Gulliver International Co., Ltd.

Consolidated Results
Fiscal 2005

(March 1, 2005 to February 28, 2006)

This document is a translation of sections of the original Japanese as a guide for non-Japanese
investors. It contains forward-looking statements based on a number of assumptions and beliefs madeby management in light of information currently available. Actual financial results may differ materiallydepending on a number of factors, including changing economic conditions and the pricing and productinitiatives of new and existing competitors.

SUMMARY OF FINANCIAL STATEMENTS (Consolidated)
Results for the fiscal year ended February 28, 2006

Gulliver International Co., Ltd.

．
．
．．．．．．．
．．．．．
Stock
Code:
7599
．
．
．
．
．
．
．
．
．．．
．
．
．
．
．．
．
．
．
．
．．．
．
．
．．
．
http://
www.glv.co.jp/english
．．
．．
．
．
．．
．
．．．．
．
．．
．．．
．
．
．
．/
President:
Kenichi
Hatori
．．
．
．．
．．
．．．
．．
．
．
．．．
．．
．．．．．
．
．．
．．
．
．
．．
．
．
．
．
．．．
．
．
．．．
．．．．．
Date
of．
the
me
eting
of
the
．．
．
．．
．．
．
．．
．．．．
．
．
．
． board of directors: April 18, 2006
U.S. GAAP: Not adopted

April 18, 2006

．
．
．
．
．．．．
．．．．．．．
．．．．
．．．
．．．．．．
．
．
．．
．
st
Listed ex．
changes:okyo(1．
Section)
．．．
．
．
．
．．
．T．
．．
．
．
．
．．
．．
．
．
．．．
．
．．．
．
．．
．
．．．
．
．．
．．．．．
．
．
．
．
Inquiries:
Executive．．
．
．．．．．．
．Senior．．．．．
．．．
．
．．．．Vice President: Ikuo Murata
Telephone: +81 3 5208-5503

1. Consolidated financial results for the fiscal year ended February 28, 2005
1) Consolidated Operating Results

Millions of yen, rounded down

Fiscal year ended
February 28, 2006

Fiscal Year ended
February 28, 2005(% change)

Sales ..............................................................................
Operating income...........................................................
Ordinary income.............................................................
Net income.....................................................................
Earnings per share (¥) ...................................................
Fully diluted earnings per share (¥)................................
Return on equity (%) ......................................................
Ratio of ordinary income to shareholders’ equity (%).....
Ratio of ordinary income to sales (%) ............................

182,649
9,423
9,382
4,421
435.61
431.10
27.4
25.5
5.1

(% change)

16.5
(7.8)
(8.1)
(21.7)------

156,696
10,22910,2195,652
548.86537.88
35.6
33.6
6.5

28.5
33.7
32.7
39.5
------

Notes:
1. Investment gains and losses under equity method: FY ended February 2006: ¥ -- million; FY ended February 2005: ¥ -- million
2. Average number of shares outstanding during FY ended February 2006: 9,979,943; FY ended February 2005: 10,127,471
3. Differences in accounting treatments applied compared to previous consolidated fiscal year: No
4. Percentage figures for sales, operating income, etc. represent changes compared to the previous fiscal year.

2) Financial Position (consolidated)

Millions of yen, rounded down

As of February 28, 2006

As of February 28, 2005

Total assets....................................................................

38,812

34,529

Shareholders’ equity ......................................................

16,011

16,143Equity ratio (%) ..............................................................
Shareholders’ equity per share (¥) .................................

41.3
1,623.1

46.7
1,603.84

Note:
Number of shares outstanding (consolidated) at end of period: FY ended February 2006: 9,865,317; FY ended February 2005: 10,007,067.

3. Consolidated cash flows
Cash flow from operating activities.................................
Cash flow from investing activities .................................
Cash flow from financing activities .................................
Cash and cash equivalents at end of period ..................

Millions of yen, rounded down

Fiscal Year ended
February 28, 2006

4,442
(6,385)
1,029
3,374

Fiscal Year ended
February 28, 2005

2,724
(5,791)(1,427)4,1304) Scope of consolidation and application of the equity method
Number of consolidated subsidiaries: 7; Number of non-consolidated subsidiaries under the equity method: 0; Number of affiliated companies underthe equity method: 0; Changes in the scope of consolidation and companies accounted for by the equity method: 4 companies newly consolidated.

3. Forecasts for the fiscal year ending February 28, 2007 (March 1, 2006 to February 28, 2007)
Millions of yen, rounded downInterim period ending August 31,
2006
Sales ............................................................................ 94,800
Ordinary income........................................................... 3,900
Net Income................................................................... 1,900
Earnings per share (¥) ................................................. --− 1 −FY ending February 28,
2007
205,400
11,2005,700
577.78

1. Management Policy

1. Basic management policy
Gulliver has adopted ‘Growing together’ as its corporate philosophy and, under the principle ofcoexistence and mutual prosperity, the company is striving to become a corporation that is wellregarded by community and society as well as all those involved with the Group, including
customers, employees, partners and shareholders. Under this philosophy, Group management
is making every effort to create an attractive company that is worthy of support from customers.
We also aim to bring about a revolution in the distribution of cars, and to support the ‘car life’ of
our customers.
2. Basic policy concerning distribution of profits
We have identified the return of profits to investors as an important management issue and also
place emphasis on our dividend payout ratio. We consider the return of profits appropriate toresults to be a fundamental management principle.
With the intention of further increasing profits and increasing corporate value, as well as
strengthening competitiveness and improving services, retained capital will be used to carry out
effective and efficient investments in such areas as the launch or relocation of directly-owned
stores and replacement stores (re-locating or launching at new locations), the strengthening ofinternal infrastructure, and the development and training of personnel.
3. Management targets
We consider return on equity (ROE) to be an important management financial indicator and aim
to maintain ROE above 10% over the medium to long term. Further, we are aiming to achieve a
Gulliver Group annual purchase volume of one million cars.
4. Mid- to long-term management strategy
We have set an annual purchase volume of one million cars as a specific objective, with the aimof securing a dominant market share in the used car industry. We feel that, in order to realize ourgoal of bringing about a revolution in the distribution of cars, this is the volume necessary toensure a dominant number one position in the industry. In order to achieve this goal, thefollowing measures are being taken:
・Creating a low cost operation
・Improving productivity at each store
・Increasing launches of directly operated stores・Enhancing brand power and recognition
・Improving service quality and customer satisfaction
・Maintaining personnel and strengthening the development and training structure
・ Expanding sales channels, utilizing ‘Dolphinet System’ and ‘GAO! Auction’− 2 −5. Tasks ahead
In Japan’s very large market for used vehicles, where eight million vehicles (including buses,
trucks, etc.) are registered each year, there are a range of issues that must be addressed by theGroup in order to achieve a dominant market share and improve profitability. As part of ourstrategic marketing activities, these include further enhancing our brand power, broadening ourcustomer base through improving brand recognition in a wide range of age groups, making
qualitative improvements in service and customer satisfaction, and strengthening operations
through personnel development and training.
6. Corporate governance and related initiatives
Basic policies regarding corporate governanceIn order to maximize corporate value, we are working to enhance corporate governance focusedon the board of directors and auditing system.
In a rapidly changing management environment, we have rationalized the board of directors andintroduced an executive officer system. In addition, we have adopted a functional organizational
system that places emphasis on flexibility, and at the same time we are introducing measures
such as the promotion of organizations and projects that cross divisional boundaries to provide
dynamism to the organization.
We intend to continue taking active measures to further enhance corporate governance.
Overview of corporate governance initiatives(1) Management administration bodies and other corporate governance systems related toGroup management decision making, execution and auditing
We will continue to employ an auditor system, and currently have three auditors, two of which areexternal auditors.
In order to maintain strategic flexibility in a rapidly changing business environment, in 2001 we
reduced the number of directors with the aim of speeding up management decision making and,at the same time, introduced an executive officer system to clarify business execution
responsibilities. We have strengthened our management monitoring systems through the
improvement of our internal legal division and the establishment of internal audit systems as well
as receiving advice and guidance from external lawyers and accounting auditors.
In September 2005, under our new framework, we established a Compliance Committee andcreated a compliance framework to strictly and effectively adhere to all legal obligations. Further,
we are currently involved in the establishment of a crisis management framework to handle latentinternal and external risks, and are strengthening our IR and PR structure in order to cope with
unforeseen occurrences.
(2) Overview of personal, capital or business relationships between Gulliver and its external
directors and auditors and any other interests− 3 −Neither of the two external auditors currently employed by the company have any personal
relationship with other auditors or directors, nor does either have any special interests within theGroup.
(3) Overview of measure taken to enhance corporate governance in the 12 months ended
August 31, 2005.
Recognizing that each director plays an important role as a member of the management
decision-making body, we have strengthened the functions not only of the board but also of arange of administrative meetings, while also clearly delegating responsibilities and defining
authorities at executive officer level and below, with the aim of continually improving the flexibility
and capability of our management.
In addition, as stated above, in September 2005, we established a Compliance Committee andare strengthening our investor relations and corporate communications structure.
7. Items relating to the parent company
None

− 4 −

2. Operating Results and Financial Position(1) Outline of consolidated interim operating results
Gulliver operates 278 directly operated stores involved in the purchase and sale of cars (30 morethan at the end of the previous fiscal year) and has 217 affiliated stores (32 fewer than at the endof the previous fiscal year). In total, Gulliver operates 495 stores (two fewer than at the end of theprevious fiscal year.
In our directly operated store operations, the opening of 30 more branches from the end of theprevious fiscal year progressed well and we were able to increase the number of cars handled
through increasing brand recognition and marketing activities. On the other hand, despite aiming
to increase market share and employee numbers during the period, staff training was insufficientin some respects and the efficiency of investments in marketing and personnel costs did not
improve as expected. We believe that these are issues which we must address and began
modifications to our sales structure from November 2005, as well as improving our businessproductivity. Further, in affiliated stores, despite decreasing the number of branches, the numberof cars handled per store has been increasing.
We are continually engaged in improving the capabilities of our personnel, and in line with theincrease of our store network have been recruiting and focusing training efforts on employees at
new directly operated stores. Our efforts to improve our strategic position include a range oftraining methods, including OJT (on-the job training), and we are continuing to adopt measures
aimed at improving our sales and management approach.
Vehicles handled by Gulliver are sold quickly, with an average timeframe of only one week to tendays required to achieve a sale via channels that include auction sites throughout Japan, theCompany’s unique on-screen selling system ‘Dolphinet’, and GAO! Auction, the internet based
real-time auction aimed at used-car dealers. GAO! Auction was launched in January 2005 andhas around 20,000 members. It is also performing well, with a closure rate of around 40%.
There are currently seven subsidiaries of Gulliver International: G-Trading Co., Ltd., thesecond-hand truck, bus and construction vehicles purchase, sales and export company; G-ONE
Financial Service Co., Ltd., the consolidated auto-loan and financial business company; Gulliver
Europe Ltd., which aims to spread the risks in our future business activities, Hakobo Co., Ltd.,
which is mainly involved in the car transportation business; and Carbross, which was registeredin March 2005 and handles the sale of cars at auction. This figure also includes G-Bus., Ltd. andSamurai Motors Co. which are consolidated subsidiaries of G-Trading Co., Ltd. The Group also
includes Gulliver USA, Inc., a non-consolidated affiliate that is involved in the purchase and saleof second-hand cars in the U.S.
G-Trading made efforts to broaden its sales channels by improving its dealer network andstrengthening relationships with customers through initiatives such as expanding the workforce
and creating new branches in Tokyo and Osaka and launching on-site auctions for domestic
users in August 2005, as well as launching its first internet auction for foreign users in July . As a
− 5 −

result of this, due to an increase in the average unit price through increased handling of older
cars, revenue from sales increased. However, as regards profits, due to the extended period ofhigher oil prices, the number of cars handled in the sluggish overseas market has declined and,with an increase in purchase costs due to increased competition, there has been a decline inprofitability. Further, SG&A expense has increased due to a sharp rise in employee numbers andwe have a seen a decline in profits compared to the previous fiscal year.
Consolidated subsidiary G-One Financial Services Co., Ltd. (“G-One”) recorded an ordinary loss
for the fiscal year ended. During the period under review, G-One began fully-fledged sales ofautomobile loan products. As a result, from the current period Gulliver has been receiving loan
rebates from G-One for automobile loan contracts. Previously, Gulliver received rebates fromoutside companies, through the provision of loan services from other companies.
Income from automobile loans sold by G-One (a certain proportion of the total credit provided) isrecorded on a deferred basis, whereas rebates are recorded as a one-time expense, and in the
period under review this led to a loss at the ordinary income level. We had expected that in thecase of securitization of loan receivables, income could be recorded as a lump sum, but theCompany now understands that recording income on a deferred basis is the appropriate
accounting treatment. Business development of G-One is proceeding well, as shown by thesteady increase in the number of automobile loan contracts etc..
Hucobo Co., Ltd. began operations in earnest from this period, with expenses relating tobusiness establishment incurred until the middle of the period resulting in an ordinary loss.
As a result of the factors noted above, consolidated net sales for the period under review
increased 16.5% (¥25,953 million) to ¥182,649 million and operating income decreased 7.8%(¥806 million) to ¥9,423 million. Ordinary income decreased 8.1% (¥836 million) to ¥9,382million
and net income decreased 21.7% (¥1,231 million) to ¥4,421 million.

Performance by Segment
Sale of used automobiles
Net sales in this business segment increased 17.2% (¥25,523 million) to ¥173,647 million, andoperating income decreased 9.9% (¥1,265 million) to ¥11,419 million.
Although there was a slight decline in the average unit sales price and gross profit margin per
vehicle sold during the period under review, the number of vehicles handled steadily rose due toincreased brand awareness and improved effectiveness of marketing activities. As a result ofcontinued business expansion, marketing costs and SG&A expenses increased and, due also todecreased income from the consolidated subsidiary G Trading, operating income declined while
net sales increased.

Other businesses
Net sales in this business segment increased 5.0% (¥436 million) to ¥9,011 million, while− 6 −operating income decreased 21.6% (¥301 million) to ¥1,698 million.
Due to the decrease in the number of Gulliver affiliated stores, revenue from this area of
business decreased. However, the development of GAO! Auction and GiPAS resulted in higher
revenue from commissions and subscriptions.

(2) Financial position
For the fiscal year ended February 28, 2006, cash flow from both operating and financing
activities was positive and cash flow from investing activities was negative, while overall cash
flow was a negative figure of ¥913 million. The balance of cash and cash equivalents as of theend of the period was ¥3,374 million.
Cash flow from operating activities
Cash and cash equivalents (“cash”) generated from operating activities was ¥4,442 million.
Principal components of this included net income before adjustment for taxes of ¥8,437 million, adecrease in receivables of ¥660 million, and a decrease in accounts payable of ¥1,079 million.
Cash flow from investing activities
Net cash used in investment activities was ¥6,385 million. The principal factors contributing tothis result was investment in the opening of new directly operated stores and in establishinginternal systems.
Cash flow from financing activities
Net cash generated from financing activities was ¥1,029 million. This was primarily due to anincrease in short-term loans.

(3) Outlook for the fiscal year ending February 28, 2007
Gulliver intends to continue to pursue higher profits, seeking to increase the number of vehicles
handled (by opening new stores and increasing the number of customers handled per store) andthe further implementation of low cost operations.
Consolidated forecasts for the fiscal year ending February 2007 are for net sales to increase
12.5% to ¥205,400 million, ordinary income to increase 19.4% to ¥11,200 million and net
income to increase 28.9% to ¥5,700 million.
Non-consolidated forecasts for the fiscal year ending February 2007 are for net sales to increase
11.9% to 190,000 million, ordinary income to increase 15.4 to ¥11,700 million, and net income toincrease 25.9% to ¥6,700 million.

Note: The above figures do not include consumption tax.
− 7 −Consolidated Balance Sheets
Millions of yen
As of February 28, 2006

As of February 28, 2005
% of total

ASSETS% of total

Current assets
Cash and deposits............................................

3,374

4,130

Accounts receivable .........................................

11,18010,015Marketable securities .......................................

100

--

Inventory...........................................................

4,659

4,555

Deferred tax assets ..........................................

468

549

Others ..............................................................

1,393

1,813

Allowance for doubtful accounts.......................

(84)

Total current assets ......................................

21,091(84)
54.4

20,98060.8

Fixed assets
Tangible fixed assets
Buildings and structures ...................................

6,812

5,340

Vehicles and transport equipment ....................

528

Tools, fixtures and equipment ..........................

1,689

1,099

Land .................................................................

327

327

Construction in progress ..................................

409

231

Total tangible fixed assets

9,244

23.8

7,026

20.4

Intangible fixed assets
Goodwill ..........................................................

36

16

Software ...........................................................

2,719

2,187

Other ................................................................

85

Total intangible fixed assets..........................

2,841

87
7.3

2,290

6.6

Investments and other assets
Investment securities.........................................

199

373

Shares of related companies.............................

103

224

Long-term loans receivable ...............................

18

135

Deposits and guarantee money.........................

3,052

2,185

Construction cooperation fund...........................

1,890

960

Deferred tax assets ...........................................

111

135

Other .................................................................

629

533

Allowance for doubtful accounts........................

(371)

Total investments and other assets.................

5,633

14.5

4,231

12.2

Total fixed assets ..........................................

17,72045.6

13,548

39.2

Total Assets .......................................................

38,812100.0

34,529

100.0

− 8 −

(314)

Consolidated Balance Sheets
Millions of yen
As of February, 2006
LIABILITIESAs of February 28, 2005%%

Current liabilities
Accounts payable ...................................

3,501

5,734

Short-term borrowing ..............................

9,350

3,950

Accrued expenses ..................................

4,156

2,272

Accrued corporate taxes .........................

1,867

2,677

Deposits received ...................................

462

767

Reserve for bonuses...............................

532

519

Others.....................................................

1,678

Total current liabilities...........................

21,5491,513
55.5

17,435

50.5

Long-term liabilities
Long-term borrowing .................................

304

--

Guarantee deposits received ..................

594

621

Total long-term liabilities.......................

898

2.3

621

1.8

Total liabilities.....................................

22,44857.8

18,056

52.3

352

0.9

328

1.0

4,157

10.7

4,139

12.0

Capital surplus ........................................

4,032

10.4

4,014

11.6

Retained earnings .................................
Unrealized gains and losses in othersecurities .................................................

15,82240.8

13,668

39.6

67

0.2

10

0.0

Translation adjustments ..........................
Treasury stock Note 1 ...........................

(0)(8,067)0.0(20.8)-(5,689)-(16.5)

Total capital........................................

16,011

41.3

16,143

46.7

Total Liabilities, Minority Interests
and Shareholders’ Equity.......................

38,812100.0

34,529100.0

MINORITY INTERESTS
Minority interests.....................................
CAPITAL
Paid-in capital .........................................

− 9 −Consolidated Statements of Income
Millions of yen
March 1, 2005 to
February 28, 2006

March 1, 2004
to February 28, 2005%%
Sales .....................................................

182,649100.0

156,696

100.0

Cost of sales .........................................

139,37176.3

118,089

75.4

Gross profit.....................................

43,27823.7

38,607

24.6

Sales general and administrative
expenses Note 1 ................................

33,85518.5

28,377

18.1

9,423

5.2

10,229

6.5

Operating income
Non-operating income
Interest received ...............................

1

2

Dividends received .................... ......

03

Commissions received......................

16

3

Investment fund income ...................

--

11

Other ....................................................

103

33

Total non-operating income

120

0.1

53

0.0

Non-operating expenses
Interest paid ......................................

31

12

New shares issuance expense .........

5

7

Addition to reserve for doubtful
accounts ...........................................

35--

Cancellation penalties................... ...

9

11Investment fund valuation loss ..... ...

2

17

Other.................................................

77

15

Total non-operating expenses..............

161

0.1

64

0.0

Ordinary income...................................

9,382

5.2

10,219

6.5

Extraordinary profit
Gains on sales of fixed assets
Note 2 ...............................................

3--

Reversals of reserve for doubtful
accounts ...........................................

45--

Insurance gains .......................... .....

6--

Gain on reorganization of relatedcompanies .................................. .....

--

82

Other ......................................... .....

1

7

Total extraordinary profit

56

0.0

90

0.1

Extraordinary losses
Loss on disposal of fixed assets
Note 3...............................................

879

247

Loss on cancellation of insurance
contracts...........................................

121

--

Other............................................. ...

--4

Total extraordinary losses ................ ...

1,001

0.6

251

0.2

Income before taxes, etc. ...................

8,437

4.6

10,058

6.4

Income tax, inhabitants tax andenterprise tax ............................. ...

3,935

2.2

4,402

2.8

Corporate tax adjustment ................. ...

− 1066−

Minority interests .............................. ...

14

0.0

84

0.0

Net income...................................... ...

4,421

2.4

5,652

3.6

(81)

Consolidated Statement of Surplus
Millions of yen
March 1, 2004 to February 28,
2005

March 1, 2005 to
February 28, 2006
Capital Surplus
4,014

3,943

Issuance of new shares through capital increase ........

17

184

Gains on disposal of treasury stock .........................

--

(113)

Reduction in capital surplus.......................................

----

Capital surplus at end of period .................................

4,032

4,014

13,668

9,927

4,421

5,652

Dividends.....................................................................
Directors’ bonuses .......................................................

1,786

1,341

94

83

Losses on disposal of treasury stock ...........................

387

287

Reduction resulting from new consolidation.................

0--

Retained earnings at end of period ............................

15,822

13,668

Capital surplus at beginning of period.......................
Increase in capital surplus

Reduction in capital surplus

Retained earnings
Retained earnings at beginning of period .................
Increase in retained earnings
Net income for the period.............................................
Reduction in retained earnings− 11 −

Consolidated Statements of Cash flows
March 1, 2005 to August 31,
2005

Millions of yen
March 1, 2004 to February 28,
2005

I. Cash flow from operating activities
Income before taxes, etc............................................................

8,437

10,058Depreciation ...............................................................................

2,061

1,383

Increase (decrease) in reserve for bonuses...............................

2

139

Increase (decrease) in allowance for doubtful accounts ............

47

37

Interest and dividends received .................................................

(1)

(5)

Interest paid ...............................................................................

28

12

New share issuance expenses ..................................................

5

6

Gain on sale of fixed assets .......................................................

(3)

-247

Loss on disposal of fixed assets ................................................

879

Appraisal loss on investment securities .....................................

(45)

--

Payment of directors’ bonuses...................................................

(94)

(83)

(Increase) decrease in accounts receivable...............................

(660)(4,757)(Increase) decrease in inventory................................................

(17)(2,559)

Increase (decrease) in accounts payable ..................................

(1,079)2,657

Increase (decrease) in accrued consumption tax ......................

328

(200)

Other ..........................................................................................

(549)

54

Subtotal ......................................................................................

9,339

6,990

Interest and dividends received .................................................

1

6

Interest paid ...............................................................................

(26)

(14)

Corporate taxes paid..................................................................

(4,871)(4,257)

Cash flow from operating activities..........................................

4442

2,724

II. Cash flow from investing activities
Payments for acquisition of marketable securities

--

228

Proceeds from sale/redemption of marketable securities ..........

--

(100)

Payments for purchase of investment of securities....................

212

--

Payments for acquisition of tangible fixed assets ......................

(3,032)(3,565)

Proceeds from sale of tangible fixed assets...............................

7

0

Payments for acquisition of intangible fixed assets....................

(1,588)(1,322)Acquisition of shares of affiliates................................................

--

(224)

Amounts lent ..............................................................................

(492)

(105)

Proceeds from repayment of loans ............................................

(577)

118

Increase (decrease) in short-term borrowing .............................

(130)

(14)

Deposit and guarantee payments ..............................................

(2,096)(832)

Proceeds from repayment of investments..................................

--

26

Other ..........................................................................................

128

(0)

Cash flow from investing activities ..........................................

(6,385)(5,791)

5,687

3,400

(340)
200

---

III. Cash flow from financing activities
Net increase (decrease) in short term borrowings .....................
Repayment of long-term debt.....................................................
Increases in long-term borrowing...............................................
Proceeds from disposal of treasury stock ..................................
Payments for acquisition of treasury stock.................................
New share issuance expenses ..................................................

209

491

(2,974)(4,512)

Proceeds from issuance of new shares .....................................
Payment of dividends.................................................................

(5)
35

-367

(1,786)(1,341)

Payments from minority shareholders........................................

3

167

Cash flow from financing activities ..........................................

1,029(1,427)− 12 −

1--

V. (Decrease) increase in cash and cash equivalents ...........

(913)(4,494)

VI. Cash and cash equivalents at beginning of period ..........

4,130

8,624

Ⅶ．Increase in cash and cash equivalents due to changes
in the scope of consolidation

155

--

Ⅷ. Cash and cash equivalents at end of period.....................

3,374

4,130

IV. Exchange differences in cash and cash equivalents− 13 −

Material Items Forming the Basis for the Preparation of the Interim
Consolidated Financial Statements
Item
1.Items relating to thescope ofconsolidation

2. Application of theequity method

3. Items relating to the(interim) settlement
days ofconsolidated
subsidiaries

Items relating toaccounting
treatment(1) Valuation criteria
and valuation
methods formaterial assets

March 1, 2005 – February 28, 2006

March 1, 2004 - February 28, 2005

(1) Number of consolidated subsidiaries: 7
G Trading Co., Ltd.
G One Financial Service Co., Ltd.
Gulliver Europe Ltd.
Hucobo Co., Ltd.
SAMURAI MOTORS CO. Ltd.
G-Bus., Ltd.
Carbross Co., Ltd.
(Change in scope of consolidation)
Of the above Hakobo Co., Ltd. has been
included in the scope of consolidation as
its importance to the financial statements
has increased. Further, as SAMURAI
MOTORS CO. Ltd., G-Bus., Ltd., andCarbross Co., Ltd. were all established in
the year under review, they have been
included in the scope of consolidation.
(2) Non-consolidated subsidiaries:
Gulliver USA Inc.
Reasons for exclusion from consolidation:
Gulliver USA, Inc. is small and its total assets,
sales, net income and retained profit, etc. do
not significantly affect the consolidated financial
statements.
There are no non-consolidated subsidiaries andaffiliates to which the equity method is applied
Non-consolidated subsidiaries and affiliates towhich the equity method is not applied:Gulliver USA Inc.

(1) Number of consolidated subsidiaries: 3
G Trading Co., Ltd.
G One Financial Service Co., Ltd.
Gulliver Europe Ltd.
Note: E Investment Co., Ltd. has changed
its name to G One Financial Service Co.,Ltd.

1. Marketable securities
Bonds intended to be held to maturity:
As at right

1. Marketable securities
Bonds intended to be held to maturity:
Amortizing cost method (straight line)

Other marketable securities
As at right

Other marketable securitiesThose with a market price: Valued by themarket method based on the market priceas at the accounting date. Valuation gains orlosses are taken direct to capital and thebook value is determined by moving(2) Non-consolidated subsidiaries: Hucobo Co.,
Ltd. and Gulliver USA Inc.
Reasons for exclusion from consolidation:
Hucobo and Gulliver USA Inc. were excluded
from the scope of consolidation because theirimportance is low.

There are no non-consolidated subsidiaries andaffiliates to which the equity method is applied
Non-consolidated subsidiaries and affiliates towhich the equity method is not applied:
Hucobo Co., Ltd.
Gulliver USA Inc.
Reasons for not applying the equity method:
Reasons for not applying the equity method:
The effect of the company on net income and
Hakobo and Gulliver USA Inc. were excluded
retained profit is immaterial and its overall
from the scope of consolidation because theirimportance is low.
importance is low
Of the consolidated subsidiaries, Gulliver
Of the consolidated subsidiaries, Gulliver Europe
Europe Ltd. and SAMURAI MOTORS have aLtd. has a settlement date (December 31) that
settlement date (December 31) that differs from differs from the Consolidated Settlement Date
the Consolidated Settlement Date (end(end February). In preparing the Consolidated
February). In preparing the Consolidated
Financial Statements, as the gap between theInterim Financial Statements, as the gap
settlement dates does not exceed 3 months,
between the settlement dates does not exceed consolidation is performed based on the said
3 months, consolidation is performed based on subsidiary’s financial statements. For material
the said subsidiary’s financial statements. For
transactions occurring between the settlement
material transactions occurring between thedates necessary consolidation adjustments aresettlement dates necessary consolidation
made.
adjustments are made.

4.

− 14 −

Those without a market value:
Shareholdings in subsidiaries:
As at right
2. Derivatives
As at right
3. Inventories
A. Merchandise:
Vehicles: As at right
Other: As at right
B. Supplies:(2) Depreciation
methods applied
to material
depreciable
assets

As at right(i) Tangible Fixed Assets
As at right(ii) Intangible Fixed Assets
As at right(iii) Long Term Prepaid Expenses
As at right(3) Treatment ofdeferred assets(4) Criteria forrecordingmaterial reserves

New share issue expenses
As at right(i) Reserve for Doubtful Accounts
As at right(ii) Reserve for Bonuses
As at right

As at right(5) Treatment ofmaterial leasetransactions(6) Material hedge
accounting(i) Method of Hedge Accounting
As at right(ii) Hedging Tools and Hedge Target
As at right(iii) Hedging Policy
As at right(iv)Method of evaluating hedge effectivenessAs at rightaverage method.
Those without a market value:
The cost method using the moving average method
Shareholdings in subsidiaries:
The cost method using the moving averagemethod
2. Derivatives
Market price method
3. Inventories
A. Merchandise
Vehicles: Actual cost method
Other: Cost method under first in, first out
methodB. Supplies:
Cost method under last purchase method(i) Tangible Fixed Assets
Declining Balance Method is applied. However,for buildings excluding attached equipment)
acquired since April 1, 1998,
the Straight Line Method has been applied. The
useful lives are as follows:
Buildings and Structures: 15 – 20 years
Vehicles and transportation equipment: 2-6 years(ii) Intangible Fixed Assets
The Straight Line Method is applied. However,with respect to software for internal use, theStraight Line Method based on useful lives
forinternal use (5 years) has been applied.
(iii) Long Term Prepaid Expenses
The Straight Line Method is applied
New share issue expenses
Expensed in their entirety at the time of
expenditure(i) Reserve for Doubtful Accounts
To prepare for the losses occurring from bad
debts, with respect to general claims the actual
bad debt to loan rate is applied. Specific claims,
such as those where there are concerns on theprobability of recovery, are assessed on an
individual basis and estimated unrecoverable
amounts are recorded.
(ii) Reserve for Bonuses
To prepare for the payment of bonuses to
employees, amounts are recorded based on theestimated payment amount.
Financing leases other than those lease assets
whose title is deemed to pass to the lessee havebeen accounted for in accordance with methods
applied to normal lease transactions.
(i) Method of Hedge Accounting
According to Deferred Hedge
Treatment(ii) Hedging Tools and Hedge Target
Hedging Tools – Interest Rate
Swap
Hedge Target - Borrowings(iii) Hedging Policy
Interest Rate Swap transactions
are entered into for the purposeof hedging the risk of interest rate fluctuation on
borrowings and entered into only for the target
obligations.
(iv) Method of evaluating hedge effectiveness
The target cumulative market fluctuation of thehedge target and the hedge tool are compared
during the period from the initiation of the hedge
to the time of assessing the effectiveness and theevaluation
is made based on the variance of the two values.

− 15 −

(7) Other material
items in the
preparation of theconsolidated
financial statements
5. Items relating to
the valuation ofassets andliabilities of
consolidated
subsidiaries
6. Items relating to
the amortization of
the consolidation
adjustment
account
7. Items relating to
the appropriationof profits
8. Definition of cashin theconsolidated
statements of cashflow

Accounting treatment for

Accounting treatment for Consumption Tax
The Tax Exclusion Method is applied in theaccounting treatment of Consumption Tax.

Consumption Tax
As at right

The Market Value Method is used for thevaluation of all assets and liabilities of
consolidated subsidiaries.

As at rightNo items.

As at right

In respect of the appropriation of profits ofconsolidated subsidiaries the Consolidated
Statement of Surplus is based on confirmed profit
appropriation during the consolidated fiscal year.
Cash on hand, deposits that can be withdrawn as
needed, and short term investments that areeasily convertible into cash and that have low riskof fluctuation in value and whose maturities are 3
months or less at the date of acquisition.

As at right− 16 −

Changes in Accounting Treatment
March 1, 2005 – February 28, 2006

March 1, 2004 - February 28, 2005――――――

Method of presentation of Gains from
Sale of Courtesy Cars and Procurement Expenses for CourtesyCars
In the previous consolidated fiscal year the acquisition expense andgains on sale of vehicles to be used as courtesy cars were
presented as “Gains on Sale of Courtesy Cars” in Non-Operating
Income but due to the fact that in many cases such cars were soldafter use and in addition to a change in policy to actively market thevehicles in the same way as other used vehicles the number of cars
sold has been increasing resulting in the increased materiality.
Thus, the amount of the proceeds of such sales has been recorded
in Sales while the cost of acquisition has been included in Cost ofGoods Sold.
The impact of the change is not material.

Additional information
March 1, 2005 – February 28, 2006

March 1, 2004 - February 28, 2005

Treatment of the tax based on business size portion of
corporate taxes in the statements of income
Following the promulgation of ‘Treatment of the tax based on
business size portion of corporate taxes in the Statements ofIncome’ (February 13, 2004, Corporate Accounting Standards
Committee Practice Report 12), from this accounting period the
proportionate amounts of corporation tax on value added andcapital have been included in Selling, General and Administrative
expenses. As a result Selling, General and Administration expenses
increased by ¥122 million and operating income, ordinary income
and income before taxes, etc. each decreased by ¥122 million.

− 17 −――――――

Notes(Related to the consolidated balance sheets）
February 28, 2006

February 28, 2005

1 Number of treasury shares held:
The number of Gulliver shares held by consolidated
companies is as follows:
Ordinary shares:
823,000 shares

1 Number of treasury shares held:
The number of Gulliver shares held by consolidated
companies is as follows:
Ordinary shares:
670,000 shares(Related to the consolidated statements of income)(Millions of yen)March 1, 2005 – February 28, 2006

March 1, 2004 - February 28, 2005

1. Principal components of SGA expenses
Advertising
Contracting fees
Salaries
Bonuses
Transfer to reserve for doubtful
accounts
Transfer to reserve for bonuses
Depreciation
Rent

1. Principal components of SGA expenses
6,300
1,839
8,178
723
13
1,503
2,064
3,540

2. Components of gains on sales of fixed assets.
Buildings and structures

4,737
1,618
6,912
1,290
39
519
1,383
2,899

2. Components of gains on sales of fixed assets.
--

Buildings and structures--

Tools & equipment

3

Tools & equipment--

Vehicles and transportation equipment--

Vehicles and transportation equipment

--

Total
3.

Advertising
Contracting fees
Salaries
Bonuses
Transfer to reserve for doubtful
accounts
Transfer to reserve for bonuses
Depreciation
Rent

Components of losses on disposal of fixed assets
Buildings and structures
Vehicles and transportation
Tools & equipment
Construction in progress
Software
Long-term prepaid expenses
Total

Total

3

--

2. Components of losses on disposal of fixed assets
Buildings and structures
Vehicles and transportation
Tools & equipment
Software
Long-term prepaid expenses
Total

699
0
50
51
80
0
879

− 18 −

217
0
8
14
5
247

（Related to the consolidated statements of cash flow）(Millions of yen, rounded down)

March 1, 2005 – February 28, 2006

March 1, 2004 - February 28, 2005

(1) Relationship between period end cash and cash
equivalents and cash recorded in the balance sheet(1) Relationship between period end cash and cash
equivalents and cash recorded in the balance sheet

Cash and deposit accounts
Securities account
Total
Fixed deposits with maturities
exceeding 3 months
Stocks and bonds with redemption
period exceeding 3 months
Cash and cash equivalents

Cash and cash deposit accounts
Securities accounts
Total
Fixed deposits with maturities exceeding
3 months
Stocks and bonds with redemption
period exceeding 3 months
Cash and cash equivalents− 19 −

4,130-4,130--4,130

Segment Information
Segment information by business type
Fiscal year ended February 28, 2006 (March 1, 2005 to February 28, 2006)
Millions of yen

Trading of

Other businessused cars

Elimination/

Total

All company

Consolidated

Sales(1) Sales to external

173,648

9,001

182,649--

1826,49

--

--

--

--

--

Total

173,648

9,001

182,649--

1826,49

Operating expenses

162,227

7,302

169,529

3,696

173,226

Operating income

11,420

1,698

13,119(3,696)

10,22924,441

4,187

28,628

10,18438,812

Depreciation

1,127

235

1,363

701

2,064

Capital expenditure

2,546

416

2,963

2,595

5,558

customers(2) Inter-segmental sales
or transfers

Assets, Depreciation andCapital Expenditure
Assets

Notes:
1. Method of business classification: Businesses have been classified according to the classification used in calculating sales.
Further, due to the increased importance of other business in the ‘Franchise operations’ segment this segment has beenrenamed ‘Other businesses’ commencing from the fiscal year ended February 28, 2006.
2. Names of principal products or services attributable to each business classification:
Business Classification

Principal Product Name or Service Name

Used Car Sales

Purchase and sales of used automobiles through directly operated outlets and the like.

Other businessRoyalties arising out of franchise agreements and fees for the provision of training etc., andintermediation in buying and selling of used automobiles, fees arising from financial businessand other business.

− 20 −

Fiscal year ended February 28, 2005 (March 1, 2004 to February 28, 2005)
Millions of yen

Trading ofFranchiseused cars

business

Elimination/

Total

Consolidated

All company

Sales(1) Sales to external

148,1318,564

156,696--

156,696

--

--

--

--

--

148,1318,564

156,696--

156,696

Operating expenses

135,438

7,167

142,605

3,860

146,466

Operating income

12,693

1,396

14,090(3,860)

10,22922,734

3,915

26,6497,879

34,529

833

235

1,068

315

1,383

2,926

1,027

3,953

777

4,731

customers(2) Inter-segmental sales ortransfers
Total

Assets,Depreciation

andCapital Expenditure
AssetsDepreciation
Capital expenditureNotes:
1.Method of business classification: Businesses have been classified according to the classification used in calculating sales.

2.Names of principal products or services attributable to each business classification:

Business Classification

Principal Product Name or Service Name

Used Car Sales

Purchase and sales of used automobiles through directly operated outlets and the like.

Franchising

Royalties arising out of franchise agreements and fees for the provision of training etc.,
intermediation in buying and selling of used automobiles and services included in otherbusinesses, such as financial businesses.

− 21 −

Amount and principal content included in the “Elimination or Total Company” item
Millions of yen
March 1, 2005 to February

March 1, 2004 to February

28, 2006

28, 2005

Amount of operating expense whichcannot be allocatedPrincipal content

Expenses relating to head office
3,696

3,860

administration

at

the

parentcompany
Expenses related to management

Amount of assets included inof surplus funds and head office“Eliminations or Total Company”
10,184

7,879
administration

item

at

the

company.

Segment information by geographical location
For the current consolidated fiscal year and for the previous fiscal year over 90% of total sales and assets
for each segment were in Japan so segment information by geographical location has been omitted.

Overseas sales
For the current consolidated fiscal year, and for the previous fiscal year, overseas sales were less than
10% of consolidated sales and have therefore been omitted.

− 22 −

parent