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, 2010 and 2009, and the related consolidated
statements of operations, changes in net assets, and cash flows for each of three years in the
period ended March 31, 2010, 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, 2010 and 2009, and the consolidated results of their operations andtheir cash flows for each of the three years in the period ended March 31, 2010 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, 2010 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 18, 2010

JALUX Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31,
2009
2010
(Thousands of yen)

AssetsCurrent assets:
Cash and time deposits (Notes 14 and 18)
Notes and accounts receivable (Notes 14 and 20):
Trade
Unconsolidated subsidiaries and affiliates
Other
Allowance for doubtful accounts
Inventories (Note 4)
Deferred income taxes (Note 11)
Other (Note 20)
Total current assets

2010(Thousands of
U.S. dollars)(Note 3)

¥ 8,143,114¥ 6,151,963$ 87,560

9,657,474
104,874
2,359,289(60,958)
6,345,498
808,651
1,053,907
28,411,851

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

103,844
1,128
25,369(655)
68,231
8,695
11,332
305,504

1,863,101
405,1972,268,298

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

20,033
4,357
24,390

Accumulated depreciation
Property and equipment, net

1,844,350
5,733,595
167,634
2,925,448
1,153,521
951,430
12,775,981(4,687,475)
8,088,506

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

19,832
61,652
1,803
31,456
12,403
10,230137,376(50,403)
86,973

Intangible assets (Note 10):
Software
Other
Total intangible assets

1,151,866
212,176
1,364,042

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

12,3862,281
14,667438,058
2,139,695–
641,099
87,573¥43,439,125

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

4,710
23,007–6,894
942$467,087

Investments and advances:
Unconsolidated subsidiaries and affiliates (Note 14)
Other (Notes 14 and 15)
Total investments and advances
Property and equipment (Notes 5 and 10):Land
Buildings and structures
Machinery and vehicles
Flight equipment
Construction in process
Other

Long-term loans
Deposits for business space (Note 14)
Prepaid pension expenses (Note 6)
Deferred income taxes (Note 11)
Other assets, net

2

March 31,
2009
2010
(Thousands of yen)

Liabilities and net assets
Current liabilities:
Short-term borrowings (Notes 5 and 14)
Current portion of long-term debt (Notes 5 and 14)
Notes and accounts payable (Notes 14 and 20):
Trade
Affiliates
Accrued expenses
Accrued income taxes (Note 11)
Provision for relocation expenses
Other
Total current liabilities

2010(Thousands of
U.S. dollars)(Note 3)

¥ 5,486,594
1,654,132¥ 2,120,074
1,637,292$ 58,996
17,786

9,391,921
285,573
2,092,777
92,299123,5232,477,039
21,603,861

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

100,988
3,071
22,503992
1,328
26,635
232,300

7,422,887

5,368,349

79,816

Accrued pension and severance costs (Note 6)

186,586

77,954

2,006

Directors’ and statutory auditors’ retirement benefits

92,231

189,344

992

Deferred income taxes (Note 11)

168,654

179,348

1,813

Other

141,386

94,6761,520

2,558,550
711,4999,991,571

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

27,511
7,651
107,436(97,872)(11,213)(1,052)(1,389)(25,214)

(15)

2,748
(556,762)
21,381
1,193,791
13,823,518¥43,439,125

948(581,058)–
1,180,632
15,702,249¥42,899,208

30(5,987)230
12,836
148,640$467,087

Long-term debt (Notes 5 and 14)

Commitments and contingent liabilities (Notes 5 and 12)
Net assets (Note 7):
Common stock, without par value:
Authorized: 20,000,000 shares
Issued: 12,775,000 shares in 2010 and 2009
Capital surplus
Retained earnings
Common stock in treasury: 77,884 shares in 2010 and
15,275 shares in 2009
Net unrealized loss on other securities, net of taxes(Note 15)
Net unrealized gain on hedging instruments, net of taxes(Note 16)
Translation adjustments
Subscription rights to shares (Note 8)
Minority interests
Total net assets

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

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Operations

2010

Operating revenues (Notes 19 and 20)
Operating expenses (Notes 19 and 20):
Cost of sales
Selling, general and administrative
expenses (Note 8)
Operating (loss) income
Non-operating income (expenses):
Interest income
Interest expense
Equity in earnings (losses) of affiliates
Other, net (Note 9)(Loss) income before income taxes andminority interests
Income taxes (Note 11):
Current
Deferred
Minority interests
Net (loss) income

Year ended March 31,
2009
2008
(Thousands of yen)

2010
(Thousands of
U.S. dollars)(Note 3)¥105,561,308¥113,225,704¥120,228,386$1,135,068

83,809,256

90,721,969

96,359,302

901,175

22,047,044
105,856,300(294,992)

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

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

237,065
1,138,240(3,172)

16,321(173,882)
9,310(1,347,690)(1,495,940)

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

34,809(135,928)(91,047)
324,557
132,390175(1,870)100(14,491)(16,085)(1,790,933)

956,099

2,320,819(19,257)

182,726(714,329)(531,602)(3,736)¥ (1,263,067) ¥480,465(6,730)473,735(90,073)
392,290997,868
180,196
1,178,065(164,271)¥
978,483

1,965(7,681)(5,716)(40)(13,581)$

The accompanying notes are an integral part of these statements.

4

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

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Commonstock intreasury

Net unrealized Net unrealized(loss) gain on gain (loss) on
Subscription
otherhedgingrights tosecurities,
instruments,
Translation
sharesnet of taxes
net of taxes
adjustments(Note 8)(Note 15)
(Note 16)

Minority
interests

Total
net assets¥ 940,591¥15,515,577(Thousands of yen)
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

12,775,000

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

12,775,000

Balance at March 31, 2009
Cash dividends(¥35 per share)
Net loss for the year
ended March 31, 2010
Change in scope ofequity method
Purchases of common
stock in treasury
Other

12,775,000

Balance at March 31, 2010

12,775,000¥2,558,550¥711,421¥11,289,771¥ (9,677)¥ 13,707¥ 4,068

¥

7,144

¥

–

(383,139)(383,139)

978,483

978,483(1,293)78
2,558,550

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

45,559160(76,990)986,150

16,032,797(446,994)(446,994)

392,290392,290

37,692

37,692(324)

2,558,550

711,499

11,868,103(11,213)(19,323)

44,110(532,481)(25,214)948(581,058)–

194,482(324)(313,212)

1,180,632

15,702,249(446,986)(446,986)(1,263,067)(1,263,067)(166,478)(166,478)(86,659)

Number ofshares ofcommonstock¥2,558,550

Commonstock¥711,499

Capitalsurplus¥ 9,991,571

Retainedearnings¥(97,872)

Commonstock intreasury

23,8241,800

24,295

21,381

13,158(86,659)
84,460¥ (1,389)¥ 2,748¥(556,762)¥21,381¥1,193,791¥13,823,518

Minority
interests

Total
net assets$12,695$168,841

Net unrealized Net unrealized(loss) gain on gain (loss) on
Subscription
otherhedgingrights tosecurities,
instruments,
Translation
sharesnet of taxes
net of taxes
adjustments(Note 8)(Note 15)
(Note 16)
(Thousands of U.S. dollars) (Note 3)

Balance at March 31, 2009
Cash dividends($0.38 per share)
Net loss for the year
ended March 31, 2010
Change in scope ofequity method
Purchases of common
stock in treasury
Other

12,775,000

Balance at March 31, 2010

12,775,000$27,511$7,651$127,614$ (121)$(271)$10$(6,248)$ –(4,806)(4,806)(13,581)(13,581)(1,790)(1,790)(932)$27,511$7,651$107,436$(1,052)

256

19

261

230

141

(932)
908

$ (15)$30$(5,987)$230$12,836$148,640

The accompanying notes are an integral part of these statements.

5

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
2010

Year ended March 31,
2009
2008
(Thousands of yen)

Operating activities(Loss) income before income taxes and minority interests¥(1,790,933) ¥ 956,099 ¥ 2,320,819
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by operating activities:
Depreciation and amortization
1,143,430
1,095,961
1,111,740(Decrease) increase in provision for allowance for doubtful accounts(121,498)
75,299(13,387)
Increase (decrease) in net provision for accrued pension andseverance costs
108,6313,542(82,240)
Decrease (increase) in prepaid pension expenses
94,368
152,567(246,936)Interest and dividend income(24,218)(64,619)(78,133)
Interest expense
173,882
143,612
135,928
Exchange (gain) loss, net(3,881)
41,53039,686Equity in (earnings) losses of affiliates(9,310)(88,808)
91,047(Gain) loss on sales of, and loss on disposal of property and equipment(2,346)51,922
141,546
Impairment losses on fixed assets
368,573
17,90535,592
Loss (gain) on sales of investments in securities
55,056
26,704(19,999)
Loss on revaluation of investments in affiliates–
69,094–
Loss on revaluation of investments in securities
8,513
190,061
90,879Decrease (increase) in notes and accounts receivable
2,018,482(748,177)
922,958
Decrease (increase) in inventories
368,269(537,145) (1,238,277)(Decrease) increase in notes and accounts payable(3,678,171)
329,200(200,189)(Increase) decrease in advance payment(18,000)
197,209739,175
Increase (decrease) in advance received
441,747
172,317(916,872)
Decrease (increase) in bad debts on receivables
64,983(70,138)
11,513
Other, net
357,418
368,220
601,106
Subtotal(201,314)
2,371,558
3,213,070
Interest and dividends received
59,322
81,98571,392
Interest paid
(159,159)(153,922)(145,746)
Income taxes paid
(195,685)(899,433) (1,266,258)
Income taxes refund
130,557––
Payment for special termination benefits––(804,511)
Net cash used in (provided by) operating activities(1,170,791)
1,400,187
1,872,458
Investing activities
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of investment in unconsolidated subsidiaries and 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 in change inscope 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

2010(Thousands of
U.S. dollars)(Note 3)$(19,257)
12,295(1,306)
1,168
1,015
(260)
1,870
(42)
(100)
(25)
3,963
592
–
92
21,704
3,960(39,550)
(194)
4,750
699
6,464
(2,165)638(1,711)(2,104)
1,404(8,651)(12,589)(1,504,896)
87,364–(408,080)(77,048)
202,541(2,159,132)
3,116(14,907)(287,080)(264,658)
2,185(478,985)
2,927(27,000)(581,539)(240)
20,000(16,182)939–(4,388)
(828)
2,178

–
(166,924)
68,127(979)
59,014(23,386)
71,592–75,499(1,617,173)(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)–(1,795)
733
(11)
635
(251)
770
–
812
(17,389)

Financing activities
Increase (decrease) 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

3,349,104
3,661,590(1,654,567)(446,527)(40,339)(44,964)
4,824,294(449,978)4,000,000(1,262,741)(449,824)(120,000)(4,492)
1,712,962

275,480
1,200,000(1,188,272)(377,810)(122,473)(3,706)(216,782)

36,01239,372(17,791)(4,801)(434)(483)
51,874

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year (Note 18)

12,014
2,048,343
6,091,048¥ 8,139,392(152,586)(38,364)(83,780)
528,654
6,174,828
5,646,173¥ 6,091,048 ¥ 6,174,828

129
22,02565,495$ 87,520

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

JALUX Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2010

1.

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. 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 andinclude certain additional financial information for the convenience of 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 eight 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
Subsidiariesf.

– by the moving average method– 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.

Suppliesby the last purchase price method–

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 and the buildings for rent is computed principally by thestraight-line method and depreciation 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 the straight-line method based on the estimated useful lives of therespective assets.

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.
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.

91.

Summary of Significant Accounting Policies (continued)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.

Provision for relocation expenses
Provision for relocation expenses is provided for the estimated amounts payable forrelocation of the head office.

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.

2.

Accounting Changes

Accounting Standard for Retirement Benefits
Effective the year ended March 31, 2010, the Company and its consolidated subsidiaries
have adopted “Partial Amendments to Accounting Standard for Retirement Benefits (Part3) “(Accounting Standards Board of Japan (ASBJ) Statement No. 19 issued on July 31,2008). This change has no impact on net loss for the year ended March 31, 2010.
Accounting Standard for Measurement of Inventories
Effective the year ended March 31, 2009, the Company and its consolidated subsidiaries
adopted “Accounting Standard for Measurement of Inventories” (Accounting Standards
Board of Japan (ASBJ) Statement No. 9 issued on July 5, 2006).
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.

10

2.

Accounting Changes (continued)

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.

3. U.S. Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of the reader. The rate of¥93.00 = U.S.$1.00, the approximate exchange rate prevailing on March 31, 2010, 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.

4.

Inventories

Inventories at March 31, 2010 and 2009 were as follows:
March 31,
2009
2010
2010
(Thousands of yen)(Thousands of
U.S. dollars)
Merchandise and finished products
Real estate held for sale
Raw materials and supplies¥6,019,685
217,067
108,746¥6,345,498¥6,596,654
1,364,489
95,431¥8,056,575$64,728
2,334
1,169$68,231

The real estates held for sale of ¥1,373,549 thousand ($14,769 thousand) were transferred
to property and equipment on March 31, 2010 because the Company changed the purposeof holding those real estates.
Revaluation loss included in “Cost of sales” amounted to ¥267,287 thousand ($2,874
thousand) and ¥25,545 thousand for the years ended March 31, 2010 and 2009.

11

5.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at March 31, 2010 and 2009 consisted of thefollowing:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)
Short-term Borrowings:
Short-term Borrowings with collateral,
at rates 1.16%
Short-term Borrowings without collateral,
at rates ranging from 1.09% to 5.10%¥ 4,500,000¥–$ 48,387

986,594¥ 5,486,594

2,120,074¥ 2,120,074

10,609$ 58,996

Long-term debt:
Loans with collateral, due 2009 to 2015,
at rates ranging from 1.88% to 7.03%¥ 4,268,346 ¥ 1,126,620
Loans without collateral, due 2009 to 2015,
at rates ranging from 1.28% to 4.32%
4,230,811
5,358,000
Other
577,861
521,0219,077,019
7,005,641
Less current portion of long-term debt
(1,654,132) (1,637,292)¥ 7,422,887 ¥ 5,368,349$ 45,896
45,4936,214
97,602(17,786)$ 79,816

The aggregate annual maturities of long-term debt subsequent to March 31, 2010 are
summarized as follows:Year ending March 31,(Thousands ofyen)(Thousands of
U.S. dollars)¥1,654,132
1,610,724
3,774,800
1,223,532
813,829¥9,077,019$17,786
17,32040,58913,156
8,751$97,602

2011
2012
2013
2014
2015 and thereafter

Assets pledged as collateral at March 31, 2010 and 2009 are summarized as follows:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)
Land
Buildings and structures, net ofaccumulated depreciation
Flight equipment, net of accumulated
depreciation
Construction in process¥1,803,987¥ 152,947$19,398

1,714,991

919,653

18,441

661,476
872,468¥5,052,924

890,677–¥1,963,278

7,113
9,381
$54,33312

5.

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

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, 2010 and 2009 were as
follows:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)
Total commitment available
Less amount utilized
Balance available

6.

¥ 4,500,000(4,500,000)¥–¥4,500,000–¥4,500,000$ 48,387(48,387)$–

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.
The Company and three domestic consolidated subsidiaries adopt lump-sum retirement
plans and defined benefit pension plans. And the Company and overseas consolidated
subsidiaries adopt defined contribution pension plans.
The projected benefit obligation and the funded status of the plans were as follows:
March 31,2010
2009
(Thousands of yen)
Projected benefit obligation
Plan assets
Accrued pension and severance costs
Prepaid pension expenses
Net unrecognized amount¥(3,368,264) ¥(3,302,334)
2,544,721
2,499,071
186,586
77,954(94,368)–¥ (636,956) ¥ (819,676)

2010(Thousands of
U.S. dollars)$(36,218)
27,363
2,006–$ (6,849)

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

13

6.

Accrued Pension and Severance Costs (continued)

The net unrecognized amount was as follows:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)
Actuarial assumption adjustment
Post service cost
Net unrecognized amount¥(455,926)(181,030)¥(636,956)¥(578,302)(241,373)¥(819,676)$(4,902)(1,947)$(6,849)

The components of net periodic pension and severance costs excluding the employees’
contributory portion were as follows:Year ended March 31,
2009
2008
2010
2010
(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¥166,773
56,828(60,795)¥166,527
56,391(65,485)¥147,993
63,368(68,820)$1,793611(654)

130,994
60,343–¥354,143

102,245
60,343–¥320,022

41,327–
29,917¥213,786

1,409
649
–
$3,808In addition to the net periodic pension and severance costs referred to above, special
termination benefits of ¥804,511 thousand ($8,651 thousand) were accounted for
non-operating expenses for the year ended March 31, 2010.
The 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
7.

2010

2009

1.8%
2.5%

1.8%
2.5%

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.
14

7.

Net Assets (continued)

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, 2010 and 2009 were as follows:Year ended March 31, 2010At
March 31,
2009
Number of shares of stockin issue:Common stock
Number of shares ofcommon stock in treasury:
Common stock

Increase
Decrease(Thousands of shares)

At
March 31,2010

12,775––

12,775

15

63

–

77

The increase in common stock in treasury of 63 thousand shares during the current period
resulted from purchase of 63 thousand shares in accordance with a decision made by the
Board of Directors and 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, 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

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.

15

8.

Stock Options

The Company adopted the stock option plan under which share subscription rights are
granted to directors and operating officers of the Company in accordance with the
Corporation Law.
The description of stock options for the year ended March 31, 2010 are as follows:2009 Stock Option Plan
Individuals covered by the plan
Type and number of shares to be issued upon
the exercise of the share subscription rights
Granted date
Vesting conditions
Vesting period
Exercise period

7 directors of the Company
6 operating officers of the Company
23,600 shares of common stock
October 29, 2009
No provisions
No provisions
October 30, 2009 – October 29, 2039

The changes in the size of stock options for the year ended March 31, 2010 are as follows:2009 Stock Option Plan
Share subscription rights which are not yet
vested (Number of shares)
Outstanding as of March 31, 2009
GrantedForfeited
VestedOutstanding as of March 31, 2010–
23,600–(23,600)–

Share subscription rights which have alreadybeen vested (Number of shares)
Outstanding as of March 31, 2009
VestedExercised
Forfeited
Outstanding as of March 31, 2010–
23,600––23,600Exercise price (yen)Weighted average fair value per stock at theexercising date (yen)Fair value per stock option at the granted date
(yen)

¥

Exercise price (U.S. dollars)
Weighted average fair value per stock at theexercising date (U.S. dollars)
Fair value per stock option at the granted date
(U.S. dollars)

$

1
–
1,208
0.01
–
12.99

16

8.

Stock Options (continued)

Stock option expense included in “Selling, general and administrative expenses” for theyear ended March 31, 2010 amounted to ¥21,381 thousand ($230 thousand). The fairvalue of options granted is estimated by using the Black-Scholes model with the following
assumptions.
2009 Stock Option Plan
Expected volatility
Expected holding period
Expected dividend
Risk-free rate

28.968%2.5 years¥35 per share
0.3412%The expected volatility of the share price is estimated based on the market fair value for the
past 2.5 years (from May 2007 to October 2009).
The expected holding period is estimated based on the service period as directors and theage at retirement of the directors in the past.
The expected dividend is estimated based on dividends paid for the year ended March 31,
2009.
Risk-free rate is the yield on government bonds for the period that corresponds to theremaining life of the stock option.

17

9.

Other Income (Expenses)

The components of “Other, net” in “Non-operating income (expenses)” for each of thethree years in the period ended March 31, 2010, 2009 and 2008 were as follows:Year ended March 31,
2009
2008
2010
(Thousands of yen)
Dividends received
Exchange gain, net
Brokerage commission received
Gain on sales of property and equipment
Gain on sales of investments insecurities
Gain on reversal of allowance for
doubtful accounts
Gain on reversal of reserve for bonuses
to officers
Commission paid
Nondeductible consumption tax
Loss on sales and disposal of property
and equipment
Impairment losses on fixed assets
Loss on sales of investments insecurities
Loss on revaluation of investments insecurities
Loss on revaluation of investments in
non-consolidated subsidiaries andaffiliates
Loss on closing stores
Loss on transfer of retirement benefit
plan
Special termination benefits
Other, net¥

2010(Thousands of
U.S. dollars)

7,897
99,54747,661
44,575¥ 46,230
544,250
53,194
2,906¥ 43,323
446,493
53,292
–

$

85
1,070
512
479

70,966–19,999

763

8,356

–

4,654

90

–
(50,839)(65,400)–(24,339)–

15,010(24,796)
–

–
(547)
(703)

(42,229)(368,573)(54,828)(17,905)(141,546)(35,592)(454)(3,963)(126,023)(26,704)–(1,355)(8,513)(190,061)(90,879)

(92)

–
–

(69,094)––(20,265)–––(804,511)(160,604)¥(1,347,690)––
127,239¥ 390,887(29,917)–84,781¥ 324,557–(8,651)(1,727)$(14,491)

18

10.

Impairment of Fixed Assets

For the year ended March 31, 2010, the Company and a consolidated subsidiary recognizedimpairment losses on fixed assets of ¥368,573 thousand ($3,963 thousand), and for theyears ended March 31 2009 and 2008 the Company recognized impairment losses on fixed
asset of ¥17,095 thousand and ¥35,592 thousand which consisted of the following:
Year ended March 31,
Location

Use

Classification

2010

2009

2008

2010

(Thousands of yen)(Thousands of
U.S. dollars)

Tokoname-shi, Aichi Airport shops
and other 4 shops

Buildings, furnitureand other¥ 23,211

–

–

$ 250

Shinagawa-ku,
Tokyo

Head officeassetsBuildings, furniture,
software and other¥244,756––$2,632

Shinagawa-ku,
Tokyo and other

Business assets Buildings, furniture,
software and other

¥

3,951

–

–

$

Ito-shi, Shizuoka

Idle assets¥ 12,327

–

–

$ 133

¥ 84,327

–

–

$ 907

¥17,905––¥35,592–Land

California, America

Business assets Flight equipment

Ikeda-shi, Osaka andother 5 shops

Airport shops

Kobe-shi, Hyogo and Airport shops
other 4 shops

Buildings, furnitureand other
Buildings, furnitureand other–

42

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 Business assets including airport shops were recognized due tosignificant decrease in expected future cash flows on the strategy plan. Impairment losses
on head office assets were recognized due to decrease in estimated recoverable amounts
resulting from the restructuring of business structure and the decision of head officerelocation. Impairment losses on idle assets were recognized due to significant decreasein fair value.
The recoverable amount of each group of assets was measured by their usage value andfuture cash flows at discount rates from 2.7% to 5.0%, 3.7% and 5.0% for the years ended
March 31, 2010, 2009 and 2008, respectively.

19

11.

Income Taxes

The significant components of deferred tax assets and liabilities at March 31, 2010 and2009 were as follows:
March 31,
2010
2009
2010
(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 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
Tax loss carryforwards
Other¥ 181,252
39,428¥ 241,208
72,845$ 1,949424

71,66478,168771

37,482
76,230199,624
82,743100,067
31,92962,47042,029

403
820
2,146
890

Valuation allowance
Total deferred tax assets

12,171
6,173
612,580
362,778
1,682,128(99,464)
1,582,663

93,666
37,69330,192
125,441915,714(68,760)
846,954

131
66
6,587
3,901
18,087(1,070)17,018Deferred tax liabilities:
Accumulated retained earnings ofconsolidated subsidiaries
Depreciation
Prepaid pension expenses
Other
Total deferred tax liabilities
Net deferred tax assets(74,832)(198,552)–(28,183)(301,568)¥1,281,095(41,476)(179,257)(38,398)(6,727)(265,860)¥ 581,093(805)(2,135)–(303)(3,243)¥13,775

For the year ended March 31, 2010 a reconciliation between the statutory tax rate and theeffective tax rate was not required to be disclosed since the Company and its consolidated
subsidiaries recorded loss before income taxes and minority interests.
Reconciliations between the statutory tax rate and the effective tax rates for the years ended
March 31, 2009 and 2008 were presented as follows:Year ended March 31,
2009
2008
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

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%
20

12.

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, 2010 and 2009, and the related depreciation and interest expense for theyears ended March 31, 2010, 2009 and 2008, respectively, which would have beenreflected in the consolidated balance sheets and the related consolidated statements ofincome:March 31, 2010
Property andequipment –otherAcquisition costs
Less accumulated depreciation
Net book value

Software(Thousands of yen)Total

¥9,195
8,072¥1,122¥72,761
56,608¥16,153¥63,566
48,535¥15,030

March 31, 2010
Property andequipment –otherSoftware
Total(Thousands of U.S. dollars)
Acquisition costs
Less accumulated depreciation
Net book value

$684
522
$162

$99
87
$12

$782
609
$174

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

Year ended March 31,
2010
2009
2008
2010
(Thousands of yen)(Thousands of
U.S. dollars)
Depreciation expense¥23,791¥25,990¥46,687$256

Interest expense¥¥ 1,237¥ 2,936

$

722

8

21

12.

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,
2010, 2009 and 2008.
Lease expenses relating to the financing leases accounted for as operating leases amounted
to ¥25,886 thousand ($278 thousand), ¥27,375 thousand and ¥49,644 thousand for theyears ended March 31, 2010, 2009 and 2008, respectively.
Future rental expenses under financing leases accounted for as operating leases outstandingat March 31, 2010 and 2009 are summarized as follows:
March 31,
2009
2010
2010
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥14,033
5,025¥19,059¥25,164
19,059¥44,223

$151
54
$205

As lessee under operating leases
Future rental expenses under operating leases outstanding at March 31, 2010 and 2009 aresummarized as follows:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥115,195
215,352¥330,548¥112,719
294,104¥406,731$1,2392,316$3,554As lessor under financing leases
The annual collections of lease receivables subsequent to March 31, 2010 are summarized
as follows:Year ending March 31,(Thousands ofyen)(Thousands of
U.S. dollars)

2011
2012
2013
2014
2015
2016 and thereafter¥34,265
25,681
24,096
19,86916,364
10,532

$368
276
259
214
176
113

22

12.

Leases (continued)

As lessor under financing leases (continued)
The annual collections of lease receivables subsequent to March 31, 2009 weresummarized as follows:Year ending March 31,(Thousands of
yen)

2010
2011
2012
2013
2014
2015 and thereafter¥48,767
30,896
22,11721,804
17,432
26,670As lessor under operating leases
Future rental revenues under operating leases outstanding at March 31, 2010 and 2009 aresummarized as follows:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥ 773,329
3,605,082¥4,378,412¥ 635,483
1,903,104¥2,538,588$ 8,315
38,764$47,080

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 sublease agreements areoperating leases.
Future rental revenues as lessor under the sublease agreements outstanding at March 31,
2010 and 2009 are summarized as follows:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥1,765,105
5,348,267¥7,113,373¥1,853,628
6,446,460¥8,300,089$18,980
57,508$76,48823

12.

Leases (continued)

As lessee and lessor under subleases (continued)
Future rental expenses as lessee under the original lease agreements outstanding at March
31, 2010 and 2009 are summarized as follows:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year13.

¥1,695,023
7,750,923¥9,445,946¥ 1,756,203
9,115,486¥10,871,689$ 18,226
83,343$101,569

Amounts Per Share

Net income (loss) per share is computed based on the weighted average number of sharesof common stock outstanding during each year. Diluted net income per share is computed
based on the weighted average number of shares of common stock outstanding during eachyear after giving effect to the potentially dilutive securities to be issued upon the exerciseof stock options. However, diluted net income per share had not been presented since theCompany and its consolidated subsidiaries posted a net loss per share for the year ended
March 31, 2010 and the Company and its consolidated subsidiaries did not issue any
potentially dilutive stocks for the year ended March 31, 2009.
Year ended March 31,
2009
2008
2010
(Yen)
(U.S. dollars)2010
Net (loss) income per share¥(99.28)¥30.74¥76.68$(1.068)

Net assets per share are computed based on the number of shares of common stock
outstanding at each balance sheet date.
March 31,
2010
2009
(Yen)
Net assets per share¥993.01¥1,138.08

2010(U.S. dollars)$10.678

The following table sets forth the basis of the computation of net income per share for theyears ended March 31, 2010, 2009 and 2008:
Year ended March 31,
2009
2008
2010
2010
(Thousands of yen, except share)(Thousands of
U.S. dollars,
except share)
Net (loss) income¥(1,263,067)
Net (loss) income available tostockholders of shares of common stock ¥(1,263,067)
Weighted average number of shares ofcommon stock outstanding

12,722,092¥392,290¥978,483$(13,581)¥392,290¥978,483$(13,581)

12,759,809 12,760,491

12,722,092

24

14.

Financial Instruments

Effective the year ended March 31, 2010, “Accounting Standard for Financial Instruments”(ASBJ Statement No. 10 issued on March 10, 2008) and “Implementation Guidance on
Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 issued on
March 10, 2008) have been adopted.
Policy for financial instruments
The Company and its consolidated subsidiaries (the “Group”) manage temporary cash
surpluses mainly through short-term deposits. Further, the Group raises short-term capitalthrough bank borrowings.
Types of financial instruments and related risk
Notes and accounts receivable are exposed to credit risk in relation to customers. In
addition, the Company is exposed to foreign currency exchange risk arising fromreceivables denominated in foreign currencies. In principle, the foreign currency
exchange risks deriving from the trade receivables denominated in foreign currencies arehedged by forward foreign exchange contracts.
Marketable securities and investment securities are composed of mainly stocks. Those
securities are exposed to market risk.
Deposits for business space are composed of mainly deposits for rental spaces of the airport
buildings. Those deposits are exposed to credit risk in relation to counterparties.
All notes and accounts payable have payment due dates within one year. Although theCompany is exposed to foreign currency exchange risk arising from those payables
denominated in foreign currencies, foreign exchange contracts are arranged to reduce therisk.
Short-term borrowings are raised mainly in connection with business activities, andlong-term debt is taken out principally for the purpose of making capital investments.
Long-term debt with variable interest rates is exposed to interest rate fluctuation risk.
However, to reduce such risk and fix interest expense for long-term debt bearing interest at
variable rates, the Company utilizes interest rate swap transactions as a hedging instrument.
A certain subsidiary has the hybrid financial instrument (bond) with embedded derivative.

25

14.

Financial Instruments (continued)

Risk management for financial instrumentsa.

Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arisingfrom receivables and deposits for business space, each related division monitors credit
worthiness of their main customers periodically, and monitors due dates andoutstanding balances by individual customer. In addition, the Group is making
efforts to identify and mitigate risks of bad debts from customers who are having
financial difficulties.
The Group believes that the credit risk of derivatives is insignificant as it enters into
derivative transactions only with financial institutions which have the highcredit-rating.

b.

Monitoring of market risks (the risks arising from fluctuations in foreign exchange
rates, interest rates and others)
For accounts receivables and payables denominated in foreign currencies, theCompany enters into forward foreign exchange contracts to hedge such risk. In orderto mitigate the interest rate risk for loans payable bearing interest at variable rates, theCompany may also enter into interest rate swap transactions if certain conditions aremet.
For marketable securities and investment securities, the Group periodically reviews thefair values of such financial instruments and the financial position of the issuers. In
addition, the Group continuously evaluates whether securities should be maintained
taking into account their fair values and relationships with the issuers.
In conducting derivative transactions, the division in charge of each derivativetransaction follows the internal policies, which set forth delegation of authority andmaximum upper limit on positions.

c.

Monitoring of liquidity risk (the risk that the Group may not be able to meet its
obligations on scheduled due dates)
Based on the report from each division, the Group prepares and updates its cash flowplans on a timely basis to manage liquidity risk.

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments and estimated fair value on the consolidatedbalance sheet as of March 31, 2010 are shown in the following table. The following table
does not include financial instruments for which it is extremely difficult to determine thefair value.
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value.
26

14.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)

Carrying
value

March 31, 2010
Estimated
Difference
fair value(Thousands of yen)

AssetsCash and time deposits¥ 8,143,114
Trade notes and accounts receivable
9,732,202
Other notes and accounts receivable
2,389,436
Investment securities
240,466
Total assets¥20,505,219¥ 8,143,114
9,732,202
2,389,436
240,466¥20,505,219¥

Liabilities
Trade notes and accounts payable
Short-term borrowings
Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥ 9,677,495
5,486,594
8,475,143¥23,639,233
¥
4,634

¥

¥ 9,677,495
5,486,594
8,499,157¥23,663,247
¥
4,634

–
–
–
–
–

¥

–
–
(24,014)¥(24,014)¥–

March 31, 2010
Carrying
Estimated
value
Difference
fair value(Thousands of U.S. dollars)
AssetsCash and time deposits
Trade notes and accounts receivable
Other notes and accounts receivable
Investment securities
Total assets$ 87,560
104,647
25,6932,586$220,486$ 87,560
104,647
25,6932,586$220,486$

Liabilities
Trade notes and accounts payable
Short-term borrowings
Long-term debt (*1)
Total liabilities
Derivatives (*2)$104,059
58,996
91,389$254,444$50$104,059
58,996
91,131$254,185
$
50

$

$

–
–
–
–
–

–
–
(258)
$(258)$–*1. Long-term debt includes current portion of long-term debt.
*2. The value of assets and liabilities arising from derivatives is shown at net value,
and with the amount in parentheses representing net liability position.

27

14. Financial Instruments (continued)
Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactionsa.

Cash and time deposits, Trade notes and accounts receivable and Other notes andaccounts receivable
Since these items are settled in a short period of time, their carrying value
approximates fair value.

b.

Investment securities
The fair value of stocks is based on quoted market prices. The fair value ofinvestment trusts and debt securities is based on either quoted market prices or prices
provided by the financial institutions making markets in these securities.

c.

Trade notes and accounts payable and Short-term borrowings
Since these items are settled in a short period of time, their carrying value
approximates fair value.

d.

Long-term debt
The fair value of long-term debt is based on the present value of the total of principal
and interest discounted by the interest rate to be applied if similar new debt
agreements were entered into.

e.

Derivative transactions
Please refer to Note 16 Derivatives of the notes to the consolidated financial
statements. The fair value information of embedded derivative of the hybrid
financial instrument is included in Note 15 Securities.

Financial instruments for which it is extremely difficult to determine the fair value
March 31, 2010
(Thousands of (Thousands ofyen)
U.S. dollars)
Unlisted stocks
Deposits for business space¥2,022,832
2,139,695$21,751
23,007

Because no quoted market price is available and it is extremely difficult to determine thefair value, the above financial instruments are not included in the above table.

2814. Financial Instruments (continued)
Redemption schedule for receivables and marketable securities with maturities at March
31, 2010

Due in one
year or less
Cash and time deposits¥ 8,074,761
Trade notes and accounts
receivable
9,732,202
Other notes and accounts
receivable
2,389,436
Investment securities withmaturities:
–
Bonds
Total
¥20,196,400

Due in one
year or less
Cash and time deposits
Trade notes and accounts
receivable
Other notes and accounts
receivable
Investment securities withmaturities:
Bonds
Total

March 31, 2010
Due after
Due after one five years
year throughthroughfive years
ten years(Thousands of yen)

Due after
ten years

¥–

¥–

–

–

–

–

–

–

–
¥–

–
¥–

100,000¥100,000March 31, 2010
Due after
Due after one five years
year throughthroughfive years
ten years(Thousands of U.S. dollars)¥–

Due after
ten years$ 86,825

$–

$–

$

–

104,647–––

25,693––––$217,166

–
$–

–
$–

1,075
$1,07529

15.

Securities

The Company and its consolidated subsidiaries did not possess any trading securities orheld-to-maturity securities at March 31, 2010 and 2009. Securities classified as othersecurities have been included in “investments and advances – other” in the accompanying
consolidated balance sheets at March 31, 2010 and 2009.
The components of unrealized gain or loss on marketable securities classified as othersecurities at March 31, 2010 and 2009 are summarized as follows:

Carrying
value
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

March 31, 2010
Acquisition
Unrealized
costs
gain (loss)(Thousands of yen)

¥129,589
129,589¥92,277
92,277¥ 37,311
37,311

13,16020,020(6,860)82,16015,557
110,877¥240,466

100,000
20,000140,020¥232,297(17,840)(4,442)(29,142)¥ 8,168

March 31, 2010
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of U.S. dollars)
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

$1,393
1,393

$ 992
992

$ 401
401

142

215

(74)

883
167
1,192
$2,586

1,075
215
1,506
$2,498

(192)
(48)
(313)
$ 88

30

15.

Securities (continued)
March 31, 2009
Acquisition
Unrealized
costs
gain (loss)(Thousands of yen)

Carrying
value
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

¥ 36,969
36,969¥ 20,241
20,241¥ 16,728
16,728144,271

155,940(11,668)

92,13013,197
249,599¥286,568

100,000
23,810279,751¥299,992(7,870)(10,613)(30,151)¥ (13,423)

Non-marketable securities classified as other securities at March 31, 2010 and 2009amounted to ¥159,731 thousand ($1,718 thousand) and ¥176,816 thousand, respectively.
Proceeds from sales of securities classified as other securities and the aggregate gain andloss for the year ended March 31, 2010, 2009 and 2008 were as follows.
March 31, 2010
(Thousands of (Thousands ofyen)
U.S. dollars)
Sales proceeds:
StocksOther
Aggregate gain:
StocksOther
Aggregate loss:
StocksOther¥135,763
2,367¥138,131$1,46025$1,485¥ 22,616
12¥ 22,628

$ 243
0
$ 243

¥ 27,785
374¥ 28,160

$ 299
4
$ 303

March 312009
2008
(Thousands of yen)
Sales proceeds
Aggregate gain
Aggregate loss

¥ 2,185–
26,704¥20,000
19,999–31

16.

Derivative Transactions

The Company utilizes forward foreign exchange contracts to reduce the foreign currency
exchange risk arising from the receivables and payables denominated in foreign currencies.
The notional amounts and the estimated fair value of the forward foreign exchange
contracts outstanding at March 31, 2010, for which deferral hedged accounting has been
applied, are summarized as follows:

Maturing within one year
Sell:
USD
Buy:
USD
EUR
Others
Total

Maturing within one year
Sell:
USD
Buy:
USD
EUR
OthersTotal

March 31, 2010
Notional amount
Fair value(Thousands of yen)
¥ 525,874¥(14,474)

934,965
121,506
25,212¥1,607,557

20,765(2,257)601¥ 4,634

March 31, 2010
Notional amount
Fair value(Thousands of U.S. dollars)$ 5,655$(156)

10,053
1,307
271$17,286

223
(24)
6
$ 50

Foreign receivables and payables are translated at the applicable forward foreign exchange
rates if certain conditions are met. The notional amounts of the forward foreign exchange
contracts accounted for as part of accounts receivable or payable outstanding at March 31,
2010, are summarized as follows:

Maturing within one year
Sell:
USD
Buy:
USD
EUR
OthersTotal

March 31, 2010
(Thousands of(Thousands ofyen)
U.S. dollars)¥ 275,885$ 2,967

963,863
10,231
13,121¥1,263,100

10,364110
141$13,58232

16.

Derivative Transactions (continued)

The Company also utilizes interest rate swap transactions to reduce fluctuation risk
deriving from interest payable for long-term debt bearing interest at variable rates. The
related interest differential paid or received under interest-rate swaps utilized as hedging
instruments is recognized over the terms of the swap agreements as an adjustment ofinterest expense on the hedged items if certain conditions are met. The notional amountsof the interest-rate swaps hedging long-term debt outstanding at March 31, 2010, aresummarized as follows:
March 31, 2010
(Thousands of(Thousands ofyen)
U.S. dollars)
Maturing within one year
Maturing after one year
Total

¥200,000
420,000¥620,000$2,151
4,516$6,667

The notional amounts of derivatives are not necessarily indicative of the actual market risk
involved in derivative transactions.
17.

Investment and Rental Properties

Effective the fiscal year ended March 31, 2010, “Accounting Standard for Disclosuresabout Fair Value of Investment and Rental Property” (ASBJ Statement No. 20 issued on
November 28, 2008) and “Guidance on Accounting Standard for Disclosures about Fair
Value of Investment and Rental Property” (ASBJ Guidance No. 23 issued on November 28,2008) have been adopted.
The Company and a certain consolidated subsidiary own buildings and lands for leasemainly in Tokyo and other areas. The carrying value in the consolidated balance sheet
and corresponding fair value of those properties are as follows:

March 31, 2010
¥5,771,428

March 31, 2010
$62,058

Carrying ValueNet change
March 31, 2009
(Thousands of yen)
¥2,663,457¥3,107,971

Carrying ValueNet change
March 31, 2009
(Thousands of U.S. dollars)$28,639$33,419

Fair Value
March 31, 2010
¥5,182,421
Fair Value
March 31, 2010
$55,725

The carrying value represents the acquisition cost less accumulated depreciation andcumulative impairment loss. The fair value is mainly estimated in accordance withappraisal standards for valuing real estate.
The components of net change in carrying value include increases mainly due toacquisitions in the amount of ¥1,360,577 thousand ($14,630 thousand) and transfers fromreal estate held for sale in the amount of ¥1,373,549 thousand ($14,769 thousand), anddecreases mainly due to depreciation in the amount of ¥58,342 thousand ($627 thousand).
33

18.

Cash Flow Information

The components of cash and cash equivalents are summarized as follows:
March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Time deposits with maturities of more than
three months
Credit balances of current accounts included
in short-term bank loans¥8,143,114¥6,151,963$87,560(3,721)(60,200)(40)–¥8,139,392(714)¥6,091,048–$87,520

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:(Thousands ofyen)
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
19.

¥1,081,664
121,618
208,949(603,684)(118,135)(234,912)
455,500
295,198¥ 160,301

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
Aviation-related businessCorporate solutions businessTravel retail business

Food & beverage business

Main product and sales
Aircraft, Aircraft components, Machinery & Facilities,
Materials, Cabin service supply, Textiles supply,
Clothing & Uniform
Printing, Insurance, Real estate, Property management
Cabin service supply, Brand & Fashion, Mail-ordersales, Overseas real estate, Souvenir & Specialty goods,
Restaurant, Duty-free items
Agriculture & marine products, Processed foods, Wine,
Food gift items
34

19.

Segment Information (continued)

The business segment information of the Company and its consolidated subsidiaries for theyears ended March 31, 2010 and 2009 are summarized as follows:Year ended March 31, 2010

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

Generalcorporate assets
andintercompany
eliminations

Consolidated¥–¥105,561,308–
105,561,308
105,856,300

Aviation-related
business

Corporate
solutionbusiness

Travel retailbusiness

Food &
beveragebusiness(Thousands of yen)Total

¥27,739,967¥14,803,458¥41,275,049¥21,742,832¥105,561,308

4,173
27,744,140
26,678,241

85,392
14,888,851
13,947,258

24,82541,299,874
41,358,936

49,612
21,792,445
21,290,940

164,003
105,725,311
103,275,377(164,003)(164,003)
2,580,923¥ 1,065,899¥

941,592¥(59,061)¥

501,504¥

2,449,934¥ (2,744,927)¥(294,992)¥¥

19,628¥350,170¥

26,909¥749,571¥¥

1,143,430

352,862¥
88,808¥ 170,999¥ 9,728,978¥
6,164¥ 1,418,286¥ 8,527,383¥
24,618¥ 400,047¥11,652,521¥
116¥
58,116¥ 6,490,217¥
119,707¥ 2,047,449¥ 36,399,100

393,858¥ 248,865¥
67,844¥ 7,040,024¥
368,573¥ 2,115,293¥ 43,439,125

Generalcorporate assets
andintercompany
eliminations

Consolidated

Year ended March 31, 2010

Aviation-related
business

Corporate
solutionbusiness

Food &
beverage
Travel retailbusinessbusiness
Total(Thousands of U.S. dollars)$298,279$159,177$443,818$233,794$1,135,068

45
298,324
286,863918
160,095
149,971267
444,085444,720533
234,327
228,935$ 11,461$ 10,125$$ 5,393$ 3,794$211$ 3,765$$955$ 1,839$104,613$
66$ 15,250$ 91,692$
265$ 4,302$125,296$
1$
625$ 69,787

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

(635)

289

$

–

$1,135,068

1,763
1,136,831
1,110,488(1,763)(1,763)27,752–
1,135,068
1,138,240$

26,343$ (29,515)$(3,172)$

8,060$ 4,235$

12,295$
1,287$ 22,016$ 391,388$ 2,676$730$ 75,699$
3,963$ 22,745$ 467,087

Generalcorporate assets
andintercompany
eliminations

Consolidated

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

Aviation-related
business

Corporate
solutionbusiness

Travel retailbusiness

Food &
beveragebusiness(Thousands of yen)Total

¥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

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

375,873¥–¥ 240,604¥ 6,243,616

1,095,961¥
17,905¥ 2,545,945¥ 42,899,208

35

19.

Segment Information (continued)
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

Generalcorporate assets
andintercompany
eliminations

Consolidated

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

Unallocated operating expenses included in “General corporate assets and intercompany
eliminations” for the years ended March 31, 2010, 2009 and 2008 amounted to ¥2,749,046
thousand ($29,560 thousand), ¥2,997,075 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, 2010, 2009 and 2008 amounted to ¥7,080,076 thousand($76,130 thousand), ¥6,288,474 thousand and ¥6,910,902 thousand, respectively, andconsisted primarily of cash and cash equivalents, investments in securities and assets
belonging to the headquarters of the Company.
The geographical segment information of the Company and the consolidated subsidiaries
for the years ended March 31, 2010, 2009 and 2008 are summarized as follows:Year ended March 31, 2010

Japan
Sales to outside parties ¥102,375,940
Inter-segment sales
and transfers
525,701
Total
102,901,642
Operating expenses
103,409,528
Operating (loss) income ¥ (507,886)
Identifiable assets¥ 38,488,220

North
AmericaOtheroverseas
Total
counties(Thousands of yen)

Generalcorporate
assets andintercompany
eliminations

Consolidated¥ 1,928,760¥1,256,606¥ 105,561,308 ¥– ¥105,561,308

10,669,879
12,598,639
12,355,846¥ 242,793¥ 5,947,684

561,574
1,818,180
1,804,940¥ 13,240¥ 689,600–
11,757,154(11,757,154)
117,318,463(11,757,154) 105,561,308
117,570,315(11,714,014) 105,856,300¥ (251,852) ¥(43,140) ¥ (294,992)¥ 45,125,506 ¥ (1,686,380) ¥ 43,439,125

36

19.

Segment Information (continued)
Year ended March 31, 2010

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

Generalcorporate
assets andintercompany
eliminations

Japan

North
AmericaOtheroverseas
Total
counties(Thousands of U.S. dollars)$1,100,817$ 20,739$ 13,512$1,135,068$–$1,135,068

5,653
1,106,469
1,111,930$ (5,461)$ 413,852

114,730
135,469
132,859$ 2,611$ 63,954

6,038
19,55019,408$ 142$ 7,415

126,421
1,261,489
1,264,197$ (2,708)$ 485,220(126,421)(126,421)(125,957)$(464)$ (18,133)–
1,135,068
1,138,240$ (3,172)$ 467,087

Generalcorporate
assets andintercompany
eliminations

Consolidated

Consolidated

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)

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– ¥113,225,704

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
AmericaOtheroverseas
Total
counties(Thousands of yen)

Generalcorporate
assets andintercompany
eliminations

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

For the years ended March 31, 2010 and 2009, 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.

37

19.

Segment Information (continued)

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

20.

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%

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 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 Japan Airline International Co., Ltd.,a subsidiary of Japan Airlines Corporation for the years ended March 31, 2010, 2009 and2008 are summarized as follows:
With Japan Airlines International Co., Ltd.:
2010

Sales of flight equipment
Purchases of merchandise
Purchase of land for businessYear ended March 31,
2009
2008
(Thousands of yen)

¥11,551,745
7,780,376–¥13,023,066
7,075,975
490,028¥15,863,137
8,288,247–

March 31,2010
2009
(Thousands of yen)Accounts receivable
Advance payment
Accounts payable¥1,661,261
16,907335,260¥1,945,443
5,296
356,202

2010(Thousands of
U.S. dollars)$124,212
83,660–2010(Thousands of
U.S. dollars)$17,863
182
3,605

38

20.

Related Party Transactions (continued)

The significant transactions between certain consolidated subsidiaries of the Company andJapan Airlines International Co., Ltd. for the years ended March 31, 2010 and 2009 aresummarized as follows:
With Japan Airlines International Co., Ltd.:Year ended March 31,
2010
2009
2010
(Thousands of yen)(Thousands of
U.S. dollars)
Sales of flight equipment and revenue fromleases of aircraft¥1,459,944¥2,267,176

March 31,2010
2009
(Thousands of yen)Accounts receivable
Lease receivable21.

¥ 97,061
130,809¥ 84,452
167,690$15,6982010(Thousands of
U.S. dollars)$1,044
1,407

Subsequent Events

The Company entered into the loan commitment agreement with some correspondent
financial institutions on April 20, 2010 after the expiry of the previous agreement, andborrowed ¥3,080,000 thousand ($33,118 thousand) on April 23, 2010. The details of theagreement are shown below.
Purpose of loan:
Total commitment available:
Term of agreement:
Pledged assets as additional collateral:

Working capital¥4,000,000 thousand ($43,011 thousand)From April 20, 2010 to April 19, 2011
Buildings and structures, net ofaccumulated depreciation as ofMarch 31, 2010
¥998,701 thousand ($10,739 thousand)

The company also pledged the above assets as additional collateral for the existing
syndicate loan agreement.

39