Year Ended September 30, 2005
Overview of Consolidated Financial Results and Performance (Excerpt)
October 31, 2005(a) Performance
Consolidated net sales for the year ended September 30, 2005, increased 12.3% year over yearto ¥1,411 million. By business segment, “Product sales” advanced 7.6% year over year to ¥525
million, “Consultancy sales” rose 16.2% to ¥857 million and “Training sales” declined 7.3% to ¥27
million.
Product sales in the year under review increased ¥37 million from the previous fiscal year. This
rise mainly reflected successful sales of “OPQ” and “IMAGES,” which are aptitude tests used forthe recruitment screening of new graduates. Consultancy sales increased ¥119 million. This rise wasprincipally due to increased sales of “TAMATEBAKO,” our Internet screening system; “SOFT”(SHL’s original filter test); and internal service products. Training sales remained flat compared withthe previous fiscal year.
Consolidated operating income for the year under review expanded 28.4% year over year to¥483 million. The cost of goods sold increased ¥14 million, or 7.2%, to ¥212 million, and selling,
general and administrative expenses rose ¥33 million, or 4.9%, to ¥715 million. However,consolidated operating income increased ¥106 million from the previous fiscal year reflecting a ¥154
million jump in net sales. The rise in selling, general and administrative expenses was attributable tosuch factors as an increase in personnel expenses (¥18 million) due to the increased number of staff
in the sales and administrative departments, an increase in sales promotion related expense (¥16million) and the recording of the pro forma standard tax, which has been implemented effective fromthe year under review, in taxes and public charges (¥6 million). Consolidated ordinary income
increased 28.5% to ¥476 million, up ¥105 million from the previous fiscal year. Nonoperating
income edged up ¥2 million, whereas nonoperating expenses increased ¥3 million. A major factor ofthis rise in nonoperating expenses was a ¥4 million devaluation loss on investment securities (equity
capital in an investment business limited-liability consortium for venture enterprises).
An extraordinary loss of ¥8 million was recorded mainly due to a loss on the retirement ofobsolete test brochures.
After taking into account the above factors and income taxes―current and income
taxes―deferred, consolidated net income for the year under increased 32.2% year over year to ¥275
million.

(b) Projected Consolidated Performance for the Year Ending September 30, 2006 (October 1, 2005,through September 30, 2006)

As for the projected consolidated performance for the year ending September 30, 2006, a morefavorable operating environment is anticipated in the next year because employment and wage
conditions have been improving principally due to the continued economic recovery and the socalled 2007 Issue, which is the concern of possible suspended technology/expertise inheritance atcorporations because of the anticipated mass retirement of baby boomer employees. Accordingly, we
now see many corporations actively recruiting not only newcomers but also mid-career staff. In viewof this wind-wing situation, the SHL-JAPAN Group intends to improve its performance byexpanding Internet-related services in the employment market, enhancing business alliances withother human resources service operators (placement agencies) and strengthening sales promotion for
employee assessment services, which emphasize internal evaluations based on a diagnosis oforganization, employees and managerial staff.
As a consequence, net sales of ¥1,700 million (up 20.5% year over year), ordinary income of¥590 million (up 23.7%) and net income of ¥342 million (up 24.3%) are projected on a consolidated
basis for the year ending September 30, 2006.