Development of the Global Best Strategy

In fiscal 2005, we made steady progress in implementing our fundamental Global Best strategy, especially in the burgeoning Chinese market, where we took a major step forward in bolstering our infrastructure with the establishment of four companies: a chain sales company, an automotive parts production company, a power transmission units and components production company, and a joint-venture materials handling systems engineering company. In automotive parts, the production base established in Shanghai has begun to supply products to Japanese automakers in China. As a result, we have strengthened our customer-oriented production system through the completion of five-point production system for timing chain drive systems, with our new base in China joining bases in Japan, North America, Europe, and Southeast Asia. Other challenges the entire Group is taking on are raising production capacity and lowering inventories. At the Kyotanabe Plant, for example, we have made further progress toward the creation of a highly efficient production system with the introduction of the cell manufacturing method on all 76 assembly lines. At the same time, the Group has made progress in strengthening its financial position. We improved our capital efficiency in fiscal 2005 through the introduction of a cash management system and other initiatives. As a result, interest-bearing debt was reduced at year-end by ¥6.9 billion from a year earlier.

In our consolidated results for fiscal 2005, orders received grew 8.7% from a year earlier to ¥129.5 billion, while net sales increased by the same rate to ¥129.6 billion. On the profit end, operating income jumped 31.4% to ¥10.4 billion, ordinary income surged 43.0% to ¥8.9 billion, and net income gained 31.5% to ¥4.4 billion.

The annual dividend for fiscal 2005 was ¥7 per share, with a ¥3 per share interim dividend and a ¥4 per share year-end dividend, up ¥1 from the previous year.

Basic Strategy for Future Growth

In fiscal 2005, the Tsubakimoto Chain Group forged ahead with its Global Best strategy, which has the "three G" keywords of Global operational development, bolstered Group management, and transition to a course of Growth. The aim has been to instill this strategy deeper into the Group in order to support future growth and expansion. Accelerating the strategy will require the development of innovative new products and the creation of opportunities in new fields of business, and the Group will eagerly research new businesses to invest in. This expansion is closely linked to the Global Best strategy, which requires that each business area and Group company strive to maximize Group results while optimizing their own individual operations in each respective field and marketplace. A Group structure has been created to promote this strategy by clarifying business areas and goals. Global Best promotion supervisors are now in control of each business area, strengthening authority and accountability. In fiscal 2006, this structure will be further promoted throughout the Group.

The consolidated financial targets for fiscal 2006 are net sales of ¥136.0 billion, up 5.0% from the previous year, an ordinary income of ¥10.0 billion, an increase of 12.5%, and a net income of ¥5.1 billion, a rise of 14.6%.

Basic Strategy for Future Growth

In fiscal 2005, the Tsubakimoto Chain Group forged ahead with its Global Best strategy, which has the "three G" keywords of Global operational development, bolstered Group management, and transition to a course of Growth. The aim has been to instill this strategy deeper into the Group in order to support future growth and expansion. Accelerating the strategy will require the development of innovative new products and the creation of opportunities in new fields of business, and the Group will eagerly research new businesses to invest in. This expansion is closely linked to the Global Best strategy, which requires that each business area and Group company strive to maximize Group results while optimizing their own individual operations in each respective field and marketplace. A Group structure has been created to promote this strategy by clarifying business areas and goals. Global Best promotion supervisors are now in control of each business area, strengthening authority and accountability. In fiscal 2006, this structure will be further promoted throughout the Group.

The consolidated financial targets for fiscal 2006 are net sales of ¥136.0 billion, up 5.0% from the previous year, an ordinary income of ¥10.0 billion, an increase of 12.5%, and a net income of ¥5.1 billion, a rise of 14.6%.

New Management Structure

In fiscal 2005, the Tsubakimoto Chain Group made progress in shifting from a policy of "streamlining and balance" to an emphasis on "growth and expansion." To achieve continued growth in the future, we must reinforce our development in global markets. Accordingly, the management structure has been changed to instill a fresh global outlook into the Group. At the board of directors' meeting held after the shareholders' meeting on June 29, 2005, we formalized a new structure under which Takashi Fukunaga will serve as chairman and representative director, sharing supervisory responsibility for general management duties with the new president and representative director, Tatsuhiko Mimoto, who will also have principal responsibility for operational execution.

We remain dedicated to raising corporate value through the faithful execution of the Global Best strategy under this new management structure. To further enhance shareholder-centered management, from the year under review, in addition to the stable dividends that we have paid in the past, we have transitioned to a policy of implementing profit allocation flexibly in consideration of consolidated performance.

We thank our shareholders and investors in advance for their continued support of the Tsubakimoto Chain Group as we forge ahead with our Global Best strategy.