During the consolidated fiscal year under review, the global economy showed an even more distinctive contrast between robust emerging economies—symbolized by China, which became the world’s second largest economy in terms of real GDP, and advanced economies that were struggling to deal with their severe fiscal problems and their slumping employment and consumption. The second half of the fiscal year brought a raft of fresh problems, such as political unrest in the Middle East and North Africa, plunging the global economy into further disarray.
The Japanese economy, meanwhile, remained generally sluggish, reflecting the termination or downsizing of official packages provided to encourage the public to purchase a variety of goods, as well as the rapid appreciation of the yen and the continued severity of the employment market in the second half of the fiscal year, which offset the growth in private consumption fuelled by such packages in the first half. Additionally, the Great East Japan Earthquake on March 11 had a profound impact on all aspects of the Japanese economy, including production, distribution and consumption.
The vehicle market, the market for semiconductor manufacturing and inspection systems, and the cellular phone market—all key markets of the Group—are heading toward growth over the medium to long term, given the structural reform on both demand and supply sides, aided by progress in the commercialization and rising popularity of new eco-friendly cars, such as electric vehicles, as well as next generation products such as smartphones. However, with the supply-chain bottlenecks and other disruptions caused by the Great East Japan Earthquake, the short-term outlook is growing increasingly uncertain.
Given these circumstances, the Yokowo Group focused on comprehensive growth strategies, including (i) reinforcing its three mainstay operations of vehicle communications equipment, circuit testing connectors, and fine connectors in emerging markets, (ii) strengthening the foundations of the Medical Devices (medical equipment components and units) and Infrastructure Solutions operations that the Group has been promoting as its fourth mainstay operation, and (iii) developing more technological and value-added products. Although the Group did not suffer any direct damage or losses due to the Great East Japan Earthquake that will significantly affect its operations, orders dropped sharply, especially for vehicle communication equipment, reflecting the termination or downscaling of operations by key customers in Japan and overseas.
As a result of these developments, consolidated sales for the fiscal year rose slightly to ¥27,129 million, up 4.2% year on year, reflecting a strong first half following by a sudden downturn in the second half. Consolidated operating income grew, albeit at a slower pace than last year, climbing 6.4% year on year to ¥1,306 million. This slowdown can be attributed to a higher cost ratio, caused mainly by low capacity utilization amidst plummeting sales in the fourth quarter, which offset the positive impact of improvement in the operating structure. Consolidated ordinary income fell 9.2% year on year to ¥955 million, primarily reflecting foreign exchange losses associated with the rapid appreciation of the yen. Consolidated net income decreased sharply, falling 28.5% year on year, to ¥586 million, mainly due to an increase in tax expense as a result of improvement in the performance of certain global subsidiaries.

As explained earlier, both sales and profits fell short of our initial forecast, reflecting the impact of the Great East Japan Earthquake as well as the termination or downsizing of official packages to encourage purchases of vehicles and household electrical appliances. However, based on a comprehensive consideration of a range of business issues, including capital expenditure and R&D expenditure for business expansion and financial stability, the Company plans to distribute year-end dividends of ¥9 yen per share, which is the same level as the previous year. Since the Company already distributed interim dividends of ¥9 per share, combined dividends for the year will therefore total ¥18 yen per share (consolidated dividend payout ratio: 61.4%).

Japan's economic outlook is clouded with a great deal of uncertainty, but the world economy is expected to continue to grow despite many unstable factors.
In this business environment, the Group has been striving to achieve its Medium-Term Management Targets ("Minimum 8") and recovery to consolidated sales of ¥30 billion by pushing ahead with initiatives based on company-wide growth strategies, while recognizing the need to tap into the growth potential of overseas markets more acutely than ever.
An outline of our measures is as follows.

Outline of Companywide Growth Strategies

• Redefining Entire Business Domains of the Company
• Important Policies of Management Execution

1)		Accelerating product innovation, the basis of our growth strategy, and shifting innovation into full swing
2)		Promoting process innovation, the basis of reinforcing business capabilities
3)		Further accelerating profit structure reform
4)		Strengthening the system of monitoring management indexes
5)		Further accelerating personal innovation

The Group will continue to work on its fundamental efforts, including CSR efforts such compliance, corporate ethics and environmental preservation, as well as improvements in the internal control system and their tighter implementation, and reinforcement of corporate governance. Under the abovementioned companywide growth strategies, officers and employees alike resolve themselves to working as a unit for a solid fulfillment of targets.

We hope that we can count on the continued support and guidance of our shareholders.

May 13, 2011
President   Takayuki Tokuma