october 13, 2005 aderans co., ltd.pdf.irpocket.com/c8170/kzoo/r52z/dh9x.pdf · 2013-05-08 ·...

Consolidated

(Unaudited) 1

October 13, 2005 ADERANS CO., LTD.

Consolidated Semiannual Financial Statements (Unaudited) for the Six Months Ended August 31, 2005

(Translated from the Japanese original) Corporate information Code: 8170 Listing: Tokyo Stock Exchange, Osaka Securities Exchanges (URL http://aderans.co.jp) Head Office: Metropolis of Tokyo Representative: Katsuji Tokumaru President and Representative Director Contact: Michiyoshi Takahashi General Manager, Investor Relations Div. Telephone: 81-3-3350-3268 Date of Board Meeting for Settlement of Accounts: October 13, 2005 Applicability of U.S. GAAP: Not applicable 1. Consolidated Results for the Six Months Ended August 31, 2005 (from March 1, 2005 to August 31, 2005) (1) Consolidated operating results Millions of yen (amounts rounded down) Net Sales

(YOY % change) Operating income (YOY % change)

Recurring Profit (YOY % change)

August 31, 2005 August 31, 2004

(%) 35,425 （1.8) 34,793 (-7.0)

(%) 4,014 (3.9) 3,862 (-26.1)

(%) 4,445 (8.6) 4,094 (-22.6)

Fiscal 2005 70,625 (-4.4) 8,468 (-21.6) 8,756 (-21.1) Net Income

(YOY % change) Net Income per Share

(Yen) Fully Diluted Net Income per Share

(Yen) August 31, 2005 August 31, 2004

(%) 2,297 (12.9)

2,035 (-21.3)

57.21 50.01

57.09 50.01

Fiscal 2005 (3,568) (-) (88.02) — (Notes) 1) Equity in earnings or losses of affiliates: ― million yen (August 31, 2005) ― million yen (August 31, 2004) ― million yen (February 28, 2005) 2) Average number of outstanding shares (consolidated): 40,169,445 shares (Six months ended August 31, 2005) 40,696,799 shares (Six months ended August 31, 2004) 40,536,343 shares (Year ended February 28, 2005) 3) Changes to accounting methods: none

4) Percentage shown in net sales, operating income, recurring profit and net income are year-on-year changes. (2) Consolidated financial position Millions of yen Total Assets Shareholders’ Equity Equity Ratio Shareholders’ Equity per

Share August 31, 2005 August 31, 2004

84,900 89,398

68,157 73,665

(%) 80.3 82.4

(Yen) 1,703.18 1,824.57

Fiscal 2005 83,140 67,477 81.2 1,671.4 (Note) Number of outstanding shares at the end of term (consolidated): 40,017,845 shares (August 31, 2005) 40,374,255 shares (August 31, 2004) 40,371,833 shares (February 28, 2005)

Consolidated

(Unaudited) 2

(3) Consolidated cash flows Millions of yen Net Cash Provided by

Operating Activities Net Cash Provided by

(Used in) Investing Activities

Net Cash Provided by (Used in) Financing

Activities

Cash and Cash Equivalents at

End of Term August 31, 2005 August 31, 2004

4,372 3,725

(2,863) (3,007)

(1,750) (2,052)

13,106 15,276

Fiscal 2005 7,868 (8,354) (2,825) 13,356 (4) Scope of consolidation and application of the equity method Consolidated subsidiaries 27Non-consolidated subsidiaries accounted for using the equity method ―

Affiliates accounted for using the equity method ―

(5) Changes in the scope of consolidation and the application of the equity method Consolidated subsidiaries (added) 1 (excluded) 1Companies under the equity method (added) ―

(excluded) ―

2. Anticipated Consolidated Results for Fiscal 2006 (March 1, 2005 to February 28, 2006)

Millions of yen Net Sales Operating income Net Income Year ending February 28, 2006 ¥74,400 ¥11,400 ¥6,500 Reference: Anticipated net income per share (12 months): 162.43 yen (Note) The figures in the table above are estimates based on management’s assumptions and beliefs in light of information available

as of the date on which these performance-related figures were disclosed. Please understand that actual results may differ substantially from estimates due to factors unforeseen at this time.

Consolidated

(Unaudited) 3

1. Aderans Co., Ltd. and its Subsidiaries (The Aderans Group) The Aderans Group consists of Aderans Co., Ltd. and its 33 subsidiaries (27 consolidated and six non-consolidated subsidiaries). The Group is engaged in hair-related businesses, including the manufacturing and sales of wigs, beauty, hairdressing and hair-care services, hair-transplant services, and related businesses. The organization and major activity Group companies, including Aderans Co., Ltd. are as follow: Business Segment Major Business Major Companies in the Group

- Sales of custom-made wigs, beauty, hairdressing and hair-care services. Aderans Co., Ltd. (reporting company for the consolidated financial statements)

Japan

- Sales of ready-made wigs FONTAINE Co., Ltd.

- Manufacturing of wigs Aderans Thai Ltd. World Quality Co., Ltd. Aderans Philippines, Inc.

Asia (excluding Japan)

- Sales of custom-made wigs, beauty, hairdressing and hair-care services Aderans Inc. (Taiwan)

- Sales of ready-made wigs General Wig Manufacturers, Inc. Rene of Paris

- Hair-transplant services Bosley, Inc.

North America

- Research and development on hair-regeneration treatments

Aderans Research Institute, Inc.

Hair-related businesses

- - - - -

Manufacturing and sales of wigs Beauty, hairdressing and hair-care

services Sales of cosmetics and non-medical

products Hair-transplant services Research and development on

hair-regeneration treatments

Europe - Sales of ready-made wigs Camaflex S.A.S. Trend Hair Supplies Co., Ltd. Carl M Lundh AB

- Advertising and golf course management ADN Co., Ltd.

Japan

- Real estate agency ADE Co., Ltd.

Other businesses - - - -

Advertising Golf course management Real estate agency Holding company operation

Overseas - Holding company Aderans Holding Co., Inc. Aderans Europe B.V.

Non-consolidated subsidiaries - Six non-consolidated subsidiaries

Consolidated

(Unaudited) 4

The above-named companies in the ADERANS Group are shown in the following diagram:

Notes: consolidated subsidiaries flow of products (wigs)

Aderans Co., Ltd. (reporting company for the consolidated financial

statements)

Sales of wigs (18 companies）

[Japan] FONTAINE Co., Ltd.

[U.S.A.] General Wig Manufacturers、Inc. and four others

[France] Camaflex S.A.S., and one other

[Germany] Creation de Paris Camaflex Vertriebs G..m.b.H. and one other

[The Netherlands] D. Van Nooijen B.V.

[Belgium] Camaflex S.A.

[U.K.] Trend Hair Supplies Co., Ltd.

[Thailand] Aderans Siam Co., Ltd. [Republic of Korea] Aderans Korea Inc. [Singapore] Aderans Singapore Pte, Ltd.

[Taiwan] Aderans Inc. (Taiwan)

Manufacturing of wigs (Four companies)

[Thailand] Aderans Thai Ltd.

[Thailand] World Quality Co., Ltd.

[The Philippines] Aderans Philippines, Inc.

(One other non-consolidated subsidiary)

Hair-transplant related (Two companies)

[U.S.A.] Bosley, Inc.

(One other consolidated subsidiary)

Aderans Research Institute, Inc. <Hair-related business>

[Japan] ADN Co., Ltd. (Advertising agency and golf course management)

[Japan] ADE Co., Ltd. (Real estate agency and sales of custom-made wigs)

(One other consolidated subsidiary and two other non-consolidated subsidiaries)

<Other businesses>

[U.S.A.] Aderans Research Institute, Inc

<Hair-related businesses>

U.S.A., Europe Taiwan, Korea Fontaine Co. Ltd.

[Sweden.] Carl M Lundh AB

Research and development on hair-regeneration treatments

[France] Gesmofra S.A.S.

[The Netherlands] Aderans Europe B.V.

[U.S.A.] Aderans Holding Co., Inc.

Holding company

Consolidated

(Unaudited) 5

1. Aderans Co., Ltd. and its Subsidiaries (The Group) (1) Management policy of the Aderans Group

The Aderarns Group strives to provide a comprehensive range of products and services, from wigs to hairdressing, haircare and hair transplant services, that alleviates whatever concerns people may have about their hair. We are a global group of companies involved in hair-related businesses. We pursue activities from a client-oriented perspective and work to elicit a higher level of satisfaction not only from clients but also from shareholders and employees. Our efforts are based on a mission statement that emphasizes our development into a trustworthy organization with products and services in constant demand from clients and society as a whole. Indeed, we seek to epitomize the “good company” ideal. (2) Basic policy on distributing profit

One of the Company’s most important policies is the return of profits to shareholders. Our primary objective is, of course, to maintain stable dividends, but we also aim to raise the payout ratio. In addition, while we seek to return profits to shareholders through the buyback of treasury stock, we promote growth through the implementation of investment strategies, such as the expansion of retained earnings to foster business development that will reinforce management capabilities and financial position in the medium to long term.

Our goal is to achieve a shareholder return ratio of 50% or higher on non-consolidated net income.

(3) Medium- to long-term management goals and strategies, and pertinent issues To get profits back on track after two years of sluggish results, Aderans decided to formulate a new medium-term management

plan better geared to the times. Through this plan, which began March 1, 2005, the Company will utilize the comprehensive business capabilities of the Aderans Group to create enhanced corporate value in the market for hair-related products and services.

We are confident that the new plan will be a springboard for constructive business development and lead to a recovery in profits.

i) Expand demand base in domestic men’s market as a total hair solution organization by utilizing full range of products, from wigs and medical care

Our priority in the domestic men’s market is to expand our base of new male clients. We will achieve the desired results through energetic promotional activities, including greater application of funds toward advertising. In addition, we will create new markets through the development of products and services geared to market needs and through tie-ups with hair-transplant clinics.

ii) Widen demand base in domestic women’s market through joint projects with Fontaine, a leader in the fashion wig market

In the custom-made wig market, we will enhance recognition of two brands — Eve and Sifore — in Japan among women in our main target age group through increased promotional activities and the launch of new products.

In the ready-made wig market, we have taken a stronger group perspective to growth. We are working with Fontaine to boost demand for fashion wigs and accessories through such approaches as a joint sales system and market development spotlighting young women and middle-aged women.

iii) Strengthen high-value-added salon network, particularly new-concept salons handling wigs and hairpieces

To address diversifying market needs, we will strive to expand the group wide sales network and develop new markets. Toward this end, we will promote service-oriented salons, which are different to the directly operated salons currently

used to sell products. We will also formulate a new business model utilizing regular distribution channels as well as business alliances and mergers and acquisitions (M&A).

iv) Improve overseas market share and profitability by reinforcing wig sales and promoting the hair transplant business Business results are growing steadily in regions where we have already established a presence through Group companies.

Wider market shares in these areas will be the building blocks of a stronger overall business foundation that supports higher profitability from operations abroad.

To complement these results, we will pursue M&A opportunities and set up local representative offices in regions where we have yet to achieve a prominent foothold. These efforts will strengthen Group sales capabilities.

Consolidated

(Unaudited) 6

(4) Basic policy on corporate governance Aderans actively works to enhance corporate governance. Toward this end, we have applied particular effort to the establishment

of a flexible organization primed for speedy decisions on business strategies and their implementation and the execution of clear, timely and impartial disclosure of corporate information on business activities to all stakeholders.

i) Corporate structure and internal controls (Basic description) Aderans maintains a corporate auditor system, and internal controls have been set up according to the positions described below.

In addition, we have clearly defined the responsibility for making decisions and implementing them, with the Chief Executive Officer (CEO) accountable for long-term business strategies and the Chief Operating Officer (COO) responsible for executing measures aimed at achieving the goals of stated strategies.

Board of Directors: Highest decision-making authority on business strategies; meets at least once a month; chaired by COO. Board of Auditors: Comprises one full-time auditor and three external auditors; meets at least once a month Executive Committee: Comprises managing directors and full-time auditor; meets at least once a month Reporting Sessions: Comprises directors and general managers; meets twice a month.

(Status) Internal controls are undertaken through Board of Directors’ meetings, which are held at least once a month. The Board functions as the highest decision-making authority and discusses and prioritizes topics of particular importance to operations. The Board of Auditors also meets at least once a month. Corporate auditors attend Board of Directors’ meetings and contribute to sound business practices at Aderans by strictly monitoring the performance of directors. The Executive Committee discusses topics already tapped as priority issues by the Board of Directors, while reporting sessions provide opportunities for directors to get timely updates on activities in each division and discuss topics with general managers. Both groups meet regularly.

(Disclosure) Aderans believes the disclosure of business information must be a committed and timely effort to ensure management transparency. Relevant investor relations materials and news releases are provided through the Investor Relations Division.

ii) Risk management

Aderans has established a structure to ensure appropriate responses to risk-management issues. For example, if a scandal or an unforeseen situation arises, an emergency response headquarters will be set up immediately with the president in charge. We are building a system to deliver quick explanations to investors and the market at large in the event a problem appears.

As for compliance, we encourage each and every director and employee of the Company to improve his or her understanding of compliance, and we have established a systems featuring educational seminars and other awareness measures to make management and staff conscious of behavior conforming to all applicable laws and social standards.

iii) Current status of measures for corporate governance

(a) 5 board of directors’ meetings were held in the current period. (b) 5 audit committee meetings were held in the current period. (c) 5 executive committee meetings as well as 8 reporting sessions were held in the current period. (d) As a part of disclosure in the current period, the Company posted the financial result and flash sales report on its homepage

on the day of announcement made. (5) Business targets

As a measurement of medium- to long-term management efficiency, we endeavor to uphold a ratio of 20% or more on recurring profit to sales on Consolidated basis. We also strive to uphold a consolidated return on equity (ROE) of 10% or higher by implementing strategies that utilize group strengths to further enhance capital efficiency.

Consolidated

(Unaudited) 7

3. First-Half Business Results and Financial Position (1) Business results for interim period

i) Consolidated performance During the first half of fiscal 2006, the interim period ended August 31, 2005, Aderans continued to prioritize efforts to cultivate demand from new clients in Japan. In the men’s market, we launched a series of television commercials in May 2005 highlighting the fact that we provide total solutions to men with conerns about their hair, and in the women’s market, we trengthened our two-brand strategy to foster wider recognition of both the Eve and Sifore series. As part of this effort, we introduced Sifore Aroma in March 2005.

Truning overseas, in Europe, we reinforced the mareting base of our wigs sales company by opening more directly operated salons and by encouraging subsidiaries there to improve profitability.

In addition, to expand our share of the market in Scandinabia, we acquired share of Sweden’s Carl M Lundh AB under the Aderans’ umbrella in January 2005. In the United States, we debuted new brands and new products to attract market attention and worked to translate this interest into higher sales. We also channeled energy into the hair transplant business and prompted Bosley Inc., to boost its advertising budget to secure new demand.

As a result, net sales for the first half of fiscal 2006 edged up 1.8% year-on-year, to ¥35.4 billion. On the profit front, operating income increased 3.9%, to ¥4.0 billion, recurring profit climbed 8.6%, to ¥4.4 billion, and net income grew 12.9%, to ¥2.2 billion.

The dividend for the interim period was set at ¥22.00 per share, up ¥3.00 per share from the corresponding period a year earlier. Results by geographical segment are as follows:

<Japan>

Favorable demand for custom-made wigs, our key product group, nudged sales up 0.9%, to ¥15.8 billion. The March 2005 introduction of Sifore Aroma for women and concerted efforts to promote ourselves as a total hair solution organization for men were particularly effective in generating interest from new clients and underpinning a trend among existing clients to replace older products. Sales of ready-made wigs increased 4.6%, to ¥4.1 billion, thanks in part to solid demand at sales booths inside department stores, at directly operated salons, and at beauty salons. Sales of other hair-related products slipped 2.0%, to ¥2.5 billion, but service revenues edged up 1.3%, to ¥4.7 billion, primarily because of steady demand for hair-growth services aimed at new male clients. Revenue from other operations came to ¥234 million, up 7.7%, while intersegment sales contributed ¥26 million, down 21.2%. In the end, aggregate net sales from operations in Japan rebounded 1.3% over the corresponding period a year earlier, to ¥27.7 billion. But operating income fell 2.7%, to ¥5.7 billion. <Asia, excluding Japan>

Aderans tried to strengthen its marketing structure in Taiwan but the effort was not wholly successful. Sales of custom-made wigs declined 7.3%, to ¥110 million, but sales of ready-made wigs rallied, increasing 3.1%, to ¥36 million, and sales of other hair-related products jumped 37.4%, to ¥32 million. Service revenues declined 3.5%, to ¥41 million, but intersegment sales grew 14.3%, to ¥ 2.0 billion. As a result, aggregate net sales from operations in Asia, excluding Japan, hovered at ¥221 million, on a par with the first half of fiscal 2005. Operating income rebounded, stepping up 15.0%, to ¥68 million. <North America>

Despite a larger advertising budget aimed at attracting new clients, the hair transplant business failed to reach as many new clients as expected, causing service revenues to dip 1.3%, to ¥4.0 billion. Sales of ready-made wigs were solid, rising 1.1%, to ¥1.6 billion, which primarily reflects the successful introduction of new products offered through wholesale routes and a pickup in sales to large-scale retailing chains. Unfortunately, sales of custom-made wigs rose 4.7%, to ¥113 million, and sales of other hair-related products retreated 38.4%, to ¥77 million. Intersegment sales, however, jumped 33.7%, to ¥388 million. Overall, aggregate net sales from North American operations slipped 0.3%, to ¥6.2 billion. The operating loss decreased 22.4%, to ¥342 million.

Consolidated

(Unaudited) 8

<Europe> The addition of Sweden’s Carl M Lundh AB to the Aderans Group handsomely offset the negative conditions of

heightened competition in Europe and slimmer sales growth in markets where Aderans has established a presence. As a result, sales of custom-made wigs surged 61.8%, to ¥204 million, sales of ready-made wigs climbed 16.1%, to ¥1.1 billion, sales of hair-related products jumped 66.9%, to ¥250 million and service revenues soared 66.7%, to ¥45 million. Consequently, aggregate net sales from European operations rose 27.3%, to ¥1.6 billion. The region also showed operating income, at ¥95 million, and reversed the operating loss position of the previous interim period.

(ii) Outlook for Fiscal 2006 On a consolidated basis, the fiscal year ending February 28, 2006, should deliver net sales of ¥74.4 billion, up 5.3%, recurring profit of ¥11.4 billion, up 30.2%, and net income of ¥6.5 billion, a positive turnaround from a net loss in fiscal 2005.

(2) Financial Position

As of August 31, 2005, consolidated cash and cash equivalents stood at ¥13.1 billion, slight down 1.9% from the beginning of the period.

The status of cash flows from operating, investing and financing activities and their respective factors at the end of first half of fiscal 2006 were as follows:

Net cash provided by operating activities amounted to ¥4.3 billion, decrease 79.9%. The company maintained a positive position, primarily because of ¥4.3 billion in income before income tazes, ¥987 million in depreciation and amortization, and ¥305 million in amortization of consolidation difference, which , which outweighed such uses funds as ¥1.6 billion for income taxes.

Net cash used in investing activities amounted to ¥2.8 billion. Proceed from sales of marketable securities amounted to ¥10.9 billion, while payment was ¥7.9 billion for purchase of marketable securities and ¥4.5 billion for purchase of long-term investment securities.

Net cash used in financing activities amounted to ¥1.7 billion. Payment for buyback of treasury stock was ¥1.5 billion.

Consolidated

(Unaudited) 9

4. State of Sales (Sales Results) Millions of yen Product/service

Six Months Ended August 31, 2005 (A)

Six Months Ended August 31, 2004 (B)

Year-on-year change (A-B)

Year ended February 28, 2005

Amount Component ratio (%)


Amount Comparison ratio (%)


Hair-Related Businesses Customer-made

wigs 16,322 46.1 16,108 46.3 214 1.3 32,259 45.7

Ready-made wigs

7,056 19.9 6,692 19.2 364 5.4 14,452 20.5

Other products 2,948 8.3 2,939 8.5 9 0.3 5,665 8.0 Service revenues 8,862 25.0 8,835 25.4 27 0.3 17,736 25.1 Sub-total 35,190 99.3 34,576 99.4 614 1.8 70,113 99.3Other Businesses 234 0.7 217 0.6 17 7.8 511 0.7Total 35,425 100.0 34,793 100.0 632 1.8 70,625 100.0 (Notes) 1) Above amounts do not include consumption tax.

Consolidated

(Unaudited) 10

5. Consolidated Financial Statements

(1) Consolidated Balance Sheets Millions of yen

August 31, 2005 August 31, 2004 February 28, 2005 Amount (%) Amount (%) Amount (%)

Assets Current assets 34,589 40.7 35,237 39.4 36,492 43.9 Cash and deposits 12,348 10,530 13,626 Notes and accounts receivable - trade 4,636 4,514 4,815 Marketable securities 11,201 14,096 12,199 Inventories 3,914 3,806 3,787 Deferred tax assets 1,137 1,055 984 Other current assets 1,391 1,294 1,134 Allowance for doubtful accounts (40) (59) (54) Fixed assets 50,311 59.3 54,160 60.6 46,648 56.1 Tangible fixed assets 26,629 31.4 32,345 36.2 26,955 32.4 Buildings and structures 13,078 14,858 13,440 Land 11,593 14,019 11,616 Other tangible fixed assets 1,956 3,467 1,897 Intangible fixed assets 5,262 6.2 9,235 10.3 4,897 5.9 Goodwill 112 704 112 Consolidation difference 2,926 5,866 2,570 Other intangible fixed assets 2,223 2,664 2,214 Investments and other fixed assets 18,419 21.7 12,579 14.1 14,795 17.8 Investment securities 8,719 3,710 5,082 Guarantee deposits 3,671 3,772 3,788 Deferred tax assets 2,830 1,951 2,780 Other fixed assets 3,273 3,221 3,221 Allowance for doubtful accounts (74) (77) (77)

Total Assets 84,900 100.0 89,398 100.0 83,140 100.0

Consolidated

(Unaudited) 11

Millions of yen August 31, 2005 August 31, 2004 February 28, 2005

Amount (%) Amount (%) Amount (%)Liabilities Current liabilities 11,082 13.0 10,313 11.5 10,214 12.3 Notes and accounts payable - trade 1,477 1,303 1,253 Allowance for employees’ bonus 1,501 1,393 1,283 Warranty reserve 142 119 126 Allowance for returned goods 73 69 96 Accrued corporate and other taxes 2,072 1,705 1,281 Advances received 2,889 2,895 3,066 Deferred tax liabilities 4 3 5 Other current liabilities 2,921 2,821 3,101 Fixed liabilities 5,569 6.6 5,315 6.0 5,362 6.4 Allowance for employees’ severance

and retirement benefits 3,507 3,194 3,362

Allowance for retirement gratuities to officers

826 826 855

Deferred tax liabilities 9 ― ―

Other fixed liabilities 1,225 1,294 1,144Total liabilities 16,652 19.6 15,629 17.5 15,577 18.7

Minority Interests Minority interests 91 0.1 103 0.1 85 0.1Shareholders’ Equity Common stock 12,944 15.3 12,944 14.5 12,944 15.6 Capital surplus 13,157 15.5 13,157 14.7 13,157 15.8 Earned surplus 48,336 56.9 53,275 59.6 46,905 56.4 Unrealized gains (losses) on

investment securities 337 0.4 171 0.2 230 0.3

Foreign currency translation adjustments

(2,116) (2.5) (2,269) (2.5) (2,140) (2.6)

Treasury stock (4,501) (5.3) (3,613) (4.1) (3,618) (4.3)Total shareholders’ equity 68,157 80.3 73,665 82.4 67,477 81.2

Total liabilities, minority interests and shareholders' equity

84,900 100.0 89,398 100.0 83,140 100.0

Consolidated

(Unaudited) 12

(2) Consolidated Statements of Income Millions of yen

Six Months (from March 1 2005 to

August 31, 2005)


August 31, 2004)

Fiscal 2005 (from March 1 2004 to February 28, 2005)

Amount (%) Amount (%) Amount (%) Net sales 35,425 100.0 34,793 100.0 70,625 100.0 Cost of sales 6,373 18.0 6,152 17.7 12,326 17.5 Gross profit 29,051 82.0 28,641 82.3 58,299 82.5 Selling, general and administrative

expanses 25,036 70.7 24,778 71.2 49,830 70.5

Operating income 4,014 11.3 3,862 11.1 8,468 12.0 Non-operating Income 611 1.7 478 1.4 841 1.2 Interest received 81 35 87 Dividends received 7 8 10 Rent on real estates 170 179 343 Gains on sales of investment

securities 4 61 61

Foreign exchange income 203 ― ―

Other non-operating income 143 192 339 Non-operating Expenses 180 0.5 246 0.7 553 0.8 Interest paid 8 3 11 Rent on real estates 127 48 99 Loss on disposal of inventory 17 26 55 Taxation ― 75 75 Allowance for doubtfull accounts ― 35 42 Foreign exchange losses ― ― 203 Other non-operating expenses 27 57 65 Recurring profit 4,445 12.5 4,094 11.8 8,756 12.4 Extraordinary income 85 0.3 2 0.0 2 0.0 Gains on sale of fixed assets 77 2 2 Gains on reversal of allowance for

doubtful accounts 7 ― ―

Extraordinary expenses 135 0.4 37 0.1 8,951 12.7 Losses on prior year accounts 97 ― ―

Losses on sale of fixed assets 12 0 33 Losses on disposal of fixed assets 25 37 83 Unrealized loss on land ― ― 1,755 Impairment loss ― ― 6,889 Unrealized loss on investment

securities ― ― 190

Income before income taxes 4,395 12.4 4,058 11.7 (192) (0.3) Corporate, inhabitant and business

taxes 2,339 6.6 2,121 6.1 4,373 6.2

Adjustments to corporate and other taxes

(242) (0.7) (77) (0.2) (873) (1.2)

Minority interests ― ― 20 0.0 124 0.2Net Income 2,297 6.5 2,035 5.8 (3,568) (5.1)

Consolidated

(Unaudited) 13

(3) Consolidated Statements of Surplus Millions of yen

Six Months (from March 1 2005 to August 31, 2005)


Fiscal 2005 (from March 1 2004

to February 28, 2005) Capital surplus Capital surplus at the beginning

of fiscal year 13,157 13,157 13,157

Capital surplus at fiscal year-end

13,157 13,157 13,157

Earned surplus Earned surplus at the beginning

of fiscal year 46,905 52,265 52,265

Increase in earned surplus Net Income 2,297 2,035 ―

Decrease in earned surplus Net loss ― ― 3,568 Dividends 767 657 1,424 Bonus to officers ― 178 178 Decrease by consolidation

(Exclusion) ― 188 188

Loss on disposal of treasury stock

99 ― 0

Earned surplus at the end of term

48,336 53,275 46,905

Consolidated

(Unaudited) 14

(4) Consolidated Statements of Cash Flows Millions of yen


Six Months (from March 1 2004

to August 31, 2004)


to February 28, 2005) 1. Cash flows from operating activities Income before income taxes (loss) 4,395 4,058 (192) Depreciation and amortization 987 1,207 2,510 Impairment loss ― ― 6,889 Loss on retirement f fixed assets 63 76 226 Unrealized loss on land ― ― 1,755 Unrealized loss on investment securities ― ― 190 Amortization of consolidation difference 305 419 838 Change in allowance for employees’ bonuses 219 (10) (122) Increase in employees’ severance and

retirement benefits 146 182 349

Interest and dividends received (88) (44) (97) Interest paid 8 3 11 Change in notes and accounts receivable 255 1,088 801 Increase in inventories (20) 27 51 Change in notes and accounts payable 159 321 275 Change in guarantee deposits 121 84 139 Bonuses to officers ― (178) (178) Other (610) (363) 222 Sub total 5,943 6,872 13,670 Proceeds from interest and dividend income 81 43 76 Payment of interest (8) (3) (11) Payment of income taxes (1,644) (3,186) (5,866) Net cash provided by operating activities 4,372 3,725 7,8682. Cash flows from investing activities Payment for purchase of time deposit 33 (2,122) (4,131) Payment for purchase of marketable securities (7,996) (3,998) (9,996) Proceeds from sales of marketable securities 10,995 5,009 10,596 Payment for purchase of property, plant and

equipment (720) (1,639) (2,453)

Payment for purchase of intangible fixed assets (63) (537) (580) Payment for purchase of investment securities (4,503) (39) (2,144) Proceeds from sales of investment securities 49 245 245 Payment for purchase of subsidiaries’ stock

due to change of scope of consolidation (665) ― ―

Other 7 75 111 Net cash used in investment activities (2,863) (3,007) (8,354)

Consolidated

(Unaudited) 15

Six Months

(from March 1 2005 to August 31, 2005)



to February 28, 2005)3. Cash flows from financial activities

Payment for purchae treasury stock （1,548） (1,394) (1,401) Proceed from sales of treasury stock

consolidated subsidiary 566 ― 0

Cash dividends paid (767) (657) (1,424) Net cash used in financing activities (1,750) (2,052) (2,825)

4. Effects of exchange rate on cash and cash equivalents

(8) (70) (13)

5. Net increase in cash and cash equivalents (249) (1,404) (3,324)6. Cash and cash equivalents at the beginning of fiscal year

13,356 16,819 16,819

7. Decrease by exclusion from consolidation ― (139) (139)8. Cash and cash equivalents at the fiscal year-end

13,106 15,276 13,356

Consolidated

(Unaudited) 16

Basis for Preparation of Consolidated Financial Statements 1. Scope of consolidation

(i) There are 27 consolidated subsidiaries in the Aderans Group. Major consolidated subsidiaries are listed below. FONTAINE Co., Ltd. ADN Co., Ltd. ADE Co., Ltd. Aderans Holding Co., Inc. (overseas subsidiary) Aderans Europe B.V. (overseas subsidiary) Aderans Thai Ltd. (overseas subsidiary)

Bosley Healthy Hair Institute, Inc. excluded from consolidated subsidiaries during this fiscal year under review, due to the merger within consolidated subsidiaries while Carl M Lundh AB included into consolidated subsidiaries because of acquisition.

(ii) The effects of non-consolidated subsidiaries’ accounts on consolidated results would be negligible, hence their result

excluded from the scope of consolidation.

2. Application of equity method The equity method has not been adopted for non-consolidated subsidiaries, as their effects on the consolidated financial

statements would be negligible. 3. Fiscal terms of consolidated subsidiaries

Among the consolidated subsidiaries, ADN Co., Ltd., ADE Co., Ltd. and the 24 overseas subsidiaries close their interim period on June 30. However, as the gaps between the interim period end of each company do not exceed a period of three months, the financial statements of these companies as of their respective interim perid end are handled on a consolidated basis as a general rule. Any major transactions happening between these dates and the consolidated interim period end are adjusted for as required by consolidated accounting practices.

4. Accounting Principles and Methods

(i) Principles and methods of valuation of important assets ① Securities

Bonds to be held until maturity: Amortized cost method (straight line method) Stocks of subsidiaries: Cost recorded using the moving-average method Other securities: Securities quoted on exchanges: Market value method based on market value at interim period end.

Appraisal differences are dealt with by means of the direct capital influx method, with cost of securities sold calculated with the moving average method.

Securities not quoted on exchanges: Cost recorded using the moving average method

② Derivatives Derivatives are stated at market value.

③ Inventories Goods and products: With respect to the reporting company, custom-made wigs are accounted for by

the unit cost method, ready-made wigs by the weighted average cost method, and other goods and products by the last invoice method. At domestic consolidated subsidiaries, the moving average cost method is most commonly used. Overseas consolidated subsidiaries use either the first-in first-out (FIFO) cost method or the moving-average cost method.

Raw materials and work in process: Consolidated subsidiaries use either the first-in first-out cost method or the moving-average cost method.

Supplies: The unit cost method is applied to supply materials, with other supplies mainly being accounted for with the last invoice cost method. However, overseas consolidated subsidiaries use the first-in first-out cost method.

Consolidated

(Unaudited) 17

(ii) Depreciation of important fixed assets Tangible fixed assets: These assets are primarily accounted for with the declining-balance method,

although buildings (excluding annexes) acquired since April 1, 1998, are accounted for with the straight-line depreciation method. The straight-line method is also applied to certain domestic consolidated subsidiaries. The tangible fixed assets of overseas consolidated subsidiaries are primarily accounted for with the straight-line method.

Estimated useful life of principal items are as follows: Buildings and structures: 13-47 years Intangible fixed assets: The straight-line method is applied. Software for in-house use is accounted for with the straight-line method over the

estimated useful life (five years). Long-term prepaid expenses: Equal depreciation

(iii) Standards for important allowances ① Allowance for doubtful accounts:

To prepare against credit losses, Aderans makes additions to this allowance on the basis of loan loss ratios for standard loans, and on an individual basis for loans considered unlikely to be repaid in full. For overseas consolidated subsidiaries, the estimated uncollectable amount for individual accounts is added.

② Allowance for bonus to employees: To prepare for bonus payments to employees, the reporting company and its domestic consolidated subsidiaries make additions to the allowance in accordance with the estimated amounts payable.

③ Allowance for product warranties: To prepare for expenses arising from free warranties on goods and products sold, the consolidated financial statements reporting company adds an appropriate amount based on past experience.

④ Allowance for returned goods: Consolidated subsidiary FONTAINE Co., Ltd., makes provisions in order to account for losses due to returns of sold products. Amounts of the allowance for returned goods are calculated by multiplying the average returned goods ratios of the current period and previous fiscal year by the gross profit margin of the current period, and adding this total to the balance of accounts receivable.

⑤ Employees’ severance and retirement benefits: To prepare for retirement benefits to employees, Aderans and its domestic consolidated subsidiaries and certain overseas consolidated subsidiaries make provisions for an amount based on existing retirement benefit liabilities and pension assets. Prior pension costs will be booked as costs within a set time (five year) of less than the average remaining working period at the time when the differences was recorded. The numerical difference will be booked as costs from the next consolidated fiscal year, within a set time period (five years) of less than the average remaining working period at the time when the difference was recorded.

⑥ Allowance for retirement bonuses to officers: To prepare for retirement benefits to directors, Aderans, its consolidated subsidiary FONTAINE Co., Ltd. and certain overseas consolidated subsidiaries make provisions for an amount based on the total benefits required at the interim period end. Allowance is the estimated amount of bonuses to officers who served at the time of the abolishment of the system of bonus to officers as of May 2005.

(iv) Translation of assets and liabilities denominated in foreign currencies into yen

Assets and liabilities denominated in foreign currencies are converted into yen at the rates of exchange in effect at the interim perid end, with translation differences treated as gains or losses. The assets and liabilities of overseas consolidated subsidiaries are also converted into yen at the rates of exchange in effect at the end of the current interim period. Income, losses, and expenses are converted into yen using average exchange rates over the period in question, and translation differences are recorded in the shareholders’ equity section of the balance sheets under foreign currency translation adjustments.

(v) Accounting methods pertaining to important lease transactions

Aderans accounts for finance lease transactions using the same method as ordinary rent transactions, except for those transactions where ownership of the leased property is considered to be transferred to the lessee.

Consolidated

(Unaudited) 18

(vi) Other significant items Consumption and other taxes Aderans applies the tax-exclusion accounting method to national and local consumption taxes.

5. Scope of funds in the consolidated statements of cash flows

Funds (cash and cash equivalents) in the consolidated statements of cash flows comprise cash in hand, demand deposits that can be withdrawn at any time, and short-term investments that are highly liquid, easily convertible into cash, have little risk of fluctuation in value, and that mature within three months or less of the date of acquisition.

6. [Additional information] In accordance with the announcement of Report of Practical Issues No.12, “Practical Treatment of Presentation for

Corporate Size-Based Aspect of Corporate Income Tax on Income Statement”, by the Accounting Standards Board of Japan on February 13, 2004, which followed an official announcement on March 31, 2003, regarding legislation to amend local tax laws (Law No.9, 2003) and the subsequent introduction of an income tax structure based on corporate size, effective from the business year beginning April 1, 2004, Aderans and its consolidated subsidiaries presents value-added taxes on capital stock under selling, general and administrative (SG&A) expenses.

As a result, SG&A expenses for the interim period increased ¥88 million over the first half of fiscal 2005, while operating income, recurring profit and income before taxes and minority interests decreased by the same amount over the corresponding period.

Consolidated

(Unaudited) 19

Notes [Consolidated Balance Sheets]

Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005 1. Accumulated depreciation of tangible fixed assets 22,197 21,028 21,520 [Consolidated Statements of Income] 1. Cost of Sales includes amounts related to allowances:

Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005

Transfer to allowance for product warranties 79 57 126 Transfer from allowance for returned goods 23 54 27

2. Main items and amounts under selling, general and administrative expenses: Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005

Advertising expenses 6,153 5,988 12,440 Salaries and wages 6,518 6,453 14,008 Addition to allowance for bonus to employees 1,469 1,367 1,589 Retirement benefit expenses 220 337 640 Addition to allowance for retirement benefits to directors 233 31 62 Depreciation 852 1,129 2,335 Amortization of consolidation difference 320 435 869

3. Gains on sales of fixed assets: Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005

Mainly land and Vehicles and Vehicles and buildings equipment equipment 4. Losses on fixed assets sold: Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005 Land and buildings ― Mainly land and buildings 5. Main item and amount under losses on disposal of fixed assets was as follows: Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005

Buildings and structure 23 34 66 Other 1 2 16

6. Unrealized loss on land Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005 ― ―

Unrealized loss on land results when a revised book value, based on the consolidated market value recorded in the land account for consolidated subsidiaries, is deducted during capital consolidation

Consolidated

(Unaudited) 20

7. Impairment losses August 31, 2005 ― August 31, 2004 ― February 28, 2005 8. Adjustments to corporate and other taxes Amounts of income tax and adjustment to corporate and other taxes during the interim periods ended August 31, 2005 and 2004 are caluculated based on the appropriation of profit through withdrawal from reserves for deferred income taxes.

The Aderans Group recorded impairment losses for fiscal 2005 under the following asset group: (1) Major assets with impairment losses

Company (Location) Application Type Aderans (Tokyo and other four prefectures)

Business assets (8 New Concept salons)

Buildings and structures

ADE (Osaka and other four prefectures)

Business assets (5 offices)

Buildings and structures

ADN (Niigata Prefecture) Business assets (Golf facilities)

Buildings, structures and land

Bosley, Inc. and three other companies (U.S.)

Business assets (Goodwill)

Consolidation difference account, goodwill

(2) Dealing with impairment losses Because of the continued operating losses and fall down in aggregated future cash flows to net book value of each asset group, Aderans reduced the carrying amount of each asset group to the recoverable amount and recorded the aggregate amount of decrease as an impairment loss under extraordinary losses. (3) Impairment loss amounts Millions of yen

Type Amount Buildings and structures 1,577 Land 612 Other tangible fixed assets 954 Goodwill 573 Consolidation difference account 2,826 Other intangible fixed assets 343

Total 6,889 (4) Asset-grouping method In principle, Aderans and its domestic consolidated subsidiaries consider location as well as type of operations in grouping assets. The assets of overseas consolidated subsidiaries are grouped by company. (5) Calculating recoverable amounts A recoverable amount is the net selling price of the asset in question. For golf facilities, the recoverable amount is based on the appraisal amount determined by a real estate appraiser. For goodwill, including any amounts in the consolidation difference account, the recoverable amount is based on an amount determined by an external third party. All other assets are viewed with zero recoverable amount.

Consolidated

(Unaudited) 21

[Consolidated Statements of Cash Flows] Relationships between cash and cash equivalents at the end of year and items listed on the consolidated balance sheets: Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005

Cash and deposits 12,348 10,530 13,626 Money management funds and others included under marketable securities 3,502 5,501 2,502 Time deposits with maturities over three months (2,744) (755) (2,772) Cash and cash equivalents 13,106 15,276 13,356

[Lease transaction]

Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 20051. Finance lease transactions, other than those where ownership of the lease assets is transferred to lessees (1) Amount equivalent to acquisition costs, accumulated depreciation and net book value at fiscal year-end Acquisition costs Vehicle 30 44 44 Equipment 77 550 98 Total 107 594 142 Accumulated depreciation Vehicle 18 30 35 Equipment 40 506 54 Total 58 536 89 Net book value at fiscal year-end Vehicle 11 13 8 Equipment 36 43 44 Total 48 57 53 (Note) Amount equivalent to acquisition costs is calculated using paid-interest-inclusion method, as the proportion of tangible

fixed assets taken up by the balance of outstanding lease fees at the fiscal year end is minor. (2) Amount equivalent to the net book value of outstanding lease fees Due within one year 19 36 21 Due over one year 28 20 32 Total 48 57 53 (Note) Amount equivalent to the net book value of outstanding lease fees is calculated using the paid-interest-inclusion method, as the

proportion of tangible fixed assets taken up by this value at the end of the period is minor. (3) Lease fees paid and amount equivalent to depreciation Lease fee paid 11 62 96 Amount equivalent to depreciation 11 62 96 (4) Calculation of the amount equivalent to depreciation This calculation is made with straight-line method, assuming the leasing period of each leased item to be its durability and the

scrap value of each item to be nil.

Consolidated

(Unaudited) 22

2. Operating lease transaction

Outstanding lease fees at fiscal year-end Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005 Due within one year 561 422 475 Due over one year 2,498 1,613 2,907 Total 3,059 2,036 3,382 [Marketable Securities] As of August 31, 2005 1. Marketable securities quoted on exchanges

Millions of yen Balance Sheet Amounts

(A) Market Value

(B) Differences

(A-B) (1) Marketable Debt Securities Being Held to Maturity Corporate bonds 10,707 10,707 0 Total 10,707 10,707 0 Acquisition

Cost Balance Sheet Amounts Differences

(A-B) (2) Other Marketable Securities Stocks 753 1,322 569 Total 753 1,322 569 2. Major marketable securities not evaluated at fair value Millions of yen Balance Sheet Amounts (1) Marketable Debt Securities Being Held to Maturity Commercial Paper 5,998 (2) Other non-marketable securities Money Management Fund 1,502 As of August 31, 2004 1. Marketable securities quoted on exchanges


(A) Market Value

(B) Differences



(A-B) (2) Other Marketable Securities Stocks 756 1,043 287 Total 756 1,043 287 2. Major marketable securities not evaluated at fair value Millions of yen Balance Sheet Amounts (1) Marketable Debt Securities Being Held to Maturity Commercial Paper 5,998 (2) Other non-marketable securities Money Management Fund 1,502

Consolidated

(Unaudited) 23

As of February 28, 2005 1. Marketable securities quoted on exchanges


(A) Market Value

(B) Differences



(A-B) (2) Other Marketable Securities Stocks 757 1,145 387 Total 757 1,145 387 2. Major marketable securities not evaluated at fair value Millions of yen Balance Sheet Amounts (1) Marketable Debt Securities Being Held to Maturity Commercial Paper 4,998 (2) Other non-marketable securities Money Management Fund 1,502 [Derivative Transactions] 1. Situation of transactions

End of first half of fiscal 2006 (as of August 31, 2005) No derivative transaction

End of first half of fiscal 2005 (as of August 31, 2004)

Millions of yenType of the underlying Type of transaction Contract amount Fair value Unrealized profit (loss) Currencies Currency options Short: buy Yen/sell US Dollar 988 (53) (53) Long: sell Yen/buy US Dollar 329 2 2 Total 1,318 (50) (50) (Note) Calculation of fair value:

Fair value is based on the prices that are indicated by the financial institutions with which the company enters in the currency option contracts.

Fiscal 2005 (from March 1, 2004 to February 28, 2005) Millions of yenType of the underlying Type of transaction Contract amount Fair value Unrealized profit (loss) Currencies Currency options Short: buy Yen/sell US Dollar 314 (29) (29) Long: sell Yen/buy US Dollar 104 0 0 Total 418 (29) (29) (Note) Calculation of fair value:

Fair value is based on the prices that are indicated by the financial institutions with which the company enters in the currency option contracts.

Consolidated

(Unaudited) 24

[Segment Information] 1. Business segments

First half of fiscal 2006 (from March 1, 2005 to August 31, 2005)

Information by business segment is omitted as the share of “Hair-related business” in the total sales, operating income, and assets of all the segments exceeds 90% respectively.

First half of fiscal 2005 (from March 1, 2004 to August 31, 2004)


Fiscal 2005 (from March 1, 2004 to February 28, 2005)


Consolidated

(Unaudited) 25

2. Geographical segments Fist half of Fiscal 2006 (from March 1, 2005 to August 31, 2005)

Millions of yen Japan Asia North America Europe Total Eliminations ConsolidatedI. Sales and operating incomes and

losses

Sales External customers 27,673 221 5,853 1,676 35,425 ― 35,425 Inter-segment 26 2,075 388 ― 2,491 (2,491) ― Total 27,700 2,297 6,242 1,676 37,916 (2,491) 35,425 Operating expenses 21,930 1,807 6,585 1,581 31,903 (493) 31,410 Operating income

(loss) 5,769 490 (342) 95 6,012 (1,998) 4,014

Fist half of Fiscal 2005 (from March 1, 2004 to August 31, 2004)


losses


(loss) 5,931 459 (441) (21) 5,927 (2,065) 3,862

Fiscal 2005 (from March 1, 2004 to February 28, 2005)


losses


(loss) 12,266 793 (688) 107 12,479 (4,010) 8,468

(Notes) 1. Countries and/or regions are classified by geographical proximity. 2. Major countries and areas classified in the regions other than Japan: (i) Asia -------------------- Thailand, Philippines, Taiwan

(ii) North America ------- United States (iii) Europe ---------------- France, Germany, The Netherlands, Belgium, United Kingdom, Sweden 3. Operating expenses under “Elimination” included unallocable expenses, which primarily consist of costs relating to the administrative

division, including the general affairs division of the parent company and to the assets of the entire company as follows: Fist half of fiscal 2006: ¥1,865 million, Fist half of fiscal 2005: ¥2,084 million, Fiscal 2005: ¥4,085 million

Consolidated

(Unaudited) 26

3. Overseas sales First half of fiscal 2006 (from March 1, 2005 to August 31, 2005)

Millions of yen Asia North America Europe Other regions Total

1. Overseas sales 196 5,753 1,812 42 7,805 2. Consolidated net sales ― ― ― ― 35,425 3. Share of overseas sales 0.6% 16.2% 5.1% 0.1% 22.0%

First half of fiscal 2005 (from March 1, 2004 to August 31, 2004) Millions of yen Asia North America Europe Other regions Total

1. Overseas sales 201 5,806 1,453 18 7,479 2. Consolidated net sales ― ― ― ― 34,793 3. Share of overseas sales 0.6% 16.7% 4.2% 0.0% 21.5%

Fiscal 2005(from March 1, 2004 to February 28, 2005) Millions of yen Asia North America Europe Other regions Total

1. Overseas sales 432 11,484 2,889 35 14,841 2. Consolidated net sales 70,625 3. Share of overseas sales 0.6% 16.3% 4.1% 0.0% 21.0% (Notes) 1. Countries and/or regions are classified by geographical proximity. 2. Major countries and areas classified in the regions other than Japan: (i) Asia -------------------- Thailand, Philippines, Taiwan, Korea

(ii) North America ------- United States (iii) Europe ---------------- France, Germany, The Netherlands, Belgium, United Kingdom, Sweden (iv) Other regions --------- Australia, Central & South America

3. Overseas sales are sales of the reporting company and its consolidated subsidiaries in the countries and areas outside of Japan.

============================================================

(END)

Non-consolidated

(Unaudited) 29

October 13, 2005

ADERANS CO., LTD. Summary of Non-consolidated Semiannual Financial Statements

for the Six Months ended August 31, 2005 (Translated from the Japanese original)

Corporate information Code: 8170 Listing: Tokyo Stock Exchange, Osaka Securities Exchanges (URL http://aderans.co.jp) Head Office: Metropolis of Tokyo Representative: Katsuji Tokumaru President and Representative Director Contact: Michiyoshi Takahashi General Manager, Investor Relations Div. Telephone: 81-3-3350-3268 System of interim dividend: adopted Unit stock (tangen kabu) system: adopted (100 shares per unit) Date of Board Meeting for Settlement of Accounts: October 13, 2005 Commencement of interim dividend payment: November 16, 2005 1. Operating Results for the Six Months Ended August 31, 2005 (from March 1, 2005 to August 31, 2005) (1) Operating results Millions of yen (amounts rounded down) Net Sales

(YOY % change) Operating income (YOY % change)

Recurring Profit (YOY % change)

August 31, 2005 August 31, 2004

(%) 22,700 (0.6)

22,574 (-9.0)

(%) 3,696 (3.8) 3,559 (-24.8)

(%) 6,040 (-1.7)

6,145 (19.2) Fiscal 2005 44,883 (-6.0) 6,620 (-28.1) 9,325 (-6.3) Net Income

(YOY % change) Net Income per Share

(Yen) August 31, 2005 August 31, 2004

(%) 4,236 (-2.9) 4,363 (46.6)

105.47 107.14

Fiscal 2005 (-6,813) ― (-168.03) (Notes) 1) Average number of outstanding shares : 40,169,445 shares (Six months ended August 31, 2005) 40,722,634 shares (Six months ended August 31, 2004) 40,549,366 shares (Year ended February 28, 2005) 2) Changes to accounting methods: none 3) Percentage figures in net sales, operating income, recurring profit and net income are year-on-year changes. (2) Payment of dividends Interim Dividend

Per share Yearly Dividend Per share

August 31, 2005 August 31, 2004

Yen 22.00 19.00

Yen — —

February 28, 2005 — 38.00

Non-consolidated

(Unaudited) 30

(3) Financial position Millions of yen Total Assets Shareholders’ Equity Equity Ratio Shareholders’ Equity per

Share August 31, 2005 August 31, 2004

76,685 85,367

64,652 73,956

(%) 84.3 86.6

(Yen) 1,615.58 1,831.76

Fiscal 2005 73,098 62,062 84.9 1,537.28 (Notes) Number of outstanding shares at fiscal year-end: 40,017,845 shares (August 31, 2005) 40,374,255 shares (August 31, 2004) 40,371,833 shares (February 28, 2005) Number of treasury stock at fiscal year-end: 1,695,543 shares (August 31, 2005) 1,339,133 shares (August 31, 2004) 1,341,555 shares (February 28, 2005) 2. Performance outlook for Fiscal 2006 (from March 1, 2005 to February 28, 2006)

Millions of yen 12 months ending February 28, 2006 Net sales 46,200 Recurring profit 10,300 Net income 6,700 Annual dividends per share

Interim dividends ¥22.00 Full-year dividends ¥42.00

cf. Forecast net income per share (12 months): 167.43 yen (Note) Forecast figures quoted above presuppose an estimation, based on the information available as of the date of announcement

of this material. Please acknowledge in advance that actual results may differ from the forecast figures due to certain unforeseen factors.

Non-consolidated

(Unaudited) 31

1. Non-consolidated Financial Statements

(1) Non-consolidated Balance Sheets


Amount (%) Amount (%) Amount (%)Assets Current assets 20,428 26.6 21,888 25.6 20,087 27.5 Cash and cash equivalents 3,824 2,439 2,954 Notes receivable 11 4 606 Accounts receivable – trade 2,627 2,533 1,806 Marketable securities 11,201 14,096 12,199 Inventories 1,192 1,206 1,245 Deferred tax assets 725 708 591 Other current assets 846 900 685 Allowance for doubtful accounts ― (2) (2) Fixed assets 56,256 73.4 63,479 74.4 53,010 72.5 Tangible fixed assets 22,594 29.5 23,525 27.6 23,024 31.5 Buildings 10,753 11,034 11,089 Land 10,670 10,693 10,693 Other tangible fixed assets 1,169 1,798 1,241 Intangible fixed assets 2,121 2.8 2,124 2.5 2,109 2.9 Investments and other fixed assets 31,541 41.1 37,829 44.3 27,876 38.1 Investment securities 8,282 3,094 4,650 Investments in affiliates 10,766 22,600 10,766 Long-term loans to affiliates 5,069 4,569 5,025 Guarantee deposits 2,847 2,919 2,913 Deferred tax assets 2,230 1,700 2,175 Other investments 2,901 3,003 2,904 Allowance for doubtful accounts (557) (58) (560)

Total Assets 76,685 100.0 85,367 100.0 73,098 100.0

Non-consolidated

(Unaudited) 32


Amount (%) Amount (%) Amount (%)Liabilities Current liabilities 8,007 10.4 7,649 9.0 7,084 9.7 Notes and accounts payable – trade 221 190 248 Accrued corporate and other taxes 1,743 1,420 546 Advances received 2,869 2,876 3,023 Allowance for employees’ bonus 1,070 1,023 946 Warranty reserve 142 119 126 Other current liabilities 1,960 2,020 2,194 Fixed liabilities 4,026 5.3 3,761 4.4 3,950 5.4 Allowance for employees’ severance

and retirement benefits 2,975 2,780 2,945

Allowance for retirement gratuities to officers

694 717 739

Other fixed assets 356 264 266Total liabilities 12,033 15.7 11,411 13.4 11,035 15.1

Shareholders’ Equity Common stock 12,944 16.9 12,944 15.2 12,944 17.7 Capital surplus 13,157 17.1 13,157 15.4 13,157 18.0 Additional paid-in capital 13,157 13,157 13,158 Earned surplus 42,785 55.8 51,359 60.1 39,415 53.9 Earned reserve 1,022 1,022 1,022 Voluntary reserve 25,015 25,016 25,016 Unappropriated retained earnings 16,748 25,321 13,377 Unrealized gains (losses) on investment

securities 315 0.4 157 0.2 213 0.3

Treasury Stock (4,550) (5.9) (3,661) (4.3) (3,667) (5.0)Total shareholders’ equity 64,652 84.3 73,956 86.6 62,062 84.9

Total liabilities and shareholders' equity 76,685 100.0 85,367 100.0 73,098 100.0

Non-consolidated

(Unaudited) 33

(2) Non-consolidated Statements of Income

Millions of yen Six Months

(from March 1 2005 to August 31, 2005)


August 31, 2004)

Fiscal 2005 (from March 1 2004 to February 28, 2005)

Amount (%) Amount (%) Amount (%) Net sales 22,700 100.0 22,574 100.0 44,883 100.0 Cost of sales 3,775 16.6 3,779 16.7 7,475 16.7 Gross profit 18,924 83.4 18,795 83.3 37,408 83.3 Selling, general and administrative

expanses 15,228 67.1 15,235 67.5 30,787 68.5

Operating income 3,696 16.3 3,559 15.8 6,620 14.8 Non-operating Income 2,496 11.0 2,830 12.5 3,223 7.2 Interest received 126 105 214 Dividends received 1,940 2,349 2,350 Other non-operating income 428 374 658 Non-operating Expenses 151 0.7 244 1.1 519 1.2 Recurring profit 6,040 26.6 6,145 27.2 9,325 20.8 Extraordinary income 5 0.0 ― ― ― ―

Extraordinary expenses 24 0.1 5 0.0 13,245 29.5 Income before income taxes 6,020 26.5 6,140 27.2 (3,920) (8.7) Corporate, inhabitant and business

taxes 2,043 9.0 1,796 8.0 3,309 7.4

Adjustments to corporate and other taxes

(259) (1.2) (19) (0.1) (416) (0.9)

Net Income (Loss) 4,236 18.7 4,363 19.3 (6,813) (15.2) Unappropriated retained earnings

brought forward from the previous fiscal year

12,611 20,957 20,957

Loss on disposal of treasury stock 99 ― 0 Interim dividends ― ― 767 Unappropriated retained earnings

for the fiscal year 16,748 25,321 13,377

Non-consolidated

(Unaudited) 34

Significant Accounting Standards 1. Valuation standards and methods of marketable securities

Shares of subsidiaries: Cost determined by the moving-average method Held-to-maturity securities: Amortized cost method (straight-line method) Other marketable securities:

Securities quoted on exchanges: Fair value based on the quoted market price as of the interim period-end (The related unrealized gains or losses are reported as a separate component of

shareholders’ equity; cost of securities sold is determined by the moving average method.)

Securities not quoted on exchanges: Cost determined by the moving average method 2. Valuation standards and methods of derivatives

Fair value 3. Valuation standards and methods of inventories

Goods and products: Wigs (custom-made): Cost on the basis of the specific identification method Wigs (ready-made): Cost on the basis of periodic average method other goods: Cost on the basis of last invoice method

Supplies: Supply materials: Cost on the basis of the specific identification method Other supplies: Cost on the basis of last invoice method

4. Depreciation method of fixed assets

(1)Tangible fixed assets: Declining balance method. For buildings (excluding building fixtures) acquired after April 1, 1998, straight-line method applies.

Main useful lives are as follows: Buildings: 13 to 47 years (2)Intangible fixed assets: Straight-line method. Software for own use is depreciated by the straight-line method over the

estimated useful lives (5 years). (3)Long-term prepaid expenses: Equal-installment depreciation

5. Standards for allowances

(i) Allowance for doubtful accounts: To prepare against credit losses, allowance for doubtful accounts are stated at an amount considered appropriate based on the company’s past credit loss experience for ordinary receivables. For receivables such as those threatened with bankruptcy, allowance is provided for the estimated amount of uncollectable receivables by examining collectible amounts individually.

(ii)Allowance for employees’ bonuses: To prepare for bonus payments to employees, allowance is provided in accordance with the estimated amounts payable.

(iii)Warranty reserve: An estimated necessary amount is provided based upon prior actual experience of repairs, in order to prepare against repair expenses arising from free warranties on the goods sold.

(iv)Employees’ severance and retirement benefits: To prepare for retirement benefits to employees, allowance is provided based on the estimated amounts of projected retirement benefit obligation and pension assets at fiscal year-end. Prior pension costs will be booked as costs within a set time (five year) of less than the average remaining working period at the time when the differences was recorded. Actuarial difference is and treated as expenses by the straight-line method over a certain number of years within the period of average remaining years of service of employees at the time of accrual (five years) and accounted for starting in the following fiscal year.

Non-consolidated

(Unaudited) 35

(v)Allowance for retirement gratuities to officers: Necessary amounts payable at interim period-end as retirement gratuities to officers are provided in accordance with the established standards of the company. Allowance is the estimated amount of bonuses to officers who served at the time of the abolishment of the system of bonus to officers as of May 2005.

6. Translation of Asset and Liabilities Denominated in Foreign Currencies into Yen

Assets and liabilities denominated in foreign currencies are converted into yen at the rates of exchange in effect at the end of the interim period, with translation differences treated as gains or losses.

7. Finance leases Finance leases which do not transfer ownership to lessees are accounted for in the same manner as operating leases under accounting principles generally accepted in Japan.

8. Consumption and other taxes Consumption taxes and local taxes are accounted for by the tax-excluded method.

9. [Additional information]

In accordance with the announcement of Report of Practical Issues No.12, “Practical Treatment of Presentation for Corporate Size-Based Aspect of Corporate Income Tax on Income Statement”, by the Accounting Standards Board of Japan on February 13, 2004, which followed an official announcement on March 31, 2003, regarding legislation to amend local tax laws (Law No.9, 2003) and the subsequent introduction of an income tax structure based on corporate size, effective from the business year beginning April 1, 2004, the Company presents value-added taxes on capital stock under selling, general and administrative (SG&A) expenses.

As a result, SG&A expenses for the interim period increased ¥76 million over the first half of fiscal 2005, while operating income, recurring profit and income before taxes and minority interests decreased by the same amount over the corresponding period.

Non-consolidated

(Unaudited) 36

Notes [Balance Sheets]

Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005 1. Accumulated depreciation of tangible fixed assets 16,805 16,031 16,377 2. Amount of consumption tax during the interim periods ended August 31, 2005 and 2004 are included into other current liabilities after off-setting the temporary received consumption tax and provisionally paid consumption tax. [Statements of Income]

Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005 1. Main items and amounts under non-operating expenses Foreign exchange loss ― ― 211 Rent on real estate ― ― 148 2. Main items and amounts under extraordinary expenses Unrealized loss on investments in affiliates ― ― 12,493 Transfer of allowance for doubtful accounts ― ― 500 3. Amount of depreciation Tanfible fixed assets 675 719 1,510 Intangible fixed assets 31 40 76 4. Adjustments to corporate and other taxes Amounts of income tax and adjustment to corporate and other taxes during the interim periods ended August 31, 2005 and 2004 are caluculated based on the appropriation of profit through withdrawal from reserves for deferred income taxes.

Non-consolidated

(Unaudited) 37

5. Impairment losses August 31, 2005 ― August 31, 2004 ― February 28, 2005 The Company recorded impairment losses for fiscal 2005 under the following group: (1) Major assets with impairment losses Location Application Type Tokyo and four prefectures Business Assets (8 New Concept Salons) Building, tools and furnitures (2) Dealing with impairment losses Because of the continued operating losses and fall down in aggregated future cash flows to net book value of each

asset group, the Company reduced the carrying amount of each asset group to the recoverable amount and recorded the aggregate amount of decrease as an impairment loss under extraordinary losses.

(3) Impairment loss amounts Millions of yen Type Amount Building 199 Tools and furnitures 24 Total 224 (4) Asset-grouping method In principle, the Company considers location as well as type of operations in grouping assets. (5) Calculating recoverable amounts A recoverable amount is the net selling price of the asset in question, and disposal price are viewed with a zero.

Non-consolidated

(Unaudited) 38

[Lease transaction] Millions of yen

Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 20051. Finance lease transactions, other than those where ownership of the lease assets is transferred to lessees (1) Amount equivalent to acquisition costs, accumulated depreciation and net book value at fiscal year-end Acquisition costs Vehicle ― 20 20 Equipment 35 472 39 Total 35 493 59 Accumulated depreciation Vehicle ― 17 19 Equipment 14 452 14 Total 14 469 33 Net book value at fiscal year-end Vehicle ― 3 1 Equipment 21 20 24 Total 21 23 25 (Note) Amount equivalent to acquisition costs is calculated using paid-interest-inclusion method, as the proportion of tangible

fixed assets taken up by the balance of outstanding lease fees at the fiscal year end is minor. (2) Amount equivalent to the net book value of outstanding lease fees Due within one year 6 23 8 Due over one year 14 0 17 Total 21 23 25 (Note) Amount equivalent to the net book value of outstanding lease fees is calculated using the paid-interest-inclusion method, as the

proportion of tangible fixed assets taken up by this value at the end of the period is minor. (3) Lease fees paid and amount equivalent to depreciation Lease fee paid 4 53 81 Amount equivalent to depreciation 4 53 81 (4) Calculation of the amount equivalent to depreciation This calculation is made with straight-line method, assuming the leasing period of each leased item to be its durability and the

scrap value of each item to be nil. 2. Operating lease transaction

Outstanding lease fees at fiscal year-end Millions of yen Aug. 31, 2005 Aug. 31, 2004 Feb. 28, 2005 Due within one year 0 Due over one year ― ― ―

Total 0

Non-consolidated

(Unaudited) 39

[Marketable Securities] First half of Fiscal 2006 (as of August 31, 2005)

There is nothing marketable subsidiaries securities to be accounted for. First half of Fiscal 2005 (as of August 31, 2004)

There is nothing marketable subsidiaries securities to be accounted for. Fiscal 2005 (as of February 28, 2005)

There is nothing marketable subsidiaries securities to be accounted for.

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(END)

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