DAIICHIKOSHO

CO.,

LTD.

FY2006, the year ended March 31, 2007

Flash Report on the Consolidated Results for the Year Ended March 31, 2007
May 14, 2007

Company Name: DAIICHIKOSHO CO., LTD.
Code Number: 7458
(URL http://www.dkkaraoke.co.jp)
Stock Exchange Listing: JASDAQ

Representative: Yasutaka Wada, President
Contact: Eiji Hata, Managing Director and Senior Corporate Officer; and Executive Director, Administration
Headquarters

Phone: (03) 3280-2151
Date of the Ordinary General Meeting of Shareholders: June 23, 2007
Start Date for Dividend Payment: June 25, 2007
Scheduled Date to Submit the Securities Report: June 25, 2007
(Amounts below one million yen are truncated.)

1. Consolidated Performance for the Year Ended March 2007 (from April 1, 2006, to March 31, 2007)(1) Consolidated operating results(Percentage figures indicate increase/decrease from a year earlier.)
Year ended March 2007
Year ended March 2006

Net sales¥ Million
124,654
129,341

%
(3.6)
5.9

Net income
Year ended March 2007
Year ended March 2006

¥ Million
4,801
4,009

Operating income¥ Million%
13,18916.9
11,286
8.7

Ordinary income¥ Million%
12,937
11.4
11,61817.0

Net income per share

Fully diluted net income
per share
¥
―
―

%
19.7
(21.7)¥
68.99
112.60Return on equity

Ordinary income to total
assets%%Year ended March 2007
7.1
9.8
Year ended March 2006
6.2
8.8
(Reference) Equity in net income of unconsolidated subsidiaries and affiliates:
Year ended March 2007: (¥199 million)
Year ended March 2006: ¥0 million

Operating income to net
sales
%
10.6
8.7

(2) Consolidated financial position
Total assets¥ Million
Year ended March 2007
130,931
Year ended March 2006
133,524(Reference) Shareholders’ equity
Year ended March 2007: ¥67,890 million
Year ended March 2006: —Net assets¥ Million
68,78866,4401

Equity ratio
%
51.9
49.8

Net assets per share¥
975.44
1,906.58

DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated cash flows

Year ended March 2007
Year ended March 2006

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities¥ Million
32,50924,081¥ Million(18,059)(21,808)¥ Million(6,792)(2,018)Cash and cash
equivalents at theend of the year
¥ Million
31,91824,222

2. Dividend(Reference dated)

Dividend per share
Year-end

Interim

Annual

Yen
—
—
—

Yen
30.00
20.00
20.00

Yen
30.00
20.00
20.00

Aggregate amount ofdividend (annual)¥ Million
1,044
1,391
—

Payout ratio (consolidated)

Ratio of dividends to net
assets (consolidated)
%
1.6
1.4
—

Year ended March 2006
Year ended March 2007
Year ending March 2008
(forecast)%Year ended March 2006
26.6
Year ended March 2007
29.0
Year ending March 2008
21.8
(forecast)
Note: A two-for-one share split was conducted for the Company’s common stock as of July 1, 2006.

3. Forecast Consolidated Performance for FY2007, the Year Ending March 31, 2008 (from April 1,
2007, to March 31, 2008)(Percentage figures indicate increase/decrease from a year earlier: The percentages for full-year forecasts mean theincrease/decrease from the end of the previous year, and the half-year forecast percentages represent theincrease/decrease from the end of the previous interim term.)
Net sales
Operating income
Ordinary income¥ Million%¥ Million%¥ Million%
Six months ending
63,700
0.8
6,200
(6.9)
6,300
(8.1)
September 30, 2007
Year ending March 31,
127,800
2.5
13,000(1.4)
13,2002.0
2008 (full year)

Six months ending
September 30, 2007
Year ending March 31,
2008 (full year)

Net income¥ Million%
3,200(19.1)
6,400

33.3

Net income per share
¥
45.98
91.95

4. Other(1) Change in important subsidiaries during the term under review (Change in specific subsidiaries causing a change
in the scope of consolidation): No(2) Change in accounting principals, procedure and presentation methods for preparation of consolidated financial
statements (Items set forth in “Changes in important matters in preparing the consolidated financial
statements”)
1) Changes following a revision of accounting standards: Yes
2) Other changes: No(3) Number of common shares issued
1) Number of shares issued (including treasury stock)

2

DAIICHIKOSHO

CO.,

LTD.

Year ended March 2007: 73,242,596 sharesYear ended March 2006: 36,621,298 shares
2) Number of shares of treasury stockYear ended March 2007: 3,642,580 sharesYear ended March 2006: 1,820,807 shares(Reference) Outline of Nonconsolidated Financial Results
1. Nonconsolidated Performance for the Year Ended March 2007 (from April 1, 2006, to March 31,
2007)(1) Nonconsolidated operating results
Net sales¥ Million

Year ended March 2007
Year ended March 2006

83,38287,537(Percentage figures indicate increase/decrease from a year earlier.)
Operating income
Ordinary income¥ Million¥ Million
%
%
%
(4.7)
7,888
22.9
8,317
23.5
5.6
6,418
(0.5)
6,735
3.8

Net income¥ Million
2,310
2,333

Year ended March 2007
Year ended March 2006

Fully diluted net income
per share¥—―

Net income per share%(1.0)(40.8)

¥
33.20
66.48

(2) Nonconsolidated financial position
Total assets¥ Million
Year ended March 2007
80,200Year ended March 2006
82,630(Reference) Shareholders’ equity:Year ended March 2007: ¥52,189 million
Year ended March 2006: —Net assets¥ Million
52,18953,169Equity ratio
%
65.1
64.3

Net assets per share
Yen
749.85
1,527.27

2. Forecast Nonconsolidated Performance for FY2007, the Year Ending March 31, 2008 (from April 1,
2007, to March 31, 2008)(Percentage figures indicate increase/decrease from a year earlier: The percentages for full-year forecasts mean theincrease/decrease from the end of the previous year, and the half-year forecast percentages represent theincrease/decrease from the end of the previous interim term.)
Operating
Net income per
Net sales
Ordinary income
Net income
incomeshare
Six months
endingSeptember 30,
2007
Year ending
March 31, 2008
(full year)¥ Million %¥ Million %¥ Million %¥ Million %43,400

(0.7)

4,100

(4.5)

4,400

(13.3)

2,200(23.0)

31.61

Yen

85,700

2.8

8,300

5.2

8,500

2.2

4,200

81.8

60.34

Note: These projected performance figures are based on information available to the Company’s management at
the time of preparing this report. There are many uncertain factors inherent in forecasting, and there might becases in which actual results differ from forecast values.

3

DAIICHIKOSHO

CO.,

LTD.

(Attachment)

2. Corporate GroupThe Daiichikosho Group (“DKG”) consists of Daiichikosho Co., Ltd. (“DK” or “the Company”), 48
consolidated subsidiaries and five affiliates. The major group companies engage in the commercial
karaoke business, the karaoke cabin and restaurant business, the Gateway business and the music
software business.
Business segment

Business line

Commercial
karaoke business

Sales and rental of commercial-use
karaoke equipment

Karaoke cabin
and restaurant
business

Operation of karaoke cabins andrestaurants

Gateway businessSupply of content service via thespecial “DAM Station” information
terminal and mobile phones

Music software
business

Production and sales of music andvideo software products

Other business

Satellite broadcasting, real estate lease
and rental business, etc.

Domestic

Overseas

Daiichikosho Co., Ltd.,
Hokkaido Daiichikosho Co., Ltd.,
Tohoku Daiichikosho Co., Ltd.,
Taito Daiichikosho Co., Ltd.,
Niigata Daiichikosho Co., Ltd.,
Tokai Daiichikosho Co., Ltd.,
Daiichikosho Kinki Co., Ltd.,
Kyushu Daiichikosho Co., Ltd.,and 19 other subsidiaries

DK KOREA
Co., Ltd.,
Daiichikosho(Shanghai), Ltd.,and two othersubsidiary
Saha Daiichi
Kosho Co., Ltd.,BIG ECHO(SHANGHAI)
Co., Ltd.,and four othersubsidiaries

Daiichikosho Co., Ltd.,
Nippon Crown Co., Ltd.,
Tokuma Japan Communications Co.,Ltd.,First Distribution Co., Ltd.,
Union Eiga Co., Ltd.,and four other subsidiaries
Daiichikosho Co., Ltd.,DK Finance Co., Ltd.,and Maruhagi Yoshu Kogyo Co., Ltd.

4

D.K. Enterprises(Guam), Inc.,and one othersubsidiary

DAIICHIKOSHO

CO.,

LTD.

The following diagram schematically shows the relationships of the respective group companies and businesses.

(Intermediary services related to
installment sales and loans for
DK and group companies)
DK Finance Co., Ltd.
(Production and sales of music
software products)
Nippon Crown Co., Ltd.
Tokuma Japan Communications
Co., Ltd.
First Distribution Co., Ltd.
Tri-M, Inc.
DK Music Publishing Co., Ltd.
Union Eiga Co., Ltd.
Crown Music Enterprise Co.
Zoom Republic(Operation of karaoke cabins andrestaurants)
Saha Daiichi Kosho Co., Ltd.
BIG ECHO (SHANGHAI) Co., Ltd.
BIG ECHO (SHXG) CO., LTD.
BIG ECHO (SHSG) CO., LTD.
Shanghai Daiichi Kosho F&B Co.,LTD.
BEIJING BIG ECHORESTAURANT SERVICE CO.,LTD
(Operation and management ofrecreation facilities)
D.K. Enterprises (Guam), Inc.
(Other overseas subsidiaries)
Daiichikosho (Beijing) Music &Culture Co., Ltd.
(Equity method affiliate)
Spice Records Co., Ltd.
Breezeway Corp.
JD CREATE Co.,Ltd
Sin corporation
Bono Music(Production and sale of fruitwines)
Maruhagi Yoshu Kogyo Co., Ltd.

Sales and rentals of merchandise and products

DK KOREA Co., Ltd.
Daiichikosho (Shanghai), Ltd.
DAIICHI KOSHO (SHANGHAI)
TRADE CO., LTD.
Daiichi Kosho (Singapore), Pte
Ltd.

Overseas users(Domestic sales subsidiaries)
Hokkaido Daiichikosho Co., Ltd.
Tohoku Daiichikosho Co., Ltd.
Niigata Daiichikosho Co., Ltd.
Kyushu Daiichikosho Co., Ltd.
Taito Daiichikosho Co., Ltd.
Tokai Daiichikosho Co., Ltd.
Daiichikosho Kinki Co., Ltd.
19 other companies

DAIICHIKOSHO CO., LTD. (Reporting company)

Domestic users(Overseas subsidiaries)

Operation of karaoke cabins and restaurants

5

Provision of services

DAIICHIKOSHO

CO.,

LTD.

4. Consolidated Financial Statements(1) Consolidated Balance Sheets
Fiscal year

Account item
(Assets)
I. Current assets
1. Cash and bank deposits
2. Notes and accounts receivable―trade
3. Inventories
4. Deferred tax assets
5. Other
6. Allowance for doubtful accounts
Total current assets
II. Fixed assets
1. Tangible fixed assets(1) Buildings and structures
Accumulated depreciation(2) Karaoke equipment for rental
Accumulated depreciation(3) Karaoke cabin and restaurant
facilities
Accumulated depreciation(4) Land(5) Construction in progress(6) Other
Accumulated depreciation
Total tangible fixed assets
2. Intangible assets
3. Investments and other assets(1) Investments in securities(2) Long-term loans receivable(3) Deferred tax assets(4) Leasehold deposits andguarantee money(5) Other(6) Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total Assets(Millions of yen)
Year-over-yearchangeFY2005(As of March 31, 2006)
ComAmount
positionratio (%)

FY2006(As of March 31, 2007)
AmountComposition
ratio (%)

24,732
12,09232,4049,593

7,671(2,498)

7,683
2,254
4,376
(1,173)49,965

5,093
1,294
4,569
(745)
52,210(2,589)
(959)
192
428
2,244

14,4788,570
28,537
18,834
28,66814,983

9,900
6,014

37.4

14,652
8,529
28,57019,62028,063

5,907
9,702

13,684
14,284172

15,419

8,506
6,412

3,886
47,638
7,950

35.7
5.9

39.9

6,122

214

8,949

(752)

12,644
14,272235(1,040)
(12)
63

2,094
44,318
6,074

33.9
4.6

(1,792)(3,320)(1,875)

10,7191,086
1,111
13,373

9,820
1,220
2,624
13,151

(898)
134
1,513
(221)

3,789
(2,110)27,96983,558
133,524

3,432(1,923)28,32778,720130,931

(356)
186
357
(4,838)(2,593)

21.0
62.6
100.0

6

21.6
60.1
100.0

DAIICHIKOSHOFiscal year

Account item
(Liabilities)
I. Current liabilities
1. Notes and accounts
payable―trade
2. Short-term borrowings
3. Accounts payable―other
4. Income taxes payable
5. Reserve for bonuses
6. Unrealized profit on installment
sales
7. Other
Total current liabilities
II. Long-term liabilities
1. Long-term borrowings
2. Deferred tax liabilities
3. Reserve for employees’ retirement
benefits
4. Reserve for directors’ retirement
allowances
5. Negative goodwill
6. Other
Total long-term liabilities
Total Liabilities(Minority Interests)
Minority Interests(Shareholders’ Equity)
I. Capital stock
II. Capital surplus
III. Retained earnings
IV. Land revaluation difference
V. Net unrealized gains or losses onavailable-for-sale securities
VI. Foreign currency translation
adjustments
VII. Treasury stock
Total shareholders’ equity
Total Liabilities, Minority Interests
and Shareholders’ Equity(Net assets)
I. Shareholders’ equity
1. Capital stock
2. Capital surplus
3. Retained earnings
4. Treasury stock
Total shareholders’ equity
II. Valuation gains and losses andtranslation adjustments
1. Net unrealized gains or losses onavailable-for-sale securities
2. Land revaluation difference
3. Foreign currency translation
adjustments
Total valuation gains and losses andtranslation adjustments
III. Minority interest
Total net assets
Total liabilities and net assets

CO.,

FY2005(As of March 31, 2006)
AmountComposition
ratio (%)

LTD.

FY2006(As of March 31, 2007)
AmountComposition
ratio (%)

(Millions of yen)
Year-overyear change

5,262

4,646

(615)

20,109
6,466
1,407
1,044
373

17,162
6,959
3,386
1,074
267

(2,946)
492
1,978
29
(106)

3,151
37,81528.3

3,446
36,943

28.2

295
(872)

21,096817
2,590

18,304150
2,660(2,792)
(666)
70

2,153

2,437

284

620
1,224
28,502
66,318

21.3
49.6

409
1,235
25,19862,142

19.3
47.5

(210)
11
(3,303)(4,175)

764

0.6

—

—

(764)

12,35024,00332,029
(845)
2,354

9.2
18.0
24.0
(0.6)
1.8

—
—
—
—
—

—
—
—
—
—

(12,350)(24,003)(32,029)845(2,354)

188

0.1

—

—

(188)

(3,639)66,440133,524

(2.7)
49.8
100.0

—
—
—

—
—
—

3,639
(66,440)(133,524)

—
—
—
—
—

—
—
—
—
—

12,35024,00335,671(3,641)
68,384

9.4
18.3
27.2
(2.7)
52.2

12,35024,00335,671(3,641)
68,384

—

—

123

0.1

123

—
—

—
—

(845)
229

(0.6)
0.2

(845)
229

—

—

(493)

(0.3)

(493)

—
—

—
—
—

897
68,788130,931

0.6
52.5
100.0

897
68,788130,931—7

DAIICHIKOSHO

CO.,

LTD.

(2) Consolidated Statements of Income
Fiscal year

Account item
I. Net sales
II. Cost of sales
Gross profit before adjustment for
unrealized profit on installment sales
Unrealized profit on installment
sales─reversal (+)
Unrealized profit on installment
sales─deferred (–)
Gross profit on sales
III. Selling, general and administrative
expenses
Operating income
IV. Nonoperating income
1. Interest income
2. Interest income on installment
sales
3. Fees and commissions received
4. Cooperative monetary aid received
5. Amortization of negative goodwill
6. OtherV. Nonoperating expenses
1. Interest expense
2. Loss on devaluation of inventories
3. Provision for allowance for
doubtful accounts
4. Equity in losses of affiliates
5. OtherOrdinary income
VI. Extraordinary gains
1. Gain on sales of fixed assets
2. Gain on sales of investments insecurities
3. Reversal of allowance for doubtful
accounts
4. Reversal of reserve for directors’
retirement allowances
5. Indemnity of cancellation of leases
6. Gain on revisions to the past-year
copyright use fees
VII. Extraordinary losses
1. Loss on sales and disposal of fixed
assets
2. Impairment loss on fixed assets
3. Loss on sales of investments insecurities
4. Loss on valuation of investments
in securities
5. Loss on cancellation of a new
business
Income before income taxes andminority interests
Income taxes―current
Income taxes―deferred
Minority interests in income (loss) ofconsolidated subsidiaries
Net income

FY2005(From April 1, 2005, to March
31, 2006)
AmountPercentage (%)
129,341
100.0
78,99961.1
50,34238.9
106
16

FY2006(From April 1, 2006, to March 31,
2007)
AmountPercentage (%)
124,654
100.0
74,82460.0
49,829
40.0

89

0.1

50,431
39,145
11,286

19

106

0.1

118.7

39.0
30.3

49,93536,745

40.1
29.5

99.0
93.9

8.7

13,189

10.6

116.9

1,781

1.4

81.5

2,033
12,937

1.6
10.4

109.8
111.4

857

0.7

143.0

4,451

3.6

108.4

9,343

7.5

115.2

4,409
132

3.5
0.1

107.4
(3,405.5)

4,801

3.9

119.7

98
235

180
236
232
1,194

172
265
210
798

2,184

1.7

477
887
50

475
854

—

—
1,852
11,618

1.4
9.0

199
502

98
370

199
105

75

186

55

2

—
—

599

0.5

249
112

1,165

1,420

2,493
4

2,850

7

180

435

2,062
2,041

96.4
94.7
99.0

126

95
244

436

(Millions of yen)
Year-over-yearchange (%)

—

4,107

3.2

8,110

6.3

4,104
(3)

3.2
(0.0)

4,009

3.1

8

—

4,171
238

DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated Statement of Retained Earnings and Consolidated Statement of Changes in Net
AssetsConsolidated Statement of Retained Earnings(Millions of yen)
FY2005(From April 1, 2005, to March 31,
2006)
AmountFiscal year
Account item
(Capital surplus)
I. Capital surplus at the beginning of the year
II. Increase in capital surplus
Gain from purchase and redemption of treasury stock
III.Capital surplus at the end of the fiscal year

24,0020(Retained earnings)
I. Retained earnings at the beginning of the year
II. Increase in retained earnings
1. Net income
2. Increase in retained earnings due to the increase in thenumber of consolidated subsidiaries
III.Decrease in retained earnings
1. Cash dividends
2. Bonuses to directors and statutory auditors
3. Reversal of land revaluation difference
IV.Retained earnings at the end of the fiscal year0
24,00330,050

4,009
414
1,392
104
948

9

4,424

2,445
32,029DAIICHIKOSHO

CO.,

LTD.

Consolidated Statement of Changes in Net Assets
FY2006 (From April 1, 2006, to March 31, 2007)(Millions of yen)
Capital stock
Balance as of March 31, 2006
Changes in the consolidated fiscal
year under review
Cash dividends paid (Note)
Bonuses to directors and statutory
auditors (Note)
Net income
Purchase of treasury stock
Disposal of treasury stock
Net change in items other thanthose in shareholders’ equity
Total of changes during theconsolidated fiscal year underview
Balance as of March 31, 2007

Balance as of March 31, 2006
Changes in the consolidated
fiscal year under review
Cash dividends paid (Note)
Bonuses to directors andstatutory auditors (Note)
Net income
Purchase of treasury stock
Disposal of treasury stock
Net change in items other thanthose in shareholders’ equity
Total of changes during theconsolidated fiscal year underview
Balance as of March 31, 2007

12,350Shareholders’ equity
Capital surplus
Retained
Treasury stockearnings
24,00332,029Total
shareholders’equity64,743(3,639)(1,044)(115)(1,044)
(115)

4,801
0

(1)
0

4,801
(1)
0

—

0

3,642

(1)

3,640

12,35024,00335,671(3,641)

68,384

Valuation gains and losses and translation adjustments
Net unrealizedLand
Foreign
Total
gains or losses onrevaluation
currency
valuation
available-for-saledifferencetranslation
gains andsacurities
adjustments
losses andtranslation
adjustments
2,354
(845)
188
1,697

Minority
interest

764

Total net
assets67,205(1,044)(115)(2,231)—40(2,191)

132

4,801
(1)
0
(2,058)(2,231)—40(2,191)

132

1,582

123

(845)

229

(493)

897

68,788

Note: These are items for which retained earnings were appropriated by resolution of the Ordinary General Meetingof Shareholders held in June 2006.

10

DAIICHIKOSHO

CO.,

LTD.

(4) Consolidated Statements of Cash Flows(Millions of yen)
Fiscal year
Account item

FY2005(From April 1, 2005, to
March 31, 2006)
Amount

FY2006(From April 1, 2006, to
March 31, 2007)
Amount8,110
15,783
2,493
(232)
43
(842)

9,343
15,633
2,850
(210)
(390)
284

(460)
(365)
4

(387)
(105)
(8)

477
1,067
7
415
(928)
1,016

475
1,220
180
2,489
2,589
738

(1,980)1,061
25,672453(460)(1,583)24,081(612)
725
34,816377(491)(2,192)32,509(358)
515(14,628)605(4,766)(1,512)(2,598)
544
(996)
1,249
(908)
819

(190)
214
(10,442)626(4,076)(1,206)(3,249)
154
(509)
737
(769)
579

227
(21,808)73(18,059)

3,749(2,606)15,322(13,330)(1,391)(10)(2)(2,018)141(1,667)
10,776(14,848)(1,043)(1)(8)(6,792)38(4,774)(103)395
22,428

7,695
24,222

7,300
1,794

1,398

—

(1,398)24,222

31,918

7,695

I. Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation expense
Impairment loss on fixed assets
Amortization of negative goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in reserve for directors’ retirement
allowances
Dividend and interest income
Gain or loss on sales of investments in securities
Gain or loss on investments in investment businessassociations
Interest expense
Gain or loss on disposal of fixed assets
Loss on valuation of investments in securities
Decrease in trade receivables
Decrease (increase) in inventories
Transfer of cost of sales on karaoke equipment forrentalDecrease in trade payables
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
II. Cash flows from investing activities:
Increase in time and saving deposits
Proceeds from decrease in time and saving deposits
Payments for acquisition of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for acquisition of intangible assets
Payments for acquisition of video licenses
Payments for purchase of investments in securities
Proceeds from sales of investments in securities
Payments for loans
Proceeds from collection of loans receivable
Payments for leasehold deposits and guarantee money
Proceeds from repayment of leasehold deposits andguarantee money
Other
Net cash used in investing activities
III. Cash flows from financing activities:
Net increase in short-term borrowings
Increase in long-term borrowings
Payments for repayment of long-term borrowings
Cash dividends paid
Payments for purchase of treasury stock
Other
Net cash used in financing activities
IV. Effect of exchange rate changes on cash and cash
equivalents
V. Net increase (decrease) in cash and cash equivalents
VI. Cash and cash equivalents at the beginning of theyear
VII. Increase in cash and cash equivalents due to theincrease in the number of newly consolidated
subsidiaries
VIII. Cash and cash equivalents at the end of the fiscal
year

11

Year-over-yearchangeIncrease anddecrease

8,428

DAIICHIKOSHO

CO.,

LTD.

4. Summary of Significant Accounting Policies(1) Valuation basis and method for important assets① Marketable securities and investments in securities
Other securities primarily designated as available-for-sale securities for which the fair values are readily
determinable:
Carried at fair value as of the balance-sheet date with changes in net unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. The cost of securities sold is determined by themoving-average method.
Other securities primarily designated as available-for-sale securities for which the fair values are notreadily determinable:
Carried at cost determined by the moving-average method.
With regard to investments in the Investment Business Limited Liability Partnership and similarorganizations (which are regarded as “securities” in accordance with Article 2, Paragraph 2, of the Securities
Exchange Law), initial investments in such associations are recognized as receivables from associations andthe amount assumed to be held by the Company for fluctuations due to the financial situation of theassociations after such investment is recognized as receivables and payables related to such associations.

② Derivatives
Carried at fair value.
③ Inventories
Principally stated at cost determined by the moving-average method.
(2) Depreciation method of major depreciable assets① Tangible fixed assets
Depreciation is principally computed by the declining-balance method at rates based on the estimated useful
lives of the assets as shown below. However, the straight-line method is adopted for buildings (excluding
building improvements) acquired after March 31, 1998.
Buildings and structures: 3–50 years
Karaoke equipment for rental: 5–6 years
Karaoke cabin and restaurant facilities: 3–19 years② Intangible assets
Amortization of intangible assets is computed by the straight-line method.
(3) Accounting standard for important reserves① Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount of possible losses from uncollectible receivables
based on the actual rate of losses from bad debt for ordinary receivables, and on the estimated recoverability forspecific doubtful receivables.
② Reserve for bonuses
The reserve for bonuses of DK and its domestic consolidated subsidiaries is provided at an estimated amountbased on the internal payment prediction standard.
③ Reserve for employees’ retirement benefits
The reserve for employees’ retirement benefits of DK and its domestic consolidated subsidiaries is provided at
an amount recognized to have accrued as of the balance-sheet date, based on the projected benefit obligations
and plan assets as of March 31, 2007.
Actuarial differences are amortized on a pro rata basis by the straight-line method over a certain period (10years), which is shorter than the average remaining service years for employees at the time of their recognition,from the following fiscal year of recognition.
④ Reserve for directors’ retirement allowances
The reserve for directors’ retirement allowances of DK and its domestic consolidated subsidiaries is provided at
amounts that would be required to be paid in accordance with their respective internal rules concerning directors’
retirement allowances if all eligible directors and statutory auditors were to resign their positions as of therespective balance-sheet dates.

12

DAIICHIKOSHO

CO.,

LTD.

(4) Translation of important assets and liabilities denominated in foreign currencies into yen
Monetary receivables and payables denominated in foreign currencies are translated into yen at the spot exchange
rate in effect at the consolidated balance-sheet date. The resulting exchange differences are charged or credited toincome. The balance sheet accounts, as well as the revenue and expense accounts, of the overseas subsidiaries aretranslated into yen at the spot exchange rate in effect at their respective balance-sheet dates. The resulting translationdifferences have been included in “Foreign currency translation adjustments” and “Minority interests” in Net
Assets.
(5) Accounting for important leases
Finance leases that do not transfer ownership of leased property to the lessee are accounted for as rental transactions.
(6) Hedge accounting
DK and its domestic consolidated subsidiaries hedge against risks of interest rate fluctuations for its variable-rateborrowings using interest rate swaps. The preferential treatment is applied to these interest rate swaps.
(7) Other important matters in preparing the consolidated financial statements① Accounting for installment sales
Unrealized profit on installment sales is deferred for the amount corresponding to the portion of installment
receivables for which the due date has not expired based on the installment standards used by DK and some of its
domestic consolidated subsidiaries.
② Accounting for consumption taxes
Consumption taxes are accounted for using the tax exclusion method.

5. Valuation for assets and liabilities of consolidated subsidiaries
Assets and liabilities of consolidated subsidiaries are carried at fair value.

6. Amortization of negative goodwill
Negative goodwill is equally amortized over 5 or 15 years on a straight-line basis.

7. Cash and Cash Equivalents in the Consolidated Statements of Cash Flows
Cash and cash equivalents in the consolidated statements of cash flows included cash on hand, demand deposits andshort-term investments due within three months from the acquired date, which are easily convertible into cash withlittle risk of value fluctuation.

13

DAIICHIKOSHO

CO.,

LTD.

(Segment Information)
1. Business segments
FY2005 (From April 1, 2005, to March 31, 2006)
Item
Sales and operating
incomeSales
Sales to third
partiesIntersegment sales
and transfers
Total
Operating expenses
Operating income(loss)
Assets, depreciation
and amortization,
impairment loss
and capital
expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure(Millions of yen)
Eliminations Consolidated
and corporate

Commercial karaoke

Karaokecabin and
restaurant

GatewayMusic
software

Other

Total

69,67233,307

4,780

14,261

7,319

129,341―

129,341

238

―

―

166

696

1,101

(1,101)―

69,91058,660
11,25033,30730,101
3,206

4,780
7,238
(2,457)

14,42813,988
439

8,015
6,118
1,896

130,442
116,106
14,336(1,101)
1,948(3,049)129,341
118,054
11,28667,314
8,823

30,4972,854

10,664
1,624

8,741
35

3,130
1,182

120,347
14,521

13,17660

133,524
14,582

65
9,924

1,273
5,183

—
3,041

—
46

814
349

2,153
18,545

340
38

2,493
18,583

FY2006 (From April 1, 2006, to March 31, 2007)
Item
Sales and operating
incomeSales
Sales to third
partiesIntersegment sales
and transfers
Total
Operating expenses
Operating income(loss)
Assets, depreciation
and amortization,
impairment loss
and capital
expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure(Millions of yen)
Eliminations Consolidated
and corporate

Commercial karaoke

Karaokecabin and
restaurant

GatewayMusic
software

Other

Total

64,68535,681

4,227

11,982

8,077

124,654―

124,654

228

―

―

178

750

1,158

(1,158)―64,91454,74010,17435,681
30,576
5,105

4,227
5,661
(1,434)

12,161
12,010
150

8,827
7,042
1,785

125,812110,030
15,781(1,158)1,433(2,591)

124,654
111,464
13,18964,313
8,433

29,636
2,773

5,187
1,432

7,804
43

3,903
1,241

110,845
13,92320,08573

130,931
13,997

113
9,302

256
2,836

2,168
788

—
144

310
1,269

2,850
14,341—

2,850
14,34914

8

DAIICHIKOSHO

CO.,

LTD.

Notes: 1. Segmentation method
According to DKG’s sales tabulation categories.
2. Major products and/or services of each business segment
Business segment
Commercial karaoke businessKaraoke cabin and restaurant
business
Gateway business
Music software business
Other business

Major products and/or services
Sales and rental of commercial-use karaoke equipment and software
Operation of karaoke cabins and restaurants
Supply of music content, etc., via “DAM Station” special information terminals andmobile phones
Production and sales of music and video software products
Satellite broadcasting business and real estate lease and rental business, etc.

3. Amounts and major items included in “Eliminations and corporate”
Amounts of unabsorbed operating
expenses included in“Eliminations and corporate”
Amounts of assets of the overall
Company included in“Eliminations and corporate”

FY2005¥3,049FY2006¥2,591¥13,596¥20,733(Millions of yen)
Major items
Expenses required for operations byadministrative departments such as the General
Affairs Dept.
Surplus funds of the Company (cash and bankdeposits), long-term investment funds(investments in securities) andmanagement-related assets

2. Geographical segments(FY2005 and FY2006)
As sales and assets in Japan account for more than 90% of the sum of sales and the sum of assets, respectively, in eachregion of the respective geographical segments, the segment information by geographical region is omitted.

3. Overseas sales(FY2005 and FY2006)
As sales overseas account for less than 10% of consolidated net sales for fiscal 2005 and 2006, overseas sales-related
information is omitted.

15