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Financial Results Conference Call - Q&A Transcript

Fiscal Year Ended March 31, 2020

Date and Time: 6:30-7:30 p.m. Monday, April 27, 2020

Please note that this document is not a direct transcript of the Q&A session from the conference call, but is a simple summary including additions and corrections at the discretion of the company. The results and forecasts are forward-looking statements determined by the Company based on currently available information that may include risks and uncertainties. Please be aware that actual results may vary significantly due to various factors.

1.Please explain the factors in the increase or decrease in the consolidated operating income for 4Q (3 months) ended March 31, 2020 compared to 3Q ended December 31, 2019.

The factors impacting the change in operating income are:

- Product mix +6 billion yen
- Fixed costs +2.5 billion yen
- Impact of foreign exchange +1.5 billion yen
- Sales volume variance -12 billion yen
- Restructuring charges (impairment loss) -7 billion yen
- Price reduction offset by streamlining, etc. -1 billion yen

As a result, operating income decreased by 9.6 billion yen.

2. Please explain the special factors in the fiscal years ended March 31, 2020 and the fiscal year ending March 31, 2021.

For the fiscal year ended March 31, 2020, we recorded impairment losses of 4.2 billion yen for Transportation and 2.3 billion yen for Optronics as restructuring charges. In the fiscal year ending March 31, 2021, royalty revenue is expected to be recorded in 1Q and 2Q.

3. Please explain the trends in the results of Information Fine Materials for the period from 4Q of fiscal year ended March 31, 2020 to 1Q and 2Q of fiscal year ending March 31, 2021.

With regard to polarizer for TV, due to progressing collaboration with Chinese licensees, we do not anticipate significant changes in sales. Regarding to non-TV polarizers and others, however, demand for tablet and notebook PC increased in the situation of the expansion of Coronavirus Disease 2019 (COVID-19). As for smartphone, orders have been firm at this point in time.

4. Please explain why the outlook for the 1st half of the fiscal year ending March 31, 2021 of the Information Fine Materials decreasing from the same period in the previous year.

Sales of polarizer for TV are expected to decline.
Sales of non-TV polarizers and others are expected to increase slightly overall. Sales of products for smartphone are expected to decline, primarily due to a decline in demand comparing with the same period of the previous year which had a rush demand in Chinese customer due to the U.S.-China trade friction and other factors. On the other hand, new demand for notebook PC and other products is expected to remain firm due to the progress of telework.
Demand for ITO film is expected to decline.

From the above, we anticipate a year-on-year decline in sales, but we expect an improvement in the product mix, in addition, we expect an increase in profit in Optronics due to an increase in sales of printed circuits.

5. Please explain why the company plans to increase sales of printed circuits for the 1st half of fiscal year ending March 31, 2021.

Demand for data centers is expected to grow over the medium to long term, partly due to an increase in telework resulting from the expansion of COVID-19. However, our customers' hard disk drive manufacturing plants are concentrated in South Asia, and their plants are currently shut down. As a result, this situation might be the downside for our revenue in the very short term. As for upside, a variety of needs for high-precision boards have begun to emerge. Due to these factors, we expect sales to increase in the 1st half of fiscal year ending March 31, 2021.

6. Due to the impact of COVID-19, demand for durable goods and automobiles may decline in the medium to long term. Despite these structural changes, please explain your medium to long term management philosophy for the Transportation Business.

Industrial Tapes are expected to make a significant shift to electronics related products. Although it is expected that it is not soon for car electronics related products to contribute to our revenue as a large portion. We will keep focusing on this region expecting future growth. Meanwhile, we will continue to fulfill our supply and social responsibilities in the structural materials and processed products business by increasing profitability through structural reforms.

7. Please explain your approach to shareholder returns.

The Company’s dividend policy is to ensure stable and fair returns to its shareholders.
The dividend amount for the next fiscal year cannot be determined due to rational forecasting for the year ending March 31, 2021 being difficult because of COVID-19 impact, however, we intend to maintain stable dividend. Dividend forecast is to be announced immediately when determined.

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