Toru Kobayashi, President

We are indebted to our shareholders for their support of our business activities, and must also take this opportunity to extend our deepest condolences to those who have suffered as a result of the Great East Japan Earthquake.

Right after the earthquake hit, we were concerned that our parts procurement would be temporarily impacted, but we were able to ensure that our products remained in supply by making design changes to some of our products and by taking other measures as well. Overall, the earthquake did not have a significant impact on our business.

In the first half of fiscal 2011, the global economy headed toward recovery, driven by strong demand in emerging economies. At the same time, economic stimulus measures introduced by various economies had less of an effect, as the overall pace of economic recovery slowed. Under the circumstances, the Optex Group recorded strong results in Japanese and international markets throughout its business segments. For our first-half consolidated earnings, we recorded net sales of \9-.323 million (up 14.2% year-over-year) and operating income of \931 million (up 23.0% year-over-year), with ordinary income of \1061 million (up 42.4% year-over-year) and quarterly net income of \583 million (up 38.2% year-over-year). These results reflect higher revenues and profits for the second consecutive half-year period. Our net sales were basically on target with the forecast we made at the beginning of the fiscal year, and we significantly improved on our forecast for ordinary income and operating income.

In the Security Products Business, we recorded a year-over-year increase in net sales from strong sales of outdoor sensors in international markets, and the addition of net sales from U.S.-based subsidiary Fiber SenSys, Inc., which was added to our consolidated accounting in the second half of fiscal 2010. In the Automatic Door Sensors Business, we recorded strong sales in Japan while increasing our market share in overseas markets centering on Europe and the U.S. In the Factory Automation Products Business, we secured strong sales in Europe and Asia, driven by a recovery in capital investment in the manufacturing sector. We also recorded a year-over-year increase in net sales and profits in the Japanese market, from strong sales of products for the food, pharmaceuticals and cosmetics sectors, and of electronic components together with products for the LCD and solar cell industries.

In the second half of the fiscal year, we will continue to actively pursue business development in Japan and international markets. In the Security Products segment, we will ramp up our marketing of laser sensors in the U.S. market with the introduction of our own installer certification program, while developing new applications for laser sensors including in safety applications. Furthermore, we will accelerate our efforts to develop the Middle East market for fiber sensors manufactured by our Fiber SenSys subsidiary, and actively develop anti-terrorism applications for the Russian and Chinese markets. For the lighting sector, we will seek to expand sales by targeting energy conservation solutions for offices. (For more information, read the feature on page 3.)

In the Automatic Door Sensors Business, we expect to secure major orders in the second half of the fiscal year, from our marketing tie-ups with major distributors in Europe and the U.S. We will also develop the access control market for our tailgating intrusion detection system.

In the Factory Automation Products Business, we expect to continue to record strong sales driven by a recovery in demand in Japanese and international markets. For the Japanese market, we will make an even stronger push to expand our business by focusing on displacement sensors that directly connect to sequencers made by Mitsubishi Electric.

We have started to gain momentum with our mid-term management plan. Since realigning our corporate organization around four business divisions, we have begun the process of selecting areas of business for each business division to focus on in order to secure sustainable growth. We are also being more aggressive in pursuing international business development, by canvassing markets and marketing our products to emerging economies in Russia, China, Southeast Asia and South America.

In addition, we are making steady progress in developing products that target the low-end "volume market." Moving forward, we will seek to enhance productivity by further streamlining our administrative costs, so that we can achieve our goals of securing net sales of \30 billion and ordinary income of \5 billion within the next three years.

We are forecasting a full-year dividend of \30 per share in fiscal 2011. The new areas of business and new products that we have been developing until now are starting to germinate, and we will make certain to bring them further along in the second half of fiscal 2011 and secure new growth. The Optex Group can best facilitate the reconstruction efforts in Japan through our business activities and helping to restore the health of the Japanese economy. To our shareholders, we ask for your continued support and understanding as we move forward.