In the fiscal term ended March 31, 2009, the Japanese economy entered a serious regressive phase due to the drastic world economic downturn since last autumn, which has caused exportation - a major locomotive for the Japanese economy - to plummet, leading to a drop in capital expenditure, aggravating the employment situation and resulting in further sluggish consumer spending. As for the world economy, in Europe and North America rapid aggravation followed the collapse of major U.S. financial institutions, throwing the financial markets into confusion and causing drastic decrease in the value of securities, real estate and other assets. This has created a vicious cycle of curtailed demand and employment. Likewise in China and other emerging economies, economic growth slowed. A worldwide recession has set in.

As for the Sumitomo Electric Group's business environment, despite the Group's generally favorable performance until the middle of 2008, demand began to drop worldwide last autumn, mainly in the automotive and electronics markets. The situation was further aggravated by the drastic appreciation of the yen, seriously affecting the profitability of exports from Japan, and by lower product prices necessitated in the face of ever-intensifying international competition.

In this business environment, the Group worked on thorough cost reduction, quality improvement, new product and technological development, and sales expansion, thereby reinforcing the Group's foundation of profitability. Nevertheless, the enormous impact of sluggish worldwide demand was not contained, and a large decrease was registered in terms of both revenue and earnings: for the fiscal year ended March 2009, our net sales on a consolidated basis totaled 2,121.978 billion yen, down 16.5% from the previous year's 2,540.858 billion yen; operating income was 23.527 billion yen, down 84.2% year-on-year from 148.996 billion yen; and ordinary income was 37.773 billion yen, down 77.7% year-on-year from 169.644 billion yen. The term's net income was 17.237 billion yen, down 80.4% from the previous term's 87.804 billion yen. In the term, gains on the contribution of assets to retirement benefit trust were entered as extraordinary gain, and business restructuring expenses were entered as extraordinary loss.

In consideration of the company's performance during the term, the year-end dividend was set at 7 yen per share, regrettably, a 3-yen decrease from the previous year. As a result, the dividend payment for the term was 18 yen per share on an annual basis, including the interim dividend of 11 yen per share, a 2-yen decrease from the previous year.

Regarding future prospects of the world economy, while positive effects can be expected to a certain extent from governmental economic boosters and financial policy measures, confusion in the financial domain is likely to continue for some time, and the employment situation is likely to worsen in Europe and North America, further affecting consumer spending. In China and other newly emerging economies, globally sluggish demand is expected to dampen exportation, and thus economic growth. As for the Japanese economy, stagnant exports and consumer spending are likely to continue, adding further and unprecedented uncertainties to the environment surrounding corporations and their profits.

Under these circumstances, the Sumitomo Electric Group has adopted three measures to reinforce its corporate constitution so as to overcome the unprecedented severe economic situation and get back on the growth track. The three measures are: "keeping our organizations appropriate to our abilities and reconstructing our cost system," " expanded and deeper internal solidification," and "educational rearmament." Specifically, we are reforming our business structure to make it appropriate for our abilities, and are fundamentally reviewing our cost system in view of current market demand. Secondly, we are solidifying ourselves internally by taking a thorough inventory of challenges in the "S-E-Q-C-D-D (Security, Environment, Quality, Cost, Delivery and Development)" areas. Finally, we are reinforcing our corporate constitution through reinforced personnel training, knowledge promotion and skill acquisition by every single employee of the Group in a variety of SEI University training programs. We are determined to carry through these Group-wide efforts to secure our progress and become a Glorious Excellent Company. At the same time, the respective business segments are also promoting measures, as described below:

In the Automotive segment, to counter the ongoing worldwide automobile demand decrease we will work in the wiring harness business on thorough cost reduction and restructuring of the production system, reorganizing business on a global scale and relocating production bases to less costly regions. We will accelerate global business expansion, with more vigorous sales activities targeted at domestic and foreign automakers and greater efforts for the development and sales expansion of products for eco-cars, including hybrid and electric automobiles, demand for which is increasing, so as to attain a 25% global market share by 2012. At the same time, for the vibration-proof rubber business we will promote further cost reduction and the improvement and expansion of our overseas production bases.

In the Information & Communications segment, we will accelerate global business development in the optical fiber and cable business, to capture growing demand for FTTH-related products in cooperation with the already existing subsidiary in North America and the following newly established companies. We signed an agreement last year with a Chinese business group to establish joint ventures that manufacture a range of products, from optical fiber preform to cables. In Europe, we have decided on partnership with, and investment in, a local company in the optical fiber and cable sector. In the area of optical communication devices, in April 2009 we made Eudyna Devices Inc. a wholly owned subsidiary to reinforce management, quality improvement and cost competitiveness, pursuing further synergy effects by building on the effects created by existing products. With regard to network-related products, we will work on the development and sales expansion of products for next-generation network (NGN) services, which commenced last year.

In the Electronics segment, we will focus our efforts on developing new technologies that fulfill market needs, as well as on further cost reduction, so as to realize a solid corporate constitution capable of securing profits despite drastic demand fluctuations and intense price competition. Specifically, we will pursue the development and sales expansion of high value-added products including multi-layered doubled-faced flexible printed circuits (FPC), micro flex coaxial cables, and GaN (gallium nitride) substrates for blue-violet laser. We will also optimize production by shifting manufacturing operations to overseas bases in such as China and Vietnam, and importing overseas-made products into Japan, thereby taking advantage of the stronger yen. At the same time, we will invest our resources in new growth areas to develop original products and technologies, such as precision filtration modules for water treatment.

In the Electric Wire & Cable, Energy segment, we will work on further corporate constitutional reinforcement through business structural reforms and cost reduction, to counter diminished domestic demand for electrical wire. At the same time, we will establish a global production system to effectively capture growing demand, mainly in newly emerging economies in Asia and the Middle East, where electric power infrastructural development is in progress, and will develop our cost competitiveness despite the stronger yen. In response to increasing environmental consciousness, we will actively develop and expand sales of high-efficiency power transmission wire featuring low energy loss; eco-cables and products for eco-cars - demand for which is expected to grow - such as porous metal (Celmet) and highly resistant magnet wire for electric components.

In the Industrial Materials & Others segment, in the special steel wire division we will capture demand in and outside Japan for PC steel used in bridge, airport and other infrastructural development projects. For cemented carbide tools we will make the most of our global manufacturing and sales network, to vigorously expand sales in newly emerging economies while promoting product development for new industrial sectors such as aviation and energy. Regarding tungsten and other main raw materials, we will diversify suppliers and promote recycling to stabilize our material procurement and promote environmental protection. We will also develop and promote sales of what we believe to be growth products, such as heat sinks for automobiles and communication equipment.

In the area of research and development, with "Environment and Resource Conservation," "Life Science" and "Safe, Secure and Ubiquitous Society" as key R&D themes for the Group's next-generation growth, we will work toward the earliest possible creation of new business segments, so as to achieve the goal of 30% ratio of sales of new products in fiscal 2012. More specifically, we will pursue highly original research and development in anticipation of changes in society and technological trends such areas as superconducting technology and power devices that are expected to reduce energy loss and contribute to environmental conservation, a magnesium alloy that reduces the weight of mobile devices and automobiles, and ultrafast optical transmission technology in response to ever-increasing data communication via the Internet.

The Sumitomo Electric Group embraces global environmental protection as one of our most important challenges, and carries out the Group-wide campaign "Action ECO 21" to alleviate global warming, conserve resources and promote recycling. As part of this campaign, the Sumitomo Electric Group's industrial sites have been working on production facility improvement, in-house waste liquid treatment, in-house recycling or reuse of waste plastic and so forth. As a result, all of our plants in Japan (Osaka, Itami and Yokohama Works) have achieved a zero emission rate (waste disposed by simple incineration or landfill is less than 1% of total waste) for the second consecutive year. Furthermore, to reduce carbon dioxide emissions during long-distance transportation, we have been switching to more environmentally friendly intermodal transportation (for example, from trucks to rail containers or ships). To improve container loading efficiency, with companies from different industrial sectors we have started a system of joint round-trip transportation. Just as we have all along been earnestly making such environmental efforts, we will continue and reinforce our actions in the future. In the area of CSR, in July 2008 we established Sumiden Friend Corporation, to provide a favorable working environment and conditions to disabled persons. We will also vigorously continue our CSR activities.

The Sumitomo Electric Group is firmly committed to continuing its efforts to contribute to society, not only through our business activities, but also through environmental protection and community service, so as to become a Glorious Excellent Company.

Our shareholders' continued understanding and support of this process will be greatly appreciated.