Gulliver International Co., Ltd.

Consolidated Results
Interim period of the fiscal year ending February 28, 2007
(March 1, 2006 to August 31, 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 interim period of the fiscal year ending February 28, 2007

Gulliver International Co., Ltd.

October 17, 2006．
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Stock
Code:
7599
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http://
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Inquiries:
Managing
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．Senior．．．．．
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．．．．Director: Ikuo Murata
President:
Kenichi
Hatori
Telephone: +81 3 5208-5503
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U.S. GAAP: Not adopted
1. Consolidated financial results for the interim period of the fiscal year ending February 28, 2007
1) Consolidated Operating Results

Millions of yen, rounded downInterim period ended
August 31, 2006

Interim period ended
August 31, 2005(% change)

Sales ..............................................................................
Operating income...........................................................
Ordinary income.............................................................
Net income.....................................................................
Earnings per share (¥) ...................................................
Fully diluted earnings per share (¥)................................

87,999
4,463
4,414
3,320
339.56337.56

1.4
27.8
27.4
103.2
---

Fiscal year ended
February 28, 2006(% change)

86,783
3,490
3,463
1,633
163.07161.0831.1(10.6)(11.3)(25.4)---(% change)

182,649
9,423
9,382
4,421
435.61
431.10Notes:
1. Investment gains and losses under equity method: Interim period of FY ending February 28, 2007: ¥ -- million; Interim period of FY ended February
28, 2006: ¥ -- million; FY ended February 28, 2006
2. Average number of shares outstanding during Interim period of FY ending February 28, 2007: 9,778,218; Interim period of FY ended February 28,
2006: 10,017,053; FY ended February 28, 2006: 9,979,943
3. Differences in accounting treatments applied compared to previous consolidated fiscal year: Yes
4. Percentage figures for sales, operating income, etc. represent changes compared to the comparable period of the previous fiscal year.

2) Financial Position (consolidated)

Millions of yen, rounded down

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

As of August 31,
2006
40,381

As of August 31,
2005
34,336

As of February 28,
2006
38,812

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

16,745

15,311

16,011Equity ratio (%) ..............................................................
Shareholders’ equity per share (¥) .................................

40.6
1,680.60

44.6
1,539.49

41.3
1,623.01

Note:
Number of shares outstanding (consolidated) at end of period: Interim period of FY ending February 28, 2006: 9,747,607; Interim period of FY
ended February 28, 2006: 9,945,687; FY ended February 28, 2006: 9,865,317

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 downInterim period ended
August 31, 2006
3,298
(3,958)348
3,064Interim period ended
August 31, 2005
1,261
(2,844)
1,886
4,599

Fiscal year ended
February 28, 2006
4,442
(6,385)
1,029
3,374

4) Scope of consolidation and application of the equity method
Number of consolidated subsidiaries: 8; Number of non-consolidated subsidiaries under the equity method: 0; Number of affiliated companies underthe equity method: 0;
5. Changes in the scope of consolidation and companies accounted for by the equity method
Companies newly consolidated: 2; Companies removed from consolidation: 0; Equity method companies newly consolidated: 0;
Equity method companies newly excluded: 0

3. Forecasts for the fiscal year ending February 28, 2007 (March 1, 2006 to February 28, 2007)
Millions of yen, rounded down

FY ending February 28, 2007
Sales .......................................................................................
Ordinary income......................................................................
Net Income..............................................................................
Forecast annual dividend per share

205,400
11,2005,700
584.75

Forecasts and forward-looking statements in this document are based on a number of assumptions and beliefs made by management in light of
information currently available. Actual financial results may differ materially depending on a number of factors, including economic conditions,legislative and regulatory developments, delay in new product or service
and pricing and product initiatives of competitors.
− 1 launches,−2. 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 in the Group, including
customers, employees, partners and shareholders. Under this philosophy, Group management ismaking 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 ourcustomers.

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. Concretely, we are targeting a dividend payout ofapproximately 30% of non-consolidated net income for the period.
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 opening new directly operated stores,
strengthening internal infrastructure (IT), developing new business, and training and nurturingpersonnel.

3. Management targets
We consider return on equity (ROE) to be an important management financial indicator and aim
to maintain ROE above 20% over the medium to long term, excepting the financial business.
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.
・ Continued opening of directly operated stores
・ Increasing productivity at each store
・ Increasing business capabilities through strengthening personnel development and training
・ Enhancing brand power and recognition
・ Improving service quality and customer satisfaction− 2 −・ Improving retail sales through ‘Dolphinet System’
・ Improving in-house sales utilizing ‘GAO! Auction

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 maintain our 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. Items relating to the parent company
None

− 3 −

3. Operating results and Financial Position(1) Outline of consolidated interim operating results
Gulliver operates 278 directly operated stores involved in the sale and purchase of cars (14 morethan at the end of the interim period of the previous fiscal year) and has 194 affiliated stores (36fewer than at the end of the interim period of the previous fiscal year and 23 fewer than at theend of the previous fiscal year). In total, Gulliver operates 472 stores (22 fewer than at the end of
the interim period of the previous fiscal year and 23 fewer than at the end of the previous fiscal
year).
In our directly operated store operations, we closed a number of branches in the first quarter ofthe year ending February 28, 2007, but the opening of new branches is continuing smoothly. In
the interim period under review we restrained marketing costs and carried out effective marketing
activities. Further, in order to address personnel issues, we are modifying our sales structure,enhancing staff training and taking other such initiatives. Addressing these key management
issues allowed us to maintain the same levels of cars handled at our directly operated stores as
the previous comparable period. At our affiliated stores, operations have gone generallyaccording to plan and the number of cars handled per store is increasing, despite a reduction in
the number of branches.
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 1) auction sites throughout Japan, 2)
the Company’s unique on-screen selling system ‘Dolphinet’, and 3) GAO! Auction, the internet
based real-time auction aimed at used car dealers. The number of cars handled has increased at
all of these channels.
There are currently eight consolidated subsidiaries of Gulliver International. Despite steadily
increasing the number of vehicles sold by G-Trading Co., Ltd., the second-hand truck, bus andconstruction vehicles purchase, sales and export company revenues decreased from theprevious comparable fiscal period.
We have been steadily increasing the operating base of the consolidated auto-loan and financial
business company G-One Financial Services Co., Ltd through such steps as increasing thenumber of automobile loans sold. Further, as announced on July 11, 2006, an extraordinary gainof approximately ¥1.16 billion was recorded as a result of changes to the accounting treatment of
automobile loans.
As a result of the factors noted above, consolidated net sales for the interim period under review
increased 1.4% (¥1,215 million) to ¥87,999 million, and operating income increased 27.8%− 4 −(¥972 million) to ¥4,463 million. Ordinary income increased 27.4% (¥950 million) to ¥4,414
million and net income increased 103.2% (¥1,686) million to ¥3,320 million.

Performance by Segment
Sales of used automobiles
Our focus on improving efficiency has been a factor allowing us to maintain the same levels ofcars handled at directly operated stores. The average unit sales price and gross profit margin per
vehicle sold during the interim period under review increased. Further, SG&A expenses such as
personnel and marketing costs have decreased.
As a result, consolidated net sales increased 1.3% (¥1,084 million) over the previous
comparable period to ¥83,652 million and operating income increased 31.6% (¥1,544 million) to¥6,422 million.

Other businesses
Due to the decrease in the number of Gulliver affiliated stores compared to the previous interim
period, revenue from this area of business decreased. However, revenues increased in thefinancing business as a result of factors such as changes in the accounting policies regarding
revenue from auto-loans.
As a result, consolidated net sales increased 3.1% (¥131 million) to ¥4,347 million and operating
income decreased 20.2% (¥157 million) to ¥617 million.

(2) Financial position
For the interim period of the fiscal year ending February 28, 2007, cash flow from operating
activities was positive and cash flow from investing activities was negative, while overall cash flow
was a negative figure of ¥310 million. The balance of cash and cash equivalents at the end of theperiod was ¥3,064 million.
Cash flow from operating activities
Cash and cash equivalents (“cash”) generated from operating activities was ¥3,298 million.
Principal components of this included interim net income before adjustment for taxes of¥5,291million, a change in trade receivables of ¥211 million, and a change of trade payables of¥1,087 million.
Cash flow from investing activities
Net cash used in investing activities was ¥3,958 million. The principal factor contributing to thisresult was investment in the opening of new directly managed stores and in internal systems.
Cash flow from financing activities
Net cash used in financing activities was ¥348 million. This was the difference from ¥2,730− 5 −million through increased short-term borrowings and ¥2,079 billion expenditure on the purchaseof treasury stock.
Trends in Gulliver’s cash flow indicators are as follows:
Interim FY 2004

FY 2004

Interim FY 2005

FY 2005

Interim FY 2006

Equity ratio (%)

61.0

46.7

44.6

41.3

40.6

Shareholders’ equity toasset ratio by market
price (%)

438.5

443.4

357.7

338.5

230.5

Debt redemption years(years)

0.8

1.4

6.5

2.1

3.8

Interest coverage ratio

181.4

192.8

92.4

167.8

134.9

Notes:
1. Breakdown of each indicator
Equity ratio = shareholders’ equity/gross assets
Shareholders’ equity to asset ratio by market price = Total share value/gross assets
Debt redemption years = Interest bearing debt/Operating cash flow
Interest coverage ratio = Operating cash flow/Interest payments
2. Each index is calculated from values on a consolidated base
3. Total share value is calculated using the formula: closing share price at period end x number of sharesin issuance (excluding treasury stock).

(3) Outlook for the fiscal year ending February 28, 2007
Gulliver intends to pursue higher profits through such measures as seeking to increase thenumber of vehicles handled (increasing customer numbers per store) and further implementing
low cost operations.
Forecasts for the fiscal year ending February 28, 2007 are unchanged from those announced on
April 18, 2006.
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
for the period 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
to increase 25.9% to ¥6,700 million.
Note: The above figures do not include consumption tax.

− 6 −Consolidated Balance Sheets
As of August 31,
2006% of total

ASSETS

Millions of yen
As of February 28,
2006

As of August 31,
2005% of total% of total

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

3,064

4,599

3,374

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

10,886

6,848

11,180Marketable securities........................................

--

--

100

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

4,811

5,621

4,659

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

695

457

468

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

2,745

2,038

1,393

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

(88)

(53)

(84)

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

22,11454.8

19,512

56.8

21,091

54.4

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

7,494

5,756

6,812

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

1,504

1,227

1,689

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

327

327

327

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

175

210

415

Total tangible fixed assets

9,500

23.5

7,521

21.9

9,244

23.8

Intangible fixed assets
Software ...........................................................

2,456

2,681

2,719

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

139

99

121

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

2,596

6.4

2,781

8.1

2,841

7.3

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

98

270

199

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

3,340

2,365

3,052

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

2,206

1,432

1,890

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

150

104

111

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

745

668

751

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

(372)

(320)

(371)

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

6,170

15.3

4,521

13.2

5,633

14.5

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

18,26745.2

14,82443.2

17,72045.6

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

40,381

100.0

34,336100.0

38,812

100.0

− 7 −

Consolidated Balance Sheets
Millions of yen
As of August 31,
2006

As of August 31,
2005%

LIABILITIESAs of February 28,
2006
%

%

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

2,512

2,993

3,501

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

12,230

8,250

9,350

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

2,504

2,258

4,156

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

2,229

1,556

1,867

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

540

703

462

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

899

576

532

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

1,321

1,698

1,678

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

22,23855.1

18,03652.5

21,54955.5

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

603

--

304

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

793

643

594

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

1,397

3.4

643

1.9

898

2.3

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

23,636

58.5

18,68054.4

22,448

57.8

--

--

345

1.0

352

0.9

Paid-in capital .................................................

--

--

4,157

12.1

4,157

10.7

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

--

--

4,032

11.8

4,032

10.4

Retained earnings .........................................

----

14,04040.9

15,822

40.8

50

0.1

67

0.2

MINORITY INTERESTS
Minority interests.............................................

CAPITAL

Unrealized gains and losses in othersecurities .........................................................

----

Translation adjustments ..................................

--

--

(0)

(0.0)

(0)

(0.0)

Treasury stock Note 1 ...................................

----(6,969)(20.3)(8,067)(20.8)

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

----

15,311

44.6

16,011

41.3

--

--

34,336100.0

38,812

100.0

4,157

10.3

--

--

--

--

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

4,032

10.0

--

--

--

--

Retained profit ................................................

18,060

44.7

--

--

--

--

Treasury stock ................................................

(9,873)(24.4)

--

--

--

--

Total shareholders’ equity .........................

16,376

40.6

--

--

--

--

7

0.0

--

--

--

--

(1)

(0.0)

--

--

--

--

5

0.0

--

--

--

--

363

Total Liabilities, Minority Interests andShareholders’ Equity ......................................
NET ASSETS
Shareholders’ equity..........................................
Common stock ................................................

Valuation and differences due to foreignexchange
Valuation difference on other marketablesecurities ........................................................
Translation adjustments .................................
Total valuation and differences due toforeign exchange .......................................
Minority interests

0.9

--

--

--

--

Total net assets.........................................

− 8 − 41.5
16,745

--

--

--

--

Total liabilities and other net assets ..........

40,381

--

--

--

--

100.0

Consolidated Statements of Income
March 1, 2006 to
August 31, 2006

Millions of yen

March 1, 2005 toAugust 31, 2005%

March 1, 2005
To February 28, 2006%%

Sales ...........................................................

87,999100.0

86,783100.0

182,649 100.0

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

67,822

77.1

66,35976.5

139,371

76.3

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

20,17722.9

20,424

23.5

43,278

23.7

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

15,71417.8

16,93419.5

33,855

18.5

4,463

5.1

3,490

4.0

9,423

5.2

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

1

1

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

0

0

0

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

4

3

16

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

32

34

103

Total non-operating income

39

0.0

38

1

0.1

120

0.1

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

24

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

--

5

5

Share re-issuing expense ......................

7

--

--

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

--

--

35

14

31

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

1

7

9

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

--

3

2

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

54

34

77

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

88

0.1

65

0.1

161

0.1

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

4,414

5.0

3,463

4.0

9,382

5.2

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

--

--

3

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

--

45

45

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

--

2

6

Reversal of bad debt reserve..................

3

24

--

Unrealized profit on installment sales .....

1,164

--

--

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

--

1

1

Total extraordinary profit

1,168

1.3

73

0.1

56

0.0

Extraordinary losses
Loss on disposal of fixed assets Note 2.

291

162

879

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

--

119

121

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

--

--

--

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

291

0.3

281

0.3

1,001

0.6

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

5,291

6.0

3,255

3.8

8,437

4.6

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

2,183

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

(225)

2.2

95

1.9

66

2.2

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

13
0.0
− 9 −
3,320
3.8

3

0.0

14

0.0

1,633

1.9

4,421

2.4

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

1,522

3,935

Consolidated Statement of Surplus and Changes in Shareholders’ Equity
Millions of yen
March 1, 2005 to

March 1, 2006 to
August 31, 2006

March 1, 2005 to
February 28, 2006

August 31, 2005

Capital Surplus
--

4,014

4,014

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

--

17

17

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

--

4,032

4,032

--

13,66813,668

--

1,633

4,421

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

--

1,000

1,786

--

94

94

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

--

167

387

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

--

0

0

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

--

14,04015,822

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

Retained earnings
Retained earnings at beginning of period .................
Increase in retained earnings
Net income for the period.............................................
Reduction in retained earnings− 10 −

Changes in consolidated interim shareholders’ equity
Millions of yen
Shareholders’ equity
CapitalBalance as of February 28, 2006

Capital surplus
4,157

Retained profit

4,032

Total

Treasury stock

15,822shareholders’equity(8,067)

15,944

Change during interim accounting
periodSurplus dividend

(818)

(818)

(73)

(73)

3,320

3,320

Bonuses to directors throughprofit appropriation
Interim net income
Acquisition of treasury stock
Disposal of treasury stock(2,079)(2,079)

(190)

273

83

Changes to items other thanshareholders’ equity during the

―

―

―

―

―

―

―

2,237

(1,805)

431

4,157

4,032

18,060(9,873)

16,376

interim accounting period
Total change during interim
accounting period
Balance as of August 31, 2006

Valuation and differences due to foreign exchange
Valuation differenceson other marketablesecurities
Balance as of February 28, 2006

67

Adjustment due toexchange rate(0)

Total valuation anddifferences due to

Minority interests

Total net assets

352

16,364(5)(824)

foreign exchange
67

Change during interim accounting
periodSurplus dividend
Bonuses to directors through(73)

profit appropriation
Interim net income

3,320

Acquisition of treasury stock(2,079)

Disposal of treasury stock

83

Changes to items other thanshareholders’ equity during the

(59)

(1)

(61)

16

(42)

(59)

(1)

(61)

11

381

7

(1)

5

363

16,745interim accounting period
Total change during interim
accounting period
Balance as of August 31, 2006

− 11 −

Consolidated Statements of Cash flows
Millions of yen
March 1, 2005 to
February 28, 2006

March 1, 2006 to
August 31, 2006

March 1, 2005 toAugust 31, 2006

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

5,291

3,255

8,437

Depreciation ...............................................................................

1,087

890

2,061

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

377

56

2

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

5

(26)

47

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

(2)

(1)

(1)

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

24

14

28

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

--

5

5

Share reissuing expenses..........................................................

7

--

--

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

--

--

(3)

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

291

162

879
(45)

Gain on sale of investment securities ........................................

--

(45)

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

(73)

(94)

(94)

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

211

3,871

(660)

(Increase) decrease in inventory................................................

(73)

(958)

(17)

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

(1,087)(2,334)(1,079)

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

(294)

54

328

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

(742)

(875)

(549)
9,339

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

5,023

3,976

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

1

0

1

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

(24)

(13)

(26)

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

(1,700)(2,701)(4,871)

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

3,298

1,261

4,442

II. Cash flow from investing activities
Proceeds from sale/redemption of investment securities ...........
Payments for acquisition of marketable securities

100

212

212

(2,494)(1,092)(3,032)

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

0

0

7

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

(184)(1,013)(1,558)

Payments for acquisition of shares of affiliates ..........................

(5)

(10)

--

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

(44)

(3)

(492)

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

14

12

577

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

(734)

8

(130)

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

(615)

(949)

(2,096)

Proceeds from transfer of operations.........................................

--

--

127

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

5

(8)

1

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

(3,958)(2,844)(6,385)

Net increase (decrease) in short term borrowings .....................

2,730

4,300

5,687

Payment of long-term debt.........................................................

(54)

--

(340)

Proceeds from long-term borrowings .........................................

500

--

200

Payments for acquisition of treasury stock ................................

(2,079)(1,545)(2,974)

III. Cash flow from financing activities

Proceeds from disposal of treasury stock ..................................

83

98

209

Expenditure on issuance of new shares ....................................

(7)

--

(5)

Proceeds from issuance of new shares .....................................

--

30

35

Payment of dividends.................................................................

(818)(1,000)(1,786)

Payment of dividends to minority shareholders .........................

(5)

--

--

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

--

3

3
1,029

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

348

1,886

IV. Accounting differences in cash and cash equivalents .....

0

(0)

1

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

(310)

304

(913)

VI. Cash and cash equivalents at beginning of period ..........
VII. Increase in cash and cash equivalents due to change
in scope of consolidation .......................................................
VIII. Cash and cash equivalents at end of period...................

3,374

4,295

4,130

− 12 −

--

--

155

3,064

4,599

3,374

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

March 1, 2006 –March 1, 2005 –March 1, 2005 –August 31, 2006

August 31, 2005

February 28, 2006

(1) Number of consolidated
subsidiaries: 6
G Trading Co., Ltd.
G One Financial Service
Co., Ltd.
Gulliver Europe Ltd.
Hucobo Co., Ltd.
SAMURAI MOTORS CO.
Ltd.
G-Bus, Ltd.

(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 Hucobo Co., Ltd.
has been included in the scopeof consolidation as its
importance to the financial
statements increased in theinterim period. Further,
SAMURAI MOTORS CO. Ltd.
and G-Bus, Ltd. were
established in the interim period
under review and have been
included in the scope of
consolidation.

(Change in scope of
consolidation)
Of the above Hucobo Co., Ltd.
has been included in the scopeof consolidation as its
importance to the financial
statements increased in thefiscal year. Further, as
SAMURAI MOTORS CO. Ltd.,
G-Bus, Ltd., and Carbross Co.,
Ltd. were established in theinterim period under review,
they have been included in thescope of consolidation(1) Number of consolidated
subsidiaries: 8
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.
TAKEOFF Co., Ltd.
(Change in scope of
consolidation)
Of the above Carbross Co., Ltd.
has been included in the scopeof consolidation as its
importance to the financial
statements increased in theinterim period. Further,
TAKEOFF Co., Ltd. wasestablished in the interim period
under review and has been
included in the scope of
consolidation.

(2) Non-consolidated
subsidiaries:
Gulliver USA Inc.,

2. Application of theequity method(2) Non-consolidated(2) Non-consolidated
subsidiaries:
subsidiaries:
Gulliver USA Inc.,
Gulliver USA Inc.
Carbross Co., Ltd.
Reasons for exclusion from
Reasons for exclusion from
Reasons for exclusion fromconsolidation:
consolidation:
consolidation:
Gulliver USA, Inc. is small and Gulliver USA, Inc. and Carbross Gulliver USA, Inc. is small andits total assets, sales, net
Co., Ltd, are small and their
its total assets, sales, net
income and retained profit, etc. total assets, sales, net income
income and retained profit, etc.
do not significantly affect theand retained profit, etc. do not
do not significantly affect theconsolidated financial
significantly affect theconsolidated financial
statements.
consolidated financial
statements.
statements.
Non-consolidated subsidiaries
Non-consolidated subsidiaries
Non-consolidated subsidiaries
and affiliates to which the equity and affiliates to which the equity and affiliates to which the equity
method is not applied:method is not applied:method is not applied:Gulliver USA Inc.
Gulliver USA Inc.
Gulliver USA Inc.
UG Powers Co., Ltd.
Carbross Co., Ltd.
As at rightReasons for not applying theequity method: The effect of thecompanies on net income andretained profit is immaterial andtheir overall importance is low.

− 13 −

Reasons for not applying theequity method: The effect of thecompany on net income andretained profit is immaterial andits overall importance is low.

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

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

March 1, 2006 –March 1, 2005 –March 1, 2005 –August 31, 2006

August 31, 2005

February 28, 2006

Of the consolidated
subsidiaries, Gulliver Europe
Ltd., SAMURAI MOTORS and
TAKEOFF Co., LTD. have asettlement date (December 31,
June 30 and end of February
respectively) that differs fromthe Consolidated Settlement
Date (end February). With
regard to Gulliver Europe Ltd.
and SAMURAI MOTORS, in
preparing the Consolidated
Interim Financial Statements,
as the gap between thesettlement dates does notexceed 3 months,
consolidation is performed
based on the said subsidiary’s
financial statements. For
material transactions occurring
between the settlement dates
necessary consolidation
adjustments are made.
In the case of TAKEOFF Co.,
Ltd., as the gap exceeds 3months, consolidation is
performed based onprovisional statements.

Of the consolidated
subsidiaries, Gulliver Europe
Ltd. and SAMURAI MOTORS
have a settlement date
(December 31 and June 30
respectively) that differs fromthe Consolidated Settlement
Date (end February). In
preparing the Consolidated
Interim Financial Statements,
as the gap between thesettlement dates does notexceed 3 months, consolidationis performed based on the said
subsidiary’s financial
statements. For materialtransactions occurring between
the settlement dates necessary
consolidation adjustments are
made.

Of the consolidated
subsidiaries, Gulliver Europe
Ltd. has a settlement date
(December 31) that differsfrom the Consolidated
Settlement Date (endFebruary). In preparing theConsolidated Financial
Statements, as the gap
between the settlement dates
does not exceed 3 months,
consolidation is performed
based on the said subsidiary’s
financial statements. For
material transactions occurring
between the settlement dates
necessary consolidation
adjustments are made.

4.

1. Marketable securities
1. Marketable securities
1. Marketable securities
Bonds intended to be held to
Bonds intended to be held to
Bonds intended to be held
maturity:
maturity:
to maturity:
As at rightAmortizing cost method
As at left
(straight line)
Other marketable securities
Other marketable securities
Other marketable securitiesThose with a market price: Those with a market price:
Those with a market price:
Valued by the market method Valued by the market method
Valued by the market method
based on the market price as based on the market price as atbased on the market price asat the accounting date. the accounting date. Valuation
at the accounting date.
Valuation gains or losses are gains or losses are taken direct
Valuation gains or losses aretaken direct to capital and the to capital and the book value istaken direct to capital and thebook value is determined by determined by moving averagebook value is determined bymoving average method.
method.
moving average method.
Those without a market value:
As at rightThose without a market value:Those without a market value:
The cost method using the
As at left
moving average method
Shareholdings in subsidiaries: Shareholdings in subsidiaries:
Shareholdings in subsidiaries:
As at rightThe cost method using the
As at left
moving average method
2. Derivatives
2. Derivatives
2. Derivatives
As at rightMarket price method
As at left
3. Inventories
3. Inventories
3. Inventories
A. Merchandise:
A. Merchandise
A. Merchandise:
Vehicles: As at right
Vehicles: Actual cost method
Vehicles: As at left
Other: As at right
Other: Cost method under
Other: As at left
first in, first out method
B. Supplies:
B. Supplies:
B. Supplies:
As at right
Cost method under last purchase
As at left
method− 14 −

Item(2) Depreciation
methods applied
to material
depreciable
assets(3) Treatment ofdeferred assets(4) Criteria forrecordingmaterial reserves

March 1, 2006 –March 1, 2005 –March 1, 2005 –August 31, 2006

August 31, 2005

February 28, 2006(i) Tangible Fixed Assets
As at right(i) Tangible Fixed Assets(i) Tangible Fixed Assets
Declining Balance Method is
Declining Balance Method isapplied. However, for buildings applied. However, for buildings
excluding attached equipment)
excluding attached equipment)
acquired since April 1, 1998,
acquired since April 1, 1998,
the Straight Line Method has
the Straight Line Method has
been applied. The useful lives
been applied. The useful lives
are as follows:
are as follows:
Buildings and Structures: 15 –Buildings and Structures: 15 –20 years
20 years
Vehicles and transportation
Vehicles and transportationequipment: 2-6 years
equipment: 2-6 years(ii) Intangible Fixed Assets(ii) Intangible Fixed Assets(ii) Intangible Fixed Assets
As at right
The Straight Line Method is
As at left
applied.
However,withrespect to software forinternal use, the Straight Line
Method based on useful lives
forinternal use (5 years) has
been applied.
(iii) Long Term Prepaid Expenses (iii) Long Term Prepaid(iii) Long Term Prepaid Expenses
Expenses
As at right
As at left
The Straight Line Method isappliedShare delivery expenses
New share issue expenses
Expensed in their entirety at the Expensed in their entirety attime of expenditure
the time of expenditure(i) Reserve for Doubtful(i) Reserve for Doubtful
Accounts
Accounts
As at right(ii) Reserve for Bonuses
As at right

To prepare for the losses
occurring from bad debts, withrespect to general claims theactual bad debt to loan rate isapplied. Specific claims, suchas those where there areconcerns on the probability ofrecovery, are assessed on an
individual basis and estimatedunrecoverable amounts arerecorded.
(ii) Reserve for Bonuses
To prepare for the payment ofbonusestoemployees,
amounts are recorded basedon the estimated payment
amount.

− 15 −New share issue expenses
Expensed in their entirety at
the time of expenditure(i) Reserve for Doubtful
Accounts
As at left(ii) Reserve for Bonuses
As at left

Item

March 1, 2006 –March 1, 2005 –March 1, 2005 –August 31, 2006

August 31, 2005

February 28, 2006

(5) Treatment ofmaterial leasetransactions

As at right(6) Material hedge
accounting(i) Method of Hedge
Accounting
As at right(ii) Hedging Tools and Hedge
Target
As at right

Financing leases other than
As at left
those lease assets whose title
is deemed to pass to thelessee have been accountedforin
accordancewithmethods applied to normallease transactions.
(i) Method of Hedge Accounting (i) Method of Hedge Accounting
According to Deferred Hedge
As at left
Treatment(ii) Hedging Tools and Hedge
TargetHedging Tools – Interest Rate
Swaps
Hedge Target – Interest on
borrowings(ii) Hedging Tools and Hedge
Target
As at left(iii) Hedging Policy(iii) Hedging Policy
As at left
Interest Rate Swap transactions
are entered into for the purposeof hedging the risk of interest
rate fluctuation on borrowingsand entered into only for thetarget obligations.
(iv)Method of evaluating hedge(iv) Method of evaluating
effectiveness(iv) Method of evaluating hedge hedge effectivenessAs at left
effectiveness
The target cumulative market
As at rightfluctuation of the hedge target
and the hedge tool arecompared during the period
from the initiation of the hedge
to the time of assessing theeffectiveness and theevaluation is made based on
the variance of the two values.
(iii) Hedging Policy
As at right(7) Other material
items in the
preparation of theinterim consolidated
financial statements
5. Definition of cashin the consolidated
statements of cashflow

Accounting treatment for
Consumption Tax
As at right

As at right

Accounting
treatment
Consumption Tax

for

The Tax Exclusion Method isapplied in the accounting
treatment of Consumption
Tax.
Cash on hand, deposits thatcan be withdrawn on demand,and short term investmentsthat are easily convertible into
cash and that have low risk offluctuation in value and whosematurities are 3 months or lessat the date of acquisition.

− 16 −

Accounting treatment for
Consumption Tax
As at left

As at left

Changes in Accounting Treatment
March 1, 2006 –March 1, 2005 –March 1, 2005 –August 31, 2006

August 31, 2005

February 31, 2006

Accounting standards relating to impairment losses on
fixed assets
From the interim period of the fiscal year ending February
28, 2007 the ‘Statement Regarding the Establishment of
Accounting Policies for Impairment Losses on Fixed
Assets’ (Business Accounting Council, August 9, 2002)and ‘Guidelines for the Application of Accounting Policies
for Impairment Losses on Fixed Assets (Guideline forApplication of Business Accounting Policies, Article 6;
Business Accounting Council, October 31, 2003) havebeen applied as accounting standards relating to
impairment losses.
This change has not affected profits and losses.
Accounting treatments relating to income generated
through autoloans
Previously, in respect of autoloans at the consolidated
subsidiary G-One Financial Service Co., Ltd. the entire
amount of the income was recorded as income over theperiod of the loan. However, from the current fiscal period,
we have begun to employ a method in which the financing
cost for the unexpired portion is accounted for over thecontract period. For the remaining portion, excluding
income related to foreseeable losses arising from early
repayment or subrogated performance the income isrecorded in full at the time of contracting for the autoloan.
We made this change as most of the costs associated withautoloan income occur at the time of contracting and also
because the expertise and internal data we haveaccumulated on the auto-loans business allows us torationally forecast early repayment or subrogatedperformance. As a result we believe the new method betterreflects actual operating conditions.
In order to make loan contracts signed in previous fiscal
years conform to this method, the balance of unpaid loansat the end of the fiscal year ended February 28, 2006,
excluding income related to financing rates andforeseeable losses arising from early repayment or
subrogated performance, has been recorded as
extraordinary profit.
As a result of this change, net sales, gross profit on sales,
operating income and ordinary income have increased by¥401 million compared to the previous method, and net
income before adjustment for income taxes has increased¥1,565 million.
Accounting standards relating to presentation of net
assets on balance sheets
From the interim period of the fiscal year ending February
28, 2007, the ‘Statement Regarding the Presentation of
Net Assets on the Balance Sheet’ (Business Accounting
Council, December 9, 2005, Article No. 5) and‘’Guidelines for the Application of Accounting Policies for
the Presentation of Net Assets on the Balance Sheet’(Guidelines for the Application of Business Accounting
Polices, Article 8; Business Accounting Council,
December 9, 2005) have been applied. The equivalentamount previously recorded as ʻCapitalʼ is ¥16,381
million. Following changes to the regulations on financial
statements, net assets on the interim balance sheet havebeen recorded in accordance with the revised regulations.

――――――――――――――――――――――――――――――――――――− 17 −

March 1, 2006 –March 1, 2005 –March 1, 2005 –August 31, 2006

August 31, 2005

February 31, 2006

Partial revision of accounting standards relating to the
reduction of treasury stock and reserves
From the interim period of the fiscal year ending February
28, 2007, the ‘Statement Regarding Accounting Policies
for the Reduction of Treasury Stock and Reserves’(Business Accounting Council, December 27, 2005 Article
No. 1) and ‘Guidelines for the Application of Accounting
Policies for the Reduction of Treasury Stock andReserves’ (Guidelines for the Application of BusinessAccounting Policies, Article 2; Business Accounting
Council, December 27, 2005). This change has notaffected profits and losses. Following changes to theregulations on financial statements, net assets on theinterim balance sheet have been recorded in accordancewith the revised regulations.

――――――――――――

Additional information
March 1, 2006 –March 1, 2005 –March 1, 2005 –August 31, 2006

August 31, 2005

February 31, 2006――――――

Treatment of the tax based on business size
portion of corporate taxes in the statements
of incomeFollowing the promulgation of ‘Treatment of thetax based on business size portion of corporate
taxes in the Statements of Income’ (February 13,
2004,
Corporate
AccountingStandards
Committee Practice Report 12), from thisaccounting period the proportionate amounts ofcorporation tax on value added and capital havebeen included in Selling, General and
Administrative expenses. As a result Selling,
General and Administration expenses increasedby ¥58 million and operating income, ordinary
income and income before taxes, etc. eachdecreased by ¥58 million.

Treatment of the tax based on business size
portion of corporate taxes in the statements
of incomeFollowing the promulgation of ‘Treatment of thetax based on business size portion of corporate
taxes in the Statements of Income’ (February
13, 2004, Corporate Accounting Standards
Committee Practice Report 12), from thisaccounting period the proportionate amounts ofcorporation tax on value added and capital
have been included in Selling, General and
Administrative expenses. As a result Selling,
Generaland
Administration
expenses
increased by ¥126 million and operating
income, ordinary income and income before
taxes, etc. each decreased by ¥126 million.

− 18 −

Notes(Related to the consolidated balance sheets)
As of August 31, 2006
*１

As of August 31, 2005

Total accumulated depreciation of*１

tangible fixed assets:

As of February 28, 2006

Total accumulated depreciation of*１

tangible fixed assets:¥3,411 million

Total accumulated depreciation of
tangible fixed assets:¥2,974 million¥3,053 million(Related to the consolidated statements of income)March 1, 2006 – August 31, 2006
1. Principal components of SGA expenses
Advertising

1. Principal components of SGA expenses

2,309

Contracting fees

(Millions of yen)March 1, 2005 – August 31, 2005

Advertising

876

March 1, 2005 – February 28, 2006
1. Principal components of SGA expenses

2,975

Contracting fees

857

Advertising

6,300

Contracting fees

1,839

Salaries

4,137

Salaries

4,151

Salaries

8,178

Bonuses

235

Bonuses

337

Bonuses

723

Transfer to reserve for
doubtful accounts
Transfer to reserve forbonuses
Depreciation

12

2,064

Rent

3,540

Transfer to reserve for
doubtful accounts
Transfer to reserve forbonuses
Depreciation
Rent

--

Transfer to reserve for
doubtful accounts
Transfer to reserve forbonuses
Depreciation

886
1,087
2,138

Rent

2. Components of gains on sales of fixed
assets.

-852
890
1,688

2. Components of gains on sales of fixed
assets.

――――――

2. Components of gains on sales of fixed
assets.

――――――

Buildings and structures
Vehicles and transportationequipment

Total
Components of losses on disposal of fixed 3.
assetsComponents of losses on disposal of
fixed assets

2.

205

Buildings and structures

Vehicles and transportation

12

Tools & equipment

18

Buildings and structures

Software40

Vehicles and transportation

Long-term prepaid expenses

5

Tools & equipment

Others

8

Total

162

Long-term prepaid expenses− 19 −

3

699

Vehicles and transportation0

Tools & equipment

500Construction in progress

51

18

Software

80

143

Total

291

--

Components of losses on disposal of fixed
assetsBuildings and structures

Total

--

3

Tools & equipment

3.

546

0
879

Changes to Consolidated Interim Shareholders’ Equity
March 1, 2006 to August 31, 2006
Category and number of ordinary and treasury shares in issuanceThousands of shares
No. of shares at theend of the previous
fiscal year

Increase in number ofshares during theinterim period

Decrease in number ofshares during theinterim period

Number of shares atthe end of the interim
periodShares in issuance
Ordinary shares

10,688----

10,688

Total

10,688----

10,688

Ordinary shares

823

143

26

941

Total

823

143

26

941

Treasury stock

Dividends
Amount of dividends paid
Resolution
Regular meeting ofshareholders (May 24,
2006)

Share category

Total dividend(millions of yen)

Dividend pershare (¥)

Base date

Effective dateOrdinary shares

818

83

February 28,
2006

May 25, 2006

Dividend payments for which the base date falls within the interim period under review but for which the effective datefollows the end of the period
Total
dividend
Share
Dividend
Dividend per
Base date
Effective date(millions of
categorysourceshare (¥)
yen)）
Resolution
Board meeting
Ordinary
Retained
November 14,
789
81
August 31, 2006
(October 17, 2006) sharesearnings
2006− 20 −

（Related to the consolidated statements of cash flow）(Millions of yen)March 1, 2004 - February 28, 2005
(1) Relationship between period end (1) Relationship between period end cash
(1) Relationship between period end
cash and cash equivalents andand cash equivalents and cash recorded
cash and cash equivalents andcash recorded in the balancein the balance sheet
cash recorded in the balance sheet
sheet
March 1, 2006 – August 31, 2006

Cash and deposit accounts
Securities accountCash and cash equivalents

3,064-3,064

March 1, 2006 – August 31, 2005

Cash and cash deposit accounts
Securities accounts
Cash and cash equivalents

4,599-4,599Cash and cash deposit accounts
Securities accounts
Cash and cash equivalents

3,374-3,374(2) Breakdown of assets and liabilities
increased through transfer ofoperations
Brain Trust Co., Ltd. (as of January 31,
2006)
Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities

158
49
208
138
56
195

Value of transfer of operation: ¥13 million− 21 −

4. Segment Information
Segment information by business typeInterim period of the fiscal year ending February 28, 2007 (March 1, 2006 to August 31, 2006)
Millions of yen

Trading of

Other businessused cars

Elimination/

Total

All company

Consolidated

Sales(1) Sales to external

83,652

4,347

87,999--87,999

--

--

--

--

--

Total

83,852

4,347

87,999--87,999Operating expenses

77,2293,729

80,9592,576

83,536

Operating income

6,422

617

7,040

(2,576)

4,463

customers(2) Inter-segmental sales
or transfers

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.

− 22 −

Interim period of the fiscal year ended February 28, 2006 (March 1, 2005 to August 31, 2005)
Millions of yen

Trading of

Other businessused cars

Elimination/

Total

Consolidated

All company

Sales(1) Sales to external

82,567

4,215

86,783--86,783

--

--

--

--

--

82,567

4,215

86,783Operating expenses

77,6893,440

81,1302,162

83,293Operating income

4,878

774

5,652

(2,162)

3,490

customers(2) Inter-segmental sales ortransfers
Total

86,783

Notes:
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.

− 23 −

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(2) Sales to external

173,648

9,001

182,649--

182,649

--

--

--

--

--

Total

173,648

9,001

182,649--

182,649

Operating expenses

162,227

7,302

169,529

3,696

173,226

Operating income

11,420

1,698

13,119(3,696)

9,423

customers(2) Inter-segmental sales
or transfers

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.

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Amount and principal content included in the “Elimination or Total Company” item
Millions of yen
March 1, 2006 to

March 1, 2005 to

March 1, 2005 toAugust 31, 2006

August 31, 2006

February 28, 2006

Amount of operating expense whichcannot be allocated to a segment

Principal content

Expenses relating to head
2,576

2,162

3,696

office administration at theparent company

Segment information by geographical location
For the interim period of the current consolidated fiscal year and that of the previous fiscal year, despite
the presence of Gulliver consolidated subsidiaries overseas, over 90% of total sales and assets for eachsegment were in Japan so segment information by geographical location has been omitted.

Overseas sales
For the interim period of 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.

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