(Translation)

Stock code: 8165
March 10, 2009

NOTICE OF THE
64 ORDINARY GENERAL MEETING OF SHAREHOLDERSthDear Shareholder
You are cordially invited to attend the 64th 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 “Procedure for Exercising Voting Rights” on page 3.
Sincerely yours,
Yasuhiro Yukimachi
President and Representative Director
Senshukai Co., Ltd.
1-8-9 Doshin, Kita-ku, Osaka
MEETING AGENDA
1. Date and Time:
2. Venue:
3. Agenda:
Items to be reported:

10:00 a.m., Friday, March 27, 2009
Hall on the second floor of Senshukai Head Office,1-8-9 Doshin, Kita-ku, Osaka
1.

2.
Items to be proposed:
Proposal 1
Proposal 2
Proposal 3
Proposal 4
Proposal 5

Business Report, Consolidated Financial Statements for the 64th
fiscal year (January 1 to December 31, 2008); and Audit Reports of
the Accounting Auditors and the Board of Corporate Auditors
regarding Consolidated Financial Statements for the 64th fiscal
year.
Financial Statements for the 64th fiscal year (January 1 to
December 31, 2008).

Appropriation of retained earnings
Partial amendments to the Articles of Incorporation
Election of nine (9) Directors
Election of one (1) substitute Corporate Auditor
Grant of retirement benefits to retiring Directors and payment of
retirement benefits attendant upon the abolition of the retirement benefit
system-1-

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,
consolidated financial statements, or 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, Thursday, March 26,

2009, 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, Thursday, March 26, 2009, 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 SP2 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.)<For other inquiries, including requests for forms>
Tel: 0120-176-417 (toll-free and available from 9:00 a.m. to 5:00 p.m. on weekdays)-3-3. To institutional investors
You can exercise your voting rights through electronic voting platforms (TSE platforms) as ameans of exercising voting rights by electromagnetic means at the General Meeting of
Shareholders.

-4-[Appendix to notice of the 64th ordinary general
meeting of shareholders of Senshukai Co., Ltd.]Business Report(January 1 to December 31, 2008)

1. Summary of Operations(1) Senshukai Group operating progress and results
Overview
During the fiscal year ended December 31, 2008, corporate performances rapidly became worse
in Japan due to sharp declines in the stock markets and abrupt foreign exchange fluctuations
because of the issue of the U.S. subprime mortgage crisis and an unprecedented global financial
crisis originating in the failure of Lehman Brothers Holdings Inc.

Also, the employment andpersonal income environments became harsher, and the economy has been showing signs ofdeterioration.

In the retail industry, consumer spending is sluggish due to consumers’

preference for saving and their growing awareness of the need to protect their lifestyles,
resulting from substantial fluctuations in prices of various kinds of resources and a worsening of
the economy.

In the mail-order industry, consumer spending still lacks power although

Internet-order sales are growing thanks to purchases of products that can be enjoyed at home.
The mail-order industry is also affected by unseasonable weather, in addition to the relative
merits and difference between business categories as well as between companies.

In thisdifficult business environment, price-cutting competition will further intensify and consumers
will become more selective about products and services. Thus, uncertainty over the future is
expected to remain.
Under these circumstances, the Senshukai Group has been promoting the priority strategies
defined in newly started the Medium-Term Management Plan covering the three fiscal years
from 2008 to 2010.
As a result of these activities, the Senshukai Group’s consolidated net sales amounted to158,285 million yen, an increase of 1.0% year-on-year.
On the profit front, operating income decreased by 54.4% year-on-year to 2,413 million
yen because of the slight rise in the cost-to-sales ratio and the increase in the ratio of the selling,
general and administrative expenses, including catalogue expenses.

Ordinary loss amounted to4,553 million yen (against ordinary income of 5,626 million yen in the previous fiscal year) due
to a loss on revaluation of compound instruments of approximately 1,300 million yen and a-5-foreign exchange loss of approximately 5,900 million yen, attributable to the rapid appreciationof the yen and stock price falls resulting from concerns about the financial instability.

Net lossof 6,833 million yen (against a net income of 2,494 million yen in the previous fiscal year) was
posted, as we booked a loss on sale or retirement of fixed assets of approximately 700 million
yen, a loss on revaluation of investment securities of approximately 500 million yen due toimpairment treatment following the sharp declines in stock quotations, and unfortunately, a loss
on prior period adjustment of approximately 900 million yen because of the revision of thesettlement of accounts of the previous fiscal year attendant upon the review of hedge
accounting.
Business results by segment[Mail-order Business]
The mail-order business, which consists of catalogue and buyer’s club businesses, posted net
sales of 144,585 million yen (down 0.7% year-on-year), and operating income of 2,866 million
yen (down 48.8% year-on-year).
(1) Catalogue BusinessIn the catalogue business, we currently deliver various lifestyle proposals and products that are
unique to Senshukai through 18 kinds of catalogues.
Since the start of the catalogue business in 1976, we have delivered merchandise in various
categories ranging from clothing sundries, interior goods and household miscellaneous goods tomaternity goods and children’s clothing, centering on fashion clothes, in accordance with theneeds of our members, and our products have been favorably accepted.
In the fiscal year under review, sales of the catalogue business remained relatively
favorable until the third quarter. However, sales continued to post a year-on-year decrease
from October due to a rapid plunge in consumer spending as a result of the global financial
crisis.

As a result, the catalogue business posted consolidated net sales of 131,886 million yen(down 0.1% year-on-year).
(2) Buyer’s Club BusinessIn the buyer’s club business, each month we deliver merchandise to group and individual
members, mainly women working in offices, under an original sales system which is different
from those of other mail-order sales companies.
The products we deliver comprise a variety of items that are largely for collection purposes,
primarily sundries and foodstuffs. Most of them feature originality that other products on themarket lack.
We started the “workplace group BOX (Chokotabe (snack) BOX)” business in the previous-6-term as a measure to restructure the buyer’s club business, expanding workplace liaison
counters. The number of such Boxes reached approximately 21,000.

However, both sales

and membership of the buyer’s club business decreased from a year earlier.
The buyer’s club business posted consolidated net sales of 12,698 million yen (down 6.9%
year-on-year).
*Following an organizational change, some media were mutually transferred between the catalogue business andthe buyer’s club business in the fiscal year under review.

The year-on-year changes in numerical values are

based on the standards after the transfer.

[Other Businesses]
Other businesses that consist of the service business (with travel services and credit-card
as the core fields), storefront business, pet business, B-to-B operations that provide products
and services to corporations, and Dears Brain Inc., an owner and operator of residence-likewedding places, which was turned into a consolidated subsidiary in the latter half of thecurrent fiscal year, posted consolidated net sales of 13,699 million yen (up 23.1%
year-on-year).

However, an operating loss of 439 million yen was posted (an increase of 146

million yen in loss from the previous fiscal year).
Net sales by business segment
Name of the segment
and product
Mail-order Business:
ApparelInterior goods
Householdsundries
Clothing sundries
Foodstuffs
OthersSubtotal
Other Businesses:
Total(Millions of yen)

63rd fiscal year
(Jan. 1 to Dec. 31, 2007)
Amount% of total

64th fiscal year
(Jan. 1 to Dec. 31, 2008)
Amount% of total

Change fromthe previous
fiscal year

Year-on-Year(%)

59,34736,25624,364

37.9
23.1
15.5

61,373
34,61323,502

38.8
21.9
14.8

2,025
-1,643
-861

3.4
-4.5
-3.5

17,7096,409
1,576
145,664
11,128
156,792

11.3
4.1
1.0
92.9
7.1
100.0

16,867
6,150
2,079
144,585
13,699158,285

10.6
3.9
1.3
91.3
8.7
100.0

-842
-258
502
-1,078
2,571
1,493

-4.8
-4.0
31.9
-0.7
23.1
1.0

Note: In the mail-order business, we disclosed net sales by item, focusing on the buyer’s club business, in theprevious consolidated fiscal year.

However, we changed to net sales by item, with the focus on the

catalogue business, since the catalogue business now accounts for the most part of net sales.

(2) Capital expenditures
In the consolidated fiscal year under review, the Senshukai Group invested a total of 2,597
million yen in capital expenditures including 1,441 million yen for head office building, and 614
million yen to develop computer systems, etc.

-7-

(3) Fund procurement
In the consolidated fiscal year under review, the Senshukai Group procured funds throughborrowings as well as funds on hand.
(4) Issues to be handled
The Senshukai Group has established the Medium-Term Management Plan covering the threefiscal years to the year ending December 31, 2010 (the 66th term).
1) ”Basic Policies of the Medium-Term Management Plan”
i) Promoting channel mix
We will aim to obtain synergistic effect, aimed at essential merger of channels, notmere expansion of the number of channels, and speedup, by further pushing forwardwith “promotion of multi channels,” which was put up under the previous
Medium-Term Management Plan.
ii) Developing multi-brand strategy
We will shift to a “multi-brand strategy,” under which plural brands that matchcustomer base and merchandise category to be handled are operated, so that the valueof the “Bell Maison” brand itself will not be damaged as a result of excessive
utilization of the brand when we strive to acquire customers in some age groups, whohave been difficult to be obtained with the Bell Maison brand alone, and to diversify
operations (expansion of groups of merchandise and services).
iii) Expanding customer baseWe will endeavor to increase the number of customers in their 50s or older bydeveloping merchandise and media for the senior market.

We will also aim to

expand customers in their 20s. To that end, we will maintain customers in their 20s
as a whole by strengthening to get concentrating resources on customers aged 25 to
29, while aiming to get customers aged 20 to 24 in the long term by utilizing suchnew media as the Internet, mobile communications and magazines based on businessalliances with other companies and M&A.
iv) Enhancing SCM (supply-chain management)
Recognizing the improvement of cash flows that have aggravated due to increased
inventories as the most important challenge, we will facilitate inventories throughrestructuring of the management system and further reinforce SCM.
2) Status of initiatives in the consolidate fiscal year under reviewi) Promoting channel mix
Starting from the fiscal year under review, each business divisions has the channel
control function, manages sales by channel and formulates Internet and store policies-8-to promote channel mix.

Overall Internet-based sales amounted to 66,300 million

yen in the current term (of which, net online sales stood at 37,300 million yen). We
opened five new “Kurasu Fuku” shops, which brought the total to six. We will aim
to further deepen channels.
ii) Developing multi-brand strategy
We definitely position the Bell Maison brand as a brand including not only catalogue
but also Web-order sales, and foster brands other than Bell Maison to enhance thevalue of both groups of brands, aiming to eventually raise the value of the Senshukai
Group as a whole.
iii) Expanding customer base
Customers in their 20s: We changed the Web site of the Company to specialize by
product category in August to develop customers in their 20s. We also opened a new
Web site for those in their 20s, dubbed “bellissi.” We plan to renew the Fashion Plus
catalogue in fiscal 2009. Through these efforts, we will provide a selection of
products featuring reliable quality and price value.
Customers in their 50s: With regard to customers in their 50s, we aim to acquire newmembers and maintain existing members by making the most of the sales leaflets of
the Kurasu Fuku catalogue and expanding the sizes and tastes of StyleNote andRashisa.
iv) Enhancing SCM (supply-chain management)
The ratio of the number of orders received to the number of products shipped and theinstant supply ratio worsened from the previous fiscal year.

However, inventories ofcatalogue merchandise decreased about 2,600 million yen year-on-year through suchmeasures as controlling any excessive arrival of goods by installment delivery andspeedily implementing bargain sales after the expiration of catalogue period. We willcontinue to strive to improve cash flows by normalizing inventory levels.
The Senshukai Group also places importance on the creation of highly transparent
management system and its effective operation as well as the establishment of an internal
control system, being fully aware of the significance of “corporate governance” in businessactivities 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.

-9-

Looking ahead, The 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 (or loss)
Net income (or loss)
Net income per share (or loss)(yen)
Total assets
Net assets
Net assets per share (yen)

st

nd

rd

The 61(ended Dec. 2005)
145,453
3,962
1,267

The 62(ended Dec. 2006)
148,150
5,240
3,627

The 63(ended Dec. 2007)
156,792
5,626
2,494

The 64rh(ended Dec. 2008)
158,285-4,553-6,83327.44
92,78852,519
1,143.12

78.81
95,50855,7081,207.89

53.60
98,422
55,955
1,197.62-146.29
104,059
44,274947.19Note :“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.
As “Net Asset” in the above table, the total amount of Shareholders’ Equity is presented for the 61st term,
while the total amount of Net Assets is stated for the 62nd term and thereafter.

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

ii)

Major subsidiaries
Company name

Capital(Millions of yen)

Percentage of voting
rights of theCompany(%)

Major businessTravel services, information
services
Residence-like wedding
business

Senshukai General Service Co., Ltd.

496

100

Dears Brain Inc.

350

98.2

Senshu Unyu Co., Ltd.

99

100

Truck transportation business

Senshu Logisuko Co., Ltd.

95

100

Packing and wrapping business

Senshukai Call Center Co., Ltd.

60

100

Senshukai Service Hanbai Co., Ltd.

50

100

Planning and executing
telephone marketing
Customer service and area
marketing business

Senshukai Co., Ltd. owns a total of thirteen consolidated subsidiaries, including the six major
subsidiaries described above.
Dears Brain Inc., which had been an affiliate under the equity-method, became a- 10 -

consolidated subsidiary following the additional acquisition of shares in May 2008.
For fiscal under review, the Company posted consolidated net sales of 158,285 million
yen and net loss of 6,833 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 wedding business and travel service) and related businesses, including B-to-B
operations that provide products and services to corporations.
(8) Principal offices
Senshukai Co., Ltd.

Head Office:Kita-ku, Osaka

Tokyo Head Office:Shinagawa-ku, Tokyo

Head Office:Kita-ku, Osaka

Tokyo branch:

Shinagawa-ku, Tokyo

Dears Brain Inc.

Head Office:Chiyoda-ku, Tokyo

Senshu Unyu Co., Ltd.

Head Office:Ibaraki-shi, Osaka

Senshu Logisuko Co., Ltd.

Head Office:Kita-ku, Osaka

Kanuma branch office:Kanuma-shi, Tochigi

Chubu branch office:Kani-shi, Gifu

Kyoto branch office:Kyotanabe-shi, Kyoto

Koshien branch office:Nishinomiya-shi, Hyogo

Senshukai Call Center Co., Ltd.

Head Office:Kita-ku, Osaka

Senshukai Service Hanbai Co., Ltd.

Head Office:Kita-ku, Osaka

Senshukai General Service Co., Ltd.

(9) Employees of Senshukai Group
1) Consolidated basis
Segment
Mail-order Business
Other businesses
Other staff (consolidated basis)
Total

Number of employees
1,024
370
104
1,498

Change from the previous fiscal year
35
155
3
193

Notes:
1. The number of employees includes regular and contract staff.
2. The number of employees in other businesses increased by 155 from the figure at the end of the previous
consolidated fiscal year, mainly due to the inclusion of Dears Brain Inc., which had been an affiliate, in the scopeof consolidation following the additional acquisition of shares in May 2008.

- 11 -

2) Senshukai Co., Ltd.
Number of employees
785
(149)

Change from the previous
fiscal year
18
(32)

Average age

Average service years
37.9

11.0

Notes:
1. The number of employees includes regular and contract staff, but does not include (87) employees seconded tosubsidiaries.
2. The figure in parenthesis in the column of the number of employees is the annual average number of temporary
employees (converted assuming the employees work 7.5 hours per day).
3. The retirement age of employees is 60.

(10) Major creditors
Borrowings outstanding(Millions of yen)
5,494
3,553
3,120
1,300
550

Creditors
Sumitomo Mitsui Banking Corp.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mizuho Bank, Ltd.
The Sumitomo Trust & Banking Co., Ltd.
Resona Bank, Limited.

- 12 -

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

10,387

There are no shareholders that hold at least one tenth of the total number of shares
outstanding (except for treasury stock). The status of the major shareholders is asfollows:
Name
Brestsheave Co., Ltd.
Nikko Principal Investments Japan Ltd.
Toppan Printing Co., Ltd.
Sawzan, Ltd.
Sumitomo Mitsui Banking Corp.
Dai Nippon Printing Co., Ltd.
Japan Trustee Services Bank, Ltd. (Trust account 4G)
Mizuho Bank, Ltd.
Nippon Life Insurance Company
Senshukai Group Employee Stock Ownership Plan

Shareholders’ investment in the Company
No. of shares held (thousands)
Investment ratio (%)
3,650
7.81
3,400
7.28
1,838
3.94
1,792
3.84
1,665
3.57
1,509
3.23
1,480
3.17
1,319
2.83
988
2.12
825
1.77

Notes:
1. Amounts less than one thousand shares have been omitted.
2. The investment ratio is calculated by subtracting treasury stock (917,908 shares).

3. Items regarding stock acquisition rights of the Company
No applicable items- 13 -

4 Directors and Corporate Auditors(1)

Name of Directors and Corporate Auditors (As of December 31, 2008)

Title
President andRepresentative
Director

Name
Yasuhiro
Yukimachi

SeniorManaging
Director

Kiichi Tagawa

SeniorManaging
Director

Michio Tanabe

Managing
Director
Director andManaging
Executive
Officer
Director andManaging
Executive
Officer

Position and principal duty in the Company, or major occupation

Shohachi
Sawamoto

In charge of Business Division (Fashion Business Division, Lifestyle Business
Division, Childcare Business Division, Monthly Business Division, Gift &Gourmet Business Division, International Department, Belle Maison Lifestyle
Laboratory, Atopurame Development Section)
In charge of Corporate Development Division and Administration Division(Corporate Planning Department, General Affairs Division, Operation
Division, Marketing Division, Production Division, Sales Department,
Creative Research & Development Section)
In charge of Tokyo Head Office (Tokyo Business Division, Tokyo General
Affairs and Public Relations Department)

Kazuhide
Fujiyoshi

General Manager of General Affairs Division

Mamoru Asada

General Manager of Lifestyle Business Division

Director

Tomoko Oishi

Professor of Kyoto Gakuen University, Faculty of Business Administration

Director

Toshikatsu Sano

Standing
Corporate
AuditorStanding
Corporate
AuditorCorporate
AuditorCorporate
AuditorShoji Tottori
Yoshihiro Inoda
Hideyuki
KoizumiHiroshi Morimoto

Certified Public Accountant (Representative of Koizumi C.P.A. Office)Lawyer (Representative member of Kitahama Law Office L.P.C.)

Notes:
1. Director Tomoko Oishi and Toshikatsu Sano are external Directors.
2. Corporate Auditors Hideyuki Koizumi and Hiroshi Morimoto are external Corporate Auditors.
3. External Corporate Auditor Hideyuki Koizumi is qualified as certified public accountant and has considerable
knowledge regarding finance and accounting.
4. Managing Directors Kiichi Tagawa and Michio Tanabe became Senior Managing Directors and Directors andExecutive Officers Kazuhide Fujiyoshi and Mamoru Asada became Directors and Managing Executive Officers asof March 28, 2008.
5. Changes in “Position and principal duty in the Company, or major occupation” of Directors attendant upon theorganizational change as of June 1, 2008 are as follows:
Title
Name
Before reorganization
Director andGeneral Manager of General Affairs
KazuhideManaging
Division and Corporate
Fujiyoshi
Executive Officer
Development Division- 14 -

After reorganization
General Manager of General Affairs
Division

(2)Resigned Director during the business year under review
Name
Koichi Horii
Kiyoshi Kubota(3)

Date of resignation
March 28, 2008
March 28, 2008

Reason for resignation
termination of a term
termination of a term

Title as of resignation
Senior Managing Director
Director

Total of compensation paid to Directors and Corporate Auditors

Directors[of which external Directors)
Corporate Auditors[of which external Corporate
Auditors]
Total[of which external Directors andexternal Corporate Auditors]

Number of Directors andCorporate Auditors

Amount(Millions of yen)

10
[2]
4
[2]

200
[13]
40
[10]

14
[4]

241
[23]

Notes:
1. The amount of compensation paid to Directors does not include salaries for employees paid to Directors who
concurrently serve as employees.
2. The number of Directors, to whom compensation was paid, and the amount of compensation paid to Directors
respectively include two Directors who retired from their office at the end of the 63rd Ordinary General Meeting of
Shareholders, held on March 28, 2008, and the amount of compensation paid to them.
3. It was resolved at the 62nd Ordinary General Meeting of Shareholders, held on March 29, 2007, that the maximum
amount of remuneration to be paid to Directors in total per year shall not exceed 400 million yen (however, notincluding salaries for employees).
4. It was resolved at the 62nd Ordinary General Meeting of Shareholders, held on March 29, 2007, that the maximum
amount of remuneration to be paid to Corporate Auditors in total per year shall not exceed 70 million yen.
5. Other than the aforementioned, retirement benefits of 76 million yen were paid to two retiring Directors, based ona resolution made at the 63rd Ordinary General Meeting of Shareholders, held on March 28, 2008.

Also, if“Grant of retirement benefits to retiring Directors and payment of retirement benefits attendant upon the abolitionof the retirement benefit system,” which is planned to be submitted to the 64th Ordinary General Meeting of
Shareholders, to be held on March 27, 2009, is approved, a total of 301 million yen will be paid to one Director,
who will retire from his office at the end of this general meeting, and five Directors subject to the payment of
retirement benefits attendant upon the abolition of the retirement benefit system.

- 15 -

(4)Items regarding external Directors and external Corporate Auditors
A. Positions concurrently held in other companies, including position as executive
director- Corporate Auditor Hideyuki Koizumi concurrently serves as external corporate auditorof Japan Cash Machine Co., Ltd.
- Corporate Auditor Hiroshi Morimoto concurrently serves as external corporate auditorof Japan Cash Machine Co., Ltd.
B. Major activities in the business year under review
Major activities
Director
Tomoko Oishi

Director
Toshikatsu Sano

Corporate Auditor
Hideyuki Koizumi

Corporate Auditor
Hiroshi Morimoto

She attended 27 of the 30 meetings of the Board of Directors held in the business year
under review.
She gives advice and proposals for ensuring validity andappropriateness of decision-making of the Board of Directors, offering opinions
mainly based on her insight and experience on working women, our main customers,
as a professor acquired familiarity with labor issues for women over many years.
He attended 22 of the 23 meetings of the Board of Directors held in the business year
under review after taking office. He has successively served as director mainly atfinancial-related companies, and gives advice and proposals for ensuring validity andappropriateness of decision-making of the Board of Directors, offering opinions fromthe perspective of corporate manager based on his wealth of knowledge, experience,etc.
He attended 28 of the 30 meetings of the Board of Directors and all of the nine
meetings of the Board of Corporate Auditors held in the business year under review.
He gives opinions for ensuring validity and appropriateness of decision-making of theBoard of Directors at the meetings of the Board of Directors from the professional
standpoint as a certified public accountant. Also, he properly offers necessary views
about the accounting procedure of the Company at the meetings of the Board of
Corporate Auditors.
He attended 26 of the 30 meetings of the Board of Directors and all of the nine
meetings of the Board of Corporate Auditors held in the business year under review.
He gives opinions for ensuring validity and appropriateness of decision-making of theBoard of Directors at the meetings of the Board of Directors from the professional
standpoint as a lawyer. Also, he properly offers necessary views about complianceof the Company at the meetings of the Board of Corporate Auditors.

C. Outline of the details of the agreement to limit liability
Pursuant to Article 427, Paragraph 1 of the Corporation Law, the Company and its
external Directors and external Corporate Auditors conclude an agreement to limit their
liability for compensation as stipulated in Article 423, Paragraph 1 of the said law.
The limit of liability for compensation under the relevant agreement is the minimum
amount provided for in Article 423, Paragraph 1 of the Corporation Law.

- 16 -

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

Ernst & Young ShinNihon LLC(2) Compensation for the independent accounting auditor:(i): Compensation, etc. for the independent accounting auditors for the current fiscal year.
30 million yen(ii): The total fiscal benefit that should be paid by the company and its subsidiaries
40 million yen
Notes:
1. Compensation, etc. in (i) is written in total amount, because in agreement withindependent accounting auditors clear classification of compensation amounts based on
the Corporation Law and those based on the Financial Instruments and Exchange Law
is difficult.
2. Ernst & Young ShinNihon became Ernst & Young ShinNihon LLC, as it shifted to alimited liability auditing firm as of July 1, 2008.
(3) Details of non-auditing services
Advice on the establishment of an internal control system regarding financial reporting, etc.
(4) Policy on decision to discharge or not to reappoint accounting auditor
The Board of Directors shall make discharging or not reappointing the accounting auditor
the purpose of a General Meeting of Shareholders after obtaining the consent of the Boardof Corporate Auditors, or based on the demand of the Board of Corporate Auditors,
mentioned below, when it recognizes necessity for doing so, including a case in which
performance of duties by the accounting auditor is hindered.
When the accounting auditor falls under any of the items in Article 340, Paragraph 1of the Corporation Law, the Board of Corporate Auditors shall discharge the accounting
auditor based on the consent of all Corporate Auditors.

In this case, a Corporate Auditor

selected by the Board of Corporate Auditors shall report the discharge of the accounting
auditor and the reason for discharge at the first General Meeting of Shareholders to be held
after the discharge.

- 17 -

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 based on the provisionsof 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 stated in 1. Summary of Operations (4) Issues to be addressed andaims to prepare the internal control system for it, strengthen compliance, improve
efficiency in business execution and establish a risk control system.

The Company

Group reviewed part of the details of (2) 1) and 4) mainly, and 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 has been established within the Legal Division, which
supervises compliance.

The Audit Department operates and evaluates internal

control over financial reporting, and conduct internal audit in order to assess the statusof business operations to improve them, and they are reported to the president.
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 andcorporate auditors at all times on the Intranet (internal network).

- 18 -

Also, any revision

of important 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 classified risks concerning the basis of management into ten categories, andclarified the control system by establishing a division or a committee for each risk
category, so that responses can be made quickly when trouble occurs. Any risk is tobe reported to the “Risk Management Control Committee,” comprising the membersof the Board of Directors. Also, we have prepared a manual for each risk category
and established a system to take concrete measures.

For the system against

unexpected situations of any directors, we have established 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 improve transparency of the Board of Directors and to strengthen the
supervisory function, an external director (part-time service) system has been
implemented.

In addition, an executive officer system and business division system

has been introduced in order to speed up and streamline the decision-making processof the management.

Also, a “Management Council” mainly made up of full-time

directors and a “Council of Division General Managers” made up of generalmanagers of divisions has been established separate from the Board of Directors toenable quick decision-making.

Executive officers take office as general mangers ofbusiness divisions, in principle, and Directors with managerial positions supervise andgive guidance to each general manager of division, as Directors in charge.
Company rules and rules for liquidation items have been set up to improve
efficiency of business activities by clarifying the roles of the Board of Directors,
Management Council, Council of Division General Managers, Board of Corporate
Auditors or other parties duty positions of the employees, duty allotment, official
authority, roles, decision authority. Also, we have implemented a technique thatutilizes BSC (Balance Score Cards) effectively supporting determination oforganization performance monitoring and evaluation indexes, and constructed asystem to conduct reviews and to gather feedback of results by the Management
Council.
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
management regulations. Lead offices for each affiliated companies are set in the
Company, and check the important items of the subsidiaries.

We also aim torationalize the business activities as the group at large giving guidance, advice and- 19 -

evaluation in close cooperation in directions, instructions and communication
between the parent company and the subsidiaries. We also hold regular meetings
between the incorporated auditing firm and the directors of the Company to exchange
opinions about the entire group’s situation.

On the other hand, we have establishedrules common to the group companies for compliance and conduct 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 a full-time staff for the corporate auditor is 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 corporate auditors and the system to assure that audits are
effectively conducted by the corporate auditors
The full-time corporate auditors are to attend major meetings if necessary, and receive
important information including the management status, and any important items ineach 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 Directors, the business execution officers and important
employees are interviewed.

On the other hand, materials required by corporate

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.

- 20 -

7. Basic policy on control of the company
I. Basic policy on the person who controls decisions on financial and operational policies of
the Company
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 increaseof 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 and information being given for a Board of Directors’ Meeting and shareholders of
the target company to examine the large-scale purchase of shares, or for the Board of
Directors’ Meeting of the target company to present alternative proposals, and where thetarget company needs to negotiate with the purchaser to obtain more favorable terms thanthe purchaser has offered.
The Company considers a person or a company that intends to make such
improper large-scale purchases of shares to be not suitable as a person who controls
decisions on financial and operational policies of the Company, and believes that theincrease of the corporate value of the Company and by extension, common interests ofshareholders need to be ensured by taking necessary and considerable measures against
large-scale purchases by such purchasers.
II. Special efforts for realizing the basic policy
In order to increase corporate value, the Company has developed and is implementing
new Medium-Term Management Plan, covering three fiscal years from January 2008 to
December 2010, following the previous Medium-Term Management Plan.

We areconfident that we will be able to increase our corporate value and eventually meet the
expectations of shareholders by steadily implementing the Medium-Term Management
Plan.
III. Efforts for preventing decisions on financial and operational policies of the Company
from being controlled by inappropriate persons in light of the basic policy
The Board of Directors of the Company considers that a framework is indispensable in- 21 -

order to prevent large-scale purchases that are against the corporate value of the Company
and common interests of shareholders. When a large-scale purchase of shares of theCompany is to be made, the framework allows us to request that the purchaser andproponent of purchase (hereafter, referred to collectively as the purchaser or similar party)
provides information prior to such purchase, thereby shareholders decide whether toaccede 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 the purchaser orsimilar party on behalf of the shareholders.
The Company introduced a Policy toward Large-scale Purchases of Shares of theCompany (hereinafter referred to as the “previous plan”) at the 62nd Ordinary General
Meeting of Shareholders, held on March 29, 2007, 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, the Company
thereafter continued to examine the appropriate countermeasures against takeovers inordinary times.

Accordingly, Company decided to continue with the previous plan, after

making partial revision, (hereinafter, the revised plan shall be referred to as “the plan”) as
part of our efforts for ensuring and increasing the corporate value of the Company andcommon interests of shareholders, to prevent any attempts at abusive acquisitions
targeting the Company, with the approval of shareholders at the 63rd Ordinary General
Meeting of Shareholders held on March 28, 2008.
IV. Judgment of the Company’s Board of Directors on the aforementioned efforts andreasons for the judgment
1. About special efforts for realizing the basic policy (efforts specified in II.)
Each effort stated in II. has been worked out as a measure to continuously and persistently
increase the corporate value of the Company and common interests of shareholders, andcontributes to the realization of the basic policy.
Therefore, these efforts are in line with the basic policy and in accord with
common interests of shareholders of the Company, and not aimed at maintaining thestatus of corporate directors of the Company.
2. About efforts for preventing decisions on financial and operational policies of theCompany from being controlled by inappropriate persons in light of the basic policy(efforts specified in III.)(1) The plan is in line with the basic policy- 22 -

The plan is a framework for ensuring the corporate value of the Company and byextension, the common interests of shareholders.

When a large-scale purchase of sharesof the Company is to be made, the plan allows us to request that the purchaser or similar
party provides information prior to such purchase, thereby shareholders decide whether toaccede 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 the purchaser orsimilar party on behalf of the shareholders. It is in line with the basic policy.
(2) The relevant efforts neither damage common interests of shareholders nor are aimed atmaintaining the status of corporate directors and corporate auditors of the Company
We believe that efforts for preventing control by inappropriate persons in light of the basic
policy neither damage common interests of shareholders nor are aimed at maintaining thestatus of corporate directors of the Company, since 1) they completely satisfy the“Guidelines on takeover defense for ensuring and/or increasing corporate value andstakeholder profits,” released by the Ministry of Economy, Trade and Industry and theMinistry of Justice on May 27, 2005; 2) they attach importance to the intention ofshareholders in various ways: they will be continued on condition that amendments to the
Articles of Incorporation made based on the prescribed procedure are approved byshareholders in the General Meeting of Shareholders in accordance with provisions of the
Articles of Incorporation and the so-called sunset clause is established; 3) a Special
Committee has been established; and 4) they are not a dead-hand type of countermeasureagainst takeovers.

- 23 -

Consolidated Balance Sheet
As of December 31, 2008
Millions of yen
As of December 31, 2008ASSETS
Current Assets
Cash and deposits
Notes and accounts receivable
Marketable securities
Inventories
Deferred tax assets
Accounts receivable
Other current assets
Allowance for doubtful accounts
Total Current Assets

7,670
10,888524
16,497
1,009
8,028
5,695
-316
49,998Fixed Assets
Property, Plant and Equipment:
Buildings and structures
Machinery and delivery equipment
Instruments and fixtures
Land
Construction in progress
Total Property, Plant and Equipment

15,059
1,133
1,162
11,16813
28,536

Intangible Fixed Assets:
Goodwill
Other intangible fixed assets
Total Intangible Fixed Assets

2,963
2,502
5,465

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

11,368
826
1,626
1,546
4,894
-203
20,05854,060Total Assets

104,059- 24 -

Millions of yen
As of December 31, 2008
LIABILITIESCurrent Liabilities:
Notes and accounts payable
Short-term borrowing
Current portion of bonds
Accrued liabilities
Factoring accrued liabilities
Accrued expenses
Accrued corporate tax and others
Accrued consumption tax and others
Reserve for sales promotion
Foreign exchange contract
Other current liabilities
Total Current Liabilities

8,527
9,957
66
6,508
15,789
1,854
194
289
346
9,788
831
54,153Long-term Liabilities:
Corporate bonds
Long-term borrowing
Deferred tax liabilities relating to revaluation
Employees’ retirement benefits
Retirement benefits for directors and corporate auditors
Other long-term liabilities
Total Long-term Liabilities

168
4,112
764
45
335
206
5,631

Total Liabilities

59,784

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

20,35921,03814,064-631
54,830

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-1,312-2,038-7,103-130-10,584
29

Total Net Assets
Total Liabilities and Net Assets

44,274
104,059- 25 -

Consolidated Statement of Income
For fiscal year ended December 31, 2008

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividends received
Co-sponsor fee
Other income
Non-operating expenses
Interest payable
Loss on revaluation of compound instruments
Equity in losses of affiliates
Foreign exchange loss
Other expenses
Ordinary loss
Extraordinary income
Gains on sale of fixed assets
Extraordinary losses
Loss on sale or retirement of fixed assets
Loss on revaluation of investment securities
Loss on sale of investment securities
Impairment loss
Special retirement expenses
Loss on revaluation of golf club membership
Provision of allowance for doubtful accounts
Loss from the prior-term adjustments
Loss before income taxes and minority interests
Corporate, inhabitant and business taxes
Adjustment of corporate and other taxes
Minority interests in income
Net loss- 26 -

Millions of yen
For the year ended
December 31, 2008
158,285
81,912
76,37373,960
2,413
924
442
103
377
7,890
162
1,331
247
5,904
245
4,553
245
245
2,531
759
594
28
153
48
2
1
943
6,838
444
-455
5
6,833

Consolidated Statement of Changes in Shareholders’ Equity
For fiscal year ended December 31, 2008
(Millions of yen)
Shareholders’ Equity
CapitalBalance as of December 31,
2007

20,359

Capital Surplus

Retained Earnings

Treasury Stock

Total Shareholders’Equity21,03822,253-630

63,020Changes during the fiscal
year under review
Dividends from surplus-1,027-1,027Net loss-6,833-6,833Acquisition of treasury
stock
Amortization of treasury
stock

0

-1

-1

0

0

Reversal of revaluation
reserve for land, net of tax

-256

-256

Variation of the scope of
consolidation and thescope of equity method

-70

-70

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

0-8,188-1-8,190

Balance as of December 31,
2008

20,35921,03814,064-631

54,830- 27 -

(Millions of yen)
Valuation and Translation Adjustments

Balance as ofDecember 31, 2007

Net
Unrealized
Gain on
Other
Securities

DeferredHedge
Profit/Loss

Revaluation
Reserve for
Land, Net of
Tax

486

-185

-7,359Foreign
Currency
Translation
Adjustment-16

Total Valuation
and Translation
Adjustments-7,074

Minority
Interests

Total Net
Assets10

55,955

Changes during the
fiscal year underreviewDividends fromsurplus-1,027Net loss-6,833Acquisition oftreasury stock-1

Amortization oftreasury stock0

Reversal ofrevaluation reserve
for land, net of tax-256

Variation of thescope ofconsolidation andthe scope of equity
method-70

Net change ofitems other thanshareholders’equity during the
fiscal year underreview-1,798-1,853256-114-3,50918-3,491

Total change during
the fiscal year underreview-1,798-1,853256-114-3,50918-11,681

Balance as ofDecember 31, 2008

-1,312-2,038-7,103-130-10,58429

44,274- 28 -

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

Number of consolidated subsidiaries: 13
Names of major consolidated subsidiaries:
Senshukai General Service Co., Ltd., Senshu Logisuko Co., Ltd., Senshukai Call Center
Co., Ltd., Dears Brain Inc.
Dears Brain Inc., which had been an affiliate under the equity-method, became aconsolidated subsidiary following the additional acquisition of shares in the company in
May 2008.

However, its profit and loss are reflected by the equity method until theinterim period of the consolidated fiscal year under review, since the deemed acquisition
date is the end of the interim period of the consolidated fiscal year under review.
Future Compass Co., Ltd. was liquidated and terminated in December 2008.
(2)

Number of unconsolidated subsidiaries: 11
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: 4Name of major unconsolidated subsidiaries under the equity-method:
Senshukai Hong Kong Limited(2)

Number of affiliates under the equity-method: 2Name of affiliate under the equity-method:
SENTENs Co., Ltd., Mobakore Co., Ltd.
Dears Brain Inc., which had been included in the scope of the equity-method until theinterim period of the consolidated fiscal year under review following the acquisition ofshares in November 2007, became a consolidated subsidiary attendant upon the additional
acquisition of shares in May 2008.

Since the deemed acquisition date is the end of theinterim period of the consolidated fiscal year under review, the equity-method is applied
to the interim period of the consolidated fiscal year under review, and the profit and lossof the company are included in equity in losses of affiliates.
Mobakore Co., Ltd. has been included in the scope of equity-method since the- 29 -

consolidated fiscal year under review because of its increased importance from an
accounting viewpoint.
(3)

With regard to companies under the equity-method whose balance sheet dates are morethan six months apart from the consolidated balance sheet date, we use the financial
statements of the relevant companies as of their latest interim balance sheet dates before
the consolidated balance sheet date.
We make necessary consolidation adjustments regarding material transactions conducted
between the consolidated balance sheet date and the balance sheet dates of the relevant
companies.

(4)

Name of major unconsolidated subsidiaries excluded from the scope of equity-method:
Innovation Information Technology（ShangHai）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. Fiscal year-end of consolidated subsidiaries
The balance sheet dates of all the consolidated subsidiaries are the same as the consolidatedbalance sheet date.
The balance sheet date of Dears Brain Inc. was changed from June 30 to December 31 in
the consolidated fiscal year under review.
4. 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 year. (Both unrealized
gains and losses are included in net assets; cost of securities sold is determined by themoving-average method.)(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)- 30 -

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(Additional information)
Following the revision of the Corporation Tax Law, with regard to tangible fixed assets
acquired on and before March 31, 2007, the Company and its domestic consolidated
subsidiaries equally amortize the difference between the amount equivalent to 5% of theacquisition value and the reminder value over a period of five years and include theamount in depreciation expenses, starting from the following consolidated fiscal year of
the consolidated fiscal year when the value of assets reached 5% of the acquisition value
as a result of the application of the depreciation method based on the Corporation Tax
Law before the revision.
As a result, operating income decreased 53 million yen and ordinary loss and loss
before income taxes and minority interests respectively increased 53 million yen
compared with the figures under the previous method.
(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)

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.

(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- 31 -

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.

(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.

5. Valuation of assets and liabilities of consolidated subsidiaries
These are estimated at market value.
6. Amortization of goodwill and negative goodwill
Each goodwill or negative goodwill is equally amortized within a period decided based on
estimate of the period during which its effect will be revealed.
Change in Presentation(Consolidated balance sheet)“Goodwill,” which had been collectively presented under intangible fixed assets until theprevious consolidated fiscal year, is presented separately from the consolidated fiscal year under- 32 -

review because of its increased importance from an accounting viewpoint.
The amount of “Goodwill” included in intangible fixed assets at the end of the previous
consolidated fiscal year is 227 million yen.

- 33 -

Notes for Consolidated Balance Sheet
1. Amounts less than one million yen have been omitted.
2. Accumulated depreciation on tangible fixed assets

32,395 million yen

3. Details of collateral(1) Collateral
Cash and deposits (time deposits)

15 million yen

Buildings and structures

1,003 million yen

Total

1,018 million yen(2) Liabilities corresponding to the aforementioned collateral
Short-term borrowing

287 million yen

Current portion of bonds

66 million yen

Corporate bonds

168 million yen

Long-term borrowing

730 million yen

Total

1,251 million yen

4. Guarantee obligation:
Guarantee for bank borrowings

30 million yen

Utilizers of employee housing loan

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:-2,606 million yen- 34 -

Notes for Consolidated Statement of Income
1. Amounts less than one million yen have been omitted.
2. Loss on prior period adjustment
We reviewed various contracts related to foreign exchange in consideration of the current
situation in which the yen’s strength is soaring. As a result, it became clear that derivative
contracts that should be treated by the market-price method had been treated by the deferredhedge method.

We revised the treatment method, and posted a loss on prior period

adjustment of 943 million yen under extraordinary losses.
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 28,
2008
General Meetingof the Board of
Directors held on
July 31, 2008

Type of stock

Total amount ofdividends(millions of yen)

Dividends per
share (yen)Common stock

653

Common stock

373

Base date

Effective date14

December 31,
2007

March 31, 2008

8

June 30, 2008

September 1,
2008(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
27, 2009

Commonstock

Total amountof dividends(millions ofyen)

Financialfunds ofdividends

Dividends per
share (yen)420

Retainedearnings

9Note to information per share
1. Net assets per share:
2. Net loss per share:

Base date

Effective date

December 31,
2008

March 30,
2009

947.19 yen
146.29 yen

Note on important events occurred afterwards
No particular items- 35 -

Non-consolidated Balance Sheet
As of December 31, 2008
Millions of yen
As of December 31, 2008ASSETS
Current Assets
Cash and deposits
Notes receivable
Account receivable
Marketable securities
Products
Inventories
Prepaid expense
Deferred tax assets
Short-term loan
Loan receivable
Other current assets
Allowance for doubtful accounts
Total Current Assets

4,972
84
10,441
7
16,154
64
3,314
871
691
7,966
2,237
-287
46,518Fixed Assets
Property, Plant and Equipment:
Buildings
Other structures
Machinery
Delivery equipment
Instruments and fixtures
Land
Construction in progress
Total Property, Plant and Equipment

11,370
398
1,081
6
926
11,095024,880Intangible Fixed Assets:
Goodwill
Land lease rights
Software
Other intangible fixed assets
Total Intangible Fixed Assets

122
139
2,012
172
2,447

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

10,163
7,011
2,508
1,367
893
116
4,465
-759
25,76753,095

Total Assets

99,613- 36 -

Millions of yen
As of December 31, 2008
LIABILITIESCurrent Liabilities:
Notes
Accounts payable
Short-term borrowing
Current portion of bonds
Accrued liabilities
Factoring accrued liabilities
Accrued expenses
Accrued corporate tax and others
Accrued consumption tax and others
Deposit received
Reserve for sales promotion
Foreign exchange contract
Other current liabilities
Total Current Liabilities

2,114
5,639
8,000
1,670
5,913
15,789
1,051
11
206
454
337
9,788
152
51,129Long-term Liabilities:
Long-term borrowing
Deferred tax liabilities relating to revaluation
Retirement benefits for directors and corporate auditors
Other long-term Liabilities
Total Long-term Liabilities

3,330
764
289
4
4,388

Total Liabilities

55,517NET 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

20,35921,03819,864
1,174
13,695
1,118
12,57669
36
13,600-1,129-631
54,461

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-1,223-2,038-7,103-10,364
44,096
99,613- 37 -

Non-consolidated Statement of Income
For fiscal year ended December 31, 2008

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividends received
Other income
Non-operating expenses
Interest payable
Loss on revaluation of compound instruments
Foreign exchange loss
Other expenses
Ordinary loss
Extraordinary income
Gains on sale of fixed assets
Extraordinary losses
Loss on sale or retirement of fixed assets
Loss on revaluation of investment securities
Provision of allowance for doubtful accounts
Loss on revaluation of stocks of affiliates
Loss on liquidations of subsidiaries
Loss on revaluation of golf club membership
Loss from the prior-term adjustments
Loss before income taxes
Corporate, inhabitant and business taxes
Adjustment of corporate and other taxes
Net loss- 38 -

Millions of yen
For the year ended
December 31, 2008
150,72979,081
71,647
69,294
2,353
1,253
935
318
7,461
141
1,199
5,892
226
3,853
24
24
3,180
736
594
551
309
43
2
943
7,009
104
-396
6,717

Statement of Changes in Shareholders’ Equity
For fiscal year ended December 31, 2008
(Millions of yen)
Shareholders’ Equity
Retained Earnings

Capital Surplus

Other Retained Earnings
CapitalOther Total
CapitalCapital Capital
Reserve
Reserve Surplus
Balance as ofDecember 31,
2007

20,359 19,864

1,174 21,038

Total
Retained
Earnings

Treasury
Stock

Total
Shareholders’Equity-630

62,464

EarnedSurplusReserves for
Advanced
Depreciationof Fixed
AssetsReservefor Loss inOverseas
Investment

GeneralReserve

UnappropriatedRetained
Earnings

1,118

73

34

13,6006,871

21,697

3――

Changes during
the fiscal year
under review
Reversal ofreserves foradvanceddepreciation of
fixed assets-3

Transfer ofreserve for loss
in overseas
investment,
etc.

8

-8

―

―

Reversal ofreserve for loss
in overseas
investment,
etc.

-5

5

―

―

Dividends fromsurplus-1,027-1,027-1,027Net loss-6,717-6,717-6,717

Acquisition oftreasury stock
Amortizationof treasury
stock

0

0

Reversal ofrevaluation
reserve forland, net of tax

-256

-256

-1

-1

0

0

-256

Net change ofitems otherthanshareholders’equity during
the fiscal year
under review
Total change
during the
fiscal year
under review
Balance as ofDecember 31,
2008

―

―

20,359 19,864

0

0

―

-3

2

―

-8,001-8,001-1-8,003

1,174 21,038

1,118

69

36

13,600-1,12913,695-631

54,461- 39 -

(Millions of yen)
Valuation and Translation Adjustments
Net Unrealized Gain Deferred Hedge Revaluation Reserve
on Other Securities
Profit/Lossfor Land, Net of Tax
Balance as of December 31, 2007

498

-185

-7,359Total Net
Total Valuation
and Translation

Assets-7,04655,418Changes during the current fiscal year
Reversal of reserves for advanced
depreciation of fixed assets―

Reversal of reserve for loss inoverseas investment, etc―

Transfer of reserve for loss in overseas
investment, etc.

―

Dividends from surplus-1,027Net loss-6,717

Acquisition of treasury stock-1

Amortization of treasury stock0

Reversal of revaluation reserve forland, net of tax-256

Net change of items other thanshareholders’ equity during the fiscal
year under review-1,722-1,853256-3,318-3,318

Total change during the fiscal year
under review-1,722-1,853256-3,318-11,321

Balance as of December 31, 2008

-1,223-2,038-7,103-10,364

44,096- 40 -

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:
Buildings:

38-50 years

Machinery:

12 years(Additional information)
Following the revision of the Corporation Tax Law, with regard to tangible fixed assets
acquired on and before March 31, 2007, the Company equally amortize the difference
between the amount equivalent to 5% of the acquisition value and the reminder value overa period of five years and include the amount in depreciation expenses, starting from thefollowing fiscal year of the fiscal year when the value of assets reached 5% of theacquisition value as a result of the application of the depreciation method based on the
Corporation Tax Law before the revision.
As a result, operating income decreased 52 million yen and ordinary loss and loss
before-tax respectively increased 52 million yen compared with the figures under theprevious method.
(2)

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.

- 41 -

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)

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.

(3)

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 and Executive Officers.

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.

- 42 -

Notes for Non-consolidated Balance Sheets
1. Amounts less than one million yen have been omitted.
2. Accumulated depreciation on tangible fixed assets

31,239 million yen

3. Guarantee obligation:
Guarantee for bank borrowings
Utilizers of employee housing loan

30 million yen

4. Short-term cash credit for affiliates

976 million yen

Long-term cash credit for affiliates

2,138 million yen

Short-term cash debt for affiliates

152 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,” 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:-2,606 million yen- 43 -

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

131 million yen

Operating expense:

12,226 million yen

Non-operating transaction:

609 million yen

3. Loss on prior period adjustment
We reviewed various contracts related to foreign exchange in consideration of the current
situation in which the yen’s strength is soaring. As a result, it became clear that derivative
contracts that should be treated by the market-price method had been treated by the deferredhedge method.

We revised the treatment method, and posted a loss on prior period

adjustment of 943 million yen under extraordinary losses.
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:
917,908 common shares- 44 -

Notes for Tax Effective Accounts
1. Details of deferred tax assets and deferred tax liabilities by major causes(Millions of yen)
(1) Current
Deferred tax assets(2) Fixed
Deferred tax assets
1,804

Deferred hedge profit/loss

923

Deferred hedge profit/loss

461

Loss on revaluation ofcompound instruments

563

Bonus payable

146

Investment securities

549

OthersSub-total deferred tax assets

265

Investment securities
evaluation loss

398

Loss brought forward

Valuation allowance
Total deferred tax assets

2,677
1,804
873

OthersSub-total deferred tax assets
Valuation allowance
Total deferred tax assets

1,202
3,637
2,101
1,535

Deferred tax liabilities
Accrued consumption tax
and others or otherliabilities
Total deferred tax liabilities
Net deferred tax liabilities

1
1
871

Deferred tax liabilities
Investment securities
OthersTotal deferred tax liabilities
Net deferred tax liabilities

92
75
168
1,367

2. Details of deferred tax liabilities relating to re-evaluation(Millions of yen)
Deferred tax assets
Deferred tax assets relating to
re-evaluation
Valuation allowance
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

3,325
3,325
―

764
764

- 45 -

Note for fixed assets leased for use
In addition to fixed assets posted on the Balance Sheet, some of instruments and fixtures, etc.
are used under finance lease contracts without transfer of ownership of the leased assets to thelessee.
Notes for related party transactions
PropertyCompany
nameOwnership
percentage
of votingrights, etc.

Relationship
Interlocking Relation
directoratetobusiness

Name oftransactions(Note)

Subsidiary

Dears
Brain
Inc.

Directly
98.2%

Twointerlocking
directors

Loan offundsCollectionof loans
Receipt ofinterests

Loan offunds

Transaction
amount(Millionsof yen)1,956
495

Accounts

Short-termloansLong-term
loans

14

Note: Transaction condition or policy for deciding transaction condition
The interest rates of loans are rationally decided by taking into account market interest rates.

Notes for information per share
1. Net assets per share

943.99 yen

2. Net income per share

143.80 yen

Notes for important events occurred afterwards
No applicable items- 46 --

Balanceat theend ofthe fiscal
year(Millionsof yen)591
869-

Audit Report of Accounting Auditor on Consolidated Balance Sheet and Consolidated
Statement of Income (Certified Copy)
Audit Report of Independent Auditor
February 18, 2009
To the Board of Directors of Senshukai Co., Ltd.
Ernst & Young ShinNihon LLC
Yoshitaka Fujiwara
Certified Public Accountant, Designated, Limited Liability andOperating Partner
Hirotoshi Hiroda
Certified Public Accountant, Designated, Limited Liability andOperating Partner
We have examined the consolidated financial statements of Senshukai Co., Ltd. from January 1, 2008 to
December 31, 2008, 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.
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.

- 47 -

Audit Report of Accounting Auditor on Non-consolidated Balance Sheet and Non-consolidated
Statement of Income (Certified Copy)
Audit Report of Independent Auditor
February 18, 2009
To the Board of Directors of Senshukai Co., Ltd.
Ernst & Young ShinNihon LLC
Yoshitaka Fujiwara
Certified Public Accountant, Designated, Limited Liability andOperating Partner
Hirotoshi Hiroda
Certified Public Accountant, Designated, Limited Liability andOperating Partner
We have examined the non-consolidated financial statements of Senshukai Co., Ltd. for the 64th businessterm from January 1, 2008 to December 31, 2008, 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.
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.

- 48 -

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 64th fiscal year fromJanuary 1, 2008 to December 31, 2008, 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 corporate auditors’ auditing standards, auditing policies, share of assignment, etc.
stipulated by the Board of Corporate Auditors, each Corporate Auditor communicated with the Directors, theAudit Department and other employees, etc. strived to maintain the environment for information gathering andauditing, attended meetings of the Board of Directors and other important meetings; received reports ofexecution of duty from Directors and employees, etc.; demanded explanations, as the occasion demanded,
inspected important documents, etc.; investigated the activities and assets of the head office and of otherprincipal places of business. 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 the contents and the resolutions of the Board of Directors and the relevant resolutions
regarding maintenance of the system 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 thecorporation (Internal control systems). We examined the contents of the basic policy, specified in Item 1 of
Article 127 of the enforcement rules of the Corporation Law, and each effort in accordance with Item 2 of thesame article, which are stated in the Business Report, in consideration of the status of deliberations at themeetings of the Board of Directors and other meetings. As for the subsidiaries, we communicated and exchanged
information with the Directors and Corporate Auditors, etc. of the subsidiaries and received reports on theirbusiness operations as the occasion demanded. Based on the above-mentioned methods, we examined thebusiness 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” (October28, 2005, the Business Accounting Council) from the Accounting Auditors and demanded explanation as theoccasion 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) andaccompanying financial schedule as well as the consolidated financial statements (Consolidated Balance Sheet,
Consolidated Statements of Income, Consolidated Variable Statements including Shareholders’ Equity and theconsolidated 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.

- 49 -

4)

Basic policy on the person who controls decisions on financial and operational policies of theCompany, which is stated in the Business Report, has nothing to be pointed out. The efforts inaccordance with Item 2 of Article 127 of the enforcement rules of the Corporation Law, which arestated in the Business Report, are found to be in line with the relevant basic policy and at the sametime to neither damage common interests of shareholders of the Company nor be aimed atmaintaining the status of corporate directors of the Company.
(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 LLC,
an incorporated auditing firm, are found to be proper.
(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 LLC, an incorporated auditing firm to be proper.
February 20, 2009
Board of Corporate Auditors, Senshukai Co., Ltd.
Shoji TottoriStanding Corporate Auditor
Yoshihiro Inoda
Standing Corporate Auditor
Hideyuki Koizumi
External Corporate Auditor
Hiroshi Morimoto
External Corporate Auditor- 50 -

Reference Material for Ordinary General Meeting of Shareholders

Proposals and References:
Proposal 1: Appropriation of retained earnings
In determining the Company’s year-end dividend for the fiscal year, we intend to maintainstable dividend and to continue to implement profit distribution in consideration of various
circumstances including earnings for this fiscal year and business environment in the future,
based on the aim of an annual dividend payout ratio of 30%.
Under this policy, the year-end dividend was set as follows although the 64th fiscal year ended in
the red.
(1) Type of dividend
Cash(2) Items concerning allocation of dividend and its amount of total thereof
9 yen per share of common stock of the Company; the total amount of 420,412,365 yen(3) Effective date of dividend payment from surplus:
March 30, 2009
Proposal 2: Partial amendments to the Articles of Incorporation
1. Reasons for change
The Law for Partial Amendment of the Law Concerning Book-Entry Transfer of Corporate
Bonds, etc. to Streamline Settlement for Transactions of Shares, etc. (Law No. 88 of 2004;
hereinafter referred to as the “Settlement Rationalization Law”) was enforced on January 5,
2009, shares of listed companies were simultaneously transferred to the book-entry transfer
system for stocks (the so-called share certificate dematerialization).
Following this transfer to the new system, we propose to make necessary changes,
including the deletion of provisions concerning stock certificates, beneficial shareholders andthe register of beneficial shareholders that have become unnecessary in the Company’s Articles
of Incorporation.

With regard to the register of lost share certificates, we propose to establish

necessary provisions in the supplementary provisions, since the register should be prepared andkept until the day one year after the following day of the enforcement of the Settlement
Rationalization Law.
With regard to Article 7 (Issuance of Stock Certificates) of the current Articles ofIncorporation, it is deemed that a resolution on a change of the Articles of Incorporation toabolish provisions of the Articles of Incorporation in accordance with Article 6, Paragraph 1 of

- 51 -

the Supplementary Provisions of the Settlement Rationalization Law, with January 5, 2009, theenforcement date of the law, as the effective date.
2. Details of the proposed amendments
Details of the proposed amendments are following:(Underlined portions indicate the parts that are to be changed.)
Current Articles

Revised Articles proposed

Article7 (Issuance of Stock Certificate)
The Company shall issue stock certificates relating to(Deleted)

shares.
Article 8 (Acquisition of Own Shares)

Article 7 (Acquisition of Own Shares)(Description of the article is omitted.)(Unchanged)

Article 9 (Additional Purchase of Shares of Less Than

Article 8 (Additional Purchase of Shares of Less Than

One Unit)

One Unit)

Shareholders of the Company (including beneficial

Shareholders of the Company may demand that theshareholders; the same applies hereinafter) may demandCompany sell and deliver such number of shares, thatthat the Company sell and deliver such number of shares,

together with the shares less than one unit (hereinafterthat together with the shares less than one unit

referred to as “fractional shares”) held by them,(hereinafter referred to as “fractional shares”) held byconstitute one unit of shares based on Share Handlingthem, constitute one unit of shares based on ShareRegulations.

Handling Regulations.
Article 10 (Number of Shares of One Unit andArticle 9 (Number of Shares of One Unit)

Non-issuance of Stock Certificates for Fractional Shares)(Unchanged)

One unit of shares of the Company shall be comprised of
one hundred (100) shares.
2. Notwithstanding the provision of Article 7, the2. (Deleted)

Company shall not issue share certificates for
fractional shares.
Article 11 (Rights on Fractional Shares)

Article 10 (Rights on Fractional Shares)

Shareholders of the Company may not exercise, with

(Unchanged)

regard to shares less than one unit 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

1. (Unchanged)of the Corporation Law of Japan;
2. Right to make a claim pursuant to Article 166,

2. (Unchanged)

Paragraph 1 of the Corporation Law of Japan;
3. Right to be allotted with offered shares and stock

3. (Unchanged) ; andacquisition rights in proportion to the number of sharesalready held; and4. Right to make a claim provided for in Article 9 of

4. Right to make a claim provided for in Article 8 ofthese Articles of Incorporation.
Article 12 (Share Handling Regulations)these Articles of Incorporation.
Article 11 (Share Handling Regulations)- 52 -

Current Articles

Revised Articles proposed(Description of the article is omitted.)(Unchanged)

Article 13 (Manager of Register of Shareholders)

Article 12 (Manager of Register of Shareholders)

The Company shall have a manager of the register of(Unchanged)

shareholders.
2. The manager of the register of shareholders and its

2. (Unchanged)

place of business shall be designated by resolution of
the Board of Directors and shall be publicly
announced.
3. Preparation and keeping of the register of shareholders

3. Preparation and keeping of the register of shareholders(including the register of beneficial shareholders; theand the original register of stock acquisition rights andsame applies hereinafter), the original register of stock

other operations relating to the foregoing registers shallacquisition rights and the register of lost share

be entrusted to the manager of the register ofcertificates and other operations relating to theshareholders and shall not be handled by the Company.

foregoing registers shall be entrusted to the manager ofthe register of shareholders and shall not be handled
by the Company.
Article 14

Article 13

toto(Description of the articles is omitted.)(Unchanged)

Article 41

40(Newly established article)

Supplementary Provisions(Interim Measures)(Newly established article)

Article 1
Preparation and keeping of the register of lost sharecertificates and other operations relating to the foregoingregister shall be entrusted to the manager of the registerof shareholders and shall not be handled by theCompany.

(Newly established article)

Article 2
The preceding article and this article shall be valid until
January 5, 2010, and the preceding article and this article
shall be deleted as of the following day.

- 53 -

Proposal 3: Election of nine (9) Directors
The term of office of eight (8) 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
Mar. 1966
Jun. 1997
Mar. 2001

2

Kiichi Tagawa(September 25, 1947)

Mar. 2005
Mar. 2008
Jan. 2009

Apr. 1967
Jun. 1997
Mar. 2001

3

Michio Tanabe(July 23, 1946)

Mar. 2005
Mar. 2008
Jan. 2009

Mar. 1972
Jun. 1997
Mar. 2001
4

Shohachi Sawamoto(February 9, 1948)

Mar. 2005
Jan. 2008

Joined Mirakukai
Founded the Company, Director of theCompany
Managing Director of the Company
Senior 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
Executive Officer and Director of theCompany
Managing Director of the Company
Senior Managing Director of the Company(present position)
In charge of Fashion Business Division,
Lifestyle Business Division, Childcare
Business Division, Monthly Business
Division, Gift & Gourmet Business Division,
Atopurame Development Section, Sales
Department (present position)
Joined the Company
Director of the Company
Executive Officer and Director of theCompany
Managing Director of the Company
Senior Managing Director of the Company(present position)
In charge of Corporate Planning Department,
General Affairs Division, Legal Division ,Operation Division, Marketing Division,
Production Division, International Division(present position)
Joined the Company
Director of the Company
Executive Officer and Director of theCompany
Managing Director of the Company (present
position)
In charge of Tokyo Head Office and Tokyo
Business Division, Tokyo General Affairs andPublic Relations Department, BIO Research
Department (present position)- 54 -(1) No. of the Company’s
shares held
(2) Any conflict of interests
between the candidate andthe Company(1) 495,036(2) None(1) 21,800(2) None(1) 6,200(2) None(1) 16,240(2) None

Mar. 1982
Mar. 2005
Mar. 2006
Mamoru Asada(April 1, 1954)

5

Mar. 2008
Jan. 2009

Apr. 1977
Feb. 1988
6

Tomoko Oishi(November 8, 1954)

Jun. 1997
Apr. 2001
Mar. 2006
Jun. 1969
Jun. 1997
Apr. 2000

7

Toshikatsu Sano
(July 12, 1945)

Apr. 2001
Jul. 2001

8

9

Shigemitsu Mineoka(October 17, 1951)

Hiroyuki Hoshino(December 10, 1959)

Jun. 2005
Mar. 2008
Jul. 1977
Aug. 2001
Mar. 2005
Mar. 2008
Jan. 2009

Sep. 1982
Jan. 2005
Mar. 2006
Jan. 2009

Joined the Company
Executive Officer of the Company
Executive Officer and Director of theCompany
Managing Executive Officer and Director of
the Company (present position)
General Manager of Monthly Business
Division and Planning Division and Head of
Product Development Department of Monthly
Business Division (present position)
Joined Yamaha Music Foundation
Joined Yokohama Women’s Association forCommunication and Networking
Joined Japan Association for The
Advancement of Working Women
Professor of Kyoto Gakuen University, Facultyof Business Administration (present position)
Director of the Company (present position)
Joined Mitsui Bank
Director and General Manager of Fund andSecurities Planning Department of Sakura
Bank
Managing Executive Officer and General
Manager of Nagoya Branch of Sakura BankManaging Executive Officer of Mitsui MutualLife Insurance Company
Director and Managing Executive Officer of
Mitsui Mutual Life Insurance Company
President of SMBC Consulting Co., Ltd.
Director of the Company (present position)
Joined the Company
Head of Theme Development Department
Executive Officer of the Company
Managing Executive Officer of the Company(present position)
General Manager of Fashion Business
Division and Head of Brand Fashion
Development Department of Fashion Business
Division
Joined the Company
Head of Corporate Strategy Department
Executive Officer of the Company (present
position)
General Manager of Tokyo Business Division(1) 3,200(2) None(1) 0(2) None(1) 0(2) None(1) 2,700(2) None(1) 1,500(2) None

Notes:
1. Among the candidates for the Directors, Tomoko Oishi and Toshikatsu Sano are the candidates for the external
Directors.
2. We believe that Tomoko Oishi will properly perform her duties as external Director concerning working women
who are principle customers of the Company, by making the most of her thorough knowledge about labor issues ofwomen, acquired through her long experience as a university professor, as well as her insight and experience
although she has not directly taken part in corporate management.

We nominated Toshikatsu Sano, who has

successively served as director mainly at financial-related companies, since we want him to reflect his wealth ofknowledge, experience, etc. in management.
3. On June 10, 2005, while Toshikatsu Sano served as a director to Mitsui Life Insurance Co., Ltd., Mitsui Life
Insurance received a business improvement administrative order, pursuant to Item 1 of Article 132 of insurance
business law from the Financial Services Agency (FSA), according to contracts with insurants or insures out ofrange defined in legal documents in group term insurance, group annuity insurance or group insurance.

On

December 7, 2007, the Company closed investigation, pursuant to the FSA's order calling for a report regarding- 55 -

actual situation of payment of insurances and others, and reported the matters to the FSA.

On investigation, it

was identified that insurances and others were totally 124,047 cases and 5,245 million yen to be adjustment from2001 fiscal period to 2005 fiscal period.
2001 to June, 2005.

Toshikatsu Sano served as a director of Mitsui Life Insurance from July,

Insurances and others includes insurances, benefits, lapsed refund and delay interest.

On

April, 2004, Mitsui Life Insurance changed organization from a mutual company to a company.
4. Tomoko Oishi and Toshikatsu Sano are currently external Directors of the Company, but their terms of office as
external Directors will reach three years and one year, respectively at the end of this meeting.
5. The Company has concluded the agreement with Tomoko Oishi and Toshikatsu Sano to limit their liabilities forcompensation as stipulated in Article 427, Paragraph 1 of the Corporation Law, based on the provisions of the
Articles of Incorporation.

If they are elected, we plan to continue the agreement.

The limit amount of liability

for compensation for damages under the relevant agreement is the minimum liability amount set forth by laws andregulations.

Proposal 4: Election of one (1) substitute Corporate Auditor
To provide for a case in which the number of Corporate Auditors falls short of the number
stipulated by the law, we would like you to elect one (1) substitute Corporate Auditor in advancepursuant to Article 329, Paragraph 2 of the Corporation Law.
Prior to our proposal of this item, we have already obtained the consent of the Board of
Corporate Auditors.
The candidate for substitute Corporate Auditor is as follows:
Name(Date of birth)

Koichi Masui(November 17, 1950)

Brief personal profile and representation in other companies
Mar. 1986
Jul. 1986
Jul. 1987
Jan. 1989

Registered as a certified public accountant
Registered as a certified tax accountant
Established Masui Kouichi Office,Representative of the Office (present position)
Established Mass Management Co., Ltd.,
President of Mass Management Co., Ltd.
(present position)(1) No. of the Company’s
shares held
(2) Any conflict of interests
between the candidate and theCompany(1) 0(2) None

Notes:
1. Koichi Masui, candidate for substitute Corporate Auditor, is a candidate for substitute external Corporate Auditor.
2. We expect that Koichi Masui will make the best use of his financial and accounting knowledge he has cultivatedthrough his long experience as a certified public accountant and a certified tax accountant for the audit system of
the Company if he becomes Corporate Auditor, and we judge that he will properly execute his duties as external
Corporate Auditor.
3. We may cancel this election by a resolution of the Board of Directors after obtaining the consent of the Board of
Corporate Auditors, if the cancellation is before he takes office.
4. If Koichi Masui is elected as proposed, we plan to conclude an agreement with him to limit his liability forcompensation as stipulated in Article 427, Paragraph 1 of the Corporation Law.

The limit amount of liability forcompensation for damages under the relevant agreement is the minimum liability amount set forth by laws andregulations.

- 56 -

Proposal 5: Grant of retirement benefits to retiring Directors and payment of retirement
benefits attendant upon the abolition of the retirement benefit system
We propose to grant retirement benefits to retiring Director Mr. Kazuhide Fujiyoshi, whose termof office will expire at the end of this meeting, in appreciation of his service, within the dueamount based upon certain standards stipulated by the Company.

We propose that thedetermination of the actual amount, time, method, and other matters relating to the granting of
the said retirement benefits be decided by the Board of Directors.
The Company resolved at the meeting of the Board of Directors, held on January 29, 2009,
to abolish the retirement benefit system for retiring Directors and retiring Corporate Auditors asof December 31, 2008.
Accordingly, we propose to pay proper amounts of retirement benefits to the five Directors
described below (2) who will be reappointed, which is subject to the approval of Proposal 3 inits original form, based on their respective periods of office by December 31, 2008 and inaccordance with the prescribed standards of the Company, and to leave decisions on issues suchas the specific amount and payment method entirely to the Board of Directors.
We propose to pay the benefits when each Director retires from his or her office as
Director.
(1) Brief personal profiles of the retiring Directors are as follows:
Name
Kazuhide Fujiyoshi

Mar. 2005

Brief personal profile
Director of the Company (present position)(2) Brief personal profiles of the Directors who are planed to be paid retirement benefits

attendant upon the abolition of the retirement benefit system as follows:
Name

Yasuhiro Yukimachi

Kiichi Tagawa
Michio Tanabe
Shohachi Sawamoto
Mamoru Asada

Nov. 1955
Oct. 1976
Jan. 1985
Oct. 1991
Apr. 1999
Apr. 2000
Jun. 1997
Mar. 2005
Mar. 2008
Jun. 1997
Mar. 2005
Mar. 2008
Jun. 1997
Mar. 2005
Mar. 2006

Brief personal profile
Founded the Company, Director of the Company
Managing Director of the Company
Senior 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 the Company (present
position)
Director of the Company
Managing Director of the Company
Senior Managing Director of the Company (present position)
Director of the Company
Managing Director of the Company
Senior Managing Director of the Company (present position)
Director of the Company
Managing Director of the Company (present position)
Director of the Company (present position)- 57 -