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 March 2002
Trend Micro Incorporated
(Translation of registrant's name into English)
Odakyu Southern Tower, 10th Floor, 2-1, Yoyogi 2-chome,
Shibuya-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. Notice of convocation of the 13th annual meeting of shareholders (English
translation)
2. Press release regarding notice of the issuance of bonds with subscription
warrants pursuant to the "incentive plan" (English translation)
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: March 29, 2002 By: /s/ Mahendra Negi
---------------------------
Mahendra Negi
Representative Director and
Chief Financial Officer
Trend Micro Incorporated
Odakyu Southern Tower, 10th Floor
2-2-1, Yoyogi,
Shibuya-ku, Tokyo
March 4, 2002
The 13th Annual Meeting of Shareholders
---------------------------------------
Dear Shareholders:
You are cordially invited to attend our annual shareholder's meeting of the 13th
fiscal period as shown below.
If you are unable to attend the meeting, you can participate by submitting the
enclosed voting paper, after filling it out upon your review, by the specified
date.
1. Time & Date: 10 a.m. Tuesday, March 26, 2002
2. Location: Century Room in Century Hyatt Tokyo, B1F
7-2, Nishi-shinjuku 2-chome, Shinjuku-ku, Tokyo
(Please note that the location has been changed from last
year)
3. Agenda
.. Matters to be reported: Balance Sheet as of Dec. 31, 2001, and Business
Report and Income Statement for the period of Jan. 1, 2001 through Dec.
31, 2001
.. Matters to be resolved
Item 1: Proposed Appropriation of Retained Earnings
for the 13th fiscal period
Item 2: Acquisition of treasury stock
This is detailed in the attached "Reference Information" (page )
Item 3: Modification of the Articles of Incorporation of the Company
This is detailed in the attached "Reference Information" (page )
Item 4: Election of one director
Item 5: Election of four statutory auditors
We look forward to seeing you at the meeting or receiving your completed voting
paper.
Yours sincerely,
Steve Ming-Jang Chang
President
P.S. If you are able to attend the meeting, please submit the voting paper to
the staff members at the reception.
Attached Document
BUSINESS REPORT FOR FISCAL YEAR 2001
====================================
(Jan. 1, 2001 to Dec. 31, 2001)
1. Business Review of Fiscal 2001
(1) Overview of 2001 Results
During 2001, IT demand has been sluggish in Japan, the U.S. and Europe, for
example, there has been a reduction of corporate investment in IT. The influence
of such investment reduction has begun to reach the network security area, which
has previously been considered a high priority IT investment. Thus, the
circumstances surrounding the Group have been increasingly harsh. The survey of
October 2001 conducted by Information Security, a U.S. company, reported the
result that approximately one-third of the companies subject to the survey have
frozen their network security-related investments for 2001 because of the
deterioration of economic conditions, and this is most prevalent in North
America.
However, many companies have not changed their basic policies to continuously
expand investment in the promotion of networking, the review of core business
systems, and others. Therefore, although short-term fluctuations are shown,
there is no change in the prospect that our industry will steadily grow in the
long and medium terms. In addition, recently there are new types of viruses
which automatically attack the existing weakness in a computer through the
Internet. This causes damage, which is typified by viruses such as "Code Red,"
programmed to attack the White House, or "Nimda," having a number of attacking
methods: Such new viruses are characterized as having higher infection ability
compared to conventional viruses. Therefore, users are demanding network
security vendors for more effective products and services more than ever before.
The report of the Information-technology Promotion Agency, Japan (IPA), shows
that the damage caused by viruses has also been increasing in Japan, including
the fact that the number of reports of found viruses in 2001 is more than double
the number reported the previous year, which is the worst result to date. Due to
the drastic increase in the number of broadband users and others, the
recognition of the need for network security has substantially improved.
In the Company's domestic business, as anti-virus products are gradually
spreading from large companies to small and medium sized businesses, the number
of customers subscribing to "Virus Buster Corporate Edition" and "ServerProtect"
are steadily increasing. In addition, accompanied by the increase in the cases
of virus damage via e-mail, the sales of the "InterScan" series, anti-virus
software based on Internet servers, grew solidly. The sales of package products
in the retail market exceeded the company's estimate due to the timely release
of the new product "Virus Buster 2002" when malicious viruses were rampant
during the second half of the year. Regarding the VirusWall E-Mail Service
(formally-known as Internet Outsourcing Service) which provides anti-virus
measures as a service through alliances with ISPs (Information Service
Providers), also, services provided by large ISPs such as @Nifty or OCN became
well under way and the number of customers are rapidly increasing for the same
reason as above.
As for the business developments in North America and Europe, the sales of
products for relatively large customers, mostly anti-virus products for high-
level networks, such as "InterScan" series or "ScanMail" series, showed a steady
growth.
Large corporate customers are concerned with not only the performance of
the anti-virus software itself, but also the quality of the support provided by
a vender during the software license term. Therefore, they select a vender in
the viewpoint of how promptly it can provide a response to a threat of a new
virus infection. We have taken advantage of being specialized in the anti-virus
business and have already started to provide our customers with "Premium Support
Service." This service guarantees support quality ahead of other U.S.
competitors. In line with the increasing demand for anti-virus measures for
network storage, "ServerProtect for EMC Celerra" and "ServerProtect for Network
Appliance," have been added as new products of the "ServerProtect" series.
As a result, the sales for the 2001 fiscal year totaled JPY 18,454 million (up
95.8% compared to 2000), the ordinary income totaled JPY 7,589 million (up
199.5% compared to 2000) and the net income totaled 393 million (down 80.7%
compared to 2000).
(2) Facility Investment
The total facility investment for the 2001 fiscal year was JPY 545 million,
which was mainly made in equipment necessary for the development of new
technologies and the streamlining of the core business.
(3) Fund Raising
The Company issued the 6th round of unsecured bonds (with detachable stock-
purchase warrants) of JPY 5,000 million, specifying the due date of payment as
March 19, 2001, the 7th round of unsecured bonds (with detachable stock-purchase
warrants) of JPY 1,500 million, specifying the due date of payment as June 4,
2001 and the 8th round of unsecured bonds (with detachable stock-purchase
warrants) of JPY 6,000 million, specifying the due date of payment as November
19, 2001.
(4) Future projections
Caused mainly by worsened business confidence in North America and Europe,
corporate investments in IT have begun to show a sluggish growth. The Company's
business environment is not very optimistic, influenced by these reductions in
IT investments. However, today as many companies are depending more on networks,
including mail systems, the scope of opportunity loss in the case of an internal
system being down is becoming an overwhelmingly large amount of money compared
to several years ago. Therefore, network security measures, including anti-virus
measures, will be more important in the future. In this market environment in
which steady expansion can be projected in the long and medium terms, the
Company recognizes its business challenge to maintain its competitive advantage
over major U.S. competitors. Setting as its goals the enhancement of
distribution channels, the improvement of company recognition (brand power), and
product development based on the customer's needs, the Company, as a corporate
group including the U.S corporation, the Europe corporations, the Taiwanese
corporation, etc., will endeavor to expand its share in domestic and overseas
markets in the future.
(5) The business results and the state of assets for the past few fiscal
years
(Millions of yen except *, which is in single yen units)
------------------------------------------------------------------------------------------------------------
Fiscal year 10th (ended 11th (ended 12th (ended 13th (ended
Dec. 1998) Dec. 1999) Dec. 2000) Dec. 2001)
------------------------------------------------------------------------------------------------------------
Sales 5,843 7,220 9,426 18,454
------------------------------------------------------------------------------------------------------------
Ordinary Income 2,422 2,160 2,533 7,589
------------------------------------------------------------------------------------------------------------
Net income 1,391 1,125 2,038 393
------------------------------------------------------------------------------------------------------------
Net income per share* 73.28 17.70 31.26 2.99
------------------------------------------------------------------------------------------------------------
Total assets 15,745 24,436 33,493 49,142
------------------------------------------------------------------------------------------------------------
Net assets 14,131 15,719 19,655 21,139
------------------------------------------------------------------------------------------------------------
Notes:
1. The net income per share is calculated based on the average number of
shares during each fiscal year. The Company had a three for one stock
split as of Nov. 19, 1999 during the 11th fiscal period, as well as a two
for one stock split as of May 18, 2001 during the 13th fiscal period. It
is assumed that the stock split was performed at the beginning of each
fiscal year.
2. During the 10th fiscal year, the Company reduced the par value of its
shares from 50,000 yen to 500 yen as of Jan. 1, 1998. The Company also
split and 500 yen par value shares into ten shares of 50 yen par value as
of May 7, 1998. In addition the Company issued 2,500,000 new shares in a
public offering as of Aug. 18, 1998, and issued 335,600 shares due to the
exercise of the stock-purchase warrants during the period of Sept. 1
through Dec. 31, 1998.
3. An increase in the total assets and net assets for the 10th fiscal year
was primarily due to the public offering of new shares.
4. An increase in total assets for the 11th fiscal year was primarily due to
the issuance of the 4th round of unsecured bonds (with detachable
stock-purchase warrants).
5. During the 11th fiscal year, the net assets increased by 672 million yen
due to the issue of new shares associated with the exercise of the stock-
purchase warrants.
6. The increase in the net assets for this 12th fiscal year was primarily due
to the issuance of the 5th round of unsecured bonds (with detachable
stock-purchase warrants).
7. During the 12th fiscal year, the net assets increased by 1,750 million yen
due to the issue of new shares associated with the exercise of the stock-
purchase warrants.
8. An increase in total assets for the 13th fiscal year was primarily due to
the issuance of the 6th and the 7th rounds of unsecured bonds (with
detachable stock-purchase warrants).
9. During the 13th fiscal year, the net assets increased by 1,091 million yen
due to the issue of new shares associated with the exercise of the stock-
purchase warrants.
10. From the 13th fiscal year, the net income per share is calculated after
deducting the treasury stocks from the total number of issued stocks, due
to the amendment of the rules for account statement in the Commercial
Code, which provides a deduction of treasury stocks from capital.
2. Company Profile (as of Dec. 31, 2001)
(1) Main Business
Development and marketing of security-related software for computers
and the Internet.
(2) Offices
Main office: Shibuya-ku, Tokyo
Sales office: Osaka office (Chuo-ku, Osaka)
Fukuoka office (Hakata-ku, Fukuoka)
Nagoya office (Naka-ku, Nagoya)
Note: The Nagoya office has been moved to Naka-ku from Nakamura-ku in
Nagoya as of March 1, 2001.
(3) Details on the Company's Shares
[1] Total number of shares to be issued by the Company: 250,000,000 shares
[2] Total number of outstanding shares: 132,052,284 shares
Notes:
1. Based on the resolution made at the meeting of the Board of Directors
held on February 15, 2001, regarding those shares owned by the
shareholders listed on the final shareholder register and beneficiary
shareholder register as of March 31, 2001, the stock split was
performed by splitting one share into two shares as of May 18, 2001. In
accordance with this, the total number of outstanding shares increased
by 65,679,227 shares.
2. The new shares issued by the Company during this fiscal year by
exercising the stock-purchase warrants are as follows:
1st round unsecured bonds (with detachable stock-purchase warrants):
373,800 shares
2nd round unsecured bonds (with detachable stock-purchase warrants):
159,300 shares
3rd round unsecured bonds (with detachable stock-purchase warrants):
73,800 shares
4th round unsecured bonds (with detachable stock-purchase warrants):
205,736 shares
5th round unsecured bonds (with detachable stock-purchase warrants):
- shares
6th round unsecured bonds (with detachable stock-purchase warrants):
- shares
7th round unsecured bonds (with detachable stock-purchase warrants):
- shares
8th round unsecured bonds (with detachable stock-purchase warrants):
- shares
[3] Total number of shareholders: 14,529 persons
[4] Major shareholders
------------------------------------------------------------------------------------------------------------
Contribution to the Company Contribution to
by shareholders shareholders by the
Shareholder's name Company
--------------------------------------------------------------------
No. of Shareholders' No. of Shareholders'
shares Equity shares Equity
(%) (%)
------------------------------------------------------------------------------------------------------------
Trueway Company Limited 24,850,000 18.81 - -
------------------------------------------------------------------------------------------------------------
MLPFS Custody Account No. 2 12,628,500 9.56 - -
------------------------------------------------------------------------------------------------------------
Gainway Enterprises Limited 12,511,000 9.47 - -
------------------------------------------------------------------------------------------------------------
Ming-Jang Chang 5,208,000 3.94 - -
------------------------------------------------------------------------------------------------------------
Japan Trustee Services and Banking 4,986,500 3.77 - -
Corporation
Trust Account
------------------------------------------------------------------------------------------------------------
The Mitsubishi Trust and Banking 4,572,000 3.46 - -
Corporation
Trust Account
------------------------------------------------------------------------------------------------------------
State Street Bank and Trust Company 3,285,800 2.48 - -
------------------------------------------------------------------------------------------------------------
The Toyo Trust and Banking Co., Ltd. 3,179,000 2.40 - -
Trust Account A
------------------------------------------------------------------------------------------------------------
The Dai-ichi Mutual Life Insurance 1,770,500 1.34 - -
Company
Special Account
------------------------------------------------------------------------------------------------------------
Trust & Custody Services Bank, Ltd. 1,455,000 1.10 - -
Pension Trust Account
------------------------------------------------------------------------------------------------------------
[5] Issuance of compensatory warrants to officers
Based on the resolution at the meeting of the Board of Directors held on
Mar. 17, 1998, and the special resolution at the annual meeting of
shareholders held on March 28, 1998, the Company issued the 2nd round of
unsecured bonds (with detachable stock-purchase warrants) as of Apr. 15,
1998. Based on the resolution at the meeting of the Board of Directors held
on May 28, 1998, and the special resolution at the extraordinary meeting of
shareholders held on May 29, 1998, the Company issued the 3rd round of
unsecured bonds (with detachable stock-purchase warrants) as of June 17,
1998. Based on the resolutions at the meetings of the Board of Directors
held on June 30, 1999 and July 7, 1999, the Company issued the 4th round of
unsecured bonds (with detachable stock-purchase warrants) as of July 29,
1999. Based on the resolutions at the meetings of the Board of Directors
held on June 1, 2000 and June 8, 2000, the Company issued the 5th round of
unsecured bonds (with detachable stock-purchase warrants) as of June 26,
2000. Based on the resolutions at the meetings of the Board of Directors
held on Feb. 15, 2001 and Feb. 23, 2001, the Company issued the 6th round
of unsecured bonds (with detachable stock-purchase warrants) as of Mar. 19,
2001.
Based on the resolutions at the meetings of the Board of Directors held on
May 8, 2001 and May 16, 2001, the Company issued the 7th round of unsecured
bonds (with detachable stock-purchase warrants) as of June 4, 2001. Based
on the resolutions at the meetings of the Board of Directors held on Oct.
25, 2001 and Nov. 1, 2001, the Company issued the 8th round of unsecured
bonds (with detachable stock-purchase warrants) as of Nov. 19, 2001.
These were "compensatory warrants" defined under the provisions concerning
"the allocation of new shares to third parties prior to registration and
the transfer of shares to persons specially interested (Clause 10, Article
2)" provided by the Japan Securities Dealers Association. The detachable
stock-purchase warrants are outlined below. For the 2nd, 3rd and 4th rounds
of unsecured bonds (with detachable stock-purchase warrants), the "exercise
price" was adjusted from the stock split (splitting one share into three
shares) which took place as of Oct. 1, 1999. Furthermore, for the 2nd, 3rd,
4th, 5th and 6th rounds of unsecured bonds (with detachable stock-purchase
warrants), the "exercise price" was adjusted from the stock split
(splitting one share into two shares) which took place as of April 1, 2001.
Regarding the 1st Round of Unsecured Bonds (with detachable stock-purchase
warrants) issued as of Oct. 17, 1997, the exercise period for the warrant
expired on Oct. 12, 2001.
[2nd Round of Unsecured Bonds (with detachable stock-purchase warrants)]
. Total amount of bonds: 412,965,000 yen
. Stock type: Common stock
. Exercise price: 142.50 yen
. Total amount represented by warrants: 412,965,000 yen
. Exercise period: From April 27, 1998 to Apr. 5, 2002
. Purchaser: The directors and certain employees of the
Company and the officers and certain
employees of the Company's subsidiaries
[3rd Round of Unsecured Bonds (with detachable stock-purchase warrants)]
. Total amount of bonds: 196,650,000 yen
. Stock type: Common stock
. Exercise price: 142.50 yen
. Total amount represented by warrants: 196,650,000 yen
. Exercise period: From June 25, 1998 to June 7, 2002
. Purchaser: The directors and certain employees of the
Company and the officers and certain
employees of the Company's subsidiaries
[4th Round of Unsecured Bonds (with detachable stock-purchase warrants)]
. Total amount of bonds: 6,000,000,000 yen
. Stock type: Common stock
. Exercise price: 3,200 yen
. Total amount represented by warrants: 6,000,000,000 yen
. Exercise period: From August 20, 1999 to July 22, 2002
. Purchaser: The directors and certain employees of the
Company and the officers and certain
employees of the Company's subsidiaries
[5th Round of Unsecured Bonds (with detachable stock-purchase warrants)]
. Total amount of bonds: 5,000,000,000 yen
. Stock type: Common stock
. Exercise price: 7,850 yen
. Total amount represented by warrants: 5,000,000,000 yen
. Exercise period: From July 21, 2000 to June 19, 2003
. Purchaser: The directors and certain employees of the
Company and the officers and certain
employees of the Company's subsidiaries
[6th Round of Unsecured Bonds (with detachable stock-purchase warrants)]
. Total amount of bonds: 5,000,000,000 yen
. Stock type: Common stock
. Exercise price: 5,675 yen
. Total amount represented by warrants: 5,000,000,000 yen
. Exercise period: From April 12, 2001 to March 12, 2004
. Purchaser: The directors and certain employees of the
Company and the officers and certain
employees of the Company's subsidiaries
[7th Round of Unsecured Bonds (with detachable stock-purchase warrants)]
. Total amount of bonds: 1,500,000,000 yen
. Stock type: Common stock
. Exercise price: 5,760 yen
. Total amount represented by warrants: 1,500,000,000 yen
. Exercise period: From May 17, 2002 to May 28, 2004
. Purchaser: The directors and certain employees of the
Company and the officers and certain
employees of the Company's subsidiaries
[8th Round of Unsecured Bonds (with detachable stock-purchase warrants)]
. Total amount of bonds: 6,000,000,000 yen
. Stock type: Common stock
. Exercise price: 2,590 yen
. Total amount represented by warrants: 6,000,000,000 yen
. Exercise period: From November 2, 2002 to November 12, 2004
. Purchaser: The directors and certain employees of the
Company and the officers and certain
employees of the Company's subsidiaries
As of Dec. 31, 2001, the number of obtainable shares relating to non-
exercised stock-purchase warrants and the balance of such warrants are
shown below:
Obtainable
----------
shares (shares) Balance (yen)
--------------- -------------
2nd Compensatory Warrants 500,400 71,307,000
3rd Compensatory Warrants 505,800 72,076,500
4th Compensatory Warrants 1,169,062 3,741,000,000
5th Compensatory Warrants 636,942 5,000,000,000
6th Compensatory Warrants 873,127 4,955,000,000
7th Compensatory Warrants 256,076 1,475,000,000
8th Compensatory Warrants 2,316,602 6,000,000,000
[6] Stock options by warrants pursuant to Paragraph 2, Article 280-19 of the
Commercial Code
. Stock type: Common stock
. Exercise price: 5,760 yen
. Total amount represented by warrants: 4,109,760,000 yen
. Exercise period: From April 1, 2002 to March 31, 2009
. Purchaser: The directors and certain employees of the
Company and the officers and certain
employees of the Company's subsidiaries
As of Dec. 31, 2001, the number of obtainable shares relating to non-
exercised stock-purchase warrants and the balance of such warrants are
shown below:
Obtainable shares (shares) Balance (yen)
-------------------------- -------------
713,500 4,109,760,000
[7] Acquisition, disposal and holding of treasury stocks
1. Acquired stocks:
Acquisition by purchasing the shares less than one unit (tangen)
Common stock: 57,471 shares
Total amount of purchase price: 398,856,000 yen
2. Disposed stocks:
Common stock: 51,000 shares
Total amount of disposal price: 398,702,000 yen
3. Stocks held at the settlement of accounts:
Common stock: 9,102 shares
At the 10th annual meeting of shareholders held on March 11, 1999, the
Articles of Incorporation of the Company were modified so that the Company
would be able to actively acquire treasury stocks and cancel them by means
of earnings and capital reserve. As of the end of this fiscal year,
however, no treasury stocks have been cancelled by means of the earnings
and capital reserve.
(4) Employee Statistics
--------------------------------------------------------------------------------
Number of Up/Down from Average age Average service
employees previous year years
--------------------------------------------------------------------------------
Male workers 234 76 up 31.9 2.2
--------------------------------------------------------------------------------
Female workers 85 10 up 31.1 2.4
--------------------------------------------------------------------------------
Total/Average 319 86 up 31.7 2.2
--------------------------------------------------------------------------------
Notes:
1. In addition to the above information, the average number of temporary
employees per month for the past year was 68 persons.
2. The increase in the number of employees for this fiscal year was due to new
hiring for business expansion purposes.
(5) Subsidiaries
[1] Table of the substantial subsidiaries
---------------------------------------------------------------------------------------------------
Company Name Capital Equity Main Business
----------------------------------------------------------------------------------------------------
Trend Micro Incorporated 212,500,000 99% Development and marketing of
(Taiwan) Taiwan $ security-related software
---------------------------------------------------------------------------------------------------
Trend Micro Inc. (U.S.A.) 477,250.67 100% Development and marketing of
US $ security-related software
---------------------------------------------------------------------------------------------------
Trend Korea Inc. (Korea) 750,000,000 99% Marketing of security-related software
won
---------------------------------------------------------------------------------------------------
Trend Micro Italy Srl (Italy) 20,000,000 100% Marketing of security-related software
lira
---------------------------------------------------------------------------------------------------
Trend Micro Deutschland 25,600 100% Marketing of security-related software
GmbH (Germany) Euro
---------------------------------------------------------------------------------------------------
Trend Micro Australia Pty. Ltd. 150,000 100% Marketing of security-related software
(Australia) Australia $
---------------------------------------------------------------------------------------------------
Trend Micro do Brazil Ltda. 220,054 99% Marketing of security-related software
(Brazil)*2 real
---------------------------------------------------------------------------------------------------
Trend Micro France 295,181 99% Marketing of security-related software
(France) *1 France franc
---------------------------------------------------------------------------------------------------
Trend Micro Hong Kong 2 99% Marketing of security-related software
Limited (China) *1 HK $
---------------------------------------------------------------------------------------------------
Trend Micro Latinoamerica 50,000 100% Marketing of security-related software
S.A de C.V. (Mexico) *2 Mexican
Peso
---------------------------------------------------------------------------------------------------
Trend Micro Incorporated 436,500 99% Marketing of security-related software
Sdn. Bhd. (Malaysia) *1 Malaysia $
---------------------------------------------------------------------------------------------------
Trend Micro (UK) Limited (UK) 110,000 100% Marketing of security-related software
pound
---------------------------------------------------------------------------------------------------
ipTrend Incorporated 50,000,000 100% Marketing of security-related software
(Taiwan) Taiwan $
---------------------------------------------------------------------------------------------------
Trend Micro (Shanghai) Inc. 23,163,990 100% Development and marketing of
(China) *2 yuan security-related software
---------------------------------------------------------------------------------------------------
Notes:
1. Indirect ownership through Trend Micro Incorporated (Taiwan)
2. Indirect ownership through Trend Micro Inc. (U.S.A.)
[2] Consolidation status
1. The status of Trend Micro Australia Pty. Ltd. (Australia), which was an
indirect ownership through Trend Micro Incorporated (Taiwan), has been
changed to a direct ownership during the current fiscal year.
2. A subsidiary, ip TREND Inc. (Chuo-ku, Tokyo) went into liquidation after
transferring most of its business to the Company. Wells Antivirus Research
Laboratory, Inc. (U.S.A.) which is indirectly owned through subsidiaries ip
TREND Inc. (Shibuya-ku, Tokyo) and Trend Micro Inc. (U.S.A), also went into
liquidation in the current fiscal year.
3. Trend Micro Incorporated Sdn. Bhd. (Malaysia) and ipTrend Incorporated
(Taiwan) are under liquidation.
4. The number of consolidated subsidiaries (including the above 14 substantial
subsidiaries) is 18, and the number of affiliated companies (equity-method)
is 4. The consolidated sales for this fiscal year totaled JPY 31,326
million and the consolidated net income for this fiscal year totaled JPY
2,421 million. From this fiscal year, Netstar Inc. has joined the Company
as an equity-method affiliated company.
(6) Directors and Statutory Auditors
--------------------------------------------------------------------------------
Title Name Role or responsibility
--------------------------------------------------------------------------------
Representative Director, Steve Ming-Jang Chang
President
--------------------------------------------------------------------------------
Representative Director, Toshihiro Watanabe
Vice President
--------------------------------------------------------------------------------
Director Eva Yi-Fen Chiang Technology Development
--------------------------------------------------------------------------------
Director Mahendra Negi Financial and Accountant
--------------------------------------------------------------------------------
Director Mike Conner North American business
--------------------------------------------------------------------------------
Director Edward Tian CEO of China Netcom
Corporation
--------------------------------------------------------------------------------
Statutory Auditor Fumio Hasegawa
(standing)
--------------------------------------------------------------------------------
Statutory Auditor Mitsuo Sano Statutory Auditor
(standing), SOFTBANK Corp.
--------------------------------------------------------------------------------
Statutory Auditor Sadatoshi Nakayama Certified Public Accountant
--------------------------------------------------------------------------------
Statutory Auditor Yasuo Kameoka Certified Public Accountant
--------------------------------------------------------------------------------
Notes:
1. At the 12th annual meeting of shareholders held on March 27, 2001, Mahendra
Negi, Mike Conner and Edward Tian were elected and took office as
Directors. Also, Sadatoshi Nakayama and Yasuo Kameoka were elected and took
office as the Statutory Auditors.
2. Upon the closing of the 12th annual meeting of shareholders held on March
27, 2001, Directors Andrew Lai and Yoshitaka Kitao and Statutory Auditors
Akira Kajikawa and Katsuya Kawashima retired from office.
3. Regarding the Japanese description for the name of Director Edward Tian, it
was written in katakana characters as "Edward Chan" in the "Reference
Information" for the 12th annual meeting of shareholders held on March 27,
2001. However, in order to facilitate a more accurate pronunciation, it has
been changed to "Edward Ten" in katakana characters in this Annual Report.
4. All of the statutory auditors are external auditors as defined under Clause
1, Article 18 of the "Law for Special Measures under the Commercial Code
with respect to Auditing etc. of Joint Stock Corporations."
3. Important Facts concerning the Status of the Company after this Fiscal Year
None.
(Note: As for the stated values in this Business Report, fractions less than
the respective units are omitted.)
BALANCE SHEET
-------------
(as of Dec. 31, 2001)
ASSETS (Unit: Thousands of yen)
------
---------------------------------------------------------------- -------------------------------------------
Current Assets 40,900,977
Cash and bank deposits 27,935,721
Accounts receivable 9,062,033
Finished goods 46,976
Works in progress 46,040
Supplies 17,236
Intercompany accounts receivable 495,727
Intercompany short-term loans 508,266
Deferred tax assets 2,704,514
Other current assets 212,383
Allowance for doubtful receivables (127,923)
Non-current Assets 8,241,981
Property and Equipment 676,311
Buildings 501,738
Furniture and fixtures 462,175
Accumulated depreciation (287,601)
Intangibles 909,686
Software 465,072
Software in process 400,202
Others 44,411
Other assets 6,655,983
Investments in securities 2,571,039
Investments in subsidiaries and affiliates and capital funds 2,133,916
Investments in capital funds 707,389
Intercompany Long-term loans 66,169
Claims in bankruptcy 14,616
Deposits 593,363
Deferred tax assets 584,069
Others 977
Allowance for doubtful receivables (15,559)
Total Assets 49,142,958
------------------------------------------------------------------------------------------------------------
BALANCE SHEET (continued)
------------------------
(as of Dec. 31, 2001)
LIABILITIES AND SHAREHOLDERS' EQUITY (Unit: Thousand yen)
------------------------------------
---------------------------------------------------------------- -------------------------------------------
Current Liabilities 15,806,660
Accounts payable 231,874
Bonds (to be redeemed within 1 year) 3,000,000
Other payables 1,840,557
Accrued corporate income taxes and other 2,269,000
Accrued consumption taxes and other 303,266
Allowances for sales return 505,309
Warrants 2,556,691
Short-term deferred revenue 4,619,339
Other current liabilities 480,621
Fixed Liabilities 12,196,418
Bonds 11,500,000
Long-term deferred revenue 466,493
retirement allowance reserves 229,924
Total Liabilities 28,003,079
------------------------------------------------------------------------------------------------------------
Common Stock 6,833,677
Legal Reserve 8,574,651
Capital surplus 8,553,818
Legal reserve 20,833
Retained Earnings 5,731,876
Unappropriated retained earnings for the year 5,731,876
[Retained earnings for this fiscal year] [393,127]
Estimate Difference 21,735
Difference from the estimates of 21,735
other securities
Treasury Stocks (22,063)
Treasury stocks (22,063)
Total shareholders' equity 21,139,878
Total Liabilities and Shareholders' equity 49,142,958
------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
----------------
(Jan. 1, 2001 through Dec. 31, 2001)
(Unit: Thousand yen)
------------------------------------------------------------------------------------------------------------
Ordinary Profits and Losses
Operating Profits and Losses
Operating Revenues
Sales 18,454,367 18,454,367
Operating Expenses
Cost of sales 1,171,372
Selling, general, and administrative expenses 9,703,516 10,874,889
Operating Income 7,579,478
Non-operating Profits and Losses
Non-operating Income
Interest income 51,690
Dividends received 42,463
Investment income 62,325
Gain on sales of marketable securities 19,974
Exchange gain 481,001
Others 12,240 669,696
Non-operating Expenses
Interest on bonds 290,755
Bond issue expenses 108,438
Loss on sales of treasury stocks 13,401
Valuation loss on capital investments 220,730
Others 26,247 659,572
Ordinary Income 7,589,602
Extraordinary Profits and Losses
Extraordinary losses
Loss on prior year adjustment due to the change 2,800,962
in sales recording standards
Retirement allowance expenses 106,581
Valuation loss on security investments 177,673
Loss on subsidiary liquidation 3,460,700
Valuation loss on subsidiaries' stock 26,010
Loss on disposal of fixed assets 24,034
Loss on repurchase of treasury bonds 12,000 6,607,963
------------------------------------------------------------------------------------------------------------
Income Before Taxes 981,639
Corporate, inhabitant and enterprise tax 3,310,828
Corporate tax, etc. adjustment (2,722,317)
Net Income 393,127
Balance as of Dec. 31, 2000 5,338,749
Unappropriated Retained Earnings as of Dec. 31, 2001 5,731,876
------------------------------------------------------------------------------------------------------------
Notes to Financial Statements
-----------------------------
1. Significant Accounting Policies
(1) Standards and methods for the valuation of securities
-----------------------------------------------------
.. Subsidiary Stocks: Calculated by the cost method, subject to
the moving average method
.. Other Securities
Securities having
market prices: Calculated by the market price method
based on market prices, etc. as of the
last day of the fiscal year (Differences
from estimates are accounted for by the
comprehensive capital inclusion method,
and sales costs are calculated by the
moving average method.)
Securities having
no market prices: Calculated by the cost method, subject to
the moving average method
(Additional Information)
Starting from this fiscal year, the Company has adopted the
accounting standards for financial products, as set forth in the
"Opinion on the Establishment of Accounting standards for Financial
Products," dated January 22, 1999, submitted by the Business
Accounting Council. Consequently, compared to the calculation by the
conventional method, net income has increased by 72,282,000 yen and
income before taxes has increased by 72,282,000 yen. Furthermore, due
to the change in the valuation method for securities, securities
having market prices that are included in the "other securities,"
have decreased by 25,362,000 yen, and a deferred tax fund of
10,664,000 yen was recognized. Accordingly, a loss of 14,697,000 yen
has been accounted for in the Shareholders' Equity section, under the
item "difference from the estimates of other securities" (non-
conformity with the 21,735,000 yen listed on the balance sheet is due
to the conversion of securities in foreign currencies, etc.).
Moreover, the Company has verified the objective of holding the
securities that were held as of the beginning of this fiscal term.
Starting from this fiscal term, "other securities," which have been
previously accounted for as securities in the Current Assets until
the previous fiscal year, are now indicated as "investments in
securities." Consequently, securities in the Current Assets have
decreased by 1,872,475,000 yen, and "investment in securities" has
increased by 1,872,475,000 yen.
(2) Standards and methods for the valuation of net credits (and liabilities)
------------------------------------------------------------------------
resulting from derivatives
---------------------------
Calculated by the market price
method
(3) Standards and methods for the valuation of inventories
------------------------------------------------------
.. Finished goods, works in progress
and supplies
Calculated by the cost method,
subject to the weighted average cost
(4) Method for the depreciation and amortization of fixed assets
------------------------------------------------------------
.. Tangible fixed assets
Calculated by the fixed rate method
.. Intangible fixed assets
Software for
market sale: Calculated by the fixed amount
method, based on an expected
effective period (12 months)
Software for
internal use: Calculated by the fixed amount
method, based on an expected
internal use period (5 years)
Others intangible
fixed assets: Calculated by the fixed amount
method
.. Long-term prepaid expenses
Calculated by the fixed amount
method
(5) Accounting method for deferred assets
-------------------------------------
Expenses for issuing new stocks or
bonds are fully recorded as expenses
when incurred.
(6) Accounting policies for allowances and reserves
-----------------------------------------------
.. Allowances for
doubtful receivables: In order to prepare for the future
losses from bad debts, allowances
for general receivables are provided
according to the historical ratio of
bad debts. As for specific
receivables, such as doubtful
receivables, the collectibility of
the respective receivables are
determined, and the amounts that are
expected as not collectible are
provided.
Starting from this fiscal year, the
Company has adopted the accounting
standards for financial products, as
set forth in the "Opinion on the
establishment of accounting
standards for financial products,"
dated January 22, 1999, submitted by
the Business Accounting Council.
Consequently, the standards for
providing allowances for bad debts
have been changed. (Regarding
general receivables, such standards
have been changed from legal
provision rate to historical ratio
of bad debts). However, this has
little effect on the Company's
profits and losses.
.. Allowances for sales return: In order to prepare for the
estimated losses from goods
returned after the fiscal year-end,
"allowances for sales return" are
calculated, based on the historical
ratio of returned goods.
. Reserve for retirement
allowances: In order to prepare for the payment
of retirement allowances to
employees, an amount expected to
accrue as of the current fiscal
year-end has been provided for.
Such amount is based on the
estimated amount of retirement
allowance liabilities as of the
current fiscal year-end.
An amount of 106,581,000 yen, i.e.,
the difference accrued upon the
change of sales recording
standards, has been comprehensively
calculated as expenses, and fully
recorded as extraordinary expenses.
(Additional information)
Starting from this fiscal year, the
Company has adopted the accounting
standards for financial products,
as set forth in the "Opinion on the
establishment of accounting
standards for the payment of
retirement allowances," dated June
16, 1998, submitted by the Business
Accounting Council. Consequently,
compared to the calculation by the
conventional method, retirement
allowance expenses have increased
by 143,808,000 yen and net income
has decreased by 35,539,000 yen and
income before taxes has decreased
by 142,121,000 yen. The
conventional "accrued severance
indemnities" are included in the
"reserve for retirement allowances"
and indicated as such.
(7) Standards for conversion of assets and liabilities into foreign currencies
--------------------------------------------------------------------------
Monetary credits and liabilities in foreign currencies have been converted
into yen by the spot exchange rate as of the last day of the current fiscal
year, and differences resulting from such conversion have been calculated
as profits or losses.
(Additional Information)
Starting from this fiscal year, the Company has adopted the amended
accounting standards for transactions in foreign currencies, etc., as set
forth in the "Opinion on the amendment of accounting standards for
transactions in foreign currencies, etc.," dated October 22, 1999,
submitted by the Business Accounting Council. This has no effect on the
Company's profits and losses.
(8) Method for accounting lease transactions
----------------------------------------
Finance lease transactions, other than those considered to involve the
transfer of ownership for the related leased assets, are accounted for by
the same method as regular operating leases.
(9) Method for accounting of consumption tax or the like
----------------------------------------------------
Transactions subject to consumption tax or local consumption tax are stated
as the net amount excluding related taxes.
(10) Accounting of compensatory warrants and stock options granted to directors
--------------------------------------------------------------------------
and certain employees
---------------------
The Company has introduced an incentive plan, in which the Company issues
bonds with detachable stock-purchase warrants and repurchases such stock
warrants and distributes them to directors and certain employees.
Compensation expenses related to this incentive plan are recorded as of the
grant of the repurchased stock warrants to directors and employees, at the
repurchase value thereof. Furthermore, the warrant portions within the
bonds with detachable stock-purchase warrants are recorded in the
"warrants" account in the Current Liabilities when they are issued;
subsequently, they are transferred from the "warrants" account to the
"legal capital surplus" account at the time of the payment of the exercise
value upon the exercise of the warrants.
Furthermore, starting from this fiscal year, the Company has introduced for
directors and certain employees an incentive plan that is based on the
stock option system (warrant method) pursuant to Article 280-19, Paragraph
2 of the Commercial Code. Moreover, compensation expenses are not recorded
in such plan, and no accounting is performed in relation thereto.
(11) Change in the standards for recording sales related to post-contract
--------------------------------------------------------------------
customer support services
-------------------------
The software product license agreements executed between the Company and
its customers in relation to the sale of the software products usually
include provisions on the post-contract customer support services, which
consist of the customer support services, product upgrades and virus
pattern file upgrades, etc. performed for a certain period of time after
the grant of license.
According to the conventional accounting method adopted by the Company, the
total contract amounts, including compensation for post-contract customer
support services, were comprehensively added, upon the licensing of
products (delivery of the products). Starting from this fiscal year, the
Company has changed to an accounting method in which the compensation for
post-contract customer support services are separately determined and
deferred at the time of the licensing of the products as the "short-term
deferred revenue" account of the Current Liabilities and the "long-term
deferred revenue" account of the Fixed Liabilities, so that said
compensation is equally recorded throughout the contracted supporting term.
The sales accounting standards were changed because the compensation for
post-contract customer support services tended to increase within the total
contract amount of the software products sold by the Company, such that
there was increased importance of such compensation. The sales accounting
standards were changed for the purpose of ensuring appropriate profit/loss
calculations for the period by reasonably accounting for such revenue in
correspondence with related expenses.
As a result of the change in the sales recording standard, if the amended
accounting method is adopted by the Company, sales in the amount of
2,800,962,000 yen, i.e., the post-contract customer support services
portion corresponding to the deferred revenue from previous fiscal year,
processed at the beginning of this fiscal year, are to be recorded as "loss
on prior year adjustment due to change in the sales recording standard" in
the Extraordinary Profits and Losses. Consequently, compared to calculation
by the conventional method, the sales, the operating income and the net
income for the current fiscal year have respectively decreased by
2,284,871,000 yen, and the income before taxes has decreased by
5,085,833,000 yen.
(12) In the stated values, fractions less than 1,000 yen are rounded down.
2. Change in the method of indication
Starting from this fiscal year, the provided amount (reduced amount) for
the "allowances for sales return," which had been independently indicated,
is included within the "sales." The amount provided for "allowances for
sales return," subtracted from the sales, is 217,648,000 yen.
3. Additional Information
Starting from this fiscal year, the "treasury stocks" (22,063,000 yen as of
the year-end), which had been indicated as an independent item in the
Current Liabilities, are indicated in the Shareholders' Equity section as
an item deducted from the Shareholders' Equity, in accordance with the
amendment of regulations on documents required under the Commercial Code.
4. Balance Sheet
(1) Monetary credits and debts from subsidiaries
--------------------------------------------
Short-term credits 4,099,795,000 yen
Long-term credits 66,169,000 yen
Short-term debts 710,489,000 yen
(2) Monetary credits and debts from directors, etc.
-----------------------------------------------
None
(3) Material assets and liabilities in foreign currencies
-----------------------------------------------------
Cash and bank deposits 2,204,892,000 yen (16,716,391.98 US$)
Accounts receivables 846,525,000 yen (6,417,932.38 US$)
158,767,000 yen (42,281,676.34 NT$)
379,674,000 yen (3,262,652.99 EURO)
254,793,000 yen (4,239,487,048.40 ITL)
212,974,000 yen (12,005,339.64 US$)
1,048,242,000 yen (5,473,853.67 BP)
Intercompany
short-term loans 101,505,000 yen (769,562.62 US$)
Investment in securities 627,793,000 yen (5,502,403.13 US$)
Investment in subsidiaries
and affiliates and capital
funds 313,842 yen (2,627,396.51 US$
1,794,184,000 yen (455,888,253.00 NT$)
Other payables 622,335,000 yen (4,718,235.34 US$)
(4) Stock-purchase rights
(a) Stock-purchase rights for bonds with stock-purchase warrants
Type of stocks issued: Common stocks (2nd and 3rd rounds)
Balance of
outstanding warrants: 143,383,000 yen (2nd and 3rd rounds)
3,741,000,000 yen (4th round)
5,000,000,000 yen (5th round)
4,955,000,000 yen (6th round)
1,475,000,000 yen (7th round)
6,000,000,000 yen (8th round)
Issue value of stocks
issued upon the exercise of 142.5 yen (2nd and 3rd rounds)
warrant: 3,200 yen (4th round)
7,850 yen (5th round)
5,675 yen (6th round)
5,760 yen (7th round)
2,590 yen (8th round)
(b) Stock option method based on
Article 280-19, Paragraph 2 of
the Commercial Code
Type of stocks issued Common stocks
Balance of total issue value
of stocks issued upon the
exercise of warrant: 4,109,760,000 yen
Issue value of stocks
issued upon the exercise of
warrant: 5,760 yen
(5) Treasury Bonds
--------------
The Company has issued unsecured bonds with detachable stock-purchase
warrants for the purpose of providing or assigning them to directors and
certain employees of the Company and its subsidiaries. In accordance with
the proviso of Article 341-8, Paragraph 4 of the Commercial Code, the
redemption or extinguishment of such bonds is prohibited when the total
issue value of the bonds is less than the total issue value of the stocks
related to unexercised warrants.
In order to reduce the interest on the bonds, the Company repurchases from
the market a part of the outstanding bonds after the warrants are detached.
The repurchased bonds are to be held until the treasury bonds can be
legally redeemed.
Nonetheless, the "bonds" account and the "treasury bonds" account are
mutually set off and respectively listed on the balance sheet in the
following manner, because this has substantially the same effect as the
redemption of bonds. The difference between the repurchase value and the
balance sheet treasury bond value at the time of the repurchase is recorded
as the "loss on repurchase of treasury bonds" in the Extraordinary Profits
and Losses.
Current Liabilities Fixed Liabilities
------------------- ----------------------
Bonds 3,800,000,000 yen 17,500,000,000 yen
Treasury bonds (800,000,000 yen) (6,000,000,000 yen)
------------------ --------------------
3,000,000,000 yen 11,500,000,000 yen
------------------ --------------------
(6) Retirement allowances
---------------------
(i) Summary of the retirement allowance plan adopted by the Company
---------------------------------------------------------------
Under the Company's retirement allowance plan, a defined lump-sum
retirement allowance plan is provided. Furthermore, the Company is
a member of the Tokyo small size computer software industry
employee pension fund (tokyoto kogata computa sofutouea sangyo
kosei nennkin kikin).
(ii) Issues related to lump sum retirement allowances
------------------------------------------------
(a) Issues related to the retirement allowance liabilities
------------------------------------------------------
(as of December 31, 2001)
(a) Retirement allowance liabilities 222,044,000 yen
(b) Pension assets --
-----------------------------------------------------
(c) Unaccumulated retirement
allowances 222,044,000 yen
(d) Undisposed amount for
the difference upon changes in
the accounting standards --
(e) Unrecognized difference upon
arithmetic calculation (7,880,000 yen)
-----------------------------------------------------
(f) Reserve for retirement allowances 229,924,000 yen
-----------------------------------------------------
(b) Issues related to the retirement allowance expenses
---------------------------------------------------
(January 1, 2001 through December 31, 2001)
(a) Service costs 68,475,000 yen
(b) Interest costs 4,808,0000 yen
(c) Expected operation revenue rate --
(d) Undisposed amount for
the difference upon changes in
the accounting standards 106,581,000 yen
--------------------------------------------------
(f) Reserve for retirement allowances 179,866,000 yen
--------------------------------------------------
(c) Issues related to the criteria of retirement allowance credits, etc.
--------------------------------------------------------------------
The issues related to the grounds of calculation of the retirement
allowances, adopted by the Company are as follows:
------------------------------------------------ ----------------------------------
(a) Method for distributing the Fixed amount for the period
estimated retirement allowances
------------------------------------------------ ----------------------------------
(b) Discount rate 3%
------------------------------------------------ ----------------------------------
(c) Estimated operation revenue --
rate
------------------------------------------------ ----------------------------------
(d) Number of years for disposing of Extinguished within one year
the difference upon arithmetic from the fiscal year immediately
calculation following the accruing fiscal
year
------------------------------------------------ ----------------------------------
(e) Number of years for disposing One year
the difference upon the change
in the accounting standard
------------------------------------------------ ----------------------------------
(iii) The Tokyo small size computer software industry employee pension fund,
which the Company participates in, is a multi-company fund, and the
amount of pension asset corresponding to the Company's contribution may
not be feasably calculated. Therefore, 53,237,000 yen, the amount of the
Company's contribution to the pension fund, is calculated as the
retirement allowance expenses. The pension assets of the pension fund,
corresponding to the Company's contribution calculated by the ratio of
the number of members to the pension plan, is 325,791 yen.
(7) Restrictions on Dividends
--------------------------
Net assets have increased by 21,735,000 yen according to the market
value accounting of securities. Applying such amount to dividends is
restricted under Article 290, Paragraph 1, Item 6 of the Commercial
Code.
(8) Earnings per share for this fiscal year
---------------------------------------
(Based on the average number of shares during the year) 2.99 yen
5. Income Statement
Volume of trade with subsidiaries
Business
Sales 6,905,819,000 yen
Purchase 11,446,000 yen
Research and development 1,662,302,000 yen
Other operating expenses 1,916,247,000 yen
Non-business
Interests received 15,516,000 yen
PROPOSED APPROPRIATION OF RETAINED EARNINGS
-------------------------------------------
ITEM VALUE
---- -----
Unappropriated retained earnings 5,731,876,652 yen
for the year
Retained earnings carried forward 5,731,876,652 yen
Certified copy of the audit report made by the Audit Corporation
AUDIT REPORT
------------
February 18, 2002
Mr. Steve Ming-Jang Chang,
Representative Director and President of
Trend Micro Incorporated
Chuo Aoyama Audit Corporation
Representative and
Engagement Partner, Certified Public Accountant
Koji Hatsukawa
Representative and
Engagement Partner, Certified Public Accountant
Aiko Sekine
Engagement Partner, Certified Public Accountant
Shinya Deguchi
In accordance with Article 2 of the "Law for Special Measures under the
Commercial Code with respect to Auditing etc of Joint Stock Corporations", we
have examined the balance sheet, the related profit and loss statement, the
business report (accounting figures only included therein) and the statement of
proposed appropriation of retained earnings, and the related supplementary
statements of account (accounting figures only included therein) of Trend Micro
Incorporated for the 13th fiscal period from 1 January, 2001 to 31 December,
2001. Accounting figures contained in the business report and the supplementary
statements of account, which were subject to our examination, are those based on
the accounting books and records.
Our examination was made in accordance with generally accepted auditing
standards and included such auditing procedures as normally required. Such
auditing procedures also included those applied on the statutory accounts in the
subsidiaries of Trend Micro Incorporated, which we considered necessary.
As a result of our examination of the above mentioned financial
documents, our opinion is as follows:
(1) The balance sheet and the related profit and loss statement present
fairly in conformity with the applicable regulations and the Articles
of Incorporation, the financial position and the results of operations
of the Company.
(2) As set forth in Paragraph (11) of the Material Accounting
Policies, starting from this fiscal year, the accounting of sales
for the post-contract customer support service portion included in
the software product license agreement, which consist of the
customer support services, product upgrades and virus pattern file
upgrades, etc. performed for a certain period of time after the
grant of license, was changed as follows: from the previous method
of comprehensively adding, upon the licensing of products
(delivery of the products), the total contract amounts, including
compensation for post-contract customer support services, to a new
accounting method of separately determining the compensation for
post-contract customer support services and deferring such
compensation at the time of the licensing of the products as the
"short-term deferred revenue" account of the Current Liabilities
and the "long-term deferred revenue" account of the Fixed
Liabilities, and thereby equally recording the compensation
throughout the contracted supporting term. Accordingly, we found
the above proper.
(3) The business report (accounting figures only included therein)
presents fairly the Company's affairs in conformity with the
applicable regulations and the Articles of Incorporation.
(4) The statement of proposed appropriation of retained earnings is
presented in conformity with the applicable regulations and the
Articles of Incorporation.
(5) We have no matters to report on the supplementary statements of
account (accounting figures only included therein) as required by
the provisions of the Commercial Code.
There are no special relationships as stipulated in the Certified Public
Accountants Law between the Company and our firm or the engagement partners.
Certified copy of the audit report made by the Board of Statutory Auditors
AUDIT REPORT
------------
In order to audit the business activities of the Directors undertaken during the
13th fiscal year from Jan. 1, 2001 to Dec. 31, 2001, we, the Board of Statutory
Auditors, heard auditing reports from each auditor regarding auditing procedures
of their results, held meetings of the Board of Statutory Auditors, and
accordingly, hereby report as follows:
1. Scope of Audit and Auditing Procedures
In accordance with the guidelines provided by the Board of Statutory Auditors,
each auditor performs his own share of the responsibilities by attending the
meetings of the Board of Directors and other important meetings, hearing
business reports from the Directors, reviewing important documents, examining
business activities and the existing state of the assets in the main and
principal offices of the Company. Regarding the subsidiaries, we heard business
reports from the Directors in charge and visited the subsidiaries to hear
business reports from their representative directors as needed. We also received
the audit report and sought explanation from the accounting auditor. We further
reviewed the financial statements and supplementary statements.
With regard to the competitive trading by the Directors, conflict-of-interest
trading between the Directors and the Company, free offering of benefit by the
Company, unusual trading with the subsidiaries or shareholders, and acquisition
and disposal of treasury stocks, we sought reports from the Directors, et al, if
necessary, and carefully examined such trading, in addition to the
aforementioned auditing procedures.
2. Results of Audit
(1) We found proper the method and result of the audit by Chuo Aoyama Audit
Corporation who had been appointed as the Company's accounting auditor.
(2) We found that the business report fairly reflects the Company's business
situation in conformity with and pursuant to the applicable laws and the
Articles of Incorporation of the Company.
(3) As for the agenda regarding the proposal for appropriation of retained
earnings, we did not find any matters which should be brought to the
shareholders' attention in light of the existing state of the Company's assets
and other conditions.
(4) The supplementary statements fairly present the necessary items to be
described and we did not find any matters which should be brought to the
shareholders' attention.
(5) We are aware of neither unfair practices nor material violation against the
applicable laws or the Articles of Incorporation of the Company in connection
with the performance of the duties of the Directors.
As for the competitive trading by the Directors, conflict-of-interest trading
between the Directors and the Company, free offering of benefit by the Company,
unusual trading with the subsidiaries or shareholders, and acquisition and
disposal of treasury stocks, we did not find any breach of duties on the part of
Directors.
Feb. 19, 2002
Trend Micro Incorporated
Board of Statutory Auditors
Standing Statutory Auditor
Fumio Hasegawa
Statutory Auditor
Mitsuo Sano
Statutory Auditor
Sadatoshi Nakayama
Statutory Auditor
Yasuo Kameoka
(Note: Statutory auditors, Fumio Hasegawa, Mitsuo Sano, Sadatoshi Nakayama,
Yasuo Kameoka, are external auditors as defined under Clause 1, Article 18 of
the "Law for Special Measures under the Commercial Code with respect to Auditing
etc. of Joint Stock Corporations.")
Reference Information for the Shareholders to Exercise the Right to Vote
------------------------------------------------------------------------
1. Number of Total Shareholders' Voting Rights: 263,955
2. Matters to Be Resolved at the Meeting
Item 1: Proposed Appropriation of Retained Earnings for the 13th Fiscal Period
For details, please refer to the attachment (page.).
The Company has smoothly expanded its scope of operations in the past
several years. However, the Internet security related market has just
reached the full-scale stage of expansion and, as compared with other
U.S. competitors, the Company's share of the market in the world scale
has not yet reached a stable level. Also in terms of the corporate scale,
the Company's competitors can commit more management resources to the
Internet security business than the Company can.
Moreover, due to the effect of the fact that the Company's business area
is specialized in a more limited market in the Internet security market,
that is, primarily relating to anti-virus measures and contents
securities, there is a possibility that earnings may become volatile in a
short term, as compared with the competitors which are engaged in more
than one business area.
In consideration of the above-described business environment and the
Company's individual factors, the Company recognizes that in order to
maintain its competitiveness against the competitors, a stable balance
sheet, enhancement of managerial foundation, and active operations are
important management challenges. We consider that we should give
precedence to sufficiently increasing retained earnings without paying
any dividends for the time being. Accordingly, we would appreciate it
very much if you could understand that we will not distribute dividends
as profit sharing for this fiscal period.
We plan to make full use of the retained earnings fund as a source for
the investment in the research and development area that, the Company
considers, should be enhanced still further, and for the improvement of
our brand recognition in North America and Europe.
Item 2: Purchase of Treasury Shares
We request that in accordance with the provisions of Article 210 of the
Commercial Code, the purchase of 5,000,000 common shares of the Company
be approved to the extent of purchase prices in the total amount of 5.7
billion yen (Yen5,700,000,000) during a period from the conclusion of
this general meeting of shareholders to the conclusion of the ordinary
general meeting of shareholders for the next period.
Item 3: Partial Modifications of the Articles of Incorporation
1. Reason for Modifications
As the "Law for Partial Amendments of the Commercial Code" (Law No. 79
in 2001) was enforced on October 1, 2001 in order to, for example,
abolish par value shares, create a unit (tangen) share system, and
abolish the Law for Special Exceptions Concerning Redemption of Shares,
necessary modifications are made to the Articles of Incorporation and
the article numbers are changed accordingly.
2. Modifications
Details of the modifications are as follows:
(Modified parts are underlined.)
---------------------------------------------------- --------------------------------------------------
Current Articles of Incorporation Proposed Modifications
---------------------------------------------------- --------------------------------------------------
Article 5 (Total Number of Shares To Be Issued) Article 5 (Total Number of Shares To Be Issued)
The total number of shares to be issued by the The total number of shares to be the Company
Company shall be two hundred fifty million shall be two hundred fifty million (250,000,000).
(250,000,000). However, if the redemption of
-----------------------------
shares is conducted, the corresponding number
---------------------------------------------
of the retired shares shall be subtracted from
----------------------------------------------
the total number of shares.
---------------------------
Article 6 (Amount of One Par Value Share) (Deleted)
-----------------------------------------
The amount of one par value share issued
----------------------------------------
by the Company shall be fifty (yen50).
--------------------------------------
Article 7 (Number of Shares Constituting Article 6 (Number of Shares Constituting
- -
One Unit(tan'i) of Stock) One Unit (tangen) of Stock)
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The number of shares constituting one The number of shares constituting one unit
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unit (tan'i) of stock shall be five (tangen) of stock shall be five hundred (500).
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hundred (500).
(To be newly set forth) Article 7 (No Issuance of Shares Less Than One
------------------------------------------------
Unit (tangen))
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The Company shall not issue any share
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certificate for shares less than the number of
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shares constituting one unit (tangen) of stock.
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Article 8. (Transfer Agent) Article 8. (Transfer Agent)
1. The Company shall appoint a transfer agent 1. (As set forth in the current provision)
in respect to shares.
2. The transfer agent and its handling office 2. (As set forth in the current provision)
shall be selected in accordance with a
resolution of the Board of Directors.
3. The Company's register of shareholders 3. The Company's register of shareholders
(including a register of beneficial (including the register of beneficial
shareholders; hereinafter the same shareholders; hereinafter the same
interpretation being applicable) shall be interpretation being applicable) shall be
kept at the handling office of the transfer kept at the handling office of the transfer
office. The Company shall cause the transfer office. The Company shall cause the transfer
agent to handle registration of transfer agent to handle registration of transfer of
of shares, purchase of shares constituting shares, purchase of shares constituting less
less than one full unit (tan'i) of stock, than one full unit (tangen) of stock, acceptance of
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acceptance of notification of beneficial notification of beneficial shareholders, and other
shareholders, and other business activities business activities pertaining to shares. The
pertaining to shares. Company itself shall not handle the above matters directly.
The Company itself shall not handle the above
matters directly.
Article 9 (Share Handling Regulations) Article 9 (Share Handling Regulations)
Denominations of share certificates, registration of Denominations of share certificates, registration
transfer of shares, purchase of transfer of shares, purchase
of shares constituting less than one full unit of shares constituting less than one full unit
(tan'i) of stock, acceptance of notification of (tangen) of stock, acceptance of notification
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beneficial shareholders, and other business activities beneficial shareholders, and other business
pertaining to shares and the fees relating thereto shall activities pertaining to shares and the fees
be governed by the Share of Handling Regulations adopted relating thereto shall be governed by the Share
by the Board of Directors. Handling Regulations adopted by the Board of Directors.
Article 10 (Record Date) Article 10 (Record Date)
(Omitted) (As set forth in the current provision)
Article 11 (Redemption of Shares in Accordance with (Deleted)
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Resolution of the Board of Directors)
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1. On and after March 11, 1999, the Company may
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purchase and retire, with profit, a maximum of
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800,000 shares of its treasury stock in
---------------------------------------
accordance with a resolution of the Board of
--------------------------------------------
Directors.
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2. In addition to the preceding provisions, on
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and after March 11, 1999, the Company may
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purchase and retire, with capital reserve, a
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maximum of 4,000,000 shares of its treasury
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stock and to the extent of purchase prices in
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the total amount of 5,5 billion yen
-----------------------------------
(yen5,500,000,000) in accordance with a resolution
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of the Board of Directors.
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Article 12 to Article 17 Article 11 to Article 16
-- -- --- --
(Omitted) (As set forth in the current provisions)
Article 18 (Election of Directors) Article 17 (Election of Directors)
--
1. Directors shall be elected at the general 1. (As set forth in the current provision)
meeting of shareholders.
2. In order to adopt a resolution for the 2. In order to adopt a resolution for the
election of directors, the attendance of election of directors, the attendance of
shareholders holding shares corresponding to not shareholders holding not less than
----------------------- one-third (1/3) of the total shareholders'
less than one-third (1/3) of the total shares -----------------------
---------------- voting rights, and the majority of such
with voting rights issued and outstanding, and ------------
----------------------------------------- voting rights shall be required.
the majority of such voting rights shall be
required.
Article 19 to Article 27 Article 18 to Article 26
-- -- -- --
(Omitted) (As set forth in the current provisions)
Article 28 (Election of Statutory Auditors) Article 27 (Election of Statutory Auditors)
-- --
1. Statutory auditors shall be elected at the 1. (As set forth in the current provision)
general meeting of shareholders.
2. In order to adopt a resolution for the election 2. In order to adopt a resolution for the the election
of statutory auditors, the attendance of shareholders of statutory auditors, the attendance of shareholders
holding shares corresponding to not less than one-third holding not less than one-third (1/3) of the total
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(1/3) of the total shares with voting rights issued and shareholders' voting rights, and the majority of such
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outstanding, and majority of such voting rights shall be voting rights shall be required.
-----------
required.
Article 29 to Article 40 Article 28 to Article 39
-- -- -- --
(Omitted) (As set forth in the current provisions)
Item 4: Election of One Director
Mr. Toshihiro Watabe, vice president and representative director, will
resign as director with the closing of this general meeting.
Accordingly, we request that one director be elected as a substitute
for the resigned director.
The term of office for the director to be elected as the substitute
will expire with the closing of the 14/th/ period ordinary general
meeting of shareholders to be held in late March 2003 when the term of
office for his predecessor would have expired.
The candidate is shown below.
Name (Date of birth): Nick Dederer (Feb. 16, 1951)
Resume: Oct. 1979 Joined Intel Corporation (U.S.)
June 1998 Director of Intel Corporation
Oct. 2000 Corporate Vice President of Trend Micro, Inc.
(U.S.)
Feb. 2002 COO of the Company's group (presently)
Shares held by the candidate: 0 shares
Note: There exists no special common interests between the Company
and the candidate.
Item 5: Election of Four Statutory Auditors
The terms of office for all the four statutory auditors will expire
with the closing of this general meeting.
Accordingly, we request that four statutory auditors be elected.
The candidates are shown below. All of them are candidates for
external statutory auditors as defined under Article 18, Paragraph 1
of the "Law for Special Exceptions to the Commercial Code Concerning
Audits, etc. of Kabushiki-kaisha."
Candidate Number: 1
Name (Date of birth): Fumio Hasegawa (Feb. 15, 1940)
Resume: May 1994 Manager of Management Accounting Division
and Assistant Director of Accounting
Department of Showa Shell Sekiyu K.K.
Dec. 1996 Senior Managing Director of Tokyo Shell Pack
K.K.
Mar. 2000 (Standing) Statutory Auditor of the Company
(presently)
Shares held by the candidate: 500 shares
Candidate Number: 2
Name (Date of birth): Sadatoshi Nakayama (Dec. 20, 1951)
Resume: June 1984 Registered as a certified public accountant
July 1992 President of the Office of Certified Public
Accountant Sadatoshi Nakayama (presently)
Mar. 2001 Statutory Auditor of the Company (presently)
Shares held by the candidate: 0 shares
Number: 3
Name (Date of birth): Yasuo Kameoka (Nov. 12, 1955)
Resume: April 1982 Registered as a certified public accountant
Sep. 1988 Joined the Office of Certified Public
Accountant Tokuichi Hayashi
April 1999 Established Taiko CPA Firm
Representative Employee of Daiko CPA Firm
(presently)
Mar. 2001 Statutory Auditor of the Company (presently)
Shares held by the candidate: 0 shares
Number: 4
Name (Date of birth): Kouji Fujita (June 9, 1962)
Resume: April 1989 Admitted to Tokyo Bar Association
Joined Okuno Law Firm (renewed "Okuno Sogo
Law Firm") (presently)
April 2000 Statutory Auditor of K.K. Toei Jutaku
Shares held by the candidate: 0 shares
Note: There exist no special common interests between the Company
and the respective candidates.
Press Release
-------------
Notice of the Issuance of Bonds with Subscription Warrants
pursuant to the "Incentive Plan"
Tokyo, Japan - March 26, 2002 - Trend Micro Inc. (NASDAQ:TMIC, Tokyo TSE:4704),
a leading provider of antivirus and Internet content security software, today
adopted the following resolutions regarding the issuance of bonds with
subscription warrants at the meeting of the Board of Directors of the Company
held on March 26, 2002.
Pursuant to the Company's "Incentive Plan for the Year 2002," the
purpose of the issuance of the bonds with subscription warrants is to grant the
subscription warrants to certain directors and employees of the Company as well
as to officers and certain employees of the Company's subsidiaries.
The summary of the issuance is as follows.
Trend Micro Incorporated
The Summary of the Issuance of the Ninth Series of Unsecured Bonds with
Subscription Warrants
1. Name of the bonds
Trend Micro Incorporated Ninth Unsecured Bonds with Subscription Warrants
2. Total aggregate volume of bonds to be issued
4 billion yen
3. Price of each bond
100 million yen
4. Type of bond
Only bearer type
5. Price of bond at issue
Undecided (It will be decided at the meeting of the Board of Directors to
be held on April 2, 2002). (Of which, the bond issue price shall be 100
yen. As a tentative rule, subscription warrant issue price shall be 13 to
18 yen, and it will be decided at the meeting of the Board of Directors to
be held on April 2, 2002).
6. Interest rate
Undecided (As a tentative rule, it shall be 1.5% to 2.0% per year. It will
be decided at the meeting of the Board of Directors to be held on April 2,
2002).
7. Redemption price
100 yen par value of 100 yen
8. Term of redemption
April 18, 2006
9. Application period
From April 3, 2002 until April 16, 2002
10. Date of payment
April 18, 2002
11. Subscription method
Daiwa Securities SMBC Co., Ltd. shall purchase the total amount.
12. Security, guarantee
There is no collateral or guarantee, and there is no asset serving as a
back up for the bonds.
13. Special agreements
"Negative Pledge"
14. Cancellation of the purchase
From the day after the date of the issuance, as long as the total value of
the shares that can be obtained by the then unexercised subscription
warrants does not exceed the total value of the outstanding bonds,
cancellation of the purchase of the bonds is allowed.
15. Method and period of interest payment
(1) From the day after the date of the issuance until the redemption
date, the interests will be paid first on October 18, 2002 for
all the interest payments due by then, and from thereafter, six-
months worth of interest will be paid on every April 18 and
October 18.
(2) If the banks are closed on the day when interests are to be paid,
then, the date of interest payment shall be moved to the prior
bank business day.
(3) When paying less-than-six-months worth of interests, interests
should be calculated according to the calendar.
(4) No interest will be paid after the redemption date.
16. Place where principal and interest shall be paid
The registered head office of the Company
17. Underwriting company
Daiwa Securities SMBC Co., Ltd.
18. Regarding subscription warrants
(1) Ratio of the bond to the share obtained by the subscription warrant
For every 100 million yen par value bond price, total issue price of
par value shares of common stock issuable upon exercise of the
subscription warrant shall be granted 100%. Each subscription warrant
certificate represents the right to obtain 1 million yen worth of new
shares.
(2) Total amount of the issue price of shares issuable upon exercise of
the subscription warrants
4 billion yen
(3) Type of shares issuable upon exercise of the subscription warrant
Common stock of the Company
(4) Conditions of exercise of the subscription warrants
Issue price per share ("exercise price") of shares issuable upon
exercise of the subscription warrants is undecided. (As a tentative
rule, the exercise price shall be the amount which is the closing
price per share of the shares of common stock of the Company on the
Tokyo Stock Exchange on the day on which the exercise price is decided
(if no closing price is reported on such day, the closing price of the
immediately preceding such day should be used).
It will be decided at the meeting of the Board of Directors to be held
on April 2, 2002). Number of shares issuable upon exercise of the
subscription warrant is as follows:
The total value of subscription warrant certificates
submitted by the warrantholder for the exercise
of the the warrant
Number of shares = ------------------
Exercise price
Any fraction less than one share shall be disregarded. The adjustment of
the exercise price will take the market-price format.
(5) Exercise period of the subscription warrants:
From April 3, 2003 through April 11, 2006. If bond acceleration
occurs, no subscription warrant may be exercised thereafter.
(6) Partial exercise of the subscription warrant
No subscription warrant may be partially exercised.
(7) Transfer of the subscription warrants
Normally, subscription warrants detachable from bonds can be
transferred, however, pursuant to the Company's and/or its
subsidiary's memorandum, the Company's directors and employees as well
as the subsidiary's directors and employees cannot transfer the
subscription warrants.
(8) The portion of the issue price of the shares to be issued upon
exercise of the subscription warrant which will not be transferred to
stated capital.
The balance of the exercise price (if adjusted pursuant to 18(4)
above, the adjusted exercise price) remaining after deduction of the
amount to be transferred to stated capital. The amount to be
transferred to stated capital shall mean an amount obtained by
multiplying the exercise price (if adjusted pursuant to 18(4) above,
the adjusted exercise price) by 0.5, with any fraction of one yen
occurring as a result of such calculation to be rounded up to a full
yen. However, the amount to be so transferred to stated capital for
each such share shall not be below the par value of a share of the par
value common stock of the Company.
(9) Payment in kind
Not applicable
(10) Effectiveness of exercise of the subscription warrants
The exercise of the subscription warrants shall become effective if
the certificate evidencing the relevant subscription warrant,
documents required for exercise of the subscription warrant and cash
payment reach the handling agent.
(11) Dividends payable on shares to be issued upon exercise of the
subscription warrants.
Any annual dividend or interim dividend payable on shares issuable
upon exercise of the subscription warrants with respect to the
Dividend Accrual Period (as defined below), during which the relevant
date of exercise falls, shall be paid for the full Dividend Accrual
Period as if the exercise had taken effect at the beginning of such
Dividend Accrual Period. The "Dividend Accrual Period" means each six-
month period ending on June 30 and December 31 in each year.
(12) Place for accepting the request for exercise of the subscription
warrant
The registered head office of the Company
(13) The handling agent resulting from exercise of the subscription warrant
The registered head office of UFJ Trust Bank Limited.
(14) Method of delivery of share certificates
Share certificates will be delivered by the corporate agency
department of UFJ Trust Bank Limited as soon as after the relevant
subscription warrant is exercised. No certificates will be issued for
any fractional shares.
19. Registration agency
The company has not appointed a registration agency of the bond.
20. Any other matters required for the issuance of the Bonds of Subscription
Warrants will be decided at a meeting of the Company's board of directors
to be held hereafter and entrusted to the representative director of the
Company.
21. The subscription warrants to be issued by the Company will be fully
repurchased by the Company from Daiwa Securities SMBC Co., Ltd. Then, they
will be partly granted to certain directors of the Company as part of
director compensations and partly offered to certain employees of the
Company and to the Company's subsidiaries.
Offering of Subscription Warrants for Sale
------------------------------------------
1. Name of certificates
Trend Micro Incorporated Subscription Warrants (Ninth)
2. Holder of certificates to be sold
Trend Micro Incorporated
3. Number of certificates to be sold
3,680
4. Minimum unit for application
One certificate
5. Period during which applications will be accepted
From April 3, 2002 through April 16, 2002
6. Date of delivery
April 19, 2002
7. Place where applications will be accepted
At the holder of certificates as stated in 2 above
8. Miscellaneous
(1) Offering price per certificate, the aggregate offering prices and
other details will be decided at the meeting of the Board of
Directors to be held on April 2, 2002.
(2) This offer for sale will be made to certain employees of the Company
and to the Company's subsidiaries.
About Trend Micro, Inc.
Trend Micro is a worldwide leader in network antivirus and Internet content
security and the global leader in server-based antivirus and Internet content
security products and services. The Tokyo-based Corporation has its North
American headquarters in Cupertino, CA and business units worldwide. Trend Micro
products and services are sold directly, and VARs and managed service providers.
For additional information and evaluation copies Trend Micro products, visit
www.trendmicro.com.
For additional information contact:
Mr.Mahendra Negi
Chief Financial Officer/IR Officer
phone: +81-3-5334-4899
fax: +81-3-5334-4874
ir@trendmicro.co.jp