JVC is by no means a large company, and we see no real need to make it any bigger than it has to be. That's because our conventional approach of working with partners to amass technologies, without substantively increasing our own assets, and rapidly launching products, still serves us well today. In manufacturing, we are building symbiotic partnerships with material and component suppliers around the world. By carefully selecting and assessing respective needs, we have reduced our suppliers by nearly half in the past two to three years. Through a shared vision for the future, and by listening carefully to our partners to accurately identify mutual needs, we hope to create even closer and more responsive supply networks. For our part, we will cultivate personnel capable of better identifying industry trends five years down the road. These personnel will be our eyes on the future, helping us to procure the best materials and components for next-generation products. Ultimately, this will help us to create an optimal global procurement framework. Retailers are also key JVC partners. In order to build stronger relationships with them, we know we have to do more than simply sell them products. Working together with them, we have to clearly communicate our corporate policy, and take on board those of our partners too, to ensure we grow in line with the strategies we have set out. These partnerships are underpinned by a certain amount of give and take: we want retailers to understand the essence of our brand statement—The Perfect Experience—while we have to listen to the advice of people closest to consumers. In this way, we will share feedback from customers and use it to create "Only One" products. I am confident that this approach will yield the best possible results for JVC and its retail partners, and raise customer satisfaction. Partnerships are not our only strength. I also see JVC's current size as something we can really use to our advantage. Unshackled by organizational constraints, our engineers are given free rein to combine diverse proprietary audio, TV and video technologies to create new and exciting value-added products based on market needs. Our presence in the software, hardware and media fields, despite our comparatively small size, is also a strength. In fact, it is our unrestricted approach that allows hardware engineers to easily mix with music studio engineers, for example, to come up with new value-added products that fuse both technologies. In short, using these networked working practices afforded by our nimble size, we can capture maximum synergies between our audiovisual technologies and our content production technologies. JVC has a long-held commitment to advanced technologies and to high-quality manufacturing. We can also demonstrate strengths that rivals find hard to emulate, such as a strong track record in creating truly groundbreaking technologies like VHS, and know-how in creating entertainment content. Ensuring these strengths are passed on to the next generation of JVC personnel is a vital mission for the company. That means shaping professionals capable of standing in the shoes of the customer, using JVC's unique technologies to create the next wave of "Only One" products, and then skillfully marketing these products. To achieve this goal, we are working to ensure internal communication processes are more dynamic by lowering organizational barriers. This will also mean encouraging our people to speak their minds more, about raising product quality for example, at meetings designed to increase interaction among staff involved in development, manufacturing, marketing and other stages of the product cycle. By experiencing these kinds of exchanges, I believe all our personnel will gain the confidence to express, act, and grow as members of the JVC family. Up to now, efforts to revitalize our corporate culture have led to a more open atmosphere. However, we still have work to do to transform JVC into an unconventional and free-spirited company—a company capable of winning in an era characterized by seismic change. As ever, your support will be vital in helping us to create this new corporate culture and in realizing our goals for the company. July 2004 President