for the year ended march 31, 2012 so - ir pocketpdf.irpocket.com/c9783/saip/szcl/uewf.pdf ·...

Annual Report 2012For the Year Ended March 31, 2012

SoLife is B r i g htB e aut i f u lC h a l l e ng i ngWo n d e r f u l

What is “Benesse”?

The heart of “Benesse” is enjoying the process of moving forward step by

step, with resolve, toward the realization of your dreams and aspirations.

Benesse empowers people to solve issues for themselves and to enjoy life

to the full at every stage by offering them the tools and support they need to

create well-being.

We aim to be a globally respected corporate group that is both supported

by and indispensable to its customers, communities, and society in general.

Benesseesse[ being ]

bene[ well ] “ Well-Being ”

004 Ten-Year Summary of Consolidated Financial Statements

Contents

008 Interview with the President Aiming to be the World’s No.1 Company in the Education Field — A new medium-term management plan for fiscal 2012–2016—

At the right time014 Message from the Independent Director

016 Special Feature: A Discussion with Investors Exploring Benesse's Growth Potential

022 Feature: Aiming to be the World’s No.1 Company in the Education Field

022 New Challenges for Berlitz

030 Expanding the Kodomo Challenge Business in China

038 Message from the Chairman

040 Board of Directors and Statutory Auditors

044 Benesse Group CSR046 CSR Activity Report051 Corporate Governance054 Compliance System055 Communicating with Stakeholders and Investors

058 Benesse’s History060 Market Environment062 Review of Operations/ At a Glance

Tomorrow Section

Guide to Online Annual Report 2012Our online Annual Report 2012 enables you to click on online features such as a video interview with our president.

WEBhttp://www.benesse-hd.co.jp/en/ir/ar2012/

Forward-Looking StatementsThis annual report contains forward-looking statements concerning the future plans, strategies, beliefs and performance of Benesse Corporation and its subsidiaries. These forward-looking statements are not historical facts. They are expectations, estimates, forecasts and projections based on information currently available to the Company and are subject to a number of risks, uncertainties and assumptions, which, without limitation, include economic trends, competition in markets where the Company is active, personal consumption, market demand, the tax system and other legislation. As such, actual results may differ materially from those projected.

007 SectionCSR 043

Fact Section 057

Financial Section 071

126 Consolidated Subsidiaries127 The History of Benesse

Holdings, Inc.128 Investor Information129 Corporate Data

001Benesse Holdings, Inc. Annual Report 2012

Number of deaths in Japan

1 2 6 1 0 0 0, ,

Number of births in Japan

1 0 5 7 0 0 0, ,

2011

Source: Annual Estimates of Vital Statistics, 2011, Ministry of Health, Labour and Welfare

Dreams and aspirations...imagine our future

The Benesse Group is focused on the never-changing nature of human endeavor, empowering people to solve issues for themselves so that they can enjoy life to the full at every stage.

Offering people the tools and support they need to create better lives, for a brighter future

Envisioning our Future

0

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500

0

10

20

30

40

50

0

10

20

30

40

0

75

150

225

300

354.6384.5

412.7 406.6 412.8 423.7

31.334.9

39.1 37.942.9

33.8

18.215.5

10.7

21.9 20.616.4

178

Net Income (Left)Net Income per Share (Right)

152

107

222208

168

07 08 09 10 11 12[ Years ended March 31 ]



Billions of Yen

Net Sales Operating Income

Billions of Yen Yen

Net Income/Net Income per Share

Billions of Yen

004 Benesse Holdings, Inc. Annual Report 2012

Ten-Year Summary of Consolidated Financial Statements

Years ended March 31 2003 2004 2005

For the Year:

Net sales ¥258,289 ¥260,142 ¥291,403Cost of sales 133,223 125,312 139,672Selling, general and administrative expenses 108,749 114,128 125,553Operating income 16,317 20,702 26,178Income before income taxes and minority interests 14,446 17,251 25,799Income taxes 7,553 7,628 11,439Net income 6,973 9,394 14,297

CAPEX ¥ 8,046 ¥ 9,851 ¥ 11,116Depreciation and amortization 8,666 7,821 7,511

Per Share of Common Stock:

Net income ¥ 65 ¥ 89 ¥ 138Cash dividends 29 40 60

At Year-End:

Total assets ¥275,516 ¥292,100 ¥307,668Shareholders’ equity/Total equity 169,428 170,781 174,711

Shareholders’ equity/ Total equity per share of common stock ¥ 1,612 ¥ 1,641 ¥ 1,701Number of shares of common stock issued (in thousands) 106,353 106,353 106,353

Notes: 1. The computation of net income per share of common stock is based on the weighted-average number of shares of common stock outstanding during each year. 2. CAPEX for the fiscal year ended March 31, 2008 and before includes rental deposits. 3. Depreciation and amortization for the fiscal year ended March 31, 2008 and before includes depreciation of non-operating expenses.

0

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11.8

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18.113.5

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14.2

349.1 366.6343.1 356.2

405.1432.1

197.3 202.3

168.5183.2 192.8 194.2

CAPEXDepreciation and Amortization


07 08 09 10 11 12[ As of March 31 ] [ As of March 31 ]

07 08 09 10 11 12

Billions of Yen

CAPEX/Depreciation and Amortization

Total Assets Shareholders’ Equity/Total Equity

Billions of Yen Billions of Yen


2006 2007 2008 2009 2010 2011 2012

Millions of Yen

¥333,767 ¥354,596 ¥384,514 ¥412,711 ¥406,602 ¥412,829 ¥423,707165,347 175,219 192,182 204,115 199,835 203,842 212,017140,008 148,060 157,449 169,470 168,878 166,119 177,892

28,412 31,317 34,883 39,126 37,889 42,868 33,79827,746 32,339 31,007 29,984 38,616 36,670 34,05611,637 13,903 15,025 18,653 15,912 15,607 17,11016,039 18,244 15,462 10,679 21,875 20,587 16,369

¥ 20,504 ¥ 11,802 ¥ 22,767 ¥ 18,051 ¥ 27,042 ¥ 21,938 ¥ 44,6119,775 9,929 11,829 13,456 13,029 13,738 14,184

Yen

¥ 156 ¥ 178 ¥ 152 ¥ 107 ¥ 222 ¥ 208 ¥ 16875 85 90 90 90 95 95

Millions of Yen

¥330,230 ¥349,099 ¥366,585 ¥343,129 ¥356,153 ¥405,119 ¥432,081186,292 197,302 202,342 168,497 183,170 192,793 194,190

Yen

¥ 1,818 ¥ 1,918 ¥ 1,949 ¥ 1,647 ¥ 1,793 ¥ 1,894 ¥ 1,934106,353 106,353 106,353 106,353 106,353 106,353 104,153

Number of births each year worldwideNumber of births each year worldwide

Projections for 2010–15Projections for 2010–15

Number of deaths each year worldwideNumber of deaths each year worldwide

5 8 0 9 3 0 0 0, ,

1 3 5 7 7 4 0 0 0, ,

Based on World Population Prospects: The 2010 Revision, United NationsBased on World Population Prospects: The 2010 Revision, United Nations

Number of births each year worldwideNumber of births each year worldwide

Projections for 2010–15Projections for 2010–15

Number of deaths each year worldwideNumber of deaths each year worldwide

55 88 00 99 33 00 00 00, ,,

11 33 55 77 77 44 00 00 00,, ,,

Based on World Population Prospects: The 2010 Revision, United NationsBased on World Population Prospects: The 2010 Revision, United Nations

Number of births each year worldwide

Projections for 2010–15

Number of deaths each year worldwide

5 8 0 9 3 0 0 0, ,

1 3 5 7 7 4 0 0 0, ,

Based on World Population Prospects: The 2010 Revision, United Nations

http://www.benesse-hd.co.jp/en/ir/ar2012/

Please see online Annual Report 2012 for more detail, including a video message from the management.

Guide to Online Annual Report 2012

WEB

Tomorrow S e c t i o n

008 Interview with the President Aiming to be the World’s No.1 Company in the Education Field — A new medium-term management plan for fiscal 2012–2016—

At the right time 009 Our Growth Vision for the Benesse Group 010 Enhance and Expand the Domestic Education Business 012 Step up Global Business Expansion 013 Expand the Senior/Nursing Care Business 015 Medium-term Management Plan Targets

014 Message from the Independent Director

016 Special Feature: A Discussion with Investors Exploring Benesse’s Growth Potential

022 Feature: Aiming to be the World’s No.1 Company in the Education Field

022 New Challenges for Berlitz 024 Interview with Senior Management

030 Expanding the Kodomo Challenge Business in China 032 Interview with Senior Management

038 Message from the Chairman

040 Board of Directors and Statutory Auditors

An interview with the president can be viewed on our website. WEB


At the right time

Aiming to be the World’s No.1 Company in the Education Field—A new medium-term management plan for fiscal 2012–2016—

Interview with the President

Tamotsu FukushimaRepresentative Director and President

Benesse Holdings, Inc. Annual Report 2012008

The Benesse Group’s Growth Vision

Key Strategic Tasks

As a company involved in “Education (Human Resource Development)” and “Solutions for Society’s Challenges,”

(1) Become the world’s No.1 company in the education field, supporting childcare, education and human resource development globally.

(2) Position the senior/nursing care business as an important growth field and propel growth further.

Promote growth strategies in the domains of “education and childcare,” “language/global leadership training” and “senior/nursing care.”

Our Growth Vision for the Benesse Group

Envisaged net sales CAGR (FY2012-2016)

Accelerate global business development

Around 20% Around 3% Around 8%

Enhance and expand domestic education and

childcare businessesExpand senior/

nursing care business

Education and nursing care are central to our vision

We have painted an ambitious vision for growth under our new medium-term management plan, which runs for five years from fiscal 2012 until fiscal 2016. We aim to become the world’s leading company in the education field and drive further growth by positioning the senior/nursing care busi-ness as a key growth field. In order to become the world’s leading education company, we will continue developing our operations in Japan and step up global business expansion. In parallel, we will target further growth in the senior/nursing care business by assigning it the same strategic status as our education business.

Transforming Benesse into the world’s leading education company

Stepping up global business development is a central plank of our new medium-term management plan, illustrated by our aim of increasing overseas sales at a compound annual rate of around 20% over the next five years. To achieve this, the whole Benesse Group will have to pull together to create a more global business culture. One of the main reasons we declared our objective to become the world’s top company is to channel all the energies of Benesse Group employees into building an organization with a more global outlook. I believe this bold statement of intent will change the way our people think and act. In fact, we are already seeing a shift in our workforce away from the domestic-oriented approaches of the past. Raising and educating children and training people to be globally competitive are set to become extremely important themes worldwide as the global population grows. At the moment, our businesses are mainly focused on Japan, but the Group also includes Berlitz Corporation, which has an operational reach extending into more than 70 countries. This international network is a business asset we can use more effec-tively. Going forward, we will generate even greater synergies between Group companies and make a valued contribution to people worldwide through the education services provided by the entire Benesse Group.

An interview with the president can be viewed on our website.

http://www.benesse-hd.co.jp/en/ir/ar2012/

WEB


Domestic Education

Roll out next-generation Shinkenzemi products

Boost value by harnessing digital media

Strategically utilize the classroom businessReinforce the prep school business and strategically use visual content

Overhaul marketing approachesDiversify marketing channels

Increase marketing efficiency

Strengthen the English learning business for young children

Enhance language skills and promote a more global outlook

Build up the global leadership training business

Provide support for overseas study, improve professional development, etc.

Increase our share of the home study market

Build up the global leadership training business

Targeting Shinkenzemi penetration rate of 25% in fiscal 2018

Leverage Groupwide assets to build the global leadership training

business across all age groups, from preschool

through university and beyond

Key Strategies: Domestic Education

Enhance and Expand the Domestic Education Business

Targeting further growth with a new generation of products and services

Around one million children are born every year in Japan, or roughly half the annual level during Japan’s sec-ond baby boom in 1971–74. Despite this trend, the number of children enrolling in our main correspondence courses is rising. In Japan, 21% of all children up to age 18 are currently enrolled in Shinkenzemi and Kodomo Challenge. This is a large share of the market, but we plan to increase it further to 25% by 2018 and scale up the enrollment even as the number of children declines. To reach this target, we will need to continuously improve our range of products and services to boost the motivation of students and improve learning outcomes. We have already started this process. Since 2008, we have been gradually modernizing and upgrading our courses by incorporating the latest developments in online, mobile and digital education tools. Pocket Challenge, a new digital education tool for elementary school fourth-graders launched in April 2012, has proved extremely popular. From the current fiscal year, we also started offering courses with mixed paper-online learning materials as standard at the junior high school level. Previously, these courses were only optional, but this shift has seen a rise in student satisfaction and a subsequent improvement in retention rates. We will continue to push ahead with this shift to next-generation courses, aiming to complete the upgrade to paper-online hybrid educational materials by around 2015.



Transform Japan’s children into global citizens through Benesse-Berlitz teamwork

Japan’s education system is beset by a number of issues. The basic academic ability of elementary and junior high school students is consistently high, but a gap in ability emerges when they enter high school, with moti-vation and ability dropping markedly among children with weaker grades. Today’s children are less motivated to learn because of a lack of clear study goals: fewer children have career plans, a rising number of students gain admission to university on the basis of recommendations from their high schools, and the falling birthrate in Japan means most high school students are almost assured a place at university. Also, I strongly believe that children should be taught from an early age how to succeed in global society, and this is another area where I think the Japanese education system is lacking. At Benesse, our aim is to help children become more independent and discover their best study or career path by giving them hands-on learning experiences and the skills they need to improve professional development, in addition to the current focus on learning facts and figures. We also want to help them acquire the essential skills they need to thrive on the global stage through English studies and overseas learning opportunities. In the overseas study field, there is plenty of scope for synergies between Benesse Corporation and Berlitz. Berlitz operates the ELS business, which helps students from around the world, particularly Saudi Arabia, South Korea and China, to acquire the English language skills they need to gain entry into overseas universities, mainly in the U.S. Leveraging these and other assets across the Group, we will enhance our ability to support Japanese children who want to study overseas or experience different cultures. Our Route H prep school, which prepares students for entry into Harvard University and other top universities overseas, has produced a string of successful applicants, attracting attention in the media. However, we want to create a system that encourages an even wider cross-section of students to head overseas for their studies.


Increase the number of children enrolled in preschool correspondence courses

Update the product range and revise pricing (fiscal 2012)

Opened a new office in Chengdu, following Shanghai, Beijing and Guangzhou (April 2012)

Expand the store network: 100 stores (April 2012) 140 stores (fiscal 2012 end)

Launch classroom businessShift from focus on home study to complete education brand

Start developing new marketsIndonesia: Representative office opened (March 2012)

U.S.: Local subsidiary established (February 2012)

Brazil: Started market research

Develop services for schools and classroom business

Aggressively expand the China business Move into new markets and expand our business reach

Target a membership base of 1 million by April 2015

Establish a successful overseas business model

to drive faster regional expansion

Key Strategies: Overseas Education

Overseas Education Expand our business in China and rapidly achieve profitability

Overseas, we are using Berlitz to expand our language learning and global leadership training business in over 70 countries worldwide. In parallel, we are developing our education services for preschoolers in China, South Korea and Taiwan. In China, we launched a local version of our Kodomo Challenge preschool correspondence courses in 2006. Marketed under a Chinese brand name, these courses have expanded rapidly and boasted a member-ship of 480,000 children as of April 2012. We aim to increase the Chinese membership base to 600,000 by April 2013, then 1 million by April 2015. We expect the business to become profitable in fiscal 2013. Through our experience in China, we are aiming to establish a successful overseas business model that can underpin business expansion elsewhere but that also delivers reliable profits. Our next step in China will be to expand the business further by extending our reach into classroom and prep school education, complementing our existing presence in correspondence courses.

Devising business models for new markets

Success is now within reach in China, so we are now turning our gaze to other new markets. We have already started exploring opportunities in new markets such as Indonesia and Brazil, as well as the U.S. These countries look promising due to prospects for strong growth in the young population and the economy. Until now, we have taken a long-term approach to overseas business development, starting with Taiwan more than 20 years ago and China more recently. However, we plan to reduce the time it takes to build our business in new markets, which will mean devising different business models. As part of our preparatory work for entry into these markets, we are looking at a range of possibilities, such as services for schools and classroom businesses, in addition to correspondence courses.

Step up Global Business Expansion


Bolster the Language/Global Leadership Training (GLT) business

Drive market growth in emerging markets and other areas

Target sales of around US$1 billion in fiscal 2015

Expand the global leadership training business

Develop and upgrade programs, create standardized services worldwideOffer services in more markets (Europe, emerging markets, Latin America)

Promote Media-Based LearningOffer services in more markets(Launch services in Japan in fiscal 2012)

Reinforce the ELS businessExpand the International Pathways concept into new marketsAttract a wider range of overseas student nationalities

Generate stronger demand in emerging markets

China, India, Middle East, etc.

Step up M&A strategy

Aiming to be the best, not just the biggest

People often ask why Benesse moved into the nursing care business. Nursing care is mainly about helping the elderly to live as independently as they can so that they can enjoy their senior years with dignity. This dovetails perfectly with our corporate philosophy—helping people to live well—and our desire to provide services to customers that we would be happy to provide to our own families. Another key reason we moved into the nursing care business is that society's need for nursing care services is considerable due to Japan’s rapidly aging population. Our nursing care business is focused on nursing homes. First and foremost, these homes must be safe and offer residents and their families peace of mind. This kind of environment also feeds into a higher quality of care from nursing home staff. At the moment, we have the largest network of nursing homes in Japan, but we want to be more than just the biggest—we also want to maintain our reputation as the leading company for service and trust.

Senior/Nursing Care

Expand the Senior/Nursing Care Business

Berlitz has reformed its business ahead of planned global expansion

Since becoming Berlitz CEO in 2008, Yukako Uchinaga has implemented business reforms in response to tough market conditions. Berlitz has traditionally focused on language lessons offered through a network of centers worldwide. However, with the acquisition of French company Telelangue SA in 2011, it can now combine these lessons with learning modules offered over the Internet or the phone. Along with a menu of leadership training courses for business executives and managers that help them interact with and understand different cultures, Berlitz can now provide all-round support to companies worldwide. Berlitz is aiming to leverage this extensive range of services to drive further growth.

Language/Global Leadership Training

Key Strategies: Language/Global Leadership Training



Since my appointment as independent director in 2008, I have consistently stressed the importance of globalization and digitalization. Companies can become globalized in two ways. One is by adjusting to the local market environment through “local adaption,” the other is by building a shared global platform and IT infrastructure through “global integration” in order to accelerate business development overseas. The Japanese service sector has typically been poor at the latter approach.

Business globalization and innovative learning approaches are vital to Benesse’s future

Steadily open new nursing homesOpen 27 new homes in fiscal 2012 (planned)

(Targeting a total of 250 homes by end-March 2013)

Step up area dominance strategyTransfer responsibility for market areas to new in-house companies

Bon Sejour folded into Benesse Style Care by merger in April 2012

Serviced residences for seniors

Development of related nursing care businesses

Food, nursing care products, etc.

Steady growth in existing business New business development to offer “total senior living” services

Target sales of around ¥100 billion in fiscal 2016

Key Strategies: Senior/Nursing Care

Building a nursing care service company focused on local communities

Guided by our desire to be a locally focused nursing care services company, we decided to adopt an area dominance strategy, where we seek to build a dominant market share in specific local markets. This involves establishing different brands of nursing homes and services in each area so that customers can choose the optimum service for their needs. In fiscal 2012, we also plan to open serviced residences for seniors. This will be followed by the development of related businesses in the same area, such as food services and nursing care product retailers. By offering a diverse range of services, we are aiming to provide “total senior living” services (comprehensive lifestyle services for the aged) that will allow the elderly to remain in their local area even as they age.

Message from the Independent Director

Teruyasu MurakamiIndependent DirectorDirector, Research Institute for Industrial Strategy


Medium-term Management Plan Targets

As Benesse expanded its business into Taiwan, South Korea and China, it explored business models tailored to local markets by working to accurately understand local customers, their needs and what is best for them. Using this experience, Benesse is now going beyond “local adaption” to develop the best approaches for each new market it moves into as it steps up global expansion. “Local adaption" and "global integration" together ultimately evolve into a “trans-national approach.” My hope is that Benesse will be the first Japanese company to achieve this worldwide. The other point I have stressed is digitalization. In Japan, this is sometimes confused with a simple shift from conventional textbooks to digitalized learning materials, but is actually a process that has the potential to create a new

education system for the 21st century. Education worldwide is already moving into the next stage. The past approach of competing to solve problems as quickly as possible using predetermined formulas is being replaced by an approach where students have to analyze the problems they face and then work out the solution themselves as part of a team. Benesse will need to drive the shift to digitalization in order to realize this innovation in learning approaches. I want Benesse to become the world’s No.1 company in the education field by making its business more globalized and by promoting innovative new education approaches for the next generation based on an accurate understanding of how the times and the market are changing.

Working to attain our targets and deliver further growth through overseas expansion

Under our new medium-term management plan, we are targeting net sales of ¥600 billion and oper-ating income of ¥60 billion in fiscal 2016. The whole Benesse Group will work hard to achieve these ambitious targets. From a long-term perspective, overseas business expansion will become increasingly important. We are aiming for an overseas sales ratio of 25% in fiscal 2016, but we plan to boost this even further over the next 20 to 30 years so that we generate a much greater proportion of sales overseas than in Japan. To support Benesse’s growth 30 years from now, it is crucial that we build powerful core businesses to drive growth overseas. The period through to fiscal 2016 will be an important initial step in this process.

Fiscal 2011 Fiscal 2016 targets

Net sales ¥423.7 billion ¥600 billion

Operating income ¥33.8 billion ¥60 billion

ROE 8.7% 12% or higher

Actively invest in new businesses and M&A to drive growth; establish dominant competitive positions in core businesses; and rapidly expand businesses and generate profits in new and growth fields

Medium-term Management Plan: Numerical Targets



Benesse today and the way forward

Watanabe: Benesse has grown by offering public services such as educa-tion and nursing care. But recently we have seen that Benesse’s exclusive focus on these areas might be limiting growth potential. Government policy on educa-

tion and nursing care is increasingly unclear, and Benesse is finding it harder to read signals about what direction it should take in these markets. This means that although the issues in education and nursing care are plain to see, Benesse is not in a position to develop clear policies to solve them. Meanwhile, the issues created by Japan’s aging society offer new business opportunities for companies like Benesse. Many companies in the service sector are working to develop new services for all stages of people’s lives, but progress so far has been patchy. I think Benesse is one of the companies that has made the most progress, but we are in totally new market territory here and it feels like Benesse is still groping towards a solution.

Digitalization holds the key to growth in domestic education

Uesugi: Two things that the stock market likes about Benesse are its abil-ity to deliver reliable market-beating growth underpinned by resilience to the macroeconomic environment and its dominant market share in core

businesses. However, it faces challenges in its operating environment, such as the declining number of children in Japan. The question is how will Benesse maintain growth going forward?

Fukushima: The number of children in Japan is declining, but we aim to expand our membership base for Shinkenzemi correspondence courses even further, targeting 25% of the target age groups. Digitalization will be the key to this growth. Until now, the postal system has played a key role

Special Feature

Benesse’s executives recently met with a group of investors

and analysts to discuss how the Company can realize its

growth potential. To start off the discussion, Benesse President

Tamotsu Fukushima talked about four key areas that are likely

to have a major impact on the Group’s medium- to long-term

growth: (1) the digitalization of learning, (2) the impact of

Japan’s aging society and plans for global business develop-

ment, (3) global leadership training, and (4) efforts to retain

public support and trust. The investors and analysts talked

about their expectations for Benesse and offered their views

about what steps the Group should take going forward.

(Discussion held at Benesse offices on June 11, 2012)

—Investor expectations and their ideas for delivering growth—

ward rowth

A Discussion with Investors Exploring Benesse's Growth Potential


in our service delivery, but we are now working to harness the possibilities of the digital world to rapidly develop a new learning platform. By going back to the basics of our educa-tion business and developing new home study approaches that make learning fun, I believe we can realistically capture around 50–60% of the home study market.

Jacobs: Speed and creativity are vital to digitalization. The boundaries between correspondence learning (home study) and prep schools (classroom study) are breaking down, leading to lower barriers to entry. Companies will have to move

quickly to take the lead in this new operating environment.

Uesugi: By creating rich content, Benesse can encourage customers to pay more for its services. One company in the services sector has hiked prices on a regular basis over the last few years, but it has managed to boost customer satisfac-tion by upgrading its services.

Ichikawa: Given recent growth in the proportion of household income spent on communications, I think there is scope to develop digital content services that customers will pay for as optional extras. Using digital content and social

media in marketing activities would also allow Benesse to

cut back marketing expenses, its biggest cost.

Fukushima: We put priority on customer satisfaction when setting our prices. We will need to review our pricing structure as we push ahead with the digitalization of our products and services. And I agree, I think there is scope to develop video and other content that we can offer as optional services. We already have a portfolio of premium prep school content from Tetsuryokukai and UP that we can utilize.

Kitami: Benesse has acquired four dif-ferent prep schools, but I think it needs to generate greater synergies between these brands. Digitalization holds the key to harnessing content across the entire Benesse Group, including its prep

school business. That’s why I think Benesse needs to set up a cross-divisional team to oversee the shift to digitalization for the whole Group. This team, under the active leadership of management, would significantly accelerate the pace of digitalization.

Fukushima: Our approach in the prep school business has been to implement separate strategies for each brand, but we plan to leverage their combined strengths going forward. As a first step, we have already gathered the top people from each prep school company to talk about an integrated

(From back left)

Investors and analysts in attendance

(From back right)

Benesse representatives

Michael D. Jacobs Vice President, JP Morgan Asset Management (Japan) Ltd.

Kayo Uesugi Analyst, Equity Research Group, Equity Fund Management Dept., Nikko Asset Management Co., Ltd.

Hidekatsu Watanabe Senior Analyst, Healthcare Sector, Services Sector, Equity Research Dept., Global Research Division, Mizuho Securities Co., Ltd.

Masatoshi Ichikawa Analyst, Equity Research Department, Sumitomo Mitsui Trust Bank, Limited

Masaaki Kitami Vice President, Service Sector Analyst, Global Research, Merrill Lynch Japan Securities Co., Ltd.

Kenichi Fukuhara Representative Director, Executive Vice President and CFO

Tamotsu Fukushima Representative Director and President

(Moderator) Katsuhiko Masumoto

General Manager, Corporate Communications & IR Dept. and Group CSR Promotion Dept.


would go a long way to winning over investors in the equity market, even those who tend to be focused on short-term trends.

Uesugi: Berlitz is also part of Benesse's global expansion. More and more companies are moving into the online language education market, which is bringing down the cost of language studies. What strategy is Berlitz following in this environment?

Fukushima: Berlitz is radically overhauling its learning approaches. Many of our corporate clients asked us to add phone- and web-based lessons to our service lineup. With our acquisition last year of Telelangue, a French company strong in web- and phone-based language learning services, we now have more options available to respond to this kind of request. We also implemented root-and-branch reforms to Berlitz’s corporate marketing organization, giving us the platform to expand the business globally. Berlitz is reporting record sales and continues to expand. The next challenge will be to boost margins.

Watanabe: I get the impression that Berlitz still doesn’t have a clear role in Benesse’s global strategy. Berlitz is part of the Group, but I don't think Benesse is harnessing its organi-zation or personnel effectively enough in global expansion. How do you plan to generate synergies between Benesse and Berlitz?

Fukuhara: I agree, we need to leverage greater synergies between the two companies. Berlitz's operating environ-ment has been particularly challenging in the last few years due to the impact of the global financial crisis after the collapse of Lehman Brothers and the yen’s appreciation. However, Berlitz CEO Yukako Uchinaga has been working hard to turn around the business. As you say, Berlitz needs to be part of our strategy to expand the Benesse Group worldwide. The idea that Japanese children need a more global education has been attracting growing attention in Japan in recent years. This offers an opportunity for the Benesse Group, which includes the well-known parts of our

strategy and we have started exchanging personnel between schools. We also plan to increase the number of Benesse personnel who work at these companies.

The Benesse Group’s global development

Kitami: The Japanese manufacturing sector was quick to move into China, with many companies now relying on the market as a source of earnings. However, very few Japanese service companies have made a profit there. I believe the China business has great potential for Benesse, but many investors are still not convinced. To highlight its growth potential overseas, Benesse needs to rapidly make its China business profitable and show investors it can generate profits outside Japan. Benesse then has to explain its strategy of measured overseas expansion through careful analysis of market potential based on factors such as education infrastructure and target populations in each country—rather than a blind headlong rush into new markets. I think investors will dramatically shift their stance on the overseas business if Benesse can clearly communicate its strategy for medium- and long-term development.

Fukushima: The China business is close to becoming profitable. We are now looking at the possibility of offering services other than preschool education services in new markets outside China. Our expansion there has been sup-ported by a new overseas business model that we developed gradually over time. We now plan to use this experience and expertise to step up the pace of business development in other markets.

Jacobs: Achieving critical mass (the point where economies of scale start to emerge) will be crucial in China. Focusing too much on making a profit in the early days of a new business can come back to haunt companies later in the form of unstable earnings. That’s why it is very important that Benesse clearly explains to investors the reasons behind its investments and its vision for medium-term growth. This


business like Shinkenzemi, but also encompasses businesses with strong links to schools in Japan, as well as Berlitz and ELS. Using all these assets, Berlitz and Benesse can work together to approach schools, or Benesse can even act as an agent channeling business to ELS, for instance. I believe the Benesse Group is the only major player in Japan that can help children adopt a more global outlook. Also, Berlitz has a higher profile than Benesse overseas. I think our global expansion will progress more smoothly if we work closely with Berlitz.

Communicating with employees—a key stakeholder group

Ichikawa: I think an important role for senior managers is communicating with and rewarding employees—one of Benesse’s key stakeholder groups. Companies have to give employees the opportunity to grow and develop. This helps them to build a track record of success, boosting motivation in the process and giving them the incentive to try even harder. Benesse is relying heavily on its employees to drive the Group’s growth and achieve the targets in the medium-term management plan. What steps is management taking on a daily basis to boost employee motivation?

Fukushima: We are asking our employees to take on a raft of new challenges such as digitalization and globalization to achieve things that wouldn’t have been possible under our past approach. Employees that have the task of leading frontline projects are asked to take even greater responsibil-ity for their projects through presentations to the Board of Directors. Our goal to become the world’s No.1 company in the education field, stated in the vision of our medium-term man-agement plan, is partly aimed at raising employee motivation and making sure everybody is on the same page. The desire to make our business more global has captured the imagination of our younger employees in particular, who are quite literally queuing up to work for Benesse businesses overseas.

Fukuhara: Every year, we run an employee awareness sur-vey called GAMBA. The data we collect allows us to identify trends in employee awareness about a range of issues, such as whether messages from senior management are getting through to employees, their views on the Group’s growth potential, and whether team leaders are communicating a clear vision. Recent results indicate that employees are more confident about Benesse’s prospects for growth. I think this shows how our recent emphasis on globalization and digita-lization is winning over employees. Both the President and I strive to communicate our ideas to employees in informal situations that engender more relaxed discussions.

Investors’ expectations for shareholder returns

Jacobs: Japanese companies have tended to focus on paying stable dividends. Going forward, I expect investor sentiment to show a clear split between companies that can consistently hike dividends, and those that can’t. Dividends are extremely useful for sending clear signals to the market. My hope is that sustained dividend hikes, rather than just stable dividends, will become the norm for strong Japanese companies like Benesse.

Fukuhara: My view has been that our track record in dividends and share buybacks was enough to show investors our proactive stance on returning profits to shareholders, but we need to send out an even clearer message to the market about our position on shareholder returns. To close, I would like to thank you all for taking time out of your busy schedules to take part today. You provided us with useful insights that I hope to reflect in our business and IR activities in the future.

* The opinions expressed by investors and analysts in this discussion are not intended as a solicitation to buy or sell the Company’s securities and do not necessarily represent the views of their respective organizations.


SoPeople and companies now interact freely across borders

Advances in transport and IT are making the world a borderless place. The Benesse Group gives people the skills they need to succeed in a world of diverse languages, cultures and values.

Helping people achieve their goals, on today’s demanding global stage

ChallengingThe world is no longer divided by lines on the map

Berlitz’s integrated learning solutions for corporate clients

Top

dow

n

Executives

Managers

Staff

GLT / language services / MBLCustomized services / total learning solutions

Global Leadership Training (GLT)

Media-Based Learning (MBL)

We offer a range of programs tailored to specific company needs so that their business leaders can acquire practical language abilities and the communication skills they need to succeed overseas, such as a better understanding of dif-ferent cultures and diversity, and the ability to respond to any contingency.

We use e-learning tools (online self-study systems), phone-based lessons and other media to create customized learning programs for individual customers based on characteristics such as their occupation, skill level and study goals. Bo

ttom

up

Feature 111 Aiming to be the World’s No.1 Company in the Education Field

Berlitz Corporation, a consolidated subsidiary based in the U.S., operates in 75 countries and regions around the world. Amid rising needs for global human resources training, Berlitz is now transforming itself from a language services company into a global education company with new services such as global leadership training (GLT) and media-based learning (MBL) as well as its existing language services.

New Challenges for Berlitz


Canada

United States

aArgentinana

Brazil

Costa Ricacaca

Dominican RepublicDD

Ecuadd

El SalvadordordorGuatemauatemalauatemala

Meexicoe

uguayrugug

Australia

Irelandelandeland

tvia

Indonesia

Japan

SingapoSS

Chile

Mororoccoor

Portugaala

Russia

South Africah Africah Africa

Rising needs for global human resources training

Japanese companies increasingly need people who can function on the global stage

The number of overseas students has risen sharply since 2000

The number of students heading overseas to undertake their studies has accelerated sharply since the start of the 21st century, rising 77% between 2000 and 2009. The mar-ket for highly skilled personnel is becoming more global-ized, reflecting the increasingly important role of overseas studies and experiences in career development.

173 231 8260 5 12

The Americas

Berlitz language centers Berlitz language centers Berlitz language centers

ELS ELS ELS

Europe Asia

8001,100 1,100

1,7002,100

1,300

3,000

3,700

75 80 85 90 95 00 05 090

1,000

2,000

3,000

4,000Thousands

The need to secure and train personnel who can drive global business expansion is an issue shared by many Japanese companies, regardless of overseas sales exposure.

Number of students enrolled at institutions outside their country of citizenship

Obstacles to global business development

Source: Creating a New Style of Japanese Corporate Management, Japan Association of Corporate Executives, July 2009 Source: OECD and UNESCO Institute for Statistics

As of December 31, 2011, Berlitz’s network comprised 563 locations in 75 countries and regions worldwide.

46.2Creating products andservices for global markets

Securing and training personnelto drive global expansion

Establishing overseas sites(R&D, production, sales)

Creating integrated globalorganizations and systems

Ensuring corporate philosophy andvision is adhered to worldwide

Promoting exchanges with personnel at overseas sites

45.141.4

84.684.5

70.5

17.925.4

43.645.1

53.8

Overseas sales ratio of 50% and higherOverseas sales ratio of 20–50%Overseas sales ratio of 0–20%

32.418.0

20.523.9

13.5

15.2

18.9

(%)0 20 40 60 80 100


Berlitz has reformed its business in response to changes in the market environment

When I was appointed CEO in 2008, I felt very strongly that the language services market was becoming commoditized. In other words, companies in the market were competing on price, rather than on the value of their products and services, making it increasingly difficult to stand out in the market based on value. Berlitz provides high-value, premium language services via 563 language centers in 75 countries and regions worldwide. I was convinced that Berlitz had to implement radical reforms to remain competitive and grow. Berlitz mainly targets customers who are highly com-mitted to learning. I decided that we first had to understand the needs and goals of these serious learners. We discovered that their goals have shifted considerably over the last few

Interview with Senior Management

New Challenges for BerlitzEvolving into a Global Education Company

Amid changes in the language service business environment, Berlitz Corporation has been reforming its business to transform itself from a language services company into a global education company. In this section, Yukako Uchinaga, who was appointed Berlitz CEO in 2008, talks about the initiatives implemented so far and the strategy for the business going forward.

Executive Vice President and Director, Benesse Holdings, Inc.Chairman of the Board and CEO, Berlitz Corporation

Yukako Uchinaga


and teaming up with other partners to complement our services, we developed a comprehensive suite of learning solutions called Global Leadership Training (GLT). We offer this program worldwide to employees of cor-porate clients. It is also offered via our global network of 563 language centers. This network is an important advantage unique to Berlitz. My view was that Berlitz can stand apart from other companies in the market by offering its high value-added GLT services worldwide.

Targeting a wider range of customer needs with Media-Based LearningIn the high-end market, we are aiming to expand the pro-vision of GLT to highly committed learners, while in the broader market, we are focusing on providing Media-Based Learning (MBL) services over the Internet or phone. The market for web-based lessons is characterized by severe price competition among many providers. We therefore moved to acquire Telelangue SA in August 2011. Telelangue is a French company that is strong in web- and phone-based language learning services and has a language management system (LMS) that enables close control over learning progress. Telelangue customers can also use its CyberTeachers system (an online self-study system) to automatically

years—from a desire to simply speak English on overseas business trips, to hopes of building successful careers in global businesses or showing leadership. This prompted me to shift Berlitz's focus to the provi-sion of comprehensive support for succeeding in global business, in addition to offering language lessons. As a result, Berlitz is now transforming itself from a language services company into a global education company.

Implementing business reforms

Building a unique position in the mar-ket by off ering Global Leadership Training worldwideGlobal business leaders need to be comfortable with different cultures and diversity, not just have an ability to speak other languages. This is because they will have to understand the diverse values of countries around the world and lead entire organizations toward common goals. Nurturing communication skills through languages has been our strength at Berlitz. To add to this strength, we acquired cross-culture training specialist Training Management Corporation (TMC) in 2008. By combining our existing skills with those of TMC

Akio WatanabeGlobal Business Sector, Global Business Management

Department, KDDI Corporation

* BBCS is a GLT program designed to improve practical communication skills through English.

At KDDI, we need to train personnel who will play a key role in the development of our overseas business. As part of these efforts, we have formed a strategic partner-ship with Berlitz and implemented unique training programs to develop the neces-sary human resources. We have introduced the Berlitz Business Communications School (BBCS)* to enhance language communication and global leadership skills, with the ultimate aim of nurturing a next generation of business leaders who can immediately deal with local business people on equal terms to promote our busi-ness overseas.

Training the next generation of leaders to head overseas businesses

Case study: KDDI Corporation

Feature New Challenges for Berlitz

Aiming to be the World’s No.1 Company in the Education Field


customize lessons to match their study goals, business fields, or skill levels. The company also offers phone-based les-sons 24 hours a day using a global network of around 600 teachers. At Berlitz, we know that we have to offer a range of products to remain competitive. Our strength now is that we can provide integrated blended solutions (face-to-face lessons and phone- or web- based lessons), and also help students manage the progress of their learning plans.

Leveraging partnerships with univer-sities to expand our overseas study business Demand for overseas study courses is rising as globalization accelerates. A major trend in emerging markets in particular is a desire by parents to send their children abroad to study, in order to give them a better chance to succeed globally. Berlitz’s subsidiary ELS provides support to people who want to study overseas. ELS has forged partnerships with around 600 universities in the US and operates 48 ELS language

The ELS business (support for study abroad) has expanded mainly through courses focused on developing language skills that are aimed at students who will study in the U.S. Instruction in language and other skills required to advance to university is currently offered at 48 U.S. university campuses. One key feature of these courses is that a certificate of completion exempts students from taking TOEFL tests at around 600 partner universities throughout the U.S. Destinations have been expanded to include Canada and Australia, with career assistance also included as part of diverse support offered based on the concept of “International Pathways.”

centers, which are mainly located on university campuses. Students undertake language training at ELS and automatically enter partner universities if they meet the ELS standards. ELS English standards are recognized by partner universities as comparable with those of TOEFL and other English testing formats. In addition to the high level of English language edu-cation and the care provided to overseas students by ELS, the company’s key competitive advantage is that students can feel comfortable about their prospects for overseas study thanks to the partnerships between ELS centers and universities.

Implementing internal reforms

Building a system to support the glo-balization of our business worldwideI decided that upgrading and integrating global IT systems was the first step in rolling out our strategy worldwide, because without an integrated IT infrastructure, we could

ELS Business

0

20,000

40,000

60,000

80,000

100,000

39,181

58,864

95,621

09 10 11

Number of students

Number of ELS students

ELS Language Centers—Offering English study programs on university campuses


not provide services or share information on a global basis. For more than 130 years, Berlitz has provided services through language centers around the world. However, as a global company, we failed to develop a unified IT system. Language centers in each country typically built IT infra-structure based on their own needs, and for many years our regional businesses used incompatible local IT systems. This situation was illustrated by the fact that the Berlitz head office did not know the work email addresses of all our employees when I wanted to send out a companywide message. Upgrading and integrating our IT systems has enabled us to provide shared services to customers worldwide and share information with other Berlitz employees in differ-ent countries in real time, giving us the base we needed to develop our global business.

Changing employee attitudes through client sales talks that also enlighten our employees Next, I turned my attention to changing the attitudes of Berlitz employees. When we launched the GLT program, Berlitz employ-ees were not so convinced because they had been focused on providing language services. Although securing the support of clients was important, we were unlikely to make much progress without the backing of our employees. I therefore decided to take employees along with me to clients to listen to my sales talks. This gave me the opportunity to explain GLT to our client, but also to enlighten our employees. My explanations to clients and the opinions we received from them helped our employees to understand GLT, its value as a product, and the need for Berlitz to take this approach. We took some time to win over all our employees. But I think the fact that everyone across the company now talks about GLT illustrates how integral it has become to Berlitz, thanks to our perseverance with this training at clients’, as well as the explanations we gave internally.

A new phase of growth for Berlitz as a global education company

Since 2008, I have pushed through a range of reforms covering products, services, IT infrastructure and employee attitudes. In services, we added GLT for the high-end market and MBL for the broader market to complement our exist-ing lineup of face-to-face language services. As a result, we now have in place the framework to comprehensively satisfy a wide range of customer needs. Also, our upgraded IT infrastructure means we can provide customized services worldwide. The new IT systems in conjunction with person-nel training have also driven a change in employee attitudes. Moreover, our ELS business continues to expand amid a favorable market environment, supported by its strength in partnerships with universities. Through the reforms implemented since 2008, I believe we have put the groundwork in place to transform Berlitz from a language services company into a global education company. Next, we plan to leverage Berlitz’s unique strengths to deliver a new phase of growth.

Feature New Challenges for Berlitz



BeautifulSoEmpowering children with skills for the future

Society is in a constant state of flux.At the Benesse Group, we believe education has to prepare children for the future, not just the present.

Giving children the confidence, to create their own future

Children are the future

Chengdu Office openedShanghai Children’s Epoch Benesse Culture Development Co., Ltd. established

Shimajiro (Qiaohu) TV programs launchedBenesse Corporation Guangzhou established

Number of Chinese members as of April each year (thousands)

Chinese membership target: 1 million

Beijing Office openedCorrespondence courses for elementary school students started

Educational materials sales company Benesse Corporation China established in Shanghai

Chinese version of Kodomo Challenge launched

1,000

480

340

220

2012

2015

2011

2010

2009

2008

2007

2006

150

100

50

Enrollments in the Chinese version of Kodomo Challenge have grown rapidly

Feature 222

Benesse offers correspondence courses in China, Taiwan and South Korea, where it focuses on the pre-school market. As of April 2012, 780,000 children were enrolled in Benesse courses overseas. We see China as a particularly promising market due to its size—ten times more children are born every year than in Japan—and the fact that parents attach great importance to their child’s education. Benesse’s business is expanding steadily in China, supported by active initiatives to drive growth.

Expanding the Kodomo Challenge Business in China



China’s enthusiasm for education is supporting market growth

0

80000

Guangxi

Hainan

Yunnan

Fujian

Guangdong (55,000 members)

Sichuan

Guizhou

Tibet

Qinghai

XinjiangGansu Inner Mongolia

Liaoning Heilongjiang

Jilin

Beijing (56,000 members)

Ningxia

Chongqing

Shanghai (76,000 members)

Jiangxi

Anhui

ShandongShanxi

Hubei

Hunan

ShaanxiHenan

Hebei

Jiangsu (57,000 members)

Zhejiang (55,000 members)

Tianjin

Membership is spread across China (As of April 2012)

The approach to education in China The approach to child-rearing in China

According to a study carried out by the Benesse Institute for the Child Sciences and Parenting, the ratio of Chinese mothers in Beijing and Shanghai who want their children to attend prestigious universities and learn reading, writing and arithmetic as early as possible is higher than for mothers in Tokyo, highlighting the high level of enthusiasm for education in China.

A traditional goal for success in

education and business in China

is that boys should be like dragons

while girls should be phoenixes.

* Dragons and phoenixes are mythical creatures in Chinese culture that have both been symbols of wise and virtuous emperors since ancient times.

Boys should be dragons, girls should be phoenixes

Source: 2010 Report on Children: Questionnaire Survey on Children’s Daily lives and Parent’s Child-rearing in Five East Asian Cities, Benesse Institute for the Child Sciences and Parenting

Survey samples: Mothers in Beijing (765), Shanghai (1,073) and Tokyo (1,693)

61.9%Beijing

67.4%Shanghai

29.7%Tokyo

(%)0 25 50 75 100

35.1%Beijing

40.3%Shanghai

19.2%Tokyo

(%)0 25 50 75 100

I want my child to go to a prestigious university

I want my child to learn reading, writing and arithmetic from as early an age as possible

Cities with more than 50,000 members

Cities with less than 50,000 members

望子成龙　望女成凤


Continued Growth in China Supported by a Business Model Tailored to Local Needs and a Strong Organization

President of Global Education Business Division, President of China Business Division, Benesse Corporation President, Benesse Corporation China

Takashi Matsuhira

In China, Benesse is creating a new market, and increasing membership, through localized development of learning tools tailored to Chinese culture, customs and needs, but based firmly on expertise built up in Japan through our Kodomo Challenge correspondence courses. Here, Global Education Business Division President Takashi Matsuhira describes progress made in China to date, future strategy and moves into other emerging markets.

Building a new business model tailored to Chinese culture and customs

In the education and lifestyle fields, our services are designed to help people live well by increasing their motivation and giving them the support they need to overcome the chal-lenges they face every day. In overseas business development as well, we need to get as close as possible to people in each market to understand their hopes and concerns. History, culture and lifestyles differ from country to country. In order to make our China business a success, we needed to understand those differences to help us develop genuinely useful educational materials and services for Chinese children. This presented some major challenges. China also has different business customs to Japan. After recognizing these differences in areas such as educa-tional material production and marketing, we devised the best ways of tackling the Chinese market and built a new business model from scratch.

Interview with Senior Management


Educational materials designed for the education issues and needs of each country

Simply using translations of educational materials that worked well in Japan does not necessarily work overseas. We therefore needed to develop educational materials that carefully incorporate the specific education issues and needs of each country. When we created materials for China, we researched conditions in the Chinese education market and worked with experts from local universities to identify the needs of parents today and the issues they face. We then used this research to develop a range of completely new materials. This process took a long time because we made numerous revisions to incorporate feedback from custom-ers, but this underpins the competitiveness of our educa-tional materials.

Unique marketing methods that allow children to try the materials themselves

Marketing in Japan is mainly conducted through the direct mail channel, but direct mail marketing is not common in China. Although bookstores are the main sales channel for educational materials in China, we adopted a unique approach in the Chinese market—telemarketing. We decided that the best strategy was to hand out large amounts of free sample materials to give potential customers an insight into the quality of our products, then follow up later with telemarketing contact. Over the phone, our marketing personnel communi-cate the appeal of our products by carefully explaining the concepts and thinking behind the materials. At Benesse, we endeavor to provide long-term support to each customer based on a strong relationship with them. However, the idea of buying the same product on a regular basis was unusual in China. Our telemarketing personnel therefore needed to explain the rationale for continuing with our courses, what materials to expect in upcoming editions and the benefits of the materials, to ensure the loyalty of our Chinese customers. Thanks to these efforts, our educational materials, which had a very low profile in China until recently, are gradually being accepted by consumers and are supporting an increase in local enrollment.

The Chinese version of Kodomo Challenge is marketed under a Chinese brand name for the local market. It has six product lines aimed at children aged 1–7.

Shimajiro is called Qiaohu in China and is popular with Chinese children as well. A team of 750 staff serves the Chinese market.

We have a call center in Shanghai and another in Guangzhou.

FeatureExpanding the Kodomo Challenge Business in China



Retail stores and word of mouth are also driving growth in enrollment

Customers that like our educational materials provide posi-tive feedback, which spreads through word of mouth. People are more likely to trust information from friends and family than corporate advertising, and this has also driven growth in enrollments in China. More people in China now recognize Shimajiro and Kodomo Challenge, so over the last few years we have opened stores in areas such as shopping malls, which are popular places for Chinese families to visit at the weekend, to display our educational materials. Store staff explain the key points of the materials, as well as the concepts behind them and how to use them. The children can often be seen engrossed in the materials while they are waiting for their parents. The number of people we can approach over the phone is limited, so our stores enable us to engage with passing shoppers or people who come to see us after hearing good reports about our educational materials. This allows us to communicate with more poten-tial customers and is driving growth in enrollment.

We have been holding Shimajiro Concerts since 2010 amid the rising popularity of Shimajiro in China. Many children in China now see him as a close friend who is an important part of daily family life. However, this is confined to the home, so when parents take their children to Shimajiro

Concerts, they see how popular the character is with other children, making them more confident about their choice of Kodomo Challenge. The children themselves also come home from the concert liking Shimajiro even more.

Local employees in tune with Benesse values are building a strong organization

Localization is a key part of our overseas business develop-ment strategy. In China, local employees play a crucial role in supporting our business and we currently employ over 1,000 people locally. I am putting priority on building a strong organiza-tion. Specifically, I attach great importance to ensuring the idea that the customer always comes first is woven into the very fabric of our organization. This is difficult to achieve, but important nonetheless. Signs that display our corporate philosophy and slo-gans are visible in many areas of the company, so employees see them on a daily basis. This is contributing to the creation of shared criteria for making decisions and common values among local employees. When our employees face decisions at work, we encourage them to think seriously about why we attach so much importance to customer satisfaction and what it really means to put the customer first. By repeating this process, we are starting to see some success in developing local employees that understand our values as a company and who consistently approach customers with the right attitude. Developing this kind of local workforce takes time, but the process gathers pace as employees we trained at the

We currently have around 100 stores in China. Visitors to our stores can see the latest items delivered with educa-tional materials that month or enjoy Shimajiro shows at the weekend.

Shimajiro Concerts are held in venues for around 1,000 people. In 2011, we held 94 concerts in 16 cities across China with a total attendance of around 80,000.


beginning then pass on their skills to other employees. Imitation educational materials have been appearing in the market, but I do not see this as a major threat because our strong organization gives us an overwhelming advantage. The depth of our product planning and the large amount of research we put into a single page of our educational materi-als puts Benesse on a different level to these competitors, who I think will find it hard to copy our approach.

Still plenty of room for growth in the Chinese market

Every year around 15 million children are born in China and the number of preschool children and children in early elementary school grades is set to top more than 100 million. Based on economic conditions, we believe roughly 20% of the total, or around 20 million children, are potential consumers of our education services. Assuming only 10% of the target segment enrolls in our courses, our membership base in China would total two million. Also, given China’s rate of economic growth, we think the target customer segment will be even bigger in five years’ time. Our target membership base for fiscal 2018 is two mil-lion, but we see the potential for growth to five million or even 10 million further down the line. Looking ahead, we plan to use our brand in China to start a classroom-based education business. We will initially focus on preschool children, who already recognize Shimajiro, then turn our attention to elementary school children.

Using our experience in China to move into other emerging markets

We plan to move into other emerging markets using the experience we have gained in China. Emerging markets put great value in education as a means of driving economic growth. Despite this, some children in these countries still do not have proper access to education. I believe Benesse can use its track record in the

education field to contribute to the national development of emerging markets. Our next emerging market targets are Indonesia and Brazil, because they have large potential markets and economic growth is strong. We have already sent a team to Indonesia to study the local market. We plan to start a similar study in Brazil next year. As with China, business development in these emerging markets will start with steps to create a local organization, including recruiting local people. Whatever the country, parents have the same affec-tion for their children and the same hopes and fears for their future. However, many parents are unsure about how to nurture their talents and abilities, which is where I think Benesse can help. We have big dreams at Benesse. Achieving our goal of becoming the world’s No.1 company in the education field will not be easy. Many obstacles lie ahead, but I believe we can overcome them one by one by staying committed to our vision and our corporate philosophy. We will move forward step by step, because there are no shortcuts in our business.

FeatureExpanding the Kodomo Challenge Business in China



So A bright future

Building vibrant and rewarding communities

Contributing to communities and giving back to society are important roles for companies.At the Benesse Group, we believe that building vibrant and rewarding communities, not just pursuing individual happiness, ultimately leads to happiness for all.

Playing an integral and vital role in communities and society

Wonderful

The world is undergoing unprecedented change. The era of extreme financial capitalism that characterized the global economy in recent years is coming to an end and the lines that divided country from country are dissolving. Our increasingly borderless, global world asks new questions of us as individuals and companies. More than ever, we have to think and act globally to stay relevant. I have worked for many years to transform the Benesse Group into the world’s leading education services com-pany. The changes occurring now offer an exciting opportunity to realize this goal, because people who can take the initiative in the face of new challenges created by today’s global society will be in greater demand than ever before. We want to take the lead in harnessing education to create the kind of people that thrive on this change. First, though, we have to transform our own attitudes and approaches. Benesse employees will have to adopt a more international perspective by being global citizens first, Japanese second. This outlook, along with our unquestioned enthusiasm and strength to stay the course, will be the driving force behind our efforts to become a more global company. At Benesse, we constantly strive to live up to the meaning of our company name: Well-Being. This has resulted in a unique, holistic approach to business that was unfashionable until the collapse of Lehman Brothers, but is now gaining currency worldwide amid the search for a new kind of compassionate capitalism — a mutually beneficial relationship between communities, government and the private sector to underpin society. We have known for many years that pursuing higher sales and profits is not the only measure of success for a company, but also whether it can make a meaningful and lasting contribution to local communities and society as a whole. Our holistic business approach has no better example than the island of Naoshima in Japan’s Seto Inland Sea, where the best that art and culture has to offer is an integral part of the local community. This island is the showpiece of our efforts over 20 years to develop a symbiotic relationship between business, art, culture and communities. Some of the money used to fund these activities is paid as dividends to foundations that own more than 6% of Benesse shares, underlining our long-term commitment to this approach. As a company, we have always asked ourselves what we can do to ensure these activities are sustainable. Our answer has been to develop an entirely new approach to the way we interact with society, founded on the idea of compassionate capitalism—where companies recognize their responsibility to society and all their stakeholders, not just investors. The key point of this approach is that it does not have to be detrimental to investors; in fact, it ultimately benefits them through the growth of the company. Our commitment to this approach will be unwavering so that we remain a vital part of local communities and society and earn respect worldwide.

Message from the Chairman

Soichiro FukutakeDirector, Chairman


Board of Directors and Statutory Auditors

For a Sustainable Future

Kenichi FukuharaRepresentative Director, Executive Vice President and CFO

Soichiro FukutakeDirector, Chairman

Yukako UchinagaExecutive Vice President and Director

Tamotsu FukushimaRepresentative Director, President

Senior executives’ profiles can be viewed online. Online Annual Report 2012

http://www.benesse-hd.co.jp/en/ir/ar2012/WEB


Kimie SakuragiKimie SakuragiStatutory AuditorStatutory AuditorKimie SakuragiStatutory Auditor

Teruyasu Murakami* Director

Tomoji Wada** Statutory Auditor

Tamotsu Adachi* Director

Nobuko Takahashi** Statutory Auditor

Hiroyuki Mitani* Director

Hitoshi KobayashiDirector

Yoshinori MatsumotoYoshinori MatsumotoStatutory AuditorStatutory AuditorYoshinori MatsumotoStatutory Auditor

* Independent Directors ** Outside Statutory Auditors


Live your life: realize your dreams and aspirations

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Well-Being

044 Benesse Group CSR

046 CSR Activity Report 046 Human Resources 048 Environment 049 Community / Social Contributions 050 Survey and Research Activities at Benesse

051 Corporate Governance

054 Compliance System

055 Communicating with Stakeholders and Investors

CSR S e c t i o n

http://www.benesse-hd.co.jp/en/csr/ WEB


Benesse Group CSR

In fiscal 2011, the Benesse Group established medium- to long-

term CSR Achievement Targets.

Throughout the year, we strove repeatedly to clarify

management’s awareness of issues, identify the Benesse Group’s

strengths and issues, and verify expectations of the Benesse

Group through dialogue with diverse stakeholders. The CSR

Promotion Committee then discussed the findings, and estab-

lished CSR Achievement Targets that set out key CSR themes

for the Benesse Group.

The Benesse Group considers it essential to work to

solve social issues while engaging in business activities that

balance social contributions, environmental preservation, and

economic success to realize its philosophy and generate solid

earnings. We have identified five key areas for achieving this: 1)

education and childcare and 2) senior / nursing care, which are

the core of our operations, as well as 3) human resources, 4) the

environment, and 5) community / social contributions.

The entire Group will make continued efforts to realize

medium- to long-term objectives in these five key areas.

Th e basis of CSR at the Benesse Group is activities that create social value, which begin from our corporate philosophy: Benesse = “Well-Being”

The Benesse Group’s CSR activities originate with its corporate

philosophy: Benesse = “Well-Being” and aim to create new value

for society. This involves engaging in good faith with stakehold-

ers to provide solutions to social issues through our businesses.

We will challenge ourselves to reach beyond our corporate

responsibilities, including legal compliance and sustainable

development measures, to undertake innovative activities that

solve social problems and create new value.

While working to resolve social issues through businesses

that are supported by many stakeholders, like education and

childcare and nursing care, we are devoting energy to regional

development activities focused on education, culture, and art.

This effort is exemplified by our initiatives at Benesse Art Site

Naoshima. We believe this CSR focus reflects the unique spirit

of Benesse.

We will strive to be a corporate group that performs essen-

tial functions for its stakeholders, setting our sights on helping

every individual to “Well-Being” from birth into old age.

Benesse Group CSR Achievement Targets

Education and childcare■ Make the future brighter by providing educational support to

children, who are our future, and to households, as one of the world’s most trusted educational groups.

■ Provide educational services and opportunities for over 100 million people from children through adults in countries and regions throughout the world, seeking to develop open-minded individuals with the ability to think and act independently.

Senior / Nursing care■ Perform vital functions for local communities amid the aging

of society by providing personalized residential and lifestyle support that enables people to lead their lives in the way that they wish.

Human resources■ Develop human resources that have an extensive interest in

worldwide issues and a desire to improve society as a member of global society, and an abundance of autonomy and willing-ness to take on new challenges connected to business.

■ Support employees who aspire to resolve social issues.

Environment■ Recognize global warming as an important issue and reduce

our business activities’ environmental footprint. ■ Use environmental education to support the development of

human resources who are able to look at the bigger picture and take action to help to solve environmental issues.

Community / Social contributions■ As a member of the community and society, work to realize

the concept of “Well-Being” on a local level by helping to create sound communities where people live happily with the aim of harmonious coexistence.

CSR Approach

Benesse Group CSR Achievement Targets

Resolving social issues through our businesses, which are supported by a wide range of stakeholders, and supporting community development with a focus on education, culture and the arts — this is the Benesse approach to CSR.


The Benesse Group’s CSR activities originate with its corporate

philosophy: Benesse = “Well-Being” and aim to create new value

for society. CSR Achievement Targets help to form the connec-

tion between Benesse’s corporate philosophy and its growth

vision.

The Benesse Group aims to realize its corporate philosophy

and Growth Vision, through its business plan, the medium-term

management plan, and its CSR Achievement Targets, which are

based on the Benesse Group’s aspirations for its own role in

society including in areas where its actions impact society, such

as human resources, the environment, and local communities.

Chairperson: President of Benesse Holdings, Inc.Members: Persons responsible for each business, etc.

CSR Promotion Committee Members

The CSR Promotion Committee, which is chaired by the

President, meets several times each year to examine the Group’s

CSR policy and promote CSR activities.

Positioning of Corporate Philosophy and Vision, and CSR Achievement Targets

CSR Promotion Structure

Corporate Philosophy

Single-Year Business Plan

Medium-Term Management Plan

CSR Achievement

Targets

Vision

Accelerate global business development

Enhance and expand domestic education and childcare business

Expand senior/nursing care business

Promote growth strategies in the domains of “education and childcare,” “language/global leadership training” and “senior/nursing care.”

Key Strategic Tasks in the Medium-Term Management Plan

As a company involved in “Education (Human Resource Development)” and “Solutions for Society’s Challenges,” become the world’s No. 1 company in the education field, support-ing childcare, education and human resource development globally position senior/nursing care business as an important growth field and propel growth further.

Benesse Group’s Growth VisionBenesse = “Well-Being”

Benesse Holdings’ Management Meeting

CSR Promotion CommitteeChairperson:

President of Benesse Holdings, Inc.

Secretariat Group CSR

Promotion Dept.

President

CSR Promotion Structure


Human Resources

The Benesse Group views the quality of human resources as one

of the most essential elements in any company’s growth. The

variety of skills and values possessed by employees determine a

company’s basic strengths and capabilities.

Benesse supports the growth of one of its most valuable

assets—bright and hard-working employees, working to create

an environment where they can maximize their potential.

The Benesse Group’s operations span a wide range of

business areas, customers, and regions, making it increasingly

imperative for employees to also put their varied strengths to

work. In the Benesse Group, employees of different genders,

nationalities, and ages aspire to bring greater value to customers

and society in general.

Leadership Development:

Benesse Group Middle Management Program

The Benesse Group sees the development of middle manage-

ment at the core of front-line operations as indispensable to the

growth of its operating companies, and is taking steps to achieve

this throughout the Group.

In fiscal 2011, Benesse Holdings management worked to

“share the corporate philosophy,” “expand views and perspec-

tives,” and “provide opportunities to learn about management’s

perspective” by holding lectures on management philosophy and

Group growth strategies, finance and accounting workshops,

and sessions to help participants to understand one another’s

businesses and discuss Group issues. Participants gave feedback

such as “It was a great opportunity to rethink my business

from management’s point of view,” and “I was able to share the

corporate philosophy, learn about other companies within the

Group, and network with other middle managers.” We plan to

continue to provide similar opportunities on an ongoing basis

in the future.

Develop human resources that have an extensive interest in worldwide issues and a desire to improve so-ciety as a member of global society, and an abundance of autonomy and willingness to take on new chal-lenges connected to business.

Support employees who aspire to resolve social issues.

[CSR Achievement Targets]

Leadership Development:

The Berlitz Leader Development ProgramBerlitz Corporation kicked off its Leader Development Program

to produce global leaders in fiscal 2011. Country Managers

gathered to participate in a hands-on program, where they

discussed action plans based on Berlitz’s strategies and made

presentations to top management.

Future plans call for programs attended by around 100

people to be held every three years, with an eye to develop-

ing leaders whose activities transcend national and regional

borders.

Women in the WorkforceBenesse Corporation has consistently supported women’s

participation in the workforce since its establishment. Many

women are actively contributing at the Company not because of

special measures, but rather as a result of ongoing gender-neutral

recruitment, promotion, and career development practices, and

evaluations based on actual abilities and performance.

25%33%Ratio of Women in Management (Section leader)

Ratio of FemaleCorporate Officers

Ratio of Women in Management and Female Corporate Officers (As of April 2012)

CSR Activity Report


Direct Interaction Between Management and Employees at Benesse Evening University

Benesse Evening University is an ongoing program held by the

Benesse Group where management chooses themes they wish

to talk about with employees. Held in the evening after work,

the basic program comprises a lecture and get-together, and

provides a forum for unhurried dialogue between top manage-

ment and employees. The program’s objective is to shake up

ways of thinking that tend to become fixed in the day-to-day

bustle, reduce the sense of distance between management and

employees, and provide exposure to management philosophy.

In fiscal 2011, a total of six sessions were held on the following

four themes.

Creating an Organization and Culture Where Employees Thrive: Organizational Health Survey (GAMBA)

Each year the Benesse Group conducts the GAMBA survey on

organizational health to ascertain the status of employees, and

their views on management and operations. The results are used

to create a better organization and corporate climate.

The survey is used to gain an understanding of management

issues at the Group, operating company, and workplace levels,

and to make improvements.

For instance, top management and department leaders

at Shinken-AD identify and analyze issues from GAMBA

results, and bring them to management meetings for review.

Improvement plans for overall company management and

workplace operations are also reflected in the next fiscal year’s

business plan. Initiatives follow a continuous cycle of verifying

results, making plans for improvement, and executing plans.

Promoting Men’s Involvement in Childcare through a Paid Childcare Leave System

Benesse Corporation aims to allow every employee to use their

abilities to the fullest, working according to their individual

life stages. To this end, the company has introduced childcare

support and nursing support systems, such as a childcare leave

system, and sought the best ways to implement them with the

goal of creating a healthy working environment. In recent years

around 100 employees per year have taken childcare leave, with

over 90% returning to the workplace afterward.

From fiscal 2006, Benesse Corporation began providing

financial support for workers taking leave. Currently, 50% of the

basic salary is paid for the first month of childcare leave. We aim

to bring male employees applying for childcare leave under this

program as well.

Chairman’s Insights on “The World Ahead”President Talks on “Three Frontlines”Hot Lecture: “Course on Reading Financial Statements”Learning from Berlitz Growth Strategies

Themes:


Environment

Benesse Group Environmental PolicyIn August 2011 Benesse Holdings drafted the Benesse Group

Environmental Policy, which reaffirms the importance of

addressing environmental issues as a management priority.

Guided by this policy, Benesse Holdings will implement Group-

wide measures to reduce the Group’s environmental impact,

while enhancing environmental activities so that they have a

greater impact on society and the local community by actively

promoting these activities through its core business. Efforts

will be concentrated particularly on environmental education,

which ties in closely with its core business.

http://www.benesse-hd.co.jp/en/csr/environmentpo-

licy.html

Promoting Environmental Education Tailored to Developmental Stages

Benesse Corporation provides environmental education pro-

grams tailored to developmental stages, from the preschool to

the high school years, as part of efforts to raise children’s interest

in the environment.

Supporting the Development and Popularization of Electric Vehicles

Benesse Holdings is cooperating with and supporting SIM-

Drive Corporation*1 in its bid to develop and popularize elec-

tric vehicles with a view to mass production by 2013. Benesse

Holdings hopes that its support for this project will help ensure

that future generations will inherit a beautiful planet.

SIM-Drive’s new prototype, SIM-WIL, completed in

March 2012, boasts one of the world’s longest driving distances

for a single charge of the battery at 351 kilometers. It also offers

vastly superior driving performance to its predecessor SIM-

LEI,*2 which was announced in March 2011.

*1 Professor Hiroshi Shimizu of Keio University founded SIM-Drive in August 2009 with the aim of spreading his unique electric vehicle technologies all over the world. He has developed these technologies over the past 30 years, since his days at the National Institute for Environmental Studies.

*2 LEI stands for Leading Efficiency In-wheel motor

Recognize global warming as an important issue and reduce our business activities’ environmental footprint.

Use environmental education to support the development of human resources who are able to look at the bigger picture and take action to help to solve environmental issues.


SIM-Drive’s fi rst prototype vehicle SIM-LEI

Preschool Elementary School Junior high school Senior high school University

Recycling“Kuru Kuru Recycle” proj-ect for recycling Benesse educational materials

ContestsContests with environmental themes for elementary, junior high school, and senior high school students held during summer vacation. University student

educationA course on environ-mental activities as part of secretary experience program for university students.

Website for learning environmental issuesThe “Ecostudy-High School Students’ Environ-mental Research Lab”

Water sprinkling for cooling purposesA fun electricity-saving learning event featuring a picture-story show and water sprinkling.

Tree plantingOne hundred trees planted in Sammu City, Chiba Prefecture.

Facility toursBenesse also aims to make the Benesse Logistics Center’s solar power generation system a symbol of regional envi-ronmental activities, and conducts tours of the facilities for elementary school students and others.


CSR Activity Report

Community / Social Contributions

Benesse Group and Foundations Promote Creation of Sound Communities

Benesse Holdings contributes to the creation of healthy local

communities by promoting modern art and culture in collabo-

ration with the Group's four foundations. Because the founda-

tions' activities are financed by dividends from a shareholding

representing approximately 6% of Benesse Holdings shares,

the Benesse Group sees sustainable business growth and stable,

continuous dividends as a way of continuing to support these

foundations. Benesse Art Site Naoshima is a project located on

the islands of Naoshima, Teshima and Inujima in Japan’s Seto

Inland Sea. Organized by Benesse Holdings and the Naoshima

Fukutake Art Museum Foundation, the project supports a

multitude of art-related activities. The Seto Inland Sea provides

a perfect traditional Japanese setting, filled with natural beauty

and a distinctive local culture.

Benesse Corporation’s Benesse Life Smile Shop launched the

“Smile Basket” program to develop and sell products that involve

mothers and children in disaster-stricken regions and develop-

ing countries, and donate a portion of sales from the products.

Smile Basket will continue to provide support to children’s

education, mothers’ employment, and local industry.

Our vision is to realize “shopping connecting people,”

where customers purchasing Smile Basket products are also

helping a wide range of people.

Benesse Life Smile Shop’s “Smile Basket” Program Connects Customers with Disaster-Stricken Regions and Developing Countries

Supporting Preschool Educators in China: Soong Ching Ling Preschool Education Award

Benesse Corporation supports early childhood education in

China through the Soong Ching Ling Preschool Education

Award. Under an arrangement with our partner the China

Welfare Institute, each year we pick one or two preschool educa-

tors in each province with excellent performance records, and

invite them to accept awards in Shanghai.

Award recipients also participate in early childhood edu-

cation study sessions and tours of cutting-edge facilities, putting

what they learn to use in their own educational activities.

Soong Ching Ling Preschool Education Award Ceremony

Water hyacinth basket-style bag (off ered in cooperation with the NGO Japanese Organization for International Cooperation in Family Planning (JO ICFP))

Serbian wool socks (off ered in cooperation with the NGO JEN)

Interlocking wood toy made in Fukushima (Jenga®)(off ered in cooperation with the NGO Fukunoshima Project)

As a member of the community and society, work to realize the concept of “Well-Being” on a local level by helping to create sound communities where people live happily with the aim of harmonious coexistence.



CSR Activity Report

Survey and Research Activities at Benesse

Benesse Corporation has conducted over 400 research surveys

since 1980 when it established its in-house Education Research

Center (now Benesse Educational Research & Development

Center). Survey results are released through reports and the

Benesse Educational Research & Development Center and

Child Research Net websites.

Surveys are mainly of students (elementary school to

university), guardians, and school teachers. We are looking

from many angles to develop deeper insight into where educa-

tional issues currently lie, in part by gaining an understanding

of survey respondents’ views and approaches to education and

learning.

Further, we will continue to make proposals on education

methods for the future, taking into consideration the opinions

Benesse Educational Research & Development Center and Benesse Institute for the Child Sciences and Parenting

of children and guardians themselves as well as educators in the

field and other experts.

Established in 2006, the Benesse Institute for the Child

Sciences and Parenting conducts studies and research on

guardians engaged in child-rearing, children, and their environ-

ments. The institute conducts academic studies and constructs

systematic principles on themes such as pregnancy, childbirth,

parenting, childcare, preschool education, and work-life balance

for people currently raising children. In addition, the institute

has expanded its research network to countries overseas and

conducts international studies.

By providing research results that are of widespread use to

society and applicable in a variety of fields, the institute aims to

contribute to the development of the next generation.

Study name Year Subject Theme

Study on actual conditions of children’s lifestyles

First 2004 Elementary, junior high school and senior high school students Lifestyle-related views and behavior

Second 2009

Basic study on teaching

First 1997

Elementary, junior high school, and senior high school princi-pals and teachers

Views on teaching and actual conditionsSecond 1998Third 2002Fourth 2007Fifth 2010

Study on actual conditions of university student study habits and lifestyles

First 2008Nationwide university students (fi rst through fourth year)

Actual conditions of university student study habits and lifestyle conditions, learning outcomes Second 2012

(Planned)

Basic study on child-rearing (elementary and junior high school students)

First 1997Guardians of elementary and junior high school students

Status of child-rearing, guardians’ views on discipline, education, etc.Second 2002

Third 2011

List of Studies at the Benesse Educational Research & Development Center

Study name Year Subject Theme

Basic study on pregnancy, childbirth, and child-rearing

First 2006 Couples pregnant or with a child up to 2 years of age

Actual conditions of pregnancy, childbirth, and child-rearing; links between child-rearing routines and family QOLSecond 2011

Study of fathers with infants and young children

First 2005 Fathers with a child 0 to 6 years of age

Actual conditions of family life, views on children and familySecond 2009

Study on preschool education First 2012 Guardians with a child 3 to 7 years of age

Actual lifestyle conditions for children from preschool age through elementary school entry

Study on Tokyo metropolitan area childcare vacancy waits

First 2009Mothers who applied for April entrance in a childcare center Childcare needs, childcare center application status Second 2010

Third 2011

Basic study on preschool educa-tion and childcare

First 2007, 2008

Heads of kindergartens, childcare centers, and similar institutions

Actual conditions and issues in preschool education and childcare

List of Studies at the Benesse Institute for the Child Sciences and Parenting


Corporate Governance

Benesse’s corporate governance system ensures management decision-making is transparent and fast. Although Benesse has adopted the statutory auditor corporate governance model, the Company has also incorporated elements of the “committee-based system of corporate governance,” setting up a Nomination and Compensation Committee and the Group Com-pany Executive Nomination Committee as advisory bodies to the Board of Directors. This has resulted in a unique corporate governance system incorporating the benefits of both systems. In addition, Benesse has bolstered management oversight, with an emphasis on the roles of Independent Directors and Outside Statutory Auditors. On October 1, 2009, the Be-nesse Group shift ed to a holding company structure. By separating Group management and oversight functions from business execution functions, the Group has clarifi ed the roles and responsibilities of the holding company and the operating companies, with the aim of further increasing the speed and transparency of management.

Management StructureBenesse puts particular emphasis on the role of Independent

Directors in the Board of Directors. Three of the eight directors

are independent directors. In appointing multiple independent

directors on an ongoing basis, Benesse seeks to foster vibrant

debate unbiased by internal affairs and conditions, and

to strengthen management oversight functions. Since the

transition to a holding company structure, Benesse has been

experimenting in creating additional venues for sharing infor-

mation about the status of Group management and discussing

management policy outside of the Board of Directors. Benesse

uses the statutory auditor corporate governance model. Of the

four statutory auditors, two are outside statutory auditors. In the

Board of Statutory Auditors as well, the role of outside statutory

auditors is emphasized to increase the Board’s independence.

Benesse is committed to enhancing management oversight

functions even after adopting the holding company structure.

Ensuring Transparency in Decision-Making

Based on the holding company structure, Benesse has created

mechanisms for collecting, sharing and controlling information

related to management of the Group as a whole, with the aims of

realizing the management policy, long-term vision and manage-

ment targets for the entire Group.

Benesse has established Company Management

Committees (CMCs) for significant consolidated subsidiaries,

which report and investigate important matters and handle

decision-making and business performance reporting relating

to these subsidiaries.

The President, Chief Officers, Directors, and Statutory

Auditors of Benesse attend the meetings of these committees

to give their opinions and select especially important issues for

deliberation at the Board of Directors at Benesse. This system

ensures the independence of management in each domain and

at each company, and maintains the transparency and fairness

of decision-making processes, while enabling Benesse, as a

holding company, to oversee Group-wide execution of manage-

ment policy.

As the holding company, the Company has also established

the Management Council, the Human Resources Committee,

the Risk and Compliance Committee and the Business

Investment Committee.

Board of DirectorsHeaded by the Company’s Chairman and meeting in principle

once every month, the Board of Directors is responsible for

management decision-making on important matters and moni-

tors conduct of business by operating companies.

The Company has established two committees that serve

as advisory bodies to the Board of Directors: the Nomination

and Compensation Committee, and the Group Company

Executive Nomination Committee.

The Nomination and Compensation Committee, comprising


three independent directors, the Chairman and the President,

was established to select candidates for the posts of Company

Director and President and examine proposals for dismissals,

as well as to review evaluation and remuneration systems for

Directors. It reports to the Board of Directors. The Committee

can also make recommendations on personnel affairs for man-

agers in Group companies to the Group Company Executive

Nomination Committee.

The Group Company Executive Nomination Committee

comprises the President, Executive Vice Presidents, CHO (Chief

Human Officer ) and GC (Group Controller). The Committee

selects candidates for the post of president at consolidated

Corporate Governance Structure

subsidiaries directly managed by the holding company. The

Committee also examines proposals for dismissals, indicates

standards for remuneration for this position, and reports to

the Board of Directors. Further, the Committee exercises final

approval over other proposals for executives of consolidated

subsidiaries. The Committee considers plans for cultivating

candidates, as well as assignments and transfers that will help

foster future managers.

In order to conduct impartial activities, members of each

committee are not permitted to participate when they them-

selves are the subject of deliberation.

CMC CMC CMC CMC CMC

Independent Auditors

Nomination and Compensation Committee

Group Company Executive Nomination Committee

CFO, CHO, CRO, GC

Risk and Compliance Committee

Human Resources Committee

Business Investment Committee

General Meeting of Shareholders

Board of Directors

Appoint Appoint Appoint

Board of Statutory Auditors

Chairman

President Executive Vice President

Management Council

Berlitz Corporation

Benesse Corporation

Benesse Style Care Co., Ltd. TMJ, Inc.

Simul International Inc.


Board of Statutory Auditors and Audit SystemIn principle, the Board of Statutory Auditors meets once every

month. In accordance with corporate audit guidelines, and with

an emphasis on preventative audits, Benesse’s audit policy is

designed to ensure that the Board of Statutory Auditors fulfills

its responsibility of creating a robust and trusted corporate gov-

ernance system based on a shared understanding of key man-

agement issues with senior management. Currently there are

no dedicated staff members assigned to the Statutory Auditors;

following audit policy, each auditor regularly exchanges opin-

ions with senior management, participates in meetings of the

Officer Compensation (Fiscal year ended March 31, 2012)Details of compensation and benefits for directors and statutory auditors in fiscal 2011 are as follows:

Officer CategoryAmount of

Compensation (Millions of Yen)

Amount of Compensation by Type (Millions of Yen)Number of

Eligible OfficersBasic Compensation Stock Options Bonuses Retirement

Benefits

Directors (excluding Independent Directors) ¥190 ¥150 ¥— ¥30 ¥9 4

Statutory Auditors (excluding Outside Statutory Auditors) 61 58 — — 2 2

Outside Officers ¥ 54 ¥ 52 ¥— ¥— ¥2 5

Notes: 1. Maximum compensation levels for fiscal 2011 were determined by a resolution of the general shareholders’ meeting, as follows:i. Directors: ¥500 million in financial compensation annually, plus stock option-based compensation in the form of stock acquisition rights up to ¥250 million.ii. Statutory Auditors: ¥100 million in financial compensation annually, plus stock option-based compensation in the form of stock acquisition rights up to ¥30

million.2. No new stock options have been granted to statutory auditors since fiscal 2008 or to directors since fiscal 2009. 3. As of March 31, 2012, the Company had seven directors and four statutory auditors.4. “Bonuses” in the table above includes the amount recorded in the fiscal 2011 financial statements as provision for reserve for directors’ bonuses.5. “Retirement Benefits” in the table above are the amounts recorded in the fiscal 2011 financial statements as provision for reserve for directors’ retirement allowances.

Please note that Benesse abolished its retirement benefits system at the conclusion of the General Meeting of Shareholders held on June 25, 2011. Therefore, “Retirement Benefits” mentioned above refer to the amounts before the system was abolished.

Corporate Governance

Board of Directors, the CMCs, the Group Company Executive

Nomination Committee, the Risk and Compliance Committee

and other important management meetings, actively listens

to business reports from responsible persons at the operating

companies, and conducts surveys of operational status.

With regard to internal audits, the auditing entity of each

operating company conducts audits of the holding company

and each operating company based on an annual audit plan.

The entity then evaluates the results and makes proposals to

those companies, and reports the results of internal audits to

senior management and the statutory auditors.


Benesse Group operations cover domains such as Domestic Education, Overseas Educa-tion, Lifestyle, Senior/Nursing Care, and Language/Global Leadership Training. The Group not only has to comply with all related laws and regulations, but also has to meet the highest standards of corporate ethics. Accordingly, we believe it is vital that all of our employees un-derstand the importance of sincerity. We strive to be a corporation that grows and develops unceasingly, continuing to create value for society by ensuring each employee acts in line with the highest ethical principles.

Compliance System

The award ceremony

Benesse Group PrinciplesIn October 2010, we established the Benesse Group Principles.

Rooted in the Group’s corporate philosophy, the principles

lay down the correct behavior for each executive officer and

employee, to ensure that they perform their duties appropri-

ately and ethically. Following the Benesse Group Principles, each

operating company will observe societal rules, corporate ethical

principles and laws and regulations, while continuing to create

value for society. In this way, we are building a management

structure to facilitate continuous growth and development.

The Internal Whistleblower SystemSince 1999, the Benesse Group has operated an internal

whistleblower system, that was set up to give employees a means

of reporting violations of standards and principles, and made

such reporting an obligation of all our employees. To avoid

any potential disadvantage to whistleblowers, reports can be

made anonymously and confidentially. Since 2005, we have

also operated a Group Ethics Compliance line via a third-party

organization, to provide a contact point for employees at Group

companies. The mechanism was extended to include overseas

companies in March 2009.

In May 2007, the Statutory Auditor Hotline was set up

specifically as an internal channel for all executive officers and

employees of the Group to provide information about issues

concerning Directors and other senior managers of Benesse, and

allows this information to be reported directly to the Company’s

Statutory Auditors, who are independent of other senior man-

agement. With this system, the Group aims at further improving

its audit functions.

Internal ControlsFollowing the enactment of the Companies Act of Japan in

2006, the Benesse Group established the basic policies of its

Internal Control System and other necessary systems by a

resolution of the Board of Directors’ meeting held in May 2006,

in accordance with Article 362, Paragraph 5 of the Companies

Act. Subsequently, a decision was taken to review this resolution

at the Board of Directors’ meeting held on March 9, 2012.

A project team has also been established under the CFO

with the purpose of creating internal controls and other mea-

sures relating to financial reporting, based on Japan’s Financial

Instruments and Exchange law. The team’s activities cover the

entire Group.

Honored in Integrity AwardsThe Company won a prize in the 2012 Key Firm of Integrity

Awards, which is granted to companies which prioritize

Corporate Social Responsibility (CSR) in their management.

This award indicates how important sincerity is in corporate

management, and provides societal endorsement for companies

that show high awareness. Companies are selected and granted

the award in light of their initiatives in the fields of CSR, cor-

porate ethics, compliance, internal controls and other measures.

Benesse was highly acclaimed

for its “management based on

corporate philosophy” initiative,

CSR initiatives, and its “internal

whistleblower system for fast and

effective solutions.”


Communicating with Stakeholders and Investors

In addition to proactively disclosing information to shareholders and investors, and providing a full complement of IR disclosure tools, Benesse places great importance on mutual commu-nication in its relationship with shareholders and investors. Th erefore the Company promotes a variety of IR activities which permit face-to-face discussions.

of Benesse and its role in the local community, allowing new

investors to quickly understand Benesse’s business activities and

earnings results.

IR Tools and Activities Highly Evaluated and Highly Ranked

The Company's IR activities have received favorable evalua-

tions from the investment community. In the Nikkei Annual

Report Awards Benesse's fiscal 2008 annual report received

the top award, and the fiscal 2011 annual report also received

an award—the tenth consecutive year that Benesse has received

at least some mention in the awards rankings. Furthermore,

Benesse received a Gold Award in the education and services

category at the 2011 International ARC Awards, a prominent

international annual report competition. In addition, Benesse's

website was selected as one of the best corporate websites among

all listed Japanese companies in Nikko Investor Relations Co.,

Ltd.'s ranking of web-based investor relations activities.

SRI InclusionBenesse has been included in major SRI indices and funds

worldwide, reflecting its strong reputation in areas such as

corporate governance, compliance systems and CSR initiatives.

In 2011, Benesse was selected for inclusion in DJSI World

for the seventh consecutive year. Further, the rating organiza-

tion SAM of Switzerland selected Benesse for its top SAM Gold

Class distinction for the first time as well as SAM Sector Leader

(highest score) and SAM Sector Mover (greatest improvement)

recognition in the specialized consumer services sector for the

fifth consecutive year.

Information Disclosure and Two-Way Communication–Putting a Face on IR Activities

Benesse's President and Executive Vice President take part in

the Company's earnings results meeting to provide their own

explanations of earnings performance and company strategy. A

summary of the meetings is then disseminated on the website.

Furthermore, in order to ensure that important details are pro-

vided to investors as swiftly as possible, from April 2010 Benesse

has begun conducting its earnings results meeting on the same

day that results are released. During fiscal 2011, the Company

conducted 279 separate meetings with institutional investors

and/or securities company analysts from Japan and overseas,

as well as stakeholder dialogues attended by the President and

Executive Vice President, facilitating direct and open discussion

of earnings and business activities.

Benesse actively promotes communication with overseas

institutional investors as well. In fiscal 2011 the Representative

Director, Executive Vice President and CFO and representatives

of the Corporate Communications & IR Division traveled to

the U.S., Europe and Asia on five occasions to meet with insti-

tutional investors. They also participated in various conferences

sponsored by securities companies, which allowed them to meet

with a wide variety of investors.

The Company also promotes active communication with

individual investors. Benesse representatives held direct discus-

sions with individual investors, and conducted surveys to solicit

important feedback from these investors in an effort to improve

management and enhance IR activities.

Benesse operates a comprehensive website that promptly

provides financial data and information on the Company's

business activities, including the full text of all press releases.

The Company is working to ensure that not only is the infor-

mation comprehensive, but that data can also be downloaded,

processed and analyzed, thus making it more convenient and

useful to investors. The website also includes a page for indi-

vidual investors featuring content that offers a brief overview


058 Benesse’s History

060 Market Environment

060 Demographics

060 Nursing Care Market

061 Supplementary Education Market

062 Review of Operations/At a Glance

064 Domestic Education Business Domain

067 Overseas Education Business Domain

068 Lifestyle Business Domain

069 Senior/Nursing Care Business Domain

070 Language/Global Leadership Training Business Domain

Fact S e c t i o n

For more detail, please see our IR website:

http://www.benesse-hd.co.jp/en/ir/ WEB


1955 1960 1965 1970 1975 1980 1985

Benesse’s History

The Growth Story Continues

Benesse starts out as a publishing company

Benesse was founded in 1955 as Fukutake Publishing, a publisher of educational materials. Since then, we have continued to take on new challenges and evolve, to generate growth by developing new markets and diversifying into other business fields. We are working to deliver sustained growth, under our corporate philosophy, “Benesse (Well-Being).”

The early years Shinkenzemi expansion phase

1969Correspondence courses for senior high school students launchedNow marketed as Shinkenzemi Senior High School Courses

1955Fukutake Publishing Co., Ltd. founded in Okayama PrefectureBegan publishing junior high school texts and student pocket books

1962Simulated exams for senior high school students launchedNow marketed as Shinken Simulated Exams

1980Correspondence courses for elemen-tary school students launchedNow marketed as Shinkenzemi Elementary School Courses

1972Correspondence courses for junior high school students launchedNow marketed as Shinkenzemi Junior High School Courses

1988Correspondence courses for preschool children launchedNow marketed as Kodomo Challenge(Preschool Courses)

1989Correspondence courses for pre-school children launched in Taiwan

1950s–60s

Business office and residence where Fukutake Publishing was founded

Some of Fukutake Publishing’s early products

First issue of Shinkenzemi Junior High School Courses

First issue of Shinkenzemi Senior High School Courses

First issue of Kodomo Challenge (Preschool Courses)

First issue of Shinkenzemi Elementary School Courses

Expansion of Shinkenzemi correspondence courses enjoy strong

1970s–80s

Benesse launched correspondence courses for high school students, followed by those for junior high school and elementary school students and preschoolers. With correspondence education still in its infancy, Benesse cultivated a market based on this new product concept, leading to significant growth in the enrollment in its courses. Building on this success, it took correspondence courses into the Taiwanese market in 1989.

Fukutake Publishing was established in 1955. The predecessor company had collapsed the previous year, despite making a profit. Determined not to fail again, Benesse's founder developed the business model that continues to this day: cash-driven enterprise inventory-free management business based on ongoing relationship.

B i ffi d

f h k


1990 1995 2000 2005 2010 20160

100

200

300

400

500

600Entry into new business domains guided by the “Benesse” corporate philosophy

Evolution into next-generation educational materials and stepping up global expansion

Net sales of ¥600 billion(growth target for fiscal 2016)

With the launch of new medium-term management plan for fiscal 2012 to 2016, Benesse will keep trying to expand further growth in the domains of Education and Childcare, Language/Global Leadership Training, and Senior/Nursing Care.

New business domains The growth story continues…

2000Benesse lists on the First Section of the Tokyo Stock Exchange

2009Benesse adopts a holding company struc-ture; company name changed to Benesse Holdings, Inc.

Prep school business launchedOchanomizu Seminar Co., Ltd. becomes a subsidiary

2006Preschool correspondence courses introduced into China and South Korea

2008Introduction of next-generation Shinkenzemi correspondence courses gets underwayShinkenzemi Junior High School Courses + i launched

2012U.S. subsidiary established, representative office opened in Indonesia

1990s 2000s

1995Company name changed to Benesse Corporation

Benesse lists on the Second Section of the Osaka Securities Exchange

Nursing care business launchedBenesse Home Clara Okayama openedin 1997

growth

Guided by its corporate philosophy of “Benesse (Well-Being),” it moved into new business domains to tap into major trends such as globalization and aging societies. This period saw the company transform itself from Fukutake Publishing focused on the education field into a provider of diverse people-oriented services.

New pregnancy, childbirth and childcare magazines publishedTamago Club and Hiyoko Club

1990New “Benesse” corporate identity announced

Newspaper ad reveal-ing the new corporate identity

Benesse Home Clara Okayama Okayama City

1993Benesse moves into the language education businessBerlitz International, Inc. (now Berlitz Corporation) becomes a subsidiary

Cl Okl k

Berlitz joins Benesse: signing ceremony

Net Sales(billion yen)


Market Environment

Demographics

Nursing Care Market

The number of people receiving nursing care insurance service in Japan has grown roughly 2.8 times in 11 years

As low birthrates and societal aging continue, roughly 40% of Japan’s population is projected to be aged 65 or older by 2050

With society aging, the issue of nursing care for the elderly is becoming increasingly acute.Against this backdrop, in 2000, Japan introduced nursing care insurance. As the nursing care insurance system has expanded, the number of people receiving care grew by approximately 2.74 million, or 184.1%, in the 11 years leading up to 2011. In-home services (home-visit care, day care and private nursing homes) have grown particularly, rising 219.2% over the same 11-year period. By 2025, it is projected that around 30% of Japan’s total population will be over the age of 65, and the market is expected to grow alongside this trend.

The annual number of births in Japan peaked at 2 million in 1975, and has been on a downward trend since then. In 2011, the number of births had decreased to nearly half of the peak level, at 1.05 million. While the number of children decreases, society is rapidly aging. In 2010, the number of people aged 65 or older topped 23% of the total population. Japan’s society is aging at a level not yet experienced by any other country.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Population Trends by Age Group and Future Projections

2010 2015 2020 2025 2030 2035 2040 2045 2050

Thousands

Source: National Institute of Population and Social Security Research “Population Projection for Japan” (January 2012 estimate)

Age 0–19 Age 20–64 Age 65 or older

With the decline in birthrate and the aging of society projected to continue, it is believed that in 2050 over 40% of the population will be 65 years or older.


Supplementary Education Market

While the overall market is contracting, the correspondence course market continues to expand

The supplementary education market is experiencing a downward trend as Japan’s birthrate continues to decline. From fiscal 2005 to fiscal 2010, the market declined an average of around 1% annually. This pace is virtually identical to the decline in the number of children in Japan. The correspondence course market (for preschool children/for elementary to high school students) in fiscal 2010 was worth ¥192.5 billion. This figure accounted for 13.1% of the supplementary education market, and represented an increase from ¥184.1 billion in fiscal 2005. Benesse’s share of the correspondence market has grown each year, rising from 81% in fiscal 2005 to 89% in fiscal 2010. The cram school/prep school sector of the supplementary education market was worth ¥915.0 billion in fiscal 2010, down from ¥960.0 billion in fiscal 2005. Nevertheless, the sector remains a large one in its own right, accounting for 62.1% of the supplemen-tary education market as a whole.

0

300

600

900

1,200

1,500

1,800

Cram schools/Prep schoolsCorrespondence courses (for preschool children/elementary to high school students)Others (Preschool education, Study guides/Workbooks, Tutoring)

share of correspondence coursesNote: This graphic was compiled by Benesse based on data in Yano Research Institute,

Ltd.’s “Education Industry 2011.”

FY2005 FY2006 FY2007 FY2008 FY2009 FY20100

5

10

15

The overall market is contracting by an average of 1% per year, but the correspondence course market has grown to 13.1% of the total supplementary education market in FY2010.

FY2010Cram schools/

Prep schools

11.6%

6.4%

6.8%

13.1%

62.1%

Correspondence courses (See the above Note)

Tutoring

Study guides/Workbooks

Preschool education (See the above Note)

915.0 billion yen

1,473.4 billion yen in total

192.5 billion yen

100.0 billion yen

95.0 billion yen

170.9 billion yen

Billions of Yen %

Trends in the Supplementary Education Market Supplementary Education Market in Japan

Source: National Institute of Population and Social Security Research“Population Projection for Japan” (January 2012 estimate)Source: Ministry of Health, Labour and Welfare

“Report Survey on Situation of Long-Term Care Insurance Service”

2010 20152000/4 2011/4 2020 2025 2030 2035 2040In-home servicesCommunity-based servicesFacility services

Population aged 65 or older (left)People aged 65 or older as a percentage of the total population (right)

In 2025, over 30% of the population are expected to be senior citizens.

Significant growth in the number of people receiving in-home service care

0

10,000

20,000

30,000

40,000

20

25

30

35

40

0

900

1,800

2,700

3,600

4,500

29,484

520

970

1,490

850

280

3,1003,100

4,23033,952

36,124 36,573 36,849 37,407 38,678

23.0%

26.8%29.1%

30.3%31.6%

33.4%

36.1%

ThousandsThousands %

Estimated Population and Percentage of People Aged 65 or OlderNumber of People Receiving Nursing Care Insurance Service

184.1% increase (overall)

219.2% increase (in-home)

63.6% increase (facility)

Note: Supplementary education market includes preschool education (English-language teaching materials, intensive education, and English-language schools up to age 15), study guides/workbooks, tutoring, correspondence courses (for preschool children/elementary to high school students), and cram schools/prep schools.


Review of Operations/At a Glance

Overseas Education Business Domain

▶ Page 067

Domestic Education Business Domain

▶ Page 064

Lifestyle Business Domain

▶ Page 068

Major Business

● Shinkenzemi and Kodomo Challenge correspondence courses (from preschool to senior high school)

● School and teacher support business, centered on Shinken Simulated Exams (mock university entrance exams)

● Cram schools/prep schools

● English-language teaching business for preschool children and elementary school students

Major Business

● Correspondence course business focused on preschool children in mainland China, Taiwan and South Korea

Major Business

● Tamago Club and Hiyoko Club — magazines dealing with pregnancy, childbirth, and child-rearing

● Women’s Park website

● Mail-order business Tamahiyo Shop, Tamahiyo Uchiiwai (family celebration items), Sukku Store

● Mail-order website Women’s Mall

Major Group Companies

Benesse Corporation Shinken-AD Co., Ltd. UP Inc. Plandit Co., Ltd. Tokyo Individualized Educational Institute, Inc.


Benesse Corporation Benesse Corporation China Benesse Korea Co., Ltd.


Benesse Corporation Benesse en-Famille Inc. Benesse Music Publishing Co.

Billions of Yen

10 11 120

100

200

300Billions of Yen

10 11 120

10

20

30

40

50

Net SalesSegment Sales to Total Sales

240.2240.6240.0

56.7%

Operating Income

32.9

40.638.4

FY2011

[ Years ended March 31 ]

Billions of Yen

10 11 12

Billions of Yen

10 11 120

2.5

5.0

7.5

10.0

12.5

-2.0

-1.5

-1.0

-0.5

0


10.89.4

7.7

2.6%

Operating Income (Loss)

(1.3)

(0.7)

(1.0)

FY2011


Billions of Yen

10 11 12

Billions of Yen

10 11 120

10

20

30

40

-2.0

-1.5

-1.0

-0.5

0


25.328.3

30.6

6.0%

Operating Income (Loss)

(1.3)

(0.5)

(1.5)

FY2011



Language/Global Leadership Training Business Domain

▶ Page 070

Others

Senior/Nursing Care Business Domain

▶ Page 069

Major Business

● Operation of nursing homes for the elderly (a total of six distinct brands of such homes—Aria,

Clara, Granny & Granda, Madoka, Bon Sejour and Cocochi)

Major Business

● Language education business, global leadership training businesses, educational services for those who plan to study overseas

● Interpreting and translation business

Major Business

● Telemarketing business

● Computer information processing service business, and system development and sales business


Benesse Style Care Co., Ltd. Benesse MCM Corp.*On April 1, 2012, Bon Sejour was folded into Benesse Style Care Co., Ltd. by merger.


Berlitz Corporation Okayama Language Center Simul International, Inc.


TMJ, Inc. Synform Co., Ltd.*Effective July 1, 2012, Telemarketing Japan, Inc. changed its corporate name to TMJ, Inc.

Billions of Yen

10 11 12

Billions of Yen

10 11 120

1

2

3

4

5

0

25

50

75


66.558.9

44.6

15.7%

Operating Income

4.74.1

3.0FY2011


Billions of Yen

10 11 12

Billions of Yen

10 11 120

0.6

0.3

0.9

0

20

40

60


59.454.053.8

14.0%

Operating Income

0.5

0.8

0.3

FY2011


Billions of Yen

10 11 12

Billions of Yen

10 11 120

10

20

30

0

1.0

0.5

1.5


21.421.7

29.9

5.0%

Operating Income

1.01.0

1.2

FY2011



Domestic EducationBusiness Domain

Review of Operations

Develop the next generation of Shinkenzemi Strategically utilize the classroom business

In fiscal 2011, both consolidated sales and operating income declined year on year due to a fall in enrollment for the Shinkenzemi and Kodomo Challenge courses in the wake of the earthquake disaster, and to an increase in sales expenses and to costs associated with the launch of a new Shinkenzemi Senior High School Course. However, fiscal 2012 got off to a smooth start, with enrollment in April in the Shinkenzemi and Kodomo Challenge courses both trending above pre-earthquake levels.

Shinkenzemi Enrollments

3,910 3,960 4,040 4,080 4,0904,030

Senior High School CoursesJunior High School CoursesKodomo Challenge (Preschool Courses)

[ As of April ]Elementary School Courses

Senior High School CoursesJunior High School CoursesKodomo Challenge (Preschool Courses)

Elementary School Courses

Thousands of Students

0

2,000

1,000

3,000

4,000

5,000

0

20,000

10,000

30,000

40,000

50,000

10090807 11 12

Cumulative Enrollmentsin Shinkenzemi Over a Full Year

44,690 43,410 43,900 45,510 45,59045,940



10090807 11 12

Number of Students Taking ShinkenSimulated Exams and Other Exams

6,180 6,360 6,650 6,9007,3507,170



0

2,000

4,000

6,000

8,000

10090807 11 12

Overview

The Domestic Education Business Domain is a core business segment, accounting for 56.7% of the Benesse Group’s consolidated sales in fiscal 2011. The main products in this domain are Shinkenzemi and Kodomo Challenge, corre-spondence courses for children of all ages up to 18. As of April 2012, about one in five children in Japan was enrolled in these courses. In addition to enhancing its lineup of educational materials to better meet increasingly diverse and individualized customer needs, the Group is developing next-generation products involv-ing incorporation of web-based components and other learning media. In addition to correspondence courses, the Group provides a variety of education pro-grams for senior high schools such as Shinken Simulated Exams (mock university entrance examinations) and Study Support, a learning assessment study aid. Benesse programs and services are used in 94% of senior high schools in Japan (the year ended March 2012). We also provide a range of educational services, such as cram and prep schools and preschool and elementary school English-learning materials, to respond to children’s diversifying study methods and needs.

Review of Fiscal 2011

Consolidated net sales in the Domestic Education Business Domain in the year ended March 31, 2012 amounted to ¥240,179 million, a decrease of 0.2% from the previous fiscal year. The main factors behind the decline were a drop in enrollment for the Company’s mainstay Shinkenzemi and Kodomo Challenge correspondence courses, and cancellation of spring seminars in the Tokyo metropolitan area along with lower student numbers at Tokyo Individualized Educational Institute, Inc. in the wake of the earthquake disaster. On the other hand, sales in the school and teacher support business grew on the back of a steady performance from Shinken Simulated Exams and materials offering guidance on courses of study and paths for advancement such as Course Map. Operating income declined 19.1% to ¥32,857 million. The decline was mainly attrib-utable to lower earnings on decreased sales in the correspondence course business, higher

Strategies

Daisuke OkadaManaging Director, President, Education Business Division, Benesse Corporation


Leverage Groupwide assets to build the global leadership training business Reform marketing

Domestic Correspondence Course Market Composition (Elementary to High School Students)

165.0 billion yen

88.0%

FY2010

Benesse

0.5%Company C

2.0%Others

1.0%Company B

Company A 8.5%

0.5%0.7%1.5%

Domestic Correspondence Course Market Composition(Preschoolers)

27.5 billion yen

96.0%

FY2010

Benesse

Company ZCompany Y

Company X 1.2%Others

sales expenses, and development costs for the new Shinkenzemi Senior High School Course. The overall decline was offset somewhat by higher earnings on increased sales in the school and teacher support business. After falling in April 2011 in the wake of the earthquake disaster, the number of enrollees in correspondence courses such as Shinkenzemi and Kodomo Challenge as of April 2012 was 4.09 million, up 60,000 year on year. This figure surpassed pre-quake levels.

Strategies for the future

In our Shinkenzemi business, we will continue to combine traditional paper-based materials tools with PCs, mobile devices and digital materials as we continue evolving our business model to meet the needs of the coming genera-tion of children. In fiscal 2012, we are develop-ing the next-generation Shinkenzemi model. In Elementary School Courses, we are introduc-ing the Pocket Challenge digital study device for fourth-grade children. In Junior High School Courses, we are making previously optional courses with online elements standard. Senior High School Courses incorporating PCs, mobile devices and digital materials that were already introduced for first-years in fiscal 2011 were also provided for second-year student courses. In addition, in Junior and Senior High School Courses, we are expanding interactive live classes using USTREAM. By continuing to provide increasingly high value-added learning services incorporat-ing digital technologies, we aim to establish an overwhelming competitive lead, and expand further our share of the home-study market. We are determined to increase market share and grow enrollment for our services, from

21% of all children in Japan (in relevant age ranges) in 2012 to 25% in 2018, despite Japan’s declining birthrate. In addition to strengthening our prod-ucts, we aim to make our marketing channels more diversified and efficient. As well as the correspondence course business, we are building up the cram and prep school business. In March 2012, we made UP Inc. and Tokyo Educational Institute Co., Ltd. into subsidiaries, the former consolidated and the latter wholly owned. UP has an impres-sive track record in admission rates to the most sought-after universities, while Tokyo Educational Institute manages Tetsuryokukai, a highly successful prep school that helps prepare students targeting Tokyo University and other elite universities. Looking ahead, we plan to make strategic use of first-class video content in cram schools within the Group. In addition, we are developing our global leadership training business, to meet the grow-ing need in Japan for talented people who can function effectively on a global stage. While strengthening English-teaching business for preschool and elementary school levels, we plan to harness assets within the Benesse Group such as Berlitz Corporation as we develop and expand businesses arranging and supporting overseas study and professional development for all age groups, from preschool through university and beyond.

Source: Yano Research Institute, Ltd.’s “Education Industry 2011.”


Age 0-6 7-12 (Elementary School) 13-15 (Junior High School) 16-18 (Senior High School)

Correspondence Courses

Cram schools / Classes

English-Learning Materials/ Mock Examinations

Kodomo Challenge (Preschool Courses)

Benesse Science Classes

Tetsuryokukai

Ochanomizu Seminar

Benesse’s English Classes for Children

Worldwide Kids English BE-GO Shinken Simulated Exams

Shinkenzemi

Elementary School Courses Junior High School Courses Senior High School Courses

Up Inc. (Shingakukan, Kaishinkan, Kenshinkan and others)

Tokyo Individualized Educational Institute

Main Products and Services

Domestic EducationBusiness Domain




In fiscal 2011, this business increased its sales on the back of growth in enrollment for correspondence courses, chiefly in China. However, operating losses also increased, due to the cost of upfront investment in business expansion. The total number of enrollment in overseas correspondence courses in April 2012 was 780,000, an increase of 130,000 year on year.

Proactively expand the China business Enter new markets and expand business domains

Takashi MatsuhiraPresident of Global Education Business Division, President of China Business Division, Benesse Corporation

President, Benesse Corporation China

Preschool Courses in China

Benesse Shop in China

�ousands of Students

ChinaSouth KoreaTaiwan

[ As of April ]

10090807 11 120

200

400

600

800

Overseas Enrollment

270340

430520

780

650

Overview

The Overseas Education Business Domain accounted for 2.6% of the Benesse Group’s consolidated sales in fiscal 2011. The Group’s current focus is correspondence courses for preschool children in China, Taiwan and South Korea, and enrollment in all three markets is growing steadily. As of April 2012, enrollment in correspondence courses in China stood at 480,000, while the figure for Taiwan was 170,000 and for South Korea 130,000, for a total of 780,000.

Review of fiscal 2011

Consolidated net sales in the Overseas Education Business Domain in the year ended March 31, 2012 amounted to ¥10,830 mil-lion, an increase of 15.3% over the previous fiscal year. Growth in correspondence course enrollment, particularly in China, was the main factor driving higher sales. Turning to earnings, the operating loss increased from ¥692 million in the previous fiscal year to ¥1,344 million, due to upfront costs for business expansion and other factors, despite a boost in earnings from higher sales.


In China, the Group plans to further expand its preschool education businesses, aiming to boost total enrollment to 1 million by April 2015. An upgrade of the product range is planned in fiscal 2012, with the addition of electronic teaching aids and educational

materials targeting particular age-groups, as well as price revisions. We will also aggressively expand our presence on the ground, opening offices in Chengdu in April 2012, in addition to the Guangzhou office (opened in January 2011) and the established Shanghai and Beijing offices. In addition to expansion of call center operations, the Group will increase opportu-nities for potential customers to familiarize themselves with Benesse products, through new openings of Benesse shops (100 as of April 2012), concerts featuring the little tiger character Shimajiro (Qiaohu in China; 94 shows in fiscal 2011) and television shows (since September 2011). We also plan to enter the classroom business. Looking beyond China, we set up offices in the United States in February 2012 and in Indonesia in March 2012, and are carrying out market research studies in Brazil too. In the new markets, we are also involved in development of businesses targeting schools, classrooms and other initiatives. We will accelerate overall development of overseas businesses after quickly identifying successful business models.

Strategies


Overview

The Lifestyle Business Domain accounted for 6.0% of the Benesse Group’s consolidated sales in fiscal 2011. In this domain, the Group aims to encourage women to make more of themselves and to support the lifestyles of women and their families. Main business activities are magazine publication, mail-order businesses and website management. Services relate to women’s daily living needs, including pregnancy, childbirth, childcare, housekeeping and household management.


Consolidated net sales in the Lifestyle Business Domain in the year ended March 31, 2012 amounted to ¥25,338 million, a decline of 10.3% from the previous fiscal year. The main factors in the decline were discontinuation of mail-order magazine bon merci!, a dietary support magazine for families with small children and elementary school students, and child-rearing publication Kokko Club, after their respective April 2011 issues. The operating loss increased from ¥473 million in the previous fiscal year to ¥1,277 million. The main factor was startup costs for Women’s Mall, an e-commerce website specializing in pregnancy, childbirth and child-rearing, which was launched in November

2011. Earnings positives were discontinuation of unprofitable magazines, and measures to control the cost of sales ratio in the mail-order business.


In the Lifestyle Business Domain, the Benesse Group has built up a strong No.1 brand in Japan in businesses touching on the lifestyles of women and their families, particularly through magazines dealing with pregnancy, childbirth, child-rearing and lifestyle topics. Backed by such brand power, the Group is now develop-ing new earnings models using the Internet. While expanding the range of commission/advertising and user-charge services offered online, the Group in November 2011 launched Women’s Mall, an e-marketplace specializing in pregnancy, childbirth and child-rearing. We aim to convert our mail-order business model to this format too.

Sales declined in fiscal 2011 due to the discontinuation of unprofitable magazines. Although these closures and reduced costs provided an earnings boost, the operating loss increased due to expenses connected with the launch of new businesses.

Establishment of new earnings models using the Internet Revamp of the mail-order business model

Ikuyo HoriguchiPresident, Women & Family Business Division, Benesse Corporation


Tamago Club Hiyoko Club

THANK YOU!

Magazines

Tamahiyo website

Women’s Park web

Tamahiyo mobile site

Website Services

Women’s Mall

Tamahiyo Shop

Sukku Store

Mail-Order Business

Strategies



Steadily open new nursing homes Develop new businesses aimed at the “total senior living” concept*

Hitoshi KobayashiDirector, Benesse Holdings, Inc.

Representative Director and President, Benesse Style Care Co., Ltd.

Senior/ Nursing Care Business Domain

Overview

The Senior/Nursing Care Business Domain accounted for 15.7% of the Benesse Group’s total consolidated sales. Operations in this domain have grown to a scale second only to those in the Domestic Education Business Domain. Benesse Style Care Co., Ltd. operates nursing homes and visiting home care services for the elderly and provides training courses for nursing care personnel, while Benesse MCM Corp. is a staff placement and personnel dispatch company specializing in medical and nursing care personnel. We operate six dif-ferent brands of nursing home for the elderly, depending on price and services offered, to meet a broad range of customer needs.


Consolidated net sales from the Senior/Nursing Care Business Domain in the year ended March 31, 2012 amounted to ¥66,540 million, an increase of 13.0% over the previous fiscal year. The main positive was growth in the number of residents following the establish-ment of 21 new nursing homes. Operating income rose 14.5% over the previous fiscal year to ¥4,669 million, tracking the higher sales.

During the year ended March 31, 2012, Group company Bon Sejour Corporation opened four new homes in its Cocochi series, the Benesse Group’s sixth nursing home brand.


As society ages, demand for nursing care ser-vices continue to broaden. The Benesse Group already operates the largest number of nursing homes for the elderly in Japan, and in fiscal 2012 plans to open another 27. Looking ahead, we plan to further strengthen our strategy of “area dominance” and steadily expand the number of nursing homes under our operation. We also plan to open serviced residences for seniors, and develop new peripheral businesses such as pro-vision of meals and care accessories, aimed at realizing the “total senior living” concept.* We are developing a comprehensive elderly care business portfolio as a key service-provider in the community.

* At Benesse, “total senior living” concept means providing comprehensive life style services for the aged.

In fiscal 2011, The Senior/Nursing Care Business Domain posted higher sales and operating income due to increases in the number of nursing homes and residents.

Strengthen the “area dominance” strategy

Number of Nursing Homes

115129 139

172

224204

AriaGranny & GrandaBon Sejour

[ As of March 31 ]Clara MadokaCocochi

0

100

50

150

200

250

10090807 11 12

* On April 1, 2012, Bon Sejour Corporation was folded into Benesse Style Care Co., Ltd. by merger.

Cocochi

Aria

Strategies



Yukako UchinagaExecutive Vice President and Director, Benesse Holdings, Inc.

Chairman of the Board and CEO, Berlitz Corporation

Language/Global Leadership Training Business Domain

In fiscal 2011, the Language/Global Leadership Training Business Domain booked its highest-ever sales (US dollar basis), on the back of a strong performance by the ELS business (overseas study support) of Berlitz Corporation, and an increase in the total number of language lessons taught. However, operating income declined, due to expenses arising from the conversion of French language services provider Telelangue SA into a wholly owned Berlitz subsidiary in August 2011.

Step up M&A activities Strengthen and expand value-added products and services Strengthen the ELS business Expand emerging markets

Number of Berlitz Lessons

6,873 7,145 7,256

6,217 6,5066,038

[ Years ended December 31 ]

Thousands of Lessons

09080706 10 11

Berlitz Language Centers and Franchises

542 557 561 567 563570

[ As of December 31 ]

09080706 10 110

150

300

450

600

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Berlitz Sales by Region

685.9 Millions of U.S. Dollars

18.5%Americas

0.7%HQ, Others

29.3%Europe

24.3%Asia

27.2%ELS FY2011

Net Sales

Overview

The Language/Global Leadership Training Business Domain accounted for 14.0% of the Benesse Group’s consolidated sales. US-based subsidiary Berlitz Corporation operates 563 language schools in 75 countries and regions worldwide, making it the largest language and global leadership training company in the world. Simul International provides translation and interpreting services for international conferences including summits and meet-ings of governmental, financial and business organizations.


Consolidated net sales from the Language/Global Leadership Training Business Domain in the year ended March 31, 2012 amounted to ¥59,428 million, an increase of 10.1% over the previous year. The main factors were steady growth in Berlitz Corporation’s ELS business (overseas study support), a return to growth in the num-ber of language lessons taught, expansion of the global leadership training business, and the conversion of Internet and telephone language education service operator Telelangue SA into a wholly owned Berlitz subsidiary in August 2011. These factors outweighed the negative impact of the yen’s appreciation.

Operating income declined 29.2% to ¥544 million, mainly because of expenses asso-ciated with the takeover of Telelangue, which outweighed the earnings boost from higher sales.


In addition to provision of language lessons, Berlitz aims to strengthen and expand its lineup of higher value-added products and services such as the Global Leadership Training and Media-Based Learning programs, to provide a wide range of services for both individuals and companies. We also plan to strengthen our ELS business by broadening the range of regions we target and services we offer, and are commit-ted to expanding our businesses in emerging markets.

es

Strategies


072 Six-Year Summary of Consolidated Financial Statements

074 Management’s Discussion and Analysis

084 Consolidated Balance Sheets

086 Consolidated Statement of Income

087 Consolidated Statement of Comprehensive Income

088 Consolidated Statement of Changes in Equity

089 Consolidated Statement of Cash Flows

091 Notes to Consolidated Financial Statements

125 Independent Auditor’s Report

Financial S e c t i o n

http://www.benesse-hd.co.jp/en/ir/ WEB


Six-Year Summary of Consolidated Financial StatementsBenesse Holdings, Inc. and Consolidated Subsidiaries

Years ended March 31 2007 2008 2009 2010 2011 2012

Millions of YenFor the Year:

Net sales ¥354,596 ¥384,514 ¥412,711 ¥406,602 ¥412,829 ¥423,707Cost of sales 175,219 192,182 204,115 199,835 203,842 212,017Selling, general and administrative expenses 148,060 157,449 169,470 168,878 166,119 177,892Operating income 31,317 34,883 39,126 37,889 42,868 33,798Income before income taxes and minority interests 32,339 31,007 29,984 38,616 36,670 34,056

Income taxes 13,903 15,025 18,653 15,912 15,607 17,110Net income 18,244 15,462 10,679 21,875 20,587 16,369

CAPEX ¥ 11,802 ¥ 22,767 ¥ 18,051 ¥ 27,042 ¥ 21,938 ¥ 44,611Depreciation and amortization 9,929 11,829 13,456 13,029 13,738 14,184

YenPer Share of Common Stock:

Net income ¥ 178 ¥ 152 ¥ 107 ¥ 222 ¥ 208 ¥ 168Cash dividends 85 90 90 90 95 95

Millions of YenAt Year-End:

Total assets ¥349,099 ¥366,585 ¥343,129 ¥356,153 ¥405,119 ¥432,081Shareholders’ equity/Total equity 197,302 202,342 168,497 183,170 192,793 194,190

YenShareholders’ equity/ Total equity per share of common stock ¥ 1,918 ¥ 1,949 ¥ 1,647 ¥ 1,793 ¥ 1,894 ¥ 1,934

Number of shares of common stock issued (in thousands) 106,353 106,353 106,353 106,353 106,353 104,153

Notes: 1. The computation of net income per share of common stock is based on the weighted average number of shares of common stock outstanding during each year. 2. CAPEX for the fiscal year ended March 31, 2008 and before includes rental deposits. 3. Depreciation and amortization for the fiscal year ended March 31, 2008 and before includes depreciation of non-operating expenses.


Years ended March 31 2007 2008 2009 2010 2011 2012Profitability:

Operating income ratio (%) 8.8 9.1 9.5 9.3 10.4 8.0Net income ratio (%) 5.1 4.0 2.6 5.4 5.0 3.9Return on equity (ROE) (%) 9.5 7.8 5.9 12.9 11.3 8.7Return on assets (ROA) (%) 5.4 4.3 3.0 6.3 5.4 3.9Operating income per employee (thousands of yen) 2,456 2,528 2,657 2,468 2,538 1,784Net income per employee (thousands of yen) 1,431 1,121 725 1,425 1,219 864Number of employees 12,753 13,796 14,726 15,353 16,888 18,941

Growth Trends:Increase (decrease) of net sales (%) 6.2 8.4 7.3 (1.5) 1.5 2.6Increase (decrease) of operating income (%) 10.2 11.4 12.2 (3.2) 13.1 (21.2)Increase (decrease) of net income (%) 13.7 (15.2) (30.9) 104.8 (5.9) (20.5)

Stability:Current ratio (%) 133.0 125.4 121.7 128.9 156.4 150.3Fixed assets ratio (%) 88.9 94.2 96.9 96.3 89.0 104.1Equity ratio (%) 56.4 54.2 47.5 49.7 46.2 43.5Liquidity (months) 3.1 2.9 2.5 2.5 3.0 3.5Debt-to-equity ratio (%) 1.8 1.2 1.6 2.4 9.0 19.7Interest coverage (times) 98.2 848.4 697.5 597.2 504.4 118.0

Per Share of Common Stock:Net income (yen) 178 152 107 222 208 168Cash dividends (yen) 85 90 90 90 95 95Dividend payout ratio (%) 47.8 59.4 84.1 40.6 45.6 56.6

Notes: 1. ROE and ROA are calculated using the average amounts of shareholders’ equity/equity and total assets at the beginning and end of each fiscal year. 2. Liquidity = {Cash and time deposits (yearly average) + marketable securities (yearly average)} / average monthly sales 3. Debt-to-equity ratio = Interest-bearing liabilities (yearly average) / shareholders’ equity/total equity (yearly average) × 100 4. Interest coverage = (Operating income + interest and dividend income) / interest expense 5. The computation of net income per share of common stock is based on the weighted-average number of shares of common stock outstanding during each year.

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Operating Income Ratio


Net Income Ratio


Increase (Decrease) of Net Sales


Increase (Decrease) ofOperating Income


Current Ratio

[ As of March 31 ]

Equity Ratio

[ As of March 31 ]

07 08 09 10 11 12 07 08 09 10 11 12 07 08 09 10 11 12

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Management’s Discussion and Analysis

Kenichi FukuharaRepresentative Director, Executive Vice President and CFO

Benesse Holdings, Inc. and Consolidated Subsidiaries

1. Market EnvironmentThe government of Japan has launched new national curriculum guidelines reaffirming academic ability, effective fiscal 2011 for elementary schools and fiscal 2012 for junior high schools. In tandem with this move, which affects our mainstay education business, curriculums have been expanded at both types of school and moves are also underway to make English compulsory for fifth-and sixth-grade students at elementary school, leading to growing parent concern with educational matters. In addition, educational services are diversifying as information technol-ogy continues to evolve and use of mobile devices spreads. In the senior/nursing care business, care service needs continue to expand as rapid aging of the population continues. Against this backdrop, the revised Act on Securement of Stable Supply of Elderly Persons’ Housing was implemented in 2011. This legislation sets out policies for stimulating the supply of serviced residences for seniors. In addition, the amended framework for compensation for care workers unveiled in fiscal 2012 included policies encouraging a shift away from institution-based care toward in-home care. While stepping up in-home services such as regular 24-hour security patrols and round-the-clock response, as well as strengthening independent support-type services in areas such as rehabilitation, the framework effectively lowered reimbursement rates for carers in other in-home and institutional services. In the language/global leadership training business, talented personnel who can function on a global stage are increasingly needed by companies all around the world as the process of globalization deepens. Due to an increase in the number of overseas students chiefly from the emerging countries, the number of overseas students is also increasing globally, and at the same time, e-learning is expanding and language services are diversifying.

2. Operating Results for Fiscal 2011Consolidated net sales rise but earnings declineNet sales hit record high for second straight yearOperating and net income both dragged down by the Great East Japan Earthquake disaster

(1) Net SalesConsolidated net sales rose 2.6% or ¥10,878 million year on year to ¥423,707 million. The main factors were expansion in the number of nursing homes for the elderly and growth in the number of residents (Senior/Nursing Care Business Domain), higher sales at Berlitz Corporation despite the high yen (Language/Global Leadership Training Business Domain), and growth in overseas correspondence course enrollment, particularly in China (Overseas Education Business Domain). However, sales in the Lifestyle Business Domain declined due to discon-tinuation of three magazines, and the Domestic Education Business Domain was hit by falling correspondence course enrollment and lower student numbers at Tokyo Individualized Educational Institute, Inc. in the wake of the earthquake disaster in March 2011.

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Net Sales (Left)Operating Income (Right)

Cost of Sales RatioSG&A Ratio

Net Sales/Operating IncomeBillions of Yen Billions of Yen

[ Years ended March 31 ]07 08 09 10 11 12

Cost of Sales Ratio/SG&A Ratio

[ Years ended March 31 ]07 08 09 10 11 12

49.4 50.0 49.5 49.1 49.4 50.0

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33.8


Net Sales by SegmentMillions of Yen

Years ended March 31 2009 2010 2011 2012Net Sales ¥412,711 ¥406,602 ¥412,829 ¥423,707

Domestic Education 234,304 240,012 240,577 240,179Overseas Education 6,856 7,671 9,395 10,830Lifestyle 29,532 30,587 28,260 25,338Senior/Nursing Care 40,354 44,612 58,897 66,540Language/Global Leadership Training 68,354 53,794 53,990 59,428Others 33,311 29,926 21,710 21,392

Notes: 1. Segment sales are based on outside sales and intersegment sales are not included. 2. Segments have been changed pursuant to the application of “Accounting Standard for Disclosures about Segments of an Enterprise and

Related Information” and “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” from the fiscal year ended March 31, 2011. Segment information for the fiscal years ended March 31, 2009 and 2010 has been modified to fit the new segments to allow for comparison with the fiscal year ended March 31, 2011.

5.0%

14.0%

15.7% 56.7%

6.0%

2.6%

Others

Domestic Education


Senior/Nursing Care

Lifestyle

Overseas Education

423,707

Net Sales by Segment

[ Year ended March 31, 2012 ]

million yen

(2) Cost of Sales and SG&A ExpensesCost of sales increased 4.0% or ¥8,175 million year on year to ¥212,017 million. The cost of sales ratio increased 0.6 percentage point to 50.0%, from 49.4% in the previous fiscal year.

Cost of Sales Ratio and SG&A RatioYears ended March 31 2007 2008 2009 2010 2011 2012Cost of Sales Ratio 49.4% 50.0% 49.5% 49.1% 49.4% 50.0%SG&A Ratio 41.8 40.9 41.1 41.5 40.2 42.0

Selling, general and administrative (SG&A) expenses rose 7.1% year on year to ¥177,892 million, an increase of ¥11,773 million. The SG&A ratio (SG&A as a proportion of net sales) increased 1.8 percentage points to 42.0% from 40.2% in the previous fiscal year.

(3) Operating IncomeConsolidated operating income fell 21.2%, or ¥9,070 million, to ¥33,798 million. In the Senior/Nursing Care Business Domain, earnings increased on the back of higher sales, but the Domestic Education Business Domain posted lower earnings. This was due to lower sales and an increase in sales expenses as sales activities were stepped up to recapture business lost in the wake of the earthquake disaster in March 2011, as well as costs incurred in connection with the launch of a new Shinkenzemi Senior High School Course.


Operating Income (Loss) by SegmentMillions of Yen

Years ended March 31 2009 2010 2011 2012Operating Income ¥39,126 ¥37,889 ¥42,868 ¥33,798

Domestic Education 37,116 38,380 40,619 32,857Overseas Education (1,749) (984) (692) (1,344)Lifestyle (1,390) (1,525) (473) (1,277)Senior/Nursing Care 2,634 3,010 4,078 4,669Language/Global Leadership Training 4,166 314 768 544Others 814 1,213 953 980Reconciliation (2,465) (2,519) (2,385) (2,631)

Notes: 1. Operating income (loss) for each segment is before eliminations in consolidated totals. 2. Segments have been changed pursuant to the application of “Accounting Standard for Disclosures about Segments of an Enterprise and

Related Information” and “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” from the fiscal year ended March 31, 2011. Segment information for the fiscal years ended March 31, 2009 and 2010 has been modified to fit the new segments to allow for comparison with the fiscal year ended March 31, 2011.

(4) Other Income (Expenses)Other income-net totaled ¥258 million during the fiscal year, compared with other expenses-net of ¥6,198 million in the previous fiscal year. The main factor was loss on impairment of long-lived assets totaling ¥6,401 million in the previous fiscal year, largely incurred in connection with sales management systems for the correspondence courses and other businesses of Benesse Corporation, a consolidated subsidiary, and with unused assets.

(5) Income before Income Taxes and Minority InterestsIncome before income taxes and minority interests decreased 7.1% or ¥2,614 million during the period, to ¥34,056 million.

(6) Income TaxesTotal income taxes increased 9.6% or ¥1,503 million from the previous fiscal year to ¥17,110 million. Tax obliga-tions as a proportion of income before income taxes and minority interests amounted to 50.2%, up from 42.6% in the previous fiscal year. The normal effective statutory tax rate was changed effective for the fiscal years beginning on and after April 1, 2012. The effect of this change was to increase income taxes—deferred in the consolidated statement of income for the year by ¥837 million.

(7) Net IncomeConsolidated net income decreased 20.5% or ¥4,218 million year on year to ¥16,369 million.ROE and ROAYears ended March 31 2007 2008 2009 2010 2011 2012ROE 9.5% 7.8% 5.9% 12.9% 11.3% 8.7%ROA 5.4 4.3 3.0 6.3 5.4 3.9

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3. Segment Information(1) Domestic Education Business DomainConsolidated net sales in the Domestic Education Business Domain in the year ended March 31, 2012 amounted to ¥240,179 million, a decrease of 0.2% from the previous fiscal year. The main factors behind the decline were a drop in enrollment for the Company’s mainstay Shinkenzemi and Kodomo Challenge correspondence courses, and cancellation of spring seminars in the Tokyo metropolitan area along with lower student numbers at Tokyo Individualized Educational Institute, Inc. in the wake of the earthquake disaster. On the other hand, sales in the school and teacher support business grew on the back of a steady performance from Shinken Simulated Exams (mock university entrance exams) and materials offering guidance on courses of study and paths for advancement such as Course Map. Operating income declined 19.1% to ¥32,857 million. The decline was mainly attributable to lower earnings on decreased sales in the correspondence course business, higher sales expenses, and development costs for the new Shinkenzemi Senior High School Course. The overall decline was offset somewhat by higher earnings on increased sales in the school and teacher support business. After falling in April 2011 in the wake of the earthquake disaster, the number of enrollees in domestic correspondence courses such as Shinkenzemi and Kodomo Challenge as of April 2012 was 4.09 million, up 60,000 year on year. This figure surpassed pre-quake levels. Moreover, the Company took steps to bolster the cram and prep school business by making UP Inc. a consolidated subsidiary and Tokyo Educational Institute Co., Ltd. a wholly owned subsidiary in March 2012.

Breakdown of Net Sales for the Domestic Education Business DomainMillions of Yen

Years ended March 31 2011 2012Percentage

ChangeShinkenzemi:

Senior High School Courses ¥ 28,476 ¥ 26,410 (7.3)Junior High School Courses 44,398 44,206 (0.4)Elementary School Courses 72,367 73,217 1.2Kodomo Challenge (Preschool Courses) 26,410 25,378 (3.9)

Subtotal 171,651 169,211 (1.4)School & Teacher Support Company 37,200 38,472 3.4Other 31,726 32,496 2.4

Total ¥240,577 ¥240,179 (0.2)Note: Net sales by segment do not include internal sales.

(2) Overseas Education Business DomainConsolidated net sales in the Overseas Education Business Domain in the year ended March 31, 2012 amounted to ¥10,830 million, an increase of 15.3% over the previous fiscal year. Growth in correspondence course enroll-ment, particularly in China, was the main factor driving higher sales. Turning to earnings, the operating loss increased from ¥692 million in the previous fiscal year to ¥1,344 million, due to upfront costs for business expansion and other factors, despite a boost in earnings from higher sales. In China, the Company added new bases in Guangzhou in January 2011 and Chengdu in April 2012, as it stepped up sales activities. It already had offices in Shanghai and Beijing. Enrollment in overseas correspondence courses as of April 2012 was 780,000, up by 130,000 year on year.

(3) Lifestyle Business DomainConsolidated net sales in the Lifestyle Business Domain in the year ended March 31, 2012 amounted to ¥25,338 million, a decline of 10.3% from the previous fiscal year.


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The main factors in the decline were discontinuation of mail-order magazine bon merci!, a dietary support magazine for families with small children and elementary school students, and child-rearing publication Kokko Club, after their respective April 2011 issues. The operating loss increased from ¥473 million in the previous fiscal year to ¥1,277 million. The main factor was startup costs for Women’s Mall, an e-commerce website specializing in pregnancy, childbirth and child-rearing, which was launched in November 2011. Earnings positives were discontinuation of unprofitable magazines, and measures to control the cost of sales ratio in the mail-order business.

(4) Senior/Nursing Care Business DomainConsolidated net sales from the Senior/Nursing Care Business Domain in the year ended March 31, 2012 amounted to ¥66,540 million, an increase of 13.0% over the previous fiscal year. The main positive was growth in the number of residents following expansion in the number of nursing homes. Operating income rose 14.5% over the previous fiscal year to ¥4,669 million, tracking the higher sales. During the year ended March 31, 2012, Group company Bon Sejour Corporation opened four new homes in its Cocochi series, the Benesse Group’s sixth nursing home brand. On April 1, 2012, Bon Sejour Corporation was folded into Benesse Style Care Co., Ltd. by merger.

(5) Language/Global Leadership Training Business DomainConsolidated net sales from the Language/Global Leadership Training Business Domain in the year ended March 31, 2012 amounted to ¥59,428 million, an increase of 10.1% over the previous fiscal year. The main factors were steady growth in Berlitz Corporation’s ELS business (educational services including language training for those who want to study abroad), a return to growth in the number of language lessons taught, expansion of the global leadership training business, and the conversion of Internet and telephone language education service operator Telelangue SA into a wholly owned Berlitz subsidiary in August 2011. These factors outweighed the negative impact of the yen’s appreciation. Operating income declined 29.2% to ¥544 million, mainly because of expenses associated with the takeover of Telelangue, which outweighed the earnings boost from higher sales.

(6) OthersConsolidated net sales in the Others segment amounted to ¥21,392 million, a decline of 1.5% from the previous fiscal year, due to discontinuation of a business and other factors. Operating income increased 2.9% year on year to ¥980 million, mainly due to a decline in costs associated with the business discontinuation, and increased earnings at Telemarketing Japan, Inc.* On July 1, 2012, Telemarketing Japan, Inc. changed its corporate name to TMJ, Inc.



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4. Outlook for the Fiscal Year Ending March 31, 2013For fiscal 2012, the Company is projecting net sales to rise 8.3% year on year to ¥459.0 billion. Positives include conversion of UP Inc. into a consolidated subsidiary in March 2012, early recovery in enrollment for mainstay correspondence courses in Japan in the wake of earthquake disaster (4.09 million enrollment as of April 2012, up 60,000 year on year), continued growth in the senior/nursing care business, a strong performance by the ELS business and an increase in language lessons taught all around the world at Berlitz Corporation. Turning to earnings, the Company projects operating income to increase 18.4% year on year to ¥40.0 billion, ordinary income to likewise rise 16.1% to ¥40.3 billion and net income to rise 27.1% to ¥20.8 billion, as a result of the increase in sales and the absence of one-time cost increases that followed the earthquake disaster.

5. Financial Position and Liquidity(1) Assets, Liabilities and Total EquityTotal assets at March 31, 2012 were ¥432,081 million, an increase of ¥26,962 million, or 6.7%, compared to the end of the previous fiscal year. Total current assets were ¥230,014 million, a decrease of ¥3,530 million, or 1.5%, due chiefly to a decline in cash and time deposits. Net property and equipment increased ¥15,983 million, or 21.3%, to ¥91,106 million. This was due chiefly to a rise in total lease assets as lease transactions rose, under a Senior/Nursing Care Business Domain program of opening new nursing homes in the residential care services business. Total investments and other assets increased ¥14,509 million, or 15.0%, to ¥110,961 million, chiefly due to an increase in goodwill and other intangible assets. Total liabilities at March 31, 2012 were ¥237,891 million, ¥25,565 million, or 12.0%, higher than a year earlier. Total current liabilities rose ¥3,713 million, or 2.5%, to ¥153,002 million, due mainly to an increase in advances received. Long-term liabilities amounted to ¥84,889 million, an increase of ¥21,852 million, or 34.7%, from a year earlier. This was chiefly due to increases in long-term debt, less current portion, and in lease obligations as lease transactions rose under a Senior/Nursing Care Business Domain program of opening new nursing homes in the residential care services business. Total equity at March 31, 2012 was ¥194,190 million, an increase of 0.7%, or ¥1,397 million. This was due mainly to an increase in retained earnings associated with the recording of net income. Total equity per share was ¥1,933.52, up ¥39.80 year on year.


Financial PositionMillions of Yen

As of March 31 2007 2008 2009 2010 2011 2012Total Assets ¥349,099 ¥366,585 ¥343,129 ¥356,153 ¥405,119 ¥432,081

Current Assets 173,567 175,900 179,850 179,687 233,544 230,014Property and Equipment 71,811 72,606 74,609 75,995 75,123 91,106Investments and Other Assets 103,721 118,079 88,670 100,471 96,452 110,961

Current Liabilities 130,525 140,277 147,825 139,390 149,289 153,002Long-term Liabilities 21,272 23,966 26,807 33,593 63,037 84,889Shareholders’ Equity/ Total Equity 197,302 202,342 168,497 183,170 192,793 194,190Equity Ratio (%) 56.4 54.2 47.5 49.7 46.2 43.5Shareholders’ Equity/ Total Equity per Share of Common Stock (Yen) 1,918 1,949 1,647 1,793 1,894 1,934Note: The computation of Shareholders’ Equity/Total Equity per Share of Common Stock is based on the weighted-average number of shares of

common stock outstanding during each year.

(2) Cash FlowsCash and cash equivalents (hereafter, “cash”) at the end of the fiscal year under review stood at ¥96,943 million, a decrease of ¥4,748 million, or 4.7%, compared to the previous fiscal year-end. Net cash provided by operating activities in the total of ¥40,632 million was more than offset by net cash used in investing activities totaling ¥33,524 million, and ¥11,254 million in net cash used in financing activities. Major factors affecting cash flows were as follows:

Cash flow from operating activitiesNet cash provided by operating activities totaled ¥40,632 million. Income taxes—paid totaling ¥25,876 million were outweighed by income before income taxes and minority interests of ¥34,056 million and non-cash expenses (depreciation and amortization) of ¥14,397 million, with increase in advances received and income taxes—refund of ¥7,876 million and ¥5,882 million, respectively. Net cash provided by operating activities declined ¥4,305 million year on year (9.6% less), due chiefly to increased income taxes—paid in the amount of ¥10,541 million, which outweighed a ¥6.9 billion increase in advances received.

Cash flow from investing activitiesNet cash used in investing activities totaled ¥33,524 million. Cash outflows included ¥14,689 million for acquisi-tion of controlling interests in a company and acquisition of shares of a consolidated subsidiary, ¥10,147 million for purchases of software, and ¥5,611 million for purchases of property and equipment. This outweighed net cash inflows where proceeds from sales of marketable securities exceeded purchases of marketable securities by ¥3,411 million. Net cash used in investing activities increased by ¥18,892 million year on year, or 129.1%. This was chiefly due to acquisition of controlling interests in a company and acquisition of shares of a consolidated subsidiary (¥14,689 million in total), as well as a ¥4,873 million increase in time deposits.

Cash flow from financing activitiesNet cash used in financing activities was ¥11,254 million. This mainly reflected cash outflows of ¥9,315 million in dividends paid and ¥5,341 million used for purchases of treasury stock, which outweighed ¥5.0 billion in proceeds from long-term debt. Net cash used in financing activities increased ¥24,178 million, from an inflow of ¥12,924 million in the previous fiscal year. This arose due chiefly to a ¥20,019 million decrease in proceeds from long-term debt and a ¥5,322 million increase in expenditure for purchases of treasury stock.


Cash FlowsMillions of Yen

Years ended March 31 2007 2008 2009 2010 2011 2012Net Cash Provided by Operating Activities ¥ 28,240 ¥ 27,484 ¥38,664 ¥ 30,311 ¥44,937 ¥40,632Net Cash Used in Investing Activities (11,223) (15,152) (5,218) (36,449) (14,632) (33,524)Net Cash (Used in) Provided by Financing Activities (10,629) (13,825) (23,262) (11,711) 12,924 (11,254)Foreign Currency Translation Adjustments on Cash and Cash Equivalents 561 (95) (4,381) 443 (1,713) (602)Net (Decrease) Increase in Cash and Cash Equivalents 6,949 (1,588) 5,803 (17,406) 41,516 (4,748)

(3) CAPEX, Depreciation and AmortizationCAPEX in fiscal 2011 increased 103.3% year on year to ¥44,611 million, due chiefly to increases in lease assets in the Senior/Nursing Care Business Domain and increases in goodwill and assets as a result of conver-sion of UP Inc. (previously an equity method affiliate) into a consolidated subsidiary, and the acquisition of Telelangue SA by consolidated subsidiary Berlitz Corporation. Depreciation and amortization increased 3.2% year on year to ¥14,184 million.

6. Capital Structure Policy(1) Dividend PolicyBenesse’s fundamental policy is to pay a stable, sustainable dividend to its shareholders, with a near-term payout ratio target of at least 35%. In accordance with this policy, the Company paid a year-end dividend of ¥47.5 per common share in fiscal 2011 ended March 31, 2012, and an interim dividend of the same amount, making the annual divi-dend ¥95.0. For fiscal 2012, ending March 31, 2013, the Company plans to pay the same annual dividend of ¥95.0 per common share (again comprising an interim and year-end dividend of ¥47.5), based on the above policy. Benesse plans to use retained earnings for business investment to drive medium- to long-term growth, including M&A, R&D and investments to strengthen business fundamentals. The Company plans to be particu-larly proactive regarding M&A in fields where growth is anticipated.

(2) Share Buyback ProgramBased on a resolution of the Board of Directors approved May 20, 2011, 1,556,800 shares, at a total cost of ¥5,335 million, were repurchased in the period May 23, 2011 to March 31, 2012. The Company’s policy on treasury stock ownership is to hold around 5% of all issued Benesse shares, including treasury shares. Any treasury shares exceeding this shareholding, in principle, will be cancelled every fiscal year, and 2,200,000 shares were cancelled on June 30, 2011. The cumulative total of treasury stock at March 31, 2012 was 6,941,033 shares, at a total cost of ¥23,845 million, representing 6.7% of all issued company shares.

7. Risk FactorsThe following items are major risks related to the business activities of the Benesse Group that could potentially have a significant effect on the judgment of investors. Recognizing the possibility that these risks may materialize, the Benesse Group considers and implements concrete measures with the aim of avoiding such risks and minimiz-ing the impact on the Group’s results and financial position in the event that they should occur. The following discussion of risk factors contains forward-looking statements, and reflects management’s judgment as of June 25, 2012, the submission date of its securities report (yukashoken hokokusho).



(1) Declining Birthrate (Effect on Core Business)The Benesse Group’s core correspondence course businesses, Shinkenzemi and Kodomo Challenge (preschool courses), have membership ranging from infants to senior high school students. As of April 2012, the number of members totaled 4.09 million. The Benesse Group strives to satisfy increasingly diverse and individualized customer needs in the education market by enhancing its lineup of educational materials, and seeks to expand its penetration rate by providing next-generation products that combine the Internet and various other learning media. The Group aims to grow its businesses outside the correspondence course business by providing prep schools and other places for learning. The Group is also developing the correspondence course business in East Asian countries, including China, where a high growth rate is expected, and will seek to expand these and other education businesses outside of Japan further going forward. Meanwhile, in order to respond to the rapid aging of the population in Japan, the Group will also work to expand the senior/nursing care business, centering on operation of nursing homes for the elderly. Nevertheless, if Japan’s declining birthrate falls at a significantly greater pace than projected, there may be a dramatic contraction in the overall size of the education market, which could have an impact on the Benesse Group’s results and financial position.

(2) Acquisition of Personal InformationThe Benesse Group’s core business involves the provision of products and services to individual customers, centered on correspondence courses such as Shinkenzemi and Kodomo Challenge. The Group obtains and holds the personal information of existing and potential customers, such as their name, gender, date of birth, address, telephone number, and the name of a guardian, and uses this information in sales activities. Benesse is diversifying its marketing methods. Current initiatives include actively acquiring personal information directly on the basis of individual consent, using conventional direct mail, active use of TV commercials and the Internet, further strengthening of telemarketing, and promotion of marketing activities tailored to the specific characteristics of different regions. Moreover, in the management of personal information, the Company has a strong focus on information security measures to prevent leaks through unauthorized access or other means. However, conditions for the collection of personal information or a large-scale leak of personal information held by the Company could dramatically reduce the personal information that the Company can use. If this were to happen, it could affect Shinkenzemi and Kodomo Challenge enrollment.

(3) Regulations (Education system and nursing care insurance)1) Education systemIn the education field, the Ministry of Education, Culture, Sports, Science and Technology announced new curricula for kindergarten, elementary, and junior and senior high schools, which have been implemented in kindergartens since fiscal 2009, elementary schools since fiscal 2011, and junior high schools since fiscal 2012. Implementation for senior high schools is scheduled to begin with the fiscal 2013 entering freshmen class. There is also broad and growing recognition of the need to address issues of globalization and the use of information and communication technology (ICT) in education. Amid these changes, the educational needs of children and their parents are rapidly becoming more diverse and individualized. The Benesse Group is therefore providing products and services that are carefully tailored to these fragmenting needs. Nevertheless, the Benesse Group’s results and financial position could be affected by a decline in the appeal of its core products and services and a decline in sales, given the high share of total sales accounted for by the Shinkenzemi business, if its response is insufficient to cater to the rapid pace of change in the education environ-ment and in customer needs.


2) Nursing Care InsuranceNursing care benefits in Japan underwent what could be termed a regressive revision in April 2012, since subsidies to improve the terms of employment of nursing staff have now been included as part of the budget for actual nurs-ing care benefits. Furthermore, although the Japanese government’s policy on the opening of new specified nursing homes is to delegate total control of number of openings to local governments, most continue to restrict their numbers. At the same time, the Japanese government is taking steps to promote the supply of serviced residences for seniors, in line with revisions to the Act on Securement of Stable Supply of Elderly Persons’ Housing. The Benesse Group has built a nursing care business model with reduced reliance on income from nursing care insur-ance. For its part, the Group will gather additional information with respect to future policy changes to support business development that is resilient to changes in Japan’s long-term care insurance system. Nevertheless, the Group’s results and financial position could be affected by the need to review the nature of products, services and fee structures due to revisions in regulations related to nursing care services, standard reimbursement rates applicable to various nursing care services, payment limits commensurate with care require-ments, and other factors accompanying future revisions to related laws and reimbursements.

(4) Damage from Natural DisastersTo ensure its readiness to cope with major earthquakes and other natural disasters, the Benesse Group is implementing business continuity measures. This includes putting in place a system for gathering data concerning damage suffered by Group companies and the strategic dispersal of key information systems and distribution bases in the domestic education business. Nevertheless, in the event of a catastrophic natural disaster, the Benesse Group’s results and financial position could be affected by the interruption of sales activities in the disaster-stricken area, the destruction of Group facilities and other property, subsequent turmoil related to transportation, communications, distribution, and other social infrastructure, and damage to companies we outsource to. Furthermore, most of the Benesse Group’s operating companies are headquartered in Tokyo, which could adversely impact Group operations should a catastrophic event strike the city.

(5) Accounting for Asset ImpairmentThe Benesse Group’s results and financial position may be affected by the necessity to record impairment losses on such assets as landholdings, buildings, and goodwill in the event of a sharp decline in the profitability of Benesse Holdings, Inc. and Group companies.

(6) Overseas Procurement and BusinessThe Benesse Group oversees manufacturing of, and procures, educational tools and toys mainly in China. Elsewhere, subsidiary Berlitz Corporation operates over 560 schools in more than 70 countries and regions worldwide. The Benesse Group also operates a business primarily providing preschool education services in China and other East Asian countries. As of April 2012, the business in China had 480,000 members, the Taiwan business had 170,000 members, and the business in Korea had 130,000 members. In an attempt to mitigate risk, the Benesse Group actively collects data concerning legal and regulatory revisions and policy trends, particularly in East Asian countries, and ascertains the status of civil conflicts in which it could inadvertently become involved. Similarly, the Group hedges against volatility in foreign currency exchange rates, and seeks to identify new procurement sources. Nevertheless, natural disasters, cultural and religious tension, political or economic instability, or the new establishment or amendment of laws or regulations in any of these countries and regions could have an adverse impact on the Benesse Group’s results and financial position.

(7) DistributionThe Benesse Group relies on postal services and the distribution services of other external parties for the delivery of its Shinkenzemi and Kodomo Challenge educational materials and direct mailings. The Group is currently promoting further digitalization of its educational materials and is developing marketing approaches beyond direct mail. Nevertheless, the Group’s results and financial position may be affected by an increase in distribution costs.



Millions of Yen

Thousands of U.S. Dollars

(Note 1)Assets 2012 2011 2010 2012Current Assets:

Cash and time deposits (Notes 3 and 4) ¥ 72,647 ¥ 93,982 ¥ 48,877 $ 885,939Marketable securities (Notes 4 and 5) 49,129 32,053 31,632 599,134Trade receivables (Note 4):

Accounts 27,360 26,156 24,217 333,659Other 46,665 41,852 42,026 569,085Due from affiliates 32 41 8 390

Inventories (Note 6) 22,633 20,283 19,011 276,012Deferred tax assets (Note 17) 5,482 6,262 5,230 66,854Other current assets 7,781 14,451 10,426 94,890Allowance for doubtful receivables (1,715) (1,536) (1,740) (20,915)

Total current assets 230,014 233,544 179,687 2,805,048

Property and Equipment:Land (Notes 7 and 10) 38,127 35,985 36,107 464,963Buildings and leasehold improvements (Notes 7 and 10) 80,583 74,102 72,716 982,720Equipment, fixtures and other (Note 7) 25,537 23,822 24,134 311,427Lease assets (Note 7) 14,434 3,231 2,582 176,024

Total 158,681 137,140 135,539 1,935,134Accumulated depreciation (67,575) (62,017) (59,544) (824,085)

Net property and equipment 91,106 75,123 75,995 1,111,049

Investments and Other Assets:Investment securities (Notes 4 and 5) 15,681 14,756 24,376 191,232Investments in unconsolidated subsidiaries and associated companies (Note 4) 816 2,001 725 9,951Goodwill and other intangible assets (Notes 7, 9 and 20) 27,691 16,990 20,095 337,695Software (Note 7) 27,639 26,545 22,406 337,061Prepaid pension expenses (Note 11) 4,237 4,383 4,443 51,671Deferred tax assets (Note 17) 6,849 6,099 3,261 83,524Other assets 28,048 25,678 25,165 342,049

Total investments and other assets 110,961 96,452 100,471 1,353,183

Total ¥432,081 ¥405,119 ¥356,153 $5,269,280See notes to consolidated financial statements.

Consolidated Balance SheetsBenesse Holdings, Inc. and Consolidated SubsidiariesMarch 31, 2012


Millions of Yen


(Note 1)Liabilities and Equity 2012 2011 2010 2012Current Liabilities:

Short-term bank loans (Notes 4 and 10) ¥ 271 ¥ 468 ¥ 1,447 $ 3,305Current portion of long-term debt (Notes 4 and 10) 259 45 122 3,159Trade payables (Note 4):

Accounts 14,090 13,036 11,927 171,829Other 24,990 23,583 23,902 304,756Due to affiliates 1,122 810 679 13,683

Advances received 87,625 78,655 78,692 1,068,598Income taxes payable (Notes 4 and 17) 6,647 14,324 4,864 81,061Other current liabilities 17,998 18,368 17,757 219,487

Total current liabilities 153,002 149,289 139,390 1,865,878

Long-Term Liabilities:Long-term debt, less current portion (Notes 4 and 10) 31,500 25,009 219 384,146Lease obligations (Note 8) 12,130 2,068 2,026 147,927Guarantee deposits received from nursing home residents 27,805 25,300 21,100 339,085Liability for retirement benefits (Note 11) 3,355 4,416 4,242 40,915Deferred tax liabilities (Note 17) 2,411 611 668 29,402Other long-term liabilities 7,688 5,633 5,338 93,756

Total long-term liabilities 84,889 63,037 33,593 1,035,231

Commitments and Contingent Liabilities (Notes 4, 8 and 16)

Equity (Notes 12, 18 and 22):Common stock—authorized, 405,282,040 shares in 2012, 2011 and 2010; issued, 104,153,453 shares in 2012 and 106,353,453 shares in 2011 and 2010 13,600 13,600 13,600 165,854Capital surplus 29,358 29,381 29,358 358,025Stock acquisition rights 684 684 667 8,341Retained earnings 176,863 177,342 165,372 2,156,866Treasury stock—at cost—6,941,033 shares in 2012, 7,583,093 shares in 2011 and 7,717,445 shares in 2010 (23,845) (26,067) (26,527) (290,793)Accumulated other comprehensive income:

Unrealized gain (loss) on available-for-sale securities 281 (17) 89 3,427Foreign currency translation adjustments (7,855) (6,793) (5,056) (95,793)Pension liability adjustments for a foreign consolidated subsidiary (440) (402) (5,366)

Total 188,646 187,728 177,503 2,300,561Minority interests 5,544 5,065 5,667 67,610

Total equity 194,190 192,793 183,170 2,368,171Total ¥432,081 ¥405,119 ¥356,153 $5,269,280


Consolidated Statement of IncomeBenesse Holdings, Inc. and Consolidated SubsidiariesYear Ended March 31, 2012

Millions of Yen


(Note 1)2012 2011 2010 2012

Net Sales ¥423,707 ¥412,829 ¥406,602 $5,167,159

Cost of Sales (Notes 8, 11 and 15) 212,017 203,842 199,835 2,585,574Gross profit 211,690 208,987 206,767 2,581,585

Selling, General and Administrative Expenses (Notes 8, 11, 14, 15 and 18) 177,892 166,119 168,878 2,169,414

Operating income 33,798 42,868 37,889 412,171

Other Income (Expenses):Dividend income 52 125 173 634Interest income—net (Note 10) 133 429 617 1,622Foreign exchange (loss) gain (131) (536) 647 (1,598)Gain (loss) on investments—net 200 493 (17) 2,439Equity in net earnings of unconsolidated subsidiaries and associated companies 244 528 96 2,976Gain on sales of investments of a consolidated subsidiary 118 1,152Loss on impairment of long-lived assets (Note 7) (80) (6,401) (33) (976)Loss on restructuring of business (1,106)Other—net (160) (954) (802) (1,951)

Income before Income Taxes and Minority Interests 34,056 36,670 38,616 415,317

Income Taxes (Note 17):Current 16,203 19,347 14,548 197,598Deferred 907 (3,740) 1,364 11,060

Total income taxes 17,110 15,607 15,912 208,658

Net Income before Minority Interests 16,946 21,063 22,704 206,659

Minority Interests in Net Income 577 476 829 7,037

Net Income ¥ 16,369 ¥ 20,587 ¥ 21,875 $ 199,622

Yen U.S. Dollars2012 2011 2010 2012

Per Share of Common Stock (Notes 2.t and 21):Net income ¥167.79 ¥208.47 ¥221.65 $2.05Diluted net income 208.44 221.55Cash dividends applicable to the year 95.00 95.00 90.00 1.16

Diluted net income per share for the year ended March 31, 2012, is not disclosed because there were no potentially dilutive shares outstanding.

See notes to consolidated financial statements.


Consolidated Statement of Comprehensive IncomeBenesse Holdings, Inc. and Consolidated SubsidiariesYear Ended March 31, 2012

Millions of Yen


(Note 1)2012 2011 2012

Net Income before Minority Interests ¥16,946 ¥21,063 $206,659

Other Comprehensive Income (Note 19):Unrealized gain (loss) on available-for-sale securities 294 (122) 3,585Foreign currency translation adjustments (1,062) (1,734) (12,952)Pension liability adjustments for a foreign consolidated subsidiary (38) 111 (464)Share of other comprehensive income in associates 4 (4) 49

Total other comprehensive income (802) (1,749) (9,782)

Comprehensive Income (Note 19) ¥16,144 ¥19,314 $196,877

Total Comprehensive Income Attributable to (Note 19):Owners of the parent ¥15,567 ¥18,855 $189,840Minority interests 577 459 7,037



Consolidated Statement of Changes in EquityBenesse Holdings, Inc. and Consolidated SubsidiariesYear Ended March 31, 2012

Thousands Millions of YenAccumulated Other Comprehensive Income

Number of Shares of Common

Stock Outstanding

Common Stock

Capital Surplus

Stock Acquisition

RightsRetained Earnings

TreasuryStock

Unrealized Gain

(Loss) on Available-for-Sale Securities

Foreign Currency

Translation Adjustments

Pension Liability

Adjustments for a Foreign Consolidated

Subsidiary TotalMinority Interests Total Equity

Balance, April 1, 2009 98,909 ¥13,600 ¥29,358 ¥552 ¥152,240 ¥(25,452) ¥(1,634) ¥(5,227) ¥163,437 ¥5,060 ¥168,497Net income 21,875 21,875 21,875Cash dividends, ¥90 per share (8,889) (8,889) (8,889)Purchases of treasury stock (401) (1,514) (1,514) (1,514)Disposal of treasury stock due to exercise of stock options 128 (100) 439 339 339Pension liability adjustments for a foreign consolidated subsidiary 246 246 246Net change in the year 115 1,723 171 2,009 607 2,616

Balance, March 31, 2010 98,636 13,600 29,358 667 165,372 (26,527) 89 (5,056) 177,503 5,667 183,170Transfer to pension liability adjustments for a foreign consolidated subsidiary 513 ¥(513)Net income 20,587 20,587 20,587Cash dividends, ¥92.5 per share (9,130) (9,130) (9,130)Purchases of treasury stock (5) (19) (19) (19)Disposal of treasury stock due to exercise of stock options 139 23 479 502 502Net change in the year 17 (106) (1,737) 111 (1,715) (602) (2,317)

Balance, March 31, 2011 98,770 13,600 29,381 684 177,342 (26,067) (17) (6,793) (402) 187,728 5,065 192,793Net income 16,369 16,369 16,369Cash dividends, ¥95 per share (9,309) (9,309) (9,309)Purchases of treasury stock (1,558) (5,341) (5,341) (5,341)Disposal of treasury stock 1 1 1Retirement of treasury stock (23) (7,539) 7,562Net change in the year 298 (1,062) (38) (802) 479 (323)

Balance, March 31, 2012 97,212 ¥13,600 ¥29,358 ¥ 684 ¥176,863 ¥(23,845) ¥ 281 ¥(7,855) ¥(440) ¥188,646 ¥5,544 ¥194,190

Thousands of U.S. Dollars (Note 1)Accumulated Other Comprehensive Income

Common Stock

Capital Surplus

Stock Acquisition

RightsRetained Earnings

TreasuryStock

Unrealized Gain

(Loss) on Available-for-Sale Securities

Foreign Currency

Translation Adjustments

Pension Liability

Adjustments for a Foreign Consolidated

Subsidiary TotalMinority Interests Total Equity

Balance, March 31, 2011 $165,854 $358,305 $8,341 $2,162,707 $(317,891) $ (207) $(82,841) $(4,902) $2,289,366 $61,780 $2,351,146Net income 199,622 199,622 199,622Cash dividends, $1.16 per share (113,523) (113,523) (113,523)Purchases of treasury stock (65,134) (65,134) (65,134)Disposal of treasury stock 12 12 12Retirement of treasury stock (280) (91,940) 92,220Net change in the year 3,634 (12,952) (464) (9,782) 5,830 (3,952)

Balance, March 31, 2012 $165,854 $358,025 $8,341 $2,156,866 $(290,793) $3,427 $(95,793) $(5,366) $2,300,561 $67,610 $2,368,171See notes to consolidated financial statements.


Consolidated Statement of Cash FlowsBenesse Holdings, Inc. and Consolidated SubsidiariesYear Ended March 31, 2012

Millions of Yen


(Note 1)2012 2011 2010 2012

Operating Activities:Income before income taxes and minority interests ¥ 34,056 ¥36,670 ¥ 38,616 $ 415,317Adjustments for:

Income taxes—paid (25,876) (15,335) (21,250) (315,561)Income taxes—refund 5,882 71,732Depreciation and amortization 14,397 13,865 13,157 175,573Loss on impairment of long-lived assets 80 6,401 33 976Loss on restructuring of business 1,106Gain on sales of investments of a consolidated subsidiary (118) (1,152)Increase (decrease) in allowance for doubtful receivables, liability for retirement benefits and other reserves 485 263 (340) 5,915Other noncash expenses—net 845 1,116 1,250 10,303Changes in assets and liabilities, net of effects from newly consolidated subsidiaries:

(Increase) decrease in trade accounts receivable (498) (2,348) 648 (6,073)Increase in inventories (2,338) (1,376) (158) (28,512)Increase (decrease) in trade accounts payable 5,565 (195) (794) 67,866Increase in advances received 7,876 976 817 96,049

Other—net 158 5,018 (1,622) 1,927Total adjustments 6,576 8,267 (8,305) 80,195Net cash provided by operating activities 40,632 44,937 30,311 495,512

Investing Activities:(Increase) decrease in time deposits—net (1,919) 2,954 (2,510) (23,402)Purchases of marketable securities (56,541) (73,628) (59,170) (689,524)Proceeds from sales of marketable securities 59,952 70,436 55,177 731,122Purchases of property and equipment (5,611) (4,974) (5,350) (68,427)Proceeds from sales of property and equipment 16 54 4 195Purchases of software (10,147) (11,768) (13,681) (123,744)Purchases of investment securities (6,363) (6,054) (2,966) (77,598)Proceeds from sales of investment securities 4,498 11,565 5,035 54,854Acquisition of controlling interests in a company (10,683) (5,725) (130,280)Acquisition of shares of a consolidated subsidiary (4,006) (48,854)Cash decrease due to sale of interests in subsidiary previously consolidated (1,001)Proceeds from sale of investments of a consolidated subsidiary 230Proceeds from transfer of business 298 153 3,634Payment for absorption type of company split (1,681)Other—net (3,018) (3,600) (4,581) (36,805)

Net cash used in investing activities (33,524) (14,632) (36,449) (408,829)Financing Activities:

Decrease in short-term bank loans—net (197) (971) (723) (2,402)Proceeds from long-term debt 5,000 25,019 38 60,976Repayment of long-term debt (44) (304) (280) (537)Dividends paid (9,315) (9,126) (8,889) (113,598)Proceeds from exercise of stock options 500 337Purchases of treasury stock (5,341) (19) (1,514) (65,134)Purchases of treasury stock by consolidated subsidiaries (1,117)Repayments of lease obligations (1,090) (799) (508) (13,293)Other—net (267) (259) (172) (3,256)

Net cash (used in) provided by financing activities ¥(11,254) ¥12,924 ¥(11,711) $(137,244)


Millions of Yen


(Note 1)2012 2011 2010 2012

Foreign Currency Translation Adjustments on Cash and Cash Equivalents ¥ (602) ¥ (1,713) ¥ 443 $ (7,341)Net (Decrease) Increase in Cash and Cash Equivalents (4,748) 41,516 (17,406) (57,902)Cash and Cash Equivalents, Beginning of Year 101,691 60,175 77,581 1,240,134Cash and Cash Equivalents, End of Year (Note 3) ¥ 96,943 ¥101,691 ¥60,175 $1,182,232Additional Cash Flow Information:

Acquisition of controlling interest in a company:Current assets ¥ 4,541 ¥ 1,841 $ 55,378Long-term assets 11,696 1,789 142,634Consolidation goodwill 6,944 6,067 84,683Current liabilities (4,414) (997) (53,830)Long-term liabilities (2,176) (2,721) (26,537)Minority interests (914) (11,145)Acquisition cost 15,677 5,979 191,183Carrying value under the equity method (1,265) (15,427)Gain on step acquisitions (357) (4,354)Reclassification adjustments (2) (24)Foreign currency translation adjustments 182 2,219Cash and cash equivalents of newly consolidated subsidiary (3,552) (254) (43,317)Cash decrease due to acquisition of controlling interest in a company ¥ 10,683 ¥ 5,725 $ 130,280

Sale of controlling interest in a company:Current assets ¥ 1,293Long-term assets 927Current liabilities (3,142)Long-term liabilities (260)Transfer expenses 30Gain on sales of investments of a consolidated subsidiary 1,152Cash and cash equivalents of consolidated subsidiary 1,001Cash decrease due to sale of interests in subsidiary previously consolidated ¥ 1,001

Payments for absorption type of company split:Current assets ¥ 321Long-term assets 801Consolidation goodwill 1,043Current liabilities (365)Acquisition cost 1,800Cash and cash equivalents carried out absorption type of company split (119)Payments for absorption type of company split ¥ 1,681

Noncash Investing and Financing Activities:Assets and obligations from finance lease transactions recognized in the consolidated balance sheets:

Lease assets ¥ 11,350 ¥ 953 ¥ 1,782 $ 138,415Lease obligations 11,464 994 1,866 139,805



Notes to Consolidated Financial StatementsBenesse Holdings, Inc. and Consolidated SubsidiariesYear Ended March 31, 2012

1. Basis of Presentation of Consolidated Financial Statements

The accompanying consolidated financial statements of Benesse Holdings, Inc. (the “Company”) have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards. The foreign consolidated subsidiaries maintain and prepare their financial statements in accordance with accounting principles generally accepted in the United States of America, where such subsidiaries are established. Under Japanese GAAP, a consolidated statement of comprehensive income is required starting with the fiscal year ended March 31, 2011, which has been presented herein. Accordingly, accumulated other comprehensive income is presented in the consolidated balance sheet and the consolidated statement of changes in equity. Information with respect to other comprehensive income for the year ended March 31, 2010, is disclosed in Note 19. In addition, “net income before minority interests” is disclosed in the consolidated statement of income starting with the year ended March 31, 2011. In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2011 and 2010 consolidated financial statements to conform to the classifications used in 2012. The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥82 to U.S.$1, the approximate rate of exchange at March 31, 2012. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies

a. Consolidation—The consolidated financial statements include the accounts of the Company and its 35 (31 in 2011 and 32 in 2010) significant subsidiaries (collectively, the “Companies”). Consolidation of the remaining unconsolidated subsidiaries would not have a material effect on the accompanying consolidated financial state-ments in 2012, 2011 and 2010. Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Companies have the ability to exercise significant influence are accounted for by the equity method. Investments in 4 (4 in 2011 and 3 in 2010) associated companies and 1 (1 in 2011 and 2010) unconsolidated subsidiary are accounted for by applying the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profits included in assets resulting from transactions within the Companies are also eliminated.

b. Business Combinations—In October 2003, the Business Accounting Council issued a Statement of Opinion, “Accounting for Business Combinations,” and in December 2005, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Statement No. 7, “Accounting Standard for Business Divestitures” and ASBJ Guidance No. 10, “Guidance for Accounting Standard for Business Combinations and Business Divestitures.” The accounting standard for business combinations allows companies to apply the pooling of interests method of accounting only when certain specific criteria are met such that the business combination is essentially regarded as a uniting - of - interests. For business combinations that do not meet the uniting - of - interests criteria, the business combination is considered to be an acquisition and the purchase method of accounting is required. This standard also prescribes the accounting for combinations of entities under common control and for joint ventures. In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement


No. 21, “Accounting Standard for Business Combinations.” Major accounting changes under the revised accounting standard are as follows: (1) The revised standard requires accounting for business combinations only by the purchase method. As a result, the pooling of interests method of accounting is no longer allowed. (2) The previous accounting standard required research and development costs to be charged to income as incurred. Under the revised standard, in - process research and development costs acquired in the business combination is capitalized as an intangible asset. (3) The previous accounting standard provided for a bargain purchase gain (negative goodwill) to be systematically amortized over a period not exceeding 20 years. Under the revised standard, the acquirer recognizes the bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after a review of the procedures used in the purchase allocation. The revised standard was applicable to business combinations undertaken on or after April 1, 2010.

c. Cash Equivalents—Cash equivalents on the consolidated statements of cash flows are defined as low - risk, highly liquid, short - term (maturity within three months of acquisition date) investments that are readily convert-ible to cash.

d. Inventories—Inventories are primarily stated at the lower of average cost, determined by the average method, or net selling value. Inventories of the foreign consolidated subsidiaries are primarily stated at the lower of average cost or market, or net selling value.

e. Marketable and Investment Securities—Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) trading securities, which are held for the purpose of earning capital gains in the near term are reported at fair value, and the related unrealized gains and losses are included in earnings; (2) held - to - maturity debt securities, for which there is the positive intent and ability to hold to maturity are reported at amortized cost; and (3) available - for - sale securities, which are not classified as either of the afore-mentioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. Non - marketable available - for - sale securities are stated at cost determined by the moving - average method. For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.

f. Property and Equipment—Property and equipment are stated at cost. Depreciation of property and equip-ment of the Company and its domestic consolidated subsidiaries is computed by the declining - balance method over the estimated useful lives of the assets, while the straight - line method is applied to buildings acquired after April 1, 1998 and lease assets of the Company and its domestic consolidated subsidiaries, and all property and equipment of foreign consolidated subsidiaries. The range of useful lives in the Company and its domestic consoli-dated subsidiaries is principally from 2 to 50 years for buildings. The useful lives for lease assets of the Company and its domestic consolidated subsidiaries are the terms of the respective leases.

g. Long - Lived Assets—Long - lived assets of the Company and its domestic consolidated subsidiaries are reviewed for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

h. Goodwill and Other Intangible Assets—The differences between the cost and net equity in domestic consoli-dated subsidiaries at acquisition (“Consolidation goodwill”) are amortized on a straight - line basis, ranging from 4 to 20 years. Immaterial Consolidation goodwill that was incurred in the current period was charged to income.


Prior to April 1, 2008, in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill and other intangible assets of Berlitz Corporation that are determined to have an indefinite life will no longer be amortized, but rather will be tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. Effective April 1, 2008, however, the goodwill and other intangible assets were changed to be amortized on a straight - line basis primarily over 20 years due to the adoption of ASBJ Practical Issues Task Force No. 18, “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements.” See Note 9, details of goodwill and other intangible assets. Intangible assets that are determined not to have an indefinite life primarily consist of publishing rights. Publishing rights are amortized on a straight - line basis over 25 years.

i. Software—Software used internally is amortized by the straight - line method over its estimated useful life (primarily over 5 years) within the Company.

j. Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the previous accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions was effective for fiscal years beginning on or after April 1, 2008. Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as operat-ing lease transactions if certain “as if capitalized” information was disclosed in the note to the lessee’s financial state-ments. The revised accounting standard requires that all finance lease transactions be capitalized by recognizing lease assets and lease obligations in the balance sheet. In addition, the accounting standard permits leases which existed at the transition date and do not transfer ownership of the leased property to the lessee to continue to be accounted for as operating lease transactions. The Company and its domestic consolidated subsidiaries applied the revised accounting standard effective April 1, 2008. In addition, the Company and its domestic consolidated subsidiaries continue to account for leases which existed at the transition date and did not transfer ownership of the leased property to the lessee as operating lease transactions. All other leases are accounted for as operating leases.

k. Retirement and Pension Plans—The Company and certain domestic consolidated subsidiaries have sever-ance lump - sum payment plans for employees, directors, corporate auditors and company officers. The Company and certain domestic consolidated subsidiaries have a non - contributory unfunded retirement benefit plan and a contributory funded defined benefit pension plan. The Company and its domestic consolidated subsidiaries accounted for the liability for retirement benefits based on the projected benefit obligations and plan assets at the consolidated balance sheet date. Retirement benefits to directors, corporate auditors and company officers of the Company and domestic consolidated subsidiaries are recorded to state the liability at the amount that would be required if all directors, corporate auditors and company officers retired at each consolidated balance sheet date. Foreign consolidated subsidiaries have defined contribution plans. Effective June 25, 2011, the Company terminated its unfunded retirement allowance plan for all directors, corporate auditors and company officers. A part of outstanding balance of retirement allowances for directors, corporate auditors and company officers was transferred to the other long-term liabilities in the year ended March 31, 2012.

l. Asset Retirement Obligations—In March 2008, the ASBJ published ASBJ Statement No. 18, “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset.

Notes to Consolidated Financial Statements


The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obliga-tion is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

m. Stock Options—In December 2005, the ASBJ issued ASBJ Statement No. 8, “Accounting Standard for Stock Options” and related guidance. The new standard and guidance are applicable to stock options newly granted on and after May 1, 2006. This standard requires companies to recognize compensation expense for employee stock options based on the fair value at the date of grant and over the vesting period, as consideration for receiving goods or services. The standard also requires companies to account for stock options granted to non - employees based on the fair value of either the stock option or the goods or services received. In the balance sheet, the stock option is presented as a stock acquisition right as a separate component of equity until exercised. The standard covers equity - settled, share - based payment transactions, but does not cover cash - settled, share - based payment transac-tions. In addition, the standard allows unlisted companies to measure options at their intrinsic value if they cannot reliably estimate fair value.

n. Research and Development Costs—Research and development costs are charged to income as incurred.

o. Foreign Currency Transactions—All short- term and long- term monetary receivables and payables denomi-nated in foreign currencies are translated into Japanese yen at the exchange rates at the consolidated balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts.

p. Foreign Currency Financial Statements—The consolidated balance sheet accounts of the foreign consoli-dated subsidiaries are translated into Japanese yen at the current exchange rate as of the consolidated balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation are shown as “Foreign currency translation adjustments” in a separate component of equity. Revenue and expense accounts of foreign consolidated subsidiaries are translated into yen at the average exchange rate.

q. Derivative Financial Instruments—The Companies use derivative financial instruments to manage their exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by the Companies to reduce foreign currency exchange risks. The Companies do not enter into derivatives for trading or speculative purposes. The Company marks the foreign exchange forward contracts to fair value, and the unrealized gains/losses are recognized in the consolidated statement of income.

r. Bonuses to Directors—Bonuses to directors, corporate auditors and company officers are accrued at the year - end to which such bonuses are attributable.

s. Income Taxes—The provision for income taxes is computed based on the pretax income included in the consoli-dated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.


t. Per Share Information—Basic net income per share is computed by dividing net income available to common shareholders by the weighted - average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year. The Company applied ASBJ Statement No. 2, “Accounting Standard for Earnings Per Share” and ASBJ Statement No. 4, “Guidance on Accounting Standard for Earnings Per Share” effective April 1, 2011. In calculating the diluted net income per share, the method used to reflect the effects of stock options of which, the rights are obtained by the holders after a certain employment period, has been changed to include the amount pertaining to said holders’ services to be provided to the Company that comprises part of the assessed fair value of stock options, which is assumed to be paid in at the time of the exercise of the rights. There was no effect of this change.

u. Accounting Changes and Error Corrections—In December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under this standard and guidance are as follows:

(1) Changes in Accounting PoliciesWhen a new accounting policy is applied with a revision of accounting standards, the new policy is applied retrospectively unless the revised accounting standards include specific transitional provisions. When the revised accounting standards include specific transitional provisions, an entity shall comply with the specific transitional provisions.(2) Changes in PresentationsWhen the presentation of financial statements is changed, prior-period financial statements are reclassified in accordance with the new presentation.(3) Changes in Accounting EstimatesA change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods.(4) Corrections of Prior-Period ErrorsWhen an error in prior-period financial statements is discovered, those statements are restated.

This accounting standard and the guidance are applicable to accounting changes and corrections of prior-period errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.

v. New Accounting PronouncementsAccounting Standard for Retirement Benefits—On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the Accounting Standard for Retirement Benefits that had been issued by the Business Accounting Council in 1998 with effective date of April 1, 2000 and the other related practical guidances, being followed by partial amendments from time to time through 2009.

Major changes are as follows:

(a) Treatment in the balance sheetUnder the current requirements, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are not recognized in the balance sheet, and the difference between retirement benefit obligations and plan assets (hereinafter, “deficit or surplus”), adjusted by such unrecognized amounts, are recognized as a liability or asset.



Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss shall be recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and the deficit or surplus shall be recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).

(b) Treatment in the statement of income and the statement of comprehensive income (or the statement of income and comprehensive income)

The revised accounting standard would not change how to recognize actuarial gains and losses and past service costs in profit or loss. Those amounts would be recognized in profit or loss over a certain period no longer than the expected average remaining working lives of the employees. However, actuarial gains and losses and past service costs that arose in the current period and yet to be recognized in profit or loss shall be included in other comprehensive income and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments.

This accounting standard and the guidance are effective for the end of annual periods beginning on or after April 1, 2013, with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required.

3. Cash and Cash Equivalents

Cash and cash equivalents at March 31, 2012, 2011 and 2010, consisted of the following:

Millions of YenThousands of U.S. Dollars

2012 2011 2010 2012Cash and time deposits ¥72,647 ¥ 93,982 ¥48,877 $ 885,939Marketable securities 49,129 32,053 31,632 599,134Time deposits and short-term investments which mature or become due after more than three months from acquisition date (7,012) (8,117) (10,212) (85,512)Investment fund and other (17,821) (16,227) (10,122) (217,329)Cash and cash equivalents ¥96,943 ¥101,691 ¥60,175 $1,182,232

4. Financial Instruments and Related Disclosures

In March 2008, the ASBJ revised ASBJ Statement No. 10, “Accounting Standard for Financial Instruments” and issued ASBJ Guidance No. 19, “Guidance on Accounting Standard for Financial Instruments and Related Disclosures.” This accounting standard and the guidance were applicable to financial instruments and related disclosures at the end of the fiscal years ending on or after March 31, 2010. The Company and its consolidated subsidiaries applied the revised accounting standard and the guidance effective March 31, 2010.

(1) Group Policy for Financial InstrumentsThe Companies focus on liquidity and safety for investments of surplus funds, after considering their application and timing. Particularly, derivative transactions are utilized mainly to hedge various risks and perform fund invest-ments efficiently. The Companies consider derivative transactions with high leverage to be high-risk transactions, and do not enter into such transactions. In addition, the Companies have set overdraft limit in order to finance operating capital with efficiency and stability in case of unexpected contingency.

(2) Nature and Extent of Risks Arising from Financial InstrumentsTrade receivables are exposed to credit risks of counterparties. Trade receivables in foreign currencies are exposed


to the market risk of fluctuation in foreign currency exchange rates. The Companies enter into foreign exchange forward contracts in order to earn returns and manage exposure to market risk from changes in foreign currency exchange rates of loans receivable with foreign consolidated subsidiaries. Foreign exchange forward contracts are exposed to credit risks of counterparties and the market risk of fluctuation in foreign exchange rates. Marketable and investment securities mainly comprise commercial papers, negotiable certificates of deposit, trust beneficiary rights, government and corporate bonds, and others including equity securities and trust fund investments with certain holding limits, which are exposed to issuer credit risk and fluctuation risks of foreign exchange, interest rates and market price. Lease obligations relating to finance leases are primarily used for capital expenditures. Trade payables and income taxes payable are less than one year. Short -term bank loans and long -term debt are primarily used for future business investments in the Company, and used for financing operating capital and capital expenditures in consolidated subsidiaries. In those items, short -term bank loans and long -term debt by variable interest are exposed to fluctuation risk of interest rates.

(3) Risk Management for Financial InstrumentsCredit risk managementThe Companies manage credit risks of trade receivables as defined in the “Management Regulations for Receivables,” based on which the general manager at each department manages each receivable by type with regard to its counterparty, due date, the amount and the balance, in order to recognize or mitigate any concerns over their collection at an earlier stage. “Management Regulations for Receivables” of consolidated subsidiaries are established pursuant to the “Management Regulations for Receivables” of Benesse Corporation, a consolidated subsidiary of the Company. The Finance Department of the Companies manages the credit risk of security issuers by regularly monitor-ing the fair values, rating and credit standing in accordance with “Fund Management Regulations.” Because the counterparties to these derivatives are limited to major international financial institutions, the Company and its foreign consolidated subsidiaries do not anticipate any losses arising from credit risk.Market risk managementFor fluctuation risks of foreign exchange, interest rates and market prices relating to marketable and investment securities, the Companies’ Finance Department obtains and monitors the price information of marketable and investment securities from financial institutions, on a steady basis for securities with market prices, and periodi-cally for those without market prices. With respect to securities transactions, the Companies’ Finance Department executes transactions in accordance with the provisions of the “Fund Management Regulations,” which regulate the authorization and transaction limit amounts, in order to monitor operating status on a steady basis. It reports to the CFO daily and to the Board of Directors quarterly. Fluctuation risks of foreign exchange markets relating to receivables in foreign currencies are hedged by for-eign exchange forward contracts. In addition, a portion of short -term bank loans and long -term debt are financed by fixed interest to prevent fluctuation risk of interest rates of them. For fluctuation risks of foreign exchange markets relating to derivative transactions which are foreign exchange forward contracts, the authorization and credit limit amount are defined in “Derivatives Transactions Regulations.” The Companies’ Finance Department also monitors foreign exchange forward contracts in terms of the balance and gain or loss on valuation, and reports to the CFO daily and to the Board of Directors quarterly.Liquidity risk managementThe Companies’ Finance Department monitors liquidity risk by preparing an annual cash management plan based on the reports from each department, and a monthly cash management plan through confirmation of daily cash receipts and payments. Consolidated subsidiaries perform similar procedures in conformity with the Company’s procedures.

(4) Fair Values of Financial InstrumentsFair values of financial instruments are based on quoted prices in active markets. If quoted price is not available, other rational valuation techniques are used instead. Such techniques include variable factors and the results of valuation may differ depending on prerequisites. The contract amounts of derivatives which are shown in



the following table do not represent the amounts exchanged by the parties and do not measure the Companies’ exposure to market risk. The table below shows the carrying amounts of financial instruments recorded in the consolidated balance sheets as of March 31, 2012 2011 and 2010, and their fair values, as well as the differences between the carrying amounts and the fair values. Financial instruments whose fair values are deemed extremely difficult to assess are not included. (Please refer to (b) below.)

(a) Fair value of financial instrumentsMillions of Yen

Carrying Amount Fair Value

Unrealized Gain/Loss

March 31, 2012Cash and time deposits ¥ 72,647 ¥ 72,647Trade receivables 74,057Allowance for doubtful receivables (1,684)

Total trade receivables 72,373 72,373Marketable and investment securities 63,334 63,337 ¥ 3Total ¥208,354 ¥208,357 ¥ 3Short-term bank loans ¥ 271 ¥ 271Trade payables 40,202 40,202Income taxes payable 6,647 6,647Long-term debt 31,759 31,898 ¥ 139Lease obligations 13,248 13,348 100Total ¥ 92,127 ¥ 92,366 ¥ 239Derivatives ¥ 19 ¥ 19March 31, 2011Cash and time deposits ¥ 93,982 ¥ 93,982Trade receivables 68,049Allowance for doubtful receivables (1,520)

Total trade receivables 66,529 66,529Marketable and investment securities 46,529 46,342 ¥(187)Total ¥207,040 ¥206,853 ¥(187)Short-term bank loans ¥ 468 ¥ 468Trade payables 37,429 37,429Income taxes payable 14,324 14,324Long-term debt 25,054 25,054Lease obligations 2,905 2,991 ¥ 86Total ¥ 80,180 ¥ 80,266 ¥ 86Derivatives ¥ (161) ¥ (161)March 31, 2010Cash and time deposits ¥ 48,877 ¥ 48,877Trade receivables 66,251Allowance for doubtful receivables (1,711)

Total trade receivables 64,540 64,540Marketable and investment securities 54,645 54,651 ¥ 6Total ¥168,062 ¥168,068 ¥ 6Short-term bank loans ¥ 1,447 ¥ 1,447Trade payables 36,508 36,508Income taxes payable 4,864 4,864Long-term debt 341 342 ¥ 1Lease obligations 2,690 2,755 65Total ¥ 45,850 ¥ 45,916 ¥ 66Derivatives ¥ (69) ¥ (69)


Thousands of U.S. DollarsCarrying Amount Fair Value

Unrealized Gain/Loss

March 31, 2012Cash and time deposits $ 885,939 $ 885,939Trade receivables 903,134Allowance for doubtful receivables (20,537)

Total trade receivables 882,597 882,597Marketable and investment securities 772,366 772,403 $ 37Total $2,540,902 $2,540,939 $ 37Short-term bank loans $ 3,305 $ 3,305Trade payables 490,268 490,268Income taxes payable 81,061 81,061Long-term debt 387,305 389,000 $1,695Lease obligations 161,561 162,781 1,220Total $1,123,500 $1,126,415 $2,915Derivatives $ 232 $ 232Notes: 1. Trade receivables are stated net of each allowance for doubtful receivables. 2. Long-term debt and lease obligations are stated the amount, including current portion. 3. Derivatives are stated net of assets and liabilities. The figures in parentheses indicate net liabilities.

Cash and Time Deposits and Trade ReceivablesThe carrying values of cash and time deposits and trade receivables approximate fair value becauseof their short maturities.Marketable and Investment SecuritiesWhile the fair values of equity securities are measured at the quoted market price of the stockexchange, the fair values of government and corporate bonds and trust fund investments and otherare measured at the quoted market price of the stock exchange and also by the prices obtainedfrom financial institutions. The information of the fair value for the marketable and investmentsecurities by classification is included in Note 5.Short - Term Bank Loans, Trade Payables and Income Taxes PayableThe carrying values of short - term bank loans, trade payables and income taxes payable approximatefair value because of their short maturities.Long - Term Debt and Lease ObligationsThe fair values of long - term debt and lease obligations are determined by discounting the cash flows related to the debt at the Companies’ assumed corporate borrowing rate.DerivativesFair value information for derivatives is included in Note 16.

(b) Carrying amount of financial instruments whose fair value cannot be reliably determined


2012 2011 2010 2012Investments in equity instruments that do not have a quoted market price in an active market ¥ 734 ¥ 841 ¥ 904 $ 8,951Investments in partnerships 742 643 459 9,049Investments in associated companies 774 755 682 9,439Investment in an unconsolidated subsidiary 42 42 43 512Total ¥2,292 ¥2,281 ¥2,088 $27,951



(5) Maturity Analysis for Financial Assets and Securities with Contractual MaturitiesMillions of Yen

Due in 1 Year or Less

Due after 1 Year through

5 Years

Due after 5 Years through

10 YearsMarch 31, 2012Time deposits ¥72,498Trade receivables 74,057Marketable and investment securities — Available-for-sale securities with fund investments and other:

Government and corporate bonds ¥ 3,822 ¥9,624 ¥ 411Trust fund investments and other 45,300 853

Total marketable and investment securities ¥49,122 ¥9,624 ¥1,264March 31, 2011Time deposits ¥93,827Trade receivables 68,049Marketable and investment securities — Available-for-sale securities with fund investments and other:

Government and corporate bonds ¥ 4,147 ¥5,647 ¥1,716Trust fund investments and other 27,900 1,247

Total marketable and investment securities ¥32,047 ¥5,647 ¥2,963March 31, 2010Time deposits ¥48,750Trade receivables 66,251Marketable and investment securities — Available-for-sale securities with fund investments and other:

Government and corporate bonds ¥ 6,000 ¥9,100 ¥2,145Trust fund investments and other 21,100 1,712

Total marketable and investment securities ¥27,100 ¥9,100 ¥3,857


Due in 1 Year or Less

Due after 1 Year through

5 Years

Due after 5 Years through

10 YearsMarch 31, 2012Time deposits $844,122Trade receivables 903,134Marketable and investment securities — Available-for-sale securities with fund investments and other:

Government and corporate bonds $ 46,610 $117,366 $ 5,012Trust fund investments and other 552,439 10,403

Total marketable and investment securities $599,049 $117,366 $15,415

Please see Note 10 for annual maturities of long - term debt and Note 8 for obligations under finance leases.


5. Marketable and Investment Securities

Marketable and investment securities as of March 31, 2012, 2011 and 2010, consisted of the following:


2012 2011 2010 2012Current:

Government and corporate bonds ¥ 3,832 ¥ 4,154 ¥ 5,992 $ 46,732Trust fund investments and other 45,297 27,899 25,640 552,402

Total ¥49,129 ¥32,053 ¥31,632 $599,134Non-current:

Marketable equity securities ¥2,908 ¥ 2,399 ¥ 5,842 $ 35,463Government and corporate bonds 11,179 10,420 16,143 136,329Trust fund investments and other 1,594 1,937 2,391 19,440

Total ¥15,681 ¥14,756 ¥24,376 $191,232

The costs and aggregate fair values of marketable and investment securities at March 31, 2012, 2011 and 2010, were as follows:

Millions of Yen

CostUnrealized

GainsUnrealized

Losses Fair ValueMarch 31, 2012Securities classified as available-for-sale:

Equity securities ¥ 1,754 ¥459 ¥ 39 ¥ 2,174Government and corporate bonds 14,942 97 28 15,011Trust fund investments and other 46,301 152 46,149

March 31, 2011Securities classified as available-for-sale:

Equity securities ¥ 1,485 ¥ 83 ¥ 10 ¥ 1,558Government and corporate bonds 14,545 112 83 14,574Trust fund investments and other 29,460 3 270 29,193

March 31, 2010Securities classified as available-for-sale:

Equity securities ¥ 4,636 ¥547 ¥245 ¥ 4,938Government and corporate bonds 21,940 325 130 22,135Trust fund investments and other 27,927 355 27,572


CostUnrealized

GainsUnrealized

Losses Fair ValueMarch 31, 2012Securities classified as available-for-sale:

Equity securities $ 21,390 $5,598 $ 476 $ 26,512Government and corporate bonds 182,220 1,183 342 183,061Trust fund investments and other 564,646 1,853 562,793

The proceeds, realized gains and realized losses of the available-for-sale securities which were sold during the years ended March 31, 2012, 2011 and 2010, were as follows:


2012 2011 2010 2012Proceeds from sales ¥745 ¥9,194 ¥2,505 $9,085Gross realized gains ¥131 ¥ 729 ¥ 437 $1,598Gross realized losses (11) (213) (477) (135)Net realized gain (loss) ¥120 ¥ 516 ¥ (40) $1,463



The impairment losses on available - for - sale equity securities for the years ended March 31, 2012, 2011 and 2010 were ¥98 million ($1,195 thousand), ¥20 million and ¥17 million, respectively.

6. Inventories

Inventories at March 31, 2012, 2011 and 2010, consisted of the following:


2012 2011 2010 2012Finished products ¥16,901 ¥14,334 ¥13,969 $206,110Work in process 4,099 4,256 3,335 49,988Raw materials and supplies 1,633 1,693 1,707 19,914Total ¥22,633 ¥20,283 ¥19,011 $276,012

7. Long - Lived Assets

The Company and its domestic consolidated subsidiaries reviewed their long - lived assets for impairment as of the years ended March 31, 2012, 2011 and 2010. As a result, the Company recognized impairment losses as follows:

Use TypeMillions

of YenThousands ofU.S. Dollars The Recoverable Amounts

Year ended March 31, 2012 Unused Rights of telephone

¥ 60 $732 The assessed value of fixed assets

Prep school business Buildings and structures and others

20 244 The assessed value of fixed assets

Total ¥ 80 $976Year ended March 31, 2011 Sales management

system for its correspondence course business and other business

Software for internal use

¥5,689 Nil (see Note)

Telemarketing business

Goodwill 152 The estimated amount based on discounting anticipated future cash flows

Prep School Business

Buildings and structures and others

19 The assessed value of fixed assets

Unused Land 541 The assessed value of fixed assets

Total ¥6,401Year ended March 31, 2010 Prep School

BusinessBuildings and structures and others

¥ 33 The assessed value of fixed assets

Total ¥ 33

Note: Benesse Corporation, a consolidated subsidiary of the Company, has been developing a sales management system for its correspondence course business and other business, with the goal of enhancing customer service through a comprehensive system renewal. The new system was to be put into operations during fiscal 2012, but Benesse Corporation was required to delay the development schedule. The main causes have been a temporary stoppage in the development program following the Great East Japan Earthquake, and the challenges with securing key personnel while responding to the impact of the earthquake. After considering all ensuing development costs, the current status of key personnel, the current progress of the system development, and the risk of negatively impacting the business, Benesse Corporation decided to revise the initial plan and change the method of development to a stage- by- stage approach while using the existing system. Following this change, Benesse Corporation recognized an impairment loss totaling ¥5,689 million, which represents the entire book value amount of the program under development deemed to be unusable.

8. Leases

LesseeTotal lease payments under finance lease arrangements that do not transfer ownership of the leased property to the Company and its domestic subsidiaries were ¥611 million ($7,451 thousand), ¥1,090 million and ¥1,567 million for the years ended March 31, 2012, 2011 and 2010, respectively.


For the years ended March 31, 2011 and 2010, the Company and its domestic consolidated subsidiaries recorded an impairment loss of ¥1 million and ¥5 million, respectively, on certain leased property held under finance leases that do not transfer ownership and a corresponding allowance for impairment loss on leased property, which was included in other current liability and other long-term liability. As discussed in Note 2.j, the Company and its domestic consolidated subsidiaries account for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee, as operating lease transactions. A foreign consolidated subsidiary leases certain equipment, office space and other assets under noncancelable operating leases. The Company and a domestic consolidated subsidiary have lease contracts for certain land, buildings and other assets under noncancelable operating leases. Obligations under finance leases and future minimum payments under noncancelable operating leases were as follows:

Millions of Yen Thousands of U.S. Dollars2012 2012

Finance Leases

Operating Leases

Finance Leases

Operating Leases

Due within one year ¥ 1,118 ¥11,748 $ 13,634 $143,268Due after one year 12,130 70,199 147,927 856,086Total ¥13,248 ¥81,947 $161,561 $999,354

Pro forma information of leased property whose lease inception was before March 31, 2008 ASBJ Statement No. 13, “Accounting Standard for Lease Transactions” requires that all finance lease transactions be capitalized to recognize lease assets and lease obligations in the balance sheet. However, ASBJ Statement No. 13 permits leases that do not transfer ownership transfer of the leased property to the lessee and whose lease inception was before March 31, 2008 to continue to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the note to the financial statements. The Company applied ASBJ Statement No. 13 effective April 1, 2008 and continued to account for such leases as operating lease transactions. Pro forma information of leased property whose lease inception was before March 31, 2008, was as follows:


Equipment and Fixtures and Other Assets 2012 2011 2010 2012Acquisition cost ¥2,400 ¥4,210 ¥6,309 $29,268Accumulated depreciation 2,031 3,195 4,194 24,768Accumulated impairment loss 5 10 16 61Net leased property ¥ 364 ¥1,005 ¥2,099 $ 4,439

Obligations under finance leases:


2012 2011 2010 2012Due within one year ¥307 ¥ 636 ¥1,059 $3,744Due after one year 57 369 1,040 695Total ¥364 ¥1,005 ¥2,099 $4,439

Allowance for impairment loss on leased property of ¥2 million ($24 thousand) as of March 31, 2012, ¥6 mil-lion as of March 31, 2011 and ¥13 million as of March 31, 2010, is not included in obligations under finance leases. Depreciation expense, which is not reflected in the accompanying consolidated statements of income, was computed by the straight-line method for the years ended March 31, 2012, 2011 and 2010.



9. Goodwill and Other Intangible Assets

Goodwill and other intangible assets at March 31, 2012, 2011 and 2010, consisted of the following:


2012 2011 2010 2012Consolidation goodwill ¥14,769 ¥ 8,907 ¥ 9,315 $180,110Goodwill associated with domestic consolidated subsidiaries 1,090 1,332 1,110 13,292Goodwill associated with a foreign consolidated subsidiary 7,594 5,381 8,113 92,610Others 4,238 1,370 1,557 51,683Total ¥27,691 ¥16,990 ¥20,095 $337,695

10. Short -Term Bank Loans and Long -Term Debt

Short- term bank loans at March 31, 2012, 2011 and 2010, consisted of notes to banks and bank overdrafts. The annual interest rates applicable to the short-term bank loans ranged from 0.38% to 1.41% at March 31, 2012, ranged from 0.43% to 4.86% at March 31, 2011 and ranged from 0.61% to 4.86% at March 31, 2010. Long -term debt at March 31, 2012, 2011 and 2010, consisted of the following:


2012 2011 2010 2012Long-term debt, collateralized—banks and others, in yen—with interest rates of 1.975% in 2010 ¥269

Total long-term debt, collateralized 269 Long-term debt, unsecured:

Banks and others, in yen—with interest rates ranging from 0.196% to 0.667% in 2012 and 0.187% to 0.667% in 2011 ¥31,750 ¥25,000 $387,195Banks and others, in U.S. dollars—with interest rate of 2.35% in 2012, 2011 and 2010 9 22 35 110Banks and others, in renminbi—with interest rate of 4.86% in 2011 and 2010 32 37

Total long-term debt, unsecured 31,759 25,054 72 387,305Total long-term debt 31,759 25,054 341 387,305

Less current portion (259) (45) (122) (3,159)Long-term debt, less current portion ¥31,500 ¥25,009 ¥219 $384,146

Annual maturities of long -term debt at March 31, 2012, were as follows:

Year Ending March 31 Millions of YenThousands of U.S. Dollars

2013 ¥ 259 $ 3,1592014 250 3,0492015 6,250 76,2202016 25,000 304,877Total ¥31,759 $387,305

At March 31, 2012, assets having the following carrying values were pledged as collateral for short - term bank loans of ¥120 million ($1,463 thousand) by a consolidated subsidiary.


Land ¥577 $7,037Buildings and leasehold improvements—net of accumulated depreciation 213 2,597Total ¥790 $9,634


11. Retirement and Pension Plans

The Company and Its Certain Domestic Consolidated SubsidiariesRetirement benefits for employeesUnder most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump - sum severance payment from the Company or from certain domestic consolidated subsidiaries and annuity payments from a welfare annuity fund. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age. The Company and its domestic consolidated subsidiaries have a contributory funded defined benefit pension plan. The plan, which is established under the Japanese Welfare Pension Insurance Law, covers a substitutional por-tion of the governmental pension program by the Company on behalf of the government and a corporate portion established at the discretion of the Company. The pension fund is administered by a board of trustees composed of management and employee representatives as required by government regulations. Effective from April 1, 2004, the Company and its certain domestic consolidated subsidiaries introduced a cash -balance plan to reduce the Company’s future risk due to unexpected low returns from the pension fund. The liability for employees’ retirement benefits at March 31, 2012, 2011 and 2010, consisted of the following:


2012 2011 2010 2012Projected benefit obligation ¥15,170 ¥13,401 ¥12,819 $185,000Fair value of plan assets (13,826) (12,209) (11,863) (168,610)Unrecognized actuarial loss (2,224) (2,446) (2,469) (27,122)Unrecognized prior service cost (204) (148) (94) (2,488)Prepaid pension expenses 4,237 4,383 4,443 51,671Net liability ¥ 3,153 ¥2,981 ¥2,836 $ 38,451

The components of net periodic benefit costs for the years ended March 31, 2012, 2011 and 2010, were as follows:


2012 2011 2010 2012Service cost ¥1,651 ¥1,669 ¥1,462 $20,134Interest cost 276 247 225 3,366Expected return on plan assets (244) (236) (226) (2,976)Recognized actuarial loss 334 264 298 4,073Amortization of prior service cost (46) (55) (59) (560)Net periodic benefit costs ¥1,971 ¥1,889 ¥1,700 $24,037

Assumptions used for the years ended March 31, 2012, 2011 and 2010, were as follows:2012 2011 2010

Discount rate 2.0% 2.0% 2.0%Expected rate of return on plan assets 2.0% 2.0% 2.0%Recognition period of actuarial loss 8 years 8 years 8 yearsAmortization period of prior service cost 8 years 8 years 8 years

Retirement benefits for directors, corporate auditors and company officersThe liability for retirement benefits at March 31, 2012, 2011 and 2010, for directors, corporate auditors and com-pany officers was ¥202 million ($2,464 thousand), ¥1,435 million and ¥1,406 million, respectively. The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders.



A Foreign Consolidated Subsidiary—Berlitz CorporationBerlitz Corporation has a Supplemental Executive Retirement Plan (“SERP”) for the benefit of its Chairman of the Board, certain designated executives and their designated beneficiaries. Information for the SERP at March 31, 2012, 2011 and 2010, was as follows:


2012 2011 2010 2012Accrued benefit liability ¥1,539 ¥1,503 ¥1,607 $18,768Net periodic benefit costs 127 148 155 1,549

12. Equity

Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

a. DividendsUnder the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year- end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1) having a Board of Directors, (2) having independent auditors, (3) having a Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if the Company has prescribed so in its articles of incorporation. The Company meets all the above criteria. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

b. Increases/Decreases and Transfer of Common Stock, Reserve and SurplusThe Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid - in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the aggregate amount of legal reserve and additional paid -in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid -in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid -in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.

c. Treasury Stock and Treasury Stock Acquisition RightsThe Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.


13. Segment Information

In March 2008, the ASBJ revised ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and issued ASBJ Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures.” Under the standard and guidance, an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. This accounting standard and the guidance are applicable to segment information disclosures for the fiscal years beginning on or after April 1, 2010. The segment information for the year ended March 31, 2010 under the revised accounting standard is also disclosed hereunder as required.

(1) Description of reportable segmentsReportable segments of the Benesse Group (the “Group”) are subject to regular review in order for the Board of Directors to decide on the allocation of management resources and evaluate results, and to obtain financial data separated from the constituents of each company. The Group positions the five fields of Domestic Education, Overseas Education, Lifestyle, Senior/Nursing Care and Language/Global Leadership Training as growth business domains, and concentrates investment of management resources in these areas in order to achieve long - term growth for the Group as a whole. Accordingly, the Group is made up of segments grouped by products and services based on these five business domains, and has designated the Domestic Education Business Domain, Overseas Education Business Domain, Lifestyle Business Domain, Senior/Nursing Care Business Domain, and Language/Global Leadership Training Business Domain as its reportable segments. In the Domestic Education Business Domain, the Group engages in the correspondence course business, the school and teacher support business, the cram and prep school business and other businesses. In the Overseas Education Business Domain, the Group engages in the correspondence course business in China, Taiwan and South Korea, targeting mainly infants. In the Lifestyle Business Domain, the Group engages in magazine publishing, mail - order business and other businesses. In the Senior/Nursing Care Business Domain, the Group engages in the residential care services business (operation of nursing homes), home helper service business, training courses for nursing care personnel, staff placement and personnel dispatch company specializing in medical and nursing care personnel and other businesses. In the Language/Global Leadership Training Business Domain, the Group engages in the language instruc-tion business, the ELS business which provides educational services including language training to those who want to study abroad, the global leadership training business, the translation and interpreting business and other businesses.

(2) Methods of measurement for the amounts of sales, profit (loss), assets and other items for each reportable segment

The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of Significant Accounting Policies.”



(3) Information about sales, profit (loss), assets and other items is as follows:Millions of Yen

2012Reportable Segment




Senior/Nursing

Care Business Domain

Language/Global

Leadership Training Business Domain

Reportable Segment

Total Others Total Reconciliations ConsolidatedSales:

Sales to external customers ¥240,179 ¥10,830 ¥25,338 ¥66,540 ¥59,428 ¥402,315 ¥21,392 ¥423,707 ¥423,707Intersegment sales or transfers 261 1 1 46 41 350 22,357 22,707 ¥ (22,707)

Total ¥240,440 ¥10,831 ¥25,339 ¥66,586 ¥59,469 ¥402,665 ¥43,749 ¥446,414 ¥ (22,707) ¥423,707Segment profit (loss) ¥ 32,857 ¥ (1,344) ¥ (1,277) ¥ 4,669 ¥ 544 ¥ 35,449 ¥ 980 ¥ 36,429 ¥ (2,631) ¥ 33,798Segment assets 181,426 5,729 14,644 81,221 40,866 323,886 17,981 341,867 90,214 432,081Other:

Increase in property and equipment and intangible assets 20,086 279 754 12,090 10,096 43,305 681 43,986 625 44,611Depreciation 6,867 172 407 1,422 1,291 10,159 1,046 11,205 (36) 11,169Amortization of goodwill 381 534 2,100 3,015 3,015 3,015Loss on impairment of long-lived assets 20 20 20 60 80Goodwill at March 31, 2012 8,205 7,653 7,595 23,453 23,453 23,453Investment in equity method affiliates 30 213 243 602 845 845

Thousands of U.S. Dollars2012

Reportable Segment




Senior/Nursing


Language/Global


Reportable Segment


Sales to external customers $2,929,012 $132,073 $309,000 $811,463 $724,732 $4,906,280 $260,879 $5,167,159 $5,167,159Intersegment sales or transfers 3,183 12 12 561 500 4,268 272,647 276,915 $(276,915)

Total $2,932,195 $132,085 $309,012 $812,024 $725,232 $4,910,548 $533,526 $5,444,074 $(276,915) $5,167,159Segment profit (loss) $ 400,695 $ (16,390) $ (15,573) $ 56,939 $ 6,634 $ 432,305 $ 11,952 $ 444,257 $ (32,086) $ 412,171Segment assets 2,212,512 69,866 178,585 990,500 498,366 3,949,829 219,280 4,169,109 1,100,171 5,269,280Other:

Increase in property and equipment and intangible assets 244,951 3,402 9,195 147,439 123,122 528,109 8,306 536,415 7,622 544,037Depreciation 83,744 2,098 4,963 17,341 15,744 123,890 12,756 136,646 (439) 136,207Amortization of goodwill 4,646 6,512 25,610 36,768 36,768 36,768Loss on impairment of long-lived assets 244 244 244 732 976Goodwill at March 31, 2012 100,061 93,329 92,622 286,012 286,012 286,012Investment in equity method affiliates 366 2,598 2,964 7,341 10,305 10,305


Millions of Yen2011

Reportable Segment




Senior/Nursing


Language/Global


Reportable Segment


Sales to external customers ¥240,577 ¥9,395 ¥28,260 ¥58,897 ¥53,990 ¥391,119 ¥21,710 ¥412,829 ¥412,829Intersegment sales or transfers 217 2 44 40 303 25,294 25,597 ¥(25,597)

Total ¥240,794 ¥9,395 ¥28,262 ¥58,941 ¥54,030 ¥391,422 ¥47,004 ¥438,426 ¥(25,597) ¥412,829Segment profit (loss) ¥ 40,619 ¥ (692) ¥ (473) ¥ 4,078 ¥ 768 ¥ 44,300 ¥ 953 ¥ 45,253 ¥ (2,385) ¥ 42,868Segment assets 157,895 3,225 15,051 65,462 38,083 279,716 17,951 297,667 107,452 405,119Other:

Increase in property and equipment and intangible assets 9,053 155 592 1,994 1,957 13,751 1,260 15,011 6,927 21,938Depreciation 6,405 126 413 1,319 1,222 9,485 1,103 10,588 (32) 10,556Amortization of goodwill 337 525 2,249 3,111 71 3,182 3,182Loss on impairment of long-lived assets 19 19 152 171 6,230 6,401Goodwill at March 31, 2011 2,052 8,187 5,381 15,620 15,620 15,620Investment in equity method affiliates 1,204 195 1,399 601 2,000 2,000

Millions of Yen2010

Reportable Segment




Senior/Nursing


Language/Global


Reportable Segment


Sales to external customers ¥240,012 ¥7,671 ¥30,587 ¥44,612 ¥53,794 ¥376,676 ¥29,926 ¥406,602 ¥406,602Intersegment sales or transfers 213 22 4 39 82 360 26,057 26,417 ¥(26,417)

Total ¥240,225 ¥7,693 ¥30,591 ¥44,651 ¥53,876 ¥377,036 ¥55,983 ¥433,019 ¥(26,417) ¥406,602Segment profit (loss) ¥ 38,380 ¥ (984) ¥ (1,525) ¥ 3,010 ¥ 314 ¥ 39,195 ¥ 1,213 ¥ 40,408 ¥ (2,519) ¥ 37,889Segment assets 154,860 2,721 16,527 59,193 41,031 274,332 18,904 293,236 62,917 356,153Other:

Increase in property and equipment and intangible assets 7,099 110 470 7,855 2,640 18,174 2,281 20,455 6,587 27,042Depreciation 6,368 76 492 1,046 1,218 9,200 1,102 10,302 (33) 10,269Amortization of goodwill 284 196 2,157 2,637 123 2,760 2,760Investment in equity method affiliates 188 188 562 750 750

Note: The details of Reconciliations are as follows:


Sales 2012 2011 2010 2012Intersegment eliminations ¥(22,707) ¥(25,597) ¥(26,417) $(276,915)Total ¥(22,707) ¥(25,597) ¥(26,417) $(276,915)




Profit (Loss) 2012 2011 2010 2012Intersegment eliminations ¥ (164) ¥ 97 ¥ 334 $ (2,000)Corporate expenses (2,467) (2,482) (2,853) (30,086)Total ¥(2,631) ¥(2,385) ¥(2,519) $(32,086)Notes: 1. Corporate expenses are mainly related to the Company that are not attributable to the reportable segments. 2. Segment profit (loss) is adjusted with operating income in the consolidated statement of income.


Assets 2012 2011 2010 2012Intersegment eliminations ¥ (3,524) ¥ (3,891) ¥ (3,820) $ (42,975)Corporate assets 93,738 111,343 66,737 1,143,146Total ¥90,214 ¥107,452 ¥62,917 $1,100,171Notes: 1. Corporate assets consist mainly of long - term investments (investment securities) of the Company that are not attributable to the report-

able segments, and assets (software) related to a sales management system for its correspondence course business and other business at Benesse Corporation, a consolidated subsidiary of the Company.

2. Assets related to the sales management system at Benesse Corporation are not attributable to reportable segments because it is still under development.


Increase in Property and Equipment and Intangible Assets 2012 2011 2010 2012Investment in the sales management system in Benesse Corporation, a consolidated subsidiary of the Company ¥874 ¥6,949 ¥6,523 $10,659Intersegment eliminations (361) (321) (212) (4,403)Capital investment at the Company 112 299 276 1,366Total ¥625 ¥6,927 ¥6,587 $ 7,622Notes: 1. Investment in the sales management system in Benesse Corporation is not attributable to reportable segments because it is still under

development. 2. Capital investment in the Company is not attributable to reportable segments.


Depreciation 2012 2011 2010 2012Intersegment eliminations ¥(284) ¥(292) ¥(299) $(3,463)Corporate expenses 248 260 266 3,024Total ¥ (36) ¥ (32) ¥ (33) $ (439)Note: Corporate expenses are related to the Company that are not attributable to the reportable segments.


Loss on Impairment of Long-Lived Assets 2012 2011 2012Loss on impairment of corporate assets ¥60 ¥6,230 $732Total ¥60 ¥6,230 $732Notes: As discussed in Note 7, loss on impairment of corporate assets is related to the sales management system for the year ended March 31, 2011,

and unused assets in Benesse Corporation, a consolidated subsidiary of the Company for the years ended March 31, 2012 and 2011.

(4) Information about geographical areasSales

Millions of Yen Thousands of U.S. Dollars2012 2011 2012

Japan Others Total Japan Others Total Japan Others Total¥369,672 ¥54,035 ¥423,707 ¥364,611 ¥48,218 ¥412,829 $4,508,195 $658,964 $5,167,159

Note: Sales are classified in countries or regions based on location of customers.


14. Advertising Costs

Advertising costs charged to income were ¥43,902 million ($535,390 thousand), ¥39,613 million and ¥43,547 million for the years ended March 31, 2012, 2011 and 2010, respectively.

15. Research and Development Costs

Research and development costs charged to income were ¥3,372 million ($41,122 thousand), ¥3,042 million and ¥3,340 million for the years ended March 31, 2012, 2011 and 2010, respectively.

16. Derivatives

The Company and its foreign consolidated subsidiary enter into foreign exchange contracts to hedge foreign exchange risk associated with certain assets denominated in foreign currencies. It is the Company’s policy to use derivatives only for the purpose of reducing market risks associated with assets. The Company and its foreign consolidated subsidiary do not hold or issue derivatives for trading purposes. Derivatives are subject to market risk and credit risk. Market risk is the exposure created by potential fluctua-tions in market conditions, including foreign exchange rates. Credit risk is the possibility that a loss may result from a counterparty’s failure to perform according to the terms and conditions of the contract. Because the counterparties to these derivatives are limited to major international financial institutions, the Company and its foreign consolidated subsidiary do not anticipate any losses arising from credit risk. The execution and control of derivatives are managed by the Companies’ Finance Department applying internal control policies which regulate the authorization and credit limit amount. Each derivative transaction is reported to the CFO daily, and reported to the Board of Directors quarterly. Prior to entering into its derivative contracts, the foreign consolidated subsidiary conferred with independent advisers to assess the reasonableness of the contracts and obtained Board of Directors’ approval, and each derivatives transaction is periodically reported to its Board of Directors.

Derivative Transactions to Which Hedge Accounting is Not Applied at March 31, 2012, 2011 and 2010Millions of Yen

2012

Contract Amount

Contract Amount Due after One Year Fair Value

Unrealized Gain (Loss)

Foreign currency forward contracts:Payables—U.S. dollars ¥2,491 ¥28 ¥28Payables—Korean won 3,948 (9) (9)

Total ¥6,439 ¥19 ¥19

Millions of Yen2011

Contract Amount



Foreign currency forward contracts:Payables—U.S. dollars ¥1,878 ¥ (34) ¥ (34)Payables—Korean won 3,824 (127) (127)

Total ¥5,702 ¥(161) ¥(161)



Millions of Yen2010

Contract Amount



Foreign currency forward contracts:Payables—U.S. dollars ¥2,131 ¥ (8) ¥ (8)Payables—Korean won 3,476 (61) (61)

Total ¥5,607 ¥(69) ¥(69)

Thousands of U.S. Dollars2012

Contract Amount



Foreign currency forward contracts:Payables—U.S. dollars $30,378 $342 $342Payables—Korean won 48,146 (110) (110)

Total $78,524 $232 $232

The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts exchanged by the parties and do not measure the Company’s exposure to credit or market risk.


17. Income Taxes

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 40.6% for the years ended March 31, 2012, 2011 and 2010. The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March 31, 2012, 2011 and 2010, were as follows:


2012 2011 2010 2012Deferred tax assets:

Provision for employees’ bonuses ¥2,421 ¥ 2,367 ¥ 2,391 $ 29,524Enterprise tax 383 1,089 455 4,671Social insurance premium 366 334 333 4,463Inventories 363 495 325 4,427Trade receivables—accounts 358 221 47 4,366Liability for retirement benefits 1,223 1,741 1,699 14,915Deferred tax assets of the foreign consolidated subsidiaries 2,544 2,600 2,527 31,024Unrealized profit of fixed asset 389 355 321 4,744Tax loss carryforwards 287 535 645 3,500Unrealized loss on available-for-sale securities 68 20 78 829Asset adjustment account 538 845 1,188 6,561Loss on impairment of long-lived assets 2,587 2,739 377 31,549Depreciation 2,685 2,058 1,865 32,744Long-term payable—other 651 114 86 7,939Valuation difference of consolidated subsidiaries 983 11,988Other 1,507 1,573 1,378 18,378Less valuation allowance (2,497) (1,615) (2,301) (30,451)

Total 14,856 15,471 11,414 181,171Deferred tax liabilities:

Prepaid pension expenses 1,552 1,781 1,806 18,927Deferred tax liabilities of the foreign consolidated subsidiaries 2,696 1,615 1,689 32,878Other 728 546 204 8,878

Total 4,976 3,942 3,699 60,683Net deferred tax assets ¥9,880 ¥11,529 ¥ 7,715 $120,488

Net deferred tax assets were included in the consolidated balance sheets as follows:


2012 2011 2010 2012Current assets—Deferred tax assets ¥5,482 ¥ 6,262 ¥5,230 $ 66,854Investments and other assets— Deferred tax assets 6,849 6,099 3,261 83,524Current liabilities—Other current liabilities (40) (221) (108) (488)Long-term liabilities—Deferred tax liabilities (2,411) (611) (668) (29,402)Net deferred tax assets ¥9,880 ¥11,529 ¥7,715 $120,488



The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities of the foreign consolidated subsidiaries at March 31, 2012, 2011 and 2010, were as follows:


2012 2011 2010 2012Deferred tax assets:

Accrued expenses ¥1,613 ¥1,445 ¥1,477 $19,671Inventories 101 182 113 1,232Net operating losses 3,727 4,686 4,397 45,451Other 605 781 1,058 7,377Less valuation allowance (3,502) (4,494) (4,518) (42,707)

Total 2,544 2,600 2,527 31,024Deferred tax liabilities:

Deferred revenue 46 101 107 561Intangible assets 2,648 1,511 1,582 32,293Other 2 3 24

Total 2,696 1,615 1,689 32,878Net deferred tax (liabilities) assets ¥ (152) ¥ 985 ¥ 838 $ (1,854)

Net deferred tax (liabilities) assets were included in the tax effects of significant temporary differences as follows:


2012 2011 2010 2012Deferred tax assets ¥2,276 ¥1,663 ¥1,584 $27,756Deferred tax liabilities (2,428) (678) (746) (29,610)Total ¥ (152) ¥ 985 ¥ 838 $ (1,854)

A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2012, 2011 and 2010, and the actual effective tax rate reflected in the accompanying consolidated statement of income were as follows:

2012 2011 2010Normal effective statutory tax rate 40.6% 40.6% 40.6%Amortization of goodwill 3.3 3.3 2.4Differences of income taxes with foreign consolidated subsidiaries 1.7 0.7 1.2Permanently nondeductible expenses of social expenses and other 1.0 0.8 0.6Change in the valuation allowance 0.4 (1.9) (5.4)Per capita inhabitants’ taxes 0.8 1.1 0.3Not recognized deferred tax on consolidation adjustment of allowance for doubtful receivables (0.2) (1.5)Decrease in deferred tax assets by change of tax rate 2.5Other 0.1 (0.5) 1.5Actual effective tax rate 50.2% 42.6% 41.2%

On December 2, 2011, new tax reform laws were enacted in Japan, which changed the normal effective statutory tax rate from approximately 40.6% to 38.0% effective for the fiscal years beginning on or after April 1, 2012 through March 31, 2015, and to 35.6% afterwards. The effect of this change was to decrease deferred taxes in the consolidated balance sheet as of March 31, 2012 by ¥805 million ($9,817 thousand), to increase income taxes—deferred in the consolidated statement of income for the year then ended by ¥837 million ($10,207 thousand) and to increase unrealized gain on available-for-sale securities in the consolidated balance sheet as of March 31, 2012 by ¥32 million ($390 thousand).


18. Stock Option Plan

The CompanyThe stock options outstanding as of March 31, 2012 are as follows:

Stock Option Persons Granted

Number of Options Granted Date of Grant

Exercise Price Exercise Period

2003 Stock Option 5 directors 3,000 July 25, 2003 ¥2,148 From July 1, 2005 to June 30, 200915 officers 4,800

2 directors of subsidiaries 4002004 Stock Option 6 directors 1,060 August 2, 2004 ¥3,549 From July 1, 2006

to June 30, 201012 officers 1,2604 directors of subsidiaries 80

2005 Stock Option 8 directors 990 July 6, 2005 ¥3,780 From July 1, 2007 to June 30, 201111 officers 960

4 corporate auditors 1,0005 selected employees 5009 directors of subsidiaries 7002 officers of subsidiaries 200

2006 Stock Option 7 directors 1,130 August 3, 2006 ¥4,389 From July 1, 2008 to June 30, 201214 officers 940

4 corporate auditors 802 selected employees 2007 directors of subsidiaries 220

2007 Stock Option 9 directors 1,820 August 10, 2007 ¥4,211 From August 2, 2009 to June 30, 201317 officers 1,160

4 corporate auditors 26012 selected employees 8404 directors of subsidiaries 340

2008 Stock Option 9 directors 1,710 August 5, 2008 ¥4,956 From August 5, 2010 to June 30, 2014

The stock option activity is as follows:2003

Stock Option2004

Stock Option2005

Stock Option2006

Stock Option2007

Stock Option2008

Stock Option(Shares)

Year Ended March 31, 2010Non-vested

March 31, 2009—Outstanding 4,420 1,710GrantedCanceledVested (4,420)

March 31, 2010—Outstanding 1,710Vested

March 31, 2009—Outstanding 940 2,026 3,942 2,270Vested 4,420Exercised (865) (186) (226)Canceled (75)

March 31, 2010—Outstanding 1,840 3,716 2,270 4,420



2003 Stock Option

2004 Stock Option

2005 Stock Option

2006 Stock Option

2007 Stock Option

2008 Stock Option

(Shares)Year Ended March 31, 2011Non-vested

March 31, 2010—Outstanding 1,710GrantedCanceledVested


March 31, 2010—Outstanding 1,840 3,716 2,270 4,420VestedExercised (1,083) (305)Canceled (757)

March 31, 2011—Outstanding 3,411 2,270 4,420Year Ended March 31, 2012Non-vested

March 31, 2011—Outstanding 1,710GrantedCanceledVested


March 31, 2011—Outstanding 3,411 2,270 4,420VestedExercisedCanceled (3,411)

March 31, 2012—Outstanding 2,270 4,420Exercise price ¥4,389 ¥4,211 ¥4,956

($54) ($51) ($60)Fair value price at grant date ¥ 991 ¥ 718 ¥ 828

($12) ($ 9) ($10)

The Assumptions Used to Measure the Fair Value of the 2008 Stock OptionEstimate method: Black-Scholes option-pricing modelVolatility of stock price: 27.81%Estimated remaining outstanding period: Four yearsEstimated dividend: ¥90 per shareInterest rate with risk free: 1.0%


Consolidated SubsidiaryTokyo Individualized Educational Institute, Inc.The stock options outstanding as of February 29, 2012 are as follows:

Stock Option Persons Granted

Number of Options Granted Date of Grant

Exercise Price Exercise Period

2004 Stock Option 2 directors and 45 selected employees

998 September 28, 2004

¥227 From August 28, 2007 to August 27, 2009


534 January 31, 2005



968 June 24, 2005 ¥292 From August 28, 2007 to August 27, 2009


2,358 February 27, 2006



2,005 April 28, 2006 ¥570 From August 31, 2008 to August 30, 2010

The stock option activity is as follows:2004

Stock Option2005

Stock Option2005

Stock Option2006

Stock Option2006

Stock Option(Shares)

Year Ended February 28, 2010Non-vested

February 28, 2009—OutstandingGrantedCanceledVested

February 28, 2010—OutstandingVested

February 28, 2009—Outstanding 612 363 742 1,797 1,360VestedExercised (43)Canceled (569) (363) (724) (45) (125)

February 28, 2010—Outstanding 1,752 1,235Year Ended February 28, 2011Non-vested

February 28, 2010—OutstandingGrantedCanceledVested

February 28, 2011—OutstandingVested

February 28, 2010—Outstanding 1,752 1,235VestedExercisedCanceled (1,752) (1,235)

February 28, 2011—Outstanding



19. Comprehensive Income

The components of other comprehensive income for the year ended March 31, 2012, were as follows:


2012 2012Unrealized gain (loss) on available-for-sale securities:

Gains arising during the year ¥ 662 $ 8,072Reclassification adjustments to profit or loss (115) (1,402)Amount before income tax effect 547 6,670Income tax effect (253) (3,085)Total ¥ 294 $ 3,585

Foreign currency translation adjustments—Adjustments arising during the year ¥(1,062) $(12,952)Pension liability adjustments for a foreign consolidated subsidiary:

Adjustments arising during the year ¥ (112) $ (1,367)Reclassification adjustments to profit or loss 61 744Amount before income tax effect (51) (623)Income tax effect 13 159Total ¥ (38) $ (464)

Share of other comprehensive income in associates:Gains arising during the year ¥ 2 $ 25Reclassification adjustments to profit or loss 2 24Total ¥ 4 $ 49

Total other comprehensive income ¥ (802) $ (9,782)

The corresponding information for the years ended March 31, 2011 and 2010, was not required under the accounting standard for presentation of comprehensive income as an exemption for the first year of adopting that standard and not disclosed herein.

Total comprehensive income for the year ended March 31, 2010, comprises the following:Millions of Yen

2010Total comprehensive income attributable to:

Owners of the parent ¥23,769Minority interests 830

Total comprehensive income ¥24,599

Other comprehensive income for the year ended March 31, 2010, consists of the following:Millions of Yen

2010Other comprehensive income:

Unrealized gain on available-for-sale securities ¥1,723Foreign currency translation adjustments 172

Total other comprehensive income ¥1,895


20. Business Combinations

Business Combination by Means of AcquisitionAcquisition of UP Inc.The Company acquired the shares of UP Inc. through a tender offer on March 21, 2012. This acquisition made UP Inc. into a consolidated subsidiary of the Company.

(1) Overview of integration(a) Name of acquired company and details of business

Acquired company: UP Inc.Business acquired: Operation of schools providing educational guidance for people of all ages, from

preschool children to adults, on preparation for entrance examinations for ele-mentary school, junior high school, senior high school, and university; operation of non-examination-focused schools, primarily instructional science laboratories and English conversation instruction; and sales of related educational materials.

(b) Reasons for corporate integrationUP Inc.’s abundance of experience and know-how in its classroom business and its numerous human resources who are acquainted with that business are extremely attractive to the Group. The Company was late in launching the classroom business and these resources will be extremely useful when increasing the degree of success and the speed of initiatives, not just within Japan, but also in the overseas expansion of the Company’s education business, particularly the expansion of the classroom business planned for the future. Moreover, the Company and UP Inc. believe that a plan for further expansion of business with UP Inc., as a member of the Group to improve the corporate value and customer satisfaction early on, would contribute to the profits of both companies’ stakeholders. This would be achieved by reinforcing coopera-tion between the Company and UP Inc. and applying both companies’ management resources more effectively.

(c) Date of integrationDeemed date of acquisition: March 31, 2012

(d) Legal form of the integrationCash acquisition of shares (tender offer)

(e) Name after integrationUP Inc.

(f) Percentage of voting rights acquiredPercentage of voting rights held prior to the integration: 15.13%Percentage of additional voting rights acquired on the date of integration: 73.06%Percentage of voting rights held after the integration: 88.19%

(g) Basis for determination of the acquiring companyThe Company acquired the shares by cash.

(2) Period of business results of the acquired company included in the financial statement for the year ended March 31, 2012Since the date of the integration was March 31, 2012, the business results as an equity method affiliate prior to the date of integration are included as equity in earnings of affiliates.



(3) Purchase price for acquired company and breakdown


Acquisition price:Market price on the date of integration of shares of UP Inc. held by the Company directly prior to the integration ¥1,624 $ 19,805Cash 7,908 96,439

Direct cost required for acquisition—Advisory fees and other 162 1,976Purchase price ¥9,694 $118,220

(4) Difference between purchase price of acquired company and the sum of all transactions in the acquisi-tion processGain on step acquisitions: ¥357 million ($4,354 thousand)

(5) Amount of goodwill incurred, reasons for goodwill, amortization method and period(a) Amount of goodwill incurred

¥2,876 million ($35,073 thousand)(b) Reasons for goodwill

The net balance exceeding the acquisition price for UP Inc. allocated for assets, or due to liabilities assumed, as a result of acquire of shares is recorded as goodwill.

(c) Amortization method and periodAmortized equally over 10 years

(6) Amount and breakdown of assets and liabilities received due to integration


Current assets ¥ 3,346 $ 40,805Long-term assets 8,022 97,829Total assets ¥11,368 $138,634Current liabilities ¥ 1,541 $ 18,793Long-term liabilities 2,095 25,549Total liabilities ¥ 3,636 $ 44,342

(7) If this business combination had been completed as of April 1, 2011, the beginning of this fiscal year, the condensed pro forma consolidated statement of income for the year ended March 31, 2012, would be as follows:


Sales ¥8,568 $104,488Operating income ¥ 764 $ 9,317Net income ¥ 132 $ 1,610

(Method of calculating condensed pro forma and important assumptions)The condensed pro forma of the corporate integration of UP Inc. is calculated assuming the integration was completed on April 1, 2011, the first day of the fiscal year ended March 31, 2012. It is the difference between the net sales and income reported for UP Inc. between April 1, 2011 and March 31, 2012, and the net sales and income for the Company on its consolidated statement of income. Moreover, amortization of goodwill corresponding to the period from April 1, 2011, to the actual date of the corporate integration has been recognized in this amount. These notes have not been audited.


Acquisition of Telelangue SABerlitz Corporation, a consolidated subsidiary of the Company, acquired all of the outstanding shares of Telelangue SA (Headquarters: Paris, France) on August 10, 2011 (French local time). This acquisition made Telelangue SA into a subsidiary of Berlitz Corporation.

(1) Overview of integration(a) Name of acquired company and details of business

Acquired company: Telelangue SABusiness acquired: Language instruction business

(b) Reasons for corporate integrationTelelangue SA provides remote language services for many global corporations. The company has an advanced learning management system (“LMS”) that allows students to manage their learning progress. The LMS forms the core infrastructure for the company’s phone classes and e-learning programs, which it provides to students all over the world. Berlitz Corporation will utilize the expertise of Telelangue SA to add e-learning and phone-based training to its face-to-face lessons, which have earned a strong reputation. In doing so, Berlitz Corporation will strengthen its framework for comprehensively meeting the needs of globalizing corporations.

(c) Date of integrationAugust 10, 2011 (French local time)

(d) Legal form of the integrationCash acquisition of shares

(e) Name after integrationTelelangue SA

(f) Percentage of voting rights acquired100%

(g) Basis for determination of the acquiring companyThe Company’s consolidated subsidiary acquired the shares by cash.

(2) Period of business results of the acquired company included in the financial statements for the year ended March 31, 2012From August 10, 2011 to December 31, 2011Note: The fiscal year-end of Berlitz Corporation is December 31.

(3) Purchase price for acquired company and breakdown


Acquisition price—Cash ¥5,983 $72,963



The net balance exceeding the acquisition price for Telelangue SA allocated for assets, or due to liabilities assumed, as a result of acquire of shares is recorded as goodwill.

(c) Amortization method and periodAmortized equally over 15 years



(5) Amount and breakdown of assets and liabilities received due to integration


Current assets ¥1,195 $14,573Long-term assets 3,674 44,805Total assets ¥4,869 $59,378Current liabilities ¥2,873 $35,037Long-term liabilities 81 988Total liabilities ¥2,954 $36,025

(6) Amounts allocated to intangible assets other than goodwill, and their breakdown, and weighted-average amortization period by major category

Major Category AmountWeighted-Average

Amortization PeriodTechnology ¥1,882 million ($22,951 thousand) Over 10 yearsTrade names ¥1,247 million ($15,207 thousand) Over 10 yearsCustomer relationships ¥ 339 million ($ 4,135 thousand) Over 5 yearsTotal ¥3,468 million ($42,293 thousand) Over 9 years

(7) If this business combination had been completed as of April 1, 2011, the beginning of this fiscal year, the condensed pro forma consolidated statement of income for the year ended March 31, 2012, would be as follows:


Sales ¥1,820 $22,195Operating income ¥(455) $(5,549)Net income ¥(385) $(4,695)

(Method of calculating condensed pro forma and important assumptions)The condensed pro forma of the corporate integration of Telelangue SA is calculated assuming the integration was completed on January 1, 2011, the first day of the fiscal year ended December 31, 2011. It is the difference between the net sales and income reported for Telelangue SA between January 1, 2011 and December 31, 2011, and the net sales and income for the Company on its consolidated statement of income. Moreover, amortization of goodwill and other intangible assets corresponding to the period from January 1, 2011, to the actual date of the corporate integration has been recognized in this amount. These notes have not been audited.

Transaction under Common Control and OthersAdditional Acquisition of Tokyo Educational Institute Co., Ltd.’s Shares

(1) Overview of transaction with minority shareholders(a) Name of consolidated subsidiary and details of business

Consolidated subsidiary: Tokyo Educational Institute Co., Ltd.Business description: Tetsuryokukai, a prestigious university entrance exam-oriented prep school

(b) Date of additional acquisition of consolidated subsidiary’s sharesDeemed date of acquisition: March 31, 2012

(c) Percentage of additional voting rights acquiredPercentage of voting rights held before additional acquisition: 40.00%Percentage of additional voting rights acquired: 60.00%Percentage of voting rights held after additional acquisition: 100.00%


(d) Other information of the dealThe Company paid cash to acquire all of the shares of Tokyo Educational Institute Co., Ltd., held by minority shareholders by mutual agreement between shareholders, thereby making it into a wholly owned subsidiary. This move was made to improve the Group management efficiency and strengthen governance.

(2) Overview of accounting treatment appliedThe share exchange was accounted for as transaction under common control in accordance with the ASBJ Statement No. 21 of December 26, 2008 and the ASBJ Guidance No. 10 of December 26, 2008.

(3) Matters related to additional acquisition of the subsidiary’s sharesPurchase price for acquired company and breakdown


Acquisition price—Cash ¥4,006 $48,854Direct cost required for acquisition—Advisory fees and other 145 1,768Purchase price ¥4,151 $50,622



The Company recorded goodwill due to the difference between the additional acquisition cost of Tokyo Educational Institute Co., Ltd., and the decreasing amount of minority interests.

(c) Amortization method and periodAmortized equally over nine years

21. Net Income per Share

Reconciliation of differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2012, 2011 and 2010, was as follows. Diluted EPS for the year ended March 31, 2012, is not disclosed because there were no potentially dilutive shares outstanding.

Millions of YenThousands of

Shares Yen U.S. Dollars

Net IncomeWeighted-

Average Shares EPSYear Ended March 31, 2012Basic EPS—Net income available to common shareholders ¥16,369 97,558 ¥167.79 $2.05Year Ended March 31, 2011Basic EPS—Net income available to common shareholders ¥20,587 98,749 ¥208.47Effect of dilutive securities—Stock options 14Diluted EPS—Net income for computation ¥20,587 98,763 ¥208.44Year Ended March 31, 2010Basic EPS—Net income available to common shareholders ¥21,875 98,692 ¥221.65Effect of dilutive securities—Stock options 45Diluted EPS—Net income for computation ¥21,875 98,737 ¥221.55




22. Subsequent Events

a. Retirement of Treasury StockAt a Board of Directors meeting on May 2, 2012, the Company resolved to retire some treasury stock, pursuant to the provisions of Article 178 of the Companies Act. Details are as follows:(a) Type of share to be retired: Common stock(b) Number of shares to be retired: 1,700,000 shares (1.6% of currently issued

common stock before retirement)(c) Total number of shares issued after retirement: 102,453,453 shares(d) Scheduled retirement date: June 29, 2012

b. Appropriations of Retained EarningsThe following appropriation of retained earnings at March 31, 2012, was approved at the Company’s shareholders meeting held on June 23, 2012:


Year-end cash dividends, ¥47.5 ($0.58) per share ¥4,618 $56,317


Independent Auditor’s Report


Consolidated SubsidiariesAs of March 31, 2012

Name of companyCommon

stockRatio of

shareholding Description of businessMillions of Yen %

Benesse Corporation 3,000 100.0 Education, publishing, mail-order sales, etc.

UP Inc. 1,667 88.2 Operation of prep schools

Tokyo Individualized Educational Institute, Inc.

642 61.9 Operation of prep schools

Shinken-AD Co., Ltd. 65 100.0 Advertising services and creation of university information magazines

Plandit Co., Ltd. 40 100.0 Planning and editing of study materials

Benesse Base-Com, Inc. 20 100.0 Production, distribution and sales of study materials and software

Learn-S Co., Ltd. 10 100.0 Planning, editing, production and sales of study materials

Ochanomizu Seminar Co., Ltd. 10 *1 100.0 Operation of prep schools

Tokyo Educational Institute Co., Ltd. 10 100.0 Operation of prep schools

BENESSE GCA PTY LTD 1,250Thousands of

Australian Dollars

100.0 Support for study overseas

Benesse Corporation China 125,000Thousands of

RMB

100.0 Sales of correspondence course materials for preschoolers

Benesse Korea Co., Ltd. 2,000Millions of

Won

100.0 Correspondence-based education, production and sales of study materials

Benesse en-Famille Inc. 50 66.0 Home food-delivery service

Benesse Music Publishing Co. 10 100.0 Rights management of music publications

Benesse Style Care Co., Ltd.*2 100 100.0 Operation of senior citizen welfare business

Bon Sejour Corporation*2 100 100.0 Operation of senior citizen welfare business

Benesse MCM Corp. 80 *3 100.0 Introduction and temp staffing of nurses and human resources trained in nursing care

Berlitz Corporation 1,005Thousands of

U.S. Dollars

100.0 Language instruction, global leadership training and support for study overseas

Okayama Language Center 50 100.0 Language instruction and translation services

Simul International, Inc. 40 100.0 Interpretation, translation and language instruction services

Telemarketing Japan, Inc.*4 300 60.0 Telemarketing, temporary staffing

Synform Co., Ltd. 95 100.0 Computer information processing and systems development and sales

Benesse Business-mate, Inc. 50 *5 100.0 Office operational management, outsourcing and support services

Naoshima Cultural Village Co., Ltd. 20 100.0 Hotel and campsite operation and management

Benesse Insurance Services, Inc. 20 *6 94.0 Insurance agency business

Benesse Hong Kong Co., Ltd. 3,600Thousands of

H.K. Dollars

100.0 General trading and quality assurance related to educational equipment, toys and other items

9 other subsidiaries

*1 Including an indirect stock holding of 50.0% through subsidiary.*2 On April 1, 2012, Bon Sejour Corporation was folded into Benesse Style Care Co., Ltd. by merger.*3 Indirect stock holding through subsidiary.*4 Effective July 1, 2012, Telemarketing Japan, Inc. changed its corporate name to TMJ, Inc. *5 Including an indirect stock holding of 4.0% through subsidiaries.*6 Including an indirect stock holding of 64.0% through subsidiaries and affiliates.


The History of Benesse Holdings, Inc. (Formerly Benesse Corporation)

Year History

1955 Fukutake Publishing Co., Ltd. is established in Minamigata, Okayama Prefecture, and begins publishing junior high school educational materials and student pocket books.

1962 The Company establishes Kansai School Entrance Research Association and begins offering Kansai Simulated Exams (now Shinken Simulated Exams) for senior high school students.

1969 Correspondence Education Seminar (now Shinkenzemi Senior High School Courses) is launched. Tokyo Office opens and begins offering Shinken Simulated Exams in eastern Japan.

1972 Correspondence Education Seminar Junior (now Shinkenzemi Junior High School Courses) is launched.1973 Kansai Simulated Exams are renamed Shinken Simulated Exams.

Correspondence Education Seminar is renamed Shinkenzemi.1980 Shinkenzemi Elementary School Courses are introduced.1988 Shinkenzemi Preschool Courses for ages 4 to 5 (now Kodomo Challenge) are introduced.1990 The Company’s new corporate identity “Benesse” is announced.

The Company invests in Berlitz School of Languages, Inc. (now Berlitz Japan, Inc.).1993 The Company acquires Berlitz International, Inc. (now Berlitz Corporation) of the United States.

The magazines Tamago Club and Hiyoko Club are launched.

1994 Shinkenzemi Preschool Courses for ages 2 to 3 (now Kodomo Challenge) are introduced.1995 The Company’s name is changed to Benesse Corporation.

Benesse lists on the Second Section of the Osaka Securities Exchange and the Hiroshima Stock Exchange.1997 Benesse moves up to the First Section of the Osaka Securities Exchange.

Benesse Home Clara opens in Okayama.1998 Simul International, Inc. joins the Benesse Group.2000 Benesse lists on the First Section of the Tokyo Stock Exchange.

Benesse Care Corporation is established. Benesse acquires controlling stake in Shinkoukai Co., Ltd.

2001 Berlitz International, Inc. (now Berlitz Corporation) becomes the Company’s wholly owned subsidiary. Benesse en-Famille Inc. is established through joint capital investment with Taihei Co., Ltd., a home food-delivery company.

2003 Benesse introduces Corporate Executive Officer System and Group Executive Officer System. Shinken-AD Co., Ltd. becomes a consolidated subsidiary. Benesse Style Care Co., Ltd. is established. Benesse Hong Kong Co., Ltd. is established.

2004 Benesse Korea Co., Ltd. is established.2005 Benesse Educational Research and Development Center (BERD) is established.

AVIVA Co., Ltd. joins the Benesse Group.2006 Kodomo Challenge courses are introduced into China.

Benesse acquires Ochanomizu Seminar Co., Ltd.2007 Benesse acquires Tokyo Individualized Educational Institute, Inc.2008 Shinkenzemi Junior High School Courses + i launched.2009 Tokyo Educational Institute Co., Ltd. joins the Benesse Group.

Benesse converts to a holding company structure using a corporate spin-off.2010 Benesse acquires all shares of Bon Sejour Corporation.

Benesse transfers all shares of AVIVA Co., Ltd. 2012 Benesse acquires UP Inc.

Bon Sejour Corporation is folded into Benesse Style Care Co., Ltd. by merger.


Investor InformationAs of March 31, 2012

Number of Shares Issued:104,153,453 shares

Listing Date :October 26, 1995

Securities Listings (Common Stock):Tokyo Stock Exchange, Inc., First SectionOsaka Securities Exchange, Co., Ltd., First Section

Ticker Code:9783

Unit of Trading:100 shares

Independent Auditors:Deloitte Touche Tohmatsu LLC

Transfer Agent:Mitsubishi UFJ Trust and Banking Corporation

Number of Shareholders:35,656

Top 10 Shareholders:Shares

(Thousands)Percentage

(%)

The Nomura Trust and Banking Co., Ltd. 14,328 14.73Japan Trustee Services Bank, Ltd. 9,760 10.03The Master Trust Bank of Japan, Ltd. 4,181 4.30Naoshima Fukutake Art Museum Foundation 3,090 3.17The Chugoku Bank, Ltd. 2,787 2.86Nobuko Fukutake 2,769 2.84Trust & Custody Services Bank, Ltd. 2,161 2.22Junko Fukutake 2,155 2.21Mitsuko Fukutake 2,075 2.13Minamigata Holdings, Inc. 1,836 1.88Notes 1. The shares held by The Nomura Trust and Banking Co., Ltd. include 13,618 thousand Company

shares (14.00%) contributed by efu Investment Limited as trust assets. efu Investment is an asset management and investment corporation wholly owned by Soichiro Fukutake and Reiko Fukutake; the former serves as a representative.

2. In addition to the above, The Chugoku Bank, Ltd. has contributed 1,600 thousand Company shares (1.64%) to a retirement benefit trust retaining voting rights.

3. The Company owns 6,941 thousand shares of treasury stock which are not included above because they do not carry voting rights. These shares of treasury stock are also excluded from the calculation of investment ratios.

4. Effective April 1, 2012, Naoshima Fukutake Art Museum Foundation has become a public inter-est incorporated foundation.

Shareholdings by Type of Shareholder:

Financial Instruments Firms

0.46%

Financial Institutions

36.55%

Foreign Companies—Other

24.52%

Individuals and Other

21.62%

Other Corporations

10.19%

Treasury Stock

6.66%

Stock Price Range (Osaka Securities Exchange):

2,500

3,000

3,500

4,000

4,500

5,000

5,500

0

12,000,000

9,000,000

6,000,000

3,000,000

09/6 09/8 09/10 09/12 10/2 10/4 10/6 10/8 10/10 10/12 11/2 11/4 11/6 11/8 11/10 11/12 12/2 12/4

09/6 09/8 09/10 09/12 10/2 10/4 10/6 10/8 10/10 10/12 11/2 11/4 11/6 11/8 11/10 11/12 12/2 12/4

(Yen)

(Shares)Trading Volume (Osaka Securities Exchange):


Corporate Data

Company Name: Benesse Holdings, Inc.

Headquarters: 3-7-17 Minamigata, Kita-Ku, Okayama-shi, Okayama 700-0807 Japan

Date Established: January 28, 1955

Capital: ¥13.6 billion

Number of Employees: 18,941 (Consolidated) (As of March 31, 2012)

Website: http://www.benesse-hd.co.jp/en/

Organization Chart (As of July 2012)

General Meeting of Shareholders

Board of Directors

Chairman

President

Board of Auditors Major Consolidated Subsidiaries

Domestic Education

Overseas Education

Lifestyle

Senior/Nursing Care


Others

Tokyo Individualized Educational Institute, Inc.

Benesse Corporation China

Benesse en-Famille Inc.

Benesse Style Care Co., Ltd.

Berlitz Corporation

TMJ, Inc.

Bene

sse C

orpo

ratio

n

UP Inc.

Benesse Korea Co., Ltd.

Simul International, Inc.

Tokyo Educational Institute Co., Ltd.

Ochanomizu Seminar Co., Ltd.

Benesse Holdings, Inc. Annual Report 2012 129

CORPORATE COMMUNICATIONS &INVESTOR RELATIONS DEPARTMENT

1-34, Ochiai, Tama City, Tokyo 206-0033 JapanPhone: +81-42-356-0808Facsimile: +81-42-356-0722E-mail: [email protected]: http://www.benesse-hd.co.jp/en/ir/

Printed in Japan

Yayoi Kusama“Pumpkin” 1994

Benesse Art Site Naoshima is a project located on the islands of Naoshima, Teshima and Inujima in Japan’s Seto Inland Sea. Organized by Benesse Holdings, Inc. and Naoshima Fukutake Art Museum Foundation, the project supports a multitude of art-related activities. The Seto Inland Sea provides a perfect traditional Japanese setting, filled with natural beauty and a distinctive local culture, and Benesse is sponsoring and creating modern art and architecture there found nowhere else.

Benesse Art Site Naoshimahttp://www.benesse-artsite.jp/en/

On the Cover

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