CIAJ JOURNAL Prefatory Thoughts :

Greeting the 60th Anniversary of Our Founding and Starting from Zero

Nakayo has participated in planning as a member company of the Communications and Information Network Association of Japan since the CIAJ was launched in 1948. The objectives of the activities of the CIAJ are to promote the further utilization of information communication technology and develop industries related to information communication networks in a healthy manner and by contributing to the expansion and upgrading of the use of information in society, the economy and culture, to attain a rich lifestyle for the people of Japan and contribute to international society. From these objectives, Nakayo too has learned many things and this has served a role in our business activities. Nakayo also belongs to 21 committees, section meetings, research groups, working groups, etc. within the CIAJ. We at Nakayo are grateful for the many hints these meetings have provided us as to how to tackle new technology and new business chances and for the valuable guidance we have received from the CIAJ and member companies. Please allow us to use this opportunity to express our deepest thanks.

Thanks to all of you, Nakayo last year reached the 60th anniversary of our founding. In greeting the 60th anniversary of our founding, we unified the awareness of the entire company that we are starting from zero. We raised the company-wide slogan - for new challenges - new perspectives, new thinking, new action and made all employees aware of creating a new Nakayo. As Nakayo's management ideals, we have the three founding principles promulgated by our founder Yoichiro Nakamura: our company must be a public entity, our company must be relevant to the time, and our company must grow and develop as an integral part of society. We think that our role is to strictly observe these three basic principles all the time in good times economically and bad, and to transmit these principles in our businesses. Greeting the 60th anniversary of our founding with the feeling of starting from zero, passing on the spirit of the three founding principles that have been our management ideals since we were founded, and aiming yet higher, we took on the challenge of being designated for the First Section of the Tokyo Stock Exchange. Because this year also marked the 30th year since our listing on the Second Section of the Tokyo Stock Exchange, we put together a project team at the end of March of last year and moved forward with preparations. Thanks to everyone, we were notified on February 18 of this year that our shares had been designated for listing on the First Section of the Tokyo Stock Exchange and March 1 saw the start of sales of Nakayo in the First Section of the Tokyo Stock Exchange, something we had much desired. We strongly feel the issues facing our management and our social responsibility as a company. All of our employees will come together as one unified team, aim for further development, and make the enthusiastic effort required to meet all your expectations.

Speaking of these past few years for our company, in 1999, when the IT revolution began to be called the locomotive of the economy, our company faced a severe drop in domestic and overseas demand. At that time, President Hoshino (currently a company adviser) hammered out the presidential policy of Customer First. That meant becoming a company loved by its customers. It meant making products that reflected the opinions of customers and were loved by them. It meant returning to the starting point of establishing transactions that customers are happy about and let's do business from a close distance to our customers.
　We built our in-company system with a thorough awareness of our customers. Our marketing personnel thoroughly emphasize on-site realities. Instead of theorizing at the desk, we go out to our customer's actual sites and directly verify customers' desires with our own eyes and ears, we work to strengthen our SE support system for products in the field," "in developing products, we pick up the voices of our customers more and reflect them in our products, and we make products whose quality our customers will trust. We think that the starting point for where we are today was when we made thinking about our customers our employees' sense of value. We are continuing to pass on this awareness without change.

We think that a major future issue for this company is further improvement in IP product development technology. Companies and ordinary households are starting to become aware of and purchase IP telephones. This is still a new service and compared to conventional telephone lines, it still faces many technological problems. At Nakayo, in April we started up a development organization specializing in the development of IP products.
　There is no doubt that IP telephones are a product that brings new convenience to customers and with the solution of sound quality issues, network security issues, and reduced functions compared to business phones, we want to contribute to enlarged and improved information use and to contribute to society through the information communications field. This will require the cooperation of CIAJ and its member companies. We again and again request your guidance and encouragement.

NAKAYO NO KAZE: Greeting the 60th Anniversary of Our Founding

- Taking on New Challenges - New Perspectives, New Thinking, New Action

In greeting the 60th anniversary of its founding last year, this company acted under the slogan Taking on New Challenges - 'New Perspectives, New Thinking, New Action'. This slogan contains the meaning that this is the start, so let us make this the year we create a new Nakayo. With the three founding principles that have led this company since its founding - our company must be a public entity, our company must be relevant to the time, and our company must grow and develop as an integral part of society - of course serving as our business ideals, as one aspect of these activities we prepared to try to shift from the second section to the first section of the Tokyo Stock Exchange. Thanks to everyone, the shares in this company were approved by the Tokyo Stock Exchange and from March 1, Nakayo was listed in the first section of the Tokyo Stock Market. I want to express my heartfelt gratitude to everyone who made this possible.

We intend to be even more aware of our social mission and responsibility, for our employees to work as one team with renewed determination, to aim for further development, and to eagerly meet all your expectations.

According to a report from the government, our nation's economy is recovering, even if gradually. However, last fiscal year was marked by such natural calamities as a large typhoon landing in Japan, earthquakes, and the tsunami which is all too fresh in our memories and this seemed to strike a blow to the economy just when it was starting to turn upward. Soaring oil prices and concerns about deceleration in the American economy and the rest of the world economy are also areas of concern. We judge that the business environment that our company must work in still does not permit optimism.

Nakayo's communications business last fiscal year entered the period of full-scale introduction of IP (internet protocol). A shift is underway from large-capacity ADSL service provided by communications carriers to further fiber optic networks and competition among non-mobile telephone carriers is heating up with reductions in basic service fees and the entry of new players into the market, so the market environment is marked by intense competition for survival.

In such a market environment, we think that the future development of our businesses requires that we aggressively deploy our own technology development, give priority in the investment of management resources to fields with good growth prospects, attain short cycle times from development and manufacture to sales, and pour energy into newly emerging themes in order to establish our superiority in the market.

1. We want to re-recognize the importance of our SE support system, which is our sales support department, provide customers with quick response, and also with our marketing department as our contact point for quality, take what our customers say about quality and reflect it in our quality to further strengthen our trusted quality assurance system, raise our added value and build a support system that can satisfy our customers.
2. When it comes to development, our product planning departments and our marketing departments, as well as our research and development departments, will work together as one team to build a system that directly reflects the opinions of our customers and aggressively deploy the development of IP products and IP system related products.

This fiscal year we were able to bring onboard 50 new permanent company employees in the Nakayo Group as a whole. We intend to develop them in such a way that they are interested in everything and set targets and blend in with our corporate group as professionals as soon as possible and become the kind of professionals that our customers can be satisfied with.

We are counting on our new employees to cultivate their awareness and sense of responsibility, to work hard every day, and to work proactively. We are counting on their future activities.

Keeping this year's presidential policy of Unleashing our total capacity in mind, we will move forward with our corporate activities in order to meet the desires of our customers. We ask for your continued support and guidance.