The Great East Japan Earthquake that struck on March 11, 2011, and subsequent power supply shortages have significantly impacted the Japanese economy, leading to production stoppages and undermining consumer sentiment, among other issues. As such, the Company’s operating environment remains fraught with uncertainty.

The Benesse Group’s core business—the Domestic Education Business Domain—saw enrollment numbers in April 2011 for Shinkenzemi and Kodomo Challenge decline for the first time in four years, as sales activities ahead of the new school year were interrupted in the wake of the disaster. Consequently, operations in fiscal 2011 got off to a rocky start, with lower earnings currently projected for the year. In this context, the Group enacted bold internal organizational reforms in the Domestic Education Business Domain aimed at integrating its product planning and development and marketing organizations. In tandem, the Group strove for optimal allocation of expenses for enhancing product capabilities and in marketing, aiming for a swift rebound in business performance by spurring a recovery in correspondence course enrollment.

Furthermore, the Group is promoting the following three strategies in the domains of education/childcare, language/global leadership training, and senior/nursing care, with the goal of becoming a global corporate group.

The first point is to strengthen global business development. In China, where substantial growth is expected, the Company is accelerating expansion in the education business, while promoting education service commercialization in the U.S. and other new markets. Elsewhere, through Berlitz Corporation, work is being done to expand target regions in the ELS business (English lessons for students who want to study overseas) beyond the U.S. Other efforts include bolstering and expanding products with higher added value in global leadership training (GLT) and online lessons (BVC), and promoting business development in emerging markets, as the Group looks to create new markets on a global scale.

The second point is strengthen and expansion in education and childcare businesses in Japan. In the correspondence course business, in step with the rapid uptake and development of IT and digitalization, the Group will continue to vigorously promote a shift to educational materials that blend paper and online elements to further strengthen its product capabilities. In marketing too, it is responding to the market environment by supplementing its traditional direct mailing activities by actively utilizing the Internet and other tools in order to optimize its marketing methods.

The third point is expansion in the senior/nursing care business. The Benesse Group already operates the largest number of homes in Japan tailored to the living needs of seniors. In a bid to meet customers’ diverse needs and expand services, in June 2011 the Group will add a new low-cost series of homes, called Kokochi, to its existing five home series. With further market expansion anticipated, the Group will steadily increase the number of nursing homes and expand business while continuing to provide the safe and reliable high-quality services that consumers have come to expect of the Benesse Group.

Capital policy is another key issue for the Benesse Group. It has clearly stated its goal of achieving a dividend payout ratio of at least 35%, and for fiscal 2010, the Company expects to pay an annual dividend of ¥95 per common share, for a payout ratio of 45.6% (on a consolidated basis). As of March 31, 2011, Benesse held 7.58 million shares of treasury stock (cost of ¥26.0 billion), representing 7.1% of all issued shares. The Company plans to conduct further repurchases as deemed appropriate. The target level for treasury stock is 5% of all issued shares, with the Company scheduled to cancel any surplus above this level. In order to preserve financial health, the Group will pursue management policies that put an emphasis on cash flows. The Group also intends to actively use cash reserves for business investment in M&A activities in fields where growth is expected going forward. Investments will also be used to drive medium- to long-term growth, including in R&D, and investments to strengthen the business foundation.