At the Board of Directors Meeting on August 9, 2006, SANIX Incorporated (Ticker: 4651, TSE/OSE/FSE, President & CEO: Shin-ichi Munemasa) decided on the “Business Streamlining Plan”. At the same time, in view of changes in recent operational results and the “Business Streamlining Plan”, the forecasts for the first half-year and full-year operational results, announced on May 17, 2006 are modified as follows:

“Business Streamlining Plan”

The Company has promoted streamlining of its operation for three years in order to overcome slumps in business results. Despite these efforts, recent misconduct in the industry and at SANIX, as well as other problems, have had negative effects, leading to shrinkage of our sales revenues. Under these circumstances, it is likely that the profit for the current year may be far below that projected in the business plan. If we continue with the current business policy and operational organizations, it would be very difficult to record an operating profit for the current year. To overcome this situation and put our operations back on the track of growth as soon as practicable, we will establish a “Business Reform Committee” at SANIX. This Committee will fundamentally restructure business management organizations and drastically and proactively reform the cost structure, so as to improve and stabilize the profitability of SANIX businesses.

1. Closing and Consolidation of Sales Offices

All HS Division sales offices in the Kanto district will be closed. No sales office will operate in the Kanto district. Certain under-performing sales offices in other districts will also be closed and consolidated into other profitable sales offices. In addition, certain facilities of indirect departments will be reorganized so as to save costs related to these facilities, and to improve the profitability of the operation.

(1) Offices to be closed/consolidated in the HS Division

(2) Offices to be closed/consolidated in the ES Division

(3) Relocation of regional headquarters to save rent (three regional headquarters and one training center)

(4) Closing of four employee dormitories

2. Labor Cost Reduction
(1) Wage reduction
Wage reduction will be implemented in wages from August, for the following positions:

(2) Personnel reduction
Based on the closing and consolidation of sales offices, the number of workers at each office will be reduced to a level appropriate to its sales size.

3. Other Cost Reduction Measures
(1) Reduction of policy costs (mainly advertising)
(2) Reduction of indirect department expenses (head office expenses and department expenses at headquarters)
(3) Cost reductions mainly in selling, general and administrative expenses

4. Impact of Business Streamlining Plan on Operational Results (decreases)

Details of the Revisions

1. Revision to First-half Results Forecast
(1) Consolidated results forecast (April 1, 2006 to September 30, 2006)

(2) Non-consolidated results forecast (April 1, 2006 to September 30, 2006)

2. Revision to Full-year Results Forecast
(1) Consolidated results forecast (April 1, 2006 to September 30, 2006)

(2) Non-consolidated results forecast (April 1, 2006 to September 30, 2006)

3. Reasons for the Revision

On July 7, 2006, the Ministry of Economy, Trade and Industry issued to SANIX, according to the provisions in Article 8, Paragraph 1 of Specific Commercial Transactions Law (hereinafter the "Law"), an order to suspend six sales offices of the HS Division from conducting certain home-call sales activities as defined in Article 2, Paragraph 1 of the Law, from July 8, 2006 to October 7, 2006; and directions in accordance with Article 7 of the Law.
Under these circumstances, the HS Division established internal rules to restrict sales activities to senior citizens, conducted a compliance education meeting in each district, in which all employees of the HS Division participated, and implemented other measures to ensure strict compliance and prevention of recurrence of similar misconduct. However, the impact of the administrative punishment that led to consumers’ buying reluctance, the suspension of six sales offices’ operations and the decrease in sales working days was so great that the sales revenues for July decreased from the same month last year. It is difficult to predict how much the weakened sales will improve in August and later. Accordingly, the sales projection for the second quarter was adjusted on the basis of sales figure recorded in July. Accordingly, the consolidated sales revenue forecasts for the first half-year and the full year announced last time have been modified.
To improve recurring profit and net income, in accordance with the “Business Streamlining Plan”, sales office closures and consolidation, personnel reduction and radical cost reduction measures will be implemented to reduce fixed costs in the second half of the year. Because sales have decreased in the HS Division, which deals in products having a high profit margin, recurring profit and net income for the first half of the year are expected to be lower than originally forecast. However, measures implemented in accordance with the “Business Streamlining Plan” will have a substantial and positive effect in the second half. It is expected that SGA expenses will be saved drastically as compared with the original forecast, resulting in great improvement to the profit structure. Accordingly, recurring income and net income for the full year are expected to exceed the original forecast. Based on these facts and assumptions, the consolidated recurring profit and net income forecasts for the first half-year and the full year announced last time have been modified.

Semi-annual and annual forecasts of non-consolidated operating results have also been modified accordingly, for the same reasons.

(Note) These forecasts are based on information available as of August 9, 2006. Actual results may be different from forecasts due to various unexpected factors in the future.

For more information, please contact:
Kozo Inoue, Managing Director
E-mail: k-inoue@sanix.co.jp