Q1.

What are the factors involved in the increased revenues and profits in the financial forecast for FY2005 (Apr.2004-Mar.2005)?

A1.

Due to the continued strong appetite of semiconductor/FPD manufacturers for investment in plants and equipment, we expect net sales to grow during the current fiscal year as well. In addition to this, progress is also being made in reducing fixed costs, as well as in manufacturing and other costs, thanks to the structural reform. Taking this into consideration, we expect the gross profit margin to rise by around 2 percentage points compared to the previous fiscal year.

Q2.

How far do you expect the headcount reduction carried out during FY2004 (Apr.2003-Mar.2004) to bring benefits during FY2005?

A2.

Assuming that headcount reduction of 1,000 employees was not implemented, we estimate that personnel expenses totaling 8.2 billion yen will be incurred throughout the current fiscal year. The factors for increases in personnel expenses during the current fiscal year compared to the previous year include reducing the discount rate for calculations of projected retirement benefit obligations by 0.5 percentage points to 2.0% (approx. 2 billion yen) and planning to increase the amounts of employee bonuses (approx. 1 billion yen) because of improved business performance.

Q3.

For your FY2005 sales forecast, sales growth in Japan is listed at around 6%, but isn't this figure too low?

A3.

The result of FY2004 shows that sales grew by more than 45% over the previous year. Taking this into account, we set growth rate low, while we expect the amount of net sales to reach a high level. Based on a comparison of calendar year, instead of fiscal year, we estimate that the growth rate of net sales for the SPE division in CY2004 will surpass the previous calendar year by around 50%. As the Japanese market has recovered since the previous fiscal year, we anticipate that the growth rate for domestic sales will be lower than for other regions, but our current forecast may be slightly conservative.

Q4.	Deferred tax assets were written off during FY2003 (Apr.2002-Mar.2003). Does this have any effect on net income for FY2005?
A4.	Part of the deferred tax assets was written off and reported as expenses for FY2003. We have no plan to resume it for FY2005, and based on this we envisage no effect on net income.

Q5.

Given the strong performance of the semiconductor industry and semiconductor/FPD manufacturers' investment plans, isn't financial forecast for FY2005 too conservative?

A5.

As you pointed out, favorable winds are blowing for the whole industry. For the first half of FY2005, our forecast is likely to be highly reliable given the current order backlog. We are also receiving many inquiries from manufacturers for the second half as well, but at present, many of them are still in the early stage of planning and still have not fully reflected within the financial forecast. We naturally aim for an ordinary income margin of 10% or more. However, we consider suppliers' request for price hikes due to soaring prices for materials a negative factor, and this is why our financial forecast is slightly conservative.

Q6.	Is major extraordinary gains/losses included in the financial forecast for FY2005?
A6.	No such gains/losses are included.

Q7.	What is the effective corporation tax rate used in the financial forecast for FY2005?
A7.	So far we have not applied the consolidated tax payment system. Consolidated companies are divided into those that apply tax benefit accounting and those that do not this year. The effective tax rate for companies that apply tax benefit accounting is about 40% while that for companies that do not apply tax benefit accounting is practically 0% due to the effects of deficits brought forward.

Q8.	Orders accepted during the Jan.-Mar. 2004 period was down from the preceding quarter. Was there any change in the environment?
A8.	The results for order accepted during the Oct.-Dec. 2003 period include orders that had been planned for the Jan.-Mar. 2004 period but were placed earlier. Orders accepted during the Jan.-Mar. period, which totaled 146.9 billion yen, reached a high level, even compared to the previous peaks.

Q9.	At the financial announcement for 3Q 2004, you commented that orders for the Jul.-Sept. 2004 period might grow. Is there any change in this outlook?
A9.	There is no major change in the outlook at present, but we expect orders that have been planned for the Jul.-Sept. period may be placed earlier. Recently momentum of demand remains strong, and it is becoming less likely that orders for the Apr.-Jun. period will decrease. By region, we feel Japanese and Taiwanese manufacturers have strong motivations to invest.

Q10.

What are the prospects of orders for FY 2005?

A10.

For the first half of FY2005, we expect orders will continue to reach on a quarterly basis, a level comparable to the Jan.-Mar. period of 2004. Semiconductor manufacturers have aggressive investment plans for the second half as well, and no negative factors are noticeable at present. We reckon that around July or August, manufacturers will make their investment plans for CY2005 clear after determining possible developments in the semiconductor market for the mid-CY2005 and thereafter.

Q11.	Will the implementation of headcount reduction involving 1,000 employees have an effect on increased production?
A11.	Headcount has been reduced compared to FY2001 (Apr.2000-Mar.2001) when net sales reached their peak, but the manufacturing capacity for facilities remains, and it is fully possible to respond to demands to increase production by shortening manufacturing lead-time.

Q12.	With respect to coaters/developers, TEL's key products, we hear that your competitor's products are performing well. Is this having any effect on TEL's share of the equipment market?
A12.	We hear that new coaters/developers from our competitor made a good start, but we maintain a roughly 90% share of the 300mm equipment market. Rather than aiming to maintain our market share at this level, we will strive to maintain a high profit margin and also hold a market share of 80% or higher continuously.

Q13.

What are the results for accounts receivable turnover for FY2004 and future prospects of the indicator?

A13.

The accounts receivable turnover for FY2004 was 159 days, slightly longer than the average, partly due to the effects of increased sales. We recognize that accounts receivable should be collected earlier as part of our structural reform, and some of the orders received in CY2004 offer earlier payment terms. In fact, our efforts to collect accounts receivable earlier will start to bring effects during FY2005. The negative factor is that the Japanese market, in which it takes long to collect accounts receivable, continues to be strong and this is expected to more or less affect the turnover of accounts receivable. Overall, however, we will continuously strive to shorten the time required for collection of accounts receivable.