Lamp Manufacturer Price Increase - July 1, 2011

We value our role as your lighting supplier and believe it is important to inform you of industry events that will affect your business. Todays lighting market is faced with tremendous volatility due to the scarcity of Rare Earth Oxides and the hyperinflation associated with those elements.

Rare Earth Oxides are a critical component in the making of the phosphors used in linear and compact fluorescent lamps. China controls the over 95% of the global market for these Rare Earth Oxides. The Chinese Government has imposed taxes for environmental clean-up and imposed limitations on the amount of oxides available for export. The combination of limited production and imposed taxes to mine and produce these elements has led to unprecedented cost increases that started in January of this year.

Another complicating factor is that varying phosphor mixes at the individual product level affect the amount of increase for that product differently. It is not a flat increase across all products, but rather a variance by each product depending on lamp color, lamp tube diameter, and lamp wattage.

As a result, every major lamp manufacturer (GE, OSI, Philips, TCP, Maxlite, etc.) has announced scheduled price increases that will begin on July 5th and will likely continue at monthly intervals for the foreseeable future through 2012. The manufacturers have stated they will do all they can to manage and control the price increases by tying them only to the inflationary pressure associated with the rare earth elements.

FSG is committed to helping our customers best navigate these volatile times. We are investing in more inventory to ensure that you are not affected by the scarcity and we will only be passing on the percentage cost increase on a SKU by SKU basis as they occur.

We have also equipped your account representative with all of the industry data regarding this matter and they will be your best resource for staying current on the situation, as well as how to best manage your lighting products to minimize the impact to your business

As always we value your business and will do all we can to continue to earn it during these challenging times.