A Happy New Year to all of you in the Tokyo Electron Group.

Starting on the threshold of the 21st century, I feel certain that each of us is bursting with hope for what this new era will bring. The information technology (IT) revolution, which forms the axis for the rapid proliferation of such products as personal computers, cellular phones, Internet-centered network devices, and digital appliances, has taken off at a truly fierce pace. In addition, the Asian economy-which influences the global economy-has recovered and is now entering a period of growth, with the result that the markets in which our company is involved, semiconductors and LCDs, and the information and communications fields, have been expanding rapidly. Global demand for semiconductors has shown serious growth, propelled by expansion in these markets, with the semiconductor market topping 20 trillion yen, about 40% over the previous year. Faced with these conditions, all manufacturers of semiconductors and LCDs are engaging in large-scale investment at home and abroad. Investment in equipment and facilities for semiconductors has grown at the dramatic rate of 70%, or more, since last year.

In response, the Tokyo Electron Group has performed very strongly. Interim consolidated sales for the current fiscal year were 328.1 billion yen, ordinary income was 53.9 billion yen, and interim net income was 29.4 billion yen. This represents a year-on-year increase of 79% in sales, 603% in ordinary income, and 834% in interim net income over the same period last year-or year-on-year increases of about 1.8 times for sales, 7 times for ordinary income, and 9.3 times for net income, respectively-amounting to record performance interim figures. I would like to take this opportunity to express my deepest appreciation for the extraordinary efforts made by all our employees the world over to achieve our goals. Projected performance for this entire fiscal year is 710 billion yen in consolidated sales, 110 billion yen in ordinary income, and 61 billion yen in net income for the current term. These figures represent projected year-on-year increases of 61% for sales, 225% for ordinary income, and 207% for net income in the current term, all of which are projected to reach their highest levels ever in our company's history. I have high expectations for still greater contributions from all of you in achieving these goals.

It is said that the IT revolution is only just beginning. Looking back at the pace with which IT has permeated our society over the past year, I think we can all perceive the remarkable speed with which technological reformations have advanced. Semiconductors are an essential part of core technologies, and I am confident that we can look forward to truly vigorous developments over the medium and long term. In terms of the much talked-about "Silicon Cycle," the coming decade will see increasing demand for devices with comprehensive application, such as digital appliances and PDAs, as opposed to the 1980s, which was the era of the mainframe, or the 1990s, which was the era of the personal computer. In this way, I believe that the coming decade will differ considerably from the previous 20 years, and it will be necessary to closely watch what is coming, and not be caught up in what has gone before. Nor can there be any doubt that, in these times of worldwide reformation and upheaval, it is technology that will be the source of value and technology that will lead the way. In these times, companies are being strictly judged on whether they have the ability to bring revolutionary new technologies to the market at the best time, and the gap between those corporations, that will lead the way in the world, and those that will follow, is becoming very distinct.

Seeing the movement of the Tokyo Electron Group as a whole from this viewpoint, the semiconductor production equipment field, computer networking field, and electronic components field are all bringing together new products and technologies and making great strides forward in accordance with the demands of the coming era.

In the field of semiconductor production equipment, as increasingly advanced and sophisticated technologies as well as investment in 300mm production equipment and facilities comes into play, our company has unveiled leading products and technologies at Semicon Japan, at the end of last year, which included CLEAN TRACK ACT 12 Spin On Dielectric (SOD), a system for continuous coating, bake, and cure processing of low k material; TELFORMULA, a system for mini-batch processing with very high-speed heating and cooling; Telius, a new concept etch system for use at the 300mm wafer processes, and its companion CVD system, Trias, the PR200Z organic cleaning system; software for Advanced Process Control; new measurement verification systems; and new plating technologies. We have high expectations for the future growth of all of these systems, and end users are already speaking very highly of them.

In the field of computer networking, business has been buoyant for new products accompanied with the increasing speed and volume of information offered over the Internet. Examples include products from such companies as F5 Networks and Extreme Networks, which are essential to building Internet infrastructure, and products from nCipher, which are necessary for improved security. Storage Area Network, or SAN, technology, which processes large volumes of data without increasing the load on LANs (Local Area Networks), is also drawing attention, driving increased sales of related products from such companies as Brocade Communications Systems and Veritas.

In the field of electronic components handled by Tokyo Electron Device, new products for use in digital appliances, such as communications infrastructures and cable adapters for household LANs and set-top boxes contributed to sales, in addition to the core semiconductors made by Fujitsu, Motorola, Xilinx, and so forth, and we expect further sales improvements from them in future. With regard to development under our own brand, we have managed to offer products to the market that have matched the requirements of the times, by utilizing our own unique marketing and technical strengths.

In the area of field services, the information system for "FE" business processes, which has been developed and operated primarily by Tokyo Electron FE, has entered the operational stage. In addition to allowing for amplification of content, including enabling analysis of service operations through accumulated data, the ability to get information precisely via knowledge bases, and knowing, in realtime, the condition of each and every machine, by individual customer, we have significantly improved operability and accessibility by making it Web-enabled. We are also aggressively pursuing such areas as e-commerce and e-diagnostics. I want to see us all work hard to get these new products and technologies seriously adopted by customers, and for them to become number one in product share in their respective markets.

For the Tokyo Electron Group to be truly recognized as a Globally Excellent Company worldwide, we must make further improvements to our company quality, in addition to the establishment of new technology that I have just discussed. Now I would like to identify a number of important areas in which such improvements are now being carried out.

The first area is the taking of aggressive action, from a variety of points, to be a corporation that shows consideration for environment, health, and the safety. And with regard to safety in particular, we inaugurated "Safety 2000 Basic Safety Education," a consolidated training program for everyone connected with the Tokyo Electron Group, from top management to rank-and-file employees, extending also to the employees of Tokyo Electron Group partner companies, to impress the importance of safety firmly upon the group as a whole. As I said last year, with the technological reformation and industrial changes happening on a worldwide scale, and the rapid environmental changes that they are bringing about, the risks to environment, health, and the safety are becoming unimaginably great, and thus are becoming an element that will greatly affect our business. It is necessary for each of us to act with firm awareness of this situation, however, to translate this awareness into overall achievement. I want all of us to put the shared knowledge that we have learned in safety training to create a workplace environment that further increases safety awareness in all companies and departments.

The second area is policy regarding the establishment of a business management organization with the objectives of operational transparency and full-fledged corporate governance. In the management structure reforms of April 1998, we made a clear distinction between the functions of the board of directors and those of corporate management, and established a new Corporate Senior Staff (CSS) system, which is in charge of corporate management. We have also positioned Business Units (BU) by product as vertical management structure, operating through companies of the Tokyo Electron Group in countries worldwide, to pursue more thoroughly our goals of "Quick Decisions, Small Operations, and Flat Organization." Furthermore, we have established a "Compensation Committee" within the board of directors that determines the president's compensation, and the compensation paid to the president and the directors (corporate officers) of the company are disclosed. In November of last year, we established a "Nominating Committee" within the board of directors that engages in such proceedings as selecting candidates for the board of directors, who are elected at the shareholders' meeting, as well as selecting the candidate for the president of the company, who is elected at the board meeting. Also, in addition to adopting the policies of stock options and an incentive plan based on consolidated performance to drive further optimization of corporate value, we have expanded stock options to make them available group-wide and worldwide as well. At this time, Tokyo Electron's overseas sales are in excess of 70%, and about 35% of its shareholders are now outside Japan. Given these facts, it is very important that we continue to secure and maintain transparency and objectivity in management, and formulate policy for increasing corporate value, with corporate governance uppermost in our minds. We will be studying and implementing such policies in all areas in future.

The third area is the building of a "muscular" corporate structure that is capable of thoroughly optimizing the efficiency of company assets, while also being sensitive to changes in the external environment. One part of this is the "Total Cost Down Project," which the manufacturing department is carrying out to cut in half the cycle time for all processes, from order processing to on-site delivery. And a "reformation project" is underway in the administration department to make it into a more efficient organization, one which will accomplish our company's high-performance global headquarters' functions. We must motivate ourselves even more this year to achieve these goals, and have them applied across the group as a whole.

The fourth area is the advancement of globalization. The globalization of sales, services, development, manufacturing, management and administrative functions, which we began six years ago, is making great strides through all our efforts in the Tokyo Electron Group. With 70% of our total business now overseas, and one quarter of our total workforce located outside Japan, we have not been able to infuse all parts of our organization with sufficient "dynamism," "vitality," and "responsiveness." It is necessary for group executives to push ahead with even greater globalization efforts, while also focusing on new frameworks, and simultaneously keeping uppermost in their minds how to increase the motivation of the employees operating on the front lines of our business.

In the 21st century, our society will develop increasingly sophisticated information infrastructures, advancing into realms that we cannot imagine now. Business models of types currently unknown, but which will certainly differ from those that have come before, also lie ahead. I will now discuss the items that we must successfully execute this year if we are to strengthen our vitality and creativity as a corporation for the times to come.

The first item pertains to the individual level. In the coming era, with heretofore unknown business models lying ahead, there will be a consistent demand for ways of looking at things from new perspectives, and for decision-making ability at the individual level as well as at the corporate level. To achieve this, there will be a demand for individuals who can think and act independently, who can consider and decide for themselves how to respond to new circumstances. Waiting for instructions will suffice no longer. Also in demand will be a "spirit of challenge" and an "ability to act," to boldly take on new things without fear of failure. First of all, take the chance. If you make a mistake, fix it promptly. Courage and speed of action of just this sort are important. And it is even more important to have "conceptual flexibility," that is, to be able to see the various changes that will occur as opportunities and try out new ways of thinking and acting without being caught up in established ways of thinking. We must also have rapid communication for these new circumstances, new ways of thinking, decisions and results between and among groups, as well as beyond them. We simply must not keep these findings to our individual selves. Rather, we must air them in the open. These concepts have always been part of the spirit of the Tokyo Electron Group since its founding, and I want each and every one of you to act with this philosophy in mind.

The second item is proceeding with integration. As you can all see, barriers between industries and technologies are being cast away, and consolidation, restructuring, and mergers are being carried out at a remarkable pace. In this newly network-centric society, which revolves around the Internet, a wide range of information and technology can pass between large numbers of people without obstruction, and this provides a foundation for the creation of new values and new methods through the blending of so-called "Best Known Methods." New technologies and processes are being created, or else demanded, without being held back by what has gone before, this applies to the products and manufacturing processes of our customers as well. Naturally, vast bodies of specialized knowledge and technology lie at the base of these various fields, but in the here and now, we are at or approaching the limits of what they can achieve by themselves. The integration of the development, manufacturing, management and service areas that our company is currently undertaking is not simply for offering integrated solutions to our customers. Rather, it is because new technologies and operating methods will be created or fused together, and value will either shift or be created anew in the midst of this integration. I ask that each and every one of you carry out the integration effort determinedly, and with conceptual flexibility from this viewpoint.

Lastly, as you are all already aware, last summer we solicited suggestions for our new corporate message from the entire global Tokyo Electron Group. Based on the responses we received, we decided on "People. Technology. Commitment." to replace our existing message of "Customer Satisfaction." We first began using this new message, together with our new corporate logo design, itself based on the infinity symbol , at the aforementioned Semicon Japan held at the end of last year. At the same time, we also formulated a corporate statement that would more clearly articulate the specific terms that we wanted to communicate in this message. As we stand on the threshold of a new year, I would like to take this opportunity to present that message to you anew:

People
TEL was founded on a simple philosophy: the prosperity and respect of our customers, partners, shareholders, and employees. We encourage community involvement, exercising responsibility by promoting safety and environmental conservation. As a people-centered company, we strongly believe in encouraging the creativity and unlimited potential of people. With offices around the world, TEL respects all cultures and their unique values. Accordingly, TEL embodies dedicated people with a spirit of service and a passion for their work.

Technology
TEL provides a wide variety of highly competitive products, utilizing original development and technological capabilities, and an unparalleled service system. These factors have propelled us to leadership in the technology marketplace. In the future, we are determined to keep ahead of industry developments by designing technologies for the next generation and beyond. Furthermore, we will continue to provide our customers with the value they expect by producing original technology and the highest-quality products.

Commitment
We firmly believe that our future is built on a foundation of trust. It is essential that we make efficient use of our resources to continue leading the digital age and that we take responsibility to fulfill our promises, without fail. To that end, we are firmly committed to the future success of our customers, shareholders, partners, and local communities.

As you can see, this corporate message clearly shows the corporate stance of the Tokyo Electron Group for the future, with regard to both those within as well as without the company. I ask that all of you act with sufficient understanding of the meaning of this new message, which is itself based upon the policy of "Customer Satisfaction" that has been the fundamental policy of the Tokyo Electron Group since its founding.

And finally, let me wish you all a Happy New Year, with best wishes for the good health of you and your families, and hopes that 2001 will be a year of ever greater accomplishments for the Tokyo Electron Group.