I am pleased to report our results for the first half of fiscal 2011, ending March 31, 2012.

During the period, production activities in Japan, which had declined after the Great East Japan Earthquake began to recover. However, the economy continued to face a challenging situation, reflecting a slowdown in exports due to the record strength of the yen and the effect of economic instability in Europe and the United States.

In the machine tool industry, domestic demand recovered moderately, and demand from emerging countries in Asia, especially China, was strong. However, uncertainty emerged because of the effects of the sharp appreciation of the yen in the second half of the period and monetary tightening in China, which had driven foreign demand.

In this environment, Tsugami Corporation (the “Company”) and its affiliates (the “Group”) bolstered production in China and strove to cut production costs. However, the Group was not able to avoid the effect of the sharp appreciation of the yen.

As a result of these initiatives, net sales for the first half of the fiscal year under review came to 16,664 million yen,(decreasing 17.8% from previous year.) Operating income for the first half amounted to 1,397 million yen (decreasing 44.0% from previous year). Ordinary income for the period totaled to 1,221 million yen (decreasing 47.9% from previous year). Net income for the period totaled to 873 million yen (decreasing 57.2% from previous year).

The Company decided to pay interim dividends of 5 yen per share according to its initial plan and plans to pay year-end dividends of 5 yen per share (annual dividends of 10 yen per share).The Company will continue to pay stable dividends based on its policy of returning profits to shareholders in light of its operating performance, while strengthening its business structure.

The Group remains committed to consistently enhancing its business performance through higher sales, improved production efficiency and cost cutting, and offering new products that fully meet customer requirements, while enriching the services it provides. Aiming to enhance customer satisfaction, we will devote all of our efforts to management, so that we can provide reliable products that our customers need.

We respectfully ask for the continued support and encouragement of our shareholders.

November 2011
Takao Nishijima Chairman and CEO