Despite concerns regarding the impact of the Great East Japan Earthquake on the amusement device market, which is the primary market for the Group at present, according to our analysis, this impact is viewed to be limited as there have been signs of recovery in demand for new units of amusement devices at amusement facilities after a temporary downturn. However, owing to consumers still opting persistently for budget saving due to a decrease in personal income and uncertainties about employment conditions, there is still a strong tendency to curb amusement expenses. As such, a harsh profit environment persists for amusement facilities. For this reason, demand for new units of amusement devices also concentrated on a few models such as well-established models and major projects that can attract many customers, and continued to hover at low levels overall, according to our analysis. Under such circumstances, the Group concentrated its efforts on promoting the sale of various products, focusing on Graphics LSI products targeted at the amusement device market, which are the Group’s mainstay products (including an integrated product that fulfills multiple functions such as sound-generating and LED driver functions). Furthermore, the Group has been expanding the adoption of Graphics LSI products toward the embedded system market, excluding the amusement device market, and also concentrated its efforts on product development in the field of Digital Convenience Radio by NEW ZONE CORPORATION (hereinafter “NZ”), a wholly-owned subsidiary. As for the Group’s mainstay Graphics LSI products targeted at the amusement device market, although sales volumes were down year-on-year and remained low at approximately 580,000 units due to factors such as the re-use of amusement device components including the Company’s products being prevalent on a full scale, the migration from conventional products to “AG4” (high value-added LSI) has been progressing steadily. Regarding other products targeted at the amusement device market, the sales volume of Sound LSI products fell year-on-year due to the migration to integrated function products and the demand trends among customers. However, the sales volume of LED driver LSI products rose greatly above the level in the previous corresponding period thanks to the increase in the number of companies using these products and strong sales of devices equipped with these products. Moreover, sales of Graphics LSI products targeted at embedded systems market were at same level as the previous corresponding period, due to the demand for industrial equipment aimed at countries overseas. NZ, which became a consolidated subsidiary from the first quarter of fiscal 2011, has no net sales for this second quarter. As a result, for the second quarter of fiscal 2011, the Group recorded net sales of 3,932 million yen. As for selling, general and administrative expenses, 933 million yen in R&D expenditures and 1,452 million yen in selling, general and administrative expenses on the whole were recorded due primarily to such factors as the recording of prototype development expenses for next-generation “AG11” products targeted at the embedded systems markets and LSI products targeted at Digital Convenience Radio at NZ. In addition, loss on valuation of membership of 10 million yen in extraordinary losses was posted for the second quarter of fiscal 2011. Consequently, for the second quarter of fiscal 2011, the Group posted operating income of 608 million yen, ordinary income of 634 million yen, and net income of 372 million yen.   Income Statement (¥1 million)   2011/3 1st half Sales ratio 2012/3 1st half Sales ratio yoy Net sales 3,950 100% 3,932 100% -0% Gross profit 2,139 54% 2,061 52% -4% Operating income 655 17% 608 15% -7% Ordinary profit 662 17% 634 16% -4% Net profit 428 11% 372 9% -13% Balance Sheet (¥1 million)   2011/3 1st half Compo -nent ratio 2012/3 1st half Compo -nent ratio Current assets 13,230 96% 12,548 95% Fixed assets 616 4% 676 5% Current liabilities 2,500 16% 969 7% Long-term 12 0% 13 0% Net assets 12,865 93% 11,850 90% LIabilities and Net assets 13,846 100% 13,224 100%