(Translation)

Stock code: 8165
March 7, 2007

NOTICE OF THE
62 ORDINARY GENERAL MEETING OF SHAREHOLDERSnd

Dear Shareholder
You are cordially invited to attend the 62nd Ordinary General Meeting of Shareholders of
Senshukai Co., Ltd. (“the Company”), which will be held as described hereunder.
If you are unable to attend the meeting, you may exercise your voting right in writing or via theInternet. Please review the attached reference materials for General meeting of shareholders
and exercise your voting right with the instructions on page 3.
Sincerely yours,
Yasuhiro Yukimachi
President and Representative Director
Senshukai Co., Ltd.
1-4-31 Doshin, Kita-ku, Osaka
MEETING AGENDA
1. Date and Time:
2. Venue:
3. Agenda:
Items to be reported:

10:00 a.m., Thursday, March 29, 2007
Lecture hall on the seventh floor of Senshukai Business Center,
1-6-23 Doshin, Kita-ku, Osaka
1.

2.
Items to be proposed:
Proposal 1
Proposal 2
Proposal 3
Proposal 4
Proposal 5
Proposal 6
Proposal 7
Proposal 8
Proposal 9

Business Report, Consolidated Financial Statements for the 62nd
fiscal year (January 1 to December 31, 2006); and Audit Reports of
the Accounting Auditors and the Board of Corporate Auditors
regarding Consolidated Financial Statements for the 62nd fiscal
year.
Financial Statements for the 62nd fiscal year (January 1 to
December 31, 2006).

Appropriation of retained earnings
Partial amendments to the Articles of Incorporation (1)Partial amendments to the Articles of Incorporation (2)Proposal to introduce countermeasures against large-scale purchases ofshares of the Company
Election of nine (9) Directors
Election of three (3) Corporate Auditors
Grant of retirement benefits to retiring Corporate Auditors
Payment of bonuses to Directors and Corporate Auditors
Revision of compensation of Directors and Corporate Auditors-1-4. Other matters determined for convening the Ordinary General Meeting of Shareholders
Exercise of voting rights by proxyIf you are unable to attend the General Meeting of Shareholders, you can have anothershareholder who has voting rights attend it in your place as a proxy. Note, however, that theproxy shareholder must submit a written certificate to prove his or her entitlement to act asproxy.
If attending the meeting in person, please present your voting form at the reception desk.
We will post any corrections to the reference documents for the General Shareholders Meeting, business reports,financial statements, or consolidated financial statements on our website (http://www.senshukai.co.jp/soukai).

[This is an English translation prepared for the convenience of non-resident shareholders.
Should there be any inconsistency between the translation and the official Japanese text, the latter shall prevail.]-2-

Procedure for Exercising Voting Rights
1. Voting by Mail
Please indicate your approval or disapproval of the proposal on the enclosed voting form
and return it to us. All forms must be received by no later than 17:30, Wednesday, March
28, 2007, the day before the Ordinary General Meeting of Shareholders.
2. Voting by electromagnetic methods such as the Internet(1) Please access the dedicated voting website at http://www.webdk.net, input the voting
right exercise code and provisional password written in the enclosed voting form, andregister your approval or disapproval of the proposals by following the on-screen
instructions.
(2) Online votes will be accepted until 17:30, Wednesday, March 28, 2007, the day before
the Ordinary General Meeting of Shareholders.

However, shareholders are kindly

requested to register their online votes as early as possible to facilitate the counting of
online votes.
(3) If shareholders duplicate the vote, such as by exercising the voting rights both by mailand via the Internet, we will consider only the Internet vote to be valid.
(4) If you vote more than once over the Internet, or vote both over the internet and using
cellular phone, we will consider the latest vote to be valid.
(5) Any fees, such as connection fees to Internet providers or any telecommunication feesto the telecommunication companies incurred by shareholders in using the dedicatedvoting website, are to be borne by the shareholders.
(6) The following system requirements are necessary to access the dedicated voting
website:(i)Internet access; and(ii)

Shareholders choosing to exercise their voting rights using a PC should notethat the website only supports the following browser software: Microsoft®
Internet Explorer 5.5 or above, Netscape 6.2 or above.

The website supports

any hardware platform running the browser software specified above.
(Microsoft® is a registered trademark in the United States and other countries of Microsoft Corporation.
Netscape® is a registered trademark in the United States and other countries of Netscape Communications
Corporation.)
For more information about the foregoing items 1 and 2, please contact the Stock Transfer Agency Department of
The Sumitomo Trust & Banking Co., Ltd
Tel: 0120-186-417 (toll-free and available 24 hours. Japanese language only.)-3-3. To institutional investors
Effective from this fiscal year, you can exercise your voting rights through electronic voting
platforms (TSE platforms) as a means of exercising voting rights by electromagnetic means at
the General Meeting of Shareholders.

-4-Reference Material for Ordinary General Meeting of Shareholders

Proposals and References:
Proposal 1: Appropriation of retained earnings
Issues related to the year-end dividend for the 62nd fiscal year
In determining the Company’s year-end dividend for the fiscal year, we intend to continue to
implement profit distribution in consideration of various circumstances including earnings forthis fiscal year and business environment in the future, based on the policy of an annual
dividend payout ratio of 30%.
(1) Items concerning allocation of dividend and its amount of total thereof
10 yen per share of common stock of the Company; the total amount of 460,820,960 yen(2) Effective date of dividend payment from retained earnings:
March 30, 2007
Proposal 2: Partial amendments to the Articles of Incorporation (1)1. Reasons for change
Pursuant to the enforcement of the Corporation Law (Law No.86 of 2005), the Law Concerning
Adjustment and Coordination of Relevant Laws in Association with the Enforcement of the
Corporation Law (Law No. 87 of 2005), Enforcement Regulations for the Corporation Law(Ordinance of the Ministry of Justice No. 12 of 2006) and the Corporate Calculation
Regulations (Ordinance of the Ministry of Justice No. 13 of 2006), came into effect on May 1,
2006.

Accordingly, the Company proposed the following amendments to the Articles ofIncorporation:
1) The addition or modifications of articles that reflect the details of provisions in the
Articles of Incorporation at the time of enforcement of the Corporation Law. (Proposed
Revised Articles 4 and 7.)2) The addition of article to set out the rights in of fractional shares. (Proposed Revised
Article 11.)3) The addition of article to facilitate diversification of information provision method forshareholders by disclosing information for reference materials to the General Meetingof Shareholders and business reports, as well as financial statements and consolidated
financial statements on the Internet pursuant to stipulations in Enforcement
Regulations for the Corporation Law and Corporate Calculation Regulations.
(Proposed Revised Article 17.)-5-4) The modification in articles to specify the number of proxy who is another shareholderof the Company to exercise voting rights on behalf of shareholder at the General
Meeting of Shareholders. (Proposed Revised Article 19.)5) The addition of article to allow prompt decision making and to adopt resolutions madeby the Board of Directors when all directors agreement to the items in writing at theBoard of Directors’ Meeting, and no objections being raised by auditors. (Proposed
Revised Article 25.)
6) The addition of articles to allow the Company to conclude an agreement with Outside
Auditors to limit the liability for damage for failing to carry out their duties in order tofacilitate invitation of competent human resources. (Proposed Article 35.)
Also, the addition of regulations to allow conclusion of an agreement to limit the
responsibility of external directors for similar purport. (Proposed Change to Article
28.)
The Company has already obtained agreement from all auditors to submit regulations
that allow conclusion of liability limitation agreements with external directors to theGeneral Meeting of Shareholders.
7) In addition, changes such as additions and amendments as well as relocation andarrangement of wording, necessary as a publicly traded company that is operated
pursuant to the Corporation Law, shall be made across the board.
2. Details of the proposed amendments
The details of the proposed amendment are stated below.
(Underlined portions indicate the parts that are to be changed.)
Current Articles

Revised Articles proposed

ARTICLES OF INCORPORATIONARTICLES OF INCORPORATIONOFOF

SENSHUKAI CO., LTD.

SENSHUKAI CO., LTD.

CHAPTER I. GENERAL PROVISIONSCHAPTER I. GENERAL PROVISIONS

Article 1 (Trade Name)

Article 1 (Trade Name)

The Company shall be called KABUSHIKIGAISHAThe Company shall be called KABUSHIKIGAISHASENSHUKAI and shall be rendered in English as

SENSHUKAI and shall be rendered in English as

SENSHUKAI CO., LTD.

SENSHUKAI CO., LTD.

Article 2 (Purpose)

Article 2 (Purpose)

The purpose of the Company shall be to engage in the

The purpose of the Company shall be to engage in thefollowing businesses:

following businesses:-6-

Current Articles

Revised Articles proposed

1.

1.

(Description of the clauses is omitted.)(Unchanged)

24.

24.

Article 3 (Location of Head Office)

Article 3 (Location of Head Office)The head office of the Company shall be located in

The head office of the Company shall be located in

Osaka City.

Osaka City.

(Newly established article)

Article 4 (Organizations)
The Company shall establish the following organizations
as well as general meetings of shareholders andDirectors.
(1)

Board of Directors(2)

Corporate Auditors(3)

Board of Corporate Auditors(4)

Accounting Auditors

Article 4 (Method of Public Notice)

Article 5. (Method of Public Notice)

Public notices of the Company shall be given by means

Public notices of the Company shall be given by meansof electronic notification.

of electronic notification.

However, in case electronic

However, in case electronic

notification is not available due to an accident or

notification is not available due to an accident or

unavoidable circumstances, notices shall be given byunavoidable circumstances, notices shall be given bymeans of publishing in the Nihon Keizai Shimbun.

means of publishing in the Nihon Keizai Shimbun.

CHAPTER II. SHARESCHAPTER II. SHARESArticle 5 (Total Number of Shares to Be Issued)

Article 6 (Total Number of Shares Authorized to Be
Issued)The total number of shares to be issued by the Company

The total number of shares authorized to be issued by theshall be one hundred eighty million (180,000,000)

Company

shares.

(180,000,000) shares.

shall

be

one

hundredeightymillionHowever, if any shares are cancelled, the number ofshares equivalent to that of the cancelled shares shall be
deducted from the above-mentioned total number ofshares.
(Newly established article)

Article 7 (Issuance of Stock Certificate)
The Company shall issue stock certificates relating toshares.

Article 6 (Acquisition of Own Shares)

Article 8 (Acquisition of Own Shares)

The Company may acquire its own shares by resolution

The Company may acquire its own shares through-7-

Current Articles

Revised Articles proposedof the Board of Directors pursuant to Article 211-3,

market dealings or other means by resolution of theParagraph 1, Item 2 of the Commercial Code of Japan.

Board of Directors pursuant to Article 165, Paragraph 2of the Corporation Law of Japan.

Article 7 (Additional Purchase of Shares of Less Than

Article 9 (Additional Purchase of Shares of Less Than

One Unit)

One Unit)

Shareholders who hold shares less than one unit

Shareholders of the Company may demand that the(hereinafter referred to as “fractional shares”) of theCompany sell and deliver such number of shares that,

Company (including beneficial shareholders entered or

together with the shares less than one unit (hereinafter

registered in the register of beneficial shareholders; thereferred to as “fractional shares”) held by them,same applies hereinafter) may demand that the Company

constitute one unit of shares.

sell and deliver such number of shares that, together withthe fractional shares held by them, constitute one unit ofshares.
Article 8 (Number of Shares of One Unit andArticle 10 (Number of Shares of One Unit andNon-issuance of Stock Certificates for Fractional Shares)

Non-issuance of Stock Certificates for Fractional Shares)

1.

1.

One unit of shares of the Company shall becomprised of one thousand (1,000) shares.

2.

One unit of shares of the Company shall becomprised of one thousand (1,000) shares.

The Company shall not issue any share certificate

2.

that indicates a number of shares less than one unit.

Notwithstanding the provision of Article 7, theCompany shall not issue share certificates for
fractional shares.

(Newly established article)

Article 11 (Rights on Fractional Shares)
Shareholders (including beneficial shareholders; thesame applies hereinafter) of the Company may not
exercise, with regard to fractional shares held by them,
any right other than those set out in the following:(1) Rights set out in the items of Article 189, Paragraph
2 of the Corporation Law of Japan;(2) Right to make a claim pursuant to Article 166,
Paragraph 1 of the Corporation Law of Japan;(3) Right to be allotted with offered shares and stockacquisition rights in proportion to the number ofshares already held; and(4) Right to make a claim provided for in Article 9 ofthese Articles of Incorporation.

Article 9 (Share Handling Regulations)

Article 12 (Share Handling Regulations)

Denominations of share certificates, registration ofProcedures for handling shares of the Company andtransfer of shares, acceptance of notices of beneficial

charges therefore shall be governed by the Share

shareholders, purchase and adding to holdings ofHandling Regulations established at a meeting of the-8-Current Articles

Revised Articles proposed

fractional shares and other procedures for handling

Board of Directors in addition to applicable laws andshares of the Company and charges for the foregoingregulations or these Articles of Incorporation.

procedures shall be governed by the Share Handling
Regulations established at a meeting of the Board of
Directors.
Article 10 (Transfer Agent)

Article 13 (Manager of Register of Shareholders)

1.

1.

The Company shall have a transfer agent for its
shares.

2.

The Company shall have a manager of the registerof shareholders.

The transfer agent and its place of business shall be

2.

The manager of the register of shareholders and its

designated by resolution of the Board of Directors

place of business shall be designated by resolution

and shall be publicly announced.

of the Board of Directors and shall be publicly
announced.

3.

The register of shareholders, the register ofPreparation and keeping of the register ofbeneficial shareholders and the register of lost share

shareholders (including the register of beneficial

certificates shall be held at the place of business ofshareholders; the same applies hereinafter), thethe transfer agent and registration of transfer oforiginal register of stock acquisition rights and theshares,beneficial

register of lost share certificates and othershareholders, purchase and additional purchase ofoperations relating to the foregoing registers shallacceptanceofnoticesoffractional shares and other operations for handlingbe entrusted to the manager of the register ofshares shall be entrusted to the transfer agent andshareholders and shall not be handled by theshall not be handled by the Company.

Company.

Article 11 (Record Date)
1.

3.

(Deleted)

The Company shall determine shareholders whosenames are entered or registered in the register ofshareholders as of the account closing day of eachaccounting period as the shareholders who shall beentitled to exercise their voting rights at the ordinary
general meeting of shareholders for such accounting
period.

2.

In addition to the preceding paragraph, if necessary,
the Company may extraordinarily determine arecord date by giving a public notice in advance.
CHAPTER III. GENERAL MEETING OF

CHAPTER III. GENERAL MEETING OF

SHAREHOLDERSSHAREHOLDERS

Article 12 (Convocation of General Meeting of

Article 14 (Convocation of General Meeting of

Shareholders)Shareholders)

Ordinary general meetings of shareholders of theOrdinary general meetings of shareholders of theCompany shall be convened within three (3) months

Company shall be convened within three (3) months-9-Current Articles

Revised Articles proposedfrom the day following the account closing day of eachfrom the end of each business year and extraordinaryaccounting period and extraordinary general meetings ofgeneral meetings of shareholders shall be convened

shareholders shall be convened whenever necessary.

whenever necessary.

(Newly established article)

Article 15 (Record Date for Ordinary General Meetingsof Shareholders)
The record date for the voting rights of ordinary general
meetings of shareholders shall be December 31 of eachyear.

Article 13 (Convocator and Chairperson)

Article 16 (Convocator and Chairperson)

1.

1.

General meetings of shareholders shall be convenedby the President, who shall act as chairperson.

2.

General meetings of shareholders shall be convenedby the President, who shall act as chairperson.

If the President is prevented from so acting, one of2.

If the President is prevented from so acting, one ofthe other Directors shall take the President’s place inthe other Directors appointed in accordance with theaccordance with the order previously determined byorder previously determined by the Board of

the Board of Directors.

Directors shall convene a general meeting ofshareholders and act as chairperson thereat.

(Newly established article)

Article 17 (Internet Disclosure and Deemed Supply ofReference Documents and Other Materials for General
Meetings of Shareholders)
At the convocation of a general meeting of shareholders,the Company may be deemed to have supplied theshareholders with information relating to matters to beentered or indicated in the reference documents for thegeneral meeting of shareholders, business reports,financialstatements

andconsolidated

financialstatements, by disclosing such information over theInternet pursuant to the provisions of the Ministry ofJustice Ordinance.
Article 14 (Method of Resolution)

Article 18 (Method of Resolution)

1.

1.

In addition to applicable laws and regulations orUnless otherwise provided for in laws andthese Articles of Incorporation, resolutions ofregulations or these Articles of Incorporation,

general meetings of shareholders shall be adopted

resolutions of general meetings of shareholders shallby a majority of the voting rights of thebe adopted by a majority of the voting rights of theshareholders present thereat.

shareholders present thereat who are entitled toexercise voting rights.

2.

Special resolutions prescribed in Article 343 of the2.

Resolutions prescribed in Article 309, Paragraph 2

Commercial Code of Japan shall be adopted byof the Corporation Law of Japan shall be adopted by

two-thirds (2/3) or more of the voting rights of the

two-thirds (2/3) or more of the voting rights of the- 10 -

Current Articles

Revised Articles proposed

shareholders present, who shall have at least

shareholders present, who shall have at least

one-third (1/3) of the aggregate voting rights of all

one-third (1/3) of the aggregate voting rights of all

the shareholders.

the shareholders who are entitled to exercise voting
rights.

Article 15 (Exercise of Voting Rights by Proxy)

Article 19 (Exercise of Voting Rights by Proxy)

1.

1.

2.

Shareholders may exercise their voting rights by

Shareholders may exercise their voting rights byauthorizing other shareholders who have voting

authorizing other shareholders who have voting

rights in the Company to act as proxies.

rights in the Company to act as proxies.

When authorizing a proxy, as described in the2.

The shareholder or the proxy must submit to thepreceding paragraph, the shareholder or the proxyCompany a document certifying such proxy at eachmust submit to the Company a document certifying

general meeting of shareholders.

such proxy at each general meeting of shareholders.
Article 16 (Minutes)(Deleted)

A summary of proceedings of a general meeting ofshareholders and the results thereof shall be entered orrecorded in minutes, which shall be kept at the Company
after having been signed and sealed or electronicallysigned by the chairperson and the Directors who were
present.
CHAPTER IV. DIRECTORS AND THE BOARD OF

CHAPTER IV. DIRECTORS AND THE BOARD OF

DIRECTORSDIRECTORS

Article 17 (Number of Directors)

Article 20 (Number of Directors)

The Company shall not have more than ten (10)The Company shall not have more than ten (10)Directors.

Directors.

Article 18 (Election)

Article 21 (Method of Election)

1.

1.

Directors shall be elected by a resolution adopted by

Directors shall be elected by a resolution adopted bya majority of the voting rights of the shareholders

a majority of the voting rights of the shareholders

present at a general meeting of shareholders, who

present at a general meeting of shareholders, whoshall have at least one-third (1/3) of the aggregate

shall have at least one-third (1/3) of the aggregate

voting rights of all the shareholders.

voting rights of all the shareholders who are entitled
to exercise voting rights.

2.

Directors shall not be elected by cumulative voting.

2.

Directors shall not be elected by a resolution basedon cumulative voting.

Article 19 (Term of Office)

Article 22 (Term of Office)The term of office of a Director shall expire at the

The term of office of a Director shall expire at theconclusion

conclusion

of

the

ordinary

generalmeetingof- 11 -

oftheordinary

generalmeetingofCurrent Articles

Revised Articles proposed

shareholders for the latest accounting period ending

shareholders for the last business year ending within one

within one (1) year from his/her assumption of office.

(1) year from the election.

Article 20 (Representative Directors and Executive

Article 23 (Representative Directors and Executive

Directors)

Directors)

1.

Representative Directors shall be elected by1.

Directors by its resolution.

resolution of the Board of Directors.
2.

One (1) President and, if necessary, one (1)Chairperson,severalVice

Presidents,

The Board of Directors shall elect Representative

2.

The Board of Directors may elect one (1) President
and, if necessary, one (1) Chairperson, several Vice

SeniorManaging Directors and Managing Directors may

Presidents,

be elected by resolution of the Board of Directors.

Managing Directors by its resolution.

However, the President shall be elected from

SeniorManaging

Directors

andHowever, the President shall be elected among

among the Representative Directors.

the Representative Directors.

Article 21 (Meetings of the Board of Directors)

Article 24 (Meetings of the Board of Directors)

1.

1.

A meeting of the Board of Directors shall be

A meeting of the Board of Directors shall be

convened by the President, who shall act asconvened by the President, who shall act aschairperson.

chairperson, unless otherwise provided for in laws
and regulations.

2.

If the President is prevented from so acting, one of2.

If the President is prevented from so acting, one ofthe other Directors shall take the President’s place inthe other Directors appointed in accordance with theaccordance with the order previously determined byorder previously determined by the Board of

the Board of Directors.

Directors shall convene a meeting of the Board of
Directors and act as chairperson thereat.

3.

Notice of convocation of a meeting of the Board of3.

Notice of convocation of a meeting of the Board of

Directors shall be dispatched to each Director andDirectors shall be dispatched to each Director andeach Corporate Auditor five (5) days prior to theeach Corporate Auditor at least five (5) days prior todate of the meeting.

the date of the meeting.
However, such period may be shortened in

However, such period may be shortened inemergencies.

emergencies.
4.

With the consent of all Directors and Corporate
Auditors, a meeting of the Board of Directors may
be held without taking procedures for convocation.

(Newly established article)

Article 25 (Omission of Resolution of the Board of
Directors)
If the requirements of Article 370 of the Corporation
Law of Japan are satisfied, the Company shall deem thata resolution of the Board of Directors has been adopted.

- 12 -

Current Articles

Revised Articles proposed

Article 22 (Minutes of Meetings of the Board of(Deleted)

Directors)
A summary of proceedings of a meeting of the Board of
Directors and the results thereof shall be entered orrecorded in minutes, which shall be kept at the Company
after being signed and sealed or electronically signed by
the Directors and the Corporate Auditors who were
present.
Article 23 (Regulations of the Board of Directors)

Article 26 (Regulations of the Board of Directors)

In addition to applicable laws and regulations and theseIn addition to applicable laws and regulations or these

Articles of Incorporation, matters relating to the Board of

Articles of Incorporation, matters relating to the Board of

Directors shall be governed by the Regulations of the

Directors shall be governed by the Regulations of theBoard of Directors established at a meeting of the Board

Board of Directors established at a meeting of the Boardof Directors.

of Directors.

Article 24 (Remuneration and Retirement Benefits)

Article 27 (Remuneration and Other Allowance)

The amounts of remuneration and retirement benefits of

The amounts of remuneration, bonus and other financial

Directors shall be determined at a general meeting of

benefits to be received for the performance of duties

shareholders.

(hereinafter referred to as “remuneration and otherallowance”) for Directors shall be determined byresolution of a general meeting of shareholders.

(Newly established article)

Article 28 (Limitation of Liabilities of External
Directors)
The Company may, pursuant to the provisions of Article
427, Paragraph 1 of the Corporation Law of Japan,
conclude with external Directors, agreements to limit theliabilities for damages caused by the neglect of theirduties.

However, the maximum amount of the liabilities

based on such agreements shall be the amount provided
for in laws and regulations.
CHAPTER V. CORPORATE AUDITORS AND THE

CHAPTER V. CORPORATE AUDITORS AND THE

BOARD OF STATUTORY AUDITORSBOARD OF STATUTORY AUDITORS

Article 25 (Number of Corporate Auditors)

Article 29 (Number of Corporate Auditors)

The Company shall not have more than five (5)The Company shall not have more than five (5)Corporate Auditors.

Corporate Auditors.

Article 26 (Election)

Article 30 (Method of Election)

1.

Corporate Auditors shall be elected by a resolution

Corporate Auditors shall be elected by a resolution- 13 -

Current Articles

Revised Articles proposed

adopted by a majority of the voting rights of the

adopted by a majority of the voting rights of theshareholders present at a general meeting ofshareholders

shareholders, who shall have at least one-third (1/3)

shareholders, who shall have at least one-third (1/3) ofof

the aggregate voting rights of all the shareholders whotheaggregate

votingrights

of

all

the

present

atageneralmeetingofare entitled to exercise voting rights.

shareholders.

(Deleted)
2.

Statutory Auditors may express their opinions on
their election or removal at a general meeting ofshareholders.

Article 27 (Term of Office)

Article 31 (Term of Office)The term of office of a Corporate Auditor shall expire at

The term of office of a Corporate Auditor shall expire at

the conclusion of the ordinary general meeting of

the conclusion of the ordinary general meeting ofshareholders for the last accounting period ending withinshareholders for the last business year ending within four

four (4) years from such Corporate Auditor’s assumption(4) years from the election.

of office.

However, the term of office of a Corporate Auditor

However, the term of office of a Corporate Auditor

who was elected to fill a vacancy of another Corporate

who was elected to fill a vacancy of another Corporate

Auditor who had retired before the expiration of the term

Auditor shall be the remaining term of office of theof office shall be the remaining term of office of thepredecessor.

retired Corporate Auditor.

Article 28 (Meetings of the Board of Corporate Auditors)

Article 32 (Meetings of the Board of Corporate Auditors)

Notice of convocation of a meeting of the Board of

1.

Notice of convocation of a meeting of the Board of

Corporate Auditors shall be dispatched to each Corporate

Statutory Auditors shall be dispatched to each

Auditor five (5) days prior to the date of the meeting.

Statutory Auditor at least five (5) days prior to the

However,suchperiodmaybeshortened

date of the meeting.

in

However, such period may be shortened inemergencies.

emergencies.
2.

With the consent of all Corporate Auditors, ameeting of the Board of Corporate Auditors may beheld without taking procedures for convocation.

Article 29 (Minutes of Meetings of the Board of(Deleted)

Directors)
A summary of proceedings of a meeting of the Board of
Statutory Auditors and the results thereof shall be enteredor recorded in minutes, which shall be kept at theCompany after being signed and sealed or electronicallysigned by the Corporate Auditors who were present.
Article 30 (Regulations of the Board of Corporate

Article 33 (Regulations of the Board of Corporate

Auditors)

Auditors)- 14 -

Current Articles

Revised Articles proposed

In addition to applicable laws and regulations and theseIn addition to applicable laws and regulations or these

Articles of Incorporation, matters relating to the Board of

Articles of Incorporation, matters relating to the Board of

Statutory Auditors shall be governed by the Regulations

Corporate Auditors shall be governed by the Regulationsof the Board of Corporate Auditors established at aof the Board of Corporate Auditors established at a

meeting of the Board of Corporate Auditors.

meeting of the Board of Corporate Auditors.

Article 31 (Remuneration and Retirement Benefits)

Article 34 (Remuneration and Other Allowance)

The amounts of remuneration and retirement benefits of

The amounts of remuneration and other allowance ofCorporate Auditors shall be determined at a general

Corporate Auditors shall be determined by resolution of ameeting of shareholders.

general meeting of shareholders.

(Newly established article)

Article 35 (Limitation of Liabilities of External
Corporate Auditors)
The Company may, pursuant to the provisions of Article
427, Paragraph 1 of the Corporation Law of Japan,
conclude with external Statutory Auditors, agreements tolimit the liabilities for damages caused by the neglect of
their duties.

However, the maximum amount of theliabilities based on such agreements shall be the amountprovided by laws and regulations.
CHAPTER VI. ACCOUNTING

CHAPTER VI. ACCOUNTING

Article 32 (Accounting Period)

Article 36 (Business Year)

The accounting period of the Company shall be from

The business year of the Company shall be the one-year

January 1 of each year through December 31 of the same

period from January 1 of each year through December 31

year and the last day of the accounting period shall be theof the same year.

account closing date.
Article 37 (Record Date for Distribution of Surplus

Article 33 (Dividends)

Money)
Dividends shall be paid to the shareholders or registered1.

pledges whose names are entered or registered in theregister of shareholders as of each account closing date.

The record date for the year-end distribution of theCompany shall be December 31 of each year.

2.

Surplus money may be distributed by designating arecord date in addition to the above.

Article 34 (Interim Dividends)

Article 38 (Interim Dividends)

The Company may, by resolution of the Board of

The Company may, by resolution of the Board of

Directors, pay interim dividends to the shareholders or

Directors, pay interim dividends designating June 30 ofregistered pledges whose names are entered or registeredeach year as the record date.

in the register of shareholders as of June 30 of each year.
Article 35 (Period of Limitation of Dividends)

Article 39 (Period of Limitation of Dividends)- 15 -

Current Articles
1.

Revised Articles proposed

If any dividends or interim dividends are not1.

received for three (3) full years from the date ofare not received for three (3) full years from the date

determination of payment, the Company shall beof commencement of payment, the Company shallrelieved of the obligation to pay such dividends.
2.

If any distributable assets are in monetary form andbe relieved of the obligation to pay such dividends.

Unpaid dividends shall not accrue any interest.

2.

Unpaid dividends shall not accrue any interest.

Proposal 3: Partial amendments to the Articles of Incorporation (2)1. Reasons for change
1) Pursuant to the resolution of the Board of Directors’ Meeting held on December 13, 2005,
the Company introduced a “Policy toward Large-scale Purchases of Shares of theCompany” as a countermeasure against takeovers in ordinary times with an effective
period up to the end of the General Meeting of Shareholders for the fiscal year ending
December 2007. In consideration of various developments surrounding
countermeasures against corporate acquisition such as the enforcement of the Corporation
Law (Law No. 86 of 2005), the Company thereafter continued to examine the appropriate
countermeasures against takeovers in ordinary times. Accordingly, we propose to add a
regulation that will allow us to introduce “countermeasures against large-scale purchasesof shares of the Company” to the Articles of Incorporation, to be resolved at the General
Meeting of Shareholders as part of our efforts for ensuring and increasing the corporate
value of the Company and common interests of shareholders, to prevent any attempts at
abusive acquisitions targeting the Company and reflecting the intention of shareholders in
defined form from a legal point of view. (Proposed Change to Article 20)
2) Pursuant to the addition of Article 20 to the Articles of Incorporation, we propose to
move down the article number as required.
2. Details of the proposed amendments
The details of the proposed amendment are stated below.
(Underlined portions indicate the parts that are to be changed.)
Current Articles(Newly established article)

Revised Articles proposed
Article 20 (Matters to Be Resolved at General Meetingof Shareholders)
1.

At general meetings of shareholders, the Company
may determine, by way of resolution, not only
matters separately prescribed to be resolved thereat
in laws and regulations and these Articles ofIncorporation but also countermeasures for theacquisition of a large amount of shares of the- 16 -

Current Articles

Revised Articles proposed
Company.
2.

The countermeasures for acquisition of a large
amount of shares of the Company mentioned in thepreceding paragraph shall mean measures that
propose to make it difficult to acquire the Company
by issuing new shares or stock acquisition rightsthat are not mainly for business purposes such as
funding and tie-ups, and which are introduced
before the commencement of acquisition by any
party that may prejudice the corporate value of theCompanyorshareholders.

thecommoninterestoftheThe introduction in the above

sentence shall mean the determination of concrete
details of the countermeasures for acquisition oflarge amounts of the Company’s shares.
Article 20

Article 21(Description of the articles is omitted.)

Article 39(Unchanged)
Article 40

Note: The details of the proposed revision 2. are those assuming the original proposal is approved.

Proposal 4:
Proposal to introduce countermeasures against large-scale purchases of shares of the Company
As specified in Proposal 3, reasons of change (2) of Partial amendments to the Articles ofIncorporation, and pursuant to the resolution of the Board of Directors’ Meeting held on
December 13, 2005, the Company introduced “Policy toward Large-scale Purchases of Sharesof the Company” as a countermeasure against takeovers in ordinary times with an effective
period up to the end of General Meeting of Shareholders for fiscal year ending December 2007.
(Hereafter, referred to as “the prevailing plan.”) In consideration of various developments
surrounding countermeasures against corporate acquisition such as the enforcement of the
Corporation Law (Law No.86 of 2005), the Company thereafter continued to examine theappropriate countermeasures against takeovers in ordinary times.

As a result, the Board of

Directors’ Meeting held on February 2, 2007 resolved to introduce the following
countermeasures against large-scale purchases of shares of the Company (hereafter, referred toas “the plan”) as part of efforts to ensure and increase the corporate value of the Company andcommon interests of shareholders, to prevent any attempts at abusive acquisitions targeting theCompany, on the condition that we obtain the approval of the shareholders at the General
Meeting of Shareholders. As the plan is a crucial issue associated with the basis of theCompany’s capital policy and we deemed it appropriate to reflect the intention of the- 17 -

shareholders concerning the subject, we propose to introduce the plan on condition that
Proposal 3, Partial Amendments to the Articles of Incorporation (2), is approved.
I. Our efforts for increasing the corporate value and common interests of shareholders
1. Overview of efforts for maximizing the corporate value
In order to increase corporate value, the Company has developed and implemented the“medium-term business plan” for the three years planning period from January 2005 to
December 2007. We are confident that we will be able to increase our corporate value
and eventually meet the expectations of shareholders by steadily implementing the
medium-term business plan.

At the start of fiscal 2005, we developed a new policy on

the profit distribution to shareholders, and we intend to return profits proactively inaccordance with earnings in the future. We believe that CSR (Corporate Social
Responsibility) and compliance (compliance with lows and regulations) will be
increasingly necessary for the Companies. Given the circumstances, we place
implementation of these as a crucial issue of management, and by boosting earnings
accordingly, we will strive to increase our corporate value (shareholders value) further.
2. Basic policy of the medium-term business plan
The Company established the following three policies as a basic policy for the
medium-term business plan:
1) Enhancing profitability in the core businessWe will not strain ourselves to boost sales in the catalog mail-order business,
especially in existing areas primarily targeting women in their late 20s to 30s.
Rather, we will focus on enhancing profitability.
2) Making proactive investment in growth areas
We will make proactive investment in order to achieve sales growth through“expansion of customer age groups from 20s to 40s” and “expansion of sales
channels” to Internet shopping and retail outlets.
3) Increasing brand value
All employees of the Company will act in unison to create “Belle Maison” that will
touch the customers’ heartstrings with the slogan “Super thrilling and superexciting .”3. Progress of prime strategies
1) Promotion of SCM (supply-chain management)
Our rapid delivery ratio (the ratio of product in-stock and available for immediate- 18 -

delivery) and delivery-to-order ratio (ratio of number of shipments per order) for
fiscal 2006 underachieved our projection because of a change in the in-stock
indicator rule (rule that decides the timing of shipment by the in-stock condition of
all products, for which orders are received) and increased sales of products from
“Watashitachi no Kurasu Fuku” catalogue.

In the meantime, our ratio of imports

is increasing steadily in comparison with our projection.

We will strive to achieve

our projection for fiscal 2007, the last fiscal year of the medium-term business plan.
2) Reassessment of Catalog Positioning
We continued to reassess each catalog’s positioning in fiscal 2006 and havesuccessfully reduced the total number of catalogs published in comparison with theprevious year.

Looking ahead, we will continue to reassess catalogs.

3) Expansion of Female Customer Age Groups from 20s to 40s
20s:

In order to strengthen product sales and services provided via the Internet
and mobile content targeting customers in their 20s, we opened the following
shopping websites: Edite, an Internet exclusive shop; “mobakore” (mobile
collections) a fashion-related shopping site on the mobile website operated
by a joint venture with DeNA Co., Ltd.

Shoplat, a mobile website operated

by a subsidiary; and RanRan Ranking, a mobile-phone information shopping
website (for NTT DoCoMo i-mode users) operated jointly with Bandai
Networks Co., Ltd.
40s:

Targeting these customers, we have launched the fashion catalog Rashisa
and the interiors catalog Luxe Living. In addition, we are striving to retain
more customers in this age group and acquire new customers by publishing
Watashitachi no Kurasu Fuku.

4) Promotion of Internet Sales
During fiscal 2006, we posted Internet sales of 55.7 billion yen, an increase of
22.6% from the previous year, of which sales via the mobile website increased by
14.3% from the previous year to 12.5 billion yen, through our efforts forstrengthening the affiliate program and development of products that are soldexclusively on the Internet. In the meantime net sales on the Internet (sales from
customers who utilize only the Internet through all the shopping processes and do
not refer to a copy of the catalog) were 25.4 billion yen, an increase of 52.2% fromthe previous year.
5) Development of Storefront Businesses
We opened one new Belle Maison Market store, specifically Yao store (Yao city,
Osaka), bringing the total number of these stores to seven. Looking ahead, we will

- 19 -

steadily develop store front business while examining the buying pattern ofcustomers for each store and the catalog products that match each store.
6) Stronger Product Planning and Development Capabilities
We are in the process of reassessing our merchandising processes andreconstructing our management framework for product development.
7) Better Customer Service
We are working to enhance various customer services, including strengthening theorder system at the Belle Maison Call Center and reducing the number of days fordeliveries.
4. Profit distribution policy
We have set an annual dividend payout ratio of 30% as the basic policy from fiscal 2005.
Concerning fiscal 2005, we paid out ordinary dividend of 16 yen per share annually,
which was the same as the previous year, in consideration of the profit decline as a resultof early adoption of accounting for impaired assets, and a commemorative dividend of 2
yen celebrating the Company’s 50th anniversary. We will strive to maintain profit
distribution based on an annual dividend payout ratio of 30% for fiscal 2006 and beyond.
II. Purposes of introducing the plan
As we described above, the Senshukai Group will focus its efforts on implementing various
measures to achieve further growth and enhance our corporate value as well as increasing
common interests of shareholders while maintaining our management policy to date.
However, we have recently seen an obvious trend in the capital market to abruptly purchaseshares on a large-scale without going through the process of sufficient discussion andagreement with the management of targeted companies.
We do not reject large-scale purchase of shares if it contributes to the increase of ourcorporate value and common interests of shareholders. In addition, we believe that thedecision whether to agree to the proposal of large-scale share purchases that accompanies
transfer of control of the Company should ultimately be made based on the consensus ofshareholders.
However, many large-scale purchases of shares do not contribute to the increase of
corporate value and common interests of shareholders. For example, sometimes such
purchases target only specific assets and technology, which is clearly detrimental to thecorporate value and common interests of shareholders. At other times, such purchase may
effectively force shareholders to sell their shares, where it may provide insufficient time andinformation being given for a Board of Directors’ Meeting, and shareholders of the target- 20 -

company to examine the large-scale purchase of shares, or for the Board o f Directors’Meeting of the target company to present alternative proposals, and where the target
company needs to negotiate with the purchaser to obtain more favorable terms than thepurchaser has offered.
In order for the Company to ensure and increase the corporate value and common
interests of shareholders under the Medium-term Business Plan, it is critical, as describedabove, that we should execute business while focusing on the following points: 1)
reinforcing profitability of the core business; 2) making proactive investment in growthareas; and 3) improving brand value.

If the entity purchasing the Company’s shares will

not ensure and improve these in the medium-to-long term, such action will be detrimental to
our corporate value and common interests of shareholders.
The Senshukai Group operates in a broad range of businesses such as the mail-orderbusiness that includes catalog mail order and buyer’s club business; the corporate businessthat provides products and services for corporations; and the service business that primarily
deals in travel and credit businesses.

Provided that shareholders accept the proposal forlarge-scale purchase of our shares, therefore, it is not always easy to judge appropriately
whether to accede to such proposal after fully assessing various elements that construct thecorporate value of the Company, which operates in a broad range of businesses.
Considering the above, and with the purpose of ensuring and increasing the corporate
value and the common interests of shareholders, the Company decided to introduce the plan
as a framework to deal with the large-scale purchase of shares and allow us to request thatthe purchaser and proponent of purchase (hereafter, referred to collectively as the purchaser
or similar party) provides information prior to such purchase, thereby shareholders decide
whether to accede to the purchase or not, or ensure necessary information and time for the
Board of Directors of the Company to make alternative proposals or negotiate with thepurchaser or similar party on behalf of the shareholders.
In the meantime, the Board of Directors of the Company has not received any proposalon the large-scale purchase of shares from any particular third party at the time of deciding
to introduce the plan.

Information on the major shareholders of the Company is listed inAppendix 1.
III. Details of the plan
1. The purchase that is deemed to be the subject of the plan
The plan shall be implemented in compliance with the procedures defined therein if thepurchase that applies to either 1) or 2) below is carried out:
1) The purchase of the stocks (Note 1), which are issued by the Company, in which the- 21 -

total ratio of shareholding (Note 3) of the shareholders (Note 2) is 20% or more.
2) Tender offer for the stocks (Note 4), which are issued by the Company, in which thetotal of the ratio of shareholding of stocks (Note 6) related to tender offer (Note 5)
and the ratio of shareholding of the special interested parties (Note 7) is 20% or
more.
Note 1: Stocks as stipulated in Paragraph 1, Article 27-23 of the Securities and Exchange Law. The same
shall apply unless otherwise provided for hereinafter.
Note 2: Shareholders as stipulated in Paragraph 3, Article 27-23 of the Securities and Exchange Law. The
same shall apply unless otherwise provided for hereinafter.
Note 3: The ratio of shareholding as stipulated in Paragraph 4, Article 27-23 of the Securities and Exchange
Law. The same shall apply unless otherwise provided for hereinafter.
Note 4: Stocks as specified in Paragraph 1, Article 27-2 of the Securities and Exchange Law. The same
shall apply hereinafter in 2) above.
Note 5: Tender offer as stipulated in Paragraph 6, Article 27-2 of the Securities and Exchange Law. The
same shall apply unless otherwise provided for hereinafter.
Note 6: The ratio of shareholding as stipulated in Paragraph 8, Article 27-2 of the Securities and Exchange
Law. The same shall apply unless otherwise provided for hereinafter.
Note 7: Special interested parties as stipulated in Paragraph 7, Article 27-2 of the Securities and Exchange
Law. Note, however, that those listed in Paragraph 7 (1), Article 27-2 of the Securities andExchange Law excludes those stipulated in Paragraph 1, Article 3 of the Government Office
Ordinance with regard to disclosure of tender offer for stocks by entities other than issuers. The
same shall apply unless otherwise provided for hereinafter.

2. Request for information from the purchaser or similar party
Prior to carrying out the purchase or making proposal thereof (hereinafter, collectively
referred to as “the purchase”), the purchaser or similar party must submit a letter ofintention to the Company expressing its willingness to comply with the procedures
specified in the plan in purchasing shares unless otherwise provided by the Board of
Directors of the Company. This letter of intention must be in the format specified by theCompany, describing the name, address, governing law for establishment, name ofrepresentative, contact information in Japan, and outline of the purchase.
Subsequently, the Company shall deliver the list of information to be provided toform an opinion as the decision of shareholders and the Board of Directors (hereinafter,
referred to as “the necessary information”) to the purchaser or similar party within fivebusiness days after the receipt of the letter of intent. Specific details of information to beprovided differ depending on the attributes of the purchaser or similar party and nature of
the purchase. Some examples of items are listed below.
(1) Specific details of the purchase1) Purpose, method, and details of the purchase (including timing of purchase, schemeof related transactions, legality of the purchase method, certainty of performing thepurchase).
2) Whether there was a communication of intention with the third party in performing
the purchase and any details thereof.
- 22 -

3) The details of acquisition consideration (amount and type, etc.), the basis of
calculation of consideration (including facts and assumptions as a condition of
calculation, calculation method, numerical information used in calculation and theamount of synergy as well as the basis of calculations thereof, etc. that are expected
to arise as a result of a series of transactions with regard to the purchase).
4) Support for the purchase fund and the name of the provider of funds to thepurchaser or similar party (including virtual providers) and the method of raisingfunds (including the details of related transactions).
5) Details of management policy, business plan, financial plan, capital policy, dividend
policy, and asset utilization measures of the Senshukai Group after the purchase.
6) Policy of treatment of employees of the Company and its Group and interested
parties including business partners and customers after the purchase.
7) Other information judged reasonably necessary by the Company.
(2) Matters related to the purchaser or similar party
Details (including name, capital structure, background, and history) of the purchaser orsimilar party and its group (including joint owner, special interested parties, and in thecase of fund, associate partners and other constituent members), description of business,financial conditions, management status as well as operating performance, backgroundof past corporate acquisitions and the results thereof, existence or nonexistence of
violations of law in the past and any details thereof, background of directors, etc.
If the information provided initially is not deemed to be sufficient for forming an
opinion that contributes to the judgment of shareholders and if the Special Committee
indicates its approval of the necessity of additional information in writing, we shallrequest that the purchaser or similar party provides additional information until we havesufficient information.
The fact that the letter of intention was submitted and the information provided to
the Company shall be entirely or partially disclosed, if it is deemed to be necessary forthe judgment of shareholders.
3. Examination of the details of the purchase, negotiation with the purchaser or similar
party, and presentation of alternative proposals
Based on 2. above, and after the sufficient information the Company requested is ready,the Company shall set a period (hereinafter, referred to as “the evaluation period”) in
accordance with 1) or 2) below, depending on the details of such purchase, as a grace- 23 -

period for the Board of Directors’ Meeting of the company to evaluate and examine suchinformation and form an opinion for negotiation with the purchaser or similar party, or on
the purchase of the Company’s shares and develop alternative proposals or schemes.
The purchase shall be carried out only after such evaluation period.
1) 60 days for the purchase of all shares of the Company through tender offer with allconsideration paid out in cash (in yen)2) 90 days for the purchase in other cases
The Board of Directors of the Company shall evaluate and examine the details of thepurchase proposed by the purchaser or similar party during the evaluation period based on
the information and materials provided by the purchaser or similar party from theviewpoint of ensuring and increasing the corporate value and common interests ofshareholders.

In addition, the Board of Directors of the Company shall discuss ornegotiate with the relevant purchaser or similar party, as well as presenting the alternative
proposal to the shareholders as the need arises, in order to improve the terms of relevantpurchase from the viewpoint of ensuring and increasing the corporate value and common
interests of the shareholders.
If the Board of Directors of the Company does not decide whether to implement theplan during the evaluation period, it shall be allowed to extend the evaluation period
within the range deemed necessary to examine the details of the purchase by thepurchaser or similar party negotiate with the purchaser or similar party, and develop analternative proposal. (The same process shall apply thereafter to further extend the period
after such extension of period.) In this case, the Board of Directors of the Company shalldisclose information on the reason for extending the evaluation period and matters
including the extension period and other matters deemed appropriate after the resolutionof such extension of the evaluation period.
4. Recommendation by Special Committee(1) Special Committee
The Company has separately established a Special Committee for the prevailingplan to discuss and negotiate with the purchaser or similar party, extend the evaluation
period as specified in 3. above, and secure objectivity and rationality of the decision of
the Board of Directors of the Company with regard to appropriateness of the reason for
implementation as specified in (2) below. As the Company introduces the plan, theSpecial Committee for the prevailing plan takes charge of such matters related to theplan continuously.
In compliance with the procedures specified in the Special Committee Rules in- 24 -

Appendix 2, the Special Committee shall evaluate and examine terms of the purchaseby the purchaser or similar party and make recommendations to the Board of Directorsof the Company. When the Special Committee makes the evaluation and examination,
it shall be allowed to obtain the advice of experts (such as financial advisors, lawyers,
and certified accountants) who are independent third parties at the expense of theCompany, to ensure that its decision shall contribute to the corporate value and thecommon interests of shareholders.
Decisions of the Special Committee shall be made with all constituent members
attending the meeting in principle and by approval of the majority of members, and theBoard of Directors of the Company shall place prime importance on its
recommendation in making its final decision.
The Special Committee shall be comprised of three or more committee members,
who are selected by the Board of Directors of the Company among those satisfying thefollowing conditions in general and who have signed an agreement with the Company
that includes provision of duty of care in principle. The name and brief personal
profile of members of the Special Committee are listed in Appendix 3.
1) Those who have not served as directors (excluding external directors; the same shallapply hereinafter) or auditors (excluding external auditors; the same shall apply
hereinafter) of the Company, its subsidiaries or affiliates (hereinafter, referred to
together as the Company or related entities) either currently or in the past.
2) Those who are not relatives of directors or auditors of the Company or related
entities, either currently or in the past.
3) Those who do not have a special vested interest in the Company or related entities.
4) Those who are top executives of corporations with track records, lawyers, certified
accountants, or experts or pursuant to them.
(2) Recommendation for implementation of the plan by the Special Committee
If the reason for the purchase by the purchaser or similar party applies to either of thefollowing (hereinafter, referred to as “the reasons of implementation”) and theimplementation of the plan is deemed appropriate, the Special Committee shall make a
recommendation for the implementation of the plan to the Board of Directors of theCompany (specific details of countermeasures are as described in 6. below).
1) If the purchase does not follow the procedures specified in the plan2) If the purchase may cause clear impairment of corporate value of the Company andcommon interests of shareholders because of the actions listed from (i) to (iv)
below.

- 25 -

(i) If the purchaser or similar party boosts the share price with no real intentionof participating in the management of the Company and demands that theCompany buys back the purchased shares at inflated price (so-called a“greenmailer”).
(ii) If the purchaser engages in management to achieve the interest of thepurchaser or similar party at the sacrifice of the Company, such as
controlling the management of the Company temporarily to obtain
important intellectual property rights, operating know-how, corporate
confidential information, and assets of the main business partners andcustomers at low cost.
(iii) If the purchaser or similar party diverts the assets of the Company or its
group companies as collateral of debt or payment resource.
(iv) If the purchaser or similar party controls the management of the Company
temporarily and disposes of high-value assets that are not related to thebusiness for the time being such as real estate and marketable securities of
the Company or its group companies to force the Company to pay highdividends temporarily using the profit from disposal, or sells the shares at
the highest price by waiting for the share price to surge against the
backdrop of temporarily high dividends.
3) If the purchaser applies for a coercive, two-step large-scale purchase of shares, etc.
(in which the purchaser or similar party does not solicit purchase of all shares at theinitial purchase attempt but presents unfavorable terms of purchase or does notdefine the terms thereof clearly at the second purchase attempt), etc. that may
virtually force the shareholders of the Company to sell shares.
4) If the purchase goes ahead without setting a reasonable period for the Company topresent an alternative proposal for the relevant purchase.
5) If the purchase goes ahead without sufficiently providing information that isdeemed reasonably necessary for the shareholders of the Company to assess thenecessary information and other details of the purchase.
6) If the terms of the purchase (including price and type of consideration, timing ofpurchase, legality of the purchase method, certainty of performing the purchase,treatment policy for employees of the Company, business partners, customers andother interested parties after the purchase) are significantly insufficient orinadequate in light of the underlying value of the Company.
7) If the purchase could destroy the relationships with employees, business partners
including customers and interested parties, such as creditors who are essential to- 26 -

sustainably increase the corporate value of the Company and significantly impair
the corporate value of the Company and common interests of shareholders.
Note, however, that regardless of whether it is prior to or subsequent to the record datefor determining the right, the Special Committee shall make independent decision
including cancellation or withdrawal of implementation of the plan and recommend it to
the Board of Directors of the Company in the following cases: If the purchaser orsimilar party withdraws the purchase after the aforementioned recommendation and if
the purchase ceases to exist, or if there are changes in facts that were assumed in thedecision of the above recommendation so that the purchase by the purchaser or similar
party shall not be deemed to qualify for reasons of implementation.
(3) Recommendation for non-implementation of the plan by the Special Committee
The Special Committee determines whether the purchaser or similar party provides
information and ensures the evaluation period as specified in 2 and 3 above andcomplies with the procedures specified in the plan.

In addition, if the purchase by thepurchaser or similar party shall not be deemed to apply to any of the reasons of
implementation as a result of evaluation and examination of information and materials
provided by the purchaser or similar party as well as discussion and negotiation with thepurchaser or similar party by the Board of Directors of the Company, the Special
Committee shall recommend no-implementation of the plan at the Board of Directors’Meeting of the Company.
Note, however, that if there are changes in facts that were the assumptions of suchdecision so that the purchase by the purchaser or similar party shall be deemed to apply
either of the reasons of implementation, the Special Committee shall be allowed tomake independent decision anew including implementation of the plan and recommend
it at the Board of Directors’ Meeting of the Company.
5. Resolution of the Board of Directors
The Board of Directors of the Company shall place prime importance on therecommendation by the Special Committee in compliance with 4 in the above and makefinal decision on implementation or non-implementation of the plan or cancellation orwithdrawal thereof. If the Board of Directors of the Company makes such decision, it
shall disclose information on the outline of such decision, overview of recommendationby the Special Committee and other matters deemed appropriate by the Board of Directorsof the Company promptly thereafter.
If the Board of Directors of the Company decides to cancel or withdraw- 27 -

implementation of the plan after the decision on the implementation thereof, there shall be
no dilution of per-share value of stock. Therefore, if the shares are traded assuming thedilution of per-share value of the stock, the person trading the stock may sustain due
losses from fluctuations in the share price.
6. Specific countermeasures
As specific countermeasures of the Board of Directors of the Company against
inappropriate purchases, it shall allocate stock acquisition rights at no cost (hereinafter,
referred to as “the stock acquisition rights”), described in Appendix 4: Important points onallotment of stock acquisition rights granted free of charge.
The main details of the stock acquisition rights are as follows:(1) Target shareholders of allocation of the stock acquisition rights
The Company shall assign one unit of the stock acquisition rights per share of stocks
held (excluding the shares of the Company held by the Company) to the shareholders
who are listed or recorded in the final register of shareholders or the list of beneficial
shareholders as of the record date (hereinafter, referred to as “the allocation date”)
specified by the Board of Directors of the Company in making resolution with regard to
the issuance of the stock acquisition rights (hereinafter, referred to as “the resolution on
the issuance of the stock acquisition rights”).
(2) Type and number of shares to be issued upon exercising the stock acquisition rights
Type of share is common stock of the Company, and one share of common stock of theCompany shall be issued per unit of the stock acquisition rights unless adjusted
otherwise.
(3) Total number of the stock acquisition rights
Total number of final shares outstanding on the allocation date shall be the maximum
number of the total number of stock acquisition rights to be issued. (Note, however, thatthe number of the shares held by the Company at that moment shall be excluded.)(4) The amount to be paid upon exercising the stock acquisition rights
The amount to be paid upon exercising the stock acquisition rights to shall be ¥1 pershare.
(5) Exercise period of the stock acquisition rights
The exercise period of the stock acquisition rights shall be the period between three
weeks elapsed after the effective date of the allocation of the stock acquisition rights at
no cost and six months elapsed thereafter.

Note, however, that if the final date of

exercise period falls on a non-business day for the payment handling agent, thefollowing business day shall be the final date of exercise period.

- 28 -

(6) Terms and conditions applicable for the exercise of the stock acquisition rights
Only those holders of the stock acquisition rights who shall not fall into any of thefollowing shall be allowed to exercise the stock acquisition rights: a) specificlarge-volume holders; b) their joint holders; c) specific large-scale purchasers; d) their
special interested parties; or e) persons who are transferred or have inherited the stockacquisition rights from those listed in a) through d) above without approval at the Boardof Directors of the Company; or f) persons involved with those listed in a) through e)
above.

In addition, because of applicable rules or regulations both in Japan and abroad,nonresidents who are required to follow predetermined procedures after exercising thestock acquisition rights shall not exercise them in principle.

For definitions of theterms and details used above, please refer to Appendix 4: Important points on allotmentof stock acquisition rights granted free of charge.
(7) Acquisition of stock acquisition rights
The Company shall be allowed to acquire stock acquisition rights held by those who do
not fall into any of a) through f) in (6) in the above, by issuing one unit of common
stock of the Company in the number of shares to be issued per unit of the stockacquisition rights by the decision of the Board of Directors of the Company on the datespecified by the Board of Directors of the Company within the period between theeffective date of the stock acquisition rights allocation at no cost and the expiration of
the exercise period thereof. If the Board of Directors of the Company recognizes on
the date of such acquisition or thereafter that there are holders of the stock acquisitionrights who do not fall into any of a) through f) of (6) above, the Company shall allow toacquire the stock acquisition rights held by those who do not fall into any of a) throughf) in (6) above by issuing the unit of common stock in the number of shares to be issued
per unit of the stock acquisition rights on the date specified by the Board of Directors of
the Company held after the date of above acquisition, and the same shall apply
thereafter.
(8) Transfer of stock acquisition rights
The approval of the Board of Directors of the company is required to transfer the stockacquisition rights.
7. Expiration date of the plan, and continuation, abolition, and change thereof
The expiration date of the plan shall be at the end of ordinary general meeting ofshareholders for the fiscal year ending December 2007. Note, however, that if theagenda for abolishing the plan is approved at the general meeting of shareholders, even- 29 -

prior to the end of the expiration date, or if the Board of Directors of the Company
comprised of directors, who are selected at the general meeting of shareholders of theCompany, resolve to abolish the plan, the plan shall be abolished at that point. Therefore,
the plan may be abolished if that is the intention of the shareholders.
Based on the examination of the Board of Directors of the Company in considerationof amendment and improvement of applicable laws and regulations such as the Securities
and Exchange Law, the Company may review or modify the plan as the need arises fromthe viewpoint of ensuring and increasing the corporate value and the common interests ofshareholders.
If the plan is abolished or changed, the Company shall promptly disclose the fact
thereof and, in the case of modification, shall also disclose details of the modification andother matters deemed to be appropriate by the Board of Directors of the Company.
IV. Mechanism of enhancing the rationality of the plan
1. Ensure that the requirements of guidelines with regard to the countermeasuresagainst corporate acquisition shall be satisfied completely.
The plan completely satisfies the three basic principles (the principle of ensuring and/or
increasing corporate value and stakeholder profits; the principle of prior disclosure andshareholders’ intention; and the principle of securing the necessity and thereasonableness) stipulated in the “Guidelines on takeover defense for ensuring and/or
increasing corporate value and stakeholder profits,” released by the Ministry of Economy,
Trade and Industry and the Ministry of Justice on May 27, 2005.
2. Ensure that the plan was introduced for the purpose of ensuring and increasing thecommon interests of shareholders
As is described in II. Purposes of introducing the plan in the above, the plan was
introduced to ensure and increase the corporate value of the Company, and by extension,
the common interests of shareholders, by ensuring that, when the purchase of theCompany’s shares should be carried out, shareholders shall be able to decide whether toaccept such purchase or not, or the Board of Directors of the Company shall be allowed tosecure the necessary information and time to present an alternative proposal or negotiatewith the purchaser on behalf of the shareholders.
3. Ensure that the plan places emphasis on the shareholders’ intention
The plan shall be introduced after we obtain approval of the shareholders at the general
meeting of shareholders and its expiration date shall be the end of the ordinary general- 30 -

meeting of shareholders for the fiscal year ending December 2007.
Even before the expiration of that period, if the agenda for abolishing the plan isapproved at the general meeting of shareholders or the Board of Directors of the Company,
which is comprised of directors selected at the general meeting of shareholders of theCompany, the plan shall be abolished at that point.

In this sense, the plan shall reflect

the intention of the shareholders.
4. Setting reasonable and objective reasons of implementation of the plan
As is described in III-4 (2) above, the plan was set not to be implemented unlesspredetermined, reasonable, and detailed objective requirements are satisfied. Therefore,
the plan has ensured the mechanism of preventing arbitrary implementation by the Boardof Directors of the Company.

In addition, such reasons of implementation were set after

exhaustive analysis of appropriate and reasonable countermeasures against corporate
acquisition in reference to the analysis of judicial precedents in Japan as well as theaforementioned “guidelines.”
The Special Committee shall evaluate the appropriateness of reasons of
implementation of the purchase by the purchaser or similar party, in compliance withprocedures specified in the Special Committee Rules and make recommendations at theBoard of Directors’ Meeting. The Board of Directors’ Meeting of the Company shallplace prime importance on the recommendation by the Special Committee and make final
decision on the implementation or non-implementation of the plan or cancellation orwithdrawal thereof.
5. Establishing Special Committee
The Company has established the Special Committee separately for the purpose of
discussion and negotiation with the purchaser or similar party, and for securing theobjectivity and reasonableness of the decision of the Board of Directors with regard to theextension of the evaluation period and the appropriateness of reasons of implementation.
In consideration of the purpose of its establishment, the Special Committee shall becomprised of individuals who satisfy the conditions listed in III-4 (1) above and are
independent from the Board of Directors’ Meeting of the Company.

In addition, it shallbe allowed to obtain the advice of experts, such as financial advisors, lawyers, andcertified accountants, who are independent third parties.
In compliance with the procedures specified in the Special Committee Rules, theSpecial Committee shall evaluate and examine the appropriateness of reasons of- 31 -

implementation and make recommendations at the Board of Directors’ Meeting of theCompany.

The Board of Directors of the Company shall place prime importance on therecommendations made by the Special Committee and make final decision on theimplementation or non-implementation of the plan or cancellation or withdrawal thereof.
6. Ensuring that the plan is not a dead-hand type of countermeasure against takeovers
The Board of Directors, which is comprised of directors selected at the general meeting ofshareholders of the Company, is allowed to abolish the plan. Given the nature of theplan, it is possible that those who purchase the stocks of the Company in large volume
shall nominate directors at the Board of Directors of the Company and have the Board of
Directors comprised of such directors abolish the plan.
Therefore, the plan is not a dead-hand type of countermeasure against takeovers(countermeasures against takeovers in which implementation of the plan shall not be
stopped, even if the majority of the Board of Directors are replaced).
V. Influence on shareholders and investors
1. Influence on shareholders and investors exerted at the time of introducing the plan
The stock acquisition rights shall not be issued at the time of introducing the plan.
Therefore, there shall be no direct influence on the rights and economic interests ofshareholders and investors.
2. Influence on shareholders and investors exerted at the time of issuing the stockacquisition rights
If the Board of Directors of the Company decides to implement the plan and resolves toissue the stock acquisition rights through allocation of stock acquisition rights at no cost,
one unit of the stock acquisition rights per share of stock shall be allocated to shareholders
who are listed or recorded in the final register of shareholders, or list of beneficial
shareholders, on the date of allocation specified by the relevant resolution.
3. Procedures required of shareholders following the issuance of the stock acquisitionrights(1) If the Board of Directors of the Company decides to implement the plan and resolves
to issue the stock acquisition rights through the allocation of the stock acquisitionrights at no cost, it shall determine the allocation date and announce it publicly.

As

the stock acquisition rights shall be allocated to the shareholders listed or recorded in
the final register of shareholders or the list of beneficial shareholders at the allocation
date according to the number of shares held by each shareholder, shareholders shall be
required to go through the procedures for transfer of shares by the notified allocation- 32 -

date. (In the meantime, procedures for transfer of shares shall not be necessary forshare certificates entrusted with Japan Securities Depository System, Inc.)(2) Procedures for exercising the stock acquisition rights
The Company shall send the stock acquisition rights exercise request form (in theformat predetermined by the Company that includes a written pledge to declare that theshareholders themselves are not specific large-volume holders) and other documents
required to exercise the stock acquisition rights to shareholders who are listed orrecorded in the final register of shareholders or the list of beneficial shareholder on the
allocation date.

Shareholders shall be required to submit these necessary documents

by the end of the exercise period, specified separately by the Board of Directors’Meeting, and pay 1 yen per unit of the stock acquisition rights to the payment handlingagency to have one share of common stock of the Company issued per unit of the stockacquisition rights.
Note, however, that if the Company decides that the stock acquisition rights shallbe obtained in exchange for the shares of the Company, and if the Company goes
through the acquisition procedures, shareholders who hold the stock acquisition rights,
which the Board of Directors’ Meeting determined as the subject of acquisition, shallreceive the shares of the Company in consideration of acquisition of such stockacquisition rights without paying money equivalent to the exercise price. In this case,therefore, the Company shall not send the stock acquisition rights exercise request form,
but it may request such shareholders to submit a written pledge in the predetermined
format to declare that they are not specific large-volume shareholders.

- 33 -

[Appendix 1]

Shareholder status
1. Breakdown of shares by type of shareholder (as of December 31, 2006)
Financial institutions(9,947 shares / 21.08%)

Foreign corporations(4,844 shares / 10.27%)

Securities companies(532 shares / 1.13%)

Treasury stocks(1,548 shares / 3.28%)

Other corporations(17,347 shares / 36.78%)

Individuals and others(12,951 shares / 27.46%)

2. Major shareholders (Top 10)

Name

Brestoshieb Co., Ltd.
Nikko Principal Investments Japan Ltd.
Toppan Printing Co., Ltd
Sawzan, Ltd.
Dai Nippon Printing Co., Ltd.
State Street Bank and Trust Company
505019Japan Trustee Services Bank, Ltd.
(Trust account)
Sumitomo Mitsui Banking Corp.
Mizuho Bank, Ltd.
Nippon Life Insurance Company(As of December 31, 2006)
Shareholders’ investmentin the Company
Number of shares
The ratio ofheldvotingrights (%)
3,436,000
7.53
3,400,000
7.45
1,838,147
4.03
1,792,857
3.93
1,509,663
3.31
1,288,440

2.82

1,229,000

2.69

1,165,370
1,019,961
988,307

2.55
2.23
2.17

Note: The Company holds 1,548,297 shares of the Company as treasury stock.

3. Shareholding status for the directors and corporate auditors of the Company and theirfamily members (as of December 31, 2006)
Total number of shares held:

1,713,726 shares;

ratio of voting rights: 3.75%

4. Recent report on large-volume shareholding (after December 31, 2006)
There has been no applicable report.

- 34 -

[Appendix 2]

Special Committee Rules
Article 1 (Purpose)
A Special Committee with regard to countermeasures against the large-scale purchase ofshares of the Company (hereinafter, referred to as “the plan”) shall comply with the Special
Committee Rules.
Article 2 (Authority and obligation)
1. If the purchase of the shares of the Company is proposed, the Special Committee shallevaluate and examine the details of the purchase, based on the information provided. In
addition, if necessary, the Special Committee shall strive to improve the condition of thepurchase for the sake of the corporate value of the Company and the common interests ofshareholders by means such as making recommendation to extend the evaluation period andnegotiate with the prospective purchaser through the representative director or similar partyof the Company, and ultimately decide whether there are reasons for implementation, as
stipulated in Article 9, in compliance with the Special Committee Rules. The Special
Committee shall thereby make a recommendation to the Board of Directors of the Company
as to whether to implement the plan.
2. The Special Committee shall be allowed to request that the Board of Directors of theCompany submits the information necessary to make resolution and recommendation at theSpecial Committee, such as all materials provided by the purchaser or similar party to theBoard of Directors and evaluation of such information by the Board of Directors.
3. The Special Committee shall conduct the matters specified in the preceding clause with theduty of care.
Article 3 (Constituents and role thereof)
1. The Special Committee shall be established by the resolution of the Board of Directors of
the Company.
2. The Special Committee shall be comprised of all constituting members.
3. The Special Committee shall be comprised of three or more committee members.
4. The Special Committee members shall be selected by the Board of Directors of theCompany among those who satisfy the following conditions and shall be required inprinciple to conclude a mandate with the Company that includes provision of duty of care.
(1) Those who have not served as directors (excluding external directors; the same shallapply hereinafter) or auditors (excluding external auditors; the same shall apply
hereinafter) of the Company, its subsidiaries or affiliates (hereinafter, collectively
referred to as the Company or related entities) either currently or in the past.

- 35 -

(2) Those who are not relatives of directors or auditors of the Company or related entities,
either currently or in the past.
(3) Those who do not have a special vested interest in the Company or related entities.
(4) Those who are top executives of corporations with track records, lawyers, certified
accountants or experts or those pursuant to them.
5. If the purchase of shares of the Company is proposed, the Special Committee shall be
required to collect and examine information on details of the purchase, express an opinion
from the viewpoint of whether it is beneficial for the corporate value of the Company orcommon interests of shareholders, and participate in resolutions. Therefore, the Special
Committee shall not aim solely to promote the interest of individuals or of the directors of
the Company.
Article 4 (Holding of Special Committee)
The Special Committee shall be held when each special committee member convenes it incompliance with the specification in Article 5.
Article 5 (Person entitled to convene Special Committee)
1. The Special Committee shall be convened by each Special Committee Member
2. The Representative Director of the Company (if the representative director cannot convene
the committee because of an accident, other directors shall convene it in the orderpredetermined by the Board of Directors; the same shall apply hereinafter) shall be allowed
to request each Special Committee member to convene the Special Committee.
3. If notice of convocation of the Special Committee is not made within three days after therequest was made in compliance with the preceding clause, the Representative Director of
the Company shall be able to convene the Special Committee.
Article 6 (Notice of convocation)
Notice of convocation for the Special Committee shall be delivered to each Special
Committee by three days prior to the date of the meeting. In the event of emergency, thisperiod may be shortened.
Article 7 (Omission of convocation procedures)
The Special Committee may be held without going through the convocation procedures withthe approval of the Special Committee members.
Article 8 (Resolution method)
1. The Special Committee shall be approved with all members attending and resolutions shallbe made with the approval of a majority of members. However, if any of the members isabsent for inevitable reasons, the Special Committee shall be approved with a majority ofthe members attending and resolutions shall be made with the approval of the majority of
the attendants.

- 36 -

2. If members of the Special Committee are absent from the Special Committee, the relevant
members shall notify the administrative office of their absence and the reasons thereof in
writing by the day before the date of the meeting in principle.
3. Special Committee members who have a special vested interest in the agenda shall not beallowed to participate in the resolution.
Article 9 (Recommendation)
1. If the reasons of purchase by the purchaser or similar party (hereinafter, referred to as “thereasons of implementation”) apply to any of the following and implementation of the plan isdeemed to be reasonable, the Special Committee shall recommend the implementation of
the plan to the Board of Directors of the Company:
1) If the purchase does not follow the procedures specified in the plan.
2) If the purchase may cause clear impairment of corporate value of the Company andcommon interests of shareholders because of actions listed in (i) to (iv) below.
(i) If the purchaser or similar party boosts the share price with no real intention ofparticipating in the management of the Company and demands that the Company
buys back the purchased shares at an inflated price (a greenmailer).
(ii) If the purchaser engages in management to achieve the interest of the purchaser orsimilar party at the sacrifice of the Company, such as controlling the managementof the Company temporarily to obtain important intellectual property rights,
operating know-how, corporate confidential information, and assets of the main
business partners and customers at low cost.
(iii) If the purchaser or similar party diverts the assets of the Company or its groupcompanies as collateral of debt or payment resource.
(iv) If the purchaser or similar party controls the management of the Company
temporarily and disposes of high-value assets that are not related to the business forthe time being, such as real estate and marketable securities, of the Company or its
group companies to force the Company to pay high dividends temporarily using the
profit from the disposal, or sells the shares at the highest price by waiting for theshare price to surge against the backdrop of a temporarily high dividend.
3) If the purchase applies to coercive, two-step large-scale purchase of shares (in which thepurchaser or similar party does not solicit purchase of all shares at the initial purchaseattempt but presents unfavorable terms of purchase or does not define the terms thereof
clearly at the second purchase attempt), that may virtually force the shareholders of theCompany to sell shares.
4) If the purchase is carried out without setting a reasonable period for the Company topresent an alternative proposal for the relevant purchase.

- 37 -

5) If the purchase is carried out without sufficiently providing information that is deemed
reasonably necessary for the shareholders of the Company to assess the necessary
information and other details of the purchase.
6) If the terms of the purchase (including price and type of consideration, timing of purchase,legality of the purchase method, certainty of performing the purchase, treatment policy
for employees of the Company, business partners, customers and other interested parties
after the purchase) are significantly insufficient or inadequate in light of the underlying
value of the Company.
7) If the purchase may destroy the relationships with employees, business partners including
customers, and interested parties such as creditors who are essential for sustainably
increasing the corporate value of the Company and may significantly impair the
corporate value of the Company and common interests of shareholders.
Note, however, that regardless of whether it is prior to or subsequent to the record
date for determining the right, the Special Committee shall make independent decision
including cancellation or withdrawal of implementation of the plan and recommend it at
the Board of Directors’ Meeting of the Company in the following cases: If the purchaser
or similar party withdraws the purchase after the aforementioned recommendation and if
the purchase ceases to exist, or if there are changes in facts that were the assumptions ofdecision of the above recommendation so that the purchase by the purchaser or similar
party shall not be deemed to qualify the reason of implementation.
2. The Special Committee shall promptly recommend the result of resolution and the reason
thereof to the Board of Directors of the Company.
3. The Board of Directors of the Company shall place prime importance on therecommendation by the Special Committee as in the preceding clause in making the final
decision.
4. Details of the recommendation by the Special Committee shall be made public at the time ofannouncing the details of resolution of the Board of Directors of the Company on therelevant matter.
Article 10 (Advisory)
1. If necessary, the Special Committee shall be allowed to have the Company’s directors,
auditors, executive advisers, corporate advisers, operating officers, accounting auditors, or
employees attend its meeting to ask for reports or opinions on necessary matters.
2. The Special Committee shall be allowed to obtain advice of independent third party experts(such as financial advisers, certified accountants, lawyers and other specialists) at theexpense of the Company.

- 38 -

Article 11 (The Minutes of meeting)
1. The Special Committee shall create the minutes of the meeting with the record of progress
and the result of the proceedings, which shall be signed and sealed by the Special
Committee members who attended the meeting.
2. Minutes of meeting shall promptly be circulated to Special Committee members who wereabsent.
Article 12 (Administrative office)
The Legal and Credit Department of the Company shall be the administrative office of theSpecial Committee.
Article 13 (Amendment or abolishment of the regulation)
The regulation shall be amended or abolished by the resolution of the Board of Directors of
the Company.
Article 14 (Enforcement)
The regulation shall be enforced effective on January 19, 2006.
The regulation shall be amended and enforced effective on March 29, 2007.

- 39 -

[Appendix 3]

Brief Personal Profile of Special Committee Members
Jotaro Yabe:

Born in 1939
1963: Joined Secretariat of Japan Fair Trade Commission
1997: Assumed General Secretariat of Japan Fair Trade Commission
1998: Retired from Japan Fair Trade Commission
1999: Assumed Professor of Graduate School of Law and Politics at Osaka University
2002: Retired from Professor of Osaka University
Assumed Vice Chairman of Fair Trade Institute2004: Assumed Professor of Humanities and Social Sciences at Jissen Women’s
University (Present position)
2005: Assumed external auditor of Onward Kashiyama Co., Ltd. (present position)
Assumed external director of Daiichi Pharmaceutical Co., Ltd. (Present
position)
Assumed external director of Daiichi Sankyo Company, Limited (Present
position)
2006: Retired from Vice Chairman of Fair Trade InstituteToshio Kobayashi: Born in 1960
1988: Assumed teaching fellow at School of Economics at Osaka University
1991: Earned a doctoral degree in Economics at Osaka University
2003: Assumed Professor at Graduate School of Economics at Osaka University(Present position)
2005: Assumed examiner of second-stage CPA examination under the jurisdiction of
Financial Services Agency (Present position)
Hiroshi Morimoto: Born in 1960
1987: Registered as lawyer (Osaka Bar Association)
Joined Kitahama Partners
1992: Promoted to Partner of Kitahama Partners (Present position)
1995: Assumed external auditor of Japan Cash Machine Co., Ltd. (Present position)
2006: Assumed external auditor of Senshukai Co., Ltd. (Present position)- 40 -

[Appendix 4]

Summary of allotments of stock acquisition rights granted free of charge(a) Details of the stock acquisition rights(1) Type and number of shares subject to the stock acquisition rights
1) The type of shares subject to the stock acquisition rights shall be the Company’s commonshares.
2) The number of the Company’s common shares to be granted in exchange of acquiring thestock acquisition rights (the Company’s common shares to be issued and the Company’scommon shares held by the Company to be transferred instead) (The same applies
hereinafter.) and the number of the Company’s common shares to be newly issued byexercising stock acquisition rights is specified in (b) below. Note that if the number ofapplicable shares (defined in 3) below) is adjusted according to 3) below, it shall be
adjusted by multiplying the number of applicable shares after the relevant adjustment by
the total number of the stock acquisition rights.
3) The number of the Company’s common shares to be issued by acquiring or exercisingeach of these stock acquisition rights (hereafter referred to as “applicable number ofshares”) shall be one share. Note that if the Company splits or consolidates shares, thenumber of the applicable shares shall be adjusted according to the following formula:
Number of the applicable
shares after adjustment=

Number of the applicable
shares before adjustment

X

Ratio of split orconsolidation

Such an adjustment shall be made only for shares with respect to the stock acquisitionrights that have not been acquired or exercised at the relevant time, and any fractions lessthan one share, that occurs as a result of such adjustment shall be rounded down, and no
adjustment by cash shall be made. Also, when processing these fractions, and adjusting
the number of the applicable shares based on the reasons for adjustment of the number ofapplicable shares occurred afterward, the number of the applicable shares after adjustment
shall be calculated upon appropriately reflecting such fractions in the number ofapplicable shares before adjustment.
(2) The value of property financed on the exercise of the stock acquisition rights
1) The amount to be paid for the shares on the exercise of the stock acquisition rights shallbe obtained by multiplying the exercising price (defined in 2) below) by the number of theapplicable shares.
2) The amount to be paid per common share of the Company on the exercise of the stockacquisition rights (hereafter referred to as “exercising price”) shall be 1 yen.
(3) The bank handling payment for the shares on the exercise of the stock acquisition rights andthe place handling payment- 41 -

To be determined by the Board of Directors with a resolution to issue the stock acquisitionrights.
(4) Period of exercise of the stock acquisition rights
The period of exercise of the stock acquisition rights shall be 6 months from 3 weeks elapsed
after the effective date of the allotment of the stock acquisition rights granted free of charge
stated in (d) below. Note that if the last day of the period of exercise falls on a holiday for theplace handling payment, the last day shall be the following business day.
(5) Items regarding the capital to be increased when issuing shares by exercising the stockacquisition rights and the capital reserve
In case of issuing common shares of the Company by exercising the stock acquisition rights,
the entire amount of the issuing of the shares at in issue price shall be incorporated into thecapital, and the amount not incorporated into the capital shall be 0 yen.
(6) Limitation of transfer of stock acquisition rights
Transfer of the stock acquisition rights must be approved by the Board of Directors of theCompany.
(7) Acquisition of the stock acquisition rights by the Company
The Company may acquire stock acquisition rights held by a person who does not fall under(e)(1) 1) to 6) stated below, by granting one unit of the Company’s applicable common shares
per stock acquisition right on the day specified by the Company’s Board of Directors between
the day allotment of the stock acquisition rights granted free of charge takes effect (defined in(d) below) and the day the exercise of the stock acquisition rights expires. Also, if theCompany’s Board of Directors acknowledges that there is someone who does not fall under(e)(1) 1) to 6) stated below, of those who own the stock acquisition rights after the day such anacquisition is made, the Company may acquire stock acquisition rights held by a person who
does not fall under (e)(1) 1) to 6) by granting one unit of the Company’s applicable commonshares per stock acquisition right on the day specified by the Company’s Board of Directors
after the day the above acquisition is made, and the same afterwards.
(8) Takeover of obligations for stock acquisition rights in case of a merger, company split, stock
exchange or stock transfer
To carry out a merger in which the Company ceases to exist, a merger split or new
establishment split in which the Company becomes a demerged corporation, or a stock
exchange or stock transfer in which the Company becomes a wholly-owned subsidiary,
obligation for stock acquisition rights that have not been acquired or exercised or redeemed asof the relevant point of time may be handed over to the following entities: 1) the company that
continues to exist after the relevant merger (hereafter referred to as the “company continuing toexist after an absorption merger”); 2) the company that will be established as a result of the- 42 -

relevant merger (hereafter referred to as the “newly established company as a result of a new
establishment merger”) in the event of a merger; 3) the company that takes over whole or partof the rights and obligations owned by the company split as a result of the relevant merger split(hereafter referred to as “company taking over after a merger split”) in the event of a merger
split; 4) the company that is established as a result of the relevant new establishment split(hereafter referred to as the “company newly established as a result of new establishment split”)
in the event of a new establishment split; or 5) the company that will be the wholly owningparent company as a result of the relevant stock exchange or stock transfer (hereafter referred
to as the “wholly owning parent company as a result of a stock exchange” or “wholly owningparent company established as a result of stock the stock transfer.” The above 6 entities are
hereafter collectively referred to as “company that continues to exist”) in the event of a stock
exchange or stock transfer based on the following decision policies. Note that this applies
only if the general meeting of shareholders of the Company approves the agenda on the merger
agreement, merger split agreement, new establishment split plan, stock exchange agreement or
stock transfer plan, which provides statements complying with the following decision policies
with respect to takeover of obligations for the stock acquisition rights in each case.
1) Type of shares for the purpose of the stock acquisition rights taken over
Common shares of the company that continues to exist.
2) Number of shares that are the purpose of the stock acquisition rights taken over
To be rationally adjusted according to the ratio of the merger, company split, stock
exchange or stock transfer, and fractions less than one share after adjustment shall be
rounded down.
3) Amount to be paid to exercise the stock acquisition rights taken over
To be rationally adjusted according to the ratio of the merger, company split, stock
exchange or stock transfer, and fractions less than 1 yen after adjustment shall be rounded
down.
4) Period of exercise of the stock acquisition rights taken over, other conditions foracquisition or exercise of the rights, termination of the resolution for issuance, etc.
To be determined by the Company’s Board of Directors at the time of the merger,
company split, stock exchange, or stock transfer following this outline.
5) Approval for transfer by the Board of Directors
Transfer of the stock acquisition rights must be approved by the Company’s Board of
Directors that continues to exist.
(9) Limitation of issuance of stock acquisition rights securities
No stock acquisition rights securities shall be issued.
(b) Total number of stock acquisition rights- 43 -

The upper limit shall be obtained by multiplying the final outstanding number of shares issued
as of the base date for allotment of the stock acquisition rights to be granted free of charge(defined in (d) below) (excluding the number of the Company’s common shares held by theCompany as of the same time) by 1.
(c) Shareholders subject to the allotment of the stock acquisition rights to be granted free of charge
Shareholders who are listed or recorded on the final shareholders’ list or the beneficial
shareholders’ list as of the base date for allotment of the stock acquisition rights are granted freeof charge (defined in (d) below; including those who are not able to exercise the stockacquisition rights according to (e) specified below and excluding the Company as a holder oftreasury shares).
(d) Base date and effective date for allotment of the stock acquisition rights to be granted free ofcharge(1) Base date
The base date shall be the date separately specified by the Company’s Board of Directors on orafter the exercise date of this plan has been resolved by the Company’s Board of Directors.
(2) Effective date
The effective date shall be the date separately specified by the Company’s Board of Directors
on or after the base date.
(e) Conditions to exercise the stock acquisition rights(1) Persons may exercise the stock acquisition rights providing they do not fall under thefollowing: 1) a specific mass shareholder; 2) his/her co-shareholder; 3) a specific mass buyer;4) his/her special stakeholder; 5) a person to whom the stock acquisition rights have beentransferred or who has taken over the stock acquisition rights from the person stated in 1) or 4)
above without obtaining approval from the Company’s Board of Directors; or 6) a person
related to any person stated in 1) to 5) above.
The terms used above are defined as follows:
1) A “specified mass shareholder” refers to a person who holds at least 20% (defined in
Paragraph 4 of Article 27-23 of the same law) of the stock certificates, etc., issued by theCompany (defined in Paragraph 1 of Article 27-23 of the Securities Exchange Law;
hereafter the same unless otherwise separately specified) or who are approved by theCompany’s Board of the Directors to hold not less than 20% of such stock certificates, etc.
2) The “co-shareholder” refers to a person defined in Paragraph 5 of Article 27-23 of the
Securities and Exchange Law (including a person who has been recognized by theCompany’s Board of Directors as falling under this category). This also includes persons
who have been regarded as co-shareholders based on Paragraph 6 of the same article.
3) “Specific mass buyer” refers to a person who has given public notice of purchase, of the- 44 -

share certificates issued by the Company (defined in Paragraph 1 of Article 27-2 of thesame law) by a take-over bid (defined in Paragraph 6 of Article 27-2 of the same law) andwhose share certificates, etc., held (defined in Paragraph 1 of Article 27-2 of the samelaw) and whose special stakeholders’ share certificates held (including the cases defined in
Paragraph 1 of Article 7 of Enforcement Ordinance of the same law as equipment cases)
altogether account for (defined in Paragraph 8 of Article 27-2 of the same law; hereafter
the same) at least 20%.
4) The “special stakeholder” refers to a person defined in Paragraph 7 of Article 27-2 of the
Securities Exchange Law (including a person who has been recognized as falling under
this by the Company’s Board of Directors). Note that as for persons put up in No. 1 ofthe same paragraph, persons who are specified in Paragraph 2 of Article 3 of the Cabinet
Office Ordinance regarding disclosure of a take-over bid of the share certificates by those
who are not the issuer are excluded.
5) A “person related to” somebody refers to a person who has been recognized by theCompany’s Board of Directors to be a person who is actually controlled by that person, oris under joint control of that person, or a person who acts in cooperation with that person.
(2) Regardless of (1) above, the persons specified in any of a) through d) below are not classed as
specific mass shareholders or specific mass buyers.
a) The Company, the Company’s subsidiaries, or the Company’s affiliatesb) A person who has been recognized by the Company’s Board of Directors to be a person
who has become a specific mass shareholder with no intention of controlling theCompany and who is no longer a specific mass shareholder by disposing of theCompany’s share certificates, etc., held within 10 days after the day he/she became a
specific mass shareholder (note that such a period may be extended by the Company’s
Board of Directors.)c) A person who has been recognized by the Company’s Board of Directors to be a specificmass shareholder of the Company without his/her own intention because of acquisition oftreasury shares by the Company or for other reasons (excluding a person who has newly
acquired the Company’s share certificates, etc. with his/her own intention afterward.)d) A person who has been recognized by the Company’s Board of Directors as someone who
causes no harm to the corporate values and joint interests of the shareholders of theCompany by acquiring or holding the Company’s share certificates, etc. (This may berecognized by the Company’s Board of Directors at any time. Also, if the Company’s
Board of Directors recognizes that no harm is caused to the corporate values and the joint
interests of the shareholders of the Company under certain conditions, then it only applies
to cases in which the relevant conditions are met.)- 45 -

(3) If, with respect to applicable foreign laws, 1) execution of the specified procedures or 2)
fulfillment of the specified conditions (including prohibition against exercise for a certain
period of time, submission of the specified documents, etc.) or 3) both of the above (hereaftergenerically referred to as “compliance laws exercise procedures and conditions”) are required
for a person located in the jurisdiction of the relevant law to exercise the stock acquisitionrights, the person located in the relevant jurisdiction may exercise the stock acquisition rights
only if all of the relevant compliance law exercise procedures and conditions have been
executed or fulfilled.

Note that the Company is not obligated to execute or fulfill any of thecompliance law exercise procedures and conditions requiring the Company to execute or fulfill
them in order for the person located in the relevant jurisdiction to exercise the stock acquisitionrights.

Also if a person located in the relevant jurisdiction is not permitted to exercise thestock acquisition rights by the relevant law (hereafter referred to as a “compliance law exercise
prohibition reason”), the person located in the relevant jurisdiction may not exercise the stockacquisition rights.
(4) Regardless of (3) above, persons located in the United States of America may exercise therelevant stock acquisition rights only if they express and guarantee that 1) they are accredited
investors as defined in the Rule 501(a) of the Securities Act of 1933 of the United States, and2) they promise to resell the common shares of the Company, which are to be acquired as aresult of exercise of the stock acquisition rights held by them, by regular transaction in theTokyo Stock Exchange if they decide to do so (this must not be based on any prior arrangement
and there must be no prior inducement). The Company will execute or fulfill the compliancelaw exercise procedures and conditions relating to Regulation D of the Securities Act of 1933of the U.S. and the U.S. state laws, which require the Company to execute or fulfill in order forthe person located in the U.S. to exercise the relevant stock acquisition rights.

If theCompany’s Board of Directors recognizes that exercise of the stock acquisition rights may not
be approved legally in terms of the U.S. Securities Law even if 1) and 2) above are fulfilled bya person located in the U.S. because of a change in the law in the U.S., etc., persons located in
the U.S. may not exercise the stock acquisition rights.
(5) Even if persons who hold the stock acquisition rights according to the provision of (1) or (4)above are unable to exercise the stock acquisition rights, the Company is not liable for any
damage to the persons who hold the relevant stock acquisition rights.
(f) Method to exercise the stock acquisition rights, etc.
(1) The method to exercise the stock acquisition rights and the place to claim exercise
The stock acquisition rights shall be exercised by filling in the required items including thenumber of the stock acquisition rights to be exercised, the number of applicable shares, and theaddress in the Stock Acquisition Rights Exercise Claim Form, which is specified by the- 46 -

Company, (including the expression and guarantee clause and the compensation clause thatstate the relevant person with the stock acquisition rights does not fall under any of 1) to 6)
stated in (e)(1) above and has no intention of exercising the rights for any of such persons),
signing and sealing it and submitting it with a separately specified document required toexercise the stock acquisition rights as well as other documents required on each occasion by
the Corporation Law, Securities and Exchange Law, and other laws and related laws andregulations (including the rules, etc., set by Japan Securities Dealers Association and the stock
exchanges in Japan) attached to the place handling payment if necessary, and paying amount ofmoney equivalent to the total amount of the exercise price of the shares that are the purpose of
the stock acquisition rights for the relevant exercise. A person with the stock acquisitionrights may individually exercise each of the stock acquisition rights held, and if there are any
remaining stock acquisition rights at the time of such individual exercise, the Company shallenter or record the date of the individual exercise of the relevant person with the stockacquisition rights and the number of the remaining stock acquisition rights into the Stock
Acquisition Rights Original Register.
(2) Time when claim of exercise of the stock acquisition rights takes effectClaim of exercise of the stock acquisition shall take effect when the stock acquisition rights
exercise claim form and the attached document for the exercise arrive at the place handling
payment according to the provision of (1) above. Exercise of the stock acquisition rights shalltake effect if claim of exercise of such stock acquisition rights has taken effect and amount ofmoney equivalent to the total amount of the exercise price of the shares that are the purpose of
the stock acquisition rights for the relevant exercise is paid at the place handling payment.
(g) Notice to stock acquisition rights holders(1) Notice to stock acquisition rights holders shall be given in writing to the stock acquisitionrights holders’ addresses recorded in the Stock Acquisition Rights Original Register, and such
notice is regarded to have arrived when it is normally supposed to arrive.
(2) As for approval, if no particular will is expressed to the Company by a stock acquisition holder
in writing within 14 days after the day the notice asking for approval is regarded to havearrived, the Company may regard that the stock acquisition holder has approved it.
(h) Notification by the Securities Exchange Law
As for each of the above items, if notification is required by the Securities Exchange Law, thecondition shall be occurrence of effect of that notification.
(i) Modification due to revision of the laws, etc.
If any necessity to modify any clause specified in each of the above sections or meanings of theterms arises due to new establishment or modification and abolishment of the laws, upon
considering the aim of the relevant new establishment or modification and abolishment, the- 47 -

clauses specified in each of the above articles or the meaning of the terms shall be changed
within the rational range as needed.

- 48 -

Proposal 5: Election of nine (9) Directors
The term of office of nine (9) Directors will expire at the end of this meeting. We would like
you to elect a total of nine (9) Directors.
The candidates for the Directors are as follows.
No.

Name
(Date of birth)

Brief personal profile and representation in other companies
Oct. 1953
Nov. 1955

1

Yasuhiro Yukimachi(January 30, 1932)

Oct. 1976
Jan. 1985
Oct. 1991
Apr. 1999
Apr. 2000
Jul. 1964
Jun. 1994
Apr. 1999
Mar. 2001
Mar. 2005

2

Koichi Horii(November 17, 1942)
Mar. 2006

3

Kiichi Tagawa(September 25, 1947)

Jul. 2006
Mar. 1966
Jun. 1997
Mar. 2001
Mar. 2005
Mar. 2006

Apr. 1967
Jun. 1997
Mar. 2001
Mar. 2005
Mar. 2006
4

Michio Tanabe(July 23, 1946)

Jan. 2007

Joined Mirakukai
Founded the Company, Director of theCompany
Managing Director of the Company
Executive Managing Director of the Company
Vice President and Director of the Company
Vice President and Representative Director of
the Company
President and Representative Director of theCompany (present position)
Joined the Company
Director of the Company
Managing Director of the Company
Executive Officer of the Company
Executive Managing Director of the Company(present position)
In charge of B-to-B Operations Department,
Belle Marie Business Department, Rebondir
Business Department; Tokyo Branch Manager(present position)
In charge of Pet Operation Development
Department (present position)
Joined the Company
Director of the Company
Executive Officer of the Company
Managing Director of the Company (present
position)
In charge of Management Strategy
Department, Marketing Department,
Producing and Planning Department, DigitalMedia Department, Print Material Department,
Quality Control Department, SCM Promotion
Department (present position)
Joined the Company
Director of the Company
Executive Officer of the Company
Managing Director of the Company (present
position)
In charge of Fashion Development
Department, Childcare Development
Department, SCM Department First Division,
Beauty and Health Development Department,
Disney Development Department, Monthly
Development Department, Gift Development
Department, Twenties Development
Department (present position)
In charge of Management Department (present
position)- 49 -(1) No. of the Company’s
shares held
(2) Any conflict of interests
between the candidate andthe Company(1) 480,036(2) None(1) 16,000(2) None(1) 16,000(2) None(1) 4,100(2) None

Mar. 1972
Jun. 1997
Mar. 2001
Mar. 2005
Mar. 2006

Joined the Company
Director of the Company
Executive Officer of the Company
Shohachi Sawamoto
Managing Director of the Company (present(1) 15,640
5(February 9, 1948)
position)(2) None
In charge of Store Front Business Division,
and Business Planning Department (present
position)Mar. 1967 Joined the Company
Apr. 1998 Head of the Human Resources Department of
the Company
Mar. 2001 Executive Officer of the Company
Kiyoshi Kubota
Jan. 2005
Head of the Information System Department(1) 11,000
6(April 28, 1948)of the Company(2) NoneMar. 2005 Director of the Company (present position)
In charge of Human Resources Department
and Information System Department (present
position)Mar. 1974 Joined the Company
Jun. 1999
Head of Corporate Planning Department of theCompany
Mar. 2001 Executive Officer of the Company
Jan. 2005
Head of General Affairs, IR & Public
Kazuhide Fujiyoshi(1) 2,000
7
Relations Department, and Financial Affairs(September 5, 1948)(2) None
Planning Department of the Company
Mar. 2005 Director of the Company (present position)
In charge of General Affairs, IR & Public
Relations Department and Financial Affairs
Planning Department (present position)
Mar. 1982 Joined the Company
Aug. 2001 Head of Living Development Department(present position)
Mar. 2005 Executive Officer of the Company (present
position)
Mamoru Asada
Head of Belle Maison Lifestyle Research(1) 1,000
8(April 1, 1954)
Institute (present position)(2) NoneMar. 2006 Director of the Company (present position)
In charge of Living Development Department,
SCM Department Second Division, and Belle
Maison Lifestyle Research Institute (present
position)
Apr. 1977 Joined Yamaha Music Foundation
Feb. 1988 Joined Yokohama Women’s Association forCommunication and Networking
Tomoko Oishi
Jun. 1997
Joined Japan Association for The(1) None
9(November 8, 1954)
Advancement of Working Women(2) None
Apr. 2001 Professor of Kyoto Gakuen University, Facultyof Business Administration (present position)
Mar. 2006 Director of the Company (present position)
Note: Among the candidates for the Directors, Ms. Tomoko Oishi is the candidate for the Outside Director who meetsthe requirements regarding the outside directors prescribed in Article 2, Paragraph 3, Item 7 of the Enforcement
Regulations of the Corporation Law.

- 50 -

Proposal 6: Election of three (3) Corporate Auditors
The terms of office of Corporate Auditors Mr. Makoto Sano, Mr. Hirotsugu Yamagishi, Mr.
Heian Hazama, and Mr. Hideyuki Koizumi will expire at the end of this meeting. We would
like you to elect a total of three (3) Corporate Auditors.

Prior to our proposal of this item, we

have already obtained the consent from the Board of Corporate Auditors.
The candidate for the Corporate Auditor is as follows:
Name(Date of birth)

Brief personal profile and representation in other companies
Jul. 1993
Apr. 1995

Shoji Tottori(Jan. 8, 1943)

Jun. 1998
Jun. 1999
Mar. 2001
Mar. 2005
Aug. 1960
Jun. 1992
Mar. 2001

Yoshihiro Inoda(Sep. 20 1941)

Aug. 2004
Mar. 2005
Oct. 1977
Mar. 1981
Jul. 1984
Jan. 1987

Hideyuki Koizumi(Jan. 9 1953)

Apr. 1987
Mar. 1995
Mar. 2003

Joined the Company
Head of Legal Affair / Deliberation
Department of the Company
Director of the Company
Head of Legal Affair / Deliberation and Headof Audit Department of the Company
Executive Officer of the Company
Resigned from Director of the Company
Managing Director of the Company (present
position)
Joined the Company
Director of the Company
Managing Director and Managing Executive
Officer of the Company
President and Chief Executive Officer of
Senshu Logisco Co., Ltd. (present position)
Resigned from Managing Director of theCompany
Joined Tohmatsu Aoki & Co. (Presently
Deloitte Touche Tohmatsu)
Registered as a certified public accountant
Registered as a licensed tax accountant
Opened Koizumi Certified Public Accountant
Office (present position)
Joined Century Auditor (Presently Ernst &Young ShinNihon)
Corporate Auditor of Japan Cash MachineCo., Ltd. (present position)
Corporate Auditor of the Company (present
position)(1) No. of the Company’s
shares held
(2) Any conflict of interests
between the candidate andthe Company(1) 8,000(2) None(1) 49,923(2) None(1) None(2) None

Note: Mr. Hideyuki Koizumi is the candidate for the Outside Corporate Auditor who meets the requirements
regarding the outside auditors prescribed in Article 2, Paragraph 3, Item 8 of the Enforcement Regulations of
the Corporation Law.

Proposal 7: Grant of retirement benefits to retiring Corporate Auditor
We propose to grant retirement benefits to retiring Corporate Auditor Mr. Makoto Sano and Mr.
Hirotsugu Yamagishi, whose terms of office will expire at the end of this meeting, inappreciation of their service, within the due amount based upon certain standards stipulated by
the Company. We propose that the determination of the actual amount, time, method, andother matters relating to the granting of the said retirement benefits be decided by discussion
among the Corporate Auditors.

- 51 -

Brief personal profiles of the retiring Corporate Auditors are as follows:
Name
Makoto Sano
Hirotsugu Yamagishi

Mar. 2003
Jun. 2000

Brief personal profile
Corporate Auditor at the Company (present position)
Corporate Auditor at the Company (present position)

Proposal 8: Payment of Bonuses to Directors and Corporate Auditors
It is proposed that 9 Directors and 5 Corporate Auditors at the end of the period under review be
paid a total amount of 39 million yen in officers’ bonuses (33,750,000 yen for directors, and5,250,000 for corporate auditors) considering the performance of the period under review, etc.
Proposal 9: Revision of compensation of Directors and Corporate Auditors
The remuneration to be paid to directors and corporate auditors of the Company has been not
more than 50 million yen a month for a director and 6 million yen a month for a corporate
auditor based on the resolution approved in the 49th Ordinary General Meeting of Shareholders
held on June 29, 1994; however, considering the decrease in the number of directors and desire
to pay bonuses for directors and corporate auditors within the limit of the remuneration, we
propose that remuneration be revised to not more than 400 million yen a year for directors and
70 million yen a year for corporate auditors.
It is also proposed that remuneration for directors does not include that for employees of
employees cum directors as before.
Currently, there are 9 directors and 5 corporate auditors; however, if Proposal 5 and 6 areapproved as they are, there will be 9 directors and 4 corporate auditors.

- 52 -

[Appendix to notice of the 62nd ordinary general
meeting of shareholders of Senshukai Co., Ltd.]Business Report(January 1 to December 31, 2006)

1. Summary of Operations(1) Senshukai Group operating progress and results
Overview
During the fiscal year ended December 31, 2006, the Japanese economy was steady because of
the favorable corporate performances and the associated expansion of capital investment.

Onthe other hand, although there was improvement in the employment environment, it fell short ofbenefiting households, and consumer spending still lacks vigor and continues to advance andretreat.

In the distribution industry, some types of business and companies are more dominant

than others, and we see a widening gap between them.

In the mail-order industry, companies

that provide products via the Internet or mobile phones are enjoying strong sales growth as in
the previous year, and firms that engage in comprehensive catalogue business are showing asign of recovery in sales. In this rapidly changing competitive environment, the businessenvironment is getting increasingly severe with difficulty in assessing consumers’ needs becauseof diversification of lifestyle and with reorganizations and alliances in the distribution industry.
Under these circumstances, Senshukai Group promoted the priority strategies defined in
the Medium-term Management Plan covering the three fiscal years from 2005 to 2007.
As a result of these activities, Senshukai Group’s consolidated net sales amounted to148,150 million yen, an increase of 1.9% year-on-year.
On the profit front, however, operating income increased by 34.1% year-on-year to 4,602
million yen because of the increase in the sales gross profit resulting from the decrease in thesales cost rate as well as the reduction in the selling, general and administrative including
expenses related to media. Ordinary income increased by 32.3% year-on-year to 5,240 million
yen because of foreign exchange gains, etc.

Net income was 3,627 million yen, up 186.2%

year-on-year, because of the increase of the ordinary income in addition to the reduction ofeffect of impairment loss recorded in the previous consolidated fiscal year although loss fromthe cancellation of the business alliance agreements and other was recorded.
Business results by segment- 53 -

[Mail-order Business]
The mail-order business, which consists of catalogue and buyer’s club businesses, posted net
sales of 142,081 million yen (up 1.9% year-on-year), and operating income of 4,607 million yen(up 30.3% year-on-year).
[Other Businesses]
Other businesses that consist of the service business (with travel services, credit-card and loan
services as the core fields), transport business, storefront business, and B-to-B operations, thatengage in the sale and provision of business merchandise and services, posted consolidated net
sales of 6,068 million yen (up 0.1% year-on-year), and an operating income of 7 million yen (anoperation loss of 38 million yen was posted in the same period of the previous fiscal year).
Senshukai Group net sales by business segment
stName of the segment
and product61 fiscal year
(Jan. 1 to Dec. 31, 2005)
Amount% of total

Mail-order Business:
Publications
ApparelHousehold articles
Hobby goods
OthersSubtotal
Other Businesses:
Total

535
50,221
53,69627,296
7,642
139,391
6,062
145,453(Millions of yen)nd

62 fiscal year
(Jan. 1 to Dec. 31, 2006)
Amount% of total

0.4
34.5
36.9
18.8
5.2
95.8
4.2
100.0

870
53,93754,87425,0207,378
142,081
6,068
148,150

0.6
36.4
37.0
16.9
5.0
95.9
4.1
100.0

Changefrom theprevious
fiscal year

Year-on-Year
(%)

335
3,716
1,178
-2,275
-263
2,690
6
2,697

62.6
7.4
2.2
-8.3
-3.5
1.9
0.1
1.9

(2) Capital expenditures
In the consolidated fiscal year under review, the Senshukai Group invested a total of 615 million
yen in capital expenditures, and 1,564 million yen to develop computer systems, etc.
(3) Fund procurement
There were no noteworthy events.
(4) Issues to be handled
The Senshukai Group has established and implemented the Medium-Term Management Plancovering three fiscal years from 2005 to 2007.

In fiscal 2006, the second year of thismanagement plan, our business evolved favorably as we executed the three basic policies
steadily defined as (1) higher profitability for core businesses, (2) aggressive investment ingrowth areas, and (3) improved brand value, as well as our seven priority strategies (statedbelow) laid out in the management plan.
In the final stage of fiscal 2007, we expect to steadily continue implementing the seven- 54 -

priority strategies of the Medium-Term Management Plan. These strategies are: 1) promotionof supply-chain management, 2) reassessment of catalog positioning, 3) expansion of customer
age groups to include customers in their 20s to 40s, 4) promotion of Internet sales, 5)development of storefront business, 6) stronger development and product planning capabilities,
and 7) better customer service.
The Senshukai Group also places importance on the creation of a highly transparent
management system and its effective operation, being fully aware of the significance of“corporate governance” in business activities as an essential factor to improve its corporate
value by establishing balanced relationships with our stakeholders, including shareholders,customers, employees, business partners and local communities.
Accordingly, we will enhance our corporate governance by clarifying the scope ofsupervisory roles of Directors, strengthening our compliance system, and promoting quick andaccurate information disclosure.
Looking ahead, Senshukai Group will endeavor to realize further improvement in thecorporate value.
We look forward to your continuous support and encouragement.
(5) Trends in financial position and gain and loss
(Millions of yen)
Fiscal year
Items
Net sales
Ordinary income
Net income
Net income per share (yen)Total assets
Net assets
Net assets per share (yen)thThe 59(ended Dec. 2003)
147,607
4,041
1,819
40.81
87,26947,183
1,105.80

th

The 60(ended Dec. 2004)
147,159
3,033
1,231
28.81
87,56047,135
1,122.20

st

The 61(ended Dec. 2005)
145,453
3,962
1,267
27.44
92,78852,519
1,143.12

The 62nd(ended Dec. 2006)
148,150
5,240
3,627
78.81
95,50855,7081,207.89

Notes:
1.

From the 60th fiscal year, the Company prepared consolidated financial reports.

Accordingly, CorporatethAuditors and Accounting Auditors did not audit the reported figures for the 59 fiscal year.
2.

“Accounting Standards for Indication of Net Assets of Balance Sheet” (Corporate Accounting Standard
No. 5, December 9, 2005) and “Guidelines for application of corporate accounting standards, etc.)(Corporate Accounting Standards Application Guideline No. 8, December 9, 2005) have been applied
since the 62nd fiscal year.

The amount equivalent to the total amount of shareholders’ equity in the past standards is 54,927 million yen.

(6) Status of the important parent company and subsidiaries
i)Relationship with the parent company
No applicable items

ii)

Major subsidiaries- 55 -

Company name

Capital(Millions of yen)

Percentage of voting
rights of theCompany(%)

Senshukai General Service Co., Ltd.

496

100

Senshu Unyu Co., Ltd.
Senshu Logisco Co., Ltd.

99
95

100
100

Senshukai Call Center Co., Ltd.

60

100

Senshukai Service and Sales Co., Ltd.

50

100

Major businessTravel services, information
services
Truck transportation business
Packing and wrapping business
Planning and executing
telephone marketing
Customer service and area
marketing businessNote: The name of Belle Maison Service Center Co., Ltd. was changed to Senshukai Service and Sales Co., Ltd. asof September 1, 2006.

Senshukai Co., Ltd. owns a total of nine consolidated subsidiaries, including the five major
subsidiaries described above.
For fiscal under review, the Company posted consolidated net sales of 148,150 million
yen and net income of 3,627 million yen.
(7) Major business
The Senshukai Group operates a mail-order business as its core business, and is also engaged inother related businesses such as the retail business (including retail stores), the service business(including the travel service) and the transportation businesses.
(8) Principal offices
Senshukai Co., Ltd.

Headquarters:

Kita-ku, Osaka

Tokyo branch office:Shinagawa-ku, Tokyo

Headquarters:

Kita-ku, Osaka

Tokyo branch:

Shinagawa-ku, Tokyo

Senshu Unyu Co., Ltd.

Headquarters:

Yasu-shi, Shiga

Senshu Logisco Co., Ltd.

Headquarters:

Kita-ku, Osaka

Kanuma Branch Company

Kanuma-shi, Tochigi

Chubu Branch Company

Kani-shi, Gifu

Kyoto Branch Company

Kyotanabe-shi, Kyoto

Koshien Branch Company

Nishinomiya-shi, Hyogo

Senshukai Call Center Co., Ltd.

Headquarters:

Kita-ku, Osaka

Senshukai Service / Sales Co., Ltd.

Headquarters:

Kita-ku, Osaka

Senshukai General Service Co., Ltd.

- 56 -

(9) Employees of Senshukai Group
Segment
Number of employees
Mail-order Business
886
Other businesses
58
Other staff (consolidated basis)
138
Total
1,082
Note: The number of employees includes regular and contract staff.

Change from the previous fiscal year
142
-6
-19
117

(10) Major creditors
Borrowings outstanding(Millions of yen)276
119

Creditors
Japan Bank for International Cooperation
Sumitomo Mitsui Banking Corporation- 57 -

2. Items regarding shares of the Company(1)

Total number of shares authorized to be issued:

180,000,000(2)Total number of shares outstanding:

47,630,393(3)

Number of shareholders:(4)

Major shareholders

5,264

There are no shareholders that hold at least one tenth of the total number of shares
outstanding (except for treasury stock) who fall under No. 1 of Article 122 of theenforcement rules of the Corporation Law. The status of the major shareholders is asfollows:
Name
Brestoshieb Co., Ltd.
Nikko Principal Investments Japan Ltd.
Toppan Printing Co., Ltd
Sawzan, Ltd.
Dai Nippon Printing Co., Ltd.
State Street Bank and Trust Company
505019Japan Trustee Services Bank, Ltd.
(Trust account)
Sumitomo Mitsui Banking Corp.
Mizuho Bank, Ltd.
Nippon Life Insurance Company

Shareholders’ investment in the Company
No. of shares held (thousands)
Investment ratio (%)
3,436
3,400
1,838
1,792
1,509
1,288

2.80

1,229

2.67

1,165
1,019
988

2.53
2.21
2.14

Notes:(5)

1.

Amounts less than one thousand shares have been omitted.

2.

The investment ratio is calculated by subtracting treasury stock (1,548,297 shares).

Other principal items regarding sharesNo applicable items- 58 -

7.46
7.38
3.99
3.89
3.28

3. Items regarding stock acquisition rights of the Company(1)

Status of stock acquisition rights as of the end of the fiscal year under review
Number of stock acquisition rights:

1,153 units

Number and type of intended stock:

1,153,000 shares of common stock(1,000 shares per stock acquisition right)

Total stock acquisition rights held by the directors by category
Number (exercise price)
No. 1 (693 yen)
Directors
No.2 (1,198 yen)

Term of exercise
From Apr. 1, 2005 toMar. 30, 2007
From Apr. 1, 2006 to
March 31, 2008

Number of rights

Number of holders

2

1

102

8

Notes:
1.

The above rights were granted based on the resolution of the 58th and 59th Ordinary General Meeting of
Shareholders prior to enforcement of the Corporation Law, and were not granted as consideration of execution of
duty.

2.

Not granted to external Directors(2)

Status of stock acquisition rights granted in the fiscal year under review
No applicable items(3)

Other important items regarding stock acquisition rights
No applicable items- 59 -

4 Directors and Corporate Auditors(1)

Name of Directors and Corporate Auditors

Title
President andRepresentative
Director

Name

Position and principal duty in the Company, or major occupation

Yasuhiro
Yukimachi

Executive
Managing
Director

Koichi Horii

Managing
Director

Kiichi Tagawa

Managing
Director

Michio Tanabe

Managing
Director

Shohachi
Sawamoto

Director

Kiyoshi Kubota

Director

Kazuhide
Fujiyoshi

Director

Mamoru Asada

DirectorStanding
Corporate
AuditorStanding
Corporate
AuditorCorporate
AuditorCorporate
AuditorCorporate
AuditorTomoko Oishi

In charge of B-to-B Operations Department, Belle Marie Business
Department, Rebondir Business Department, and Pet Operation Development
Department;
Tokyo Branch Manager (present position)
In charge of Management Strategy Department, Marketing Department,
Producing and Planning Department, Digital Media Department, Print Material
Department, Quality Control Department, and SCM Promotion Department
In charge of Fashion Development Department, Childcare Development
Department, SCM Department First Division, Beauty and Health Development
Department, Disney Development Department, Monthly Development
Department, Gift Development Department, and Twenties Development
Department
In charge of Store Front Business Department, and Business Planning
Department
In charge of Human Resources Department and Information System
Department
In charge of General Affairs, IR & Public Relations Department, and Financial
Affairs Planning Department
In charge of Living Development Department, SCM Department Second
Division, Belle Maison Lifestyle Research Institute.
Executive Officer of the Company and General manager of Living
Development Department
Head of Belle Maison Lifestyle Research Institute
Professor of Kyoto Gakuen University, Faculty of Business Administration

Makoto Sano
Hirotsugu
Yamagishi
Heian Hazama
Hideyuki
KoizumiCertified Public Accountant

Hiroshi Morimoto

LawyerNotes:
1.

Mr. Mamoru Asada and Ms. Tomoko Oishi as Directors of the Company, and Mr. Hiroshi Morimoto as
Corporate Auditor were newly elected at the 61st Ordinary General Meeting of Shareholders held on March 30,
2006.

2.

Ms. Tomoko Oishi is an Outside Director as defined in No.15 of Article 2 of the Corporation Law.

3.

Mr. Heian Hazama, Mr. Hideyuki Koizumi, and Mr. Hiroshi Morimoto are Outside Corporate Auditors as
defined in No.16 of Article 2 of the Corporation Law.

(2) Compensation for Directors and Corporate Auditors
9 Directors

246 million yen

5 Corporate Auditors 45 million yen- 60 -

The amount of compensation includes 39 million yen of officers’ bonus scheduled to beresolved in the 62nd Ordinary General Meeting of Shareholders.

5. Item regarding independent accounting auditors(1) Name of the independent accounting auditor:

Ernst & Young ShinNihon(2) Compensation for the independent accounting auditor:(i): Compensation, etc. for the independent accounting auditors for the current fiscal year.
27 million yen(ii): The total fiscal benefit that should be paid by the company and its subsidiaries
45 million yen

6. The system to assure appropriateness of the business activities
The Company made a resolution on the basic strategy for the internal control system, andprovision of it, as follows, at the meeting of the Board of Directors held on May 12, 2006
based on the provisions of Article 362, Paragraph 4 No. 6 and Paragraph 5 of the
Corporation Law and has been executing it.
(1) Basic ideas on the internal control system
The Company Group acknowledges that “corporate governance” is essential in its
corporate activities as mentioned earlier in “Issues to be addressed” and aims to prepare
the internal control system for it, strengthen compliance, improve efficiency in businessexecution and establish a risk control system.

The Company will review the internal

control system according to demand of society or change in the environment as required
to improve and enrich it.
(2) Specifics of the internal control system
1) A system to assure that execution of duties of the directors and employees complies
with the laws and the Articles of Incorporation
We have provided guidelines for routine actions and internal compliance training forthe directors and employees as required.

Also, responsibilities for intellectual

property and products, which are important themes in the Company, are checked by
the specialized department. Moreover, the “Senshukai Group Compliance Policies”
have been established, and the corporate ethics helpline has been opened, and if any
compliance issues arise in any directors and employees, each one will be discussed
and examined in the Audit Committee and the Corporate Ethics Compliance
Committee.
The Audit Department directly under the president has been established. Internal
audits are conducted in order to assess the status of business operations and to
improve them and they are reported directly to the president.
- 61 -

2) The system for storage and management of information related to execution of dutiesof the directors
Documents are stored and managed fully based on the document handling rules, etc.
and important confidential items are strictly managed according to the confidential
document handling rules. Also this information is accessible by the directors andauditors at all times on the Intranet (internal network).

Also, any revision ofimportant rules is to be made with the approval of the Board of Directors.
3) The rules for management of risk of loss and other systems
We have established a Risk Management Control Committee and various committees
and divisions, providing a system to report to the Risk Management Control
Committee.

Also, for concrete measures in risk management, we have preparedmanuals and established a system to assure operation, and if any emergency situationarises, we can take required action such as establishment of a “task force” based on
the rules.

For the system against unexpected situations of any directors, we haveestablished rules and a system to execute operations smoothly on their behalf.
4) A system to assure efficient execution of duties of the directors
In order to check speedy decision-making as well as the execution status of eachdepartment, a separate management meeting from the Board of Directors has been
established.

In addition, an external director (part-time service) system has been

implemented in order to improve transparency of the Board of Directors and tostrengthen the supervisory function.

Also, an execution officer system has been

implemented in order to speed up and streamline the decision-making process of the
management, in which no one concurrently serves as a director and an execution
officer in principle and the directors provide supervision and guidance as directors
managing each department to improve efficiency of execution of duties.

Company

rules and rules for liquidation items have been set up to improve efficiency ofbusiness activities by clarifying the roles of the Board of Directors, Management
Meeting, Board of Corporate Auditors or other parties duty positions of theemployees, duty allotment, official authority, roles, decision authority.

Also, wehave implemented a technique that utilizes BSC (Balance Score Cards) effectively
supporting determination of organization performance monitoring and evaluationindexes, and constructed a system to conduct reviews and to gather feedback ofresults by the Management Meeting.
5) A system to assure appropriateness of business activities in the corporate groupconsisting of the Company and the subsidiaries
The Company and the group companies have established affiliated company- 62 -

management regulations. Important items of the subsidiaries are also checked by theCompany, and we aim to rationalize the business activities as the group at large giving
guidance, advice and evaluation in close cooperation in directions, instructions andcommunication between the parent company and the subsidiaries. We also holdregular meetings between the incorporated auditing firm and the directors of theCompany to exchange opinions about the entire group’s situation.

On the other hand,

we have established rules common to the group companies for compliance andconduct the same training for all the employees of the group companies.
6) Item regarding employees in case that corporate auditors request employees who are toassist their duties and item regarding independency of the relevant employees from thedirectors
Dedicated staff members for the corporate auditors are in place according to therequest of the Board of Corporate Auditors. Also, personnel change, personnel
evaluation and disciplinary punishment, opinions of the Board of Corporate Auditors
are to be fully respected.
7) The system for the directors and the employees to report to the corporate auditors, thesystem regarding report to auditors and the system to assure that audits are effectively
conducted by the corporate auditors
The full-time auditors are to always attend management meetings, attend major
meetings if necessary, and receive important information including the management
status, and any important items in each risk management committee and the corporate
ethics helpline.

Any facts that could cause substantial damage to the Company, if

detected, are to be immediately reported to the Board of Corporate Auditors. Also,in regular audits conducted by the corporate auditors, the business execution officers
and important employees are interviewed.

On the other hand, materials required bycorporate auditors for inspection are available for inspection upon request at any time.
In addition, results of audits conducted by the Internal Audit Department are to bereported to the corporate auditors. Also, the corporate auditors regularly holdopinion exchange meetings with the Chief Executive Officer and the independentaccounting auditor, respectively.
The corporate auditors are able to take professional advice if they so request.

7. Countermeasures against large-scale purchases of shares of the Company
In an effort to improve the corporate value based on the Medium-Term Management Plancovering three fiscal years from January 2005 to December 2007, we established the Policy
toward Large-Scale Purchases of shares of the Company, which is a so called “warning type”- 63 -

measure at the Board of Directors of the Company on December 13, 2005 to protect
shareholders’ interests.
If there is a large-scale purchase of shares of the Company, we consider a sufficient
disclosure of information to shareholders to be essential since it should be ultimately deferred toa shareholder’s decision on whether to accept such large-scale purchase, and we haveestablished the following rules: When a person or a company (“acquirer”) that intends to make alarge-scale purchases of shares of the Company to obtain not less than 20% of the total voting
rights (except when the Company’s Board of Directors has given consent for the purchase), 1)
the acquirer must provide necessary and sufficient information to the Company’s Board of
Directors about the acquirer’s overview and management policy, as well as the objective of thepurchase and basis of the purchase price in advance; and 2) the execution of the large-scalepurchase shall be commenced after a certain evaluation period for the assessment of suchlarge-scale purchase by the Company’s Board of Directors.

In cases where the acquirer does

not follow these rules, the Company may take counter-measures including, but not limited to,
issuing the stock acquisition rights to protect shareholders’ interest. To ensure fairness, a
special committee consisting of external members has been established to examine theappropriateness of the Company’s counter-measures and make recommendations to the Boardof Directors.
We would like to continue with the “Countermeasures against large-scale purchases ofshares of the Company” on condition that they are approved by the shareholders in the 62nd
Ordinary General Meeting of Shareholders.

- 64 -

Consolidated Balance Sheet
As of December 31, 2006
Millions of yen
As of December 31,
2006
ASSETS
Current Assets
Cash and deposits
Notes and accounts receivable
Marketable securities
Inventories
Deferred tax assets
Accounts receivable
Foreign exchange contract
Other current assets
Allowance for doubtful accounts
Total Current Assets

5,464
11,29385
16,432
100
7,835
1,444
4,864
-192
47,328Fixed Assets
Property, Plant and Equipment:
Buildings and structures
Machinery and delivery equipment
Instruments and fixtures
Land
Construction in progress
Property, Plant and Equipment, net

10,492
1,859
793
11,411
36
24,592Intangible Fixed Assets:

2,600

Investments and Other Assets:
Investment securities
Long-term loans
Guarantees and deposits
Deferred tax assets
Other investments
Allowance for doubtful accounts
Total Investments and Other Assets
Total Fixed Assets

16,509
1,102
1,304
55
2,660
-645
20,98748,180Total Assets

95,508- 65 -

Millions of yen
As of December 31,
2006
LIABILITIESCurrent Liabilities:
Notes and accounts payable
Short-term borrowing
Accrued liabilities
Factoring accrued liabilities
Accrued expenses
Accrued corporate tax and others
Accrued consumption tax and others
Deferred tax liabilities
Bonuses to directors and corporate auditors
Reserve for sales promotion
Other current liabilities
Total Current Liabilities

11,71053
7,046
14,990
1,908
285
181
265
49
276
786
37,554Long-term Liabilities:
Long-term borrowing
Deferred tax liabilities
Deferred tax liabilities relating to revaluation
Employees’ retirement benefits
Retirement benefits for directors and corporate auditors
Other long-term liabilities
Total Long-term Liabilities

342
533
804
17
497
50
2,245

Total Liabilities

39,800

NET ASSETS
Shareholders’ Equity
CapitalCapital surplus
Retained earnings
Treasury stock
Total Shareholders’ Equity

20,35920,716
20,889-1,041
60,923

Valuation and Translation Adjustments
Net unrealized gain on other securities
Profit or loss on deferred hedge
Revaluation reserve for land, net of tax
Foreign currency translation adjustments
Total Valuation and Translation Adjustments
Minority Interests

1,336
734
-7,301-31-5,26146

Total Net Assets
Total Liabilities and Net Assets

55,70895,508- 66 -

Consolidated Statement of Income
For fiscal year ended December 31, 2006

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividends received
Foreign exchange gains
Other income
Non-operating expenses
Interest payable
Other expenses
Ordinary income
Extraordinary income
Gains on sale of fixed assets
Gains on sale of investment securities
Extraordinary losses
Loss on sale or retirement of fixed assets
Loss on revaluation of investment securities
Loss on sale of investment securities
Impairment loss
Loss on annulment of contracts
Loss on liquidations of subsidiaries
Loss on disposal of products
Loss on policy cancellation
Loss on cancellation of deposits
Income before income taxes and minority interests
Corporate, inhabitant and business taxes
Adjustment of corporate and other taxes
Minority interests
Net income- 67 -

Millions of yen
For the year ended December 31,
2006
148,150
75,72772,42367,821
4,602
773
244
120
408
134
48
86
5,240
57
3
54
1,422
110
17
0
128
415
328
270
130
20
3,874
375
-136
7
3,627

Consolidated Statement of Changes in Shareholders’ Equity
For fiscal year ended December 31, 2006
(Millions of yen)
Shareholders’ Equity

CapitalBalance as of December 31,
2005

20,359

Capital Surplus

Retained Earnings

Treasury Stock

Total Shareholders’Equity20,657

18,438-1,15358,302

Changes during the fiscal year
under review
Dividends from surplus (Note)

-459

-459

Dividends from surplus

-460

-460

Bonuses to directors andcorporate auditors (Note)

-47

-47

Net income

3,627

3,627

Acquisition of treasury stock

58

Amortization of treasury stock

-18

-18

129

188

Reversal of revaluation reserve
for land, net of tax

-161

-161

Variation of the scope of
consolidation

-48

-48

Net change of items other thanshareholders’ equity during the
fiscal year under review
Total change during the fiscal
year under review

―

58

2,450

111

2,620

Balance as of December 31,
2006

20,35920,716

20,889-1,041

60,923- 68 -

(Millions of yen)
Valuation and Translation Adjustments
Net
Deferred
Unrealized
Hedge
Gain on Other
Profit/Loss
Securities
Balance as ofDecember 31, 2005

1,719

―

Revaluation
Reserve for
Land, Net ofTaxForeign Currency
Translation
Adjustment

Total
ValuationandTranslation-7,462-40-5,783

Minority
Interests

Total Net
Assets43

52,562

Changes during the
fiscal year under review
Dividends from surplus(Note)-459

Dividends from surplus-460

Bonuses to directors
and corporate auditors(Note)-47

Net income

3,627

Acquisition of treasury
stock

-18

Amortization oftreasury stock

118

Reversal of revaluation
reserve for land, net of
tax

-161

Variation of the scopeof consolidation-48

Net change of items
other than shareholders’equity during the fiscal
year under review

-382

734

161

9

522

3

525

Total change during the
fiscal year under review

-382

734

161

9

522

3

3,146

Balance as ofDecember 31, 2006

1,336

734

-7,301-31-5,261

46

55,708

Note: These are profit appropriation items approved at the general meeting of shareholders held in March 2006.

- 69 -

Notes for Consolidated Financial Statements
Basis for the Presentation of Consolidated Financial Statements
1. Scope of consolidation(1)

Number of consolidated subsidiaries: 9
Names of major consolidated subsidiaries:
Senshukai General Service Co., Ltd., Senshu Unyu Co., Ltd., Senshu Logisco Co., Ltd.,Senshukai Call Center Co., Ltd., Senshukai Service and Sales Co., Ltd.
Senshukai Iihana Co., Ltd, which was a non-consolidated subsidiary in the previous
consolidated fiscal year, has been included in the scope of consolidation since theconsolidated fiscal year under review because of its increased importance.

(2)

Number of unconsolidated subsidiaries: 12
Names of major unconsolidated subsidiaries: Senshukai Hong Kong Limited[Reason for exclusion from the scope of consolidation]
None of the factors of the unconsolidated subsidiaries mentioned above, including total
assets, net sales, net income/loss (amount appropriate for relevant shareholdings), andretained earnings (amount appropriate for relevant shareholdings), have any significant
effects on the consolidated results.

2. Scope of equity-method subsidiaries(1)

Number of unconsolidated subsidiaries under the equity-method: 3Name of major unconsolidated subsidiaries under the equity-method:
Senshukai Hong Kong Limited.

(2)

Name of major unconsolidated subsidiaries excluded from the scope of equity-method:
Shanghai Senshu Merchant and Commerce Co., Ltd[Reason for exclusion from the scope of equity-method]
None of the factors of the unconsolidated subsidiaries excluded from the equity method,such as net income/loss (amount appropriate for relevant shareholdings), and retained
earnings (amount appropriate for relevant shareholdings), have any significant effects on
the consolidated results.

3. Significant accounting policies(1) Valuation method for assets(i)Marketable securities

Stated at fair value based on the market prices at the end of fiscal. (Both unrealized gains
and losses are included in net assets; cost of securities sold is determined by themoving-average method.)- 70 -

(ii)Derivatives

Stated at market price.
(iii) Inventories
Mainly stated at monthly average method and lower of cost or market method.
(2)

Depreciation method of primary depreciable assets(i)

Property, plant and equipment: Depreciation of property and equipment is mainlycomputed using the declining-balance method, except for buildings (excluding fixtures)acquired after April 1, 1998, which are depreciated using the straight-line method.
The depreciation periods are basically as follows:
Buildings and structures: 38-50 years
Machinery and delivery equipment: 12 years(ii)

Intangible fixed assets: Amortization of intangible fixed assets is computed using

the straight-line method. Software for internal use is amortized by the straight-line
method based on a usable life of five years.
(3)

Basis for provision of reserves(i)

Allowance for doubtful accounts
The allowance for doubtful accounts is provided to cover possible losses from bad
debts. The amount for normal debtors is determined by the loan-loss ratio, andthat for special debtors, such as debtors at risk of bankruptcy, is determined basedon the expected probability of those accounts being collectable, considered on an
individual basis.

(ii)

Bonuses to Directors and Corporate Auditors
Expected amount to be paid is recorded in order to prepare for expenditure ofbonuses to be paid to the officers of the Company and the consolidated subsidiaries.

(iii) Employees’ retirement benefits
To cover projected employees’ retirement benefits in part of our consolidated
subsidiaries, the Company posts the deemed obligations at the end of fiscal, basedon the estimated amount of retirement benefit liabilities and pension assets.
The amount of retirement benefit liabilities is calculated using the simplified
method.
(iv)

Retirement benefits for Directors and Corporate Auditors
The Company reports 100% of the projected amount of the retirement benefits
based on its internal rules, to cover the retirement benefits for Directors of theCompany and part of our consolidated subsidiaries and Executive Officers of theCompany.

- 71 -

(v)Reserve for sales promotion
To cover the projected sales-promotion expenses due to our mileage point system,
the Company posts a reserve for sales promotion, which is calculated bymultiplying the amount payable, which is based on the number of issued andunclaimed points, and the past claim ratio.

(4)Standard used in converting assets or liabilities denominated in major foreign currencies
into Japanese currency
Assets or liabilities denominated in foreign currencies are converted into Japanese yen
using the spot exchange rate on the consolidated account date, and any differences
generated by this conversion are included as gains or losses.

(5)

Sales promotion costs
As for the Company’s sales promotion costs in the mail-order business, catalogue-related
costs corresponding to the expected sales in the next consolidated fiscal year are
registered as prepaid expenses and included in “Other current assets.”(6)

Accounting method of primary leasing business
Finance leases other than those that are deemed to transfer the ownership of the leased
assets to the lessee are accounted for by a method similar to that applicable to ordinary
operating leases.

(7)

Hedge accounting method
The Company adopts deferral hedge accounting.

(8)

Consumption taxes
Consumption taxes and local consumption taxes are excluded from revenues andexpenses.

4. Valuation of assets and liabilities of consolidated subsidiaries
These are estimated at market value.
5. Change of important items that are bases of preparing the consolidated financial
statements(1) Accounting standards for bonuses to Directors and Corporate Auditors“Accounting standards for officers”(Corporate Accounting Standard No. 4, November 29,2005) has been applied since the fiscal year under review.
Operating income, ordinary income and net income before adjustment including tax all
decreased by 49 million yen because of it.
(2) Accounting standards for indication of Net Assets of Balance Sheet (Corporate AccountingStandard No. 5, December 9, 2005) and “Guidelines for application of accounting standards- 72 -

for indication of Net Assets of Balance Sheet” (Corporate Accounting Standard Application
Guideline No. 8, December 9, 2005) have been applied since the fiscal year under review.
The amount equivalent to the total amount of shareholders’ equity in the past standards
is 54,927 million yen.

- 73 -

Notes for Consolidated Balance Sheet
1. Amounts less than one million yen have been omitted.
2. Assets pledged as collateral:
Investment securities:

1,357 million yen

Debt corresponding to the above
Long-term loan:

37 million yen

Short-term loan:

238 million yen

3. Accumulated depreciation on tangible fixed assets
4. Guarantee obligation:

32,083 million yen
43 million yen

5. The land owned by the Company was revaluated under the “Law Concerning Revaluation ofLand” (March 31, 1998, Law No. 34), and the “Law Regarding Partial Revision of Law
Concerning Revaluation of Land” (amended on March 31, 1999), and unrealized losses
resulting from the revaluation were included in “Unrealized loss on revaluation of land” in the
net assets, after offsetting the related deferred tax liabilities.
The method of revaluation stipulated in Article 3, Paragraph 3 of the Law Concerning
Revaluation of Land:
The Director-General of the National Tax Administration Agency announced a calculation
method to determine the land price that will be the basis of tax value calculations for theland holding tax, under Article 2, Item 4 of “Enforcement Rule of the Law Concerning
Revaluation of Land” (March 31, 1998, Law No. 119), and Article 16 of the “Landholding
Tax Law” (1991, Law No. 69).
The Company executed calculation and adjustments using the abovementioned method.
Date of revaluation:

March 31, 2000

The difference between the revaluated book value of the land and the estimated market
value at the end of fiscal under review:-3,202 million yen- 74 -

Notes for Consolidated Statement of Changes in Shareholders’ Equity
1. Amounts less than one million yen have been omitted.
2. Total number of shares outstanding as of the end of the consolidated fiscal year under review.
47,630,393 shares
3. Item on dividends of retained earnings(1) Dividend to be paid, etc.
Resolution
Ordinary General
Meeting of
Shareholders heldon March 30,
2006
General Meetingof Shareholders
held on July 27,
2006

Type of stock

Total amount ofdividends(millions of yen)

Dividends per
share (yen)Common stock

459

Common stock

460

Base date

Effective date10

December 31,
2005

March 31, 200610

June 30, 2006

September 1,
2006(2) Of dividends whose base date belongs to the consolidated fiscal year under review,
dividends that take effect in the next consolidated fiscal year
Resolution

Type of stock

Ordinary
GeneralMeeting of
Shareholders
held on March
29, 2007

Commonstock

Total amountof dividends(millions ofyen)

Financialfunds ofdividends

Dividends per
share (yen)460

Retainedearnings

10

Base date

Effective date

December 31,
2006

March 30,
2007

4. Number of shares that are the purpose of the stock acquisition rights as of the end of theconsolidated fiscal year under review (whose period to exercise the rights has come)Stock options by the resolution of the Ordinary General Meeting of Shareholders heldon March 28, 2003:
33,000 shares
Stock options by the resolution of the Ordinary General Meeting of Shareholders heldon March 30, 2004:
1,120,000 shares
Note to information per share
1. Net assets per share:
2. Net income per share:

1,207.89 yen
78.81 yen

Note on important events occurred afterwards
No particular items- 75 -

Non-consolidated Balance Sheet
As of December 31, 2006
Millions of yen
As of December 31,
2006
ASSETS
Current Assets
Cash and deposits
Notes receivable
Account receivable
Products
Inventories
Prepaid expense
Short-term loan
Loan receivable
Foreign exchange contract
Other current assets
Allowance for doubtful accounts
Total Current Assets

3,568
4
11,153
16,293
122
2,415
210
7,767
1,444
2,178
-194
44,962

Fixed Assets
Property, Plant and Equipment:
Buildings
Other structures
Machinery
Delivery equipment
Instruments and fixtures
Land
Construction in progress
Property, Plant and Equipment, net

9,891
446
1,794
8
677
11,25936
24,113

Intangible Fixed Assets:
Land lease rights
Software
Other intangible fixed assets
Total Intangible Fixed Assets

139
779
1,665
2,584

Investments and Other Assets:
Investment securities
Stock of affiliates
Long-term loans
Guarantees and deposits
Long term prepaid expense
Other investments
Allowance for doubtful accounts
Total Investments and Other Assets
Total Fixed Assets

14,392
2,990
1,478
1,073
183
2,214
-919
21,413
48,111

Total Assets

93,073- 76 -

Millions of yen
As of December 31,
2006
LIABILITIESCurrent Liabilities:
Notes
Accounts payable
Long-term loan scheduled to be repaid within 1year
Accrued liabilities
Factoring accrued liabilities
Accrued expenses
Accrued corporate tax and others
Accrued consumption tax and others
Deposit received
Bonuses to directors and corporate auditors
Reserve for sales promotion
Deferred tax liabilities
Other current liabilities
Total Current Liabilities

4,117
7,565
53
6,899
14,990
1,164
102
97
234
39
276
284
443
36,269Long-term Liabilities:
Long-term borrowing
Deferred tax liabilities
Deferred tax liabilities relating to revaluation
Retirement benefits for directors and corporate auditors
Other long-term Liabilities
Total Long-term Liabilities

342
528
804
441
50
2,165

Total Liabilities

38,435NET ASSETS
Shareholders’ equity
CapitalCapital surplus
Capital reserve
Other capital reserve
Retained earnings
Earned surplus
Other retained earnings
Reserves for advanced depreciation of fixed assets
Reserve for loss in overseas investment
General reserves
Unappropriated retained earnings
Treasury stock
Total Shareholders’ Equity

20,35920,716
19,864852
19,807
1,118
18,68976
38
13,6004,973-1,041
59,841

Valuation and translation adjustments
Net unrealized gain on other securities
Profit or loss on deferred hedge
Revaluation reserve for land, net of tax
Total valuation and translation adjustments
Total Net Assets
Total Liabilities Net Assets

1,364
734
-7,301-5,202
54,63893,073- 77 -

Non-consolidated Statement of Income
For fiscal year ended December 31, 2006

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividends received
Foreign exchange gains
Other income
Non-operating expenses
Interest payable
Other expenses
Ordinary income
Extraordinary income
Gains on sale of fixed assets
Gains on sale of investment securities
Extraordinary losses
Loss on sale or retirement of fixed assets
Loss on revaluation of investment securities
Loss on sale of investment securities
Impairment loss
Loss on annulment of contracts
Loss on liquidations of subsidiaries
Loss on disposal of products
Loss on policy cancellation
Loss on cancellation of deposits
Income before income taxes
Corporate, inhabitant and business taxes
Adjustment of corporate and other taxes
Net income- 78 -

Millions of yen
For the year ended December 31,
2006
146,917
76,24370,673
66,959
3,714
818
499
120
198
113
48
65
4,419
54
0
54
1,404
107
17
0
128
415
328
255
130
20
3,069
74
-147
3,142

Statement of Changes in Shareholders’ Equity
For fiscal year ended December 31, 2006
(Millions of yen)
Shareholders’ Equity
Retained Earnings

Capital Surplus

Other Retained Earnings
CapitalEarnedOther
Total Surplus
CapitalCapital Capital
Reserve
Reserve Surplus

Balance as of December
31, 2005
20,359 19,864(Millions of yen)793 20,657

1,118

Total
Retained
Earnings

Reserves for
Advanced
Depreciationof Fixed
AssetsReservefor Loss inOverseas
Investment

GeneralReserve

UnappropriatedRetained
Earnings

84

46

13,6002,931

17,7803―

Treasury
Stock

Total
Shareholders’Equity-1,15357,644

Changes during the fiscal
year under review
Reversal of reserves foradvanced depreciation of
fixed assets (Note)―-3

Reversal of reserve forloss in overseas
investment, etc. (Note)-11

Reversal of reserves foradvanced depreciation of
fixed assets

―

―

―

―

―

―

―

―

11

-3

3

Transfer of reserve forloss in overseas
investment, etc.

14

-14

Reversal of reserve forloss in overseas
investment, etc.

-10

10

Dividends from surplus(Note)

-459

-459

-459

Dividends from surplus

-460

-460

-460

Bonuses to directors andcorporate auditors (Note)

-34

-34

-34

Net income

3,142

3,142

3,142

Acquisition of treasury
stock
Amortization of treasury
stock

58

58

Reversal of revaluation
reserve for land, net of
tax

-161

-161

-18

-18

129

188

-161

Net change of items otherthan shareholders’ equity
during the fiscal year
under review
Total change during the
fiscal year under review――

Balance as of December
20,359 19,864
31, 2006

58

58

―

-7

-7

―

2,041

2,026

111

2196

852 20,716

1,118

76

38

13,6004,973

19,807-1,041

59,841- 79 -

Valuation and Translation Adjustments
Total Net Assets

Balance as of December
31, 2005

Net Unrealized Gainon Other Securities

Deferred Hedge
Profit/Loss

Revaluation Reservefor Land, Net of Tax

Total Valuation
and Translation

1,744

―

-7,462-5,71851,926

Changes during thecurrent fiscal year
Reversal of reserves foradvanced depreciation of
fixed assets (Note)―

Reversal of reserve forloss in overseas
investment, etc. (Note)―

Reversal of reserves foradvanced depreciation of
fixed assets―

Reversal of reserve forloss in overseas
investment, etc―

Transfer of reserve forloss in overseas
investment, etc.

―

Dividends from surplus(Note)-459

Dividends from surplus-460

Bonuses to directors andcorporate auditors (Note)-34

Net income

3,142

Acquisition of treasury
stock

-18

Amortization of treasury
stock

188

Reversal of revaluation
reserve for land, net of
tax

-161

Net change of items
other than shareholders’equity during the fiscal
year under review

-380

734

161

515

515

Total change during the
fiscal year under review

-380

734

161

515

2,712

Balance as of December
31, 2006

1,364

734

-7,301-5,202

54,638

Note: These are profit appropriation items approved at the annual meeting of shareholders held in March 2006.

- 80 -

Notes for Non-consolidated Financial Statements
Principal accounting policies
1. Valuation method for assets(1)

Marketable securities
Stocks of subsidiaries and affiliates are determined by the moving-average method.
Other marketable securities are stated at fair value based on the market prices at the endof the fiscal year. (Both unrealized gains and losses are included in net assets; cost of
securities sold is determined by the moving-average method.) Non-marketable securities
are stated at cost based on the moving average method.

(2)

Derivatives
Derivatives are stated at market price.

(3) Inventories
Inventories are stated at lower of cost or market method by the monthly average method.
2. Amortization method of fixed assets(1)

Property , Plant and equipment
Depreciation of property, plant and equipment is mainly computed using thedeclining-balance method, except for buildings (excluding fixtures) acquired after April 1,
1998, which are depreciated using the straight-line method.
The depreciation periods are basically as follows:(2)

Buildings:

38-50 years

Machinery:

12 years

Intangible fixed assets
Amortization of intangible fixed assets is computed using the straight-line method.
Software for internal use is amortized by the straight-line method based on a usable life of
five years.

3. Basis for provision of reserves(1)

Allowance for doubtful accounts
The allowance for doubtful accounts is provided to cover possible losses from bad debts.
The amount for normal debtors is determined by the loan-loss ratio, and that for special
debtors, such as debtors at risk of bankruptcy, is determined based on the expected
probability of those accounts being collectable on an individual basis.

(2)

Bonuses to Directors and Corporate Auditors
Expected amount to be paid is recorded in order to prepare for expenditure of bonuses tobe paid to the officers.

(3)

Retirement benefits for Directors and Corporate Auditors
The Company reports 100% of the projected amount of the retirement benefits based on- 81 -

its internal rules, to cover the retirement benefits for Directors and Executive Officers.
(4)

Reserve for sales promotion
To cover the projected sales-promotion expenses due to our mileage point system, theCompany posts a reserve for sales promotion, which is calculated by multiplying theamount payable, which is based on the number of issued and unclaimed points, and thepast claim ratio.

4. Standard used in converting assets or liabilities denominated in foreign currencies into
Japanese currency
Assets or liabilities denominated in foreign currencies are converted into Japanese yen
using the spot exchange rate on the account date, and any differences generated by thisconversion are included as gains or losses.
5. Sales promotion costs
As for the Company’s sales promotion costs in the mail-order business, catalogue-related
costs corresponding to the expected sales in the next fiscal year are registered as prepaid
expenses.
6. Accounting method of leasing business
Finance leases other than those that are deemed to transfer the ownership of the leased
assets to the lessee are accounted for by a method similar to that applicable to ordinary
operating leases.
7. Hedge accounting method
The Company adopts deferral hedge accounting.
8. Consumption taxes
Consumption taxes and local consumption taxes are excluded from revenues andexpenses.
9. Important changes in accounting policies(1) Accounting standards for bonuses to Directors and Corporate Auditors“Accounting standards for officers’ bonuses (Corporate Accounting Standard No. 4,
November 29, 2005) has been applied since the fiscal year under review.
Operating income, ordinary income and net income before adjustment including tax all
decreased by 39 million yen because of it.
(2) Accounting standards for indication of Net Assets of Balance Sheet (Corporate AccountingStandard No. 5, December 9, 2005) and “Guidelines for application of accounting standards
for indication of Net Assets of Balance Sheet” (Corporate Accounting Standard Application
Guideline No. 8, December 9, 2005) have been applied since the fiscal year under review.
The amount equivalent to the total amount of shareholders’ equity in the past standards
is 53,904 million yen.

- 82 -

Notes for Non-consolidated Balance Sheets
1. Amounts less than one million yen have been omitted.
2. Assets pledged as collateral:
Investment securities:

1,357 million yen

Debt corresponding to the above
Long-term loan scheduled to be repaid within one year:

37 million yen

Long-term loan:

238 million yen

3. Accumulated depreciation on tangible fixed assets

31,660 million yen

4. Guarantee obligation:

43 million yen

5. Short-term cash credit for affiliates

270 million yen

Long-term cash credit for affiliates

1,108 million yen

Short-term cash debt for affiliates

175 million yen

6. The land owned by the Company was revaluated under the “Law Concerning Revaluation ofLand” (March 31, 1998, Law No. 34), and the “Law Regarding Partial Revision of Law
Concerning Revaluation of Land” (amended on March 31, 1999), and unrealized losses
resulting from the revaluation were included in “Unrealized loss on revaluation of land,” oneof the components of net assets, after offsetting the related deferred tax liabilities.
The method of revaluation stipulated in Article 3, Paragraph 3 of the Law Concerning
Revaluation of Land:
The Director-General of the National Tax Administration Agency announced a calculation
method to determine the land price that will be the basis of tax value calculations for theland holding tax, under Article 2, Item 4 of “Enforcement Rule of the Law Concerning
Revaluation of Land” (March 31, 1998, Law No. 119), and Article 16 of the “Landholding
Tax Law” (1991, Law No. 69).
The Company executed calculation and adjustments using the abovementioned method.
Date of revaluation:

March 31, 2000

The difference between the revaluated book value of the land and the estimated market
value at the end of fiscal under review:-3,202 million yen

Notes for Non-consolidated Statements of Income
1. Amounts less than one million yen have been omitted.
2. Transaction with affiliates
Sales:

35 million yen

Operating expense:

6,207 million yen

Non-operating transaction:

426 million yen- 83 -

Notes for Statement of Changes in Shareholders’ Equity
1. Amounts less than one million yen have been omitted.
2. Number of treasury shares at the end of the fiscal year under review:
1,548,297 common shares
Notes for Tax Effective Accounts
1. Details of deferred tax assets and deferred tax liabilities by major causes(1) Current
Deferred tax assets
Sales promotion expenses

268

Bonus payable

191

Adjustment of loss of
subsidiaries
OthersTotal deferred tax assets

128

Deferred tax liabilities
Sales promotion loss
recognizedDeferred hedge profit/loss
OthersTotal deferred tax liabilities
Net deferred tax liabilities(2) Fixed
Deferred tax assets
Allowance for doubtful
accounts
Retirement benefits for
directors and corporate auditors
Investment securities
evaluation loss
Depreciation excess amount
OthersSub-total deferred tax assets
Valuation allowance
Total deferred tax assets

186
774
561
497
0
1,059
284

Deferred tax liabilities
Investment securities
Reserve for advanced
depreciation of fixed assets
Reserve for loss in overseas
investment, etc.
Total deferred tax liabilities
Net deferred tax liabilities- 84 -

365
178
120
114
651
1,430
831
598

1,048
51
26
1,126
528

2. Details of deferred tax liabilities relating to re-evaluation
Deferred tax assets
Deferred tax assets relating to
3,429
re-evaluation
Valuation allowance
3,429
Total deferred tax assets relating to―
re-evaluation
Deferred tax liabilities
Deferred tax liabilities relating to
re-evaluation
Net deferred tax liabilities relating
to re-evaluation

804
804

Note for fixed assets leased for use
In addition to the fixed assets recorded in the Balance Sheet, there are various leased computersthat are important fixed assets.
Notes for information per share
1. Net assets per share

1,185.68 yen

2. Net income per share

68.27 yen

Notes for important events occurred afterwards
No applicable items- 85 -

Audit Report of Accounting Auditor on Consolidated Balance Sheet and Consolidated
Statement of Income (Certified Copy)
Audit Report of Independent Auditor
January 31, 2007
To the Board of Directors of Senshukai Co., Ltd.
Ernst & Young ShinNihon
Kiyoshi Takekawa
Certified Public Accountant, Designated and Operating Partner
Yoshitaka Fujiwara
Certified Public Accountant, Designated and Operating Partner
Hirotoshi Hiroda
Certified Public Accountant, Designated and Operating Partner
We have examined the consolidated financial statements of Senshukai Co., Ltd. from January 1, 2006 to
December 31, 2006, including the consolidated balance sheet, the consolidated statement of income, theconsolidated statements of changes in shareholders’ equity and notes for consolidated financial statements
for the purpose of reporting under the provisions of Article 444, Paragraph 4 of the Corporation Law.
Responsibility as to the preparation of such consolidated financial statements lies with the management of
the Company, and the responsibility of the audit corporation is to express our opinion on the consolidated
financial statements from an independent position.
We conducted our audit in accordance with the auditing standards generally accepted in Japan.

The

auditing standards require that our audit corporation obtain reasonable assurance that there are no material
false representations in the consolidated financial statements.

The audit is conducted on a test basis andincludes the examination of representations in the consolidated financial statements as a whole, including
the examination of the accounting principles adopted by the management and the method of application
thereof and the evaluation of the estimate by the management.

Our audit corporation has determined

that, as a result of the audit, we have obtained a reasonable basis for giving an opinion.
Our opinion is that the above-mentioned consolidated financial statements present fairly the status ofassets and earnings during the period relating to the relevant consolidated financial statements of thecorporate group consisting of Senshukai Co., Ltd. and its consolidated subsidiaries in every important
point in accordance with the corporate accounting standards generally accepted in Japan.
Additional information
As stated in “Change of important items that are bases of creating consolidated financial statements,”
the Company has created consolidated financial statements applying the accounting standards forindication of Net Assets of Balance Sheet since the consolidated fiscal year under review.
Our audit corporation or operating partner has no financial or other interest in the Company required
to be stated by the provision of the Certified Public Accountant Law.

- 86 -

Audit Report of Accounting Auditor on Non-consolidated Balance Sheet and Non-consolidated
Statement of Income (Certified Copy)
Audit Report of Independent Auditor
January 31, 2007
To the Board of Directors of Senshukai Co., Ltd.
Ernst & Young ShinNihon
Kiyoshi Takekawa
Certified Public Accountant, Designated and Operating Partner
Yoshitaka Fujiwara
Certified Public Accountant, Designated and Operating Partner
Hirotoshi Hiroda
Certified Public Accountant, Designated and Operating Partner
We have examined the non-consolidated financial statements of Senshukai Co., Ltd. for the 62nd businessterm from January 1, 2006 to December 31, 2006, including the non-consolidated balance sheet, thenon-consolidated statement of income, the non-consolidated statements of changes in shareholders’ equity
and notes for non-consolidated financial statements and the accompanying financial schedule for the
purpose of reporting under the provisions of Article 436, Paragraph 2, Item 1 of the Corporation Law.
Responsibility as to the preparation of such non-consolidated financial statements and the accompanying
financial schedule lies with the management of the Company, and the responsibility of the audit
corporation is to express our opinion on the non-consolidated financial statements from an independent
position.
We conducted our audit in accordance with the auditing standards generally accepted in Japan. The
auditing standards require that our audit corporation obtain reasonable assurance that there are no material
false representations in the non-consolidated financial statements and the accompanying financial
schedule. The audit is conducted on a test basis and includes the examination of representations in the
non-consolidated financial statements and the accompanying financial schedule as a whole, including theexamination of the accounting principles adopted by the management and the method of application
thereof and the evaluation of the estimate by the management. Our audit corporation has determined
that, as a result of the audit, we have obtained a reasonable basis for giving an opinion.
Our opinion is that the above-mentioned non-consolidated financial statements and theaccompanying financial schedule present fairly the status of assets and earnings during the period relating
to the relevant non-consolidated financial statements and the supplementary financial in every important
point in accordance with the corporate accounting standards generally accepted in Japan.
Additional information
As stated in “Change of important items which are bases of creating non-consolidated financial
statements,” the Company has created non-consolidated financial statements applying the accounting
standards for indication of Net Assets of Balance Sheet since the non-consolidated fiscal year underreview.
Our audit corporation or operating partner has no financial or other interest in the Company required
to be stated by the provision of the Certified Public Accountant Law.

- 87 -

Audit Report of Board of Corporate Auditors(Certified Copy)
Audit Report
The Board of Corporate Auditors has prepared this Audit Report upon deliberation based on the Audit Report createdby each Corporate Auditor regarding the performance by the Directors of their duties during the 62nd fiscal year fromJanuary 1, 2006 to December 31, 2006, and hereby reports as follows:1.

Corporate Auditors, Corporate Auditors’ Auditing Methods and Contents
The Board of Corporate Auditors stipulated the auditing policies, share of assignment, etc., received reports fromeach Corporate Auditor on the auditing status and the auditing results; received reports of execution of duty from
Directors, etc. and the accounting auditor and demanded explanations, as the occasion demanded.
In accordance with the auditors’ auditing standards, auditing policies, share of assignment, etc. stipulated by the
Board of Corporate Auditors, each Corporate Auditor communicated with the Directors, the Audit Department
and other employees, etc. strived to maintain the environment for information gathering and auditing, attended
meetings of the Board of Directors and other important meetings; received reports of execution of duty from
Directors and employees, etc.; demanded explanations, as the occasion demanded, inspected important
documents, etc.; investigated the activities and assets of the headquarters and of other principal places ofbusiness. We also monitored and verified the activities of the system to assure that execution of duty by the
Directors complies with the laws and the Articles of Incorporation and the system maintained based on thecontents and the resolutions of the Board of Directors and the relevant resolutions regarding maintenance of thesystem stipulated in Paragraphs 1 and 3 of Article 100 of the enforcement rules of the Corporation Law as the
one required to assure the appropriateness of other business activities of the corporation (Internal control
systems). As for the subsidiaries, we communicated and exchanged information with the Directors andCorporate Auditors, etc. of the subsidiaries and received reports on their business operations as the occasion
demanded. Based on the above-mentioned methods, we examined the business reports and accompanying
financial schedule for the relevant fiscal year.
In addition, we monitored and verified whether or not the accounting auditor had maintained their independent
positions and had conducted appropriate audits and received reports on activities of execution of duty from theaccounting auditor and received explanation as the occasion demanded. Also, we received notice that the“system to assure that duty is executed appropriately” (the item posted in each number of Article 159 of the
Accounting Rules) has been maintained in accordance with the “Quality Control Standards for Audits” from the
Accounting Auditors and demanded explanation as the occasion demanded. Based on the above methods, we
examined the financial statements (Balance Sheet, Statements of Income, Variable Statements including
Shareholders’ Equity and the individual note table) and accompanying financial schedule as well as theconsolidated financial statements (Consolidated Balance Sheet, Consolidated Statements of Income,Consolidated Variable Statements including Shareholders’ Equity and the consolidated note table).

2.

Results of Audit(1) Results of Audit on the reports on business operations
1) The business reports and accompanying financial schedule are found to accurately present the statusof the Company in conformity with the laws, regulations and Articles of Incorporation.
2) In connection with the performance by the Directors of their duties, no dishonest act or significant
fact of a violation of laws, regulations, or the Articles of Incorporation is found to exist.
3) The contents of the resolutions of the Board of Directors regarding the internal control systems arefound to be proper. Also, execution of duty by the Directors regarding the relevant internal control
systems is found to accurately present the matters to be stated therein and have nothing to be
pointed out.
(2) Results of Audit on the financial statements and accompanying financial schedule
The methods and results of the audit made by the Accounting Auditor, Ernst & Young ShinNihon,
an incorporated auditing firm, are found to be proper.

- 88 -

(3) Results of Audit on the consolidated financial statements
We have found the methods and results of the audit made by the Accounting Auditor, Ernst & Young
ShinNihon, an incorporated auditing firm to be proper.
February 1, 2007
Board of Corporate Auditors, Senshukai Co., Ltd.
Makoto Sano
Standing Corporate Auditor
Hirotsugu YamagishiStanding Corporate Auditor
Heian Hazama
Outside Corporate Auditor
Hideyuki Koizumi
Outside Corporate Auditor
Hiroshi Morimoto
Outside Corporate Auditor- 89 -