Financial Results for the Year Ended March 2007 (Consolidated)
May 22, 2007
Name of listed company: Nichii Gakkan Company
Location of headquarters: Tokyo Exchange where listed: Tokyo Stock Exchange
Company code number: 9792
(URL: http://www.nichiigakkan.co.jp/)
Representative: President and Representative Director Takashi Mori
Contact: Director, Vice President of Accounting Division and General Manager of Accounting Department Koichi Terada
Telephone: 03-3291-2121
Scheduled date of the ordinary general meeting of shareholders: June 27, 2007
Scheduled date of dividend payments: June 28, 2007
Scheduled date of filing securities report: June 28, 2007

All amounts are rounded off to the nearest million yen.
1. Consolidated results for the year ended March 2007 (April 1, 2006 - March 31, 2007)(1) Consolidated results
Percentage figures represent changes from previous year.
Net Sales

Operating Income

Millions of yen%

202,549
206,222

Year ended Mar. 31, 2007
Year ended Mar. 31, 2006

Millions of yen

(1.8)
2.3

2,635
4,990

Net Income Per ShareNet Income Per Shareafter Adjusting for Latent
Shares

Yen

Yen

22.00
55.03

Year ended Mar. 31, 2007
Year ended Mar. 31, 2006
Notes: Equity-method investment profit (loss)

Ordinary Income

Net Income%

Millions of yen%

Millions of yen%(47.2)
(5.6)

2,709
5,185

(47.7)
(5.3)

774
1,974

(60.8)(2.7)

Ordinary Income toTotal Assets

Return on Equity-

Year ended 31st March, 2007: - million yen

Operating Income to
Net Sales

%

%

%

1.5
3.8

2.9
5.7

1.3
2.4

Year ended 31st March, 2006: - million yen(2) Consolidated financial position
Total Assets

Equity Ratio

Net Assets Per Share

Millions of yen%

Yen

92,11597,89852,24752,15956.6
53.3

1,479.10
1,479.74

Year ended Mar. 31, 2007
Year ended Mar. 31, 2006
Notes: Shareholders’ Equity:

Net Assets

Millions of yen

Year ended 31st March, 2007: 52,096 million yen

Year ended 31st March, 2006: 52,159 million yen(3) Consolidated cash flows
Net cash provided by(used in) operating activities
Millions of yen

Net cash provided by(used in) investment activities
Millions of yen

Net cash provided by(used in) finance activities
Millions of yen

Cash and cash equivalents
at end of year
Millions of yen

2,656
6,672

(1,090)(5,538)(4,386)
7,385

9,570
12,391

Year ended Mar. 31, 2007
Year ended Mar. 31, 2006

2. Dividends
Dividends per Share (Yen)

Yen

Yen

Yen

Millions of yen%

Ratio of
Dividends to Net
Assets(Consolidated)
%

0.00
0.00

22.00
22.00

22.00
22.00

774
774

40.0
100.0

1.5
1.5

InterimYear ended Mar. 31, 2006
Year ended Mar. 31, 2007
Year ended Mar. 31, 2008
(Forecast)-Year-end-

Full Year

Total Amount of
Cash Dividends(Annual)-Dividends Payout
Ratio(Consolidated)-

3. Forecast of Consolidated results for the year ended March 2008 (April 1, 2007 - March 31, 2008)(Percentage figures represent changes from previous year for full year figures and from same period of previous year for interim period figures.)
Net Income Per
Net Sales
Operating Income
Ordinary Income
Net Income
Share
Millions of yen% Millions of yen% Millions of yen% Millions of yen%
Yen
Half Year
99,800 (2.4)
(250)
(180)
(570)
(16.18)Full Year
201,600 (0.5)
2,730 3.6
2,840
4.8
970
25.2
27.54

4. Others(1) Changes in significant subsidiaries during the year ended March 2007(changes in specified subsidiaries resulting in changes in scope of consolidation): Yes[Newly consolidated: Excluded: One (Power Bank Co., Ltd.) ]Note: Please refer to “Status of the Corporate Group”, on page 7, for details.
(2) Changes in accounting principles, procedures and method of presentation associated with preparation of the consolidated financial
statements (the matters to be included in the section, changes in basic important matters for preparation of consolidated financial statements)
1) Changes due to revisions of accounting standards etc.: Yes
2) Changes other than 1): None
Note: Please refer to "Basis of Presenting Consolidated Financial Statements”, on page 22, for details.
(3) Number of shares outstanding (common stock)1) Number of shares outstanding at fiscal year end (including treasury stock):
March 31, 2007 36,508,976 shares
March 31, 2006 36,508,976 shares
2) Number of shares of treasury stock at fiscal year end:
March 31, 2007
1,287,351 shares
March 31, 2006
1,284,549 shares(Reference)Overview of the Non-Consolidated Business Results
1. Non-Consolidated Results for the Year Ended March31, 2007 (April 1, 2006 - March 31, 2007)(1) Non consolidated results
Percentage figures represent changes from previous year.
Year ended Mar. 31, 2007
Year ended Mar. 31, 2006

Net Sales
Millions of yen%

198,099
197,6350.2
3.7

Operating Income
Millions of yen

2,506
4,956

Net Income Per ShareNet Income Per Shareafter Adjusting for Latent
Shares

Yen

Yen

24.30
(28.81)

Year ended Mar. 31, 2007
Year ended Mar. 31, 2006%

(49.4)(19.9)

Ordinary Income
Millions of yen

2,682
5,257

%

(49.0)(18.4)Net Income Per Share
Millions of yen
%

856
(978)

-

-

(2) Non consolidated financial position
Total Assets
Year ended Mar. 31, 2007
Year ended Mar. 31, 2006
Notes: Shareholders’ Equity:

Net Assets

Equity Ratio

Net Assets Per Share

Millions of yen

Millions of yen%

Yen

86,811
92,66648,36948,35055.7
52.2

1,373.29
1,371.63

Year ended 31st March, 2007: 48,369 million yen

Year ended 31st March, 2006: 48,350 million yen

2. Forecast of Non consolidated results for the year ended March 2008 (April 1, 2007 - March 31, 2008)(Percentage figures represent changes from previous year for full year figures and from same period of previous year for interim period figures.)
Net Income Per
Net Sales
Operating Income
Ordinary Income
Net Income
Share
Millions of yen% Millions of yen% Millions of yen% Millions of yen%
Yen
Half Year
96,600 (3.4)
(300)
(200)
(500)
(14.20)
Full Year
195,000 (1.6)
2,600 3.7
2,840
4.4
1,100
28.5
31.23

The amounts as above are rounded off to the nearest million yen.
The above projections are based on information available as of time of this announcement. Actual results may differ due to various factors.

11. Business Results(1) Analysis of business results1) Overview of business results
Although the stability of Japan’s economy is still unclear during this fiscal year due to such influences as the increase in the price of oil andraw materials, as general corporate performances were steady, an increase in capital investment and an improvement in the employment
market led to a continuing recovery trend.
The market environment surrounding medical and health care businesses is under continuous fundamental reviews for public services inorder that the social security system can be sustainable. This was typified when in April 2006, a full-scale system reform came into practicefor nursing care insurance, which was the first since the new social security’s conception. This meant a large change in operating procedures
for nursing care operators.
The revision of the medical treatment fee and nursing care fee which went into effect at the same time lowered rates and the negative
impact of the market for this revision was larger than expected and more strongly felt than the change in percentage of rate itself.
Under these circumstances, our group has implemented active sales promotions by utilizing our national network strengths and the media
mix strategy mainly through TV commercials.
In September 2006, to quickly respond to the change in the market environment from such factors as the system reform and economic
trends, an "Information and strategy office" was created which promotes strengthening existing businesses, developing new services, andrealizing mid-term business strategies. This will help us develop a new service menu and maintain our infrastructures.
Regarding sales, factors such as the sale and liquidation of consolidated subsidiaries due to the group reorganization, the revisions of nursing
care insurance, and decline in the number of students in our education business led to a fall.
On profit, factors such as the revision in the treatment fee system, and limited effects of opening of classes in convenient locations forstudents and advertising investments led to the increase in advance fee and the consolidated accounting term was faced with unfavorable
results.
As a result of these activities, net sales during the current accounting period were ¥202,549 million (down 1.8% year on year), ordinary
income was ¥2,709 million (down 47.7% year on year), and net income was ¥774 million (down 60.8% year on year).

2) Business results by segment【Medical Support Business】
Our "Medical Support Business" has improved and expanded services to increase per medical institute revenue and promoted the acquisitionof new business contracts by offering support services matching changes in the health care system to Diagnosis Procedure Combination(DPC)-ready and -planning hospitals and aggressively strengthening sales to regional medical cooperation rooms.
Additionally, as an investment in human resources, we have begun introduction of the career-up system which includes improvements in
hiring conditions and further strengthen the personnel service system through cooperation with the Education Business,with the aim of acquiring and securing human resources.
As a result of these activities, sales during the current fiscal year were ¥110,956 million (up 2.7% year on year) and operating income
were ¥10,824 million (down 5.4% year on year).

【Health Care Business】
Regarding "Health Care Business", as of 2005, in order to conform to the nursing care insurance reform implemented in April 2006, we haveactively promoted nation-wide openings of "multi-function care centers", which offer the advantages of combined service centers with theaddition of a preventive care service. We also worked to help users' understanding of preventive care services, and offered these services.

2However, the operational status of the "comprehensive regional support centers" operated by local government was modest andcompared to the transition of light-level care patients to new preventive care service benefits, the growth in number of preventive careservice users was limited. This greatly impacted the number of users for our home care service and day care service.
Also, in revision to the nursing care fees which was conducted at the same time, home nursing care fees were lowered by one percent on
average and specifically, the home light nursing care fee was reduced by five percent on average which greatly affected us as we have manyhome light nursing care users.
Sales for this consolidated fiscal year was ¥78,027 million yen (down 1.7% year on year) and operating income was ¥1,820 million(down 9.5% year on year). However, regarding the non-insurance service centering on our manpower supply service to institutions, thenumber of contracts steadily increased and sales continued on a growing trend.
【Education Business】
Our "Education Business", which is the backbone of manpower supply to the medical support and health care business, was strengthened insales by simultaneously running TV commercials to increase recognition of our corporate brand and by a highly-appealing advertising
campaign in newspapers, magazines, and web sites intended to be image linked to the TV commercials.
Additionally, to improve the convenience for students, we revised our curriculum and class operation to improve our services.
Unfortunately, due to the lack of clarity of the home-helper qualification in the future and improvement in employment environment, thenumber of students enrolled in our main classes of “medical clerk” and “home-helper” declined. Sales for this consolidated fiscal year was¥12,469 million yen (down 8.3% year on year) and operating loss was ¥1,709 million yen (operating loss of ¥2,419 million in the previous
fiscal year).

【Other Businesses】
In Other Businesses, we are engaging in such businesses as welfare equipment leasing, storage and delivery service, and production and saleof flowers, ornamental plants, seeds, and saplings.
We are advancing our business growth strategy, primarily concentrating on strengthening existing business and approaches 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 thecurrent fiscal year.
As a result, net sales for this segment were ¥1,095 million (down 78.9% year on year) and operating income was ¥254 million (up508.0% year on year).

3) Outlook for the full year performance【Medical Support Business】
Regarding our "Medical Support Business", as the business environment of medical institutions changes greatly, needs of medical
institutions are becoming varied and we will promote the expansion of services to meet those needs.
Additionally, to bring more balanced conditions to contract services, we will be presenting reviews of contracts with medical institutions.
For our future growth strategy, factors such as the balancing of nursing care and medical treatment fees due to the revisions and reductionof hospital beds have increased the need for better cooperation between medical care and nursing care. To cope with this need, we will
aggressively pursue contracts for regional medical cooperation rooms and seek cooperation with home nursing care support clinics, expand
our hospital private finance initiative (PFI) business, deploy a support service for introducing DPC, and additionally develop and supply aservice for supporting efficient medical business management for implementing IT technologies in medical institutions.

3

【Health Care Business】
On "Health Care Business", we will increase the amount of existing facilities to meet the needs of the increased amount of patients for suchcare as home care and day care services.
As the shift to new preventive cure benefits for light care patients (due to the revision of nursing care insurance) will settle down, we
believe that the number of service users will gradually, but steadily increase.
Maximizing use of our deep and extensive service infrastructures, by appealing to local governments and users with our achievement
records and response capabilities of preventive cure programs, we seek to acquire contracts for our regional support business and new usersof preventive cure services.
On the subject of rental and sale of welfare equipment for light users who fell outside of the insurance bracket due to the revision ofnursing care insurance, we will provide a non-insured price rental service to obtain sales and continuous users. Additionally, by transferring
our welfare equipment wholesale business to Nichii Carenet Co., Ltd. (formerly reha team japan Co., Ltd.), we plan to increase the businessefficiency within the group and strengthen our service providing system.
Additionally, in order to increase sales and secure profits, we will make efforts to expand non-insured services centering on providing
helper workers to medical institutions and nursing care facilities and to promote the development and provision of new self-paid services.

【Education Business】
In Education Business, we are promoting to obtain more students by running the media mix advertising campaign through the high response
rate advertising medium, by promoting convenient class operation, and by revising the curriculum for students.
We also plan to promote the improvement of business efficiency by reviewing business development in terms of the geographical area of
responsibility of each branch office under the special type branch office system and by implementing effective classroom operations.
Due to an aging society, demand for qualifications in medical and nursing care is anticipated to remain steady in the future. Therefore, ourcompany will attempt to expand our medical support business as well as to improve the quality of education by focusing on development of
the care workers’ basic course and the nursing care courses.

【Other Businesses】
In Other Businesses, we are centralizing our management resources by restructuring the subsidiaries. This category will contribute to ourgroup management by establishing a group network that can provide better coordination and synergy effects with our core competencebusinesses, Medical Support Business, Health Care Business and Education Business.
For the fiscal year 2008, in addition to the above segment by segment business strategy, branch offices will be set-up to focus directly on
Education, Medical, or Health care businesses, and these will strengthen sales and the management of income and expenditures.
In consideration of these situations and prospects, our outlook for performance in the year ending March 31, 2008 is ¥201,600 million in
net sales (down 0.5% year on year), ¥2,730 million in operating income (up 3.6% year on year), ¥2,840 million in ordinary income (up 4.8%
year on year) and ¥970 million in net income (up 25.2% year on year).

(2) Analysis of Financial Position
1) Overview of financial position
During the current accounting period, cash and cash equivalents ("funds") amounted to ¥9,570 million, down ¥2,820 million year on year.
Cash flow from each activity and their factors are shown below.

4【Cash flow from operating activities】
As a result of operating activities during the current fiscal year, funds increased by ¥2,656 million (in the same period of theprevious fiscal year, funds increased by ¥6,672 million).
The revision of the nursing care insurance system caused a negative impact in the health care division and the investment made on the
opening of classrooms in convenient locations for students and the advertisement expenses, including TV commercials, did not achieved a
expected effects. As a result, operating income was 2,635 million yen (the previous consolidated fiscal year was 4,990 million yen) and net
income before tax and other deductions was 2,230 million yen with the effect of the liquidation of a subsidiary company through group
reorganization which continued on from the previous consolidated fiscal year.

【Cash flow from investing activities】
As a result of investing activities during the current fiscal year, funds decreased by ¥1,090 million (in the same period of the previous fiscal
year, funds decreased by ¥5,538 million).
Principal investments include ¥965 million for day service centers, etc. (14 new facilities and 48 existing facilities) and ¥199 million
for helper stations.
【Cash flow from financial activities】
As a result of financial activities during the current fiscal year, funds decreased by ¥4,386 million (in the same period of theprevious fiscal year, funds decreased by ¥7,385 million).
This was because we issued unsecured bonds amounting to 11 billion yen and returned all short-term loans (fulfillment of payment
obligations on commitment line contract).

Trends in cash flow indicators for the Group can be seen below.
Year ended 31 March, 2006

Equity ratio (%)
Equity ratio based on present value (%)
Debt redemption (years)
Interest coverage ratio

Year ended 31 March, 2007

53.3
98.2
2.0
114.5

56.6
81.3
3.6
31.1

Notes: 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. Each indicator was calculated from consolidated financial results.
2. Total present value of stock is the product of closing stock price at the end of period and the total number of outstanding sharesat the end of period (after deducting treasury stock).
3. 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 the interest payments as shown in the consolidated cash flow statement.

(3)Basic Principles of Profit Distribution

We make it a basic policy to provide our stockholders with stable and continuous profit distributions.
Considering business performance 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.

5(4) Business Risks
Presented below are matters that may be of risk to the operations of each business of the Group. Although we mitigate such risks bydispersing and acknowledging them, in the event of an unforeseeable incident, such risks may cause serious effect on the businessperformance 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 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 practice itself,
medical-related duties, and medical service management consultation services. Medical institutions will see major fluctuations in their
medical revenues due to the revision of the medical service payment system approximately every two years and the medical insurance
system reform (Article 2, Paragraph 2 of the Health Insurance Law Revision Law).
For our group which provides services to health care institutions, contents of revision rate for medical treatment fee and medical
insurance system reform may impact our contract fee and its contents.

【Health Care Business】
Approximately 90% of our Group's Health Care Business can be attributed to services that are covered by public long-term care insurance.
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 Insurance Law) andlong-term care compensation is subject to review every three years. The service provision and care management is to undergo a greattransformation 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 home community, 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 care providers” (Health,
Labor and Welfare Ministry Ordinance No. 23), and is required to obtain certification from the prefectural government.
The home helper training course is expected to combine with the care worker's basic course in the future and this change may affect thesales and revenue of the course.

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

6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 businessperformance.

【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 this causes unavailability of our services to users, it could reduce sales and incur special expenses.

2. Status of the Corporate Group
This consolidated corporate group consists of Nichii Gakkan Company, its 12 subsidiaries, and its 1 affiliate. The Group is engaged in fourbusinesses (Medical Support Business, Health Care Business, Education Business, and Other Businesses). In Medical Support Business, theGroup 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-termcare 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 publicationand 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

Principal Businesses/Products
Medical practice services such as reception, medical fee claims,
accounting, computer operations, and medical record
management, sell/disinfection/sterilization services for medical
equipment, medical affairs consulting

Health Care Business

Home-visit long-term care, home-visit bathing, day care,rental/sale of welfare equipment, catering, etc.

Education Business

Courses for medical office work, home helper training, babysitter
training, and sign language

Other Businesses

Information processing, storage and delivery service, publicationand sale of books, production and sale of flowers, ornamental
plants, seeds and saplings, leasing, manpower service, etc.

Principal Companies
Nichii Gakkan Company
Nihon Support Service Co., Ltd.

Nichii Gakkan Company
Keihin Life Service Co., Ltd.
Nichii Carenet Co., Ltd.
Nihon Support Service Co., Ltd.
Nichii Gakkan Company
Nihon Support Service Co., Ltd.
Tokyo Marunouchi Publishing Co., Ltd.
Roris Co., Ltd.
NIHON CREDIT LEASE Co., Ltd.

Notes: 1) Power Bank Co., Ltd. was liquidated on March 27, 2007.
2) Reha team Japan Co., Ltd. was renamed to Nichii Carenet Co., Ltd. on January 1, 2007.

7

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 / ASP
Consolidated subsidiaries
Keihin Life Service Co., Ltd.
Nichii Carenet 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
Sales ofmerchandise

Nichii Gakkan Company

Sales of merchandise
Provision of services

Sales of merchandise
Provision of services

Local governments, etc.
Medical institutions
Customers
Member stores

Health Care Business
Nichii Gakkan Company
Nihon Support Service Co., Ltd.

Medical institutions, etc.
Provision of services

Storage and delivery service of teaching materials andproducts, 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.
Unconsolidated subsidiaries
Yao Iryo PFI / 2 other companies

Students
Nichii Gakkan Company
Courses and sale and lease of
educational books

Health Care Business
Nichii Gakkan Company
Keihin Life Service Co., Ltd.
Nichii Carenet Co., Ltd.
Merchandise sales and childcare
Provision of services
Leasing Manpower service

8

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

Customers

3. Management Principles(1) Basic Principles of Management
Based upon the management philosophy of “Contributing to the health and welfare of society”, our company aims to be recognized ascontributing to the improvement and furthering the quality of life and society in three fields; the medical support business, nursing care andeducation for daily living.
Nichii’s mission
1) Assist stable management of healthcare institutions in healthcare related fields.
2) Create an environment where people can live a full life through nursing care without worries.
3) Support educational activities, to encourage self-improvement.

We also recognize that we must fulfill our social responsibilities as a company, comply with corporate ethics, and elevate the corporate brandvalue in our activities while deepening our trusting relationship with our shareholders and other stakeholders.
In order to achieve this goal, we wish to spread the idea of self-improvement to each organizational structure and employee as well as
aggressively maximizing our corporate value based on the slogan, “Strength through kindness.”(2) Management goals
Our long-term goal includes taking the following three points into consideration 1) our core business is manpower dispatching services, 2)
the business of medical support and those businesses in the welfare field are expected to expand in the future and 3) share value should befocused upon;
1) Net sales growth →double-digit growth2) Operating income to Net sales → 8% or higher
3) ROE (return on equity) → 15% or higher(3) Mid- to long-term strategies
Japan is becoming a society that faces a decline in population due to a low birthrate and an aging population. Given the situation, ourcompany is putting into effect a business growth strategy and organizational reform with an aim of establishing a robust corporate structurethat quickly and adequately responds to the changes in business environment.
Regarding our business growth strategy, an “information and strategy office” was newly established in Kobe Port Island Center on
September 16, 2006. The office is tackling the concepts of reinforcing existing businesses, expanding business operations and creating new
businesses for each division.
In order to strengthen the management foundation of our group, we are promoting a reorganization and integration of subsidiaries with atransfer of businesses. Furthermore, as of March 26,2007, a totally comprehensive plan for organizational renovation came into effectcontinuing on from 2004 in which our regional and branch office system changed to a “new business branch office system” where eachbusiness focused on a single division; educational business, medical support business or healthcare business. As a result, the regional officesystem changed to a sales control division which promotes and manages regional sales according to the 18 districts.
As a result of this renovation, our company plans to improve business performance and quality of services by establishing a branch officesystem, which can demonstrate an increase of performance by concentration as well as establishing a competitive regional system.
Although multiple brands existed in our group such as Nichii Gakkan and Iris Care Service, we integrated all these brands into one brand,“Nichii” on April 1, 2007 and are carrying out corporate activities aiming at improving our brand value.
Our group will attempt to realize our future goals which will lead to the maximization of corporate value by implementing acomprehensive management strategy.

9(4) Issues to be handled【Medical Support Business】
A healthcare system reform in Japan which started with the amendment of Healthcare Ordinance and Health Insurance in 2006 plans to startachieving its actual goals from April 2007 and further rapid progress is anticipated in the future.
In addition, the Japanese government is investigating a policy that aims at “regional decentralization” including healthcare system reform.
As a result, medical institutions are further required to incorporate a working system to share and reinforce collaboration, so that to perform
an effective medical business that can respond to various environmental changes.
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 a mid- and long-term business strategy, we will promote expansion of system resource related services aiming at improving
information technology for healthcare institutions and will aggressively develop and provide “Healthcare management support services” toproduce better value services including the enhancement of staff members’ skills.

【Health Care Business】“Introduction of disease prevention benefits”, “Partial collection of occupancy expense” and “Regulation reinforcement” were implemented
in the reform in April 2006 and nursing care operators are urgently required to respond to the new system change as well as creating a new
business model.
Further, reform is anticipated in 2009 and 2012 leading up to 2015 when the postwar baby-boom generation will become 65 years old or
more. Bearing this situation in mind, our group is currently developing strategies and promoting business operations from a long-term
perspective.
We will also attempt to expand and improve nursing care insurance services, welfare services for handicapped persons as well as promote
development and provision of self-paid services which lie beyond nursing care insurance coverage. Furthermore, we plan to focus on thecreation of value added services through collaboration with regional communities and businesses in different sectors to achieve further
business expansions.

【Education Business】
The number of workers engaged in nursing care and welfare services in 2005 was 3.28 million, which is a 4.6 times increase over 1993
amounting to 710,000 workers.
In addition, due to the low birthrate and aging society in Japan, an increase in the number of workers engaged in nursing care and welfare
services is anticipated for the future. (Source: Health, Labour and Welfare Ministry. Nursing care and welfare services means services
dealing in the fields of the elderly, the handicapped, children and others.)
Our education business offers 12 courses focusing on medical/nursing care, and is engaged in enhancing human resources for the said
fields. This business is based on our own business model exemplified with the key phrase of “education creates employment”, and is crucial
for providing our company with human resources.
In a bid to improve our visibility and strengthen our personnel distribution system, we are promoting quantitative expansion measures
mixed with an advertising strategy, while moving forward with school deployments that aim to improve students’ convenience, as well as
placing advertisements mainly in the media (that have had a good response in the past) such as in television commercials and web ads.
Our education business will help us secure human resources necessary to maintain our company and will contribute to fulfilling the need
for workers in the medical and health care industries, while further improving our main courses such as the medical clerk course and homehelper training course, as well as promoting the development and expansion of the value-added courses such as care worker related courses.

10【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 wholesale and welfare equipment leasing business are responsible for rejuvenating product distribution in thewelfare equipment market and improving 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.

Regarding the personnel deployment and nursing care reward claims, on December 27, 2006, our three offices responsible for in-patientcare and in-home nursing care support received guidance and business improvement recommendations from the Tokyo Metropolitan
Government. We are terribly sorry for the troubles and concerns this has caused you.
We will seriously take this guidance under advisement, reflect on our past conduct, and plan to ensure proper office management byfurther strengthening our management system of the nursing care business.
Although we have obtained a status of “Improved” from the Tokyo Metropolitan Government after they received our improvement planand evaluated our quickly rectified procedure, our company is attempting to bring the system operation standard in our offices up to par withan aim of preventing further occurrence.
Furthermore, we are implementing a re-inspection of operation conditions according to a regulation standard by using in-house made,self-evaluation forms in every prefecture across the country.
In order to avoid such negative events in the future, our company plans to reinforce the compliance of our organizational structure andmakes efforts of preventing further occurrence by recovering our reliability throughout the entire company.
(5) Other significant matters in the management
There are no relevant matters.

11

4. Consolidated Financial Statements(1) Consolidated Balance Sheets
FY 2006(As of March 31, 2006)

Category

I

Note
No.

Amount(thousands of yen)

Share
(%)

Amount(thousands of yen)

YoY (%)

Share(%)

Change(thousandsof yen)(ASSETS)
Current assets
1. Cash and deposits
2. Notes and accounts receivable*6

12,557,413

9,872,547(2,684,865)

25,343,630

24,124,838(1,218,791)

3. Inventories

1,943,892

1,475,298(468,594)

4. Deferred tax assets

2,882,923

3,766,302

883,378

5. Other current assets

2,650,723

3,330,480

679,757

6. Allowance for doubtful accounts(135,756)(105,039)

30,717

Total current assets
II

FY 2007(As of March 31, 2007)

45,242,826

46.2

42,464,428

46.1(2,778,398)

Fixed assets(1) Tangible fixed assets
1. Buildings and structures*3

Less: cumulative depreciation

30,759,463
6,059,786

2. Machinery and vehicles

153,221

Less: cumulative depreciation

114,522

3. Tools, furniture and fixtures*3

Less: cumulative depreciation

33,741,425
24,699,677

7,389,680

26,351,745

1,652,068

29,078(9,620)411,078(81,155)

138,853
38,698109,775

1,566,994

1,532,729

1,074,761

492,233

1,121,650

4. Land7,844,328

7,681,997(162,331)

5. Construction in progress

2,040,667-(2,040,667)

Total tangible fixed assets

35,115,605

35.9

34,473,899

37.4(641,706)(2) Intangible fixed assets
1. Consolidated adjustment account2,881,157-(2,881,157)

2. Goodwill-

2,670,896

2,670,896

3. Software

922,147

735,451(186,696)

4. Other intangible fixed assets

192,755

Total intangible fixed assets

3,996,060

398,157
4.1

3,804,505

205,402
4.1(191,555)(3) Investments and other assets
1. Investment in securities*1

2. Long-term loans receivable

1,219,031

1,201,807(17,224)

2,557,397

2,444,542(112,855)

3. Long-term prepaid expenses

147,460

145,539(1,921)

4. Guarantee money deposited

4,977,231

4,763,833(213,398)

5. Deferred tax assets

3,307,304

1,525,228(1,782,075)

2,024,097(1,849,407)

6. Other investments and other assets*1, 2

3,873,504

7. Allowance for doubtful accounts*4(2,538,361)

Total investments and other assets(732,681)

1,805,679

13,543,570

13.8

11,372,368

12.4(2,171,201)

Total fixed assets

52,655,236

53.8

49,650,772

53.9(3,004,463)

Total assets

97,898,062

100.0

92,115,200

100.0(5,782,861)

12

FY 2006(As of March 31, 2006)
Category

Note
No.

(LIABILITIES)Current liabilities
1. Notes and accounts payable
2. Short-term loans payable
3. Current installments of long-term
debt
4. Current redemption of bonds
5. Income taxes payable
6. Consumption tax payable
7. Accrued expenses
8. Allowance for employee bonuses
9. Allowance for bonuses to directors
10. Other current liabilities
Total current liabilities
II Long-term liabilities
1. Bonds
2. Long-term loans payable
3. Allowance for employee retirement
benefits

Amount(thousandsof yen)FY 2007(As of March 31, 2007)
Amount(thousands of yen)

Share (%)

YoY (%)
Share(%)

Change(thousands ofyen)I

1,736,727
13,063,000

1,144,987
402,000(591,739)(12,661,000)

55,17133,178(21,992)

2,074,565
1,742,666
15,402,527
3,475,893
5,017,256
42,567,807

3,808,000
154,193
1,574,166
16,011,429
3,320,330
36,0004,891,422
31,375,708

3,808,000(1,920,372)(168,499)
608,901(155,563)
36,000(125,833)(11,192,099)

4. Allowance for directors' andauditors' retirement benefits
5. Other long-term liabilities
Total long-term liabilities
Total liabilities

*8

*9

34.1

39,3455,288,000
19,1185,288,000(20,226)

2,767,862

2,941,991

174,129

129,209132,2433,034

102,333
3,038,751
45,606,559

3.1
46.6

110,927
8,492,282
39,867,990

9.2
43.3

8,593
5,453,530(5,738,569)

132,488

0.1

-

-

-

11,933,790
17,354,214
28,723,606
77,628(5,930,226)
52,159,014

12.2
17.7
29.4
0.1
(6.1)
53.3

-

-

-

97,898,062

100.0

-

-

-

-

-

11,933,790
17,354,214
28,686,400(5,934,751)
52,039,654

13.0
18.8
31.1
(6.4)
56.5

-

-

-

56,82656,826
150,729
52,247,210
92,115,200

0.0
0.0
0.2
56.7
100.0

-

(MINORITY INTERESTS)
Minority interests(SHAREHOLDERS' EQUITY)I Common stock
II Capital surplus
III Retained earnings
IV Unrealized gains on other securities
V Treasury stock
Total shareholders' equity
Liabilities, minority interests andshareholders' equity

43.5(NET ASSETS)
Shareholders' equity
1. Common stock
2. Capital surplus
3. Retained earnings
4. Treasury stock
Total shareholders' equity
II Unrealized gains and adjustments
1. Unrealized gains on other securities
Total unrealized gains and adjustments
III Minority interests
Total net assets
Total liabilities and net assetsI13(2) Consolidated Statements of Income
FY 2006(April 1, 2005 to March 31, 2006)
Category
I Net sales
II Cost of sales
Gross profit
III Selling, general and administrative
expenses
1. Advertising and promotion expenses
2. Directors' compensation
3. Salaries and benefits
4. Transfer to allowance for bonuses
5. Transfer to allowance for directors' andauditors' bonuses
6. Transfer to allowance for directors' andauditors' retirement benefits
7. Directors' and auditors' retirement
benefits
8. Employee retirement benefits
9. Legal welfare expenses
10. Travel and transportation expenses
11. Rent
12. Transfer to allowance for doubtful
accounts
13. Depreciation expenses
14. Amortization of consolidated
adjustment accountAmount(thousands of yen)
206,222,324
165,174,725
41,047,599

Amount(thousands of yen)

100.0
80.1
19.9

5,121,130
151,158
13,563,532
861,687

6,938,565
152,406
12,621,856
808,351-

36,000

7,604

8,501

320

86

422,501
1,984,977
1,463,609
3,604,763

326,118
1,857,519
1,362,105
3,439,362

101,661

29,184674,210

662,828

215,964-

15. Amortization of goodwill
16. Others
Operating income
IV Non-operating income
1. Interest income
2. Commission on consignment for officework7,884,440

3. Income from lease of fixed assets
4. Others
V Non-operating expenses
1. Interest expenses
2. Bond interest
3. Compensation for damages
4. Bond issue cost
5. Loss on disengagement of guaranteemoney deposited

153,670

6. Others
Ordinary income(%)

FY 2007(April 1, 2006to March 31, 2007)

36,057,561
4,990,037

17.5
2.4

207,389
8,152,111

36,152

26,342

91,95290,904
281,775

0.1

30,985150,529

57,43011,931-40,451
57,40927,262
32,940931

41,063

16,16986,463
5,185,349

14

0.0
2.5

25,500(%)

YoY (%)
Change(thousandsof yen)202,549,097
163,310,893
39,238,203

100.0

36,602,387
2,635,815

18.1
1.3

544,826(2,354,221)

298,7620.1

16,987

224,627
2,709,950

0.1

138,163(2,475,398)

80.6
19.4

1.3

(3,673,227)(1,863,831)(1,809,395)

FY 2006(April 1, 2005 to March 31, 2006)
Amount(thousands of yen)

Category
VI Extraordinary income
1. Gain on sale of fixed assets*
1

2. Gain on sale of shares of relatedcompany
3. Gain on sale of investment in securities
4. Others
VI 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. Loss on revaluation of inventories
5. Transfer to allowance for doubtful
accounts
6. Loss on closedown of offices
7. Loss on impairment
8. Loss on disengagement of lease
9. Others
Income before income taxes
Income, inhabitants and business taxes
Adjustments for income and other taxes
Minority interests
Net income

29,3201,489,112-

552,837

2,850

*
2

2,041,954

1.0

634

74,99759,47255,32522,147

118,492-

2,422,614

274,665

2,455,000

-

7,552

-

131,098

52,5603,503
3,243,944(3,295,144)

15

5,268,583
1,958,719

2.6
0.9(51,199)
34,984
1,974,934

(0.1)
0.0
1.0

103,395
510,409912,722

YoY (%)(%)

Change(thousandsof yen)32,8040.1(2,009,149)

512,2422,230,512

0.3
1.1(4,756,341)
271,793

1,423,132
32,612774,768

0.7
0.0
0.4

1,474,331(2,371)(1,200,166)

Amount(thousands of yen)

4

*
1
*
1

(%)

FY 2007(April 1, 2006to March 31, 2007)

(3) Consolidated Statements of Retained Earnings
and Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Retained Earnings
FY 2006(April 1, 2005 to March 31, 2006)
Note
No.

Category

Amount(thousands of yen)

(CAPITAL SURPLUS)
I

Capital surplus at beginning of the fiscal year

17,354,214

II

Capital surplus at end of the fiscal year

17,354,214(RETAINED EARNINGS)I Retained earnings at beginning of the fiscal year
II Increase in retained earnings
1 Net income

27,562,047
1,974,934

1,974,934

776,050
36,0001,325

813,376

III Decrease in retained earnings
1 Dividends
2 Directors' and auditors' bonuses
3 Loss on retirement of treasury stock
IV Retained earnings at end of the fiscal year

28,723,606

16

Consolidated Statements of Changes in Shareholders’ Equity
The current consolidated fiscal year (April 1, 2006 to March 31, 2007)(Thousands of yen)
Shareholders' equity

Balance as of March 31, 2006

Common stock

Capital surplus

11,933,790

17,354,214(5,930,226)

Total
shareholders'equity52,081,385(1,037)(6,370)1,845(774,937)(36,000)
774,768(6,370)808

Retainedearnings
28,723,606

Treasury stock

Amount of fluctuation during theconsolidated fiscal year
Dividends from retained earnings*
Directors' and auditors' bonuses*
Net income
Purchase of treasury stock
Retirement of treasury stock
Amount of fluctuation of items otherthan shareholders' equity during theconsolidated fiscal year
Total amount of fluctuation during theconsolidated fiscal year
Balance as of March 31, 2007

(774,937)(36,000)
774,768--(37,206)(4,524)(41,731)

11,933,790

17,354,214

28,686,400(5,934,751)

52,039,654

Minority
interests

Total net
assets

Unrealized gains andadjustments
Total
unrealized
gains andadjustments
77,628

Unrealized
gains on othersecurities
Balance as of March 31, 2006

77,628132,488

52,291,502

Amount of fluctuation during theconsolidated fiscal year
Dividends from retained earnings*
Directors' and auditors' bonuses*
Net income
Purchase of treasury stock
Retirement of treasury stock
Amount of fluctuation of items otherthan shareholders' equity during theconsolidated fiscal year
Total amount of fluctuation during theconsolidated fiscal year

(774,937)(36,000)
774,768(6,370)808(20,801)(20,801)

18,240(2,560)(20,801)(20,801)

18,240(44,291)

Balance as of March 31, 2007
56,82656,826
150,729
52,247,210*Appropriation of retained earnings approved at the ordinary general meeting of shareholders in June 2006.

17

(4) Consolidated Statements of Cash Flows

Category

Note
No.

FY2006 (April 1,2005 to March 31,
2006)
Amount(thousands of yen)

I Cash flow from operating activities
Income before income taxes
Depreciation expenses
Increase in allowance for doubtful
accounts
Decrease in allowance for employee
bonuses
Increase in allowance for directors' andauditors' bonuses
Increase in allowance for employee
retirement benefits
Increase in allowance for directors' andauditors' retirement benefits
Interest and dividends income
Interest expenses
Amortization of consolidated adjustment
account
Amortization of goodwill
Gain on sale of investment in securities
Other incomes
Loss on retirement of fixed assets
Loss on sale of fixed assets
Gain on sale of fixed assets
Loss on impairment
Gain on sale of shares of relatedcompanies
Loss on revaluation of shares of relatedcompanies
Loss on revaluation of inventories
Loss on extraordinary losses(Increase) decrease in accounts receivable
Decrease in inventories(Increase) decrease in other current assets
Decrease in claims provable inbankruptcies
Increase (decrease) in accounts payable
Increase in other current liabilities
Increase (decrease) in consumption tax
payableDecrease in other fixed assets
Increase in other long-term liabilities
Directors' and auditors' bonuses paid
SubtotalInterest and dividends received
Interest paid
Income and other taxes paid
Income and other taxes refunded
Cash flow from operating activities

18

FY2007 (April 1,
2006 to March 31,
2007)
Amount(thousands of yen)

YoY (%)
Change(thousands of yen)

1,958,719
1,781,896

2,230,512
2,021,741

271,793239,845

2,530,998(1,836,397)(4,367,396)(167,514)(155,563)

11,950-36,00036,000359,693

174,129(185,564)

927

3,034

2,106

(64,063)
57,430(39,181)
97,86024,88240,429215,964-(215,964)(552,837)(2,521)
74,99755,325(4)
131,098

207,389(2,850)(8,148)59,472
22,147(29,320)
52,560207,389
549,987(5,626)(15,524)(33,178)(29,315)(78,537)(1,489,112)-

1,489,112

118,492-(118,492)

2,422,614
3,503(1,111,859)
173,720
366,889274,665
1,135,841
193,928(718,806)(2,147,948)(3,503)
2,247,701
20,207(1,085,696)-

1,842,880

1,842,880

13,383
1,698,167(591,739)
513,686(605,122)(1,184,480)

538,836(168,499)(707,335)

30,326
13,006(36,000)
9,122,079
63,284(58,274)(2,546,191)
91,923
6,672,819

73
8,593(27,850)
5,296,163
38,253(85,398)(2,592,692)
2,656,325(30,252)(4,412)
8,150(3,825,915)(25,030)(27,123)(46,500)(91,923)(4,016,493)

FY2006 (April 1, 2005
to March 31, 2006)
Category

Note
No.

Amount(thousands of yen)

II Cash flow from investing activities
Payments for time deposits
Proceeds from time deposits
Acquisition of shares of consolidated
subsidiaries
Acquisition of tangible fixed assets
Proceeds from sale of tangible fixed
assetsAcquisition of intangible fixed assets
Purchases of investment in securities
Proceeds from sale of investment insecurities
Acquisition of shares of relatedcompanies
Proceeds from sale of related companies
Proceeds from sale of subsidiary's shareswith changes in the scope of
consolidation
Long-term prepaid expenses paid
Loans payable
Proceeds from return of loans
Payments for guarantee money
deposited
Proceeds from collection of guaranteemoney deposited
Other investments (net)Cash flow from investing activities
III Cash flow from financial activities
Proceeds from short-term loans
Repayments of short-term loans
Proceeds from bond issued
Payments for redemption of bonds
Proceeds from long-term loans
Repayments for long-term loans
Proceeds from sale of treasury stock
Acquisition of treasury stock
Payments for dividends by parent
company
Payments for dividends to minority
shareholders
Cash flow from financing activities
IV Effect of exchange rate changes on cash
and cash equivalents
V Change in cash and cash equivalents
VI Cash and cash equivalents at beginning of
the fiscal year
VII Cash and cash equivalents at end of the
fiscal year

19

FY2007 (April 1,
2006 to March 31,
2007)
Amount(thousands of yen)

YoY (%)
Change(thousands of yen)

(378,500)
399,000(396,000)
300,000(17,500)(99,000)(20,000)(7,000)13,000(7,796,518)(1,340,623)

6,455,895

58,593160,977

102,384(250,691)-(132,451)(300,000)

118,240(300,000)

874,633

305,000(569,633)(260,500)-

260,500

250,005-(250,005)

434,841-(434,841)(94,749)(232,942)
1,659,152(47,022)(61,400)
173,355

47,727
171,542(1,485,797)(319,504)(210,196)

109,307237,671423,594

185,923(99,005)(5,538,514)

41,359(1,090,406)

140,364
4,448,108

184,150,000(175,804,000)
42,109(84,149)
2,107(142,025)

170,540,000(183,201,000)
11,000,000(1,904,000)
15,689(57,909)808(6,370)(13,610,000)(7,397,000)
11,000,000(1,904,000)(26,419)
26,240(1,299)135,655(776,050)(769,594)

6,456(2,400)(4,500)(2,100)7,385,590(4,386,876)(11,772,467)

0

(1)

(1)

8,519,895(2,820,958)(11,340,854)

3,871,610

12,391,506

8,519,895

12,391,506

9,570,547(2,820,958)