Financial Results for the First Half of the Fiscal Year Ending March 31, 2007 (Consolidated)
November 22, 2006
Name of listed company: Nichii Gakkan Company
Company code number: 9792
(URL: http://www.nichiigakkan.co.jp)
Representative
Title: President and Representative Director
U.S. Accounting Standards: N/A

Exchange where listed: Tokyo Stock Exchange
Location of headquarters: Tokyo
Name: Takashi Mori

1. Consolidated results for the six months ended September 30, 2006 (April 1, 2006 - September 30, 2006)(1) Consolidated results
Net Sales
Operating Income
Ordinary Income
Millions of yen%
Millions of yen%
Millions of yen%
Six months ended
102,211
△1.1
1,328
△50.2
1,371
△50.9
Sep. 30, 2006
Six months ended
103,333
3.4
2,670
29.8
2,791
28.9
Sep. 30, 2005
Year ended Mar. 31, 2006
206,222
－
4,990
－
5,185
－

Millions of yen
484

%
△66.8

Net Income Per
Share after
Adjusting for Latent
Shares
Yen
Yen
13.75
－

1,458

320.0

41.37

－

1,974

－

55.03

－

Net Income Per
Share

Net Income

Six months ended
Sep. 30, 2006
Six months ended
Sep. 30, 2005
Year ended Mar. 31, 2006

Notes: 1. Equity-method investment profit (loss) Six months ended 30th September, 2006: - million yen Six months ended 30th September, 2005: - million yen
Year ended 31st March, 2006: - million yen
2. Average number of shares during the term (consolidated)
Six months ended 30th September, 2006: 35,223,871 shares
Six months ended 30th September, 2005: 35,243,877 sharesYear ended 31st March, 2006: 35,234,670 shares
3. Changes in the method of accounting: None
4. Percentages indicated for Net sales, Operating income, Ordinary income and Net income are increases (decreases) compared to the same period of
the previous fiscal year.

(2) Consolidated Financial Position
Total Assets
Six months ended
Sep. 30, 2006
Six months ended
Sep. 30, 2005
Year ended Mar. 31, 2006

Net Assets

Equity Ratio

Shareholders' Equity Per
Share
%
Yen
54.8
1,471.19

Millions of yen
94,505

Millions of yen
51,95490,37351,856

57.4

97,89852,15953.3

Note: Number of outstanding shares at the end of the term (consolidated)(3) Consolidated Cash FlowsNet cash provided by(used in) operating
activities
Millions of yen
Six months ended
389
Sep. 30, 2006
Six months ended
2,587
Sep. 30, 2005
Year ended Mar. 31, 2006
6,672

Six months ended 30th September, 2006:
Six months ended 30th September, 2005:
Year ended 31st March, 2006:

Net cash provided by(used in) investing
activities
Millions of yen△1,077

1,472.06
1,479.74
35,223,382 shares
35,227,367 shares
35,224,427 shares

Net cash provided by
Cash and cash(used in) financing
equivalents
activities
at the end of the term
Millions of yen
Millions of yen△2,472
9,230△3,981

2,311

4,789

△5,538

7,385

12,391(4) Scope of consolidation and application of equity method
Number of consolidated subsidiaries: 7 companies
Number of unconsolidated subsidiaries subject to the equity method: None
Number of affiliates subject to the equity method: None

(5) Changes in companies subject to consolidation and equity method
Newly consolidated: None Newly unconsolidated: None
Newly excluded from the equity method: None

Newly subjected to the equity method: None

2. Projected consolidated results for the Year ending 31st March, 2007 (April 1, 2006 - March 31, 2007)
Net Sales
Ordinary Income
Net Income
Millions of yen
Millions of yen
Millions of yen
Year ending Mar. 31, 2007
207,800
2,100
640
Supplementary information

Projected Net income per share for the fiscal year: ¥18.17

Note: Fractions of one million yen are rounded down. The above projections are based on information available as of time of this announcement.
Actual results may differ due to various factors. Refer to page 9 of the Attachment for details on the projections.

11. Status of the Corporate Group
This consolidated corporate group consists of Nichii Gakkan Company, its 15 subsidiaries, and its 1 affiliate. The Group is
engaged in four businesses (Medical Support Business, Health Care Business, Education Business, and Other Businesses).
In Medical Support Business, the Group primarily provides medical practice services to medical institutions and pharmacies;
sales, disinfection, and sterilization services for medical equipment; and medical affairs consulting. In Health Care Business,
the Group provides home care services mainly under long-term care insurance (home-visit long-term care, home-visit bathing,
day care), sale and rental of welfare equipment, catering, and other services. In Education Business, the Group provides
educational programs primarily for medical office workers and home helpers. In Other Businesses, Nichii Gakkan
Company's subsidiaries take the lead in providing data processing, storage and delivery service, book publication and sale,production and sale of flowers, ornamental plants, seeds and saplings, leasing, and manpower services.
The Group's businesses and positioning of each business are as shown below. The business categories correspond to
those in the segment information by business category.
Business Category
Medical Support Business

Health Care Business
Education Business

Other Businesses

Principal Businesses/Products

Principal Companies

Medical practice services such as reception, medical fee
claims, accounting, computer operations, and medical
Nichii Gakkan Company
record management, sell/disinfection/sterilization services
Nihon Support Service Co., Ltd.
for medical equipment, medical affairs consulting
Home-visit long-term care, home-visit bathing, day care, Nichii Gakkan Company
rental/sale of welfare equipment, catering, etc.
Keihin Life Service Co., Ltd.
reha team japan Co., Ltd.
Courses for medical office work, home helper training, Nichii Gakkan Company
babysitter training, and sign language
Support Service Co., Ltd.
Information processing, storage and delivery service, Nihon
Tokyo
Marunouchi Publishing Co., Ltd.
publication and sale of books, production and sale of flowers, Roris Co.,Ltd.
ornamental plants, seeds and saplings, leasing, manpower NIHON CREDITLEASE Co., Ltd.
service, etc.
Power Bank Co., Ltd.

<Note> Power Bank Co., Ltd. halted business as of June 15, 2006 and we will liquidate the company.

2

The functions of the corporate group described above can be illustrated as shown below.
Health Care Business- Home-visit long-term care
- Home-visit bathing- Day care
- Sale and rental of welfare equipment- Catering- Consultation and information- Welfare equipment / ASPSales ofmerchandise

Consolidated subsidiaries
Keihin Life Service Co., Ltd.
reha team japan Co., Ltd.
Unconsolidated subsidiaries
Hospica Co., Ltd. / 2 other companies
Affiliates not subject to the equity method
Life Care Partners Co., Ltd.
Other Businesses-Data processing, and storage anddelivery service-Publishing and sale of publications-Production and sale of flowers,
ornamental plants, seeds and saplings-Leasing-Manpower service

Customers
Local governments, etc.

Health Care Business
Nichii Gakkan Company

Sales of merchandise
Provision of services

Sales of merchandise
Provision of services

Local governments, etc.
Medical institutions
Customers
Member stores

Medical Support Business
Nichii Gakkan Company
Nihon Support Service Co., Ltd.

Medical institutions, etc.
Provision of services

Storage and delivery service of teaching materials
and products, and computer operations service
Leasing,Manpower- service

Education Business
Consolidated subsidiaries
Nihon Support Service Co., Ltd.
Tokyo Marunouchi Publishing Co., Ltd.
Roris Co., Ltd.
NIHON CREDIT LEASE Co, Ltd.
POWER BANK Co., Ltd.
Unconsolidated subsidiaries
Yao Iryo PFI / 3 other companies

Students
Nichii Gakkan Company
Courses and sale and lease of
educational books
Leasing
Manpower
service

Health Care Business
Nichii Gakkan Company
Keihin Life Service Co., Ltd.
reha team japan Co., Ltd.

Merchandise sales and childcare
Provision of services
Leasing
Manpower service

3

Customers
Local governments, etc.
Provision of services
Sales of merchandise

Customers

2. Management Principles
1. Basic Principles of Management
Based on our management concept of “contributing to the public's health and welfare”, we make it a basic policy to conduct
corporate activities in fields closely related to human well-being, such as Medical, Long-term care, and Education, andcontribute to the improvement of living standards and the advancement and development of society.
Under our "user oriented" business concept, as a company able to respond to consumer needs and changes in the social
environment flexibly and properly, we strive to achieve lasting growth and aggressively promote wide-ranging activities in the
medical and welfare fields to contribute to society, in order to be a socially valuable company.
We also recognize that we must fulfill our social responsibilities as a company, comply with corporate ethics, and elevate thecorporate brand value in our activities while deepening our trusting relationship with our shareholders and other stakeholders.
In order to maximize our corporate value, we will continue to work actively to improve the autonomy of each organization andemployee, enhance compliance, and carry out business activities that can contribute to the market penetration of the Nichii
brand.

2. Basic Principles of Profit Distribution
We make it a basic policy to provide our stockholders with stable and continuous profit distributions. Considering businessperformance trends from a mid- to long-term standpoint, we will promote a consolidated dividend policy.
Retained earnings will be invested to continue our business growth and increasingly upgrade our corporate value. The
investments include development of new businesses and backbone systems/software.

3. Management goals
From the view that our business is to provide human resources, the medical and welfare markets in which we operate arelikely to continue to grow, and emphasis is to be placed on shareholder value, we set the following three points as ourmanagement goals.
1) Net sales growth →double-digit growth2) Operating income to Net sales → 8% or higher
3) ROE (return on equity) → 15% or higher

4. Mid- to long-term strategies and issues to be handled
In the medical and welfare field, social security system benefits are expected to rise with the declining birthrate and aging
population, and the Japanese government is contemplating a fundamental review of the medical and long-term care systems,
as well as revisions and enforcement of public regulations.
Aiming to be a solid company capable of quick and adequate responses to changes in the business environment that may
come along with changes in society, the Nichii Gakkan group is working on business growth strategies and structural reform.
For our business growth strategy, we set up a new “Information and Strategy Headquarters” at Kobe Port Island center on
September 16, 2006, to promote strategic business development and adequately respond to customer needs and market
environments in the medical, long-term care, and education fields. To streamline the entire business, our group strategy is towork on organizational reform, including liquidation of some subsidiary companies.
We recognize enhancement of human resource development as the basis of service, and have set it as a mid-term businessstrategy, while promoting aggressive investment strategies in human resources to establish our future business growth model.
The Nichii Gakkan group will carry out all of these business strategies in a comprehensive way, in order to provide
high-quality services, develop service menus that adequately respond to various needs, and realize the recovery of
profitability.

【Medical Support Business】
The national health insurance reform executed in April 2006, was the third major reform following the establishment of auniversal health care system in 1961, and the formulation of laws for the welfare of the elderly in 1982. This latest reform
shortened the average number of hospitalization days, established a new medical system for the elderly, and brought in a new
medical and long-term care provision system, thus largely changing the business environment surrounding medical institutions.
Therefore, medical institutions are now required to address management efficiency, in response to the changing environment.
To adequately deal with various problems faced by medical institutions, we aim to stabilize and improve utilization of humanresources, and enhance human resources development.
As part of our mid-term business strategy, we will actively offer service proposals to medical institutions and provide high-value
added services through enhancement of staff skills.

4

【Health Care Business】
In the April 2006 revision of the long-term care insurance system, under the basic principles of “Promotion of preventive care”,“Creation of community-based services”, “Clarification of roll assignment and cooperation between medical and long-term care”,
and “Strengthened support for moderate-to-severe long-term care receivers living at home”, fundamental reforms have been
implemented, which are compelling service providers to build new business models.
We had already set up about 200 complex-type care facilities, capable of providing services ranging from preventive care to
long-term care, ahead of the insurance system revision, and have accumulated results from various preventive care programs.
Based on these results, we are working to approach local governments, and offer our preventive care services to mild long-termcare customers.
As Japan sees the baby-boom generation of 7 million people reaching mandatory retirement age in 2007, the service domain in
the long-term care market is expected to scale up beyond the long-term care insurance policy limits. The Nichii Gakkan groupwill take a proactive stance in the creation of value-added services. In collaboration with local communities and other companies,
we plan to secure new growth areas and maximize the synergy effect of our existing businesses, in order to adequately respondto diversifying customer needs.

【Education Business】
The national census of 2005 reported that the number of workers in the medical and welfare industries increased
by 24.4% for the five year period from 2000 through 2005, and the number of home helpers, in particular, increasedby 1.4 times, the largest increase by occupation, so that the number of people in this field utilizing the specialist
qualification are tending to increase. In order to deal with the increasing elderly population, service quality
improvements, reinforcement of the cooperation between medical and long-term care, and establishment ofpreventive care service are being carried out, and skills are being enhanced and diversified.
Based on the original business model of “Train and Employ”, the Education Business is a core area that provides
human resources for our main businesses. Therefore, to raise awareness of our company and strengthen thehuman resources provision system, we started to air TV commercials in June 2006, advertise with mixed media,
expand the class offerings to be more available for students, and promote sales increase measures.
We continue to offer home-helper training courses and medical office work courses as our main educational
programs, and promote development and provision of value-added training courses to contribute to improvement of
employment in the medical and welfare fields.
【Other Businesses】
Other businesses focus on support operations such as welfare equipment leasing and publication of books on medicine andwelfare, taking advantage of our management resources in the medical and welfare services.
The welfare equipment leasing business is responsible for rejuvenating product distribution in the welfare equipment market andimproving the medical and long-term care environment.
The publication business is making a contribution through improving the quality of personnel by providing the latest specialized
information through publication of magazines specializing in medicine and welfare, and textbooks for the education business.
We will continue to implement our group strategies with the ideal form of organization in order to increase the corporate value of
the Nichii Gakkan group.

5. Matters relating to the holding company
There are no relevant matters.

5

3. Business Results and Financial Condition
1.

Business Results1) Overview of the current interim accounting period
Japan's economy showed a continuous upturn in the current interim consolidated accounting period, with an increase incapital investment and improvement of the employment situation, supported by steady growth in corporate performance.
Meanwhile, however, economic uncertainty prevailed with the prolonged inflation of oil prices and fear of rising interest
rates.
The medical insurance and long-term care insurance systems are going through fundamental reforms in order to rebuild
social security into a sustainable system. This is making the medical and long-term care market environment thatsurrounds our group even more severe. In April, the government carried out the first full-scale revision of the long-term careinsurance system since its establishment. At the same time, they also implemented revisions to medical service
payments and long-term care compensation. In the course of such revisions, the management environment for medical
institutions and nursing care service providers is undergoing major changes.
Against such a backdrop, we have developed new service menus and improved the infrastructure, to be able to respondquickly to changes in the market, and have pursued sales promotion and business operations that take full advantage of“Our nationwide network”, “High-quality service” and “Brand image”. We are also advancing strategic investments toward“Development of the organization, human resources and IT”, our medium- and long-term business strategy.
Net sales in this period declined, influenced by the sale and liquidation of a consolidated subsidiary for group restructuring
and revision of the long-term care insurance system.
Profit in the current interim consolidated accounting period was severely affected due to costs preceding profits, etc. It will
be only in the second half of the year, or later, that we can expect to see the influence of the revision of the long-term carecompensation system, the effects of course development pursuing student convenience, and the results of our investments
in advertising.
As a result of these activities, Net sales during the current interim accounting period were ¥102,211 million (down 1.1%
year on year), Ordinary income was ¥1,371 million (down 50.9% year on year), and Net income was ¥484 million (down
66.8% year on year).

2) Business results by segment【Medical Support Business】
In the Medical Support Business, we strived to expand medical practice services for hospitals and clinics, and promoted
support services for hospitals with DPC as well as those preparing to introduce DPC. We also took a proactive stance insales promotion at community health care liaison centers, and have started to improve the system for future community
health care liaisons (partnerships between medical services and long-term care, etc.).
In addition, we commenced introduction of a career improvement system, including better labor conditions, as a strategy
for investment in human resources.
As a result of these activities, Net sales in the Medical Support Business during the current interim accounting period was¥55,316 million (up 3.3% year on year) and Operating income was ¥5,171 million (down 0.7% year on year).

【Health Care Business】
In the Health Care Business, the use of preventive care services is undergoing a slow transition due to the moderate
operational status of the "Regional comprehensive support center” as the contact point for the preventive care services
newly established by the revision of the long-term care insurance system in April. Such circumstances limited the effect of
the current interim period’s investment in integrated long-term care facilities, which we developed to establish a frameworkfor providing preventive care services ahead of the system revision. The number of users of the preventive care services,
however, is growing slowly but steadily. In October, rental service for welfare equipment, such as beds and wheelchairs for
those requiring level 1 nursing care, lost insurance coverage. This change decreased the number of users of the service.
On the other hand, the number of contracts showed solid growth with regard to services not covered by insurance,
including the manpower service for welfare facilities. As a consequence, sales in this segment remained on a growthpath.
As a result of these activities, Net sales for this segment were ¥39,532 million (up 1.0% year on year) and Operating
income was ¥1,065 million (down 13.8% year on year).

6

【Education Business】
In the Education Business, we started aggressive efforts to promote sales using new advertisement strategies in mid June.
While boosting the recognition of our corporate brand through TV commercials, we have run highly appealing
advertisements carrying the same image in newspapers, magazines and on web sites. We also expanded and improved
our services by renewing curriculums and course management to enhance convenience for students.
The number of students taking medical office work courses and home helper training courses was less than that of theprevious year, but is showing signs that this downturn is coming to an end.
Meanwhile, we have undertaken a cost-reduction plan for earnings recovery, but are revising the original plan, because weare assessing the effect of the advertisement strategies, and promoting a forward-looking long-term strategy for enhanced
convenience of students, to secure human resources for our future business.
As a result, Net sales for this segment amounted to ¥6,741 million (down 2.3% year on year) and Operating loss was ¥640
million (Operating loss of ¥820 million in period for the previous term.)【Other Businesses】
In Other Businesses, we are engaging in such businesses as welfare equipment leasing, storage and delivery service, andproduction and sale of flowers, ornamental plants, seeds, and saplings.
We are advancing our business growth strategy, primarily concentrating on strengthening existing business andapproaches to new business and services, and restructuring of group companies. As a part of such reforms, we decided
to liquidate POWER BANK Co., Ltd. in the current fiscal year.
As a result, Net sales for this segment were ¥620 million (down 83.3% year on year) and Operating income was ¥46 million(down 19.3% year on year)72. Financial Status
Cash flow in the current interim accounting period
During the current interim accounting period, cash and cash equivalents ("funds") amounted to ¥9,230 million, up ¥4,441 million
from the same period the previous fiscal year. Cash flow from each activity and their factors are shown below.

【Cash flow from operating activities】
As a result of operating activities during the current interim accounting period, funds increased by ¥389 million (funds
increased by ¥2,587 million in the same period of the previous fiscal year).
This mainly attributes to a decrease in Income before income taxes and an increase in the payment of income and othertaxes.

【Cash flow from investing activities】
As a result of investing activities during the current interim accounting period, funds decreased by ¥1,077 million (funds
decreased by ¥3,981 million in the same period of the previous fiscal year).
Principal investments include establishment of new facilities and expansion of existing facilities for day care service.

【Cash flow from financing activities】
As a result of financial activities during the current interim accounting period, funds decreased by ¥2,472 million (funds
increased by ¥2,311 million in the same period of the previous fiscal year).
This is primarily due to short-term loans payable to the parent company.

Trends in cash flow indicators for the Group can be seen below.
Year ended March 31, 2005
First-half
Full year
Equity ratio (%)
Equity ratio based on present
value (%)
Debt redemption (years)
Interest coverage ratio

Year ended March 31, 2006
First-half
Full year

Year ending March 31, 2007
First-half

62.1

60.1

57.4

53.3

54.8

126.3
-

133.7
10.3
11.1

108.0
1.6
103.1

98.2
2.0
114.5

68.8
14.7
13.2

Notes:
Shareholders’ equity ratio: Shareholders' equity/total assets
Equity ratio based on present value: Total present value of stock/total assets
Debt redemption: Interest-bearing liabilities/operating cash flow
Interest coverage ratio: Operating cash flow/interest payments
1.
2.
3.

4.
5.

Each indicator was calculated from consolidated financial results.
Total present value of stock is the product of closing stock price at end of term and total number of outstanding shares at the end of term
(after deducting treasury stock).
Operating cash flow is equal to the cash flows from operating activities in the consolidated cash flow statement. Interest-bearing
liabilities are all the liabilities on which interest is paid, out of the liabilities in the consolidated balance sheet. Interest payments are theinterest payments as shown in the consolidated cash flow statement. Total present value of stock is the product of closing stock price at
end of term and total number of outstanding shares at the end of term (after deducting treasury stock).
In calculating the debt redemption for the first-half result, the operating cash flow is doubled to annualize the figure.
The debt redemption and interest coverage ratio for the first-half of the year ended March 31, 2005 is not shown because the cash flowfrom operating activities was negative.

8

3. Outlook for the full year performance
In the Medical Support Business, the necessity of stronger partnerships between medical services and long-term care isincreasing due to changes such as the reduced number of beds for long-term care. Under the circumstances, we plan toexpand our sales by increasing the Net sales per medical institution, receiving commissions from the community health careliaison centers, and working actively in collaboration with home care support clinics.
Also, as a strategy to intensify the management support services for medical institutions, we will expand the hospital PFI
business, support medical institutions with their introduction of DPC, and shift support services for efficient medical service
management into full swing. As for profitability, we will promote the career improvement system, including better labor conditions,as a strategy for investment in human resources, aiming to secure and develop competitive human resources. In addition, we
will continue our efforts to improve operational efficiency in the medical support area, establish self-directed organization in thefield, and negotiate with medical institutions for improvement of contracts.
In the Health Care Business, due to the revision of the long-term care insurance system, people in need of mild long-term careare shifting to the new preventive benefit. This change is anticipated to reduce the users of long-term care benefit services,
and at the same time, continue to slowly increase the number of users of preventive care services. Taking full advantage of ourservice infrastructure of unparalleled scale, we will appeal to local governments and users with the actual effectiveness andreadiness of our preventive care program, which will help us to receive commissions for community support business and obtain
new users of preventive care services. Also, for the welfare equipment leasing services, we are going to secure sales and obtainregular users by providing low-cost rental services beyond insurance coverage, for users in need of mild long-term care who lost
insurance coverage due to the revision of the long-term care insurance system. In terms of profitability, we will expand services
covered by the new preventive benefit and promote operation of self-pay services to increase sales and ensure profits.
In the Education Business, the severe environment for home-helper training courses is anticipated to continue, because thequalifications for long-term care workers have not yet been made clear. However, we are striving to boost our corporate brandpower by continuing our new full-scale advertisement strategy using mixed media. Also, we will respond to student needs
adequately by developing courses that are more convenient, and promote efficient class management by renewing course
curriculums to improve the operating status of each class, thus trying to ensure profits.
In Other Businesses, we are centralizing our management resources by restructuring the subsidiaries. This category willcontribute to our group management by establishing a group network that can provide better coordination and synergy effects
with our core competence businesses, Medical Support Business, Health Care Business and Education Business.
In consideration of these situations and prospects, our outlook for performance in the year ending 31st March, 2007 is ¥207,800
million in Net sales (up 0.8% year on year), ¥2,100 million in Ordinary income (down 59.5% year on year), and Net income of¥640 million (down 67.6% year on year).

94. Business Risks
Presented below are matters that may be of risk to the operations of each business of the Group. Although we mitigate suchrisks by dispersing and acknowledging them, in the event of an unforeseeable incident, such risks may cause serious effect on
the business performance or financial conditions of the Group.
External factors and risk factors with low potential are also mentioned here from the standpoint of positive information disclosure
on matters deemed important for those making investment decisions.
The matters below were determined to be potential risks by the Group upon preparing this data as of the end of the current
interim accounting period, and may not cover all the risks related to investment in our stocks.
1）Risks to Business<Medical Support Business>
The Group's Medical Support Business provides, among other services, medical practice services other than medical practiceitself, medical-related duties, and health service management consultation services. Medical institutions will see major
fluctuations in their medical revenues due to the revision of the medical service fee system approximately every two years andthe medical insurance system reform (Article 2, Paragraph 2 of the Health Insurance Law Revision Law). As we provide services
to medical institutions, such fluctuations can affect our contract amounts and contract provisions, particularly in a situation where
higher management efficiency and improved service quality are required by medical institutions as a consequence of the
medical service fee revision of April 2006, which has caused the largest-ever decrease of relevant compensation.

<Health Care Business>
Approximately 90% of our Group's Health Care Business can be attributed to services that are covered by public long-term careinsurance. Therefore, a review of the long-term care insurance system or compensation can have a major effect on Net sales
and profits. These services are regulated by the Long-term Care Insurance Law (Law No. 123, December 7, 1997) and various
other laws and ordinances.
The entire system is subject to review every five years (Article 2 of Supplementary Provisions of the Long-term Care InsuranceLaw) and long-term care compensation is subject to review every three years. The service provision and care management is toundergo a great transformation with the revision of the Long-term Care Insurance Law to be implemented in April 2006, which
will shift the current system to a “Preventive-care-focused system” with “new preventive benefits” and “community support
activities,” and establish “community-based services” to enable those who require long-term care to keep living in their homecommunity, and it is determined hereafter may have an impact on the profitability of our health care business.

<Education Business>
Our major educational program, the home helper training courses, is subject to the “ordinance concerning home-visit careproviders” (Health, Labor and Welfare Ministry Ordinance No. 23), and is required to obtain certification from the prefectural
government. The Japanese government plans to change the qualifications for long-term care workers (e.g. longer training andmore difficult curriculums), but have not yet disclosed detailed information, timing of implementation, etc. Depending on theoutcome of the revision of the qualification system and related trends, it may significantly affect the sales and profitability of thecourses.

<Other Businesses>
The welfare equipment leasing business may come under the influence of interest-rate drift, changes in the accounting
standards on leasing transactions, and tax reforms.

102) Risks due to the Internal Management System
The Nichii Gakkan group is working to strengthen the self-directed operational management framework as well as internal check
functions, to prevent human errors and dishonesty of employees. However, future operational management problems could
cause a loss of trust by stakeholders, and could affect our business performance.

<Risks due to personal information>
Each business segment of the Group handles personal information specified in the Personal Information Protection Law.
As we recognize the protection of personal information as an extremely important business challenge, we have established an“Information Privacy Committee” to ensure appropriate acquisition and handling of information, and are working to prevent
leakage of personal information and reoccurrence of such problems, setting up privacy policies and providing in-house training.
However, a personal information leak could affect our business performance due to loss of confidence, claims for damage, etc.
3) Risks due to natural disasters and accidents
Large-scale natural disasters such as earthquakes or tsunami might impede staff and facilities from operating properly. If thiscauses unavailability of our services to users, it could reduce sales and incur special expenses.

11

4. Consolidated Financial Statement(1) Consolidated Balance Sheets
First half of FY 2006
(As of September 30, 2005)
Category

I.

Note
No.

(As of September 30, 2006)(As of March 31, 2006)

AmountShareAmountShareAmountShare(Thousands of yen)(%)(Thousands of yen)(%)(Thousands of yen)(%)

ASSETS
Current assets
1.

Cash and deposits

2.

Notes and accounts
receivable

3.

Inventories

4.

Short-term loans
receivable

5.

Deferred tax assets

6.

Other current assets

7.

Allowance for doubtful
accounts

Total current assets
II.

Summer of consolidated Balance Sheets
for FY2006First half of FY 2007

4,971,127

9,414,600

12,557,413

25,419,684

25,512,929

25,343,630

3,877,947

1,877,408

1,943,892

1,607,030--

2,432,112

2,330,274

2,882,923

3,606,706

2,824,452

2,650,723△ 121,848△ 109,616△ 135,756

41,792,760

41,850,049

46.2

44.3

45,242,826

46.2

35,115,605

35.9

3,996,060

4.1

13,543,570

13.8

Fixed assets(1)

Tangible fixed assets

1.

Buildings and structures

2.

Land

3.

Other tangible fixed
assets(2)

Intangible fixed assets

1.

Consolidated adjustment
account2.

Goodwill

3.

Other intangible fixed
assets(2)

Investments and otherassets1.

Investment securities

2.

Long-term loans
receivable

3.

Guarantee money
deposited4.

Deferred tax assets

5.

Other investments

6.

Allowance for doubtful
accounts

Total fixed assets
Total assets

21,006,743

26,830,136

24,699,677

7,958,054

7,828,496

7,844,328

2,293,588

31,258,385

34.6

783,00735,441,640

37.5

2,571,600

3,005,063-

2,881,157-

2,774,831-

897,667

3,902,731

4.3

1,237,157

4,011,988

4.2

1,114,903

1,783,054

921,848

1,219,031

4,959,347

2,463,168

2,557,397

4,983,087

4,955,686

4,977,231

1,661,649

3,412,716

3,307,304

1,399,845

3,981,483

4,020,965△ 1,367,478

13,202,266

14.0

53.8

52,655,895

55.7

52,655,236

53.8

100.0

94,505,944

100.0

97,898,062

100.0

13,419,506

14.9

48,580,623
90,373,384

12△ 2,532,638△ 2,538,361

Category

I.

First half of FY 2007

Summer of consolidated Balance Sheets
for FY2006(As of September 30, 2005)(As of September 30, 2006)(As of March 31, 2006)

AmountShareAmountShareAmountShare(Thousands of yen)(%)(Thousands of yen)(%)(Thousands of yen)(%)

LIABILITIESCurrent liabilities
1.

Notes and accounts
payable2.

Short-term loans
payableCurrent installments oflong-term debt

3.
4.

Current redemption of
bonds

5.

Accrued expenses

6.

Consumption taxes
payable7.

Income taxes payable

8.

Allowance for employee
bonuses9.

Other current liabilities

Total current liabilities
II.

Note
No.

First half of FY 2006

1,640,093

1,425,359

1,736,727

7,959,000

395,000

13,063,000

70,71649,54655,171-

3,808,000-

14,827,968

16,282,914

15,402,527

1,155,931

1,309,096

1,742,666

2,376,850

598,588

2,074,565

4,010,601

3,428,992

3,475,893

3,459,344

4,918,485

5,017,256

35,500,506

39.3

32,215,984

34.1

42,567,807

43.5

Long-term liabilities
1.

Bonds

2.

Long-term loans payable3.

Allowance for employee
retirement benefits

4.

Allowance for directors'
and auditors' retirement
benefits

5.

Other long-term
liabilities
Total long-term liabilities
Total liabilities-

7,192,000-

45,677

27,11039,3452,599,771

2,867,891

2,767,862

125,407

128,006

129,209

94,133

120,683

102,333

28,64,990

3.1

10,335,692

10.9

3,038,751

3.1

38,365,496

42.4

42,551,677

45.0

45,606,559

46.6

151,055

0.2--

132,488

0.1

11,933,790

13.2

-

-

11,933,790

12.2

17,354,214

19.2

-

-

17,354,214

17.7

28,207,232

31.2

-

-

28,723,606

29.4

283,867

0.4--

77,6280.1△ 5,922,273

△ 6.6

-

-

△ 5,930,226△ 6.1

51,856,832

57.4

-

-

52,159,014

53.3

90,373,384

100.0

-

-

97,898,062

100.0

MINORITY INTERESTS
Minority interest

I.

SHAREHOLDERSEQUITY
Common stock

II.

Capital surplus

III.

Retained earnings

IV.

Gain or loss from revaluationof marketable securities

V.

Treasury stock

Total shareholders' equity
Total liabilities, minority interests andshareholders' equity

13

CategoryI.

1.

Common stocks

2.

Capital surplus

3.

Retained earnings

4.

Treasury stocks

Unrealized gains andadjustments
1.

Unrealized gains onother securities

Total unrealized gains andadjustments
III.

First half of FY 2007

Summer of consolidated Balance Sheets
for FY2006(As of September 30, 2005)(As of September 30, 2006)(As of March 31, 2006)

AmountShareAmountShareAmountShare(Thousands of yen)(%)(Thousands of yen)(%)(Thousands of yen)(%)

NET ASSETS
Shareholders' equity

Total shareholders' equity
II.

Note
No.

First half of FY 2006

Minority interest

Total net assets
Total liabilities and net assets--

11,933,790

12.6

-

-

-

-

17,354,214

18.4

-

-

-

-

28,396,360

30.0

-

-

-

-

△ 5,931,686

△ 6.2

-

-

-

-

51,752,679

54.8

-

-

-

-

67,437

0.1

-

-

-

-

67,437

0.1

-

-

-

-

134,151

0.1

-

-

-

-

51,954,267

55.0

-

-

-

-

94,505,944

100.0

-

-

14

(2) Interim Consolidated Statements of Income

CategoryI.

Net sales

II.

Cost of sales

Note
No.

(In thousand yen)First half of FY2006First half of FY2007

Summary of consolidated
Statement of Income for FY2006(April 1, 2005 through September
30, 2005)(April 1, 2006 through September
30, 2006)(April 1, 2005 through March 31,
2006)

Amount(Thousands of yen)

Gross profit
III.

1

Advertising and promotion expenses

2

Directors' compensation

3

Salaries and benefits

4

Transfer to allowance for bonuses

5

Employee retirement benefits

6

Allowance for directors' and auditors'
retirement benefits

7

Directors' and auditors' retirement
benefits
Legal welfare expenses

9

Travel and transportation expenses

10

Rent

11

Transfer to allowance for doubtful
accounts
Depreciation expenses

12(Thousands of yen)(%)

Amount(Thousands of yen)(%)

103,333,872

100.0

102,211,719

100.0

206,222,324

82,662,867

80.0

82,224,638

80.4

165,174,725

80.1

20,671,005

20.0

19,987,080

19.6

41,047,599

19.9

13

Amortization of consolidated
adjustment account

14

Amortization of goodwill

15

Other selling, general andadministrative expenses

36,057,561

17.5

4,990,037

2.4

281,775

0.1

2,197,949

3,486,948

5,121,130

71,24576,798151,158

6,507,085

5,993,677

13,563,532

887,416

809,974

861,687

211,720

164,007422,501

3,802

4,264

7,604

-

86

320

992,101

917,868

1,984,977

734,185

680,723

1,463,609

1,881,477

1,730,481

3,604,763

44,717

5,372

101,661

319,877

316,417674,210

107,011-

215,964-

103,820-

4,042,353

Operating income

V.

Amount100.0

Selling, general and administrative expenses

8

IV.

(%)

18,000,944

17.4

2,670,060

2.6

4,368,069

18,658,508

18.3

1,328,571

1.3

7,884,440

Non-operating income
1Interest income

2

Dividend income

34Commission on consignment of officeworkIncome from lease of fixed assets

5

Others41,116

16,56236,152

19,79012,493

27,911

43,57144,09591,952

13,00815,756

27,06543,032

160,5180.1

47,755

136,663

0.1

98,693Non-operating expenses
1

Interest expenses

2

Bond interest

3

Compensation for damages

4

Bond issue cost

5

OthersOrdinary income

24,50628,72057,430-15,158

-

3,734

3,833

11,931-

32,940-11,32839,5690.0

2,791,009

2.7

15

12,841

93,4930.1

1,371,741

1.3

17,101

86,4630.0

5,185,349

2.5

Category
VI.

Note
No.

First half of FY2006First half of FY2007

Summary of consolidated Statementof Income for FY2006(April 1, 2005 through September 30,
2005)(April 1, 2006 thro+F47ugh
September 30, 2006)(April 1, 2005 through March 31,
2006)

Amount(Thousands of yen)(%)

Amount(%)(Thousands of yen)Amount(Thousands of yen)(%)

Extraordinary income
1

Gain on sale of fixed assets

2

Gain on sale of investment in securities

-

4

-

-

552,837

3

VII.

Gain on sale of shares of relatedcompany
Extraordinary losses-

1

Loss on retirement of fixed assets

2

Loss on sale of fixed assets

3

Loss on revaluation of shares of relatedcompany

4
5Transfer to allowance for doubtful
accounts
Loss on closedown of office6

Loss on impairment

7

Loss on revaluation of inventories

8

Loss on disengagement of lease

9

Others1,489,112

Adjustments for income and other taxes

-

-

0.0

1,489,112

17,39374,997--55,32527,494-

118,492

1,308,488-

2,455,000

-

-

7,552

131,098

52,560131,098

657,000-

2,422,614-

96,3002,156,224

2.1

2,123,897

2.1

1,990,087△ 1,340,306

-

1.0

0.1

1,205,487

1.2

3,503

5,268,583

2.6

1,958,719

0.9

3,243,944

649,7800.7

706,341

0.7△ 51,199△ 0.1

16,0750.0

14,6670.0

34,9840.0

1,458,041

1.4

484,478

0.5

1,974,934

1.0

16454,223

2,041,954

166,253

252,118

Minority interest
Net income

1.5

32,143

Income before income taxes
Income, inhabitants and business taxes

1,489,112△ 3,295,144

(3) Consolidated Statements of Retained Earnings
and Consolidated Statements of Changes in Shareholders’ Equity (Summary)
Consolidated Statements of Retained Earnings

Category

Note
No.

First half of FY2006

Summary of consolidated Statements of
Retained Earnings for FY2006(April 1, 2005 through September 30, 2005)(April 1, 2005 through March 31, 2006)

AmountAmount(Thousands of yen)(Thousands of yen)

Capital surplus
I. Capital surplus at beginning of the year
II. Capital surplus at end of the interim term

17,354,214
17,354,214

17,354,214
17,354,214

27,562,047

27,562,047

Retained earnings
I. Retained earnings at beginning of year
II. Increase in retained earnings
1. Net income

1,458,041

1,458,041

1,974,934

1,974,934

III. Decrease in retained earnings
1. Dividends

776,050

2. Bonuses for directors and auditors
3. Loss on Liquidation of treasury stock

36,000806

776,050
812,857

IV. Retained earnings at end of the interim
term

28,207,232

17

36,0001,325

813,376
28,723,606

Consolidated Statements of Changes in Shareholders’ Equity (Summary)(In thousand yen)

Shareholders’ equity
CommonstocksBalance as of March 31, 2006

11,933,790

Capital surplus
17,354,214

Retainedearnings

Treasurystocks28,723,606△ 5,930,226

Total
shareholder’sequity52,081,385

Amount of fluctuation during the consolidated
interim term
Dividend from retained earnings)
Directors' bonuses
Net income△ 774,937△ 774,937△ 36,000△ 36,000

484,478

Acquisition of Treasury stock

484,478△ 2,891△ 2,891

△ 786

1,430

643

△ 327,245△ 1,460△ 328,706

28,396,360△ 5,931,686

51,752,679

Retirement of Treasury stock
Amount of fluctuation of items other thanshareholders' equity during the consolidated
interim term
Amount of fluctuation during the consolidated
interim term
Balance as of September 30, 2006

11,933,790

17,354,214

Unrealized gains andadjustments

Balance as of March 31, 2006

Unrealized
gains onothersecurities

Total
unrealized
gains andadjustments

77,62877,628

Minority
interest

132,488

Total net
assets52,291,502

Amount of fluctuation during the consolidated
interim term
Dividend from retained earnings)△ 774,937

Directors' bonuses△ 36,000

Net income

484,478

Acquisition of Treasury stock△ 2,891

Retirement of Treasury stock
Amount of fluctuation of items other thanshareholders' equity during the consolidated
interim term
Amount of fluctuation during the consolidated
interim term
Balance as of September 30, 2006

643

△ 10,191△ 10,191

1,662△ 8,528△ 10,191△ 10,191

1,662△ 337,235

67,43767,437

134,151

51,954,267

18

(4) Interim Consolidated Statements of Cash Flows

Category
I.

Note
No.

First half of FY2006First half of FY2007(April 1, 2005 throughSeptember 30, 2005)
Amount(April 1, 2006 throughSeptember 30, 2006)
AmountSummary of consolidated
Statement of Cash Flow
for FY2006(April 1, 2005 throughMarch 31, 2006)
Amount(Thousands of yen)(Thousands of yen)(Thousands of yen)

Cash flow from operating activities
1.

Income before income taxes

2.

Depreciation expenses

2,123,897
833,407

1,205,487
986,683

3.

Increase in allowance for doubtful accounts

1,346,208△ 31,862

2,530,998

4.

Increase in allowance for employee bonuses

367,193△ 46,901△ 167,514

5.

191,602

100,028

359,693

6.
7.

Increase in allowance for employee retirement
benefits
Change in directors' and auditors' retirement benefits
Interest income and dividend income△ 2,874△ 60,906△ 1,202△ 29,056

927△ 64,063

8.

Interest expenses

24,50643,87857,430

9.
10.

Amortization of consolidated adjustment account
Amortization of goodwill

107,011-

103,820

215,964-

11.

Gain on sale of investment securities--△ 552,837

12.

Other incomes-0△ 2,521

13.

Loss on retirement of fixed assets

32,143

17,39374,99714.

Loss on sale of fixed assets--

55,32515.

Gain on sale of fixed assets

16.

Loss on impairment

17.

Gain on sale of shares of related companies

18.
19.

loss on revaluation of shares of related companies
loss on revaluation of inventory

20.

Other extraordinary loss

21.

Increase in accounts receivable

-

-

△4

131,098

52,560131,098△ 1,489,112-△ 1,489,112

27,494
657,000-

118,492
2,422,614

-

-

3,503

△ 1,158,373△ 176,568△ 1,111,859

22.

Decrease in inventory

5,280

66,483

173,720

23.

Change in other current assets

139,768△ 160,542

366,889

24.

Change in accounts payable△ 83,250△ 311,367

13,38325.

Change in other current liabilities△ 59,603

717,230

1,698,167

26.

Decrease in unpaid consumption taxes, etc.

△ 47,898△ 433,569

538,836

27.

Decrease in other long-term liabilities

17,621506

30,32628.

Increase in other long-term liabilities

4,806

18,35013,00629.

Directors' bonuses paid
SubtotalInterest and dividends received

II.

1,958,719
1,781,896△ 36,000△ 36,000△ 36,000

3,071,020

2,085,353

9,122,079

38,04028,27963,284

Interests paid

△ 25,084△ 29,408△ 58,274

Income and other taxes paid

△ 2,546,191△ 588,401△ 1,694,691

Income and other taxes refunded

91,492-

91,923

Cash flow from operating activities

2,587,068

389,532

6,672,819△ 378,500

Cash flow from investing activities
1.

Net increase in time deposits△ 188,500△ 58,000

2.

Proceeds from time deposits

193,000

40,000399,000

3.
4.

Acquisition of shares of consolidated subsidiaries
Acquisition of tangible fixed assets△ 3,494,577△ 6,000△ 1,225,579△ 20,000△ 7,796,518

5.

Proceeds from sales of tangible fixed assets--

58,593

6.

Acquisition of intangible fixed assets△ 175,811△ 221,587△ 250,691

7.

Purchases of investment in securities△ 10,500

-

-

8.
9.

Proceeds form sales of investments in securities
Acquisition of shares of related companies

200,000-

300,000-

874,633△ 260,500

10.

Proceeds from shares of related companies--

250,00511.

△ 165,159

-

-

-

-

434,841

13.

Expenditure for sale of subsidiary's shares withchanges in the scope of consolidation
Proceeds for sale of subsidiary's shares with changes
in the scope of consolidation
Long-term prepaid expenses paid

△ 19,458△ 10,346△ 94,749

14.

Loans extended△ 182,342△ 25,600△ 232,942

12.

15.

Proceeds from repayment of loans

16.

Deposits paid

17.

Proceeds from return of deposits

18.

Other investments (net)Cash flow from investing activities

19

43,351

119,829

1,659,152△ 167,936△ 150,004△ 319,504

80,246

171,549

237,671△ 93,712△ 11,956△ 99,005△ 3,981,400△ 1,077,695△ 5,538,514

Category
III.

Note
No.

First half of FY2006First half of FY2007(April 1, 2005 throughSeptember 30, 2005)
Amount(April 1, 2006 throughSeptember 30, 2006)
AmountSummary of consolidated
Statement of Cash Flow
for FY2006(April 1, 2005 throughMarch 31, 2006)
Amount(Thousands of yen)(Thousands of yen)(Thousands of yen)

Cash flow from financing activities
1.

Proceeds from short-term loans

2.

Repayment of short-term loans

3.

Proceeds from bond issued

4.

Proceeds from long-term loans

5.

Repayment of long-term loans

6.

Proceeds from sales of treasury stock

7.

Acquisition of treasury stock

84,950,000

86,240,000

184,150,000△ 81,708,000△ 98,908,000△ 175,804,000-

11,000,000-

26,611

11,933

42,109△ 46,773△ 29,793△ 84,149

1,250

643

2,107

△ 132,696△ 2,891△ 142,025△ 776,050

8.

Payment of dividends by parent company△ 776,050△ 780,035

9.

Payment of dividends minority shareholders△ 2,400△ 4,500△ 2,400

Cash flow from financing activities

2,311,940△ 2,472,642

7,385,590

△0

△0

0

V.

Effects of exchange rate changes on cash
and cash equivalents
Change in cash and cash equivalents

917,608△ 3,160,805

8,519,895

VI.

Cash and cash equivalents at beginning of the year

3,871,610

12,391,506

3,871,610

VII.

Cash and cash equivalents at end of the interim term

4,789,218

9,230,700

12,391,506

IV.

20

Basic Conditions to Prepare Consolidated Financial Statements
First half of FY2006First half of FY2007(April 1, 2005 through(April 1, 2006 throughSeptember 30, 2005)
September 30, 2006)
1. Scope of Consolidation
1. Scope of Consolidation
The accompanying consolidated
The accompanying consolidated
financial statements include thefinancial statements include theaccount of the following 7 subsidiaries:
account of the following 7 subsidiaries:
Tokyo Marunouchi Publishing Co.,Tokyo Marunouchi Publishing Co.,
Ltd., Nihon Support Service Co., Ltd.,
Ltd., Nihon Support Service Co., Ltd.,
Roris Co., Ltd., Keihin Life Service
Roris Co., Ltd., Keihin Life Service
Co., Ltd., reha team japan Co., Ltd.,
Co., Ltd., reha team japan Co., Ltd.,NIHON CREDIT LEASE Co, Ltd.,NIHON CREDIT LEASE Co, Ltd.,POWER BANK Co., Ltd. (renamed
POWER BANK Co., Ltd.
from “NICHII POWER BANK Co.,
Having sold Sun Medic Co., Ltd. as ofLtd.”).
September 30, 2005, we have only
Having sold Sun Medic Co., Ltd. as ofconsolidated its income and loss in
September 30, 2005, we have only
these statements.
consolidated its income and loss in“Hospica Co., Ltd.” and 6 otherthese statements.
subsidiaries are not included in the“Hospica Co., Ltd.” and 7 otherscope of consolidation because theirsubsidiaries are not included in the
total assets, Net sales, Net income andscope of consolidation because theirloss (corresponding to respective
total assets, Net sales, Net income andequity) and Retained earnings
loss (corresponding to respective(corresponding to respective equity)
equity) and Retained earnings
are all small, and have little effect on(corresponding to respective equity)
the financial statements as a whole.
are all small and have little effect on
the financial statements as a whole.

FY2006(April 1, 2005 throughMarch 31, 2006)
1. Scope of Consolidation
The accompanying consolidated
financial statements include theaccount of the following 7 subsidiaries:
Tokyo Marunouchi Publishing Co.,
Ltd., Nihon Support Service Co., Ltd.,
Roris Co., Ltd., Keihin Life Service
Co., Ltd., reha team japan Co., Ltd.,NIHON CREDIT LEASE Co, Ltd.,POWER BANK Co., Ltd. (renamed
from “NICHII POWER BANK Co.,
Ltd.”).
Having sold Sun Medic Co., Ltd. as of
September 30, 2005, we have only
consolidated its income and loss inthese statements.
“Hospica Co., Ltd.” and 6 othersubsidiaries are not included in thescope of consolidation because their
total assets, Net sales, Net income andloss (corresponding to respective
equity) and Retained earnings(corresponding to respective equity)
are all small and have little effect on
the financial statements as a whole.

2. Application of the Equity Method
Investments in “Hospica Co., Ltd.” and7 other unconsolidated subsidiaries and
1 affiliate are not covered by the equity
method because their Net income andloss (corresponding to respective
equity) and Retained earnings(corresponding to respective equity)
have little effect on the financial
statements, and have little importanceas a whole.

2. Application of the Equity Method
Investments in “Hospica Co., Ltd.” and6 other unconsolidated subsidiaries and
1 affiliate are not covered by the equity
method because their Net income andloss (corresponding to respective
equity) and Retained earnings(corresponding to respective equity)
have little effect on the financial
statements, and have little importanceas a whole.

2. Application of the Equity Method
Investments in “Hospica Co., Ltd.” and6 other unconsolidated subsidiaries and
1 affiliate are not covered by the equity
method because their Net income andloss (corresponding to respective
equity) and Retained earnings(corresponding to respective equity)
have little effect on the financial
statements, and have little importanceas a whole.

3. The Interim Balance Sheet Dates ofConsolidated Subsidiaries
Shown below are accounting closing
dates for some of the company’s
consolidated subsidiaries.

3. The Interim Balance Sheet Dates ofConsolidated Subsidiaries
Same as on the left

3. The Interim Balance Sheet Dates ofConsolidated Subsidiaries
Shown below are accounting closing
dates for some of the company’s
consolidated subsidiaries.

Keihin Life Service Co., Ltd.
The end of Jun.
NIHON CREDIT LEASE Co., Ltd.
The end of Jun.
Tokyo Marunouchi PublishingCo., Ltd.
The end of Jul.
Nihon Support Service Co., Ltd.
The end of Aug.

Keihin Life Service Co., Ltd.
The end of Dec.
NIHON CREDIT LEASE Co., Ltd.
The end of Dec.
Tokyo Marunouchi PublishingCo., Ltd.
The end of Jan.
Nihon Support Service Co., Ltd.
The end of Feb.

For the purpose of preparing these
consolidated financial statements, wehave used financial statement data forthese companies as of their respectivebalance sheet dates. However,appropriate adjustments were made formaterial transactions during the periods
from their respective balance sheet
dates to September 31.

For the purpose of preparing these
consolidated financial statements, wehave used financial statement data forthese companies as of their respectivebalance sheet dates. However,appropriate adjustments were made formaterial transactions during the periods
from their respective balance sheet
dates to March 31.

21

First half of FY2006(April 1, 2005 throughSeptember 30, 2005)
4. Summary of Significant Accounting
Policies(1) Valuation standard and method forsignificant assets(a) Securities
Other Securities
Securities with available fair market
values are stated at fair market value
based on the quoted market price as ofthe end of the interim consolidated
period. The related valuationdifferences are directly charged or
credited to the shareholders’ equity,and cost of securities sold is computed
using the moving average method.
Securities without available fair market
value are stated at a cost determinedusing the moving average method.

First half of FY2007(April 1, 2006 throughSeptember 30, 2006)
4. Summary of Significant Accounting
Policies(1) Valuation standard and method forsignificant assets(a) Securities
Other Securities
Securities with available fair market
values are stated at fair market value
based on the quoted market price as ofthe end of the interim consolidated
period. The related valuationdifferences are directly charged or
credited to the net assets, and cost of
securities sold is computed using themoving average method. Securities
without available fair market value arestated at a cost determined using themoving average method.

FY2006(April 1, 2005 throughMarch 31, 2006)
4. Summary of Significant Accounting
Policies(1) Valuation standard and method forsignificant assets(a) Securities
Other Securities
Securities with available fair market
values are stated at fair market value
based on the quoted market price as ofthe end of the fiscal year. The related
valuation differences are directly
charged or credited to the shareholders’equity, and cost of securities sold iscomputed using the moving averagemethod.
Securities without available fair market
value are stated at a cost determinedusing the moving average method.

(b) Inventories(i) Merchandise is stated at a cost
determined using the moving averagemethod.

(b) Inventories(i) Same as on the left(b) Inventories(i) Same as on the left(ii) Teaching materials are stated at a cost
determined using the moving averagemethod.

(ii)

Same as on the left

(ii)

Same as on the left(iii) Other inventories are mainly stated ata cost determined using the specificcost method.

(iii)

Same as on the left

(iii)

Same as on the left

(2) Depreciation method for significant
depreciable assets(a) Tangible fixed assets
Tangible fixed assets are depreciatedusing the declining balance method.
However, buildings (except forbuilding attachments) and day carefacilities’ building attachments,
structures and fittings acquired on andafter April 1, 1998 are depreciatedusing the straight-line method. The
range of useful lives is as follows:(2) Depreciation method for significant
depreciable assets(a) Tangible fixed assets
Same as on the left

(2) Depreciation method for significant
depreciable assets(a) Tangible fixed assets
Same as on the left(b) Intangible fixed assets
Same as on the left(b) Intangible fixed assets
Same as on the left

Buildings and structures: 10 to 50 years
Other assets (fittings): 3 to 6 years(b) Intangible fixed assets
Intangible fixed assets are depreciatedusing the straight-line method.
Software for internal use is amortizedusing the straight-line method overthe expected available period (5years).

22

First half of FY2006(April 1, 2005 throughSeptember 30, 2005)(3) Accounting for significant
allowances and reserves(a) Allowance for doubtful accounts
In the case of bad debt loss foraccounts receivable, generalallowances are provided using a rate
determined by past bad debt
experience for general accounts, andalso specific allowances are provided
in the estimated amounts considered
to be uncollectible after reviewing
certain doubtful accounts.

First half of FY2007(April 1, 2006 throughSeptember 30, 2006)(3) Accounting for significant
allowances and reserves(a) Allowance for doubtful accounts
Same as on the left

FY2006(April 1, 2005 throughMarch 31, 2006)(3) Accounting for significant
allowances and reserves(a) Allowance for doubtful accounts
Same as on the left(b) Allowance for employee bonuses
To provide for payment of bonuses to
employees, allowance for employee
bonuses are recorded as the amount
expected to be paid.

(b) Allowance for employee bonuses
Same as on the left(b) Allowance for employee bonuses
Same as on the left(c) Allowance for employees’ retirement
benefits
To provide for employees’ retirement
benefits, a reserve for retirement
benefits deemed accrued at the end of
the current interim consolidated
accounting period is recorded, based on
the projected retirement benefit
obligations and related plan assets as of
the current consolidated fiscal year
end.
Actuarial differences are amortized ona straight-line basis over certain years(5 years for regular and junioremployees and managing service staff,
and 4 years for non-managing service
staff) within the average remaining
years of service of employees,
allocated proportionately starting fromthe year following the respective
consolidated fiscal year of occurrence.

(c) Allowance for employees’ retirement
benefits
Same as on the left(c) Allowance for employees’ retirement
benefits
To provide for employees’ retirement
benefits, a reserve for retirement
benefits is recorded based on the
projected retirement benefit obligations
and related plan assets as of the current
consolidation fiscal year end.
Actuarial differences are to be charged
to income from the following
consolidation fiscal year based ondetermined years; 5 years for regularand junior employees and managing
service staff, and 4 years fornon-managing service staff.

(d) Allowance for directors' and auditors'
retirement benefits
To provide for benefits for retired
directors and auditors, reserve forretirement benefits is recorded for thenecessary payment amount as of theend of the interim consolidated period
based on internal regulations.

(d) Allowance for directors' and auditors'
retirement benefits
Same as on the left(d) Allowance for directors' and auditors'
retirement benefits
To provide for benefits for retired
directors and auditors, reserve forretirement benefits is recorded for thenecessary payment amount as of theend of the fiscal year based on internal
regulations.

(4)(4) Accounting of deferred assets
Bond issue costs are recorded in full at
the time of occurrence.

(4)(5) Accounting for significant leases
Same as on the left

(5) Accounting for significant leases
Same as on the left―

(5) Accounting for significant leases
Finance lease transactions, other thanthose that are deemed to transfer theownership of the leased assets tolessees, are accounted for using themethod that is applicable to ordinary
operating leases.

23―

First half of FY2006(April 1, 2005 throughSeptember 30, 2005)(6) Other significant issues for presenting
interim consolidated financial
statements
Accounting for consumption taxes
National and local consumption taxes
are accounted for based on the tax
exclusion method. Nondeductible
consumption taxes are treated as
selling, general and administrative
expenses.

First half of FY2007(April 1, 2006 throughSeptember 30, 2006)(6) Other significant issues for presenting
interim consolidated financial
statements
Accounting for consumption taxes
Same as on the left

FY2006(April 1, 2005 throughMarch 31, 2006)(6) Other significant issues for presenting
interim consolidated financial
statements
Accounting for consumption taxes
Same as on the left

5. Scope of Cash and Cash Equivalents in
the Consolidated Statement of CashFlow
The cash and cash equivalents
consists of cash on hand, deposits
with banks withdrawable on demand,and short-term investments which arereadily convertible to cash subject toan insignificant risk of any change intheir value and which were purchasedwith an original maturity of threemonths or less.

5. Scope of Cash and Cash Equivalents in
the Consolidated Statement of Cash
Flow
Same as on the left

5. Scope of Cash and Cash Equivalents in
the Consolidated Statement of Cash
Flow
Same as on the left

24

Change in Basic of Presenting Consolidated Financial Statements
First half of FY2006First half of FY2007(April 1, 2005 through(April 1, 2006 throughSeptember 30, 2005)
September 30, 2006)(Accounting standards related to―
impairment losses on fixed assets)
From the current interim consolidated
period, we adopted the new accounting
standard for impairment loss on fixed
assets (“Opinion Concerning
Establishment of Accounting Standard
for Impairment of Fixed Assets” issued
by the Business Accounting
Deliberation Council on August 9,2002) and the implementation guidance
for the accounting standard for
impairment of fixed assets (TheFinancial Accounting Standard
Implementation Guidance No. 6 issued
on October 31, 2003). This resulted ina 131,098 thousand yen decrease in
Income before income taxes for thecurrent interim consolidated period.
The accumulated impairment loss on
fixed assets is deducted directly fromthe amount of each asset, based on therevised rules for consolidated financial
statements.
―(Accounting standards for presentation of
net assets on balance sheet)
Effective from the interim accounting
period ended September 30, 2006, theCompany has adopted the “AccountingStandard for Presentation of Net Assets
in the Balance Sheet (AccountingStandard board Statement No. 5)”” the“Implementation Guidance for
Accounting Standard for Presentationof Net Assets in the Balance Sheet(Accounting Standard Board Statement
No. 8)” both issued by the AccountingStandards Board of Japan on December
9, 2005.
The latest total shareholders' equity isequivalent to 51,820,116 thousand yen.
Net assets are shown on the
consolidated balance sheet for thecurrent interim accounting period inline with amended guidelines for the
preparation of interim consolidated
financial statements.

25

FY2006(April 1, 2005 throughMarch 31, 2006)(Accounting standards related to
impairment losses on fixed assets)
From the current consolidated fiscal
year, we adopted the new accounting
standard for impairment loss on fixed
assets (“Opinion Concerning
Establishment of AccountingStandard for Impairment of Fixed
Assets” issued by the BusinessAccounting Deliberation Council on
August 9, 2002) and theimplementation guidance for theaccounting standard for impairment of
fixed assets (The Financial
Accounting Standard Implementation
Guidance No. 6 issued on October 31,2003). This resulted in a 131,098
thousand yen decrease in Income
before income taxes for the current
consolidated fiscal year. The
accumulated impairment loss on fixed
assets is deducted directly from theamount of each asset, based on therevised rules for consolidated
financial statements.
―

Changes in Listing Method
First half of FY2006(April 1, 2005 throughSeptember 30, 2005)―

First half of FY2007(April 1, 2006 throughSeptember 30, 2006)(Interim consolidated Balance Sheets)
The item named “Consolidated adjustment account” in thefinancial statements for the previous interim consolidated
accounting period is presented as “Goodwill” from thecurrent interim consolidated accounting period.

―(Interim consolidated Statements of Income)The item named “Amortization of Consolidated adjustment
account” in the financial statements for the previous interim
consolidated accounting period is presented as “Amortizationof goodwill” from the current interim consolidated
accounting period.

―(Interim consolidated Statements of Cash Flows)
The item named “Amortization of consolidated adjustment
account” in the financial statements for the previous interim
consolidated accounting period is presented as “Amortizationof goodwill” from the current interim consolidated
accounting period.

26

Notes(Interim consolidated Balance Sheets)
First half of FY 2006
(As of September 30, 2005)

First half of FY 2007
(As of September 30, 2006)

FY2006(As of March 31, 2006)*1. Accumulated depreciation related totangible fixed assets*1. Accumulated depreciation related totangible fixed assets*1. Accumulated depreciation related totangible fixed assets¥6,548,246 thousand
Accumulated depreciation related toother investments and other assets(assets leased to others)*2. Accounting for notes matured at theend of the interim consolidated
accounting period
The Notes receivable to be matured
on the book closing date at the end of
the interim consolidated accounting
period are settled on the date of bankclearing. As the end of the current
interim consolidated accounting
period was a bank holiday, thefollowing notes matured at the end of
the interim consolidated accounting
period are included in the balance asof the end of the interim consolidated
accounting period.

―

Accumulated depreciation related toother investments and other assets(assets leased to others)¥249,789 thousand¥264,240 thousand¥233,580 thousand*2.

¥7,249,070 thousand¥8,050,370 thousand
Accumulated depreciation related toother investments and other assets(assets leased to others)*2.

―

Accounts receivable¥1,224 thousand*3. In the current interim consolidated
period, due to the receipt ofgovernmental subsidies, advanced
depreciation was undertaken for
Buildings and structures (13,332
thousand yen) and for Others (3,617
thousand yen).
Due to the receipt of governmental
subsidies related to tangible fixed
assets, accumulated advanced
depreciation amounts to 161,570
thousand yen for Buildings andstructures, 18,856 thousand yen for
Others, and 180,426 thousand yen in
total.

*3. Due to the receipt of governmental
subsidies related to tangible fixed
assets, accumulated advanced
depreciation amounts to 161,570
thousand yen for Buildings andstructures, 18,856 thousand yen for
Others, and 180,426 thousand yen in
total.

*3. In the current consolidated fiscal year,
due to the receipt of governmental
subsidies, advanced depreciation wasundertaken for Buildings andstructures (13,332 thousand yen) andfor Others (3,617 thousand yen).
Due to the receipt of governmental
subsidies related to tangible fixed
assets, accumulated advanced
depreciation amounts to 161,570
thousand yen for Buildings andstructures, 18,856 thousand yen for
Others, and 180,426 thousand yen in
total.

4. Guarantee liabilities
The company is liable as guarantor for
indebtedness of non-consolidated
companies as follows:

4. Guarantee liabilities
The company is liable as guarantor for
indebtedness of non-consolidated
companies as follows:

4. Guarantee liabilities
The company is liable as guarantor for
indebtedness of non-consolidated
companies as follows:

Keihin Recycle Jigyo-Kumiai

Keihin Recycle Jigyo-Kumiai

Keihin Recycle Jigyo-Kumiai¥262,990 thousand¥222,530 thousand

27¥242,760 thousandFirst half of FY 2006
(As of September 30, 2005)
5. Overdraft contract and credit
commitments
The company and its consolidated
subsidiaries (Nihon Support Service
Co., Ltd. and 3 other companies) havean overdraft contract and credit
commitments from seven banks inorder to perform efficient financing.
Based on these contracts, total unused
credit available at the end of thisinterim consolidated period was asfollows:(Thousands of yen)
Total credit available
45,764,000
and credit commitments
7,950,000
Total credit used
37,814,000
BalanceFirst half of FY 2007
(As of September 30, 2006)
5. Overdraft contract
The company and its consolidated
subsidiaries (Nihon Support Service
Co., Ltd. and 1 other company) havean overdraft contract from five banks
in order to perform efficient financing.
Based on these contracts, total unused
credit available at the end of thisinterim consolidated period was asfollows:

FY2006(As of March 31, 2006)
5. Overdraft contract and credit
commitments
The company and its consolidated
subsidiaries (Nihon Support Service
Co., Ltd. and 2 other companies) havean overdraft contract and credit
commitments from six banks in orderto perform efficient financing. Basedon these contracts, total unused credit
available at the end of this consolidated
fiscal year was as follows:(Thousands of yen)
24,500,000
388,000
24,112,000(Thousands of yen)
Total credit available
37,818,000
and credit commitments
13,051,000
Total credit used
24,767,000
Balance

Total credit available
Total credit used
Balance28

(Consolidated Statements of Income)First half of FY2006(April 1, 2005 throughSeptember 30, 2005)*1. Losses on retirement of fixed assets
are itemized as follows:First half of FY2007(April 1, 2006 throughSeptember 30, 2006)*1. Losses on retirement of fixed assets is
itemized as follows:

FY2006(April 1, 2005 throughMarch 31, 2006)*1. Gains on sales of fixed assets, losses
on retirement of fixed assets andlosses on sales of fixed assets are
itemized as follows:

Losses on retirement of fixed assets(Thousands of yen)

Losses on retirement of fixed assets(Thousands of yen)

Gains on sales of fixed assets(Thousands of yen)

27,775
4,368
32,143

Buildings and structures
Other tangible fixed assets
Total

Buildings and structures
Other tangible fixed assets
Other intangible fixed assets
Total

14,4542,622
316
17,393

3
1
4

Buildings and structures
Other tangible fixed assets
Total

Losses on retirement of fixed assets(Thousands of yen)
66,044
8,952
74,997

Buildings and structures
Other tangible fixed assets
Total

Losses on sales of fixed assets(Thousands of yen)
55,325Land*2. Impairment losses
The group recorded the following
impairment losses in the current
interim consolidated period.

*2. Impairment losses
The group recorded the following
impairment losses in the previous
interim consolidated period.
Location
Kitakanto
Sterilization
Center(Kawasato-mura,
Kitasaitama-gun,
Saitama)

Use

Category

Sterilizati
on facility

Buildings andstructures
Land
OthersAmount(Thousandsof yen)Location

79,969Airis CareShop(Kamakura-shi,
Kanagawa)

Use

Category
Buildings andstructures

Shop

Land

44,813

Others6,315*2. Impairment losses
The group recorded the following
impairment losses in the previous
fiscal year.

Amount(Thousandsof yen)36,57015,831
158

Location

Use

Category

Kitakanto
Sterilization
Center(Kohnosu-shi,
Saitama)

Sterilizati
on facility

Buildings andstructures
Land
OthersAmount(Thousandsof yen)79,96944,813
6,315

The group categorizes assets andapplies asset-impairment accounting
based on the smallest business units
that generate cash flow
independently.

The group categorizes assets andapplies asset-impairment accounting
based on the smallest business units
that generate cash flow
independently.

The group categorizes assets andapplies asset-impairment accounting
based on the smallest business units
that generate cash flow
independently.

The headquarters and properties suchas training facilities are recognized asshared assets, as they do not generatecash flow by themselves.
The above-listed assets scheduled forsale have been accounted for as
impaired assets, and the carrying
amount was reduced to a recoverable
value. Recoverable value is measured
using net sale value. The calculation
is based on the remaining balance ofappraised value by a real estateappraiser after deducting estimateddisposal cost.

The headquarters and properties suchas training facilities are recognized asshared assets, as they do not generatecash flow by themselves.
The above-listed assets scheduled forsale have been accounted for as
impaired assets, and the carrying
amount was reduced to a recoverable
value. Recoverable value is measured
using net sale value. The calculation
is based on the remaining balance of
the amount equivalent to theappraised value by a real estateappraiser after deducting estimateddisposal cost.

The headquarters and properties suchas training facilities are recognized asshared assets, as they do not generatecash flow by themselves.
The above-listed assets scheduled forsale have been accounted for as
impaired assets, and the carrying
amount was reduced to a recoverable
value. Recoverable value is measured
using net sale value. The calculation
is based on the remaining balance ofappraised value by a real estateappraiser after deducting estimateddisposal cost.

29

(Statements of Shareholders’ Equity)
The current interim consolidated period (April 1, 2006 through September 30, 2006)
1. Items regarding the type and total number of outstanding shares and the type and number of shares of treasury stocks
Increased number of sharesin the first half of FY2007(April 1, 2006 throughSeptember 30, 2006)

Number of sharesat the end of FY2006(As of March 31, 2006)(Shares)

Decreased number of sharesin the first half of FY2007(April 1, 2006 throughSeptember 30, 2006)

Number of Shares at the endof the first half of FY 2007
(As of September 30, 2006)

Issued Stocks
Common Stocks
Total

36,508,976--

36,508,976

36,508,976--

36,508,976

1,284,549

1,355

310

1,285,594

1,284,549

1,355

310

1,285,594

Treasury Stocks
Common Stocks *Total*１．The increase in the number of common stock for treasury by 1,355 resulted from acquisition of fractional stock.
２．The decrease in the number of common stock for treasury by 310 resulted from additional acquisition of fractional stock.

2. Items regarding warrants

Category

Breakdownof warrants

Company
Warrants ofsubmitting
FY2001 *these
Warrants ofstatements
FY2003(Parent
Warrants ascompany)
stock option
Consolidated―
subsidiaries
Total

Type ofsharesallocatableforwarrants
CommonstocksCommonstocksNumber of shares allocatable for warrants
Increased in thefirst half of
FY2007(April 1, 2006
through
September 30,
2006)

The end of
FY2006(As of March 31,
2006)

Decreased in thefirst half of
FY2007(April 1, 2006
through
September 30,
2006)(Shares)

The end of thefirst half of FY
2007(As of September
30, 2006)

Balance at theend of First halfof FY 2007
(As of Sep. 30,
2006(Million of yen)

207,408―

207,408――

247,500――

247,500

―

―

―

―

―

―

―

―

―

―

―

―

―

454,908
207,408
247,500――* The decrease in the warrants in FY2001 resulted from termination of the period for the exercise of warrants―

3. Items regarding dividends(1) Amount of paid dividends
Resolution

Type of stock

Total amount ofdividends(Thousands of yen)Amount of dividends
per share (yen)June 28, 2006
Annual meetingof shareholders

Common stock

774,93722(Consolidated Statements of Cash Flows)First half of FY2006(April 1, 2005 throughSeptember 30, 2005)
1. The reconciliations of cash and cash
equivalents at the end of the interim
period, and accounts in the
consolidated balance sheets as of
September 30, 2005 are as follows.

First half of FY2007(April 1, 2006 throughSeptember 30, 2006)
1. The reconciliations of cash and cash
equivalents at the end of the interim
period, and accounts in the
consolidated balance sheets as of
September 30, 2006 are as follows.
(Thousands of yen)(Thousands of yen)
Cash and deposits
Time deposits maturing after threemonthsMarketable securities
Cash and cash equivalents

4,971,127△222,000
40,091
4,789,218

Cash and deposits
Time deposits maturing after threemonthsMarketable securities
Cash and cash equivalents(i) Lease transactions
30

9,414,600△224,000
40,0999,230,700

Base date

Effective date

March 31, 2006

June 29, 2006

FY2006(April 1, 2005 throughMarch 31, 2006)
1. The reconciliations of cash and cash
equivalents at the end of the fiscal
year, and accounts in the consolidatedbalance sheets as of March 31, 2006
are as follows.
(Thousands of yen)
Cash and deposits
Time deposits maturing after threemonthsMarketable securities
Cash and cash equivalents

12,557,413△206,000
40,093
12,391,506

First half of FY2006(April 1, 2005 throughSeptember 30, 2005)
1. Finance lease transactions other thanthose that are deemed to transfer theownership of the leased assets tolessees

First half of FY2007(April 1, 2006 throughSeptember 30, 2006)
1. Finance lease transactions other thanthose that are deemed to transfer theownership of the leased assets tolessees

FY2006(April 1, 2005 throughMarch 31, 2006)
1. Finance lease transactions other thanthose that are deemed to transfer theownership of the leased assets tolessees(1) Acquisition cost, accumulated
depreciation (amortization) andperiod ending balance of leased
assets.

(1) Acquisition cost, accumulated
depreciation (amortization),
accumulated impairment loss andperiod ending balance of leased
assets.

(1)(Thousands of yen)
Accumulated
Acquisition depreciationcostor
amortization

Acquisition cost, accumulated
depreciation (amortization),
accumulated impairment loss andperiod ending balance of leased
assets.

(Thousands of yen)
Accumulated
Acquisition depreciationcostor
amortization

Periodendingbalance(Thousands of yen)
Accumulated
Acquisition depreciationcostor
amortization

Periodendingbalance

Periodendingbalance

Buildings andstructures

86,57741,07245,505

Buildings andstructures

42,80920,147

22,661

Buildings andstructures

74,76738,552

36,215

Other tangible
fixed assets

17,655,118

9,686,203

7,968,915

Other tangible
fixed assets

13,760,059

6,942,739

6,817,319

Other tangible
fixed assets

16,503,443

8,919,268

7,584,175

Other intangible
fixed assets

2,764,007

1,568,052

1,195,955

Other intangible
fixed assets

2,144,290

1,244,216

900,073

Other intangible
fixed assets

2,625,050

1,684,959

940,091

Total

20,505,703

11,295,328

9,210,375

Total

15,947,158

8,207,104

7,740,054

Total

19,203,262

10,642,780

8,560,482(2)

Outstanding balance of future lease
payments at the end of the period

Within one year
Over one year
Total

(3)

(Thousands of yen)
3,863,917
5,577,445
9,441,363

Lease fee payments, depreciation
expenses and interest expenses(Thousands of yen)
2,413,120
Lease fee payments
2,228,503
Depreciation expenses
143,197
Interest expenses(2) Outstanding balance of future lease
payments at the end of the period(Thousands of yen)
3,006,066
4,918,663
7,924,730

Within one year
Over one year
Total(3) Lease fee payments, reversal of theimpairment of lease property、
depreciation expenses, interest
expenses and impairment losses
Lease fee payments
Depreciation expenses
Interest expenses(Thousands of yen)
2,137,420
1,989,065
127,992(4) Accounting method for depreciation
expenses
Calculated by assuming the leaseterm is the depreciable life anddepreciating the remaining amount tozero using the straight-line method.

(4) Accounting method for depreciation
expenses(5) Accounting method for interest
expenses
Interest expenses for leased assets arecalculated as the difference between
the total lease payments and theacquisition price of the leased assets,
and the amount is allocated to eachperiod using the interest method.

(5) Accounting method for interest
expensesSame as on the left

Same as on the left

31(2) Outstanding balance of future lease
payments at the end of the period
Within one year
Over one year
Total

(Thousands of yen)
3,431,811
5,334,166
8,765,977(3) Lease fee payments, reversal of theimpairment of lease property,
depreciation expenses, interest
expenses and impairment losses
Lease fee payments
Depreciation expenses
Interest expenses(Thousands of yen)
4,794,807
4,434,909
276,830(4) Accounting method for depreciation
expensesSame as on the left

(5) Accounting method for interest
expensesSame as on the leftFirst half of FY2006(April 1, 2005 throughSeptember 30, 2005)(6) Subleasing
The above listed finance leasetransactions as a lessee include thosewhere the leased assets are subleased
to related companies under generally
identical conditions. In regard to suchtransactions, the outstanding balanceof future lease payments as a less orat the end of the interim period is asfollows:(Thousands of yen)
396,982
565,485
962,467

Within one year
Over one year
Total

2. Operating lease transactions
Future lease payments(Thousands of yen)
29,33570,57999,914

Within one year
Over one year
Total

―

First half of FY2007(April 1, 2006 throughSeptember 30, 2006)(6) Subleasing
Same as on the left(Thousands of yen)
258,937
475,966
734,904

Within one year
Over one year
Total

2. Operating lease transactions
Future lease payments(Thousands of yen)
25,804
41,18866,993

Within one year
Over one year
Total

(Impairment losses)
There is no loss on impairment
allocated to leased assets.

32

FY2006(April 1, 2005 throughMarch 31, 2006)(6) Subleasing
The above listed finance leasetransactions as a lessee include thosewhere the leased assets are subleased
to related companies under generally
identical conditions. In regard to suchtransactions, the outstanding balanceof future lease payments as a less orat the end of the fiscal year is asfollows:
Within one year
Over one year
Total

(Thousands of yen)
364,086
549,705
913,792

2. Operating lease transactions
Future lease payments
Within one year
Over one year
Total

(Impairment losses)
Same as on the left(Thousands of yen)
27,20054,366
81,567

(ii) Securities(The end of the previous interim consolidated period)
Securities
1. Other securities with market price(Thousands of yen)First half of FY 2006 (As of September 30, 2005)
Amount recorded oninterim consolidatedbalance sheets

Acquisition prices
StocksTotal
2.

Difference

142,572

621,189478,616

142,572

621,189478,616

Securities without any market price(Thousands of yen)First half of FY 2006 (As of September 30, 2005)
Amount recorded on interim consolidated balance sheet

Other securities
Unlisted stocks

861,865

Unlisted foreign stocks(The end of the current interim consolidated period)
Securities
1.
Other securities with market price

300,000(Thousands of yen)First half of FY 2007 (As of September 30, 2006)
Amount recorded oninterim consolidatedbalance sheets

Acquisition prices
StocksTotal
2.

Securities without any market priceDifference

20,776

134,480

113,703

20,776

134,480

113,703(Thousands of yen)First half of FY 2007 (As of September 30, 2006)
Amount recorded on interim consolidated balance sheet

Other securities
Unlisted stocks

787,368(The end of the previous consolidated fiscal year)
Securities
1. Other securities with market price(Thousands of yen)
FY2006 (As of March 31, 2006)
Acquisition prices

Stocks

20,776
20,776Total
2.

Amount recorded oninterim consolidatedbalance sheets
151,663
151,663

Securities without any market priceDifference
130,886
130,886(Thousands of yen)

FY2006 (As of March 31, 2006)
Amount recorded on interim consolidated balance sheet
Other securities
Unlisted stocks
Unlisted foreign stocks

767,368
300,000

33

(iii) Derivative Transactions
The previous interim consolidated period (April 1, 2005 through September 30, 2005)
The group did not have any derivative transactions in the first half of the previous interim consolidated period.
The current interim consolidated period (April 1, 2006 through September 30, 2006)
The group did not have any derivative transactions in the first half of the current interim consolidated period.
The previous consolidated fiscal year (April 1, 2005 through March 31, 2006)
The group did not have any derivative transactions in the previous consolidated fiscal year.

(iv) Stock Options
The current interim consolidated period (April 1, 2006 through September 30, 2006)
There are no relevant matters.

345) Segment Informationa. Information by Business Segment
MedicalSupportBusiness

Health Care
Business

Education
Business

Other
Businesses

Total(Thousands of yen)
Elimination
ConsolidatedorUnallocatedFirst half of FY2006(April 1, 2005 throughSeptember 30, 2005)
Net sales(1) Net sales to externalcustomers(2) Inter-segment Net
sales or transfer
Total
Operating expenses
Operating income orloss (△)
First half of FY2007(April 1, 2006 throughSeptember 30, 2006)
Net sales(1) Net sales to externalcustomers(2) Inter-segment Net
sales or transfer
Total
Operating expenses
Operating income orloss (△)

53,560,839

39,159,901

6,902,822

3,710,309

103,333,872―

103,333,872

530
53,561,369
48,354,504

902,408
40,062,310
38,825,516

111
6,902,933
7,723,592

5,010,171
8,720,480
8,663,335

5,913,221
109,247,093
103,566,948(5,913,221)(5,913,221)(2,903,137)―
103,333,872
100,663,811

5,206,865

1,236,793△ 820,658

57,1455,680,144(3,010,084)

2,670,060

55,316,834

39,532,497

6,741,968

620,418

102,211,719―

102,211,719

8,967
55,325,802
50,154,570

162,680
39,695,178
38,629,575

8,972
6,750,941
7,391,563

1,076,559
1,696,978
1,650,838

1,257,181
103,468,900
97,826,548(1,257,181)(1,257,181)
3,056,598―
102,211,719
100,883,147

5,171,231

1,065,602△ 640,622

46,1395,642,351(4,313,779)

1,328,571

108,086,864

79,347,354

13,593,306

5,194,799

206,222,324―

206,222,324

4,209
108,091,073
96,652,991

1,555,340
80,902,694
78,891,726

6,043
13,599,349
16,019,094

6,878,124
12,072,923
12,030,988

8,443,717
214,666,041
203,594,801(8,443,717)(8,443,717)(2,362,514)―
206,222,324
201,232,287

11,438,081

2,010,968△ 2,419,744

41,935

11,071,240(6,081,202)

4,990,037

FY2006 (April 1, 2005
through March 31, 2006)
Net sales(1) Net sales to externalcustomers(2) Inter-segment Net
sales or transfer
Total
Operating expenses
Operating income orloss (△)(Notes)1.The group’s operations are classified into the above business segments with regard to the type of business and other similarities.
2. Principal businesses and products of each business segment
Business Segment
Principal Businesses/Products
Medical practice services such as reception, medical fee claims, accounting,computer operations, medical record management,
Medical Support Businesssell/disinfection/sterilization services for medical equipment,
medical affairs consulting, etc.
Home-visit long-term care, home-visit bathing, day care,
Health Care Business
rental/sale of welfare equipment, catering, etc.
Courses for medical office work, home helper training, babysitter training,
Education Businesssign language, etc.
Information processing, storage and delivery service, publication and sale of books,
Other Businesses
production and sale of flowers, ornamental plants, seeds and saplings, leasing,manpower service, etc.
3. Non-allocatable operating expenses
The non-allocatable operating expenses included in the Elimination or Unallocated account of the operating expenses for the
first half of FY2006, the first half of FY2007 and FY2006 are 3,052,210 thousand yen, 4,378,438 thousand yen and 6,140,035
thousand yen respectively. They mainly consist of expenses for the parent company’s administrative sections such as generaladministration division and accounting division.

35

4. Additional information
Out of the Operating expenses non-chargeable to either segment directly, those related to the general administration section of
the parent company’s branch offices used to be allocated equally to the Medical support, Health care and Education Businesssegments for convenience sake. However, along with their growing importance to each segment’s business performance, we
decided to allocate them in proportion to the business hours spent for each of the said three business segments by the generaladministration section of the branch offices, starting from the current interim consolidated accounting period. As a result of thischange in the accounting method, the operating expenses and income changed as follows in comparison to those by theprevious method: Operating expenses for the Medical Support Business increased by 764,445 thousand yen and the operating
income for it decreased by the same amount. The Operating expenses for the Health care business and Education Businessdecreased by 71,949 thousand yen and 692,496 thousand yen respectively, and the Operating income for them increased by thesame amounts respectively.
b. Information by Geographical Segments
Geographic segment information is not presented because the company has had no overseas consolidated subsidiaries or significant
ranches in the first half of FY2006, the first half of FY2007 and FY2006.
c. Overseas Sales
Overseas information is not presented because the company has had no overseas sales in the first half of FY2006, the first half of
FY2007 and FY2006.

36

(Per Share Information)
First half of FY2006(April 1, 2005 throughSeptember 30, 2005)
Net assets per share¥1,472.06
Net income per share¥41.37First half of FY2007(April 1, 2006 throughSeptember 30, 2006)
Net assets per share¥1,471.19
Net income per share¥13.75

FY2006(April 1, 2005 throughMarch 31, 2006)
Net assets per share¥1,479.74¥55.03
Net income per share

Same as on the left
Diluted net income per share is not
Same as on the leftpresented because there were no potential
stocks with dilutive effect.
(Note) Shown below is the basis for calculation of Net income per share and Diluted net income per share in the first half of FY2007.
First half of FY2006First half of FY2007
FY2006(April 1, 2005 through(April 1, 2006 through(April 1, 2005 throughSeptember 30, 2005)
September 30, 2006)
March 31, 2006)
Net income per share
Net income¥1,458,041 thousand¥484,478 thousand¥1,974,934 thousand
Amount not attributable to――¥36,000 thousand
common stockholders(Directors’ bonuses through(―)(―)(¥36,000 thousand)profit distribution included)
Net income relating to¥1,458,041 thousand¥484,478 thousand¥1,938,934 thousand
common stock
Average number of shares
during the period
35,243 thousand shares
35,223 thousand shares
35,234 thousand shares
Net income per share – diluted
Dilution of Net income
Increase in number of common
stockOutline of stock not included
in Diluted net income pershare due to lack of dilutive
effect

―

―

―

―

―

―

(1) Warrants
Number of shares for the
warrants based on the
resolution of the ordinary
general meeting ofshareholders held on June 28,
2001: 207,408(1) Warrants
Number of shares for the
warrants based on
the resolution of the ordinary
general meeting ofshareholders held on June 27,
2003: 2,250(1) Warrants
Number of shares for the
warrants based on the
resolution of the ordinary
general meeting ofshareholders held on June 28,
2001: 207,408(2) Warrants
Number of shares for the
warrants based on the
resolution of the ordinary
general meeting ofshareholders held on June 27,
2003: 2,250(2) Warrants
Number of shares for the
warrants based on the
resolution of the ordinary
general meeting ofshareholders held on June 27,
2003: 2,250(Important Subsequent Events)
There are no relevant matters.
5. Sales Performance
Shown below are the sales performance results for each business segment for the first half of FY2006, the first half of FY2007 and FY2006.

(Thousands of yen)Segment
Medical Support Business
Health Care Business
Education Business
Other Businesses
Total

First half of FY2006(April 1, 2005 throughSeptember 30, 2005)
Amount53,560,839
39,159,901
6,902,822
3,710,309
103,333,872

First half of FY2007(April 1, 2006 throughSeptember 30, 2006)
Amount55,316,834
39,532,497
6,741,968
620,418
102,211,719

37

FY2006(April 1, 2005 throughMarch 31, 2006)
Amount108,086,864
79,347,354
13,593,306
5,194,799
206,222,324

Year on year
103.3%
101.0%
97.7%
16.7%
98.9%