, 2001 )
To June 30, 2001
-------------------------------------------------------------------------------------------------------
Japan North Taiwan Europe Others Total Eliminations Consoli-
America or dated
Corporate
------------------------------------------------------------------------------------------------------------------------------------
I Sales and operating profit/loss
Sales
(1) Sales to 4,487,537 4,017,815 883,543 2,796,599 753,858 12,939,355 - 12,939,355
third parties
(2) Intersegment 3,053,423 881,345 1,080,149 8,105 35,295 5,058,319 (5,058,319) -
sales
------------------------------------------------------------------------------------------------------------------------------------
Total 7,540,960 4,899,160 1,963,693 2,804,705 789,153 17,997,674 (5,058,319) 12,939,355
------------------------------------------------------------------------------------------------------------------------------------
Operating expenses 2,815,535 4,596,694 1,991,885 2,851,499 771,900 13,027,514 (2,986,639) 10,040,875
------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 4,725,425 302,466 (28,192) (46,794) 17,253 4,970,159 (2,071,679) 2,898,479
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
For the first-half of the previous fiscal year ( From January 1, 2000 )
To June 30, 2000
---------------------------------------------------------------------------------------------------------
Japan North Taiwan Europe Others Total Eliminations Consoli-
America or dated
Corporate
------------------------------------------------------------------------------------------------------------------------------------
I Sales and operating
profit (loss)
Sales
(1) Sales to 3,655,611 2,778,166 832,227 1,870,516 463,819 9,600,341 - 9,600,341
third parties
(2) Intersegment 885,727 789,235 386,007 4,397 68,903 2,134,272 (2,134,272) -
sales
------------------------------------------------------------------------------------------------------------------------------------
Total 4,541,339 3,567,402 1,218,235 1,874,913 532,722 11,734,613 (2,134,272) 9,600,341
------------------------------------------------------------------------------------------------------------------------------------
Operating expenses 2,089,276 2,259,756 867,277 1,122,346 413,281 6,751,939 (168,262) 6,583,676
------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 2,452,062 1,307,645 350,957 752,567 119,441 4,982,674 (1,966,009) 3,016,664
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
For the previous fiscal year ( From January 1, 2000 )
To December 31 2000
---------------------------------------------------------------------------------------------------------
Japan North Taiwan Europe Others Total Eliminations Consoli-
America or dated
Corporate
------------------------------------------------------------------------------------------------------------------------------------
I. Sales and operating profit (loss)
Sales
(1) Sales to 8,447,154 6,258,300 1,869,024 4,126,420 1,133,898 21,834,797 - 21,834,797
third parties
(2) Intersegment 2,031,350 1,602,229 957,303 135,633 144,804 4,871,320 (4,871,320) -
sales
------------------------------------------------------------------------------------------------------------------------------------
Total 10,478,504 7,860,529 2,826,327 4,262,053 1,278,702 26,706,117 (4,871,320) 21,834,797
------------------------------------------------------------------------------------------------------------------------------------
Operating expenses 4,207,010 5,264,325 1,987,241 2,739,898 912,699 15,111,175 (719,696) 14,391,478
------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 6,271,493 2,596,204 839,086 1,522,155 366,003 11,594,942 (4,151,624) 7,443,318
------------------------------------------------------------------------------------------------------------------------------------
21
(Notes)
1. Classification of countries and regions is based on geographical proximity.
2. Classification of countries and regions into each geographic segment.
North America : U.S.A.
Europe : Italy,Germany,France,UK
Others : Korea,Australia,Brazil,Hong Kong,Malaysia,
Mexico,New Zealand.
3. Unallocable operating expenses for the current semi-annual period in the
operating expense (JPY 2,565 millions) is included in "Eliminations or
Corporate". Major components are expenses for the administrative department
in parent company and research and development costs for our products.
4. Unallocable operating expenses for the previous semi-annual period in the
operating expense (JPY 2,080 millions) is included in "Eliminations or
Corporate". Major components are expenses for the administrative department
in parent company and research and development costs for our products.
5. Unallocable operating expenses for the previous annual period in the
operating expense (JPY 4,429 millions) is included in "Eliminations or
Corporate". Major components are expenses for the administrative department
in parent company and research and development costs for our products.
6. Unallocable operating expenses are included in "Elimination or Corporate"
due to the difficulty in recognizing their contribution to each segments
profit and loss.
7. As described in Significant accounting policies and practices for preparing
consolidated financial statements, Deferred revenue is recognized by Trend
Micro Incorporated (Japan) and Trend Micro Incorporated (Taiwan). It
resulted in decrease of Sales to third parties and Operating income by
JPY545,816 thousand in Japan and in increase of Sales to third parties and
Operating income by JPY53,155 thousand in Taiwan.
8. As described in Significant accounting policies and practices for preparing
consolidated financial statements, Allowance for retirement benefit is
reserved by Trend Micro Incorporated (Japan) and Trend Micro Incorporated
(Taiwan). It resulted in increase of Operating expense and decrease of
Operating income by JPY11,529 thousand in Japan and in increase of
Operating expense and decrease of Operating income by JPY6,808 thousand in
Taiwan.
(3) Overseas sales
(Thousands of yen)
-------------------------------- ------------------ ------------------ ----------------- ----------------- -----------------
For the first-half of the ( From January 1, 2001 )
current fiscal year To June 30, 2001
-------------------------------- ------------------ ------------------ ----------------- ----------------- -----------------
North Taiwan Europe Others Total
America
-------------------------------- ------------------ ------------------ ----------------- ----------------- -----------------
I.Overseas sales 4,017,815 663,751 2,796,599 982,714 8,460,881
II.Consolidated sales 12,939,355
III.Ratio of overseas sales 31.1% 5.1% 21.6% 7.6% 65.4%
against consolidated sales
-------------------------------- --------------------------------------- -- -------------------------- ---------------------
For the first-half of the ( From January 1, 2000 )
previous fiscal year To June 30, 2000
------------------ ------------------ ----------------- ----------------- -----------------
North Taiwan Europe Others Total
America
-------------------------------- ------------------ ------------------ ----------------- ----------------- -----------------
I. Overseas sales 2,778,166 654,515 1,870,516 641,531 5,944,729
II.Consolidated sales 9,600,341
III.Ratio of overseas sales 28.9 % 6.8 % 19.5 % 6.7 % 61.9 %
against consolidated sales
-------------------------------- ------------------ ------------------ ----------------- ----------------- -----------------
For the previous fiscal year ( From January 1, 2000 )
To December 31, 2000
------------------ ------------------ ----------------- ----------------- -----------------
North Taiwan Europe Others Total
America
-------------------------------- ------------------ ------------------ ----------------- ----------------- -----------------
I. Overseas sales 6,258,300 1,503,037 4,126,420 1,595,093 13,482,851
II.Consolidated sales 21,834,797
III.Ratio of overseas sales 28.7 % 6.9 % 18.9 % 7.3 % 61.7 %
against consolidated sales
-------------------------------- ------------------ ------------------ ----------------- ----------------- -----------------
22
(Note) 1. Overseas sales are sales to countries/regions other than Japan by
Trend Micro Inc. and its consolidated subsidiaries.
2. Classification of countries/region is based on geographical
proximity.
3. Classification North America : USA
Europe : Italy, Germany, France, UK
Others : Korea, Australia, Brazil,
Hong Kong, Malaysia,
Mexico and New Zealand
5. Lease transactions None
-- ------------------
23
6. Fair Market Value of Marketable Securities
---------------------------------------------
* Regarding "Marketable securities with market value" classified at the
first half of previous fiscal year and Investments in subsidiaries and
affiliates" for the first half of current fiscal year, they are described in
the notes of the Non-consolidated financial statements for the first half of
current year.
(1) Other securities with fair market value
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------------
Classification For the first-half of the current fiscal year
------------------------------------------------------------------------------------------------------------------------
Other securities Acquisition cost Recorded amount on Difference
Consolidated B/S
------------------------------------------------------------------------------------------------------------------------
1. Equity securities 332,475 737,206 404,730
2. Debt securities
Government bond/Municipal bond - - -
Corporate bond 1,700,000 1,768,510 68,510
Others - - -
3. Others 9,995 9,781 (214)
------------------------------------------------------------------------------------------------------------------------
Total 2,042,471 2,515,498 473,027
------------------------------------------------------------------------------------------------------------------------
(2) Major securities market value non-applicable
(Thousands of yen)
-------------------------------------------------------------------------------------------------
As of June 30, 2001
Classification
-------------------------------------------------------------------------------------------------
Other securities Recorded amount on consolidated B/S
1. Unlisted securities
(excluding OTC transaction securities) 428,223
2. Others -
-------------------------------------------------------------------------------------------------
Total 428,223
-------------------------------------------------------------------------------------------------
24
Market value of the marketable securities
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------------
Current/Non-current FY 2000 (As of December 31,2000)
------------------------------------------------------------------------------------------------------------------------
Recorded amount on B/S Fair market value Appraisal gain (loss)
------------------------------------------------------------------------------------------------------------------------
Securities classified as current
assets
Equity securities 172,475 172,475 -
Debt securities 1,700,000 1,711,050 11,050
Others - - -
--------------------------------------------------------------------------------
Sub-total 1,872,475 1,883,525 11,050
------------------------------------------------------------------------------------------------------------------------
Securities classified as
non-current assets
Equity securities - - -
Debt securities - - -
Others - - -
--------------------------------------------------------------------------------
Sub-total - - -
------------------------------------------------------------------------------------------------------------------------
Total 1,872,475 1,883,525 11,050
------------------------------------------------------------------------------------------------------------------------
(Note) 1.Calculation method of fair (market) value.
--------------------------------------------------------------------------------
For the fist-half of current fiscal year
--------------------------------------------------------------------------------
I. Securities traded in the overseas over-the-counter market
Based on price quotations in NASDAQ.
II. Debt securities whose fair value are determinable
Based on the standard indication price announced by Japan Securities
Association.
--------------------------------------------------------------------------------
2.The amount of securities included in the balance sheets but excluded from the
above table.
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------
FY 2000
(As of December 31, 2000)
------------------------------------------------------------------------------------------------------------------
Securities classified as current assets:
Mutual fund that is not affected by
market volatility including medium-term JGB
fund and MMF 44
[MMF included in above] [ 31]
------------------------------------------------------------------------------------------------------------------
Securities classified as non-current assets:
Non-listed equity securities excluding equity
securities traded in the over-the-counter market 600,198
[Investments in subsidiaries and affiliates [including the investment in affiliates 182,472
included above] thousand yen )
------------------------------------------------------------------------------------------------------------------
25
7. Contract or Notional amount, FMV and Valuation gain (loss) of Derivatives
----------------------------------------------------------------------------
Basic policies for derivative transactions
A corporate policy of Trend Micro Group does not engage in derivative
transactions. However, the interest cap trading and the interest rate swap had
been made by ipTrend Incorporated (Tokyo, Chuo-ku), during fiscal year 2000,
before the company's acquisition. These transactions had been made to avoid
risks for interest rate fluctuation. The borrowing applied to the hedge was paid
completely, when ipTrend Incorporated became a consolidated subsidiary.
Although, these transactions are not in completion as of June 30, 2001, the
company expects them to be settled with high degree of certainly. Trend Micro
Group has no intention of changing. The contractor for the interest cap trading
and the interest rate swap is the financial institution, which is trustworthy
institution. No expectation is required for future losses because of any
defaults.
Fair market value of the derivative transaction
Contract or notional amount, fair market value and appraisal gain (loss) (Thousands of yen)
-------------------------------------------------------------------------------------------------------------------
Transaction type FY 2001 (As of June 30, 2001)
-------------------------------------------------------------------------------------------------------------------
Contract or notional amount Fair market value Appraisal gain (loss)
Over 1 year
-------------------------------------------------------------------------------------------------------------------
Other than market transactions
Interest rate cap
Buy 100,000 100,000 111 (3,088)
[Option premium] [3,200] [3,200]
Interest rate swap
Receive / floating and Pay /
fixed 200,000 200,000 (10,680) (10,680)
-------------------------------------------------------------------------------------------------------------------
Total 300,000 300,000 (10,569) (13,768)
-------------------------------------------------------------------------------------------------------------------
Note: The amount of option premium is stated in [ ] and the fair market value of
it and Appraisal gain (loss) are stated on the above.
Contract or notional amount, fair market value and appraisal gain (loss) (Thousands of yen)
-------------------------------------------------------------------------------------------------------------------
Transaction type FY 2000 (As of December 31, 2000)
-------------------------------------------------------------------------------------------------------------------
Contract or notional amount Fair market value Appraisal gain (loss)
Over 1 year
-------------------------------------------------------------------------------------------------------------------
Other than market transactions
Interest rate cap
Buy 100,000 100,000 731 (2,468)
[Option premium] [3,200] [2,275]
Interest rate swap
Receive / floating and Pay/fixed 200,000 200,000 (7,482) (7,482)
-------------------------------------------------------------------------------------------------------------------
Total 300,000 300,000 (6,751) (9,950)
-------------------------------------------------------------------------------------------------------------------
Note: Calculation method of fair (market) value
Fair market value is determined based on the price, which is provided by the
contractor of the financial institute.
26
(Significant subsequent events)
Members of the Trend Micro, Inc. board meeting on August 3, 2001 decided to
transfer the business of the consolidated subsidiary ipTrend Inc (Chuo-ku,
Tokyo) (100% Trend Micro controlling share) to Trend Micro and to IPSQUARE Inc
(no human or capital relation to Trend Micro); the board also decided to
commence dissolution and liquidation procedures of ipTrend (Chuo-ku). As for
ipTrend (Taiwan), a 99.9%-owned subsidiary of ipTrend (Chuo-ku) and a
consolidated subsidiary of Trend Micro, all the business will be transferred to
Trend Micro (Taiwan) (99.9% Trend Micro controlling share) and will be
liquidated.
1 Corporate profile of ipTrend Inc. (Chuo-ku, Tokyo)
Address: 2-13-9 Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo, Japan
Representative: Mahendra Negi
Business description: Providing Internet platform-related products and
services
Capital: 218 million yen
Acquisition value of the shares: 2.8 billion yen
2 Business, properties, and liabilities to be transferred
2.1 IPSQUARE Inc.
Real-time OS Project and equipment, works in progress, and sales
deposits involved in the project
2.2 Trend Micro, Inc.
All business and properties other than those mentioned above and the
same amount of liabilities (Trend Micro will take over all the
liabilities from third persons.)
3 Transfer price
Transfer price will be calculated by the fair market value on the day of
transfer.
4 Business transferring schedules
Business transfer contracted on August 3, 2001
Business transfer to be implemented by August 31, 2001
5 Dissolution date: September 3, 2001
6 Completion date for liquidation: December 2001
7 Reasons for dissolution and liquidation:
To restructure the operations of ipTrend and improve efficiency of the
group because the market of appliance servers for small and medium-sized
businesses has not expanded fast enough.
8 Influence on Trend Micro in terms of consolidated business results
8.1 The consolidated adjustment account incurred by acquisition of
ipTrend's stock has been added up to intangible fixed assets and
extinguished evenly for five years. With the decision of dissolution
and liquidation, the unamortized balance of two billion yen will be
extinguished across the board, and added up as an extraordinary loss
during Trend Micro's interim consolidated fiscal period.
8.2 It is expected that the influence on consolidated business results of
Trend Micro by partial transfer of business of ipTrend (Chuo-ku) to
IPSQUARE should be minor.
27
August 3, 2001
Report of First-Half Results (Non-consolidated)
For Fiscal Year Ending December 31, 2001
Company: Trend Micro Incorporated Tokyo Stock Exchange 1st Section
Code: 4704 Location : Tokyo
Address: Odakyu Southern Tower, 10F 2-2-1 Yoyogi Shibuya-ku Tokyo, 151-8583 Japan
Contact: Title Director, Chief Financial Officer
Name Mahendra Negi (Phone: 81-3-5334-3600)
Date of the board of directors meeting
authorizing the first-half results: August 3, 2001
Adoption of semi-annual dividend system: Yes
Starting date of semi-annual dividend payment: No semi-annual dividends were authorized for this
semi-annual period.
1. Financial Highlights for the first half of FY 2001 (January 1, 2001 through
June 30, 2001)
(1) Results of operations
(All figures except for per share information are rounded down to millions of
yen.)
---------------------------------------------------------------------------------------------------------------------------------
Sales Growth Operating Growth Ordinary Growth
rate income rate income rate
---------------------------------------------------------------------------------------------------------------------------------
Millions of yen % Millions of yen % Millions of yen %
The first half of FY 01 7,066 78.9 2,699 454.2 2,779 491.3
The first half of FY 00 3,950 30.4 487 ( 60.0 ) 470 ( 63.4 )
---------------------------------------------------------------------------------------------------------------------------------
FY 00 (annual) 9,426 2,734 2,533
---------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
Net income Growth rate Net income
per share
------------------------------------------------------------------------
Millions of % Yen
yen
The first half of FY 01 ( 2,166) - ( 16.49)
The first half of FY 00 982 45.0 15.12
-----------------------------------------------------------------------
FY 00 (annual) 2,038 31.26
-----------------------------------------------------------------------
(Note)
1. Weighted average number of 131,339,944 shares (for the first half of FY 01)
shares 65,005,579 shares (for the first half of FY 00)
outstanding: 65,194,481 shares (for FY 00)
2. Change in accounting policies: Yes
3. The percentage of sales, operating income, ordinary income and net income
are comparisons to the first half of prior fiscal year.
(2) Dividends
-----------------------------------------------------------------------
Semi-annual Annual dividends per
dividends per share Share
(Yen) (Yen)
-----------------------------------------------------------------------
The first half of FY 01 0 -
The first half of FY 00 0 -
-----------------------------------------------------------------------
28
FY 00 (annual) - 0
-----------------------------------------------------------------------
(3) Financial Position
-------------------------------------------------------------------------------------------------------------------------------
Total assets Shareholders' equity Shareholders' Shareholders' equity
equity ratio per share
-------------------------------------------------------------------------------------------------------------------------------
As of Millions of yen Millions of yen % Yen
June 30, 2001 41,809 18,803 45.0 142.80
June 30, 2000 31,226 17,310 55.4 265.59
-------------------------------------------------------------------------------------------------------------------------------
December 31, 2000 33,493 19,655 58.7 299.80
-------------------------------------------------------------------------------------------------------------------------------
(Note)
1. Shares issued and outstanding at the end of period: 131,681,887 shares as of June 30,2001
65,172,669 shares as of June 30, 2000
65,560,421 shares as of December 31, 2000
2 Earning projections for the current fiscal year (January 1, 2001 through December 31, 2001)
-------------------------------------------------------------------------------------------------------------------------------
Sales Ordinary income Net income
-------------------------------------------------------------------------------------------------------------------------------
Millions of yen Millions of yen Millions of yen
For the year ending 14,000 3,000 ( 2,000 )
December 31, 2001
-------------------------------------------------------------------------------------------------------------------------------
(Note) 1. Projected consolidated net income per share for the current fiscal
year : JPY (15.21)
Supplementary information on the results (January 1, 2001 through June30, 2001)
The Company's sales revenues are mainly derived from licensing of its products,
upgrading of its products and patterns files and post-contract support including
customer support. Until the end of FY 2000, the Company had recognized sales
revenues from customer support (which was included in post-contract support) at
the beginning of the relevant support period. Effective from FY 2001, the method
of the revenue recognition has been changed and sales revenues from customer
support are deferred through Deferred revenue under Current liabilities and
Non-current liabilities over the relevant support period.
For convenience of comparison, the result for the year ending June 30, 2001, are
presented in two ways. Result based on the accounting policies applied from the
first half of fiscal year, assumed result based on the accounting policies
applied until the previous fiscal year and its differential are stated in the
below.
(Millions of yen except for per share information)
-------------------------------------------------------------------------------------------------------------
Result of the first half Assumed result of the Increase(Decrease)
of FY 2001 first half of FY 2001
(based on Accounting
policies applied until
previous fiscal year)
-------------------------------------------------------------------------------------------------------------
Sales 7,066 7,612 ( 545)
Ordinary income 2,779 3,325 ( 545)
Net income (loss) ( 2,166 ) ( 226 ) ( 1,939)
Net income (loss) ( 16.49 ) ( 1.73 ) ( 14.77)
per share
-------------------------------------------------------------------------------------------------------------
[Information on net income per share and shareholders' equity per share]
For periodic comparison of net income per share and shareholders' equity per
share, restated per share information reflecting the effect of stock split on
March 31,2001 is as follows:
---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) Shareholders' equity Weighted average number Shares issued and
per share per share of shares outstanding outstanding at the end
(Yen) (Yen) of period
---------------------------------------------------------------------------------------------------------------------------------
The first half of FY 01 (16.49) 142.80 131,339,944 131,681,887
29
The first half of FY 00 7.56 132.79 130,011,158 130,345,338
---------------------------------------------------------------------------------------------------------------------------------
FY 00(annual) 15.63 149.90 130,388,962 131,120,842
---------------------------------------------------------------------------------------------------------------------------------
1. Non-consolidated Semi-annual Financial Statements
----------------------------------------------------
(1) Non-consolidated semi-annual balance sheets
-----------------------------------------------
(Thousands of yen)
--------------------------------------------------------------------------------------------------------------------------------
Period At the end of the At the end of the Condensed balance sheet
first half of the first half of the at the end of
current fiscal year previous fiscal year previous fiscal year
Account (As of June 30, 2001) (As of June 30, 2000) (As of December 31, 2000)
--------------------------------------------------------------------------------------------------------------------------------
Amount Percentage Amount Percentage Amount Percentage
--------------------------------------------------------------------------------------
% % %
(Assets)
I Current assets
1. Cash and bank deposits *2 23,950,538 17,512,240 16,271,731
2. Notes receivable, trade - 1,058 -
3. Accounts receivable, *2 4,726,066 3,213,461 4,131,960
trade
4. Marketable securities *2*7 - 2,242,848 1,872,506
5. Treasury stock *3 4,523 22,421 21,908
6. Inventories 32,792 33,781 39,025
7 Intercompany loan *2 1,349,980 387,982 762,169
receivables
8. Other accounts 873,047 1,573,185 290,375
receivable
9. Deferred tax assets 1,764,611 159,194 500,494
10. Other current assets 228,682 155,037 161,832
11. Allowance for doubtful
accounts ( 473,275) ( 98,739) ( 106,649)
------------------ ------------------- ------------------
Total current assets 32,456,969 77.6 25,202,472 80.7 23,945,356 71.5
II Non-current assets
1. Property and equipment *1 266,152 0.6 238,882 0.8 260,871 0.8
2. Intangibles
(1) Software copyright 46,070 184,280 115,175
(2) Software 148,955 173,151 162,799
(3) Software in progress 493,220 30,631 163,629
(4) Others 52,361 72,120 62,103
------------------ ------------------- ------------------
Total intangibles 740,608 1.8 460,183 1.5 503,707 1.5
3. Investments and other
non-current assets
(1) Investments in *2*7 2,824,316 - 397,730
securities
(2) Investments in
subsidiaries and *2 3,894,043 3,873,840 6,960,940
affiliates
(3) Deferred tax assets 39,176 79,274 81,544
(4) Others *2 1,603,680 1,386,620 1,358,577
(5) Allowance for bad
debts ( 15,477) ( 14,960) ( 15,534)
------------------ ------------------- ------------------
Total investments and
other non-current assets 8,345,739 20.0 5,324,775 17.0 8,783,260 26.2
------------------ ------------------- ------------------
Total non-current assets 9,352,500 22.4 6,023,842 19.3 9,547,839 28.5
------------------ ------------------- ------------------
Total assets 41,809,470 100.0 31,226,314 100.0 33,493,195 100.0
================== =================== ==================
30
(Thousands of yen)
--------------------------------------------------------------------------------------------------------------------------------
Period At the end of the first At the end of the first half Condensed balance sheet at
half of the current fiscal of the previous fiscal year the end of the previous
Account year (As of June 30, 2000) fiscal year
(As of June 30, 2001) (As of December 31, 2000)
-------------------------------------------------------------------------------------
Amount Percentage Amount Percentage Amount Percentage
--------------------------------------------------------------------------------------------------------------------------------
% % %
(Liabilities)
I Current liabilities
1. Accounts payable, trade 24,801 33,993 36,658
2. Accounts payable, other *2 1,569,093 797,135 819,825
3. Accrued corporate taxes
and other 3,756 489,000 1,229,925
4. Allowance for sales returns 179,739 128,940 287,661
5. Stock warrants 1,917,943 1,508,667 1,345,666
6. Deferred revenue 3,011,041 - -
7. Other current liabilities *4 367,416 215,165 364,050
----------------- ------------------- -----------------
Total current liabilities 7,073,791 16.9 3,172,902 10.2 4,083,788 12.2
II Long-term liabilities
1. Bond payable 15,400,000 10,700,000 9,700,000
2. Deferred revenue 335,737 - -
3. Accrued severance - 43,155 53,716
indemnities
4. Allowance for retirement 196,423 - -
benefits
----------------- ------------------- -----------------
Total long-term liabilities 15,932,160 38.1 10,743,155 34.4 9,753,716 29.1
----------------- ------------------- -----------------
Total liabilities 23,005,952 55.0 13,916,057 44.6 13,837,504 41.3
(Shareholders' equity)
I Common stock *5 6,799,373 16.3 5,618,852 18.0 6,182,838 18.5
II Advance received for newly *6 - - 1,340 0.0 427 0.0
issued stock
III Additional paid-in capital 8,517,103 20.4 7,385,576 23.6 8,112,841 24.2
IV Legal reserve 20,833 0.0 20,833 0.1 20,833 0.1
V Retained earnings
1. Unappropriated retained
earnings at the end of the
period 3,172,626 4,283,653 5,338,749
----------------- ------------------- -----------------
Total retained earnings 3,172,626 7.6 4,283,653 13.7 5,338,749 15.9
----------------- ------------------- -----------------
VI Valuation difference on other
securities 293,580 0.7 - - - -
----------------- ------------------- -----------------
Total shareholders' equity 18,803,517 45.0 17,310,256 55.4 19,655,690 58.7
----------------- ------------------- -----------------
Total liabilities and
shareholders' equity 41,809,470 100.0 31,226,314 100.0 33,493,195 100.0
================= =================== =================
31
(2)Non-consolidated semi-annual income statements
(Thousands of yen)
----------------------------------------------------------------------------------------------------------------------------------
Period For the first half of For the first half of Condensed income statement for
Account the current fiscal year the previous fiscal year the previous fiscal year
(From January 1, 2001) (From January 1, 2000) (From January 1, 2000)
To June 30, 2001 To June 30, 2000 To December 31, 2000
----------------------------------------------------------------------------------------------------------------------------------
Amount Percentage Amount Percentage Amount Percentage
----------------------------------------------------------------------------------------------------------------------------------
% % %
I Sales 7,066,538 100.0 3,950,190 100.0 9,426,589 100.0
II Cost of sales *6 320,302 4.5 332,167 8.4 625,267 6.6
Allowance for sales returns - - 36,737 0.9 195,458 2.1
----------------- ----------------- ----------------
Gross profit 6,746,235 95.5 3,581,286 90.7 8,605,863 91.3
III Selling,general and 4,046,471 57.3 3,093,378 78.3 5,871,643 62.3
administrative expenses *1*6
----------------- ----------------- ----------------
Operating income 2,699,764 38.2 487,907 12.4 2,734,219 29.0
IV Non-operating income *2 298,684 4.2 139,369 3.5 439,650 4.7
V Non-operating expense *3 219,152 3.1 156,415 4.0 639,873 6.8
----------------- ----------------- ----------------
Ordinary income 2,779,296 39.3 470,861 11.9 2,533,996 26.9
VI Unusual gains *4 - - 1,030,785 26.1 1,019,734 10.8
VII Unusual losses *5 6,376,441 90.2 2,195 0.0 5,027 0.1
----------------- ----------------- ----------------
Income (loss) before taxes ( 3,597,145) ( 50.9) 1,499,451 38.0 3,548,703 37.6
Corporate, inhabitant and
enterprise tax 3,756 0.1 607,845 15.4 1,945,570 20.6
Income tax deferred 1,434,778 20.3 91,316 2.3 434,886 4.6
----------------- ----------------- ----------------
Net income (loss) ( 2,166,122) ( 30.7) 982,923 24.9 2,038,019 21.6
Retained earnings at
the beginning of the year 5,338,749 3,153,577 3,153,577
Cumulative effects of
adopting deferred tax
accounting - 147,152 147,152
----------------- ----------------- ----------------
Unappropriated retained 3,172,626 4,283,653 5,338,749
Earnings at the end of the period
================= ================= ================
----------------------------------------------------------------------------------------------------------------------------------
32
Significant accounting policies and practices for preparing non-consolidated
semi-annual financial statements.
------------------------------------------------------------------------------------------------------------------------------------
1. Accounting for evaluation of securities (1) Securities
(1) Investments in affiliates and in subsidiaries
Moving average cost method
(2) Other securities
Other securities with fair market value:
The securities are stated at the market value method based on the value
at the end of the period (valuated differences are recognized in equity
directly, not to reflect to net earnings and cost of selling is
determined by the weighted average method.
Other securities without a market value:
The securities are stated at the weighted average cost.
(Additional information)
For the financial instruments, "Accounting Standard for financial instruments"
(("Argument of establishment for Accounting Standard for Financial
Instruments") Business Accounting Deliberation Council, January 22, 1999), is
applied from the first half of current fiscal year. According to the adoption,
the valuation basis and the method for securities are changed. The change
resulted in increase of ordinary income by 77,269 thousand yen and in decrease
of losses before taxes by 77,269 thousand yen.
In addition, the other securities, which are classified as "Marketable
securities" til previous fiscal year, are classified as "Investment in
securities" uneffective from the first half of current fiscal year under
review. The classification resulted in increase of other securities in
"Investment in securities" by 473,240 thousand yen and "Deferred tax
liabilities" of 198,997 thousand yen was recognised. Finally, 274,243 thousand
yen of "Valuated difference on other securities" is recognised under
Shareholders equity (The difference from 293,580 thousand yen disclosed on the
balance sheet) is caused by the translation of security in foreign currency.
The classification also resulted in decrease of Marketable securities under
Current assets by 1,872,475 thousand yen and in increase of Investment in
securities by 1,872,475 thousand yen.
(2) Inventories
Finished goods . Raw materials . Supplies
Moving average cost method
---------------------------------------------------------------------------------------------------------------------------
2. Depreciation and amortization method for (1) Property and equipment
fixed assets Declining-balance method
(2) Intangibles
[Software for mass sale]
Straight-line method over the estimated useful lives
(12 months).
---------------------------------------------------------------------------------------------------------------------------
33
[Software for internal use]
Straight-line method over the estimated useful lives (5 years).
[Other intangibles]
Straight-line method
(3) Long-term prepaid expense
Amortization is computed by a straight-line method
------------------------------------------------------------------------------------------------------------------------------------
3. Accounting for deferred assets Issuing costs of stocks and bonds are charged to expenses when incurred.
------------------------------------------------------------------------------------------------------------------------------------
4. Accounting policies for provisions (1) Allowance for doubtful accounts
As contingency against losses from default of note and account receivable,
the allowance for doubtful accounts is provided. The amount is determined
using a percentage based on own actual doubtful account loss against total
of debts and an amount, which takes into consideration the possibility of
recovering specific liabilities.
(Additional information)
For the financial instruments, from the current fiscal year, pursuant to
"Accounting Standards for financial instruments" (("Argument of
establishment for Accounting Standard for Financial Instruments") Business
Accounting Deliberation Council, January 22, 1999), The recording principal
of Allowance for doubtful accounts is changed (The allowance for bad debts
is recognized at a percentage based on the accomplishments instead of a
statutory prescribed percentage). The adoption had no significant effect.
(2) Allowance for sales return
In order to reserve future losses from sales return subsequent to the fiscal
year end, allowance for sales return is provided based on the past
experience in the sales return.
(3) Allowance for retirement benefits
In order to reserve future losses arising from retirement of employees,
allowance for retirement benefits is provided based on retirement benefit
liabilities at the end of the period under review. The difference from the
changing accounting standard 106,581 thousand yen is recognised as an
expense under Unusual losses.
(Additional information)
From the current fiscal year, pursuant to "Accounting Standards for
Retirement Benefits Obligation" (("Argument of establishment for Accouting
Standard for Retirement Benefits Obligation") Business Accounting
Deliberation Council, June 16, 1998), allowance is provided. The adoption
resulted in an increase of retirement benefits expense by 119,759 thousand
yen, a decrease of Ordinary income by 11,529 thousand yen and a increase of
losses before taxes by 118,111 thousand yen. Amount of accrued severance
indemnities, which was recognised until previous fiscal year, is included
and disclosed in Allowance for retirement benefits.
------------------------------------------------------------------------------------------------------------------------------------
34
------------------------------------------------------------------------------------------------------------------------------------
5. Translation of major foreign-currency Foreign-currency financial receivables and liabilities are
assets and liabilities into Yen. translated into yen at the spot rate effective at the end of the
period. Exchange differential is treated as a profit/loss.
(Additional information)
From the first half of current fiscal year, the company adopted revised
accounting standards for foreign currency transactions (Views on Revision of
Accounting Standards for Foreign Currency Transactions, etc., issued by
Business Accounting Deliberation Council on October 22, 1999). The adoption
had no significant effects on profits and losses.
------------------------------------------------------------------------------------------------------------------------------------
6. Accounting for leased assets Finance leases without transfer of ownership of the leased assets are
accounted for in the same manner as applied for operating leases.
------------------------------------------------------------------------------------------------------------------------------------
35
-----------------------------------------------------------------------------------------------------------------------------------
7. Other important matters for preparing (1) Consumption tax
semi-annual financial statements
Transactions subject to consumption tax are stated at the amount net of the
related consumption tax.
(2) Accounting for stock warrants that was granted to some officers and
employees.
The Company has adopted incentive plans where warrants to purchase parent
company's shares are granted to directors and certain employees after parent
company issues bonds with detachable warrants and immediately repurchases
all of the warrants. Compensation costs are measured at repurchase costs of
warrant securities at the point of grant because that is only one of the
compensation scheme which grants warrants to directors and employees.
Warrant portion of the bonds is recorded as "warrant account" upon issuance
and then transferred to "additional paid-in capital" upon exercise.
(3) Change of policy and method of revenue recognition for PostContract
Customer Support Service (PCS)
Basically, The product license agreement, which the company contract with
the end-user, states the article for PCS (customer support and upgrading of
products and its pattern files).
Till previous fiscal year, whole revenue of the company applied to each
product license agreement including a portion of PCS revenue had been
recognized when the license is delivered to user. From the first half of
current fiscal year, the revenue recognition method for portion of PCS is
changed as follows. Portion of PCS revenue is recognized separately from
whole revenue and it is deferred as Deferred revenues under Current
liabilities and Non-current liabilities based on contracted period. Deferred
revenue is finally recognized for the contracted period evenly.
As per the tendency of the company that the ratio of site license products
revenue (to corporation user) is getting larger than as before compared with
package products revenue (to private user), the ratio of a portion of PCS
revenue is increased. As the result of the above, the companies adopt new
revenue recognition policy on PCS, in order to recognize proper periodic
profits and losses accurately.
According to the above change, PCS revenue 2,800,962 thousand yen, which
should be deferred by the company as of the beginning of the current fiscal
year applied to the prior year's revenues, is stated as Losses on prior year
adjustment under Unusual losses at the first half of current period. And it
resulted in a decrease of Operating income and Ordinary income by 545,816
thousand yen and in increase of losses before taxes by 3,346,779 thousand
yen.
-----------------------------------------------------------------------------------------------------------------------------------
Changes in presentation
-----------------------------------------------------------------------------------------------------------------------------------
Allowance for sales return indicated independently until the previous fiscal year is deducted from sales amount immediately
from the first half of current fiscal year. Allowance for sales return cause sales revenue to increase by 107,922 thousand
yen in this period.
-----------------------------------------------------------------------------------------------------------------------------------
36
Notes
-----
(Non-consolidated semi-annual balance sheets)
(In thousands)
-----------------------------------------------------------------------------------------------------------------------------
At the end of the first half At the end of the first half
of the current fiscal year of the previous fiscal year At the end of the previous fiscal year
(As of June 30, 2001) (As of June 30, 2000) (As of Dec. 31, 2000)
-----------------------------------------------------------------------------------------------------------------------------
* 1 Accumulated depreciation of * 1 Accumulated depreciation of * 1 Accumulated depreciation of
property and equipment property and equipment property and equipment
JPY 231,119 JPY 155,696 JPY 192,765
-----------------------------------------------------------------------------------------------------------------------------
* 2 Major assets and liabilities * 2 Major assets and liabilities
denominated in foreign currencies denominated in foreign currencies
are as follows. are as follows.
Accounts in foreign currency in JPY Accounts in foreign currency in JPY
Cash and bank Cash and bank deposits
deposits US$ 4,837 510,310 US$ 11,123 1,276,932
Accounts receivable, Accounts receivable,
trade US$ 6,523 688,253 trade US$ 7,805 896,078
Marketable securities Marketable securities
US$ 4,255 442,817 US$ 1,502 172,476
Intercompany Intercompany
loan receivables loan receivables
US$ 3,063 323,532 US$ 3,693 424,049
AU$ 140 8,869 GBP 406 69,573
GBP 106 16,998 Investments in securities
Investments in US$ 2,000 215,730
subsidiaries Investments in
and affiliates US$ 1,276 146,429 subsidiaries
NT$ $353,999 1,434,300 and affiliates US$ 1,276 146,429
GBP 110 20,611 NT$ 436,499 1,721,400
Others (Investments GBP 110 20,611
and other assets) 501 51,925 Other (Investments
and other assets) US$ 501 57,590
Accounts Accounts
payable, other payable, other US$ 2,709 311,103
US$ 3,511 370,355 NT$ 36,848 127,790
GBP 11 1,859 DM 221 12,082
DM 632 32,459 GBP 24 4,195
-----------------------------------------------------------------------------------------------------------------------------
* 3 Number of treasury stocks * 3 Number of treasury stocks * 3 Number of treasury stocks
916 shares 1,374 shares 2.631 shares
-----------------------------------------------------------------------------------------------------------------------------
* 4 Presentation of * 4 Presentation of * 4 Presentation of
consumption tax consumption tax consumption tax
Net of consumption tax paid and Net of consumption tax paid and Net of consumption tax paid and
consumption tax received are included in consumption tax received are included consumption tax received are included
other current liabilities. in other current liabilities. in other current liabilities.
-----------------------------------------------------------------------------------------------------------------------------
* 5 Description of increases in * 5 Description of increases in * 5 Description of increases in
the number of shares issued the number of shares issued the number of shares issued
Exercise of stock warrants detached from Exercise of stock warrants detached Exercise of stock warrants detached
bonds from bonds from bonds
-Number of shares issued -Number of shares issued -Number of shares issued
442,239 shares 329,769 shares 717,521 shares
-Issue price per share -Issue price per share -Issue price per share
JPY - JPY - JPY -
-Increase in common stock -Increase in common stock -Increase in common stock
JPY 445,635 JPY 204,192 JPY 768,178
Stock split
-Number of shares issued
65,679,227 shares
-Issue price per share
JPY -
-Increase in common stock
JPY 170,900
-----------------------------------------------------------------------------------------------------------------------------
37
-----------------------------------------------------------------------------------------------------------------------------
* 6 Advance received for newly * 6 Advance received for newly
issued stocks are the paid-in issued stocks are the paid-in
capital proceeds from exercise of capital proceeds from exercise of
stock warrants. On July 3, 2000, stock warrants. 1,500 stocks were
1,356 stocks were newly issued. newly issued.
JPY 670 thousands were appropriated JPY 214 thousands were appropriated
to common stock and JPY 669 to common stock and JPY 213
thousands were appropriated to thousands were appropriated to
additional paid-in capital. additional paid-in capital.
-----------------------------------------------------------------------------------------------------------------------------
* 7 Additional information
JPY 417,600 thousands of stocks and
JPY 1,800,000 thousands of bonds, which
had been recorded as "Investments in
securities" in non-current assets, were
reclassified to "Marketable securities"
in current assets in the first-half of
current fiscal year.
-----------------------------------------------------------------------------------------------------------------------------
38
(Non-consolidated semi-annual income statement)
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------------------
For the first half of the current fiscal For the first half of the previous For the previous fiscal year
year fiscal year
(From January 1, 2001 (From January 1, 2000 (From January 1, 2000
To June 30, 2001) To June 30, 2000) To December 31 2000)
------------------------------------------------------------------------------------------------------------------------------
* 1 Major components of selling, * 1 Major components of * 1 Major components of selling,
general and administrative selling, general and administrative general and administrative
expenses are as follows. expenses are as follows. expenses are as follows.
Advertising and sales Advertising and sales Advertising and sales
promotions 208,144 promotions 339,247 promotions 533,333
Salaries and bonuses 830,865 Salaries and bonuses 698,684 Salaries and bonuses 1,339,050
Allowance for Pension and severance Pension and severance costs 26,485
retirement benefit 28,351 costs 12,966
Depreciation expense 30,575 Depreciation expense 25,623 Allowance for doubtful
Service charge 489,562 Service charge 276,447 accounts 10,755
Research and Research and Depreciation expense 61,652
development costs 1,038,519 development costs 880,251 Service charge 359,501
Software maintenance fee 302,088 Amortization of Research and development
Amortization of software copyright 69,105 costs 927,403
software copyright 69,105 Software maintenance fee 966,591
------------------------------------------------------------------------------------------------------------------------------
* 2 Major components of * 2 Major components of * 2 Major components of
non-operating income non-operating income non-operating income
Interest on securities 36,218 Interest on securities 27,331 Interest on securities 52,973
Interest income 22,010 Interest income 15,312 Interest income 45,836
Foreign exchange gain 227,396 Foreign exchange gain 24,044 Foreign exchange gain 215,766
Gain on sales of securities 65,376 Gain on sales of 119,649
------------------------------------------------------------------------------------------------------------------------------
* 3 Major components of * 3 Major components of * 3 Major components of
non-operating expense non-operating expense non-operating expense
Bond interests 131,755 Bond interests 77,946 Loss from evaluation of
Bond issue cost 34,180 Bond issue cost 44,295 securities 245,124
Warrants fees 34,012 Loss on sale of Bonds interests 202,714
treasury stock 22,270 Bond issue cost 44,295
Loss from sale of
treasury stock 67,380
------------------------------------------------------------------------------------------------------------------------------
* 4 Major component of * 4 Major component of
unusual gain unusual gain
Gain from lawsuit
settlement 1,030,785 Gain from lawsuit settlement 1,019,734
------------------------------------------------------------------------------------------------------------------------------
* 5 Major component of * 5 Major component of * 5 Major component of
unusual loss unusual loss unusual loss
Loss on prior year adjustment Loss on disposal of Loss on disposal of
(due to change in fixed assets 2,195 fixed assets 5,027
revenue recognition) 2,800,962
Allowance for intercompany
loans receivable 370,000
Valuation difference on investments in
subsidiaries and affiliates 3,098,897
Retirement benefit expense 106,581
------------------------------------------------------------------------------------------------------------------------------
* 6 Depreciation and amortization * 6 Depreciation and * 6 Depreciation and amortization
expense amortization expense expense
Property and equipment 38,354 Property and equipment 31,839 Property and equipment 76,042
Intangible fixed assets 207,088 Intangible fixed assets 329,669 Intangible fixed assets 621,172
------------------------------------------------------------------------------------------------------------------------------
2. Lease transactions
---------------------
None
39
3. Market value of the marketable securities
--------------------------------------------
* Regarding "Securities ( excluding investments in subsidiaries and affiliates
with fair market value)" and "Marketable securities with market value" for the
first half of current fiscal year, they are described in the notes of the
consolidated financial statements for the first half of current fiscal year.
(1) FY 2000 (As of June 30, 2000)
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------------
Current/Non-current Recorded amount on B/S Fair market value Appraisal gain(loss)
------------------------------------------------------------------------------------------------------------------------
Securities classified as current assets
Equity securities 465,238 1,394,774 929,535
[Treasury stock included above] [22,421] [24,045] [1,623]
Debt securities 1,800,000 1,811,280 11,280
Others - - -
------------------------------------------------------------------------------------------------------------------------
Sub-total 2,265,238 3,206,054 940,815
------------------------------------------------------------------------------------------------------------------------
Securities classified as
non-current assets
Equity securities - - -
Debt securities - - -
Others - - -
------------------------------------------------------------------------------------------------------------------------
Sub-total - - -
------------------------------------------------------------------------------------------------------------------------
Total 2,265,238 3,206,054 940,815
------------------------------------------------------------------------------------------------------------------------
(Note) 1. Calculation method of fair (market) value.
--------------------------------------------------------------------------------
For the fist-half of the previous fiscal year
--------------------------------------------------------------------------------
(1) Securities traded in the overseas over-the-counter market
Based on price quotations in NASDAQ.
(2) Securities traded in the domestic over-the-counter market
Based on price quotations announced by Japan Securities Association.
(3) Debt securities whose fair value are determinable
Based on the standard indication price announced by Japan Securities
Association.
--------------------------------------------------------------------------------
2. The amount of securities included in the balance sheets but excluded
from the above table.
(Thousands of yen)
-----------------------------------------------------------------------------------------------------------
FY 2000
As of June 30, 2000
-----------------------------------------------------------------------------------------------------------
Securities classified as current assets:
Mutual fund that is not affected by market volatility including
medium-term JGB fund and MMF 30
[MMF included above] [ 30 ]
-----------------------------------------------------------------------------------------------------------
Securities classified as non-current assets:
Non-listed equity securities excluding equity securities traded 3,873,840
in the over-the-counter market
40
[Investments in subsidiaries and affiliates included above] [ 3,873,840]
-----------------------------------------------------------------------------------------------------------
(2) FY 2001 (As of June 30, 2001)
Subsidiaries and affiliaties : No fair market value
(Significant subsequent events)
Members of the Trend Micro, Inc. board meeting on August 3, 2001 decided to
transfer the business of the consolidated subsidiary ipTREND Inc (Chuo-ku,
Tokyo) (100% Trend Micro controlling share) to Trend Micro and to IPSQUARE Inc
(no human or capital relation to Trend Micro); the board also decided to
commence dissolution and liquidation procedures of ipTREND (Chuo-ku). As for
ipTREND (Taiwan), a 99.9%-owned subsidiary of ipTREND (Chuo-ku) and a
consolidated subsidiary of Trend Micro, all the business will be transferred to
Trend Micro (Taiwan) (99.9% Trend Micro controlling share) and will be
liquidated.
1 Corporate profile of ipTREND Inc. (Chuo-ku, Tokyo)
Address: 2-13-9 Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo, Japan
Representative: Mahendra Negi
Business description: Providing Internet platform-related products and
services
Capital: 218 million yen
Acquisition value of the shares: 2.8 billion yen
2 Business, properties, and liabilities to be transferred
2.1 IPSQUARE Inc.
Real-time OS Project and equipment, works in progress, and sales
deposits involved in the project
2.2 Trend Micro, Inc.
All business and properties other than those mentioned above and the
same amount of liabilities (Trend Micro will take over all the
liabilities from third persons.)
3 Transfer price
Transfer price will be calculated by the fair market value on the day of
transfer.
4 Business transferring schedules
Business transfer contracted on August 3, 2001
Business transfer to be implemented by August 31, 2001
5 Dissolution date: September 3, 2001
6 Completion date for liquidation: December 2001
7 Reasons for dissolution and liquidation:
To restructure the operations of ipTREND and improve efficiency of the
group because the market of appliance servers for small and medium-sized
businesses has not expanded fast enough.
8 Influence on Trend Micro in terms of business results
8.1 With the business transfer, dissolution, and liquidation of ipTREND
with excessive liabilities as of June 30, 2001, the loan from Trend
Micro is expected to be abandoned. Accordingly, 370 million yen will
be added up as an allowance for doubtful accounts, and the whole value
of the stock of ipTREND (2.8 billion yen) will be written down, which
will be added as an extraordinary loss in this interim fiscal period.
8.2 It is expected that the influence on business results of Trend Micro
by partial transfer of business of ipTREND should be minor.
41
Supplementary information (Consolidated)
----------------------------------------
(1) Manufacturing result
-----------------------------
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------
Period ( From January 1, 2001 ) ( From January 1, 2000 )
Products To June 30, 2001 To December 31, 2000
------------------------------------------------------------------------------------------------------------------
P C Client 4,116 39,002
------------------------------------------------------------------------------------------------------------------
LAN Server 15,735 7,879
------------------------------------------------------------------------------------------------------------------
Internet Server 154,956 149,751
------------------------------------------------------------------------------------------------------------------
Other Products 10,290 56,938
------------------------------------------------------------------------------------------------------------------
Internet based products/ service 356,427 680,722
------------------------------------------------------------------------------------------------------------------
Sub-total 541,525 934,292
------------------------------------------------------------------------------------------------------------------
Other service 0 16,700
------------------------------------------------------------------------------------------------------------------
Total 541,525 950,992
------------------------------------------------------------------------------------------------------------------
(Note)
1. Amount is based on manufacturing expense.
2. Consumption tax is not included in the amount above.
(2) Sales result
-----------------
(Thousands of yen)
------------------------------------------------------------------------------------------------------------------
Period ( From January 1, 2001 ) ( From January 1, 2000 )
Products To June 30, 2001 To December 31, 2000
------------------------------------------------------------------------------------------------------------------
P C Client 4,320,161 4,926,095
------------------------------------------------------------------------------------------------------------------
LAN Server 1,237,716 2,163,586
------------------------------------------------------------------------------------------------------------------
Internet Server 4,513,593 8,021,347
------------------------------------------------------------------------------------------------------------------
Other Products 209,099 870,137
------------------------------------------------------------------------------------------------------------------
Internet based products/ service 505,043 1,218,954
------------------------------------------------------------------------------------------------------------------
Sub-total 10,785,615 17,200,119
------------------------------------------------------------------------------------------------------------------
Other service 2,153,739 4,634,678
------------------------------------------------------------------------------------------------------------------
Total 12,939,355 21,834,797
------------------------------------------------------------------------------------------------------------------
(Note)
1. Quantity is omitted due to many types of products included in one product
line.
42