IR Information(IR情報) 2006/8/22

Meitec Corporation

Sale of US Subsidiary of Drake Beam MorinJapan, Inc. and Revision of the Financial Forecast for the Fiscal Year Ending March 31, 2007

Meitec Corporation announced that, at an extraordinary board meeting held on August 21, 2006, it decided and executed the sale of its consolidated subsidiary, Novations Group Inc., a US subsidiary of Drake Beam Morin-Japan, Inc., to MCG Global, LLC.
Accordingly, the financial forecast for the fiscal year ending March 31, 2007 (April 1, 2006 - March 31, 2007) has been revised as follows.

1. Revised forecasts for the interim period ending September 30, 2006 (April 1, 2006 - September 30, 2006)

(Millions of yen) 
<Consolidated>
  Revenues Operating
Income
Ordinary
Income
Net Income
Previous forecast(A) 42,500 6,000 6,000 3,200
Revised forecast(B) 42,000 5,850 5,850 2,300
Difference(B-A) -500 -150 -150 -900
% difference -1.2 -2.5 -2.5 -28.1
Results for fiscal year ended March 31, 2006 40,723 5,935 5,996 3,250
<Non-Consolidated>
  Revenues Operating
Income
Ordinary
Income
Net Income
Previous forecast(A) 30,500 5,150 5,650 3,300
Revised forecast(B) 30,700 5,250 9,700 -3,250
Difference(B-A) 200 100 4,050 -6,550
% difference 0.7 1.9 71.7 -
Results for fiscal year ended March 31, 2006 30,365 5,378 5,729 3,422

2.Revised forecasts for the fiscal year ending March 31, 2007 (April 1, 2006 - March 31, 2007)

(Millions of yen)
<Consolidated>
  Revenues Operating
Income
Ordinary
Income
Net Income
Previous forecast(A) 86,000 12,500 12,550 6,500
Revised forecast(B) 83,800 12,000 12,000 5,700
Difference(B-A) -2,200 -500 -550 -800
% difference -2.6 -4.0 -4.4 -12.3
Results for fiscal year ended March 31, 2006 83,223 12,485 12,562 5,302
<Non-Consolidated>
  Revenues Operating
Income
Ordinary
Income
Net Income
Previous forecast(A) 61,500 10,500 11,000 6,050
Revised forecast(B) 61,800 10,650 15,650 500
Difference(B-A) 300 150 4,650 -5,550
% difference 0.5 1.4 42.3 -91.7
Results for fiscal year ended March 31, 2006 61,425 11,131 11,556 6,820
* See Attachment 1 for the financial forecast of each company for the fiscal year ending March 31, 2007

3.Reasons for Revision

<Consolidated>
(1)Effect to the consolidated revenue by the sale of US business. (Novations Group Inc.)
Regarding the consolidated performance for the fiscal year ending March 31, 2007, performance for the first half (January 1st to June 30th) of the fiscal year of Novations Group Inc. will be included. And net income for July to August of 2006 will be included in the extraordinary losses due to the sales of the company. Therefore second half of the fiscal year of Novations Group Inc. will be excluded from the consolidation.

(2)Downward Revision of Performance Forecast of Novations Group Inc. for the Interim Period of the Fiscal Year Ending March 2007.
We revise the performance forecast of the Novations Group Inc. for the interim period for the fiscal year ending March 31, 2007 as Attachment 1.

(3)Extraordinary losses from the sale of US business (Novations Group Inc.)
The main reason for the revision is that the extraordinary losses of 685 million yen are expected from the sale of Novations Group Inc., Meitec’s consolidated subsidiary, which is a US subsidiary of Drake Beam Morin-Japan, Inc., on August 21, 2006.

(4)Advance Investment to the New Business
In order to quickly startup the new subsidiary, Meitec Next Corporation which was established on July, 2006 and is in the job placement business, during the second half of the fiscal year ending March 31, 2007, we will implement a advance investment of about 250 million yen. Because of this, as we will record the expense as a cost to promote the new business, we are revising our consolidated operating income downward for the fiscal year ending March 31, 2007.

*Please see Attachment 2 for the details regarding the sale of Novations Group Inc.
*Please see Attachment 1 for the effect of the sale of Novations Group Inc. on the consolidated performance forecast of Drake Beam Morin-Japan for the fiscal year ending March 31, 2007

<Non-Consolidated>
(1)Loss from revaluation of stock of Drake Beam Morin-Japan, Inc. (Extraordinary Losses)
Considering a decline in the net asset value of Drake Beam Morin-Japan, Inc. due to the sale of its US subsidiary and Meitec’s consolidated subsidiary, Novations Group Inc. on August 21, 2006, stocks of Drake Beam Morin-Japan, Inc. owned by Meitec have been revaluated. As a result, 10,426 million yen in loss on revaluation of subsidiary stock is expected to be recorded as extraordinary losses for the interim period of fiscal year ending March 31, 2007.

(Millions of yen)
Net Loss on Revaluation of Investment Securities for the Interim Period of Fiscal Year Ending March 31, 2007
(A) Loss on revaluation of investment securities for the interim period of fiscal year ending March 31, 2007* 10,426
(B) Net assets for the fiscal year ended March 31, 2006 (A/B×100) 47,262 (22.0%)
(C) Ordinary income for the fiscal year ended March 31, 2006 (A/C×100) 11,556 (90.2%)
(D) Net income for the fiscal year ended March 31, 2006 (A/D×100) 6,820 (152.8%)
* Figures are based on the information that has been finalized as of the date of the release of this document.

Incidentally, part of revaluation loss of US subsidiary, 4,802 million yen, has been included in the past consolidated performance for the fiscal year ended March 31, 2006 as deficit performance of Drake Beam Morin-Japan reflecting the decline in the net asset value of Drake Beam Morin-Japan. But the consolidation adjust account (equally depreciated over 20 year period), 4,939 million yen, had not been included in the consolidated performance at this point because it need to be evaluated according to a separate test in accounting for the impairment of assets (a test to assess the excess earning power of Drake Beam Morin-Japan at the end of each fiscal year). Therefore, there is no other effect other than the effect from above said “ <Consolidated>(2) Extraordinary losses from the sale of US business (Novations Group Inc.)” to the consolidated performance for the current fiscal year.

(Millions of yen)
Details of Revaluation Loss for the US Subsidiary (1 = 2+3+4)

1.Loss on revaluation of investment securities for the interim period of fiscal year ending March 31, 2007* 10,426
2.Deficit performance of Drake Beam Morin-Japan recorded until the fiscal year ended March 31, 2006 due to the decline in net assets. 4,802
3. Consolidation adjust account 4,939
4. Extraordinary loss due to the sale of US business (Novations Group Inc.) 685

(2) Recording the Special Dividends Received from Subsidiaries as the Non-Operating Income
Meitec’s shareholder return policy is implemented based on dividends from surplus and retirement of shares according to consolidated accounting principles.
In order to implement a shareholder return policy based on consolidated accounting principles, Meitec’s consolidated subsidiaries, MEITEC FIELDERS INC. and Japan Cast Inc. will provide special dividend to Meitec Corporation during the interim period of fiscal year ending March 31, 2007 (From Meitec Fielders to Meitec Corporation:3,549 million yen; from Japan Cast to Meitec Corporation:305 million yen). This will be recorded as non-operating income of Meitec Corporation for the interim period of fiscal year ending March 31, 2007.

*Purpose of this is to secure the funds for the dividend of Meitec Corporation alone.

4.Dividends for the Interim Period and End of Fiscal Year Ending March 31, 2007
with regard to factors relating to the downward revision of consolidated net income, as its effect on consolidated cash flow is minor, , annual dividend for the fiscal year ending March 31, 2007 will remain the same as the previously forecasted 89 yen per share (interim period: 44 yen, fiscal year end: 45 yen).

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