Market Environment and Business Results in Fiscal 2010

The business environment during the fiscal year ended February 20, 2011 started to recover gradually due to a number of factors including increased exports backed by growth in emerging economies, and the effect of the Japanese government’s stimulus packages. However, uncertainty persisted as consumer spending remained lackluster for a number of reasons, most notably stagnation in household incomes, curbing the extent of recovery. In the shopping center industry, the gap between successful and unsuccessful shopping malls grew wider despite an overall improvement trend in tenant sales. In this climate, we continued to create shopping malls that were the most competitive in their respective regions while also being in line with customer needs. Additionally, we took aggressive measures to attract new tenants and reduce costs through structural reform. In the domestic market, cumulative consolidated sales from specialty stores at our 49 (as of February 20, 2011) existing malls, visitor numbers, and vehicle numbers all rose compared to the previous fiscal year. Behind these increases was the opening of 3 new shopping malls, the renovation of 12 existing malls, and a series of synchronized sales at the Group’s 23,000 general merchandise stores and some tenant stores in March, June, September, and December. Moreover, vacant floor space (by area), excluding space reserved for incoming tenants, also improved.

As a result of the above, ÆON MALL recorded an increase in both operating revenue and operating income. Other income included gains on the sales of stocks of an affiliate under the equity method, resulting in an increase in net income for the fiscal year ended February 20, 2011, to ¥22,379 million.