DAIICHIKOSHO

CO.,

LTD.

FY2007, the year ended March 31, 2008

Flash Report on the Consolidated Results for the Year Ended March 31, 2008
May 15, 2008

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 22, 2008
Start Date for Dividend Payment: June 23, 2008
Scheduled Date to Submit the Securities Report: June 23, 2008
(Amounts below one million yen are truncated.)

1. Consolidated Performance for the Year Ended March 2008 (from April 1, 2007, to March 31, 2008)(1) Consolidated operating results(Percentage figures indicate increase/decrease from a year earlier.)
Year ended March 2008
Year ended March 2007

Net sales¥ Million
126,844
124,654

%
1.8
(3.6)

Net income
Year ended March 2008
Year ended March 2007

¥ Million
5,869
4,801

Operating income¥ Million%
16,37424.1
13,18916.9

Ordinary income¥ Million%
16,43227.0
12,937
11.4

Net income per share

Fully diluted net income
per share
¥
―
―

%
22.2
19.7

¥
84.35
68.99

Return on equity

Ordinary income to total
assets%%Year ended March 2008
8.4
12.9
Year ended March 2007
7.1
9.8
(Reference) Equity in net income of unconsolidated subsidiaries and affiliates:
Year ended March 2008: (¥307 million)
Year ended March 2007: (¥199 million)

Operating income to net
sales
%
12.9
10.6

(2) Consolidated financial position
Total assets¥ Million
Year ended March 2008
124,721
Year ended March 2007
130,931(Reference) Shareholders’ equity
Year ended March 2008: ¥71,862 million
Year ended March 2007: ¥67,890 million

Net assets¥ Million
72,39968,7881

Equity ratio
%
57.6
51.9

Net assets per share¥
1,036.52
975.44DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated cash flows

Year ended March 2008
Year ended March 2007

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities¥ Million
25,41932,509¥ Million(18,448)(18,059)¥ Million(10,516)(6,792)

Cash and cash
equivalents at theend of the year
¥ Million
28,30031,918

2. Dividend(Reference dated)

Annual

Yen
—
—
—

Yen
20.00
25.00
30.00

Yen
20.00
25.00
30.00

Aggregate amount ofdividend (annual)¥ Million
1,391
1,733
—

Payout ratio (consolidated)

Ratio of dividends to net
assets (consolidated)
%
1.4
2.5
—

Year ended March 2007
Year ended March 2008
Year ending March 2009
(forecast)Year ended March 2007
Year ended March 2008
Year ending March 2009
(forecast)

Dividend per share
Year-end

Interim

%
29.0
29.6
26.0

3. Forecast Consolidated Performance for FY2008, the Year Ending March 31, 2009 (from April 1,
2008, to March 31, 2009)(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
63,200
1.6
7,300
(7.5)
7,400
(7.4)
September 30, 2008
Year ending March 31,
128,500
1.3
15,700(4.1)
15,800(3.8)
2009 (full year)

Six months ending
September 30, 2008
Year ending March 31,
2009 (full year)

Net income¥ Million
%
3,800
79.1
8,000

Net income per share
¥
54.81

36.3

115.394. 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: Yes(3) Number of common shares issued
1) Number of shares issued (including treasury stock):
Year ended March 2008: 69,600,596 shares

2

DAIICHIKOSHO

CO.,

LTD.

Year ended March 2007: 73,242,596 shares
2) Number of shares of treasury stockYear ended March 2008: 270,292 sharesYear ended March 2007: 3,642,580 shares(Reference) Outline of Nonconsolidated Financial Results
1. Nonconsolidated Performance for the Year Ended March 2008 (from April 1, 2007, to March 31,
2008)(1) Nonconsolidated operating results
Net sales¥ Million

Year ended March 2008
Year ended March 2007

85,523
83,382(Percentage figures indicate increase/decrease from a year earlier.)
Operating income
Ordinary income¥ Million¥ Million%%%
2.6
10,17429.0
11,162
34.2
(4.7)
7,888
22.9
8,317
23.5

Net income¥ Million
2,806
2,310

Year ended March 2008
Year ended March 2007

Fully diluted net income
per share¥—―

Net income per share
%
21.4
(1.0)

¥
40.33
33.20

(2) Nonconsolidated financial position
Total assets¥ Million
Year ended March 2008
76,554
Year ended March 2007
80,200(Reference) Shareholders’ equity:Year ended March 2008: ¥53,269 million
Year ended March 2007: ¥52,189 million

Net assets¥ Million
53,26952,189Equity ratio
%
69.6
65.1

Net assets per shareYen
768.34749.85

2. Forecast Nonconsolidated Performance for FY2008, the Year Ending March 31, 2009 (from April 1,
2008, to March 31, 2009)(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,
2008
Year ending
March 31, 2009
(full year)¥ Million %¥ Million %¥ Million %¥ Million %42,5000.2

4,300 (17.1)

5,100(14.8)

2,700

56.5

38.94

86,4001.0

9,700

10,500

(5.9)

5,500

96.0

79.33

(4.7)

Yen

* Explanation for the appropriate use of performance forecasts and other special notes:
These projected performance figures are based on information available to the Company’s management at the timeof preparing this report. There are many uncertain factors inherent in forecasting, and there might be cases 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”), 43
consolidated subsidiaries and 5 affiliates. The major group companies engage in the commercial
karaoke business, the karaoke cabin and restaurant business, and the music software business.
From the fiscal year ended March 31, 2008, DKG changed the segmentation of the business. The
contents of new segments are described in Segment Information.
Business segment

Business line

Commercial
karaoke business

Sales and rental of commercial-use
karaoke equipment, supply of soundsource and video content forcommunication karaoke and supply ofcontent services via the special “DAM
Station” information terminal

Karaoke cabin
and restaurant
business

Operation of karaoke cabins andrestaurants

Music software
business

Production and sales of music andvideo software products

Other business

Satellite broadcasting, supply ofcontent services via mobile phone andreal 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 18 other subsidiaries

DK KOREA
Co., Ltd.,
Daiichikosho(Shanghai), Ltd.,and 2 othersubsidiaries

Daiichikosho Co., Ltd.,
Nippon Crown Co., Ltd.,
Tokuma Japan Communications Co.,Ltd.,First Distribution Co., Ltd.,
Union Eiga Co., Ltd.,and 4 other subsidiaries
Daiichikosho Co., Ltd.,DK Finance Co., Ltd.,and Maruhagi Yoshu Kogyo Co., Ltd.

4BIG ECHO(SHANGHAI)
Co., Ltd.,And 2 othersubsidiaries

D.K. Enterprises(Guam), Inc.,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)
BIG ECHO (SHANGHAI) Co., Ltd.
BIG ECHO (SHXG) CO., LTD.
BIG ECHO (SHSG) CO., LTD.

(Operation and management ofrecreation facilities)
D.K. Enterprises (Guam), Inc.

(Equity method affiliate)
Spice Records Co., Ltd.
Breezeway Corp.
JD CREATE Co., Ltd.
Shin 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.
18 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-yearchangeFY2006(As of March 31, 2007)
ComAmount
positionratio (%)

FY2007(As of March 31, 2008)
AmountComposition
ratio (%)

32,404
9,593

28,7899,017(3,614)
(576)

5,093
1,294
4,569
(745)
52,210

4,577
1,274
4,191
(436)
47,414

(516)
(20)
(377)
309
(4,796)

14,652
8,529
28,57019,62028,063
15,419

8,506
6,412

39.9

14,548
8,498
27,977
19,90729,517

6,122
8,949

12,644
14,272
235

15,887

8,240
6,402

2,094
44,318
6,074

33.9
4.6

38.0

6,049

(72)

8,069

(879)

13,62917,485
138

985
3,213
(96)

1,837
47,211
6,324

37.8
5.1

(256)
2,893
249

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

4,598
865
3,572
12,999(5,222)
(355)
947
(151)

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

3,036(1,302)
23,77177,307
124,721(395)
621(4,555)(1,412)(6,209)

21.6
60.1
100.0

6

19.1
62.0
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(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.,

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

LTD.

FY2007(As of March 31, 2008)
AmountComposition
ratio (%)

(Millions of yen)
Year-overyear change

4,646

4,552

(94)

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

12,152
6,419
3,689
1,098
286

(5,010)
(540)
303
24
18

3,446
36,94328.2

3,230
31,42825.2(216)(5,514)18,304150
2,660

14,469150
2,772(3,834)

2,437

1,849

(588)

409
1,235
25,19862,142

19.3
47.5

391
1,259
20,89352,322

16.8
42.0

(18)
24
(4,305)(9,820)12,35024,00335,671(3,641)
68,384

9.4
18.3
27.2
(2.7)
52.2

12,35020,36240,149(266)
72,595

9.9
16.3
32.2
(0.2)
58.2

(3,640)
4,477
3,375
4,211

123

0.1

47

0.0

(75)

(845)
229

(0.6)
0.2

(845)
64

(0.7)
0.1

(164)

(493)

(0.3)

(733)

(0.6)

(239)

897
68,788130,931

0.6
52.5
100.0

537
72,399124,721

0.4
58.0
100.0

(360)
3,611
(6,209)

7

—
111

—

—

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. Equity in losses of affiliates
4. 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 in
subsidiaries and affiliates
4. Loss on valuation of investments
in securities
5. Loss on cancellation of a new
business
6. Loss on irregularities
Income before income taxes andminority interests
Income taxes―current
Income taxes―deferred
Minority interests in income of
consolidated subsidiaries
Net income

FY2006(From April 1, 2006, to March
31, 2007)
AmountPercentage (%)
124,654
100.0
74,82460.0
49,82940.0
126
19FY2007(From April 1, 2007, to March 31,
2008)
AmountPercentage (%)
126,844
100.0
72,715
57.3
54,128
42.7

106

0.1

49,93536,745
13,189

69

(18)

(0.0)

(17.7)

40.1
29.5

54,10937,735

42.7
29.8

108.4
102.7

10.6

16,374

12.9

124.1

1,605

1.3

90.1

1,547
16,432

1.2
13.0

76.1
127.0

518

0.4

60.5

6,405
10,545

5.1
8.3

143.9
112.9

4,523
152

3.6
0.1

102.6
115.6

5,869

4.6

122.2

117
165

172
265
210
798

134
331
74
781

1,781

2,033
12,937

1.4

1.6
10.4

413
472
307
354

199
105

—

186

243

2

112

249
112

76

85
857

0.7

—

1,420

556

2,850

—

211
62

180

4,484

—

410

—
4,171
238

101.8
97.2
108.6

50

98
235

475
854
199
502

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

4,451
9,343

3.6
7.5

4,409
132

3.5
0.1

4,801

3.9

8

681

5,336
(813)

DAIICHIKOSHO

CO.,

LTD.

(3) 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
24,00332,029(3,639)(1,044)
(115)

Total
shareholders’equity64,743(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 andsecurities
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.

9

DAIICHIKOSHO

CO.,

LTD.

FY2007 (From April 1, 2007, to March 31, 2008)(Millions of yen)
Capital stock
Balance as of March 31, 2007
Changes in the consolidated fiscal
year under review
Cash dividends paid
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, 2008

Balance as of March 31, 2007
Changes in the consolidated
fiscal year under review
Cash dividends paid
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, 2008

12,350Shareholders’ equity
Capital surplus
Retained
Treasury stockearnings
24,00335,671

Total
shareholders’equity68,384(3,641)(1,391)
5,869(1,391)
5,869
(265)

(265)
3,640

(3,640)——(3,640)

4,477

3,375

4,211

12,35020,36240,149(266)

72,595

Valuation gains and losses and translation adjustments
Net unrealizedLand
Foreign
Total
gains or losses onrevaluation
currency
valuation
available-for-saledifferencetranslation
gains andsecurities
adjustments
losses andtranslation
adjustments
123
(845)
229
(493)

Minority
interest

897

Total net
assets

68,788(1,391)
5,869
(265)

—
(75)

—

(164)

(239)

(360)

(600)

(75)

—

(164)

(239)

(360)

3,611

47

(845)

64

(733)

537

72,39910

DAIICHIKOSHO

CO.,

LTD.

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

FY2006(From April 1, 2006, to
March 31, 2007)
Amount

FY2007(From April 1, 2007, to
March 31, 2008)
Amount9,343
15,633
2,850
(210)
(390)
284

10,545
14,169
211
(74)
(626)
(588)

(387)

(359)
62

I. Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation expense
Impairment loss on fixed assets
Amortization of negative goodwill
Decrease in allowance for doubtful accounts
Increase (decrease) in reserve for directors’ retirement
allowances
Dividend and interest income
Loss on sales of investments in subsidiaries andaffiliates
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
Loss on irregularities
Decrease in trade receivables
Decrease in inventories
Transfer of cost of sales on karaoke equipment forrentalDecrease in trade payables
Other
SubtotalInterest and dividends received
Interest paid
Irregularities 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 purchase of investments in subsidiaries
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. Cash and cash equivalents at the end of the fiscal
year

—
(105)
(8)

—

475
1,220
180

413
479
4,484
681
558
516
680

—
2,489
2,589
738
(612)
725
34,816377(491)—(2,192)32,509(190)
214(10,442)626(4,076)(1,206)(3,249)154

Increase anddecrease

(8)

(94)
127
31,177
366
(411)
(681)
(5,032)
25,419(7,090)

(509)
737
(769)
579

(241)
238
(12,848)
156(4,351)(1,304)
(200)
450
(413)
(319)
707
(1,017)641

73(18,059)

56(18,448)(389)(1,667)
10,776(14,848)(1,043)(1)(8)(6,792)38(2,975)
6,510(12,382)(1,392)(265)(10)(10,516)(72)(3,723)
(111)

7,695
24,222(3,618)31,918(11,314)
7,695

31,91828,300(3,618)—

11

Year-over-yearchangeDAIICHIKOSHO

CO.,

LTD.

1. 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 Financial
Instruments and Exchange Act), initial investments in such associations are recognized as receivables fromassociations and the amount assumed to be held by the Company for fluctuations due to the financial
situation of the associations 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 years(Change in accounting method)
Pursuant to the revisions to the Income Tax Law, DK and its consolidated subsidiaries changed the method ofdepreciation of tangible fixed assets and, effective in the fiscal year ended March 31, 2008, use a method based on
the revised Income Tax Law with regard to those assets acquired on and after April 1, 2007.
This change decreased operating income, ordinary income and income before income taxes and minority interests
each by ¥466 million for the period ended March 31, 2008.
(Additional Information)
Pursuant to the revisions to the Income Tax Law, DK and its consolidated subsidiaries use a method of depreciationof tangible fixed assets acquired before April 1, 2007, based on the Income Tax Law before the revision. Specifically,
from the consolidated fiscal year following the consolidated fiscal year in which the depreciation amount reaches
5% of the acquisition cost, the difference between the assumed amount of 5% of the acquisition cost and thememorandum price is equally amortized over five years, included in Depreciation and amortization.
This change decreased operating income, ordinary income and income before income taxes and minority interests
each by ¥67 million for the period ended March 31, 2008.

② 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.

12

DAIICHIKOSHO

CO.,

LTD.

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, 2008.
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.
(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 of the overseas subsidiaries are translated into yen at the spot exchange rate ineffect at their respective balance-sheet dates, and the revenue and expense accounts are translated into yen at the
average rate during the fiscal year. The resulting translation differences have been included in “Foreign currencytranslation adjustments” 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.
2. Valuation for assets and liabilities of consolidated subsidiaries
Assets and liabilities of consolidated subsidiaries are carried at fair value.

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

4. 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.

Change in Important Matters Essential for the Preparation of the Consolidated Financial Statements(Translation of important assets and liabilities denominated in foreign currencies into yen)
The revenue and expense accounts of the overseas subsidiaries were translated into yen at the spot exchange rate ineffect at their respective balance-sheet dates. From the current consolidated fiscal year, however, the above foreign
currency translation method has been changed to a method employing the average exchange during the fiscal year.
Differences between the average rate during the fiscal year and the spot exchange rate in effect at the respectivebalance-sheet dates of the overseas subsidiaries were considerably widening due to exchange rate fluctuations; therefore,
this change was made in order to properly reflect the performance of the overseas subsidiaries in the consolidated
financial statements, by implementing more accurate translation.
As a result, operating income decreased by ¥780 million, ordinary income increased by ¥36 million, and income before
income taxes and minority interests increased by ¥37 million, as compared with the amounts calculated using the former
method.
Meanwhile, the former method was used for the interim period ended September 30, 2007 because the exchange rate
fluctuations during the period were not material. Thus, for the interim period ended September 30, 2007, operating
income decreased by ¥60 million, ordinary income increased by ¥3 million, and income before income taxes andminority interests increased by ¥4 million, as compared with the amounts calculated using the new method.

13

DAIICHIKOSHO

CO.,

LTD.

(Segment Information)
1. Business segments
FY2006 (From April 1, 2006, to March 31, 2007)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales
and transfers
Total
Operating expenses
Operating income
Assets, depreciation
and amortization,
impairment loss andcapital expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure

Commercial
karaokeKaraokecabin and
restaurantMusic
software65,957228

35,681―

66,186
57,632
8,554(Millions of yen)
Eliminations Consolidated
and corporate

Other

Total

11,982
178

11,032
750

124,654
1,158―(1,158)

124,654―

35,681
30,576
5,105

12,161
12,010150

11,7839,811
1,971

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

124,654
111,464
13,18967,784
9,429

29,636
2,773

7,804
43

5,620
1,677

110,845
13,92320,08573

130,931
13,997

2,582
9,908

256
2,836

—
144

10
1,451

2,850
14,341—

2,850
14,3498FY2007 (From April 1, 2007, to March 31, 2008)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales
and transfers
Total
Operating expenses
Operating income (loss)
Assets, depreciation
and amortization,
impairment loss andcapital expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure

Commercial
karaokeKaraokecabin and
restaurantMusic
software

66,069270

38,235―66,34054,96911,370(Millions of yen)
Eliminations Consolidated
and corporate

Other

Total

11,739166

10,800808

126,844
1,245―(1,245)

126,844―

38,23532,933
5,301

11,905
11,009896

11,6089,871
1,737

128,089
108,782
19,306(1,245)
1,687(2,932)

126,844
110,470
16,37460,903
8,154

34,145
2,830

7,795
43

5,313
1,533

108,159
12,562

16,562
66

124,721
12,629

—

175
7,861

—
13

36
1,024

211
17,333—

211
17,398

8,433

14

65

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
Music software business
Other business

Major products and/or services
Sales and rental of commercial-use karaoke equipment, supply of sound source andvideo content for communication karaoke, and supply of content services via thespecial “DAM Station” information terminal
Operation of karaoke cabins and restaurants
Production and sales of music and video software products
Satellite broadcasting business, supply of content services via mobile phones and realestate 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”

FY2006¥2,591

FY2007¥2,932¥20,733¥17,036(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

4. Change in business segments
In the fiscal year ended March 31, 2008, DK and its consolidated subsidiaries reviewed business segments asfollows.
The “supply of content services via the special ‘DAM Station’ information terminal,” which had previously been
included in the Gateway business, has been included in the Commercial karaoke business since the fiscal year
ended March 31, 2008. We decided to position this business as a value-added service in the commercial karaokebusiness, our mainstay business, and develop this business by integrating it with the mainstay business.
Along with such a change in business segmentation, the monetary importance of e-business (the supply of content
services via mobile phones), which had been a component of the Gateway business, declined, thereby resulting inthis business being included in “Other business” from the fiscal year ended March 31, 2008.
The above segment information for the previous fiscal year has been prepared based on the updated businesssegments after the change.

2. Geographical segments(FY2006 and FY2007)
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(FY2006 and FY2007)
As sales overseas account for less than 10% of consolidated net sales for fiscal 2006 and 2007, overseas sales-related
information is omitted.

15