(FUKUSHIMA)

• We have accelerated the speed of decision-making, and as a result made greater progress in concentration in core competences based on the Group's overall growth strategy.

The adoption of a holding company structure allows the holding company to oversee the Group's overall growth strategy and make decisions regarding the allocation of resources and the training of employees, allowing Benesse Corporation and the other individual operating companies to focus their full attention on business operations. This allocation of responsibilities has also helped speed up management decision-making.
Under the holding company structure, we have reorganized our businesses into five business domains.Domestic Education, Overseas Education, Lifestyle, Senior/Nursing Care and Language/ Global Leadership Training.allowing Benesse to focus management resources on key operations. In the six months following Benesse's adoption of a holding company structure we have acquired Bon Sejour Corporation as a consolidated subsidiary and sold off our stake in AVIVA Co., Ltd. We view this as a good start in the effort to consolidate operations in areas of core competence and concentrate management resources in areas of potential growth.
At a time when earnings are relatively healthy, it is important to solidify the organizational base and prepare the way to accelerating growth in the future. We intend to focus specifically on issues like productivity and the more efficient use of financial resources and assets, in order to give Benesse a healthier and more robust corporate structure.

(FUKUSHIMA)

• Fiscal 2009:

• Negative impact of yen appreciation
• Number of Berlitz lessons decreased due to global economic slump

• Fiscal 2010:

• Lowered net sales target in mid-term plan due to global economic woes
• Aim to meet the original mid-term plan operating income target

The main reason for the year-on-year decline in both net sales and operating income for fiscal 2009 was that earnings from Berlitz International deteriorated during the period. Although continued yen appreciation had a negative impact on currency conversions, another serious factor was the global economic slump, which caused corporate demand for language lessons to drop off, reducing the volume of lessons provided in each of Berlitz's business regions.

On the other hand, Benesse's education business — which forms the core of our earnings structure — continued to register growth in the number of enrollees in correspondence courses in Japan and overseas, and these was also a steady increase in sales for the senior high school business. This, plus the acquisition of prep school businesses, contributed to rising sales and profits in this segment. The senior/nursing care business also posted sales and profit growth, due to an increase in the number of nursing homes that Benesse operates.
In fiscal 2010, initial enrollment in correspondence courses in Japan and overseas has been quite strong, and the number of nursing care facilities in operation are expected to increase significantly year on year. The addition of Bon Sejour as a subsidiary is expected to contribute among other factors to elevating revenues by 3.7% year on year. This growth in sales in the education and senior/nursing care businesses among other factors should allow Benesse to register growth in operating income by 8.2% year on year. We expect all major earnings figures.from sales through net income.to reach new historical highs.
Fiscal 2010 marks the final year of our medium-term management plan, which was announced in May 2006. Due to the unanticipated impact of the global economic crisis, we have lowered the sales target contained in that medium-term plan to ¥421.5 billion, from an original ¥430.0 billion. However, we expect to achieve the plan's original operating income target, in real terms. Due to a change in Japanese accounting standards from fiscal 2008 for the amortization of goodwill on Berlitz International., Inc., that required the Company to book a ¥2.0 billion expense on goodwill amortization every year, we expect operating income to be ¥41.0 billion (the original ¥43.0 billion target minus ¥2.0 billion in goodwill amortization). We continue to aim for ROE of 12%.

(FUKUSHIMA)

• The strong earnings are a testament to our ongoing efforts to improve product quality and marketing capabilities, as well as some favorable external factors. By developing a new generation of products and services, we aim to maintain this growth in the future.

Although the low birthrate and prolonged economic stagnation have had an adverse impact, domestic correspondence course enrollment continues to grow. The number of domestic enrollees as of April 2010 stood at 4.08 million. This represents a 1.0% increase year on year, marking the third consecutive year of growth. With overseas enrollees included, Benesse's total enrollment increased 2.9% year on year, to a new record high of 4.6 million. We are off to a strong start in fiscal 2010. The company's superior products and marketing capabilities provide the driving force for this growth, but Benesse has also benefitted from some positive external factors.

Let me start by outlining the product strengths Benesse offers. We have developed lessons that can be finely adjusted to match the learning style, objectives and individual needs of each student. The fruits of these efforts have earned high marks from students and their parents. In fiscal 2008 we began offering lessons that combine traditional paper-based materials with the interactive features of the Internet. This Shinkenzemi Junior High School Course + i helps to increase a student's motivation to learn, and we are gradually developing the structure in ways that help to maximize learning results. This has contributed greatly to enrollment. The Marketing and Sales Division helps focus and coordinate Benesse's company-wide marketing resources towards the education business, and maximize the results of marketing activities.
Several outside factors have also had an influence on the business. First of all, the new national curriculum guidelines, due to be implemented from fiscal 2011, place a strong emphasis on upgrading educational performance. Measures to make the transition to the new curriculum guidelines were initiated at the elementary and junior high school levels in fiscal 2009. This has helped to give parents a stronger awareness of, and interest in their children's education. This trend is likely to make supplemental education services, such as Shinkenzemi courses, increasingly important. Meanwhile, despite the potential problems that might be created by prolonged economic stagnation, Shinkenzemi courses have fared well relative to other education services. They are viewed as superior in quality, and more cost-competitive than other products and services, allowing them to withstand the impact of a weak economy.
In the future, factors such as the low birth rate and rising market competition are likely to create continued pressure in the domestic education market. In response, Benesse plans to continue developing a new generation of products and services, using the Internet and various other types of media to increase its share of the market and perpetuate growth. In fiscal 2011, we will introduce a next-generation course for high school students, and we are planning to add internet-based checking and feedback features to the company's elementary school correspondence courses as well. We intend to continue improving and upgrading products to meet the needs of the next generation, and aim to increase the percentage of school-aged children enrolled in a Benesse course from the current 21% to 25% in fiscal 2018.

(FUKUSHIMA)

• We are accelerating growth in China by opening multiple new sales offices and expanding our capacity to reach customers.

The Benesse Group recognizes that in order to maintain growth over the longer term, we will need to focus on expanding our global operations. Benesse made its first move into the Chinese education market in 2006, with a correspondence course product aimed at preschoolers. As of April 2010, the number of Chinese enrollees in Benesse correspondence courses stood at 220,000 — an increase of 70,000 from the previous year. In China, 15 million children are born every year — close to 15 times the number in Japan. This massive potential market, combined with the country's rapid economic growth, rising income levels and strong parental interest in their children's education, combine to create an enormous market opportunity for Benesse.
We expect the education business in China to become a major engine for growth in the years to come, and Benesse intends to accelerate the pace of business expansion in China from fiscal 2010 onward. Specifically, we plan to open sales offices — which serve as the core for local business — in cities other than the current base in Shanghai. This will allow Benesse to increase contact with customers and strengthen marketing capabilities. We also intend to expand the product lineup on offer. At present, Benesse offers products in China for pre-school children only. Following on the launch of products for elementary school students in September 2010, we will continue to expand the product lineup.
We believe that these efforts will allow Benesse to increase enrollment in China from around 300,000 students at the end of fiscal 2010 to roughly 1.5 million by the end of fiscal 2018.

(FUKUSHIMA)

• The market is diversifying, with various new services that respond to changing client needs, including lower prices and online lessons. By constantly focusing on the needs of the customer, and trying to find ways to add value with new services, Berlitz is establishing itself as the leader in global leadership training.

Due to the global economic slump, both corporate demand and consumer spending declined. These market conditions are still a serious problem. Meanwhile, the market is changing as new services and options are added. In addition to traditional language lessons in a classroom, students can use a computer to select lower-priced lessons provided via the Internet.
In fiscal 2009, earnings at Berlitz were severely affected by the global recession. But even during this downturn, the company made useful progress by implementing fundamental changes to its infrastructure, IT structure, personnel and marketing policies, to lay the foundation for future growth.
In fiscal 2010, the operating environment remains very difficult for Berlitz, but the company is responding to the changing needs of customers and the market, and striving to provide services that address those needs. For example, we are developing individual lesson plans that focus on the needs of different types of people depending on their company or industry, and the type of work that they do. Berlitz operates schools in over 70 countries and regions worldwide, and also offers lessons online, or hybrid-type lessons that include both online and face-to-face instruction. In this way, the company is responding flexibly to customer needs. Berlitz is also strengthening its global leadership training program, which helps prepare its students to work on the international stage, and expanding the area covered by its ELS business, which supports those who want to study overseas. These efforts will help drive earnings growth over the medium and long term. Berlitz constantly focuses on the needs of the customer, providing not only traditional language lessons but a variety of other value-adding services. By establishing itself as a diversified global personnel training company, the company is laying the foundation for future growth.

(FUKUSHIMA)

• As the numbers and percentages of elderly people increase, and the regulations on the scale of facilities are eased, we expect the market as a whole to expand. Benesse intends to accelerate the pace at which it opens new nursing homes, and expand the markets and regions it covers, making this the growth driver of the Group.

The market served by Benesse's senior/nursing care business is continuing to expand in parallel with the aging of Japan's population. In response, many local governments are starting to relax the restrictions on the number of nursing care facilities in each area. At the same time, the economic slump has caused a number of nursing homes to close, or be transferred to new owners in recent years, due to weak finances. As a result, customers have begun to include the financial position of the operator as one of the key criteria in selecting a care facility.
Benesse Style Care Co., Ltd. has been opening new facilities at a steady pace each year, and had 150 nursing homes in operation nationwide as of the end of March 2010. The company has maintained extremely high levels of service quality and financial strength, and this has earned Benesse Style Care a reputation of trust among customers. As a result, the company maintains an occupancy ratio of roughly 94% (as of March 2010). In 2007, we introduced new personnel policies aimed at providing comprehensive training for staff, and management policies which helped to improve employee retention dramatically. These policies allow the company to attract high-quality caregivers, and help us lay the foundation for a new phase of growth.
In March 2010, Benesse acquired Bon Sejour Corporation, a nursing home operator which manages facilities in a less expensive price range than those managed by Benesse Style Care, and made it a consolidated subsidiary. This allows Benesse to expand the range of services that address a wider range of needs. In this way, we have expanded the demographic and the geographical area that we serve with senior/nursing care operations, and accelerated the pace of expansion. In fiscal 2010, Benesse Style Care plans to open 26 new facilities, compared with 12 opened in fiscal 2009. If we also include the 29 facilities operated by Bon Sejour, this will increase the number of facilities under the Benesse umbrella to 205, making Benesse the largest nursing home operator in Japan (based on projections for March 2011). Over the longer term, we plan to develop operations in new business fields, expanding beyond the range covered by Benesse Style Care's current business model to cultivate new markets. This will help address regulatory risk and expand the range of customer needs that Benesse can address. In the future, we intend to maintain a leading position as the largest player in the nursing care market, while maintaining high levels of quality and service which match Benesse's reputation for safety and security. By addressing the needs of the market, the company can achieve steady growth and establish its senior/nursing care business as the second largest source of income, after the education business.

(FUKUSHIMA)

• we intend to develop a new business model which enhances the company's presence on the Internet.

At present, the main operations overseen by Benesse's lifestyle business include publishing and mail-order operations. In recent years, however, the publishing business has been weakening, and sales of the company's major magazine titles have dropped off, along with advertising revenues. Compared to Benesse's other operations, the publishing business generates comparatively meager earnings. On the other hand, the mail order business has managed to record relatively steady earnings results despite a slump in consumer spending, thanks to our ongoing effort to provide a lineup of products that meet the needs of women and their children, at each stage of their lives.
In order to maintain its dominant position as the number one brand in the markets that address pregnancy, birth and child care and lifestyles of women and their families, Benesse plans to expand operations from the print media to cover new media channels, providing information and web community activities via the Internet and various mobile phone networks. In this way, the company is developing a new business model that aims to strengthen Internet-based businesses and mail-order operations.

(FUKUHARA)

• We will continue actively seeking M&A targets in order to perpetuate self sustainable growth in each of our core business segments.

The shift to a holding company structure, last October, has allowed Benesse to accelerate responsive decision-making in each of our business domains and to allocate management resources more effectively. In order to promote the Group's long-term growth, we intend to actively seek out opportunities to form mergers, acquisitions and business alliances which will help to perpetuate self sustainable growth in each of the Group's core business domains. However, the key consideration in making M&A decisions is not whether or not the deal can simply expand the size of Benesse's operations. The corporate concept embodied in the Benesse company name is a basic prerequisite to any acquisition. Benesse will continue seeking to strengthen the Group and to develop synergies in the core business domains of Domestic Education, Overseas Education, Lifestyle, Senior/Nursing Care, and Language/Global Leadership Training.
During fiscal 2009, the Company made M&As in three business domains.Domestic Education, Senior/Nursing Care and Language/Global Leadership Training.
We intend to continue these M&A efforts in our drive to perpetuate Group growth.

(FUKUHARA)

• Management strives to maintain a high, positive cash flow, and to use the cash to invest in the Company’s medium- and long-term growth through R&D, M&A activities and strengthening of the IT platform, the customer management system and other platforms. We also pursue a policy of steadily enhancing shareholder value through dividends and share repurchases.

Capital policy is an important issue for the management of the Benesse Group. We place great importance on the Group's financial health and pursue management policies that aim to generate a strong and positive cash flow. Cash from operating activities is used to invest in measures that will help perpetuate growth over the medium and long term, such as R&D of new products, M&As, and measures to strengthen the business foundation. We also try to use cash effectively in order to steadily return value to shareholders. By using capital efficiently, we achieved an ROE of 12.9% in fiscal 2009, above our targetted ROE level of 12% in fiscal 2010. In the future, we will continue to target an ROE of 12% or above.
Benesse maintains a policy of aggressive share repurchases and dividends in order to return value to our shareholders. We have adopted a dividend policy which sets the payout ratio target at 35% or more of net income. In fiscal 2010, Benesse expects profit levels to reach a new record level, and accordingly, we plan to raise dividends by ¥5 per share, to ¥95. This will represent an estimated dividend payout ratio of 41.5%. In fiscal 2009, DOE stood at 5.2%, and the Company has been conducting share repurchase activities on a continuing basis. Benesse repurchased 3.11 million shares in fiscal 2008 for ¥13,252 million, and it spent ¥1,511 million in fiscal 2009 to acquire 400,000 shares. As a result, the balance of treasury stock as of March 2010 stood at 7.71 million shares (at a cost of ¥26,527 million), or 7.3% of total shares outstanding. The Company plans to continue repurchasing shares, from time to time, when market conditions make it appropriate. As a result, the rate of return on shareholders' equity stood at 5.7% in fiscal 2009.