As a Group with businesses in the education, language, lifestyle and welfare fields, Benesse not only has to comply with all related laws and regulations, but also has to achieve the highest standards of corporate ethics. Accordingly, we believe it is vital that all of our employees understand the importance of sincerity.

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In 2001, Benesse devised the Benesse Code of Corporate Conduct and the Benesse Standard of Conduct. In 2005, these were radically revised and combined into the Benesse Group Code of Conduct in response to changes in the social and business environments. The public release of the code was accompanied by its adoption throughout the Group's domestic businesses. Furthermore, in April 2008, sections of the code were revised and its adoption was extended to our overseas businesses. Benesse's senior managers and employees were widely consulted about the content of the new code, resulting in a document that expresses Benesse's values and the standards each employee should use in making decisions in their work. The code also provides a basis for disciplinary measures based on internal rules in case of transgression.
Putting clear emphasis on customers and consumers, the Benesse Group Code of Conduct explains in detail areas that our people should focus on with respect to stakeholders of the Benesse Group, as well as protecting personal information, promoting environmental management, and conducting business activities in general. To ensure our employees are aware of the Benesse Group Code of Conduct, we provide training for managers and employees, and require each of them to sign an acknowledgement and consent form to verify they understand the code.

In May 2007, aiming to further enhance the internal whistleblower framework, we combined the existing Ethics Line and Group Ethics Compliance Line into a single Benesse Group Speak Up Line, and established a new Corporate Auditor Hotline. The Benesse Group Speak Up Line enables employees to report breaches or possible breaches of the Benesse Group Code of Conduct anonymously to the Management Process Control Dept. The newly established Corporate Auditor Hotline, meanwhile, was set up specifically for employees to provide information that could relate to directors and other senior managers of Benesse Corporation, and issues that involve the management of the entire Benesse Group. This will allow more effective and rapid responses by ensuring information is reported directly to the Company's full-time corporate auditors, who are independent of other senior management.

In January 2008, Benesse established the Product Safety Inspection Center and put into place a quality assurance system, not just for education equipment and toys, but for all Benesse products. The four main functions of the center are as follows: carrying out safety inspections on products from all divisions; collecting data on regulations and other matters related to safe product development from regulatory authorities and related organizations in Japan and overseas and incorporating this into in-house standards; inspecting factories of business partners and contract manufacturers; and training employees in safety practices and sponsoring activities designed to promote awareness of product safety.

Benesse gives consideration not only to the Group but also the responsibilities of corporations, including business partners, in the Benesse Group Code of Conduct. In selecting business partners, as a rule, we compare multiple potential vendors. Besides quality and cost, we give due consideration to other conditions in order to confirm the supplier's performance capacity, management capacity, legal compliance and credit situation, among other factors.
Benesse does not do business directly or indirectly with companies engaging in forced labor, illegal labor, or illegal child labor. In the event that Benesse should discover that a supplier is using any of these types of labor, it will immediately take appropriate measures.

• Strengthening the Internal Control System
  Following the enforcement of the Companies Act of Japan in 2006, the Benesse Group established the basic policies of the Internal Control System and other necessary systems by a resolution of the Board of Directors' meeting held in May 2006, in accordance with Article 362, Paragraph 5 of the Companies Act. Since then, the policies and systems have been reviewed every year. Furthermore, Benesse has established a dedicated Management Process Control Department to create a system that ensures the accurate reporting of financial information and to respond to other requirements stipulated by Japan's Financial Instruments and Exchange Law. The department is also working to build other internal control mechanisms required by the Companies Act and other regulations, as well as the Financial Instruments and Exchange Law.
• Protecting Personal Information—Maintaining Privacy Mark Certification
  Benesse has established a Personal Data Protection Department under the Chief Privacy Officer (CPO)*. This is Benesse's main body responsible for protecting personal information. Privacy protection officers have also been appointed at each in-house company to ensure personal data is strictly controlled across the entire Group. Following improvements to our personal information protection measures, including stricter monitoring of contractors, upgrades to the internal control system and enhanced training, Benesse acquired Privacy Mark certification in January 2006. Run by the Japan Information Processing Development Corporation (JIPDEC), the Privacy Mark System certifies companies that handle personal information in an appropriate manner. We will continue to improve our personal data protection system going forward through further enhancements and regular verification in accordance with data protection regulations.
  * The CPO is responsible for formulating and implementing management plans in accordance with Privacy Mark standards and reviewing them with the president. This process is performed in conjunction with customers and other external feedback about the progress and results of the plans, changes in the social environment, and similar issues.

Benesse Group Action Plan

1. Establish regulations, prepare documents and promote awareness
   Create documents (internal regulations, etc.) that satisfy Privacy Mark requirements; ensure compliance and thorough awareness of these documents.
2. Formulate and implement training programs
   Develop personal information training programs and conduct training for all employees.
3. Analyze and mitigate risk related to information leaks
   Identify all personal information, create business flow processes and analyze risk continually on an annual basis. Systematically deal with any identified risks.
4. Conduct audits and reviews
   Conduct annual operational audits of relevant documents, including progress on Groupwide convergence on shared Privacy Mark requirements, and personal information protection systems; individuals responsible to systematically deal with any areas requiring improvement. Create a framework to ensure these audits are conducted on an ongoing basis.
5. Supervision of subcontractors
   Select all subcontractors and outsourcing personnel on the basis of their ability to meet Privacy Mark requirements, conclude personal information protection contracts with them, and conduct regular audits.

“Take stock of whether business execution is fulfilling its accountability to employees, the most immediate stockholders”

Kimie Sakuragi Corporate Auditor

In May 2007, we supplemented the existing internal reporting system by establishing the Corporate Auditor Hotline, which enables employees to report issues with management or the management team directly to Full-time Corporate Auditors, who are independent of the Company's managing executives. It is difficult to bring negative information directly to the management team, but since we launched the hotline, we have received two or three reports per month. Some have been important points related to the management decision-making process, and we have responded by making requests to the directors and Board of Directors for necessary reforms, in addition to offering suggestions and advice. Needless to say, the hotline functions as a check on the decision-making of top management. At the same time, however, we recognize that it plays a role in helping top management to gain an accurate grasp of negative information and make appropriate decisions.
CSR is the way in which a company works toward sustainable growth while incorporating the requests and expectations of all related stakeholders into its management. The preconditions for this to happen are ensuring that decision-making is transparent and rapid for all stakeholders, and fulfilling accountability while maintaining positive relationships. It is crucial to keep in mind that if employees, the Company's most immediate stakeholders, do not understand how management makes its decisions, neither will other stakeholders. As a Corporate Auditor, I intend to pay particular attention to taking stock of whether the management team is ensuring transparency for employees and truly fulfilling its accountability.

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