(FUKUSHIMA)

• We are on track to achieve our targets.

Since we adopted a new management structure in April 2007, the Benesse Group has made progress in building up existing businesses and developing new products and services. The Group set quantitative targets for fiscal 2010 of ¥430.0 billion in net sales, ¥43.0 billion in operating income and ROE of 12%. As a result of our efforts, the Group performed well in fiscal 2008 despite the deteriorating economic situation, posting net sales of ¥412.7 billion (up 7.3% year on year) and operating income of ¥39.1 billion (up 12.2%). For fiscal 2009 we are forecasting net sales of ¥418.1 billion (up 1.3%) and operating income of ¥41.0 billion (up 4.8%). Our plans call for record high results again, constituting seven consecutive years of higher sales and earnings. So we are on track to achieve our fiscal 2010 targets.
Our ROE dropped as low as 5.9% in fiscal 2008 due to an extraordinary loss related to amortization of goodwill as a result of the falling share price for consolidated subsidiary Tokyo Individualized Educational Institute (TKG). However, in fiscal 2009 we intend to restore our ROE by regaining net income. We are aiming to achieve ROE of over 12% in fiscal 2010.

(FUKUSHIMA)

• Our marketing strategies and continuous efforts to boost product competitiveness have been successful.

Cumulative enrollments in fiscal 2008 for our core Shinkenzemi and Kodomo Challenge correspondence courses showed a solid 1.1% increase year on year.We also made an excellent start to the new fiscal year with enrollment in April 2009 standing at 4.04 million, up by 80,000, or 1.9%, since the previous year, and surpassing the 4 million mark for the first time in three years.
I believe it was thanks to our efforts to bolster our products and marketing over the past few years that we were able to increase enrollment by as many as 80,000 even under these difficult business conditions.
Where products are concerned, we boosted our lineup in Shinkenzemi Junior High School Courses during fiscal 2008 by launching Shinkenzemi Junior High School Course + i, a new-generation product combining traditional paper-based learning materials with online materials. At the same time, we continued to carefully tailor our existing products to address differing situations and needs including individual academic abilities, targets and study methods. As a result, we have full confidence in the quality of our products.
On the marketing front, meanwhile, in fiscal 2007 we integrated all the separate marketing divisions for each course from pre-school to high school level, establishing a centralized Marketing Headquarters to oversee marketing for the education business as a whole. This enabled us to share know-how and allocate resources efficiently, ensuring seamless marketing from pre-school to the high-school level. As a result, there was a marked increase in the rates of continuation from Kodomo Challenge to Shinkenzemi Elementary School Courses, and from the Elementary School Courses to Shinkenzemi Junior High School Courses, one of the factors that drove up membership numbers.
In addition to the above factors, we also benefited from trends in society at large. Amendments to the national curriculum guidelines for elementary schools to be enacted from fiscal 2011 will place greater focus on academic ability. Consequently, parents' interest in their children's education has increased in anticipation of the changes to come. What is more, despite the current downturn in the economy, the portion of household expenses allocated to education has not significantly decreased. In comparison to other educational services, Benesse's correspondence courses are of high quality and offer value for money, and as such we believe they will face no difficulty in weathering the current recession.
In addition to correspondence courses, we offer educational services targeting schools, which are also performing well. Mock university entrance exam papers are our core product for the high school market, and unit sales for these and other assessment materials set a new record high in the year under review. Against a backdrop of changes in the Japanese school and university entrance exam systems, products and services carefully tailored to the needs of schools and teachers were behind this achievement.

(FUKUSHIMA)

• Ensure stable expansion in correspondence courses by devising new ways to study at home

• Expand our education business overseas, focusing on China

• Supplement our correspondence courses by offering a diverse variety of ways to learn

First of all, we will continue to steadily grow our core domestic correspondence course business.Its penetration rate within the target user population is currently 21%, but we intend to extend this rate over the next ten years, targeting a 25% penetration rate in 2018. Thus we aim to increase enrollment even as the number of Japanese children decreases.
To do so, we will need to devise and offer to our customers new ways of studying at home. One initiative in this regard was the launch in 2008 of Shinkenzemi Junior High School Course + i targeting junior high school first grade students. The new course combines traditional teaching materials with online content. In 2009 we offered additional courses for junior high school second grade students, and enrollment increased from 42,000 in 2008 to 133,000—evidence that this new way to study is winning students over.
Our second means of growing our education business will be to expand overseas. We currentlyoperate correspondence courses in Taiwan, China and South Korea. The history of our operations in Taiwan spans 20 years, with current enrollment at 180,000, including courses for both pre-schoolers and elementary school students. In 2006 we added courses for pre-schoolers in China and South Korea.Enrollment has grown steadily, standing at 150,000 in China and 120,000 in South Korea as of April 2009.We will build on these achievements and target further expansion. China offers particparticular growth potential, with an annual birthrate of 16 million contributing to a huge market approximately 15 times the size of that in Japan. In China we are targeting enrollment of 300,000 in 2010.
The third strategy for our education business will be to expand non-correspondence course businesses. To this end, we are supplementing our correspondence courses by bolstering our prep school business as an education service, employing a diverse variety of learning methods. We made Ochanomizu Seminar into a subsidiary in October 2006, followed by Tokyo Individualized Educational Institute (TKG) in June 2007.We then added Tetsuryokukai—a prep school for students aiming to enter top schools such as the university of Tokyo—as a new subsidiary in April 2009. Looking ahead, we will continue to expand our services by catering to customer needs that cannot be fully met by correspondence courses alone.

(FUKUHARA)

• In the short term Berlitz needs to ensure profitability by realigning its cost structure

• In the longer term, the company aims to become a leader in global business training

Berlitz International, Inc. operates in over 70 countries around the world. Since it has a high proportion of corporate customers—around 60% of its customers worldwide—there is no denying that the sudden global economic collapse from the second half of 2008 has had an effect. Growth during fiscal 2008 was driven by the language education business in Europe and the ELS business, which provides intensive language training to prospective exchange students, resulting in higher sales and earnings on a local currency basis. Now, however, the operating environment has become extremely tough in all three of the company's operating regions—Europe, the Americas and Asia. During fiscal 2009 Berlitz needs to take measures such as stepping up its marketing to corporates, realigning its cost structure and enhancing operational efficiency to ensure profitability.
Meanwhile, Berlitz is also investing funds with an eye on the future, in pursuit of its quest to become a global education company. We believe that economic globalization will continue to increase demand for language education and improvement in language-based business skills. In future, therefore, Berlitz needs to target further growth by supplementing straightforward language lessons with expanded provision in areas such as business skills training and cross-cultural training. In this way the company can nurture talented businesspeople capable of performing on the global stage.

(FUKUHARA)

• Introduced a new personnel system to improve working conditions for staff

• Focus on employment of new graduates and staff training

The Benesse Group operates 139 nursing homes as of March 31, 2009, making us one of Japan's largest nursing home operators in terms of sales and earnings. The current occupancy rate remains high at over 96%. In fiscal 2008 we opened 10 new homes, and in fiscal 2009 we plan to open 20 homes, twice as many as in the previous year. However, the one thing that is hindering our plans for this business is the difficulty in hiring staff.
We face two major issues in trying to maintain a steady increase in the number of homes: how do we hire promising personnel and how do we retain more of them? We are currently implementing a range of measures to address these issues.
In October 2007 we initiated a new personnel system, acting to improve working conditions for staff by introducing pay rises and mechanisms for career development. As a result of these measures, the staff retention rate has improved significantly, by around 15% over the past two years. We also made concerted efforts to hire new graduates, whose retention rates are higher than mid-career hires, employing over 300 new graduates in fiscal 2009.
Going forward, we intend to further our collabocollaboration with educational institutions to establish a framework for employing a stable number of new graduates on an ongoing basis. Our first initiative in this regard was to offer the Benesse Style Care Course at Ehime Women's College from April 2009. We dispatch our own instructors for the course, and offer opportunities for work experience.
Furthermore, in April 2009 nursing care payments under the long-term care insurance system were revised, and Benesse allocated the entire 2.4% increase in payments to raising pay for nursing staff.

(FUKUSHIMA)

• We are currently in the process of formulating a long-term vision to last until fiscal 2018, and have decided to convert to a holding company structure to achieve this vision.

We have started drawing up a long-term vision to follow the current Medium-Term Management Plan, which ends in fiscal 2010. Benesse has grown until now at an average annual rate of 7%, and we are aiming to maintain the annual growth rate at around 7% during the next ten years. We envisage that net sales in fiscal 2018 will be approximately double what they are now, at around ¥800 billion.

We have identified five strategic business fields in which we will expand our operations going forward. They are:

• Domestic education—Centering on our core correspondence course operations
• Overseas education—Centering on our correspondence courses for Chinese pre-schoolers
• Lifestyle—Centering on the existing publishing and mail-order operations targeting women
• Senior/Nursing care—Centering on our nursing care operations
• Language/Global leadership training—Centering on Berlitz

In our core domestic education field, we aim to earn, and retain, the trust of schools and families to establish our brand as the market leader in domestic education. At the same time, we intend to raise the penetration rate of our correspondence courses from the current 21% to 25% by using the internet and other means to offer new ways of studying at home.
Our overseas education operations have only just got under way, and are therefore still small-scale, but we intend to make use of the know-how accumulated in our domestic education business to firmly establish the Benesse brand in other Asian countries in addition to Japan. In China, especially, we are targeting enrollment of 1.5 million, ten times the current figure.
In our lifestyle-related operations we will build a business model to conduct direct marketing aimed at gaining repeat customers using a variety of media, including the internet, magazines and other publications.
In our senior business, we will continue to steadily increase the number of nursing homes under our existing business model. However, this will be accompanied by efforts to devise a new business model that will drive future growth by aiming to increase the number of target customers and areas.
In language/global leadership training we will strive to become a global education company, leveraging the Berlitz brand by supplementing our language lessons to actively expand new educational services such as global leadership training. In tandem with continuing to steadily grow our domestic education operations, we will significantly expand our overseas education and language/global leadership training to raise our overseas sales ratio from the current 17% to 30% or more.
In order to make this vision a reality, we have decided to convert to a holding company structure from October 1, 2009. under the new framework we will expand operations in each business field by allocating management resources effectively across the Group and conducting M&As and business tie-ups efficiently.

(FUKUHARA)

• Conduct M&As proactively in fields where we can further build on the Benesse Group's strengths.

Our operating environment is currently transforming dramatically and with unprecedented speed. Japan's changing demographics, advancing globalization and the evolution of information and telecommunication network technology are all contributory factors. We believe that to achieve further growth in our operations, it will be crucial to ensure management with increased emphasis on a Group-wide approach to growth strategies and allocation of resources. The importance of M&As and business tie-ups will therefore continue to increase as means of achieving these ends. When considering M&As it is important that we are not just looking to increase in scale. We intend, therefore, to actively enter into M&As and tie-ups that enable us to make the most of our strengths in the fields of education, language, nursing care, and lifestyle, and in areas where we can build on our core competencies. Above all, any such M&As or tie-ups must be in full alignment with our corporate philosophy.
In our education business we had already acquired two prep schools, Ochanomizu Seminar and TKG, and in April 2009 we added Tetsuryokukai to the Group. Tetsuryokukai has extremely high success rates in helping students earn places at The university of Tokyo and other leading Japanese universities, commanding unparalleled brand power as a prep school that specializes in preparation for exams to the most elite universities. These three schools will be central to Benesse's efforts to build up its prep school operations, with the potential for further acquisitions in the future. In our language business, Berlitz acquired Training Management Corporation, a u.S. company with an established reputation in cross-cultural education, in 2008. We intend to continue conducting M&As in this field with any suitably strong candidates, whether they are based in Japan or overseas. Meanwhile, in the lifestyle business field—one of the strategic areas we are emphasizing—we seek to expand operations not only through our own efforts, but also by making effective use of M&As to step up the pace of growth.
On October 1, 2009 the Benesse Group will shift to a holding company structure, facilitating swift decision-making in each Group company, as well as effective allocation of management resources across the Group. Together with our Group companies, we therefore intend to redouble our efforts to pursue further M&As and business tie-ups.

(FUKUHARA)

• Benesse will use cash for R&D, efforts to strengthen the business base, and other investments in medium- to long-term growth. At the same time the Company will aim to actively and sustainably provide returns to shareholders through dividends, repurchases of Company shares, and other means.

Capital policy is one of the most important issues for Benesse, and the Benesse Group as a whole conducts its business with close attention to cash flows. We aim to make effective use of cash from business operations by making returns to shareholders and investing in further business development. Targets include R&D, efforts to strengthen the business base, M&As and other investments in medium- to long-term growth. In addition, we are aiming to achieve the 12% target we have set ourselves for ROE in fiscal 2010 by making efficient use of liquidity.
Our policy for returns to shareholders is to pay dividends and repurchase Company shares on an ongoing basis. Where dividends are concerned, we have set a target dividend payout ratio of at least 35%, and we increased our dividends for five consecutive years from fiscal 2003 to fiscal 2007. For fiscal 2008, we paid an annual dividend of ¥90 per share, the same as in fiscal 2007. We plan to pay the same again for fiscal 2009. The resulting payout ratios are 84.1% for fiscal 2008, and 40.3% (projected) for fiscal 2009, exceeding the 35% target. Meanwhile, Benesse's DOE for fiscal 2008 stood at 5.0%.
With regard to share repurchasing, Benesse repurchased 3.1 million shares at a cost of ¥13.25 billion in fiscal 2008. As of the end of March 2009, cumulative repurchases amounted to 8.14 million shares at a cost of ¥27.39 billion, 7.7% of the total shares issued. As a result of these repurchases, our total rate of shareholder return for fiscal 2008 came to 13.2%, significantly exceeding the 5% targeted as our internal policy goal. In June 2009, Benesse also repurchased 400,000 shares at a cost of ¥1,511 million.