Individual Financial Statements for the Year Ended March 2006
May 23, 2006
Name of listed company: Nichii Gakkan Company
Company code number: 9792
(URL: http://www.nichiigakkan.co.jp)
Exchange where listed: Tokyo Stock Exchange
Location of headquarters: Tokyo
Representative
Title: President and Representative Director
Name: Takashi Mori
Contact
Title: Director, Vice President of Accounting Division and General Manager of Accounting Department
Name: Koichi Terada
Telephone: 03-3291-2121
Date of convening of the board of directors for financial settlement: May 23, 2006
Midterm dividend system: Adopted
Scheduled starting date to pay dividends: June 29, 2006
Date of convening of the ordinary general meeting of shareholders: June 28, 2006
Unit stock system: Adopted (100 shares per unit)

1. Results for the year ended March 2006 (April 1, 2005 - March 31, 2006)(1) Results
Year ended Mar. 31, 2006
Year ended Mar. 31, 2005

Net Sales
Millions of yen
197,635
190,638

Operating Income
Millions of yen
4,956
6,188

%
3.7
5.6

Notes:

Millions of yen
△978
3,407

%
△55.9

1. Average number of shares during the term

Year ended 31st March, 2006:
Year ended 31st March, 2005:

%
△18.4
△53.2

Ordinary
Income toSales

Net Income Per Share
Ordinary
Return on
after Adjusting forIncome toEquityLatent Shares
Gross Capital
Yen
Yen
%
%
△28.81
△2.0
6.1
94.93
6.9
8.2

Net Income
Per Share

Net Income

Year ended Mar. 31, 2006
Year ended Mar. 31, 2005

Ordinary Income
Millions of yen
5,257
6,438

%
△19.9
△54.2

%
2.7
3.4

35,234,670 shares
35,514,999 shares

2. Changes in the method of accounting: Included
3. Percentages indicated for sales, operating income, ordinary income, and net income are increases (decreases) compared to the same period of the preceding fiscal year.

(2) Dividend situation
Annual Dividend Per Share
Yen

Midterm
Yen

Year ended Mar. 31, 2006

22.00

0.00

Year ended Mar. 31, 2005

22.00

0.00

Note:

Year-end
Yen
22.00

Detailed dividends for the year ended March 2006

Total Dividends(Yearly)

Dividend
Payout Ratio

Dividend on
EquityMillions of yen

%

%

774

-

1.6

776

23.2

1.5

22.00
Memorial dividend:
Bonus dividend:

- Yen
- Yen

(3) Financial position
Total Assets
Year ended Mar. 31, 2006

Millions of yen
92,66680,204

Year ended Mar. 31, 2005
Note:
1. Number of outstanding shares at the end of the term

2. Number of treasury stock shares at the end of the term

2.

Shareholders' Equity

Shareholders' Equity
Per Share
Yen
1,371.63
1,427.35

Equity Ratio

Millions of yen
48,35050,385

%
52.2
62.8

Year ended 31st March, 2006:
Year ended 31st March, 2005:
Year ended 31st March, 2006:
Year ended 31st March, 2005:

35,224,427 shares
35,275,043 shares
1,284,549 shares
1,233,933 shares

Projected results for the Year ending 31st March, 2007 (April 1, 2006 - March 31, 2007)
Annual Dividend Per ShareNet Sales

Ordinary Income

Net Income

Midterm

Millions of yen
Millions of yen
Millions of yen
6 months ending
102,700
2,000
900
Sep. 30, 2006
Year ending
208,000
5,600
2,900
Mar. 31, 2007
Supplementary information
Projected net income per share for the fiscal year: ¥82.33
Note:Year-end
Yen
0.00

-

Yen
-

22.00

Fractions of one million yen are rounded off. The above projections are based on information available as of time of this announcement.
due to various factors. Refer to page 9 of the Attachment for details on the projections.

1

Yen

22.00

Actual results may differ

6. Individual Financial Statements(1) Balance Sheets
Year ended March 31, 2005

Year ended March 31, 2006

(As of March 31, 2005)
Category

Year on year

(As of March 31, 2006)

Note

AmountShareAmountShare

Increase/Decrease

No.

(thousands of yen)(%)(thousands of yen)(%)(thousands of yen)

ASSETSI.

Current assets
1. Cash and deposits

1,657,621

10,691,827

9,034,206

9,679

5,140

△4,538

3. Accounts receivable

22,955,537

24,151,666

1,196,129

4. Merchandise

3,738,790

1,319,066△2,419,724

247,110

188,120△58,990

1,915

1,534

△381

2,059

1,135

△923

2. Notes

5. Teaching materials
6. Prepaid expenses for
operations in progress
7. Prepaid expenses forconstructions in progress
8. Inventory goods

192,120

207,465

15,344

9. Prepaid expenses

1,048,326

1,288,565

240,238

10. Deferred tax assets

1,783,725

2,850,245

1,066,520

57,00072,00015,0001,455,977

1,263,639△192,337

11. Short-term loans receivableof related company
12. Accounts due
13. Other current assets

549,849

139,280△410,569

14. Allowance for△52,706△113,289△60,582

doubtful accounts
Total current assets
II.

33,647,007

42.0

42,066,398

45.4

8,419,391

Fixed assets(1) Tangible fixed assets
1. Buildings*2

Accumulated depreciation
2. Structures

4,266,048*2

Accumulated depreciation

Accumulated depreciation

74,963

1,026,760

16,787*2

35,907

5,577,984

477,091

1,429,105

402,345

81,73336,168

260

815

△549

487,601

22,552

11,9081,365

1,435,930
970,881

23,078,848

117,901

18,152

Accumulated depreciation

5,348,443
1,906,197

110,871

4. Automotive equipment

Accumulated depreciation

28,427,292
17,500,864

1,382,282
355,522

3. Machinery and devices

5.Fittings

21,766,912

11,093
1,532,999

465,0482

1,045,397

Year ended March 31, 2005

Year ended March 31, 2006

(As of March 31, 2005)
Category

Year on year

(As of March 31, 2006)

Note

AmountShareAmountShare

Increase/Decrease

No.

(thousands of yen)(%)(thousands of yen)(%)(thousands of yen)

6. Land7,801,862

7,662,995△138,866

7. Construction in progress

1,235,972

2,040,667

804,695

Total tangible fixed assets

28,067,780

35.0

34,736,202

37.5

6,668,422(2) Intangible fixed assets
1. Software
2. Rights of telephone
subscription
3. Rights to use facilities
4. Rights of trademarks

594,476879,631

285,154

78,03478,034-70,843

109,359

38,515871

Total intangible fixed assets

744,225

△547

324
0.9

1,067,348

1.1

323,122(3) Investments and other assets
1. Investment securities

1,390,998

893,442△497,556

2. Shares of related company

4,760,888

3,173,916△1,586,972

3. Bonds of related company

125,000-△125,000

4. Investment

2,024

2,000

△24

5. Investment in affiliates

20,00020,000-

6. Long-term loans receivable

79,102

152,91073,808

320

470

150

4,450,360

453,000△3,997,360

65,706

3,192,465

3,126,758

7. Long-term loans receivable for
employees
8. Long-term loans receivable foraffiliates
9. Bankruptcy claim, etc*4

10. Long-term prepaid expenses

93,476

141,80948,333

11. Deferred tax assets

963,1073,269,507

2,306,399

527,813△32,469

12. Leasing assets

777,602

Accumulated depreciation

217,319

13. Guarantee money deposited

777,602560,283

249,789

4,754,296

4,849,483

95,187

14. Insurance reserve

510,895

609,61298,717

15. Club membership

39,01039,000△10△69,783△2,528,685△2,458,901

16. Allowance for doubtful
accounts*4
17,745,686

22.1

14,796,746

16.0△2,948,940

Total fixed assets

46,557,692

58.0

50,600,297

54.6

4,042,605

Total Assets

80,204,699

100.0

92,666,696

100.0

12,461,996

Other investments and assets3Year ended March 31, 2005

Year ended March 31, 2006

(As of March 31, 2005)
Category

Year on year

(As of March 31, 2006)

Note

AmountShare

Increase/Decrease

Share

Increase/Decrease

No.

(thousands of yen)(%)(thousands of yen)(%)(thousands of yen)

LIABILITIES
I. Current liabilities
1. Accounts payable
2. Short-term loans payable
3. Payment due
4. Accrued expenses
5. Income taxes payable
6. Consumption taxes payable*4948,593

1,230,455

281,862

4,002,000

12,358,000

8,356,000

5,454,374

2,854,510△2,599,863

11,496,209

15,213,763

3,717,553

544,683

1,981,924

1,437,240-

1,721,800

1,721,800

7. Advance received

1,299,597

1,141,903△157,693

8. Deposit received

323,128

586,632

263,504

3,219,130

3,431,969

212,839-

903,000

903,000

9. Allowance for employee
bonuses
10. Allowance for loss inliquidation of related company
Total current liabilities

27,287,717

34.0

41,423,959

44.7

14,136,242

II. Long-term liabilities
1. Allowance for employee
retirement benefits
2. Allowance for directors' andauditors' retirement benefits
3. Deposit received forguarantees

2,354,084

2,707,603

353,518

123,181

124,529

1,347

53,777

59,827

6,050

Total long-term liabilities

2,531,044

3.2

2,891,960

3.1

360,915

Total liabilities

29,818,761

37.2

44,315,919

47.8

14,497,158

4

Year ended March 31, 2005

Year ended March 31, 2006

(As of March 31, 2005)
Category

Year on year

(As of March 31, 2006)

Note

AmountShareAmountShare

Increase/Decrease

No.

(thousands of yen)(%)(thousands of yen)(%)(thousands of yen)

SHAREHOLDERS’ EQUITY
I. Common stock

11,933,790

14.9

15,262,748

19.0

11,933,790

12.9

-

15,262,748

16.5

-

II. Capital surplus(1) Capital reserve

15,262,748

Total capital surplus

15,262,748

III. Retained earnings(1) Earned reserve364,928

364,928

23,802,345

25,802,345

4,631,887

839,562(2) Voluntary reserve
1. Contingent reserve(3) Unappropriated retained
earnings for the current year

28,799,160

35.9

27,006,835

29.1△1,792,325

181,872

0.2

77,6280.1△104,243

V. Treasury stock△5,791,633△7.2△5,930,226△6.4△138,592

Total shareholders' equity

50,385,937

62.8

48,350,776

52.2△2,035,161

80,204,699

100.0

100.0

12,461,996

Total retained earnings
IV. Gain or loss from revaluation
marketable securities

Total liabilities andshareholders' equity

5

92,666,696

(2)Statements of Income
Year ended March 31, 2005

Year ended March 31, 2006

(Apr. 1, 2004 through Mar. 31, 2005)
Category

Year on year

(Apr. 1, 2005 through Mar. 31, 2006)

Note

AmountShareAmountShare

Increase/Decrease

No.

(thousands of yen)(%)(thousands of yen)(%)(thousands of yen)

I. Net sales on
1. Medical support

104,314,663

107,694,743

2. Health care

70,875,348

76,341,560

3. Education

15,448,775

190,638,787

100.0

13,599,349

197,635,653

100.0

6,996,865

158,535,604

80.2

5,367,908

39,100,049

19.8

1,628,957

34,143,218

17.3

2,860,727

4,956,830

2.5△1,231,769

II. Cost of sales on
1. Medical support

87,971,499

88,754,633

2. Health care

58,080,693

63,182,649

3. Education

7,115,503

Gross profit

153,167,696

80.3

37,471,091

19.7

6,598,321

III. Selling, general and administrative
expenses
1. Advertising and promotion

4,586,465

5,326,303

84,073

102,660

expenses
2. Directors' compensation
3. Salaries and benefits

11,831,967

12,573,014

4. Transfer to allowance for bonuses

730,957

796,586

5. Directors' and auditors' retirement

874

320

7,523

7,034

benefits
6. Allowance for directors' andauditors' retirement benefits
7. Employee retirement benefits
8. Legal welfare expenses
9. Welfare expense

380,124

409,764

1,649,607

1,838,188

318,635

406,407

1,288,013

1,388,215

11. Tax and dues

1,487,082

1,686,058

12. Rent

2,703,723

3,050,523

254,793

219,145

10. Travel and transportation
expenses

13. Printing cost
14. Outsourcing expenses
15. Commission paid
16. Transfer to allowance for427,341

350,748

1,548,167

1,760,392

85,60090,146329,100

627,667

8,379-

doubtful accounts
17. Depreciation expenses
18. Bad debt loss
19. Other selling, general and

3,560,059

31,282,491

16.4

6,188,600

3.3

3,510,040

administrative expenses
Operating income

6CategoryYear ended March 31, 2005

Year ended March 31, 2006

(Apr. 1, 2004 through Mar. 31, 2005)(Apr. 1, 2005 through Mar. 31, 2006)

Year on year

Note

AmountShareAmountShare

Increase/Decrease

No.

(thousands of yen)(%)(thousands of yen)(%)(thousands of yen)

*1

41,666

38,7793,442

620

114,938

120,358

IV. Non-operating income
1. Interest income
2. Interest on securities
3. Dividend income*1

4. Commission on consignment for

77,80991,952

office work
5. Income from lease of fixed assets*3

6. Miscellaneous income

38,28776,46337,805352,608

0.2

81,318370,835

0.2

18,226

V. Non-operating expenses
1. Interest expenses

34,12549,555

2. Compensation for damages

42,546

11,059

3. Loss on disengagement of

20,784854

guarantee money deposited
4. Casualty loss

5,057

Ordinary income

102,5140.1

6,438,694

3.4

9,017

70,4870.0△32,026

5,257,178

2.7△1,181,516

968,8420.5

964,861

VI. Extraordinary income
1. Gain on sale of fixed assets
2. Gain on sale of investment in

*2

-

4

3,981

552,837

securities
3. Gain on sale of shares of related

-

3,981

company7

0.0

416,001

Year ended March 31, 2005

Year ended March 31, 2006

(Apr. 1, 2004 through Mar. 31, 2005)
Category

Year on year

(Apr. 1, 2005 through Mar. 31, 2006)

Note

AmountShareAmountShare

Increase/Decrease

No.

(thousands of yen)(%)(thousands of yen)(%)(thousands of yen)VII. Extraordinary losses
1. Loss on retirement of*2

fixed assets
2. Loss on sale of fixed assets*2

3. Loss on revaluation ofmembership
4. Loss on closedown of offices
5. Loss on revaluation of

66,301

68,977

93,67635,6534,849

10112,048

7,552-

2,422,614

inventories
6. Loss on revaluation of shares of-

1,433,466

related company
7. Loss on impairment
8. Transfer to allowance for*4-

131,098-

doubtful accounts of

2,455,000

related company
9. Allowance for loss in liquidation-

276,876

0.2

6,165,799

3.2

903,000

7,457,372

3.8

7,180,495△1,231,351△0.6△7,397,150△252,402△0.1△3,010,765△978,948△0.5△4,386,385

of related company
Income or Loss before income taxes
Income, inhabitants and business taxes

2,924,000

Adjustments for income△165,637

3,049,000
2,758,362

1.4

Net income or loss

3,407,436

1.8

Unappropriated retained earnings

1,226,022△3,301,402

and other taxes

1,819,836

593,813brought forward
Loss on liquidation of treasury stock
Unappropriated retained earnings for

1,571

1,325

△246

4,631,887

839,562△3,792,325

the current year8(3) Proposed Profit Distribution

Category

Year ended March 31, 2005

Year ended March 31, 2006

(Apr. 1, 2004 through Mar. 31, 2005)(Apr. 1, 2005 through Mar. 31, 2006)

Note

AmountShareAmountShare

Increase/Decrease

No.

(thousands of yen)(%)(thousands of yen)(%)(thousands of yen)

I. Unappropriated retained earnings

4,631,887

for the current year
II. Reversal of contingent reserve

Year on year

-

Total

-

839,562
1,000,000

4,631,887△3,792,325

1,000,000

1,000,000

1,839,562△2,792,325

810,937△2,001,113

1,028,624△791,211

III. Amount of profit distribution
1. Dividends

776,050

2. Bonuses for directors and

36,000774,937
36,000auditors(Auditors' bonuses included)
3. Contingent reserve
IV. Retained earnings carried forward(3,500)2,000,000(3,500)2,812,050
1,819,836

9-

Significant Accounting Policies
Item
1. Valuation standard andmethod for Securities

2. Valuation standard andmethod for Inventories

3. Depreciation method for
fixed assets

Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)(1) Subsidiary’s and affiliate’s shares
Stated at a cost determined using the moving
average method(2) Other Securities
Securities with available fair market values
Stated at fair market value based on the quoted
market price as of the end of the interim
consolidated accounting period. The related
valuation differences 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 arestated at a cost determined using the moving
average method.
(1) MerchandiseStated at a cost determined using the moving
average method(2) Teaching materials
Stated at a cost determined using the moving
average method(3) Prepaid expenses for operations in progressStated at a cost determined using the specific cost
method(4) Prepaid expenses for construction in progressStated at a cost determined using the specific cost
method(5) Inventory goods
Stated at a cost determined using the last-cost
methodTangible fixed assets…..Declining balance method
However, buildings (except for building
attachments) and day care facilities’ building
attachments, structures and fittings acquired on
and after April 1, 1998 are depreciated using thestraight-line method.
The range of useful lives is as follows:
Buildings: 15 to 50 years
Structures:10 to 20 years
Fittings: 3 to 6 years
Intangible fixed assets…..Straight-line method
Software for internal use is amortized using thestraight-line method over the expected available
period (5 years).
Long-term prepaid expenses…..Straight-line method

10Year ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)(1) Subsidiary’s and affiliate’s shares
Same as on the left
(2) Other Securities
Securities with available fair market values
Same as on the left

(1) MerchandiseSame as on the left
(2) Teaching materials
Same as on the left
(3) Prepaid expenses for operations in progress
Same as on the left
(4) Prepaid expenses for construction in progress
Same as on the left
(5) Inventory goods
Same as on the left
Same as on the left

Same as on the left

Same as on the left

Item
4. Accounting forallowances and reserves

5. Accounting for income
and expenses

6. Accounting for leases

7. Other basic andsignificant issues forpresenting financial
statements

Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)(1) Allowance for doubtful accounts
In the case of bad debt loss for accounts
receivable, general allowances are provided usinga rate determined by past bad debt experience forgeneral accounts, and also specific allowances areprovided in the estimated amounts considered to
be uncollectible after reviewing certain doubtful
accounts.

Year ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)(1) Allowance for doubtful accounts
Same as on the left

(2) 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.

(2) Allowance for employee bonuses
Same as on the left

(3) Allowance for employee retirement benefits
To provide for employees’ retirement benefits, areserve for retirement benefits is recorded basedon the projected retirement benefit obligations andrelated plan assets as of the current fiscal year end.
Actuarial differences are to be charged to income
from the following fiscal year based ondetermined years; 5 years for regular and junioremployees and managing service staff, and 4 years
for non-managing service staff.
(4) Allowance for directors' and auditors' retirement
benefits
To provide for benefits for retired directors andauditors, the reserve for retirement benefits isrecorded for the necessary payment amount as ofthe end of the accounting period based on internal
regulations.

(3) Allowance for employee retirement benefits
Same as on the left

(1) Sales on medical support
Sales of contracting services such as medical fee
claims are recorded for the services that havebeen completed. For other medical practiceservices, the sales of services provided during thecurrent fiscal year are recorded.
(2) Sales on education
Sales of training fees are recorded according to
the duration of the training.
Finance lease transactions, other than those that are
deemed to transfer the ownership of the leased assets
to lessees, are accounted for using the method that is
applicable to ordinary operating leases.
(1) Accounting for consumption taxes
National and local consumption taxes areaccounted for based on the tax exclusion method.
Nondeductible consumption taxes are treated as
selling, general and administrative expenses.

11(4) Allowance for directors' and auditors' retirement
benefits
Same as on the left

(5) Allowance for loss in liquidation of relatedcompany
To provide for possible losses incurred byliquidating related companies, necessary amountis recorded.
(1) Sales on medical support
Same as on the left

(2) Sales on education
Same as on the left
Same as on the left

(1) Accounting for consumption taxes
Same as on the left

Changes in Accounting Method
Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)______

Year ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)(Accounting Standard for Impairment of Fixed Assets )From the current accounting period, we adopted the new
accounting standard for impairment loss on fixed assets (“Opinion
Concerning Establishment of Accounting Standard for Impairmentof Fixed Assets” issued by the Business Accounting Deliberation
Council on August 9, 2002) and the implementation guidance forthe accounting standard for impairment of fixed assets (TheFinancial Accounting Standard Implementation Guidance No. 6
issued on October 31, 2003). This resulted in a ¥131,098
thousand increase in loss before income taxes for the current
accounting period.
The accumulated impairment loss on fixed assets is deducted
directly from the amount of each asset, based on the revised rules
for financial statements.

Changes in Listing Method
Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)"Accounts due" included in and listed as "Other current assets" ofcurrent assets in the previous fiscal year is categorized separately
for this fiscal year because it has exceeded a hundredth of the total
assets. The "accounts due" at the end of the previous term is705,588 thousand yen.

Year ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)______

Additional Information
Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)
Along with publication of practical application report No. 12“Practical handling of listing dual corporate tax system containedin corporate enterprise tax for calculation of profits and losses”(issued by the Accounting Standards Board of Japan on February
13, 2004), the value added and equity portion (525,000 thousandyen) of corporate enterprise tax is treated as selling, general andadministrative expenses according to the practical application
report from the current consolidated fiscal year.
As a result, the selling, general and administrative expenses wereincreased by 525,000 thousand yen, and the operating income,ordinary income and income before income taxes were decreasedby the same amount.

Year ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)______

12

Notes on Balance Sheets
Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)*1. Total number of shares issued by the Company
Common stock: 110,000 thousands shares
Total number of outstanding shares
Common stock: 36,508 thousands sharesYear ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)*1. Total number of shares issued by the Company
Common stock: 110,000 thousands shares
Total number of outstanding shares
Common stock: 36,508 thousands shares*2. Due to the receipt of governmental subsidies related to tangible
fixed assets, accumulated advanced depreciation amounts to
145,680 for buildings, 2,557 for structures, 15,238 for fittings,
and 163,476 in total (thousands of yen).

*2. In the current fiscal year, due to the receipt of governmental
subsidies, advanced depreciation was undertaken for buildings(13,332 thousand yen) and for fittings (3,617 thousand yen).
Due to the receipt of governmental subsidies related to tangible
fixed assets, accumulated advanced depreciation amounts to
159,012 for buildings, 2,557 for structures, 18,856 for fittings,
and 180,426 in total (thousands of yen).

3. Overdraft contract
The company has an overdraft contract and credit
commitments from seven banks in order to perform efficientfinancing. Based on these contracts, total unused credit
available at the end of this fiscal year was as follows:

3. Overdraft contract
The company has an overdraft contract and credit
commitments from seven banks in order to perform efficientfinancing. Based on these contracts, total unused credit
available at the end of this fiscal year was as follows:

Total credit available and credit commitments
Total credit used
Balance.

(Thousands of yen)
43,875,000
4,002,000

Total credit available and credit commitments
Total credit used

39,873,000

Balance(Thousands of yen)
36,668,000
12,346,000
24,322,000*4. Notes on related companies
Items related to businesses with related companies are included
as follows:(Thousands of yen)
Unpaid3,740,500
The Unpaid at the end of previous term is 354,956 thousandyen.

*4. Notes on related companies
Items related to businesses with related companies are included
as follows:(Thousands of yen)
Bankruptcy claims, etc:
3,131,277
Allowance for doubtful accounts:
2,468,073*5. Amount of treasury stock possessed by us
Common stock*5. Amount of treasury stock possessed by us
Common stock

1,233,933 shares*6. Limitation on dividend
The amount of net assets increased by adding market values tothe assets defined in the Article 124, No. 3 of the Commercial
Law Enforcement Regulations is 181,872 thousand yen.

1,284,549 shares*6. Limitation on dividend
The amount of net assets increased by adding market values tothe assets defined in the Article 124, No. 3 of theCommercial
Law Enforcement Regulations is 77,628 thousand yen.

13

Notes on Statement of Income
Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)*1. Notes on related companies
Items related to businesses with related companies are included
as follows: (thousands of yen)Interest income: 40,386
Dividend income: 87,600

Year ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)*1. Notes on related companies
Items related to businesses with related companies are included
as follows: (thousands of yen)Interest income: 36,406
Dividend income: 93,500*2. Losses on sales of fixed assets and losses on retirement of
fixed assets are itemized as follows:*2. Gains on sales of fixed assets, losses on sales of fixed assets,
and losses on retirement of fixed assets are itemized as follows:

Losses on sales of fixed assets
Buildings
Structures
Machinery and Devices
Fittings
Total(Thousands of yen)
67,729.
2,113. 3,934.
19,898.. 93,676

Losses on retirement of fixed assets
Buildings.
Structures
Automotive equipment
Fittings
Software
Total(Thousands of yen)
44,8592,933..
328
16,678..
1,500. 66,301

Gains on sales of fixed assets
Buildings
Fittings
Total(Thousands of yen)
. 3
1
4

Losses on sales of fixed assets
Land(Thousands of yen)
35,653Losses on retirement of fixed assets (Thousands of yen)
Buildings..
58,025Structures
...
3,318
Machinery142
Automotive equipment
312
Fittings
7,177
Total
68,977*3. Income from lease of fixed assets listed is offset by the
expenses related to leasing. Leasing expenses are itemized asfollows: (thousands of yen)
Allowance for depreciation/16,775
Tax and dues
8,931
Total
. 25,706*3. Income from lease of fixed assets listed is offset by the
expenses related to leasing. Leasing expenses are itemized asfollows: (thousands of yen)
Allowance for depreciation.32,469
Tax and dues
6,768
Total
.39,238*4. Impairment losses*4. Impairment losses
The group recorded the following impairment losses in the current
accounting period.

______

Location

Use

Category

Kitakanto
Sterilization
Center(Kawasato-mura,
Kitasaitama-gun,
Saitama)

Sterilization
facility

Buildings

Amount(Thousands of yen)
78,766Structures

1,203

Fittings

5,035

Land

44,813Long-term
prepaid
expenses
Others100

1,179

The group categorizes assets and applies asset-impairment
accounting based on the smallest business units that generatecash flow independently.
The headquarters and properties such as training facilities arerecognized as shared assets, as they do not generate cash
flow by themselves.
The above-listed assets scheduled for sale have beenaccounted for as impaired assets, and the carrying amount
was reduced to a recoverable value. Recoverable value ismeasured using net sale value. The calculation is based on
the remaining balance of appraised value by a real estateappraiser after deducting estimated disposal cost.

14

① Lease Transactions
Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)
1. Finance lease transactions other than those that are deemed totransfer the ownership of the leased assets to lesseesYear ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)
1. Finance lease transactions other than those that are deemed totransfer the ownership of the leased assets to lessees(1) Acquisition cost, accumulated depreciation and period endingbalance of leased assets(Thousands of yen)

(2) Acquisition cost, accumulated depreciation and period endingbalance of leased assets(Thousands of yen)

Acquisition cost
Machinery anddevices
Automotive
equipment
Fittings
SoftwareTotal

24,474

Accumulated
depreciation

Period endingbalance

1,998

Acquisition cost
Buildings
Machinery anddevices
Automotive
equipment
Fittings
SoftwareTotal

22,4752,363,175

1,689,522

673,652

11,956,587
2,562,976
16,907,213

5,982,467
1,268,629
8,942,617

5,974,120
1,294,347
7,964,596

16,172

Accumulated
depreciation
3,520

Period endingbalance
12,652

199,637

26,021

173,615

1,774,678

1,187,024

587,654

11,903,336
2,455,620
16,349,445

6,056,986
1,603,117
8,876,670

5,846,349
852,5037,472,775

(2)

(2)

(3)

(3)

(4)

Accounting method for depreciation expenses
Calculated by assuming the lease term is the depreciable lifeand depreciating the remaining amount to zero using thestraight-line method.
(5) Accounting method for interest expenses
Interest expenses for leased assets are calculated as thedifference between the total lease payments and the acquisition
price of the leased assets, and the amount is allocated to eachaccounting period using the interest method.

(4)

Accounting method for depreciation expenses
Same as on the left

(5)

Accounting method for interest expenses
Same as on the left

2. Operating lease transactions
Future lease payments

2. Operating lease transactions
Future lease payments

Outstanding balance of future lease payments at the end of theperiod(Thousands of yen)
Within one year
. 3,458,348
Over one year
4,802,407
Total
8,260,756
Lease fee payments, depreciation expenses and interest
expenses(Thousands of yen)
Lease fee payments
4,635,164
Depreciation expenses
4,169,210
Interest expenses.. 366,675

Within one year
Over one year
Total

Outstanding balance of future lease payments at the end of theperiod(Thousands of yen)
Within one year
3,000,272
Over one year.
4,717,034
Total.
.. 7,717,306

Lease fee payments, depreciation expenses and interest
expenses(Thousands of yen)
Lease fee payments
4,248,893
Depreciation expenses
3,826,141
Interest expenses.
343,602(Thousands of yen)
25,804.. 79,896. 105,700

Within one year
Over one year
Total

(Thousands of yen)
25,804.. 54,091.. 79,896② Marketable Securities
In the previous fiscal year (Apr. 1, 2004 through Mar. 31, 2005) and the current fiscal year (Apr. 1, 2005 through Mar. 31, 2006) stocks
of subsidiary and related companies have no market value.

15

③Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)

Year ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)

1. Breakdown by cause of deferred tax assets and liabilities（Thousands of Yen）
Deferred tax assets
Accrued business tax.217,301
Allowance for employee bonuses. 1,309,863
Accrued expenses/
165,082
Lump depreciation assets.
36,127
Allowance for doubtful accounts/
35,924
Allowance for employee retirement benefits// 930,028
Allowance for directors’ and auditors’ retirement benefits..50,122
Loss on revaluation of golf club membership/.27,293
Others// 99,863
Sub total of differed tax assets/.2,871,607
Total differed tax liabilities
Gain or loss from revaluation of marketable securities /// 124,774
Total differed tax liabilities//. 124,774
Net differed tax assets. 2,746,833

1. Breakdown by cause of deferred tax assets and liabilities(Thousands of Yen)
Deferred tax assets
Accrued business tax. 249,007
Allowance for employee bonuses.1,396,468
Accrued expenses... 175,022
Lump depreciation assets.
45,613
Allowance for doubtful accounts
1,056,515
Allowance for employee retirement benefits
1,101,723
Allowance for directors’ and auditors’ retirement benefits..50,671
Loss on revaluation of golf club membership..27,704
Loss on revaluation of shares of related companies . 572,090
Loss on revaluation of merchandise/
985,028
Allowance for loss on liquidation of related companies .. 367,430
Loss on impairment
52,863
Others110,241
Sub total of differed tax assets.
6,190,381
Valuation reserve...
△17,371
Total differed tax assets
Total differed tax liabilities..6,173,010
Gain or loss from revaluation of marketable securities ..… 53,257
Total differed tax liabilities...
53,257
Net differed tax assets
6,119,752

2. Breakdown by cause of material difference between the statutory
income tax rate and the effective income tax rate after the adoptionof tax-effect accounting(%)
Statutory income tax rate
(Reconciliation items)
40.69
Exclusion of entertainment cost from expenses
0.45
Exclusion of dividend income from gross revenues △0.59
Inhabitants tax on per capita basis.. ・・・4.29
Others
・・ △0.10
Effective income tax rate after the adoption of tax-effectaccounting/ 44.74

2. Breakdown by cause of material difference between the statutory
income tax rate and the effective income tax rate after the adoptionof tax-effect accounting
Causes of material difference between the statutory income tax
rate and the effective income tax rate after the adoption oftax-effect accounting are not shown because the loss before
income taxes is recorded.

16Per Share Information
Year ended March 31, 2005
(Apr. 1, 2004 through Mar. 31, 2005)
Net assets per share.
1,427.35 yen
Net income per share
94.93 yen

Year ended March 31, 2006
(Apr. 1, 2005 through Mar. 31, 2006)
Net assets per share.
1,371.63 yen
Net income per share
28.81 yen

Diluted net income per share is not presented because there wereno potential stocks with dilutive effect.

Diluted net income per share is not presented because of a net loss
per share.

(Note) Shown below is the basis for calculation of net income per share and diluted income per share.

Year ended March 31, 2005

Year ended March 31, 2006

(Apr. 1, 2004 through Mar. 31, 2005)(Apr. 1, 2005 through Mar. 31, 2006)

3,407,436
36,000(36,000)
3,371,436△978,948

36,000(36,000)△1,014,948

35,51435,234--

Net income per share
Net income or Net loss (△) (thousands of yen)Amount not attributable to common stockholders (thousands of yen)
(Directors’ bonuses through profit distribution included)
Net income or Net loss relating to common stock (△) (thousands ofyen)

Average number of shares during the period (thousands of share)
Net income per share – diluted
Dilution of net income (thousands of yen)
Increase in amount of common stock (thousands of share)(Warrants included)
Outline of stock not included in diluted net income per share 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 29,
2000: 157,300(2) Warrants
Number of shares for the
warrants based on the
resolution of the ordinary
general meeting ofshareholders held on June 28,
2001: 207,408(3) Warrants
Number of shares for the
warrants based on the
resolution of the ordinary
general meeting ofshareholders held on June 27,
2003: 2,250

17(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

(Important Subsequent Events)
Liquidation of subsidiaries
At the board meeting held on April 28, 2006, we decided to liquidate the following subsidiaries:
1. BackgroundTo expand our corporate value in the severe business environment, we are advancing our business growth strategy, primarily
concentrating on “Strengthening Core Business and Approaches to New Business and Services” and structural reforms such as
restructuring of group companies.
As the new fiscal year started in April 2006, aiming to implement major system reform in both medical and long-term care fields, wehave reexamined the profitability and possibilities of our subsidiaries. We also have comprehensively reviewed the settlement ofaccounts in the business year ending March, 2006, and considered the necessity of restructuring the group companies further.
Consequently, although we have strived to restructure the business of the following two falling subsidiaries (Power Bank Co., Ltd. And
Nihon Dental Service Co.,Ltd.), we deemed that a long-term period would be required to restructure these businesses, and so we
decided to liquidate the two subsidiaries.
2. Summary of Subsidiaries to be Liquidated(1) Corporate namePower Bank Co., Ltd.
Nihon Dental Service Co.,Ltd.
(2) Headquarter location Marunouchi, Chiyoda-ku, Tokyo
Kanda Surugadai, Chiyoda-ku, Tokyo(3) Representative
Nobusuke Mori.
Naoki Masuda(4) Business
Manpower service. Business consulting for medical institutions(5) Establishment
December, 1997
. April, 2000
(6) Capital stock
0.8 billion (100% invested by us).. 0.1 billion (70% invested by us)(7) Liquidation schedule Business suspended in May, 2006.. Business suspended at the end of September, 2006
Dissolution decided for September, 2006 Dissolution decided for October, 2006
Liquidation completed in December, 2006 Liquidation completed in December, 2006
3. Accounting Procedures for the Current Period
In accordance with the decision to liquidate subsidiaries, a ¥4,742 million extraordinary loss was recorded for this fiscal year (for PowerBank Co., Ltd., Losses on revaluation of shares of related companies of ¥1,314 million and Transfer to allowance for loss in liquidationof related companies of ¥903 million; for Nihon Dental Service Co., Ltd, Transfer to allowance for doubtful accounts of relatedcompanies of ¥2,455 million and Losses on revaluation of shares of related companies of ¥69 million).

7. Changes in Management (slated for June 28, 2006)
1. Changes in Representatives
There is no relevant information.
2. Changes in other directors(1) Candidates for incoming directors
There is no relevant information.
(2) Directors to resign
There is no relevant information.

18