First and foremost, as President and CEO of Seiren Co., Ltd., I would like to thank you for your continued support over the past year as I proudly present you with the business report for our 135th business term, which lasted from April 1st, 2006 to March 31st, 2007.

Seiren Group's consolidated net sales achieved a two-digit increase from the previous term with operating profits and recurring profits both having risen over four consecutive terms to reach an all time high.

Halfway through the year corresponding to Seiren's 135th business term, Japan was confronted with a drastic increase in the price of crude oil; the price, however, stabilized later in the year, permitting the Japanese economy to set a record in November for having the most prosperous business environment since World War Two. Positive economic conditions have prevailed, with vigorous capital investment, improved employment, increased consumer spending, increased exports supported by the depreciation of the yen, and the American economy's soft landing, among other factors. Yet at the same time, the high price of crude oil is an undeniable fact, and it is starting to have a significant impact on various economic parameters from the energy cost to the price of raw materials. In turn, this is clearly leading to increased manufacturing costs and a lower rate of profit.

In addition to such increases in cost, the Seiren Group has also been affected by the declining product prices in the automotive and electronics markets. We have been forced to respond to requests for a dramatic decrease in price for items such as automobile upholstery and EMI shielding material.

In response to such conditions, the Seiren Group has not only dedicated itself to reducing cost, starting with its energy conservation policy, but has also adopted for its core five business areas the following three key business strategies: "Promoting an IT operational structure and direct distribution", "Expanding operations to non-clothing and non-textile fields", and "Pursuing further globalization", under the motto "Assertive Management and an Assertive Workforce". Furthermore, we have continued a vigorous "Strengthening of business structure" based on our unique set of five principles: A Theoretical Approach, Observance of Rules, Field Visits, Direct Observation, and Fact-Based Analysis.

We have specifically implemented these three key business strategies in the following ways. In the area of "Promoting an IT operational structure and direct distribution", we have availed ourselves of our integrated production and distribution structure, as well as our digital production system "VISCOTECS®", in order to fully promote our OEM manufacturing business and our SPA (Specialty store retailer of Private label Apparel) retailing business. We have also gone to great lengths at KB Seiren, LTD., to promote capital investment in integrated production and to reform business structure, establishing a corporate system for design, manufacturing, and sales from the point of view of the end user. As for "Expanding operations to non-clothing and non-textile fields", demand for massage chair upholstery slowed, profits from bedding declined, and sales of our house wrapping material were sluggish. Overall, however, our non-clothing and non-textile businesses maintained a firm pace, thanks to strong sales of our EMI shielding material "PLAT®" and our composite conductive fiber "BELLTRON®", increased demand for adhesive patches and adhesive tape, and improved profits from our cosmetics business "COMOACE®". Finally, in the area of "Pursuing further globalization", our automotive upholstery material business struggled with a lower rate of profit due to falling market prices and a loss of product quality, but by aggressively increasing our production capabilities at our six global manufacturing sites in response to the needs of Japanese automotive manufacturers, we were able to set a new overall record among our foreign subsidiaries for both net sales and operating profits. We have also had great success with our cost reduction policies, such as our "Revolutionary VA (Value Analysis) Activities", "Seiryu Activities", "'Found something?' Campaign" "Small Group Based Reform Activities" and "One Rank Up Campaign".

With the success of these business strategies, our net sales for the current business term increased by 10.2% over the previous term to 111,683 million yen, and recurring profits rose by 16.4% to 7,943 million yen. Net profits during the current term, encountering no special gains or losses, showed a great increase of 26.3%, reaching 4,494 million yen. In sum, we successfully achieved increases in income and profit over four consecutive terms, with net sales, operating profits, recurring profits, and net profits all reaching record highs.

Taking a giant leap forward and embracing new challenges

Between increased employment, rising nominal wages, and an upturn in local economies, the economy in Japan on a national level can be expected to continue along a moderate expansionary trend. However, it is hard to tell exactly what will happen, with so many uncertain factors such as the Upper House election planned for this summer, and changes in the price of crude oil, the exchange rate, and interest rates. Similarly, developments in the global economy, including economic trends for the United States and the BRIC nations, will likely continue to be difficult to predict.

Given these conditions, our Seiren Group will retain a healthy sense of crisis as we foster a steady policy of "Risk Management", followed in turn by our philosophy of "Assertive Management".

Our "Risk Management" policy has two major objectives. First of all, we will adopt thorough cost reduction and energy conservation measures. We will make every effort to reduce costs by promoting a systematic policy of avoiding unnecessary use, disposal and waste, while reviewing our existing heat retention, waste heat recovery, fuel conversion and manufacturing processes and systems to improve our yield rate and increase our production efficiency. Our second objective is to respond to the urgent need to hire and train new workers, a need prompted by the rapid business growth and diversification going on within the companies in our group, as well as by the chronic shortage of labor that is emerging as baby-boomers begin to retire and Japan's population starts to decrease. We will face this challenge using all means possible, including aggressive hiring of new employees, rehiring, and implementation of other policies.

In the area of "Assertive Management", we will carry on with our business strategies of "Promoting an IT operational structure and direct distribution", "Expanding operations to non-clothing and non-textile fields", and "Pursuing further globalization". To this end, we will begin three new business projects in the upcoming year. First, in our conductive material business area, we will turn the mass production of film mesh, the next generation of EMI shielding material, into a reality by constructing new factories. Second, we will broaden the applications of "VISCOTECS®" beyond textiles to include metals, ceramics, glass, and wood; subsequently, we will endeavor to develop new products and place them on the market. Third, with regards to fashion, interior, and automotive upholstery, we will strive to construct factories and begin mass production of non-textile and other new materials such as leather, including its artificial and synthetic varieties.

To promote the "Strengthening of business structure", we will continue to implement our unique set of five principles and our "Seiryu Activities", while launching what we call "One Rank Up Campaign" among our employees to consistently raise their work performance up to the next level, thereby obtaining sure results from their work and increasing added value. We are also proceeding with projects to commemorate the 120th year of our company's founding in 2008. One such project was the opening of a Technical Center in 2006; in January of 2007, we also began construction on a new corporate headquarters building, which we plan to finish by January of 2008.

Finally, allow me to provide an overview of our company's policy on dividends: as we always have, we place the utmost importance on returning profits to our shareholders, and we will continue to provide steady dividends from now on. While targeting a dividend payout ratio of 20-25%, we plan to determine the exact rate of our profits distributed as dividends to our shareholders through a careful, comprehensive reflection upon our company's continued stable growth, business results, financial conditions, dividend yields, and other such factors. During the current business term, we have set the final dividend at 7.5 yen per share, which combined with the mid-year dividend of 7.5 yen per share comes to a total of 15 yen per share for the year. We expect a dividend of 15 yen per share for the year during the coming business term as well.

With the policy of "Taking a giant leap forward and embracing new challenges" over the next term, we will strive not just to survive but to succeed, setting ever higher goals and continually increasing the value of our company.