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Annual Report 2007Year Ended February 28, 2007

21

Printed in JapanThis annual report was printed entirely on recycled paper with soy-based ink.

Aderans Company Limited

For Further Information Contact:

Investor Relations Division, Aderans Company Limited6-3, Shinjuku 1-chome, Shinjuku-ku,Tokyo 160-8429, JapanTel. +81-3-3350-3268Fax. +81-3-3356-3052E-mail. [email protected]

Aderans Com

pany Limit ed Annual Report 2007

Profile

The Aderans Group offers a comprehensive lineup of products and services to successfully addresswhatever concerns people may have about their hair. The Group operates a variety of hair-relatedbusinesses targeting men and women in Japan and overseas. In addition to manufacturing andselling custom-made and ready-made wigs and hairpieces, the Group assists with healthy hairgrowth, hair-transplant and other hair-related services. It also undertakes research anddevelopment into hair-regeneration technology. The Group’s global presence includes bases in15 nations, mainly spanning North America, Europe and Asia. To drive further growth, the Group ismarshalling all its resources to establish itself as a total hair solution company.

Contents

Consolidated Financial Highlights 01

Message From the Management 02

Business Summary 14

Product Lineup 18

Corporate Governance 19

Directors and Auditors 23

Aderans in Society 24

Financial Section 25

Subsidiaries (Consolidated Companies) 52

Corporate Data 53

1By Utilizing Our Expertise 08

3Through New Strategies 12

SPECIALFEATURE

Cautionary Statement with Respect to Forward-looking Statements

This annual report has been prepared for non-Japanese investors

and contains forward-looking statements that are based on

management estimates, assumptions and projections at the time

of publication. Aderans cautions you that a number of factors

could cause actual results to differ materially from expectations.

2To Potential Markets 10

Corporate DataAderans Company LimitedAs of February 28, 2007

Head Office 6-3, Shinjuku 1-chome, Shinjuku-ku, Tokyo 160-8429

Established March 1, 1969

Paid-in Capital ¥12,944 million

Number of Shares Authorized 138,000,000

Number of Shares Issued 41,713,388

Number of Shareholders 6,889

Stock Listings First Section of Tokyo Stock ExchangeFirst Section of Osaka Securities Exchange

Transfer Agent and Registrar The Chuo Mitsui Trust and Banking Company, Limited, Securities Department8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063

Number of Outlets 239

Number of Employees 1,973

Principal ShareholdersNumber of Shares and

Shareholding RatioThousands

Name of Shares (%)

1 Steel Partners Japan Strategic Fund (Offshore) LP 10,300 26.7

2 State Street Bank and Trust Company 4,723 12.2

3 Nobuo Nemoto 3,856 10.0

4 The Master Trust Bank of Japan, Limited (Trust Account) 1,706 4.4

5 Japan Trustee Services Bank, Limited (Trust Account) 1,517 3.9

6 The Dai-Ichi Mutual Life Insurance Company 726 1.9

7 Citibank London NA Azimut SGR SpA 541 1.4

8 Morgan Stanley and Company International Limited 522 1.4

9 Trust & Custody Services Bank, Limited (Security Investment Trust Account) 488 1.3

10 Investors Bank West Treaty 475 1.2

Notes: 1. The Company holds 3,001 thousand shares of its own shares in treasury stock.2. Those shares held by The Master Trust Bank of Japan, Limited, Japan Trustee Services Bank, Limited, and Trust & Custody

Services Bank, Limited. are the shares relating to their trust businesses.

0

1,000

2,000

3,000

4,000

06/3 4 65 7 8 9 10 11 12 07/1 2

Stock Price (Yen)Trading Volume

(Thousands of shares)

0

2,000

4,000

6,000

8,000

Stock Price Range

Aderans Annual Report 2007 53


Consolidated Financial HighlightsAderans Company Limited and Consolidated SubsidiariesYears ended the last day of February

Total ¥73,498

Total ¥73,498

2003 2004 2005 2006 2007

–40

–20

0

20

40

60

80

–10

–5

0

5

10

15

20

2003 2004 2005 2006 2007

–10

–5

0

5

10

15

Net Sales and Net Income (Loss)to Net Sales Ratio(Billions of yen) (%)

2003 2004 2005 2006 2007

–5.0

–2.5

0

2.5

5.0

7.5

–120

–60

0

60

120

180

Net Income (Loss) andNet Income (Loss) per Share(Billions of yen) (Yen)

Return on Assets andReturn on Equity(%)

Sales by ProductCategory(Millions of yen)

Sales by Region(Millions of yen)

Net Sales

Net Income (Loss) to Net Sales RatioNet Income (Loss)

Net Income (Loss) Per Share Return on Equity

OTHER BUSINESS 543

HAIR-RELATED BUSINESSES 72,955

Custom-made wigs 31,374

Ready-made wigs 15,605

Other products 5,811

Service revenues 20,162

Japan 54,707

North America 14,573

Europe 3,746

Asia excluding Japan 471

Thousands ofMillions of yen U.S. dollars

2007 2006 2007

Net sales ¥73,498 ¥72,690 1.1% $620,555Operating income 8,212 10,319 –20.4 69,334Net income 6,091 6,149 – 0.9 51,431

PER COMMON SHARE AMOUNTS (yen and dollars):

Net income ¥156.26 ¥150.51 3.8% $ 1.31Cash dividends applicable to the year 75.00 44.00 70.5 0.63

Total assets ¥91,658 ¥87,490 4.8% $773,879Shareholders’ equity 72,700 69,239 5.0 613,813Net cash provided by operating activities 5,073 10,399 – 51.2 42,835Depreciation and amortization 2,084 2,012 3.6 17,595Capital expenditures 3,701 2,565 44.3 31,248

OTHER YEAR-END DATA:

Number of shares outstanding (thousand) 38,712 39,256 –1.4% –Number of employees 5,787 5,418 6.8 –

Notes:1. The U.S. dollar amounts represent the arithmetical results of translating yen into U.S. dollars at the rate of ¥118.44 to US$1.2. Net income per common share is calculated based on the new accounting standard described in Note 11 on page 47.

% Change


Return on Assets


Message From the Management

Fiscal 2007, ended February 28, 2007, was a year during which the Aderans Group aimed at

sustained growth by focusing on acquiring new clients in the domestic men’s and women’s

markets through the launch of new products and the introduction of a new advertising strat-

egy. Unfortunately, earnings slumped due to intensified domestic market competition, as well

as the fact that in the men’s market, the number of clients in our target age group stagnated

due to the effects of changing demographics, while in the women’s market, the market envi-

ronment changed due to diversifying client needs. Earnings at Fontaine Co., Ltd., an Aderans

subsidiary and Japan’s leading supplier of ready-made wigs, were steady thanks to new

store openings, sales demonstrations at department stores, and the introduction of new

products. In other domestic hair-related businesses, we concluded a capital and business

tie-up with the Samson Group, which has a salon network based in the Chubu region. Since

2000, Aderans has operated new-concept salons, which complement our network of directly

operated salons. These function as a channel for acquiring new clients, and we judged that a

business tie-up with an established beauty and hairdressing salon operator would bring large

benefits in terms of securing human resources and making client acquisition more efficient.

By providing Aderans products and services suited to client needs, we can improve earn-

ings at salons, where profitability for conventional services has

room for growth, and we can also count on mutual synergies.

Overseas, in a bid to strengthen our presence in the Asian

market, we established Aderans Malaysia Sdn. Bhd. in October

2006, adding to our network of Asia operating bases in Shanghai,

China, and elsewhere. In North America, we strove to increase

market share and improve profitability through initiatives that

included strengthening our hair-transplant business.

Meanwhile, sales grew steadily in the ready-made wig

business thanks to success in stimulating demand

through product launches, and the aggressive

introduction of high-value-added products. In Europe,

sales of high-value-added ready-made wigs increased,

particularly in Sweden, the United Kingdom, and the

Netherlands. As a result, consolidated net sales rose

1.1% in fiscal 2007 to ¥73,498 million, operating income

declined 20.4% to ¥8,212 million, and net income declined

0.9% to ¥6,091 million.

Fiscal Summary

Left: Takayoshi Okamoto (Chairman and Chief Executive Officer)

Right: Katsuji Tokumaru (President and Chief Operating Officer)

Domestic Business

Competition between companies is currently intensifying in the hair-related industry as

competitors seek to differentiate themselves with products and services tailored to changing

client needs. The Aderans Group, positioned at the top of the industry, also faces these chal-

lenges, but at the same time, we believe that increased promotional activities by our rivals

will heighten interest in the hair-related industry and stimulate the overall market.

We are convinced that in order for the Aderans Group to achieve sustained growth in this

environment, we will need to undertake efforts to increase corporate value with a sense of

urgency and crisis. In fiscal 2008, the final year of our medium-term management plan, we will

review the environment for all businesses and map out growth strategies. In particular, we will

implement comprehensive reviews of advertising strategies, sales structures, and investment

plans in domestic core businesses in order to ensure a return to a growth track.

Until now, the core target for Aderans in the domestic men’s market has been men in

their early 20s for healthy hair-growth services and men in their late 20s and early 30s for

custom-made wigs. In order to increase the range of our core target, it will be important to

stimulate interest not only among men with concerns about thinning hair, but also among

men whose hair has not started thinning yet. We will also promote an efficient yet effective

advertising strategy, while keeping profitability in mind, in order to widen our current core

target ranging from the 20s to the 40s.

In terms of new products, we will be working to develop untapped markets, such as the

introduction of a revolutionary product that increases hair volume by the permeation of protein

into thin hair strands, as well as launching an upgraded version of “Aderans Vital Hair”, the

artificial hair product released in March 2006. In healthy hair-growth services, we will differenti-

ate ourselves by starting a hair-growth service conducted under the supervision of a physician.

We will aim to recover market share through these measures.

In the domestic women’s market for custom-made wigs, originally developed by

Aderans, competitors focusing on women’s products and services have begun to increase

their sales to women in recent years. We will incorporate artificial hair with the same qualities

as “Aderans Vital Hair” into women’s custom-made wigs to cement our dominant market

share in this area. We also plan to launch a new product featuring a novel attachment

method that eliminates user inconvenience in order to stimulate demand from elderly users.

We will strive to acquire new clients through advertising activities, promotions with a clearly

defined concept, and acceleration of the pace at which new products spread in the market.

Outlook for Fiscal 2008, Final Year of Medium-term Management Plan

02

04 Aderans Annual Report 2007 Aderans Annual Report 2007 05

Medium-term Management Plan 2008 (Fiscal 2006 to Fiscal 2008)Groupwide Medium-term Goals

• Get back on track to growth by improving domestic results and establishing a profit-

oriented structure for overseas operations.

• Undertake a full range of hair-related businesses, from practical products and services that

alleviate concerns about hair, or lack thereof, to fashionable hairpieces.

Medium-term Strategies

1. In the domestic men’s market, boost demand by maximizing position as total hair solution

provider with a full range of products, from wigs to medical procedures.

2. In the domestic women’s market, undertake joint efforts with Fontaine, a leader in the

fashion wig market.

3. In other domestic hair-related businesses, strengthen our network of high-value-added

salons, particularly new-concept salons, which carry wigs and other products.

4. In overseas markets, work toward higher market shares and enhanced profitability by

raising wig sales and promoting the hair-transplant business.

Results and TargetsConsolidated Fiscal 2006 (results) Fiscal 2007 (results) Fiscal 2008 (targets)

Net sales ¥72.6 billion ¥73.4 billion ¥80.0 billion

Recurring profit ratio 15.2% 12.0% 15.0%

In the ready-made wig business, we will focus on expanding the market through joint efforts

with our consolidated subsidiary, Fontaine. We will strengthen joint sales efforts with Fontaine

by means such as the initiative implemented in fiscal 2006, whereby Fontaine products are

recommended at all of Aderans’ directly operated salons. In addition, we will extend our sales

support system targeting beauty and hairdressing salons, Beauty Support System, and

accelerate directly operated Fontaine salon openings.

In other domestic hair-related businesses, we will promote Aderans Group products

and services through Samson beauty and hairdressing salons, and target higher profits by

operating a salon business that possesses Samson’s unique management style. We will

continue to search for capital and business tie-up opportunities with beauty and hairdressing

salons that understand the merits of our philosophy of uniting the hair-related business and

the salon business, and would like to turn this area into an engine for growth. In the domestic

hair-transplant business, we currently have associated clinics in Tokyo and Osaka, and we

will continue to increase the number of associated clinics.

Overseas Markets

The long-term goal of the Aderans Group is to attain a 50:50 ratio between domestic and over-

seas sales, and we are striving to capture top market share in every country that we operate in, as

well as to improve profitability. Our objective going forward in overseas markets is to capture

market share of at least 40%, and we will boost our growth at an accelerated pace.

In the wig business, we will strive to improve profitability on a number of fronts. Initiatives

will include introducing new products and developing new sales outlets in the North American

market, as well as consolidating our sales and distribution network and standardizing our

product collection in Europe. In addition, we will introduce our membership sales system,

“Aderans Hair Club”, and “Aderans Vital Hair” products to Taiwan, and strengthen the sales

structure while streamlining operations there.

Turning to the hair-transplant business, which is growing in North America, we will invest

our management resources efficiently—to expand our network, for example—and develop our

business aggressively. In parallel with our efforts to expand Bosley’s market share and further

enhance its profitability, we have concluded a basic agreement with Leavitt Management, Inc.,

allowing us to take over its hair-transplant business, run by Medical Hair Restoration, Inc.,

which ranks second in the U.S. hair-transplant industry. We also plan to advance the business

into other overseas markets. R&D in hair-regeneration technology is proceeding according to

schedule, and we expect to release practical data concerning commercialization in 2009.

In this way, the Aderans Group will execute various strategies to bolster its competitive

edge and the power of its brands as a total hair solution company.

The Aderans Group has strengthened its financial structure and engaged in returning profits

to shareholders from our previous medium-term management plan. One of our top manage-

ment priorities is the return of profits to shareholders, based mainly on dividend increases.

Our total shareholder return objectives based on consolidated net income are a consolidated

payout ratio of 30% or more and a total shareholder return ratio of 50% or more. However, if

no large applications of funds are required for M&A to increase corporate value or other major

investments during fiscal 2007 and 2008, then we will target a payout ratio of 30% or more

and a 100% total shareholder return ratio.

Fiscal 2007 marked the 14th consecutive year that Aderans has decided to increase

dividends per share. The annual dividend will be ¥75 per share, for a payout ratio of 47.7%,

and a total shareholder return ratio, including consolidated dividends and treasury stock

buybacks, of 101.3%.

In fiscal 2008, we will continue the abovementioned policies, and will aim for an annual

dividend of ¥80 per share.

Raising Shareholder Value


Aderans is driving further growthby marshalling all its resources toestablish itself as a total hairsolution company.

21 3

The Aderans Group will remain true to its mission statement of becoming a trustworthy orga-

nization with products and services in constant demand from clients and society as a whole.

In line with its basic policy of providing total hair solutions for everybody with concerns about

their hair, the group will continue to offer custom-made wigs, ready-made wigs, healthy hair-

growth services and hair transplants, as well as conduct R&D into hair-regeneration technology.

We will pursue activities from a client-oriented perspective and work to elicit a higher level of

satisfaction from all stakeholders, including clients, shareholders, and employees.

Conditions continue to be harsh in the domestic market, with declining birthrates and

increased competition, and we believe the keys to winning the battle will be developing

products and services that can differentiate us from the competition, and building up chan-

nels for capturing clients. The mainstream of the current hair-related market is hair-

replacement products such as wigs, healthy hair-growth services, and medical products.

The Aderans Group has established a solid business structure that can respond to diverse

client needs, not only in regard to expanding current demand, but also in anticipation of

heightened demand in the medical field, such as hair transplants. In addition, various

businesses will be operated with a medium- to long-term perspective in order for Aderans,

as the leading company in the hair-related industry, to realize healthy development of the

industry overall.

We will continue to establish the Aderans Group’s position as a total hair solution

company through flexible ideas unfettered by preconceptions as well as our wealth of

experience, and unceasing R&D.

On behalf of the Board of Directors, we ask all of our stakeholders for their continued

encouragement and support.

Future Vision for Aderans

June 2007

TAKAYOSHI OKAMOTOChairman and Chief Executive Officer

KATSUJI TOKUMARUPresident and Chief Operating Officer



1SPECIAL

By Utilizing Our Expertise

Custom-made Wigs

Hair TransplantsReady-made Wigs

Hair-regenerationResearch andDevelopment

In 1968, the founder of Aderans started selling custom-made men’s wigs after identifying latent

demand for these products in a market dominated at the time by ready-made wigs for women.

The following year, Aderans Company Limited was formally established. Since then, the Aderans

Group has expanded its operations: nationwide advertising campaigns have led to continuous

growth in the men’s market, while the Group responded to strong demand for custom-made wigs

among women by simultaneously cultivating the women’s market. In 1985 Aderans acquired

Fontaine, Japan’s leading supplier of stylish ready-made wigs for women. Subsequently, in 1987,

Aderans led the field when it carved out a new market by launching healthy hair-growth services

for people concerned about future hair loss; this boosted sales even further. In 2000, Aderans

started opening its new-concept salons, a move into the beauty and hairdressing business that

was cemented by its September 2006 conclusion of a capital and business alliance with Samson

Co., Ltd., a beauty and hairdressing salon network. Going forward, we intend to pursue future

growth through initiatives including further alliances, should the opportunity arise.

Overseas, Aderans extended its operations to the U.S. in 1979, and to Europe and Asia

during the 1990s. In 2001, the Group furthered its efforts to establish itself as a total hair solution

company by acquiring Bosley, Inc., which leads the U.S. hair-transplant market with state-of-

the-art technology. Bosley’s hair transplants—which are essentially medical procedures—are

the standard treatment for hair loss in the U.S. Since making this acquisition, we have been

assisting in hair-transplant operations in Japan with the intention of expanding the business

here. We hope this will lead to a wider range of options for Japanese people with hair-loss

concerns. At the same time, we are conducting research and development relating to hair-

regeneration technology at Aderans Research Institute, Inc.—in the U.S., with a view to establish-

ing a timeframe for commercialization in 2009.

Thanks to a full-line service extending from the manufacture and sale of wigs to after-sales

care, the Aderans Group is the only corporation of its type capable of responding to diversifying

client needs with high-value-added products and services. This integrated manufacturing and

sales framework enables us to develop new high-quality products to drive the Group’s profitability.

The Aderans Group will continue to create business opportunities by accurately responding to

the needs of clients regarding a range of hair-related concerns. By developing highly profitable

businesses, the Group will target sustainable growth.

FEATURE

1969

2007

The Aderans Group is working to create new businessopportunities by offering a variety of solutions toaddress the full range of hair-related concerns.

SPECIALFEATURE

Beauty andHairdressing

Services

Healthy Hair-growthServices Custom-made wigs for men

Hair transplants

Custom-made wigs for women

Healthy hair-growth services

08 Aderans Annual Report 2007


2SPECIAL

FEATURE

SPECIALFEATURE

127.7

12.9 28.6

41.5

To Potential

Potential Japanesefemale clients

Potential Japanesemale clients

Japanese population

Female Population Trends in Japan(million)

Worldwide Hair Loss Rates forMale Adults

(Source: Population Census of Japan)

Over 70s 60s50s 40s

40

20

10

30

0

2000 2005 2010

(Source: Aderans Company Limited)

(million)

Adult males concernedabout hair thinning

Females aged 50 and over

(million)

1982

30

20

10

0

26.05%

15.60%

1995 1998 2001 2004

Domestic Hair Loss Ratesfor Male Adults

Hair Loss Population(Source: Aderans Company Limited)

Hair Loss Ratio

MarketsThe Aderans Group is moving boldly to gain accessto potential markets, relying on its well-establishedtrack record combined with advanced technologies.


For 24 years since 1982 Aderans has been conducting surveys into rates of hair loss among adult

males in 21 countries and regions across the world. According to these surveys, the countries of

Europe and North America have the highest rates of hair loss, while the Japanese rate has increased

by 167% in the past 22 years. Japan now has a hair loss rate of 26.05% of the adult male popula-

tion (approximately 12.93 million people), which puts it in 14th place among the countries surveyed. In

China—one of the giants of Asia—the rate of hair loss is comparatively low at 19.04%, but the size

of the population means that the estimated number of people suffering hair loss is 88.76 million, the

highest of all the countries surveyed. In fact, the number of people experiencing hair loss is rising not

only in Japan, but across the globe. In addition to the generally accepted genetic causes, this trend

reflects a complex combination of a variety of factors including stress and social issues, the types of

food people eat, and changes in the communities where they live. The global hair-replacement mar-

ket represented by these potential clients is expected to grow still further going forward.

In the domestic women’s market, the demand potential for women’s hair-replacement prod-

ucts and services is expanding as the number of women aged 50 and over—Aderans’ target

demographic—increases*. More women are seeking to use wigs as fashion accessories to hide

gray hair or add volume. As a result, interest in wigs that are easy to use and stylish has been

growing year by year.

* Source: Japan’s 2005 national census

According to research conducted by Aderans, its advanced techniques and long track record

have helped it to secure leading shares in the key domestic markets: custom-made wigs and

healthy hair-growth services for both men and women, and ready-made wigs for women.

Having firmly established itself in domestic markets, Aderans forged ahead of its peers in the

industry to expand its operations on a global scale. This included efforts to increase market shares

in Asia: Aderans now has production plants in Thailand and the Philippines, as well as sales and

service locations in China, Taiwan, South Korea, Singapore and Malaysia.

In the U.S., where plastic and cosmetic surgery has become the norm, hair transplants are now

the most widely accepted method of treating hair loss, and Aderans subsidiary Bosley commands

the top share in the market. The Group’s wig businesses in North America and Europe are also

expanding steadily. We have already achieved high shares in the U.K., Belgium and Swedish mar-

kets, and aim to achieve shares of over 40% in all our markets across the two regions in future.

The Aderans Group will continue its efforts to secure leading market shares and bolster profit-

ability by meeting client requirements in each of its overseas markets as well as in Japan. In this

way it will establish itself as a total hair solution company.

Hair Loss Hair LossRatio Population

Location (%) (million)1. Czech Republic 42.79 1.582. Spain 42.60 6.503. Germany 41.24 12.634. France 39.10 7.875. U.S.A. 39.04 40.27

14. Japan 26.05 12.93

21. China 19.04 88.76

......

......

......


SPECIALFEATURE

3SPECIAL

FEATURE

Through New Strategies

The Aderans Group is increasing its marketshare through an aggressive marketingstrategy and new sales channels.

Traditionally Aderans’primary means of attractingclients

Aderans works withFontaine to increaseopportunities for directclient contact

Aderans now offers consultationsto the clients of newly-acquiredbeauty salons

Domestic Marketing System

+

StrategicAdvertising Group Synergy

•TV

•Magazines

•Web sites

•Telephones

•Postcards

•Promotionthrough Fontaine

•Promotionthrough Beautyand HairdressingSalons

•Promotionthrough Samsongroup

Services via Nationwide Network

Consultations

Hair Check(Free)

After-sales Services

Custom-madeWigs, Ready-madeWigs and Healthy

Hair-relatedServices

•••


Advertising+

After-sales Services Fontaine Co., Ltd.Beauty andHairdressing Salons

At Aderans we consider advertising to be vital in attracting a wide range of potential clients, both

male and female, to our products and services. We have therefore positioned advertising as a key

marketing strategy. It is difficult to approach people with hair loss concerns directly and that is why

we make full use of advertising with broad-based appeal as an effective means of attracting clients.

We supplement television commercials with the use of magazines, newspapers, the Internet, and

other media to let as many potential clients as possible know what makes Aderans products and

services special. In our advertising we also emphasize the sympathetic relationship Aderans nurtures

with its clients in finding solutions to their hair-related concerns. Advertising approaches are tailored

according to age and gender of the target demographic. Our television-based strategy is carefully

planned to broadcast commercials at the right frequency and to ensure the most effective allocation

of advertising expenditure. Meanwhile, we are reinforcing the appeal of our Internet advertising by

using streaming video to showcase the attributes of our products and a wide range of other content.

For new male and female clients attracted through our advertising we offer in-depth counseling

with an emphasis on client satisfaction. Counselors and technical experts of the highest caliber

examine the client’s hair, offer advice, and provide a hair-replacement product that meets their

needs. They also provide after-sales services. Our staff are the driving force behind our company:

by building solid relationships of trust through the counseling process, they enable us to win new

clients and retain repeat clients, thereby driving sales.

In another strategy, we are increasing our opportunities for direct client contact in the women’s

market in collaboration with wholly owned subsidiary Fontaine, which owns a well-known ready-made

wig brand. Our ability to attract clients in this way is founded on the trust inspired in clients by Aderans

and Fontaine as companies. This trust is crucial to tap into the potential client base of women over 50

looking for stylish wigs. Moreover, the relationship between the two companies allows a strategy of

mutual product promotion: for example, a client who hesitates to buy an Aderans custom-made wig

due to reasons such as cost, may be encouraged to try a ready-made wig by Fontaine. Conversely,

clients who in the past have bought Fontaine wigs and who want to buy a wig of an even higher quality

may be encouraged to try a custom-made wig by Aderans. We will continue to stage wig fairs and try-

on events, as well as conduct other initiatives to build on this collaborative relationship.

In December 2000, Aderans made its debut in the beauty and hairdressing industry with its new-

concept salons, which marked the start of its bid to develop a new client base. In September 2006,

Aderans built on this initiative by concluding a capital and business alliance with Samson, a beauty

and hairdressing salon network. The integration with this industry means that, by providing such

services as regular hair cutting, we will be able to understand client needs related to hair replacement

products and services, enabling us to provide new services to meet these needs. We will continue to

look for further opportunities for integration. The Aderans Group is offering products and services

that fully reflect the input gained from direct client contact. By establishing these products and services

as its engine for growth, the Aderans Group is aiming to raise corporate value.

Non-consolidated Salon Network

Counseling Offices 9Regular Salons 140Ladies’ Salons 23Satellite Salons 51New-concept Salons 11DN Salons 5

Total 239

(As of February 28, 2007)


Business Summary

Strategy for

A fundamental aspect of business for Aderans is to encourage men concerned about hair loss to

contact us. Promotional activities, especially advertising, are therefore a vital marketing tool. Several

years ago, we focused our advertising activity to enhance operating efficiency. Unfortunately, this strategy

had unfavorable side-effects: a drop in orders from new clients. Consequently, we are stressing

promotional activities as a key strategy in our current medium-term management plan.

Fiscal 2007, the fiscal year under review, saw the March 2006 introduction of custom-made wigs

featuring “Aderans Vital Hair”, a new artificial hair for men. In conjunction with this breakthrough, we

took steps to generate demand for custom-made wigs through promotional activities, mainly television

commercials. In July, we hired a well-known female personality who is popular with our target

audience of men in their 20s and 30s, and started a new series of commercials. Introducing hair

checks via the Internet* and a comprehensive catalog of our products, the new commercials are

designed to increase the number of inquiries from clients. We also conducted a campaign offering free

trials of “Pinpoint”, our range of hair-volumizing products, from October to December. Meanwhile,

prompted by a steady annual increase in Internet orders, we renewed our corporate web site and

conducted aggressive Internet-based promotional activities. For example, having realized that

television commercials, which are only a few seconds long, cannot fully communicate the attributes of

“Aderans Vital Hair”, we started using streaming video instead. We also included web site content

relating to “Home Course”, a home-based hair-growth service.

Unfortunately, intensified competition within the industry meant that both new and repeat sales to

male clients declined year on year. We were also not able to fully spread the word about the competitiveness

of our products.

Looking ahead, we intend to take a number of steps to target earnings expansion. Initiatives will include

launching “Hairceda”, a hair-volumizing product geared toward thin hair, and differentiating ourselves from

the competition by offering new value-added hair-growth services under medical supervision. We will also

expand our target age group and further improve “Aderans Vital Hair”.

* A service offered free-of-charge whereby clients can confirm how healthy their hair is by answering an online questionnaire.

Aderans TechnologyHairceda

Our new product, “Hairceda”, infuses protein (Sericin**) into each individual hair to increase volume.

Derived from revolutionary new technology, it differs from both hair-growth services and hair-replace-

ment products. Offering tangible results from just a one-hour procedure, “Hairceda” is an innovative

product for those worried about the volume of their hair.

Main Objective: Boost demand by maximizing position as a total hair solution providerwith a full range of products, from wigs to medical procedures

Main Objective: Undertake joint efforts with Fontaine, a leader in the fashion wig market

Domestic Men’s MarketStrategy for

Domestic Women’s Market

Originally, women in their 60s and 70s formed our main target age group for custom-made wigs in the

domestic market. To stimulate new demand by appealing to a younger age group, however, in 2003 we

complemented our existing Eve Series by launching the Sifore Series, aimed at women in their 40s and

50s. Under this two-brand strategy, we have worked to win new clients by releasing original products

every other year in conjunction with promotional activities.

In March 2006, we launched “eve Fine”, a new product in the Eve Series. The launch of the health-

oriented product, which incorporates germanium, was accompanied by a promotional campaign.

Despite these measures, however, sales to new clients, new sales of custom-made wigs decreased

year-on-year due to intensified competition within the industry and diversification of client needs. Given

this situation, from November we started supplementing existing commercials for our two main brands

with fashion-focused commercials for our custom-made wigs. Targeting a wide demographic of

women aged 50 to 70 years old, the aim of these commercials is to generate demand for custom-

made wigs in general. We also aired “eve Fine” commercials in December that featured this product’s

compactness and ease of use. As a result of these initiatives, we saw signs of a recovery in new orders

in the fourth quarter.

During fiscal 2007 we also focused on utilizing the Internet in addition to our existing advertising

media including television, newspapers, and magazines. After we started airing television commercials

introducing our Internet web site in September, we received more orders from clients who had initially

contacted us via the web site. We also continued to hold wig fairs and try-on events across the country.

Fontaine, which handles ready-made wigs, posted sales and profit increases thanks to new store

openings, wig demonstrations at department stores and the introduction of new products. One of our

strategies under the current medium-term management plan is to undertake joint efforts with Fontaine,

and to this end, during fiscal 2007 staff at Aderans’ directly operated salons throughout Japan continued

suggesting Fontaine’s ready-made wigs to cost-conscious clients who shied away from the pur-

chase of a custom-made wig. As a result, approximately 10% of Aderans’ new orders from female

clients were for Fontaine wigs. We expect that as sales of both Aderans and Fontaine products increase

simultaneously, synergies will be generated. By leveraging these synergies to acquire new clients and

increase demand from repeat clients for replacement of ready-made wigs, we aim to expand profits.

Aderans Technologyeve Fine Quick

“eve Fine Quick” features a new type of clip developed through Aderans’ unique technology that makes it

easy to attach the wig, even with one hand. It uses revolutionary artificial hair offering the same properties as

“Aderans Vital Hair”, enabling a natural look that is no different from one’s own hair in terms of appearance

and texture. It is an innovative product that allows anyone to enjoy a fashionable look easily and quickly.**SericinA highly moisturizing andcohesive protein with acomposition similar to theamino acids in human hairand skin, making it suitablefor sensitive skins.

Before After Before After

2003 2004 2007200620050

5

10

15

20

Principal Product Sales toMale Clients in JapanNon-consolidated(Billions of yen)

New Repeat

2003 2004 2007200620050

2,000

4,000

6,000

0

5,000

10,000

15,000

Advertising Expenses and Number ofNew Clients (Male)Non-consolidated(Billions of yen)

Advertising expenses (left)Number of new clients (right)

1990 1995 2007200520000

25

50

75

100

Breakdown of Sales toNew Female Clients by AgeNon-consolidated(%)

Over 70s 60s

50s Under 50s

2003 2004 2007200620050

25

50

75

100

Breakdown of Sales toNew Male Clients by AgeNon-consolidated(%)

Over 50s 40s 30s

20s Under 20s

Principal Product Sales toFemale Clients in JapanNon-consolidated(Billions of yen)

Aderans New Aderans RepeatFontaine

2003 2004 2007200620050

10

20

30

40

2003 2004 2007200620050

2,000

4,000

6,000

0

10,000

20,000

30,000

Advertising Expenses and Number ofNew Clients (Female)Non-consolidated(Billions of yen)

Advertising expenses (left)Number of new clients (right)


Main Objective: Strengthen our network of high-value-added salons, particularly new-concept salons, which carry wigs and other products

Strategy forOther Domestic Hair-related Businesses

Strategy forOverseas Markets

In September 2006, we boosted the development of our new-concept salon business—which offers the

potential to generate high-value-added—by concluding a capital and business tie-up with the Samson

Group. Through regular haircutting and styling services at barbers and hairdressing salons, we will aim to

identify client demand for our products, and translate this demand into earnings. We will continue to look

for promising M&A opportunities for our hairdressing salon network.

One of our businesses involves helping to promote hair-transplant services in Japan. To develop this

business, we opened an associated clinic in Osaka, which began operations in December 2006. The

Osaka clinic augments our associated clinic in Tokyo, opened in February 2004. We support our associ-

ated clinics by offering the hair-transplant-related technical capabilities of our U.S. subsidiary Bosley. The

concept of hair transplants is still new in Japan, so we are using advertising to raise awareness of this

option. The future holds potential, however: demand for hair transplants is expected to grow domestically,

and we will continue to take a proactive approach to opening associated clinics in Japan.

In April 2006, we opened the Wellness Hair Salon at the Cancer Institute Hospital (Ariake) as our

third in-hospital hair salon. We will continue to support people fighting diseases through hair-related

products, such as custom-made wigs for people that have lost their hair due to various causes

including illness, injury or chemotherapy.

Aderans TechnologyThe Aderans R&D Headquarters in Niigata Prefecture leads the Group’s product and technology devel-

opment. It is thanks to the activities of the R&D Headquarters that high-quality Aderans-brand wigs and

other hair-replacement products can be manufactured. Two examples of technologies developed here

are molding and artificial skin. Molding technology ensures well-fitting wigs through faithful reproduction

of head shape and other unique characteristics, while artificial skin offers a color and texture extremely

close to that of real skin as the base for wigs.

Ready-made wig sales are expanding in North America, where we are working to elicit demand with new

products and sales of high-value-added items expanded steadily. Profits are also trending upwards due

to such initiatives as increased revenue and the closure of unprofitable divisions. The hair-transplant

business at Bosley recorded large increases in sales and profits as revamped television commercials,

database-oriented marketing activities, and improvements in technological capabilities bore fruit.

In Europe, we enacted measures tailored to the market environments in the six countries where

we do business. In particular, sales of high-value-added products manufactured within the Group

expanded in Sweden, the United Kingdom, and the Netherlands, leading to sales and profit increases for

the region overall.

Our aggressive expansion in the Asian region continued as we followed our establishment of a new

Shanghai subsidiary in February 2006 by establishing a new subsidiary in Malaysia in October 2006.

In the Taiwanese market, we focused on strengthening our sales system and improving business effi-

ciency geared toward medium- to long-term growth, and advertising and other expenses were con-

trolled. This led to a decrease in sales, but the operating loss was reduced. Meanwhile, operating

income at Aderans Thai., Ltd., an Aderans Group production facility, decreased due to the impact of

stagnant sales of custom-made wigs in Japan. However, yen-denominated sales increased due to Thai

baht appreciation, and Asia excluding Japan as a whole posted a sales increase and a profit decline.

The long-term goal of the Aderans Group is to attain a 50:50 ratio between domestic and over-

seas sales. To this end, we are working to increase market share and enhance profitability in the wig

business in all our markets, and working to increase market share, enhance profitability, and achieve

globalization in the hair-transplant business.

Aderans TechnologyA hair transplant is an advanced technological process whereby a thin strip of the patient’s own scalp with

healthy hair roots is surgically removed from the back or side of the head which, depending on the

individual’s genetic makeup, tend to be the areas least likely to suffer hair loss. The hair is then relocated,

one graft at a time, to areas where hair is thin. Since the patient’s own hair is transplanted, rejection is rare.

This is already the mainstream solution to thinning hair in the U.S.

The Aderans Group is also promoting R&D in hair regeneration, whereby hair is regenerated at the

cell-tissue level, at the Aderans Research Institute in the U.S., with a view to establishing a timeframe for

commercialization in 2009. Cell regeneration entails removing tissue from underneath the hair roots and

extracting the hair follicle cells. These cells are then cultured until they multiply, and injected back into

balding areas, enabling hair regrowth from a greater number of hair-forming cells.

The Aderans Group AbroadBasic Strategy: To establish a presence in Europe and North America, primarily through mergers with

and acquisitions of wholesalers, and to create new markets in Asia, excluding Japan, through the estab-

lishment of retailing outlets based on the business model used in Japan.

North America: A total of 10 consolidated companies, including Aderans Holding Co., Inc., four whole-

salers of men’s and women’s wigs, as well as Aderans, Inc., which operates retail stores, Bosley, which

is engaged in the hair-transplant business, and the Aderans Research Institute, which is pursuing

advances in hair-regeneration technology.

Europe: A total of 11 consolidated companies, including holding company Aderans Europe B.V., in the

Netherlands, which oversees subsidiaries in France, Germany, Belgium, the Netherlands, the United

Kingdom and Sweden.

Asia, excluding Japan: Subsidiaries in Taiwan, Thailand, South Korea, Singapore, the PRC and Malaysia,

which concentrate on retail operations.

Group Production Bases: Aderans Thai, World Quality Co., Ltd., and Aderans Philippines, Inc., world-

class facilities with a production volume of 1,184,510 wigs in fiscal 2007 and a combined workforce of

about 7,000 people including outsourcing contractors.

2003 2004 2007200620050

30

60

90

Sales by geographical segmentConsolidated(Billions of yen)

Japan Asia, excluding Japan

North America Europe

Hair Regeneration

A beauty and hairdressing salon operated by Samson

Ready-made wigs

Culturing

Injection

Hair regrowth

Main Objective: Work toward higher market shares and enhanced profitability by raisingwig sales and promoting the hair-transplant business


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.

Internal structures pertaining to the formation, execution and supervision of decisions by the executive team are

described below.

Corporate StructureAderans maintains a corporate auditor system. Under this system, the following two executive teams ensure that

business activities are undertaken in accordance with prevailing laws and the Company’s Articles of Incorporation.

We have clearly defined the responsibility for making decisions and implementing them, with the Chief Executive

Officer (CEO) accountable for long-term Group strategies and the Chief Operating Officer (COO) accountable for

executing measures aimed at achieving the goals of stated strategies.

Board of DirectorsChaired by the president and COO, this highest decision-making authority on business strategies meets at least once a

month to discuss key matters of business and determine responses necessary to move ahead. The president or the director

responsible for the business activity in question will ensure that appropriate steps are taken to execute proposed measures.

Board of AuditorsThe Board of Auditors comprises two full-time auditors and two outside auditors, who get together on the day the

Board of Directors has met to exchange opinions on the appropriateness of decisions formed by the Board of

Directors. The full-time auditors offer the outside auditors various updates, including a report on the content of topics

explored by the Executive Committee, a recap of items discussed in the Reporting Sessions, updates on the execution

of business activities by the Board of Directors and operating divisions, the results of audits executed by the Internal

Auditing Division, staffed by five people, and data obtained at various meetings, including those of the Executive

Committee. As a group, the Board of Auditors discusses the information brought to the table by the full-time auditors.

Executive CommitteeChaired by the president and COO, the Executive Committee comprises managing directors and the full-time auditors.

The committee meets one week prior to the Board of Directors’ meeting to select topics for discussion at that meeting

and to engage in preliminary discussions of these topics to confirm validity under prevailing laws and Articles of

Incorporation as well as acceptability vis à vis established social standards. The committee will call upon outside

experts when specialized knowledge is required.

Reporting SessionsChaired by the president and COO, these sessions are attended by managing directors, directors responsible for

executing operations and the full-time auditors. Sessions convene twice a month.

These sessions provide opportunities for directors to get regular updates on actual business activities and to confirm the

content of reports with other members. When necessary, general managers will be invited to provide progress on activities in

their respective divisions. General managers may also be asked to clarify new business proposals, which session participants

will evaluate in terms of feasibility and legality as well as potential interest to clients and acceptance in society in general.

Outside experts will be called on for their opinions when specialized knowledge is required.

Basic Policy

Status

Product Lineup

Domestic Men’s Market

Domestic Women’s Market

Overseas Markets

Hair-volumizing products

Cyberhair CA30Offers the client a series of custom-made wigs with progressively more hair, enabling a gradualtransformation similar to natural hair growth.Men’s Aderans 1Fully bespoke custom-made wigs designed to look as natural as possibleMen’s Aderans Flex Hair Augmentation SystemOffers the client a series of custom-made wigs with progressively more hair, enabling a gradualtransformation similar to natural hair growth.

Pinpoint Fix 2Increases hair volume by attaching several artificial hairs to each natural hairHair FixAugments thinning hair in a specific area, such as along the partingHair SkinAugments the hairline—an awkward area to deal with—by affixing artificial hair attached to an ultra-thinbase of artificial skinNew Product : HaircedaVolumizes individual strands of hair by infusing protein

Physical EsthéRestores the health of damaged hairHair Support Aqua 3Creates optimum scalp conditions for healthy hair growth


Hair-transplant support businessProvides Bosley’s technical capabilities to associated clinics

Custom-made wigsEve Series—New Produc t : eve Fine QuickTargets women in their 60s and 70s, offering enhanced volume in addition to concealing grey hairSifore Series 5Targets women in their 40s and 50s, offering enhanced volume in fashionable hair styles

WIG/TOPPIECE/POETE 6High-fashion ready-made wigs designed with a focus on the latest trends

Reage—Total Care CourseTreats hair from the roots to the ends and improves scalp condition to promote vigorous hair growthReage—Damage Care Course 7Thoroughly repairs damaged hair, restoring its natural beauty

Ready-made wigs 8

Wholesale and retail of ready-made wigs

Hair transplants

R&D into hair-regeneration technologyComprises research and development into regeneration of living material, including hair

3

5

7

10

9

10

2

8 8Main products

Transfers hair from the sides or back of the client’s own head to areas where hair is thinning

9

New Product

New Product

Custom-made wigs and healthy hair-growthservices available in certain regions

4

6


Ready-made wigs (Fontaine)

Sales of hair-care products 4

Custom-made wigs

1


Internal ControlsThe Board of Directors determines basic policy for internal controls, in accordance with the Company’s stated

business philosophy and business direction. Policy content is presented below.

Ensuring the activities of directors and staff conform to prevailing laws and the Company’s Articles of IncorporationActivities will be guided by a level of ethics and values demanded by society, based on respect for the law, of course,

as well as corporate philosophy and the business parameters of the Group.

Decisions on important matters that impact the Company or the Group as a whole will be formed through discus-

sions by the Executive Committee and in reporting sessions, in line with established rules governing duties and powers.

The Company relies on its directors to undertake their respective duties in all sincerity, but audits by corporate auditors

will verify that said duties have been executed lawfully.

Custody and management of information related to directors’ dutiesInformation relating to the execution of duties will be stored and maintained in line with rules governing the handling of

information assets. The paper or electronic documents to be kept are listed below, and the custody period will be

based on times set forth in rules for document management.

• Minutes of the General Meeting of Shareholders and related materials

• Minutes of Board of Directors’ meetings and related materials

• Minutes of meetings chaired by directors and related materials

• Key documents relating to other executive duties

• Internal memos passed around to directors to obtain overall approval of a decision

Directors and general managers will provide these documents whenever an auditor or someone working on an

audit at the instruction of an auditor asks to look at or copy a document deemed necessary to the audit.

Ensuring efficient execution of directors’ dutiesRepresentative directors will require all directors to execute their duties, based on a division of duties and in line with

the authority allocated to directors to undertake said duties.

Important matters that impact the operations of the Company or the Group as a whole will be clarified by directors

or general managers at regularly scheduled reporting sessions with directors in attendance. If an obstacle to the

efficient execution of duties exists, a solution will be presented to the appropriate executive forum.

Other measures to control risk leading to lossesTo preempt the appearance of risk leading to losses that would impede sustainable corporate development, the

Company established a structure that prevents risk from turning into crisis. This structure hinges on the In-House

Improvement Committee and an in-house hotline for reporting alleged illegal activities or socially unacceptable behavior

by directors or employees.

Directors ascertain the status of risk management efforts in respective areas of responsibility and provide updates

at regularly scheduled reporting sessions. The risk of losses and measures to control such risk are always under the

direct review of members of reporting sessions.

If information were to leak out or an emergency, such as an accident or natural disaster, were to arise, an emer-

gency response team would convene immediately under the direction of the president to ensure a swift and accurate

response to the situation.

Ensuring fair business practices of listed companies as well as the corporate group that comprises the parent

company and its subsidiariesTransactions between companies under the Group umbrella must be appropriate and comply with prevailing laws, account-

ing principles, tax requirements and social standards as well as in-house management rules for affiliated companies.

At meetings of the Group executive and at meetings for overseas affiliates, the CEO will indicate the direction of

Group policy and the path that should be taken in executing operations. Local executives will implement said policy

and ensure that operations follow the designated path.

While respecting the autonomy of each company, the Treasury Division, the Manufacturing Headquarters and the

Overseas Division at Aderans’ headquarters will verify budgets and the success of business plans on a quarterly basis.

Corporate auditors, as members of the Board of Auditors, will maintain a close relationship with the Company’s

accounting firm, the Treasury Division, the Manufacturing Headquarters and the Overseas Division to expedite effective,

accurate audits of the Aderans Group’s consolidated businesses.

Matters related to the system for employees asked by auditors to assist in directors’ audits and these employees’

neutrality vis à vis directorsAuditors may ask the Internal Auditing Division to provide items pertinent to the execution of an audit. In addition,

depending on the importance of a specific audit, auditors may require the assistance of employees to facilitate the

process, and in such cases, directors must cooperate with the auditors’ assistants. Employees asked by corporate

auditors to provide items pertinent to the execution of an audit shall accept neither guidance nor orders from directors

or the manager of the Internal Auditing Division that pertain to the execution of said audit.

Auditors will provide directors with reports on the business skills and work attitude of the employees who assist

them, and directors will include these reports in their evaluation of the employees.

System for directors and employees to report to auditors or the Board and other systems for reporting to auditorsReports to auditors cover the following items:

• Reports on handling responses in the event risks, such as accidents or natural disasters, arise.

• Status reports on audits by the Internal Auditing Division.

• Reports containing questions from auditors and confirmed answers.

• Other items that require reports from directors and general managers.

Risk Management — Information Monitoring and Disclosure

Monitoring informationTo date, directors and departments responsible for disclosure have sifted through risks and highlighted pertinent data

for distribution. From now on, however, risks faced by operating divisions will also be examined in detail. A list of

relevant information will be prepared and each risk will be graded according to importance and then monitored.

Aderans recently established the Information Protection Committee to safeguard information assets, including

personal data.

As its name implies, this committee has a mandate to protect information collected by the Company. It is respon-

sible for preventing leaks and, in the unlikely event that data is errantly disclosed, it will pinpoint the breach and initiate

improvements to preclude a second incident.

The activities of the committee are supported by an information protection discussion group, which utilizes cross-

sectional representation to identify key information in each division for safeguarding and undertakes awareness

programs to prevent leaks.


Aderans is currently restructuring its risk information management system. The switch to the new system —

anytime from fiscal 2007 — will soundly reinforce information management.

If information were to leak out or an unforeseen accident or a scandal were to arise, an emergency response team,

headed by the president, would convene immediately to deal with the situation and execute appropriate risk manage-

ment responses. Depending on the circumstances, investors and the market at large may require explanations, and we

have a system in place to handle this as well. In addition, we are enhancing in-house training programs to promote

greater understanding of compliance among directors and employees and make management and staff conscious of

behavior conforming to all applicable laws and social standards.

Disclosing informationAderans actively discloses business information essential to a solid reputation for management transparency. The

process hinges on close ties among the Investor Relations Division, which is responsible for disclosing information, the

Legal Affairs Division, which confirms prior to disclosure that the content of business activities undertaken by the

Company conforms to prevailing laws and the Company’s Articles of Incorporation, and the Treasury Division, which

monitors financial data for the Company and its subsidiaries.

Remuneration for Directors and AuditorsTotal annual remuneration for directors ¥490 million

Total annual remuneration for auditors ¥38 million

Portion paid to external auditors ¥6 million

Bonuses based on services described in Article 2-1 of

the Certified Public Accountants Law ¥24 million

No bonuses were paid for services other than those noted under the aforementioned law.

Structure to Ensure Efficient Execution of Other Audits by Corporate Auditors

Cooperation with accounting firmCorporate auditors receive status updates from the Company’s accounting firm at the end of the interim and year-end

audit of accounts and may ask questions of accounting firm auditors.

In addition, in situations where the participation of both the accounting firm and corporate auditors is deemed

necessary, they may work together.

Cooperation with Internal Auditing DivisionThe Internal Auditing Division is an in-house auditing department under the direct supervision of the president, and as

such, it does not fall within the corporate auditors’ chain of command and is not subject to direct requests from

corporate auditors. The results of business audits undertaken by the Internal Auditing Division are provided to the

president and the full-time auditor and may be of help to corporate auditors in their own business audits.

Corporate auditors may confirm internal control–related issues and ambiguities with the Internal Auditing Division

and, when necessary, ask for advice.

Corporate auditors’ audits parallel those of the Internal Auditing Division, which occur at irregular intervals, based

on a yearly division schedule, to ascertain routine audit status.

Appointment of outside auditorsOf the four corporate auditors, two — a lawyer and a certified public accountant — are appointed from outside the

Company. From their respective professional perspectives, they confirm that the Company is adhering to established

laws and its Articles of Incorporation, and they carefully watch to make sure that the Company maintains business

activities and strategies based on the premise that a company exists only as long as it has clients.

Private, Capital and Business Relationships or Conflict of Interest Between the Companyand Its Outside Directors and Outside AuditorsThe Company does have two outside directors and two outside auditors, but it does not maintain private, capital or

business relationships with these directors and auditors nor does any other potential conflict of interest exist between

the Company and these directors and auditors.

Accounting Firm for AderansAderans maintains an audit contract with Kyobashi & Co., which undertakes audits of the Company as required under

the Commercial Code and the Securities and Exchange Law.

The names of the certified public accountants who participated in the audit of Aderans’ books for fiscal 2007 and

the number of consecutive years these accountants have audited Aderans’ books, as well as the composition of the

team assisting these accountants in the audit, are listed below.

Names of certified public accountants who undertook audit and number of consecutive years auditing AderansIsao Kishi, representative and managing partner 21 years

Yutaka Ishihara, representative and managing partner 5 years

Tsukasa Komiyama, representative and managing partner 4 years

Composition of team assisting accounting auditors 8 certified public accountants

Chairman and Chief Executive OfficerTAKAYOSHI OKAMOTO*1975 Joined Aderans Company Limited1983 Director of the Company1987 Managing Director of the Company1991 Director of the Company1995 President of the Company1999 General Manager of sales and

marketing headquarters2004 Chairman and Chief Executive Officer

of the Company(present post)

President and Chief Operating OfficerKATSUJI TOKUMARU*1983 Joined Aderans Company Limited1996 General Manager of Chugoku branch1998 General Manager of Kansai sales

division2002 General Manager of corporate planning

division2003 Director of the Company2004 President and Chief Operating Officer

of the Company(present post)

DirectorsTSUGUO TANAKAIn charge of corporate planningheadquarters

HIROYASU YAMAKAWAGeneral manager of administrativedivision

MUTSUO MINOWAGeneral manager of overseas division

TAKEHISA FUKAZAWAOutside director

SHINGO MAJIMAOutside director

Directors and Auditors

Supreme Advisors and DirectorsNOBUO NEMOTOHARUO OKITA

Standing Corporate AuditorsFUMIO ARAIYUJI HIRANO

Corporate AuditorsMASAAKI KATAGIRI**IWAO TOIGAWA**

* Representative director

** Outside auditor

Aderans Company LimitedAs of May 24, 2007


Aderans in Society

At Aderans we strive through our hair-related businesses to promote “Wellness”, both as the basis

for individuals to maintain a healthy lifestyle and remain healthy emotionally, and for societies to

maintain healthy living environments. However, providing products and services that further these

aims is not our only aspiration: we aim also to be a company that reaches out to the hearts and

minds of its clients. We have identified Wellness as the guiding principle for our corporate activities,

and we are contributing to society through measures to promote community facilities and services,

culture, sport and environmental protection.

A notable example of such initiatives is the Aderans Love Charity Campaign. Initiated in 1985,

the campaign involves presenting custom-made wigs to children who have lost their hair due to

medicinal side-effects, alopecia, injury, burns or other causes. In doing so, we aim to help mitigate

the emotional impact of their hair loss.

In another initiative, Aderans helped to invigorate and further develop the Japanese hairdress-

ing industry through Tokyo Hair Beauty College. The college offers a choice of courses for the hair

stylists of the future.

Overseas, we support local communities in Thailand and the Philippines, where our production

facilities offer stable employment in a healthy working environment. In these countries we also play

our part in promoting the environmental protection measures detailed below.

In 2001 we teamed up with Japan’s Ministry of Economy, Trade and Industry to establish the

Japan Hair Industry Association. This body advocates stability and transparency in the disclosure

practices of domestic companies operating hair-related businesses, including the supply of wigs

and services to promote healthy hair growth. The formation of this association was prompted by

the fact that providers of hair-related products and services now have a significant impact on

society. Takayoshi Okamoto, Aderans Chairman and CEO, is the association’s representative

director and his mandate is to inspire greater consumer confidence in the industry while promoting

sound development of the industry itself.

June Sponsored the 5th Aderans Wellness Open on the Senior Professional Golf

Association Tour circuit

July Sponsored the 12th Aderans Boys and Girls Soccer Festival

August Sponsored the 10th Aderans Summer Holidays Children’s Golf Events

October-November Sponsored the 22nd Aderans Love Charity Campaign

November Sponsored the 22nd Aderans Human Forum

ISO certificationAderans Thai and World Quality, Aderans production facilities, were quick to tackle environmental

protection and quality control issues. In 1999, both production facilities were certified with ISO

14001 for environmental management systems and ISO 9002 for quality control.

Major environmental protection measures• Prevent water pollution from factory wastewater

• Prevent air pollution within the facility

• Ensure safe processing of industrial waste

• Promote effective use of available resources

• Improve working conditions within the facility

Major community activities in fiscal 2007

Environmental protection and quality control at Aderans Thai and World Quality

Aderans Love Charity Campaign

Aderans Boys and Girls Soccer Festival

Aderans production facility


Financial Section

Consolidated Five-year Summary 25

Consolidated Financial Review 26

Consolidated Balance Sheets 36

Consolidated Statements of Income 37

Consolidated Statements of Shareholders’ Equity 38

Contents

Consolidated Five-year SummaryAderans Company Limited and Consolidated SubsidiariesYears ended the last day of February

Results of Operations

Financial Position

Key Ratios (%)

Other Year-end Data

Millions of yen

2007 2006 2005 2004 2003

Net sales ¥ 73,498 ¥ 72,690 ¥ 70,625 ¥ 73,881 ¥ 77,112Cost of sales 13,726 12,690 12,326 13,146 13,080Gross profit 59,772 60,000 58,299 60,734 64,032Selling, general and administrative expenses 51,560 49,680 49,830 49,938 51,058Operating income 8,212 10,319 8,468 10,796 12,973Income before income taxes andminority interests 7,878 10,889 (192) 10,229 12,742

Net income (loss) 6,091 6,149 (3,568) 5,001 6,173Capital expenditures 3,701 2,565 2,704 5,078 2,537Research and development costs 1,557 977 703 591 519Depreciation and amortization 2,084 2,012 2,322 2,368 2,285

Net income (loss) ¥ 156.26 ¥ 150.51 ¥ (88.02) ¥ 120.46 ¥ 147.82Shareholders’ equity 1,877.95 1,760.45 1,671.40 1,798.67 1,737.41Cash dividends applicable to the year 75.00 44.00 38.00 32.00 30.00

Current assets ¥ 35,985 ¥ 35,257 ¥ 36,492 ¥ 35,029 ¥ 39,282Current liabilities 11,281 12,546 10,214 11,778 13,638Interest-bearing debt 2,035 – – – –Shareholders’ equity 72,700 69,239 67,477 73,884 70,303Total assets 91,658 87,490 83,140 91,048 92,864

Operating income to net sales 11.2 14.1 12.0 14.6 16.8Net income (loss) to net sales 8.3 8.4 (5.1) 6.8 8.0Shareholders’ equity to total assets 79.7 79.1 81.2 81.2 75.7Return on equity 8.6 8.9 (5.0) 6.9 8.9Return on assets 6.8 7.2 (4.1) 5.4 6.7Interest-bearing debt ratio 2.2 – – – –

Number of shares outstanding (thousand) 38,712 39,256 40,371 40,997 40,357Number of employees 5,787 5,418 5,457 5,373 5,406

Amounts per Shareof Common Stock(in yen)

Consolidated Statements of Cash Flows 39

Notes to the Consolidated Financial Statements 40

Report of Independent Auditors 49

Non-consolidated Five-year Summary 50

Non-consolidated Operating Data 51


The scope of consolidation for the Aderans Group during fiscal 2007, ended February 28, 2007,

covers Aderans Company Limited and 30 consolidated subsidiaries, comprising five domestic

subsidiaries and 25 overseas subsidiaries. In fiscal 2007, the following companies were added to

the scope of consolidation: Hair Trust Holding Co., Ltd. (newly established); Best Move Co., Ltd.

(newly acquired); Samson Co., Ltd. and Nodin Co., Ltd. (through increased investments). ADE

Co., Ltd. was removed from the scope of consolidation, owing to its liquidation.

Aderans is a global group engaged in comprehensive hair-related businesses. Drawing on its

consolidated management framework, Aderans conducts business from a client-oriented perspec-

tive and works to elicit a higher level of satisfaction from clients, shareholders and employees. The

Company’s efforts are based on a mission statement that emphasizes development into a trustworthy

organization with products and services in constant demand from clients and society as a whole.

Essentially, the Company seeks to epitomize the “good company” ideal.

In North America and Europe, the Aderans Group achieved higher sales and profits from opera-

tions but sluggish new sales and intensifying market competition in Japan resulted in net sales

edging up only 1.1% over fiscal 2006 to ¥73,498 million ($620 million).

Millions of yen

Operating data 2007 2006 % Change

Net sales ¥73,498 ¥72,690 1.1%Operating income 8,212 10,319 –20.4Net income 6,091 6,149 –0.9Net sales per employee 12.7 13.4 –0.7 ptsNet income per employee 1.05 1.14 –0.08 pts

Number of employees 5,787 5,418 6.8

Business results for fiscal 2007, ended February 28, 2007

Consolidated Financial Review


Cost of sales grew 8.2% to ¥13,726 million ($115 million), and the cost of sales ratio rose 1.2

points to 18.7%.

Cost of Sales and Selling, GeneralMillions of yen

and Administrative Expenses 2007 2006 % Change

Cost of sales ¥13,726 ¥12,690 8.2%Selling, general and administrative expenses 51,560 49,680 3.8

Advertising expenses 12,660 12,199 3.8Personnel expenses 20,418 19,759 3.3Other 18,480 17,721 4.3

Selling, general and administrative (SGA) expenses increased 3.8% to ¥51,560 million ($435

million), mainly due to advertising expenses, which increased 3.8% to ¥12,660 million ($106

million) and personnel expenses, which rose 3.3% to ¥20,418 million ($172 million).

As a result, operating income declined 20.4% year on year to ¥8,212 million ($69 million). In

fiscal 2007, Aderans launched two new products in the domestic market: Aderans Vital Hair for

male clients and eve Fine for female clients. In conjunction with these launches, Aderans devel-

oped new advertising campaigns making use of popular personalities, but the campaigns’

effectiveness was less than projected. Moreover, intensifying market competition also lessened the

response to Aderans’ advertising campaigns, with the result that new sales to both male and

female clients declined. Considering these results, Aderans is now fundamentally reassessing its

advertising strategy in order to create advertising campaigns that are effective in generating a

positive response from the potential clients they target.

2003 2004 2005 2006 20070

20

40

60

80

Cost of Sales, SGA Expenses and Operating Incometo Net Sales Ratios

Cost of sales ratio 17.0 17.8 17.5 17.5 18.7SGA expenses ratio 66.2 67.6 70.5 68.3 70.1Operating incometo net sales ratio 16.8 14.6 12.0 14.1 11.2

(%)

2003 2004 2005 2006 2007–5.0

–2.5

0

2.5

5.0

7.5

–10

–5

0

5

10

15

Net Income (Loss),and Net Income (Loss) to Net Sales Ratio

Net income (loss) 6.1 5.0 (3.5) 6.1 6.0Net income (loss)to net sales ratio 8.0 6.8 (5.1) 8.4 8.3

(Billions of yen) (%)


In addition to the drop in operating income, net income before income taxes and minority interests

fell 27.7% year on year to ¥7,878 million ($66 million), mainly due to the posting of ¥141 million and ¥552

million for an unrealized loss on investment securities and provision for allowance for doubtful accounts,

respectively. Net income edged down 0.9% year on year to ¥6,091 million ($51 million).

Capital expenditures soared 44.3% to ¥3,701 million ($31 million). Funds were used for a

number of purposes, including the establishment, relocation and remodeling of salons, and system-

related investments by the parent company. Funds were also used to open directly operated salons

by Fontaine, to add new consultation offices at Bosley in the U.S., and to improve hair-regeneration

research facilities. Depreciation and amortization increased 3.6% to ¥2,084 million ($17 million).

Yen

Per Share Data 2007 2006 % Change

Net income ¥ 156.26 ¥ 150.51 3.8%Shareholders’ equity 1,877.95 1,760.45 6.7Cash dividends 75.0 44.0 70.5

North America,Japan Europe and Asia Average/Total

Key Data by Geographic Region 2007 2006 2007 2006 2007 2006

Sales growth ratio –2.7% 0.8% 14.2% 11.0% 1.1% 2.9%

Operating income to net sales 18.2% 22.7% 8.2% 6.9% 15.6% 19.1%

Operating income (Millions of yen) ¥9,939 ¥12,768 ¥1,543 ¥1,143 ¥11,483 ¥13,911

Asset turnover ratio (times) 1.03 1.03 1.04 1.07 1.03 1.03

Operating income to total assets 18.7% 23.3% 8.6% 7.4% 16.1% 19.8%

Review of Operations by Geographic Region

2003 2004 2005 2006 20070

20

40

60

80

Net Sales by Geographic Region(Billions of yen)

Japan 61.8 58.4 55.8 56.2 54.7

Asia 0.7 0.5 0.4 0.4 0.4

North America 12.4 12.1 11.7 12.6 14.5

Europe 2.1 2.6 2.6 3.3 3.7

Total 77.1 73.8 70.6 72.6 73.4

2003 2004 2005 2006 2007–5,000

0

5,000

10,000

15,000

20,000

Operating Income (Loss) by Geographic Region

Japan 16,509 14,560 12,266 12,768 9,939Asia 1,371 988 793 1,000 728North America (1,343) (1,045) (688) (75) 528Europe (11) 4 107 218 286Eliminations (3,552) (3,712) (4,010) (3,591) (3,271)Total 12,973 10,796 8,468 10,319 8,212

(Millions of yen)


JapanSales from operations in Japan are mainly generated by three companies: Aderans and Fontaine,

and Samson which operates a network of hair salons.

Aggregate domestic sales, including intersegment sales, declined 2.7% year on year to

¥54,760 million ($462 million). A breakdown of sales by main product shows that sales of custom-

made wigs dropped 4.2% year on year to ¥30,139 million. This was mainly due to the fact that,

although Aderans launched Aderans Vital Hair, eve Fine and other new products and vigorously

conducted advertising campaigns, these activities did not lead to new sales. Sales of ready-made

wigs rose 3.0% year on year to ¥10,183 million, mainly attributable to increased sales of

Fontaine’s products. Sales of other hair-related products decreased 7.1% to ¥4,502 million.

Service revenues declined 2.0% to ¥9,338 million. Other business income rose 7.5%, to ¥543

million, while intersegment sales decreased 14.8%, to ¥52 million.

ADERANS’ PERFORMANCE

Non-consolidated net sales at the parent company declined 5.2% year on year to ¥42,645 million.

Cost of sales edged down 0.4% to ¥7,570 million for a cost of sales ratio of 17.8%, up 0.9

percentage points from fiscal 2006.

SGA expenses increased marginally by 0.1% year on year to ¥29,823 million. The main

components were advertising expenses, which edged down 0.5% to ¥8,927 million and personnel

expenses, which decreased 2.6% to ¥9,203 million. Research and development expenses totaled

¥1,692 million ($14 million), reflecting a 62.1% year on year increase in the cost of research into

hair-regeneration technology.

Millions of yen

Aderans’ Net Sales Product Category 2007 2006 2005 2004 2003

Custom-made wigs ¥28,008 ¥29,247 ¥29,588 ¥31,599 ¥32,950Hair Fix 97 115 132 108 167Pinpoint 1,663 1,987 1,585 1,908 2,300Hair Support 5,202 5,564 5,520 5,516 5,997Physical Esthé 1,096 1,210 1,105 1,191 1,455

Subtotal 36,066 38,125 37,933 40,325 42,872

Other custom-made wigs 143 77 63 84 68Ready-made wigs 202 74 23 8 16Other sales 3,754 3,985 4,161 4,687 5,449Service revenues 2,479 2,728 2,702 2,652 2,482

Total ¥42,645 ¥44,990 ¥44,883 ¥47,757 ¥50,888

Operating income decreased 30.9% year on year to ¥5,251 million ($44 million). This significant

drop in operating income, compounded by the Company recording ¥686 million ($5 million) in provision

for allowance for investment losses and ¥600 million ($5 million) in provision for allowance for doubtful

accounts, resulted in net income decreasing 16.4% year on year to ¥5,598 million ($47 million).


FONTAINE

Fontaine is a sales subsidiary of the Aderans Group with a share of about 30% of the women’s

ready-made wig market in Japan. The company focuses on three key sales channels—department

stores, directly operated salons and beauty salons—to reach its market.

During fiscal 2007, Fontaine focused on opening new sales outlets, introducing new products

and conducting sales demonstrations. These efforts paid off with sales rising 2.6% year on year to

¥11,352 million. Operating income also increased, rising 3.5% year on year to ¥1,505 million.

Aderans’ New Male Clients by Age Aderans’ New Female Clients by Age

(%)

Under 20 2.920s 42.430s 25.540s 12.650s 8.960s 5.170 and over 2.6

(%)

Under 20 0.520s 0.830s 1.840s 3.950s 17.860s 36.170 and over 39.1

2003 2004 2005 2006 20070

5

10

15

20

25

Aderans’ Principal Product Sales by Gender

Female 23.3 22.3 21.6 21.5 20.7Male 19.5 17.9 16.2 16.5 15.3

(Billions of yen)

2003 2004 2005 2006 20070

5

10

15

20

25

Aderans’ Principal Product Salesto New and Repeat Clients

New 18.5 15.6 13.8 13.7 11.5Repeat 24.3 24.7 24.0 24.3 24.4

(Billions of yen)


Asia (excluding Japan)In Asia, outside Aderans’ home base of Japan, the Aderans Group has established a solid

presence in Taiwan, China, Singapore, Thailand, South Korea, the Philippines and Malaysia. There

are four consolidated subsidiaries: Aderans Inc. (Taiwan), which is a sales company; and Aderans

Thai., Ltd., World Quality Co., Ltd., and Aderans Philippines, Inc., which all manufacture wigs and

hair-replacement products.

Sales growth in Asia slackened slightly because in the year under review Aderans Inc. (Taiwan)

focused on establishing a marketing base directed toward medium- and long-term growth in the

Taiwan market and curbed advertising and other expenses. Furthermore, sales of wig products

among consolidated subsidiaries were sluggish. As a result, the operating income of Aderans

Thai, a production base, declined 35.5% compared to the previous fiscal year.

A breakdown of sales by main product category shows that sales of custom-made wigs

decreased 5.2% year on year to ¥235 million, sales of ready-made wigs declined 16.9%, to ¥69

million and sales of other hair-related products fell 21.9%, to ¥57 million. However, service

revenues rallied 18.7% to ¥108 million. Intersegment sales expanded 4.0% to ¥4,611 million.

As a result, sales in the Asia region grew 3.1% year on year to ¥5,083 million ($42 million),

while operating income declined 27.2% year on year to ¥728 million ($6 million).

North AmericaIn North America, the Aderans Group is represented by 10 consolidated subsidiaries under the

umbrella of Aderans Holding Co., Inc., including four subsidiaries that wholesale men’s and

women’s wigs. Among the other subsidiaries are Aderans, Inc., involved in retailing, Bosley, Inc.,

engaged in the hair-transplant business and Aderans Research Institute, Inc., which is pursuing

the development of hair-regeneration technology.

A breakdown of aggregate sales by main product reveals that sales of ready-made wigs

increased 5.4% year on year to ¥3,012 million, reflecting demand generated by the introduction of

new products and the steady expansion of sales of high-value-added products. Sales of custom-

made wigs rose 6.7% to ¥399 million. Service revenues from hair-transplant business increased

16.6%, to ¥10,573 million, reflecting the benefits of revamped television commercials, database-

oriented marketing activities, and improved technological capabilities. Sales of other hair-related

products jumped 72.1%, to ¥587 million. Intersegment sales also surged 77.1%, to ¥1,688 million.

As a result, sales in North America increased ¥2,666 million, or 19.6%, year on year to

¥16,261 million ($137 million). Operating income totaled ¥528 million ($4 million), a turnaround

from the previous year’s operating loss of ¥75 million.


EuropeThe Aderans Group’s European presence is maintained by 11 consolidated subsidiaries, with

operations in France, Germany, Belgium, the Netherlands, the United Kingdom and Sweden.

In fiscal 2007, these subsidiaries succeeded in expanding sales of high-value-added products

manufactured within the Group, especially to the markets in Sweden, the United Kingdom and

the Netherlands. By product, sales of custom-made wigs increased 13.4% year on year to ¥599

million, and sales of ready-made wigs rose 9.6% to ¥2,340 million. Sales of other hair-related

products increased 20.5% to ¥663 million, and service revenues climbed 49.5% to ¥142 million.

As a result, sales increased ¥434 million, or 13.1%, year on year to ¥3,746 million ($31 million).

Operating income rose ¥68 million, or 31.2%, year on year to ¥286 million ($2 million), due to the

increased sales and improved profit margins.

Cash and cash equivalents at February 28, 2007 stood at ¥17,956 million ($151 million), up 13.0%

from a year earlier.

Net cash provided by operating activities declined 51.2% to ¥5,073 million ($42 million). Cash

inflow resulted primarily from ¥7,878 million in income before income taxes and minority interests

and ¥2,150 million in depreciation and amortization, while the main factor in cash outflow was

¥4,491 million in payment of income taxes.

Net cash provided by investing activities totaled ¥258 million ($2 million), a turnaround from

net cash used in investing activities of ¥2,532 million for the previous year. This reflects the fact

that ¥8,907 million received in proceeds from sales of marketable securities outweighed the

outlays of ¥5,991 million to buy marketable securities and ¥2,473 million to acquire property,

plant and equipment.

Net cash used in financing activities fell 26.2%, to ¥4,090 million ($34 million). This sum

reflects cash outflows of ¥1,831 million to pay dividends and ¥3,118 million to acquire treasury

stock, and cash inflow of just ¥1,081 million in proceeds from sales of treasury stock upon

exercise of stock options.

Cash Flow Status


Millions of yen

Summary of Cash Flows Statements 2007 2006 % Change

Net cash provided by operating activities ¥ 5,073 ¥ 10,399 –51.2%Net cash provided by (used in) investing activities 258 (2,532) 89.8Net cash used in financing activities (4,090) (5,545) –26.2Net change in cash and cash equivalents 2,010 2,540 –20.9Cash and cash equivalents at the beginning of year 15,896 13,356 19.0Cash and cash equivalents at the end of year 17,956 15,896 13.0

Financial Position At February 28, 2007, total assets were ¥91,658 million ($773 million), up ¥4,167 million, or 4.8%, from

a year earlier. Total liabilities, as of the same date, were ¥18,636 million, up ¥483 million, or 2.7%.

Current assets rose ¥728 million, or 2.1%, to ¥35,985 million ($303 million), mainly due to

increases in cash and time deposits, and notes and accounts receivable.

Fixed assets increased ¥1,241 million, or 4.6%, to ¥28,144 million ($237 million), mainly due to

increases in buildings and structures, and land. Intangible assets rose ¥1,074 million, or 19.6%, to

¥6,552 million ($55 million), reflecting the increase in software.

Current liabilities declined ¥1,265 million, or 10.1%, to ¥11,281 million ($95 million). As a result,

the current ratio (ratio of current assets to current liabilities) rose 38 percentage points to 319%.

Total shareholders’ equity amounted to ¥72,700 million ($613 million), and the equity ratio

was 79.3%.

2003 2004 2005 2006 2007–10

–5

0

5

10

Free Cash Flows

Net cash provided byoperating activities 9.7 7.5 7.8 10.3 5.0

Net cash provided by(used in) investing activities (3.3) (6.3) (8.3) (2.5) 0.2Free cash flows 6.3 1.2 (0.4) 7.8 5.2

Free cash flows = Net cash flows provided by operating activities +Net cash flows provided by (used in) investing activities

(Billions of yen)

Gross Cash Flows and Capital Expenditures

2003 2004 2005 2006 2007–2

0

2

4

6

8

10

Gross cash flows 8.5 7.5 (1.0) 8.2 8.4Capital expenditures 2.5 5.0 2.7 2.5 3.7

Gross cash flows = Net income + Depreciation and amortization

(Billions of yen)


Millions of yen

Summary of Financial Position 2007 2006 % Change

Total assets ¥91,658 ¥87,490 4.8%Total liabilities 18,636 18,153 2.7Shareholders’ equity 72,700 69,239 5.0Equity ratio (%) 79.3 79.1 0.2 pts

Dividend PolicyOne of the Company’s top management priorities is the return of profits to shareholders. The basic

policy is to achieve this by maintaining stable dividends, further raising dividends and repurchasing

treasury stock. Our targets are a payout ratio of at least 30% and a total shareholder return ratio,

including treasury stock buybacks, of at least 50%, based on consolidated net income.

2003 2004 2005 2006 2007–10

–5

0

5

10

Return on Equity and Return on Assets

Return on equity 8.9 6.9 (5.0) 8.9 8.6Return on assets 6.7 5.4 (4.1) 7.2 6.8

(%)

2003 2004 2005 2006 20070

5

10

15

20

25

30

0

60

120

180

240

300

360

Working Capital and Current Ratio

Current assets 39.2 35.0 36.4 35.2 35.9Current liabilities 13.6 11.7 10.2 12.5 11.2

Working capital 25.6 23.2 26.2 22.7 24.7Current ratio (%) 288.0 297.4 357.3 281.0 319.0

(Millions of yen) (%)

2003 2004 2005 2006 20070

0.2

0.4

0.6

0.8

1.0

Asset Turnover Ratio

Asset turnover ratio 0.83 0.80 0.81 0.85 0.82

(%)

2003 2004 2005 2006 20070

400

800

1,200

1,600

2,000

0

1

2

3

4

5

Interest-Bearing Debt Ratioand Debt to Equity Ratio

(Millions of yen) (%)

Interest-bearing debt – – – – 2,035Interest-bearingdebt ratio – – – – 2.2

Debt to equity ratio – – – – 2.8


However, if the Group does not execute any large applications of funds during the terms

ending February 2008 and February 2009, then, notwithstanding the aforementioned basic policy,

Aderans will target a payout ratio of at least 30%, and a total shareholder return ratio of 100% of

consolidated net income.

Millions of yen

2007 2006 2005 2004 2003

Treasury stock buybacks ¥3,110 ¥3,695 ¥ 1,400 ¥(3,194) ¥1,986Dividends 2,903 1,744 1,534 1,287 1,210Total shareholder returns 6,013 5,439 2,934 (1,907) 3,196Net income 6,091 6,149 (3,568) 5,001 6,173Payout ratio (%) 47.7 28.3 – 25.7 19.6Total shareholder return ratio (%) 98.7 88.4 – – 51.7Return on equity (%) 8.6 8.9 (5.0) 6.9 8.9

(1) RELIANCE ON OVERSEAS PRODUCTION AND CERTAIN PRODUCTSi. Aderans’ principal wig production facilities are located overseas, in Thailand and the Philippines.

If the production capabilities of these facilities were undermined by fire, natural disaster, labor

unrest or some other obstacle to normal operations, or if the supply of products or access to

necessary materials were hampered by a change in the political or economic environment in the

aforementioned countries, Aderans would have difficulty procuring alternative products since the

Group’s wigs and hair-replacement products require the Company’s proprietary know-how in

the production process. Therefore, the inability to make and/or distribute and export wigs and

hair replacement products could have a serious impact on Aderans’ fiscal results.

ii. If competitors were to develop and bring to market such products as revolutionary topical

hair growth agents and oral remedies, or develop and commercialize medical techniques

superior to prevailing hair-transplant procedures, the impact on Aderans’ fiscal results

would be considerable.

(2) R&DAderans’ R&D activities are currently directed toward the pursuit of hair-regeneration techniques.

The Company cannot guarantee that its efforts to develop such techniques will be successful, or

that such efforts, if they were successful, would generate profits in the short term. In addition, it

is difficult to predict with accuracy at the present time what the scale of demand might be for

hair-regeneration techniques, should such methods be marketable at some point in the future.

(3) INFORMATION MANAGEMENTThe Company is engaged in businesses for ordinary citizens who have concerns about their

hair. If information about clients should leak outside of the Company’s system, the disclosure

could cause considerable psychological or emotional anguish to those clients and could

significantly affect the Company’s business activities.

(4) MAINTAINING TALENTThe business activities of Aderans are subject to laws and regulations pertaining to barber and

beauty salon services, and 60% of the Company’s employees are qualified barbers or

beauticians. If the Company is unable to retain skilled barbers and beauticians at its salons,

the resulting shortage of essential personnel could adversely affect the Company’s provision

of services and operating performance.

Risk Information


LIABILITIES ANDSHAREHOLDERS’ EQUITY

Consolidated Balance SheetsAderans Company Limited and Consolidated SubsidiariesFor the years ended February 28, 2007 and 2006


2007 2006 2007

Current assets:Cash and time deposits (Note 4) ¥ 14,525 ¥ 14,238 $ 122,641Marketable securities (Note 6) 7,700 9,306 65,018Notes and accounts receivable 5,565 5,167 46,992Allowance for doubtful accounts (121) (96) (1,022)Inventories (Note 5) 4,364 4,046 36,847Deferred tax assets (Note 8) 1,159 1,262 9,792Other current assets 2,790 1,332 23,558

Total current assets 35,985 35,257 303,828Investments and long-term loans:

Long-term loans receivable 1,058 31 8,933Allowance for doubtful accounts (551) – (4,660)Investment securities (Note 6) 9,816 10,053 82,878

Total investments and long-term loans 10,322 10,085 87,152Property, plant and equipment, at cost:

Land 11,902 11,611 100,490Buildings and structures 31,896 30,346 269,301Machinery and equipment 7,706 6,602 65,066Construction in progress 113 50 961Other 219 156 1,856

Total 51,838 48,767 437,676Less accumulated depreciation (23,694) (21,864) (200,051)

Property, plant and equipment, net 28,144 26,902 237,625Intangible assets 6,552 5,478 55,327Security deposits 3,917 3,752 33,077Deferred tax assets (Note 8) 3,126 2,712 26,394Other assets 3,687 3,376 31,137Allowance for doubtful accounts (78) (74) (663)

Total assets ¥ 91,658 ¥ 87,490 $ 773,879

Current liabilities:Short-term bank borrowings ¥ 745 ¥ – $ 6,298Long-term debt due within one year 31 – 265Notes and accounts payable 1,632 1,408 13,782Accrued income taxes (Note 8) 843 3,246 7,120Accrued expenses 1,126 1,093 9,510Deferred tax liabilities (Note 8) 6 4 57Other current liabilities 6,894 6,793 58,214

Total current liabilities 11,281 12,546 95,250Long-term liabilities:

Long-term bank borrowings 1,067 – 9,010Long-term debt 190 – 1,604Accrued severance and retirement benefits—employees (Note 7) 3,529 3,552 29,801Accrued severance and retirement benefits—directors andcorporate auditors 953 813 8,052

Deferred tax liabilities 32 19 274Other long-term liabilities 1,581 1,220 13,355

Total long-term liabilities 7,355 5,606 62,099Total liabilities 18,636 18,153 157,349

Minority interests 321 97 2,716Shareholders’ equity:

Common stock, no par valueAuthorized—138,000 thousand shares for 2007 and 2006Issued—41,713 thousand shares for 2007 and 2006 12,944 12,944 109,287Additional paid-in capital 13,157 13,157 111,088Retained earnings 55,042 51,206 464,727Unrealized gain on available-for-sale securities 602 626 5,089Foreign currency translation adjustments 10 (1,379) 88Treasury stock, at cost (9,057) (7,314) (76,469)Premitive right on common stock 0 – 1

Total shareholders’ equity 72,700 69,239 613,813Total liabilities, minority interests and shareholders’ equity ¥ 91,658 ¥ 87,490 $ 773,879

See Notes to the Consolidated Financial Statements.

ASSETS



2007 2006 2007

Net sales ¥73,498 ¥72,690 $620,555Cost of sales 13,726 12,690 115,891

Gross profit 59,772 60,000 504,663

Selling, general and administrative expenses (Note 10) 51,560 49,680 435,328Operating income 8,212 10,319 69,334

Other income (expenses):Interest and dividend income 311 180 2,627Interest expenses (29) (11) (247)Unrealized loss on investment securities (141) – (1,190)Exchange gain on foreign currency translation 32 325 270Loss on disposal of property, plant and equipment (58) (162) (499)Other income and expenses, net (447) 238 (3,778)

Total other income (expenses) (333) 569 (2,812)

Income before income taxes and minority interests 7,878 10,889 66,521Income taxes (Note 8)

Current 2,040 5,152 17,231Deferred (152) (412) (1,283)

Minority interests 101 – 856Net income ¥ 6,091 ¥ 6,149 $ 51,431

Net income per common share (note 11) (in the whole yen) ¥156.26 ¥150.51 $ 1.27


Consolidated Statements of IncomeAderans Company Limited and Consolidated SubsidiariesFor the years ended February 28, 2007 and 2006



2007 2006 2007

Common stock:Balance, beginning of year ¥12,944 ¥12,944 $109,287Balance, end of year(2007—41,713,388 shares; 2006—41,713,388 shares) ¥12,944 ¥12,944 $109,287

Additional paid-in capital:Balance, beginning of year ¥13,157 ¥13,157 $111,088Balance, end of year ¥13,157 ¥13,157 $111,088

Retained earnings:Balance, beginning of year ¥51,206 ¥42,905 $432,339Increase in retained earnings:

Net income 6,091 6,149 51,431Decrease in retained earnings:

Cash dividends 1,831 1,647 15,461Bonuses to directors and corporate auditors 130 – 1,099Loss on exchange of treasury stock 294 201 2,483

Balance, end of year ¥55,042 ¥51,206 $464,727

Unrealized gain (loss) on available-for-sale securities:Balance, beginning of year ¥ 626 ¥ 230 $ 5,285Net change (23) 395 (190)Balance, end of year ¥ 602 ¥ 626 $ 5,089

Foreign currency translation adjustments:Balance, beginning of year ¥ (1,379) ¥ (2,140) $ (11,645)Net change 1,389 761 11,733Balance, end of year ¥ 10 ¥ (1,379) $ 88

Treasury stock:Balance, beginning of year ¥ (7,314) ¥ (3,618) $ (61,759)Net change (1,742) (3,695) (14,710)Balance, end of year(2007—3,001,021 shares; 2006—2,456,597 shares) ¥ (9,057) ¥ (7,314) $ (76,469)

Premitive right on common stock:Balance, beginning of year ¥ – ¥ – $ –Net change 0 – 1Balance, end of year ¥ 0 ¥ – $ 1


Consolidated Statements of Shareholders’ EquityAderans Company Limited and Consolidated SubsidiariesFor the years ended February 28, 2007 and 2006



2007 2006 2007

Cash flows from operating activities:Income before income taxes and minority interests ¥ 7,878 ¥10,889 $ 66,521Depreciation and amortization 2,150 2,082 18,154Loss on retirement of fixed assets 175 264 1,483Amortization for consolidation difference 595 631 5,024Change in allowance for employees’ bonus (28) 139 (238)Change in allowance for directors’ andcorporate auditors’ bonus 111 – 944

Change in accrued severance benefits—employees (93) 184 (793)Unrealized loss on investment securities 141 – 1,190Interest and dividend income (311) (180) (2,627)Interest expenses 29 11 247Change in notes and accounts receivable (268) (235) (2,265)Change in inventories (100) (21) (851)Change in notes and accounts payable 124 60 1,049Change in guarantee deposits 85 53 725Bonuses to directors and corporate auditors (130) – (1,099)Other (1,074) (449) (9,075)

Subtotal 9,284 13,431 78,391Proceeds from interest and dividend income 309 188 2,617Payment of interest (29) (11) (247)Payment of income taxes (4,491) (3,209) (37,925)

Net cash provided by operating activities 5,073 10,399 42,835

Cash flows from investing activities:Change in time deposits 2,981 131 25,172Payment for purchase of marketable securities (5,991) (11,995) (50,590)Proceeds from sales of marketable securities 8,907 18,692 75,205Payment for purchase of property, plant and equipment (2,473) (2,017) (20,885)Payment for purchase of intangible assets (1,361) (475) (11,498)Payment for purchase of investment securities (2,667) (7,283) (22,523)Proceeds from sales of investment securities 605 9,085 5,113Payment for purchase of investment in subsidiaries (27) – (229)Other 286 (640) 2,421

Net cash used in investing activities 258 (2,532) 2,184

Cash flows from financing activities:Payment to acquire treasury stock (3,118) (4,977) (26,325)Proceeds from sales of treasury stockupon exercise of stock options 1,081 – 9,131

Cash dividends paid (1,831) (1,648) (15,466)Other (222) 1,080 (1,875)

Net cash used in financing activities (4,090) (5,545) (34,536)

Effects of exchange rate changes on cash and cash equivalents 768 219 6,488Net change in cash and cash equivalents 2,010 2,540 16,972Cash and cash equivalents at the beginning of year 15,896 13,356 134,214Cash and cash equivalents held by newly

consolidated subsidiary at beginning of year 50 – 423Cash and cash equivalents at the end of year ¥17,956 ¥15,896 $151,610

See Notes to the Consolidated Financial Statements

Consolidated Statements of Cash FlowsAderans Company Limited and Consolidated SubsidiariesFor the years ended February 28, 2007 and 2006


1. Basis of Presenting Consolidated Financial Statements

Notes to the Consolidated Financial StatementsAderans Company Limited and Consolidated SubsidiariesFor the years ended February 28, 2007 and 2006

The accompanying consolidated financial statements of Aderans Company Limited (the “Company”)and its consolidated subsidiaries have been prepared in accordance with accounting principlesgenerally accepted in Japan, and from consolidated financial statements filed with the Minister ofFinance, as required by the Securities and Exchange Law of Japan.

Certain items presented in the original financial statements have been reclassified for theconvenience of readers outside Japan.

As permitted under the Securities and Exchange Law of Japan, amounts of less than one millionyen have been omitted. As a result, the totals shown in the accompanying financial statements(both in yen and in dollars) do not necessarily agree with the sum of the individual amounts. Theaccompanying consolidated financial statements include the accounts of the Company and itssignificant subsidiaries.

(a) Principles of consolidationThe accompanying consolidated financial statements include the accounts of the Company and itssignificant subsidiaries (the “Companies”).

All significant intercompany transactions and unrealized profits among the Companies havebeen eliminated in consolidation. The difference between the cost and underlying net equity ofinvestments in consolidated subsidiaries is deferred and amortized within ten years.

Investments in remaining non-consolidated subsidiaries are not accounted for by the equitymethod because of the immaterial effect on the consolidated financial statements. Fiscal year endof four domestic consolidated subsidiaries and all overseas consolidated subsidiaries is December31, which differ from that of the Company; however, the accounts of these subsidiaries have beenconsolidated with appropriate adjustments for the intercompany transactions and events to theend of fiscal year.

(b) Cash and cash equivalentsFor the purpose of consolidated statements of cash flows, the Companies consider all highly liquidlow risk investments with maturities of three months or less when purchased to be cash equivalents.

(c) Marketable and investment securitiesMarketable and investment securities are classified and accounted for, depending on managementintent. Based on the examination of the intent of holding, the Company classified those securitiesas held-to-maturity debt securities, equity securities issued by non-consolidated subsidiaries andavailable-for-sale securities.

Held-to-maturity debt securities are stated at amortized cost. Equity securities issued by non-consolidated subsidiaries are stated at cost by the moving average method.

Available-for-sale securities are with available fair market values are stated the market value.Unrealized gains or losses on those securities are reported, net of applicable income taxes, as aseparate component of shareholders’ equity. Realized gains and losses on sale of such securitiesare computed by the moving average method. Available-for-sale securities without available fairmarket value are stated at cost by the moving average method.

(d) Allowance for doubtful accountsAllowance for doubtful accounts are stated at an amount considered to be appropriate based onthe Companies’ past credit loss experience and an evaluation of potential losses in the receivablesoutstanding. Overseas consolidated subsidiaries provide for doubtful accounts at the estimatedamount of uncollectible receivables.

(e) InventoriesCustom-made goods are stated at cost on the basis of specific identification method. Ready-madegoods are stated at cost on the basis of average method. Raw materials and work in process arestated at lower of cost (first-in, first-out) or market, or lower of moving average cost or market.Supplies are principally stated at cost on the basis of specific identification method.

2. Summary of Significant Accounting Policies


(f) Property, plant and equipmentProperty, plant and equipment of the Companies have been principally depreciated by thedeclining-balance method, at rates based on the estimated useful lives of the assets.

However, the straight-line method has been applied to buildings, excluding building fixtures,acquired after April 1, 1998 at rates based on the estimated useful lives of assets. The straight-linemethod is used for some domestic consolidated subsidiaries.

The straight-line method is principally used for overseas consolidated subsidiaries. Expendituresfor maintenance and repairs are charged to operating expenses as incurred. Upon the disposal ofproperty, plant and equipment, the cost and accumulated depreciation are removed from theaccounts and any gain or loss is recorded as income or expenses.

(g) Intangible assetsIntangible assets are carried at cost less accumulated amortization, which is calculated by thestraight-line method over the estimated useful lives. (five years for software)

(h) Allowance for employees’ bonusesThe Company and its domestic consolidated subsidiaries provide allowance for employees’bonuses at the estimated-amount-method based on the bonuses to be paid subsequent to thebalance sheet dates. This allowance amounted to ¥1,395 million ($11,780 thousand) at February28, 2007 and ¥1,422 million at February 28, 2006 and was included in other current liabilities inthe consolidated balance sheets.

(i) Allowance for directors and corporate auditors’ bonusesEffective the year ended February 28, 2007, the Company and domestic consolidated subsidiarieshave adopted an accounting standard for directors and corporate auditors’ bonuses. The stan-dard requires that directors and corporate auditors’ bonuses be accounted for as an expense ofthe accounting period in which such bonuses were accrued.

As a result ,The Company and its domestic consolidated subsidiaries provide allowance fordirectors and corporate auditors’ bonuses at the estimated-amount-method based on thebonuses to be paid subsequent to the balance sheet dates. This allowance amounted to ¥111million ($944 thousand) at February 28, 2007 and was included in other current liabilities in theconsolidated balance sheets.

(j) Warranty reserveA warranty reserve is provided based upon prior actual experience, while the Companies provide awarranty on its goods. This reserve amounted to ¥150 million ($1,272 thousand) at February 28,2007 and ¥137 million at February 28, 2006 and was included in other current liabilities in theconsolidated balance sheets.

(k) Allowance for returned goodsOne of the Japanese subsidiaries, Fontaine Co., Ltd., sets allowance for returned goods up. Thisallowance is provided based on accounts receivable multiplied by an average of sales returns ratereferring current and previous year and gross profit rate of current year. Amounted to ¥110 million($933 thousand) at February 28, 2007 and ¥97 million at February 28, 2006 and was included inother current liabilities in the consolidated balance sheets.

(l) Accrued severance and retirement benefits—employeesThe Company and its consolidated subsidiaries accounted for the liability for retirement benefitbased on the projected benefit obligations and plan assets at the balance sheet date.

Past benefit liabilities are amortized from the time they accrue by the straight-line method for agiven number of years (five years) within employees’ average remaining years of service.

Actuarial difference is amortized using the straight-line method over the estimated averageremaining service lives (five years) of employees commencing with the following period.

(m) Accrued severance and retirement benefits—Directors and corporate auditorsThe Company, two domestic consolidated subsidiaries and some overseas consolidated subsid-iaries have recorded retirement benefits for directors and corporate auditors accruing the fullamount at the balance sheet date.

In May 2005, the Board of Directors of the Company resolved to abolish the unfunded retirementbenefit plans for directors and corporate auditors, and proposed to make and calculated theamounts of lump-sum payments upon abolishment of the plan for their duties up to May 2005.


(n) Translation of foreign currency accountsBalance sheets of consolidated overseas subsidiaries are translated into Japanese yen at thecurrent rate at the end of year except for shareholders’ equity accounts, which are translated athistorical rates. Statements of income of consolidated overseas subsidiaries are translated at theaverage rate. Differences arising from such translation are disclosed under “Foreign currencytranslation adjustments” on the statement of consolidated shareholders’ equity and accumulatedin the shareholders’ equity section of the consolidated balance sheet.

(o) LeasesFinance leases which do not transfer ownership to lessees (and do not have bargain purchaseprovisions) are accounted for in the same manner as operating leases under accounting principlesgenerally accepted in Japan.

(p) Research and development costsResearch and development costs are charged to income when incurred.

(q) ReclassificationsIn preparing the accompanying consolidated financial statements, certain reclassifications havebeen made to the consolidated financial statements for the year ended February 28, 2007 issueddomestically. In addition, the consolidated financial statements for 2006 have been retroactivelyrestated to conform to the 2007 presentation.

The financial statements are stated in Japanese yen. The U.S. dollar amounts included in thefinancial statements and notes thereto represent the arithmetical results of translating yen into U.S.dollars at the rate of ¥118.44 to U.S.$1. This is the approximate rate of exchange in effect onFebruary 28, 2007.

Reconciliation of cash and time deposits in the consolidated balance sheets and cash and cashequivalents shown in the consolidated statements of cash flows at February 28, 2007 and 2006were as follows:


2007 2006 2007Cash and time deposits ¥14,525 ¥14,238 $122,641Cash equivalents included in marketable securities 3,504 4,501 29,586Time deposits with maturities more than three months (73) (2,843) (617)Cash and cash equivalents ¥17,956 ¥15,896 $151,610

At February 28, 2007 and 2006, inventories consisted of the following:Thousands of

Millions of yen U.S. dollars

2007 2006 2007Finished goods ¥2,919 ¥2,760 $24,646Work in process 243 197 2,056Raw materials and supplies 1,201 1,087 10,144Total ¥4,364 ¥4,046 $36,847

3. U.S. Dollar Amounts

4. Cash and Cash Equivalents

5. Inventories


(1) The following tables summarize acquisition costs, book values and fair value of securities atFebruary 28, 2007 and 2006

(a) Held-to-maturity debt securitiesMillions of yen Thousands of U.S. dollars

February 28, 2007 Book value Fair value Difference Book value Fair value Difference

Securities with available fairvalues exceeding book valuesBonds ¥ – ¥ – ¥ – $ – $ – $ –

Sub total – – – – – –Securities other than the above

Bonds 8,501 8,423 (77) 71,777 71,123 (653)Sub total 8,501 8,423 (77) 71,777 71,123 (653)

Total ¥8,501 ¥8,423 ¥(77) $71,777 $71,123 $(653)

Millions of yenFebruary 28, 2006 Book value Fair value Difference

Securities with available fairvalues exceeding book valuesBonds ¥ 1,400 ¥ 1,400 ¥ 0

Sub total 1,400 1,400 0Securities other than the above

Bonds 9,606 9,528 (77)Sub total 9,606 9,528 (77)

Total ¥11,006 ¥10,929 ¥(77)

(b) Available-for-sale securitiesMillions of yen Thousands of U.S. dollars

February 28, 2007 Book value Fair value Difference Book value Fair value Difference

Securities with book valuesexceeding acquisition costsEquity securities ¥1,254 ¥2,376 ¥1,122 $10,589 $20,066 $9,477

Sub total 1,254 2,376 1,122 10,589 20,066 9,477Securities other than the above

Equity securities ¥ 700 ¥ 594 ¥ (105) $ 5,917 $ 5,022 $ (894)Sub total 700 594 (105) 5,917 5,022 (894)

Total ¥1,955 ¥2,971 ¥1,016 $16,505 $25,089 $8,582

Millions of yenFebruary 28, 2006 Book value Fair value Difference

Securities with book valuesexceeding acquisition costsEquity securities ¥1,453 ¥2,509 ¥1,055

Sub total 1,453 2,509 1,055Securities other than the above

Equity securities – – –Sub total – – –

Total ¥1,453 ¥2,509 ¥1,055

(2) Total sales of available-for-sale securities sold for the year ended February 28, 2007 amountedto ¥– million ($- thousand) and February 28, 2006 amounted to ¥5 million. The related gainsand losses for the year ending 2007 amounted to ¥-million ($- thousand) and no loss, and 2006amounted to ¥4 million and no loss.

6. Marketable and Investment Securities


(3) The following tables summarize book values of securities with no available fair values atFebruary 28, 2007 and 2006.


2007 2006 2007Held-to-maturity debt securities

Commercial paper ¥3,995 ¥3,998 $33,732Available-for-sale securities

Money management funds ¥1,505 ¥1,502 $12,711Unlisted stocks 193 – 1,632

(4) Available-for-sales securities with maturities and held-to-maturity debt securities were as follows:

Millions of yen Thousands of U.S. dollarsWithin Within Within Over Within Within Within Over

February 28, 2007 One year five years ten years ten years One year five years ten years ten years

Bonds ¥2,200 ¥3,800 ¥2,000 ¥501 $18,574 $32,083 $16,886 $4,232Others 3,995 – – – 33,732 – – –

Total ¥6,195 ¥3,800 ¥2,000 ¥501 $52,307 $32,083 $16,886 $4,232

Millions of yenWithin Within Within Over

February 28, 2006 One year five years ten years ten years

Bonds ¥3,805 ¥4,700 ¥2,000 ¥501Others 3,998 – – –

Total ¥7,803 ¥4,700 ¥2,000 ¥501

Employees who terminate their service with the Company or one of the domestic consolidatedsubsidiaries are entitled to defined benefit pension plans, i.e., tax-qualified pension plans andlump-sum payment plans determined by reference to basic rates of pay, length of service andconditions under which the termination occurs. other domestic subsidiaries have maintainedunfounded lump-sum payment plans, whereas certain overseas subsidiaries have definedcontribution pension plans or non-funded lump-sum payment plans.

The following table sets forth the founded and accrued status of the retirement benefits, andthe amounts recognized in the consolidated balance sheets as of February 28, 2007 and 2006:

Thousands ofMillions of Yen U.S. dollars

2007 2006 2007(a) Projected retirement benefit obligation ¥(5,423) ¥ (5,198) $(45,789)(b) Pension assets at fair value 2,549 2,251 21,524(c) Unfunded retirement benefit obligation (a)+(b) (2,873) (2,946) (24,265)(d) Unrecognized actuarial differences (321) (160) (2,818)(e) Unrecognized past benefit liabilities (333) (445) (2,718)( f ) Accrued employees’ severance and retirement benefits

(c)+(d)+(e) ¥(3,529) ¥ (3,552) $(29,801)

The component of retirement benefit costs for the years ended February 28, 2007 and 2006were as follows:

Thousands ofMillions of Yen U.S. dollars

2007 2006 2007(a) Service cost ¥ 364 ¥ 330 $3,077(b) Interest cost 100 112 852(c) Expected return on plan assets (22) (21) (190)(d) Amortization for actuarial difference 49 96 416(e) Amortization for past benefit liabilities (111) (111) (939)

Total ¥ 380 ¥ 406 $3,216

7. Accrued Severance and Retirement Benefits- Employees


The assumptions used to calculate relating to retirement benefit liabilities were as follows:

(a) Method of allocation of estimated retirement benefits: Straight–line method(b) Discount rate: 2.00%(c) Expected rate of return on pension assets: 1.00%(d) Amortization period of actuarial difference: 5 years(e) Amortization period of past benefit liabilities: 5 years

The Company and domestic consolidated subsidiaries are subject to a number of taxes based onincome, which in the aggregate amount to statutory tax rates of approximately 40.7% for the yearof 2007 and 2006. Foreign consolidated subsidiaries are subject to income taxes of countries inwhere they operate.

However, income taxes as shown in the accompanying consolidated statements of incomediffer from the amounts computed by applying the above-mentioned statutory tax rates to “incomebefore income taxes”. The principal reason for this difference is the effect of timing differences inthe recognition of certain expenses for tax and financial reporting purposes and the effect ofpermanent non-deductible expenses.

Significant components of the deferred tax assets and liabilities held by the Company and itsconsolidated subsidiaries as of February 28, 2007 and 2006 were summarized as follows:


2007 2006 2007Deferred tax assets:

Unrealized profits on inventories ¥ 163 ¥ 173 $ 1,380Excess of retirement allowance 1,395 1,342 11,783Accrued severance benefits for directors 386 331 3,266Enterprise tax payable – 245 –Excess of allowance for employees’ bonuses 565 573 4,772Warranty reserve 61 55 517Allowance for returned goods 45 39 380Excess of depreciation 591 493 4,994Unrealized loss on golf club memberships 124 126 1,049Accumulated impairment losses 1,005 489 8,490Devaluation of land – 714 –Net loss carry forward 784 1,258 6,626Other 577 891 4,876

Total deferred tax assets 5,701 6,736 48,137Valuation allowance (1,360) (2,661) (11,485)Net deferred tax assets 4,341 4,074 36,651

Deferred tax liabilities:Reserve for special depreciation 12 17 106Other 81 106 690

Total deferred tax liabilities 94 123 797Net deferred tax assets ¥ 4,246 ¥ 3,951 $ 35,854

An analysis of the difference between the statutory tax rate and the Company’s effective taxrate for the year ended February 28, 2007 and 2006 were as follows.

2007 2006Statutory tax rate 40.7% 40.7%Permanently non-deductible expenses 0.5 0.4Inhabitant tax on capita basis 1.9 1.3Changes in valuation allowance for deferred tax assets (9.9) –Loss on write-down of stock of affiliated company (11.1) –Others 1.9 1.1The Company’s effective income tax rate 24.0% 43.5%

8. Income Taxes


(1) Finance LeasesFuture lease payments and lease payments under finance lease at February 28, 2007 and2006 were as follows:


2007 2006 2007Outstanding finance lease payments

Within one year ¥109 ¥17 $ 924Over one year 298 20 2,524Total 408 37 3,449

Lease payments ¥ 56 ¥21 $ 477

A summary of assumed amounts of acquisition cost, accumulated depreciation and netbook value at February 28, 2007 and 2006 were as follows:

Millions of yenAcquisition Accumulated Accumulated Net book

February 28, 2007 cost depreciation derogation value

Building ¥ 99 ¥ 8 ¥ – ¥ 90Equipment 355 156 – 198Vehicle 30 25 – 4Software 154 34 13 106Total ¥639 ¥225 ¥13 ¥400

Thousands of U.S. dollarsAcquisition Accumulated Accumulated Net book

February 28, 2007 cost depreciation derogation value

Building $ 839 $ 74 $ – $ 765Equipment 2,999 1,323 – 1,675Vehicle 254 214 – 39Software 1,306 294 112 898Total $5,399 $1,907 $112 $3,379

Millions of yenAcquisition Accumulated Net book

February 28, 2006 cost depreciation value

Equipment ¥ 73 ¥44 ¥29Vehicle 30 21 8Total ¥103 ¥65 ¥37

(2) Operating LeasesFuture lease payments under operating lease at February 28, 2007 and 2006 were as follows:


2007 2006 2007Outstanding lease payments

Within one year ¥ 564 ¥ 565 $ 4,768Over one year 3,418 3,258 28,865Total ¥3,983 ¥3,824 $33,634

Research and development costs included in selling, general and administrative expenses for theyear ended February 28, 2007 and 2006 amounted to ¥1,557 million ($13,146 thousand) and¥977 million, respectively.

9. Leases

10. Research and Development Costs


Basic net income per share is computed by dividing net income available to common shareholdersby the weighted-average number of common stock shares outstanding for the period.

Reconciliation of the difference between basic and diluted net income per share for the yearsended February 28, 2007 and 2006 were as follows:


2007 2006 2007Net income ¥6,091 ¥6,149 $45,341Amount not allocated to the common stock – 130 –Net income allocated to the common stock 6,091 6,019 45,341Effect of dilutive securities – – –Net income allocated to the common stockfor computation of diluted net income per share 6,091 6,019 45,341

Thousand of shares

2007 2006Weighted-average number of shares 38,984 39,992Effect of dilutive securities 253 268Weighted-average number of shares for computation ofdiluted net income per share 38,730 39,723

Yen U.S. dollars

2007 2006 2007Basic net income per share ¥156.26 ¥150.51 $1.31Diluted net income per share 155.25 149.51 1.31

(1) Business SegmentsAs the ratios of “Hair-related business” against the total sales, operating income and assets ofall segment exceed 90%, information by business segment is not prepared or disclosed.

(2) Geographical SegmentsMillions of yen

NorthYear ended February 28, 2007 Japan America Europe Asia Total Elimination Consolidated

SalesOutside customers ¥54,707 ¥14,573 ¥3,746 ¥ 471 ¥73,498 ¥ – ¥73,498Intersegment 52 1,688 0 4,611 6,352 (6,352) –

Total 54,760 16,261 3,746 5,083 79,851 (6,352) 73,498Operating expenses 44,820 15,733 3,459 4,355 68,368 (3,081) 65,286Operating income ¥ 9,939 ¥ 528 ¥ 286 ¥ 728 ¥11,483 ¥ (3,271) ¥ 8,212Total assets ¥51,913 ¥ 7,631 ¥3,959 ¥8,197 ¥71,701 ¥19,956 ¥91,658

Thousands of U.S. dollarsNorth

Year ended February 28, 2007 Japan America Europe Asia Total Elimination Consolidated

SalesOutside customers $461,902 $123,042 $31,629 $ 3,981 $620,555 $ – $620,555Intersegment 443 14,258 0 38,937 53,638 (53,638) –

Total 462,345 137,300 31,629 42,918 674,194 (53,638) 620,555Operating expenses 378,420 132,836 29,209 36,771 577,238 (26,018) 551,220Operating income $ 83,924 $ 4,464 $ 2,420 $ 6,146 $ 96,955 $ (27,620) $ 69,334Total assets $438,311 $ 64,431 $33,431 $69,208 $605,382 $168,496 $773,879

11. Net Income per Common Share

12. Segment Information


Millions of yenNorth

Year ended February 28, 2006 Japan America Europe Asia Total Elimination Consolidated

SalesOutside customers ¥56,241 ¥12,641 ¥3,311 ¥ 495 ¥72,690 ¥ – ¥72,690Intersegment 61 953 0 4,433 5,449 (5,449) –

Total 56,303 13,595 3,312 4,929 78,140 (5,449) 72,690Operating expenses 43,534 13,671 3,094 3,929 64,229 (1,858) 62,370Operating income ¥12,768 ¥ (75) ¥ 218 ¥1,000 ¥13,911 ¥ (3,591) ¥10,319Total assets ¥54,404 ¥ 5,793 ¥3,278 ¥7,210 ¥70,687 ¥16,802 ¥87,490

(3) Overseas SalesMillions of yen

NorthYear ended February 28, 2007 America Europe Asia Others Total

Overseas sales ¥14,421 ¥3,916 ¥448 ¥107 ¥18,895Consolidated net sales ¥73,498Share of overseas sales 19.6% 5.3% 0.6% 0.2% 25.7%

Thousands of U.S. dollars NorthNorth

Year ended February 28, 2007 America Europe Asia Others Total

Overseas sales $121,764 $33,070 $3,790 $908 $159,533Consolidated net sales $620,555Share of overseas sales 19.6% 5.3% 0.6% 0.2% 25.7%

Millions of yenNorth

Year ended February 28, 2006 America Europe Asia Others Total

Overseas sales ¥12,409 ¥3,539 ¥438 ¥80 ¥16,468Consolidated net sales ¥72,690Share of overseas sales 17.1% 4.9% 0.6% 0.1% 22.7%

Transactions with related parties for the years ended February 28, 2007 and 2006 were as follows:Thousands of

Millions of yen U.S. dollars

2007 2006 2007Kowa Shoji KK:

Rental income ¥– ¥2 $–

On May 1, 2007, The Company, Bosley, Inc. and other U.S. subsidiaries of the Company, andLeavitt Management, Inc. (“Leavitt Management”), a major provider of hair transplant business inthe United States, signed a letter of intent to purchase Leavitt Management’s hair transplantbusiness in its entirety.

On May 24, 2007, the shareholders of the Company approved payment of a year-end cashdividend of ¥50.00 ($0.42) per share to holders of recorded at February 28, 2007, totaling ¥1,936million ($16,342 thousand), and approved that the Company will be transformed into a pure holdingcompany, effective September 3, 2007. In line with this transition, the Company will be renamedAderans Holdings Company Limited. As the splitting company, the Company will transfer to the newcompany, Aderans Company Limited., its hair-related business, including the sale of wigs, barberand beauty salon operations, and services to promote hair growth, leaving it, as a pure holdingcompany, to then focus on the formulation of overall business strategies for the group.

13. Related Party Transactions

14. Subsequent Events


To the Board of Directors of

Aderans Company Limited:

We have audited the accompanying consolidated balance sheets of Aderans Company Limited

and consolidated subsidiaries (the Company) as of February 28, 2007 and 2006, and the related

consolidated statements of income, shareholders’ equity, and cash flows for the years then ended,

all expressed in yen. These consolidated financial statements are the responsibility of the

Company’s management. Our responsibility is to independently express an opinion on these

consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards, procedures and practices

generally accepted and applied in Japan. Those standards, procedures and practices require that

we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by manage-

ment, as well as evaluating the overall financial statement presentation. We believe that our audits

provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all

material respects, the financial position of Aderans Company Limited and consolidated subsidiaries

at February 28, 2007 and 2006, and the results of their operations and their cash flows for the years

then ended in conformity with accounting principles and practices generally accepted in Japan.

As discussed in Note 14 to the consolidated financial statements,

1. The shareholders of the Company approved that the Company will be transformed into a pure

holding company, effective September 3, 2007.

2. The Company, Bosley, Inc. and other U.S. subsidiaries of the Company, and Leavitt

Management, Inc. (“Leavitt Management”) signed a letter of intent to purchase Leavitt

Management’s hair transplant business in its entirety.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect

to the year ended February 28, 2007 are presented solely for convenience. Our audit also included

the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has

been made on the basis described in Note 3 to the consolidated financial statements.

Tokyo, Japan

May 24, 2007

Report of Independent Auditors


Non-consolidated Five-year SummaryAderans Company LimitedYears ended the last day of February

Results of Operations

Amounts per Shareof Common Stock(in Yen)

Financial Position

Key Ratios (%)

Other Year-end Data

Millions of yen

2007 2006 2005 2004 2003

Net sales ¥42,645 ¥ 44,990 ¥ 44,883 ¥ 47,757 ¥ 50,888Cost of sales 7,570 7,602 7,475 7,998 8,483Gross profit 35,075 37,388 37,408 39,758 42,405Selling, general and administrative expenses 29,823 29,793 30,787 30,553 31,414Operating income 5,251 7,594 6,620 9,205 10,990Income (loss) before income taxes 6,713 10,283 (3,920) 9,957 11,313Net income (loss) 5,598 6,700 (6,813) 5,671 6,476Capital expenditures 2,224 2,694 2,051 5,709 1,831Research and development expenses 1,692 1,044 735 620 467Depreciation and amortization 1,389 1,450 1,587 1,684 1,582

Net income (loss) ¥143.61 ¥ 164.74 ¥ (168.03) ¥ 137.85 ¥ 159.86Shareholders’ equity 1,684 1,617.11 1,537.28 1,746.10 1,644.23Cash dividends applicable to the year 75 44.00 38.00 32.00 30.00

Current assets ¥16,884 ¥ 17,777 ¥ 20,087 ¥ 19,586 ¥ 24,449Current liabilities 6,292 8,800 7,084 9,072 9,374Interest-bearing debt – – – – –Shareholders’ equity 65,192 63,594 62,062 71,880 66,357Total assets 75,384 76,526 73,098 84,606 78,976

Operating income to net sales 12.3 16.9 14.8 19.3 21.6Net income (loss) to net sales 13.1 14.9 (15.2) 11.9 12.7Shareholders’ equity to total assets 86.5 83.1 84.9 85.0 84.0Return on equity 8.6 10.6 (10.2) 8.2 10.0Return on assets 7.4 8.9 (8.6) 6.9 8.4Interest-bearing debt ratio – – – – –

Number of shares outstanding (thousand) 38,712 39,256 40,371 41,081 40,357Number of employees 1,973 1,976 2,018 2,103 2,137

High ¥ 3,540 ¥ 4,190 ¥ 2,620 ¥ 2,485 ¥ 4,250Low 2,580 2,225 2,075 1,664 2,180Year-end close 3,050 3,220 2,475 2,200 2,225

Common Stock Prices(in Yen)


Non-consolidated Operating Data

Sales of PrincipalProducts

Principal Product Salesto New Clients

Principal Product Salesto Repeat Clients

Principal Product Salesto Male Clients

Principal Product Salesto Female Clients

Millions of yen

2007 2006 2005 2004 2003

Custom-made wigs ¥28,008 ¥29,247 ¥29,588 ¥31,599 ¥32,950Hair Fix 97 115 132 108 167Pinpoint 1,662 1,987 1,585 1,908 2,300Hair Support 5,201 5,564 5,520 5,516 5,997Physical Esthé 1,096 1,210 1,105 1,191 1,455Total ¥36,066 ¥38,125 ¥37,933 ¥40,325 ¥42,872

Custom-made wigs ¥ 9,240 ¥10,757 ¥11,134 ¥12,420 ¥14,321Hair Fix 9 17 19 15 18Pinpoint 564 834 651 825 1,145Hair Support 1,525 1,855 1,778 2,036 2,582Physical Esthé 246 334 311 315 469Total ¥11,586 ¥13,799 ¥13,895 ¥15,614 ¥18,539

Custom-made wigs ¥18,768 ¥18,489 ¥18,454 ¥19,178 ¥18,628Hair Fix 87 98 113 93 149Pinpoint 1,097 1,152 933 1,083 1,155Hair Support 3,676 3,709 3,741 3,480 3,414Physical Esthé 849 876 793 875 985Total ¥24,480 ¥24,325 ¥24,037 ¥24,710 ¥24,333

Custom-made wigs ¥ 9,143 ¥ 9,378 ¥ 9,497 ¥10,538 ¥10,916Hair Fix 94 108 129 102 154Pinpoint 1,566 1,908 1,527 1,849 2,241Hair Support 3,463 3,925 4,038 4,264 4,908Physical Esthé 1,096 1,210 1,105 1,174 1,320Total ¥15,364 ¥16,531 ¥16,299 ¥17,928 ¥19,541

Custom-made wigs ¥18,865 ¥19,869 ¥20,090 ¥21,060 ¥22,033Hair Fix 3 6 2 6 13Pinpoint 95 78 58 59 59Hair Support 1,738 1,638 1,482 1,252 1,089Physical Esthé 0 0 0 17 134Total ¥20,702 ¥21,593 ¥21,633 ¥22,396 ¥23,330

Counseling offices 9 9 9 9 9Regular outlets 140 140 139 138 136Ladies’ salons 23 24 26 25 25Satellite salons 51 50 52 52 50New-concept salons 11 10 10 10 6DN salons 5 – – – –Total 239 233 236 234 226

Male 740 781 796 886 967Female 533 522 508 517 507Total 1,273 1,304 1,304 1,403 1,474

Number of Outlets

Number of ClientVisits (Thousand)


Subsidiaries (Consolidated Companies)As of May 31, 2007


● Holding Company● Marketing Company■ Hair-Transplant Business■ Other Business◆ Manufacturing Company

Japan● FONTAINE Co., Ltd.

(a) January 5, 1979(Became a wholly ownedsubsidiary as of December1, 2003)

(b) ¥1,539 million(c) 100%

● Hair Trust Holdings Co., Ltd.(a) September 15, 2006(b) ¥400 million(c) 100%

■ ADN Co., Ltd.(a) May 1, 1985

(Acquired December 4, 1998)(b) ¥80 million(c) 83.2%

North America● Aderans Holding Co., Inc.

(a) November 23, 1994(b) US$83,000 thousand(c) 100%

Europe● Aderans Europe B.V.

(The Netherlands)(a) January 9, 1992(b) C= 24,000 thousand(c) 100%

Asia (excluding Japan)● Aderans Inc. (Taiwan)

(a) January 12, 1990(b) NT$20,000 thousand(c) 100%

◆ Aderans Thai., Ltd. (Thailand)(a) October 17, 1986(b) B170,000 thousand(c) 100%

◆ Aderans Philippines, Inc.(Philippines)(a) January 31, 2002(b) P300,000 thousand(c) 100%

■ SAMSON Co., Ltd.(a) July 5, 1979 (Acquired September 27, 2006)(b) ¥645 million(c) 58.3% (Indirect)

■ Nodin Co., Ltd.(a) November 21, 2005 (Acquired September 27, 2006)(b) ¥25 million(c) 75% (Indirect)

● Aderans, Inc.(a) April 19, 2001(b) US$3,000 thousand(c) 100% (Indirect)

● International Hairgoods, Inc.(a) October 31, 1968 (Acquired June 29, 1987)(b) US$2,546 thousand(c) 100% (Indirect)

● New Concepts Hair Goods, Inc.(a) February 13, 1991 (Acquired March 5, 1998)(b) US$25(c) 100% (Indirect)

● René of Paris(a) November 1, 1976 (Acquired March 1, 1989)(b) US$1,000 thousand(c) 100% (Indirect)

● General Wig Manufacturers, Inc.(a) June 14, 1963 (Acquired September 28, 1998)(b) US$37 thousand(c) 100% (Indirect)

● Gesmofra SAS (France)(a) March 1, 1980 (Acquired March 1, 1992)(b) C= 2,000 thousand(c) 100% (Indirect)

● Création de Paris CamaflexVertriebs GmbH (Germany)(a) July 26, 1966 (Acquired March 1, 1992)(b) C= 800 thousand(c) 100% (Indirect)

● Camaflex S.A. (Belgium)(a) September 25, 1962 (Acquired March 1, 1992)(b) C= 70 thousand(c) 100% (Indirect)

● D. van Nooijen B.V. (The Netherlands)(a) January 1, 1984 (Acquired March 1, 1994)(b) C= 20 thousand(c) 100% (Indirect)

● Trend Hair Supplies Co., Ltd. (United Kingdom)(a) March 26, 1973 (Acquired May 13, 2002)(b) £30 thousand(c) 100% (Indirect)

● Carl M Lundh AB (Sweden)(a) 1852 (Acquired January 7, 2005)(b) SK100 thousand(c) 100% (Indirect)

◆ World Quality Co., Ltd. (Thailand)(a) September 3, 1992(b) B15,000 thousand(c) 100% (Indirect)

■ Bosley, Inc.(a) August 3, 1989

(Acquired August 1, 2001)(b) US$8,261(c) 96.2% (Indirect)

■ Sterling Accommodations, Inc.(a) November 8, 1990

(Acquired August 1, 2001)(b) US$20 thousand(c) 100% (Indirect)

■ Bosley Medical InstituteCanada, Inc.(a) March 25, 1997

(Acquired August 1, 2001)(b) C$1,000(c) 100% (Indirect)

■ Aderans Research Institute, Inc.(a) June 25, 2002(b) US$400 thousand(c) 100% (Indirect)

● Camaflex SAS (France)(a) December 5, 1956

(Acquired March 1, 1992)(b) C= 540 thousand(c) 100% (Indirect)

● Monfair Mode SARL (France)(a) February 16, 1987


● Monfair Moden Vertriebs GmbH (Germany)(a) December 11, 1985


● Best Move Co., Ltd. (United Kingdom)(a) June 22, 1979 (Acquired January 3, 2006)(b) £115(c) 100% (Indirect)

(a) Established(b) Capital(c) Percentage of parent

company’s ownership

Profile

The Aderans Group offers a comprehensive lineup of products and services to successfully addresswhatever concerns people may have about their hair. The Group operates a variety of hair-relatedbusinesses targeting men and women in Japan and overseas. In addition to manufacturing andselling custom-made and ready-made wigs and hairpieces, the Group assists with healthy hairgrowth, hair-transplant and other hair-related services. It also undertakes research anddevelopment into hair-regeneration technology. The Group’s global presence includes bases in15 nations, mainly spanning North America, Europe and Asia. To drive further growth, the Group ismarshalling all its resources to establish itself as a total hair solution company.

Contents

Consolidated Financial Highlights 01

Message From the Management 02

Business Summary 14

Product Lineup 18

Corporate Governance 19

Directors and Auditors 23

Aderans in Society 24

Financial Section 25

Subsidiaries (Consolidated Companies) 52

Corporate Data 53

1By Utilizing Our Expertise 08

3Through New Strategies 12

SPECIALFEATURE

Cautionary Statement with Respect to Forward-looking Statements

This annual report has been prepared for non-Japanese investors

and contains forward-looking statements that are based on

management estimates, assumptions and projections at the time

of publication. Aderans cautions you that a number of factors

could cause actual results to differ materially from expectations.

2To Potential Markets 10

Corporate DataAderans Company LimitedAs of February 28, 2007

Head Office 6-3, Shinjuku 1-chome, Shinjuku-ku, Tokyo 160-8429

Established March 1, 1969

Paid-in Capital ¥12,944 million

Number of Shares Authorized 138,000,000

Number of Shares Issued 41,713,388

Number of Shareholders 6,889

Stock Listings First Section of Tokyo Stock ExchangeFirst Section of Osaka Securities Exchange

Transfer Agent and Registrar The Chuo Mitsui Trust and Banking Company, Limited, Securities Department8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063

Number of Outlets 239

Number of Employees 1,973

Principal ShareholdersNumber of Shares and

Shareholding RatioThousands

Name of Shares (%)

1 Steel Partners Japan Strategic Fund (Offshore) LP 10,300 26.7

2 State Street Bank and Trust Company 4,723 12.2

3 Nobuo Nemoto 3,856 10.0

4 The Master Trust Bank of Japan, Limited (Trust Account) 1,706 4.4

5 Japan Trustee Services Bank, Limited (Trust Account) 1,517 3.9

6 The Dai-Ichi Mutual Life Insurance Company 726 1.9

7 Citibank London NA Azimut SGR SpA 541 1.4

8 Morgan Stanley and Company International Limited 522 1.4

9 Trust & Custody Services Bank, Limited (Security Investment Trust Account) 488 1.3

10 Investors Bank West Treaty 475 1.2

Notes: 1. The Company holds 3,001 thousand shares of its own shares in treasury stock.2. Those shares held by The Master Trust Bank of Japan, Limited, Japan Trustee Services Bank, Limited, and Trust & Custody

Services Bank, Limited. are the shares relating to their trust businesses.

0

1,000

2,000

3,000

4,000

06/3 4 65 7 8 9 10 11 12 07/1 2

Stock Price (Yen)Trading Volume

(Thousands of shares)

0

2,000

4,000

6,000

8,000

Stock Price Range


3

Annual Report 2007Year Ended February 28, 2007

21

Printed in JapanThis annual report was printed entirely on recycled paper with soy-based ink.


For Further Information Contact:

Investor Relations Division, Aderans Company Limited6-3, Shinjuku 1-chome, Shinjuku-ku,Tokyo 160-8429, JapanTel. +81-3-3350-3268Fax. +81-3-3356-3052E-mail. [email protected]

Aderans Com

pany Limit ed Annual Report 2007

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