Restatement of Consolidated / Non-consolidated Financial Statements for the First Half of the Fiscal Year Ending December 31, 20

Share Name	Share Symbol	Market	Type
Trend Micro Incorporated ADS (MM)	NASDAQ:TMIC	NASDAQ	Common Stock

Trend Micro (NASDAQ:TMIC)
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TOKYO, Feb. 19 /Xinhua-PRNewswire-FirstCall/ -- Trend Micro (TSE:4704) ( NASDAQ: TMIC) , a leader in network antivirus and Internet content security software and services, today is restating its Consolidated / Non-consolidated Financial Statements for the first half of the fiscal year ending December 31, 2006, which were previously announced on August 10, 2006. 1. Reasons for Restatement The Company is restating its Consolidated / Non-consolidated Financial Statements for the first half of the fiscal year ended December 31, 2006 due to the following reasons: (1) Revenue for post-contract customer support services should be deferred based on their fair values and recognized ratably over the service period. However, certain inconsistencies between the revenue recognition period and the actual service period were found. In addition, certain fair value amounts were erroneously calculated. Thus, the Company revises its net sales to correct those errors. (2) The fair value of the legal obligation associated with the retirement of long-lived assets should be recognized as a liability as prescribed in SFAS No. 143. However, the Company had not recorded certain of such obligations that were considered immaterial. Therefore, the Company provides an appropriate amount for all of its asset retirement obligations. (3) In our North America operation, a subsidiary immediately expensed certain fixed assets with an acquisition cost of less than USD3,000 or a useful life of less than 2 years. The Company capitalizes such fixed assets and records appropriate depreciation expense. (4) In our North America operation, a subsidiary corrected its tax calculation with regard to the transfer of intellectual property which took place in 2005. The Company quantified these misstatements by applying SEC Staff Accounting Bulletin No.108, which was released in September 2006, and has concluded that these errors are material misstatements that warrant a restatement of its consolidated/non-consolidated financial results. As a result of these adjustments, deferred tax asset (current) and deferred revenue (current) on the consolidated balance sheet as of June 30, 2006 increased by (Yen) 1,249,722 thousand and (Yen) 3,297,852 thousand, respectively. With regard to the consolidated income statements for the six- month period ended June 30, 2006, net sales and operating expenses increased by (Yen) 552,088 thousand and (Yen) 10,163 thousand respectively. As a result, each of operating income and net income before taxes increased by (Yen) 541,925 thousand. Deferred tax asset (current) and deferred revenue (current) on the non- consolidated balance sheet as of June 30, 2006 increased by (Yen) 1,078,231 thousand and (Yen) 2,649,868 thousand, respectively. The increases in net sales by (Yen) 83,315 thousand and extraordinary loss by (Yen) 3,015,805 thousands in the non-consolidated income statement resulted in an increase in each of operating income and ordinary income by (Yen) 83,315 thousand and a decrease in income before taxes by (Yen) 2,932,489 thousand. 2. Restatement Refer to the attachment. Restatement of Consolidated / Non-consolidated Financial Statements for the first half of the fiscal year ending December 31, 2006 Amendments 1. Financial Highlights for the first half of FY2006 (January 1, 2006 through June 30,2006) (All figures except for per share information are rounded to the nearest millions of yen.) < As Originally Reported > (1) Consolidated Results of Operations Growth Operating Growth Net income Growth Net sales rate income rate before tax rate Millions % Millions of % Millions % of yen yen of yen The first half of FY 2006 40,673 17.9 13,717 7.4 14,229 6.9 The first half of FY 2005 34,490 21.2 12,771 12.2 13,316 15.5 FY 2005 (annual) 73,030 27,572 29,108 Net Growth Net income Net income income rate per share per share (basic) (diluted) Millions % Yen Yen of yen The first half of FY 2006 7,997 (5.8) 59.54 59.26 The first half of FY 2005 8,490 21.8 63.67 62.71 FY 2005 (annual) 18,670 139.85 137.83 (Note) 1. Equity in earnings of 11 million yen (32 million yen in the affiliated companies: first half of FY 2005, 67 million yen in FY 2005) 2. The Company made no changes in accounting principle that had a material effect on the financial position, results of operations, and cash flows during the current period. 3. Weighted average number 134,323,039 shares (133,341,012 of common shares shares in the first half of FY 2005, outstanding: 133,498,438 shares in FY 2005) 4. The percentages for net sales, operating income, net income before tax and net income represent a change from the corresponding financial figures for the first half of prior fiscal year. (2) Consolidated Financial Position Shareholders' Shareholders' Shareholders' Total assets equity equity ratio equity As of Millions of yen Millions of yen % per share Yen June 30, 2006 145,657 86,465 59.4 642.18 June 30, 2005 111,546 68,549 61.5 513.45 December 31, 2005 132,935 81,863 61.6 610.51 (Note) Number of common shares outstanding: 134,642,555 shares (133,505,467 shares as of June 30, 2005, 134,090,494 shares as of December 31, 2005) (3) Consolidated Cash Flows Cash flows Cash flows Cash flows Ending balance from from from of cash and operating investing financing cash activities activities activities equivalents As of Millions of Millions of Millions of Millions of yen yen yen yen June 30, 2006 19,978 (3,094) (5,998) 71,118 June 30, 2005 9,649 (3,218) (3,635) 55,798 December 31, 2005 20,646 (12,738) (2,406) 59,613 < As Amended > (1) Consolidated Results of Operations Growth Operating Growth Net income Growth Net sales rate income rate before tax rate Millions % Millions % Millions % of yen of yen of yen The first half of FY 2006 41,226 19.5 14,259 11.7 14,771 10.9 The first half of FY 2005 34,490 21.2 12,771 12.2 13,316 15.5 FY 2005 (annual) 73,030 27,572 29,108 Net Growth Net income Net income income rate per share (basic) per share (diluted) Millions % Yen Yen of yen The first half of FY 2006 8,385 (1.2) 62.42 62.14 The first half of FY 2005 8,490 21.8 63.67 62.71 FY 2005 (annual) 18,670 139.85 137.83 (Note) 1. Equity in earnings of 11 million yen (32 million yen in the affiliated companies: first half of FY 2005, 67 million yen in FY 2005) 2. The Company made no changes in accounting principle that had a material effect on the financial position, results of operations, and cash flows during the current period. 3. Weighted average number 134,323,039 shares (133,341,012 of common shares shares in the first half of FY 2005, outstanding: 133,498,438 shares in FY 2005) 4. The percentages for net sales, operating income, net income before tax and net income represent a change from the corresponding financial figures for the first half of prior fiscal year. (2) Consolidated Financial Position Shareholders' Shareholders' Shareholders' Total assets equity equity ratio equity per share As of Millions of yen Millions of yen % Yen June 30, 2006 147,325 84,601 57.4 628.34 June 30, 2005 111,546 68,549 61.5 513.45 December 31, 2005 132,935 81,863 61.6 610.51 (Note) Number of common shares outstanding: 134,642,555 shares (133,505,467 shares as of June 30, 2005, 134,090,494 shares as of December 31, 2005) (3) Consolidated Cash Flows Cash flows Cash flows Cash flows Ending balance from from from of cash and operating investing financing cash activities activities activities equivalents As of Millions of Millions of Millions of Millions of yen yen yen yen June 30, 2006 20,052 (3,168) (5,998) 71,118 June 30, 2005 9,649 (3,218) (3,635) 55,798 December 31, 2005 20,646 (12,738) (2,406) 59,613 2. Management Policy and Business Performance OPERATING RESULTS AND FINANCIAL CONDITION I. OPERATING RESULTS < As Originally Reported > (1). REVIEW OF CURRENT PERIOD (Unit: million yen) Operating Net income Net Sales income before tax Net income The first half of FY2006 40,673 13,717 14,229 7,997 The first half of FY2005 34,490 12,771 13,316 8,490 Rate of Change 18 % 7 % 7 % -6 % (Unit: million yen) Net Sales The first half of The first half of Rate of Change FY2006 FY2005 (%) Japan 16,073 14,248 13 % North America 8,836 6,885 28 % Europe 10,021 8,829 14 % Asia and Pacific Reg. 4,436 3,766 18 % Latin America 1,308 763 71 % (Overview of Current Business Performance) ��SNIP�� Under such environment, our group's business conditions are as follows: First of all, in Japan, the virus which abuses Winny and Share, Japanese indigenous peer-to-peer (P2P) file-sharing program with being controversial since 2003, has flourished from the beginning of this year. Such a virus has been creating many sensational headline related to the theft of proprietary information. In addition, the demand for the security products continues to increase to the SMB market since the full enforcement of the personal information protection law from April 2005. Moreover, our flagship personal product 'Virus Buster', called 'PC-Cillin" outside of Japan, has still seen healthy growth with the demand of personal users based on their strong awareness to protect against the theft of individual property helping to boost Japan revenue. In those results, the amount of sales for this period in Japan was 16,073 million yen (13% increase from the same period in previous year). In the North American region, under the situation that the Fed stopping soon based on both 2 points; increasing inflationary pressure caused by high oil price and US economy recession caused by growing rates and slowing housing market, the consumer market in which we had implemented reinforcement measures of sales channels since last year showed a substantial increase. Also, the security demands for especially the small companies in SMB business market increased. The sales for this period in the area came to 8,836 million yen (28% increase from the previous period). In the European region, the European Central Bank (ECB) has been reviewed its ultra-low interest policy that had kept with the stagnant economy in the background with raising its interest rate in March 2006 as the second times since the end of 2005 for the first time in recent 5 years and fixed. European's business economy is on a gradual recovery based on enterprise- driven with the improved employment picture and brisk exports. According to Institute for Economic Research, Munich (IFO), German business sentiment rose in June to its highest level in over 15 years. It is considered that great opportunities such as the 2006 World Cup and incentives to spend before value- added tax's expires at the beginning of 2007 are increasing. Under these circumstances, sales for the large enterprise market in France and Italy has increased. The sales for this period in the area came to 10,021 million yen (14% increase from the previous period). In Asia and Pacific regions, although inflationary pressure has concerned as the issue, the economic recovery tone in the background of brisk export stands out. In East Asia, especially mainland China has showed a better-than- expected GDP in this first half of the year. According to such a situation, we have a growth of sales for large enterprise and SMB business market, and also Australia and mainland China have been showing steady performance of sales. The net sales for this period in the regions came to 4,436 million yen (18% increase from the previous period). At Latin America region, large enterprise business market boosted net sales and its growth rate is the highest in all region for this period. In this region net sales came to 1,308 million yen (71% increase from the previous period). As a result, the consolidated net sales for this period came to 40,673 million yen (18% increase from the previous period). Meanwhile, operating expenses came to 26,956 million yen (24% increase from the previous period) due to the increases in the expense to deal with stock option expense since 2006 and expanding employee hiring. In spite of 1,766 million of a one time payment (receipt) related to intellectual property usage, the consolidated operating income for this period was 13,717 million yen (7% increase from the same period in previous year) and the consolidated net income for this period was 7,997 million yen (6% decrease from the same period in previous year). < As Amended > (1). REVIEW OF CURRENT PERIOD (Unit: million yen) Operating Net income Net Sales income before tax Net income The first half of FY2006 41,226 14,259 14,771 8,385 The first half of FY2005 34,490 12,771 13,316 8,490 Rate of Change 20 % 12 % 11 % -1 % (Unit: million yen) Net Sales The first half of The first half of Rate of Change FY2006 FY2005 (%) Japan 16,156 14,248 13 % North America 9,068 6,885 32 % Europe 10,258 8,829 16 % Asia and Pacific Reg. 4,436 3,766 18 % Latin America 1,308 763 71 % (Overview of Current Business Performance) ��SNIP�� Under such environment, our group's business conditions are as follows: First of all, in Japan, the virus which abuses Winny and Share, Japanese indigenous peer-to-peer (P2P) file-sharing program with being controversial since 2003, has flourished from the beginning of this year. Such a virus has been creating many sensational headline related to the theft of proprietary information. In addition, the demand for the security products continues to increase to the SMB market since the full enforcement of the personal information protection law from April 2005. Moreover, our flagship personal product 'Virus Buster', called 'PC-Cillin" outside of Japan, has still seen healthy growth with the demand of personal users based on their strong awareness to protect against the theft of individual property helping to boost Japan revenue. In those results, the amount of sales for this period in Japan was 16,156 million yen (13% increase from the same period in previous year). In the North American region, under the situation that the Fed stopping soon based on both 2 points; increasing inflationary pressure caused by high oil price and US economy recession caused by growing rates and slowing housing market, the consumer market in which we had implemented reinforcement measures of sales channels since last year showed a substantial increase. Also, the security demands for especially the small companies in SMB business market increased. The sales for this period in the area came to 9,068 million yen (32% increase from the previous period). In the European region, the European Central Bank (ECB) has been reviewed its ultra-low interest policy that had kept with the stagnant economy in the background with raising its interest rate in March 2006 as the second times since the end of 2005 for the first time in recent 5 years and fixed. European's business economy is on a gradual recovery based on enterprise- driven with the improved employment picture and brisk exports. According to Institute for Economic Research, Munich (IFO), German business sentiment rose in June to its highest level in over 15 years. It is considered that great opportunities such as the 2006 World Cup and incentives to spend before value- added tax's expires at the beginning of 2007 are increasing. Under these circumstances, sales for the large enterprise market in France and Italy has increased. The sales for this period in the area came to 10,258 million yen (16% increase from the previous period). In Asia and Pacific regions, although inflationary pressure has concerned as the issue, the economic recovery tone in the background of brisk export stands out. In East Asia, especially mainland China has showed a better-than- expected GDP in this first half of the year. According to such a situation, we have a growth of sales for large enterprise and SMB business market, and also Australia and mainland China have been showing steady performance of sales. The net sales for this period in the regions came to 4,436 million yen (18% increase from the previous period). At Latin America region, large enterprise business market boosted net sales and its growth rate is the highest in all region for this period. In this region net sales came to 1,308 million yen (71% increase from the previous period). As a result, the consolidated net sales for this period came to 41,226 million yen (20% increase from the previous period). Meanwhile, operating expenses came to 26,967 million yen (24% increase from the previous period) due to the increases in the expense to deal with stock option expense since 2006 and expanding employee hiring. In spite of 1,766 million of a one time payment (receipt) related to intellectual property usage, the consolidated operating income for this period was 14,259 million yen (12% increase from the same period in previous year) and the consolidated net income for this period was 8,385 million yen (1% decrease from the same period in previous year). II. FINANCIAL CONDITION < As Originally Reported > CASH FLOWS (Unit: million yen) The first half The first half Increase of of (Decrease) FY 2006 FY2005 Cash Flows from Operating Activities 19,978 9,649 10,329 Cash Flows from Investing Activity (3,094) (3,218) 124 Cash Flows from Financing Activity (5,998) (3,635) (2,363) Effect of Exchange Rate Changes on 620 93 527 Cash and Cash Equivalents Net increase (Decrease) in Cash and 11,506 2,889 8,617 Cash Equivalents Cash and Cash Equivalents at end of period 71,118 55,798 15,320 (Overview of Cash Flows) For the cash flows from operating activity for this period, cash inflows increased by 10,329 million yen compared with the previous period and the balance was ended with a surplus of 19,978 million yen. This increase in cash inflows is mainly due to a substantial increase in deferred revenue and a substantial increase in accrued income and other taxes in spite of a slight decrease in net income. For the cash flows from investing activity, cash outflows decreased by 124 million yen compared with the previous period and the balance was ended with a deficit of 3,094 million yen. This decrease in cash outflows is mainly due to an increase in proceeds from sales of marketable securities. For the cash flows from financing activity, cash outflows increased by 2,363 million yen compared with the previous period and the balance was ended with a deficit of 5,998 million yen. This increase in cash outflows is mainly due to a substantial increase in dividends paid. Taking these increases and decreases and the effect of exchange rate changes on cash and cash equivalents into account, the cash and cash equivalents at the end of this period was 71,118 million yen and was increased by 15,320 million yen compared with the previous period. (Trends of Cash Flow Indexes) (US GAAP) The first FY2003 FY2004 FY2005 half of FY2006 Shareholder's equity Ratio (%) 54.1 59.2 61.6 59.4 Capital Adequacy Ratio on Market Value Basis (%) 462.2 690.0 449.9 356.8 Debt Redemption Period (years) 0.4 -- -- -- Interest Coverage Ratio 103.3 218.2 5,566.4 2,498.8 (Japan GAAP) FY2001 FY2002 Shareholder's equity Ratio (%) 47.3 50.0 Capital Adequacy Ratio on Market Value Basis (%) 626.7 360.4 Debt Redemption Period (years) 1.2 0.8 Interest Coverage Ratio 44.2 49.4 < As Amended > CASH FLOWS (Unit: million yen) The first half The first half Increase of of (Decrease) FY 2006 FY2005 Cash Flows from Operating Activities 20,052 9,649 10,403 Cash Flows from Investing Activity (3,168) (3,218) 50 Cash Flows from Financing Activity (5,998) (3,635) (2,363) Effect of Exchange Rate Changes on 620 93 527 Cash and Cash Equivalents Net increase (Decrease) in Cash and 11,506 2,889 8,617 Cash Equivalents Cash and Cash Equivalents at end of period 71,118 55,798 15,320 (Overview of Cash Flows) For the cash flows from operating activity for this period, cash inflows increased by 10,403 million yen compared with the previous period and the balance was ended with a surplus of 20,052 million yen. This increase in cash inflows is mainly due to a substantial increase in deferred revenue and a substantial increase in accrued income and other taxes in spite of a slight decrease in net income. For the cash flows from investing activity, cash outflows decreased by 50 million yen compared with the previous period and the balance was ended with a deficit of 3,168 million yen. This decrease in cash outflows is mainly due to an increase in proceeds from sales of marketable securities. For the cash flows from financing activity, cash outflows increased by 2,363 million yen compared with the previous period and the balance was ended with a deficit of 5,998 million yen. This increase in cash outflows is mainly due to a substantial increase in dividends paid. Taking these increases and decreases and the effect of exchange rate changes on cash and cash equivalents into account, the cash and cash equivalents at the end of this period was 71,118 million yen and was increased by 15,320 million yen compared with the previous period. (Trends of Cash Flow Indexes) (US GAAP) The first FY2003 FY2004 FY2005 half of FY2006 Shareholder's equity Ratio (%) 54.1 59.2 61.6 57.4 Capital Adequacy Ratio on Market Value Basis (%) 462.2 690.0 449.9 352.8 Debt Redemption Period (years) 0.4 -- -- -- Interest Coverage Ratio 103.3 218.2 5,566.4 2,508.0 (Japan GAAP) FY2001 FY2002 Shareholder's equity Ratio (%) 47.3 50.0 Capital Adequacy Ratio on Market Value Basis (%) 626.7 360.4 Debt Redemption Period (years) 1.2 0.8 Interest Coverage Ratio 44.2 49.4 3. CONSOLIDATED FINANCIAL STATEMENTS (1) CONSOLIDATED BALANCE SHEETS < As Originally Reported > (Thousands of yen) June 30, June 30, December 31, Account 2005 2006 2005 Amount % Amount % Amount % < Assets > Current assets: Cash and cash equivalents 55,797,854 71,118,356 59,612,577 Time deposits 906,397 1,038,871 1,435,293 Marketable securities 14,915,254 22,566,765 22,395,365 Notes and accounts receivable, trade - less allowance for doubtful accounts of - June 30, 2005 (Yen) 381,428 - June 30, 2006 (Yen) 383,294 and December 31, 2005 (Yen) 282,257 - less sales returns allowance of - June 30, 2005 (Yen) 695,848 - June 30, 2006 (Yen) 517,796 and December 31, 2005 (Yen) 422,453 13,742,453 15,827,083 19,198,870 Inventories 280,722 496,261 359,897 Deferred income taxes 6,272,727 7,985,215 6,727,229 Prepaid expenses and other Current assets 1,457,490 2,603,035 1,925,791 Total current assets 93,372,897 83.7 121,635,586 83.5 111,655,022 84.0 Investments and other assets: Investment securities 9,321,151 12,469,433 11,159,428 Investments in and 206,944 297,511 321,569 advances to affiliate companies Software development costs, net 640,578 1,012,239 1,174,691 Other intangibles, net 1,260,470 1,781,019 1,390,434 Goodwill 2,442,109 2,079,121 2,130,179 Deferred income taxes 1,543,222 2,883,907 2,033,488 Other 662,846 751,433 671,800 Total investments and other assets 16,077,320 14.4 21,274,663 14.6 18,881,589 14.2 Property and equipment: Office furniture and equipment 3,841,551 4,981,586 4,468,891 Other properties 1,349,320 1,830,459 1,539,195 5,190,871 6,812,045 6,008,086 Less: Accumulated depreciation (3,094,701) (4,065,622) (3,609,473) Property and equipment, net 2,096,170 1.9 2,746,423 1.9 2,398,613 1.8 Total assets 111,546,387 100.0 145,656,672 100.0 132,935,224 100.0 (Thousands of yen) June 30, June 30, December 31, Account 2005 2006 2005 Amount % Amount % Amount % < Liabilities, minority interest and shareholders' equity > Current liabilities: Notes payable, trade 139,895 105,159 118,572 Accounts payable, trade 744,285 856,727 794,450 Accounts payable, other 2,970,364 3,476,117 3,208,625 Income taxes withheld 839,157 1,402,864 1,082,302 Accrued expenses 2,886,400 3,340,038 3,138,674 Accrued income and other taxes 4,133,554 8,768,137 5,476,791 Deferred revenue 26,240,519 34,425,100 31,506,315 Other 781,518 530,104 895,088 Total current liabilities 38,735,692 34.7 52,904,246 36.3 46,220,817 34.8 Long-term liabilities: Deferred revenue, less Current portion 3,425,101 5,281,248 3,874,936 Accrued pension and severance costs 767,945 930,540 889,774 Other 64,108 70,095 82,056 Total long-term liabilities 4,257,154 3.8 6,281,883 4.3 4,846,766 3.6 Minority interest 4,613 0.0 5,572 0.0 4,531 0.0 Shareholders' equity: Common stock Authorized -June 30,2005 250,000,000 shares -June 30,2006 250,000,000 shares -December 31,2005 250,000,000 shares (no par value) Issued -June 30,2005 136,051,155 shares 11,803,201 -June 30,2006 137,179,504 shares 13,294,144 -December 31,2005 136,603,725 shares 12,484,849 Additional paid-in Capital 18,035,675 21,928,873 18,572,063 Retained earnings 45,829,022 56,424,662 55,971,955 Accumulated other comprehensive income (loss) Net unrealized gain (loss) on debt and equity securities (2,654) 827,108 657,885 Cumulative foreign currency translation adjustments 230,810 1,431,551 1,459,600 228,156 2,258,659 2,117,485 Treasury stock, at cost -June 30,2005 2,545,688 shares (7,347,126) -June 30,2006 2,536,949 (7,441,367) shares -December 31,2005 2,513,231 shares (7,283,242) Total shareholders' equity 68,548,928 61.5 86,464,971 59.4 81,863,110 61.6 Total liabilities, minority interest and shareholders' equity 111,546,387 100.0 145,656,672 100.0 132,935,224 100.0 < As Amended > (Thousands of yen) June 30, June 30, December 31, Account 2005 2006 2005 Amount % Amount % Amount % < Assets > Current assets: Cash and cash equivalents 55,797,854 71,118,356 59,612,577 Time deposits 906,397 1,038,871 1,435,293 Marketable securities 14,915,254 22,566,765 22,395,365 Notes and accounts receivable, trade -less allowance for doubtful accounts of -June 30, 2005 (Yen) 381,428 -June 30, 2006 (Yen) 383,294 and December 31, 2005 (Yen) 282,257 -less sales returns allowance of -June 30, 2005 (Yen) 695,848 -June 30, 2006 (Yen) 517,796 and December 31, 2005 (Yen) 422,453 13,742,453 15,827,083 19,198,870 Inventories 280,722 496,261 359,897 Deferred income taxes 6,272,727 9,234,937 6,727,229 Prepaid expenses and other current assets 1,457,490 2,603,035 1,925,791 Total current assets 93,372,897 83.7 122,885,308 83.4 111,655,022 84.0 Investments and other assets: Investment securities 9,321,151 12,469,433 11,159,428 Investments in and advances to affiliate companies 206,944 297,511 321,569 Software development costs, net 640,578 1,012,239 1,174,691 Other intangibles, net 1,260,470 1,781,019 1,390,434 Goodwill 2,442,109 2,079,121 2,130,179 Deferred income taxes 1,543,222 3,000,761 2,033,488 Other 662,846 751,433 671,800 Total investments and other assets 16,077,320 14.4 21,391,517 14.5 18,881,589 14.2 Property and equipment: Office furniture and equipment 3,841,551 5,458,359 4,468,891 Other properties 1,349,320 2,031,540 1,539,195 5,190,871 7,489,899 6,008,086 Less: Accumulated depreciation (3,094,701) (4,442,004) (3,609,473) Property and equipment, net 2,096,170 1.9 3,047,895 2.1 2,398,613 1.8 Total assets 111,546,387 100.0 147,324,720 100.0 132,935,224 100.0 (Thousands of yen) June 30, June 30, December 31, Account 2005 2006 2005 Amount % Amount % Amount % < Liabilities, minority interest and shareholders' equity > Current liabilities: Notes payable, trade 139,895 105,159 118,572 Accounts payable, trade 744,285 856,727 794,450 Accounts payable, other 2,970,364 3,476,117 3,208,625 Income taxes withheld 839,157 1,402,864 1,082,302 Accrued expenses 2,886,400 3,340,038 3,138,674 Accrued income and other taxes 4,133,554 8,483,308 5,476,791 Deferred revenue 26,240,519 37,722,952 31,506,315 Other 781,518 530,104 895,088 Total current liabilities 38,735,692 34.7 55,917,269 38.0 46,220,817 34.8 Long-term liabilities: Deferred revenue, less current portion 3,425,101 5,581,312 3,874,936 Accrued pension and severance costs 767,945 930,540 889,774 Other 64,108 288,778 82,056 Total long-term liabilities 4,257,154 3.8 6,800,630 4.6 4,846,766 3.6 Minority interest 4,613 0.0 5,572 0.0 4,531 0.0 Shareholders' equity: Common stock Authorized -June 30,2005 250,000,000 shares -June 30,2006 250,000,000 shares -December 31,2005 250,000,000 shares (no par value) Issued -June 30,2005 136,051,155 shares 11,803,201 -June 30,2006 137,179,504 shares 13,294,144 -December 31,2005 136,603,725 shares 12,484,849 Additional paid-in capital 18,035,675 21,928,873 18,572,063 Retained earnings 45,829,023 54,560,940 55,971,955 Accumulated other comprehensive income (loss) Net unrealized gain (loss) on debt and equity securities (2,654) 827,108 657,885 Cumulative foreign currency translation adjustments 230,810 1,431,551 1,459,600 228,156 2,258,659 2,117,485 Treasury stock, at cost -June 30,2005 2,545,688 shares (7,347,126) -June 30,2006 2,536,949 shares (7,441,367) -December 31,2005 2,513,231 shares (7,283,242) Total shareholders' equity 68,548,928 61.5 84,601,249 57.4 81,863,110 61.6 Total liabilities, minority interest and shareholders' equity 111,546,387 100.0 147,324,720 100.0 132,935,224 100.0 (2) CONSOLIDATED STATEMENTS OF INCOME < As Originally Reported > (Thousands of yen) For the six For the six For the year Account months ended months ended ended June 30,2005 June 30,2006 December 31,2005 Amount % Amount % Amount % Net sales 34,489,740 100.0 40,673,427 100.0 73,029,901 100.0 Cost of sales: Amortization of capitalized software and materials 1,191,244 1,796,469 2,598,603 Maintenance 694,846 1,699,983 1,671,320 Customer support 3,190,146 4,009,038 6,857,901 Total cost of sales 5,076,236 14.7 7,505,490 18.5 11,127,824 15.2 Operating expenses: Selling 10,338,819 13,150,894 20,944,484 Research and development 2,196,929 2,373,496 4,395,207 General and Administrative 4,106,616 3,926,186 8,990,611 Total operating expenses 16,642,364 48.3 19,450,576 47.8 34,330,302 47.0 Operating income 12,771,140 37.0 13,717,361 33.7 27,571,775 37.8 Other income (expenses): Interest income 326,282 707,821 836,910 Interest expense (2,241) (7,826) (3,709) Gain (loss) on sales of marketable securities 20,534 73,829 370,326 Foreign exchange gain (loss), net 197,132 (127,425) 327,257 Other income (expense), net 2,897 (135,134) 5,741 Total other income (expenses) 544,604 1.6 511,265 1.3 1,536,525 2.1 Net income before income taxes 13,315,744 38.6 14,228,626 35.0 29,108,300 39.9 Income taxes: Current 4,698,548 8,361,670 11,863,127 Deferred 158,283 (2,119,648) (1,358,568) 4,856,831 14.1 6,242,022 15.3 10,504,559 14.4 Income before minority interest and equity in earnings of affiliated companies 8,458,913 24.5 7,986,604 19.7 18,603,741 25.5 Minority interest in income of consolidated subsidiaries (420) 0.0 (574) 0.0 (338) 0.0 Equity in earnings of affiliated companies 31,663 0.1 10,942 0.0 66,551 0.1 Net income 8,490,156 24.6 7,996,972 19.7 18,669,954 25.6 Per share data: Net income Yen Yen Yen - Basic 63.67 59.54 139.85 - Diluted 62.71 59.26 137.83 < As Amended > (Thousands of yen) For the six For the six For the year Account months ended months ended ended June 30,2005 June 30,2006 December 31,2005 Amount % Amount % Amount % Net sales 34,489,740 100.0 41,225,515 100.0 73,029,901 100.0 Cost of sales: Amortization of capitalized software and materials 1,191,244 1,796,469 2,598,603 Maintenance 694,846 1,699,983 1,671,320 Customer support 3,190,146 4,009,038 6,857,901 Total cost of sales 5,076,236 14.7 7,505,490 18.2 11,127,824 15.2 Operating expenses: Selling 10,338,819 13,150,894 20,944,484 Research and development 2,196,929 2,373,496 4,395,207 General and administrative 4,106,616 3,936,349 8,990,611 Total operating expenses 16,642,364 48.3 19,460,739 47.2 34,330,302 47.0 Operating income 12,771,140 37.0 14,259,286 34.6 27,571,775 37.8 Other income (expenses): Interest income 326,282 707,821 836,910 Interest expense (2,241) (7,826) (3,709) Gain (loss) on sales of marketable securities 20,534 73,829 370,326 Foreign exchange gain (loss), net 197,132 (127,425) 327,257 Other income (expense), net 2,897 (135,134) 5,741 Total other income (expenses) 544,604 1.6 511,265 1.2 1,536,525 2.1 Net income before income taxes 13,315,744 38.6 14,770,551 35.8 29,108,300 39.9 Income taxes: Current 4,698,548 8,361,670 11,863,127 Deferred 158,283 (1,965,640) (1,358,568) 4,856,831 14.1 6,396,030 15.5 10,504,559 14.4 Income before minority interest and equity in earnings of affiliated companies 8,458,913 24.5 8,374,521 20.3 18,603,741 25.5 Minority interest in income of consolidated subsidiaries (420) 0.0 (574) 0.0 (338) 0.0 Equity in earnings of affiliated companies 31,663 0.1 10,942 0.0 66,551 0.1 Net income 8,490,156 24.6 8,384,889 20.3 18,669,954 25.6 Per share data: Net income Yen Yen Yen -Basic 63.67 62.42 139.85 -Diluted 62.71 62.14 137.83 DATASOURCE: Trend Micro Inc. CONTACT: Mahendra Negi of Trend Micro, +81-3-5334-4899, or fax, +81-3-5334-4874, or

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