Economic conditions continued to slow during the first half of the fiscal year under review, influenced by the U.S. subprime loan crisis that originated in the previous fiscal year and a decline in corporate earnings linked to rising crude oil and raw material prices. The turmoil in U.S. financial markets had repercussions for real economies worldwide in the second half of the fiscal year, causing the downturn to rapidly gather momentum in North America, Europe, and China. As a result, economies around the world plunged into simultaneous recessions of unprecedented severity. The business downturn became increasingly serious in Japan, as rapid progress in production adjustment, capital investment curbs and labor adjustments across the industrial spectrum indicate. Conditions surrounding the Japan Vilene Group grew more severe in the fiscal year under review.

In this environment, the Group set up the Management Reform Committee in February 2009 to help navigate through the crisis. The Committee is undertaking sweeping reviews of the Group’s earnings structure and is taking rapid action to execute structural reforms in corporate management, both in general and under the medium-term business plan, to achieve sustained earnings. The Group was also proactive in addressing essential issues identified in “Value,” its medium term management plan, such as operational restructuring, functional improvement and an expansion of applications with new technologies, production system optimization, efficient use of management resources, and corporate Value enhancement, in the final year for “Value.”
However, consolidated net sales for the fiscal year under review declined 14.9% year on year, to ¥50,239 million, the result of a rapid deterioration in market conditions. Consolidated ordinary income dropped 56.5% year on year, to ¥1,905 million, while consolidated net income plunged 72.4% year on year, to ¥672 million.

Notwithstanding the operating results stated above, we have decided to pay ¥6.00 per share as year-end dividends for the fiscal year, based on our policies for determining surplus distribution. As a result, our annual dividends will be ¥12.00 per share, including interim dividends paid of ¥6.00 per share. Annual dividends for all shareholders will total ¥778 million, including year-end dividends of ¥389 million.

Looking ahead, there is concern that corporate earnings will decline further, in step with the escalation of the global business downturn.
In this operating environment, the Japan Vilene Group will consistently and rapidly advance its initiatives to comprehensively streamline operations and bolster cost efficiency, reduce inventories, hone production efficiency, and strengthen its financial position. The Management Reform Committee will be at the center of the initiatives. The Group will also seek to achieve its goals of developing a stronger corporate culture and boosting earnings, viewing the current challenges as an opportunity to revamp its operations.
At the same time, the Group will reinforce corporate governance and refine its compliance organization, as critical components of any improvement in management efficiency and transparency.

We hope that we can continue to count on our shareholders’ continued support and encouragement as we pursue these initiatives.

June 2009
Mitsuo Kanno
President
Japan Vilene Company, Ltd.