Consolidated Financial Statements
for the Fiscal Term Ended December 20, 2010
Summary
Name of registrant: Milbon Co., Ltd.
Code No: 4919
Representative: Ryuji Sato, President
Officer in charge: Masahiro Murai, Executive Director

January 19, 2011

Stock exchange on which the Company’s shares are listed:Tokyo Stock Exchange, First Section
URL http://www.milbon.co.jp
Tel: +81-6-6928-2331

Scheduled date of annual general meeting of shareholders: March 17, 2011
Scheduled filing date for Securities Reports: March 17, 2011

Scheduled starting date of dividend payments: March 18, 2011

(Truncated to the nearest million yen)
1. Results for the consolidated fiscal year ended December 20, 2010 (December 21, 2009 - December 20, 2010)(1) Financial results(Percentages indicate increases or decreases in comparison with figures recorded during the previous fiscal year)
Net sales
Operating income
Ordinary income
Net income(Unit: million(Unit: million(Unit: million yen)
% (Unit: million yen)
%
%
%
yen)
yen)
1 H ended December 20, 2010
19,749 2.9
3,578
9.2
3,327
7.2
1,831
2.6
1 H ended December 20, 2009
19,189 2.7
3,277 -12.5
3,103 -11.7
1,785 -11.9
Net income per
share

Diluted net income
per share

Ratio of net income
to shareholders'equity
%
10.7
11.0

Yen
Yen
1 H ended December 20, 2010146.141 H ended December 20, 2009142.46(Reference) Equity in earnings (losses) of affiliated companies
Fiscal year ended December 20, 2010, None, Fiscal year ended December 20, 2009, None

Ratio of theordinary income tothe total assets
%
16.2
15.5

Ratio of theoperating income to
the net sales
%
18.1
17.1

(2) Financial position
Total assets(Unit: million yen)
20,843
20,353

Net assets(Unit: million yen)
17,69916,653Equity ratio

Net asset per share

Cash flow from operating
activities

Cash flow from investing
activities

Cash flow from financing
activities(Unit: million yen)
2,433
3,079

(Unit: million yen)-727
-1,680(Unit: million yen)
-688
-725

%
84.9
81.8

Yen
1,412.25
1,328.80

1 H ended December 20, 2010
1 H ended December 20, 2009
(Reference) Equity capital
Fiscal year ended December 20, 2010, 17,699 million yen, Fiscal year ended December 20, 2009, 16,653 million yen(3) Cash flow (on a consolidated basis)

1 H ended December 20, 2010
1 H ended December 20, 2009
2.

Outstanding balance of
cash and cash equivalents
at the current term end date
(Unit: million yen)
2,670
1,666

Payment of Dividends(Record date)1 H ended
December 20, 2009
1 H ended
December 20, 2010
1 H ended
December 20, 2011
(forecast)(Note)

Dividends per share
End of 2nd
End of 3rd
End ofquarterquarterfiscal year
Yen
Yen
Yen

Yen

(Unit: million yen)

Dividend payout
ratio(Consolidated)
%

-

27.00

-

28.00

55.00

689

38.6

4.3

-

27.00

-

33.00

60.00

751

41.1

4.4

-

30.00

-

30.00

60.00

-

36.5

-

End of 1stquarter
Yen

Total

Total dividends(Total)Dividends onequity(Consolidated)%

Breakdown of end-of-period dividend for fiscal year ended December 20, 2010, ordinary dividend 28.00 yen,commemorative dividend 5.00 yen.

3.

Consolidated Performance Forecasts for the Next Fiscal Term (December 21, 2010 - December 20, 2011)(In the case of “Full year”, “%” indicates the increase or decrease in comparison with the “Full year” in the previous fiscal year; in the case of “2ndquarter consolidated accumulative period”, “%” indicates the increase or decrease against the same quarter in the previous fiscal year)
Net sales
Operating income
Ordinary income
Net income
Net income per share(Unit: million yen) % (Unit: million yen) % (Unit: million yen) % (Unit: million yen) %Yen
2nd quarter
consolidated
9,818
4.1
1,482 -14.1
1,344 -17.0
764 -18.6
55.42
accumulative period
Full year
20,500
3.8
3,780
5.6
3,510
5.5
2,060
12.5
149.43-1-

4. Others(1) Changes in important subsidiaries during the fiscal year (changes in specified subsidiaries accompanied bychanges in the scope of consolidation); None
New: No companies (Company name:)
Excluded: No companies (Company name:)(2) Changes in accounting policies and procedures and methods of presentation related to the preparation of
consolidated financial statements (changes to be described in Summary of Significant Accounting Policies)
1) Changes due to amendment to accounting standards; Yes
2) Changes other than those in 1) above;
None(Note) For details, please refer to “Summary of Significant Accounting Policies (Change in Accounting
Policies)” on page 18.
(3) Number of shares outstanding (common shares)
1) Number of shares outstanding at the end of fiscal year (including treasury shares)
Year ended December 20, 2010, 12,544,408 shares, Year ended December 20, 2009, 12,544,408 shares
2) Number of treasury shares at the end of fiscal year
Year ended December 20, 2010, 11,594 shares, Year ended December 20, 2009, 11,617 shares(Note) For the number of shares to calculate net income per share (on a consolidated basis), refer to page 43
for “Per Share Data”.
(Reference) Summary of non-consolidated performance
1. Results for the Non-Consolidated fiscal year ended December 20, 2010 (December 21, 2009 - December 20, 2010)(1) Non-Consolidated Financial results (Percentages indicate increases or decreases in comparison with figures recorded during the previous fiscal year)
Net sales
Operating income
Ordinary income
Net income(Unit: million yen)
(Unit: million yen)
(Unit: million yen)%%
% (Unit: million yen)%
1 H ended December 20, 2010
19,446 2.6
3,739
11.7
3,513
11.0
2,046
12.0
1 H ended December 20, 2009
18,946 3.4
3,348 -11.6
3,164 -11.5
1,827 -12.1
Net income per share
1 H ended December 20, 2010
1 H ended December 20, 2009

Yen
163.27145.81

Diluted net income per
share
Yen
-

(2) Non-Consolidated Financial position
Total assets
Net assets
Equity ratio
Net asset per share(Unit: million yen)
(Unit: million yen)%
Yen
1 H ended December 20, 2010
21,207
18,17885.7
1,450.51
1 H ended December 20, 2009
20,54816,89182.2
1,347.81(Reference) Equity capital
Fiscal year ended December 20, 2010, 18,178 million yen, Fiscal year ended December 20, 2009, 16,891 million yen
2.

Non-Consolidated Performance Forecasts for the Next Fiscal Term (December 21, 2010 - December 20, 2011)(In the case of “Full year”, “%” indicates the increase or decrease in comparison with the “Full year” in the previous fiscal year; in the case of “2ndquarter consolidated accumulative period”, “%” indicates the increase or decrease against the same quarter in the previous fiscal year)
Net sales
Operating income
Ordinary income
Net income
Net income per share(Unit: million yen) % (Unit: million yen) % (Unit: million yen) % (Unit: million yen) %Yen
2nd quarter
consolidated
9,644
3.3
1,534 -15.7
1,396 -18.7
817 -20.4
59.26
accumulative period
Full year
20,100
3.4
3,870
3.5
3,600
2.5
2,150
5.1
155.95* Explanation on Appropriate Uses of Earnings Forecasts and Other Special Instructions(Note concerning the descriptions of the future)
1. The descriptions of the future such as earnings forecasts shown in this material are based on the information currently
available and a certain assumption judged as reasonable, and actual performances may differ substantially due to various
factors. For notes on the use of the assumed preconditions for earnings forecasts, refer to page 3 for “(1) Analysis ofBusiness Results, 1 Business Results”.
2. As of December 21, 2010, the company has carried out a stock split at a ratio of 1.1 shares for 1 common stock in thecompany.

-2-

1. Business Results(1) Analysis of Business Results
1) Business results for the current consolidated fiscal year under review
During the consolidated fiscal year under review, despite a continuation in the trend towards a gentle
recovery backed up by economic stimulus measures in Japan and abroad and a recovery in demand in
emerging economies, the Japanese economy saw increased uncertainty about future economic conditions inthe second half of the year, with fears of deteriorating corporate profits as a result of the rapid strengthening
in the yen and a slump in the stock markets. In terms of trends in personal consumption, despite signs of atrend towards a partial rally in consumption brought about by government policies, severe conditions
continued as a result of difficult employment conditions and fears about deflation.
In the beauty salon industry, in addition to a decline in customer visits to salons as a result of alengthening of the visit cycle, it is estimated that the severe situation for the industry remains unchanged asa result of the falling birthrate, the ageing of society and demographic changes.
Under such circumstances, the Milbon Group has worked hard to promote policy activities under a basic
policy of supporting “the fostering of professional designers capable of total proposals leading to sales” toencourage hair design creation that can bring about the “desired female image”. Specifically, sales for theGroup as a whole increased against the previous fiscal year as a result of positive sales in hair color agentsfor gray hair and hair care products targeting women (particularly second generation baby-boomers who are
the main customers of beauty salons) and with powerful treatment effects capable of relieving concerns
over hair associated with aging.
Concerning the company’s three wholly owned subsidiaries, MILBON USA, INC. saw a fall against lastyear’s sales figures as a result of a decrease in sales of mainstay straight hair treatment LISCIO and haircare treatments used for styling maintenance.
At Milbon Trading (Shanghai) Co., Ltd., contact opportunities with new customers progressed according
to plan thanks to the development of sales activities with a focus on top salons in regions with emerging
wealthy classes in East China (Shanghai City, Jiangsu Province and Zhejiang Province) and South China(Guangdong Province and Fujian Province). However, results were below the plan, partially as a result of
delays in launching new products.
Sales at Milbon Korea Co., Ltd. performed well as a result of a large increase in the number of salonsproviding contact opportunities for hair coloring and the promotion of the new introduction of hair careproducts centered on salon treatments as a result of proactive educational support activities provided to
local hair designers.
Despite the difficult environment, consolidated sales for the consolidated fiscal year under review
increased 560 million yen to 19,749 million yen (a 2.9% increase over the previous year).
Selling, general and administrative expenses increased by 5.4% over the previous year to 9,423 million
yen as a result of sales promotion costs for new products and labor costs exceeding those for the previous
year.
Operating income increased 9.2% over the previous year to 3,578 million yen, an increase in profits of
301 million yen, ordinary income increased by 223 million yen to 3,327 million yen (an increase of 7.2%
over the previous year), and net income increased 46 million yen to 1,831 million yen (an increase of 2.6%
over the previous year).

-3-

Breakdown of sales by product type is shown as follows:[Breakdown of sales by product type]Previous fiscal year
Product type

Sales amount(million yen)

Increase/(decrease)

Current fiscal year
Sales amount(million yen)

Ratio (%)

Sales amount(million yen)

Ratio (%)

Permanent wave products

2,025

10.6

1,998

10.1

-27

Hair care products

9,864

51.4

10,13551.3

270Hair coloring products

6,969

36.3

7,278

36.9

309

330

1.7

337

1.7

7

19,189100.0

19,749100.0

560

Others
Total(Permanent wave products sector)
It is estimated that the industry as a whole has decreased in size as a result of a fall in the frequency ofuse of perm products along with changing trends.
Under such circumstances, the Milbon Group has worked hard to support improvements to hair
designers’ communication skills and design skills through sales of LISCIO GLANFE, a straight perm agent
released in April that helps create a soft, round-feeling silhouette in line with hair qualities, and LIFUME, aperm agent released in June based on a completely new concept of controlling hair volume as it decreases
with age. However, sales in the permanent wave products sector overall fell below sales for the previous
year.
(Hair care products sector)
With competition between hair care products for the public market and pro-use products sold exclusively
to beauty salons becoming increasingly severe, it is estimated that there was a small increase in the industry
as a whole as a result of initiatives in hair care products centered on salon treatments for restoring damaged
hair.
Under these circumstances, Milbon Group sales in the hair care products sector increased against theprevious year as a result of positive sales of DEESES APROU, a leave-in-treatment launched in March for
women with concerns over dry hair and reduced bounce associated with aging, and the successful creationof a market for highly effective salon treatments such as INPHENOM, which addresses a variety ofcustomers’ hair concerns.

-4-

(Hair coloring products sector)
It is estimated that the industry as a whole decreased as a result of a reduction in customer visits to salonscaused by a lengthening in the visit cycle and a prevailing attitude among consumers of needing to maintainliving standards and make savings, and compounded by the impact of increased competition frompublic market products that allow easy hair dyeing at home.
Under these circumstances, the Milbon Group worked hard to increase the attraction of salon coloring byholding Japan-wide seminars with the aim of improving hair designers’ hair coloring skills and sales skills,
in addition to proposing seasonal colors to customers (trend colors in line with the changing seasons). As aresult, sales in the hair coloring market as a whole increased against the previous year thanks to growth insales of LISEINTER, the existing fashionable gray coloring product, and FARGLAN, which dyes gray hair
without placing a burden on damaged hair, in addition to a positive performance by additional colors
launched in September for ORDEVE, a comprehensive color agent.
(Others)
There are no particular items to present.
2) Prospect for next fiscal year
In regard to the economic environment in Japan, despite signs of a partial recovery, difficult conditions
are expected to continue, with economic disparity arising in a variety of industries.
In the beauty salon industry, with declines in the female population and young working population
continuing as a result of the decline in the overall population and working population, the impact of adecline in the total number of salon customers is beginning to appear. However, at the same time, positive
signs can also be seen from an expected increase in consumption as a result of an increase in the proportionof women in work overall and an ongoing increase in spend-per-customer and customer return rates.
Under these circumstances, the Milbon Group has worked under a theme of “supporting the creation ofsystems to foster professional human resources with a deeper understanding of women’s inner needs”.
In terms of new products, we have supported improvements to the quality of hair designers’ counselingand sales skills through sales activities related to new hair care product DEESSE’S NEU-due and newsalon treatment LINKAGE-μ, which are scheduled for release in February, and new hair care treatment
FIERLI, scheduled for release in April. At the same time, in preparation for the scheduled March launch ofadditional colors for ORDEVE, a comprehensive color agent, and new color agent ORDEVE beauté,scheduled for release in July, we have promoted thorough training activities with the aim of increasing theattraction of hair coloring that is befitting of salons.
Moreover, we have supported the construction of personnel training systems (from salon staff entry
through to salon debut) via 11 training studios from throughout Japan, a variety of seminars at external
locations and internal training sessions.
With these efforts, the company expects to achieve consolidated sales of 20,500 million yen (a 3.8%
increase over the current year), consolidated operating income of 3,780 million yen (a 5.6% increase overthe current year), consolidated ordinary income of 3,510 million yen (a 5.5% increase over the current year)
and consolidated net income of 2,060 million yen (a 12.5% increase over the current year).

-5-(2) Analysis of the Financial Position
1) Assets, liabilities and net assets
Total assets at the end of the current consolidated fiscal year increased 489 million yen to 20,843 million
yen compared to the end of the previous consolidated fiscal year.
Current assets expanded 1,047 million yen to 8,035 million yen compared to the end of the previous
consolidated fiscal year. The major variable factor was an increase of 1,006 million yen in cash anddeposits.
Fixed assets decreased by 558 million yen to 12,807 million yen compared to the end of the previous
consolidated fiscal year. The major variable factors were a decrease of 338 million yen in tangible fixed
assets due to the recording of depreciation costs and a decrease of 127 million yen in investment securities
due to a decrease in the appraisal gain on the market valuation of listed stock.
Current liabilities fell 521 million yen to 2,725 million yen compared to the end of the previous
consolidated fiscal year. The major variable factor was a decrease of 486 million yen in accounts and tradenotes payable.
Fixed liabilities decreased 34 million yen to 418 million yen compared to the end of the previous
consolidated fiscal year.
Net assets increased 1,045 million yen to 17,699 million yen compared to the end of the previous
consolidated fiscal year. The major variable factors were an increase of 1,141 million yen in retained
earnings and a decrease of 69 million yen in net unrealized gains on other securities as a result of the slump
in the stock markets.
As a result, the company’s equity ratio increased from 81.8% at the end of the previous consolidated
fiscal year to 84.9%. Net assets per share based on the number of outstanding shares at the end of the termincreased from 1,328.80 yen at the end of the previous consolidated fiscal year to 1,412.25 yen.

-6-2) Cash flows
Cash and cash equivalents (hereinafter referred to as “funds”) at the end of the current consolidated fiscal
year increased 1,004 million yen to 2,670 million yen compared to funds at the end of the previous
consolidated fiscal year as a result of using funds acquired in operating activities for the payment of income
taxes and the payment of dividends.
(Cash Flows from Operating Activities)
Funds from operating activities were 2,433 million yen. This was mainly the result of 3,208 million yen
posted for income before income taxes and minority interests, depreciation costs of 1,010 million yen, adecrease of 475 million yen in purchase liabilities, and 1,161 million yen in income taxes paid.
(Cash Flows from Investing Activities)
Funds used for investing activities were 727 million yen. This was mainly the result of purchase ofproperty and equipment of 613 million yen, expenditures on the acquisition of intangible fixed assets of
262 million yen, and income from the cancellation of insurance reserve funds of 116 million yen.
(Cash Flows from Financing Activities)
Funds used as a result of financing activities were 688 million yen. The funds were mainly appropriatedfor the payment of 688 million yen in dividends to shareholders.
(Reference) Cash flow related indicators
1 H ended
December 20,
2006

1 H ended
December 20,
2007

1 H ended
December 20,
2008

1 H ended
December 20,
2009

1 H ended
December 20,
2010

Equity ratio (%)

76.5

78.1

79.9

81.8

84.9

Equity ratio based on
the market value (%)

240.6

179.5

154.0

125.6

131.4

Interest bearing debts tocash flows ratio (%)

30.2

15.1

4.7

2.8

3.3

Interest coverage ratio (x)

453.3

381.8

1,303.1

3,282.8-(Notes)Equity ratio: the ratio of equity to the total assets
Equity ratio based on the market value: the ratio of the total value of stocks calculated based on
their market value (excluding treasury stocks) to the total assets
Interest bearing debts to cash flows ratio (%): interest bearing debts/cash flow
Interest coverage ratio: cash flow/interest payment* Each indicator is calculated based on the consolidated financial figures.
* Market capitalization is calculated using the formula: year-end closing stock price x year-end number ofshares outstanding (excluding treasury shares).
* The operating cash flow is used for calculating the above figures.
* Interest bearing debt includes all debts reported on the Consolidated Balance Sheet, on which interest is
paid. The interest payment amount is based on the amount of paid interest reported in the Consolidated
Statement of Cash Flow.

-7-(3) Basic Policy on Profit Sharing and Dividends for the Current and Next Fiscal Years
The Milbon Group positions the returning of profits to shareholders as an important management issue
and makes it a basic policy to pay by results based on business performance while enhancing its business structure
by investing retained earnings to improve earnings momentum in the future.
In addition, interim dividends are determined at Board of Directors' meetings and year-end dividends atshareholders' meetings. The Group also makes it a basic policy to pay dividends twice every fiscal year.
For the current consolidated fiscal year, we have decided to pay an interim dividend of 27 yen per share, and a
year-end dividend of 33 yen per share (28 yen per share combined with a commemorative dividend of 5 yen per
share for the 50th anniversary) (annual dividend of 60 yen per share) following overall consideration of our
financial situation and profit levels. For the next fiscal year, we plan to pay an annual dividend of 60 yen per share,equal to the value determined for the current consolidated fiscal year.
We will allocate retained earnings to areas including investment in plant and equipment and research anddevelopment to enhance our business structure.

(4) Risk on Business
Risks that could potentially affect the business performances, stock price, and financial position of the Milbon
Group are summarized below.
Future risks outlined in this section are judged by the Company as of December 20, 2007. Based on awarenessof these risks, the Group endeavors to prevent risks, hedge risks, and respond appropriately to minimize theimpact if such events do arise.
1) Releasing new products and receiving returned products
The Milbon Group introduces new products and additional items to the market. Following gradualproduct changeovers, sales of old items declined and old product lines are discontinued. If new products are
swiftly accepted onto the market beyond our expectation, we would be unable to adjust the inventories of
products and materials, which would result in unexpected losses on disposal.
2) Information security
The Group has taken various measures to protect information assets, including customers' personal
information and confidential information. However, unforeseeable events, such as the leakage of
information due to unauthorized access, could have an adverse material effect on the Group's businessperformance and financial position.

-8-2. Corporate Group Performance
Name

Location

CapitalMain line ofbusiness

Ratio of voting
rights owned (%)

Related information(Consolidated subsidiaries)
MILBON USA, INC.

New York State,
USA

USD 2 million

Sale of haircosmetics

100.0

Milbon Trading(Shanghai) Co., Ltd.

Shanghai City,
China

JPY 430 million

Sale of haircosmetics

100.0

Milbon Korea Co., Ltd.

Seoul,South Korea

KRW 3,000 million

Sale of haircosmetics

100.0

Sells Milbon haircosmetics in the UnitedStates.
Sells Milbon haircosmetics in China.
Three directors holdconcurrent posts at thecompany.
Sells Milbon haircosmetics in South
Korea. Two directors
hold concurrent posts atthe company.

(Note) All companies fall under the category of “specified subsidiary.”
We have omitted the disclosure of the company’s “Business Activities Diagram (Business Contents)”, because
there have been no significant changes since the “Business Activities Diagram (Business Contents)” contained in
the recent asset securities report (submitted on March 18, 2010).
3. Management Policy(1) Basic Management Policies
Information on basic management policies is not disclosed as no significant changes are seen from thecontents disclosed in the Summary of Consolidated Financial Statements for the Fiscal Term ended December 20,
2006 (disclosed on January 19, 2007).
The relevant Summary of Consolidated Financial Statements is available at the following URLs:(Website of the Company)
http://www.milbon.co.jp(Website of the Tokyo Stock Exchange (for listed companies))
http://www.tse.or.jp/listing/compsearch/index.html(2) Target Values of Management IndicesInformation concerning the target values of management indices is not disclosed because there are no
significant changes from the contents disclosed in the Summary of Consolidated Financial Statements for the
Fiscal Term ended December 20, 2006 (disclosed on January 19, 2007).
(3) Med- to Long-Term Management Strategies
With the aim of realizing the dreams of hair designers and beauty salons and an affluent beauty industry, theCompany has set the theme of its mid- to long-term management strategies as the “creation of a new
beauty market” leading to improved individual productivity for staff at beauty salons, and considers that raising
the level of the overall beauty industry will contribute to the expansion of the business of the Milbon Group
companies. With these goals in mind, the Milton Group is promoting a “revolution in salon sales” from its new
salon treatment menu and “hair coloring technology improvements” in high-end gray hair coloring, andsupporting beauty salons to attract public customers.
1) Revolution in salon sales
We shall establish a salon sales business through the development of system hair care that supports homecare through salon treatment and attracts public customers to salon hair care.
2) Hair coloring technology improvements
We shall promote salon coloring value creation by improving hair coloring technology, including foil
work and ONEMAKE, targeting the gray hair coloring market, in which second generation baby boomers
are to play an increasingly important role, and by attracting home coloring customers to salons.

-9-3) International market strategy
We shall develop our experience in the field of beauty technology and the marketing know-how we havesuccessfully built up in Japan in line with the culture and customs of each region.
a) North American market
We shall improve the product lineup, including hair care products and hair coloring products, with afocus on the hair-straightening permanent product brand LISCIO, develop our sales network andencourage the setting up of new bases in the west coast area of North America.
b) Chinese market
We shall promote hair care and hair coloring education activities, with a focus on coastal areas
centered on Shanghai, and contribute to the development of the beauty industry.
c) Other Asian markets
We shall contribute to the development of the beauty industry by carrying out promotions with afocus on hair coloring in line with the characteristics or each region and centered on Taiwan, South
Korea and Hong Kong.
(4) Future Tasks
1) In marketing systems, enhance the strategic characteristics of managers, retrain field persons, enhancetheir expertise, and improve the qualities of marketing activities and educational assistance at hair salonsto further evolve the field person strategy.
2) In product development, further improve the Target Authority Customer (TAC) development system, withwhich to catch up with any change that may occur in hair design trends, and incorporate such ideas into
the product development process.
3) Promote the establishment of an efficient production system that is flexible enough to manufacture a wide
variety of products at different volumes, and the subcontract production elsewhere in order to avoid
disaster risk at production bases concentrated in Mie Prefecture.
4) In terms of our logistics system, we shall develop a salon delivery system as a way of carrying out
detailed information gathering with the aim of revolutionizing salon sales.
5) Strengthen human resource development activities to train and secure a certain number of staff members
eligible for international business and reinforce international marketing support operations toward
promoting international business strategies.

- 10 -

4. Consolidated Financial Statements(a) Consolidated Balance Sheet(Unit: thousand yen)Previous Consolidated Fiscal year-End(As of December 20, 2009)

Current Consolidated Fiscal year-End(As of December 20, 2010)

AssetsCurrent assets
Cash and bank deposits*2

Trade notes and accounts receivable
Merchandise and products
Semi-finished products
Raw and packaging materials
Deferred tax assets
OthersLoan loss reserves
Total current assets
Fixed assets
Tangible fixed assets
Buildings and other structures
Accumulated depreciation
Buildings and other structures (net)
Machinery, equipment and vehicles fortransportation
Accumulated depreciation
Machinery, equipment and vehicles
for transportation (net)Land
Construction in progress
Others
Accumulated depreciation
Others (net amount)
Total tangible fixed assets
Intangible fixed assets
Investments and other assets
Investment in securities
Long-term loans
Prepaid pension costs
Deferred tax assets
OthersLoan loss reserves
Total investments and other assets
Total fixed assets
Total assets- 11 -

1,666,170

2,673,044

2,804,683
1,646,427
17,417499,852
244,361
117,925-9,017
6,987,821

2,857,374
1,638,450
20,370563,184
166,841
126,378-9,9638,035,681

6,426,207-2,798,249
3,627,958

7,324,730-3,113,945
4,210,785

4,000,325

3,992,293-2,693,944-2,917,759

1,306,380

1,074,533

4,763,766
709,139
1,568,785-1,335,761
233,024
10,640,269
318,593

4,763,766
3,634
1,737,958-1,489,188
248,769
10,301,488
451,968

1,307,670
61,79082,425496,112524,366-65,160
2,407,204
13,366,068
20,353,890

1,180,555
42,057
10,461
466,016
393,042-37,730
2,054,403
12,807,860
20,843,541

(Unit: thousand yen)Previous Consolidated Fiscal year-End(As of December 20, 2009)

Current Consolidated Fiscal year-End(As of December 20, 2010)

Liabilities
Current Liabilities*2

Notes and accounts payable
Accounts payable
Accrued expenses payable
Corporate taxes payable
Reserve for returned goods
Reserve for bonuses
OthersTotal current liabilities
Fixed Liabilities
Reserve for retirement benefits
Reserve for loss on guarantees
OthersTotal fixed liabilities
Total liabilities
Net Assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Net unrealized gains on other securities
Foreign currency translation adjustments
Total valuation and translation
adjustments
Total net assets
Total liabilities and net assets- 12 -

953,356-

1,370,388
571,930
31,72062,685
256,617
3,246,698

467,309
1,284,549
635,475
19,07565,453
253,5092,725,372

39,000414,633
453,633
3,700,331

1,138
38,400379,135
418,673
3,144,046

2,000,000
199,120
14,637,996-38,572
16,798,543

2,000,000
199,120
15,779,971-38,254
17,940,836-71,571-73,412-141,280-100,061-144,984-241,341

16,653,559
20,353,890

17,699,495
20,843,541

(b) Consolidated Statement of Earnings(Unit: thousand yen)Previous Consolidated Fiscal year-End(December 21, 2008 –December 20, 2009)

Current Consolidated Fiscal year-End(December 21, 2009 –December 20, 2010)

19,189,467
6,974,723

Sales
Cost of Sales

19,749,606
6,746,943

12,214,744

Total sales revenues*1, *2

Selling, General and Administrative Expenses
Operating income

8,937,002
3,277,741

13,002,663*1, *2

9,423,732
3,578,930

Non-operating Income
Interest income
Dividends income
Profit from sale of investment securities
Rent from company housing
Bounty for corporate location
Profit on surrender of insurance
Co-sponsor fee
OthersTotal non-operating income

2,583
23,866
33,612
27,52024,81013,41019,602
145,406

1,359
31,883
1,287
42,65826,57919,910123,678956
318,379306
319,642
3,103,505

331,52244,024
375,546
3,327,062

Non-operating Expenses
Interest expense
Sales discount
OthersTotal non-operating expenses
Ordinary income
Extraordinary Profit
Gain on sale of fixed assets
Release of loan loss reserves
Reversal of reserve for guarantee losses
Total extraordinary profits*3887
15,00015,887

*3

*4

*4

91
2,197
600
2,889

Extraordinary Loss

606
*5
84,503
27,972
21,760134,843

Loss on sale of fixed assets
Loss on retirement of fixed assets
Provision for allowance for doubtful debt
Factory transfer costs
OthersTotal extraordinary losses
Income before income taxes and minority
interests
Income taxes-Current
Income taxes-Deferred
Total corporate and other taxes

Net income- 13 -*5

79
103,768
2,459
14,862
121,169

2,984,549

3,208,783

1,243,124-44,058
1,199,065
1,785,483

1,222,686
154,542
1,377,228
1,831,554

(c) Consolidated Statement of Changes in Shareholders’ Equity(Unit: thousand yen)Previous Consolidated Fiscal year-End(December 21, 2008 –December 20, 2009)

Current Consolidated Fiscal year-End(December 21, 2009 –December 20, 2010)

Shareholders’ equity
CapitalBalance at end of previous term

2,000,000

2,000,000

2,000,000

2,000,000

199,233

199,120-113-113
199,120

199,120

13,565,448

14,637,996-10,648--701,849
1,785,483-437
1,083,196
14,637,996-689,305
1,831,554-273
1,141,975
15,779,971-38,545-38,572-1,404
1,378-26-38,572

-470
788
317
-38,254

15,726,135

16,798,543-10,648--701,849
1,785,483-1,404827
1,083,056
16,798,543-689,305
1,831,554-470
514
1,142,292
17,940,836

Current term change
Total current term change
Balance at end of current term
Capital surplus
Balance at end of previous term
Current term change
Disposal of treasury stock
Total current term change
Balance at end of current term
Retained earnings
Balance at end of previous term
Change in association with changes in theaccounting procedures of overseas
subsidiaries
Current term change
Dividend of retained earnings
Current term net profit
Disposal of treasury stock
Total current term change
Balance at end of current term
Treasury stock
Balance at end of previous term
Current term change
Acquisition of treasury stock
Disposal of treasury stock
Total current term change
Balance at end of current term
Total shareholders’ equity
Balance at end of previous term
Change in association with changes in theaccounting procedures of overseas
subsidiaries
Current term change
Dividend of retained earnings
Current term net profit
Acquisition of treasury stock
Disposal of treasury stock
Total current term change
Balance at end of current term

- 14 -

(Unit: thousand yen)Previous Consolidated Fiscal year-End(December 21, 2008 –December 20, 2009)

Current Consolidated Fiscal year-End(December 21, 2009 –December 20, 2010)

Valuation and translation adjustments
Valuation difference, other securities
Balance at end of previous term

-48,601-71,571

Current term change
Current term change in items other thanshareholders’ equity (net)Total current term change-22,969-69,708-22,969-71,571-69,708-141,280

Balance at end of previous term

-9,176-73,412Current term change
Current term change in items other thanshareholders’ equity (net)Total current term change-64,236-26,648-64,236-73,412-26,648-100,061

Balance at end of previous term

-57,778-144,984

Current term change
Current term change in items other thanshareholders’ equity (net)Total current term change-87,206-96,356-87,206-144,984-96,356-241,341

15,668,357

16,653,559-10,648--701,849
1,785,483-1,404827-689,305
1,831,554-470
514-87,206-96,356

995,850
16,653,559

1,045,935
17,699,495

Balance at end of current term
Adjustments on foreign currency translation

Balance at end of current term
Total valuation and translation adjustments

Balance at end of current term
Total net assets
Balance at end of previous term
Change in association with changes in theaccounting procedures of overseas subsidiaries
Current term change
Dividend of retained earnings
Current term net profit
Acquisition of treasury stock
Disposal of treasury stock
Current term change in items other thanshareholders’ equity (net)Total current term change
Balance at end of current term

- 15 -

(d) Consolidated Statement of Cash Flows(Unit: thousand yen)Previous Consolidated Fiscal year-End
Current Consolidated Fiscal year-End(December 21, 2008 – December 20, 2009) (December 21, 2009 – December 20, 2010)
Cash flows from operating activities
Income before income taxes and minority
interests

2,984,549

3,208,783

Depreciation and amortization expense

1,116,759

1,010,245

19,804643
4,343-24,566
2,933-12,645

-

-600
1,185

56,437-26,450956-2,756-

71,963-33,242
2,230
-357

-

7,332

-280
84,503-21,909
164,147-12
21,869-53,473-66,363

42,344-475,357

16,001
4,439,096
26,975-938-1,385,749
3,079,384

95,726
3,755,650
33,579-194,441-1,161,129
2,433,659-499,966
400,000-1,473,067

2,765-613,718

2,275

3,846

-158,969-262,305-46,555
52,16548,065-6,39023,537-2,597--61,396-66,769

7,818-12,383

87,127-6,701

62,861

116,422-1,282-1,680,435-3,009-727,791

Decrease in allowance for doubtful accounts
Increase (decrease) in the provision for bonuses
Increase (decrease) in provision for returned
product adjustment
Increase (decrease) in reserve for guarantee losses
Increase (decrease) in reserve for retirement benefits
Decrease (increase) in the prepaid pension cost
Interest and dividends received
Interest paid
Foreign exchange loss (gain)
Increase (decrease) in profit from sale ofinvestment securities
Loss (gain) on revaluation of investments insecurities
Gain (loss) on sales of fixed assets
Loss from the sale/disposition of fixed assets
Decrease (increase) in accounts receivable – trade
Decrease (increase) in inventories
Increase (decrease) in accounts payable related
to procurement transactions
OthersSubtotalInterest and dividends received
Interest paid
Payment of retirement benefits to directors
Payment of corporate and other taxes
Cash flows from operating activities
Cash flows from investing activities
Payment due to the purchase of investment securities
Sale of investment securities
Purchase of property and equipment
Proceeds from sales of property, plant andequipment
Payment due to the acquisition of intangible
fixed assets
Payment due to loans
Collection of the loan payment
Expenditure for fixed period deposits
Income from cancellation of fixed deposits
Payment due to the placement ofguarantee money
Collection of guarantee money
Payment into insurance reserve fundCancellation/withdrawal from insurance reserve
fund
OthersCash flows from investing activities- 16 -

(Unit: thousand yen)Previous Consolidated Fiscal year-End(December 21, 2008 –December 20, 2009)

Current Consolidated Fiscal year-End(December 21, 2009 –December 20, 2010)

Cash flows from financing activities
Payment due to the repayment of long-termborrowing-23,381-

Net decrease (increase) in treasury stocks

-577

44

-701,201-725,159-688,199-688,154-18,403-13,333

655,386
1,010,784

1,004,380
1,666,170

Payment of dividends
Cash flows from financing activities
Effect of exchange rate fluctuations on cash andcash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Outstanding balance of cash and cash equivalents
at the end of current term*

- 17 -

1,666,170*

2,670,550

(e) Notes on the company as an ongoing concern
No corresponding data is available(f) Summary of Significant Accounting Policies
Subject
1

Application of
consolidated
accounting rules

2

Application of theequity method
Fiscal terms set for
consolidated
subsidiaries

3

Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)
Number of consolidated companies: 3 companies
Name of the consolidated subsidiary:
MILBON USA, INC.
Milbon Trading (Shanghai) Co., Ltd.
Milbon Korea Co., Ltd.
Milbon Korea Co., Ltd. was established in July2009 and is a consolidated subsidiary.
No corresponding data is available.

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)
Number of consolidated companies: 3 companies
Name of the consolidated subsidiary:
MILBON USA, INC.
Milbon Trading (Shanghai) Co., Ltd.
Milbon Korea Co., Ltd.

MILBON USA, INC. and Milbon Korea Co.,
Ltd. have their fiscal year end on September 30.
In preparing these consolidated financial
statements, Milbon Co., Ltd. has employedfinancial statements that Milbon USA Inc. andMilbon Korea Co., Ltd. independently produced
as of September 30.
The date of settlement at Milbon Trading(Shanghai) Co., Ltd. is December 31.
Consolidated financial statements are made using
September 30 as a provisional date of settlement.
With regard to important transactions that took
place in the period from October 1, throughDecember 20, the necessary adjustment has
been made to produce the consolidated financial
statements.

Same as shown on the left

- 18 -

Same as shown on the left

SubjectMajor accounting
standards(1) Basis for valuationof major assets

Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)(a) Marketable securities
Other securities
Securities with fair market value
Calculated based on the market value method
whereby relevant securities’ market prices
and other data recorded as of December 20,
2009 are taken into account to respectively
determine their fair value for reporting.
Resultant valuation differences are expensed
into the net assets. The cost of selling suchsecurities is calculated based on the moving
average method.
(Additional information)
Previously, if the market value ofother marketable securities with a fair market
value dropped in value by roughly 30%
or more in comparison to the acquisition priceof the individual stock, or if it was judged thatsuch had happened, price recovery wasdeemed to be difficult and the company
employed impairment accounting procedures.
However, in regard to such of these stocks thatfall in price by at least 30% and less than 50%,
the company has decided to determine thenecessity for impairment accounting
procedures after judging the possibility ofprice recovery on an individual basis. This
processing method has been changed because
recent falls in the prices of individual stocks
have occurred more in association with the
decline of the stock market overall due tofluctuations in various market factors thanbecause of factors inherent in the stock inquestion itself and because the company will
judge stocks more carefully and rationally inregard to the possibility of price recovery inview of the increased monetary importance of
these stocks.
Moreover, the impact of this change on profit(a) Marketable securities
Other securities
Securities with fair market value
Calculated based on the market
value method whereby relevant
securities’ market prices and other data
recorded as of December 20, 2010 are
taken into account to respectively
determine their fair value for reporting.
Resultant valuation differences are
expensed into the net assets. The cost of
selling such securities is calculated basedon the moving average method.

4

and loss is minor.

Securities without fair market value
Calculated based on the cost accounting
and moving average methods.

- 19 -

Securities without fair market value
Same as shown on the left

Subject

Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)(b) Inventories
Merchandise
Calculated mainly based on costaccounting and the first-in, first-out method(Method of book price devaluation based on
decreased profitability is used for balance
sheet values)
Products/ semi-finished products
Calculated mainly based on costaccounting and the gross average method(Method of book price devaluation based on
decreased profitability is used for balance
sheet values)
Raw materials
Calculated mainly based on costaccounting and the gross average method(Method of book price devaluation based on
decreased profitability is used for balance
sheet values)
Change in accounting policy
The company is applying the AccountingStandard for Measurement of Inventories(ASBJ Statement No. 9; July 5, 2006) fromthe current consolidated fiscal year.
Moreover, the impact of this change on
profit and loss is minor.

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)(b) Inventories
MerchandiseSame as shown on the left

Products/semi-finished products
Same as shown on the left

Raw materials
Calculated mainly through cost accounting
based on the gross average method (forbalance sheet values, the book pricedevaluation method based on decreased
profitability is used).

Supplies
Calculated through the last purchaseprice method (for balance sheet values, thebook price devaluation method based on
decreased profitability is used).

- 20 -

Subject(2) Method for
calculating
depreciation andamortization ofimportant assets(3) Basis for thevaluation andallocation of major
provisions

Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)(a) Tangible fixed assets
While Milbon Co., Ltd. applies thedeclining balance method, the consolidated
overseas subsidiary employs the fixedamount deduction method.
The useful lives relevant to major assets
are considered as indicated.
Buildings and other structures:
31 to 50 years
Machinery, equipment and vehicles fortransportation: 6 to 8 years(Additional Information)
In association with the revision of the
Corporation Tax Act (Law for the Partial
Revision of the Income Tax Act, etc [LawNo.23; April 30, 2008]), statutory useful life
and asset classifications have been revised.
Due to this revision, the useful life of some of
the machinery and equipment of thecompany, which was previously
processed mainly with a useful life of 9
years, will be changed to 8 years from thecurrent consolidated fiscal year on.
Moreover, due to this change, operating
income, ordinary income and income before
income taxes and minority interests will eachfall by 108,725 thousand yen.
(b) Intangible fixed assets
The fixed amount deduction method isapplied.
With regard to computer software
programs used in the offices, depreciation is
calculated based on the assumption that
useful years should be from 3 to 5 years and afixed amount is deducted and depreciatedfrom the relevant purchase prices every year.
(a) Provision for bad loans
In preparation of loan loss, Milbon Co.,
Ltd. estimates the amount likely to be
irrecoverable with regard to each loantransaction to secure a provision for thisspecific purpose. This amount is determinedwith reference to the Company’s historical
record (for general bad loans) and throughassessment of the possibility of collecting
individual debts (for specific doubtful
accounts). It is also a basic policy that theconsolidated overseas subsidiary also
estimates uncollectible amounts relevant tospecific loans and allocates a reasonable
allowance for the same.
(b) Provision for bonuses
The Company and its consolidated
subsidiaries outside Japan post an amountbased on estimates to provide for thepayment of employees' bonuses (including
those for officers in employment).
(c) Provision for returned merchandise
In preparation of losses that may occur inassociation with the return of merchandiseand products, Milbon Co., Ltd. assesses its
historical return ratio and other related data toestimate such possible loss in future andallocate a reasonable allowance for the same.

- 21 -

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)(a) Tangible fixed assets
While Milbon Co., Ltd. applies thedeclining balance method, the consolidated
overseas subsidiary employs the fixedamount deduction method.
The useful lives relevant to major assets
are considered as indicated.
Buildings and other structures:
31 to 50 years
Machinery, equipment and vehicles fortransportation: 6 to 8 years(b) Intangible fixed assets
Same as shown on the left(a) Provision for bad loans
In preparation for loan loss, Milbon Co.,
Ltd. and its consolidated overseas
subsidiaries estimate the amount likely to be
irrecoverable with regard to each loantransaction to secure a provision for thisspecific purpose. This amount is determinedwith reference to the Company’s historical
record (for general bad loans) and throughassessment of the possibility of collecting
individual debts (for specific doubtful
accounts).

(b) Provision for bonuses
Same as shown on the left(c) Provision for returned merchandiseSame as shown on the left

Subject

Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)(d) Provision for retirement benefits
In preparation for payments of retirement
benefits to employees, an appropriate amountis earmarked based on the estimates ofretirement liabilities and pension assets at theend of the current term.
Prior service liabilities are disposed of by thestraight-line method over a specified numberof years (5 years) within the averageremaining employee work period.
The difference relative to the liabilities iscalculated through the fixed amountdeduction method, distributed over a certain
period of time (5 years) within the averageremaining service years of employees
existing at the beginning of the current term,
and treated as an expense for each of thefollowing fiscal terms.
As the estimated value of pension assets at
the end of the current fiscal year exceeds theestimated amount of liability for retirement
benefits after adjustment of liabilities, basedon unrecognized past services andunrecognized actuarial gains and losses, thedifference is accounted for as prepaid pension
expenses.

(e) Reserves for guarantee losses
The Milbon Group gives individual
consideration to the financial circumstances
at guaranteed parties and records the amountof expected losses in order to prepare forlosses related to debt guarantees.

- 22 -

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)(d) Provision of retirement benefits
In preparation for payments of retirement
benefits to employees, an appropriate amountis earmarked based on the estimate ofretirement liabilities and pension assets at theend of the current term. The
simplified method is used for someconsolidated subsidiaries.
Prior service liabilities are disposed of by
the straight-line method over a specified
number of years (5 years) within the averageremaining employee work period.
The difference relative to the liabilities iscalculated through the fixed amountdeduction method, distributed over a certain
period of time (5 years) within the averageremaining service years of employees
existing at the beginning of the current term,
and treated as an expense for each of thefollowing fiscal terms.
As the estimated value of pension assets at
the end of the current fiscal year at Milbon
Co., Ltd. exceeds the estimated amount ofliability for retirement benefits after
adjustment of liabilities, based on
unrecognized past services and unrecognizedactuarial gains and losses, the difference isaccounted for as prepaid pension expenses.
(Change in accounting policy)
The company is applying the “Partial
Amendments to Accounting Standard for
Retirement Benefits (Part 3)” (ASBJ
Statement No. 19 issued on July 31, 2008)
from the current consolidated fiscal year.
As the same rate of discount is to be usedas that used previously, there will be no
impact on the consolidated financial
statements for the current consolidated fiscal
year.
(Additional information)
Since January 1, 2011, Milbon Co., Ltd.
has transferred part of its defined contribution
pension plan and its approved retirement
pension plan into a defined-benefit pension
plan. Accordingly, the company has appliedthe “Accounting Standard for Transfer
between Retirement Benefit Plans” (ASBJ
Guidance No.1). The impact of this change
was a decrease of 28,788 thousand yen on
operating income, ordinary income andincome before income taxes and minority
interests, respectively.
(e) Reserves for guarantee losses
Same as shown on left

Subject(4) Standard fortranslating foreign
currencies forvaluation of major
assets and liabilities(5) Other important
issues related to the
production of
consolidated financial
statements
5 Valuation of assets
and liabilities
belonging to theconsolidated
subsidiary
6 Definition of “Cash”
in the Consolidated
Statement of Cash
Flows

Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)
Financial loan and borrowing transactions inforeign currencies are translated into Japanese yenat spot exchange rates of the current term end
date, and the resultant translation adjustments arereported in the profit and loss statement. Assets
and liabilities of the consolidated overseas
subsidiary are translated into Japanese yen at spot
exchange rates on the specified term end date,
while earnings and expenses are converted at the
average exchange rate during the term before
reporting. Gains and losses resulting from suchtranslations are included in the Provision foradjustment of foreign exchange transactions in the
Net assets section of the balance sheet.
Treatment of consumption and other taxes
The consolidated financial statements areproduced on a non-tax inclusion basis.

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)Same as shown on the left

The market evaluation method is applied to all
assets and liabilities belonging to the consolidated
subsidiary.

Same as shown on the left

“Cash,” as used in the Consolidated Cash Flow
Statement, refers to cash and cash equivalents,
consisting of cash on hand, savings that can bewithdrawn at any time, and short-term
investments that can be converted into cash withlittle risk of fluctuation in value and also thatwill mature within three months of acquisition.

Same as shown on the left

- 23 -

Same as shown on the left

(g) Summary of Significant Accounting Policies(Change in Accounting Policies)
Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)(Accounting standard for lease transactions)
The company previously processed finance lease transactions
that do not transfer rights of ownership using accounting
procedures similar to those for ordinary rental transactions, but is
now applying the Accounting Standard for Lease Transactions(ASBJ Statement No. 13 (as issued by the First Subcommittee of
the Business Accounting Council on June 17, 1993 and revisedon March 30, 2007)), and the Guidance on Accounting Standard
for Lease Transactions (ASBJ Guidance No. 16 (as issued by the
Accounting System Committee at the Japanese Institute ofCertified Public Accountants on January 18, 1994 and revised on
March 30, 2007)) and will process such lease transactions using
accounting procedures similar to those for normal sales
transactions. Furthermore, in regard to the method for the
depreciation of lease assets related to finance lease transactions
that do not transfer rights of ownership, the company is using astraight line method that sets the lease period as the useful life
and the residual value to zero.
In regard to finance lease transactions that do not transfer
rights of ownership where the start date of the lease transaction
was prior to the start of the first fiscal year of application of thischange, the company will continue to use accounting procedures
similar to those for ordinary rental transactions.
There will be no impact on profit and loss due to this change.

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)-(Immediate handling related to the accounting procedures ofoverseas subsidiaries in the preparation of consolidated financial
statements)
From the current consolidated fiscal year onwards, thecompany is applying the “Practical Solution on Unification of
Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (Practical Issues Task Forcereport No. 18, May 17, 2006) and has carried out the required
revisions in consolidated settlement.
Moreover, the impact of this change on profit and loss is minor.

- 24 -

(Changes to display method)
Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)(Consolidated profit and loss statement)
In association with the application of the Cabinet Office
Regulation revising part of the regulations related to financial
statements, etc., (Cabinet Office Regulations No. 50, August 7,2008), those items included as “Inventory assets” in the previous
consolidated fiscal year will be included separately in theclassifications “Merchandise and products”, “Semi-finishedproducts” and “Raw and packaging materials” from thisconsolidated fiscal year.
Moreover, the values of “Merchandise and products”, Semifinished products” and “Raw packaging materials” included in“Inventory assets” in the previous consolidated fiscal year were1,820,528 thousand yen, 26,576 thousand yen and 491,953
thousand yen respectively.
--

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)-(Consolidated balance sheet)“Interest paid” (24 thousand yen in the current consolidated
fiscal year), which for a separate classification was given in theprevious consolidated fiscal year, has been included under“Others” in non-operating costs as a result of its reduced
financial importance.
(Consolidated Statement of Cash Flows)“Interest paid” under cash flows from operating activities has
been included under “Others” from the current consolidated
fiscal year as a result of its reduced financial importance.
“Interest paid” included under “Others” in the current
consolidated fiscal year is 24 thousand yen.

- 25 -

(h) Notes to Consolidated Financial Statements(Related to the Consolidated Balance Sheet)Previous Consolidated Fiscal year-End(As of December 20, 2009)
1 Contingent liabilities
Guarantees on liabilities
We have implemented a debt guarantee against customers’bank loans payable (one loan of 37,839 thousand yen).

Current Consolidated Fiscal year-End(As of December 20, 2010)
1 Contingent liabilities
Guarantees on liabilities
We have implemented a debt guarantee against customers’bank loans payable (three loans of 112,510 thousand yen).

*2 Handling of trade notes at end of fiscal year
The closing date of the current fiscal year was a holiday for
financial institutions, but trade notes shall be handled as
though settlement was made on the closing date.
Trade notes at the closing date of the current fiscal year
were as follows.
Trade notes receivable:
61,623 thousand yen
Trade notes payable:
176,948 thousand yen- 26 --

(Related to the Consolidated Profit and Loss Statement)
Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)*1 Major items and respective amounts included in theMarketing and General Administrative Expenses are as
follows:(Unit: thousand yen)
Sales promotion expenses
1,537,435
Remuneration, salary and other allowances
2,329,199
Provision for allowance for doubtful debt
9,017
Expensing of the Provision for bonuses
41,470
Provision for retirement benefit
217,586

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)*1 Major items and respective amounts included in theMarketing and General Administrative Expenses are as
follows:(Unit: thousand yen)
Sales promotion expenses
1,620,546
Remuneration, salary and other allowances
2,445,811
Expensing of the Provision for bonuses
46,005
Provision for retirement benefit
237,114*2 Research and development expense included in the General
Administrative Expense and Production Expense of thecurrent term
766,493 thousand yen*2 Research and development expense included in the General
Administrative Expense and Production Expense of thecurrent term
838,005 thousand yen*3 Breakdown of gains from fixed asset disposal
Machinery, equipment and vehicles for transportation
887 thousand yen*3 Breakdown of gains from fixed asset disposal(Unit: thousand yen)
Machinery, equipment and vehicles for87
transportation
Others4Total
91*4 Breakdown of the loss caused by the sale of fixed assets
Machinery, equipment and vehicles for transportation
606 thousand yen*4 Breakdown of the loss caused by the sale of fixed assets
Machinery, equipment and vehicles for transportation
79 thousand yen*5 Breakdown of the loss from the disposition of property orother fixed assets(Unit: thousand yen)
Buildings and other structures
67,179Machinery, equipment and vehicles for
13,135transportation
Others4,188
Total
84,503*5 Breakdown of the loss from the disposition of property orother fixed assets(Unit: thousand yen)
Buildings and other structures
10,495
Machinery, equipment and vehicles for
10,240transportation
Retirement costs related to refurbishment of
81,899the Tokyo Branch
Others
1,132
Total
103,768- 27 -

(Items Related to Consolidated Statement of Changes in Shareholders' Equity)
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009)
1. Items Related to Shares Issued and Outstanding
End of previous
consolidated fiscal year

Class of stock
Common stock (number of shares)

Increase

12,544,408

End of current consolidated
fiscal year

Decrease--

12,544,408

2. Items Related Treasury Stock
End of previous
consolidated fiscal year

Class of stock
Common stock (number of shares)

Increase

11,380End of current consolidated
fiscal year

Decrease
648

411

11,617(Reason for change)
1. The increase is attributed to the purchase of fractional shares upon requests for purchases from shareholders.
2. The decrease is attributed to the sale of fractional shares upon request for repurchases from shareholders.
3. Items Related to Dividends(1) Amount of dividends paid
Resolution

Class of stock

Total dividends(thousand yen)

General meeting of shareholders
held on March 18, 2009

Common stock

363,457

Board of Directors' meeting heldon June 26, 2009

Common stock

338,391

Dividend pershare (yen)Record date

Effective date29

December 20,
2008

March 19, 200927

June 20, 2009

August 7, 2009

(2) Dividends whose record date belongs to the current consolidated fiscal year and whose effective date belongs to thesubsequent consolidated fiscal year
Resolution

Class of stock

Source ofdividends

Total
dividends(thousand yen)

Dividend pershare (yen)Record date

Effective date

General meeting ofshareholders held on
March 18, 2010

Commonstock

Retainedearnings

350,918

28

December 20,
2009

March 19, 2010

- 28 -

Current Consolidated Fiscal Year (December 21, 2009 - December 20, 2010)
1. Items Related to Shares Issued and Outstanding
End of previous
consolidated fiscal year

Class of stock
Common stock (number of shares)

Increase

12,544,408

End of current consolidated
fiscal year

Decrease--

12,544,408

2. Items Related Treasury Stock
End of previous
consolidated fiscal year

Class of stock
Common stock (number of shares)

Increase

11,617

End of current consolidated
fiscal year

Decrease
215

238

11,594(Reason for change)
1. The increase is attributed to the purchase of fractional shares upon requests for purchases from shareholders.
2. The decrease is attributed to the sale of fractional shares upon request for repurchases from shareholders.
3. Items Related to Dividends(1) Amount of dividends paid
Resolution

Class of stock

Total dividends(thousand yen)

General meeting of shareholders
held on March 18, 2010

Common stock

350,918

Board of Directors' meeting heldon June 25, 2010

Common stock

338,387

Dividend pershare (yen)Record date

Effective date28

December 20,
2009

March 19, 201027

June 20, 2010

August 6, 2010

(2) Dividends whose record date belongs to the current consolidated fiscal year and whose effective date belongs to thesubsequent consolidated fiscal year
Resolution

Class of stock

Source ofdividends

Total
dividends(thousand yen)

Dividend pershare (yen)Record date

Effective date

General meeting ofshareholders held on
March 17, 2011

Commonstock

Retainedearnings

413,58233

December 20,
2010

March 18, 2011- 29 -

(Items Related to Consolidated Statements of Cash Flows)*

Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)
Relation between the balance of cash and cash equivalents
at the end of the consolidated fiscal year and account titles
stated in the consolidated balance sheets
Cash and deposit
1,666,170
Cash and cash equivalents
1,666,170(Unit: thousand yen)*

- 30 -

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)
Relation between the balance of cash and cash equivalents
at the end of the consolidated fiscal year and account titles
stated in the consolidated balance sheets
Cash and deposit
2,673,044
Fixed term deposits with deposit terms exceeding
three months-2,493
Cash and cash equivalents
2,670,550

(Segment Information)
1 Information by Business Segment
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009) and current consolidated fiscal
year (December 21, 2009 - December 20, 2010)
The Milbon Group is engaged in the production and distribution of hair-care products and otherrelated merchandise, all of which are deemed to belong to the same business segment. Since the Group is not
involved in any other business segment, no corresponding data is available.
2

Information on Business According to Geographic Areas of Operation
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009) and current consolidated fiscal
year (December 21, 2009 - December 20, 2010)
Given the fact that the domestic sales and assets of the Milbon Group account for more than 90% of both thetotal sales arising from all business segments involving Milbon and the total relevant assets, information on
business according to geographic areas of operation is not disclosed herein.

3

Overseas Sales
The previous consolidated fiscal year (December 21, 2008 - December 20, 2009) and current consolidated
fiscal year (December 21, 2009 - December 20, 2010)
Overseas sales information is not disclosed because the amounts of overseas sales for the year ended
December 20, 2009 and 2010 were less than 10% of the consolidated sales.

- 31 -

Related to Lease Transactions
Previous Consolidated Fiscal year
(December 21, 2008 – December 20, 2009)
1 Finance lease transactions that do not transfer rights ofownership where the start date of the lease transaction wasprior to the start of the first fiscal year of application of theaccounting standard for lease transactions(Borrower)(1) Purchase price equivalent, accumulated depreciationequivalent and the term-end outstanding balance equivalentof leased items are as follows:
Purchase priceequivalent(Unit: thousandyen)

Accumulated
depreciationequivalent(Unit: thousandyen)

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)
1 Finance lease transactions that do not transfer rights ofownership where the start date of the lease transaction wasprior to the start of the first fiscal year of application of theaccounting standard for lease transactions(Borrower)(1) Purchase price equivalent, accumulated depreciationequivalent and the term-end outstanding balance equivalentof leased items are as follows:

Term-end
outstanding balance
equivalent(Unit: thousandyen)

Purchase priceequivalent(Unit: thousandyen)

Accumulated
depreciationequivalent(Unit: thousandyen)

Term-end
outstanding balance
equivalent(Unit: thousandyen)

Others(tools, fixturesand supplies)

190,133

102,551

87,581Others(tools, fixturesand supplies)

139,625

77,797

61,827

Total

190,133

102,551

87,581

Total

139,625

77,797

61,827

The purchase price equivalent refers to the total amountof lease payments throughout the period of each lease,including the amount representing interest, since thetotal amount of future lease payments is not significant
in relation to the total value of tangible fixed assets asof the current term end date.

(Note)(Note)The purchase price equivalent refers to the total amountof lease payments throughout the period of each lease,including the amount representing interest, since thetotal amount of future lease payments is not significant
in relation to the total value of tangible fixed assets asof the current term end date.

(2) Future minimum lease payments equivalent(Unit: thousand yen)
Due within one year
25,753Due after one year
61,827
Total
87,581(Note) The minimum amount of payments to be made in futureis determined as of the current term end date andreported as the total amount of future minimum lease
payments, including the amount representing interest,since the amount of future minimum lease payments is
not significant in relation to the total value of tangible
fixed assets as of the current term end date.

(2) Future minimum lease payments equivalent(Unit: thousand yen)
Due within one year
18,239Due after one year
43,588
Total
61,827(Note) The minimum amount of payments to be made in futureis determined as of the current term end date andreported as the total amount of future minimum lease
payments, including the amount representing interest,since the amount of future minimum lease payments is
not significant in relation to the total value of tangible
fixed assets as of the current term end date.

(3) Lease expense and depreciation expense equivalent
Lease expense
37,981 thousand yen
Depreciation expense equivalent
37,981 thousand yen(3) Lease expense and depreciation expense equivalent
Lease expense
21,543 thousand yen
Depreciation expense equivalent
21,543 thousand yen(4) Method of calculating the depreciation expense equivalentWith regard to each item of leased property, plant andequipment, a depreciation expense equivalent is calculated
based on the fixed amount deduction method, in which theperiod of each lease contract is deemed as the useful orserviceable years of the relevant leased item and the value ofsuch leased item is supposed to be depreciated and reduced
to nil at the end of the contract.

(4) Method of calculating the depreciation expense equivalentWith regard to each item of leased property, plant andequipment, a depreciation expense equivalent is calculated
based on the fixed amount deduction method, in which theperiod of each lease contract is deemed as the useful orserviceable years of the relevant leased item and the value ofsuch leased item is supposed to be depreciated and reduced
to nil at the end of the contract.

2

2

Operating lease transactions(Borrower)
Prepaid lease charges related to irrevocable leases among
operating lease transactions.
(Unit: thousand yen)
Due within one year
38,092
Due after one year
148,102
Total
186,195- 32 -

Operating lease transactions(Borrower)
Prepaid lease charges related to irrevocable leases among
operating lease transactions.
(Unit: thousand yen)
Due within one year
38,499Due after one year
100,666
Total
139,166

(Information on affiliated business entities)
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009)
No corresponding date is available(Additional information)
From this consolidated fiscal year, the company is applying the “Accounting Standard for Related Party
Disclosures” (ASBJ Statement No. 11, October 17, 2006) and the “Implementation Guidance on the AccountingStandard for Related Party Disclosures” (ASBJ Guidance No. 13, October 17, 2006).
There will be no changes in the scope of companies subject to disclosure due to this change.
Current consolidated fiscal year (December 21, 2009 - December 20, 2010)
No corresponding date is available- 33 -

Related to tax effect accounting
Previous Consolidated Fiscal year-End(As of December 20, 2009)
1. Significant components contributing to deferred tax assets
and liabilities(Unit: thousand yen)

Current Consolidated Fiscal year-End(As of December 20, 2010)
1. Significant components contributing to deferred tax assets
and liabilities(Unit: thousand yen)

Deferred tax assets (current)

Deferred tax assets (current)

Loan-loss reserves

3,643

Loan-loss reserves

4,025

Reserve for loss on goods unsold

12,814

Reserve for loss on goods unsold

7,706

Reserve for bonus

24,676

Reserve for bonus

26,198Losses on revaluation of inventory assets

19,971

Losses on revaluation of inventory assets

12,914

Accrued enterprise and business facility taxes

50,361

Accrued enterprise and business facility taxes

55,371

Accrued social insurance contribution

22,084

Accrued social insurance contribution

23,347Retirement benefits for officers

78,554Retirement benefits for officers

11,956

Unrealized profit, inventories

18,585

Unrealized profit, inventories

22,373

Others

13,670

Others5,245

Total of deferred tax assets (current)

244,361

Subtotal of deferred tax assets (current)

Deferred tax assets (fixed)
Depreciation expenses

169,139

Valuation reserve-2,298

Total of deferred tax assets (current)

166,841

Deferred tax assets (fixed)
227,875

Depreciation expenses

247,468

Loan-loss reserves

18,882

Loan-loss reserves

10,935Reserve for guarantee losses

15,756

Reserve for guarantee losses

15,513

Loss on compulsory devaluation of investment
securities

Loss on compulsory devaluation of investment
securities

3,043

83,987Retirement benefits for officers

126,049

Retirement benefits for officers

114,092

Evaluation difference, other securities

48,515

Evaluation difference, other securities

95,767

Others8,346

Others

58,877

Subtotal of deferred tax assets (fixed)

545,698

Total of deferred tax assets (fixed)

529,412Deferred tax liabilities (fixed)
Prepaid pension cost

Valuation reserve-75,455

Total of deferred tax assets (fixed)

470,242

Deferred tax liabilities (fixed)-33,299

Prepaid pension cost

-4,226

Total deferred tax liabilities (fixed)-33,299

Total deferred tax liabilities (fixed)-4,226

Net deferred tax liabilities

740,473

Net deferred tax liabilities

632,857

The net value of the deferred tax assets is included in sections of
the Consolidated Balance Sheet as indicated below.
(Unit: thousand yen)

The net value of the deferred tax assets is included in sections of
the Consolidated Balance Sheet as indicated below.
(Unit: thousand yen)

Current assets: Deferred tax assets

244,361

Current assets: Deferred tax assets

166,841

Fixed assets: Deferred tax assets

496,112

Fixed assets: Deferred tax assets

466,016- 34 -

Previous Consolidated Fiscal year-End(As of December 20, 2009)

Current Consolidated Fiscal year-End(As of December 20, 2010)

2. Breakdown in major items leading to significant income tax
differences between the statutory tax rate and income tax rate
after application of tax effect accounting

2. Breakdown in major items leading to significant income tax
differences between the statutory tax rate and income tax rate
after application of tax effect accounting(Unit: %)Statutory tax rate
40.4
(Adjustments)
Entertainment and other expenses not
1.4
qualifying for deduction permanently
Per capita residents’ tax
0.6
Tax credit for research and development-2.5

We have omitted disclosure in relation to the above items
because the difference between the statutory tax rate andapplication of the effective income tax rate was 5% or lessthan the statutory tax rate.

Increase (decrease) in valuation allowance

1.8

Difference with effective income tax rate atoverseas subsidiaries
Others0.9

Income tax rate after application of tax
effect accounting

42.9

0.3

(Related to financial products)
We have omitted disclosure in relation to the notes on financial products because we considered such disclosure
to have little importance to the financial statements.

- 35 -

Related to marketable securities
As of the end of the previous consolidated fiscal year (As of December 20, 2009)
1 Other securities with marketable valueType(1) Equity securities

Items whose bookedvalues exceed theirrespective acquisition
pricesDifference(Unit: thousand yen)

225,385

267,223

41,838(2) Bonds---(3) Others

-

-

-

225,385

267,223

41,838Subtotal(1) Equity securities

Items whose bookedvalues do not exceed
their respective
acquisition prices

Value booked on theConsolidated Balance
Sheet(Unit: thousand yen)

Acquisition price(Unit: thousand yen)

1,186,121

1,024,196-161,925(2) Bonds---(3) Others

-

-

-

Subtotal
Total

1,186,121

1,024,196-161,925

1,411,507

1,291,420-120,086(Note) In impairment accounting procedures for marketable securities, the company employs impairment
accounting procedures on all securities where the market value of an individual security drops in value by
50% or more in comparison to its individual acquisition price. In the case of securities that fall in price byat least 30% and less than 50%, the company determines the necessity for impairment accounting
procedures after judging the possibility of price recovery on an individual basis.
The value of impairment accounting of other marketable securities with a market price for the current
consolidated fiscal year is zero.
2

Other marketable securities sold during the current consolidated fiscal year (December 21, 2008 - December
20, 2009)
Total amount of profit resulting from thesale(Unit: thousand yen)

Sold price(Unit: thousand yen)
400,000

3

Total amount of loss caused by the sale
(Unit: thousand yen)--

Other securities without fair market value
Value booked on the Consolidated
Balance Sheet(Unit: thousand yen)

Other securities
Unlisted equity securities

16,250(Note) The Company did not record any impairment charges for other securities without fair market value during
the current consolidated fiscal year.

- 36 -

As of the end of the current consolidated fiscal year (December 20, 2010)
1 Other marketable securities
Type

Items whose bookedvalues exceed theirrespective acquisition
prices
Items whose bookedvalues do not exceed
their respective
acquisition prices

Value booked on theConsolidated Balance
Sheet(Unit: thousand yen)

(1) Equity securities(2) Bonds(3) Others

Acquisition price(Unit: thousand yen)

Difference(Unit: thousand yen)

283,856

267,996

15,859

-

-

-

-

-

-

283,856

267,996

15,859880,449

1,140,688-260,238(2) Bonds---(3) Others

-

-

-

880,449

1,140,688-260,238

1,164,305

1,408,685-244,379

Subtotal(1) Equity securities

Subtotal
Total(Note) Unlisted equity securities (value of 16,250 thousand yen on the Consolidated Balance Sheet) are notincluded under “Other securities” above because it has been judged to be extremely difficult to
identify market value without a stock market price.
2

Other securities sold during the current consolidated fiscal year (December 21, 2009 - December 20, 2010)
Type(1) Equity securities

Total amount of profit
resulting from the sale
(Unit: thousand yen)

Sold price(Unit: thousand yen)

Total amount of loss causedby the sale
(Unit: thousand yen)

3,320

1,287

930

(2) Bonds---(3) Others

-

-

-

3,320

1,287

930

Total

3

Marketable securities for which impairment accounting procedures were implemented
The company recorded impairment charges of 7,332 thousand yen for other securities with fair market
value during the current consolidated fiscal year.
In carrying out impairment accounting procedures, the company employs impairment accounting
procedures on all securities where the market value of an individual security drops in value by 50% or more incomparison to its individual acquisition price. In the case of securities that fall in price by at least 30% andless than 50%, the company determines the necessity for impairment accounting procedures after judging thepossibility of price recovery on an individual basis.

- 37 -

(Related to Derivative Transactions)
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009)This item is non-applicable as the Milbon Group makes use of no derivatives trading whatsoever.
Consolidated fiscal year (December 21, 2009 - December 20, 2010)
This item is non-applicable as the Milbon Group makes use of no derivatives trading whatsoever.

- 38 -

(Related to the Provision for retirement benefits)
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009)
1 Outline of the Retirement Plan Adopted by Milbon
The Company provides an approved retirement pension plan and a defined contribution pension plan, andalso a cooperative welfare pension fund (in which companies involved in the same business have established awelfare pension fund), because their frameworks are considered effective to assure employees of definedbenefit pensions.
The matters related to the multiple employer system under which the required contributions are treated as aretirement benefit expense are as follows:(1) Matters related to the reserve situation of the system overall (March 31, 2009)
Value of pension assets
25,882,397 thousand yen
Value of benefit liabilities in pension finance calculations
46,098,575 thousand yen
Difference-20,216,177 thousand yen(2) Company’s proportion of benefit liabilities against the system overall(From December 1, 2008 to November 30, 2009)
6.7%(3) Supplementary explanation
The main factors in the difference shown in (1) above are the balance of past service liabilities of
9,905,470 thousand yen and the insufficient funds carried over of 10,310,707 thousand yen in thepension finance calculations. The depreciation method for past service liabilities used in this system isthe annuity repayment method for a period of 11 years and 9 months, and the company has processed
68,824 thousand yen as a special item in the consolidated financial statements for this term.
In addition, the proportion shown in (2) above is not the same as the company’s actual burden ratio.

2

Items related to retirement liabilities(Unit: thousand yen)

(1)
(2)
(3)
(4)
(5)

Retirement benefit liabilities
Pension assets
Non-funded retirement liabilities (1) + (2)Calculation differences due to unknown factors
Retirement liabilities that existed before revision of Milbon’s
retirement plans and have not yet been realized and expensed(Reduction of the retirement liabilities)(6) Net value posted on the Consolidated Balance Sheet (3) + (4) + (5)(7) Advanced pension payment(8) Provision for retirement benefit (6) - (7)

3

(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)

The components of retirement benefit expenses were as follows:

Service cost
Interest cost
Expected return on plan assets
Discrepancies with calculation that are expensed
Amortization of prior service cost
Subtotal (1) + (2) +(3) + (4) + (5)Contribution of the multi-employer welfare pension fund plans
Contribution to the defined contribution pension plan
Total

- 39 -

Previous Consolidated Fiscal year-End(As of December 20, 2009)-961,941
841,692-120,249
202,674-

82,42582,425-(Unit: thousand yen)Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)
63,417
17,588-17,959
42,8768,900
114,823
146,690
53,821
315,335

4

Issues related to the basic conditions for calculating retirement liabilities and other related values
Previous Consolidated Fiscal year-End(As of December 20, 2009)(1) Discount ratio(2) Expected investment profit ratio(3) Method of distributing the estimated amount of retirement benefit
over a certain period of time(4) Number of years designated to expense retirement liabilities
existing before revision of Milbon’s retirement plans(5) Number of years designated to process discrepancies withcalculations as an expense

2.0%
2.5%
Fixed amount distribution over the specified period oftime
Five years
Five years(An appropriate amount is earmarked based on theestimation of retirement liabilities and pension assets.
The difference relative to the liabilities is calculated
based on the fixed amount deduction method, distributed
over a certain period of time (five years) within the
average remaining service years of employees existing at
the beginning of the current term, and expensed in eachof the following fiscal terms.)

Consolidated fiscal year (December 21, 2009 - December 20, 2010)
1 Outline of the Retirement Plan Adopted by Milbon
The Company provides an approved retirement pension plan and a defined contribution pension plan, and alsoa cooperative welfare pension fund (in which companies involved in the same business have established awelfare pension fund), because their frameworks are considered effective to assure employees of definedbenefit pensions. Some of the company’s consolidated subsidiaries employ a retirement lump sum system as
the defined contribution pension plan.
Since January 2011, Milbon Co., Ltd. has transferred part of its defined contribution pension plan and its
approved retirement pension plan into a defined-benefit pension plan. Accordingly, the company has appliedthe “Accounting Standard for Transfer between Retirement Benefit Plans” (ASBJ Guidance No.1).
Details regarding the multi-employer plan, under which required contribution payments are handled as
accrued retirement benefit expenses, are as follows:(1) Items related to reserve status for system as a whole (March 31, 2010)
Amount of pension assets
Amount of accrued liabilities in pension financing calculations
Balance: minus

31,247,387 thousand yen
43,178,840 thousand yen-11,931,452 thousand yen(2) Ratio of gross payment assumed by the Milbon Group in system as a whole(December 1, 2009 - November 30, 2010)
6.9%(3) Supplementary explanation
The main factors in the difference shown in (1) above are the balance of past service liabilities of
14,540,959 thousand yen and a contingent reserve of 2,609,506 thousand yen. The depreciation method
for past service liabilities used in this system is the annuity repayment method for a period of 19 years and0 months, and the Company has processed 70,505 thousand yen as a special item in the consolidated
financial statements for this term.
The ratio quoted in (2) above differs from the actual ratio assumed by the company.

- 40 -

2

Items related to retirement liabilities(Unit: thousand yen)Previous Consolidated Fiscal year-End(As of December 20, 2010)-1,146,505
866,997-279,508
173,675
115,155

(1)
(2)
(3)
(4)
(5)

Retirement benefit liabilities
Pension assets
Non-funded retirement liabilities (1) + (2)Calculation differences due to unknown factors
Retirement liabilities that existed before revision of Milbon’s
retirement plans and have not yet been realized and expensed(Reduction of the retirement liabilities)(6) Net value posted on the Consolidated Balance Sheet (3) + (4) + (5)(7) Advanced pension payment(8) Provision for retirement benefit (6) - (7)9,322
10,461-1,138(Note) The simplified method is used when calculating retirement benefit liabilities at some consolidated
subsidiaries.
3

(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)

The components of retirement benefit expenses were as follows:

Service cost
Interest cost
Expected return on plan assets
Discrepancies with calculation that are expensed
Amortization of prior service cost
Subtotal (1) + (2) +(3) + (4) + (5)Contribution of the multi-employer welfare pension fund plans
Contribution to the defined contribution pension plan
Total

(Unit: thousand yen)Previous Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)
68,492
19,238-21,042
38,21628,788
133,694
149,524
56,659339,879(Note) Retirement benefit expenses at consolidated subsidiaries using the simplified method are included under“Service cost”.
4

Issues related to the basic conditions for calculating retirement liabilities and other related values
Previous Consolidated Fiscal year-End(As of December 20, 2010)(1) Discount ratio(2) Expected investment profit ratio(3) Method of distributing the estimated amount of retirement benefit
over a certain period of time(4) Number of years designated to expense retirement liabilities
existing before revision of Milbon’s retirement plans(5) Number of years designated to process discrepancies withcalculations as an expense

2.0%
2.5%
Fixed amount distribution over the specified period oftime
Five years
Five years(An appropriate amount is earmarked based on theestimation of retirement liabilities and pension assets.
The difference relative to the liabilities is calculated
based on the fixed amount deduction method, distributed
over a certain period of time (five years) within the
average remaining service years of employees existing at
the beginning of the current term, and expensed in eachof the following fiscal terms.)- 41 -

(Related to Stock Options)
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009)
No corresponding data is available.
Consolidated fiscal year (December 21, 2009 - December 20, 2010)
No corresponding data is available.
(Related to Business Combinations)
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009)
No corresponding data is available.
Consolidated fiscal year (December 21, 2009 - December 20, 2010)
No corresponding data is available.
(Related to Rental Properties and Other Real Estate)
Consolidated fiscal year (December 21, 2009 - December 20, 2010)
No corresponding data is available.

- 42 -

(Per Share Data)
Previous Consolidated Fiscal year
(December 21, 2008 - December 20, 2009)
Net asset value per share
Net income per share

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)

1,328.80 yen
142.46 yen

Diluted net income per share of common stock is not shown,because there are no diluted shares.

Net asset value per share

1,412.25 yen

Net income per share

146.14 yen

Diluted net income per share of common stock is not shown,because there are no diluted shares.

(Note) Basic data for calculating net income per share is as follows:
Previous Consolidated Fiscal year
(December 21, 2008 December 20, 2009)

Current Consolidated Fiscal year
(December 21, 2009 December 20, 2010)

1,785,483

1,831,554--

Net income related to common stocks (Unit: thousand yen)

1,785,483

1,831,554

Average number of outstanding shares of common stocks
during the term (Unit: share)

12,532,935

12,532,827

Net income (Unit: thousand yen)Amount not vested in ordinary shareholders(Unit: thousand yen)

- 43 -

(Significant subsequent events)
Previous consolidated fiscal year
(December 21, 2008 - December 20, 2009)-

Current consolidated fiscal year
(December 21, 2009 - December 20, 2010)(Stock Split)
At a Board of Directors meeting held on November 26, 2010,a resolution was passed to carry out a stock split as of December
21, 2010, at a ratio of 1.1 shares for 1 common stock as part of
the Company’s efforts to return profits to the shareholders and inorder improve the liquidity of Company shares.
(1) Increase in number of shares as a result of stock split
Common stock: 1,254,440 shares(2) Methods of split
A stock split will be carried out at a ratio of 1.1 shares for 1
common stock for all shares held by shareholders listed in theshareholders register and list of substantial shareholders as ofDecember 20, 2010. However, odd shares below one sharearising as a result of the spilt will be sold or purchased in a single
transaction, with the proceeds of such procedure to be distributed
to shareholders with odd shares in accordance with the amount of
odd shares.
Per share data for the previous consolidated fiscal year on theassumption that the above stock split had been carried out at the
beginning of the previous consolidated fiscal year, and per sharedata for the current consolidated fiscal year on the assumptionthat the above stock split had been carried out at the beginning of
the current term, are as follows.
Previous Consolidated
Fiscal YearNet asset value per share
1,208.00 yen
Net income per share
129.51 yen
Diluted net income pershare of common stock
Not shown because there are
no diluted shares.

- 44 -

Current Consolidated Fiscal
Year
Net asset value per share
1,283.86 yen
Net income per share
132.86 yen
Diluted net income pershare of common stock
Not shown because there are
no diluted shares.

5. Individual Financial Statements(a) Balance Sheet(Unit: thousand yen)Previous Term
(As of December 20, 2009)

Current Term
(As of December 20, 2010)

AssetsCurrent Assets
Cash and cash equivalents

1,275,141*3

Trade notes receivable*1

Accounts receivable
Merchandise and products

2,344,171

618,989
2,264,079
1,530,173

653,056*1

2,225,899
1,489,270

In-process

17,417

20,370

Raw and packaging materials

490,708557,374

Prepaid expenses

32,47430,325

Deferred tax asset

217,900

144,532

Short-term loans

6,174
*1

OthersLoan loss reserve
Total Current assets

46,6565,989*151,343-9,315-10,124

6,490,401

7,512,209

Fixed Assets
Tangible fixed assets
Buildings

5,998,658

6,888,168

Accumulated depreciation-2,555,692-2,843,286

Buildings (net)3,442,965

4,044,882

Structures
Accumulated depreciation
Structures (net)316,812333,260-206,655-206,287

110,156

126,973

3,953,279

3,946,812

Cumulative total of depreciation-2,655,768-2,878,359

Machinery and equipment (net)1,297,510

1,068,452

47,04644,046-38,175-39,113

8,870

4,932

Machinery and equipment

Automotive equipment
Accumulated depreciation
Automobiles and transport equipment (net)
Tools and equipment
Accumulated depreciation
Tools, implements and fixtures (net)Land

1,523,120

1,691,148-1,310,905-1,456,091

212,215

235,057

4,763,766

4,763,766

Construction in progress

721,585

3,634

Total tangible fixed assets

10,557,070

10,247,698

925
288,609
8,718
2,140
-

1,308
433,690
8,718
1,936
2,100

300,393447,754

Intangible fixed assets
Trademarks
SoftwareTelephone subscription right
Right of using a water supply facility
OthersTotal intangible fixed assets- 45 -

(Unit: thousand yen)Previous Term
(As of December 20, 2009)

Current Term
(As of December 20, 2010)

Investment and other assets
1,307,670

1,180,555

Stock of affiliates

616,369

616,369

Investments in affiliates

280,000

430,000

Investments in securities

Bankruptcy/ rehabilitation liabilities, etc

27,972

2,459

Long-term loan for employees

9,265

7,073

Long-term prepaid expenses

4,073

6,968

Prepaid pension cost

82,425

10,461

Enrolment fee

21,85021,850

Guarantee money paid

248,853

169,914

Insurance reserve fund

183,574

100,432

Deferred tax assets

456,737

466,016

Provision for bad loans-38,097-12,584

3,200,693

2,999,516

14,058,158

13,694,970

20,548,559

21,207,179

Total of investment and other assets
Total fixed assets
Total assets
Liabilities
Current Liabilities*3

530,562-

Accounts payable

422,793

467,142

Accrued liability

1,369,037

1,280,705

Accrued expenses payable and other related
liabilities

74,25170,458

Corporate tax payable

571,930

635,475

Consumption tax payable

75,637-

Trade notes payable

905

1,770

Deposit received

74,96978,574

Provision for returned merchandise

31,72019,075

Provision for bonuses

61,08064,280

Others

8,152

8,128

3,221,040

2,625,609

39,00038,400

Advances by customers

Total current liabilities
Fixed liabilities
Reserves for guarantee losses
Long-term guarantee deposits received

84,752

81,779Long-term accrued liabilities

312,004

282,408

Total fixed liabilities

435,756

402,587

3,656,797

3,028,197

Total liabilities- 46 -

(Unit: thousand yen)Previous Term
(As of December 20, 2009)

Current Term
(As of December 20, 2010)

Net Assets
Shareholders' equity
2,000,000

2,000,000

Capital reserve

199,120

199,120

Total capital surplus

199,120

199,120

300,880

300,880

Other reserve

3,500,000

3,500,000

Earned surplus forwarded

11,001,906

12,358,516

14,802,786

16,159,396-38,572-38,254

16,963,333

18,320,261

Valuation difference, other securities-71,571-141,280

Total valuation and translation adjustments-71,571-141,280

16,891,762

18,178,981

20,548,559

21,207,179

CapitalCapital surplus

Retained earnings
Earned surplus reserve
Other retained earnings

Total retained surplus
Treasury stock
Total shareholders' equity
Valuation and translation adjustments

Total net assets
Total liabilities and net assets- 47 -

(b) Statement of Earnings(Unit: thousand yen)
Current Term
(December 21, 2009 December 20, 2010)

Previous Term
(December 21, 2008 December 20, 2009)
Sales
18,657,140

19,176,679

Merchandise

289,066

270,275

Total sales

18,946,206

19,446,955

Beginning inventory of products

1,683,008

1,463,178

Cost of products manufactured

7,158,515

6,997,675

Products

Cost of Sales

8,841,523

Total
*1

Product and other account transfers

586,8268,460,854*1

509,029

Product term-end inventories

1,463,178

1,386,021

Cost of products sold

6,791,519

6,565,802

Beginning inventory of merchandise

83,492

66,995Merchandise purchased

267,608

404,015

351,100

Total*2

Product and other account transfers

37,224

471,010*2

150,785

Ending inventory of merchandise

66,995103,248

Cost of merchandise sold

246,880

216,976

Release of allowance for returns

27,376

31,720Reserve for returns

31,72019,075

Total Cost of sales

7,042,743

6,770,134

Total sales revenue

11,903,462

12,676,820

Sales promotion

1,522,402

1,599,917

Transportation

533,805

542,236

Advertising

182,537

212,112Marketing and administrative expenses

2,200,521

2,287,450

Loan loss reserve brought forward

Compensation and salary allowances

9,315

-

Reserve for bonuses

41,47043,606Retirement benefits

217,514

235,428

Travel and transport expenses

495,713532,790

Depreciation

321,798

370,109612,837

Rent expenses*3

Research and development

766,493623,838*3

838,005

Others1,650,590

1,652,196

Total sales, general and administrative expenses

8,555,001

8,937,691

3,348,461

3,739,129

Operating income- 48 -

(Unit: thousand yen)
Current Term
(December 21, 2009 December 20, 2010)

Previous Term
(December 21, 2008 December 20, 2009)
Non-operating income
1,896

507

49

-

23,86631,883-

1,287

Rent received from employees for their use ofcompany housing

33,61242,658Interest received
Interest on marketable securities
Dividends received
Profit from sale of investment securities

Incentives to attract businesses

27,520-

Profit on surrender of insurance

24,81026,579Co-sponsor fee

14,081-

Miscellaneous revenue

9,444

11,852

135,282

114,769

Total non-operating revenue
Non-operating expense

225-

318,379

331,522

306

9,177

318,912340,699

3,164,832

3,513,199

Interest paid
Sales discountMiscellaneous losses
Total non-operating expenses
Ordinary income
Extraordinary profit
Gains on fixed asset disposal*4

Reversal of allowance for doubtful accounts

15,000

2,334

-

600

15,887

3,026

*5

*5

Reversal of reserve for guarantee losses
Total extraordinary income

*4

887

91

Extraordinary loss
Loss on sale of fixed assets
Loss from the disposition of property or other fixed
assets*6606

84,503*6

79

103,768

Provision of allowance for doubtful accounts

27,972

2,459

Factory transfer expenses

21,760-

OthersTotal extraordinary losses-

14,862

134,843

121,169

Net income before tax

3,045,875

3,395,055

Income taxes-Current

1,242,094

1,237,525

Income taxes-Deferred-23,591

111,341

Total corporation tax, etc.

1,218,503

1,348,866

Net income

1,827,372

2,046,189- 49 -

Manufacturing Cost
Current Term
(December 21, 2009 December 20, 2010)

Previous Term
(December 21, 2008 December 20, 2009)
Account Title
I

Notes
ReferenceNo.

Amount(Unit: thousand yen)

Ratio
(%)

Amount(Unit: thousand yen)

Difference
Ratio
(%)

Amount(Unit: thousand yen)
70,742

Raw and Packaging
Materials

4,329,862

60.5

4,400,604

62.8

II

Subcontractor Expenses

1,040,288

14.6

1,081,488

15.4

41,199

III

Labor Cost

637,8138.9

615,458

8.8-22,354(Including reserve forbonuses)

11,190IV

Expense11,8901,146,135

16.0

907,006700
13.0-239,129(Included depreciation)

673,762

509,861-163,900(Included consumablesupplies)

71,80660,029-11,776(Included rent)

20,408

9,503-10,904

Total expenses
for manufacturing of theperiod7,154,099

100.0

7,004,557

100.0-149,541

Beginning inventory ofsemi-finished products

26,576

17,417-9,159

Total

7,180,676

7,021,974-158,701

Expenses transferred toother accounts

4,743

3,929

-814

Ending inventory of semifinished products*1

17,417

20,3702,953

Manufacturing cost of
products for the period

7,158,515

6,997,675-160,839

Previous Term
(December 21, 2008 - December 20, 2009)

Current Term
(December 21, 2009 - December 20, 2010)*1. Transfer to other accounts is as shown below:(Unit: thousand yen)
Research and development
4,685
Others
57
Total
4,743
2. Cost accounting method:
Sequential cost system*1. Transfer to other accounts is as shown below:(Unit: thousand yen)
Research and development
3,488
Others
440
Total
3,929
2. Cost accounting method:Same as shown on the left

- 50 -

(c) Statement of Changes in Shareholders' Equity(Unit: thousand yen)Previous Consolidated Fiscal year-End(December 21, 2008 –December 20, 2009)

Current Consolidated Fiscal year-End(December 21, 2009 –December 20, 2010)

Shareholders’ equity
Capital2,000,000

2,000,000

2,000,000

2,000,000

199,120

199,120

199,120

199,120

113

-

-113
-113
-

-

199,233

199,120-113-113
119,120

199,120

300,880

300,880

300,880

300,880

Balance at end of previous term

689-

Current term change
Reversal of reserve for special
depreciation
Total current term change

-689

-

-689
-

-

3,500,000

3,500,000

3,500,000

3,500,000

Balance at end of previous term
Current term change
Total current term change
Balance at end of current term
Capital surplus
Capital reserve
Balance at end of previous term
Current term change
Total current term change
Balance at end of current term
Other capital surplus
Balance at end of previous term
Current term change
Disposal of treasury stock
Total current term change
Balance at end of current term
Total capital surplus
Balance at end of previous term
Current term change
Disposal of treasury stock
Total current term change
Balance at end of current term
Retained earnings
Earned reserve
Balance at end of previous term
Current term change
Total current term change
Balance at end of current term
Other retained earnings
Reserve for special depreciation

Balance at end of current term
Other reserve
Balance at end of previous term
Current term change
Total current term change
Balance at end of current term

- 51 -

(Unit: thousand yen)Previous Consolidated Fiscal year-End(December 21, 2008 –December 20, 2009)

Current Consolidated Fiscal year-End(December 21, 2009 –December 20, 2010)

Retained earnings carried over
Balance at end of previous term

9,876,131

11,001,906-701,849-689,305

689-

1,827,372-437
1,125,774
11,001,906

2,046,189-273
1,356,609
12,358,516

13,677,700

14,802,786-701,849--689,305-

1,827,372-437
1,125,085
14,802,786

2,046,189-273
1,356,609
16,159,396-38,545-38,572-1,404
1,378-26-38,572

-470
788
317
-38,254

15,838,388

16,963,333-701,849
1,827,372-1,404827
1,124,945
16,963,333-689,305
2,046,189-470
514
1,356,927
18,320,261

Current term change
Dividend of retained earnings
Reversal of reserve for special
depreciation
Current net income
Disposal of treasury stock
Total current term change
Balance at end of current term
Total retained earnings
Balance at end of previous term
Current term change
Dividend of retained earnings
Reversal of reserve for special
depreciation
Current net income
Disposal of treasury stock
Total current term change
Balance at end of current term
Treasury stock
Balance at end of previous term
Current term change
Acquisition of treasury stock
Disposal of treasury stock
Total current term change
Balance at end of current term
Total shareholders’ equity
Balance at end of previous term
Current term change
Dividend of retained earnings
Current term net profit
Acquisition of treasury stock
Disposal of treasury stock
Total current term change
Balance at end of current term

- 52 -

(Unit: thousand yen)Previous Consolidated Fiscal year-End(December 21, 2008 –December 20, 2009)

Current Consolidated Fiscal year-End(December 21, 2009 –December 20, 2010)

Valuation and translation adjustments
Valuation difference, other securities
Balance at end of previous term

-48,601-71,571

Current term change
Current term change in items other thanshareholders’ equity (net)Total current term change-22,969-69,708-22,969-71,571-69,708-141,280

Balance at end of previous term

-48,601-71,571

Current term change
Current term change in items other thanshareholders’ equity (net)Total current term change-22,969-69,708-22,969-71,571-69,708-141,280

15,789,786

16,891,762-701,849
1,827,372-1,404827-689,305
2,046,189-470
514-22,969-69,708

1,101,975
16,891,762

1,287,219
18,178,981

Balance at end of current term
Total valuation and translation adjustments

Balance at end of current term
Total net assets
Balance at end of previous term
Current term change
Dividend of retained earnings
Current term net profit
Acquisition of treasury stock
Disposal of treasury stock
Current term change in items other thanshareholders’ equity (net)Total current term change
Balance at end of current term

- 53 -

(d) Notes on the company as a going concern
No corresponding data is available.
(e) Summary of Significant Accounting Policies
Subject
1

Evaluation criteria
and methods forsecurities

Previous Term
(From December 21, 2008 - December 20, 2009)(a) Stock of subsidiaries
Cost accounting based on the moving
average method(b) Sundry securities
With market valueMarket value method based on the market
price as of the last day of the fiscal year (total
difference between the estimate and actual
price is expensed into the net assets, and costfor selling is calculated based on the moving
average method)(Additional information)
Previously, if the market value ofother marketable securities with afair market value dropped in value by
roughly 30% or more in comparison to theacquisition price of the individual stock, or if
it was judged that such had happened, pricerecovery was deemed to be difficult and thecompany employed impairment accounting
procedures. However, in regard to such ofthese stocks that fall in price by at least 30%
and less than 50%, the company has decided
to determine the necessity for impairment
accounting procedures after judging thepossibility of price recovery on an individual
basis. This processing method has beenchanged because recent falls in the prices ofindividual stocks have occurred more inassociation with the decline of thestock market overall due to fluctuations invarious market factors than because offactors inherent in the stock in question itself
and because the company will judge
stocks more carefully and rationally inregard to the possibility of price recovery inview of the increased monetary importanceof these stocks.
Moreover, the impact of this change on
profit and loss is minor.
Without market value
Cost accounting based on the moving
average method- 54 -

Current Term
(From December 21, 2009 - December 20, 2010)(a) Stock of subsidiaries
Same as shown on the left(b) Sundry securities
With market valueMarket value method based on the market
price as of the last day of the fiscal year
(total difference between the estimate andactual price is expensed into the net assets,
and cost for selling is calculated based on
the moving average method)

Without market value
Same as shown on the left

Subject2

3Inventory valuationand its method

Depreciation methods
for fixed assets

Previous Term
(From December 21, 2008 - December 20, 2009)(a) Merchandise
Calculated based on cost accounting and thefirst-in, first-out method (Method of bookprice devaluation based on decreased
profitability is used for balance sheet values)(b) Products and semi-finished products
Calculated based on cost accounting and thegross average method (Method of book pricedevaluation based on decreased profitability
is used for balance sheet values)(c) Raw and packaging materials
Calculated based on cost accounting and thegross average method (Method of book pricedevaluation based on decreased profitability
is used for balance sheet values)(d) Stock
Calculated based on cost accounting and thefinal purchase price method (Method of bookprice devaluation based on decreased
profitability is used for balance sheet values)(Change in accounting policy)
The company is applying the AccountingStandard for Measurement of Inventories(ASBJ Statement No. 9; July 5, 2006) fromthe current consolidated fiscal year.
Moreover, the impact of this change on
profit and loss is minor.
(a) Tangible fixed assets
Declining balance method
Declining balance method is also applied
to building (excluding accessory equipment)
acquired on April 1, 1998 and thereafter.
Durable years are as shown below:
Buildings: 31 to 50 years, Machinery andequipment: 8 years(Additional Information)
In association with the revision of the
Corporation Tax Act (Law for the Partial
Revision of the Income Tax Act, etc [LawNo.23; April 30, 2008]), statutory useful life
and asset classifications have been revised.
Due to this revision, the useful life of some of
the machinery and equipment of thecompany, which was previously
processed mainly with a useful life of 9
years, has been changed to a 8 years from thecurrent consolidated fiscal year on.
Moreover, due to this change, operating
income, ordinary income and net income
prior to taxes and other adjustments will eachfall by 108,725 thousand yen.
(b) Intangible fixed assets
Fixed amount method
Fixed amount method is applied tosoftware to be used within the Company
based on the in-house durable years (5 years)- 55 -

Current Term
(From December 21, 2009 - December 20, 2010)(a) MerchandiseSame as shown on the left(b) Products/semi-finished products
Same as shown on the left(c) Raw materials
Same as shown on the left(d) Supplies
Calculated through the last purchaseprice method (for balance sheet values, thebook price devaluation method based on
decreased profitability is used).

(a) Tangible fixed assets
Declining balance method
Declining balance method is also applied
to building (excluding accessory equipment)
acquired on April 1, 1998 and thereafter.
Durable years are as shown below:
Buildings: 31 to 50 years, Machinery andequipment: 8 years(b) Intangible fixed assets
Same as shown on the left

Subject4Conversion rate ofassets and liabilities
in foreign currency
into yen5

Accounting standards
for provision

Previous Term
(From December 21, 2008 - December 20, 2009)
Monetary assets and liabilities in foreign currency
are translated into yen based on actual exchange
rate as of the last day of the fiscal year andtransactional exchange gains/(losses) are reflectedin earnings.
(a) Provision for bad loans
The estimated unrecoverable amount to
prepare for losses caused by bad loans isposted based on the historical bad loan rate
for general debts and the probability of nonrecovery in each case for problem loans.
(b) Provision for bonuses
An amount is posted based on estimates toprovide for the payment of bonuses to
employees (including bonuses for employees
who are concurrently directors and have
duties in an employee capacity)(c) Provision for returned merchandise
The estimated loss accompanying future
returns of merchandise and products is posted
based on past return rates to prepare for theloss.

- 56 -

Current Term
(From December 21, 2009 - December 20, 2010)Same as shown on the left(a) Provision for bad loans
Same as shown on the left(b) Provision for bonuses
Same as shown on the left(c) Provision for returned merchandiseSame as shown on the left

Subject

6

Other significant
accounting policies

Previous Term
(From December 21, 2008 - December 20, 2009)(d) Provision for retirement benefit
In preparation for the payment of
retirement benefits to employees, theCompany posts an amount at the end of thecurrent fiscal year based on estimatedretirement liabilities and pension assets as ofthe end of the current fiscal year.
Prior service liabilities are disposed of by
the straight-line method over a specified
number of years (5 years) within the averageremaining employee work period.
Resultant differences are disposed of fromthe fiscal year following the fiscal year inwhich they occur in proportionally divided
amounts based on the straight-line method
over a fixed number of years (5 years) within
the average remaining employee work period.
As the estimated value of pension assets at
the end of the current fiscal year exceeds theestimated amount of liability for retirement
benefits after adjustment of liabilities basedon unrecognized past services andunrecognized actuarial gains and losses, thedifference is accounted for as prepaid pension
expenses.

(e) Reserves for guarantee losses
In preparation for any possible losses
related to guarantees on liabilities, estimatedamount of losses to cover is included
considering the financial positions of theindividual borrowers from banks to which theCompany has provided guarantees.
Consumption taxes
Consumption tax is excluded from the account.

- 57 -

Current Term
(From December 21, 2009 - December 20, 2010)(d) Provision for retirement benefit
In preparation for the payment of
retirement benefits to employees, theCompany posts an amount at the end of thecurrent fiscal year based on estimatedretirement liabilities and pension assets as ofthe end of the current fiscal year.
Prior service liabilities are disposed of by
the straight-line method over a specified
number of years (5 years) within the averageremaining employee work period.
Resultant differences are disposed of fromthe fiscal year following the fiscal year inwhich they occur in proportionally divided
amounts based on the straight-line method
over a fixed number of years (5 years) within
the average remaining employee work period.
As the estimated value of pension assets at
the end of the current fiscal year exceeds theestimated amount of liability for retirement
benefits after adjustment of liabilities basedon unrecognized past services andunrecognized actuarial gains and losses, thedifference is accounted for as prepaid pension
expenses.
(Change in accounting policy)
The company is applying the “Partial
Amendments to Accounting Standard for
Retirement Benefits (Part 3)” (ASBJ
Statement No. 19 issued on July 31, 2008)
from the current term.
As the same rate of discount is to be usedas that used previously, there will be no
impact on the consolidated financial
statements for the current term.
(Additional information)
Since January 1, 2011, Milbon Co., Ltd.
has transferred part of its defined contribution
pension plan and its approved retirement
pension plan into a defined-benefit pension
plan. Accordingly, the company has appliedthe “Accounting Standard for Transfer
between Retirement Benefit Plans” (ASBJ
Guidance No.1). The impact of this change
was a decrease of 28,788 thousand yen on
operating income, ordinary income andincome before income taxes and minority
interests, respectively.
(e) Reserves for guarantee losses
Same as shown on the left

Consumption taxes
Same as shown on the left

(f) Significant Changes in Accounting Policies(Change in Accounting Policies)
Previous Term
(December 21, 2008 - December 20, 2009)(Accounting standard for lease transactions)
The company previously processed finance lease transactions
that do not transfer rights of ownership using accounting
procedures similar to those for ordinary rental transactions, but is
now applying the Accounting Standard for Lease Transactions(ASBJ Statement No. 13 (as issued by the First Subcommittee of
the Business Accounting Council on June 17, 1993 and revisedon March 30, 2007)), and the Guidance on Accounting Standard
for Lease Transactions (ASBJ Guidance No. 16 (as issued by the
Accounting System Committee at the Japanese Institute ofCertified Public Accountants on January 18, 1994 and revised on
March 30, 2007)) and will process such lease transactions using
accounting procedures similar to those for normal sales
transactions. Furthermore, in regard to the method for the
depreciation of lease assets related to finance lease transactions
that do not transfer rights of ownership, the company is using astraight line method that sets the lease period as the useful life
and the residual value to zero.
In regard to finance lease transactions that do not transfer
rights of ownership where the start date of the lease transaction
was prior to the start of the first fiscal year of application of thischange, the company will continue to use accounting procedures
similar to those for ordinary rental transactions.
There will be no impact on profit and loss due to this change.

Current Term
(December 21, 2009 - December 20, 2010)-(Change in Method of Presentation)
Previous Term
(December 21, 2008 - December 20, 2009)(Balance Sheet)
In association with the application of the Cabinet Office
Regulation revising part of the regulations related to theterminology, formats and preparation methods of financial
statements, etc., (Cabinet Office Regulations No. 50, August 7,2008), those items included as “Merchandise”, “Products”,“Raw materials” and “Packaging materials” in the previous fiscal
year will be included together as “Merchandise and products”
and “Raw and packaging materials” from this fiscal year.
Moreover, the values of “Merchandise”, “Products”,“Raw materials” and “Packaging materials” included in thisfiscal year were 66,995 thousand yen, 1,463,178 thousand yen,
277,951 thousand yen and 212,756 thousand yen respectively.
-

Current Term
(December 21, 2009 - December 20, 2010)-(Consolidated Profit and Loss Statement)“Interest paid” (24 thousand yen in the current consolidated
fiscal year), which for a separate classification was given in theprevious consolidated fiscal year, has been included under“Others” in non-operating costs as a result of its reduced
financial importance.

- 58 -

(g) Notes to Individual Financial Statements(Related to Balance Sheets)
Previous Term
(As of December 20, 2009)*1 Assets and liabilities in respect of affiliated companies
The following items have not been given classification
headings, but are included under the various existingheadings:
Trade account receivables
Other (current assets)

Current Term
(As of December 20, 2010)*1 Assets and liabilities in respect of affiliated companies
The following items have not been given classification
headings, but are included under the various existingheadings:

83,330 thousand yen
9,738 thousand yen

Trade account receivables
Other (current assets)

36,789 thousand yen
9,322 thousand yen

2 Contingent liabilities
Guarantee of liabilities
We have implemented a debt guarantee against customers’bank loans payable (one loan of 37,839 thousand yen).

2 Contingent liabilities
Guarantee of liabilities
We have implemented a debt guarantee against customers’bank loans payable (three loans of 112,510 thousand yen).

*3 Handling of trade notes at end of fiscal year
The closing date of the current fiscal year was a holiday for
financial institutions, but trade notes shall be handled as
though settlement was made on the closing date.
Trade notes at the closing date of the current fiscal year
were as follows.

-

Trade notes receivable
Trade notes payable

61,623 thousand yen
176,948 thousand yen- 59 -

Related to Statement of Earnings
Previous Term
(December 21, 2008 - December 20, 2009)*1 Details of the transfer of the cost of products to otheraccounts are as follows:(Unit: thousand yen)
Sales promotion
564,567
Entertainment
9,514
Market development
6,341
Research and development
3,478
Others2,924
Total
586,826

Current Term
(December 21, 2009 - December 20, 2010)*1 Details of the transfer of the cost of products to otheraccounts are as follows:(Unit: thousand yen)
Sales promotion
481,157
Entertainment
12,305Market development
11,068
Research and development
2,371
Others2,126
Total
509,029*2 Details of the transfer of the cost of merchandize to otheraccounts are as follows:(Unit: thousand yen)
Sales promotions
37,139Others85
Total
37,224*2 Details of the transfer of the cost of merchandize to otheraccounts are as follows:(Unit: thousand yen)
Sales promotions
150,735
Others49
Total
150,785*3 Total amount of research and development expenses
Research and development expenses included in the generaladministration and manufacturing expenses of this period.
766,493 thousand yen*3 Total amount of research and development expenses
Research and development expenses included in the generaladministration and manufacturing expenses of this period.
838,005 thousand yen*4 Details of gain on sale of fixed assets
Automobiles and transport equipment*4 Details of gain on sale of fixed assets
887 thousand yen
Machinery and equipment
Tools, equipment, furniture and fixtures
Total*5 Details of loss on sale of fixed assets
Machinery and equipment

606 thousand yen*6 Details of loss from the disposition of fixed assets are as
follows:(Unit: thousand yen)
Buildings
64,327Structures
2,852
Machinery and equipment
13,067
Automobiles and transport equipment
67
Tools and equipment
4,188
Total
84,503*5 Details of loss on sale of fixed assets
Machinery and equipment(Unit: thousand yen)
87
4
91

79 thousand yen*6 Details of loss from the disposition of fixed assets are as
follows:(Unit: thousand yen)
Buildings
8,344
Structures
2,151
Machinery and equipment
10,240Tools and equipment
1,132
Retirement costs related to refurbishment of
81,899the Tokyo Branch
Total
103,768- 60 -

(Statement of Changes in Shareholders' Equity)
Previous Term (December 21, 2008 - December 20, 2009)
Items related to treasury stock
Class of stock

End of previous
fiscal year

Increase

Decrease

Current fiscal year

Common stock
11,380648
411
11,617(Number of shares)(Reason for change)
1. The increase is attributed to the acquisition of shares upon request for the repurchasing of fractional sharesfrom shareholders.
2. The decrease is attributed to the sale of fractional shares that shareholders requested us to repurchase.
Current Term (December 21, 2009 - December 20, 2010)
Items related to treasury stock
Class of stock

End of previous
fiscal year

Increase

Decrease

Current fiscal year

Common stock
11,617215
238
11,594(Number of shares)(Reason for change)
1. The increase is attributed to the acquisition of shares upon request for the repurchasing of fractional sharesfrom shareholders.
2. The decrease is attributed to the sale of fractional shares that shareholders requested us to repurchase.

- 61 -

(Related to Lease Transactions)
Previous Consolidated Fiscal year
(December 21, 2008 – December 20, 2009)
1 Finance lease transactions that do not transfer rights ofownership where the start date of the lease transaction wasprior to the start of the first fiscal year of application of theaccounting standard for lease transactions(Borrower)(1) Purchase price equivalent, accumulated depreciationequivalent and the term-end outstanding balance equivalentof leased items are as follows:
Purchase priceequivalent(Unit: thousandyen)

Accumulated
depreciationequivalent(Unit: thousandyen)

Current Consolidated Fiscal year
(December 21, 2009 - December 20, 2010)
1 Finance lease transactions that do not transfer rights ofownership where the start date of the lease transaction wasprior to the start of the first fiscal year of application of theaccounting standard for lease transactions(Borrower)(1) Purchase price equivalent, accumulated depreciationequivalent and the term-end outstanding balance equivalentof leased items are as follows:

Term-end
outstanding balance
equivalent(Unit: thousandyen)

Purchase priceequivalent(Unit: thousandyen)

Accumulated
depreciationequivalent(Unit: thousandyen)

Term-end
outstanding balance
equivalent(Unit: thousandyen)

Others(tools, fixturesand supplies)

190,133

102,551

87,581Others(tools, fixturesand supplies)

139,625

77,797

61,827

Total

190,133

102,551

87,581

Total

139,625

77,797

61,827(Note)The purchase price equivalent refers to the total amountof lease payments throughout the period of each lease,including the amount representing interest, since thetotal amount of future lease payments is not significant
in relation to the total value of tangible fixed assets asof the current term end date.
(2) Future minimum lease payments equivalent(Unit: thousand yen)
Due within one year
25,753Due after one year
61,827
Total
87,581(Note) The minimum amount of payments to be made in futureis determined as of the current term end date andreported as the total amount of future minimum lease
payments, including the amount representing interest,since the amount of future minimum lease payments is
not significant in relation to the total value of tangible
fixed assets as of the current term end date.

(Note)(3) Lease expense and depreciation expense equivalent
Lease expense
37,981 thousand yen
Depreciation expense equivalent
37,981 thousand yen(3) Lease expense and depreciation expense equivalent
Lease expense
21,543 thousand yen
Depreciation expense equivalent
21,543 thousand yen(4) Method of calculating the depreciation expense equivalentWith regard to each item of leased property, plant andequipment, a depreciation expense equivalent is calculated
based on the fixed amount deduction method, in which theperiod of each lease contract is deemed as the useful orserviceable years of the relevant leased item and the value ofsuch leased item is supposed to be depreciated and reduced
to nil at the end of the contract.

(4) Method of calculating the depreciation expense equivalentWith regard to each item of leased property, plant andequipment, a depreciation expense equivalent is calculated
based on the fixed amount deduction method, in which theperiod of each lease contract is deemed as the useful orserviceable years of the relevant leased item and the value ofsuch leased item is supposed to be depreciated and reduced
to nil at the end of the contract.

2

2

Operating lease transactions(Borrower)
Prepaid lease charges related to irrevocable leases among
operating lease transactions(Unit: thousand yen)
Due within one year
3,708
Due after one year
10,007
Total
13,715The purchase price equivalent refers to the total amountof lease payments throughout the period of each lease,including the amount representing interest, since thetotal amount of future lease payments is not significant
in relation to the total value of tangible fixed assets asof the current term end date.
(2) Future minimum lease payments equivalent(Unit: thousand yen)
Due within one year
18,239Due after one year
43,588
Total
61,827(Note) The minimum amount of payments to be made in futureis determined as of the current term end date andreported as the total amount of future minimum lease
payments, including the amount representing interest,since the amount of future minimum lease payments is
not significant in relation to the total value of tangible
fixed assets as of the current term end date.

- 62 -

Operating lease transactions(Borrower)
Prepaid lease charges related to irrevocable leases among
operating lease transactions(Unit: thousand yen)
Due within one year
3,619
Due after one year
6,388
Total
10,007(Related to Securities)
Previous Consolidated Fiscal Year (Year ended December 20, 2009)
There are no stocks of subsidiaries or affiliates which have fair market values.
Current Consolidated Fiscal Year (Year ended December 20, 2010)
Shares in subsidiaries and affiliated companies (subsidiary shares valuing 616,369 thousand yen are listed on
the Consolidated Balance Sheet) do not have stock market prices and are not included here because it has been
judged to be extremely difficult to identify market value.

- 63 -

Related to tax effect accounting
Previous Term
(As of December 20, 2009)
Significant components contributing to deferred tax assets andliabilities(Unit: thousand yen)
Deferred tax assets (current)
Loan-loss reserves
3,763
Reserve for loss on goods unsold
12,814
Reserve for bonus
24,676
Losses on revaluation of inventory assets
19,971
Accrued enterprise and business facility
50,361taxes
Accrued social insurance contributions
22,084Retirement benefits for officers
78,554
Others5,675
Total deferred tax assets (current)
217,900

Current Term
(As of December 20, 2010)
Significant components contributing to deferred tax assets andliabilities(Unit: thousand yen)
Deferred tax assets (current)
Loan-loss reserves
4,090
Reserve for loss on goods unsold
7,706
Reserve for bonus
25,969Losses on revaluation of inventory assets
12,914
Accrued enterprise and business facility
55,371taxes
Accrued social insurance contributions
23,347Retirement benefits for officers
11,956
Others3,176
Total deferred tax assets (current)
144,532

Deferred tax assets (fixed)
Depreciation expenses
Loan-loss reserves
Reserves for guarantee losses
Loss on compulsory devaluation of investment
securities
Retirement benefits for officers
Evaluation difference, other securities
OthersTotal deferred tax assets (fixed)

126,049
48,5152,306
490,037

Deferred tax assets (fixed)
Depreciation expenses
Loan-loss reserves
Reserves for guarantee losses
Loss on compulsory devaluation of investment
securities
Retirement benefits for officers
Evaluation difference, other securities
OthersTotal deferred tax assets (fixed)-33,299-33,299456,737

Deferred tax liabilities (fixed)
Prepaid pension cost
Total deferred tax liabilities (fixed)
Net deferred tax assets (fixed)

Deferred tax liabilities (fixed)
Prepaid pension cost
Total deferred tax liabilities (fixed)
Net deferred tax assets (fixed)

203,681
9,740
15,756
83,987- 64 -

234,434
5,084
15,513
3,043
114,092
95,7672,306
470,242-4,226-4,226
466,016(Related to Business Combinations)
Previous Term (December 21, 2008 - December 20, 2009)
No corresponding data is available.
Current Term (December 21, 2009 - December 20, 2010)
No corresponding data is available.

- 65 -

(Per Share Data)
Previous Term
(December 21, 2008 - December 20, 2009)

Current Term
(December 21, 2009 - December 20, 2010)

Net assets per share

1,347.81 yen

Net assets per share

1,450.51 yen

Net income per share

145.81 yen

Net income per share

163.27 yen

Diluted net income per share of common stock is not shown
because there are no diluted shares.

Diluted net income per share of common stock is not shown
because there are no diluted shares.

(Note) Basic data for calculating net income per share is as follows:
Previous Term
(December 21, 2008 December 20, 2009)
Net income (Unit: thousand yen)

Current Term
(December 21, 2009 December 20, 2010)

1,827,372

2,046,189--

Net income related to common stocks (Unit: thousand yen)

1,827,372

2,046,189

Average number of outstanding shares of common stocks
during the term (Unit: share)

12,532,935

12,532,827

Amount not vested in ordinary shareholders(Unit: thousand yen)

- 66 -

(Subsequent Principal Event)Previous consolidated fiscal year
(December 21, 2008 - December 20, 2009)-

Current consolidated fiscal year
(December 21, 2009 - December 20, 2010)(Stock Split)
At a Board of Directors meeting held on November 26, 2010,a resolution was passed to carry out a stock split as of December
21, 2010, at a ratio of 1.1 shares for 1 common stock as part of
the Company’s efforts to return profits to the shareholders and inorder improve the liquidity of Company shares.
(1) Increase in number of shares as a result of stock split
Common stock: 1,254,440 shares(2) Methods of split
A stock split will be carried out at a ratio of 1.1 shares for 1
common stock for all shares held by shareholders listed in
the shareholders register and list of substantial shareholders
as of December 20, 2010. However, odd shares below one
share arising as a result of the spilt will be sold or purchasedin a single transaction, with the proceeds of such procedure
to be distributed to shareholders with odd shares inaccordance with the amount of odd shares.
Per share data for the previous consolidated fiscal year on
the assumption that the above stock split had been carriedout at the beginning of the previous term, and per share data
for the current term on the assumption that the above stock
split had been carried out at the beginning of the current
term, are as follows.
Previous Term
Net asset value per share
1,225.28 yen
Net income per share
132.55 yen
Diluted net income pershare of common stock
Not shown because there
are no diluted shares.

- 67 -

Current Term
Net asset value per share
1,318.65 yen
Net income per share
148.42 yen
Diluted net income pershare of common stock
Not shown because there
are no diluted shares.

6. Other(1) Appointment of directors[1] Appointment of a representative director
No corresponding data is available[2] Other appointments of directors
Retiring Directors (Scheduled for March 17, 2011)
Full-time Auditor Tsuguo Minabe- 68 -

(2) Others(1) Production

Product type

Permanent wave products
Hair care products
Hair coloring products
Others
Total

Previous Consolidated Fiscal year
(December 21, 2008 December 20, 2009)
Amount
Ratio(Unit: thousand yen) (Unit: %)2,326,698
10.6
11,872,519
53.9
7,677,289
34.9
142,7480.6
22,019,255
100.0

Current Consolidated Fiscal year
(December 21, 2009 December 20, 2010)
Amount
Ratio(Unit: thousand yen) (Unit: %)2,307,517
10.0
12,294,818
53.2
8,332,411
36.1
169,075
0.7
23,103,822
100.0

Increase(Decrease)
Amount(Unit: thousand yen)
-19,180
422,298
655,122
26,3271,084,567

Ratio(Unit: %)
-0.8
3.6
8.5
18.4
4.9

(Note) The above amounts are calculated based on the sale prices of individual products and do not include
applicable consumption tax.
(2) Purchase and procurement

Product type

Permanent wave products
Hair care products
Hair coloring products
Others
Total

Previous Consolidated Fiscal year
(December 21, 2008 December 20, 2009)
Amount
Ratio(Unit: thousand yen) (Unit: %)
2,564
1.0
22,688
8.5
27,667
10.3
214,69080.2
267,608
100.0

Current Consolidated Fiscal year
(December 21, 2009 December 20, 2010)
Amount
Ratio(Unit: thousand yen) (Unit: %)
1,279
0.3
14,323
3.5
29,022
7.2
359,39089.0
404,015
100.0

Increase(Decrease)
Amount(Unit: thousand yen)
-1,285-8,365
1,355
144,700
136,407

Ratio(Unit: %)
-50.1
-36.9
4.9
67.4
51.0

(Note) The above amounts are calculated based on the sale prices of individual products and do not include
applicable consumption tax.
(3) Receipt of orders
Previous consolidated fiscal year (December 21, 2008 - December 20, 2009) and current consolidated fiscal
year (December 21, 2009 - December 20, 2010)
Since the Milbon Group undertakes stock production, no corresponding data is available.
(4) Sales

Product type

Permanent wave products
Hair care products
Hair coloring products
Others
Total

Previous Consolidated Fiscal year
(December 21, 2008 December 20, 2009)
Amount
Ratio(Unit: thousand yen) (Unit: %)2,025,641
10.6
9,864,241
51.4
6,969,389
36.3
330,194
1.7
19,189,467
100.0

Current Consolidated Fiscal year
(December 21, 2009 December 20, 2010)
Amount
Ratio(Unit: thousand yen) (Unit: %)1,998,492
10.1
10,135,088
51.3
7,278,391
36.9
337,633
1.7
19,749,606
100.0

Increase(Decrease)
Amount(Unit: thousand yen)
-27,148
270,846
309,0027,439
560,139

Ratio(Unit: %)
-1.3
2.7
4.4
2.3
2.9

(Note) The above amounts are calculated based on the sale prices of individual products and do not include
applicable consumption tax.

- 69 -