Report of Independent Auditors

The Board of Directors
JALUX Inc.
We have audited the accompanying consolidated balance sheets of JALUX Inc. andconsolidated subsidiaries as of March 31, 2009 and 2008, and the related consolidated
statements of income, changes in net assets, and cash flows for each of three years in the
period ended March 31, 2009, all expressed in yen. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of JALUX Inc. and consolidated
subsidiaries at March 31, 2009 and 2008, and the consolidated results of their operations andtheir cash flows for each of the three years in the period ended March 31, 2009 in conformity
with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect
to the year ended March 31, 2009 are presented solely for convenience. Our audit also
included the translation of yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 3.

June 19, 2009

JALUX Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31,2009
2008
(Thousands of yen)
AssetsCurrent assets:
Cash and time deposits (Note 5)
Notes and accounts receivable (Notes 17 and 18):
Trade
Unconsolidated subsidiaries and affiliates
Other
Allowance for doubtful accounts
Inventories
Deferred income taxes (Note 11)
Other (Note 18)
Total current assets

2009(Thousands of
U.S. dollars)(Note 3)

¥ 6,151,963¥ 6,280,283$ 62,775

11,750,986
122,223
1,918,807(76,826)
8,056,575
390,453
1,088,614
29,402,798

12,080,232
106,092
1,586,041(21,902)7,309,995
470,034
1,399,731
29,210,510

119,908
1,247
19,580(784)
82,2103,984
11,108300,029

2,194,887
480,755
2,675,642

2,162,640
475,924
2,638,564

22,397
4,906
27,302

Accumulated depreciation
Property and equipment, net

274,205
3,835,781
158,8362,860,632
1,933,556
848,233
9,911,245(4,227,949)
5,683,295

282,071
4,380,280
212,378
3,587,102
97,663
781,797
9,341,294(4,528,691)
4,812,603

2,798
39,141
1,621
29,19019,7308,655
101,135(43,142)
57,993

Intangible assets:
Software
Other
Total intangible assets

1,691,083
236,193
1,927,277

1,837,729
35,983
1,873,712

17,256
2,410
19,666

378,951
2,185,073
94,368369,988
181,812¥42,899,208

445,589
1,959,907
246,936
199,820
187,298¥41,574,944

3,867
22,297
963
3,775
1,855
$437,747

Investments and advances:
Unconsolidated subsidiaries and affiliates
Other (Note 6)
Total investments and advances
Property and equipment (Notes 7 and 10):Land
Buildings and structures
Machinery and vehicles
Flight equipment
Construction in process
Other

Long-term loans
Deposits for business space
Prepaid pension expenses (Note 8)
Deferred income taxes (Note 11)
Other assets, net

2

March 31,
2009
2008
(Thousands of yen)
Liabilities and net assets
Current liabilities:
Short-term borrowings (Note 7)
Current portion of long-term debt (Note 7)
Notes and accounts payable (Notes 17 and 18):
Trade
Affiliates
Accrued expenses
Accrued income taxes (Note 11)
Other
Total current liabilities

2009(Thousands of
U.S. dollars)(Note 3)

¥ 2,120,074
1,637,292¥ 2,841,587
1,116,875$ 21,633
16,707

12,868,124
394,7012,300,718
44,908
1,921,463
21,287,284

12,736,107
523,485
2,255,387
413,664
1,826,552
21,713,660

131,307
4,028
23,477458
19,607217,217

5,368,349

3,466,495

54,779Accrued pension and severance costs (Note 8)

77,95430,526795

Directors’ and statutory auditors’ retirement benefits

189,344

176,561

1,932

Deferred income taxes (Note 11)

179,348

150,120

1,830

Other

94,676

4,781

966

2,558,550
711,499
11,868,103

2,558,550
711,499
11,885,115

26,1087,260
121,103(11,213)(10,888)(114)(25,214)(5,890)(257)

948(581,058)
1,180,632
15,702,249¥42,899,208(43,161)(48,576)
986,150
16,032,797¥41,574,944

10(5,929)12,047160,227$437,747

Long-term debt (Note 7)

Commitments and contingent liabilities(Notes 13 and 14)
Net assets (Note 12):
Common stock, without par value:
Authorized: 20,000,000 shares
Issued: 12,775,000 shares in 2009 and 2008
Capital surplus
Retained earnings
Common stock in treasury: 15,275 shares in 2009
and 15,050 shares in 2008
Net unrealized (loss) gain on other securities,
net of taxes (Note 6)
Net unrealized gain (loss) on hedging instruments,
net of taxes (Note 17)
Translation adjustments
Minority interests
Total net assets

The accompanying notes are an integral part of these statements.
3

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Income

2009

Operating revenues (Notes 16 and 18)
Operating expenses (Notes 16 and 18):
Cost of sales
Selling, general and administrative
expenses
Operating income¥113,225,704¥120,228,386 ¥114,133,497

2009(Thousands of
U.S. dollars)(Note 3)
$1,155,364

90,721,969

96,359,302

89,602,555

925,734

21,902,105
112,624,075
601,628

21,680,655
118,039,957
2,188,428

21,284,783
110,887,338
3,246,158

223,491
1,149,225
6,139

18,388(143,612)
88,808390,887354,471

34,809(135,928)(91,047)
324,557
132,390

16,998(132,492)
162,429(126,866)(79,930)

188(1,465)
906
3,989
3,617

956,099

2,320,819

3,166,227

9,756

480,465
997,868
1,309,046
180,196
93,932(6,730)473,735
1,178,065
1,402,979(164,271)(183,420)(90,073)
392,290 ¥978,483 ¥ 1,579,827

4,903
(69)
4,834
(919)
4,003

Non-operating income (expenses):
Interest income
Interest expense
Equity in earnings (losses) of affiliates
Other, net (Note 9)
Income before income taxes and minority
interests
Income taxes (Note 11):
Current
Deferred
Minority interests
Net income

Year ended March 31,
2008
2007
(Thousands of yen)¥$

The accompanying notes are an integral part of these statements.

4

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets

Balance at March 31, 2006
Cash dividends(¥24 per share)
Net income for the year
ended March 31, 2007
Adjustment due tochanges in the number
of affiliates
Share decrease inaffiliate
Purchases of common
stock in treasury
Sales of common stock
in treasury
Other
Balance at March 31, 2007
Cash dividends(¥30 per share)
Net income for the year
ended March 31, 2008
Purchases of common
stock in treasury
Sales of common stock
in treasury
Other
Balance at March 31, 2008
Cash dividends(¥35 per share)
Net income for the year
ended March 31, 2009
Change in scope ofequity method
Purchases of common
stock in treasury
Other
Balance at March 31, 2009

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

12,775,000¥2,558,550¥711,363¥ 9,992,376

2,558,550

711,421¥ (9,284)¥ 22,663¥ (2,609)¥ (51,101)

Minority
interests

Total
net assets¥ 881,358¥14,103,315(306,515)(306,515)

1,579,827

1,579,827

24,082

24,082

58
12,775,000NetNet
unrealized unrealized(loss) gain gain (loss)
on otheron hedging
securities, instruments,
Commonnet of taxes net of taxes Translation
stock in
(Note 6)(Note 17) adjustments
treasury(Thousands of yen)

8

8

(452)

(452)

51
11,289,771(9,677)(8,956)
13,707

6,677
4,068

58,246
7,144

59,233
940,591109
115,201
15,515,577(383,139)(383,139)

978,483

978,483(1,293)78
12,775,000

2,558,550

711,499(1,293)82
11,885,115(10,888)(19,598)(5,890)(47,230)(43,161)(55,721)(48,576)

45,559986,150(446,994)(446,994)

392,290392,290

37,692

37,692(324)

12,775,000

Number ofshares ofcommonstock
Balance at March 31, 2008 12,775,000
Cash dividends($0.36 per share)
Net income for the year
ended March 31, 2009
Change in scope ofequity method
Purchases of common
stock in treasury
Other
Balance at March 31, 2009 12,775,000¥2,558,550¥711,499¥11,868,103

Commonstock

CapitalsurplusRetainedearnings$26,108$7,260$121,277¥(11,213)(19,323)¥(25,214)

44,110¥948(532,481)¥(581,058)

NetNet
unrealized unrealized(loss) gain gain (loss)
on otheron hedging
securities, instruments,
Commonnet of taxes net of taxes Translation
stock in
(Note 6)(Note 17) adjustments
treasury(Thousands of U.S. dollars) (Note 3)$(111)$ (60)$(440)$ (496)

194,482¥1,180,632(324)(313,212)¥15,702,249

Minority
interests

Total
net assets$10,063$163,600(4,561)(4,561)

4,003

4,003

385

385
(3)

$26,108$7,260160(76,990)
16,032,797$121,103$(114)(197)$(257)

450$ 10(5,433)$(5,929)

1,985$12,047(3)(3,196)$160,227

The accompanying notes are an integral part of these statements.
5

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows2009

Operating activities
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization
Increase (decrease) in provision for allowance for doubtful
accounts
Increase (decrease) in net provision for accrued pension andseverance costs
Decrease (increase) in prepaid pension expenses
Interest and dividend income
Interest expense
Exchange loss (gain), net
Equity in (earnings) losses of affiliates
Loss on changes in equity interest
Loss on sales of, and loss on disposal of property andequipment
Impairment losses on fixed assets
Loss (gain) on sales of investments in securities
Loss on sales of investments in affiliates
Loss on revaluation of investments in securities(Increase) decrease in notes and accounts receivable
Increase in inventories
Increase (decrease) in notes and accounts payable
Decrease (increase) in advance payment
Increase (decrease) in advance received(Increase) decrease in bad debts on receivables
Payments of bonuses to directors and statutory auditors
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Investing activities
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of investment in unconsolidated subsidiaries andaffiliates
Proceeds from sales of investments in affiliates
Purchases of intangible assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Payments for purchase of investments in affiliate resulting inchange in scope of consolidation
Long-term loans receivable madeCollection of long-term loans
Purchases of time deposits
Proceeds from maturity of time deposits
Increase in deposits for business space
Decrease in deposits for business space
Decrease (increase) in deposits with restrictions
Other, net
Net cash used in investing activities
Financing activities(Decrease) increase in short-term borrowings, net
Proceeds from long-term loans
Repayment of long-term loans
Dividends paid to stockholders
Dividends paid to minority interests
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents arising from initial
inclusion of subsidiaries in consolidation
Cash and cash equivalents at end of the year (Note 5)¥

Year ended March 31,
2008
2007
(Thousands of yen)

2009
(Thousands of
U.S. dollars)(Note 3)

956,099¥ 2,320,819¥ 3,166,227$ 9,756

1,095,961

1,111,740

759,293

11,18375,299(13,387)(35,300)

768

3,542
152,567(64,619)
143,61241,530(88,808)–(82,240)(246,936)(78,133)
135,928
39,686
91,047–(170,848)–(57,980)
132,492(52,210)(162,429)
14,343

36
1,557
(659)
1,465
424
(906)
–

51,922
17,90526,70469,094
190,061(748,177)(537,145)
329,200
197,209172,317(70,138)–
357,418
2,371,558
81,985(153,922)(899,433)
1,400,187

141,546
35,592(19,999)–
90,879922,958(1,238,277)(200,189)
739,175(916,872)
11,513–368,220
3,213,070
71,392(145,746)(1,266,258)
1,872,458

126,112
9,382
3,599
1,265
–
(1,675,530)(150,434)
1,628,897(1,409,312)
670,31225,784(22,870)
62,3992,863,193
72,140(118,387)(1,223,163)
1,593,783

530
183
272
705
1,939
(7,634)(5,481)
3,359
2,012
1,758
(716)
–
3,647
24,200837(1,571)(9,178)14,288(2,159,132)
3,166(478,985)
2,927(748,410)
10,701(22,032)
32(14,907)–(287,080)(264,658)
2,185(27,000)–(581,539)(240)
20,000(50,000)
54,683(727,972)(192,358)
3,900

(152)
–
(2,929)(2,701)22(160,301)(463)
59,392(1,366)–(295,377)
76,345
20,593(22,691)(3,044,344)–(14,308)
153,585(127,469)
100,000(145,187)
70,598(5,449)(55,585)(1,088,655)–(220,761)
40,229(37,200)–(236,374)
310,399–(30,383)(1,823,547)(1,636)
(5)
606
(14)
–
(3,014)
779
210
(232)
(31,065)(449,978)4,000,000(1,262,741)(449,824)(120,000)(4,492)
1,712,962(152,586)(83,780)
6,174,828

275,480
1,200,000(1,188,272)(377,810)(122,473)(3,706)(216,782)(38,364)
528,654
5,646,173

766,679
1,675,120(1,246,722)(303,575)(123,114)(3,294)
765,092
48,335
583,663
4,946,949(4,592)40,816(12,885)(4,590)(1,224)(46)
17,479(1,557)(855)
63,008–¥ 6,091,048–¥ 6,174,828

115,561¥ 5,646,173–$ 62,154

The accompanying notes are an integral part of these statements.
6

JALUX Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 20091.

Summary of Significant Accounting Policiesa.

Basis of preparation
JALUX Inc. (the “Company”) and its consolidated domestic subsidiaries maintaintheir accounting records and prepare their financial statements in accordance withaccounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial
Reporting Standards, and its consolidated foreign subsidiaries, in conformity withthose of their countries of domicile. The accompanying consolidated financial
statements have been compiled from the consolidated financial statements filed with
the Financial Services Agency as required by the Financial Instruments and Exchange
Law of Japan and include certain additional financial information for the convenienceof readers outside Japan.
As permitted by the Financial Instruments and Exchange Law of Japan, amounts ofless than one thousand yen have been omitted. As a result, the totals shown in theaccompanying consolidated financial statements (both in yen and U.S. dollars) do notnecessarily agree with the sum of the individual amounts.
Certain amounts previously reported have been reclassified to conform to the current
year’s classification except for the effects with respect to the adoption of new
accounting standards.

b.

Principles of consolidation and accounting for investments in unconsolidated
subsidiaries and affiliates
The consolidated financial statements include the accounts of the Company andsignificant companies controlled directly or indirectly by the Company. Companies
over which the Company exercises significant influence in terms of their operating andfinancial policies have been included in the consolidated financial statements on an
equity basis.
The balance sheet date of seven of the consolidated subsidiaries is December 31.
Any significant differences in intercompany accounts and transactions arising fromintervening intercompany transactions during the period from January 1 throughMarch 31 have been adjusted, if necessary, for the respective years.
All significant intercompany accounts and transactions and unrealized gain or loss onintercompany accounts and transactions have been eliminated.

7

1.

Summary of Significant Accounting Policies (continued)c.

Securities
Securities except for investments in an unconsolidated subsidiaries and affiliates areclassified as trading securities, held-to-maturity securities or other securities. Trading
securities are carried at fair value. Held-to-maturity securities are carried atamortized cost. Marketable securities classified as other securities are carried at fairvalue with any unrealized gain or loss reported as a separate component of net assets,
net of taxes. Non-marketable securities classified as other securities are carried atcost. Cost of securities sold is determined principally by the average method.

d.

Derivatives
Derivatives positions are stated at fair value.
Gain or loss on derivatives designated as hedging instruments is deferred until the loss
or gain on the underlying hedged items is recognized. Foreign receivables andpayables are translated at the applicable forward foreign exchange rates if certain
conditions are met. In addition, the related interest differential paid or received underinterest-rate swaps utilized as hedging instruments is recognized over the terms of theswap agreements as an adjustment of interest expense on the hedged items if certain
conditions are met.

e.

Inventories
Inventories are stated at the lower of cost or net selling value, cost being determined asfollows:
Merchandise:
The Company– by the moving average method
Subsidiaries– principally by the first-in, first-out method
Real estate for sale – by the specific identification method
Leasing real estates for sale are depreciated by applying
the method of tangible fixed assets.
Supplies– by the last purchase price methodf.

Property and equipment
Property and equipment is stated at cost and depreciation is computed as follows:
Flight equipment:
Depreciation of flight equipment is computed by the straight-line method based on
the estimated useful lives of the respective assets.

8

1.

Summary of Significant Accounting Policies (continued)f.

Property and equipment (continued)
Other property and equipment:
For the Company and the consolidated domestic subsidiaries, depreciation of the
shops in airports is computed principally by the straight-line method anddepreciation of other property and equipment is computed principally by the
declining-balance method based on the useful lives stipulated in the Corporation
Tax Law of Japan. The consolidated foreign subsidiaries principally adopt thestraight-line method based on the estimated useful lives of the respective assets.
Effective April 1, 2007, the Company and domestic consolidated subsidiaries changed
the method of depreciation based on an amendment to the Corporation Tax Law ofJapan for tangible fixed assets acquired on or prior to March 31, 2007. Such tangible
fixed assets are to be depreciated based on the difference between the equivalent of 5%
of acquisition cost and memorandum value over a period of 5 years once they havebeen fully depreciated to the limits of their respective depreciable amounts effect April
1, 2007.

g.

Software
Computer software intended for internal use is amortized by the straight-line method
based on their estimated useful life.

h.

Leased assets
Leased assets arising from transactions under finance lease agreements which do nottransfer the ownership to the lessee is depreciated to residual value of zero by thestraight-line method over the terms of the agreements. However, such finance leaseagreements, contracted prior to April 1, 2008 continue to be accounted for by a method
corresponding to that used for ordinary operating lease contracts.

i.

Allowance for doubtful accounts
The allowance for doubtful accounts on specific receivables is provided at the estimateof the unrecoverable amounts. The allowance for doubtful accounts on otherreceivables is provided based on the historical rate of losses on receivables.

j.

Accrued pension and severance costs
To provide for employees’ severance indemnities and pension payments, net periodic
pension and severance costs are computed based on the projected benefit obligationand the pension plan assets.
Past service cost is being amortized by the straight-line method over a period of 5
years.

9

1.

Summary of Significant Accounting Policies (continued)j.

Accrued pension and severance costs (continued)
The adjustment incurred during this fiscal year arising from revisions to the actuarial
assumptions (the “actuarial assumption adjustment”) is to be amortized by thestraight-line method beginning the following fiscal year over a period of 5 years.
Effective October 1, 2007, the Company changed its retirement pension plan to the
combination of defined contribution plans and defined benefit pension plans which theCompany manages from tax qualified non-contributory defined pension plans.
Effective March 1, 2008, a domestic consolidated subsidiary changed its retirement
pension plan to the lump-sum retirement plans and the defined benefit pension planfrom tax qualified non-contributory defined pension plans. The Company and adomestic consolidated subsidiary applied “Accounting for the Transfer between
Retirement Benefit Plans” (Accounting Standards Board of Japan Implementation
Guidance No. 1).

k.

Directors’ and statutory auditors’ retirement benefits
Reserve for directors’, statutory auditors’ and operating officers’ retirement benefits isprovided at the amount which would have been paid had all directors and statutory
auditors resigned at the year end.

l.

Reserve for bonuses to officers
Reserve for bonuses to officers is provided for at the necessary amounts based on theestimated amounts payable at the date of the balance sheet.

m. Cash equivalents
The Company and its consolidated subsidiaries define cash equivalents as highly liquid,
short-term investments with an original maturity of three months or less.
n.

Goodwill
Differences between the cost and the underlying net equity at fair value of investment
in consolidated subsidiaries and in companies which are accounted for by the equity
method have been amortized by the straight-line method over the estimated effective
period.

2.

Accounting Change

Accounting Standard for Measurement of Inventories
Effective the year ended March 31, 2009, the Company and its consolidated subsidiaries
have adopted “Accounting Standard for Measurement of Inventories” (AccountingStandards Board of Japan (ASBJ) Statement No. 9 issued on July 5, 2006). The impact
on net income was immaterial for the year ended March 31, 2009.
10

2.

Accounting Change (continued)

Change in Method of Accounting for Inventories
Effective April 1, 2007, the Company changed its accounting method to calculate cost formerchandise to the moving average method from the first-in, first-out method. The
purpose of this change was to improve operational efficiency and to average the pricevolatility and ensure accuracy in the periodic accounting for profit and loss.
Accounting Standard for Lease Transactions
Up to March 31, 2008, transactions under finance lease agreements which do not transfer
the ownership of the leased assets were formerly accounted for by a method corresponding
to that used for ordinary operating lease contracts. Effective April 1, 2008, the company
and its consolidated subsidiaries adopted the “Accounting Standard for Lease
Transactions” (Accounting Standards Board of Japan (ASBJ) Statement No. 13 issued onJune 17, 1993, amended on March 30, 2007) and the “Implementation Guidance on the
Accounting Standard for Lease Transactions” (ASBJ Guidance No. 16 issued on January
18, 1994, amended on March 30, 2007). Accordingly, such finance lease agreements
contracted on and after April 1, 2008 are being accounted for similarly as the ordinary sales
and purchase transactions. However, such finance lease agreements contracted prior to
April 1, 2008 continue to be accounted for by a method corresponding to that used forordinary operating lease contracts. This change has no impact on net income for the year
ended March 31, 2009.
Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries
for Consolidated Financial Statements
Effective April 1, 2008, the Company and its consolidated subsidiaries adopted the“Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries
for Consolidated Financial Statements” (ASBJ Practical Issues Task Force No. 18 issued
on May 17, 2006) and made revisions required for consolidated accounting. This change
has no impact on net income for the year ended March 31, 2009.
Change in Method of Accounting for Depreciation Related to Tangible Fixed Assets
Effective April 1, 2007, the Company and domestic consolidated subsidiaries changed themethod of depreciation based on an amendment to the Corporation Tax Law of Japan for
tangible fixed assets acquired on or after April 1, 2007.

3. U.S. Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of the reader. The rate of¥98.00 = U.S.$1.00, the approximate exchange rate prevailing on March 31, 2009, has beenused. The inclusion of such amounts is not intended to imply that yen have been or could
be readily converted, realized or settled in U.S. dollars at that or any other rate.

11

4.

Inventories

Inventories at March 31, 2009 and 2008 were as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Merchandise and finished products
Real estate held for sale
Raw materials and supplies

5.

¥6,596,654
1,364,489
95,431¥8,056,575¥6,049,008
1,224,925
36,061¥7,309,995$67,313
13,923
974$82,210

Cash Flow Information

The components of cash and cash equivalents are summarized as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Time deposits with maturities of morethan three months
Credit balances of current accounts
included in short-term bank loans¥6,151,963¥6,280,283$62,775(60,200)(105,027)

(614)

(714)
¥6,091,048(427)¥6,174,828(7)$62,154

The following is the summary of assets acquired and liabilities assumed through theacquisition of shares of SHUFUNOTOMO DIRECT Co., Ltd. for the year ended March 31,
2009, relating acquisition cost and net disbursement:

Current assets
Fixed assets
Goodwill
Current liabilities
Long-term liabilities
Minority interests
Acquisition cost
Cash and cash equivalents
Net disbursement due to the share acquisition(Thousands ofyen)(Thousands of
U.S. dollars)¥1,081,664
121,618
208,949(603,684)(118,135)(234,912)
455,500
295,198$ 160,301$11,037
1,241
2,132(6,160)(1,205)(2,397)
4,648
3,012$ 1,63612

6.

Fair Value of Securities

The Company and its consolidated subsidiaries did not possess any trading securities orheld-to-maturity securities at March 31, 2009 and 2008. Securities classified as othersecurities have been included in “investments and advances – other” in the accompanying
consolidated balance sheets at March 31, 2009 and 2008.
The components of unrealized gain or loss on marketable securities classified as othersecurities at March 31, 2009 and 2008 are summarized as follows:
March 31, 2009
Acquisition
Carrying
Unrealized
costs
value
gain (loss)(Thousands of yen)
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

¥ 20,241
20,241¥ 36,969
36,969¥ 16,728
16,728

155,940

144,271(11,668)

100,000
23,810279,751¥299,992

92,13013,197
249,599¥286,568(7,870)(10,613)(30,151)¥(13,423)

March 31, 2009
Acquisition
Carrying
Unrealized
costs
value
gain (loss)(Thousands of U.S. dollars)
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

$ 207
207

$ 377
377

$ 171
171

1,591

1,472

(119)

1,020
243
2,855
$3,061

940
135
2,547
$2,924

(80)
(108)
(308)
$(137)

13

6.

Fair Value of Securities (continued)
March 31, 2008
Acquisition
Carrying
Unrealized
costs
value
gain (loss)(Thousands of yen)
Unrealized gain:
StocksOther
Unrealized loss:
StocksBonds:
Other
Other
Total

¥ 17,180
1,657
18,837¥ 42,972
1,801
44,773¥ 25,791
143
25,93533,21630,336(2,879)100,000
2,153
135,369¥154,207

86,560
1,666
118,563¥163,336(13,440)(486)(16,806)¥ 9,129

Non-marketable securities classified as other securities at March 31, 2009 and 2008
amounted to ¥176,816 thousand ($1,804 thousand) and ¥263,925 thousand, respectively.
Proceeds from sales of securities classified as other securities amounted to ¥2,185 thousand($22 thousand) and ¥20,000 thousand with an aggregate gain of nil and ¥19,999 thousand
and an aggregate loss of ¥26,704 thousand ($272 thousand) and nil for the years ended
March 31, 2009 and 2008, respectively.
The redemption schedule for securities with maturity dates which were classified as othersecurities as of March 31, 2009 and 2008 are summarized as follows:
March 31, 2009
Due after one
year throughDue after
five years
ten years(Thousands of yen)
Bonds:
Other
Other:
Investment trusts
Total

¥

–

¥100,000

2,193¥2,193

11,003¥111,003

March 31, 2009
Due after one
year throughDue after
five years
ten years(Thousands of U.S. dollars)
Bonds:
Other
Other:
Investment trusts
Total

$ –

$1,02022$22

112$1,13314

6.

Fair Value of Securities (continued)

Due in one
year or less
Bonds:
Other
Other:
Investment trusts
Total

7.

March 31, 2008
Due after one Due after five
year through years throughfive years
ten years(Thousands of yen)

Due after
ten years

¥–

¥

–

¥–

¥100,000

–
¥–

3,467
¥3,467–¥––¥100,000

Short-Term Borrowings and Long-Term Debt

The weighted average interest rates on short-term borrowings outstanding at March 31,
2009 and 2008 were 1.40% and 3.55%, respectively.
Long-term debt at March 31, 2009 and 2008 consisted of the following:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Loans with collateral, due 2008 to 2013,
at rates ranging from 4.25% to 7.03%
Loans without collateral, due 2008 to 2013,
at rates ranging from 1.28% to 2.68%
Other
Less current portion of long-term debt

¥ 1,126,620¥ 1,857,611$ 11,496

5,358,000
2,225,000
521,021500,758
7,005,641
4,583,370(1,637,292) (1,116,875)¥ 5,368,349 ¥ 3,466,495

54,673
5,317
71,486(16,707)$ 54,779

The aggregate annual maturities of long-term debt subsequent to March 31, 2009 aresummarized as follows:Year ending March 31,
2010
2011
2012
2013
2014 and thereafter(Thousands ofyen)(Thousands of
U.S. dollars)¥1,637,292
1,546,654
1,358,857
1,263,548
1,199,289¥7,005,641$16,707
15,782
13,866
12,893
12,238$71,48615

7.

Short-Term Borrowings and Long-Term Debt (continued)

Assets pledged as collateral for long-term debt at March 31, 2009 and 2008 aresummarized as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Land
Buildings and structures, net ofaccumulated depreciation
Flight equipment, net of accumulated
depreciation

8.

¥ 152,947¥ 191,788$1,561

919,653

1,219,165

9,384

890,677¥1,963,278

1,328,206¥2,739,160

9,089$20,033

Accrued Pension and Severance Costs

An employee whose employment is terminated is entitled, in most cases, to pension
payments or lump-sum severance indemnities, the amounts of which are determined byreference to the basic rate of pay, length of service and the conditions under which thetermination occurs.
Effective October 1, 2007 the Company and three domestic consolidated subsidiaries
changed their retirement pension plan to defined benefit pension plans and defined
contribution pension plans from tax-qualified pension plans. And effective March 1, 2008,
a domestic consolidated subsidiary changed its retirement pension plan to the lump-sum
retirement plans and the defined benefit pension plan from tax-qualified pension plans.
The projected benefit obligation and the funded status of the plans including a portion of
the governmental welfare pension program were as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Projected benefit obligation
Plan assets
Accrued pension and severance costs
Prepaid pension expenses
Net unrecognized amount¥(3,302,334) ¥(3,221,910)
2,499,071
2,677,930
77,95430,526(94,368)(246,936)¥ (819,676) ¥ (760,389)$(33,697)
25,501795(963)$ (8,364)

In computing the projected benefit obligation, several simplified methods are permitted forsmall companies, and certain consolidated subsidiaries have adopted such methods.

16

8.

Accrued Pension and Severance Costs (continued)

The net unrecognized amount was as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Actuarial assumption adjustment
Post service cost
Net unrecognized amount¥(578,302)(241,373)¥(819,676)¥(458,672)(301,716)¥(760,389)$(5,901)(2,463)$(8,364)

The components of net periodic pension and severance costs excluding the employees’
contributory portion were as follows:Year ended March 31,
2009
2008
2007
2009
(Thousands of yen)(Thousands of
U.S. dollars)Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial assumption
adjustment
Amortization of past service cost
Loss on transfer of retirement benefit plan
Net periodic pension and severance costs¥166,527
56,391(65,485)¥147,993
63,368(68,820)¥146,730
67,778(61,370)$1,699575(668)

102,245
60,343–¥320,022

41,327–
29,917¥213,786

32,759––¥185,897

1,043
616
–
$3,266The contributions based on the defined contribution pension plans have been charged toincome as paid.
The assumptions used were as follows:

Discount rate
Expected rate of return on plan assets

2009

2008

1.8%
2.5%

1.8%
2.5%

17

9.

Other Income (Expenses)

The components of “Other, net” in “Non-operating income (expenses)” for each of thethree years in the period ended Match 31, 2009, 2008 and 2007 were as follows:2009

Dividends received
Exchange gain, net
Brokerage commission received
Gain on sales of property and equipment
Gain on sales of investments in securities
Gain on reversal of allowance for doubtful
accounts
Gain on reversal of reserve for bonuses to
officers
Commission paid
Loss on sales and disposal of property andequipment
Impairment losses on fixed assets
Loss on sales of investments in securities
Loss on revaluation of investments insecurities
Loss on sales of investments in affiliate
Loss on revaluation of investments in
non-consolidated subsidiaries and affiliates
Loss on revaluation of inventories
Loss on closing stores
Loss on transfer of retirement benefit plan
Other, net

10.

Year ended March 31,
2008
2007
2009
(Thousands of yen)(Thousands of
U.S. dollars)¥ 46,230
544,250
53,194
2,906–¥ 43,323
446,493
53,292–
19,999¥ 40,982
6,846
62,146
204
3,899

$

472
5,554
543
30
–

–

4,654

24,378––(24,339)

15,010(24,796)–(20,000)–(248)(54,828)(17,905)(26,704)(141,546)(35,592)–(126,317)(9,382)(7,499)

(559)
(183)
(272)

(190,061)–(90,879)––(1,265)(1,939)–(69,094)––(8,707)–(87,358)–(20,265)(58,655)–(29,917)–
135,947
84,78145,153¥ 390,887 ¥ 324,557 ¥(126,866)

(705)
(89)
–
–
1,387
$ 3,989

Impairment of Fixed Assets

For the years ended March 31, 2009, 2008 and 2007, the Company recognized impairment
losses on fixed assets of ¥17,905 thousand ($183 thousand) and ¥35,592 thousand and¥9,382 thousand which consisted of the following:
Location

Use

Ikeda-shi, Osaka andother 5 shops
Airport shop
Kobe-shi, Hyogo andother 4 shops
Airport shop

Classification

Buildings, furnitureand other
Buildings, furnitureand otherYear ended March 31,
2008
2007
2009
(Thousands of yen)(Thousands of
U.S. dollars)

2009¥17,905

–

–

$183

–

¥35,592––

The Company and its consolidated subsidiaries did not recognize material impairment
losses for the year ended March 31, 2007. As a result, the details of such impairment
losses are not required to be disclosed in accordance with accounting principles generally
accepted in Japan.
18

10. Impairment of Fixed Assets (continued)
The Company and its consolidated subsidiaries base its grouping for assessing theimpairment loss on fixed assets on the smallest identifiable groups of assets which generatecash inflows and which are largely independent of the cash inflows from other assets orgroups of assets.
Impairment losses on airport shops were recognized due to significant decrease in expected
future cash flows on the medium-range strategy plan.
The recoverable amount of airport shops was measured by their usage value and future
cash flows at discount rates of 3.7% and 5.0% for the years ended March 31, 2009 and2008, respectively.
11. Income Taxes
The significant components of deferred tax assets and liabilities at March 31, 2009 and2008 were as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued bonuses
Allowance for doubtful accounts
Elimination of unrecognized gain on
intercompany accounts and transactions
Directors’ and statutory auditors’
retirement benefits
Accrued enterprise tax
Accrued pension and severance costs
Impairment losses on fixed assets
Loss on revaluation of inventories
Loss on revaluation of investments insecurities
Loss on revaluation of other investments
Deferred loss on hedging instruments
Tax loss carryforwards
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Accumulated earnings of consolidated
subsidiaries
Depreciation
Prepaid pension expenses
Other
Total deferred tax liabilities
Net deferred tax assets¥ 241,208
72,845¥ 259,817
45,809$ 2,461
743

78,16875,625798

100,067
11,67531,92962,47042,02971,72145,327
12,59262,72445,403

1,021
119
326
637
429

93,666
37,693–30,192
113,766
915,714(68,760)
846,954

38,65935,43529,611
34,903113,043
870,673(41,025)
829,647

956
385
–
308
1,161
9,344
(702)
8,642

(41,476)(179,257)(38,398)(6,727)(265,860)¥ 581,093(46,380)(149,663)(100,478)(13,389)(309,912)¥ 519,734(423)(1,829)(392)(69)(2,713)$ 5,930
19

11.

Income Taxes (continued)

Reconciliations between the statutory tax rate and the effective tax rates for the years ended
March 31, 2009, 2008 and 2007 were presented as follows:Year ended March 31,
2009
2008
2007
Statutory tax rate
Disallowed expenses, including
entertainment expenses
Inhabitants’ per capita taxes
Changes in valuation allowance
Equity in (earnings) losses of affiliates
Other
Effective tax rate

12.

40.69%

40.69%

40.69%

12.10
1.74
–
(3.78)
0.21
50.96%

5.48
0.68
1.76
1.60
0.55
50.76%

3.81
0.48
–
–
(0.67)
44.31%Net Assets

The Corporation Law of Japan provides that an amount equal to at least 10% of the amountto be disbursed as distributions of capital surplus (except for distributions from additional
paid-in capital) and retained earnings (except for distributions from the legal reserve) be
appropriated to additional paid-in capital and the legal reserve, respectively, until the sumof additional paid-in capital and the legal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the stockholders, or by the
Board of Directors if certain conditions are met, but neither additional paid-in capital nor
the legal reserve is available for distribution by resolution of the Board of Directors.
The total number and periodic changes in the number of shares of stock in issue and thetotal number and periodic changes in the number of shares of common stock in treasury forthe years ended March 31, 2009 and 2008 were as follows:Year ended March 31, 2009At
March 31,
2008
Number of shares of stockin issue:Common stock
Number of shares ofcommon stock in treasury:
Common stock

Increase
Decrease(Thousands of shares)

At
March 31,2009

12,775––

12,775

15

0

–

15

20

12.

Net Assets (continued)

The increase in common stock in treasury of 0 thousand shares during the current period
resulted from the Company’s purchase of 0 thousand odd-lot shares of less than one unit at
the request of the stockholders.
Year ended March 31, 2008
At
March 31,
2007
Number of shares of stockin issue:Common stock
Number of shares ofcommon stock in treasury:
Common stock

At
March 31,
2008

Increase
Decrease(Thousands of shares)

12,775––

12,775

14

0

0

15

The increase in common stock in treasury of 0 thousand shares during the period resulted
from the Company’s purchase of 0 thousand odd-lot shares of less than one unit at therequest of the stockholders and purchase of 0 thousand shares by related companies
accounted for by the equity method. The decrease in common stock in treasury of 0
thousand shares during the period resulted from the Company’s sales of such odd-lot sharesat the request of the stockholders.
Dividends
Dividends whose cut off date fall within the reporting period are as follows:

Resolution

General meeting ofstockholders held on
June 19, 2009

Type ofsharesResourcesofdividends

Commonstock

Retainedearnings

Total dividends(Thousands of (Thousands ofyen)
U.S. dollars)¥446,986$4,561Dividends
per share(Yen)

Cut off
date

Effective
date

¥35.0

March 31,2009

June 22,
2009

21

13.

LeasesAs lessee under financing leases contracted prior to April 1, 2008
The following pro forma amounts represent the acquisition costs, accumulated depreciationand net book value of the leased property held under financing accounted for as operatingleases at March 31, 2009 and 2008, and the related depreciation and interest expense for theyears ended March 31, 2009, 2008 and 2007, respectively, which would have beenreflected in the consolidated balance sheets and the related consolidated statements ofincome:March 31, 2009
Property andequipment –otherAcquisition costs
Less accumulated depreciation
Net book value

Software(Thousands of yen)Total

¥11,551
8,158¥ 3,393¥127,816
87,871¥ 39,944¥116,264
79,713¥ 36,550

March 31, 2009
Property andequipment –otherSoftware
Total(Thousands of U.S. dollars)
Acquisition costs
Less accumulated depreciation
Net book value$1,186
813
$ 373

$118
83
$ 35

$1,304897$ 408

March 31, 2008
Property andequipment –otherAcquisition costs
Less accumulated depreciation
Net book value

Software(Thousands of yen)

Total

¥18,698
9,771¥ 8,926¥200,668
110,942¥ 89,725¥181,970
101,171¥ 80,799

Year ended March 31,
2009
2008
2007
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Depreciation expense¥25,990¥46,687¥50,183$265

Interest expense¥ 1,237¥ 2,936¥ 3,832

$ 13

22

13.

Leases (continued)

As lessee under financing leases contracted prior to April 1, 2008 (continued)
No impairment loss had been recognized on leased property for the years ended March 31,
2009, 2008 and 2007.
Lease expenses relating to the financing leases accounted for as operating leases amounted
to ¥27,375 thousand ($279 thousand), ¥49,644 thousand and ¥53,427 thousand for theyears ended March 31, 2009, 2008 and 2007, respectively.
Future rental expenses under financing leases accounted for as operating leases outstandingat March 31, 2009 and 2008 are summarized as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥25,164
19,059¥44,223¥40,50251,952¥92,454

$257
194
$451

As lessee under operating leases
Future rental expenses under operating leases outstanding at March 31, 2009 and 2008 aresummarized as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥112,719
294,104¥406,731¥116,465
408,458¥524,924$1,1503,001$4,150As lessor under financing leases
The annual collections of lease receivables subsequent to March 31, 2009 are summarized
as follows:Year ending March 31,(Thousands ofyen)(Thousands of
U.S. dollars)

2010
2011
2012
2013
2014
2015 and thereafter¥48,767
30,896
22,11721,804
17,432
26,670

$498
315
226
222
178
272

23

13.

Leases (continued)

As lessor under operating leases
Certain consolidated subsidiaries lease equipment under operating leases. Future rental
income under operating leases outstanding at March 31, 2009 and 2008 are summarized asfollows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥ 635,483
1,903,104¥2,538,588¥ 688,127
2,727,554¥3,415,681$ 6,485
19,419$25,904

As lessee and lessor under subleases
The Company subleases equipment to a third party, and the lease agreements between thetwo original parties remain in effect. The original and the new lease agreements areoperating leases.
Future rental revenues as lessor under the new lease agreements outstanding at March 31,
2009 and 2008 are summarized as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥1,853,628
6,446,460¥8,300,089¥ 1,756,471
8,944,112¥10,700,584$18,91565,780$84,695

Future rental expenses as lessee under the original lease agreements outstanding at March
31, 2009 and 2008 are summarized as follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥ 1,756,203
9,115,486¥10,871,689¥ 1,769,791
8,258,716¥10,028,508$ 17,920
93,015$110,93624

14.

Loan Commitment Agreements

The Company has entered into loan commitment agreements with banks in order to source
funds for its operations smoothly.
The outstanding balance of loan commitment as of March 31, 2009 and 2008 were as
follows:
March 31,
2009
2008
2009
(Thousands of yen)(Thousands of
U.S. dollars)
Total commitment available
Less amount utilized
Balance available

15.

¥4,500,000–¥4,500,000¥4,000,000
800,000¥3,200,000$45,918–$45,918

Amounts Per Share

Net income per share is computed based on the weighted average number of shares ofcommon stock outstanding during each year. The Company and its consolidated
subsidiaries have not issued any potentially dilutive stocks during either year.
Accordingly, fully diluted net income per share and basic net income per share for theyears ended March 31, 2009, 2008 and 2007 were the same.

Net income per share

2009Year ended March 31,
2008
2007
2009
(Yen)
(U.S. dollars)¥30.74¥76.68¥124.01$0.314

Net assets per share are computed based on the number of shares of common stock
outstanding at each balance sheet date.
March 31,
2009
2008
(Yen)
Net assets per share¥1,138.08¥1,179.21

2009(U.S. dollars)$11.61325

15.

Amounts Per Share (continued)

The following table sets forth the basis of the computation of net income per share for theyears ended March 31, 2009, 2008 and 2007:
Year ended March 31,
2009
2008
2007
2009
(Thousands of yen, except share)(Thousands of
U.S. dollars,
except share)

16.

Net income
Less: appropriation of bonuses todirectors and statutory auditors
Net income available to stockholdersof shares of common stock
Weighted average number of sharesof common stock outstanding¥392,290¥978,483¥1,579,827$4,003

–

–

2,673

–

¥392,290¥978,483¥1,582,501$4,00312,759,809

12,760,491

12,760,644

12,759,809

Segment Information

The Company and its consolidated subsidiaries conduct worldwide operations inaviation-related, corporate solutions, travel retail and food & beverage business.
The primary products and services for each of the new reportable segments are as follows:Business segment

Main product and sales

Aviation-related businessAircraft, Aircraft components, Machinery & Facilities,
Materials, Cabin service supply, Textiles supply,
Clothing & Uniform

Corporate solutions business

Printing, Insurance, Real estate, Property management

Travel retail business

Cabin service supply, Brand & Fashion, Mail-ordersales, Overseas real estate, Souvenir & Specialty goods,
Restaurant, Duty-free items

Food & beverage business

Agriculture & marine products, Processed foods, Wine,
Food gift items

26

16.

Segment Information (continued)

The business segment information of the Company and its consolidated subsidiaries for theyears ended March 31, 2009 and 2008 are summarized as follows:Year ended March 31, 2009

Sales to outside
partiesInter-segment sales
and transfers
Total
Operating expenses
Operating income
Depreciation andamortization
Impairment losses on
fixed assets
Capital expenditures
Identifiable assets

Generalcorporate assets
andintercompany
eliminations

Consolidated

Aviation-related
business

Corporate
solutionbusiness

Travel retailbusiness

Food &
beveragebusiness(Thousands of yen)

¥31,968,583¥17,159,203¥43,346,717¥20,751,200¥113,225,704¥–¥113,225,704

8,575
31,977,158
31,179,193¥ 797,965

78,17017,237,374
15,898,257¥ 1,339,116

16,40743,363,125
42,592,897¥ 770,227

27,186
20,778,386
20,082,035¥ 696,351

130,340
113,356,045
109,752,383¥ 3,603,661(130,340)(130,340)
2,871,692¥ (3,002,032)–
113,225,704
112,624,075¥
601,628

¥

¥

¥

¥

¥

¥

¥

373,803¥–¥59,699¥11,425,781

30,866¥–¥ 1,938,501¥ 6,941,408

292,318¥
17,905¥ 293,786¥11,947,400

23,098¥–¥13,353¥ 6,341,000

Total

720,087¥
17,905¥ 2,305,341¥ 36,655,591

375,873

1,095,961¥–¥ 240,604¥ 6,243,616¥
17,905¥ 2,545,945¥ 42,899,208

Generalcorporate assets
andintercompany
eliminations

Consolidated

Year ended March 31, 2009

Aviation-related
business

Corporate
solutionbusiness

Food &
Travel retailbeveragebusinessTotalbusiness(Thousands of U.S. dollars)$326,210$175,094$442,313$211,747$1,155,364$–$1,155,364

88
326,298
318,155$ 8,143798
175,892
162,227$ 13,664

167
442,481434,621$ 7,859277
212,024
204,919$ 7,106

1,330
1,156,694
1,119,922$ 36,772(1,330)(1,330)29,303$ (30,633)–
1,155,364
1,149,225$
6,139$ 3,814$315$ 2,983

$

$

7,348

$ 3,835

$

$
–
$
609
$116,590$–$ 19,781$ 70,831$
183$ 2,998$121,912$–$
136$ 64,704$
183$ 23,524$ 374,037$–$ 2,455$ 63,710$
183$ 25,979$ 437,747

Generalcorporate assets
andintercompany
eliminations

Consolidated

Sales to outside
partiesInter-segment sales
and transfers
Total
Operating expenses
Operating income
Depreciation andamortization
Impairment losses on
fixed assets
Capital expenditures
Identifiable assets

236

11,183

Year ended March 31, 2008

Sales to outside
partiesInter-segment sales
and transfers
Total
Operating expenses
Operating income
Depreciation andamortization
Impairment losses on
fixed assets
Capital expenditures
Identifiable assets

Aviation-related
business

Corporate
solutionbusiness

Travel retailbusiness

Food &
beveragebusiness(Thousands of yen)

¥34,240,826¥18,745,724¥46,999,899¥20,241,936¥120,228,386¥–¥120,228,386

10,59934,251,426
33,171,532¥ 1,079,893

84,975
18,830,699
16,925,809¥ 1,904,890

6,773
47,006,673
45,200,783¥ 1,805,889

76,795
20,318,731
19,587,864¥ 730,867

179,144
120,407,531
114,885,990¥ 5,521,540(179,144)(179,144)
3,153,967¥ (3,333,111)–
120,228,386
118,039,957¥ 2,188,428

¥

¥

¥

¥

¥

¥

¥

427,789¥–¥ 182,601¥12,005,843

30,750¥–¥38,939¥ 5,213,064

280,069¥
35,592¥ 529,727¥11,788,522

29,775¥–¥51,652¥ 5,655,109

Total

768,384¥
35,592¥802,921¥ 34,662,540

343,355¥–¥ 320,228¥ 6,912,404

1,111,740¥
35,592¥ 1,123,149¥ 41,574,944

27

16.

Segment Information (continued)

Unallocated operating expenses included in “General corporate assets and intercompany
eliminations” for the years ended March 31, 2009 and 2008 amounted to ¥2,997,075
thousand ($30,582 thousand) and ¥3,585,467 thousand respectively, and consisted
primarily of administrative expenses incurred at the Company’s headquarters.
In addition, unallocated assets included in “General corporate assets and intercompany
eliminations” at March 31, 2009 and 2008 amounted to ¥6,288,474 thousand ($64,168
thousand) and ¥6,910,902 thousand, respectively, and consisted primarily of cash and cash
equivalents, investments in securities and assets belonging to the headquarters of theCompany.
Effective June 18, 2008, the Company reorganized its business headquarters into two newdivisions: the “Corporate Sales” division, which is focused on its “B-to-B” business, andthe “Retail Business” division, which is focused on its “B-to-C” business. This change
resulted from the Company’s conclusion that business strategy and business operations are
judged from the standpoint of the market. As a result of the changes in the structure of
the internal organization, the Company’s reportable segments were also changed from
“Aviation business,” “Lifestyle services business,” and “Customer services business” to“Aviation-related business,” “Corporate solutions business,” “Travel retail business,” and“Food & beverage business.”
The business segment information prior to the reclassification for the years ended March
31, 2008 and 2007 are summarized as follows:Year ended March 31, 2008

Sales to outside parties
Inter-segment sales
and transfers
Total
Operating expenses
Operating income
Depreciation andamortization
Impairment losses on
fixed assets
Capital expenditures
Identifiable assets

Generalcorporate
assets andintercompany
eliminations Consolidated

Aviationbusiness

Life service
business

Customer
serviceTotalbusiness(Thousands of yen)

¥41,851,962¥35,208,682¥43,167,741¥120,228,386¥

1,227,407
43,079,369
41,605,579¥ 1,473,790

104,338
35,313,021
33,931,526¥ 1,381,494–
43,167,741
40,248,870¥ 2,918,870

1,331,745
121,560,132
115,785,976¥ 5,774,155–(1,331,745)(1,331,745) 120,228,386
2,253,981
118,039,957¥ (3,585,726) ¥ 2,188,428

¥

¥

¥

¥

¥

422,979¥–¥ 182,601¥13,453,927

101,224¥–¥ 260,790¥ 9,547,905

233,812¥35,592¥ 389,529¥11,790,548

758,016¥
35,592¥
832,921¥ 34,792,381–¥120,228,386

353,723¥ 1,111,740¥–¥ 290,228¥ 6,782,563¥
35,592¥ 1,123,149¥ 41,574,944

28

16.

Segment Information (continued)
Year ended March 31, 2007

Sales to outside parties
Inter-segment sales
and transfers
Total
Operating expenses
Operating income
Depreciation andamortization
Capital expenditures
Identifiable assets

Generalcorporate
assets andintercompany
eliminations Consolidated

Aviationbusiness

Life service
business

Customer
serviceTotalbusiness(Thousands of yen)

¥37,892,090¥33,467,399¥42,774,006¥114,133,497¥

1,177,738
39,069,829
36,924,431¥ 2,145,397

118,205
33,585,604
32,252,905¥ 1,332,699–
42,774,006
39,901,100¥ 2,872,906

1,295,943
115,429,440
109,078,437¥ 6,351,002–(1,295,943)(1,295,943) 114,133,497
1,808,901
110,887,338¥ (3,104,844) ¥ 3,246,158¥ 380,946¥ 595,550¥15,846,030¥
44,526¥54,383¥ 8,555,737¥ 245,868¥ 202,905¥11,154,239¥
671,341¥
852,838¥ 35,556,006¥
87,951¥ 718,957¥ 6,789,929–¥114,133,497¥
759,293¥ 1,571,796¥ 42,345,936

The geographical segment information of the Company and the consolidated subsidiaries
for the years ended March 31, 2009, 2008 and 2007 are summarized as follows:Year ended March 31, 2009

Sales to outside parties
Inter-segment sales
and transfers
Total
Operating expenses
Operating income
Identifiable assets

Otheroverseas
Total
counties(Thousands of yen)

Generalcorporate
assets andintercompany
eliminations

Japan

North
America¥108,315,637¥ 3,452,180¥1,457,886¥113,225,704 ¥

349,046
108,664,684
107,887,165¥
777,519¥ 36,745,178

13,562,186
17,014,366
16,674,280¥ 340,085¥ 7,392,641

1,516,201
2,974,087
2,922,390¥ 51,696¥ 518,557–
15,427,434(15,427,434)
128,653,138(15,427,434) 113,225,704
127,483,836(14,859,760) 112,624,075¥ 1,169,302 ¥ (567,673) ¥601,628¥ 44,656,377 ¥ (1,757,169) ¥ 42,899,208

Consolidated– ¥113,225,704

Year ended March 31, 2009

Sales to outside parties
Inter-segment sales andtransfers
Total
Operating expenses
Operating income
Identifiable assets

Generalcorporate
assets andintercompany
eliminations Consolidated

Japan

North
AmericaOtheroverseas
Total
counties(Thousands of U.S. dollars)$1,105,262$ 35,226$ 14,876$1,155,364$–$1,155,364

3,562
1,108,823
1,100,889$
7,934$ 374,951

138,390
173,616
170,146$ 3,470$ 75,435

15,471
30,34829,820$ 528$ 5,291

157,423
1,312,787
1,300,855$ 11,932$ 455,677(157,423)(157,423)(151,630)$ (5,793)$ (17,930)–
1,155,364
1,149,225$
6,139$ 437,747

29

16.

Segment Information (continued)
Year ended March 31, 2008

Japan
Sales to outside parties ¥115,362,639
Inter-segment sales
and transfers
341,294
Total
115,703,933
Operating expenses
113,284,789
Operating income (loss) ¥ 2,419,144
Identifiable assets¥ 34,149,783

North
America

Generalcorporate
assets andintercompany
eliminations

Other
overseas
Total
counties(Thousands of yen)

Consolidated¥ 2,750,801¥2,114,946¥120,228,386 ¥– ¥120,228,386

12,094,410
14,845,211
14,633,769¥ 211,442¥ 7,763,279

1,955,007
4,069,953
4,084,920¥ (14,967)¥1,045,836–
14,390,712(14,390,712)
134,619,098(14,390,712) 120,228,386
132,003,479(13,963,521) 118,039,957¥ 2,615,619 ¥ (427,190) ¥ 2,188,428¥ 42,958,899 ¥ (1,383,955) ¥ 41,574,944

Year ended March 31, 2007

Japan
Sales to outside parties ¥108,287,779
Inter-segment sales
and transfers
855,014
Total
109,142,794
Operating expenses
106,046,654
Operating income (loss) ¥ 3,096,139
Identifiable assets¥ 36,784,448

North
America

Generalcorporate
assets andintercompany
eliminations

Other
overseas
Total
counties(Thousands of yen)

Consolidated¥ 3,460,012¥2,385,704¥114,133,497 ¥– ¥114,133,497

12,354,050
15,814,063
15,567,204¥ 246,858¥ 8,610,790

1,656,467
4,042,172
4,153,248¥ (111,075)¥ 912,129–
14,865,533(14,865,533)
128,999,030(14,865,533) 114,133,497
125,767,107(14,879,768) 110,887,338¥ 3,231,922 ¥
14,235 ¥ 3,246,158¥ 46,307,367 ¥ (3,961,431) ¥ 42,345,936

For the years ended March 31, 2009 and 2007, operating revenues from overseas
operations represented less than 10% of consolidated operating revenues. As a result,operating revenues from overseas operations are not required to be disclosed.
Operating revenues from overseas operations of the Company and the consolidated
subsidiaries for the year ended March 31, 2008 are summarized as follows:Year ended March 31, 2008
North
America
Operating revenues from overseas
operations
Consolidated operating revenues
Operating revenues from overseas
operations as a percentage ofconsolidated operating revenues

EuropeOther(Thousands of yen)Total

¥3,564,914¥7,053,106¥1,539,429¥ 12,157,450¥120,228,386

3.0%

5.9%

1.2%

10.1%

30

17.

Derivative and Hedging Activities

The Company has utilized forward foreign exchange contracts to hedge certain foreign
currency transactions related to foreign accounts receivable and payable on a consistentbasis. The Company has also utilized interest-rate swaps to minimize the risk offluctuation in cash flows arising from changes in interest rate related to its outstandingdebt.
And a certain subsidiary has the hybrid financial instrument with embedded derivative(bond).
The Company enters into hedging transactions in accordance with its internal guidelines.
The routine operations relating to hedging activities are formalized and controlled by the
Finance (Accounting in 2008) Department. Gain or loss on hedging instruments and theassessment of hedge effectiveness, which is performed both at the inception and on an
ongoing basis, is reported to the related directors and department managers on a timely
basis.
The fair value information of embedded derivative of the hybrid financial instrument(bond) is included in Note 5.
Since all other derivative instruments held by the Company, met the criteria for hedge
accounting, fair value information has not been presented here.
18.

Related Party Transactions

The Company had related party transactions with the companies controlled by Japan
Airlines Corporation for which the Company is an affiliate and the companies over which
the Company exercises significant influence in the terms of their operating and financial
policies.
Effective April 1, 2008, the Company has adopted the “Accounting Standard for Related
Party Disclosures” (ASBJ Statement No. 11, issued by ASBJ on October 17, 2006) and“Guidance on Accounting Standard for Related Party Disclosures” (ASBJ Guidance No. 13,
issued by ASBJ on October 17, 2006). Accordingly, the significant transactions between
consolidated subsidiaries and related parties are required to be disclosed.
The significant transactions between the Company and the companies controlled by Japan
Airlines Corporation for the years ended March 31, 2009, 2008 and 2007 are summarized
as follows:
With Japan Airlines International Co., Ltd.:

2009

Sales of flight equipment
Purchases of merchandise
Purchase of land for businessYear ended March 31,
2008
2007
(Thousands of yen)

¥13,023,066
7,075,975
490,028¥15,863,137
8,288,247–¥14,899,629
5,118,236–

2009(Thousands of
U.S. dollars)$132,888
72,204
5,000

31

18.

Related Party Transactions (continued)
March 31,
2008
2009
(Thousands of yen)Accounts receivable
Advance payment
Accounts payable¥1,945,443
5,296
356,202¥2,511,575
113,391
289,415

2009(Thousands of
U.S. dollars)$19,85154
3,635

With JAL Capital Co., Ltd.:
2009

Proceeds from short-termborrowings
Repayment of short-termborrowings
Interest expenses

Year ended March 31,
2008
2007
(Thousands of yen)

2009
(Thousands of
U.S. dollars)¥–¥–¥17,000,000

$–

–
–

–
–

16,400,000
3,828

–
–

With Japan Trans Ocean Air Co., Ltd.:
2009

Sales of flight equipment
spare parts

Year ended March 31,
2008
2007
(Thousands of yen)

¥–

¥–

2009
(Thousands of
U.S. dollars)¥2,284,092$–

The significant transactions between a certain consolidated subsidiary and the company
controlled by Japan Airlines Corporation for the year ended March 31, 2009 aresummarized as follows:
With Japan Airlines International Co., Ltd.:Year ended March 31,
2009
2009
(Thousands of (Thousands ofyen)
U.S. dollars)
Sales of flight equipment and revenue fromleases of aircraft¥2,267,176$23,134

March 31,

Accounts receivable
Lease receivable

2009(Thousands of
yen)

2009
(Thousands of
U.S. dollars)¥ 84,452
167,690

$ 862
1,711
32

19. Subsequent Events
At the ordinary stockholders’ meeting held on June 19, 2009, the termination of directors’and statutory auditors’ retirement benefits plan and the implementation of the stock option
plan as compensation scheme for the Company’s directors and statutory auditors (except
outside directors and statutory auditors) were resoluted.
The resolution is summarized as follows:
Date of resolution
Qualified beneficiaries
Type of shares
Maximum number of sharesubscription rights
Maximum number of shares
Exercise price
Exercise period

Exercise conditions

Details regarding transfer ofsubscription rights

June 19, 2009
Directors and statutory auditors (Note 1)
Common stock
250 within one year after the date of annual stockholders’meeting
25,000 within one year after the date of annual
stockholders’ meeting¥1 per share
Exercise period will be decided by the Company’s boardof directors within the range of less than 30 years from thenext day of the grant date.
Share subscription rights can be exercised within 10 days
after a beneficiary resigns from directors or statutory
auditors. Other conditions will be decided by theCompany’s board of directors.
Acquisitions of share subscription rights are required tobe approved by the Company’s board of directors.

Note 1: Operating officers of the Company are included in qualified beneficiaries.
2: The Company adjusts the number of shares in the event of a share split, gratis
stock allocation or reverse split of shares with the following formula. Odd-lot
share less than one share resulting from the adjustment is disregarded.

Adjusted number of shares =number of shares before adjustment × ratio ofa share split, gratis allocation or reverse split ofsharesThe Company may adjust the number of shares to a reasonable extent in theevent of a merger, a company split or in any other similar event where andadjustment of the number of shares will be required.

33