Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Financial Report for Fiscal 2008 (Ended December 31, 2008)
January 29, 2009
Stock Exchanges: Tokyo and Osaka, First Sections
Stock Code:8165
URL: http://www.senshukai.co.jp
Representative:
Mr. Yasuhiro Yukimachi, President and Representative Director
Inquiries:
Mr. Kazuhide Fujiyoshi,
Director, Managing Executive Officer, General Manager of the General Affairs Division
Tel: +81-6-6881-3100
Scheduled date of annual general meeting of shareholders: March 27, 2009
Scheduled date of payment of dividend: March 30, 2009
Scheduled date of filing of Annual Security Report: March 30, 2009

Company name: Senshukai Co., Ltd.

(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for Fiscal 2008 (January 1, 2008 – December 31, 2008)(1) Consolidated operating results(Percentages represent changes from the same period of the previous fiscal year)
Net sales

Operating income

Millions of yen%

158,285
156,792

1.0
5.8

Fiscal 2008
Fiscal 2007

Net income pershare

Millions of yen

%

2,413
5,291

Millions of yen(54.4)
15.0

Diluted net income
per share

Yen

Ordinary income(4,553)
4,683

Net income%

Millions of yen%(10.6)(6,271)
1,932(46.7)

Ordinary income to Operating income tototal assets
net sales

Return on equity

Yen

%

%

%

Fiscal 2008
(134.26)
Fiscal 2007
41.53
41.41
Reference: Investment profit (loss) on equity method (million yen)
Fiscal 2008:(247)
Fiscal 2007:(12.5)
3.5

(4.5)
4.8

1.5
3.4

(164)

(2) Consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen%

Yen

As of Dec. 31, 2008
104,059
As of Dec. 31, 2007
98,422
Reference: Shareholders’ equity (million yen)
As of Dec. 31, 2008:
44,24544,27455,95542.5
56.8

947.191,197.62

As of Dec. 31, 2007:

55,945(3) Consolidated cash flows
Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash equivalents
at end of period

Millions of yen

Millions of yen

Millions of yen

Millions of yen

3,849
1,444

(7,388)(6,047)

8,199
2,305

8,186
3,526

Fiscal 2008
Fiscal 2007

2. Dividends(Record date)1Q-endDividend per share
2Q-end 3Q-end Yearend

Yen

Fiscal 2007
Fiscal 2008
Fiscal 2009
(forecasts)

Yen

Yen

AnnualTotal dividends(annual)Yen

Millions of yen

Yen

-

13.00
8.00

-

14.00
9.00

27.00
17.00

-

8.00

-

9.00

17.00

Payout ratio(consolidated)
%

1,260
794

65.0
-

Dividend on equity(consolidated)
%

2.2
1.6

28.9

3. Consolidated Outlook for Fiscal 2009 (January 1, 2009 – December 31, 2009)(Percentages represent changes from the same period of the previous fiscal year)
Net income
Net income per share
Operating income
Ordinary income

Net sales
Millions of yen

First half
Full year

82,000
162,500% Millions of yen

3.5
2.7

1,300
3,200

%

Millions of yen

(7.0)
32.6

-1-

%

Millions of yen%

Yen

1,400 346.7
3,400
-

970
2,750

-

20.77
58.87

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

4. Other(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in scopeof consolidation): None
(2) Changes in accounting principles, procedures and presentation methods for preparation of consolidated financial
statements
1) Changes caused by revision of accounting standards: None
2) Other changes: None

(3) Number of shares outstanding (common shares)
1) Number of shares outstanding at end of period (including treasury stock)
As of Dec. 31, 2008: 47,630,393 shares

As of Dec. 31, 2007: 47,630,393 shares

2) Number of treasury stock at end of period
As of Dec. 31, 2008:

917,908 shares

As of Dec. 31, 2007:

916,195 shares

Note: Please refer to “Per Share Information” on page 35 for the number of shares used in calculating consolidated net income pershare.

(Reference) Summary of Non-consolidated Financial Report
1. Non-consolidated Financial Results for Fiscal 2008 (January 1, 2008 – December 31, 2008)(1) Non-consolidated operating results(Percentages represent changes from the same period of the previous fiscal year)
Net sales
Millions of yen

Fiscal 2008
Fiscal 2007

150,729
152,367

Operating income
%

(1.1)
3.7

Net income per share
Fiscal 2008
Fiscal 2007

Ordinary income

Millions of yen

2,353
4,611

%

Net income

Millions of yen%

Millions of yen%(3,853)
4,421

0.0(6,155)2,335(25.7)(49.0)
24.2

Diluted net income per share

Yen

Yen

(131.77)
50.19

50.05

(2) Non-consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen%

Yen

As of Dec. 31, 2008
99,613As of Dec. 31, 2007
95,939Reference: Shareholders’ equity (million yen)
As of Dec. 31, 2008:
44,09644,09655,41844.3
57.8

943.991,186.32

As of Dec. 31, 2007:

55,418

2. Non-consolidated Outlook for Fiscal 2009 (January 1, 2009 – December 31, 2009)(Percentages represent changes from the same period of the previous fiscal year)
Net income
Net income per share
Operating income
Ordinary income

Net sales
Millions of yen

First half
Full year%

Millions of yen%

75,600 (1.5)
150,000 (0.5)

1,000
3,000

(9.4)
27.5

Millions of yen%

1,600 115.9
3,600-

Millions of yen%

Yen

1,370 917.1
3,150
-

29.33
67.43

*Cautionary statement with respect to forward-looking statements
The above projections are based on information available at the time of release of this report. Actual results could differ significantly
from these projections due to a variety of factors. For further details regarding the projections, please refer to page 7.

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Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

1. Operating Results(1) Analysis of Operating Results
Overview
The Japanese economy deteriorated in the current fiscal year under review. Corporate earnings fell sharply as anunprecedented global financial crisis, triggered by the US subprime mortgage debacle and the bankruptcy of Lehman
Brothers, caused large declines in equity markets and extreme volatility in foreign exchange markets. The environment
for employment and incomes also deteriorated, sending the economy into recession. The retail industry suffered fromweak personal spending as consumers became more thrifty and adopted a more defensive stance toward spending inlight of volatile price movements for natural resources and economic deterioration. The mail-order industry saw somebenefit from “cloistered consumption” as consumers showed a greater interest in online shopping, but other factors
weighed on sales including weak personal spending, growing disparities among sub-sectors and individual companies,
and poor weather. The intensely competitive environment created more price competition, and prompted consumers to
become more selective regarding products and services. The future outlook is likely to remain murky.
Against this backdrop, the Senshukai Group focused on priority strategies in the first year of its medium-term
management plan which ends in Fiscal 2010.
Consolidated net sales increased 1.0% year-over-year to 158,285 million yen in the fiscal year under review.
In terms of profits, operating income declined 54.4% year-over-year to 2,413 million yen due to a slight rise in the cost
ratio, and an increase in SG&A-to-sales on higher catalog and other expenses. Ordinary income declined from a profitof 4,683 million yen last fiscal year, to a loss of 4,553 million yen this fiscal year, as financial uncertainty triggered adramatic appreciation of the yen and declines in equity prices, causing foreign exchange losses of approximately 5,900
million yen and losses on write-down of compound financial instruments of approximately 1,300 million yen. Net
income also declined from a profit of 1,932 million yen last fiscal year, to a loss of 6,271 million yen this fiscal year,
due to approximately 700 million yen of losses on sales and disposal of fixed assets, and approximately 500 million yen
of losses on write-down of investment securities whose market value fell sharply with little prospect for recovery.
Segment information[Mail-order Business]
Consolidated sales in the mail-order business, which comprises the catalog and the hanpukai businesses, decreased
0.7% year-over-year to 144,585 million yen, and operating income decreased 48.8% to 2,866 million yen in the fiscal
year under review.
1) Catalog business
The catalog business provides customers with a variety of lifestyle ideas and offers original Senshukai products through18 different catalogs.
Since 1976, the Group has won the support of members by providing them with a wide range of products centered on
fashion apparel, but also accessories, interior goods, daily sundries, maternity goods, and kid’s apparel, tailored to meettheir needs.
Sales were steady in the catalog business up through the third quarter, but declined year-over-year from October as thegrowing financial crisis weighed on consumer sentiment.
As a result, consolidated sales in the catalog business decreased 0.1% year-over-year to 131,886 million yen.
2) Hanpukai business
The hanpukai business employs an original, unique sales model differing from other mail-order companies whereby
goods are delivered monthly to all group and individual members, mainly working women.
Focusing on everyday sundries and foods, the business offers a wide lineup of products that are highly collectible,
original, and not available in retail stores.

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Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

We created the office vending box (Choko Tabe BOX) business in the previous fiscal year to expand contact points withvarious occupational fields and restructure the hanpukai business, and the number of such boxes reached approximately
21,000. However, sales and members declined year-over-year.
Consolidated sales in the hanpukai business declined 6.9% year-over-year to 12,698 million yen.
* The Group transferred some media between the hanpukai and catalog businesses in line with organizational changes
implemented beginning this fiscal year. Year-over-year comparisons are based on figures after the transfer.
[Other Businesses]
The “other businesses” segment consists of the services business which primarily offers travel and credit card services,
the storefront business, the pet business, the corporates business which provides products and services to corporations,and the guesthouse-style wedding business operated by Dears Brain Inc. which we turned into a consolidated subsidiaryin the second half of the fiscal year. Consolidated sales in this segment increased 23.1% year-over-year to 13,699
million yen, but operating losses expanded 146 million yen to 439 million yen.
(2) Analysis of Financial Position
Balance sheet position
Assets totaled 104,059 million yen at the end of the fiscal year under review, up 5,637 million yen from the end of theprevious fiscal year.
Current assets increased 1,774 million yen to 49,998 million yen. The main contributing factors were decreases ininventories of 2,820 million yen and accounts receivable-other of 1,319 million yen, while cash and deposits, deferred
tax assets and marketable securities increased 4,226 million yen, 922 million yen and 438 million yen, respectively.
Fixed assets increased 3,863 million yen to 54,060 million yen, mainly due to a decrease in investments and other assetsof 1,764 million yen, while there were increases in property and equipment of 3,508 million yen and intangible assets of
2,119 million yen.
Current liabilities increased 12,978 million yen to 54,153 million yen. The main contributing factors were decreases innotes and accounts payable-trade of 2,495 million yen and accrued income taxes of 1,693 million yen, while there wereincreases in forward exchange contracts of 9,788 million yen and short-term bank loans of 6,957 million yen.
Long-term liabilities increased 4,340 million yen to 5,631 million yen, mainly due to a 4,112 million yen increase inlong-term debt.
Net assets decreased 11,681 million yen to 44,274 million yen. The main contributing factors were decreases in retained
earnings of 7,626 million yen, deferred hedge gains (losses) of 2,415 million yen, and net unrealized gains onavailable-for-sale securities of 1,798 million yen. Consequently, the equity ratio was 42.5%.
Cash flow position
The balance of cash and cash equivalents at the end of the fiscal year under review was 8,186 million yen, an increaseof 4,660 million yen from the end of the previous fiscal year.
Operating activities provided net cash of 3,849 million yen (net cash provided of 1,444 million yen in the previous
fiscal year). The main contributing factors were a 2,844 million yen decrease in inventories, depreciation expenses of
2,140 million yen, foreign exchange losses of 5,797 million yen and losses on write-down of compound financial
instruments of 1,331 million yen. These factors were partly offset by loss before income taxes and minority interests of
5,895 million yen and a decrease in notes and accounts payable-trade of 3,183 million yen.
Investing activities used net cash of 7,388 million yen (net cash used of 6,047 million yen in the previous fiscal year).
The main cash outflows were 2,617 million yen for purchases of property and equipment, 2,473 million yen forpurchases of investment securities, and 2,297 million yen for purchases of subsidiary stock associated with changes inthe scope of consolidation.
Financing activities provided net cash of 8,199 million yen (net cash provided of 2,305 million yen in the previous
fiscal year). The main cash inflows were net increase in short-term bank loans of 4,566 million yen, and proceeds fromlong-term debt of 5,052 million yen.

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Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Cash flow indices

Equity ratio (%)

Fiscal 2006
Fiscal 2007
Fiscal 2008
(As of Dec. 31, 2006) (As of Dec. 31, 2007) (As of Dec. 31, 2008)
58.3
56.8
42.5

Equity ratio based on fair value (%)

58.5

56.0

31.7

Average debt repayment period (years)

0.3

2.1

3.7

Interest coverage ratio (times)

30.3

20.6

23.6

Notes: 1. Cash flow indices are calculated as follows using consolidated financial figures:
The equity ratio is shareholders’ equity divided by total assets.
The equity ratio based on fair value is market capitalization divided by total assets.
The average debt repayment period is interest-bearing debt divided by the quantity of operating cash flows.
The interest coverage ratio is operating cash flows divided by interest payments.
2. Market capitalization is calculated by multiplying the closing share price at the end of the period by the number of sharesissued and outstanding at the end of the period, excluding treasury stock.
3. Interest-bearing debt represents all liabilities shown on the consolidated balance sheets that incur interest.
4. Operating cash flows and interest payments represent net cash provided by operating activities and interests paid,
respectively, on the consolidated statements of cash flows.

(3) Basic Policy Regarding Distribution of Earnings and Dividends in the Current and Next Fiscal Year
The Group’s basic policy is to strengthen the business foundation while maintaining stable dividends, taking into
consideration the payout ratio, and ensuring a fair distribution of earnings to shareholders.
Specifically, we aim for a payout ratio of 30% on a consolidated basis going forward.
We will use retained earnings to invest in the development of new businesses, raise the efficiency of existing businesses,
improve the soundness of our financial condition, and strengthen our competitiveness and corporate structure.
Although we posted a net loss for fiscal 2008, we plan a total annual dividend of 17 yen per share comprised of ayearend dividend of 9 yen per share, and an interim dividend of 8 yen per share, in line with our aforementioned policy.
We plan a total annual dividend of 17 yen per share for fiscal 2009, comprised of a yearend dividend of 9 yen per share,
and an interim dividend of 8 yen per share, in line with our aforementioned policy.
(4) Business Risks
1) Economic situation in manufacturing countries
The majority of products sold by the Senshukai Group are imported from China and other Asian countries.
Consequently, political and economic conditions in these countries, as well as the occurrence of natural disasters, could
impact the Group’s operating results and financial position.
2) Exchange rate fluctuation
Some products handled in the mail-order business, the Senshukai Group’s mainstay business, are imported anddenominated in foreign currencies. Although Senshukai employs foreign exchange forward contracts and other hedging
devices to reduce the risk associated with exchange rate fluctuations, large fluctuations could adversely affect theGroup’s operating results and financial position.
3) Risks associated with personal information leaks
Senshukai and some subsidiaries handle personal information subject to Japan’s Personal Information Protection Law.
The Senshukai Group adheres to all relevant laws, has assigned a Customer Information Management Officer to prevent
information leaks and strengthened internal control systems. Furthermore, Senshukai and some subsidiaries obtained
the Privacy Mark certification.
However, in the unlikely event that personal information handled by the Senshukai Group leaks, this could damage
public trust and the corporate image, thereby significantly and adversely affect the Group’s operating results andfinancial position.

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Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

4) Risks associated with natural disasters
Natural disasters or other unexpected events that disrupt the order processing or shipment operations of the Senshukai
Group’s mainstay mail-order business could significantly affect the Group’s operating results and financial position. To
minimize these risks, Senshukai has established backup processing and shipment systems, and a preparatory framework
for earthquake disasters. We have also established a Crisis Management Committee and formulated rules applicable toemergencies. Nevertheless, severe damage to Senshukai facilities and disruptions to order processing or shipments
resulting from a major disaster could significantly and adversely affect the Group’s operating results and financial
position.
5) System risk
The Senshukai Group’s computer system could be negatively impacted by a variety of factors including earthquakes,
typhoons, floods, hardware or software trouble, terrorism, and cyber-terror. Trouble that requires an inordinate amountof time to restore the system could significantly and adversely affect the Group’s operating results and financial position
since almost all operations at Senshukai are processed by computer.
6) Legal and regulatory risk
The Senshukai Group’s mainstay business, the mail-order business, is governed by laws including the Law Against
Unjustifiable Premiums and Misleading Representations (“Premiums and Representations Law”), the Special Products
Trading Law, the Pharmaceutical Law, and the Product Liability Law. The Company is thorough in educating
employees, and establishing an administrative and compliance structure, to ensure strict compliance with all laws andregulations. If the unlikely event those compliance-related problems were to emerge, however, this could impair the
corporate image, thereby significantly and adversely affect the Group’s business and operating results.

7) Risks related to unfavorable weather
Cool summers, warm winters, long rainy seasons, and other unusual and unfavorable weather could impact demand andsales in the Senshukai Group’s mainstay mail-order business, and adversely affect the Group’s operating results.

8) Risks associated with volatility in raw materials prices
The Senshukai Group’s mainstay business, the mail-order business, uses paper for catalog printing, and a greater than
expected increase in the price of paper, pulp, and other raw materials, as well as price hikes by transportation companies
that deliver the Group’s products to reflect surging crude oil prices, could significantly and adversely affect the Group’s
operating results.
9) Risks associated with share price fluctuation
The Senshukai Group holds marketable shares and other securities, and is therefore subject to the risks associated withshare price fluctuation. Trends in share prices could adversely affect the Group’s operating results and financial
position.

10) Forward-looking statements
All forward-looking statements in the “Business Risks” section are based on the judgment of the Senshukai Group as ofthe presentation date (January 29, 2009) of this financial report for Fiscal 2008.

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Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(5) Outlook for Fiscal 2009
The Japanese economy will likely remain weak going forward as yen appreciation and the stock market slump weigh on
corporate earnings, and as employment uncertainty drives down personal consumption. The business environment for
our group also requires close monitoring.
For the new fiscal year, we forecast non-consolidated net sales will remain flat, but consolidated net sales will increaseabout 2.7% year-over-year to 162,500 million yen due to a full-year contribution from the newly consolidated
subsidiary Dears Brain Inc. We forecast operating income of 3,200 million yen due to a lower cost-of-sales ratio andother factors, ordinary income of 3,400 million yen, and net income of 2,750 million yen due to a lower corporate tax
burden. Our policy going forward is to secure stable profits.
Our earnings forecasts for the new fiscal year are as follows.
Consolidated(Million yen)

Net sales
Fiscal 2009 (forecast)Fiscal 2008 (results)

Operating income

Ordinary income

162,500

3,200

3,400

2,750

158,285

2,413(4,553)(6,271)

2.7

32.6

-

-

Change (%)
Non-consolidated

Net income(Million yen)

Net sales

Operating income

Ordinary income

Net income

Fiscal 2009 (forecast)

150,000

3,000

3,600

3,150

Fiscal 2008 (results)

150,729

2,353(3,853)(6,155)

(0.5)

27.5

-

-

Change (%)* The above projections are based on information available at the time of release of this report. Actual results could differ significantly
from projections due to a variety of factors.

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Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

2. Group Organization
The Senshukai Group comprises the parent company, 24 subsidiaries, and 2 affiliates. Mail-order sales is the mainstay
business, and other businesses include product sales, services, and transportation.
The following describes the position of each major business activity in the Group’s operations and business segments.
Segment
Mail-orderbusiness

Otherbusinesses

Major business activity
Mail order

Order processing
Transportation and warehousing
Product planning and development
Product sales
Services
Transportation

Company
Senshukai Co., Ltd., Senshukai Service Hanbai Co., Ltd.,Senshukai Iihana Co., Ltd., RG Marketing Co., Ltd., SENTENs
Co., Ltd., Shanghai Senshu Merchant and Commerce Co., Ltd.,
Mobakore Co., Ltd., Senshukai Hong Kong Ltd., Luckwin
Summit (China) Co., Ltd., and 7 other companies
Senshukai Call Center Co., Ltd.
Senshu Logisco Co., Ltd.
AIMER Co., Ltd.
Senshukai Co., Ltd., B·B·S Co., Ltd., Pet First Co., Ltd.
Senshukai Co., Ltd., Senshukai General Services Co., Ltd.,Dears Brain Inc., and 3 other companies
Senshu Transportation Co., Ltd.

Schematic of businesses
Consolidated subsidiary

Subsidiary accounted for by the equity method

Non-consolidated subsidiary

Affiliate accounted for by the equity method

Senshukai Iihana Co., Ltd.
RG Marketing Co., Ltd.
Purchases products

Sells products
Shanghai Senshu Merchant and Commerce Co., Ltd.

SENTENs Co., Ltd.

Sells products

Purchases products
Outsources
buyingproducts

Luckwin Summit (China)
Co., Ltd.
3 non-consolidated
subsidiaries

Outsources
product
inspection

Outsources productpacking and packaging

Senshukai Service
Hanbai Co., Ltd.

Order
processing

Senshukai Call Center
Co., Ltd.
Senshu Logisco Co., Ltd.

Outsources productplanning and development
Other outsourcing services

AIMER Co., Ltd.

1 consolidated subsidiary
1 non-consolidated subsidiary

Outsources transportation andwarehousing services
Senshu Transportation Co., Ltd.

Senshukai General Services Co., Ltd.

Other businesses

Suppliers

2 subsidiaries accounted forby the equity method

Outsources orderprocessing

Senshukai Co., Ltd.

Senshukai Hong Kong Ltd.

Outsources customer
services and area marketing

Dears Brain Inc.
1 consolidated subsidiary
2 non-consolidated subsidiaries

ByByS Co., Ltd.
Sells products

Purchases products
Pet First Co., Ltd.

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Providesservices

Customers

Mail-order business

Mobakore Co., Ltd.

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

3. Management Policies(1) Basic Management Policy
The Senshukai Group’s corporate philosophy is to “contribute to society by providing customers with outstanding
products and services.”
Senshukai works together with its shareholders, customers, business partners, employees, and all other stakeholders toenhance corporate value and mutual prosperity.

(2) Key Performance Indicators
Our medium-term management plan (runs from Fiscal 2008 through Fiscal 2010) aims to maximize group strengths,
and targets strong growth in existing core businesses and new businesses. Specifically, it targets consolidated net salesof 180,000 million yen, operating income of 8,000 million yen (a record), and operating cash flow of 7,000 million yen,
by Fiscal 2010.
Going forward, we aim to enhance corporate value by increasing growth and improving the earnings structure.

(3) Medium- to Long-term Corporate Management Strategy and Issues
We have formulated a three-year medium-term management plan that ends in Fiscal 2010.
1) Basic policies of the Medium-term Management Plani. Promotion of Channel Mix
We intend to further deepen “multi-channel promotion” targeted in the previous medium-term management plan, by not
merely expanding channel numbers, but fusing channels in fundamental ways and speeding up operations to achievesynergies.
ii. Development of Multiple Brands
To diversify the business through expansion of product and service offerings, and capture certain age groups that are
difficult to capture with a single brand (Belle Maison), we will move forward with a multi-brand strategy appropriate
for different customer segments and product genres, and avoid the inappropriate use of Belle Maison which could
damage its value.
iii. Expansion of Customer BaseWe will expand customers in the over-50 segment by developing new goods for the seniors market, as well as new
media to reach them. We will also aim to expand customers in their 20s, but we do not intend to rush expansion of theearly 20s market, but steadily win this customer segment over through alliances with other companies and M&A, andthrough the utilization of new media including the Internet, mobile phones, and magazines. We will strengthen
expansion of the late 20s market, and maintain our overall base of 20s customers.
iv. SCM (supply chain management) Promotion
Improving cash flow, which deteriorated due to expanding inventories, is a top priority. We will restructure themanagement framework to improve the efficiency of inventories and further strengthen SCM.

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Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

2) Fiscal 2008 strategies in the Medium-term Management Plani. Promotion of Channel Mix
Each division will have channel control functions starting this fiscal year, and will be responsible for promoting channel
mix including administration of channel sales and implementation of policies for Internet and brick-and-mortar stores.
Internet sales totaled 66,300 million yen throughout the Group (of this, pure Internet sales totaled 37,300 million yen),
and we opened five new brick-and-mortar Kurasu Fuku stores, bringing the total number of these stores to six. We
intend to deepen the reach of our sales channels going forward.
ii. Development of Multiple Brands
We are redefining the Belle Maison brand, and working to clarify Belle Maison brands from other brands to improvetheir respective values, and by extension, raise the Senshukai group’s overall value.
iii. Expansion of Customer Base
20s: We redeveloped our website in August by product genre to capture more customers in the 20s age group. We also
opened a new website, bellissi, for the 20s age group. We plan to renew our Fashion Plus catalog in Fiscal 2009 tooffer a stronger lineup of products with reliable quality and attractive prices.
50s: For customers in the 50s age group, we will use sales circulars for the catalog Kurasu Fuku, and will expand sizes
and tastes for Style Note and Rashisa to capture new customers and maintain existing ones.
iv. SCM (supply chain management) Promotion
The delivery-to-order ratio and the rapid delivery ratio deteriorated over last year. However, catalog product inventories
declined approximately 2,600 million yen year-over-year as we reduced excess procurement by splitting deliveries, andwe implemented bargains quickly after catalogs expired. We aim to optimize inventory levels going forward to improvethe cost ratio.

(4) Other Important Business Matters
Not applicable.

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Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Consolidated Financial Statements
Consolidated Financial Statements(1) Consolidated Balance Sheets(Million yen)
PeriodAccount

Fiscal 2007
(As of Dec. 31, 2007)

Fiscal 2008
(As of Dec. 31, 2008)

AmountAmount%Change%AssetsI Current assets
1. Cash and deposits*3

2. Notes and accounts receivable-trade
3. Marketable securities
4. Inventories
5. Deferred tax assets
6. Accounts receivable-other
7. Forward exchange contracts
8. Other

3,444

7,670

4,226

11,211

10,888

(323)

85

524

438

19,31816,497(2,820)

86

1,009

922

9,347

8,028

(1,319)

15

-

(15)

4,967

5,695

728

Allowance for doubtful accounts(254)

Total current assets

48,224(316)
49.0

49,998

(61)
48.0

1,774

II Fixed assets
1. Property and equipment*1(1) Buildings and structures*3

10,286

15,0594,773(2) Machinery and vehicles

1,575

1,133

(442)

(3) Furniture and fixtures

897

1,162

264

11,305

11,168

(137)

962

13

(949)

(4) Land*5(5) Construction in progress
Total property and equipment

25,02825.4

28,536

27.4

3,508

2. Intangible assets(1) Goodwill-(2) Other

2,963

3,346

Total intangible assets

2,963

2,502

3,346

3.4

5,465

(843)
5.3

2,119

3. Investments and other assets(1) Investment securities(2) Long-term loans receivable*2

15,573

11,368(4,205)
460

366

826

(3) Guarantee deposits

1,442

1,626

184

(4) Deferred tax assets

299

1,546

1,246

(5) Other

4,444

4,894

449

Allowance for doubtful accounts

(302)

(203)

99

Total investments and other assets

21,82322.2

20,05819.3(1,764)

Total fixed assets

50,19751.0

54,060

52.0

3,863

Total assets

98,422100.0

104,059

100.0

5,637

- 11 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(Million yen)
PeriodAccount
Liabilities
I Current liabilities
1. Notes and accounts payable-trade
2. Short-term bank loans*3
3. Current portion of corporate bonds*3
4. Accounts payable-other
5. Accounts payable-factoring
6. Accrued expenses
7. Accrued income taxes
8. Accrued consumption taxes
9. Deferred tax liabilities
10. Liabilities for directors and corporate
auditors’ bonuses
11. Allowance for sales promotion expenses
12. Forward exchange contracts
13. Other
Total current liabilities
II Long-term liabilities
1. Corporate bonds
2. Long-term debt
3. Deferred tax liabilities
4. Deferred tax liabilities relating to land
revaluation
5. Liabilities for employees’ retirement
benefits
6. Liabilities for retirement benefits for
directors and corporate auditors
7. Other

Fiscal 2007
(As of Dec. 31, 2007)

Fiscal 2008
(As of Dec. 31, 2008)

AmountAmount%Change%11,0233,000
6,423
15,027
2,016
1,887
232
64

8,527
9,957
66
6,508
15,789
1,854
194
289
-

(2,495)
6,957
66
85
762
(162)
(1,693)
57
(64)

51

-

(51)

133
1,315

346
9,788
831

212
9,788
(483)

41,17541.8

54,15352.1

12,978

*3
*3

3

168
4,112
-

168
4,112
(3)

*5

764

764

-

53

45

(7)

424

335

(88)

45

206

160

Total long-term liabilities

1,291

1.3

5,631

5.4

4,340

Total liabilities
Net assets
I Shareholders’ equity
1. Common stock
2. Capital surplus
3. Retained earnings
4. Treasury stock

42,46643.1

59,78457.5

17,31820,35921,03821,691
(630)

20.7
21.4
22.0
(0.6)

20,35921,03814,064
(631)

19.6
20.2
13.5
(0.6)

0
(7,626)(1)

62,45863.5

54,83052.7(7,627)486

0.5(1,312)(1.3)(1,798)376(7,359)
(16)

0.4
(7.5)
(0.0)

(2,038)(7,103)
(130)

(2.0)
(6.8)
(0.1)

(2,415)
256(114)(6,512)(6.6)(10,584)(10.2)(4,072)

10

0.0

29

0.0

18

Total shareholders’ equity
II Valuation and translation adjustments
1. Net unrealized gains on available-for-salesecurities
2. Deferred hedge gains (losses)
3. Land revaluation difference*5
4. Foreign currency translation adjustments
Total valuation and translation
adjustments
III Minority interests
Total net assets

55,95556.9

44,27442.5(11,681)

Total liabilities and net assets

98,422100.0

104,059

100.0

5,637

- 12 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(2) Consolidated Statements of Income(Million yen)
PeriodAccount
I Net sales
II Cost of sales*1

Gross profit
III Selling, general and administrative*2
expenses
1. Packing and freight
2. Sales promotion expenses
3. Provision for allowance for sales
promotion expenses
4. Provision for allowance for doubtful
accounts
5. Bad debt loss
6. Directors’ and corporate auditors’
remuneration
7. Salaries
8. Bonuses
9. Provision for liabilities for directors andcorporate auditors’ bonuses
10. Provision for liabilities for employees’
retirement benefits
11. Provision for liabilities for retirement
benefits for directors and corporate
auditors
12. Depreciation expenses
13. Other

Fiscal 2007
Fiscal 2008
(Jan. 1, 2007 – Dec. 31, 2007) (Jan. 1, 2008 – Dec. 31, 2008)
Amount156,792
80,864

%
100.0
51.6

Amount158,285
81,912

%
100.0
51.7

1,493
1,048

75,92848.4

76,37348.3

444

70,63745.0

73,960

46.8

3,322

1.5
0.6

(2,878)
155

5.0

6,514

(2.9)

(9,236)

10,38324,43010,19325,303

133

346

249

287

119

46

568

577

10,577
1,621

11,206
1,372

51

-

15

13

2

61

1,684
20,7982,127
22,423Operating income
IV Other income
1. Interest income
2. Dividend income
3. Co-sponsor fee
4. Gains on cancellation of insurance
contracts
5. Other

5,291
768
353
103
-

V Other expenses
1. Interest expenses
2. Losses on write-down of compound
financial instruments
3. Losses on investment partnershipmanagement
4. Investment loss on equity method
5. Expenses related to fixed asset
investment
6. Foreign exchange losses
7. Other

1,376
64

Ordinary income (loss)

Change

3.4
0.5

0

2,413
924
270
172
103
-

311

377
0.9

7,890
162

212

1,331

6

-

164

247

41

-

807
78

5,904
245

4,683

3.0

- 13 -(4,553)

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(Million yen)
PeriodAccount
VI Extraordinary gains
1. Gains on sales of fixed assets
2. Gains on sales of investment securities
3. Reversal of allowance for doubtful
accounts
VII Extraordinary losses
1. Losses on sales and disposal of fixed
assets
2. Losses on write-down of investment
securities
3. Losses on sales of investment securities
4. Losses on cancellation of contracts
5. Losses on liquidation of subsidiaries
6. Compensation expense
7. Losses on cancellation of leases
8. Impairment loss
9. Special retirement and severance
expense
10. Losses on write-down of golf clubmemberships
11. Provision for allowance for doubtful
accounts
Income (loss) before income taxes andminority interests
Income taxes
Deferred income taxes
Minority interests (losses)
Net income (loss)*3

Fiscal 2007
Fiscal 2008
(Jan. 1, 2007 – Dec. 31, 2007) (Jan. 1, 2008 – Dec. 31, 2008)
Amount
335
38
174

%
0.2

121

*6

*5

Change

%
0.2

(89)

1.0

375

-

1,212
*4

Amount
245
245
-

0.8

1,587

338

759

94

594

265
331
170
13
-

28
153

-

48

-

2

-

1

3,806

2.4

(5,895)(3.7)(9,701)

2,069
(175)
(20)

1.3
(0.1)
(0.0)

444
(74)
5

0.3
(0.0)
0.0

(1,624)
100
26

1,932

1.2

(6,271)(4.0)(8,204)- 14 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(3) Consolidated Statements of Changes in Shareholders’ Equity
Fiscal 2007 (Jan. 1, 2007 – Dec. 31, 2007)(Million yen)
Shareholders’ equity
Common stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders’equity20,35920,716

20,889(1,041)

60,923

Balance as of Dec. 31, 2006
Changes in the fiscal year
Dividend of surplus(1,066)(1,066)

Net income

1,932

1,932

Purchases of treasury stock
Disposal of treasury stock

322

Transfer of land revaluationdifference
Decrease in retained earnings due
to change in the number ofconsolidated subsidiaries andequity method affiliates
Changes (net) in items other thanshareholders’ equity
Total changes in the fiscal year
Balance as of Dec. 31, 2007

(32)

(32)

443

765

58

58

(122)

(122)

-

322

801

411

1,534

20,35921,03821,691(630)

62,458(Million yen)

Valuation and translation adjustments
Net unrealized
Deferred
gains onhedge gains
available-for(losses)
sale securities
Balance as of Dec. 31, 2006

1,336

734

Land
revaluationdifference(7,301)

Foreign
Total valuation
currency
and translationtranslation
adjustments
adjustments(31)(5,261)

Minority
interests

Total net
assets46

55,708Changes in the fiscal year
Dividend of surplus(1,066)

Net income

1,932

Purchases of treasury stock(32)

Disposal of treasury stock

765

Transfer of land revaluationdifference
Decrease in retained earnings
due to change in the number ofconsolidated subsidiaries andequity method affiliates
Changes (net) in items otherthan shareholders’ equity

58

(122)

(850)

(357)

(58)

15

(1,250)(36)(1,287)

Total changes in the fiscal year

(850)

(357)

(58)

15

(1,250)(36)

247

Balance as of Dec. 31, 2007

486

376

(7,359)(16)(6,512)

10

55,955- 15 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Fiscal 2008 (Jan. 1, 2008 – Dec. 31, 2008)(Million yen)
Shareholders’ equity
Common stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders’equity20,35921,03821,691(630)

62,458

Balance as of Dec. 31, 2007
Changes in the fiscal year
Dividend of surplus(1,027)(1,027)Net loss(6,271)(6,271)

Purchases of treasury stock
Disposal of treasury stock0

Transfer of land revaluationdifference
Decrease in retained earnings due
to change in the number ofconsolidated subsidiaries andequity method affiliates
Changes (net) in items other thanshareholders’ equity
Total changes in the fiscal year
Balance as of Dec. 31, 2008

(1)

(1)

0

0

(256)

(256)

(70)

(70)

-

0

(7,626)(1)(7,627)

20,35921,03814,064(631)

54,830(Million yen)

Valuation and translation adjustments
Net unrealized
Deferred
gains onhedge gains
available-for(losses)
sale securities
Balance as of Dec. 31, 2007

486

376

Land
revaluationdifference(7,359)Total
Foreigncurrency valuation andtranslationtranslation
adjustments adjustments(16)(6,512)

Minority
interests

Total net
assets10

55,955

Changes in the fiscal year
Dividend of surplus(1,027)Net loss(6,271)

Purchases of treasury stock(1)

Disposal of treasury stock0

Transfer of land revaluationdifference
Decrease in retained earnings
due to change in the number ofconsolidated subsidiaries andequity method affiliates
Changes (net) in items otherthan shareholders’ equity

(256)

(70)

(1,798)(2,415)256

Total changes in the fiscal year

(1,798)(2,415)

256

Balance as of Dec. 31, 2008

(1,312)(2,038)(7,103)- 16 -(114)(4,072)18(4,053)(114)(4,072)

18(11,681)(130)(10,584)29

44,274

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(4) Consolidated Statements of Cash Flows(Million yen)
PeriodAccount

Fiscal 2008
(Jan. 1, 2008 –Dec. 31, 2008)
AmountFiscal 2007
(Jan. 1, 2007 –Dec. 31, 2007)
AmountChangeI Cash flows from operating activities
1. Income (loss) before income taxes and minority interests

3,806(5,895)(9,701)

2. Depreciation expenses

1,724

2,140

416

3. Impairment loss

-

153

153

(266)

(61)

205

8

-

(8)

6. Increase (decrease) in allowance for sales promotion
expenses

(142)

212

354

7. Interest and dividend income

(456)

(442)

13

64

162

97

4. Decrease in allowance for doubtful accounts
5. Increase in liabilities for employees’ retirement benefits

8. Interest expenses

-

5,797

5,797

10. Investment profit (loss) on equity method

9. Foreign exchange losses (gains)

164

247

82

11. Losses on write-down of compound financial instruments

212

1,331

1,118

12. Gains on sales of fixed assets

(38)

(245)

(207)

13. Gains on sales of investment securities

(174)

-

174

14. Losses on sales and disposal of fixed assets

338

759

420

15. Losses on write-down of investment securities

94

594

499

16. Losses on liquidation of subsidiaries

331

-

(331)

17. Decrease in notes and accounts receivable-trade

375

350

(25)

18. Decrease (increase) in inventories(2,742)

2,844

5,586

19. Decrease (increase) in other current assets(1,661)

950

2,612

20. Decrease in notes and accounts payable-trade(964)(3,183)(2,219)21. Increase in accrued consumption taxes

146

249

102

22. Decrease (increase) in other current liabilities

170

(51)

(222)

23. Other

510

87

(423)

1,501

5,998

4,497

Subtotal
24. Interests and dividends received

438

417

(20)

25. Interests paid

(69)

(163)

(93)

26. Income taxes paid

(426)

(2,404)(1,977)

1,444

3,849

2,405

Net cash provided by operating activities- 17 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(Million yen)
PeriodAccount

Fiscal 2008
(Jan. 1, 2008 –Dec. 31, 2008)
AmountFiscal 2007
(Jan. 1, 2007 –Dec. 31, 2007)
AmountChangeII Cash flows from investing activities
1. Purchases of property and equipment(1,904)

2. Proceeds from sales of property and equipment(2,617)

(713)

147

447

299

(1,827)

(659)

1,168

-

0

0

5. Purchases of investment securities(3,354)(2,473)880

6. Proceeds from sales of investment securities

2,623

825

(1,797)-(2,297)(2,297)(1,217)

(997)

220

(236)

-

236

(278)

382

660

(6,047)(7,388)(1,341)

3,000

4,566

1,566

2. Proceeds from long-term debt

66

5,052

4,985

3. Repayments of long-term debt

(456)

(358)

98

4. Redemption of corporate bonds

-

(33)

(33)

5. Purchases of treasury stock

(32)

(1)

30

6. Proceeds from sales of treasury stock

765

0

(765)

7. Proceeds from minority interests

30

-

(30)

(1,065)(1,026)39

3. Purchases of intangible assets
4. Proceeds from sales of intangible assets

7. Purchases of subsidiary stock associated with changes in the *3
scope of consolidation
8. Increase in time deposits
9. Purchases of business*2

10. Other
Net cash used in investing activities
III Cash flows from financing activities
1. Net increase in short-term bank loans

8. Cash dividends paid
9. Cash dividends paid to minority interests

(2)

-

2

Net cash provided by financing activities

2,305

8,199

5,894

IV Increase (decrease) in cash and cash equivalents(2,298)

4,660

6,958

V Cash and cash equivalents at beginning of period

5,549

3,526

(2,023)

275

-

(275)

3,526

8,186

4,660

VI Increase in cash and cash equivalents due to consolidationof subsidiary
VII Cash and cash equivalents at end of period*1

Conditions and Events that Might Raise Critical Questions about the Validity of the Going-concern Assumption
Not applicable.

- 18 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Significant Accounting Policies for the Preparation of Consolidated Financial Statements
Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)

1. Scope of consolidation(1) Number of consolidated subsidiaries: 13
Main consolidated subsidiaries:
Senshukai General Services Co., Ltd.
Senshu Logisco Co., Ltd.
Senshukai Call Center Co., Ltd.
Dears Brain Inc.
Dears Brain Inc., previously accounted for by the equity-method
Melody Square Co., Ltd., B-BOP Studio Co., Ltd., Pet First Co.,
Ltd. and Future Compass Co., Ltd., non-consolidated subsidiaries affiliate, was included in the scope of consolidation due to theacquisition of additional shares in May 2008. The equity methodin the previous fiscal year, were included in the scope of
was applied for the current interim period, as Senshukai sets theconsolidation from the current fiscal year due to their incraesed
importance. Melody Square Co., Ltd. acquired B-BOP Studio Co., assumed acquisition date to the interim consolidated balance sheet
date.
Ltd. on July 1, 2007, and changed the company name to B·B·S
Future Compass Co., Ltd. was liquidated in December 2008.
Co., Ltd.
HBS Co., Ltd. was liquidated and excluded from consolidation in
December 2006.
RG Marketing Co., Ltd. was included in the scope of consolidation
due to its establishment.

1. Scope of consolidation(1) Number of consolidated subsidiaries: 13
Main consolidated subsidiaries:
Senshukai General Services Co., Ltd.
Senshu Logisco Co., Ltd.
Senshukai Call Center Co., Ltd.

(2) Number of non-consolidated subsidiaries: 6
Main non-consolidated subsidiaries:
Senshukai Hong Kong Ltd.
Reason for exclusion from scope of consolidation
The consolidated financial statements do not include the accounts
of above mentioned non-consolidated subsidiaries since their total
assets, net sales, net income/loss (equity in earnings) or retained
earnings (equity in earnings) have no significant effect on theoverall results of consolidated financial statements.

(2) Number of non-consolidated subsidiaries: 11
Same as on the left.

2. Application of equity method(1) Number of non-consolidated subsidiaries accounted for by theequity method: 4Main non-consolidated subsidiaries accounted for by the equity
method:Senshukai Hong Kong Ltd.

2. Application of equity method(1) Number of non-consolidated subsidiaries accounted for by theequity method: 4Same as on the left.

Reason for exclusion from scope of consolidation
Same as on the left.

Shanghai Senshu Merchant and Commerce Co., Ltd. was includedin the scope of the equity-method non-consolidated subsidiaryfrom the current fiscal year due to its increased importance.
(2) Number of equity-method affiliate: 1
Equity-method affiliate
SENTENs Co., Ltd.
SENTENs Co., Ltd. was included in the scope of equity-method
affiliate due to its establishment.

(2) Number of equity-method affiliates: 2
Equity-method affiliates
SENTENs Co., Ltd.
Mobakore Co., Ltd.
Dears Brain Inc. was treated as an equity-method affiliate in thecurrent interim period due to the acquisition of shares in November
2007, but moved from an equity-method affiliate to a consolidated
subsidiary following the acquisition of additional shares in May
2008. The equity method was applied for the current interim
period, and losses included with investment loss on equity method,as Senshukai sets the assumed acquisition date to the interim
consolidated balance sheet date.
Mobakore Co., Ltd. was included in the scope of theequity-method affiliate due to its increased importance.

- 19 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)(3) Of the companies accounted for by the equity method, certain
companies have balance sheet date more than six months
distant from that of the Company. To prepare for consolidated
financial statements, most recent interim financial statementsfrom the consolidated balance sheet date of such companies areused.
We make consolidated adjustments as necessary for majortransactions that occur subsequently in the period before theconsolidated balance sheet date.

(3) Same as on the left.

(4) Main non-consolidated subsidiaries and affiliates not accounted (4) Main non-consolidated subsidiaries and affiliates not accounted
for by the equity method:
for by the equity method:
Innovation Information Technology (Shanghai) Co., Ltd.
Mobakore Co., Ltd.
Reason for not accounted for by the equity method
Reason for not accounted for by the equity method
Same as on the left.
The above-mentioned entity is not accounted for under the equity
method since its net income/loss (equity in earnings) or retained
earnings (equity in earnings) have no significant effect on theoverall results of consolidated financial statements.
3. Fiscal years for consolidated subsidiaries
The fiscal years of all consolidated subsidiaries coincide with
Senshukai’s fiscal year.

3. Fiscal years for consolidated subsidiaries
The fiscal years of all consolidated subsidiaries coincide with
Senshukai’s fiscal year.
Dears Brain Inc. has changed its balance sheet date from June 30 to
December 31 in the current fiscal year.

4. Accounting standards(1) Valuation standards and accounting treatment for important
asset1) Investment securities
Available-for-sale securities
Available-for-sale securities are reported at fair value, determinedby the market price as of the fiscal year-end and other factors,
with unrealized gains or losses, net of applicable taxes, reported
in a separate component of net assets. The cost of available-forsale securities sold is determined based on the moving-averagemethod.

4. Accounting standards(1) Valuation standards and accounting treatment for important
asset1) Investment securities
Available-for-sale securities
Same as on the left.

Same as on the left.

Available-for-sale securities whose fair value is not readily
determinable are stated at cost based on the moving-averagemethod.
2) Derivatives
Derivatives are stated at market value.

2) Derivatives

3) Inventories
Inventories are stated at the lower of cost, determined by themonthly average method, or market.

3) Inventories

Same as on the left.

Same as on the left.

(2) Method for depreciating and amortizing important assets(2) Method for depreciating and amortizing important assets
1) Property and equipment
1) Property and equipment
Same as on the left.
Depreciation is computed by the declining-balance method, but thestraight-line method is applied to buildings (excluding attachedstructures) acquired on or after April 1, 1998.
The range of useful lives is as follows:
Buildings and structures: 38-50 years
Machinery and vehicles: 12 years- 20 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)(Change in accounting policy)
Effective from the current fiscal year, property and equipment
purchased on or after April 1, 2007 is depreciated in line withmethods prescribed in the revised Corporate Tax Law.
This change in accounting policy has no significant effect on theamount of income.

(Supplemental information)
Following the revision of the Corporate Tax Law, property andequipment purchased on or before March 31, 2007 is depreciatedequally over five years, and booked as a depreciation expense, thedifference between the memorandum value, and 5% of theacquisition value, beginning in the fiscal year following the fiscal
year in which the asset’s value reaches 5% of the acquisition value
based on depreciation methods prior to corporate tax law revisions.
As an effect of this change, operating income, ordinary income andincome before income taxes and minority interests declined by 53
million yen respectively.
The impact on segment businesses can be found in applicableportions of this report.

2) Intangible assets
Intangible assets are amortized using the straight-line method.
However, in-house software is amortized by the straight-line
method based on an estimated useful life of five years.

2) Intangible assets
Same as on the left.

(3) Accounting for allowances(3) Accounting for allowances
1) Allowance for doubtful accounts
1) Allowance for doubtful accounts
Same as on the left.
The allowance for doubtful accounts provides for possible losses
arising from default on accounts receivable. The allowance is madeup of two components: the estimated credit loss for doubtfulreceivables based on an individual assessment of each account, anda general reserve calculated based on historical default rates.
2) Liabilities for directors and corporate auditors’ bonuses
Bonuses to directors and corporate auditors of Senshukai andconsolidated subsidiaries are provided at the amount which would
be required for future estimated bonus obligations.

2) Liabilities for directors and corporate auditors’ bonuses
Same as on the left.

3) Allowance for sales promotion expenses
This allowance is provided to cover future cost outlays related tothe mileage point system, which is aimed at sales promotion. The
allowance provides for the projected monetary redemption valueof mileage points calculated based on the unredeemed value of
issued points and historical redemption ratios.

3) Allowance for sales promotion expenses
Same as on the left.

4) Liabilities for employees’ retirement benefits
Allowance for retirement benefits of certain consolidated
subsidiaries are provided based on the retirement benefit
obligations and pension assets at the balance sheet date.
The retirement benefit obligations are calculated based on thecompendium method.

4) Liabilities for employees’ retirement benefits
Same as on the left.

5) Liabilities for retirement benefits for directors and corporate
auditors
Retirement benefits to directors and corporate auditors of
Senshukai and of certain consolidated subsidiaries, andSenshukai’s executive officers are provided at the amount which
would be required if all of them retired at the balance sheet datepursuant to the internal rules.

5) Liabilities for retirement benefits for directors and corporate
auditors
Same as on the left.

- 21 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)(4) Conversion of credit and liabilities in foreign currencies toJapanese currency
All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yenat the spot exchange rates as of the balance sheet date. The foreignexchange gains and losses from translation are recognized in theincome statement to the extent that they are not hedged byforward exchange contracts, currency swaps and currency options.
The balance sheet accounts and income statement accounts of theoverseas equity-method affiliates were translated into Japanese
yen at the spot exchange rate as of the balance sheet date, andforeign exchange gains and losses from translation are included in
the foreign currency translation adjustments under net assets.

(4) Conversion of credit and liabilities in foreign currencies toJapanese currency
Same as on the left.

(5) Accounting for sales promotion expenses(5) Accounting for sales promotion expenses
Same as on the left.
The Company conducts a mail-order business, and among sales
promotion expenses, catalog-related expenses corresponding to net
sales in the next fiscal year are classified as prepaid expenses andincluded in “Other” under current assets to better match expenses
to earnings in each year.
(6) Accounting for leases
Finance leases, other than those that transfer ownership of theleased assets to the lessees, are treated in the same way as ordinary
operating leases for accounting purposes.

(6) Accounting for leases
Same as on the left.

(7) Accounting for hedging
1) Hedge accounting methods
The deferred hedge accounting method is adopted.

(7) Accounting for hedging
1) Hedge accounting methods
Same as on the left.

2) Hedging instruments/ hedged items
2) Hedging instruments/ hedged items
Hedging instruments:
Hedging instruments:
Foreign exchange forward contracts, currency options, currency
Foreign exchange forward contracts, currency options andswaps and interest swaps
currency swaps
Hedged items:
Hedged items:
Accounts payable for imports, denominated in foreign currencies
Accounts payable for imports, denominated in foreign currencies
and interest on borrowings
3) Hedging policy
Risks from fluctuation in foreign currency exchange and cash
flows are hedged in accordance with internal policies.

3) Hedging policy
Risks from fluctuation in foreign currency exchange, cash flows
and interest rate are hedged in accordance with internal policies.

4) Evaluation of hedging effectivenessHigh correlation and effectiveness between the hedging
instruments and the hedged items are regularly verified.
However, with respect to foreign exchange forward contracts andother instruments used in payment for imports and others, theevaluation is omitted in cases where such hedging operations
deems to fully offset cash flow variances that may be caused due
to fluctuation in foreign currency exchange.

4) Evaluation of hedging effectivenessSame as on the left.

(8) Accounting for consumption taxes
Financial statements are prepared exclusive of national andregional consumption taxes.

(8) Accounting for consumption taxes
Same as on the left.

- 22 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)

5. Valuation of consolidated subsidiaries’ assets and liabilities
The assets and liabilities of consolidated subsidiaries are evaluatedusing the fair value method.

5. Valuation of consolidated subsidiaries’ assets and liabilities
Same as on the left.

6. Amortization of goodwill and negative goodwill
Amortization of goodwill and negative goodwill are estimated foreach period in which it is expected to emerge, and then equallyamortized over the designated amortization period.

6. Amortization of goodwill and negative goodwill
Same as on the left.

7. Scope of cash and cash equivalents
Cash and cash equivalents are cash on hand and short-term
investments that are readily convertible into cash, and that are
exposed to insignificant risk of changes in value. Cash equivalents
include time deposits and bond funds, all of which mature or
become due within three months of the date of acquisition.

7. Scope of cash and cash equivalents
Same as on the left.

- 23 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Reclassifications
Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)
Consolidated balance sheets:“Goodwill,” presented as a component of “Intangible assets” inthe previous fiscal year, is shown as a separate line item since its
amount exceeded 1/100 of total assets in the current fiscal year.
“Goodwill” included in “Intangible assets” in the previous fiscal
year was 227 million yen.
Consolidated statements of income:
1. “Losses on investment partnership management” under otherexpenses stated as separate item in the previous fiscal year, is
included in “Other” under other expenses in the current fiscal
year since the amount is insignificant. “Losses on investment
partnership management” in the current fiscal year totaled 20
million yen.
2. “Expenses related to fixed asset investment” under otherexpenses stated as separate item in the previous fiscal year, is
included in “Other” under other expenses in the current fiscal
year since the amount is insignificant. “Expenses related to
fixed asset investment” in the current fiscal year totaled 12
million yen.

Consolidated statements of cash flows:
Consolidated statements of cash flows:“Gains on sales of investment securities,” which was included in 1. “Increase (decrease) in liabilities for employees’ retirement
benefits” under cash flows from operating activities stated as“Other” under “Cash flows from operating activities” in theseparate item in the previous fiscal year, is included in “Other”
previous fiscal year, is shown as a separate line item in theunder cash flows from operating activities in the current fiscal
current fiscal year, to clarify its contents.
year since the amount is insignificant. “Increase (decrease) in
The amount of “Gains on sales of investment securities” included
liabilities for employees’ retirement benefits” in the current
in “Other” under “Cash flows from operating activities” in thefiscal year totaled minus 7 million yen.
previous fiscal year was minus 54 million yen.
2. “Foreign exchange gain/loss,” which was included in “Other”
under “Cash flows from operating activities” in the previous
fiscal year, is shown as a separate line item in the current fiscal
year, to clarify its contents.
The amount of “Foreign exchange gain/loss” included in“Other” under “Cash flows from operating activities” in theprevious fiscal year was 831 million yen.

- 24 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Notes to Consolidated Financial Statements
Notes to Consolidated Balance Sheets(Million yen)

Fiscal 2007
(As of Dec. 31, 2007)

Fiscal 2008
(As of Dec. 31, 2008)*1. Accumulated depreciation on property and equipment*1. Accumulated depreciation on property and equipment

32,39532,247*2. Shares of non-consolidated subsidiaries and affiliates
Investment securities

2,207

*3.

4. Contingent liabilities
Guarantees of bank loans
Employees’ housing loans

35*2. Shares of non-consolidated subsidiaries and affiliates
Investment securities

727*3. Assets pledged as collateral(1) Collateral-backed assets
Cash and deposits (Time deposits)
Buildings and structures
Total

15
1,003
1,018

(2) Collateral-backed liabilities
Short-term bank loans
Current portion of corporate bonds
Corporate bonds
Long-term debt
Total

287
66
168
730
1,251

4. Contingent liabilities
Guarantees of bank loans
Employees’ housing loans

30*5. Land revaluation
The Company revalued its business-use land in accordance withthe “Law Concerning Revaluation of Land” (Law No. 34 enacted
on March 31, 1998) and the “Law to Partially Modify the Law
Concerning Revaluation of Land” (revised on March 31, 1999).
The result was included in net assets as “Land revaluationdifference,” after deducting the deferred tax liabilities relating toland revaluation.

*5. Land revaluation

Method of revaluation by Clause 3, Article 3 of the law
The method is based on Article 16 of the “Land-Value Tax Law”
(Ordinance No. 69 enacted in 1991) as specified by Clause 4,
Article 2 of the “Enforcement Regulations of the Law
Concerning Revaluations of Land” (Ordinance No. 119 enacted
on March 31, 1998), and computation by reasonable adjustmentof the value calculated by the Director of the National Tax
Agency to calculate land value as the basis of calculating landtaxes as specified by the latter Ordinance.
Date of revaluation
Mar. 31, 2000
Difference between market value of
relevant land on December 31, 2007
(2,999)and its book value after revaluation

Method of revaluation by Clause 3, Article 3 of the law
Same as on the left.

Same as on the left.

- 25 -

Date of revaluation
Difference between market value of
relevant land on December 31, 2008
and its book value after revaluation

Mar. 31, 2000
(2,606)

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Notes to Consolidated Statements of Income(Million yen)
Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)*1. Among cost of sales, valuation losses using the lower of costor market method were 53 million yen.

*1. Among cost of sales, valuation losses using the lower of costor market method were 62 million yen.

*2. R&D expenses included in general and administrative
expenses*2. R&D expenses included in general and administrative
expenses
555

635*3. Gains on sales of fixed assets
Machinery and vehicles, other
Land
Total

3
35
38

*4. Losses on sales and disposal of fixed assets
Losses on disposal of buildings and structures
Losses on disposal of machinery and vehicles
Losses on disposal of furniture and fixtures
Losses on disposal of intangible assets
Total

9
90
13
224
338

*5.

*3. Gains on sales of fixed assets
Machinery and vehicles
Land and buildings, other
Total

5
239
245

*4. Losses on sales and disposal of fixed assets
Losses on disposal of buildings and structures
Losses on disposal of machinery and vehicles
Losses on sales of machinery and vehicles
Losses on disposal of furniture and fixtures, others
Losses on disposal of intangible assets, others
Total

59
185
0
29
483
759

*5. Impairment loss
For the current fiscal year, the Senshukai Group posted
impairment loss on the following asset groups.
(Million yen)
Impairment
Location
Primary use
Type
loss
Pet First
Pet business Buildings, structures,
153
Co., Ltd.
assetssoftware, and others
In principle, the grouping of assets is based on categories ofmanagement accounting.
The book value of the above asset groups was marked down to therecoverable amount, reflecting a weak prospects for improved
short-term performance due to worsening operating profitability.
This markdown was posted as an impairment loss.
The impairment loss on buildings and strucures, furniture andfixtures, and software were 55 million yen, 15 million yen and 82
million yen, respectively.
The recoverable amount was measured at its net selling price.

*6. Losses on liquidation of subsidiaries
A valuation loss was booked upon dissolution of Shoplat Co., Ltd.

*6.

- 26 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Notes to Consolidated Statements of Changes in Shareholders’ Equity
Fiscal 2007 (Jan. 1, 2007 – Dec. 31, 2007)
1. Type and number of outstanding shares and treasury stock
Number of shares
Increase during the
Decrease during the
Number of shares
as of Dec. 31, 2006
current fiscal year
current fiscal year
as of Dec. 31, 2007
(Thousand shares)(Thousand shares)(Thousand shares)(Thousand shares)
Outstanding shares
Common stock
47,63047,630Total
47,63047,630Treasury stock
Common stock (Note)
1,548
19
651
916
Total
1,548
19
651
916
Note: Common shares of treasury stock increased by 19 thousand shares due to the purchase of odd-lot shares. Common shares oftreasury stock decreased by 651 thousand shares due to the transfer of odd-lot shares of 0 thousand shares in response to purchaserequests, and issuance of 651 thousand shares upon exercise of stock options.
2. Dividends(1) Dividend payment
Resolution
Annual general meeting ofshareholders on Mar. 29, 2007
Board of Directors meeting on Jul.
26, 2007

Type of share

Total amount of
Dividend per share
dividend(Yen)(Million yen)

Record date

Effective dateCommon stock

460

10

Dec. 31, 2006

Mar. 30, 2007

Common stock

606

13

Jun. 30, 2007

Aug. 31, 2007

(2) Dividends with a record date in the current fiscal year but an effective date in the following fiscal year
Total amountResource for Dividend per
Resolution
Type of share
Record dateof dividend
distribution share (Yen)(Million yen)
Annual general meeting ofRetained
Common stock653
14Dec. 31, 2007
shareholders on Mar. 28, 2008
earnings

Effective dateMar. 31, 2008

Fiscal 2008 (Jan. 1, 2008 – Dec. 31, 2008)
1. Type and number of outstanding shares and treasury stock
Number of shares
Increase during the
Decrease during the
Number of shares
as of Dec. 31, 2007
current fiscal year
current fiscal year
as of Dec. 31, 2008
(Thousand shares)(Thousand shares)(Thousand shares)(Thousand shares)
Outstanding shares
Common stock
47,63047,630Total
47,63047,630Treasury stock
Common stock (Note)
916
2
0
917
Total
916
2
0
917
Note: Common shares of treasury stock increased by 2 thousand shares due to the purchase of odd-lot shares. Common shares oftreasury stock decreased by 0 thousand shares due to the transfer of odd-lot shares in response to purchase requests.
2. Dividends(1) Dividend payment
Resolution
Annual general meeting ofshareholders on Mar. 28, 2008
Board of Directors meeting on Jul.
31, 2008

Type of share

Total amount of
Dividend per share
dividend(Yen)(Million yen)

Record date

Effective dateCommon stock

653

14

Dec. 31, 2007

Mar. 31, 2008

Common stock373

8Jun. 30, 2008

Sep. 1, 2008

(2) Dividends with a record date in the current fiscal year but an effective date in the following fiscal year
Total amountResource for Dividend per
Resolution
Type of share
Record dateof dividend
distribution share (Yen)(Million yen)
Annual general meeting ofRetained
Common stock420
9Dec. 31, 2008
shareholders on Mar. 27, 2009
earnings- 27 -

Effective dateMar. 30, 2009

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Notes to Consolidated Statements of Cash Flows(Million yen)
Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)*1. Reconciliation between balance sheet accounts and year-end
balance of cash and cash equivalents(As of Dec. 31, 2007)*1. Reconciliation between balance sheet accounts and year-end
balance of cash and cash equivalents(As of Dec. 31, 2008)

Cash and deposits
Marketable securities
Time deposits with deposit terms exceeding 3
monthsCash and cash equivalents

Cash and deposits
Marketable securities
Marketable securities other than cash
equivalents
Cash and cash equivalents

3,444
85
(3)
3,526

*2. Assets and liabilities increased by business transferred during
the fiscal year are as follows
112
Current assets
380
Fixed assets
492
Total assets
Current liabilities
Total liabilities
*3.

7,670
524
(7)
8,186

*2.

255
255
*3. Breakdown of assets and liabilities of Dears Brain Inc. as ofthe date the Company made it a consolidated subsidiary upon
the acquisition of its shares, and the relationship with thepurchase price of Dears Brain stock, and net outlays for theacquisition
242
Current assets
4,002
Fixed assets(2,709)Current liabilities(781)
Long-term liabilities
2,871
Goodwill(13)
Minority interests
Acquired surplus after application of the equity
32
method
(1,212)
Purchase price of Dears Brain
2,431
Purchase price of Dears Brain stock(134)
Cash and cash equivalents of Dears Brain
2,297
Net outlays for acquisition of Dears Brain- 28 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Segment Information
1. Business segments
Fiscal 2007 (Jan. 1, 2007 – Dec. 31, 2007)(Million yen)
Mail-orderbusiness

Other businesses

Total

Elimination or
corporate

Consolidated-

156,792

2,347)-I Net sales and operating income
Net sales(1) Sales to customers

145,664

11,128

156,792(2) Inter-segment sales

1,260

1,086

2,347

Total

(

146,925

12,215

159,140(

2,347)

156,792

141,321

12,508

153,829(

2,327)

151,501

Operating income (loss)

5,603

(293)

5,310

(

19)

5,291

II Assets, depreciation expenses,
impairment loss and capital expenditures
Assets95,115

4,738

99,853(

1,431)

98,422

Depreciation expenses

1,556

167

1,724

-

1,724

Operating expenses

Impairment loss
Capital expenditures

-

-

-

-

-

2,897

608

3,506

-

3,506

Notes: 1. The classification of business segments is based on categories adopted for internal management purposes.
2. Principal activities of each business segment(1) Mail-order business: Catalog and hanpukai businesses(2) Other businesses: Services, transportation and others
3. There are no unallocated operating expenses included in the “elimination or corporate.”
4. There are no corporate assets included in the “elimination or corporate.”
5. Revisions to segment business classifications
The Belle Mariee wedding support business, previously classified in the “mail-order business,” was reclassified to the “otherbusinesses” starting from the current fiscal year under review because it was restructured as a comprehensive bridal
producer involved in wedding dress sales, wedding hall bookings, and chapel wedding management.
This revision lowered net sales in the mail-order business by 137 million yen, and increased net sales in other businesses by
the same amount; similarly, the revision increased operating income in the mail-order business by 223 million yen, andlowered it in “other businesses” by the same amount.

Fiscal 2008 (Jan. 1, 2008 – Dec. 31, 2008)(Million yen)
Mail-orderbusiness

Other businesses

Total

Elimination or
corporate

Consolidated-

158,285

2,681)-I Net sales and operating income
Net sales(1) Sales to customers

144,585

13,699158,285(2) Inter-segment sales

1,178

1,502

2,681

Total

(

145,764

15,202160,967(

2,681)

158,285

142,898

15,642

158,540(

2,667)

155,872

Operating income (loss)

2,866

(439)

2,426

(

13)

2,413

II Assets, depreciation expenses,
impairment loss and capital expenditures
Assets94,264

12,145

106,410(

2,351)

104,059

Depreciation expenses

1,794

346

2,140

-

2,140

-

153

153

-

153

2,544

666

3,211

-

3,211

Operating expenses

Impairment loss
Capital expenditures- 29 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Notes: 1. The classification of business segments is based on categories adopted for internal management purposes.
2. Principal activities of each business segment(1) Mail-order business: Catalog and hanpukai businesses(2) Other businesses: Product sales, services, transportation
3. There are no unallocated operating expenses included in the “elimination or corporate.”
4. There are no corporate assets included in the “elimination or corporate.”
5. Supplemental information
Following the revision of the Corporate Tax Law, property and equipment purchased on or before March 31, 2007 isdepreciated equally over five years, and booked as a depreciation expense, the difference between the memorandum value,and 5% of the acquisition value, beginning in the fiscal year following the fiscal year in which the asset’s value reaches 5%of the acquisition value based on depreciation methods prior to corporate tax law revisions.
As an effect of this change, operating income in the mail-order business and other businesses declined by 52 million yen and
0 million yen respectively.

2. Geographical segment information
As there were no overseas consolidated subsidiaries or significant overseas branch offices for the fiscal years ended December 31,
2007 and 2008, geographical segment information has not been presented.

3. Overseas sales
Overseas sales have not been presented because they represented less than 10% of total consolidated sales in the fiscal years ended
December 31, 2007 and 2008.

- 30 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Investment Securities
Fiscal 2007
1. Available-for-sale securities with fair value (As of Dec. 31, 2007)(Million yen)
Acquisition cost

Carrying value

Diffenrence

2,597

3,979

1,382

-

-

-

Securities with carrying value exceeding acquisition cost(1) Stocks(2) Bonds
Corporate bonds
Other bonds

200

212

12

199

205

5

2,996

4,396

1,400

1,664

1,417

(247)

-

-

-

3,800

3,430

(369)

546

534

(11)

Subtotal

6,010

5,382

(628)

Total

9,007

9,778

771

(3) Others
Subtotal
Securities with carrying value not exceeding acquisition cost(1) Stocks(2) Bonds
Corporate bonds
Other bonds(3) Others

Notes: 1. The acquisition costs are amounts that have been treated for impairment loss. The impairment loss totaled 87 million yen.
2. “Other bonds” in the “securities with carrying value not exceeding acquisition cost” category includes compound financial
instruments, and the unrealized loss of 212 million yen is booked as “losses on write-down of compound financial
instruments” under other expense.
2. Available-for-sale securities sold during the fiscal year (Jan. 1, 2007 – Dec. 31, 2007)
Proceeds

Total gains on sales
2,623(Million yen)
Total losses on sales

174-

3. Carrying value of available-for-sale securities whose fair value is not readily determinable (As of Dec. 31, 2007)(Million yen)
Category

Carrying value(1) Available-for-sale securities
Unlisted stocks

3,443

MMF, others

85

Others143(2) Subsidiary and affiliate stock
Subsidiary and affiliate stock

2,207

Note: The carrying values are amounts that have been treated for impairment loss. The impairment loss totaled 7 million yen.
4. Projected future redemption of securities with maturities classified as available-for-sale securities (As of Dec. 31, 2007)(Million yen)
1 year or lessMore than 1 year to 5 years

More than 5 to 10 years

More than 10 years

Bonds
Corporate bonds

-

-

-

-

Other bonds

-

200

200

3,600

Total

-

200

200

3,600

- 31 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Fiscal 2008
1. Available-for-sale securities with fair value (As of Dec. 31, 2008)(Million yen)
Acquisition cost

Carrying value

Diffenrence

853

1,082

229

Corporate bonds

-

-

-

Other bonds

-

-

-

Securities with carrying value exceeding acquisition cost(1) Stocks(2) Bonds(3) Others
Subtotal

-

-

-

853

1,082

229

3,484

2,759

(725)

Securities with carrying value not exceeding acquisition cost(1) Stocks(2) Bonds
Corporate bonds

-

-

-

4,800

2,932

(1,867)

721

460

(261)

Subtotal

9,006

6,152

(2,854)

Total

9,860

7,235

(2,625)

Other bonds(3) Others

Notes: 1. The acquisition costs are amounts that have been treated for impairment loss. The impairment loss totaled 446 million yen.
2. “Other bonds” in the “securities with carrying value not exceeding acquisition cost” category includes compound financial
instruments, and the unrealized loss of 1,331 million yen is booked as “losses on write-down of compound financial
instruments” under other expense.
2. Available-for-sale securities sold during the fiscal year (Jan. 1, 2008 – Dec. 31, 2008)
Proceeds

Total gains on sales
825(Million yen)
Total losses on sales-

28

3. Carrying value of available-for-sale securities whose fair value is not readily determinable (As of Dec. 31, 2008)(Million yen)
Category

Carrying value(1) Available-for-sale securities
Unlisted stocks

3,308

MMF, others

516

Others105(2) Subsidiary and affiliate stock
Subsidiary and affiliate stock

727

Note: The carrying values are amounts that have been treated for impairment loss. The impairment loss totaled 147 million yen.
4. Projected future redemption of securities with maturities classified as available-for-sale securities (As of Dec. 31, 2008)(Million yen)
1 year or lessMore than 1 year to 5 years

More than 5 to 10 years

More than 10 years

Bonds
Corporate bonds

-

-

-

-

Other bonds

-

800

200

3,800

Total

-

800

200

3,800

- 32 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Derivatives
Fiscal 2007 (Jan. 1, 2007 – Dec. 31, 2007)
1. Matters concerning financial derivative transactions
The Company uses forward foreign exchange contracts for foreign currency-denominated accounts payable to prepare for foreignexchange fluctuation risks in import transactions. Long-term forward foreign exchange contracts are made within the limits ofinternally determined import plans, and the Company’s policy is for these contracts not to exceed future scheduled settlement
amounts. Speculation is not the purpose of derivative transactions.
The Company’s forward foreign exchange contracts embody general market risk from fluctuation in foreign exchange markets.
However, it sees little risk of contract default as its derivative transactions are with highly creditworthy financial institutions.
The Financial Planning Dept. is responsible for managing derivative transactions, and it makes and manages contracts based oninternal rules and in line with decisions made by the general manager of the Financial Planning Dept.
2. Information on market values (As of Dec. 31, 2007)
Contract amounts, fair value and unrealized gain (loss) on derivatives(Million yen)
Fiscal 2007
(As of Dec. 31, 2007)
Type of transaction

Derivatives
Contract amounts

Contract amounts
due after one year

8,455

8,455

Fair value

Unrealized gain
(loss)

Forward foreign exchange
contracts
Buy
OTC transactions

US dollars

8,384

266

Currency swap transactions
Receive US dollars/Pay yen
Total
Notes: 1. Valuation method

6,773

5,634

(883)

(883)

15,22914,089

7,501

(616)

Forward foreign exchange contracts: calculated based on forward exchange rates.
Currency swap transactions: calculated based on quotations posted by principal financial institutions.
2. The contract amounts of currency swap transactions represent contractual values or notional principal values. Theseamounts do not represent by themselves the market risk and credit risk related to the derivative financial instruments.
3. Items for which hedge accounting is applied are excluded.

- 33 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Fiscal 2008 (Jan. 1, 2008 – Dec. 31, 2008)
1. Matters concerning financial derivative transactions
The Company uses forward foreign exchange contracts for foreign currency-denominated accounts payable to prepare for foreignexchange fluctuation risks in import transactions. Long-term forward foreign exchange contracts are made within the limits ofinternally determined import plans, and the Company’s policy is for these contracts not to exceed future scheduled settlement
amounts. Speculation is not the purpose of derivative transactions.
The Company’s forward foreign exchange contracts embody general market risk from fluctuation in foreign exchange markets.
However, it sees little risk of contract default as its derivative transactions are with highly creditworthy financial institutions.
The Accounting Dept. is responsible for managing derivative transactions, and it makes and manages contracts based on internal
rules and in line with decisions made by the general manager of the Accounting Dept.
2. Information on market values (As of Dec. 31, 2008)
Contract amounts, fair value and unrealized gain (loss) on derivatives(Million yen)
Fiscal 2008
(As of Dec. 31, 2008)
Type of transaction

Derivatives

Unrealized gain
(loss)

Contract amounts

Contract amounts
due after one year

7,550

7,550

6,896

(469)

Receive US dollars/Pay yen

6,190

4,096

(5,897)(5,897)

Total

13,741

11,647998(6,367)

Fair value

Forward foreign exchange
contracts
Buy
OTC transactions

US dollars
Currency swap transactions

Notes: 1. Valuation method
Forward foreign exchange contracts: calculated based on forward exchange rates.
Currency swap transactions: calculated based on quotations posted by principal financial institutions.
2. The contract amounts of currency swap transactions represent contractual values or notional principal values. Theseamounts do not represent by themselves the market risk and credit risk related to the derivative financial instruments.
3. Items for which hedge accounting is applied are excluded.

- 34 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Per Share Information(Yen)
Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)
Net assets per share
Net income per share
Diluted net income per share

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)
1,197.62
41.53
41.41

Net assets per share
Net loss per share

947.19134.26

Diluted net income per share is not presented since the Company
posted net loss, and has no outstanding dilutive securities.

Note: Basis for calculation of net income (loss) per share and diluted net income per share is as follows.
Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)(Million yen)
Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)

Net income (loss) per share
Net income (loss)

1,932

Net income unavailable to common shareholders(6,271)--

Net income (loss) related to common stock

1,932(6,271)

Average number of shares of common stock
outstanding during the period (thousand shares)

46,54346,713--

Increase in number of common stock (thousand
shares)129-[Including: subscription rights (thousand shares)]

[129]

-

Diluted net income per share
Adjustment to net income

Number of latent shares with no dilution excluded
from calculation of diluted net income per share-

Stock options approved by resolutionof annual general meeting ofshareholders on March 30, 2004
(The exercise period ended on March
31, 2008)

Transactions with Related Parties
Fiscal 2007 (Jan. 1, 2007 – Dec. 31, 2007), Fiscal 2008 (Jan. 1, 2008 – Dec. 31, 2008)
Not applicable.

Business Combinations
Fiscal 2007 (Jan. 1, 2007 – Dec. 31, 2007)
Detailed explanations are omitted due to immateriality.
Fiscal 2008 (Jan. 1, 2008 – Dec. 31, 2008)
Not applicable.

Subsequent Events
Fiscal 2007 (Jan. 1, 2007 – Dec. 31, 2007), Fiscal 2008 (Jan. 1, 2008 – Dec. 31, 2008)
Not applicable.

Omission of DisclosureWith respect to lease transactions, deferred tax accounting, retirement benefits, and stock options are not presented since thedisclosure of such information is not significant in the context of the financial results.

- 35 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Production, Orders and Sales(1) Production
There were no production activities.
(2) Orders
There were no production activities in response to orders received.
(3) Sales(1) Sales by business segment(Million yen)
PeriodOperating segment

Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)

AmountAmountShare (%)

ChangeShare (%)

Mail-order business

145,66492.9

144,585

91.3(1,078)Other businesses

11,128

7.1

13,6998.7

2,571

156,792

100.0

158,285

100.0

1,493

Total

Note: The figures above are stated exclusive of consumption taxes.

(2) Sales by type(Million yen)
PeriodType

Fiscal 2007
(Jan. 1, 2007 – Dec. 31, 2007)

Fiscal 2008
(Jan. 1, 2008 – Dec. 31, 2008)

AmountAmountShare (%)

ChangeShare (%)

Apparel

61,29739.1

63,260

40.0

1,963

Interior goods

36,34623.2

34,65721.9(1,689)Daily sundries

24,57915.7

23,586

14.9

(993)

Fashion accessories

17,763

11.3

16,931

10.7

(831)

Foods

6,424

4.1

6,157

3.9

(267)

Others

10,380

6.6

13,692

8.6

3,312

156,792

100.0

158,285

100.0

1,493

Total

Note: 1. The figures above are stated exclusive of consumption taxes.
2. “Sales by type” were disclosed based on the conventional hanpukai business through the previous fiscal year, but from thefiscal year under review, disclosure was changed to center on the catalog business which now accounts for over 80% of total
sales.

- 36 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Non-consolidated Financial Statements
Non-consolidated Financial Statements(1) Non-consolidated Balance Sheets(Million yen)
PeriodAccount
AssetsI Current assets
1. Cash and deposits
2. Notes receivable
3. Accounts receivable-trade
4. Marketable securities
5. Merchandise
6. Supplies
7. Advances
8. Prepaid expenses
9. Deferred tax assets
10. Short-term loans receivable-affiliates
11. Accounts receivable-other
12. Forward exchange contracts
13. Other
Allowance for doubtful accounts
Total current assets
II Fixed assets
1. Property and equipment(1) Buildings(2) Structures(3) Machinery and equipment(4) Vehicles(5) Furniture and fixtures(6) Land(7) Construction in progress
Total property and equipment
2. Intangible assets(1) Goodwill(2) Leasehold rights(3) Software(4) Software in progress(5) Other
Total intangible assets
3. Investments and other assets(1) Investment securities(2) Affiliate stock(3) Long-term loans receivable(4) Long-term loans receivable-employees(5) Long-term loans receivable-affiliates(6) Guarantee deposits(7) Long-term prepaid expenses(8) Deferred tax assets(9) Reserve for directors insurance(10) Long-term time deposits(11) Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets

Fiscal 2007
(As of Dec. 31, 2007)
Amount%1,150
7
10,836
18,979
114
2,032
2,530
236
9,304
15
158
(256)
45,110

9,631
403
1,508
9
717
11,153962
24,386
185
139
2,062
648
40
3,076
12,534
4,696
344
20
880
1,136
145
164
886
2,100
982
(524)
23,36650,82995,939- 37 -

Fiscal 2008
(As of Dec. 31, 2008)
Amount
%

47.0

4,972
84
10,441
7
16,154
64
1,988
3,314
871
646
7,966
293
(287)
46,51825.4

11,370
398
1,081
6
926
11,095024,880

3.2

122
139
2,012
134
38
2,447

24.4
53.0
100.0

10,163
7,011
353
16
2,138
893
116
1,367
643
3,100
721
(759)
25,76753,095
99,613

Change

46.7

3,821
77
(395)
7
(2,824)
(49)
(44)
783
871
409
(1,338)
(15)
135
(30)
1,408

25.0

1,739
(5)
(426)
(2)
208
(58)
(962)
493

2.4

(62)
(49)
(514)
(2)
(628)

25.9
53.3
100.0

(2,370)
2,315
8
(3)
1,258
(242)
(29)
1,202
(242)
1,000
(260)
(235)
2,400
2,265
3,673

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(Million yen)
PeriodAccount
Liabilities
I Current liabilities
1. Notes payable
2. Accounts payable-trade
3. Short-term bank loans
4. Current portion of long-term debt
5. Accounts payable-other6. Accounts payable-factoring
7. Accrued expenses
8. Accrued income taxes
9. Accrued consumption taxes
10. Deposit received
11. Liabilities for directors and corporate
auditors’ bonuses
12. Allowance for sales promotion expenses
13. Deferred tax liabilities
14. Forward exchange contracts
15. Other
Total current liabilities
II Long-term liabilities
1. Long-term debt
2. Deferred tax liabilities relating to land
revaluation
3. Liabilities for retirement benefits for
directors and corporate auditors
4. Other
Total long-term liabilities
Total liabilities
Net assets
I Shareholders’ equity
1. Common stock
2. Capital surplus(1) Capital reserve(2) Other capital surplus
Total capital surplus
3. Retained earnings(1) Profit reserve(2) Other retained earnings
Reserve for reduction of fixed assets
Reserve for losses of overseas
investment
General reserve
Retained earnings carried forward
Total retained earnings
4. Treasury stock
Total shareholders’ equity
II Valuation and translation adjustments
1. Net unrealized gains onavailable-for-sale securities
2. Deferred hedge gains (losses)
3. Land revaluation difference
Total valuation and translation
adjustments
Total net assets
Total liabilities and net assets

Fiscal 2007
(As of Dec. 31, 2007)
Amount%Fiscal 2008
(As of Dec. 31, 2008)
Amount%Change

4,302
6,407
3,000
6,210
15,027
1,254
1,587
125
615

2,114
5,639
8,000
1,670
5,913
15,789
1,051
11
206
454

(2,188)
(768)
5,000
1,670
(296)
762
(202)
(1,576)
80
(161)

35

-

(35)

133
94
572
39,369

337
9,788
152
51,129

203
(94)
9,788
(420)
11,760

41.0

51.3

-

3,330

3,330

764

764

-

377

289

(88)

10
1,152
40,521

1.2
42.2

4
4,388
55,517

4.4
55.7

(6)
3,235
14,995

20,35921.2

20,359

20.4

-

21.9

19,864
1,174
21,03821.1

0
0

19,864
1,174
21,038
1,118

1,118

-

73

69

(3)

34

36

2

13,6006,309
21,134(630)
61,902

22.0
(0.6)
64.5

13,600(1,129)13,695(631)
54,461

13.8
(0.6)
54.7

(7,439)(7,439)(1)(7,440)498

0.5(1,223)(1.2)(1,722)376(7,359)0.4(7.6)(2,038)(7,103)

(2.1)
(7.1)

(2,415)256(6,483)(6.7)(10,364)(10.4)(3,880)55,41895,93957.8
100.0

44,096
99,61344.3
100.0(11,321)3,673- 38 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(2) Non-consolidated Statements of Income(Million yen)
PeriodAccount
I Net sales
II Cost of sales
Gross profit
III Selling, general and administrative expenses
1. Packing and freight
2. Sales promotion expenses
3. Sales commissions
4. Provision for allowance for sales promotion
expenses
5. Provision for allowance for doubtful accounts
6. Bad debt loss
7. Directors’ and corporate auditors’ remuneration
8. Salaries
9. Bonuses
10. Provision for liabilities for directors and corporate
auditors’ bonuses
11. Provision for liabilities for retirement benefits for
directors and corporate auditors
12. Welfare expenses
13. Rents
14. R&D expenses
15. Commissions paid
16. Depreciation expenses
17. Other
Operating income
IV Other income
1. Interest income
2. Marketable securities interests
3. Dividend income
4. Other
V Other expenses
1. Interest expenses
2. Losses on write-down of compound financial
instruments
3. Losses on investment partnership management
4. Expenses related to fixed asset investment
5. Foreign exchange losses
6. OtherOrdinary income (loss)
VI Extraordinary gains
1. Gains on sales of fixed assets
2. Gains on sales of investment securities
3. Reversal of allowance for doubtful accounts
VII Extraordinary losses
1. Losses on sales and disposal of fixed assets
2. Losses on write-down of investment securities
3. Losses on liquidation of subsidiaries
4. Compensation expense
5. Losses on cancellation of leases
6. Provision for allowance for doubtful accounts
7. Losses on write-down of affiliate stock
8. Losses on write-down of golf club memberships
Income (loss) before income taxes
Income taxes
Deferred income taxes
Net income (loss)

Fiscal 2007
Fiscal 2008
(Jan. 1, 2007 – Dec. 31, 2007) (Jan. 1, 2008 – Dec. 31, 2008)
Amount%Amount%152,367
100.0
150,729
100.0
79,903
52.4
79,081
52.5
72,46347.6
71,64747.5
67,851
44.6
69,294
45.9
9,143
8,817
24,98625,704
2,287
2,596
133

337

253
117
294
5,301
1,101

283
46
241
5,502
928

35

-

-

60

1,009
1,275
654
15,049
1,540
4,666
4,611
992
71
238
430
251
1,182
64

1,018
1,631
571
14,892
1,790
4,871
2,353
1,253
101
170
663
318
7,461
141

3.0
0.7

0.8

194

1,199

6
46
807
62
4,421
379
37
174
167
943
334
94
331
170
13
3,857
1,619
(98)
2,335

5,892
226
(3,853)
24
24
2,237
736
594
43
551
309
2
(6,066)104(15)(6,155)- 39 -

2.9
0.2

0.6

2.5
1.1
(0.1)
1.5

Change(1,637)
(821)
(815)
1,442

1.6
0.8

(2,257)
261

5.0

6,278

(2.6)
0.1

(8,275)
(354)

1.5

1,293

(4.0)
0.1
(0.0)
(4.1)

(9,923)(1,515)83(8,491)Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

(3) Non-consolidated Statements of Changes in Shareholders’ Equity
Fiscal 2007 (Jan. 1, 2007 – Dec. 31, 2007)(Million yen)

Common stock
Balance as of Dec. 31, 2006
Changes in the fiscal year
Reversal of reserve for reductionof fixed assets
Provision of reserve for losses ofoverseas investment
Reversal of reserve for losses ofoverseas investment
Dividend of surplus
Net income
Purchases of treasury stock
Disposal of treasury stock
Transfer of land revaluationdifference
Changes (net) in items otherthan shareholders’ equity
Total changes in the fiscal year
Balance as of Dec. 31, 2007

Balance as of Dec. 31, 2006
Changes in the fiscal year
Reversal of reserve for reductionof fixed assets
Provision of reserve for losses ofoverseas investment
Reversal of reserve for losses ofoverseas investment
Dividend of surplus
Net income
Purchases of treasury stock
Disposal of treasury stock
Transfer of land revaluationdifference
Changes (net) in items otherthan shareholders’ equity
Total changes in the fiscal year
Balance as of Dec. 31, 2007

20,359

Shareholders’ equity
Capital surplus
Capital reserve
Other capital surplus
19,864852

Total capital surplus
20,716

322

322

322
1,174

322
21,03820,35919,864

Shareholders’ equity
Retained earnings
Other retained earnings
Total
Total Treasury shareholders’
Reserve for
Retained
ProfitReserve forstock
retained
Generallosses of
earnings
equityreserve reduction ofoverseas
reservecarried earnings
fixed assets
investment
forward
1,118
76
38
13,6004,973 19,807 (1,041)
59,841
(3)

3

-

-

4

(4)

-

-

(9)

9

-

-

(1,066)
2,335(1,066)
2,335(1,066)
2,335
(32)
765

(32)
443

1,118

(3)
73

(4)
34

13,600

58

58

1,335
6,309

1,327
21,134

58

411
(630)

2,060
61,902

Valuation and translation adjustments

Balance as of Dec. 31, 2006
Changes in the fiscal year
Reversal of reserve for reductionof fixed assets
Provision of reserve for losses ofoverseas investment
Reversal of reserve for losses ofoverseas investment
Dividend of surplus
Net income
Purchases of treasury stock
Disposal of treasury stock
Transfer of land revaluationdifference
Changes (net) in items otherthan shareholders’ equity
Total changes in the fiscal year
Balance as of Dec. 31, 2007

Net unrealized gains
on available-for-salesecurities
1,364

Deferred hedge
gains (losses)

Land revaluationdifference734(7,301)

Total valuation
Total net assets
and translation
adjustments(5,202)
54,638(1,066)
2,335
(32)
765
58

(865)

(357)

(58)

(1,281)(1,281)

(865)
498

(357)
376

(58)
(7,359)(1,281)(6,483)779
55,418- 40 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Fiscal 2008 (Jan. 1, 2008 – Dec. 31, 2008)(Million yen)
Common stock

Balance as of Dec. 31, 2007
Changes in the fiscal year
Reversal of reserve for reduction of
fixed assets
Provision of reserve for losses ofoverseas investment
Reversal of reserve for losses ofoverseas investment
Dividend of surplus
Net loss
Purchases of treasury stock
Disposal of treasury stock
Transfer of land revaluationdifference
Changes (net) in items other thanshareholders’ equity
Total changes in the fiscal year
Balance as of Dec. 31, 2008

Balance as of Dec. 31, 2007
Changes in the fiscal year
Reversal of reserve for reduction of
fixed assets
Provision of reserve for losses ofoverseas investment
Reversal of reserve for losses ofoverseas investment
Dividend of surplus
Net loss
Purchases of treasury stock
Disposal of treasury stock
Transfer of land revaluationdifference
Changes (net) in items other thanshareholders’ equity
Total changes in the fiscal year
Balance as of Dec. 31, 2008

20,359

Shareholders’ equity
Capital surplus
Capital reserve
Other capital surplus
19,864
1,174

Total capital surplus
21,038

0

0

0
1,174

0
21,03820,35919,864

Shareholders’ equity
Retained earnings
Other retained earnings
Total
Reserve for
Retained Total Treasury shareholders’ProfitReserve forstock
retained
losses ofGeneral earnings
equityreserve reduction ofoverseas
reserve carried earnings
fixed assets
investment
forward1,118
73
34 13,600
6,309 21,134(630)
61,902
(3)

3

-

-

8

(8)

-

-

(5)

5

-

-

(1,027)(6,155)(1,027)(6,155)(1,027)(6,155)
(1)
0

(1)
0

1,118

(3)
69

2
36

13,600

(256)

(256)

(7,439)(1,129)(7,439)13,695

(256)

(1)
(631)

(7,440)54,461

Valuation and translation adjustments

Balance as of Dec. 31, 2007
Changes in the fiscal year
Reversal of reserve for reduction of
fixed assets
Provision of reserve for losses ofoverseas investment
Reversal of reserve for losses ofoverseas investment
Dividend of surplus
Net loss
Purchases of treasury stock
Disposal of treasury stock
Transfer of land revaluationdifference
Changes (net) in items other thanshareholders’ equity
Total changes in the fiscal year
Balance as of Dec. 31, 2008

Net unrealized
gains onavailable-for-salesecurities
498

Deferred hedge
gains (losses)

Land revaluationdifference

Total valuationand translation
adjustments

Total net assets

376(7,359)(6,483)55,418(1,027)(6,155)
(1)
0
(256)

(1,722)(2,415)256(3,880)(3,880)(1,722)(1,223)(2,415)(2,038)256(7,103)(3,880)(10,364)(11,321)44,096- 41 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Conditions and Events that Might Raise Critical Questions about the Validity of the Going-concern Assumption
Not applicable.

- 42 -

Senshukai Co., Ltd. (8165) Financial Report for Fiscal 2008

Changes in Members of Board of Directors (to be effective March 27, 2009)
1. Directors(1) Candidate for directors
Director: Mr. Shigemitsu Mineoka(current Managing Executive Officer, General Manager of Fashion Business Division)
Director: Mr. Hiroyuki Hoshino(current Executive Officer, General Manager of Tokyo Business Division)(2) Retiring director
Director: Mr. Kazuhide Fujiyoshi(current Director, Managing Executive Officer, General Manager of the General Affairs Division)* Mr. Kazuhide Fujiyoshi will be appointed President of Senshukai Call Center Co., Ltd. effective March 27, 2009.

* This financial report is solely a translation of summary of “kessan Tanshin” (in Japanese, including attachments), which has been
prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who
prefer an English translation.

- 43 -