NICHII GAKKAN COMPANY

Financial Results Briefing Document
for the year ended March 2006
May 24, 2006

Table of Contents¡ Financial Highlights
Financial highlights (1) ……………………………………...P2……………………………………...P2
Financial highlights (2) ………………………...
………………………... …………….P3…………….P3¡ Education Business
Sales Strategy …………………………………………..P10…………………………………………..P10
Profit Improvement Strategy ……………………………P11……………………………P11¡ Business Strategy
Progress of Organizational Strategy Aimed
Strong Enterprise Power …………………………………..P4…………………………………..P4¡ Future Business Strategy
Management Goal for Each Businessto be Emphasized ………………………………… P12
Local Partnership Scheme Addressedby Nichii Gakkan …………………………….
…………………………….….P13¡ Medical Support Business
Sales Growth Strategy (1)～Fortify～Fortify Management Support ServicesServices- …………………….P5…………………….P5
Sales Growth Strategy (2)～Fortify～Fortify Local Partnership Support ServicesServices-.………………...P6………………...P6
Strategy for Investment in Human Resources ………………...P7………………...P7¡ Reference Data
Nichii Gakkan’Gakkan’s CSR Activities……………………
Activities……………………..….P14
Changes in Sales and Growth Rate for Each Business(Consolidated) …………………………………….P15…………………………………….P15
Expanding Healthcare InsuranceInsurance-uncovered Services(Non(Non-consolidated) ………………………………..P16………………………………..P16
Changes in Capital Investment andDepreciation Allowances (Non(Non-consolidated) ………P17………P17
Changes in Cash Flow (Consolidated) ………………….P18………………….P18
Changes in ROE/EPS (Consolidated) ……………….
……………….….P19
Status of Shareholder Return …………………………..P20…………………………..P20
Changes in LongLong-term Care Benefits
for Respective Services and Market Size …………....P21…………....P21¡ Health Care BusinessResponse to Revision of the LongLong-term Care…... P8
Insurance System (1) ………………………..
………………………..…
Response to Revision of the LongLong-term
Care Insurance System (2) ………………...
………………... …….P9…….P9All the profit targets and other future data including the number of contracts, number of users and goals contained in thisdocument are forecasts based on the information that Nichii Group has a graspof at present. Such information is subject to influence of uncertain factors such as economic circumstances, relaxation ofregulations and employment conditions. Please understand, therefore, that
actual outcome of business performance and other achievements such as the number of contracts and number of users may besubstantially different from the forecast.

Nichii Gakkan Company

1

Financial highlights (1)Attainment of year-on-year sales
increase for 11 consecutive
periods since 1995 public offering(Sales growth rate ended March
2006: Up 2.3%)

Restructuring our group in
earnestConfiguring infrastructure
capable of providing
preventive care services
across the country

Achievement of best-suitedorganizational form by selection
and concentration

Nichii Gakkan Company(171 places across the country:
Operation begun in April 2006)

2

Financial highlights (2)y y yxxxxxxx Business activity points for the year ended March 2006 xxxxxxxy y yMedical Support Business- Increase of profit margin by 2.1%
(Profit margin: 8.5% for the year ended March 2005 -> 10.6% for the year ended March 2006)- Launching management support services for medical institutions(Development of medical management analysis support services, DPC introduction support seminar, and expansion of hospital PFI business)

Health Care Business- Number of long-term care service users exceeded 160,000(Total as of March 2006: 160,439) ※Including the number of care plan users- Achievement of nation-wide preventive care service infrastructure ~ Multi-functional care centers ~(56 new day-care facilities and 115 existing renovated day-care facilities which began operation in April 2006)

Education Business- Enhancement of sales promotion using new advertising strategy- Launching new training course development(Preventive-care exercise instructor course: Approximately 8,000 persons were trained.)

Nichii Gakkan Company

3

Progress of Organizational Strategy Aimed at Strong Enterprise PowerKey phrase for FY 2006 “Investment in human resources serving
as the foundation for further development.”
FiscalFiscal years
years 2003
2003 throughthrough 2005
2005

FY
FY 2006
2006 (Current(Current year)
year)

Restructuring the Nichii Group
Organizational strategy

Realizing organizational form best-suited
to business field surrounding Nichii Group

Respective business organizational strategies→“Business improvement projects” for each business to shorten
the distance between on-site staff and management teams, shifted
into the second stage.

Organizational strategy for Nichii Gakkan(Parent company)
Fortifying headquarter management system
Strengthening the management system by restructuring branch offices
and branch shops
Organizational expansion by restructuring the sales system
3 outside auditors were selected to fortify the internal audit division

Human resources strategy
Aggressively invest in human resources and establish a sustainablebusiness growth model for the future→Improving career-enhancement system and promoting fullfledged employee recruitment system

Respective business operation strategies

IT strategy

Launch “business improvement projects” for each business to shorten
the distance between on-site staffs and management teams, andestablish a scheme to promptly address various on-site problems

Goes into full-scale operation in FY 2008 in cooperation with
consulting company.
→Full-scale utilization of management information, intensificationof customer acquisition power, productivity improvement, newproduct development, and others

Other strategies

Brand strategy ・・・ Constructing brand concepts
IT strategy ・・・・・・・ Utilization of managerial information
resources by launching and promoting the “IT Project.”Human resources and organization ・・・・ Accumulationand enhancement of corporate culture, and recruitmentof younger staff.

Nichii Gakkan Company

4

[Medical Support Business] Sales Growth Strategy (1)~ Fortify Management Support Services ~Our company strategy

Market environment

1. Downward revision of medical service fees
(The largest-ever drop of 3.16% is marked.)

1.

2.

Acceleration of bringing information
technology into medical institutions
Computerized receipt creation:
To be required by the year 2013 (Proposal)

2. Management information analysis support service- Promotion of medical information analysis services such ascost analysis- Constructing a benchmark-analysis database

3. Increasing the number of DPC-applied hospitals(216 hospitals are to be launched by the end of 2006)

3. DPC-related services- Promotion of DPC introduction support business- Opening of DPC-related seminars

Medical institutions are expected to incorporate
efficient medical management, capable ofcoping with various environmental changes

Nichii Gakkan Company

Fortifying the management support business- Expansion of PFI business(Involvement in various PFI cases)- Promotion of hospital management support with a consortiumof trading companies or construction companies

5[Medical Support Business] Sales Growth Strategy (2)~ Fortify Local Partnership Support Services ~Our company strategy

Market environment

1. Promotion of accepting management
work for cooperation between hospitals and thecommunity(Acceptance result in 2005 :Approx. 150 hospitals)

1. Approval of plan for reduction ofrecuperation beds at Cabinet
Approx. 350,000beds

Approx. 120,000beds(FY
FY 2004)
2004(FY 2012)

2. Promotion of accepting home-care
support clinics

3. Provision of home-visit nursing responding
to area needs

2. Promotion of differentiation andcombination of medical practices inmedical service fee system

4. Fortify cooperation with home care service
constituting our resources

Mutual cooperation between medical
institutions and home care in
the community is expected.
Nichii Gakkan Company

Maximize synergy withhealth care business
6

[Medical Support Business] Strategy for Investment in Human
Resources
FY2006-

Deliberate
securing
FY2006of training courseCompleted
IHtrainees

Gradual introductionof career-enhancement
systemFostering professional
Staff Fostering training
course instructors

Nichii Gakkan Company

FY2007-

Promotion of recruitment plan in combination
with the training course plan
Promotion of utilizing personnel over a large area
Training for employment guidance clerks

Expansion of staff evaluation
Expansion of pay system
Clarification of career-enhancement plan

Strengthening various training courses
Fostering medical records &information management consultants
Arrangement of senior professional staff capable ofanalyzing medical management information
Recommending the acquiring professional
qualifications

7

Stabilization of humanresource provision
Improvement of utilizing
human resource utilization

Provision of high-value
added products by enhancing
staff skills

[Health Care Business] Response to Revision of the Long-term Care
Insurance System (1)Expansion of integrated services
by multi-function care centers

Establishment of multi-functional care centers

MarketMarketenvironment
environment

Foundation of new preventive benefits

Preventive care service facility [At end of September 2006 (planned)]

Setup of 206 facilities across the country
Revision of long-term care benefits
Extend total long-term care services including preventive
care services and address various service approaches

Expanding outsourcing services

Foundation of community support business

MarketMarketenvironment
environment[Target: Specific elderly; 1.25 million people,
General elderly; 19 million people]

Aggressive
Aggressive involvement
involvement inin community
community support
support businessbusiness[entrusted[entrusted byby local
local governments]
governments]

Labor shortages at facilities

Expansion
Expansion ofof staff
staff dispatchingdispatching service
service toto facilities
facilities

Long-term care services in specific facilities
Partially authorized to be entrusted
to external providers※

Efforts
Efforts toward
toward specificspecific facility
facility businessbusinesswithutilizationofexternal
serviceswith utilization of external servicesº “Partial entrustment of long-term care services in specific facilities” business approved in this revision
Nichii Gakkan Company

8

[Health Care Business] Market environment changed by revisionof the long-term care insurance system (2)<Market environment changed by revision of the long-term care>

Strengthening support for moderate to severely handicapped people
Improving service quality
Full-fledged commitment to functional classification

Field restructuring between medical and long-term care business segments
Single service providers or providers with no investment ability are expected
to meet severe management environments.

Superiority of Nichii
Gakkanの優位性
Comprehensive
Comprehensive service-provision
service-provision structure
structure

Comprehensive
Comprehensive strength
strength
・ Revenue base to complement the investment burden
・ Trusted relationships with medical institutions, andgood service-provision results
・ Personnel-acquirement scheme based on education business

Nichii Gakkan Company

Establishment of total long-term care service system enabling
comprehensive support for various care services ranging
from preventive care to long-term care

9[Education Business] Sales Strategy(1)Full-fledged commencement of new advertisement strategy<New advertisement strategy ><Existing media >Media mix

Web
Web
TV
commercials

Magazines
Newspapers

Newspapers

Increasing
response

Improving awareness of
Nichii’s activities(2) Development of new training courses with customer needs in mind
¡ Preparation for and response to long-term carepersonnel basic training course (temporary name)¡ Development and provision of new-skills
training course to support medical management

Nichii Gakkan Company

Expansion of training courses
for existing customers

10

To sales growth

Magazines

[Education Business] Profit Improvement Strategy
Promotion of
streamlining thetraining course
management

Revision oftraining course
curriculum

Medical office work course(Medical and dental course)¡Efficient training course planning by
introducing a new training system in responseto student needs¡Preparation for training courses tomaintain supply & demand balance¡Increasing the availability by effective
time utilizationº Joint lectures are arranged for each course.

Reduce costs by efficient management

Going
Going forfor early
early profit
profit increases
increases
Nichii Gakkan Company

11

[Future Business Strategy] Management Goal for Each Business to
be Emphasizedy y yxxxxxxx Fiscal 2006 through 2010 xxxxx y y y<Aiming to attain 300 billion yen in company-wide consolidated sales by fiscal year 2010 >Medical Support Business

Provision of high value added
solution by shifting from laborintensive to knowledge-intensive
business

Nichii Gakkan Company

Health Care Business
Expansion of market size
Expansion of service providers

Expansion of insurance-uncovered
service menus and volume on a basis of
long-term care insurance service

12

Education Business
Generate company brand-nameawareness, develop and extend
training courses suited tocustomer needs, aiming to
produce high-profit services

[Future Business Strategy] Local Partnership Scheme Addressed by
Nichii Gakkan((Scheme
Scheme for-term carefor strengthening
strengthening partnershippartnership between
between medical
medical andand long
long-termcare promoted
promoted byby Nichii
Nichii ))Patients

Visit doctors

Hospitals and clinics

Medical checks

Introduce those who want medical care
Cooperatively support the transition from
hospital to home care

¡To patients(1)
Introduce appropriate medical institutions(2)
Help their transition from home care tohospitalization

Nichii Gakkan
Nichii Gakkan will serve as a liaison between medical institutions andpatients to create a partnership between the medical field and care-service field.
Nichii Gakkan Company

13

Outsourcing of medicalrelated services

(1)
(2)

Provision of medical-related
services

Provision of long-termcare services

Request for long-termcare services[Serving as a bridge between medical
institutions and patients ]¡To medical institutions

[Reference Data] Nichii Gakkan’s CSR Activities
Approach to employees

General executive class¡Approach to utilization of female

employees
Proportion of female executives is high.
¡Active appointment of female executives¡Provision of school-event holidays
Provision of three school-event holidays
annually for employees who have elementaryschool children.

fe
fe
ma
ma
le
le

ma
ma
le
le

Top executive class

femal
femal
ee
16%
16%

40
40

male
male
84%
84%

Department manager class

femal
femal
ee
70%
70%

male
male
30%
30%

·Two female directors·Of 10 branch offices, 9 females are assigned as presidents.
·Of 116 branch shops and sales offices, 98 females are assigned as chief managers.
(º Mar. 2006)

Customer satisfaction survey

Social contribution activities

Since 2001, an anonymous survey has been conducted annually by
selecting 30% of the users for each service from among our homecare service users using a random-sampling method. The survey
results are disclosed on our web site and are fed back to the on-sitecare service staff, so as to improve service quality and help solve
problems.

Acceptance of junior high school students of Chiyoda-ku areafor internship at one of our care facilities (Tokyo)(July through August 2005)

Somewhat
unsatisfied 1%

According to the results ofthe survey implemented in2005 [For all services]

By providing practical training opportunities at care facilities tojunior high school students, we help them improve theircommunication abilities and, understand the value of the elderly.

Nichii Gakkan Company

14

Mostlysatisfied
31.0%
31.0%

No answer 4%Satisfied
64.0%

[Reference Data] Changes in Sales and Growth Rate for EachBusiness (Consolidated)
Changes in sales and growth rate

Sales growth rate

(Billions of Yen)

2 ,2,000
000

5.7
％
5.7%

Medical Support Business

3.4%
3.4%

10.7
％
10.7%

Health Care Business
Education Business

20.1
％
20.1%

1 ,1,500
500
25.1
％
25.1%

1 ,1,000
000

5500
00

00

Nichii Gakkan Company

FY01.3
FY01.3

FY02.3
FY02.3

FY03.3
FY03.315

FY04.3
FY04.3

FY05.3
FY05.3

FY06.3
FY06.3

[Reference Data] Expanding Healthcare Insurance-uncovered
Services (Non-consolidated)
Changes in sales of our insurance-uncovered services(Billions of Yen)

Sales of insurance-uncovered services
The component ratio exceeds 10%.
Insurance-uncovered

800

Insurance-covered
Growth rate in insuranceuncovered services

700

42.8%
24.6%

52.0%

600
This category of service is experiencing atemporary slowdown in growth rate due to theabolishment of catering services, but issteadily growing.

500
400
300
200
100
FY03.3
Nichii Gakkan Company

FY05.3

FY04.316

FY06.3

[Reference Data] Changes in Capital Investment and Depreciation
Allowances (Non-consolidated)
Capital investment and depreciation
allowances: (Billions of yen)

120
120
110
110

Operating income:(Billions of yen)

CapitalCapital investment
investment(Tangible)(Tangible)
FY
FY Mar.
Mar. 2006:
2006: Approx.
Approx. 8.5
8.5 billion
billion yenyen
FYFY Mar.
Mar. 2007:
2007: Approx.
Approx. 1.6
1.6 billion
billion yenyen (forecast)(forecast)

OperatingOperating income
incomeFYFY Mar.
Mar. 2006:
2006: Approx.
Approx. 4.9
4.9 billion
billion yenyen
FYFY Mar.
Mar. 2007:
2007: Approx.
Approx. 5.4
5.4 billion
billion yenyen (forecast)(forecast)

100
100
90
90

1120
20
1100
00

80
80
70
70

880
0
660
0

60
60

440
0

50
50
40
40

220
0
000

30
30
20
20
10
10
00

1140
40

-20
-2
0
-40
-4
0
-60
-6
0
FY00.3
FY00.3

FY01.3
FY01.3

FY02.3
FY02.3

FY03.3
FY03.3

FY04.3
FY04.3

FY05.3
FY05.3

FY06.3
FY06.3

Depreciation
Depreciation allowances
allowances(which(which includes
includes tangibles,
tangibles, intangibles,
intangibles, andand others)
others)
FY
Mar.
2006:
Approx.
1.7
billionyen
FY Mar. 2006: Approx. 1.7 billion yen
FY
FY Mar.
Mar. 2007:
2007: Approx.
Approx. 1.9
1.9 billion
billion yenyen (forecast)(forecast)Nichii Gakkan Company

17

FY07.3 (Forecast)
FY07.3

[Reference Data] Changes in Cash Flow (Consolidated)(Millions of yen)

Cash
Cash andand cashcash equivalents
equivalents at
at
end
of
periodend of period

14,00014,00012,00012,00012,391
Sales
Sales activity
activity CF
CF

Financing
Financing activity
activity CFCF

10,00010,000
8,000
8,000

7,385

6,672

3,871

6,000
6,000
4,000
4,000

5,900

2,839

2,000
2,000

1,486
471

00
▲
S2,0002,000▲
S4,0004,000

S3,748
S4,502▲
S6,0006,000▲
S8,0008,000

S4,233
S5,538Investment
Investment activity
activity CF
CF

FY Mar. 2004
04年3月期

Nichii Gakkan Company

FY Mar. 2005
05年3月期18

FY Mar. 2006
06年3月期[Reference Data] Changes in ROE/EPS (Consolidated)
19.7%
19.7%

20.0%
20.0%

¥¥250
250

18.0%
18.0%
219.8
219.8

16.0%
16.0%

(%)
ROE （％）
ROE

215.25215.25
16.1%
16.1%

14.0%
14.0%

¥¥200
200

EPS
Yen)
EPS (（円）

12.0%
12.0%

¥¥150
150

10.0%
10.0%
8.0%
8.0%
6.0%
6.0%

¥¥100
100
56.12
56.12
55.03
55.03

4.2%
4.2%

4.0%
4.0%
2.0%
2.0%

39.4
39.4

3.9%
3.9%

¥50
¥50

3.8%
3.8%

0.0%
0.0%

¥0
¥0

FY02.3
FY02.3
Nichii Gakkan Company

FY03.3
FY03.3

FY04.3
FY04.319

FY05.3
FY05.3

FY06.3
FY06.3

[Reference Data] Status of Shareholder Returnº Dividend rate for stockholder's equity [Dividend payout ratio x ROE (Consolidated)]
3 .0 %
3.0%

¥
5
¥225

DOE
(%)
DOE(%)

Dividend(Yen)
配当金(円)

22.0Yen

22.0Yen
2 .5 %
2.5%

¥
0
¥220

17.5Yen15¥¥ 15

17.5Yen
1.81%(Forecast)

15.0Yen

2 .0 %
2.0%

1.48%
1.3%

1 .5 %
1.5%

1.28%

10
¥¥ 10
1
.0 %
1.0%

0.55%

¥¥ 55

0 .5 %
0.5%

0 .0 %
0.0%¥0
F Y0 2 .3
FY02.3
Nichii Gakkan Company

F Y0 3 .3
FY03.3

F Y0 4 .3
FY04.320

F Y0 5 .3
FY05.3

F Y0 6 .3
FY06.3

[Reference Data] Changes in Long-term Care Benefits for
Respective Services and Market Size
Market for home-visit
bathing service

Market for home-visit
long-term care service(（単位：億円）
Billion s of yen)(Billion s of yen)
（単位：億円）
10,000

0.9%
Up

700

8,000

37.3%
Up

6,000

(Source: Monthly report for the survey of actual conditions inLong-term Care Benefits of the Health, Labor and Welfare Ministry)

3.7%
Up

8.2%
Up

18.6%
Up

600

15.2%
Up

500

Approx. 730
billion yen

6.4%
Up

0.3%
Down
Approx. 55
billion yen

400
300

4,000

2,000

44.7

400.1

200

billion
yen

100

0

billion
yen
0

FY 01

FY 02

FY 03

FY 04

FY 05(Forecast)

FY 01

Market for day-care service

FY 02

FY 03

(Billion s of yen)
（単位：億円）

10,000

2,000

8,000

28.5%
Up

21.6%
Up

16.9%
Up

13.8%
Up

17.1%
Up

1,800
1,600
1,400

Approx.
790billion
yen

4,000

60.6%
Up

1,200
1,000

9.1%
Up

32.1%
Up

Approx.

185billion
yen

800
600

378.4

2,000

FY 05(Forecast)Welfare equipment rental service（単位：億円）(Billion s of yen)

6,000

FY 04

68.5

400

billion yen

billion yen

200
0

0
FY 01

Nichii Gakkan Company

FY 02

FY 03

FY 04

FY 01

FY 05(Forecast)
21

FY 02

FY 03

FY 04

FY 05(Forecast)º The forecast figure is calculated on the basis of the “Monthly report for the survey of actual conditions inLong-term Care Benefits of the Health, Labor and Welfare Ministry.”