2006 BUSINESS REPORTThe year ended September 30, 2006

-1-

CONTENTS
I.

Acknowledgment ........................................... 3− Upon the Public Listing on the 1st Section of TSE −II. Management Policy........................................ 5
III. Business Performance
And Financial Position ............... 8
IV. EPS Group..................................................... 15

V. Financial Highlights......................................16

VI. Company Profile............................................. 23-2-

I. Acknowledgment- Upon the Public Listing on the 1st Section of TSE –As of today September 1, 2006, our company
EPS Co., Ltd., is publicly listed on the firstsection of the Tokyo Stock Exchange (TSE).
Our company began its history in 1991 at asmall office with a few members that could beeneven counted all on one hand.

In 15 years, wehave come a long way going through trials andtribulations.

When I look back, it was like avoyage with no navigational charts.
At this momentous day, thousands of thoughts
are going through my head and I cannot containmyself for deep emotion.

Above all others,“Gratitude” is the word comes uppermost in mymind.

I attribute this achievement primarily to

all these people's dedicated efforts, hearty
support and encouragement: our all employees,
those who have devoted themselves to support
ourcompany’s

everprogress

since

the

establishment, including the ones no longer with us; our all clients, those who havegiven us severe but warm advice and guidance; our all stockholders, those who haveunderstood our endeavor and had their expectations of our performance; and all others
involved.

It is a cliché, but my true feeling and not in the least an exaggeration to say.

Therefore, I would like to take this occasion to express my profound sense of gratitude
to you all.
Our company’s listing on such a prestigious and traditional market as the firstsection of the TSE represents the fact that a certain social approbation has just granted
us for our business.

That is a genuine pleasure to all of us and we will not hesitate torelish it well.

-3-However, metaphorically speaking, it never means that we had reached a safe andpeaceful shore to stay; I would say, we have just sailed into even rougher seas foranother voyage instead.

As we consider our company’s present situation this way, we

here with courage reaffirm our commitment to confront any challenges and difficulties
and never to cease our progress towards our next goal.
We sincerely hope that your continued support would extend to us as ever.

September 1, 2006
Yan Hao,President and CEO-4-

II. Management Policy(1) Basic Management Policy
At the core of our basic management policy, our Group maintains the goal ofproviding various services that satisfy the needs of our customers and help them to findresolutions to contradictory propositions which comply with laws, and are efficient andhigh in quality.
In the future, we will exert every effort to expand the scope of our business based onthese management principles, while at the same time maintaining our position as aleader of the industry.

We will also strive to fortify our compliance structure and live

up to our name, “Ever Progressing System”.

(2) Our Basic Policy Regarding Distribution of Profits
We seek to strengthen our corporate structure by improving our earnings generating
capability, while at the same time maintaining a fair profit distribution policy to ourshareholders.

With regards to distribution of profits, we seek to strike a balance

between the need to establish a solid financial foundation to be able to quickly respondto rapidly changing market conditions and the desire to maintain a stable level of profit
distribution.

Therefore we have established a target dividend payout ratio of 30%.

Moreover even after the implementation of the new corporate law we expect tocontinue to pay dividends at both the end of the interim and full year periods.

(3) Our Policy Regarding Reductions in the Minimum
ShareTrading Lot
We may consider offering stock splits depending upon the trading of our shares.

(4) Our Management Targets
We maintain the management target for the next three years as below.
Sales growth rate:

Approximately 15%

Ordinary profit rate:

Approximately 13%

In order to achieve the targets outlined above, we will implement the various
management strategies outlined below.

-5-(5) Intermediate to Long-Term Management Strategy
Our Group maintains the CRO and SMO business at the core of our operations.

In

addition to these core businesses in Japan, we will also promote CSO, the personnel
dispatch, pre-clinical testing business, and drug and medical information systemdevelopment businesses, and also will expand our operating territory by promoting the
CRO in China, East Asia and Southeast Asia, and software development businesses
with Chinese IT engineers.

We also seek to extract synergies between these various

services to grow our business a step further.

More specifically we will implement thestrategies outlined below.

(5)-1) Further Strengthen Our CRO BusinessIn response to the growing outsourcing needs related to drug development, we will
fortify our planning and drug approval functions in addition to our clinical trial
operation capabilities.
Additionally we seek to maintain our position as a leading company within theindustry by offering effective total support services to not only medical doctors involved
with the drug development, but also to medical equipment and the specially designatedhealth foods manufacturers.

(5)-2) Promotion of Our SMO Business
While the clinical trial support services provided to medical institutions is already
rapidly expanding.

Consequently we have been strengthening the internal structureof EP-Mint Co., Ltd. since its merger to take full advantage of the merger to expand
this business, and to become one of the top three companies within the industry.

(5)-3) Overseas Business Expansion
In order to be able to respond to international simultaneous development amidst thegrowing trend of ICH*, we continue to explore the possibilities of our overseas businessexpansion.
As part of strengthen our overseas service in current fiscal year, we have formed ajoint marketing agreement with Progenitor International Research (Germany) whichdevelops proposed type CRO business in Europe.

(5)-4) Entering the New Drug Development BusinessIn the new drug development business area, we have made the strategic decision toseek the cooperation of bio-venture and other partners to form joint ventures, and toprovide consulting and CRO business in this area rather than trying to develop themarket on our own.
-6-With regards to China, our regional subsidiary will seek to obtain local approval forvarious medial products licensed to us from pharmaceutical companies in the UnitedStates, Europe and Japan.

(5)-5) Fortification of Our Group
Currently our company and its 14 subsidiaries, which comprise the EPS Group,
provide various services to the medical product development industry.
To ensure the smooth expansion in the breadth of our business, securing high quality
staff, training them, and deploying them effectively is crucial.

Furthermore we seek

to pursue various synergies that exist within our Group and to fortify it through M&A
and new business planning activities.
* ICH is an acronym for the “International Conference on Harmonization of Technical Requirements for
Registration of Pharmaceuticals for Human Use.” This Conference maintains a goal of standardizing thevarious documentation and procedures required for new drug approval in the United States, Europe andJapan to help eliminate unnecessary duplication of clinical and laboratory testing while securing thesafety and effectiveness of drugs.

(6) Key Topics
Amidst the growing trends of outsourcing of various tasks, and of globalization of ourclients’ operations, our Group seeks to raise our overall service quality levels throughthe fortification of our QC and QA divisions, the strict abidance and adherence tostandardized guidelines, and the training and education of our staff designed to raise
their skill levels.
At the same time, we will seek to establish an efficient and well defined structure to
manage the business processes of projects, ranging from order to delivery, in order to beable to maintain our leading position despite the increasingly fierce pricing competition
with the industry.

(7) Basic Policy Regarding Relationships with Our Parent
Company
We are not a subsidiary or affiliate and therefore do not have a parent company.

-7-

III

Business Performance and Financial Position

1. Business Performance(1) Review of the Current Term
During the current fiscal year, the Japanese economy continued to grow on support ofstrong exports, higher corporate profits, brisk consumption and despite various
uncertainties such as anticipation of a rise of interest rate caused by release ofquantitative easing policy in money market, higher oil prices and overseas economy.
Against this backdrop, and despite a slight slowing in our markets we serve, we wereable to see continued growth in the CRO business, which is serviced primarily by ourcompany, and the SMO business, which is serviced primarily by our subsidiary
EP-Mint, as well as in our pre-clinical testing business.
EPS operates primarily in the CRO business realm.
With regards to our monitoring services, the clinical trial and planning division, which
performs clinical trial in the developmental and post market stages, saw favorable
trends in its existing project implementation, new project acquisition, anti-cancer,
diabetes and central nervous system related drug testing businesses.
With regards to our registration and clinical information processing division also saw
continued expansion in its project progress management, data management, and data
analysis services.

During current fiscal year, we were able to achieve higher capacity

utilization rates due to increases in the number of both existing and new projects.
In the area of medical equipment development, medical writing, and safety
information services, we were able to increase both our orders and sales compared tothe previous fiscal year despite difficult market conditions.
And EPS was transferred developing business of medical devices from Nihon
Americare Co., LTD in June 2006 for share expansion of our medical device
development section and enterprise base strengthen.
Moreover, we have established a clinical research promotion center to develop new
demand such as investigator-initiated clinical trial, post-marketing study, and speciallydesignated health foods.
Looking at our company, both sales and ordinary income of our clinical planning
development division and clinical information processing division grew compared to theprevious fiscal year.

-8-With regards to our consolidated subsidiaries in Japan, e-Trial Co., Ltd.
(shareholding ratio: 100%), which was established in March 2006 for the purpose ofbeing entrusted with the clinical trial utilized EDC, is having a favorable start.
With regards to our overseas consolidated subsidiaries, EPS China has started tooperate in earnest with a large project received in China and contributed toachievements, and recorded increased sales and profit compared to the previous fiscal
year.

EPS Singapore has been performing their own original way to capture orders

from new clients, and recorded increased sales and profit compared to the previous
fiscal year.
Moreover, EPLUS Co., Ltd. (shareholding ratio: EPS 60%, Sosei Group 40%) acquired
the business license in China and is preparing its business operations.
At the same time, EP Medical Co., Ltd. provides MR dispatch services (CSO), and thedispatched MR services are increasing for the new orders.

However, EP Medical had

front-loading of costs associated with the acquisition of personnel to help fuel the future
growth in this business.
EP Mate Co., Ltd. which is performing temporary staffing business (dispatched CRO
business) for pharmaceutical companies has been developing achievements favorably.
With regards to our system development services, All Right Software Inc. and theirconsolidated subsidiaries All Right （ Beijing ） are promoting their businesses byleveraging the Chinese IT engineers to develop new clients, and recorded increased
sales and profit compared to the previous fiscal year.
All Right Software Inc. was transferred a business from M･net Co., Ltd. in order tostrengthen business scale expansion and development organization in April, 2006.
Consequently in our CRO business consolidated sales were ¥11,151 million, up
22.9% over the previous fiscal year, with consolidated operating income of ¥1,787
million, up 37.1% over the previous fiscal year.
EP-Mint Co., Ltd. handles our SMO business.
EP-Mint Co., Ltd. efforts to fortify the internal structure since its merger, andperforms mainly site support business such as clinical trial administration with local
medical institutions in addition to CRC business.

However, the operating ratio is

falling while they are still maintaining the internal structure and could not obtain neworder as expected.

-9-Therefore, in order to attain the increase in efficiency by consolidating our Group andpursuit better service suits for the clients’ needs, EP-Mint Co., Ltd. operates all our
SMO business in our Group.

Japan SMO Co., Ltd., mainly engaged in the site support

service was decided on dissolution in the extraordinary shareholders’ meeting on July12, 2006, and it is on liquidation at present.
Consequently in the SMO business, sales were ¥2,982 million, up 14.8% over theprevious fiscal year, with consolidated operating income of ¥88 million, down 66.7%
from the previous fiscal year.
LSG Corporation operates the pre-clinical business.
LSG Corporation is facing difficulties such as cancellation of a contract with a researchorganization caused by reorganization at pre-clinical testing business organizationgroup in first- half term.

However, they have been promoting to contract withoverseas partners and expand sales of new products.
Consequently in the pre-clinical business, sales were ¥1,196 million, down 13.4%
from the previous fiscal year, with consolidated operating income of ¥71 million, down
66.9% from the previous fiscal year.
The above sales and operating income by segment in each business are recorded
including internal transactions between segments.

After deducting them, for current

fiscal year, sales were ¥15,257 million, up 17.3% over the previous fiscal year, with
operating income of ¥1,958 million, up 9.2% over the previous fiscal year, and ordinary
profit of ¥1,979 million, up 9.3% over the previous fiscal year.

However, since ¥606

million was recorded for profit by proceeding investment securities in previous fiscal
year, net profit was ¥1,079 million, down 4.2% from the previous fiscal year.

(2) Earnings Projections for the Next Fiscal Year
We anticipate the Japanese economy to continue to trend strongly, however these are
numerous uncertainties on the horizon including higher oil prices, conditions inoverseas economies, and volatility in the domestic stock market, JPY exchange rate.
Our company seeks to achieve our earning projections in the next year through themainly promoting of both the Biometrics division, which includes data management,
statistic analysis, registration and project progress management, medical writing andpharmacovigilance, and Clinical development division, which includes monitoring, andmedical device products’ clinical trial development services.

- 10 -

Furthermore we will also

promote information capturing and order activities in our Business development
department, overseas clinical trial related services in our International businessdepartment, and our Clinical research promotion center for new business proposal andother services.
With regards to our consolidated subsidiaries, E-Trial Co., Ltd., which wasestablished in March 2006 for the purpose of performing global clinical trial for
pharmaceutical companies based primarily on EDC, will begin full-scale operation, andwill leverage the synergies which exist between the various overseas companies within
our Group.
In overseas markets, EPS China Co., Ltd., which performs CRO business seeks our
new clinical trial orders in China.

And mainly in East Asia and Southeast Asia, EPS

Singapore cultivates orders from new clients for clinical trial.

Additionally EPLUS

Co., Ltd. is working to quickly locate potential new drug development work and toestablish a structure to proceed it.
EP Medical Co., Ltd. is responsible for CSO business such as MR dispatch and isacquiring new orders.

And EP Mate Co., Ltd. performs dispatched type CRO services

and focuses its efforts upon expanding new staff dispatch business for pharmaceuticalcompanies.
All Right Software Inc., which provides software development services utilizing
Chinese IT engineers, is pursuing new orders for software development from clients inthe communications, finance and network related industries.

All Right Software

Beijing Limited as its subsidiary also focuses its efforts upon developing new clients aswell as generating more business from existing clients.
EP-Mint Co., Ltd., which is responsible for our SMO business, will pursuit the effectof its merger and will perform to obtain new orders with their employee efficiently.
Additionally LSG Corporation, which performs pre-clinical testing services, will seek
new business partners, and will expand its business by performing as a domestic agentof pre-clinical testing services and providing animals for studies by adding growing
markets such as mouse cages and special animal feeds.
The earnings projections for the fiscal year to September 2007 are as follows.

- 11 -

(Non-consolidated)

Units: Yen million
Ordinary
incomeSales

Dividend per share (JPY)Net income

InterimYear end

Total

FY9/06 Results

9,479

1,664

980

1,000

2,300

3,300

FY9/07 Projections

10,852

1,750

1,031

1,200

2,300

3,500

Change

1,373

85

51

% Change

14.5

5.1

5.2

(Consolidated)
Sales

Units: Yen million
Net income

Ordinary income

FY9/06 Results

15,257

1,979

1,079

FY9/07 Projections

17,700

2,400

1,267

Change

2,443

421

188

% Change

16.0

21.3

17.4

2. Financial Position(1) Changes in Our Assets, Liabilities, and Equity
We describe changes in our financial position during the current fiscal year from theend of the previous fiscal year below.
During the current fiscal year, our consolidated current assets increased by ¥1,909
million to ¥8,400 million due to a ¥1,845 million rise in cash and cash equivalents,
which was due the issuance of convertible bonds and new loan, and a ¥121 million
increase in inventories. Our fixed assets rose by ¥519 million to ¥3,572 million due
primarily to a ¥315 million increase in intangible fixed assets, which was due
acquisition of goodwill, and a ¥172 million increase in deferred tax assets.
Consequently our total consolidated assets at the end of the fiscal year rose by ¥2,428
million to ¥11,973 million from the end of the previous fiscal year.
With regards to liabilities, income taxes payable declined by ¥233 million from theend of the previous fiscal year due mainly to reduction of non-deductible expenses, andlong-term debt increased by ¥796 million, and other current liabilities increased by¥193 million. Consequently total consolidated liabilities at the end of the fiscal year
grew by ¥694 million to ¥3,403 million from the end of the previous fiscal year.
With regards to net assets, both capital and additional paid-in capital rose by ¥550
million and ¥549 million respectively due to issuance of new shares, and retained
earnings grew by ¥844 million, despite unrealized gain on available-for-sale securities
declined by ¥276 million.

Consequently net assets at the end of the current fiscal year

rose by ¥1,733 million to ¥8,570 million from the end of the previous fiscal year.

- 12 -

(2) Consolidated Cash Flow Conditions
During the fiscal year, consolidated cash and cash equivalents rose by ¥1,845 million
from the end of the previous fiscal year to ¥3,792 million, on the back of cash inflow of¥1,357 million and ¥1,609 million from operating and financing activities respectively,
which more than offset a ¥1,139 million outflow of cash from investing activities.

(Cash Flow from Operating Activities)
At the end of the fiscal year, consolidated cash flow derived from operating activities
grew by ¥1,647 million from the previous fiscal year to ¥1,357 million. The main
sources for this increase include ¥1,840 million in income before income taxes (adecline of ¥396 million from the previous fiscal year), which reflects a decline due to¥1,006 million payment of income tax (an increase of ¥188 million from the previous
fiscal year), ¥606 million in extraordinary profits derived from the proceeding ofinvestment securities in the previous fiscal year, an inflow resulting from a decline inaccounts receivables of ¥92 million (a ¥984 million increase from the previous fiscal
year), an inflow of ¥24 million (a ¥122 million increase from the previous fiscal year)
due to increase in accounts payable-trade, and an inflow of ¥182 million (an increase of¥551 million from the previous fiscal year) due to increase in other current liabilities.

(Cash Flow from Investing Activities)
We saw a net outflow of cash from our investing activities of ¥1,139 million during
the fiscal year, which represents an increase in the outflow of ¥1,277 million from theprevious fiscal year. The main factors for this increase include a ¥132 million increase
for the acquisition of tangible fixed assets and investment securities during the current
fiscal year, an inflow of ¥702 million for proceeding of investment securities in theprevious fiscal year, and an outflow of ¥340 million for acquisition of goodwill during
the current fiscal year.

(Cash Flow from Financing Activities)
We saw a cash inflow from our financing activities increase by ¥2,360 million fromthe previous fiscal year to ¥1,609 million. The main reasons for this increase were theinflows of ¥1,997 million from the issuance of convertible bonds and ¥1,092 million of
new loan during the current fiscal year, the outflows of ¥323 million due to acquisitionof treasury stocks in the previous fiscal year, a ¥103 increase due to repayment offinance lease and payment of dividends, and a ¥900 million of redemption of
convertible bonds in the current fiscal year.

- 13 -

Trends in Our Cash Flow Related Indexes
FY9/02

FY9/03

FY9/04

FY9/05

FY9/06Equity Ratio

62.3%

65.8%

63.6%

62.9%

64.2%

Public stock market value ratio

347.3%

156.2%

380.7%

292.8%

189.6%

Debt redemption period (years)

0.0

0.2

0.1

ー

0.7

Interest coverage ratio (times)

651.9

67.0

205.4

ー

65.6

Equity ratio: Shareholder’s equity / total assets
Public stock market value ratio: Public stock market value / total assets
Debt redemption period: Interest bearing liabilities / Operating cash flow
Interest coverage: Operating cash flow / Interest payments* All indexes are based on consolidated financial data
* Public stock market value is calculated by the closing share price multiplied with the number ofoutstanding shares at the end of the fiscal year (excluding treasury stock)* Operating cash flow is based on consolidated cash flow from operating activities at the end of the fiscal
year. Interest bearing liabilities include all liabilities on the consolidated balance sheet at the end of the
fiscal year upon which interest is paid. Interest payments are based on interest payments taken from theconsolidated cash flow statement at the end of the fiscal year.

- 14 -

IV EPS Group
Providing Full-service Support for Drug Development Outsourcing
As the core of the EPS Group’s CRO business, we provide a wide range ofservices supporting pharmaceutical companies’ drug development process,including SMO operations, personnel dispatch, and non-clinical trial operations(including various services outsourced from pharmaceutical companies in thestages prior to clinical trials). As part of our full-service support business, ourGroup also provides services ranging from planning to new medical applications.
Additionally, as our medium-term management objectives, we aim to expand
overseas, build new businesses, and raise the quality and efficiency of ouroperations while at the same time growing our existing businesses.

- 15 -

V Financial Highlights
1. INFORMATION OF EPS Co,Ltd & CONSOLIDATEDSUBSIDIARIES 2006.09(2005.10.1-2006.9.30)(UNAUDITED)(1) CONSOLIDATED OPERATING RESULTS
Net sales
Sep-06
Sep-05

15,257
13,004(17.3%)(19.0%)Net Income per Share(yen)
Sep-06
Sep-05
Notes:
1.
2.

12,300.92
13,070.99( UNIT:JPYMILLON )Operating Income
1,958
1,793

(9.2%)(27.1%)

Return on Stockholders'equity (%)
15.8
19.8

Ordinary Income
1,979
1,811

Net Income(9.3%)(23.6%)

1,079
1,126

Ordinary income tototal assets (%)

Ordinary income to
net sales (%)

18.4
20.1

13.0
13.9

Average number of shares issued and outstanding during the period :Sep-0687,724 shares
Sep-0586,204
sharesPercentages for net sales, operating income, ordinary income, and net income indicate growthratio to previous year

(2) CONSOLIDATED FINANCIAL INFORMATION
Total Assets
Sep-06
Sep-05Note :

Stockholders' Equity

11,973
7,689
9,545
6,000
Total shares issued and outstanding as of :Sep-0689,398shares( UNIT:JPY MILLION )Stockholders'Equity ratio (%)

Stockholders' Equity
per share (yen)

64.2
62.9

86,012.96
69,772.18

Sep-0586,000shares(3) CONSOLIDATED CASH FLOW INFORMATIONNet cash provided by(used in)operating activities
Sep-06
Sep-05(△4.2%)(47.0%)Net cash provided by(used in)investing activities

1,357
△ 290

△ 1,139
138( UNIT:JPY MILLION )Net cash provided by(used in)financing activities

Ending balance of cash
and cash equivalents

1,609
△ 751

3,792
1,946

(4) CONSOLIDATED SUBSIDIARIES
Consolidated subsidiaries :Associated companies by equity accounting method :2. INFORMATION OF CONSOLIDATED BUDGET

14
3

2007.09

companies
companies(2006.10.1-2007.9.30)( UNIT:JPY MILLION )Sales
Mar-07
Sep-07

8,182
17,700

Budgeted net income per share :Note:

Ordinary Income
729
2,400
14,177.14

Net Income
371
1,267

yen

Above figures may differ from actual results as uncertain various factors may affect future earnings.

- 16 -

1. INFORMATION OF NON-CONSOLIDATED

2006.09 (2005.10.1-2006.9.30)(UNAUDITED)(1) OPERATING RESULTS(
Net sales
Sep-06
Sep-05

Sep-06
Sep-05
Notes:
1.
2.

9,479
7,896

Operating Income(20.0%)(12.6%)

1,587
1,142

(38.8%)(10.9%)

UNIT:JPY MILLION

Ordinary Income
1,664
1,221

Net Income(36.3%)(10.5%)Net Income per
Share (yen)Return on Stockholders'equity (%)

Ordinary income tototal assets (%)

11,171.96
9,433.09

16.1
15.7

20.2
17.8

)

980
813

(20.5%)(23.1%)

Ordinary income to
net sales (%)
17.6
15.5

Average number of shares issued and outstanding during the period :Sep-0687,724
sharesSep-0586,204
sharesPercentages for net sales, operating income, ordinary income, and net income indicate growthratio to previous year(2) OVERALL SITUATION OF DIVIDEND DISTRIBUTION(
Cash Dividends per share
Interim Dividend
per share

Total
Sep-06
Sep-05Note :

3,300
1,000
2,700
1,000
Total shares issued and outstanding as of :Sep-0689,398shares

UNIT:JPY )Year end Dividend
per share
2,300
1,700

Sep-0586,000shares(3) FINANCIAL INFORMATION(

Sep-06
Sep-05

Total Assets

Stockholders' Equity

9,365
7,088

6,890
5,320

Stockholders'Equity ratio (%)(
Sales
Mar-07
Sep-07

4,890
10,852Total
Mar-07
Sep-073,500

Ordinary Income
531
1,750

Note:

77,072.49
61,865.47

2007.09 (2006.10.1-2007.9.30)

UNIT:JPY MILLIONNet Income

)

322
1,031
( UNIT:JPY )Interim Dividend
per share

Year end Dividend
per share

1,200-

Budgeted net income per share :Stockholders' Equity
per share (yen)

73.6
75.1

2. INFORMATION OF NON-CONSOLIDATED BUDGET

UNIT:JPY MILLION

2,300
11,535.09

yenAbove figures may differ from actual results as uncertain various factors may affect future earnings.

- 17 -)

CONSOLIDATED BALANCE SHEETSSEPTEMBER 30, 2006 AND SEPTEMBER 30, 2005 （UNAUDITED)ASSETS:

CURRENT ASSETS
Cash and cash equivalents
Notes and accounts receivable
Inventories
Deferred tax assets
Pocket through expense
OthersAllowance for doubtful accounts
Total current assets
FIXED ASSETS
Tangible Assets ;Leasehold improvements
Accumulated depreciation
Furniture and fixtures
Accumulated depreciation
Others
Accumulated depreciation
Total property and equipment
Intangible Assets ;Goodwill
OthersTotal intangible assets
Investments and other assets ;Investment securities
Long-term loans receivable
Deposits
Time deposits and banking arrangements
other than cash equivalents
Deferred tax assets
OthersTotal investments and other assets
Total fixed assets
TOTAL ASSETSLIABILITIES:CURRENT LIABILITIES
Accounts payable
Current portion of long-term debt
Income taxes payable
Provision for bonuses
OthersTotal current liabilities
LONG-TERM LIABILITIESLong-term debt
Provision for employee's retirement benefits
Provision for director's retirement benefits
Deferred tax liabilities
OthersTotal long-term liabilities
TOTAL LIABILITIESNET 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- 18 -

2006
3,792,223
3,607,909
339,862
252,655
145,275
264,222△ 1,411(IN THOUSANDS,JPY)
2005
1,946,862
3,695,254
218,801
267,989
99,413
264,627△ 1,237

8,400,737

6,491,710

344,453△ 180,245
203,274△ 131,006
133,053△ 54,723

301,797△ 155,734
183,032△ 116,945
85,953△ 46,228

314,805

251,874

315,666
67,993
383,660

107,090
107,090

1,275,110
45,617
666,687
500,000

1,358,169
51,547
641,653
500,000

188,142
198,9612,874,519
3,572,985

15,796
127,768
2,694,936
3,053,902

11,973,723

9,545,612

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

157,906
86,824
608,911
370,813
978,387
2,202,842

670,000
227,604
130,499
4,258
5,825
1,038,188
3,403,591

205,545
122,335
128,788
49,504506,174
2,709,017

1,875,251
1,825,298
4,180,774△ 322,080
89,5901,325,250
1,275,300
3,336,628△ 321,251
366,394

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

18,0856,000,407
836,187
6,836,595
9,545,612

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)(IN THOUSANDS,JPY)

2006

2005

NET SALES

15,257,985

COST OF SALES

10,892,074

9,155,319

Gross profit

4,365,911

3,848,821

2,407,205

2,054,850

1,958,705

1,793,970

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating income

13,004,141

OTHER INCOME (EXPENSES)Interest

income27,69020,134

Interest

expenses(20,682)(2,890)Gain on cancellation of life insurance

10,91912,327

Service fee income

3,317

4,410

Gain on consumption tax filing

7,988

-

Incentive on re-investment in overseas subsidiaries

7,711

-

(3,050)(4,200)Foreign exchange loss

(3,884)(16,032)

Equity in losses of associated companies(9,213)-

Expense for treasury stock acquisition-(2,159)Amortization of consolidated adjustment account-(56,032)

Payment to the Association for employment of persons with disabilities

Gain on sales of property and equipment

995

1,075

Gain on sale of investments in securities-

606,114

Gain on decrease of shares in associated company

4,001

-

Loss on sales and disposal of property and equipment(14,743)(27,265)

Office removal expenses of consolidated subsidiary-(25,556)

Loss on liquidation of consolidated subsidiary-(48,541)

Loss on devaluation of investment in securities(87,593)-

Impairment loss

(3,635)-

Loss on devaluation of software(28,083)-(9,830)(18,453)

Other- net
Other income (expenses)-net(118,093)

442,929

1,840,612

2,236,900

Current

782,199

907,384

Deferred(89,728)

106,069

692,470

1,013,454

69,05596,673

1,079,085

1,126,771

Income before income taxes and minority interests
INCOME

TAXES

Total
MINORITY INTERESTSNET INCOME- 19 -

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETSFOR THE YEAR ENDED SEPTEMBER 30, 2006
(UNAUDITED)(IN THOUSANDS,JPY)
Attributable to equity holders of the Company

Balance at 30 Sep 2005

Common stock

Additional
paid-in
capitalRetainedearnings

Commonstock fortreasury

Sub total

1,325,250

1,275,300

3,336,628△ 321,251

5,615,927

550,001

549,998

Changes during theperiodIssuance of new stocks
Cash dividends△ 232,508

1,100,000△
232,508

Net income

1,079,085

1,079,085

Acquisition of treasury
stock
Retirement of treasury
stock

△ 212

△ 1,041△ 1,041212-△ 2,219

Others
Net increase/decrease invaluation,translation adjustment
and minority interest△ 2,219

Total changes during theperiod550,001

549,998

844,145△ 829

1,943,316

Balance at 30 Sep 2006

1,875,251

1,825,298

4,180,774△ 322,080

7,559,243

Evaluation and translation adjustment

Balance at 30 Sep 2005

Unrealized gainonavailable-for-salesecurities

Foreigncurrencytranslation
adjustments

Totalevaluationandtranslation
adjustments

Total
Stockholders'equityMinority
interest

Total net
assets366,394

18,085

384,480

6,000,407

836,187

6,836,595

Changes during theperiodIssuance of new stocks

1,100,000

Cash dividends△ 232,508

1,100,000△
232,508

Net income

1,079,085

1,079,085

Acquisition of treasurystock△ 1,041△ 1,041

Retirement of treasury
stock

-

-

△ 2,219△ 2,219

Others
Net increase/decrease invaluation,translation adjustment
and minority interest△ 276,803

22,466△ 254,337△ 254,337

44,557△
209,780

Total changes during theperiod△ 276,803

22,466△ 254,337

1,688,979

44,557

1,733,536

Balance at 30 Sep 2006

89,59040,552130,142

7,689,386

880,745

8,570,131- 20 -

CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2005 (UNAUDITED)(IN THOUSANDS,JPY)
2006
2005
OPERATING ACTIVITIES:
Income before income taxes and minority interests
1,840,612
2,236,900
Adjustments to reconcile income before income taxes and minority interests to
net cash provided by operating activities:
Depreciation and amortization
133,848
71,087
Impairment loss
3,635
Increase in provision for bonuses
50,76925,007
Amortization of consolidated adjustment account
15,802
63,794
Loss on liquidation of consolidated subsidiary
48,541△ 606,114
Gain on sale of investments in securities
Loss on devaluation of investments in securities
87,593
Increase in allowance for retirement benefits for employees
22,05830,308
Increase in allowance for retirement benefits for directors
8,163
7,500
△ 28,890△ 20,134
Interest and dividends income
Interest expense
20,6822,890
Loss on sales and disposal of property and equipment
14,74327,265
Changes in operating assets and liabilities:
Decrease in accounts receivable-trade（△Increase)△ 891,401
92,792△ 109,861△ 52,292
Increase in inventories
Increase in accounts payable -trade（△Decrease)△ 97,806
24,351

1,357,478△ 6,979△ 369,093
44,104
513,577
17,774△ 2,890△ 818,838△ 290,377

Proceeds from sales of investments securities
Disbursements for purchase of tangible fixed assets
Disbursements for purchase of intangible fixed assets△ 146,885△ 25,686

702,161△ 102,425△ 11,659

Payment for insurance reserve fund

△ 45,897△ 40,918

Payment for purchase of investments securities△ 477,290△ 389,623

Payment for deposit for rent office and others△ 82,086△ 114,557△ 340,000△ 21,192△ 1,139,038

95,678
138,654

1,092,000
1,997,743

520,000-

14,055△ 43,678△ 295,624△ 900,000△ 1,041△ 231,444△ 18,794△ 4,018

33,000△ 520,000△ 277,264△ 323,410△ 171,155△ 12,475△ 751,304

Increase in pocket through expense
Increase in other current liabilities（△Decrease)
Others , Net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities△ 45,255
182,905
43,1092,357,062
27,986△ 20,682△ 1,006,887

INVESTING ACTIVITIES:Payment for acquisition of goodwill
Others , Net
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES:
Proceeds from borrowing short-term debt
Proceeds from borrowing long-term debt
Proceeds from issuance of bonds
Proceeds from issuance of common stock to minority stock
holders
Disbursements for repayments of short-term debt
Disbursements for repayments of finance leases
Disbursements for repayment of long-term debt
Disbursements for redemption of bonds
Disbursement for acquisition of treasury stock
Dividends paid
Dividends paid for minority stock holders
Others , Net
Net cash provided by (used in) financing activities
EFFECT OF EXCHANGE DIFFERENCE ON CASH & CASH EQUIVALENTS
NET INCREASE (△DECREASE) IN CASH AND CASH EQUIVALENTS
BEGINNING OF BALANCE,CASH AND CASH EQUIVALENTS
INCREASE IN CASH AND CASH EQUIVALENTS BY MERGER OFCONSOLIDATED SUBSIDIARYENDING OF BALANCE,CASH AND CASH EQUIVALENTS- 21 -

1,609,198
17,722
1,845,361
1,946,862

9,791△ 893,236
2,394,225-

445,873

3,792,223

1,946,862

STATEMENT OF ORDER ENTRY AND SALES BY ITEMSFOR THE YEAR ENDED SEPTEMBER 30, 2006
(UNAUDITED)(1) RESULT OF ORDER ENTRY
2006.09<2005.10.1-2006.9.30>(JPY thousand )year-to-year
ORDER
comparison
BACKLOG(%)

DIVISIONAMOUNT OF
ORDER ENTRYCRO
Data
Management
Monitoring
Softwaredevelopment
OthersTOTAL OF CRO
SMO
Preclinical
Service
TOTAL

year-to-yearcomparison(%)

4,295,950
4,213,504

103.8
88.4

4,121,784
5,871,389

108.5
89.7

984,368
1,744,526
11,238,349
3,134,016

133.4
130.4
102.4
116.8

185,457
589,778
10,768,408
1,732,881

412.0
220.1
101.1
112.6

1,172,474

88.6

148,282

88.3

15,544,840

103.7

12,649,572

102.3* These figures are expressed by sales price.
* These above figures do not include consumption tax.
(2) RESULT OF SALESDIVISIONCRO
Data
Management
Monitoring
Softwaredevelopment
OthersTOTAL OF CRO
SMO
Preclinical
Service
TOTAL
2005

2006.09<2005.10.1-200
6.9.30>(JPY thousand )3,973,159
4,886,316

120.5
133.4

843,924
1,422,739
11,126,140
2,939,705

113.5
106.6
123.1
113.6

1,192,139

86.6

15,257,985

117.3(2004.10.1-2005.9.30)(Unit: JPY THOUSAND)
CRO

SALES
Sales to customers
Intersegment sales
Total
Operating expenses
Operating income
2006

year-to-yearcomparison (%)

SMO

9,038,313
34,3889,072,702
7,768,857
1,303,844

2,588,444
8,628
2,597,072
2,330,694
266,378

Preclinical
Service
1,377,383
4,140
1,381,523
1,164,199
217,324

Total

13,004,141
47,157
13,051,298
11,263,751
1,787,546(2005.10.1-2006.9.30)

Consolidation−

13,004,141−(47,157)(47,157)(53,580)
6,423

13,004,141
11,210,170
1,793,970(Unit: JPY THOUSAND)
CRO

SALES
Sales to customers
Intersegment sales
Total
Operating expenses
Operating income

Eliminations/
Corporate

SMO

11,126,140
25,568
11,151,709
9,363,803
1,787,905

2,939,705
42,7382,982,444
2,893,671
88,773- 22 -

Preclinical
Service
1,192,139
4,735
1,196,874
1,124,926
71,948

Total

15,257,985
73,042
15,331,028
13,382,401
1,948,626

Eliminations/
Corporate

Consolidation−

15,257,985−(73,042)(73,042)(83,120)
10,07815,257,985
13,299,280
1,958,705

VI Company Profile

Corporate Name:
President & CEO:Establishment:
Capital:Main Services:
E-Mail:URL:EPS Co., Ltd.
Yan Hao
May 1991¥ 1875.25 Million
CRO business and System Development
info@eps.co.jp
http//:www.eps.co.jp

Locations(Center Office)Tsuruya Bldg.,2-23 Shimomiyabicho, 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. ＋81-3-5804-7369(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, Nagoya4500002
TEL. ＋81-52-581-8887- 23 -

Members of the Board and Statutory Auditors(As of September 30, 2006)
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. Toru Ebihara
Mr. Koichi Shibuya

Current Situation of Shares(As of September 30, 2006)
Authorized stocks
Share of common stock issued
Number of stockholders

324,000
90,4006,044- 24 -