In Japan’s economy during the first half of this fiscal year, although manufacturing operations considerably fell due to the Great East Japan Earthquake, which occurred in March 2011, a movement to a recovery in manufacturing and exports were observed in line with the recovery of supply chain. However, the movement was not enough to raise the total economy partly due to the electricity restriction regulations implemented in summer and concerns about overseas economic slowdown.

Under this business environment, we have made a start of the “2013 Medium-Term Business Plan,” a new business plan for the three years from April 2011 to March 2014. We made efforts to strengthen our technical development capability, and concentrated on expanding sales of high-function, high value-added products in each of our focus areas, namely life sciences, electronics/IT, and environment/energy. As a result of these efforts, on a consolidated basis, we posted higher net sales, ordinary income and net income than in the same period of the previous fiscal year.

Looking ahead to the second half of the current fiscal year, we expect the business environment surrounding the NOF Group will continue to be severe since, in overseas, there are concerns about negative effects of the tight-money policy in China and financial problems in Europe and North America; and, in Japan, there are many factors to dampen the economy, such as an appreciation of the yen, deflation, and electricity restriction regulations, and a sign of more serious phenomenon of Japan’s industrial hollowing is seen.

Market needs and consumer values are diversifying further more as seen in heightened interest in environmental issues after the unprecedented earthquake disaster and boosted demand of products related to environmental protection and energy saving. The NOF Group will strive to achieve a quantum leap as a functional materials manufacturer and realize to become a business group having trust from and strong presence in the market as continuing to provide unique products that are sought by the market and consumers in our three focus areas.

In all our endeavors, we ask all shareholders and investors for their continued support and guidance.
December 2011