Summary of Consolidated Financial Results for Year to January 2006
March 13, 2006

Company name:

Pigeon Corporation

Listings: Tokyo Stock Exchange (First Section)

Stock code: 7956
(URL http://www.pigeon.co.jp)
President:
Seiichi Matsumura
Contact:
Katsumi Oyabu, Managing Officer

Headquarters: Tokyo

TEL ++81-3-3252-4113

BOD meeting for approving financial result March 13, 2006
U.S. accounting standards:
Not applicable

１. Consolidated Financial Results (Years to January 31 2006 and 2005)(¥ millions, rounded down)(1) Performance (year to January 31)
Net sales

Operating income

Change (%)

2006
2005

41,74740,719

(
(

2.5)
19.2)

Net income

Ordinary income

Change (%)

2,215 ( △18.4)
2,714 (
2.4)
Net income pershare (¥)

Net income
per share(fully diluted)
(\)

67.84
74.22

67.83
74.10

Change (%)

2,200
2,621
Return on
equity (%)( △16.1)(
4.7)
Ordinary
Ordinary
income toincome tototal assets
net sales (%)(%)

Change (%)

2006
2005

1,342
1,494

( △10.2 )( 17.6 )

6.7
7.7

6.4
8.1

5.3
6.4

Notes: 1. Equity in earnings of affiliates:¥44 million (Jan. 2006); ¥44 million (Jan. 2005)
2. Average shares outstanding (cons.):
19,790,146 (year to Jan. 2006); 20,138,055 (year to Jan. 2005)
3. Changes in accounting principles:
Not applicable
4. Figures in parentheses represent year-on-year percentage change.

(2) Financial Position (at January 31)
Total assets

2006
2005

33,93734,382(¥ millions, rounded down)
Shareholders' equity

20,312
19,997

Equity-assets ratio (%)

59.9
58.2

Equity per share (¥)

1,029.41
989.43

Note: Shares outstanding at year-end (consolidated): 19,732,372 (Jan. 2006); 20,211,283 (Jan. 2005)(3) Cash Flows (year to January 31)
Cash flows fromoperating activities

2006
2005

1,765
4,286

(¥ millions, rounded down)
Cash flows frominvesting activities(1,668)(2,850)Cash flows fromfinancing activities(1,018)(1,881)

Cash and cash equivalents
at year-end

1,903
2,768

(4) Scope of Consolidation and Equity-Method Application
Consolidated subsidiaries: 12; Nonconsolidated subsidiaries (equity method): 0; Affiliates (equity method): 2.
(5) Changes in Scope of Consolidation and Equity-Method Application
Consolidated: 0 (newly included); 1 (excluded)
Equity method application: 0 (newly included); 0 (excluded)
２. Forecast for Fiscal (Year to January 31, 2007)
Net salesInterimFull year

21,80044,500(¥ millions, rounded down)

Ordinary income

1,100
2,600

Net income

750
1,650

(Reference) Forecast net income per share (full year): ¥83.61
In this document, statements other than historical facts related to plans, forecasts, and strategies are based on information
available at the time of writing. The corporation cannot provide guarantees or commitments for these forward-looking
statements. Due to various factors, actual results may differ significantly from those anticipated in this document.
-1-

Corporate Group
The Pigeon Group consists of the Pigeon Corporation (the parent company), 12
consolidated subsidiaries, and two equity-method affiliates. The Group is engaged
mainly in the manufacture, purchase, and sale of baby care, child care, and healthcare
products, as well as in the provision of child-rearing and healthcare support services.

Management Policies
Basic Policies
Based on its corporate commitment, “providing the gift of love to all,” thePigeon Group is dedicated to helping those in need—while pregnant, giving birth, andrearing children, as well as in old age. Our policy is to develop our business bydelivering products and services that address the needs of these people. Fulfilling ourrole as a “lifestyle support company focusing on child rearing,” we are leveraging the
Pigeon brand and the quality of our management to build a high corporate profile that isrecognized worldwide. This is our medium-term corporate vision.
The period under review was the first year of our second medium-term
management plan for the 21st century. Entitled “Global 500,” the plan covers thethree-year period from February 2005 to January 2008. During the year, we steadily
implemented top-priority business initiatives and maximized synergies derived from theGroup’s comprehensive strengths.

Profit Appropriation Policy
The Pigeon Group regards the return of profits to shareholders—made possible byongoing improvements to Groupwide profitability—as an important management
priority. Our policy is to make the most effective use of retained earnings. We actively
invest these funds in growth areas, new businesses, and research and development, as
well as in reinforcing our operating foundation by streamlining production facilities tolower costs and raise product quality. With respect to appropriating earnings, our policy
is to actively return profits to shareholders. We do this by paying stable and ongoing
cash dividends, with the emphasis on raising dividend levels where possible. For the-2-year under review, we plan to distribute as dividends the equivalent of 30% ofconsolidated net income, for a dividends-on-equity ratio of 2%. We plan to pay annual
dividends of ¥20.00 per share, including the ¥10.00 interim dividend already paid.

Medium-Term Strategies
Building on the achievements of Corporate Value Creation 21, our medium-termbusiness plan that ended in January 2005, we embarked on Global 500, our second
business plan for the 21st century, in the year under review. The theme of the new plan,
covering the three-year period to January 2008, is to maximize corporate value on a
global scale. Under the plan, we are seeking achieve annual consolidated net sales of¥50 billion. Below is an outline of the new plan.

Global 500: Second Medium-Term Plan for the 21st Century(February 2005–January 2008)
Basic Policies
Through relentless market penetration, the Group will reinforce its unique position andcompetitive edge in the baby and child care segment, its core business. At the same time,
we will actively mobilize Groupwide synergies and “drawing power” to build a strong
presence in growth areas. Through these actions, we will seek to maximize corporate
value on a global scale. Specific initiatives are listed below.
（１）Our business related to baby and child care products forms the core of Groupmanagement and is a key determinant of our overall corporate value. Our basic strategy
for this business is to “create value.”（２） We will position our child-rearing support, home healthcare (HHC), nursing care,and overseas businesses as growth areas.
（３） Addressing changes in the earnings structure of our overall business, we willreform internal systems and redistribute managerial resources.
Key Performance Targets (Consolidated)
Our consolidated performance targets for the year ending January 2008, the final termof the plan, are as follows.
Net sales: ¥50 billion-3-Gross profit ratio: 39.5%
Operating income ratio: 8%
Ordinary income ratio: 7.5%
ROA (ratio of ordinary income to total assets): 10%
To date, we have actively invested to improve our business structure, which is expected
to change dramatically. With a Groupwide management approach offering superior
growth potential and efficiencies, we have built a robust foundation for achieving
strategic growth via M&A activities in Japan and overseas. In the current fiscal period,
the second year of Global 500, we will aim to further strengthen Groupwide
competitiveness. At the same time, we will address the drastic reforms taking place inthe domestic market for baby and child care products.

Issues to Address
The low-birthrate trend in Japan is gathering pace as the number of births continues tofall short of predictions. The business and social environments surrounding the PigeonGroup, therefore, require a cautious approach. A number of child-rearing support
measures have been put forth, including the appointment of a government minister incharge of tackling the declining birthrate situation. However, we expect conditions toremain difficult. Despite such challenges, the Group will unite in a concerted effort tomeet the performance objectives of Global 500 and satisfy the expectations of allshareholders.
On January 16, 2006, we implemented a structural reorganization designed topromote the progressive expansion of various Group businesses, rebuild our domestic
business related to baby and child care products, and nurture and grow our HHC andnursing care product businesses. We took this action to address major changes taking
place in our operating environment, including the widening adoption of Groupwide
management, global expansion of our operations, and the dramatically changing nature of
the domestic baby and child care product business. The reorganization is on divisionallines, with an executive officer appointed as general manager of each division. Byclarifying the functions of each division in this way, we have created an operating systemthat clearly separates various lines of authority and responsibility.

-4-

Corporate Governance
Basic Stance
Pigeon recognizes that sustained improvements in corporate value require enhanced
management efficiency and transparency. It is also crucially important to reinforce themanagement surveillance function to ensure that the Corporation pursues its
performance targets while maintaining an appropriate balance between shareholder,customer, and employee value. To this end, Pigeon is undertaking various initiatives
aimed at ensuring sound corporate governance.
Current Status(1) Key Entities
The Group adopts a corporate auditor system. Its Board of Directors has seven members,none of whom is an outside director, as well as a Board of Corporate Auditors, which
has four members, including two external ones.
In addition to the Board of Directors and Board of Corporate Auditors, theGroup is building a corporate governance framework based on an internal auditing
system.
The task of the seven-member Board of Directors is to swiftly andappropriately address changes in the business environment by ensuring thatmanagement decisions are made rationally and efficiently. Its overall aim is to assure
sustained growth and establish a robust operating foundation. In addition to the Boardof Directors, which handles control and supervision, Pigeon has a system of executive
officers, responsible for execution of business. By separating the decision-making andsupervision function from the business execution function, we are working to ensure
sound corporate governance. Problems are quickly solved at weekly Executive Council
meetings, where issues are discussed based on grass-roots perspectives. In addition,
Board of Directors meetings are attended by external and internal auditors, whose
opinions are actively sought in an effort to reinforce the Board’s ability to supervise theexecution of business. In addition, by reforming our organization along divisional lines,
we have given business execution responsibilities to the executive officers in charge of-5-each division, thus expediting the processes for deliberating business issues and making
decisions accordingly.
The Board of Corporate Auditors, which has four members (including two
external ones), performs a meticulous auditing function. Depending on their specificresponsibilities, auditors attend Board of Directors meetings, where they listen to
discussions, receive important documents for perusal, and scrutinize the Corporation’s
business and financial position.
(2) Internal Auditing and Risk Management Systems
The Group is building a management monitoring system centering on supervision ofbusiness execution by the Board of Directors, as well as on audits carried out byauditors and the Board of Corporate Auditors. The Audit Office, established to handle
the internal auditing function, undertakes audits to ascertain whether or not execution ofbusiness throughout the Group is proceeding efficiently and appropriately, according toannual plans. In addition, the Group set up a risk management framework in 2003,
devising basic policies, rules, and specific procedures.
However, both the internal and external operating environments surrounding
the Group are changing dramatically. Under Japanese corporate law to be enacted in
May 2006, for example, basic policies for “internal auditing systems” are to subject toarbitrary decision by the Board of Directors. For these reasons, we have been
reinforcing our risk management system, identifying the major risks confronting theGroup into the categories of business risk, financial risk, hazard risk, and compliancerisk. Recently, we also created a compliance program as a key part of our internal
auditing system. To ensure compliance-oriented management, for example, we haveidentified seven universal business ethics rules. We have also made a declaration that all
Group employees must obey all legal and social regulations, as well as the spirit of such
regulations, while behaving sincerely and upholding the highest ethical standards.
In addition, the parent company’s Corporate Planning Division has examined
the monitoring frameworks of consolidated subsidiaries from the standpoint of enabling
accurate reporting from those subsidiaries. As far as possible, we are now building
systems to facilitate reporting by subsidiaries. In this way, we can ensure that the valuesof management are communicated accurately to all Group employees. Througheducational forums on business ethics, we have also raised the efficacy of our-6-compliance system, with respect to observing legal regulations and business ethics.
Furthermore, we have established a hotline within our internal reporting system,
ensuring that emerging problems are properly reported while protecting the identities of
the reporters. The Compliance Committee then examines ways to address suchproblems and launches investigations into related facts. To ensure legality, we seek
counsel from lawyers as necessary.
(3) Internal Audits, Corporate Auditor Audits, and Accounting Audits
The Group has a corporate auditor system. The Board of Corporate Auditors, with two
full-time members and two external members, determines auditing policies andresponsibility apportionment, based on which each corporate auditor attends meetingsof the Board of Directors and the Executive Council. In addition, the Board conducts
audits of all head office departments, places of business, and affiliated companies, thus
ensuring effective monitoring of business execution by directors.
Details of internal audits are discussed in the previous section (“Internal
Auditing and Risk Management Systems”).
The certified public accountants handling the Group’s accounting audits are
Jun Sugita and Kazuyuki Togo, both senior partners of BDO Sanyu & Co. Mr. Sugita
and Mr. Togo have 19 and 15 years of accounting experience, respectively, includingtime spent prior to the enactment of the revised Certified Public Accountants Law inJune 2003. Also assisting in the Group’s accounting audit for the year ended January 31,
2006, were three other certified public accountants and three junior accountants.
(4) Beneficial Inter-Company Relationships (Personal, Capital, and Financial, andOther)
No such relationships exist.

Reinforcing Corporate Governance
The Pigeon Group is currently working to improve its information security and personal
information protection systems, which it regards as crucial to the effective delivery of
products, services, and information to customers. For example, we are striving toacquire the Privacy Mark, which is bestowed upon businesses with appropriate-7-mechanisms in place to protect personal information. To this end, we set up a Personal
Information Protection Committee and formed a Groupwide organizational structure
aimed at earning Privacy Mark status. As a result, on July 5, 2005, we received JIS Q
15001 certification from the Japan Information Processing Development Corporation(JIPDEC), the entity that handles Privacy Mark certification. Companies with JIS Q
15001 certification are deemed to have “met all the necessary compliance program
requirements for protecting personal information” and are thus handling personal
information in a proper manner.
Keen to enhance the transparency of our operations, we maintain proactive
investor relations (IR) activities and pursue swift and accurate information disclosurefor individual and institutional investors. Our IR activities include information meetings
to announce our business results (held semiannually), explain our medium-termbusiness plan, and describe new products and businesses. We also regularly update our
website and host tours of our domestic and overseas facilities. Through active
participation by our president in domestic and overseas IR activities, we aim to raise thetransparency and integrity of our operations.
Basic Policies on Relationships with Interested Parties (including parent company)
Such issues are not applicable.

Performance and Financial Position

Performance(1) Environment and Results
In the fiscal year under review, the Japanese economy benefited from a steadyturnaround of overall consumption, which began in the spring of 2005. The turnaroundwas sparked by brighter consumer sentiment owing to improved employment conditions
and higher worker incomes, which alleviated immediate concerns had about theeconomy. Due to an extremely cold winter, some winter-related items sold out in shops,-8-giving the economy a boost. However, rising prices of raw materials associated withgrowing crude oil prices failed to alleviate uncertainties about the direction of theeconomy, underscoring a less-than-optimistic outlook for the future.
In the domestic baby and child care segment, the Group’s main business, we
introduced into the market new products that highlight our originality andcompetitiveness, which we have built up to date. However, the trend of declining
birthrates continued unabated, and price competition at the retail level for consumables,
notably our baby wipes, remained intense, resulting in a difficult business environment.
In our overseas business, by contrast, we achieved improved year-on-year
results in East Asia, especially China, as well as in North America and Europe. In China,
our sales strategy—shifting the focus from sales in large coastal cities to introducing
new products and building brand image in regional inland cities—proved successful,generating increased sales.
In the child-rearing support segment, we achieved a solid improvement in our
performance due to ongoing privatization of public facilities, in which publicchild-minding centers are entrusting their operation to private entities. This segment
also benefited from the Law for Measures to Support the Development of the Next
Generation, enacted in April 2005, which facilitates the establishment of in-company
child-minding operations.
Consolidated net sales for the year totaled ¥41,747 million, up 2.5％ from theprevious year. Ordinary income fell 16.1 %, to ¥2,200 million, and net income declined
10.2%, to ¥1,342 million.

Segment Review
Baby and Child Care
Sales in this segment amounted to ¥32,185 million, up 3.5% from the previous year.
Operating income declined 10.6%, to ¥4,197million. This segment is classified into
three categories: baby and child care services, overseas business, and child-rearing
support services.
Baby and Child Care Services: In this category, the Group’s principal area of business-9-

development, market conditions remained difficult as domestic birthrates declined andprices of consumables, especially baby wipes, continued falling. Under these conditions,
we actively introduced new products as we sought to enhance the emotion and joy ofcustomers, from giving birth to raising children. In the intense competitive market forbaby wipes, we launched new products with enhanced grime-removal features, as well
as a lotion that protects the delicate skin of babies. We also sought to enhance namerecognition among consumers via television commercials. However, these efforts failed
to translate into improved year-on-year results.
Overseas Business: The Group achieved significantly increased sales in all overseas
countries, including such major markets as China, South Korea, and Taiwan. Sales ofbaby bottles and nipples and breast pads were particularly good. Main consolidated
subsidiaries— Pigeon Industries (Thailand) Co., Ltd., Thai Pigeon Co., Ltd., Pigeon
Singapore Pte. Ltd., Pigeon (Shanghai) Co., Ltd., and Lansinoh Laboratories, Inc.—allreported improved performances. We attribute our favorable overseas business results tosynergies derived from our overseas subsidiaries in the areas of production and sales. In
China, we expanded our market presence by shifting our focus from large coastal cities
to regional inland cities, reflecting an aggressive sales campaign to broaden the Pigeon
brand profile.
Child-Rearing Support: Pigeon has a strong track record as an operator ofgovernment-approved child-minding centers. In the year under review, we took over theoperation of two more such facilities—one each in Ota Ward and Nerima Ward. In April
2004, all of Japan’s national hospitals and nursing homes were privatized. Within thesefacilities are 113 child-minding centers that Pigeon now operates. During the year, we
also made good progress in the area of in-company child-minding operations, opening
centers within Yamaha Motor Co., Ltd., and other companies. As a result, thechild-rearing support category generated increased year-on-year revenue.
Healthcare
Sales in this segment slipped 4.2%, to ¥6,476 million, and operating income grew
18.5%, to ¥340 million.
During the year, we undertook proactive marketing efforts to raise market- 10 -

share and expand sales. In the market for incontinence pads, a mainstay product, we
introduced new items offering superior protection against lateral leakage. Despite such
efforts, however, our results fell short of our projections. Also involved in the healthcare
business is Tahira Co., Ltd., a consolidated subsidiary that makes lifestyle-enhancement
products for the elderly. Our plan is to make healthcare a central part of the PigeonGroup’s operations by exploiting synergies with Tahira in the areas of productdevelopment, sales, and distribution. In the year under review, however, Tahira’s
performance fell below the previous year’s level. Nevertheless, Pigeon Manaka Co.,
Ltd., a consolidated subsidiary that provides healthcare dispatch services for the elderly,
continued providing services while emphasizing close ties with its local communities in
Tochigi Prefecture. That company expanded its operations and reported an improved
performance as a result.

OthersSales from other operations totaled ¥3,085 million, up 7.8％. Operating income grew
12.3%, to ¥283 million.
Pigeon Will Co., Ltd., a consolidated subsidiary that sells maternity
undergarments, expanded its operations in the year under review. During the year, we
reported increased sales of Folic Acid Plus (food with health claims), an easy-to-drink
vitamin supplement combining all of the nutritional elements essential during
pregnancy and breastfeeding into one tablet. This segment’s overall performance
improved as a result.
Sales by Segment (Consolidated)(¥ millions)Year to Jan. 06

Year to Jan. 05

Baby & child care

32,185

31,100

1,084

3.5

Healthcare

6,476

6,758

–281

–4.2

Others

3,085

2,860

224

7.8

Total

41,74740,7191,027

2.5- 11 -

ChangeChange (%)

Outlook
The fiscal period to January 2007 is the second year of Global 500, our second
medium-term business plan for the 21st century. For the year, we expect conditions toremain difficult in the domestic baby and child care business, with little prospect ofrecovery in the birthrate. In response, we will harness synergies among Group
companies to maintain a framework conducive to increased revenues and earnings andthus maximize our corporate value on a global basis.
For the year, we forecast consolidated net sales of ¥44.5 billion (up 6.6%),
ordinary income of ¥2.6 billion (up 18.2%), and net income of ¥1.65 billion (up 45.3%).
Compared with our non-consolidated forecasts, these figures represent a consolidation
ratio of 1.48 times in the case of net sales, 3.25 times for ordinary income, and 2.06
times for net income—reflecting our success in harnessing the strengths of PigeonGroup companies.
During the current fiscal period, Pigeon will celebrate the 50th anniversary of its
establishment. To thank our shareholders for their support, we plan to declare acommemorative dividend of ¥10.00 (including a ¥5.00 interim commemorative
dividend), in addition to a regular dividend of ¥20.00 (including a ¥10.00 interim
regular dividend), for a total annual dividends of ¥30.00. That decision was made at theBoard of Directors meeting, held on March 13, 2006.
Forecasts (Consolidated)(¥ millions)

Net sales

Ordinary income

Net income

Year to Jan. 07

44,500

2,600

1,650

Year to Jan. 06

41,747

2,200

1,342

Change

2,752

399

308

6.6

18.2

23.0

Change (%)

Business Risks
The operating results of the Pigeon Group may be potentially and significantly affectedby various factors that could occur in the future. The Group has identified the major- 12 -

risks that could affect its business development. Details are given below. Information
contained within related to the future is based on the Group’s judgment as of the end of
the fiscal year under review.
Declining Birthrate
The domestic birthrate has declined since the 1980s, making Japan one of the world’s“low-birthrate nations.” Moreover, the advent of the “declining population society” isfast approaching. There is much concern that the low-birthrate trend will have anegative impact on economic growth and the vitality of regional communities. Even thegovernment has devised various measures to support the rearing of children.
Nevertheless, birthrates are expected to continue declining. We predict that overall(quantitative) demand in the domestic market for baby and child care products, theGroup’s main business, will be influenced by the falling birthrate, and sales in thissegment may decline as a result.
Domestic Market and Economic Trends
The baby and child care segment accounted for 77% of the Group’s consolidated net
sales in the year under review, and domestic sales of baby and child care products
represented the majority of segment revenues. The declining birthrate and fallingpersonal incomes, stemming from economic fluctuations, could potentially affect future
sales in this segment. The Group’s baby and child care products are sold mainly throughtwo channels: drugstores and shops specialized in baby products. Operators in bothchannels continue to open new outlets, causing competition between stores to intensify.
We believe, therefore, that the trend toward lower retail prices will continue. The
Group’s efforts aggressive sales and marketing activities alone may not be sufficient toovercome these obstacles, which may potentially affect its business results.
Overseas Business Risk
At present, the Group makes products in Thailand, China, and Indonesia, and also hasbusiness activities elsewhere in Asia, as well as in the Middle East and North America.
Risks associated with our overseas business are described below. We will hedge against
such risks to the extent possible, but various unforeseen factors could potentially affectour business performance.
- 13 -

- Legal revisions or tightening regulations that have a negative impact on the Group- Socioeconomic upheaval caused by terrorist acts, war, or the outbreak of infectious
diseases, such as SARS and avian influenza- Earthquakes and other natural disasters- Unforeseen foreign exchange fluctuations
Climactic and Natural Disasters
The markets for baby and child care products and healthcare products, the Group’s
mainstay businesses, are relatively impervious to weather-related factors. Earthquakes
and other major natural disasters, however, could potentially damage our manufacturing
facilities, causing production output to decline.
Changes in Raw Materials Prices
Major raw materials used by the Group include some that are affected by the market
prices of crude oil and pulp. If the prices of such materials rise, our manufacturing costs
will also increase, potentially affecting the Group’s business results.
Problems with Manufacturing Subcontractors
The Group subcontracts part of the production of baby and child care products andhealthcare products to outside manufacturers. While all due care is taken to ensure top
quality, there is a risk that quality could be compromised by an unforeseen event.
Changes in Laws and Regulations
In the course of developing its domestic business, the Group is subject to a variety oflegal regulations, including the Pharmaceutical Affairs Law, Food Sanitation Law, andProduct Liability Law. If such laws and regulations are revised, or unexpected ones
introduced, the Group’s business performance could be affected as a result.
Risks Related to the Child-Rearing Support BusinessTo assist families in which both parents are working, the Group offers a number ofservices, including operation of child-minding and daycare centers and provision ofbabysitter dispatch services. It also has its own Kids World chain of child-minding
centers. Through these activities, the Group is entrusted with the care of numerous- 14 -

babies and toddlers. The Group takes every precaution to ensure maximum safety, but
acknowledges the possibility that an accident could cause injury to a baby or toddler. To
date, there have been no accidents or compensation claims that could affect the Group’sbusiness operations. However, there is no guarantee that such events will not occur inthe future. If such an event does occur, the Group’s business performance may beaffected as a result.
Litigation
As a manufacturer of products for consumers, the Group understands the extreme
importance of product quality and safety, as well as the quality of materials used in its
products. Any claims against the reliability or safety of our products could cause asudden decline in sales, which could potentially affect the Group’s businessperformance. Since our establishment, we have not been the target of large-sum
compensation claims or lawsuits. In our business, however, there is a constant inherent
risk of being sued, either in Japan or overseas. Therefore, the Group’s business results
could potentially be affected if it is subject to a compensation claim, the extent of
impact being determined by the outcome of such legal action.
Protection of Personal Information
In the course of providing products and services to consumers, the Group handles alarge volume of personal information. For some time, we have sought to ensure that all
employees understand the importance of protecting personal information, provide
mandatory in-house education forums, and reinforce our systems for managing
customer information. Due to unforeseen circumstances, however, there is a risk that
personal information could be leaked to a third party, which could potentially affect theGroup’s business performance.
Cautionary Note on Forward-Looking Statements
In this document, statements other than historical facts related to plans, forecasts, andstrategies are based on information available at the time of writing. The Corporation
cannot provide guarantees or commitments for these forward-looking statements. Due
to various factors, actual results may differ significantly from those anticipated in thisdocument.
- 15 -

Consolidated Balance Sheets
At January 31, 2005(¥ thousands)
ASSETSI Current Assets
1. Cash and time deposits
2. Notes and accounts receivable
3. Inventories
4. Deferred tax assets
5. Other receivables
6. Other
7. Allowance for doubtful accounts
Total Current Assets
II Fixed Assets
1. Tangible Fixed Assets(1) Buildings and structures
Accumulated depreciation(2) Machinery and transportation equipment
Accumulated depreciation(3) Tools, furniture and fixtures
Accumulated depreciation(4) Land(5) Construction in progress
Total Tangible Fixed Assets
2. Intangible Fixed Assets(1) Consolidation adjustment account(2) Software(3) Other
Total Intangible Fixed Assets
3. Investments and Other Assets(1) Investment securities(2) Insurance reserve(3) Bankruptcy claims(4) Deferred tax assets(5) Other(6) Allowance for doubtful accounts
Total Investments and Other Assets
Total Fixed Assets
Total Assets

2,768,291
8,597,127
3,427,581
579,327
231,868
158,154(17,432)
15,744,917

9,921,489
5,441,094
7,248,697
5,125,080
3,487,094
2,947,048

SHAREHOLDERS' EQUITYI Capital stock
II Additional paid-in capital
III Retained earnings
IV Net unrealized gains (losses) on securities
V Foreign currency translation adjustment
VI Treasury stock, at cost
Total Shareholders' Equity
Total Liabilities, Minority Interests and Shareholders' Equity

% of
total

1,903,361
7,643,258
4,437,556
752,275
385,309150,450(12,155)
15,260,057

9,903,121
5,665,416
7,819,281
5,596,670
3,675,398
3,042,729

Change
% of
total

45.0

(¥ thousands)(864,930)(953,869)
1,009,975
172,948
153,441(7,704)5,276(484,860)

4,237,705(242,689)

2,222,610

98,994

38.7

632,669
6,123,907
141,234
13,358,127

39.4

92,624
21,40688,651
58,9869.2

2,011,458
972,033
51,902
3,035,393

8.9(339,888)
207,687(3,237)(135,438)

1,067,568
499,891
647,555
248,730
327,009(623,123)
2,167,631
6.3
18,637,604 54.2
34,382,522 100.0

1,214,238
487,241
12,812242,278
344,627(17,031)2,284,166
6.7
18,677,687 55.0
33,937,744 100.0

146,670(12,649)(634,743)(6,452)
17,618606,092
116,535
40,083(444,777)

6,160,627
859,903657,946
1,258,967
753,861－
517,332
31,200879,589
11,119,426

32.3

4,627,960
1,874,178
1,351,442
1,840,129
439,096
1,096
484,924
26,900929,042
11,574,770

1,473,212
401,531
167,152
329,339
507,7422,878,977
13,998,404
386,383

2,123,616
540,045
6,102,501
52,582
13,299,140

34.1(1,532,666)
1,014,275
693,496
581,162(314,764)
1,096(32,407)(4,300)49,452455,343

8.4
40.7

121,770
672,603
170,113338,655
303,342
1,606,485
13,181,255

4.7
38.8

(1,351,442)
271,072
2,961
9,316(204,400)(1,272,492)(817,149)

1.1

443,656

1.3

57,272

5,199,597 15.3
5,146,690 15.2
11,052,496 32.6
38,2180.1(204,080) (0.6)(920,087) (2.7)
20,312,833 59.9
33,937,744 100.0－
1,081
902,71443,378
227,714(859,790)
315,099(444,777)

5,199,597 15.1
5,145,608 15.0
10,149,781 29.5
(5,159) (0.0)(431,795) (1.2)(60,296) (0.2)
19,997,734 58.2
34,382,522 100.0- 16 -(¥ thousands)

45.8

4,480,395

2,351,346
764,345
55,1403,170,832

LIABILITIESI Current Liabilities
1. Notes and accounts payable
2. Short-term borrowings
3. Current portion of long-term debt
4. Accrued amount payable
5. Income taxes payable
6. Deferred tax liabilities
7. Accrued bonuses to employees
8. Returned goods adjustment reserve
9. Other current liabilities
Total Current Liabilities
II Long-Term Liabilities
1. Long-term borrowings
2. Deferred tax liabilities
3. Employees' retirement benefits
4. Retirement benefits for directors and corporate auditors
5. Other
Total Long-Term Liabilities
Total Liabilities
MINORITY INTERESTS
Minority Interests

At January 31, 2006

Consolidated Statements of Income
Year ended January 31, 2005

I Net Sales
II Cost of Sales
Gross Profit
Reversal of returned goods adjustment reserve
Transfer to returned goods adjustment reserve
Gross Profit (adjusted)

III Selling, General and Administrative Expenses
Operating Income

Year ended January 31, 2006

% of(¥ thousands)
total
40,719,607 100.0
25,047,114
61.5
15,672,492
38.5
30,95531,200(244)
0.0
15,672,248
38.5
12,957,900
31.8
2,714,348
6.7(¥ thousands)
41,747,212
26,116,655
15,630,556
31,20026,9004,300
15,634,856
13,419,853
2,215,002

4,853
10,189149,106

9,518
12,953
138,711

44,09844,333

Change

% of
total
100.0
62.6
37.4

(¥ thousands)
1,027,604
1,069,541(41,936)

0.1
37.5
32.2
5.3

4,544
(37,392)
461,953(499,345)

364,3440.9

24,966

378,870
2,200,476

0.9
5.3(53,027)(421,351)

56,5930.1(111,925)

72,912
2,184,156

0.2
5.2(104,232)(429,045)

775,394

1.8(251,632)

IV Other Income
1. Interest income
2. Dividend income
3. Rental income
4. Equity in earnings of nonconsolidated subsidiaries
and affiliates
5. Other

131,129

339,3770.8

158,826

V Other Expenses
1. Interest expense
2. Sales discounts
3. Rental income-related costs
4. OtherOrdinary Income

86,899204,525
115,317
25,156

431,898
2,621,827

1.1
6.4

168,5190.4

51,617
213,673
98,644
14,934

VI Extraordinary Income
1. Reversal of allowance for doubtful accounts
2. Other

158,774
9,745

53,7502,843

VII Extraordinary Loss
1. Loss on dispoal of fixed assets
2. Loss on business adjustment
3. Other
Income before Income Taxes
Income Taxes
Adjustment for Corporate Tax
Less: Minority Interests in Earnings of Consolidated
Subsidiaries
Net Income

100,076
56,38020,688980,197
46,82961,418－
11,494

177,145
2,613,202

0.4
6.4

1,027,026

2.5

91,4360.2

66,1830.2(25,253)

1,494,738

3.7

1,342,579

3.2(152,159)- 17 -

682,451
92,942

Consolidated Retained Earnings
Year ended January 31, 2005 Year ended January 31, 2006(¥ thousands)(¥ thousands)

Change(¥ thousands)

CAPITAL SURPLUS
I

Balance at Beginning of Year
Addition paid-in capital at
beginning of year

5,134,837

5,145,608

10,7701,081(9,688)5,145,608

5,146,690

1,081

8,976,465

10,149,781

1,173,316

II Increase in Capital Surplus
Gain on disposal of treasury
stock

10,770

III Balance at End of Year

10,770

1,081

RETAINED EARNINGSI Balance at Beginning of Year
Consolidated surplus at
beginning of year
II Increase in Retained Earnings
Net income

1,494,738

1,494,738

1,342,579

1,342,579(152,159)

321,422

321,422439,864

439,864

118,442

11,052,496

902,714

III Decrease in Retained Earnings
Cash dividends paid
IV Balance at End of Year

10,149,781- 18 -

Consosidated Statements of Cash Flows
Year ended January 31,
2005(¥ thousands)

Year ended January 31,
2006(¥ thousands)(¥ thousands)

2,613,202
1,316,123

2,184,156
1,372,632(429,045)
56,509282,591

375,386

92,794(117,997)(612,945)(494,948)

167,934(32,778)(200,712)

(231)

2,961

3,192

(26,567)

9,316

35,884(15,042)(22,472)(7,429)(44,098)(44,333)(234)

86,899100,076(109,475)(37,843)554,984－
106,166
110,393

51,61761,4181,106,195(909,408)(1,621,029)
576,320(135,748)
632,399(35,281)(38,657)
1,215,671(871,564)(2,176,013)
576,320(241,915)
522,005(246,549)(198,518)

48,030(13,136)
4,727,430
14,535(83,122)(372,555)
4,286,288

34,0802,829,250
21,922(49,680)(1,036,073)
1,765,419

47,216(1,898,180)
7,387
33,441(663,517)(2,520,869)

393,607(843,796)－(1,047,788)(393,607)(203,992)

13,476

8,255(5,221)(383,209)(4,990)71,391(82,201)(569,769)(17,760)510(54,587)(186,559)(12,769)(70,881)
27,614

246,773

65,313(181,460)(97,400)(29,765)

67,635(2,195,936)－

2,195,936(11,134)
37,181
5,611(1,017)
3,642(25,568)

10,116(33,538)(31,179)(2,850,626)(1,668,535)

1,182,091

5,873,296(6,839,181)
1,300,000(2,082,796)(325,238)

14,282,168(13,307,509)－(657,946)(441,703)

8,408,872(6,468,327)(1,300,000)
1,424,850(116,465)(31,495)(34,787)(3,291)

226,446(2,883)(1,881,853)

22,748(881,456)(1,018,487)(203,698)(878,573)
863,366(9,219)56,67365,893(455,411)
3,223,703
2,768,291(864,930)
2,768,291
1,903,361(409,518)(455,411)(864,930)

I Cash Flows from Operating Activities
Income before income taxes
Depreciation
Amortization of difference between investment
costs and equity in net assets acquired
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in accrued bonuses to
employees
Increase (decreas) in employees' retirement
benefits
Increase (decrease) in reserve for retirement
benefits to directors and corporate auditors
Interest and dividend income
Equity in losses of nonconsolidated subsidiaries
and affiliates
Interest expense
Loss on disposal of fixed assets
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in accrued payables
Increase (decrease) in consumption tax payable
Decrease (increase) in bankruptcy claims
Increase (decrease) in employees' accrued
retirement benefits
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net Cash Provided by Operating Activities
II Cash Flows from Investing Activities
Proceeds from reversal of time deposits
Acquisition of property, plant and equipment
Proceeds from sales of property, plant andequipment
Acquisition of intangible fixed assets
Acquisition of investment securities
Proceeds from sales of investment securities
Payment to life insurance fund for directors
Proceeds due to maturity/cancellation of
insurance reserve
Acquisition of shares in subsidiaries
Acquisition of shares in newly consolidated
subsidiaries
Loans advanced
Collection of loan receivables
Other
Net Cash Provided by (Used in) Investing
Activities
III Cash Flows from Financing Activities
Increase (decrease) in short-term bank loans
Repayment of short-term bank loans
Increase (decrease) in long-term debt
Repayment of long-term debt
Payment of cash dividends
Payment of cash dividends to minority
shareholders
Proceeds from sales of treasury stock
Acquisition of treasury stock
Net Cash Used in Financial Activities
IV Effect of exchange rate changes on Cash andCash Equivalents
V Net Change in Cash and Cash Equivalents
VI Cash and Cash Equivalents at Beginning of Year
VII Cash and Cash Equivalents at End of Year- 19 -

Change