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Q&A of Conference for the Medium Term Management Plan in 2006

The following includes questions and answers at the Conference for the Medium Term Management Plan on March 30, 2006

Earnings and Related Matters

Q:Please discuss your consolidated targets for the year ending March 31, 2009.
A:

We expect to achieve ¥900 billion in net sales, and ¥90 billion in operating income. If we were to emphasize one of these approaches over the other, we would increase income. Operating income to net sales ratio of 10% is merely the current signpost in our ongoing quest to increase this ratio even more.

Q:What is your consolidated net income estimate for the year ending March 31, 2009?
A:

We expect consolidated net income for the period to be about ¥50 billion. At this time, we do not anticipate additional extraordinary gains or losses.

Q:Could you provide a breakdown of R&D expenditures?
A:

We release no such figures, but as we continue working on new basic technologies, we anticipate that a growing share of our R&D expenditures will be applied to Imaging Company developments. Our R&D spending up to this point mostly targets Precision Equipment Company investments.

Q:What plans do you have to return profits to shareholders?
A:

We consider it important to pass profits along to our shareholders, and plan to continue distributing profits while seeking a favorable balance between dividends and business performance. Among the various approaches to looking after shareholder interests, we could increase dividends, for example, or utilize profits for increased business investments and research & development. Or we could increase shareholder value by reducing interest-bearing debt to strengthen finances. We consider and balance all of these factors in determining dividends and fulfilling our responsibilities to the various interests involved.

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Precision Equipment Business

Q:Could you provide any information on the competition in ArF immersion scanner?
A:

Nikon shipped the NSR-S609B (NA 1.07) scanner in January 2006. For the first time in the world, the NA of the projection lens is in excess of 1.0. The more ICs produced by this scanner appear on the market, the more Nikon's superiority in Immersion Lithography will be assured.

Q:The road map mentioned an alternative to ArF immersion scanner. Can you tell us more about that?
A:

We are exploring several ideas, but at this time we are unable to release specifics. All of our ideas involve scanners using a light source.

Q:Are you able to provide any details on Nikon's LCD exposure systems?
A:

Our LCD exposure systems employ an original multi-lens scanning method and promise greater benefits for applications involving the manufacture of large-size LCD panels. In fact, the larger the size of the panel, the more Nikon's superiority in LCD exposure systems becomes clear.

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Imaging Products Business

Q:How do you view the second generation of digital cameras?
A:

If first-generation digital cameras represented a shift from film to image sensors, the second generation can be seen as a giant leap in technical innovation, delivering major improvements in digital performance and systems.

Q:Please comment on your competition with consumer electronics firms in the digital SLR market.
A:

Nikon SLR cameras are widely acknowledged as being of superior quality and reliability. These successes are the result of expertise accumulated by Nikon in optics, optical sensing, cameras and many other areas in the half of a century since we started to produce film SLR cameras. Our technologies are our core strengths; they're not something that can be achieved overnight. By constantly building on these technologies, Nikon is in strong position to maintain its pioneering leadership in the digital SLR camera field.

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Instruments Business

Q:What plans do you have to increase profits?
A:

We are working to shorten production and development lead times by 30%, and to reduce manufacturing and development costs. We are also reviewing logistics systems as a means to improve efficiency and increase profits.

Q:What prospects do you see for the biological microscope business?
A:

In the biological microscope business, we are shifting toward high value-added products and system solutions from the conventional microscope-focused business. We also plan to take advantage of our biological microscope technologies to make new inroads in biosciences fields with strong growth potential.