“E-Service Integrator” PROFILE As the Internet Alters the Very Fabric of Society, Information Is Being Freely Accessed and Exchanged

S CORPORATION CSK CSK CORPORATION Annual Report 2001

nulRpr 2001 Report Annual

The First Choice “e-Service Integrator” PROFILE As the Internet alters the very fabric of society, information is being freely accessed and exchanged. This seachange is placing greater demands on the information services industry. Customers are requiring more than mere support to ratio- nalize back-office activities. Customers today need comprehensive support for their core businesses. Conventional services won’t make the grade. Our mission is to offer a new paradigm—e-Services—that will. Indeed, the CSK Group’s newly formulated business strategy positions the company as the “No. 1 e-Service Integrator.” Priority is being placed on core B2B services, an area where the Group has a competitive edge, while repositioning B2C services for future growth. The passing of CSK Group founder Isao Okawa in March 2001 marked a major juncture in our history. The cornerstone of the Group will nevertheless remain the enduring management philosophy of our founder. The entire CSK management team is firmly committed to carrying on his spirit of entrepreneurship. As we move forward, we will be adopting an increasingly systematic approach to management of the CSK Group. This will entail the clear separation of headquarter functions from the day-to-day operational functions of Group companies. Actions have already been taken toward achieving our goals, and we see immense potential for future success. This conviction is rooted in a deep passion for business among our management and employees, which was instilled by Isao Okawa.

CONTENTS FINANCIAL HIGHLIGHTS 1 CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 25 TO OUR SHAREHOLDERS 2 CONSOLIDATED STATEMENTS OF CASH FLOWS 26 REMEMBERING ISAO OKAWA 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 27 THE CSK GROUP STRATEGY 6 NON-CONSOLIDATED BALANCE SHEETS 46 BOARD OF DIRECTORS AND CORPORATE AUDITORS 16 NON-CONSOLIDATED STATEMENTS OF OPERATIONS 48 CONSOLIDATED SIX-YEAR SUMMARY 17 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 49 CONSOLIDATED FINANCIAL REVIEW 18 CSK GROUP INFORMATION 50 CONSOLIDATED BALANCE SHEETS 22 INVESTOR INFORMATION 52 CONSOLIDATED STATEMENTS OF OPERATIONS 24 CSK CORPORATION Annual Report 20012001

FINANCIAL HIGHLIGHTS CSK CORPORATION and Consolidated Subsidiaries For the years ended March 31, 1997, 1998, 1999, 2000 and 2001

Thousands of U.S. Dollars (Note 2) Millions of Yen (except per share (except per share amounts) amounts) 1997 1998 1999 2000 2001 2001 For the year: Sales and operating revenue ...... ¥ 136,459 ¥ 211,004 ¥ 223,715 ¥409,747 ¥ 418,601 $3,378,538 Operating income ...... 4,416 6,631 8,214 10,327 9,314 75,177 Income (loss) before income taxes and minority interests ...... (5,532) (18,834) (14,891) 8,075 (16,775) (135,395) Net loss ...... (8,898) (20,284) (17,386) (5,517) (21,354) (172,345)

At year-end: Total assets ...... 282,489 220,261 190,484 383,049 382,523 3,087,352 Total shareholders’ equity ...... 120,105 98,850 80,457 104,391 85,099 686,837 Interest-bearing debt ...... 119,088 67,943 52,873 149,186 151,789 1,225,094

Yen U.S. Dollars Per share (Notes 1 and 2): Net loss ...... ¥ (138.75) ¥ (317.54) ¥ (273.37) ¥ (88.10) ¥ (287.04) $ (2.32) Cash dividends...... 12.00 15.00 12.00 12.00 12.00 0.10 Total shareholders’ equity ...... 1,872.75 1,550.02 1,266.79 968.44 1,139.26 9.19

Notes: 1. Per share figures are in exact yen. 2. U.S. Dollar amounts are translated from yen, for convenience only, at the rate of ¥123.90=U.S.$1.

Forward-Looking Statements

This annual report contains forward-looking statements about the future plans, strategies, beliefs and performance of CSK and its subsidiaries. These forward-looking statements are not historical facts. They are expectations, estimates, forecasts and projections based on information currently available to the company and are subject to a number of risks, uncertainties and assumptions, which, without limitation, include economic trends, competition in the industry, personal consumption, market demand, the tax system and other legislation. As such, actual results may differ materially from those projected.

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TO OUR SHAREHOLDERS

Fiscal 2001, ended March 31, 2001, was a period of major accomplishments. We successfully addressed a number of issues, dramatically transforming CSK and our entire Group and giving us a sound base from which to move ahead. On the other hand, we were saddened by the passing on March 16, 2001 of CSK Group founder Isao Okawa. The entire CSK Group management team remains firmly committed to the management philosophy of the founder. We are determined to use these guidelines to create a bright future.

e-SERVICES STRATEGY UNDERPINS OPERATING RESULTS Our activities during the past year were all closely tied to the theme of e-Services. As a result, consolidated net sales rose 2.2% to ¥418.6 billion. As the cost of sales increased only 1.4% to ¥347.2 billion, our gross profit was up 6.2% to ¥71.3 billion. Selling, general and administrative expenses rose 9.2%, however, causing operating income to decline 9.8% to ¥9.3 billion. We also recorded a net loss of ¥21.3 billion, which was mainly the result of the write-down of investment securities at the parent company and losses resulting from restructuring initiatives at subsidiaries ASCII CORPORATION and CSK ELECTRONICS CORPORATION. The decision to implement structural reforms that resulted in this loss was a difficult one, but the funda- mental improvements made at all major CSK Group companies have largely eliminated the uncertainties that had hamstrung our businesses. We are now in a position to focus our resources entirely on increasing our sales and earnings.

ADOPTING A SYSTEMATIC APPROACH TO GROUP MANAGEMENT In the past, all CSK Group companies were managed directly by the founder, who was effectively the Group’s owner. Under his powerful leadership, the Group made substantial investments to develop new businesses. Unfortunately, these investments created a growing financial burden, particularly at companies involved in consumer businesses, causing the Group’s earnings to deteriorate. Today, all core businesses are on the path to recovery. Making this possible were the approximately ¥85.0 billion in financial support extended by the founder and the bold decisions we made regarding the strategic direction of the Group’s business activities. Thanks to the past support of the founder, our Group has the resources to move ahead of competitors by collectively assembling a one-stop service infrastructure for the Internet era. This places us in an extremely advantageous position for the successful implementation of our e-Services strategy.

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Yoshiji Fukushima Masahiro Aozono Chairman and President and Representative Director Representative Director

As we move forward, we will be adopting an increasingly systematic approach to management of the CSK Group. Vital to this transition is establishing a system that separates group management activities, which involves the allocation of resources in the most efficient manner, starting with the operational activities of individual businesses, which together deliver our complete line of e-Services. At this time, we believe the best way to maximize our value is to place priority on our core B2B corporate services sector. As we focus on this sector, we will be formulating a realignment plan for Group companies based on assessments of the maturity of each market in which they operate. The top management team of the CSK Group is dedicated to increasing value for our shareholders. With this goal in mind, we pledge to retain an intent focus on enhancing the quality of our services, making every element of the Group more competitive and improving consolidated operating results.

August 2001

Yoshiji Fukushima Masahiro Aozono Chairman and Representative Director President and Representative Director

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REMEMBERING ISAO OKAWA

CSK Group founder Isao Okawa passed away on March 16, 2001. After establishing Computer Services K.K. (the predecessor of CSK Corporation) in 1968, Mr. Okawa nurtured the company into the first in the Japanese software industry to go public. The company subsequently grew into the CSK Group, which has consolidated annual revenues of about ¥1 trillion and around 20,000 employees. As a pioneer in the IT industry, Mr. Okawa made a significant contribution to the development of the Japanese economy.

THE QUINTESSENTIAL ENTREPRENEUR Mr. Okawa was always focused on the essence of human nature and business success. “People are everything.” “Your approach to life is also your approach to management.” “Place value on each encounter with others.” “People come before technology.” “Life is bound by meaningful experiences.” Above all, he constantly adhered to the philosophy that “people are the basis of a business.” Mr. Okawa was guided by a powerful conviction regarding entrepreneurship: “People say that the emergence of any new industry is always preceded by some “prophetic manifestation.” I believe that God gives the “momentum of the times” as an aide for those who grasp these “prophetic manifestations” and who, at the risk of their own lives, seize upon that moment to create a new business. I believe as well that God gives these same individuals a social responsibility—a “mission”—to contribute to the world at large. These few sentences provide an accurate summary of the story of my life.” Today, the new CSK Group top management team is proudly carrying on this spirit of entrepreneurship and devotion to society.

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A BOUNDLESS ENTHUSIASM TO CREATE NEW BUSINESSES In 1962, Mr. Okawa took part in an IBM seminar on a punch card system. He saw this as a “prophetic manifestation” that a new industry was about to take shape. This fateful encounter with a computer led to his decision at the age of 42 to establish Computer Services K.K. in 1968. Located in Osaka, the company had capital of ¥5 million and only 10 employees. The company started out without brand recognition, money, technology or reputation. But what it did have was a strong conviction and the wisdom to create something from nothing.

THE FORMATION OF THE CSK GROUP Under the leadership of Mr. Okawa, CSK became a publicly owned company in 1982. The move was unprecedented in the Japanese IT services sector. Thereafter, CSK made investments in three key seminal fields—artificial intelli- gence (AI), databases and networks—as Mr. Okawa was convinced that the Information Age would advance from companies to households and eventually to individuals. Based on this belief, he expanded the CSK Group into a business and entertainment conglomerate with networks as the common theme. Among the major milestones were the purchase of SEGA CORPORATION (formerly SEGA Enterprises, Ltd.) from Paramount Pictures Corp. of the U.S. in 1984, an equity investment in Bellsystem24, Inc. in 1986, an equity investment in Ado Electronic Industries Co., Ltd. in 1995 (now CSK ELECTRONICS CORPORATION) and an equity investment in ASCII CORPORATION in 1998. Today, the CSK Group is made up of roughly 60 companies, of which 11 are publicly owned, in Japan and overseas and generates annual revenues of approximately ¥1 trillion. The CSK Group has around 20,000 employees.

A RENOWNED PHILANTHROPIST In 1986, Mr. Okawa established The Okawa Institute of Information and Telecommunication for the purpose of helping create a society that benefits from rapid advances in information technology. In 1995, Mr. Okawa attracted much attention by proposing at the G7 Industrial Summit’s round table an international Junior Summit that would bring together children from many nations to discuss how to achieve world peace. The summit was held later that year. In 1998, Mr. Okawa donated about ¥3.7 billion from his personal funds to the Massachusetts Institute of Technology to construct the Okawa Center for Future Children at the institute’s Media Laboratory. Among other examples of Mr. Okawa’s philanthropic endeavors were a substantial contribution to recovery programs following the devastating 1995 Great Hanshin-Awaji Earthquake and financial support extended for the preser- vation of Japanese cultural activities.

A LIFE PHILOSOPHY ECHOED IN MANAGEMENT OF THE CSK GROUP Diagnosed with cancer of the esophagus in July 2000, Mr. Okawa began a courageous battle with this disease. Even from his hospital bed, Mr. Okawa continued to participate in the management of the CSK Group. He was living out his belief that one’s approach to life and management should be identical. On January 31, 2001, Mr. Okawa made headlines by giving approximately ¥85.0 billion of his personal assets to SEGA. He dramatically demonstrated his belief that “a business lasts only for one generation,” and it is impossible to carry on his philosophy of his life and management, therefore that “money gained from a business should be returned to a business.” Gazing into the future, he repeated his belief that “the network society that I have envisioned will soon be upon us.” Sadly, his vigorous and eventful life came to an end at the age of 74 on March 16, 2001. Today, the CSK Group is carrying on Mr. Okawa’s legacy and is dedicated to making his dream a reality.

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THE CSK GROUP STRATEGY

1 ➔ BECOMING THE NO. 1 e-SERVICE INTEGRATOR

CHANGING BUSINESS ENVIRONMENT The Internet is altering the very fabric of society. Information can now be freely accessed and exchanged. Networks and related platforms themselves have become key elements of today’s Internet Age, offering users greater convenience. In this environment, business models that rely on interests in hardware and software will become obsolete. How can a company add value in a market based on a common network infrastructure? The answer is by offering services that precisely target each and every customer need. Services in the Internet Age must differ from conventional services in terms of their quality and breadth. This is why the CSK Group is leveraging its expertise in IT services to evolve into a total provider of solutions required by customers in a new century. We have coined a term to describe this entirely new concept: e-Services.

GROWING WITH OUR CUSTOMERS We are fundamentally overhauling the CSK Group’s service line-up to remain in step with the growth and increasing sophistication of the Internet-related marketplace. Our e-Services concept was formulated to provide a clear framework for this evolutionary process.

CHANGING BUSINESS ENVIRONMENT

Mainframe Wintel Megacarriers Service providers Millions of users Services

3,000

Networking

1,000

PCs

100

Systems 10

1980 1990 2000 2003 2005

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FROM BACK OFFICE TO CORE BUSINESS SUPPORT Until now, our services have offered customers ways to streamline and otherwise improve their back-office functions. Adopting a broader perspective, we are positioning network systems as a means to support the core businesses of our customers in the Internet Age. And we intend to move outward in all directions to grow and serve our customers in still more ways.

“OPERATION” IS CRUCIAL FOR THE INTERNET With networks handling everything from vital business transactions to personal messages, reliability is of the utmost importance. Merely integrating the necessary hardware and software is no longer sufficient to offer this reliability. Skill in operating networks is now just as important as the quality of the system itself.

“INTEGRATING” SYSTEMS CONSTRUCTION AND OPERATIONS SERVICES Networking demands of our customers are both expansive and exacting. They count on the CSK Group for a seamless package of assistance covering internal and external systems along with services extending from consulting to operational support. Expertise in everything from serving each of our customers on a one-to-one basis to the provision of content is essential to providing assistance on this scale. Since its inception, the CSK Group has consistently worked closely with customers to achieve mutual prosperity. Two elements underpinned this capability: the skillful application of information and communications technologies, and a staff of talented people able to extend services that accurately address each customer’s demands. As a result, we already have a powerful base for the provision of e-Services in terms of our people, technology and corporate culture. Our highly diversified array of services, a legacy of the founder, represents another invaluable advantage. More important still, each service has been refined over the years as we adapted them to the needs of individual customers. Now we intend to leverage these competencies to support our customers’ core businesses; a goal that demands offering an even more diverse service line-up to each customer. Fortunately, we are in an advantageous position in this regard as we are able to draw on the vast know-how of the many members of the CSK Group. Through the provision of a multitude of quality services, we are determined to make a direct contribution to the success of our customers’ e-businesses. This is nothing more than an extension of our long-standing policy of growing side by side with customers. To maximize this contribution, we will extend e-Services that can best enable customers to take on new Internet-related challenges and opportunities. e-SERVICE OBJECTIVES INCREASING VALUE ADDED BY HUMAN CAPITAL “People” are the key to the provision of value-added e-Services. In other words, the key indicator of our ability to succeed is the degree of value that our people can create through these services. If we express corporate value on a balance sheet, total capital employed to deliver e-Services consists of both monetary capital and human capital. Increasing value added by human capital is obviously the best path to raising corporate value. Human capital, which represents the people who provide our services, generates intangible assets. Unlike tangible assets, these assets do not decline in value over time, but instead generate still greater value the more they are utilized.

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e-SERVICE PERFORMANCE INDICATORS There are many types of value-generating intangible assets. Among them are increasingly skilled human assets, the reputation of our brands, our dedication to providing quality services, our ability to share expertise, and our ability to form value chains with our business partners. By making use of networks, we can accelerate and maximize the process by which value is generated from these assets. Value, however, now has a completely different connotation in the wake of the Internet Revolution. In an industrialized world, sales prices are determined by reference to the sum of costs and a suitable profit. Today, this approach is no longer valid. In a buyer-centric era, sales should now be viewed as an indicator of how customers evaluate our services. And costs depend on our ability to raise productivity. A suitable profit is the end result of this process. From a balance sheet standpoint, the value of our services to customers is reflected in the value of our intangible assets. Adding more value to our services makes them more valuable for customers while also making our operations more efficient. For these reasons, the CSK Group has established easily defined indicators to measure our e-Service performance: the relationship between our network usage and our ability to increase the value added by intangible assets.

2 ➔ BASIC CONCEPT FOR GROUP REORGANIZATION

CURRENT BUSINESS DOMAINS BROAD-BASED SERVICES FOR CRAFTING ONE-STOP SOLUTIONS The CSK Group is a source of a comprehensive suite of IT services. We offer consulting for a broad range of customers, from large corporations to consumers. We offer B2B services encompassing the creation and

e-SERVICES OBJECTIVES

From a Balance Sheet Perspective From an Income Statement Perspective

Liabilities Financial Assets Network usage value Capital (leveraging results and Results of efficiency) Customer Costs operating •Development of ratings efficiency Corporate Resource human resources Sales Human capital value value •Brand (trust) Human assets •Spirit of good service + •Sharing know-how Intangible assets •Value chain with Profits Added value partners

• Improving corporate value of services industry = Increasing added value from human capital • Accelerating and optimizing added value improvements = Network usage (technological + cultural) • Higher customer ratings generate more sales while efficient corporate activities lower costs, thus delivering greater profits

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TODAY’S BUSINESS DOMAIN

Systems Selling of Network Systems Call centers, PC/package Large Consulting systems/ ISP Content companies integration packages integration operation etc. sales CSK

JFITS

JIEC

Super Software

CSK Network Systems NextCom

Bellsystem 24

ServiceWare Corporation Small/ CSK Communications Mid-sized firms CSK Field Services

CSI CSK ELECTRONICS ISAO ASCII Consumers SEGA

operation of systems as well as operation of related business activities. And we are also active in the B2C sector, where we mainly provide content. Together, this service line-up enables the CSK Group to cater to requirements for individual services as well as customers’ demands for comprehensive support. At the same time, synergies are realized because expertise gained in each field of service can be applied to the provision of other types of services within the Group. System development, for instance, might yield insights into a customer’s business that enables us to extend highly valuable assistance in the operation of systems and business activities for that customer. Content distribution, a field with immense growth potential, is another illustration. Here, we have gained knowledge through the operation of our own content businesses. This experience can be translated into valuable assistance for customers. We will undoubtedly see a growing number of network-based transactions in the coming years. The CSK Group is fully prepared to grow together with customers by creating new combinations of existing services as well as entirely new services made possible by this process.

ROEs OF MAIN GROUP COMPANIES B2B SERVICES FACILITATE THE EFFICIENT USE OF CAPITAL In the services sector, the return on capital is just one of many important measures of the performance of a particular business. From the viewpoint of shareholders, the return on equity (ROE) is a key performance indicator,

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and all CSK Group companies are placing priority on improving this figure. As the table below shows, B2B companies generally have high ROEs. B2C companies, on the other hand, are reporting negative returns. The result has been a decline in CSK’s consolidated ROE. Looking only at parent-company earnings in relation to our own assets applied to business activities, our ROE would have been 14.8% in the past fiscal year. Although it would not be wise to reallocate our resources solely in accordance with current ROE data, we could use this figure in conjunction with other performance indicators to select the most effective actions to maximize the value of the CSK Group.

IMPLEMENTING THE CSK GROUP’S e-SERVICES STRATEGY REALIGNING THE GROUP STRATEGY Until now, the CSK Group has regarded the network-related marketplace as a single field covering everything from B2B to B2C activities. This approach made it possible to pursue synergies. In recent years, however, these two markets have matured at quite different speeds. In the B2C sector, large investments have invited weak results. Recognizing the maturity of these markets, we will clearly define the role of all Group companies and realign the Group’s entire strategy.

CONCENTRATING RESOURCES ON B2B SERVICES In the B2B sector, we already have a full line-up of e-Services. Looking ahead, we will seek even greater synergies by enlarging the scale and business domains of each B2B Group company, firmly positioning B2B as our core business. Establishing a powerful operating base will be our top priority. For this purpose, we will concen-

ROEs OF MAIN GROUP COMPANIES

B2B B2C

CSK 23.9% Communications 16.5% JFITS 31.0% JIEC CSK 15% (Operating company) Bellsystem 24 14.8% 13.9% NextCom

13.6% Japan Card Center CSK 12.6% Network Systems ServiceWare 12.3% Corporation 10% 11.1% CSK Venture Capital 0% CSI 1.1% CSK ELECTRONICS –2.2% SEGA Notes: –24.0% 1. Most recent figures are used for operating income, ordinary income, and net loss CSK (Consolidated) ISAO 2. CSK (operating company): ROE = (Ordinary income x 0.58)/Operating capital* (42% tax rate) –33.0% 3. Group companies: ROE = (Ordinary income x 0.58)/Shareholders’ equity * (42% tax rate) –91.4% 4. CSK on consolidated basis: ROE = (Net loss/Shareholders’ equity) –25.0% 5. ASCII was excluded due to excessive liabilities

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B2C Group companies are executing the revitalization plan in each of their core businesses. CSK Group will They will become the stepping stones concentrate its for the future full-line of GROUP STRATEGY BASED ON management resources e-Services. on the current core e-SERVICE DEVELOPMENT business of B2B e-Service.

REVOLUTIONIZING CONSUMER OPERATIONS

1. Pursue business restructuring plan developed by BPR team Present 2. Focus on software development and amusement business 1. Ensure progress in reforms Future 2. Realize constant profits in software operations SEGA CORPORATION 3. Bolster the profitability of amusement business

Present 1. Specialize as the gamers’ ISP and shift to more value added businesses

Future 1. Leverage expertise in systems development and management in game servers and expand horizontally 2. Provide a variety of new communication services such as VoIP ISAO CORPORATION 1. Withdraw from unprofitable businesses and stores Present 2. Build BPR team initiated by CSK to examine the operations, and develop a restructuring plan 3. Assign Senior Managing Director of CSK as the President of CSK Electronics to strengthen its management team

Future 1. Ensure progress in the retail business strategy CSK ELECTRONICS CORPORATION

1. Strengthen the profitability of core publishing business Present 2. Expand Web service/digital contents business

1. Expand customer base to women and the general public Future 2. Strengthen sales through reinforcing marketing abilities ASCII CORPORATION

trate capital, people and other resources in B2B services. Accompanying this focus will be steps to ensure the suitable deployment of resources in B2C and other fields as we carefully monitor the pace at which individual market sectors mature.

LAYING THE GROUNDWORK FOR FUTURE GROWTH IN THE B2C SECTOR Heretofore, we have made substantial investments to establish a presence in the B2C services market. Unfortunately, this market has not yet developed to the point where it can support a full-scale e-Service approach. The result was a large loss in the past fiscal year. Through our investments, however, we have built up valuable knowledge and technology. These strengths give us a significant advantage for future initiatives in the B2C sector.

REVOLUTIONIZING CONSUMER OPERATIONS ALL B2C SERVICE COMPANIES ARE FOCUSED ON RETURNING TO PROFITABILITY The number-one priority for each B2C Group company is to improve operating results. No more large-scale investments are planned. We intend to turn these companies around by implementing programs that have been carefully formulated to match the unique characteristics of each one. Thus far, these B2C initiatives are proceeding largely as planned.

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3 ➔ DETAILS OF e-SERVICE BUSINESS STRATEGY

EXPANDING THE CSK GROUP’S HUMAN RESOURCES MAKING EFFECTIVE USE OF INTERNAL AND EXTERNAL RESOURCES People are the most important asset of the CSK Group. Extending our human resources within the Group and making use of external resources is therefore a key priority. In the past, we have recruited primarily in major urban areas. Our new approach is to look further afield into regional Japan. We will also implement an aggressive recruitment drive in China. Meanwhile, alliances and equity partnerships will open up new external resources for the Group. The CSK Group’s core competence is high-quality project management. The people engaged in this key activity are called Project Managers (PMs). We will launch new initiatives to enhance the skills of PMs (our internal resources), while making more effective use of our business partners (external resources), which supply project team members. This strategy will increase internal and external human resources, as well as enhance the quality of our people by drawing on the expertise of the IT training services business, which has spelled success for CSK in Japan on several occasions.

REGIONAL AND OVERSEAS EXPANSION In the past, a number of obstacles prevented us from making effective use of human resources. Clearing the way is the Internet, which has spurred a technological and cultural revolution that offers infinite new possibilities for our business. Progress in networks is making companies’ operations more productive by enabling staff at distant locations to get together to undertake more detailed joint development. On the business side, services can extend beyond our current borders, as in the case of call centers. Our launch of business in Okinawa in 1997 is one example of the CSK Group’s strides into regional Japan. Pivoted around our systems development and call center operations, we devised a cyclical business model for e- Services and ICT educational businesses, comprised of systems development, call centers and ICT training centers.

OKINAWA MODEL

Systems development CSK SYSTEMS OKINAWA

Services centered Call centers CSK Communications around major cities + CSK ICT training centers Group

Expertise in ICT education Expanding employment Young labor pool

Okinawa (or other regions)

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Call centers, which take little time to get up and running, play a pioneering role in quickly generating a cash flow base for developing operations in local regions. Launched in parallel with call centers, systems development requires more training time for employees to nurture advanced technical skills. These two businesses combine to create a multiplier effect in the development and operation of systems. Adding ICT training services to this equation further shortens the time needed to get systems online. We call this system the “Okinawa Model.” Plans call for extending this model to other areas of regional Japan to locate untapped human resources who are physically distanced from the information services market. Outside Japan, Shanghai-based CSK Systems was established in 1996 to spearhead the company’s growth in China. The only Chinese software company entirely owned by a Japanese firm, CSK Systems achieved profitability in fiscal 2000 on a stand-alone basis. Over its short history, the company has gained considerable knowledge about developing a software business in China. Presently, this company is on the verge of full-scale expansion as part of the CSK Group’s human resources strategy. CSK Systems is being positioned as the key for enabling the entire Group to help its customers take advantage of opportunities in China.

CSK SYSTEMS (SHANGHAI) CSK

CSK Systems (Shanghai) Support for Expanding human CSK customers resources for entering China services in Japan Shanghai Zhejiang development center development center

DIFFERENTIATING SERVICES BASED ON CORE STRENGTHS WORKING TO ESTABLISH THE “e-SERVICE” BRAND In the e-Services field, the customers’ most important need is for core business support. Expertise in operations is vital to fulfilling this critical need. Furthermore, systems operation, a skill that is increasingly being combined with system architecture know-how, forms the basis for the provision of distinctive services that accurately meet customers’ demands. The CSK Group works alongside customers in the structuring of e-business application systems. Knowledge gained through this activity enables the Group to supply operation services rooted in a thorough understanding of each customer’s systems and business operations. Going one more step, the CSK Group operates Japan’s most extensive call center business. Overall, these strengths give us a base upon which we will build an e-Service brand with an unassailable lead over all competitors.

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THE MANAGEMENT SERVICE PROVIDER (MSP) BUSINESS The MSP field offers numerous opportunities for the CSK Group to draw on its greatest strengths. Generally speaking, iDC operation refers to the supervision and operation of e-business systems on behalf of companies involved in e-businesses. In effect, these companies are outsourcing the management of their systems. The number of firms extending iDC services has grown rapidly in recent years, but in most cases they just concentrate on overseeing networks and hardware along with establishing anti-virus measures. They may not be able to offer the reliability needed to preserve and enhance end-users’ satisfaction; the most important element of e-business success. Furthermore, many iDC companies cannot perform value-added services such as the distribution of content. Experienced in the creation of e-business application systems, the CSK Group can extend operating services based on a broad-based understanding of these systems. Backed by these invaluable advantages, the Group is able to conduct an MSP business characterized by services of a caliber that other companies find difficult to match.

e-CONTACT CENTERS e-contact centers are another means by which the CSK Group is setting itself apart. Ordinary call centers are viewed by companies as channels to identify hot-selling products and sell items to a broad range of people. e-contact centers take a different tack. Taking the end-users’ standpoint, e-contact centers are a one-to-one marketing tool that are in tune with the central goal of customer relationship management (CRM): repeatedly selling products to the same user. Success here depends on two core skills: expertise in operating call centers and specialized ICT knowledge.

DIFFERENTIATING SERVICES BASED ON CORE STRENGTHS

[ Needs for e-Services ]

From back-office support to core business support

“Operations” are crucial for Internet

“Integrating” systems construction and operations services

[ Management resources of CSK Group ]

System ConstructionSystem Management Business Operation

Synergy derived from provision of a full-line of service

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MANAGEMENT SERVICE PROVIDER (MSP) e-CONTACT CENTERS

CSK Group’s End users Maintain and “MSP” Services increase customer The CSK Group is building satisfaction by e-business application Phone FAX E-mail Internet increasing reliability systems with its and providing customers and can provide operations services that ServiceWare CSK value-added Bellsystem 24 services such as integrate customer’s Corporation Communications content distribution systems and operations CRM package

Supporting back- Support only Web Links with customers’ back-office systems end as well as and front-end Web and front- systems end systems Systems construction iDC

CSK JIEC CSK Current Internet Basic supervision Network Systems data centers of network or hardware, and virus protection e-Contact center is not a simple PBX and database solution, but rather a comprehensive system that links customers’ sales information and other back-office areas. Operating such a framework will require a combination of “call center” and “back-office ICT expertise.”

Based in Okinawa, CSK Communications was the first company in Japan to adopt the latest CRM package of Oracle Corporation Japan. With this technology, the company was able to evolve from a mere call center into an e-contact center, which enables customers to conduct next-generation marketing programs. Collectively, these strengths yield a decisive advantage. The CSK Group can integrate its exclusive technology to serve needs of corporate clients, from consulting to the structuring of systems for their outsourcing and insourcing.

A VISION AND BUSINESS FOR MEDIUM- AND LONG-TERM MODELS Constant revisions are needed to keep a company’s vision in line with current market dynamics. Every company must inevitably make assumptions about the future, and then make repeated adjustments as necessary. The CSK Group is dedicated to retaining a vision that closely reflects current realities. Based on these realities and carefully formulated assumptions, the Group is now building frameworks for a vision and business model that can withstand the forces of a constantly shifting marketplace.

WHERE B2B AND B2C SERVICES COALESCE The CSK Group is now launching a full line of e-Services. Underpinning these services are an extensive knowledge of B2C businesses and many years of experience in B2B e-Services. Several Group companies offer B2C services: CSK ELECTRONICS, ISAO, ASCII and SEGA. Restoring financial soundness is now the number-one priority at these companies. Further ahead, the Group is to be realigned to reflect the maturity of each targeted consumer market segment and the role of these companies within the Group. The ultimate objective is clear: Provide a diversified array of services to a broad range of clients, from companies to households and individuals.

15 CSK CORPORATION Annual Report 2001

BOARD OF DIRECTORS AND CORPORATE AUDITORS

Yoshiji Fukushima Masahiro Aozono Teiichi Aruga Makoto Sakagawa Takashi Miyano Chairman President Executive Vice President Executive Vice President Vice President

Yoshito Fukuyama Keiji Azuma Hiromichi Tabata Shozo Hirose Masatoshi Toriihara Masanori Furunuma Senior Managing Director Senior Managing Director Managing Director Managing Director Managing Director Managing Director

Chairman Yoshiji Fukushima Directors Kazuhiko Nishioka Senshi Ogawa President Masahiro Aozono Yoshinobu Hayashi Masahiko Suzuki Executive Vice Presidents Teiichi Aruga Hiroshi Tsujikawa Makoto Sakagawa Shigeki Date Katsushi Toki Vice President Takashi Miyano Sadayuki Nomura Hidekazu Yukawa Senior Managing Directors Yoshito Fukuyama Yujiro Sato Keiji Azuma Standing Statutory Auditor Yoshiyasu Genma Managing Directors Hiromichi Tabata Shozo Hirose Corporate Auditors Toshio Nakajima Masatoshi Toriihara Yoshiyuki Minegishi Masanori Furunuma Hidetoshi Masunaga

(As of October 1, 2001)

16 CSK CORPORATION Annual Report 2001

CONSOLIDATED SIX-YEAR SUMMARY CSK CORPORATION and Consolidated Subsidiaries For the years ended March 31, 1996, 1997, 1998, 1999, 2000 and 2001

Millions of Yen (except per share amounts) 1996 1997 1998 1999 2000 2001 For the year: Sales and operating revenue ...... ¥ 103,563 ¥ 136,459 ¥ 211,004 ¥ 223,715 ¥409,747 ¥ 418,601 Operating costs ...... 78,644 104,266 173,386 186,700 342,555 347,211 Selling, general & administrative expenses ...... 23,863 27,777 30,987 28,801 56,865 62,076 Operating income ...... 1,056 4,416 6,631 8,214 10,327 9,314 Income (loss) before income taxes and minority interests ...... (7,079) (5,532) (18,834) (14,891) 8,075 (16,775) Net loss ...... (7,811) (8,898) (20,284) (17,386) (5,517) (21,354)

At year-end: Total assets ...... 262,805 282,489 220,261 190,484 383,049 382,523 Total shareholders' equity ...... 124,945 120,105 98,850 80,457 104,391 85,099 Interest-bearing debt ...... 108,972 119,088 67,943 52,873 149,186 151,789 Working capital ...... 21,433 21,501 14,524 13,676 22,121 (38,921)

Per share (Yen) (Note): Net loss ...... ¥ (121.81) ¥ (138.75) ¥ (317.54) ¥ (273.37) ¥ (88.10) ¥ (287.04) Cash dividends...... 12.00 12.00 15.00 12.00 12.00 12.00 Total shareholders' equity ...... 1,948.23 1,872.75 1,550.02 1,266.79 968.44 1,139.26

Total outstanding shares ...... 64,133,235 64,133,235 64,133,845 64,133,845 64,700,164 74,700,164

Note: Per share figures are in exact yen.

17 CSK CORPORATION Annual Report 2001

CONSOLIDATED FINANCIAL REVIEW

OVERVIEW In fiscal 2001, ended March 31, 2001, the CSK Group made a concerted effort to expand its operations, placing top priority on e-Services. Consolidated net sales and operating revenue increased 2.2% to ¥418.6 billion, while operating income decreased 9.8% to ¥9.3 billion. The CSK Group posted a net loss of ¥21.4 billion, reflecting a loss on the write-down of investments in securities at CSK CORPORATION, restructuring expenses relating to certain consolidated subsidiaries and other items. While a significant loss was recorded for fiscal 2001, the restructuring of major CSK Group companies has enabled CSK to elimi- nate nearly all factors that were posing a risk to its business. CSK believes that its results are now moving onto a recovery footing.

NET SALES AND OPERATING REVENUE In fiscal 2001, consolidated net sales and operating revenue were ¥418.6 billion, a year-on-year increase of 2.2%. Sales at the parent company rose by ¥19.1 billion, primarily due to demand for systems development services. Sales from information services businesses increased by ¥20.7 billion. Here, steady sales were recorded in systems development services, contact center operations, network- related information processing services and equipment sales at the following Group information services companies: CSK Network Systems Corporation, Japan Future Information Technology & Systems Co., Ltd. (JFITS), NextCom K.K., ServiceWare Corporation (SWC), and Bellsystem24, Inc. Negating these sales increases to a certain extent, however, were sluggish consumer PC sales at CSK ELECTRONICS CORPORATION, and lower year-on-year sales at CSK Software, Inc., ASCII CORPORATION and other subsidiaries.

OPERATING INCOME Consolidated operating income decreased ¥1.0 billion to ¥9.3 billion. Non-consolidated operating income climbed ¥4.8 billion to ¥11.6 billion, while information services subsidiaries also recorded higher operating income due to sales increases and other factors. On the other hand, ISAO Corporation, which launched full-fledged business activities during the year under review, recorded an operating loss on account of delays in introducing fee-based services, lackluster advertising revenues, and depreciation of fixed assets. Slow PC sales to the consumer market at CSK ELECTRONICS and an increase in the amortization of goodwill also contributed to the overall decline in consolidated operating income.

OTHER INCOME (EXPENSES) Other income (expenses)—net amounted to an expense of ¥26.1 billion, an increase of ¥23.8 billion year on year, due to a number of factors. Equity in net loss of unconsolidated subsidiaries and affiliates climbed ¥6.4 billion to ¥17.4 billion. This was mainly the result of substantial losses posted by equity-method affiliate SEGA, which posted a sluggish performance in its consumer business and took radical restructuring measures in the year under review. In addition, the Group booked a ¥5.5 billion loss on the write-down of investments in securities. A ¥4.9 billion gain on sales of investments in securities and a ¥5.5 billion loss on write-down of investments in securities were recorded principally at the parent company. Others, net came to a loss of ¥7.7 billion. This chiefly comprised a ¥4.2 billion loss incurred from restructuring the game software business of ASCII, losses on the disposal of fixed assets and inventories relating to the integration of stores mainly at CSK ELECTRONICS, and a ¥3.2 billion provision for allowances for doubtful accounts following client insolvencies.

18 CSK CORPORATION Annual Report 2001

As a result of the above factors, the Group recorded a loss before income taxes and minority interests of ¥16.8 billion, and a subsequent net loss of ¥21.4 billion.

SEGMENT INFORMATION Computer Services Sales in the computer services segment, including inter-segment transactions, increased 10.3% year on year to ¥207.9 billion. Systems development service sales at the parent company rose sharply on the back of steady orders from the financial sector and other areas. Exhaustive efforts were also made to monitor the progress of projects and manage costs. The result was an increase in the operating income margin from 5.1% to 8.9%. At consolidated subsidiaries, ISAO’s results were hurt by a delay in launching businesses. How- ever, higher earnings were recorded at Bellsystem24, CSK Network Systems, SWC, JFITS and other subsidiaries. Operating income, however, declined 33.7% to ¥4.1 billion. Chief factors included an operating loss at ISAO due to delays in introducing fee-based services, lackluster advertising revenues and depreciation of fixed assets, and a poor performance from ASCII’s network-related content business.

Computer and Other Product Sales Segment sales decreased 11.2% year on year to ¥125.5 billion, while operating income declined 23.3% to ¥4.0 billion. Lackluster sales to the consumer market at CSK ELECTRONICS were the main reason for the less-than-stellar performance. On the upside, a steady flow of orders into the parent company lifted sales as CSK promoted businesses combining this segment with computer services. Furthermore, Group subsidiary NextCom put in a strong performance in fiscal 2001 following its IPO in September 2000.

Prepaid Card Sales Sales in this segment, for which consolidated subsidiary Japan Card Center Kaisha is primarily responsible, increased 4.8% to ¥53.3 billion, mainly reflecting higher sales of prepaid gift cards. Amortization of goodwill and other factors, however, resulted in an operating loss of ¥0.2 billion, a year-on-year decline of ¥0.2 billion. Although this segment recorded an operating loss, this reflected the application of a particular accounting standard in fiscal 2001. On a non-consolidated basis, Japan Card Center continued to deliver stable operating income.

Publication Segment sales increased 3.8% to ¥32.0 billion, while operating income rose 12.3% year on year to ¥0.2 billion. The main component of segment business is the publication of magazines and books relating to IT and entertainment, which are produced and sold by ASCII and its subsidiaries. This segment’s performance was underpinned by strong sales of PC magazines for beginners and interme- diate-level users, and of Mook, a magazine sold with a CD-ROM.

19 CSK CORPORATION Annual Report 2001

Others This segment primarily comprises the venture capital business conducted by CSK Venture Capital Co., Ltd. (CSK VC) and building lease operations at the parent company. Segment sales surged to ¥3.4 billion in fiscal 2001, a year-on-year increase of 82.7%. Operating income rose 47.5% to ¥1.3 billion. The favorable results were attributable to a strong performance from CSK VC’s investment business.

Millions of Yen 1999 2000 2001 SALES AND OPERATING REVENUE Computer service ...... ¥126,730 ¥188,441 ¥207,928 Computer and other product sales ...... 44,848 141,317 125,534 Prepaid card sales ...... 52,125 50,862 53,327 Publication ...... – 30,796 31,985 Others ...... 1,251 1,883 3,441 Total ...... 224,954 413,299 422,215 Elimination and corporate ...... (1,239) (3,552) (3,614) Consolidated total...... 223,715 409,747 418,601

Millions of Yen 1999 2000 2001 OPERATING INCOME Computer service ...... ¥ 5,687 ¥ 6,106 ¥ 4,050 Computer and other product sales ...... 2,035 3,283 4,047 Prepaid card sales ...... (193) (64) (212) Publication ...... – 139 155 Others ...... 663 863 1,274 Total ...... 8,192 10,327 9,314 Elimination and corporate ...... 22 – 0 Consolidated total...... 8,214 10,327 9,314

FINANCIAL POSITION At the fiscal year-end, total assets stood at ¥382.5 billion, down marginally on a year earlier. Total current assets declined ¥36.0 billion from a year ago. Cash decreased ¥33.7 billion year on year on account of the purchase of shares in SEGA through a private placement in April 2000, although a substantial improvement in cash flows from operating activities was recorded due to higher operating income at computer services companies. Furthermore, marketable securities were reclassified as fixed assets owing to the application of a new accounting standard for financial instruments.

20 CSK CORPORATION Annual Report 2001

Property, plant and equipment, net of accumulated depreciation fell ¥1.2 billion, attributable mainly to the sale of land owned by the parent company. The amortization of goodwill and other items contributed to a ¥7.7 billion decline in intangible fixed assets. Investments and other assets increased ¥45.2 billion year on year. This reflected three main factors: an increase in investments in unconsolidated subsidiaries and affiliates due principally to the purchase of shares in SEGA through a private placement; a decline in investments in affiliates due to equity in loss of unconsolidated subsidiaries and affiliates; and the reclassification of marketable securities as investment securities owing to the application of a new accounting standard for financial instruments. In liabilities, the current portion of convertible bonds payable, and convertible bonds payable in long-term liabilities, both declined. This was attributable to the redemption of convertible bonds by the parent company and the reclassification of convertible bonds in current liabilities, respectively. Commercial paper increased to ¥20.0 billion due to the procurement of short-term funding by the parent company. Shareholders’ equity was ¥85.1 billion, a year-on-year decrease of ¥19.3 billion due to the Group recording a ¥21.4 billion net loss. The shareholders’ equity ratio fell approximately 5 percentage points to 22.2%.

CASH FLOWS Cash Flows From Operating Activities Net cash provided by operating activities improved significantly to ¥15.3 billion, up ¥9.4 billion year on year. This was primarily the result of higher cash flows at the parent company, which posted record sales, operating income and ordinary income in fiscal 2001, and the computer services subsidiaries NextCom, JFITS, SWC, JIEC Co., Ltd., CSK Network Systems and Bellsystem24.

Cash Flows From Investing Activities Net cash used in investing activities was ¥40.5 billion, reflecting outflows of ¥50.7 billion at the parent company for the purchase of shares in SEGA through a private placement, and investments in facilities for network-related businesses at Group subsidiaries.

Cash Flows From Financing Activities Net cash provided by financing activities was ¥7.3 billion. Cash was provided by the procurement of short-term funds via commercial paper at the parent company, and funds were raised from the listing of NextCom shares on NASDAQ Japan in September 2000. These inflows were offset, however, mainly by redemption of bonds by the parent company. As a result of the foregoing, cash and cash equivalents at the end of the year were ¥77.5 billion, a ¥17.7 billion decline from a year earlier.

21 CSK CORPORATION Annual Report 2001

CONSOLIDATED BALANCE SHEETS CSK CORPORATION and Consolidated Subsidiaries As of March 31, 2000 and 2001

Thousands of U.S. Dollars Millions of Yen (Note 1) ASSETS 2000 2001 2001 Current assets: Cash (Notes 2 (3) and 3) ...... ¥ 98,919 ¥ 65,237 $ 526,527 Notes and accounts receivable ...... 65,374 71,469 576,832 Marketable securities (Notes 2 (4), 3 and 4)...... 31,031 20,535 165,739 Venture capital investments...... 3,194 3,906 31,526 Inventories (Notes 2 (7) and 5) ...... 19,106 18,420 148,669 Deferred income taxes (Notes 2 (13) and 12) ...... 2,219 4,850 39,143 Other current assets ...... 9,900 8,892 71,764 Allowance for doubtful accounts (Note 2 (6)) ...... (1,123) (718) (5,795) Total current assets ...... 228,620 192,591 1,554,405

Property and equipment, net of accumulated depreciation (Notes 2 (8) and 7) . . . . . 41,536 40,380 325,909

Deferred charges and intangible assets (Note 2 (9)) ...... 22,785 15,128 122,096

Investments and other assets: Investments in unconsolidated subsidiaries and affiliates (Note 6) ...... 28,000 59,487 480,118 Investments in securities (Notes 2(4) and 4) ...... 25,340 37,650 303,878 Long-term loans ...... 6,908 5,316 42,903 Other assets ...... 40,671 38,750 312,758 Allowance for doubtful accounts (Note 2 (6)) ...... (11,720) (6,779) (54,715) 89,199 134,424 1,084,942

Foreign currency translation adjustments (Note 2(2)) ...... 909 ––

Total assets ...... ¥383,049 ¥382,523 $3,087,352

The accompanying notes are an integral part of these statements.

22 CSK CORPORATION Annual Report 2001

Thousands of U.S. Dollars Millions of Yen (Note 1) LIABILITIES AND SHAREHOLDERS’ EQUITY 2000 2001 2001 Current liabilities: Notes and accounts payable ...... ¥ 39,288 ¥ 39,683 $ 320,277 Short-term bank loans payable (Note 8) ...... 105,081 104,716 845,168 Current portion of convertible bonds payable (Note 8) ...... 11,927 6,683 53,939 Commercial paper (Note 8) ...... 2,000 20,000 161,421 Accrued income taxes ...... 2,449 7,577 61,152 Unearned revenue (Note 2 (15)) ...... 14,755 19,414 156,689 Accrued bonuses to employees (Note 2 (10)) ...... 5,338 6,063 48,937 Other current liabilities (Note 2 (14)) ...... 25,661 27,376 220,956 Total current liabilities ...... 206,499 231,512 1,868,539

Long-term liabilities: Convertible bonds payable (Note 8) ...... 10,373 4,190 33,818 Long-term bank loans payable (Note 8) ...... 19,805 16,200 130,748 Accrued employees’ retirement benefits (Notes 2 (11) and 11) ...... 1,130 4,162 33,592 Other long-term liabilities ...... 7,049 6,406 51,707 Total long-term liabilities ...... 38,357 30,958 249,865

Minority interests ...... 33,802 34,954 282,111

Commitments and contingencies (Notes 2 (16), 9, and 15)

Shareholders’ equity: Common stock, par value, ¥50 per share— Authorized: 221,500,000 and 298,000,000 shares at March 31, 2000 and 2001, respectively Issued: 64,700,164 and 74,700,164 shares at March 31, 2000 and 2001, respectively ...... 47,589 69,029 557,135 Unissued common shares ...... 42,870 –– Additional paid-in capital...... 57,365 78,795 635,953 Accumulated deficit ...... (39,910) (62,220) (502,177) Unrealized gains on securities (Notes 2 (4) and 4)...... – 1,753 14,146 Foreign currency translation adjustments (Note 2 (2)) ...... – (2,251) (18,168) Treasury stock, at cost ...... (3,523) (7) (52) Total shareholders’ equity ...... 104,391 85,099 686,837 Total liabilities and shareholders’ equity ...... ¥383,049 ¥382,523 $3,087,352

23 CSK CORPORATION Annual Report 2001

CONSOLIDATED STATEMENTS OF OPERATIONS CSK CORPORATION and Consolidated Subsidiaries For each of the three years in the period ended March 31, 2001

Thousands of U.S. Dollars Millions of Yen (Note 1) 1999 2000 2001 2001 Sales and operating revenue (Note 2 (15)) ...... ¥223,715 ¥409,747 ¥418,601 $3,378,538

Costs and expenses: Operating costs (Note 13) ...... 186,700 342,555 347,211 2,802,347 Selling, general and administrative expenses (Notes 2(12) and 13) . . . 28,801 56,865 62,076 501,014 Operating income ...... 8,214 10,327 9,314 75,177

Other income (expenses): Interest and dividend income ...... 786 1,313 1,020 8,230 Interest expenses...... (1,938) (3,212) (3,206) (25,880) Gain on sales of marketable securities ...... 1,961 3,485 –– Gain on sales of investments in securities ...... 41 4,920 4,897 39,521 Loss on write-down of marketable securities ...... (186) – –– Loss on write-down of investments in securities ...... (177) (896) (5,473) (44,176) Write-down of inventories ...... – (1,562) (146) (1,175) Dilution gain (Notes 2 (1) and 14) ...... - 9,587 1,904 15,365 Equity in net losses of unconsolidated subsidiaries and affiliates (Note 6) ...... (22,451) (10,935) (17,406) (140,487) Cumulative effect of accounting change (Note 2 (15)) ...... (2,051) - -- Others, net ...... 910 (4,952) (7,679) (61,970) Income (loss) before income taxes and minority interests ...... (14,891) 8,075 (16,775) (135,395)

Income taxes (Notes 2 (13) and 12): Current ...... 2,086 5,976 11,385 91,891 Deferred ...... – 4,811 (7,101) (57,317) 2,086 10,787 4,284 34,574 Loss before minority interests ...... (16,977) (2,712) (21,059) (169,969) Minority interests in subsidiaries ...... (409) (2,805) (295) (2,376)

Net loss ...... ¥ (17,386) ¥ (5,517) ¥(21,354) $ (172,345)

U.S. Dollars Yen (Note 1) Per share information: Basic earnings per share (Note 2 (18)) ...... ¥(273.37) ¥(88.10) ¥(287.04) $(2.32) Cash dividends (Note 2 (18)) ...... ¥ 12.00 ¥ 12.00 ¥ 12.00 $ 0.10

The accompanying notes are an integral part of these statements.

24 CSK CORPORATION Annual Report 2001

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY CSK CORPORATION and Consolidated Subsidiaries For each of the three years in the period ended March 31, 2001

Millions of Yen Foreign Unissued Unrealized currency Common common Additional Accumulated gains on translation Treasury Stock shares paid-in capital deficit securities adjustments stock, at cost Total Balance as of March 31, 1998 ...... ¥ 46,117 ¥ - ¥ 55,893 ¥ (2,003) ¥ – ¥ – ¥ (1,157) ¥ 98,850 Net loss ...... (17,386) (17,386) Increase due to conversion of convertible bonds of affiliates ...... 784 784 Decrease due to changes in subsidiaries and affiliates ...... (4) (4) Cash dividends ...... (955) (955) Directors’ and statutory auditors’ bonuses . . . (14) (14) Purchase of treasury stock, net ...... (818) (818) Balance as of March 31, 1999 ...... 46,117 – 55,893 (19,578) – – (1,975) 80,457 Conversion of convertible bonds ...... 1,472 1,472 2,944 Receipts of funds for issuance of additional shares of common stock ...... 42,870 42,870 Net loss ...... (5,517) (5,517) Cumulative effect of the adoption of the asset and liability method of accounting for income taxes (Note 2(13)) ...... 7,485 7,485 Decrease due to changes in subsidiaries and affiliates ...... (21,468) (21,468) Cash dividends ...... (761) (761) Directors’ and statutory auditors’ bonuses . . . (71) (71) Purchase of treasury stock, net ...... (1,548) (1,548) Balance as of March 31, 2000 ...... 47,589 42,870 57,365 (39,910) – – (3,523) 104,391 Issuance of additional shares of common stock . . 21,440 (42,870) 21,430 - Net loss ...... (21,354) (21,354) Decrease due to changes in subsidiaries and affiliates ...... (48) (48) Foreign currency translation adjustments (Note 2 (2)) ...... (2,251) (2,251) Unrealized gains on securities (Notes 2 (4) and 4) ...... 1,753 1,753 Cash dividends ...... (836) (836) Directors’ and statutory auditors’ bonuses . . . (72) (72) Sales of treasury stock, net ...... 3,516 3,516 Balance as of March 31, 2001 ...... ¥69,029 ¥ - ¥78,795 ¥(62,220) ¥1,753 ¥(2,251) ¥ (7) ¥ 85,099

Thousands of U.S. Dollars (Note 1) Foreign Unissued Unrealized currency Common common Additional Accumulated gains on translation Treasury Stock shares paid-in capital deficit securities adjustments stock, at cost Total Balance as of March 31, 2000 ...... $ 384,092 $346,005 $ 462,991 $ (322,114) $ - $ - $(28,434) $ 842,540 Issuance of additional shares of common stock . . 173,043 (346,005) 172,962 - Net loss ...... (172,345) (172,345) Decrease due to changes in subsidiaries and affiliates ...... (391) (391) Foreign currency translation adjustments (Notes 2 (2)) ...... (18,168) (18,168) Unrealized gains on securities (Notes 2 (4) and 4) ...... 14,146 14,146 Cash dividends ...... (6,749) (6,749) Directors’ and statutory auditors’ bonuses . . . (578) (578) Sales of treasury stock, net ...... 28,382 28,382 Balance as of March 31, 2001 ...... $557,135 $ - $635,953 $(502,177) $14,146 $(18,168) $ (52) $686,837

The accompanying notes are an integral part of these statements. 25 CSK CORPORATION Annual Report 2001

CONSOLIDATED STATEMENTS OF CASH FLOWS CSK CORPORATION and Consolidated Subsidiaries For each of the two years in the period ended March 31, 2001

Thousands of U.S. Dollars Millions of Yen (Note 1) 2000 2001 2001 Cash flows from operating activities: Income (Loss) before income taxes and minority interests ...... ¥ 8,075 ¥(16,775) $(135,395) Adjustments for— Depreciation ...... 5,306 6,593 53,215 Amortization of goodwill ...... 3,420 4,687 37,832 Increase in accrued employees' retirement benefits and other ...... 2,699 5,678 45,827 Interest and dividend income ...... (1,313) (1,020) (8,230) Interest expenses ...... 3,212 3,206 25,880 Equity in net losses of unconsolidated subsidiaries and affiliates ...... 10,935 17,406 140,487 Dilution gain ...... (9,587) (1,904) (15,365) Gain on sales of marketable securities ...... (3,485) –– Gain on sales of investments in securities, net ...... (4,725) (4,551) (36,735) Loss on write-down of investments in securities ...... 896 5,473 44,176 Income from investment partnerships ...... (2,141) (2,975) (24,014) Restructuring expenses ...... – 3,646 29,423 Decrease (Increase) in inventories ...... 3,061 (1,028) (8,296) Increase in venture capital investments ...... (1,180) (345) (2,786) Others ...... (760) 5,998 48,410 Subtotal ...... 14,413 24,089 194,429 Interest and dividend income received ...... 1,313 1,052 8,490 Interest expenses paid ...... (3,338) (3,169) (25,577) Income from settlement of litigation, net...... – 52 418 Payments for restructuring...... – (905) (7,307) Income taxes paid ...... (6,433) (5,781) (46,657) Net cash provided by operating activities ...... 5,955 15,338 123,796 Cash flows from investing activities: Decrease (Increase) in time deposit, net ...... (3,889) 8,109 65,449 Net proceeds from sales and purchases of marketable securities...... 5,178 9,170 74,014 Purchase of property and equipment ...... (4,265) (7,125) (57,511) Proceeds from sale of property and equipment ...... 1,398 3,363 27,140 Purchase of intangible assets ...... (1,049) (2,156) (17,404) Purchase of investments in securities ...... (25,290) (61,335) (495,037) Proceeds from sales of investments in securities ...... 14,131 12,900 104,119 Decrease in short-term loans receivable, net ...... 489 -- Increase in long-term loans receivable ...... (4,159) (318) (2,564) Decrease in long-term loans receivable ...... 45 385 3,110 Others ...... (953) (3,535) (28,529) Net cash used in investing activities ...... (18,364) (40,542) (327,213) Cash flows from financing activities: Increase in short-term bank loans payable, net ...... 28,418 14,798 119,438 Proceeds from long-term debt ...... 3,105 6,396 51,623 Repayment of long-term debt ...... (16,902) (19,320) (155,930) Issuance of common stock ...... 51,149 6,320 51,008 Purchase of treasury stock ...... (1,093) (4,554) (36,758) Proceeds from sales of treasury stock ...... 3,875 4,941 39,881 Cash dividends paid ...... (990) (1,214) (9,803) Others ...... (443) (93) (752) Net cash provided by financing activities ...... 67,119 7,274 58,707 Effect of exchange rate changes on cash and cash equivalents ...... (84) 264 2,129 Net increase (decrease) in cash and cash equivalents ...... 54,626 (17,666) (142,581) Cash and cash equivalents, at beginning ...... 27,160 95,222 768,537 Cash and cash equivalents of initially consolidated subsidiaries, at beginning (Note 2 (1)) . . 14,110 01 Cash and cash equivalents of subsidiaries removed from consolidation, at beginning (Note 2(1)) ...... (674) (29) (234) Cash and cash equivalents, at end (Notes 2 (3) and 3) ...... ¥95,222 ¥ 77,527 $ 625,723

The accompanying notes are an integral part of these statements.

26 CSK CORPORATION Annual Report 2001

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CSK CORPORATION and Consolidated Subsidiaries

1. BASIS OF PRESENTING The accompanying consolidated financial statements of CSK CORPORATION (“CSK”) and Consolidated CONSOLIDATED Subsidiaries (collectively, the “Company”) are basically an English version of those which have been prepared FINANCIAL in accordance with accounting principles and practices generally accepted in Japan and filed with the STATEMENTS: Japanese Ministry of Finance as a part of the Annual Security Report (a Japanese equivalent of Form 10-K in the U.S.). The accounting records of CSK and its domestic consolidated subsidiaries and affiliates accounted for under the equity method are maintained in accordance with the provisions set forth in the Japanese Commercial Code and in conformity with accounting principles and practices generally accepted in Japan, which are different in certain respects as to application and disclosure requirements from International Accounting Standards. The accounting records of overseas consolidated subsidiaries and affiliates accounted for under the equity method are maintained in accordance with generally accepted accounting principles prevailing in the respective regions in which they were incorporated. In general, no adjustments on the accounts of overseas consolidated subsidiaries are reflected in the accompanying consolidated financial statements to comply with the Japanese accounting principles and practices followed by CSK and domestic consolidated subsidiaries. The accompanying consolidated financial statements incorporate certain reclassifications of figures from those included in the Annual Security Report in order to present in a form more familiar to the readers outside Japan. In addition, the notes to consolidated financial statements include certain information which is not required under generally accepted accounting principles and practices in Japan but is presented herein as additional information. The accompanying consolidated financial statements are not intended to present the consolidated financial position and the results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan. The amounts presented in the consolidated financial statements are rounded to the nearest million yen. The U.S. dollar amounts in the accompanying consolidated financial statements are included solely for convenience of readers outside Japan. The rate of ¥123.90=US$1.00, the rate of exchange on March 30, 2001, has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen has been or could be readily converted, realized or settled into U.S. dollars at that rate or any other rate. Certain amounts in the accompanying consolidated financial statements from prior years have been reclassified to conform to the current year presentation.

2. SUMMARY OF (1) Consolidation and investments in affiliates— SIGNIFICANT The accompanying consolidated financial statements include the accounts of CSK and its subsidiaries ACCOUNTING POLICIES: under its control. Effective April 1, 1999, the Company modified its approach for identification of consolidated subsidiaries and affiliates from the percentage-of-ownership approach to the effective control approach, in accordance with “Implementation Guideline on Revised Definition of Subsidiaries and Affiliates for Consolidated Financial Statements” issued by the Business Accounting Deliberation Council in October 30, 1998. Under the percentage-of-ownership approach, the determination as to whether a company would be consolidated or accounted for under the equity method was made solely on the percentage of ownership by CSK. Under the effective control approach, companies controlled by CSK are consolidated regardless of the ownership percentage, and companies influenced by CSK in material degree on their financial, operating, or business policies through investment, personnel, financing, technology, trading or other relationships are accounted for as affiliates regardless of the ownership percentage.

27 CSK CORPORATION Annual Report 2001

The list of consolidated subsidiaries as of and for the year ended March 31, 2001 is as follows: Name of subsidiary Domestic Subsidiaries: Business Extension Corporation JIEC Co., Ltd. CSI Co., Ltd. Super Software Co., Ltd. NextCom K.K. ServiceWare Corporation Digital Media Lab Corporation CSK Network Systems Corporation Japan Card Center Kaisha Japan Future Information Technology & Systems Co., Ltd. CSK Field Services Co., Ltd. Bellsystem24, Inc. CSK Venture Capital Co., Ltd. CVC Business Co., Ltd. CSK ELECTRONICS CORPORATION J-NODE Co., Ltd. ASCII Corporation ENTERBRAIN, INC.* ASCII NT, INC. ASCII EC Co., Ltd. Aspect, Inc. ISAO Corporation

Overseas Subsidiaries: CSK Computer Services (Canada) Ltd. CSK Software (Europe), B.V. CSK Computer Services (Hong Kong) Limited CSK Singapore Pte Ltd. CSK Australia Pty Limited CSK (UK) Limited CSK (Schweiz) AG CSK Spain, S.A. CSK Computer Services Kaisha (Deutschland) GmbH CSK Belgium N.V. CSK France, S.A. CSK Software (Ireland) Limited CSK Software, Inc. CSK Software, N.A., Inc. CSK North Europe, B.V. CSK South Europe, B.V. CSK Electronics Hong Kong Ltd. CSK Electronics America, Inc. * ENTERBRAIN, INC has come to have materiality in the consolidated financial statements of the Company and therefore is newly consolidated from this fiscal year. ASCII Laboratories, Inc., V. M. Technology Corporation and CSK Portugal Technologias De Informacio, L.D.A. were in liquidation and excluded from consolidation at the beginning of the year. T-ZONE Corporate & Research, Inc. was sold and excluded from consolidation from this fiscal year. Loss from operation and cash flows during the phase-out period were included in the consolidated statements of operations and the consolidated statements of cash flows, respectively.

28 CSK CORPORATION Annual Report 2001

CSK accounts for investments in non-consolidated subsidiaries and affiliates under the cost method as their total assets, sales, net income, and retained earnings are immaterial to the consolidated financial statements of the Company. JIEC Co., Ltd., ISAO Corporation, and all overseas subsidiaries have fiscal year-ends of December 31. Bellsystem24, Inc, which has a fiscal year-end of May 31, has performed tentative annual closing and prepared financial statements as of and for the year ended February 28, 2001 for consolidation purposes. All other subsidiaries have March 31 year-ends. Subsidiaries are consolidated based on their respective fiscal year- ends except for Bellsystem24, Inc., which is consolidated as of and for the year ended February 28, 2001. Necessary adjustments have been recorded to the accompanying consolidated financial statements for significant transactions during the period between these subsidiaries’ fiscal year-ends and the balance sheet dates. All significant intercompany transactions and accounts and unrealized intercompany profits are eliminated on consolidation. On occasion, a consolidated subsidiary or an affiliate accounted for under the equity method may issue its common shares to third parties as either a public offering or upon conversion of convertible bonds, or may acquire its treasury stock. Such transactions resulted in reduction of the Company’s ownership position of the subsidiary or the affiliate. With respect to such transactions, the resulting gains and losses arising from the change in interest are recognized as “Dilution gain (loss)” for the year the change in interest transaction occurs. Effective from the year ended March 31, 2000, the assets and liabilities of a newly consolidated subsidiary are marked to fair value at the time CSK is deemed to have gained control. The material excess of cost over such value of investments in a subsidiary is recognized as goodwill and is amortized over 5 years. The slight excess, whereas, is fully charged to income as amortization of goodwill for the year such transaction occurs. Amortization of goodwill is included in “Selling, general and administrative expenses” in the consolidated statements of operations.

(2) Translation of foreign currency balances and transactions— Foreign currency transactions are translated using foreign exchange rate prevailing at the transaction dates. Short-term and long-term receivables and payables denominated in foreign currencies were translated at the current exchange rate at the balance sheet date. A revised accounting standard for foreign currency transactions was effective April 1, 2000. This revision requires that long-term receivables and payables denominated in foreign currencies be translated at the current exchange rates at the balance sheet date, which were formerly translated at the exchange rate prevailing at the transaction dates; unrealized gains and losses are charged to other income (expenses). No significant impact was resulted from this change, compared with what would have been under the former method. All the assets and liabilities of foreign subsidiaries and affiliates are translated at current rates at the respective balance sheet dates. All the income and expense accounts are also translated at current rates at the respective balance sheet dates. Under the revised accounting standard, adjustments arising from translating financial statements of overseas subsidiaries denominated in foreign currencies into Japanese yen, which were recorded as a component of assets in the previous fiscal year, are recorded as a component of shareholders’ equity and minority interests in the consolidated balance sheet.

(3) Cash and cash equivalents— For the purpose of the consolidated statements of cash flows, “Cash and cash equivalents” consist of cash on hands, demand deposits, and certain investments with original maturity of three months or less with virtually no risk of loss of values. Presentation of the consolidated statement of cash flows was not required at March 31, 1999, and prior.

(4) Marketable securities and investments in securities— Prior to April 1, 2000, “Marketable securities” were stated at the lower of cost or market; cost being determined using the moving-average method. Other securities were stated at cost; cost being determined using the moving-average method.

29 CSK CORPORATION Annual Report 2001

Effective April 1, 2000, the new accounting standard for financial instruments was applied by the Company. The standard requires all applicable securities to classified and accounted for, depending on management’s intent, as follows: Trading securities, which are held for the purpose of earning capital gains in near time, are reported at fair value, and the related unrealized gains and losses are included in earnings. The Company has no trading securities as of March 31, 2001. Held-to-maturity securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity, are reported at amortized cost. Securities other than trading securities and held-to-maturity securities are classified as available-for-sale. Available-for-sale securities that are publicly traded are reported at fair market value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of shareholders’ equity. Available-for-sale securities that are not publicly traded are stated at cost; cost being determined using the moving-average method. Due to the change of the accounting standard, loss before income taxes for the year ended March 31, 2001 decreased by ¥4,175 million and as of March 31, 2001, unrealized gains on securities increased by ¥1,753 million, deferred tax liabilities-current increased by ¥444 million, deferred tax liabilities-noncurrent increased by ¥828 million, and minority interests decreased by ¥143 million, in comparison with those based on the former method. In addition, the Company’s intent to hold securities at the beginning of the year was examined. Among debt securities included in available-for-sale securities, those with maturities within one year were recorded as “Marketable securities” under current assets, and those with maturities over one year were recorded as “Investments in securities.” As a result, ¥11,902 million in securities were transferred from “Marketable securities” to “Investments in securities.”

(5) Derivatives and hedging activities— The Company use derivative financial instruments to manage their exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts, foreign currency options, foreign currency swaps, interest rate swaps and interest rate caps are utilized by the Company to reduce foreign exchange and interest rate risks. The Company do not enter into derivatives for trading purposes or speculative purposes. Effective April 1, 2000, the Company adopted a new accounting standard for financial instruments and a revised accounting standard for foreign currency transactions. These standards require that: a) all derivatives be recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are included in earnings and b) for derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until the maturity of the hedged transactions. With regard to accounting method for hedge transaction, deferred hedge accounting is adopted. The adoption of the new accounting standards for financial instruments did not have a material effect on the accompanying consolidated financial statements.

(6) Allowance for doubtful accounts— “Allowance for doubtful accounts” is maintained for the amounts deemed uncollectible based on solvency analyses and for estimated delinquency based on collection rates projected from historical credit loss experiences, and for the amounts to cover specific accounts that are estimated to be uncollectible.

(7) Inventories— Items in “Inventories” are principally stated at cost, cost being determined using the specific identification or moving-average methods.

(8) Property and equipment— “Property and equipment”, including significant renewals and improvements, are carried at cost less accumulated depreciation. Maintenance and repairs including minor renewals and betterments are charged to income as incurred. For CSK and domestic subsidiaries, depreciation is computed using the declining-balance method at rates based on the estimated useful lives of the assets which are prescribed by the Japanese Income Tax Laws, except for buildings acquired after April 1, 1998 which are depreciated using the straight-line method. For overseas subsidiaries, depreciation is computed using the straight-line method over the estimated useful lives of the assets.

30 CSK CORPORATION Annual Report 2001

(9) Deferred charges and intangible assets— “Deferred charges and intangible assets”, including capitalized software costs and goodwill, are carried at cost less accumulated amortization. Capitalized costs for software for internal use are amortized using the straight-line method over the estimated useful life of the software. Goodwill is amortized using the straight-line method over 5 years. Costs associated with issuance of common shares are expensed as incurred.

(10) Accrued bonuses to employees— “Accrued bonuses to employees” represent bonuses to employees expected to be paid for their services rendered prior to the balance sheet date.

(11) Accrued employees’ retirement benefits— CSK Corporation and its consolidated subsidiaries have employees’ pension fund, tax-qualified pension plan and lump-sum retirement payment plan as defined benefits plan covering substantially all of their employees. Employees are entitled to lump-sum indemnities upon termination of employment with the Company or to pension payments. The amount paid is calculated based on factors such as length of services, basic rates of pay and conditions under which the terminations occur. The new Japanese accounting standard for retirement benefits became effective April 1, 2000. As required by this standard, the Company reported “Accrued employees’ retirement benefits” as the unfunded accrued pension costs on the consolidated balance sheet. “Accrued employees’ retirement benefits”, the cumulative accrued net pension cost in excess of cumulative employer contributions, are calculated based on the estimated retirement obligations less estimated plan assets at the end of this fiscal year. Net transition amount at adoption of new accounting standard for the retirement benefits is amortized mainly over 15 years using the straight-line method. Unrecognized actuarial net loss will be amortized mainly using the straight-line method over the average remaining service period and amortization will be started from the next fiscal year. As a result of this change, for the year ended March 31, 2001, pension and severance costs increased by ¥3,023 million, operating income decreased by ¥1,020 million, and loss before income taxes increased by ¥3,607 million, compared with what would have been under the former method. “Accrued employees’ retirement benefits” in the previous year and retroactive allowance for past services rendered are included in “Accrued employees’ retirement benefits”.

(12) Research and development costs— Research and development costs are charged to income as incurred.

(13) Income taxes— Effective April 1, 1999, the Company adopted the asset and liability method for accounting for income taxes. This method recognizes deferred income tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. As of and for the year ended March 31, 1999 income taxes are provided based on amounts required by the tax returns for the respective year. This change resulted for the year ended March 31, 2000 in an increase in net loss of ¥4,811 million and in the cumulative effect of ¥7,485 million at April 1, 1999 of an accounting change to be credited directly to accumulated deficit as reflected in the consolidated statements of shareholders’ equity.

(14) Consumption taxes— Consumption taxes are imposed at a flat rate of 5% on all domestic consumption of goods and services. The consumption taxes imposed on the Company’s sales to customers are withheld by the Company at the time of sale and are paid to the national government subsequently. The consumption taxes withheld from sales are not included in “Sales and operating revenue” but are recorded as a liability and included in “Other current liabilities.” The consumption taxes imposed on the Company’s purchases of products, merchandise and services from vendors are not included in costs and expenses but are offset against consumption taxes withheld.

31 CSK CORPORATION Annual Report 2001

(15) Revenue recognition— a) Computer services: The Company provides customers with services relating to programming, software development for EDP systems, computer operations and various data processing. The services are provided either under fixed- amount contracts or hourly-rate contracts. Under the fixed-amount contracts, the Company recognizes revenue when the services are completed and accepted by the customers. Under the hourly-rate contracts, the Company recognizes revenue as it is accrued by multiplying the agreed rates by the number of hours worked. Revenue for data entry services is determined by multiplying the fixed-rate by the volume of processed data. b) Computer and other product sales: Overseas sales are recorded at the time of shipment. Domestic sales of computers and related supplementary equipment are recorded at the time of acceptance by the customers. Domestic retail sales of personal computers, auxiliary parts and other items are recorded at the time of shipment. c) Publication: Sales of books and magazines are recorded when goods are shipped. Advertising revenue is recognized when magazines containing customers’ advertisement are shipped. Sales returns and allowances are recorded as a reduction to gross profits. d) Prepaid card sales: The Company recognizes sales of prepaid cards at face amounts when they are issued. Cost of sales is recorded based on the actual usage of the cards. At the end of a year, the Company would record additional cost of sales and unearned revenue for the unused portion of the cards, thereby reversing, in effect, the sales for the unused portion. For the year ended March 31, 1998 and prior, the Company estimated the unused portion at year-end based on a method that did not consider the year in which the cards were sold. Effective April 1, 1998, the Company changed its method of estimating the unused portion to that which takes into consideration the year in which the cards were sold. Both methods are in accordance with the Japanese Tax Law. This change resulted in a decrease in operating income of ¥482 million and recognition of ¥2,051 million in the “Cumulative effect of an accounting change” for the year ended March 31, 1999, and losses before income taxes increased by ¥2,533 million in comparison with those based on the former method.

(16) Leases— Finance leases, other than those which are deemed to transfer the ownership of the leased assets to lessees, are accounted for by a method similar to that used for ordinary operating leases.

(17) Appropriation of (accumulated deficit) retained earnings— Appropriation of (accumulated deficit) retained earnings reflected in the accompanying consolidated financial statements is recorded after approval by the shareholders as required by the Japanese Commercial Code.

(18) Dividends and earnings per share— The amount of dividends distributed is determined based on unrestricted retained earnings on a non- consolidated balance sheet. “Basic earnings per share” is computed by dividing loss applicable to “Common stock” by weighted-average number of shares of common stock outstanding during each year. “Diluted earnings per share” reflects the potential dilution that could occur if dilutive securities and other contracts to issue common shares were exercised or converted into common shares. “Diluted earnings per share” for each of the three years in the period ended March 31, 2001 are not presented as the Company reported a net loss in these years.

32 CSK CORPORATION Annual Report 2001

3. CONSOLIDATED (1) Reconciliation of “Cash” to “Cash and cash equivalents”— STATEMENTS OF CASH “Cash” at March 31, 2000 and 2001 on the consolidated balance sheets and “Cash and cash equivalents” at FLOWS: March 31, 2000 and 2001 on the consolidated statements of cash flows are reconciled as follows: Thousands of Millions of Yen U.S. Dollars 2000 2001 2001 Cash ...... ¥98,919 ¥65,237 $526,527 Marketable securities ...... 31,031 20,535 165,739 Less: Time deposits with original maturities of more than three months or those submitted as collateral for loans . . . (9,065) (818) (6,598) Less: Cash in escrow accounts ...... (511) (3) (24) Less: Equity securities and other marketable securities with original maturities of more than three months ...... (25,152) (7,424) (59,921)

Cash and cash equivalents ...... ¥95,222 ¥77,527 $625,723

(2) Significant non-cash transactions— During the year ended March 31, 2000, “Common stock” and “Additional paid-in capital” increased by ¥1,473 million, and ¥1,471 million, respectively, due to the conversion of convertible bonds payable. The Company sold shares of Vision Tech Ltd. to Broadcom Corporation and received shares of Broadcom Corporation as proceeds in January, 2001. As a result, gain on sales of investments in securities of ¥4,000 million was recorded on the consolidated statement of operations for the year ended March 31, 2001. During the year ended march 31, 2001, equity securities of ¥3,008 million were distributed by the investment partnerships.

Expenditure for acquisition of treasury stock by consolidated subsidiaries is included in “Purchase of treasury stock.”

4. MARKETABLE “Marketable securities” and “Investments in securities,” of which the aggregate costs, unrealized gains and SECURITIES AND losses and fair market values pertaining to held-to-maturity securities and available-for-sale securities as of INVESTMENTS IN March 31, 2001 were as follows: SECURITIES: Millions of Yen Unrealized Unrealized Fair market Cost gains losses value Securities classified as: Available-for-sale— Equity securities ...... ¥14,259 ¥3,196 ¥1,551 ¥15,904 Debt securities ...... 8,579 235 1,263 7,551 ¥22,838 ¥3,431 ¥2,814 ¥23,455 Held-to-maturity— Debt securities ...... ¥12,785 ¥ 187 ¥ 34 ¥12,938

Thousands of U.S. Dollars Unrealized Unrealized Fair market Cost gains losses value Securities classified as: Available-for-sale— Equity securities ...... $115,087 $25,800 $12,520 $128,367 Debt securities ...... 69,241 1,894 10,196 60,939 $184,328 $27,694 $22,716 $189,306 Held-to-maturity— Debt securities ...... $103,189 $ 1,510 $ 275 $104,424

33 CSK CORPORATION Annual Report 2001

At March 31, 2001, debt securities classified as available-for-sale securities and held-to-maturity securities mainly consist of Japanese government and municipal bonds and corporate debt securities. In addition, unrealized gain on investment in partnerships of ¥1,233 million, net of tax effect, is included “Unrealized gains on securities” on the consolidated balance sheet and is excluded from this disclosure. Proceeds from sales of available-for-sale securities were ¥20,562 million for the year ended March 31, 2001. On those sales, gross realized gains computed on the average cost basis were ¥6,611 million and gross realized losses were ¥1,243 million. Major components of debt and equity securities of which fair values are not readily determinable as of March 31, 2001 were as follows: Thousands of Millions of Yen U.S. Dollars Held-to-maturity securities ...... ¥1,797 $ 14,505 Available-for-sale securities: Money management fund ...... 12,441 100,408 Unlisted stock ...... 10,699 86,352 Unlisted bonds ...... 581 4,691 Investments in unconsolidated subsidiaries and affiliates ...... 3,365 27,163

The amortized cost of investments in debt securities as of March 31, 2001, by contractual maturity, were as follows: Thousands of Millions of Yen U.S. Dollars Available- Held-to- Available- Held-to- for-sale maturity for-sale maturity Due within 1 year ...... ¥ 231 ¥ 7,355 $ 1,868 $ 59,366 Due after 1 year through 5 years ...... 2,420 7,227 19,531 58,328 Due after 5 years through 10 years ...... 1,710 – 13,797 – Due after 10 years ...... 47 – 382 – ¥4,408 ¥14,582 $35,578 $117,694

Carrying amounts and fair values of “Marketable securities” and “Investments in securities”, of which the market values are readily determinable as of March 31, 2000, were as follows: Millions of Yen Carrying Fair market Unrealized amount value gain (loss) Short term portfolio: Equity securities ...... ¥ 8,066 ¥27,568 ¥19,502 Debt securities ...... 1,666 1,866 200 Others ...... 7,318 6,921 (397) Sub total ...... 17,050 36,355 19,305

Long term portfolio: Equity securities ...... 26,282 56,700 30,418 Debt securities ...... 2,958 3,099 141 Others ...... 100 117 17 Sub total ...... 29,340 59,916 30,576

Total ...... ¥46,390 ¥96,271 ¥49,881

Fair market values for securities are closing prices of respective markets for publicly traded securities and mutual funds. Equity securities that are not publicly traded, unlisted foreign debt securities, commercial papers, money management fund, discounted bank debentures, coupon bank debentures, and investment trusts within closed term are excluded from this disclosure. 34 CSK CORPORATION Annual Report 2001

5. INVENTORIES: At March 31, 2000 and 2001, the Company’s inventories consisted of the following: Thousands of Millions of Yen U.S. Dollars 2000 2001 2001 Goods for resale ...... ¥11,329 ¥8,718 $ 70,363 Systems in development ...... 7,184 9,276 74,866 Others ...... 593 426 3,440

¥19,106 ¥18,420 $148,669

6. INVESTMENTS IN At March 31, 2000 and 2001, investments in subsidiaries and affiliates under the equity method were as follows: UNCONSOLIDATED 2000 2001 SUBSIDIARIES AND Equity* Capital Equity* Capital AFFILIATES: Ownership Stock Ownership Stock (%) (Millions of Yen) (%) (Millions of Yen) Domestic Affiliates: Sega Logistics Services, Ltd...... 25.0 ¥ 200 25.0 ¥ 200 Telecomet International Inc...... 20.0 1,440 20.0 1,440 SEGA Corporation (formerly SEGA Enterprises, Ltd.) . . . 17.3 64,150 24.1 117,919 Spike Co., Ltd...... 27.5 294 18.6 435 I4 Corporation ...... 49.2 1,224 40.4 1,278

(U.S. Dollars) (U.S. Dollars) Overseas Affiliates: SegaSoft Networks, Inc.** ...... 50.0 $ 800 –$–

* Includes direct and indirect ownership ** SegaSoft Networks, Inc. was in liquidation and was therefore excluded from the affiliates accounted for under the equity method of the Company as of March 31, 2001.

Investments in other subsidiaries and affiliates are immaterial to the consolidated financial statements of the Company and are therefore accounted for under the cost method.

7. PROPERTY AND “Property and equipment” as of March 31, 2000 and 2001 consisted of the following: EQUIPMENT: Thousands of Millions of Yen U.S. Dollars 2000 2001 2001 Buildings and structures ...... ¥30,042 ¥30,923 $249,580 Others ...... 19,255 20,769 167,628 49,297 51,692 417,208 Less: Accumulated depreciation ...... (25,377) (26,406) (213,125) 23,920 25,286 204,083 Land ...... 17,578 15,054 121,504 Construction in progress ...... 38 40 322

¥41,536 ¥40,380 $325,909

8. SHORT-TERM AND (1) Short-term bank loans payable and commercial paper— LONG-TERM DEBTS: The weighted-average interest rate for the “Short-term bank loans payable” were 1.7% and 1.6% as of March 31, 2000 and 2001, respectively. The weighted-average interest rates for the “Commercial paper” were 0.4% and 0.4% as of March 31, 2000 and 2001, respectively.

35 CSK CORPORATION Annual Report 2001

(2) Long-term bank loans payable— The weighted-average interest rate for the “Long-term bank loans payable” were 2.2% and 2.0% as of March 31, 2000 and 2001, respectively. Repayment schedule for the “Long-term bank loans payable” for the next five years is as follows:

Thousands of Year ending March 31, Millions of Yen U.S. Dollars 2002 ...... ¥4,939 $39,863 2003 ...... 2,237 18,055 2004 ...... 9,386 75,753 2005 ...... 448 3,616 2006 ...... 3,852 31,090

(3) Convertible bonds payable and bonds with detachable warrants– “Convertible bonds payable” as of March 31, 2000 and 2001 consisted of the following: Thousands of Millions of Yen U.S. Dollars 2000 2001 2001 Unsecured 1.8% convertible bonds due March 20, 2002, convertible currently at ¥4,363.90 for one common share, redeemable before due date ...... ¥ 6,683 ¥6,683 $ 53,939 Unsecured 3.9% convertible bonds due March 20, 2001 ...... 11,927 – – Unsecured 1.5% convertible bonds due September 30, 2003, convertible currently at ¥1,235.40 for one common share, redeemable before due date ...... 1,500 1,500 12,107 Unsecured 1.5% convertible bonds due September 30, 2003, convertible currently at ¥1,235.40 for one common share, redeemable before due date ...... 700 700 5,650 Unsecured 1.5% convertible bonds due September 30, 2003, convertible currently at ¥1,235.40 for one common share, redeemable before due date ...... 700 700 5,650 Unsecured 1.5% convertible bonds due September 30, 2003, convertible currently at ¥1,235.40 for one common share, redeemable before due date ...... 400 400 3,228 Unsecured 1.5% convertible bonds due September 30, 2003, convertible currently at ¥1,235.40 for one common share, redeemable before due date ...... 400 400 3,228 Unsecured 1.5% convertible bonds due September 30, 2003, convertible currently at ¥1,235.40 for one common share, redeemable before due date ...... 300 300 2,421 Unsecured 1.5% convertible bonds due September 30, 2003, convertible currently at ¥1,235.40 for one common share, redeemable before due date ...... 300 300 2,421 22,910 10,983 88,644 Less: Elimination ...... (610) (110) (888) Less: Current portion ...... (11,927) (6,683) (53,939)

¥10,373 ¥4,190 $ 33,818

In addition, unsecured 6 months Yen TIBOR plus 1.8% bonds due April 30, 2004 with detachable warrants amounting to ¥10 million were included in “Other long-term liabilities.”

36 CSK CORPORATION Annual Report 2001

9. ASSETS PLEDGED AS At March 31, 2001, “Accounts payable”, “Short-term bank loans payable”, “Long-term bank loans payable COLLATERAL: within a year”, “Long-term bank loans payable” and “Bonds with detachable warrants” totaling ¥307 million, ¥21,242 million, ¥1,239 million, ¥11,740 million and ¥10 million respectively, of the Company as well as contingent liabilities relating to “Convertible bonds payable” amounting to ¥4,300 million are collateralized by the following assets. Thousands of Millions of Yen U.S. Dollars Cash ...... ¥ 341 $ 2,751 Notes and accounts receivable ...... 6,670 53,834 Marketable securities ...... 40 323 Inventories ...... 939 7,579 Buildings and structures ...... 2,467 19,912 Land ...... 4,064 32,799 Investments in securities ...... 889 7,174 Other assets ...... 3,137 25,317 Assets of CSK Electronics America, Inc. (non-consolidated basis) . . . . 66 533

¥18,613 $150,222

In addition, “Accounts receivable” of ASCII Corporation payable by its subsidiaries totaling ¥282 million, which are eliminated in consolidation, have been pledged as collateral. Article 13-1 of the Law concerning Prepaid Card Operations requires that about 50% of unused amounts in prepaid cards be collateralized by the issuers. As of March 31, 2001, the Company has pledged as collateral “Investments in securities” amounting to ¥9,446 million for this purpose. In addition, based on Article 25 of Building Lots and Buildings Transaction Business Law, the Company also has pledged as collateral “Invest- ments in securities” amounting to ¥9 million to secure dealings.

10. FAIR VALUES OF The Company enters into currency related transaction and interest rate related transaction to manage OFF-BALANCE SHEET market risks relating to fluctuations in the interest and foreign exchange rates. The Company does not hold FINANCIAL or issue financial instruments for trading purposes. The estimated unrealized gains and losses from these INSTRUMENTS: contracts at March 31, 2000 and 2001 are summarized in the following tables. Market values of forward rate contracts are based on the closing prices of the Tokyo International Financial Futures Exchange. Market values of swap contracts are based on values presented by financial institutions and securities brokers. Derivative transactions to which hedge accounting have been applied from April 1, 2000 are excluded from these disclosure.

(1) Currency related transaction— Millions of Yen 2000 2001 Contract value Market Unrealized Contract value Market Unrealized Over 1 year value gain (loss) Over 1 year value gain (loss) Futures: Bought (US$) ...... ¥2,963 ¥ – ¥2,961 ¥ (2) ¥–¥–¥–¥– Options: Sold (US$) Put ...... 704 105 –– (Option premiums) . . . . 12 12 –– Bought (US$) Call ...... 704 105 –– (Option premiums) . . . . (35) (35) –– Currency swaps: US$ ...... 2,138 2,138 (20) (20) 2,138 2,138 42 42

37 CSK CORPORATION Annual Report 2001

Thousands of U.S. Dollars 2001 Contract value Market Unrealized Over 1 year value gain (loss) Futures: Bought (US$) ...... $–$–$–$– Options: Sold (US$) Put ...... –– (Option premiums) ...... –– Bought (US$) Call ...... –– (Option premiums) ...... –– Currency swaps: US$ ...... 17,257 17,257 342 342

(2) Interest rate related transaction— Millions of Yen 2000 2001 Contract value Market Unrealized Contract value Market Unrealized Over 1 year value gain (loss) Over 1 year value gain (loss) Swaps: Floating rate receipt Fixed rate payment ...... ¥10,550 ¥7,250 ¥(183) ¥(183) ¥2,000 ¥ – ¥(13) ¥(13) Caps: Bought ...... 3,500 3,500 –– (Premiums) ...... (58) (30) 3 (55) (–) (–) – –

Thousands of U.S. Dollars 2001 Contract value Market Unrealized Over 1 year value gain (loss) Swaps: Floating rate receipt Fixed rate payment ...... $16,142 $ – $(107) $(107) Caps: Bought ...... –– (Premiums) ...... (–) (–) – –

11. RETIREMENT BENEFITS: CSK Corporation and its consolidated subsidiaries have employees’ pension fund, tax-qualified pension plan and lump-sum retirement payment plan as defined benefits plan covering substantially all of their employees. Employees are entitled to lump-sum indeminities upon termination of employment with the Company or to pension payments. The amount paid is calculated based on factors such as length of services, basic rates of pay and conditions under which the terminations occur. In addition, the Company has a noncontributory pension plan covering employees of CSK and certain consolidated and non-consolidated subsidiaries. Under this plan, an employee becomes eligible for the pension benefit after 10 years of services for the Company.

38 CSK CORPORATION Annual Report 2001

Effective April 1, 2000, the Company adopted the new accounting standard for retirement benefits. “Accrued employees’ retirement benefits” as of March 31, 2001 consisted of the following: Thousands of Millions of Yen U.S. Dollars a. Projected benefit obligations ...... ¥(41,429) $(334,375) b. Plan assets ...... 22,390 180,708 c. Unfunded retirement benefit obligations (a + b) ...... (19,039) (153,667) d. Unrecognized net transition amount ...... 10,642 85,893 e. Unrecognized actuarial net loss ...... 4,235 34,182 f. Unrecognized prior service cost...... – – g. Net amount recognized on the consolidated balance sheet (c + d + e + f) ...... (4,162) (33,592) h. Prepaid pension cost ...... - - i. Accrued employees’ retirement benefits (g – h) ...... ¥ (4,162) $ (33,592)

The components of pension and severance costs for the year ended March 31, 2001 were as follows: Thousands of Millions of Yen U.S. Dollars Service cost ...... ¥3,152 $25,442 Interest cost ...... 1,128 9,105 Expected return on plan assets ...... (792) (6,395) Amortization of net transition amount ...... 1,980 15,982 Recognized actuarial loss ...... - - Amortization of prior service cost ...... - - Pension and severance costs ...... ¥5,468 $44,134

Assumptions used in the accounting for retirement benefit obligations for the year ended March 31, 2001 were as follows: Discount rate: ...... 2.5–3.5 % Expected rate of return on plan assets: ...... 3.0–4.8% Period of allocation of the actuarial net loss: ...... 5–12 years Period of amortization of net transition amount: ...... 1–15 years

12. SHAREHOLDERS’ The Japanese Commercial Code (the “Code”) provides that an amount equivalent to at least 10% of cash EQUITY: dividends paid and other cash outlays resulting from appropriation of retained earnings be appropriated to a legal reserve until such reserve equals 25% of the stated capital. Both the legal reserve and additional paid- in capital are not available for cash dividends but may be used to reduce a capital deficit by resolution of the shareholders or may be capitalized by resolution of the Board of Directors. The legal reserve is included in the retained earnings and is not shown separately in the accompanying consolidated financial statements. In addition, the Code provides that at least one-half of the issue price of new shares, with a minimum of the par value thereof, be included in “Common stock.” In conformity therewith, the Company has divided the principal amount of bonds converted into common stock and the proceeds received from the issuance of common stock equally between “Common stock” and “Additional paid-in capital” by resolution of the Board of Directors. Cash dividends are paid semi-annually. Year-end dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividends are applicable. Interim dividends may be paid upon resolution of the Board of Directors, subject to limitations imposed by the Code. Such dividends are payable to shareholders of record at the end of its fiscal year or of the six month period of the year. Year-end dividends are reflected in the consolidated statements of shareholders’ equity when authorized.

39 CSK CORPORATION Annual Report 2001

At the ordinary general meeting held on June 28, 2001, the shareholders approved the declaration of year-end cash dividends totaling ¥448 million, which will be paid to shareholders of record as of March 31, 2001, and the related appropriation of retained earnings to the legal reserve of ¥45 million. Under the Code, the amount of retained earnings available for dividends is based on the amount recorded in CSK’s books (Non-consolidated basis). At March 31, 2001, retained earnings recorded on CSK’s books were ¥32,783 million.

13. STOCK-BASED At the ordinary general meeting held on June 29, 2000, the shareholders approved a stock-based compensa- COMPENSATION PLAN: tion plan as an incentive plan for directors and selected employees. Under the plan, options for 191,000 shares and 294,800 shares of common stock were granted to 26 directors and 903 employees, respectively. All options are exercisable at an exercise price of ¥3,522 from July 25, 2001 through July 24, 2006. Upon exercise of all options, the Company will issue additional 485,800 shares of its common stock for ¥1,711 million, ¥855 million of which will be recorded in “Common stock” and the remainder in “Additional paid-in capital.” The terms of options are subject to adjustment if there are stock splits or consolidation of shares or additional shares issued at a price less than the market price per share. In addition, at the ordinary general meeting held on June 28, 2001, the shareholders approved another stock-based compensation plan. Under the plan, options for 180,000 shares and 496,500 shares of common stock were granted to 22 directors and 1,476 employees, respectively. All options will be exercisable at an exercise price of 102.5% of the average market price for the month immediately preceding the grant date. The options are exercisable over a period of five years commencing one year after the grant date. The terms of options are subject to adjustment if there are stock splits or consolidation of shares or additional shares issued at a price less than the market price per share.

14. INCOME TAXES: The Company is subject to a number of different income taxes. The applicable statutory tax rates in Japan for the year ended March 31, 2000 and 2001 were approximately 41.8% and 42.1%, respectively. Reconciliation of the difference between the effective income tax rate and statutory income tax rate for the year ended March 31, 2000 and 2001 are as follows: 2000 2001 Statutory income tax rate...... 41.8% 42.1% Increase (decrease) in tax rate: Non-deductible expenses for tax purposes ...... 3.5 (2.2) Base portion of the inhabitant tax ...... 1.9 (1.0) Equity in net losses of unconsolidated subsidiaries and affiliates ...... 54.3 (43.6) Amortization of goodwill ...... 17.6 (11.8) Dilution gain ...... (47.3) 4.8 Increase in valuation allowance for deferred income tax assets ...... 46.1 (27.9) Others ...... 15.7 14.1

Effective income tax rate ...... 133.6% (25.5)%

40 CSK CORPORATION Annual Report 2001

The significant components of deferred income tax assets and liabilities at March 31, 2000 and 2001 are as follows: Thousands of Millions of Yen U.S. Dollars 2000 2001 2001 Deferred income tax assets: Tax losses carried-forward ...... ¥29,623 ¥34,467 $278,184 Provision for allowance for doubtful accounts ...... 3,218 3,515 28,374 Loss on write-down of marketable securities ...... 1,379 2,687 21,685 Accrued bonuses to employees ...... 710 1,320 10,652 Unrealized intercompany profits ...... 323 189 1,526 Accrued employees’ retirement benefits ...... 283 714 5,763 Accrued enterprise tax ...... 192 777 6,270 Loss on write-down of fixed assets ...... 165 34 272 Depreciation expense ...... 137 131 1,059 Others ...... 2,106 2,180 17,599 Gross deferred income tax assets ...... 38,136 46,014 371,384 Less: Valuation allowance ...... 34,961 39,643 319,963 Total deferred income tax assets...... 3,175 6,371 51,421 Deferred income tax liabilities: Unrealized gains on securities ...... 4,241 3,103 25,047 Others ...... – 231 1,866 Gross deferred income tax liabilities ...... 4,241 3,334 26,913 Net deferred income tax assets (liabilities) ...... ¥(1,066) ¥3,037 $ 24,508

15. RESEARCH AND Research and development costs included in “Operating costs” and “Selling, general and administrative DEVELOPMENT COSTS: expenses” for the years ended March 31, 1999, 2000 and 2001 totaled ¥707 million, ¥1,828 million and ¥2,743 million, respectively.

16. DILUTION GAIN: For the year ended March 31, 2000, “Dilution gain” was mainly due to conversion of convertible bonds by SEGA Enterprises, Ltd. (presently SEGA Corporation), and issuance of common shares by ASCII Corporation and ISAO Corporation. For the year ended March 31, 2001, issuance of common shares by NextCom K.K. and acquisition of its treasury stock for retirement by Bellsystem24, Inc. mainly resulted in “Dilution gain.”

17. LEASES: The Company leases certain furniture and office equipment under non-cancelable operating and finance leases. Finance leases, other than those which are deemed to transfer the ownership of the leased assets to lessees, are accounted for by a method similar to that used for ordinary operating leases. The following is a summary of future minimum payments under operating leases and finance leases without transfer of ownership as of March 31, 2001: Thousands of Millions of Yen U.S. Dollars Operating leases: Due within one year ...... ¥ 80 $ 642 Thereafter...... 99 802 ¥ 179 $ 1,444

Finance leases: Due within one year ...... ¥1,717 $13,855 Thereafter...... 2,409 19,445 ¥4,126 $33,300

The lease payments above do not include future interest expenses. 41 CSK CORPORATION Annual Report 2001

Lease expenses on finance lease contracts without ownership transfer for the years ended March 31, 2000 and 2001 were ¥2,833 million, and ¥2,638 million, respectively. Pro forma data as of March 31, 2000 and 2001 as to acquisition cost, accumulated depreciation, net book value, depreciation expense and interest expense of the assets leased under finance leases without transfer of ownership are summarized as follows: Thousands of Millions of Yen U.S. Dollars 2000 2001 2001 Pro forma acquisition cost ...... ¥11,725 ¥9,353 $ 75,488 Pro forma accumulated depreciation ...... (6,597) (5,413) (43,691)

Pro forma net book value ...... ¥ 5,128 ¥3,940 $ 31,797

Pro forma depreciation expense ...... ¥ 2,460 ¥2,357 $ 19,025

Pro forma interest expense ...... ¥ 290 ¥ 251 $ 2,023

Depreciation is based on the straight-line method over the lease term of the leased assets with no residual value. The Company also leases certain computer equipment to customers in conjunction with system consulting and development activities. These leases also do not involve the transferring of ownership and therefore are accounted for by a method similar to that used for ordinary operating leases. Lease income on finance lease contracts for the year ended March 31, 2000 and 2001 were ¥169 million, and ¥160 million, respectively. The following is a summary of future minimum payments receivable under finance leases as of March 31, 2001: Thousands of Millions of Yen U.S. Dollars Due within one year ...... ¥117 $ 947 Thereafter ...... 88 709 ¥205 $1,656

The lease payments receivable above do not include future interest income. The acquisition cost, accumulated depreciation, net book value, and pro forma interest income of the leased assets as of March 31, 2000 and 2001 are summarized as follows: Thousands of Millions of Yen U.S. Dollars 2000 2001 2001 Acquisition cost ...... ¥ 773 ¥ 569 $ 4,593 Accumulated depreciation ...... (434) (372) (3,000)

Net book value ...... ¥ 339 ¥ 197 $ 1,593

Pro forma interest income ...... ¥ 29 ¥8 $ 66

Depreciation is based on the straight-line method over the lease term of the leased assets with no residual value.

18. RELATED PARTY The Company had the following significant transactions with its related parties for the year ended March TRANSACTIONS (NON- 31, 2001: CONSOLIDATED BASIS): On April 3, 2000, in accordance with the resolution of the board of directors dated February 28, 2000, CSK acquired 18 million shares of SEGA Corporation common stock for ¥50,688 million. Following the acquisition, the Company’s holdings of SEGA Corporation increased from 21,149 thousand shares (17.3%) to 39,149 thousand shares (24.7%). The underwriting price was based on the average of closing prices of Tokyo Stock Exchange for six month prior to the preceding day of Board of Directors meeting.

42 CSK CORPORATION Annual Report 2001

19. SEGMENT The Company operates principally in five segments: computer services, computer and other product sales, INFORMATION: prepaid card sales, publication, and others. Segment Major products and services Computer services Software development, systems integration, facilities management and other related services Computer and other product sales Computer and other product sales and information technology related engineering Prepaid card sales Issuance and settlement of pre-paid cards, development and sales of card systems Publication Publication of books and magazines Others Investment in venture companies, rental of “intelligent” buildings , rental of computer and related products

The segment information of the Company for each of the three years in the period ended March 31, 2001 classified by segment is presented below: Millions of Yen For the year ended March 31, 1999 Computer Elimination Computer and other Prepaid and Consolidated services product sales card sales Others Total corporate total Sales and Operating revenue: Outside customers ...... ¥126,645 ¥44,152 ¥52,120 ¥ 798 ¥223,715 ¥ – ¥223,715 Intersegment sales/transfers . . . . . 85 696 5 453 1,239 (1,239) – Total ...... 126,730 44,848 52,125 1,251 224,954 (1,239) 223,715 Operating costs and expenses ...... 121,043 42,813 52,318 588 216,762 (1,261) 215,501

Operating income (loss) ...... ¥ 5,687 ¥ 2,035 ¥ (193) ¥ 663 ¥ 8,192 ¥ 22 ¥ 8,214

Assets ...... ¥ 62,748 ¥21,292 ¥16,619 ¥3,630 ¥104,289 ¥86,195 ¥190,484

Depreciation ...... ¥ 2,551 ¥ 313 ¥ 34 ¥ 164 ¥ 3,062 ¥ 13 ¥ 3,075

Capital expenditure ...... ¥ 2,094 ¥ 381 ¥ 126 ¥ 42 ¥ 2,643 ¥ – ¥ 2,643

Millions of Yen For the year ended March 31, 2000 Computer Elimination Computer and other Prepaid and Consolidated services product sales card sales Publication Others Total corporate total Sales and Operating revenue: Outside customers . . . . . ¥187,213 ¥139,687 ¥50,839 ¥30,627 ¥ 1,381 ¥409,747 ¥ – ¥409,747 Intersegment sales/transfers ...... 1,228 1,630 23 169 502 3,552 (3,552) – Total ...... 188,441 141,317 50,862 30,796 1,883 413,299 (3,552) 409,747 Operating costs and expenses ...... 182,335 138,034 50,926 30,657 1,020 402,972 (3,552) 399,420

Operating income (loss) ...... ¥ 6,106 ¥ 3,283 ¥ (64) ¥ 139 ¥ 863 ¥ 10,327 ¥ – ¥ 10,327

Assets ...... ¥156,563 ¥ 58,459 ¥21,339 ¥16,800 ¥11,897 ¥265,058 ¥117,990 ¥383,049

Depreciation ...... ¥ 4,266 ¥ 624 ¥ 60 ¥ 261 ¥ 48 ¥ 5,259 ¥ 46 ¥ 5,306

Capital expenditure . . . . ¥ 4,562 ¥ 747 ¥ 34 ¥ 103 ¥ 21 ¥ 5,468 ¥ 4 ¥ 5,472

43 CSK CORPORATION Annual Report 2001

Millions of Yen For the year ended March 31, 2001 Computer Elimination Computer and other Prepaid and Consolidated services product sales card sales Publication Others Total corporate total Sales and Operating revenue: Outside customers . . ¥206,669 ¥123,927 ¥53,314 ¥31,787 ¥ 2,904 ¥418,601 ¥ – ¥418,601 Intersegment sales/transfers . . . . 1,259 1,607 13 198 537 3,614 (3,614) – Total ...... 207,928 125,534 53,327 31,985 3,441 422,215 (3,614) 418,601 Operating costs and expenses ...... 203,878 121,487 53,539 31,830 2,167 412,901 (3,614) 409,287

Operating income (loss) ...... ¥4,050 ¥ 4,047 ¥ (212) ¥ 155 ¥ 1,274 ¥ 9,314 ¥ 0 ¥ 9,314

Assets ...... ¥156,723 ¥ 59,519 ¥26,485 ¥24,223 ¥13,570 ¥280,520 ¥102,003 ¥382,523

Depreciation ...... ¥5,826 ¥ 523 ¥ 67 ¥ 130 ¥ 47 ¥ 6,593 ¥ 0 ¥ 6,593

Capital expenditure . . . ¥7,012¥2,218 ¥ 185 ¥ 555 ¥ 80 ¥ 10,050 ¥ – ¥ 10,050

Thousands of U.S. Dollars For the year ended March 31, 2001 Computer Elimination Computer and other Prepaid and Consolidated services product sales card sales Publication Others Total corporate total Sales and Operating revenue: Outside customers ...... $1,668,027 $1,000,220 $430,299 $256,557 $ 23,435 $3,378,538 $ – $3,378,538 Intersegment sales/transfers . . . 10,160 12,970 104 1,599 4,334 29,167 (29,167) – Total ...... 1,678,187 1,013,190 430,403 258,156 27,769 3,407,705 (29,167) 3,378,538 Operating costs and expenses ...... 1,645,503 980,525 432,111 256,901 17,488 3,332,528 (29,167) 3,303,361

Operating income (loss) ...... $ 32,684 $ 32,665 $ (1,708) $ 1,255 $ 10,281 $ 75,177 $ 0 $ 75,177

Assets ...... $1,264,920 $ 480,383 $213,759 $195,506 $109,520 $2,264,088 $823,264 $3,087,352

Depreciation ...... $ 47,018 $ 4,220 $ 538 $ 1,051 $ 383 $ 53,210 $ 5 $ 53,215

Capital expenditure . . $ 56,592 $ 17,900 $ 1,497 $ 4,478 $ 648 $ 81,115 $ – $ 81,115

(1) During the year ended March 31, 2000, ASCII Corporation became a consolidated subsidiary in conjunction with the Company’s modification of its method for identifying subsidiaries (See Note 2(1)). As a result, “Publication” segment was newly established in the segment information shown above with effect from the year ended March 31, 2000. (2) The assets of ¥86,214 million, ¥118,003 million and ¥102,279 million at March 31, 1999, 2000 and 2001, respectively included in the “Elimination and corporate” column mainly consists of the Company’s working funds (cash and marketable securities), long-term investment funds (investment in securities) and other assets which belong to the administrative departments.

44 CSK CORPORATION Annual Report 2001

(3) Unallocated operating costs and expenses under the “Elimination and corporate” column for the years ended March 31, 1999, 2000 and 2001 were ¥13 million, ¥46 million and ¥0 million, respectively. These costs were incurred as depreciation expense relating to administrative departments. (4) “Depreciation” and “Capital expenditure” include long-term prepayments, deferred charges and their amortization. (5) The Company adopted the assets and liability method for accounting for income taxes effective April 1, 1999. Due to this change, total assets in “Computer services”, “Computer and other product sales”, “Prepaid card sales”, and “Others” segments increased by ¥529 million, ¥143 million, ¥26 million, and ¥2,170 million, respectively (See Note 2(13)). (6) The net assets of subsidiaries are marked to fair value at the time the Company is deemed to have gained control starting from the year ended March 31, 2000. Due to this change, the assets increased by ¥10,085 million in “Computer services” segment as of March 31, 2000. (7) Due to the change in accounting method for retirement benefits, operating income for “Computer services”, “Computer and other product sales”, “Prepaid card sales”, “Publication” and “Others” segments for the year ended March 31, 2001 are ¥901 million, ¥69 million, ¥9 million, ¥39 and ¥2 million, respectively, lower than what would have been reported under the former method (See Note 2(11)).

Segment information for geographic locations is omitted for each of the three years in the period ended March 31, 2001 since total assets and sales for “Japan” segment exceeded 90 percent of total assets and sales in each of such years. Information regarding overseas sales is omitted for each of the three years in the period ended March 31, 2001 since total overseas sales were less than 10 percent of consolidated total sales in each of such years.

45 CSK CORPORATION Annual Report 2001 Supplementary Information NON-CONSOLIDATED BALANCE SHEETS CSK CORPORATION As of March 31, 2000 and 2001

Thousands of U.S. Dollars Millions of Yen (Note 1) ASSETS 2000 2001 2001 Current assets: Cash ...... ¥ 59,137 ¥ 17,536 $ 141,531 Notes and accounts receivable ...... 22,176 23,629 190,711 Marketable securities ...... 6,319 110 886 Systems in progress...... 2,147 2,259 18,232 Deferred income taxes ...... 1,246 1,475 11,907 Short-term loans to subsidiaries and affiliates ...... 5,965 2,159 17,430 Other current assets ...... 3,748 1,666 13,448 Allowance for doubtful accounts ...... (136) (100) (806) Total current assets ...... 100,602 48,734 393,339

Property and equipment, net of accumulated depreciation...... 22,194 19,182 154,816

Deferred charges and intangible assets ...... 498 487 3,933

Investments and other assets: Investments in securities ...... 6,366 13,751 110,983 Investments in subsidiaries and affiliates ...... 118,563 183,951 1,484,677 Investments in partnerships ...... 9,001 11,008 88,847 Long-term loans to subsidiaries and affiliates ...... 9,560 3,669 29,614 Deferred income taxes ...... 468 2,626 21,191 Fixed leasehold deposits ...... 3,348 3,687 29,754 Other assets ...... 1,976 1,950 15,736 Allowance for doubtful accounts ...... (73) (2,545) (20,538) 149,209 218,097 1,760,264

Total assets ...... ¥272,503 ¥286,500 $2,312,352

46 CSK CORPORATION Annual Report 2001

Thousands of U.S. Dollars Millions of Yen (Note 1) LIABILITIES AND SHAREHOLDERS’ EQUITY 2000 2001 2001 Current liabilities: Accounts payable ...... ¥ 11,864 ¥ 12,639 $ 102,009 Short-term bank loans and commercial paper ...... 42,500 66,000 532,688 Current portion of long-term debt ...... 12,391 7,147 57,683 Accrued expenses ...... 2,629 3,496 28,218 Accrued income taxes ...... 31 3,373 27,222 Accrued bonuses to employees ...... 3,360 3,800 30,670 Other current liabilities...... 2,079 3,234 26,104 Total current liabilities ...... 74,854 99,689 804,594

Long-term liabilities: Long-term debt ...... 8,171 1,024 8,265 Guarantee deposits received ...... 538 559 4,513 Accrued employees’ retirement benefits ...... 565 1,787 14,420 Total liabilities ...... 84,128 103,059 831,792

Shareholders’ equity: Common stock, par value, ¥50 per share— Authorized: 221,500,000 and 298,000,000 shares at March 31, 2000 and 2001, respectively; Issued: 64,700,164 and 74,700,164 shares at March 31, 2000 and 2001, respectively ...... 47,589 69,029 557,135 Unissued common shares ...... 42,870 –– Additional paid-in capital...... 57,365 78,795 635,953 Legal reserve ...... 1,183 1,271 10,262 Voluntary reserve ...... 27,231 38,000 306,699 Retained earnings ...... 12,137 (5,217) (42,108) Unrealized gains on securities ...... – 1,563 12,619 Total shareholders’ equity ...... 188,375 183,441 1,480,560

Total liabilities and shareholders’ equity ...... ¥272,503 ¥286,500 $2,312,352

47 CSK CORPORATION Annual Report 2001

NON-CONSOLIDATED STATEMENTS OF OPERATIONS CSK CORPORATION For each of the three years in the period ended March 31, 2001

Thousands of U.S. Dollars Millions of Yen (Note 1) 1999 2000 2001 2001 Operating revenues: Computer services ...... ¥ 76,895 ¥ 73,668 ¥ 90,479 $ 730,255 Computer and other product sales ...... 21,927 27,086 29,388 237,191 Rental ...... 1,244 1,086 1,116 9,011 100,066 101,840 120,983 976,457

Operating costs and expenses: Computer services ...... 58,172 56,770 68,179 550,275 Computer and other product sales ...... 19,496 24,562 26,358 212,732 Rental ...... 579 335 357 2,881 Selling, general and administrative expenses ...... 14,275 13,333 14,407 116,279 92,522 95,000 109,301 882,167 Operating income ...... 7,544 6,840 11,682 94,290

Other income (expenses): Interest and dividend income ...... 1,689 1,394 771 6,219 Interest expenses...... (1,567) (896) (1,037) (8,370) Stock issuance expenses ...... – (352) –– Gain on sales of marketable securities ...... 1,961 2,825 –– Gain on sales of investments in securities ...... - 5 4,001 32,289 Income from investment partnerships...... 1,500 2,627 2,204 17,789 Loss on write-down of marketable securities ...... (187) - –– Loss on write-down of investments in subsidiaries ...... (5,690) (950) (3,813) (30,777) Loss on write-down of investments in securities ...... (72) (120) (4,057) (32,745) Loss on liquidation of investments in subsidiaries ...... – (254) (9,792) (79,031) Foreign exchange (loss) gain ...... 212 (1,126) 46 373 Provision for allowance for doubtful accounts ...... – – (2,193) (17,696) Others, net ...... (760) 47 (2,908) (23,473) (2,914) 3,200 (16,778) (135,422) Income (loss) before income taxes ...... 4,630 10,040 (5,096) (41,132)

Income taxes Current ...... 31 34 4,040 32,602 Deferred ...... – 4,126 (3,522) (28,423)

Net income (loss) ...... ¥ 4,599 ¥ 5,880 ¥ (5,614) $ (45,311)

Yen U.S. Dollars Per share information: Basic earnings per share ...... ¥71.70 ¥91.42 ¥(75.15) $(0.61) Cash dividends ...... ¥12.00 ¥12.00 ¥ 12.00 $ 0.10

48 CSK CORPORATION Annual Report 2001

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors CSK CORPORATION

We have audited the accompanying consolidated balance sheets of CSK CORPORATION and its consolidated subsidiaries as of March 31, 2000 and 2001, and the related consolidated statements of operations and consolidated statements of shareholders' equity for each of the three years in the period ended March 31, 2001, and the related consolidated statements of cash flows for each of the two years ended March 31, 2001, all expressed in Japanese yen. Our audits were made in accordance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of CSK CORPORATION and its consolidated subsidiaries as of March 31, 2000 and 2001 and the consolidated results of their operations for each of the three years in the period ended March 31, 2001, and the consolidated result of their cash flows for each of the two years ended March 31, 2001 in conformity with accounting principles and practices generally accepted in Japan (see Note 1) applied on a consistent basis, except for the changes described in the next paragraph.

As discussed in Note 2 (15), effective April 1, 1998, Japan Card Center Kaisha, a consolidated subsidiary, changed its method of determining the unused amounts of prepaid cards to that which enables it to better estimate costs related to prepaid cards. Both the old and new methods employed by the Company are in accordance with the Japanese Tax Law. This change resulted in a decrease in operating income of ¥482 million and recognition of ¥2,051 million in the cumulative effect of an accounting change for the year ended March 31, 1999, and losses before income taxes increased by ¥2,533 million in comparison with those based on the former method.

In addition, as discussed in Note 2 (1) and (13), effective April 1, 1999, CSK CORPORATION and its consolidated subsidiaries have adopted new Japanese accounting standards for preparation of consolidated financial statements and income taxes, and as discussed in Note 2 (4), (5) and (11), effective April 1, 2000, CSK CORPORATION and its consolidated subsidiaries have adopted new Japanese accounting standards for financial instruments and accrued employees' retirement benefits.

The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have been translated on the basis set forth in Note 1 to the accompanying consolidated financial statements.

Tokyo, Japan June 28, 2001

49 CSK CORPORATION Annual Report 2001

CSK GROUP INFORMATION

CSK CORPORATION CSK GROUP CSK Network Systems Corporation Head Office ASCll CORPORATION 16th Floor, Shinjuku Sumitomo Bldg., Shinjuku Sumitomo Bldg., 4-33-10, Yoyogi, Shibuya-ku, 2-6-1, Nishi-Shinjuku, Shinjuku-ku, 2-6-1, Nishi-Shinjuku, Shinjuku-ku, Tokyo 151-8024, Japan Tokyo 163-0216, Japan Tokyo 163-0227, Japan Phone: 81-3-5321-8061 Phone: 81-3-5321-3200 Phone: 81-3-3344-1811 URL: http://www.ascii.co.jp/ Facsimile: 81-3-5321-3201 URL: http://www.csknet.co.jp/ Waseda Office Bellsystem24, Inc. Nishi-Waseda Bldg., 7th Floor, Tokyu Bldg., East No. 3 Hall, CSK SYSTEMS OKINAWA CORPORATION 1-21-1, Nishi-Waseda, Shinjuku-ku, 2-16-8, Minami-Ikebukuro, Toshima-ku, 245-3, Tsubogawa, Naha-shi, Tokyo 169-8620, Japan Tokyo 171-0022, Japan Okinawa 900-0025, Japan Phone: 81-3-5286-7100 Phone: 81-3-3590-0024 Phone: 81-98-840-4300 Facsimile: 81-3-3590-4610 Facsimile: 81-98-840-4301 Kojimachi Office URL: http://www.bell24.co.jp/ URL: http://www.okicsk.co.jp/ Kojimachi Crystal City East Bldg., 4-8-1, Kojimachi, Chiyoda-ku, Business Extension Corporation CSK Venture Capital Co., Ltd. Tokyo 102-0083, Japan 7th Floor, Sunny Bldg., 7th Floor, Kenchiku Kaikan Bldg., Phone: 81-3-3512-9450 7-11-1, Nishi-Shinjuku, Shinjuku-ku, 5-26-20, Shiba, Minato-ku, Tokyo 160-0023, Japan Tokyo 108-0014, Japan CSK Computer Building Phone: 81-3-5337-1470 Phone: 81-3-3457-5588 CSK Computer Bldg., Facsimile: 81-3-5337-1471 Facsimile: 81-3-3457-7070 3-22-17, Higashi-Ikebukuro, Toshima-ku, URL: http://www.bec-csk.co.jp/ URL: http://www.cskvc.co.jp/ Tokyo 170-0013, Japan Phone: 81-3-5956-9350 CSI Co., Ltd. Digital Media Lab Corporation 5-4-22, Chuo, Nakano-ku, 17th Floor, Shinjuku Sumitomo Bldg., CSK Computer and Tokyo 164-0011, Japan 2-6-1, Nishi-Shinjuku, Shinjuku-ku, Information Education Center Phone: 81-3-5340-4020 Tokyo 163-0227, Japan 2-5-1, Suwa, Tama-shi, Facsimile: 81-3-5340-4041 Phone: 81-3-5321-3137 Tokyo 206-0024, Japan URL: http://www.csi.co.jp/ Facsimile: 81-3-5321-3138 Phone: 81-42-372-7111 URL: http://www.dmlab.co.jp/ CSK Communications Corporation Western Division 245-3, Tsubogawa, Naha-shi, Fukui CSK Corporation 10th Floor, Nissaydowasonpo Phoenix Tower Okinawa 900-0025, Japan 2 Floor, Tomita Daiichi Seimei Bldg, Bldg., 4-15-10, Nishi-Tenma, Kita-ku, Phone: 81-98-840-4000 3-12-20, Ote, Fukui-shi Osaka 530-0047, Japan Facsimile: 81-98-840-4001 Fukui 910-0005, Japan Phone: 81-6-6363-6200 URL: http://www.cco.co.jp/ Phone: 81-776-22-1236 Facsimile: 81-776-22-3117 Umeda Office CSK ELECTRONICS CORPORATION http://www.fukuicsk.co.jp/ 19th Floor, Osaka Ekimae No. 3 Bldg., 2-18-10, Soto-Kanda, Chiyoda-ku, 1-1-3-1900, Umeda, Kita-ku, Tokyo 101-8991, Japan ISAO CORPORATION Osaka 530-0001, Japan Phone: 81-3-3257-2630 32th Floor, ARK Mori Bldg., Phone: 81-6-6345-5081 Facsimile: 81-3-3251-9705 1-12-32, Akasaka, Minato-ku, URL: http://www.csk-ele.com/ Tokyo 107-6032, Japan Chubu Branch Office Phone: 81-3-3505-8375 2-9, Chikaramachi, Higashi-ku, CSK Field Services Co., Ltd. Facsimile: 81-3-3584-1533 Nagoya 461-0018, Japan 4th Floor, Ogaku Bldg., URL: http://www.isao.co.jp/ Phone: 81-52-954-8481 2-19, Kanda-Sakuma-cho, Chiyoda-ku, Tokyo 101-0025, Japan Japan Card Center Kaisha Seibu Branch Office Phone: 81-3-3865-2503 2nd Floor, Nishi-Waseda Bldg., 5th Floor, Recruit Tenjin Bldg., Facsimile: 81-3-3865-2504 1-21-1, Nishi-Waseda, Shinjuku-ku, 1-1-3, Maizuru, Chuo-ku, URL: http://www.csk-fs.co.jp/ Tokyo 169-8603, Japan Fukuoka 810-0073, Japan Phone: 81-3-5286-7170 Phone: 81-92-724-3311 CSK Kousan Co., Ltd. Facsimile: 81-3-5286-7171 27th Floor, Shinjuku Sumitomo Bldg., URL: http://www.quo-c.com/ Regional Offices 2-6-1, Nishi-Shinjuku, Shinjuku-ku, Hitachi Tokyo 163-0227, Japan Hiroshima Phone: 81-3-5321-3947 Facsimile: 81-3-3348-6250

50 CSK CORPORATION Annual Report 2001

Japan Future Information Technology SEGA CORPORATION CSK’S OVERSEAS SUBSIDIARIES AND & Systems Co., Ltd. 1-2-12, Haneda, Ota-ku, AFFILIATES ARCAEAST, 3-2-1, Kinshi, Sumida-ku, Tokyo 144-8531, Japan Tokyo 130-6591, Japan Phone: 81-3-5736-7111 CSK Singapore Pte. Ltd. Phone: 81-3-3623-8300 URL: http://sega.jp/ 8 Robinson Road, #13-00 Cosco Bldg., Facsimile: 81-3-3623-8305 Shingapore 048544 URL: http://www.jfits.co.jp/ ServiceWare Corporation Phone: 65-536-5525 17th Floor, Shinjuku Sumitomo Bldg., JIEC Co., Ltd. 2-6-1, Nishi-Shinjuku, Shinjuku-ku, CSK Systems (Shanghai) Co., Ltd. 15th Floor, Nishi-Shinjuku Mitsui Bldg., Tokyo 163-0217, Japan 13F East Ocean Center, 6-24-1, Nishi-Shinjuku, Shinjuku-ku, Phone: 81-3-3342-6200 No. 618 Yanan Dong Road, Shanghai, PRC Tokyo 160-0023, Japan Facsimile: 81- 3-3342-6163 Phone: 86-21-5385-4383 (8007) Phone: 81-3-5326-3331 URL: http://www.serviceware.co.jp/ Facsimile: 81- 3-5326-3332 URL: http://www.jiec.co.jp/ Super Software Co., Ltd. CSK Software, N.A., Inc. 6th Floor, Usui Bldg., 40 Broad Street, 4th Floor, M&C Business Systems CORPORATION 5-4-22, Chuo, Nakano-ku, New York, NY 10004, U.S.A. 29th Floor, Twin21MID Tower, Tokyo 164-0011, Japan Phone: 1-212-504-0200 2-1-61, Shiromi, Chuo-ku, Osaka-shi Phone: 81-3-3229-5600 Osaka 540-6129, Japan Facsimile: 81-3-3229-5605 Phone: 81-6-4791-7631 URL: http://www.supersoft.co.jp CSK Software AG Facsimile: 81-6-4791-7635 Opernplatz 2, URL: http://www.panasonic.co.jp/mcbs/ Tokyo Green Systems Corporation D-60313 Frankfurt/Main, Germany 2-5-1, Suwa, Tama-shi, Phone: 49-69-50-952-0 M-BROS. Corporation Tokyo 206-0024, Japan 10F, 4-11-10, Hacchobori, Chuo-ku, Phone: 81-42-372-7007 CSK (Schweiz) A.G. Tokyo 104-0032, Japan Facsimile: 81-42-372-7017 Industriestrasse 50a, Phone: 81-3-5542-3666 URL: http://www.tgs.co.jp/ 8304 Wallisellen, Switzerland Facsimile 81-3-5542-3667 Phone: 41-1-877-8311 URL: http://www.m-bros.net/ VeriServe Corporation 3th Floor, Sunny Bldg., CSK UK NextCom K.K. 7-11-11, Nishi-Shinjuku, Shinjuku-ku, 63 Queen Victoria Street, 8th Floor, Meikei Bldg., Tokyo 160-0023, Japan London EC4N 4UD, U.K. 1-5-21, Otsuka, Bunkyo-ku, Phone: 81-3-3367-6131 Phone: 44-207-815-5200 Tokyo 112-0012, Japan Facsimile: 81-3367-6145 Phone: 81-3-5977-0801 URL: http://www.veriserve.co.jp/ CSK Spain Facsimile: 81- 3-5977-0908 * Japanese only C/Sor Angela de la Cruz, URL: http://www.nextcom.co.jp/ 6-7a Plana Izquierda, 28020 Madrid, Spain CSK FRANCHISES Phone: 34-91-555-2162 Okinawa CSK CORPORATION Regional Group companies established 245-3, Tsubogawa, Naha-shi, under the CSK franchise system: (As of October 1, 2001) Okinawa 900-0025, Japan CSK CHIBA SYSTEM CORPORATION Phone: 81-98-840-4501 CSK FUKUOKA SYSTEM CORPORATION Facsimile: 81-98-840-4001 CSK HOKKAIDO SYSTEM CORPORATION URL: http://www.okicsk.co.jp/ CSK KOBE SYSTEM CORPORATION CSK KANSAI SYSTEM CORPORATION SEbank Co., Ltd. CSK TOHOKU SYSTEM CORPORATION 17th Floor, Shinjuku Sumitomo Bldg., 2-6-1, Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0217, Japan Phone: 81-3-5321-5335 Facsimile: 81-3-5321-3984 URL: http://www.sebank.co.jp/

51 CSK CORPORATION Annual Report 2001

INVESTOR INFORMATION As of March 31, 2001

Corporate Name: CSK CORPORATION

Established: October 7, 1968

Stock Exchange Listings: First Section of the Tokyo Stock Exchange (Listed on March 1, 1985) Osaka Securities Exchange (Listed on June 17, 1991) Nagoya Stock Exchange (Listed on June 17, 1991)

Nasdaq NM (Listed on August 29, 1983)

Paid-in Capital: ¥69,029 million

Number of Employees: 4,849

URL: http://www.csk.co.jp/

Transfer Agent and Regisrar: The Sumitomo Trust & Banking Co., Ltd. Head Office: 4-5-33, Kitahama, Chuo-ku, Osaka 540-8639, Japan

Tokyo Stock Transfer Agency Department: 1-4-4, Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan

Mailing Address: 1-10, Nikko-cho, Fuchu-shi, Tokyo 183-8701, Japan

Stockholder Registration Contact Number: 81-42-351-2211 81-6-6833-4700

URL: http://www.sumitomotrust.co.jp/STA/retail/service/daiko/index.html

Depositary for ADRs: The Bank of New York 101 Barclay Street, New York, NY 10286, U.S.A. Phone: 1-212-815-2218 U.S. toll free: 1-888-269-2377

CSK

CORPORATION

Annual

Report

2001

CSK CORPORATION

URL: http://www.csk.co.jp/

For more information on this Group, please contact us as follows: CSK Public Relations Office IR Section Phone: 81-3-5321-3164 E-mail: [email protected] Printed in Japan