The fiscal year ended March 31, 2011 (fiscal 2010) ended amid extreme uncertainty and turmoil in the aftermath of the Great East Japan Earthquake. Witnessing the unprecedented natural disaster that claimed so many precious lives, I was reminded of the utter powerlessness of human beings when nature unleashes its fury. I would like to take this opportunity to offer prayers for the repose of those who perished in the disaster and heartfelt sympathies to all those affected. The corporate officers of the SPARX Group have made a monetary donation to contribute to the recovery effort, and SPARX plans to consider ways of contributing to the recovery of the stricken area and all of Japan from this devastating disaster and assist in any way we can.

I'd like to begin with a brief review of fiscal 2010. Amid concerns of a worldwide economic recession triggered by the financial crisis in Greece, Japan's deflationary trend came into increasingly sharp relief. The return on ten-year government bonds fell below 1% for the first time in seven years, and in the foreign exchange market the yen continuously appreciated against the U.S. dollar, rising from the JPY94 level to the JPY80 level. The Nikkei Stock Average fell 12% in response to these factors, and an adverse environment for investment in Japanese equities continued.

In this difficult operating environment, SPARX achieved results from the restructuring process we began implementing in fiscal 2009, and I believe the year will prove to have been a turning point. Even as we drastically cut costs throughout the Group, we were able to address several new management priorities. First of all, with respect to ongoing implementations based on the One Asia growth model, we recognize that greater Asia, including Japan, constitutes a single growth economic system. Accordingly, we strove to develop a business structure we call "One Asia, One SPARX" by means including renewal of the management systems of Group companies in Hong Kong and South Korea and the integration of Group company research capabilities into a research system that covers all of Asia. Second, as the result of forming a team that specializes in clean energy, an investment sector we have developed since 2010, and strengthening our investment and research capabilities in this field, we launched a fund with approximately JPY30.0 billion of assets under management. I believe that through these activities we have succeeded in establishing solid new investment sectors based on SPARX's research capabilities.

The SPARX Japan Small-Cap Fund received a prestigious award for the second consecutive year, and the Long-Short Strategy delivered investment results far superior to those of competitors thanks to calm judgment even after the earthquake disaster. Cosmo has established a preeminent position in South Korea in both quality and size and has grown to the point of becoming a growth driver for the SPARX Group as a whole. As a result of these developments, the Group had a net increase in the balance of assets under management for the first time in four years. Although we didn't achieve a sudden V-shaped recovery, we believe that fiscal 2010 marked the beginning of the next stage of growth for SPARX and the Group.

Although we have only taken the first step toward business recovery, the Group will move forward in unison, guided by our vision of becoming the world’s most trusted and respected investment company and a Center for Asia Investment Intelligence. We look forward to your continuing support and guidance.

July 2011