2007 INTERIM BUSINESS REPORT
October 1, 2006〜March 31, 2007

1

CONTENTSI.

The President & CEO of EPS Co., Ltd. ……..… 3

II.

Our Services...................................................... 4

III.

EPS Group........................................................ 6IV.

Qualitative Information,
Financial Statements, etc. ............ 7

V.

Financial Highlights........................................... 14

VI.

Company Profile................................................ 212

Ⅰ. The President & CEO of EPS Co., Ltd.

EPS Co., Ltd.
President & CEO
YAN HAO
Yan Hao was born in Jiangsu Province, China in 1962. He enrolled in University of
Tianjin in 1979, and then, came to Japan in 1981, as a Chinese governmental scholar.
After completion of a master course majoring in Computer Science at University of
Yamanashi, he advanced to Ph.D. Course at the University of Tokyo, to major in
Biometrics and Medical Informatics.
In 1991 when he was still a graduate student at the University of Tokyo, Mr. Yanestablished EPS Co., Ltd. as one of the few CRO (Contract Research Organizations) inJapan at that time. EPS Co. Ltd. made a successful IPO on the JASDAQ market, Tokyo,
in 2001, becoming the first public CRO company in Japan. Also，EPS Listed a stock on
the Second Section of the Tokyo Stock Exchange in 2004,and Listed a stock on the First
Section of the Tokyo Stock Exchange in 2006.

3

Ⅱ. Our Services
We support international research and development in Asia
In 1999 we became the first Japanese CRO to establish a subsidiary in China andhave since started planning, regulatory submissions and project management of clinical
trials in Asia. We have numerous medical professionals and expert staff well versed inclinical trial regulations who provide high quality clinical trial services in China andSoutheast Asia. We currently support local submissions and clinical investigations for
submission in Japan and clinical research for EBM through partnerships with EPS China
Co., Ltd. (Shanghai, Beijing, Guangzhou), EPS Singapore (Ever Progressing System
Pte Ltd.), and other partners.
Through partnership with leading world CROs based in Europe and the U.S., we also
support global development of domestic and overseas pharmaceutical companies.
Based on our clinical development know-how and experience cultivated as a CRO, inthe future we intend to reinforce such consultation capabilities as licensing andmarketing strategies, with a view toward business expansion to pharmaceuticalcompanies and bio-venture companies in Asia, especially new businesses in productdevelopment utilizing Chinese market characteristics, in order to further enrich ourservices.

■ Major Services
・Regulatory consultation/development of clinical trials
・Support for development of documents for regulatory submission and regulatory
application on behalf of clientele
・Development of trial-related documents such as protocol and CRFs
・Drug randomization
・Monitoring
・Data management
・Statistical analysis
・Medical writing
・Various marketing surveys and marketing promotion consultation4■ EPS overseas network■ Countries and regions to which we can respond:
China, Hong Kong, Taiwan, Korea, Singapore, Malaysia, US, South Africa

ADVANTAGE of EPS
1

The number of staff totals over 100 employees with medical and pharmaceuticalcareer backgrounds and experience in DM and statistical analysis.

2

Our company is one of the largest CROs in China and, with its unique web-based
case enrollment and data management systems, is capable of large-scale clinical
trials intended for EBM.

3

Local staff can speak both Japanese and English. They can give detailed responses
appropriate to client requests.

4

Utilizing our extensive network with local administration and medical sites, werealize efficient clinical trials.

Our contract experience includes achievements in:[Therapeutic areas]
Cardiovascular drugs, ophthalmic drugs, metabolic drugs, CNS drugs, PNS drugs,
allergic drugs, external dermatological drugs, tumor drugs, antibiotics, chemotherapies(antivirus agents), digestive organ drugs, revitalizers, etc.
[Services]5Strategic consultation, regulatory application, clinical trial planning and monitoring,statistical consultation, data management, statistical analysis, medical writing,
distribution channel exploration, various investigations, etc.

Ⅲ. EPS GROUPEPS International Co., Ltd. [Global Contract Research Organization]
e-Trial Co., Ltd. [ Software & CRO Coordination ]URL: http://www.e-trial.co.jp/
EPS(China) Co., Ltd [CRO]
URL: http://www.epscn.com/
EPS Singapore [CRO]ADM Korea Inc. [CRO]EPMate Co., Ltd. [CRO/ temporary staffing]
URL: http://www.epmate.co.jp/
e-Trial Co., Ltd. [ Software & CRO Coordination ]URL: http://www.e-trial.co.jp/
EPMedical Co., Ltd. [CSO]
URL: http://www.c-medicalnet.co.jp/
EP-Mint Co., Ltd. [SMO]

6

URL: http://www.epmint.co.jp/
LSG Co., Ltd. [Pre-clinical study agent]
URL: http://www.lsg.co.jp
All Right Software Inc. [Software Development]
URL: http://www.allrightsoft.co.jp/

Ⅳ. Qualitative Information, Financial Statements, etc.
1.

Business Performance

Review of business performance(Business performance for the interim term)
As regards the Japanese economy in the current consolidated fiscal year, in spite ofuncertainties such as the trend of oil price and rise in interest rates, corporate profits remainrobust and both capital investment and personal consumption are on the increase, and thefuture economy is expected to grow modestly.
Under such circumstances, the CRO (Contract Research Organization) industry, to which
EPS belongs, has been continuing to grow.

The SMO (Site Management Organizations)industry, in which EP-Mint Co., Ltd., one of our consolidated subsidiaries, operates its
business, has been continuing growth on the whole, although showing a slight downward
trend.

The pre-clinical study industry, in which the LSG Group does its business, is also on

a steady upturn.

Moreover, the software development industry, in which the All Right

Software Group develops its business, is brisk in spite of shortage of IT engineers.
The CRO business is mainly developed by EPS Co., Ltd.
As regards the monitoring service, the Clinical Development Division has been favorably
performing clinical trials in the both development and post-marketing stages, including
existing project implementation, new project acquisition and clinical trials for anti-cancer,
diabetes and CNS drugs.

The medical device development segment has achieved a

considerable growth in sales since the previous consolidated interim term, which is greatly
attributable to the purchase of the business in the previous consolidated fiscal year.
As for the services for registration & project management, data management and statisticalanalysis services, the Biometrics Division is showing a favorable performance including
existing project implementation and new project acquisition.

In the current consolidated

interim term, the operating rate has improved due mainly to establishment of the7organization that allows flexible response to projects undertaken, increase in the number ofcases in existing projects, and acquisition of new projects. In the medical writing andpharmacovigilance services, we were able to increase sales compared to the previous
consolidated interim term while pushing hard to acquire orders, although facing an uphillbattle.
The Clinical Coordination Center, which provides planning and other services for new
business, has also achieved a considerable sales increase compared to the same term lastyear due mainly to implementation of existing projects and acquisition of new ones.

We willfurther strive to provide better planning and other services and develop new services.
In terms of the performance of EPS Co., Ltd., although loss on evaluation of investments insecurities was posted as extraordinary loss, each division has fared well, achieving an
increase in sales and profits compared to the same term last year due mainly to sales
increase, improved operating rate mainly resulting from enhanced operating efficiency, andefforts for reducing expenses.
As regards our consolidated subsidiaries in Japan, e-Trial Co., Ltd., which was establishedin the previous consolidated fiscal year for providing contract clinical trial services based on
EDC, is striving to acquire orders for new projects and achieving a favorable increase inperformance. EP-Mate Co., Ltd., responsible for the temporary staffing business(dispatched CRO business) for pharmaceutical companies, is continuing to expand its
achievements favorably by providing services to our Group and other pharmaceuticalcompanies. EP Medical Co., Ltd., providing MR dispatch services (CSO business), has
acquired new projects and increased the number of MRs to be dispatched, and changed its
business structure so as to generate profits.
As for our overseas CRO business, EPS China Co., Ltd. has achieved a considerable
increase in sales and profits compared to the same term last year because the large local
project undertaken has been fully operating since the previous consolidated fiscal year,
greatly contributing the company’s performance.

EPS Singapore has been promoting newcustomer acquisition activities by itself, but recorded a decrease in sales and profits
compared to the previous consolidated interim term.
Consequently, in our CRO business, consolidated sales amounted to ¥5,738 million, up by
24.1% on a Y-o-Y basis, with consolidated operating income ¥999 million, up by 70.2% on a
Y-o-Y basis, resulting in a favorable growth in both sales and profits.
The SMO business is developed by EP-Mint Co., Ltd.

8

Besides promoting the CRC business, EP-Mint Co., Ltd. is engaged in developing theinternal structure after the merger, centering on the site support business such as clinical
trial administration in cooperation with local medical institutions.

As a result, themanagement system by branch has begun to function smoothly, leading to improvement insales and expense management.
Consequently, in our SMO business, consolidated sales amounted to ¥1,573 million, up by
8.1% on a Y-o-Y basis, with consolidated operating income ¥264 million compared to a lossof ¥15 million for the same term last year, resulting in a growth in both sales and profits.

The pre-clinical study business is developed by the LSG Group.
LSG Corporation is fighting an uphill battle due mainly to the influence of the reorganizationof oversea pre-clinical study business organizations conducted in the previous consolidated
fiscal year.

However, LSG has started an agency service for an overseas pre-clinical study

business organization with which LSG has newly established a business relationship.
Consequently, in the pre-clinical study business, consolidated sales amounted to ¥647
million, down by 1.1% on a Y-o-Y basis, with consolidated operating income ¥15 million,
down by 71.8% on a Y-o-Y basis, resulting in a decline in both sales and profits. The maincause of this sharp decline is the posting of the extraordinary income associated with theabove mentioned reorganization in the previous consolidated interim term.
The software development business is developed by the All Right Software Group.
All Right Software Inc. is continuously promoting its business using Chinese IT engineers
and sharply increasing sales of contract SE services for key systems of financial institutions
and major companies.
Consequently, in the software development business, consolidated sales amounted to ¥602
million, up by 38.1% on a Y-o-Y basis, with consolidated operating income ¥44 million, up by
79.4% on a Y-o-Y basis, resulting in a growth in both sales and profits.

ADM Korea Inc. (an affiliate subject to the equity method, located in Seoul, South Korea,
with the capital of 153 million won (about 19 million yen), 35% of whose voting stock is
owned by EPS), which is developing the contract clinical trial business in South Korea, wasincluded in EPS's affiliates subject to the equity method in January 2007 through third party
allocation of new shares.

As the result, the performance of ADM Korea has been includedin the non-operating income/loss of financial statements since the current consolidated

9interim term.
The foregoing consolidated sales and operating income by segment include internaltransactions between segments.

After deducting them, for the current consolidated interim

term, sales amounted to ¥8,472 million, up by 19.2% on a Y-o-Y basis, and operating
income, ¥1,329 million, up by 102.8%.

Despite the extraordinary loss of ¥210 million

posted on evaluation of investments in securities, net income for the current consolidated
interim term came to ¥630 million, up by 89.0% on a Y-o-Y basis, resulting in an increase inboth sales and profits.
(Forecast of performance for the full fiscal year)
The Japanese economy is expected to continue to be steady on firm trend, while various
uncertainties are yet to be seen, such as exchange rate, overseas economies and rise ininterest rates.
Our CRO business is promoted mainly by two divisions: the Clinical Development Division,
responsible for monitoring and clinical development concerning medical devices, etc., andthe Biometrics Division, responsible for data management, statistic analysis, registration &project management, medical writing, pharmacovigilance, etc.; and additionally by theClinical Coordination Center, in charge of planning and other services for new business, andthe Business Development department, which engages in information collection and order
receiving activities.

From the second half, we will further focus on acquisition of new

projects concerning clinical trials in Japan, following the split-off of the International
Business department which has been providing clinical-trial related services in overseas
markets.

We are also pushing hard to achieve our full-year profit plan with focus on

monitoring and data management by enhancing an operating rate and reducing expenses.
As regards our consolidated subsidiaries in Japan, e-Trial Co., Ltd. will strive to acquire neworders for projects including EDC based services from pharmaceutical companies andmedical research facilities.
EP Mate Co., Ltd., providing dispatched CRO services, will develop its business on a fullscale with focus on our Group and other pharmaceutical companies.

EP Medical Co., Ltd.,

responsible for the CSO business including MR dispatch, will continue to perform existing
projects and acquire new orders.
As for our overseas business, EPS International Co., Ltd., established in April through the
split from EPS Co., Ltd., is positioned as the central base for global contract clinical trial
services, with EPS China Co., Ltd., EPS Singapore and ADM Korea Inc. placed under its

10

umbrella.

Building on a strong framework for global contract services covering themanagement of group companies, EPS International will aim to improve its global contract
services and to acquire new service contracts for clinical trials in Asia, Europe and America.
EPS China Co., Ltd. is to complete the current large project and will further endeavor toacquire new clinical trial orders.
EPS Singapore will strive to increase orders for clinical trials mainly in East and Southeast
Asia.
EP-Mint Co., Ltd., responsible for the SMO business, will continue to strengthen the
management system by branch, to promote the management of orders, sales and personnel,
to maintain a high operating rate and to acquire new orders.
LSG Corporation, in charge of the pre-clinical study business, will seek to enhance its
agency income by increasing projects undertaken for an overseas pre-clinical study
business organization, which is a new partner for LSG, and will continue to expand its
business operations by handling promising fields such as mouse cages and special animal
feeds, while continuing its existing business of supplying laboratory animal resources.
All Right Software Inc., providing software development business, will continue to promote
its current SE service and offshore software development using Chinese IT engineers and to
pursue new orders for software development from clients in the communications, financeand network related industries.
Accordingly, the revised forecast values announced on April 26, 2007 represent theconsolidated profit forecast for the term ending September 2007.

2.

Review of financial positions(i)

Review of assets, liabilities, net assets and cash flows

In the current consolidated interim term, financial positions changed as follows, compared tothose at the end of the previous consolidated fiscal year.
During the current consolidated interim term, current assets increased by ¥970 million to¥9,371 million due mainly to the increases of ¥728 million in cash and deposits, ¥195 million
in trade notes and accounts receivable and ¥52 million in other current assets.
Fixed assets decreased by ¥136 million as the result of the increase of ¥120 million in other11

investments and assets and the decreases of ¥143 million in investments in securities
resulting from loss on evaluation, etc. and ¥94 million in deposits. Consequently, total
assets at the end of the current consolidated interim term increased by ¥834 million to¥12,808 million, compared by those at the end of the previous consolidated fiscal year.
As regards liabilities, current liabilities increased by ¥424 million due mainly to the increasesof ¥27 million in accounts payable, ¥156 million in income taxes payable and ¥224 million inother current liabilities, while fixed liabilities decreased by ¥85 million due mainly to
repayment of long-term debt.

Consequently, total liabilities at the end of the current

consolidated interim term increased by ¥339 million to ¥3,743 million, compared to those at
the end of the previous consolidated fiscal year.
Net assets at the end of the current consolidated interim term increased by ¥494 million to¥9,065 million compared to those at the end of the previous consolidated fiscal year, due
mainly to the increases of ¥422 million in retained earnings and ¥69 million in minority
interests.
(ii)

Consolidated cash flows

As of the end of the current consolidated interim term, cash and cash equivalents increasedby ¥728 million to ¥4,520 million compared to those at the end of the previous consolidated
fiscal year, as the result of the cash inflow of ¥1,177 million from operating activities and the
cash outflows of ¥132 million from investing and ¥328 million from financing activities.
(Cash flows from operating activities)
As of the end of the current consolidated interim term, cash inflows derived from operating
activities increased by ¥508 million on a Y-o-Y basis to ¥1,177 million.

The main causes ofthis increase are: interim net income before income taxes amounting to ¥1,144 million(Y-o-Y increase of ¥516 million), amortization of goodwill at ¥34 million, loss on evaluation of
investments in securities amounting to ¥210 million (Y-o-Y increase of ¥196 million),increase of ¥190 million in accounts receivable (Y-o-Y increase of ¥777 million), decrease of¥20 million in inventories (Y-o-Y decrease of ¥117 million), increase of ¥26 million inaccounts payable (Y-o-Y increase of ¥32 million), increase of ¥55 million in advances
received (Y-o-Y increase of ¥71 million), increase of ¥147 million in other current liabilities(Y-o-Y increase of ¥109 million), and payment of ¥357 million for corporate income taxes(Y-o-Y decrease of ¥223 million).
(Cash flows from investing activities)

12

As of the end of the current consolidated interim term, cash outflows used for investing
activities decreased by ¥422 million on a Y-o-Y basis to ¥132 million. The main causes ofthis decrease are: ¥239 million used for purchasing investment securities (Y-o-Y decrease of¥177 million), ¥72 million used for purchasing tangible fixed assets (Y-o-Y decrease of ¥20
million), ¥145 million derived from collection of deposits during the current interim term, and¥75 million derived from the sale of investment securities.
(Cash flows from financing activities)
As of the end of the current consolidated interim term, cash outflows used for financing
activities increased by ¥2,984 million on a Y-o-Y basis to ¥328 million.

The main causes ofthis increase are: payment of ¥205 million for dividends (Y-o-Y increase of ¥60 million), andincome of ¥1,997 million from the issuance of corporate bonds and of ¥1,042 million fromlong-term debt in the previous consolidated interim term.
(iii) Basic profit distribution policy and dividends for the current term
We consider it critical for the management of our Group to improve the profit distribution to
our shareholders while strengthening our corporate structure for enhancing profitability.

As

regards profit distribution, we basically aim at ensuring stable distribution of profits withconsideration given to building on our financial foundation for responding to rapidly changing
market conditions, setting our targeted dividend payout ratio for each year to 30%.

We arecommitted to continuing to pay dividends for both interim and full year terms even after theenforcement of the new Corporation Law.

13

Ⅴ. Financial Highlights
1. INFORMATION OF EPS Co,Ltd & CONSOLIDATED SUBSIDIARIES 2007.03(2006.10.1-2007.3.31)(UNAUDITED)2007.5.31(1) CONSOLIDATED OPERATING RESULTS( UNIT:JPY MILLION )Net sales
Mar-07Mar-06
Sep-068,472
7,110
15,257Net Income per Share (yen)7,052.63
3,877.21
12,300.92

Mar-07Mar-06
Sep-06

Operating Income

Ordinary Income

Net Income

1,329
655
1,958

1,352
657
1,979

630
333
1,079

(19.2%)(20.3%)−(102.8%)(43.5%)−(105.8%)(40.0%)−(89.0%)(△7.3%)−Net Income per
Share,diluted (yen)7,048.95
3,798.85
12,299.67

Notes:1 Percentages for net sales, operating income, ordinary income, and net income indicate growth ratio to previous year.
2 Average number of shares issued and outstanding during the period :Mar-0789,398 shares
Mar-0686,052 shares
Sep-0687,724 shares(2) CONSOLIDATED FINANCIAL INFORMATION

Mar-07Mar-06
Sep-06

Total Assets

Net assets

12,80812,068
11,973

9,065
6,150
8,570

Shareholders'Equity ratio (%)
63.4%
51.0%
64.2%

Notes : Total shareholders' Equity as of :Mar-07
8,115
Million yen
Sep-06
7,689
Million yen−

Mar-06( UNIT:JPY MILLION )Shareholders' Equity
per share (yen)90,775.09
71,266.53
86,012.96

Million yen(3) CONSOLIDATED CASH FLOW INFORMATION( UNIT:JPY MILLION )Net cash provided by
Net cash provided by
Net cash provided byEnding balance of cash and(used in) operating activities (used in) investing activities (used in) financing activities
cash equivalents
△ 132
△ 555
△ 1,139

1,177
668
1,357

Mar-07Mar-06
Sep-06

△ 328
2,656
1,609

4,520
4,730
3,792

(4) CONSOLIDATED SUBSIDIARIES
Consolidated subsidiaries :Affiliated companies by equity accounting method :13 companies
4 companies

2.OVERALL SITUATION OF DIVIDEND DISTRIBUTION( UNIT:JPY )Sep-06Mar-07
Sep-07(Result)(Result)(Projection)

Cash Dividends per share
Year end Dividend
2,300.00−
2,300.00

Interim Dividend
1,000.00
1,700.00−

Annual3,300.00
4,000.00

3. INFORMATION OF CONSOLIDATED BUDGET 2007.09 (2006.10.1-2007.9.30)( UNIT:JPY MILLION )Net sales
Sep-07

17,700(16.0%)

Budgeted net income per share :Operating Income

Ordinary Income

Net Income

2,622

2,650

1,331

(33.9%)(33.9%)(23.4%)

14,894.60 yen

Notes:1 Above figures may differ from actual results as uncertain various factors may affect future earnings.
2 Percentages for net sales, operating income, ordinary income, and net income indicate growth ratio to previous year.

144. OTHER INFORMATION(1) Total shares issued and outstanding as of :Mar-07
Sep-0690,40090,400sharessharesMar-0687,309sharesMar-06

1,001

shares(2) Common stock for treasury as of :Mar-07
Sep-06

1,002
1,002

sharesshares

5. INFORMATION OF NON-CONSOLIDATED 2007.03 (2006.10.1-2007.3.31)(UNAUDITED)(1) OPERATING RESULTS( UNIT:JPY MILLION )Net sales
Mar-07Mar-06
Sep-06

5,138
4,353
9,479

Operating Income

Ordinary Income

Net Income

889
591
1,587

964
638
1,664

488
367
980

(18.0%)(21.7%)−(50.3%)(91.8%)−(51.1%)(77.1%)−(32.9%)(12.6%)−Net Income per Share (yen)Mar-07Mar-06
Sep-06

5,459.20
4,268.94
11,171.96(2) FINANCIAL INFORMATION

Mar-07Mar-06
Sep-06

Total Assets

Net assets

9,786
9,769
9,365

7,153
5,483
6,890

Shareholders'Equity ratio (%)
73.1%
56.1%
73.6%

Notes : Total shareholders' Equity as of :Mar-07
7,153
Million yen
Sep-06
6,890
Million yen

Mar-06−( UNIT:JPY MILLION )Shareholders' Equity
per share (yen)80,022.49
63,536.89
77,072.49

Million yen

6. INFORMATION OF NON-CONSOLIDATED BUDGET 2007.09 (2006.10.1-2007.9.30)( UNIT:JPY MILLION )Net sales
Sep-07

10,742(13.3%)

Budgeted net income per share :Operating Income

Ordinary Income

Net Income

1,782

1,880

1050

(12.3%)(13.0%)(7.2%)

11,753.09 yen

Notes:1 Above figures may differ from actual results as uncertain various factors may affect future earnings.
2 Percentages for net sales, operating income, ordinary income, and net income indicate growth ratio to previous year.

15

CONSOLIDATED BALANCE SHEETSMARCH 31 2006, 2007 AND SEPTEMBER 30, 2006
(UNAUDITED)(IN THOUSANDS,JPY)ASSETS
CURRENT ASSETS
Cash and cash equivalents
Notes and accounts receivable
Inventories
OthersAllowance for doubtful accounts
Total current assets

MARCH 31.2006

MARCH 31.2007

SEPTEMBER 30.2006

4,730,917
3,113,088
328,241
639,491△ 878
8,810,860

4,520,469
3,803,567
334,238
714,856△ 1,813
9,371,318

3,792,223
3,607,909
339,862
662,153△ 1,4118,400,737

304,836
105,776

331,980
357,374

314,805
383,660

1,490,347
604,498

1,132,080
572,495

1,275,110
666,687

500,000

500,000

500,000

251,809−2,846,656

552,889△ 10,000
2,747,465

432,721−2,874,519

Total fixed assets

3,257,269

3,436,821

3,572,985

TOTAL ASSETS

12,068,130

12,808,139

11,973,723

LIABILITIESCURRENT LIABILITIES
Accounts payable
Current portion of long-term debt
Income taxes payable
Provision for bonuses
OthersTotal current liabilities

153,684
212,100
288,503
388,667
1,016,096
2,059,052

210,726
213,200
532,174
438,221
1,395,953
2,790,275

182,795
213,200
375,282
422,541
1,171,583
2,365,403

1,900,000
726,600
214,623
125,260
24,1622,990,646
5,049,699−
563,400
236,570
141,561
11,213
952,745
3,743,021−
670,000
227,604
130,499
10,084
1,038,188
3,403,591

867,560−−

1,375,250
1,325,299
3,521,850

−
−
−

−
−
−

208,979

FIXED ASSETS
Tangible Assets
Intangible Assets
Investments and other assets ;Investment securities
Deposits
Time deposits and banking arrangements
other than cash equivalents
OthersAllowance for doubtful accounts
Total investments and other assets

LONG-TERM LIABILITIESBond with warrantLong-term debt
Provision for employee's retirement benefits
Provision for director's retirement benefits

OthersTotal long-term liabilities
TOTAL LIABILITIESMINORITY INTERESTSSHAREHOLDERS' EQUITY
Common stock
Additional paid-in capital
Retained earnings
Unrealized gain on
available-for-sale securities
Foreign currency translation adjustments

Common stock for treasury
TOTAL SHAREHOLDERS' EQUITYTOTAL LIABILITIES, MINORITY INTERESTSAND SHAREHOLDERS' EQUITY−−

41,166△ 321,674−−−

6,150,871−−

12,068,130

−

−

−
−
−
−

1,875,251
1,825,298
4,603,680△ 322,080

1,875,251
1,825,298
4,180,774△ 322,080−

70,88889,590−−−−−62,073
8,115,111
950,006
9,065,118
12,808,139

40,552
7,689,386
880,745
8,570,131
11,973,723

NET ASSETS
Common stock
Additional paid-in capital
Retained earnings
Common stock for treasury
Unrealized gain on
available-for-sale securities
Foreign currency translation adjustments
TOTAL SHAREHOLDERS' EQUITYMinority interests
TOTAL NET ASSETSTOTAL LIABILITIES AND NET ASSETS

16CONSOLIDATED STATEMENTS OF INCOME
FOR SIX MONTHS ENDED MARCH 31, 2006, 2007 AND THE YEAR ENDED SEPTEMBER 30, 2006
(UNAUDITED)(IN THOUSANDS,JPY)

SIX MONTHS ENDED

SIX MONTHS ENDED

MARCH 31.2006

MARCH 31.2007

YEAR ENDEDSEPTEMBER
30.2006

NET SALES

7,110,205

8,472,051

15,257,985

COST OF SALES

5,273,492

5,747,242

10,892,074

Gross profit

1,836,712

2,724,809

4,365,911

1,181,201

1,395,562

2,407,205

655,510

1,329,246

1,958,705

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating income
OTHER INCOME (EXPENSES)Interest income

12,743

17,993

27,690Interest expenses△ 9,329△ 8,152△ 20,682

Gain on cancellation of life insurance

5,231

9,604

10,919Service fee income

1,578

3,694

3,317

−

6,617

7,988

Payment to the Association for employment of persons with disabilities△ 1,550△ 2,800△ 3,050

Gain on consumption tax
Foreign exchange loss

△ 4,181△ 3,299△ 3,884

Equity in losses of associated companies△ 4,888△ 6,931△ 9,213

Bond issuance cost

△ 2,256−△ 2,256

Gain on sales of property and equipment

284

450

995

Gain on sale of investments in securities−

41,161−Gain on decrease of shares in associated company

−

−

4,001

Loss on sales and disposal of property and equipment△ 8,030△ 28,561△ 14,743

Loss on devaluation of investments in securities△ 13,723△ 210,630△ 87,593

Impairment loss

△ 3,635−△ 3,635

Loss on lease cancellation△ 3,014−△ 5,794−△ 10,000

−

3,110

6,414

△ 22,150

Other income (expenses)-net△ 27,660△ 184,438△ 118,093

Income before income taxes and minority interests

627,850

1,144,808

1,840,612

Allowance for doubtful accounts
Others- net

INCOME TAXES
Current

274,520

512,370

782,199

Deferred

1,216△ 67,065△ 89,728
692,470

Total

275,736445,305

MINORITY INTERESTS

18,472

69,012

69,055NET INCOME

333,641

630,491

1,079,085

17

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETSFOR SIX MONTHS ENDED MARCH 31, 2007

(UNAUDITED)(IN THOUSANDS,JPY)
Attributable to equity holders of the Company
Common stock

Balance at 30
September 2006

1,875,251

Common stock for
Additional paid-in
Retained earnings
treasury
capital1,825,298

4,180,774

Changes during the period
Cash dividends
Net income
Others△ 322,080△ 205,615
630,491△ 1,970

Sub total

7,559,243△ 205,615
630,491△ 1,970

Net increase/decrease in valuation,translation adjustment and minority
interest

422,905

Total changes during the period

Balance at 31
March 2007

1,875,251

1,825,298

4,603,680

Evaluation and translation adjustment
Unrealized gain on
available-for-salesecurities

Balance at 30
September 2006

89,590Foreign currencytranslation
adjustments

Total evaluation andtranslation
adjustments

40,552130,142

Changes during the period
Cash dividends
Net income
Others422,905△ 322,080
Total
Shareholders'equity7,689,386

7,982,149

Minority interest

Total net assets

880,745

8,570,131△ 205,615
630,491△ 1,970△ 205,615
630,491△ 1,970

Net increase/decrease in valuation,translation adjustment and minority
interest△ 18,702

Total changes during the period△ 18,702

21,521

2,818

425,724

69,261494,986

70,88862,073

132,961

8,115,111

950,006

9,065,118

Balance at 31
March 2007

21,521

2,818

18

2,818

69,261

72,080CONSOLIDATED STATEMENTS OF CASH FLOWSFOR SIX MONTHS ENDED MARCH 31 2006, 2007 AND THE YEAR ENDED SEPTEMBER 30 2006

(UNAUDITED)(IN THOUSANDS,JPY)

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by operating activities:
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase in provision for bonuses
Increase in allowance for retirement benefits for employees
Increase in allowance for retirement benefits for directors
Interest and dividends income
Interest expense
Gain on sale of investments in securities
Loss on devaluation of investments in securities
Changes in operating assets and liabilities:
Decrease in accounts receivable-trade(△Increase)
Decrease in inventories(△Increase)
Increase in accounts payable -trade(△Decrease)
Increase in advance received(△Decrease)
Increase in other current liabilities
Others , Net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
INVESTING ACTIVITIES:
Disbursements for purchase of tangible fixed assets
Disbursements for purchase of intangible fixed assets
Payment for purchase of investments securities
Proceeds from sales of investments securities
Disbursements for loans
Proceeds from loan collections
Payment for deposit for rent office and others
Collection for deposit for rent office and others
Others , Net
Net cash provided by (used in) investing activities

SIX MONTHS ENDED

SIX MONTHS ENDEDYEAR ENDED

MARCH 31.2006

MARCH 31.2007

SEPTEMBER 30.2006

税627,850

1,144,808

1,840,612

減50,256
3,635−
17,3949,078
2,924△ 12,743
9,329−
13,72349,232−
34,00015,127
8,966
11,061△ 18,593
8,152△ 41,161
210,630

109,515
3,635
40,13550,76922,0588,163△ 28,890
20,682−87,593587,205△ 96,319△ 5,640△ 15,828
37,465
18,567
1,246,900
12,163△ 9,329△ 581,090
668,643△ 190,296
20,77826,71355,392147,035
43,1481,524,996
18,349△ 8,157△ 357,553
1,177,635

92,792△ 109,861
24,351△ 25,403
208,309
12,5982,357,062
27,986△ 20,682△ 1,006,887
1,357,478△ 92,982△ 4,098△ 416,890−△ 35,240
9,151△ 19,104−
3,843△ 555,321△ 72,756△ 9,869△ 239,872
75,161△ 4,700
31,930△ 50,730
145,130△ 6,728△ 132,434△ 146,885△ 25,686△ 477,290−△ 57,796
37,391△ 82,086−△ 386,685△ 1,139,038△ 42,901
1,042,000△ 190,124
1,997,743
14,055△ 145,152△ 18,794△ 423
2,656,403
14,3302,784,055
1,946,862
4,730,917−−△ 106,600−−△ 205,217△ 15,813△ 776△ 328,406
11,452
728,245
3,792,223
4,520,469△ 43,678
1,092,000△ 295,624
1,997,743
14,055△ 231,444△ 18,794△ 905,059
1,609,198
17,722
1,845,361
1,946,862
3,792,223

賞
退
役
受
支

売
た
仕
そ
そ
小
利
利
法

有
無
投

敷
そ

FINANCING ACTIVITIES:
Disbursement for repayment of finance leases
Proceeds from borrowing long-term debt
Disbursements for repayment of long-term debt
Proceeds from issuance of bonds

長少Proceeds from issuance of common stock to minority stock holders

Dividends paid
配Dividends paid for minority stock holders
少Others , Net
Net cash provided by (used in) financing activities
EFFECT OF EXCHANGE DIFFERENCE ON CASH & CASH EQUIVALENTS
NET INCREASE IN CASH AND CASH EQUIVALENTS
BEGINNING OF BALANCE,CASH AND CASH EQUIVALENTS
ENDING OF BALANCE,CASH AND CASH EQUIVALENTS

19

STATEMENT OF ORDER ENTRY AND SALES BY ITEMS(UNAUDITED)(1) RESULT OF ORDER ENTRY
2007.03<2006.10.1-2007.3.31>(IN THOUSANDS, JPY )DIVISIONAMOUNT OF
ORDER ENTRY

year-to-yearcomparison (%)

ORDER
BACKLOG

year-to-yearcomparison (%)

CRO
Monitoring
Data Management

4,221,669
159.5
7,352,634
2,564,271
113.7
4,722,058
662,928129.1
229,674
CRO others
TOTAL OF CRO
7,448,869
137.6
12,304,367
SMO
1,647,633
105.5
1,838,687
Preclinical Service
653,410100.9
160,087
System Development
800,976148.5
425,269
TOTAL
10,550,890
129.2
14,728,411* These figures are expressed by sales price.
* These above figures do not include the consumption tax.

106.1
111.7
88.4
107.8
111.3
98.3
229.4
109.8

(2) RESULT OF SALESDIVISION

2007.03<2006.10.1-2007.3.31>(IN THOUSANDS,JPY)

CRO
Monitoring
Data Management

2,740,424
2,327,233
659,796
5,727,454
1,541,827
641,605
561,163
8,472,051

CRO others

TOTAL OF CRO
SMO
Preclinical Service
System Development
TOTAL

year-to-yearcomparison (%)

121.2
122.1
148.5
124.2
106.5
98.3
140.7
119.2

INDUSTRY SEGMENT(UNAUDITED)2006 (2005.10.1-2006.3.31)

SALES
Sales to customers
Intersegment sales
Total
Operating expenses
Operating income

CRO

SMO

4,610,574
13,932
4,624,506
4,037,268
587,237

1,448,159
7,078
1,455,237
1,470,996(15,758)

CRO

SMO

5,727,454
10,674
5,738,129
4,738,707
999,422

1,541,827
31,538
1,573,366
1,308,814
264,552

Preclinical
Service

SystemDevelopment

652,6212,070
654,691
600,90753,783398,849
37,488436,338
411,593
24,745

Preclinical
Service

SystemDevelopment

641,605
5,823
647,428
632,252
15,176561,163
41,495602,659558,269
44,389SystemDevelopment
844,145
77,866922,012854,777
67,234

Total
7,110,205
60,5697,170,774
6,520,765
650,008

2007 (2006.10.1-2007.3.31)

SALES
Sales to customers
Intersegment sales
Total
Operating expenses
Operating income−(60,569)(60,569)(66,071)
5,502

7,110,205−
7,110,205
6,454,694
655,510(IN THOUSANDS, JPY)

Total
8,472,051
89,5318,561,583
7,238,043
1,323,540

2006 (2005.10.1-2006.9.30)

SALES
Sales to customers
Intersegment sales
Total
Operating expenses
Operating income(IN THOUSANDS, JPY)
Eliminations/
Consolidation
Corporate

CRO

SMO

Preclinical
Service

10,281,994
26,017
10,308,011
8,592,823
1,715,188

2,939,705
42,7382,982,444
2,893,671
88,773

1,192,139
4,735
1,196,874
1,124,926
71,94820

Total
15,257,985
151,357
15,409,343
13,466,198
1,943,144

Eliminations/
Corporate

Consolidation−(89,531)(89,531)(95,238)
5,706

8,472,051−
8,472,051
7,142,804
1,329,246(IN THOUSANDS, JPY)
Eliminations/
Consolidation
Corporate− 15,257,985(151,357)−(151,357) 15,257,985(166,917) 13,299,280
15,5601,958,705

VI . Company Profile

Corporate Name:EPS Co., Ltd.

President & CEO:Yan Hao

Establishment:

May 1991

Capital:¥ 1875.25 Million

Main Services:

CRO business and System Development

E-Mail:info@eps.co.jp

URL:

http//:www.eps.co.jp

Locations(Center Office)Tsuruya Bldg.,2-23 Shimomiyabi-cho, Shinjuku-ku, Tokyo 1620822
Tel: +81-3-5684-7801(Annex.1)
2-3-19 Koraku, Bunkyo-ku, Tokyo 1120004
Tel: ＋81-3-5684-7797(Annex.2)
K.I.S Iidabashi Bldg., 2-3-28 Koraku, Bunkyo-ku Tokyo 1120004
Tel: ＋81-3-5804-7639(Osaka Branch)
Nissei Shin-osaka Bldg., 3-4-30 Miyahara, Yodogawa-ku, Osaka
5320003
Tel: ＋81-6-4807-7107(Nagoya Branch)Horiuchi Bldg., 3-25-9 Meieki, Nakamura-ku, Nagoya 4500002
Tel: ＋81-52-581-8887

21

Members of the Board and Statutory Auditors(As of March 31, 2007)
President & CEO

Mr. Yan Hao

Executive Directors

Mr. Koichi Jingu
Mr. Tatsuhiko Ichiki

Directors

Mr. Tomohiro Tominaga
Mr. Yasuharu Tamai
Mr. Akihiro Shimosaka

Statutory Auditors

Mr. Kozo Okunaga
Mr. Junichi Ishikawa
Mr. Koichi Shibuya

Current Situation of Shares(As of March 31, 2007)
Authorized stocks

324,000

Share of common stock issued

90,400

Number of shareholders

4,98722