Annual Report 2009
For the Year Ended March 31, 2009

PROFILE

Tokyo Electron Limited (TEL) is a world-leading supplier of semiconductor production equipment (SPE) and flat panel display (FPD) production equipment. We provide a broad lineup of
products that offer superior process performance and high productivity and related services
to semiconductor and LCD panel manufacturers around the world. Additionally, photovoltaic(PV) cell production equipment has been in the product lineup since 2009.
An unwavering commitment to customer satisfaction that dates back to our founding in
1963 has cemented our position as the market leader. Our competitive strength lies in ourcapability to proactively and precisely identify real customer needs and respond to them with
cutting-edge technology and products.
With a global network that spans Japan, the U.S., Europe and Asia, we are opening up new
frontiers for digital networks by contributing to enhancing our customers’ production lines
through untiring dedication to technology innovation.

Contents

1
2
4
10
12
14
17
18
20
21
48
49

Consolidated Financial Highlights
To our Stakeholders
Management Interview
Tokyo Electron At a Glance
Research and Development
Corporate Governance
Board of Directors, Statutory Auditors and Executive Officers
Environmental, Health and Safety Activities
Intellectual Property Report
Financial Section
Group Companies
Investor Information

Disclaimer Regarding Forward-looking Statements
Matters discussed in this annual report, including forecasts of future business performance of Tokyo Electron, management strategies, beliefs and other statements are based on­­Tokyo ­Electron’s assumptions in light of information that is currently available. These forward-looking statements involve known or unknown risks, uncertainties and other factors that could
cause actual results to differ materially from those referred to in the forward-looking statements.
Factors that have a direct or indirect impact on Tokyo Electron’s future performance include, but are not limited to:• Economic circumstances in Japan and overseas, consumption trends, and large fluctuations in foreign exchange rates• Changes in semiconductor and FPD markets• Changes in the demand for products and services manufactured or offered by Tokyo Electron’s customers, such as semiconductor manufacturers, FPD manufacturers, photovoltaic cellmanufacturers and electronics makers• Tokyo Electron’s capabilities to continue to develop and provide products and services that respond to rapid technology innovation and changing customer needs in a timely manner
For details, please refer to Business-related and Other Risks on page 28.

CONSOLIDATED FINANCIAL HIGHLIGHTS

Thousands of
U.S. dollars

Millions of yen

2005

2006

2007

2008

2009

2009

¥635,710¥673,686¥851,975¥906,092¥508,082$5,172,371

Years ended March 31

For the year:
Net sales....................................
Operating income.......................

63,98375,703

143,979

168,498

14,711

149,761

Income before income taxes.......

55,77575,328144,414169,220

9,637

98,106

Net income.................................

61,601

48,006

91,263106,271

7,543

76,789Depreciation and amortization.....

21,463

19,17018,82021,41323,068234,837

Capital expenditures...................

9,876

13,33527,12922,703

18,108184,343

R&D expenses............................

43,88949,18256,962

66,07360,988620,869

Free cash flows...........................

106,900

68,31729,00486,753(79,591)(810,251)

Operating margin........................

10.1%

11.2%

16.9%

18.6%

2.9%

ROE...........................................

20.3%

13.5%

21.8%

21.4%

1.4%
Thousands of
U.S. dollars

Millions of yen

At year-end:
Total assets.................................

¥644,320¥663,243¥770,514¥792,818¥668,998$6,810,526

Total net assets(Total shareholders’ equity)........

332,165

376,900

469,811545,245529,265

5,388,018

Yen

U.S. dollars

Per share:
Net income—Basic.....................

¥ 343.63¥ 267.61¥ 511.27¥ 594.01¥   42.15$      0.43

Cash dividends...........................

45.00

55.00

103.00125.00

24.00

0.24

Notes: 1. U.S. dollar amounts are translated from yen, solely for convenience, at the prevailing exchange rate on March 31, 2009 of ¥98.23=U.S.$1.
2. Depreciation and amortization does not include amortization and loss on impairment of goodwill.
3. Effective from fiscal 2005, Tokyo Electron changed its method of revenue recognition upon receiving customer confirmation of product set-up and testing of products for
Semiconductor and FPD production equipment. The effect of this change decreased net sales, operating income and income before income taxes by ¥80,956 million,¥20,541 million and ¥20,563 million, respectively, for fiscal 2005, compared with the corresponding amounts which would have been recorded if the previous method had
been applied.
4. Effective from fiscal 2005, Tokyo Electron changed its method to account for after-sale repair expenses by recording accrued warranty expenses for Semiconductor and FPD
production equipment. The effect of this change decreased operating income and income before income taxes by ¥635 million and ¥13,106 million, respectively, for the year
ended March 31, 2005, compared with the corresponding amounts which would have been recorded if the previous method had been applied.

Operating income & Operating margin

Net sales(Millions of Yen)                            (%)

(Millions of Yen)

200,000

1,000,000

20

600

16

480

12

360

8

240

4

120

0

0

25

0

05 06 07 08 09

594.01

2.9

05 06 07 08 09

511.27

13.5

10

5
42.15

0

14,71140,00075,703200,000

10.1

63,98380,00015
343.63

168,498

143,979
11.2

21.8 21.4

20 20.3

267.61

906,092

851,975
673,686

120,000

508,082

400,000

635,710600,000

16.9

160,000

(%)

(Yen)

18.6

800,000

ROE

Net income per share

1.4

005 06 07 08 09

05 06 07 08 09

nn Operating income
Operating margin

Annual Report 09

Tokyo Electron Limited1

TO OUR StakeHOLDERSW

e will keep our sights set on the future as we drive
through improvements in our technological capabilities
and reinforce our business management

In fiscal 2009, the year ended March 31, 2009, Tokyo Electron posted net sales of ¥508.1 billion,
operating income of ¥14.7 billion and net income of ¥7.5 billion. These results reflect the impact of
the global recession, which caused customers to react simultaneously by significantly cutting theircapital investment. From April 2009, we did begin to see signs of a recovery in orders, but thebenefits of this recovery will not be fully apparent in terms of revenues until 2010 or later. We
expect an extremely challenging operating environment during the year ending March 31, 2010.
With regard to dividends, the Company applies a policy that aims at a payout ratio of 20% ofconsolidated net income in principle, but under the circumstances, the Company decided to pay a
reduced dividend of ¥24 per share, for a 56.9% payout ratio. We would like to ask for your continued understanding in this regard.
Amidst the present global recession, significant structural shifts are under way in the electronics
industry, especially in information and communication technology (ICT)-related fields. That being
the case, we believe that if we enact the necessary measures, Tokyo Electron has a strong chanceof growth in the medium to long term. ICT has traditionally been developed in the U.S. and Europe,
but going forward, it will expand to increasingly diverse locations, including China and other emerging
economies, until the “networked society” extends across the entire globe. As the applications for
ICT expand into such new fields as medical care, education, risk management, environmental
action and transportation, better cost performance and greater speed are required.
At the same time, the need to shift economies to a sustainable model that ensures low energy
consumption and minimal environmental impact is a pressing issue for the world as a whole.
Tokyo Electron takes an active role, providing society with technologies that facilitate efforts to
reduce electricity consumption, and promoting commercially viable technologies for photovoltaic
cell production equipment, a field we entered last year. We believe these efforts are a powerfulmeans of helping to resolve this issue. The scale of Tokyo Electron’s mission and responsibilities tosociety should not be underestimated.
Faced with the operating environment described above, it is now crucial for Tokyo Electron todevelop technologies for the future and enhance our technological capabilities, while improving
operational efficiency and reinforcing our business management. As one means of achieving this,
we intend to use 2009 as an opportunity to step up our technological capabilities and businessskills by requiring all our employees to participate in a variety of training programs.
Turning to Tokyo Electron’s management structure, in April 2009 we appointed a new generationof managers under a new president, and we will combine their strengths with those of the older
generation as we uphold our unshakable faith in the future. Going forward, we intend to continue toenhance Tokyo Electron’s corporate value as an elite technological corporation.
I would like to thank all of our stakeholders for their continued support and their belief inTokyo Electron’s potential for further growth.

Tetsuro Higashi, Chairman & CEO

2

Tokyo Electron Limited  Annual Report 09

In a harsh business environment, we will retain our senseof mission as we press ahead to the next stage of growth

For around half a century, Tokyo Electron has conducted business within the electronics
industry, which is characterized by rapid technological innovation. We have contributed toestablishing the infrastructure of our society as a leading supplier of semiconductor andFPD (flat panel display) production equipment, providing the state-of-the-art products ourcustomers demand along with exceptional service. With new industries, such as the photovoltaic cell industry, further development is likely in light of environmental concerns, and I
believe that in these fields too, the production equipment technologies Tokyo Electron has
cultivated over the years can make a significant contribution.
The worldwide economic slowdown since 2008 is currently presenting us with a challenging business environment, but still, day by day the world is steadily advancing
towards a ubiquitous society that will enable everybody to lead comfortable, fulfilling
lives. To achieve this, it will be essential for electronic products to penetrate into society
more broadly and deeply than ever before. So, assuming it is production equipment thatwill underpin such development, it is likely that in the medium to long term our social
mission will remain just as it is. Moreover, in the short term we need to continue withmeasures appropriate for the current operating environment, such as reducing fixed
expenses, while at the same time setting ourselves firmly on the path to further growth.
We are reaffirming our sense of responsibility and awareness of our role as a leader in
our industry, developing our businesses proactively by doubling our efforts to promotestate-of-the-art technology. In doing so, we will always strive to contribute in creating asociety with hope, and addressing environmental concerns. By engaging in such inspiring work, our employees will find themselves brimming with energy, making Tokyo Electron
an even more dynamic and motivating place to work.
As a global corporation that supports the electronics industry in a diverse range of fields,
Tokyo Electron will remain an advanced technology company with an enterprising approachto pioneering new frontiers.
We look forward to the continued understanding and support of our stakeholders.

Hiroshi Takenaka, President

Annual Report 09

Tokyo Electron Limited3

Management Interview

Question &AnswerTetsuro Higashi, Chairman & CEO

Hiroshi Takenaka, President

4Q

Global economic conditions have been undergoing dramatic change, and this has had a great impact on
the electronic equipment sector as well. Could you please give us your impressions of how the business environment affects Tokyo Electron?

A

The semiconductor industry is undergoing steady consolidation, creating a much more oligopolistic
market. For a company like Tokyo Electron, which manufactures semiconductor production equipment(SPE), it is natural to anticipate that competition is going to get increasingly fierce. However, I regard
this competitive phase as the preparation stage for a subsequent period of renewed and rapid growth.
The global economy has contracted rapidly since

manufacturers delay or freeze new investments in plant

autumn 2008, and there are concerns that the current

and equipment. With unit prices falling and production

recession is likely to be a prolonged one, posing contin-

volume being cut back, the pace of structural reorgani-ued difficulty for management over the long term.

zation and consolidation in the global semiconductor

During recessionary periods, demand in the electronics

industry is accelerating, thus creating a more oligopolistic

industry for items such as PCs, mobile phones andindustry structure. For companies in the SPE industry,other electronic equipment drops off, andlike Tokyo Electron, this means a more competitive

Tokyo Electron Limited  Annual Report 09

business environment, and this situation seems to per-Therefore, even though current business conditions are

sist for some time. However, as is always the case duringharsh, I prefer to view this as a preparatory phase,eras of social and industrial change, it is important for

which is necessary in order to lay the groundwork for thecompanies to take a long-term perspective, striving tonext phase of growth. Tokyo Electron is continuing to

respond swiftly and appropriately to change in themake selective and aggressive R&D investments which

industry structure, and changes in customer needs. In

we believe will bring the strongest future growth. In this

this context, we consider it essential to develop and try

way, we expect to bolster the Company’s competitive-

new plans from a broader perspective.

ness in preparation for future growth.

The world is also experiencing a dramatic change inHaving said that, Tokyo Electron is also taking mea-

people’s values related to energy production and thesures to deal with the ongoing recession. During fiscal

environment. Thus, there is a rising need for technology

2009 (the year ended March 2009), we implemented costthat can help to solve today’s environment-related chal-

reduction plans to the fullest extent possible, and took

lenges. Semiconductor devices will be essential in thesteps to streamline operations. We have adjusted thedrive to develop high-performance networks and a more

allocation of personnel and assets to more appropriately

environmentally friendly society. As the devices attainmatch the scale of business activities and the prospects

even higher integration, and are introduced in a wider

for future growth. Other measures, such as cutting

range of applications and locations, it will stimulate

performance-linked bonuses and drastically adjusting themarket growth in the SPE industry over the medium-to-

number of contract employees, enabled Tokyo Electron tolong term. Furthermore, in order for semiconductors to

reduce fixed costs by ¥40.0 billion. These swift responses

meet expectations – for example, in terms of reducing

to a rapidly changing business environment allowed theenergy consumption – new technological breakthroughs

Company to greatly lower its break-even point, and post awill be required. Pushing the envelope of technologicalpositive profit figure for the fiscal year. In fiscal 2010 weadvance, both in process development and in the cre-aim to reduce fixed costs by an additional ¥30.0 billion

ation of new equipment, is one of the most importantand further strengthen the Company’s financial structure.

roles that Tokyo Electron can play in the industry.

Semiconductor
applications
MainframecomputerPC

Mobile phone

Digital consumer
electronics, etc.

GlobalNetwork Society

TEL Consolidated Net Sales(Billions of Yen)
1,000

Technology Innovation
800

Promoted
Globalization

600

400

Established development/
manufacturing functions

200

Distributor of other suppliers’ products
0

65

70

75

80

85

90

95

00

Annual Report 09

05

09

Tokyo Electron Limited

5

Managemment Interview

Q
A

What strengths does Tokyo Electron possess to address the current difficult business environment?
Joint product development capability with global customers, and a solid financial base will allow Tokyo
Electron to continuously offer highly reliable products that maximize the customers’ mass-production
capabilities and process performance at the best value.
Today, semiconductor devices must be even more reli-­miniaturization efforts in the development of next-genera-able, higher in performance and lower in energy con-tion memory chips. In 2008, Tokyo Electron developed asumption than ever before. Tokyo Electron provides SPE

form of double-patterning technology which offers notwhich helps chipmakers meet these demands. The

only a high level of process performance, but also supe-

Company bases its strength on an extensive, worldwiderior mass-production features.

base of customers which has remained very loyal.

As the range of technological expertise and develop-

Tokyo Electron seeks to identify precisely the issues andment skills that Tokyo Electron should address expands,

requirements that each customer faces, and then works

we have begun working together with universities andclosely with the customer to develop products that match

materials companies, in consortium projects, in anthese needs. This allows us to develop highly efficient andaggressive effort to acquire the very latest in technology.

unique products and solutions for each customer, and to

The Company even cooperates on process integration

earn strong bonds of trust in return. As technology has

projects with other SPE manufacturers in strategic

improved, the role of a SPE manufacturer has expanded

collaborations that help us to generate high value-added

as well. The SPE company is expected to provide notproducts, while reducing development time andonly the wafer process technologies that help to makerelated costs.

chips smaller and faster, but also process develop-

Even though the R&D expenditure is rising with eachment, process integration, and even solutions topassing year, Tokyo Electron has established a solid

production line management, to improve the perfor-

financial base with enough funds to ensure that we canmance of the chips themselves, and methods forcontinue making these critical investments in productincreasing production capacity or reducing energy

development, even at times of economic recession.

consumption. Tokyo Electron has a strength in reputation

Thanks to the success of various measures that wefor providing process integration solutions using a wide

adopted in the past aimed at improving profitability, Tokyo

range of products. One good example involves

Electron has an extremely strong balance sheet, a total of¥210.2 billion in funds on hand as of the end of March
2009, and a debt-equity ratio of just 0.7%.
Tokyo Electron intends to further grow by providing thehigh-value added products that respond to customers’

Maintained a Strong Balance Sheetreal needs, while strengthening information gathering(Billions of Yen)capability, improving its competitiveness in case technolo-

300

gies and cutting costs.
200

207.8

203.6
155.8

151.4
127.0

100
65.3
48.4

53.0

FY02

FY03

140.0

134.4

115.4
99.5
65.1

42.7

40.2

36.1

FY07

FY08

3.8

0

FY01

■ Interest-bearing debt

6

210.2

FY04

FY05

FY06

FY09

■ Total liquidity on hand=cash and cash equivalents+short-term investments

Tokyo Electron Limited  Annual Report 09

Q

If Tokyo Electron leverages its competitiveness, what sort of growth are you expecting and how do you
intend to achieve it?

A

By helping customers to develop high-performance, high-speed, low-energy-consumption semiconductor
devices, Tokyo Electron is aggressively making efforts to acquire innovative technology. In the future, theCompany will remain a central player in the ICT (Information and Communication Technology) industry. We
aim to take advantage of a large variety of acquired technology to generate new business.
As efforts to integrate semiconductors continue, theseproductization, in segments that promise future growth.

devices will become not only smaller but more advanced,

In this way, we can continue to expand our share of theto the point that they will begin to pervade every corner ofbroader market.
Meanwhile, we intend to keep in mind the tremendous

the globe. Those advances will continue to be driven by
improvements in production equipment – a business thatvalue of the technology that we have compiled over thewill remain at the core of Tokyo Electron’s operations – asyears, in diverse product segments, and in customer

we strive to develop bold solutions to the market’s needs.

support capability. We will leverage these assets toToday, the pace of technological progress is more rapid

strengthen our position in the equipment-peripheral

than ever before, and the fate of business often depends

businesses and aggressively seek to enter new busi-

on a company’s success in developing the technology. If

nesses. Tokyo Electron is focusing on “peripheral” busi-

Tokyo Electron is to continue playing a central role in thenesses related to production equipment, such as spareindustry, it is very important that we try to anticipate future

part sales, maintenance, system modifications, and otherchanges and work ceaselessly to develop the most appro-“post-sales businesses.” One prospective new businesspriate products and solutions to the demands of the new

for the Company is the field of environment-related tech-era before competitors can do so. The Company will

nology. The market for solar power generation, for exam-

continue to enhance its development capability and tople, is likely to grow dramatically in the next few decades.

deliver products that the market needs, in a timely fash-

But in order for our society to enter an era in which solar

ion, thereby maintaining or even increasing our leading

power generation is truly ubiquitous, further advances inmarket share in each product segment. As a means oftechnology will be essential to improve the efficiency ofboth improving product quality and reducing cost, we willenergy conversion from solar energy to electrical energy,

also continue ongoing efforts to reform production activi-

and to develop production equipment that can mass-ties, considering the design concept in the initial develop-

produce photovoltaic cells efficiently. These advances

ment phase to achieve the maximum possible benefit

would greatly bring down the cost of solar power genera-

once the product enters the mass production phase.

tion. Tokyo Electron is dedicating its efforts to the devel-

We also need to recognize that the market, in which

opment of such technologies, in the hope that theTokyo Electron operates, comprises only a part of theCompany can provide high added-value and build aoverall SPE market. The Company will redouble its effortsbusiness with strong growth prospects.

to acquire the necessary technologies, and accelerate

Achieved record sales and profit
Achieved 18.6% operating margin

Toward More Growth

New growth strategy

Restored operating margin to 10%
Second medium-term management plan
First medium-term management plan

Structural reform period•Reduced fixed expenses•Adjusted inventory

FY2002 – FY2004•Develop new businesses•Further improve operating margin•Enhanced new product creation•Strengthened manufacturing•Improved business efficiency

FY2005 – FY2008

FY2009 –Annual Report 09

Tokyo Electron Limited

7

Managemment Interview

Q

You mention post-sales businesses as an area of focus for Tokyo Electron. Could you discuss thesebusinesses in a bit more detail?

A

Many customers have asked Tokyo Electron to help them realize the maximum productive use fromtheir existing equipment. This has convinced us that there is excellent potential for growth in the
post-sales market. With a newly established organization for post-sales business, we are taking active
steps to cultivate and address this potential market as never before, as a way of expanding revenues.
There are currently over 50,000 pieces of Tokyo Electron­semiconductor manufacturers will close production facili-

production equipment in operation at customer plants

ties, and find themselves with a considerable stock ofworldwide. Therefore, post-sales operations offer a poten-

used production equipment that they would like to con-tially vast market for the Company. In the past, this busi-

tinue using productively at a different production site. This

ness was mainly at the request and initiative of theis likely to create rising demand for some sort of operation

customer. Tokyo Electron is now taking the initiative, andthat can modify equipment which Tokyo Electron sold

we hope to build the business into a substantial source ofand delivered to a customer in the past, re-install it in a

future revenues.

new location and put it back into useful operation. Our

In April 2009 we combined all post-sales operations

customer base is also shifting, from a U.S. and European

into a single business unit. In the past, these operations

orientation in the past to a heavier focus on Asia. There-

were fragmented, with each product and business unit

fore, the Company will need to provide Asian customers

operating its own separate, independent post-sales struc-with increased levels of support and service. In doing so,ture. By changing this to a single structural unit which

we have an excellent opportunity to expand in markets

operates across product segments, we hope to increasethat are likely to see rapid future growth.

business opportunities and reduce costs to optimize

Tokyo Electron is also trying to play a role in the issue ofbusiness operations and maximize their future profit

environmental conservation, by actively developing tech-contributions. Some of the specific measures include a

nology and measures to address global warming, andreview of terms and condition for the sale of consumables

striving to reduce the environmental footprint of its prod-

and spare parts, as well as the system for maintenanceucts by redesigning and developing production equipment

contracts. We are also reorganizing our product service

with less of an environmental impact. As equipment-bases, both in Japan and overseas, and seeking ways torelated businesses become increasingly central to our

maximize the profit generated by a single product over its

operations, we expect this to not only boost sales andentire operating life cycle. It is expected that someprofit overall, but also to bring stable earnings.

Aiming for Higher Goals

Strengthening Post Sales Operations
OverhaulRelocation
Refurbish

Environment-friendly

On-call service

Worldwide TEL products in operation
50,000 systems
More new business opportunities, respond to
demand for longer usage of equipment withdiversified applications
Modification/Upgrade

8Tokyo Electron Limited  Annual Report 09

RepairParts/Consumables
Service contract
Preventive maintenanceQ

You also mentioned the photovoltaic (PV) cell production equipment business. Could you please tell us alittle more about this new business?

A

The market for photovoltaic cells is now entering its very early phase of growth. By accelerating ourefforts to develop new, revolutionary technology, Tokyo Electron is not only making a valuable social
contribution, but also hopes to develop a third major pillar of company earnings.
The technologies that have driven economic growth today

company has earned a high reputation for its establishedhave a very noticeable impact on the environment, andtechnology. Oerlikon Solar is eager to leverage Tokyo

since this is now beginning to cause environmental

Electron’s expertise in the market for production equip-

destruction on a global scale, it is clear that we are reach-ment, our strong technology and our large, establisheding the limits of economic growth under the old model.

customer support network in the Asia and Oceania

From a longer-term perspective, the only way that we canregions. Tokyo Electron will provide customer support for

maintain economic growth is to develop innovative tech-

Oerlikon Solar’s thin-film silicon PV cell production lines

nologies that will help to gradually reduce the environ-as well as installation, set-up support and maintenancemental burden of our economic activities.

services. Together with Oerlikon Solar, we will be able to

Today, photovoltaic (PV) cells are attracting a great dealcreate the sort of production equipment and supportof attention because they promise a clean source ofservices that the market demands, and to cultivate theelectric power generation which can help address thenext-generation technology that customers require. We

issue of global warming, and there is strong interest in

expect tremendous growth potential in this field in thedeveloping large-scale electric power generation facilities

medium- to long-term.

using this technology. Since PV cells are almost ideal as a

Up to now, the cost of solar power generation has been

way of generating power while preserving the environ-higher than the cost generated by either thermal power orment, they are a perfect match for the environmental

nuclear power, and the PV cell market has been sup-policies adopted by many governments around the world.

ported by subsidies from each country. There is a strong

Therefore, the market for production equipment used toneed for technological developments which can help

manufacture PV cells is likely to grow substantially overbring down the cost of solar power generation in order tothe long term.

help it achieve deeper market penetration. As a manufac-

At Tokyo Electron, we have been conducting a wide

turer and developer of PV cell production equipment,

range of basic research into issues that relate to PV cellTokyo Electron is making strenuous efforts to develop

production. In February 2008 the Company formed a

revolutionary new types of process technology that canjoint venture with Sharp Corporation to specialize in devel-

improve the efficiency of power conversion from solar

opment in this field, and announced plans to enter theenergy to electrical energy, and trying to enhance ourmarket for PV cell production equipment. We are cur-superiority of mass-production capabilities of production

rently working to develop higher- performance plasma

equipment in an effort to reduce the cost of electric power

CVD system, which will be essential in order to manufac-

generated using PV cells to a level low enough to make itture thin-film silicon PV cells.

a cost-competitive option. Once that happens, it will

In February 2009, Tokyo Electron signed an exclusive

stimulate the shift to a less “carbon-dependent society.”

representative agreement with Switzerland’s Oerlikon

In this way, Tokyo Electron is confidently taking on the

Solar for its end-to-end thin-film silicon PV solution in Asia

important mission of leading the way in solar energy

and Oceania. Oerlikon Solar is the world’s leading manu-

development, and striving to be a company that contrib-

facturer of production equipment for thin-film PV cells.

utes value and technological prowess, both to the industry

Over 900,000 PV panels have been produced to datesectors we participate, and to society as a whole.

using Oerlikon Solar’s production equipment, and theAnnual Report 09

Tokyo Electron Limited

9

TOKYO ELECTRON AT A GLANCE

Semiconductor Production Equipment
Main Products

Semiconductor devices (IC chips) are the key components ofPCs, mobile phones and other digital products. Tokyo Electron
offers a wide range of equipment for producing these devices,along with superior technical support and service.
Tokyo Electron has a lineup of six product groups that
includes coater/developer, plasma etch system, thermal
processing system, single wafer deposition system and cleaningsystem used in wafer processes, as well as wafer prober usedin testing processes. Many of these products have captured
top shares in their worldwide markets.

• Coater/Developer• Plasma Etch System
Dielectric Etch System, Silicon Etch System• Thermal Processing System• Single Wafer Deposition System
CVD System, Plasma Processing System• Cleaning System

Coater/Developer
CLEAN TRACK™ LITHIUS Pro™ V

Auto Wet Station, Single Wafer Cleaning System,
Pre-clean System, Scrubber System• Wafer Prober

64.0%

Thermal Processing System
TELINDY PLUS™

FY2009Single Wafer Cleaning System
CELLESTA™+

17.3%

18.6%
Others 0.1%

FPD/PV Production Equipment

Electronic Components and Computer Networks

Tokyo Electron supplies flat-panel display (FPD) production
equipment used to manufacture displays for PCs, LCD TVs
and other electronic devices, along with solid technical support and service.
The product lineup includes FPD coater/developer andplasma etch/ash system. The size of substrates handled bysuch equipment is increasing each year with the growing
popularity of large-screen LCD TVs.
Photovoltaic (PV) cells are in the spotlight these days as anenvironmentally friendly form of clean energy. In 2008,
Tokyo Electron added photovoltaic cell production equipment
as a new field of operations.

Tokyo Electron has developed a new type of dual model forthis business: the trading business handles sales, in which it
acts as a distributor of a wide array of sophisticated electronic
components and computer network equipment, while thedevelopment business designs and develops products in
response to customer needs, as well as our own in-housebrand products. Business operations for this segment arehandled by Tokyo Electron Device Limited.

Main Products

Main Products• Semiconductor Products• Other Electronic Components• Software• Computer Networks• FPD Coater/Developer• FPD Plasma Etch/Ash System• Plasma CVD System for Thin-film Silicon PV Cells• End-to-end Thin-film Silicon PV Solutions (as Swiss company
Oerlikon Solar’s exclusive representative for the Asia/
Oceania region)
inrevium™
Developed by Tokyo Electron Device Limited
FPD Plasma Etch/Ash System
Impressio™

10

Tokyo Electron Limited  Annual Report 09

Sales by Region

Net Sales(Billions of yen)
800

600

726.4

4%

8%
32%

15%

400

FY2009325.4

Overview of FY2009• Business environment: In addition to deterioration in the memory
market, overall demand for semiconductors sharply dropped dueto the global economic downturn from the second half of theyear. There was a sudden halt in capital investment by semiconductor manufacturers.
• Sales: Down 55.2% year on year to ¥325.4 billion• Sales declined in all regions, but most markedly in Asia, where
many memory manufacturers are based. Sales to Taiwan inparticular plummeted by 80.7% year on year.
• Orders decreased rapidly in the second half, and the value oforders for the full year declined 57.4% to ¥214.5 billion.

642.6

Semiconductor Production Equipment

200

12%
9%

20%

0

07

08

09

n Japann U.S.
n Europe
n South Korea
n Taiwann China
n Southeast Asia

FPD/PV Production Equipment
Sales by Region

Net Sales(Billions of yen)
120
100

7%

32%

68.0

60

21%

88.1

80

100.8

Overview of FY2009• Business environment: Capital investment in LCD panels forlarge televisions witnessed robust growth. From the second half,
however, the panel market deteriorated due to the downturn inthe global economy, and panel manufacturers began to show
signs of scaling back investment again.
• Sales: Up 29.5% year on year to ¥88.1 billion• Sales to South Korea and Taiwan both surged, by 97.3% and88.3%, respectively• Products for 7th and 8th generation large substrates accounted
for almost half of sales. Shipments also commenced for products for 10th-generation substrates.
• Orders dropped off rapidly in the second half of the year, and thevalue of orders for the full year declined 53.4% to ¥60.6 billion.

FY2009

40

40%

20
0

07

08

09

n Japann South Korea
n Taiwann China/Southeast Asia

Electronic Components and Computer Networks
Sales by Region

Net Sales(Billions of yen)

10%
94.2

100

111.2

120
107.5

Overview of FY2009• Business environment: In addition to a drop-off in demand forelectronics products, there was a marked tendency to curb new
IT investment beginning in the second half of the year, reflecting
deterioration in corporate earnings and concerns regarding the
economic outlook.
• Sales: Down 15.3% year on year to ¥94.2 billion• In semiconductor products and electronic components, which
account for 77% of sales, the division worked to strengthen its
proprietary inreviumTM brand products business and our operations in the industrial equipment industry, the segment’s main
strategic market.

80
60

FY2009

40
20

90%

0

07

08

09

n Japann Overseas

Annual Report 09

Tokyo Electron Limited

11

Research and Development

Even as technologies become more advanced, competition is intensi-

Tackling Environmental and Energy Issues

fying. Amid this change in the environment, early adoption and

The entire Tokyo Electron Group is working together to address

speed are more crucial now than ever to R&D activities. The Tokyo

global environment- and energy-related issues.

Electron Group is enhancing its exploration of new technologies

First are our efforts in the field of photovoltaic cell production equip-

through industrial academic collaboration, utilizing such consortia toment. We are leveraging vacuum, plasma, and spin coating technolo-

accelerate development of equipment and processes, in addition togies acquired through our experience in semiconductor and FPD

our own R&D activities.

manufacturing equipment to develop high-productivity equipment for
manufacturing thin-film silicon photovoltaic cells, the mainstream

Targeting the Frontiers of Semiconductor Production Technology
Tokyo Electron is continuing the perpetual quest for miniaturization,format in use today.
We are also actively engaged in R&D of photovoltaic cell produc-

the main pillar supporting the value of semiconductors.

tion equipment that use compound and organic semiconductors,

In the field of microfabrication technologies, we have developedwith a view to enhancing the efficiency and lowering the costs ofunique double patterning technologies, for example, a silicon oxide

photovoltaic cells.

film that forms at room temperature, enabling ultra-microfabrication

Second are our contributions to energy conservation. In the fieldthat exceeds the resolution limit of exposure tools.

of power electronics, silicon carbide semiconductors are expected to

We are also supporting the miniaturization and high performance

usher in a major, once-in-decades innovation. We have developedof transistors by developing high-k CVD systems with mass produc-

epitaxial growth equipment that is crucial to the production of thesetivity, MOCVD technologies, and silicon fabrication and various othernew, high-potential semiconductors. This equipment boasts thefilm deposition technologies for the era of three-dimensional transistors.

highest performance in terms of epitaxial film quality and productivity

Another technology that is the focus of much attention is 3D chipof any in the world.

stacking technology. In this area, Tokyo Electron is preparing for theadvent of the age of stacked-chip technology by developing propri-

Unearthing the World’s Most Promising Technologies

etary technologies such as a High speed Through-Silicon-Via etching

Technological development increasingly requires open innovation. Tokyosystem, low-temperature dielectric film deposition, and metal deposi-Electron participates in research programs at Japanese universities andtion system.

Tokyo Electron’s R&D Framework(As of June 2009)

Product development in existing SPE and FPD business units
Tokyo Electron AT Limited

Etch system, CVD system, FPD Etch/ash system

Tokyo Electron Kyushu Limited

Coater/developer, Cleaning system, FPD Coater/developer

Tokyo Electron Tohoku Limited

Thermal processing system

Tokyo Electron TS Limited

Wafer proberTokyo Electron Software Technologies Limited

Software technology

Timbre Technologies, Inc.

Integrated metrology

R&D for new and advanced technologies
Tokyo Electron Technology Development Center

Research and development

Tokyo Electron Leading-edge Process Development Center

Process development

Tokyo Electron Technology Development Institute, Inc.

RLSA plasma technology

Tokyo Electron PV Limited

Thin-film silicon PV cell plasma CVD technology

TEL Technology Center, America, LLC

Process development

TEL Epion Inc.

Gas cluster ion beam technology

Identification of promising technologies
TEL Venture Capital, Inc.

12

Tokyo Electron Limited  Annual Report 09

R&D Locations

Leading-edge Process
Development CenterTokyo Electron PV Limited(Nirasaki City, Yamanashi)Tokyo Electron Technology Development Institute, Inc.
(Sendai City, Miyagi)

TEL Epion Inc.
(Billerica, Massachusetts)

R&D Expenses

Kansai Technology Center(Amagasaki City, Hyogo)(Billions of Yen)
80

57.0

49.2

43.9

40

66.1

60

61.0

IMEC (Belgium)
Collaboration R&D with IMEC on
immersion lithography and extreme
ultraviolet (EUV) lithography

TEL Technology Center,
America, LLC(Albany, New York)20

About IMECIMEC is a world-leading independent research center in nanoelectronics and nanotechnology. Its research focuses on the next generations of chips and systems, and on theenabling technologies for ambient intelligence.

0

05

06

07

08

09

overseas to discover outstanding research, and actively conducts

at the forefront of industry, and to generate synergy effects between

domestic and international joint research on promising technologies.

devices and processes.

The Group has also established TEL Venture Capital, Inc., a Silicon

In Japan, Tokyo Electron participates in the MIRAI Project, while

Valley-based company that works to uncover promising technologies. Invest-

overseas the Company participates in the International SEMATECH

ments and joint research are already underway at a number of companies.

project in the United States and the Albany NanoTech project promoted by the New York State government, as well as collaborating

Promoting More Efficient R&D Via Consortia Participation

with IMEC in Belgium. These consortia allow the Company to comeIn order to improve the efficiency of R&D, it is important to match

into contact with global semiconductor industry needs and refine

industrial “needs” with the “seeds” of innovation. Consortia offer aTokyo Electron’s products through evaluation of equipment by otherpromising venue for equipment manufacturers to learn about needs

participating parties.

Annual Report 09

Tokyo Electron Limited

13

CORPORATE GOVERNANCE

Tokyo Electron maintains a management philosophy that puts
emphasis on maximizing corporate value and enhancing shareholder
satisfaction. To this end, the Company is striving to enhance corporate governance by building an optimal corporate governance structure and managing it effectively. Efforts in this regard are founded on
three basic principles.
Tokyo Electron’s Basic Principles of Corporate Governance
1. Ensure the transparency and soundness of business operations
2. Facilitate quick decision-making and the efficient execution ofbusiness operations
3. Disclose information in a timely and suitable manner

The Corporate Governance Framework
Tokyo Electron uses the statutory auditor system, and has also
adopted the executive officer system to separate the businessexecution function from the board of directors.
The Board of Directors
The board of directors consists of 13 directors, two of whom areexternal directors. During fiscal 2009, the board of directors met on
11 occasions. In order to ensure that the Company can respondquickly to changing business conditions, and to more clearly define
management accountability, the term of office for directors is set at
one year.
The board of directors has two committees: the Compensation
Committee and the Nomination Committee, whose activities areintended to improve corporate governance. The Compensation Committee proposes the remuneration to be paid to the Chairman & CEO
and the President at the board meeting for approval. The Nomination Committee selects candidates for directorships for submission
at the annual shareholders’ meeting, as well as candidates for CEO,which it submits at the board meeting for approval. Each of thesecommittees is composed of members of the board of directors,
excluding the Chairman & CEO and the President.
The Board of Statutory Auditors
The Company has four statutory auditors, two of whom are outside
auditors. The statutory auditors not only attend meetings of the boardof directors and other important business meetings, but also conduct
operations audits and accounting audits, and evaluate risk management, in addition to auditing the performance of duties by directors.
During fiscal 2009, the board of statutory auditors met six times.
The Executive Officer System
In order to further clarify the roles of the board of directors and executives in charge of business operations, Tokyo Electron adopted theexecutive officer system in April 2003. This system promotes fast
decision-making and the quick establishment and execution ofbusiness strategies.

Internal Control and Risk Management System
In order to enhance corporate value and ensure that all businessactivities are carried out responsibly, in the interests of all stakeholders, Tokyo Electron is taking steps to strengthen its internal control
systems, and make them more effective. The Company is implementing practical measures in line with the basic policy for internal
control systems established in May 2006, which was partially revisedin April 2008. It is also developing a system of internal control overfinancial reporting based on the Financial Instruments andExchange Law.
Chief Internal Control Director
Tokyo Electron considers the improvement of internal control systems and the management structure to be of great importance. In
June 2008, the Company appointed a Chief Internal Control Director

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Annual Shareholders’ Meeting
Board ofDirectors

Statutory Auditors

Compensation Committee
Nomination Committee
Chief Business Ethics Director
Chief Internal Control Director

Independent Auditors

Confirm the progress of improvements and give instructions
Request for improvement/Report

Representative Directors
Audit and improvement reports

Request for improvement/ReportCompliance & Internal Control Executive Officer

Executive Officers

Committees Ethics Committee
Information Security Committee
Export Transaction Monitoring
Committee

Internal Audit Dept.
(Global Audit Center)

Request for improvement/Report

Audit

Risk Management & Internal Control Dept.
Request for improvement/
ReportMonitoring

Business Depts.

14

Tokyo Electron Limited  Annual Report 09

Check and balance

Administrative Depts.

who is working to strengthen internal control based on the basic
policies for internal control decided by the Board of Directors.
Compliance & Internal Control Executive Officer andSection for Risk Management
To structure its internal control and risk management systems more
effectively and improve them further, Tokyo Electron appointed aCompliance & Internal Control Executive Officer in April 2009, atthe same time establishing the Risk Management & Internal
Control Department.
The Risk Management & Internal Control Department evaluates
and analyzes the various risks which could affect the Group, andmanages major risks from a Group-wide perspective.
Internal Audit Department(Global Audit Center)
The Global Audit Center oversees the internal auditing activities ofTokyo Electron and its corporate group. The Center is responsible for
auditing the business activities of the Group’s domestic and overseas
bases, as well as their compliance and systems, and evaluating theeffectiveness of internal control systems. When necessary, the Global
Audit Center also provides guidance to operating divisions.
Coordination Between Statutory Auditors andInternal Audit Department
The statutory auditors coordinate with the department responsible forinternal auditing activities primarily by attending the Global Audit
Center’s report meetings, which are held 22 times per year.
Coordination Between Statutory Auditors andIndependent Auditors
The statutory auditors receive audit plans for the fiscal year from theindependent auditors, as well as explanations regarding auditing
methods and particular areas of focus, among other matters. The
independent auditors audit the year-end financial statements andreview the quarterly financial statements, and report the results of
their audits to the statutory auditors.
The Company provides KPMG AZSA & Co., its independent auditor, with all necessary information and data to ensure that it canconduct its audits during the fiscal year promptly and correctly.

Compliance Framework
Trust is the cornerstone of Tokyo Electron’s business foundation. The
fundamental requirements for maintaining trust are rigorous conformity to ethical standards and compliance with the law, by individual
employees and by each of our organizations. The Group maintains
high standards of ethics and a clear awareness of compliance, placing the utmost priority on compliance with laws, regulations andinternational business standards in all of its corporate activities.
Ethical Standards, Chief Business Ethics Director andEthics Committee
Recognizing the need to establish uniform standards to govern all of
its global business activities, in 1998, the Company formulated the“Tokyo Electron Code of Ethics,” which concretely describes theCompany’s basic views on ethics. The same year, the Company
appointed a Chief Business Ethics Director and established the
Ethics Committee, which is responsible for promoting businessethics awareness throughout the Company.
In June 2007, the Tokyo Electron Code of Ethics was rewritten to
make it easier to understand, and to reflect the changing ethicalnorms of the current era. To ensure full awareness of the Code, it
was compiled into a booklet, which the Company distributes to all
Group employees, including those overseas.
Compliance & Internal Control Executive Officer
In April 2009, Tokyo Electron appointed a Compliance & Internal
Control Executive Officer to raise awareness of compliance acrossthe Group, and further improve its implementation.
Compliance Regulations
Tokyo Electron has drawn up compliance regulations setting out
basic compliance-related requirements in line with its code of ethics.
The compliance regulations are intended to ensure that all individuals who take part in business activities for the Group clearly
understand the pertinent laws, regulations, international standards
and internal company rules, and continuously apply these rules in allof their activities.
Compliance Education for Employees
Information on compliance issues is available to employees via the
Company intranet. The Company also conducts web-based training
programs for employees, and takes other steps to promote broad
awareness of compliance throughout the Company.
Internal Reporting System: Hotline
In the event that an employee becomes aware of any activity which
may violate laws, regulations or principles of business ethics, theCompany operates an internal reporting system (Hotline) that
employees may use to report their concerns. Strict confidentiality is
maintained to protect the whistleblower, and ensure that they are notsubject to any disadvantage or repercussions.

Remuneration for Directors, Executive Officers andStatutory Auditors
The Company and its subsidiaries (excluding listed companies) haveintroduced incentive systems, such as business results-based remuneration, and stock options linked to share prices. Effective fromfiscal 2006, the Company revised its executive remuneration system
to link remuneration more closely to financial performance andshareholder value and also improve management transparency andits competitive strength.
Remuneration System for Executives
1. The remuneration for Company directors and executive officers is
composed of two elements: a fixed monthly salary, and an annual
bonus which is linked to earnings performance.

Annual Report 09

Tokyo Electron Limited15

2. The total amount of performance-linked remuneration (annual
bonuses) for directors and executive officers of the Group is set at
a maximum of 3% of consolidated net income. This remunerationis split between cash bonuses and stock-based remuneration(stock options), at a ratio of roughly two to one. The stock-based
remuneration takes the form of new stock warrant contracts withan exercise price of one yen per share. This is because current
securities and exchange regulations make it difficult to introduce
and implement direct share issuance, or the sort of transferrestricted shares that are used in countries such as the UnitedStates. The restricted period on exercising stock options is set atthree years.
3. The earnings-linked remuneration (annual bonuses) of external
directors does not include stock options.
4. In order to ensure that statutory auditors maintain full independence from management pressures, the compensation of statutory auditors consists of a fixed monthly salary only.
5. Retirement allowances for directors, statutory auditors and executive officers were abolished at the end of fiscal 2005, as part of therevisions to Tokyo Electron’s remuneration system for executives.
Remuneration linked to corporate performance comprises a relatively large share of executives’ total remuneration. Tokyo Electron
believes this will give executives a strong incentive to improve theCompany’s earnings performance and elevate the share price,
since they share in both the benefits and the risks experienced
by shareholders.

manner if the information is deemed useful in providing stakeholders
with an accurate understanding of the Company.

Disclosure of the Individual Compensation ofRepresentative Directors
In order to increase transparency and reflect shareholders’ interests,
Tokyo Electron discloses the remuneration paid to each representative director (Chairman & CEO and President & COO), as well as theaggregate remuneration paid to directors and statutory auditors, in its
business report, which is sent to shareholders along with the Noticeof Annual General Meeting of Shareholders.

IR Spokespersons
To ensure that information is accurate and disclosure is fair, theCompany’s major investor relations activities will be undertaken by
official IR spokespersons—either the CEO, the COO, the IR director,
or representatives of the IR department. In principle, information on
the Company shall not be provided to the press, or to persons connected with the securities market, by any executive or employee ofTokyo Electron acting alone other than official IR spokespersons.
When necessary, IR spokespersons may formally appoint other executives or employees to speak on their behalf.

Disclosure Policy
Tokyo Electron is committed to disclosing information about theCompany in a fair, prompt and accurate manner, to ensure that all
stakeholders, including shareholders and other investors, can obtainan accurate, in-depth understanding of the Company and its activities, and evaluate the Company’s corporate value appropriately. The
Company also solicits feedback from its stakeholders as part of its
information disclosure activities, and uses the feedback as a point ofreference to guide corporate management.
Information Disclosure Standards
Tokyo Electron complies fully with the Financial Instruments andExchange Law, and the Tokyo Stock Exchange’s listing regulations
pertaining to marketable securities.
Furthermore, even when the information is not subject to thelisting regulations pertaining to marketable securities, the Company
discloses the information proactively, in a fair, prompt and accurate

16

Tokyo Electron Limited  Annual Report 09

Disclosure Practices
If it is subject to the marketable securities listing regulations (material
information), Tokyo Electron will release information simultaneously
in a press release, and via the Tokyo Stock Exchange’s “Timely
Disclosure Network” (TDnet), and will post the information on its
website as soon as possible, following the official announcement.
Even when it does not fall into the category of “material information,”
the Company will voluntarily disclose information which may be ofinterest to stakeholders, in a fair, accurate, and easy-to-understandmanner, either on its website or in printed form, through various
means of communication.
Tokyo Electron conducts meetings to discuss its financial resultswith securities analysts and investors; these meeting are also open tomembers of the press. The company makes audio and video recordings of its fiscal year-end and mid-term financial results meetings,
and posts these recordings on the Company’s website. All of the
documents distributed at its quarterly financial results meetings arealso posted on the website.
To ensure that foreign investors have fair and equal access to theinformation, the Company strives to disclose all information simultaneously in Japanese and English. However, due to the time required
for translation, there may be cases where the posting of English
information to the website is delayed slightly.

Shareholder Measures
Tokyo Electron mails a Notice of Annual General Meeting of Shareholders to shareholders more than three weeks in advance of themeeting, as one of its measures to vitalize these meetings and topromote smooth and efficient voting. It also sets the date of theCompany’s meeting to avoid days on which many such meetings areconcentrated. In addition, shareholders are free to cast their votes
via the Internet. Moreover, Tokyo Electron participates in the webbased voting platform for institutional investors operated by Investor
Communications Japan Inc. (ICJ). To supplement the above shareholder meeting-related initiatives, Tokyo Electron’s website carries
notices, resolutions and presentation materials of shareholders’meetings. An English version of the Notice of Annual General
Meeting of Shareholders is also provided.

Board of Directors, Statutory Auditors and Executive Officers(As of June 19, 2009)

Board of Directors

Tetsuro Higashi

Tetsuo Tsuneishi 2

Kiyoshi Sato 1

Hiroshi Takenaka

Hirofumi Kitayama

Kenji Washino

Hikaru Ito

Takashi Nakamura 2, 3, 4 Hiroshi Inoue *Chairman & CEO

Corporate Director

Vice Chairman of the Board

Corporate Director

Vice Chairman of the Board

Corporate Director

President

Statutory Auditor

Yuichi Honda
Statutory Auditor

Togo Tajika *Statutory Auditor

Haruo Iwatsu 2

Masao Kubodera

Corporate Director

Corporate Director

Corporate Director

Masahiro Sakane 1 *Corporate Director/
Chairman, Tokyo
Broadcasting System
Holdings, Inc.

Corporate Director

Statutory Auditors

Mitsutaka Yoshida

Mamoru Hara 1

Corporate Director/
Chairman of the Board,
Komatsu Ltd.

Notes:
1. Member of Compensation Committee
2. Member of Nomination Committee
3. Chief Business Ethics Director
4. Chief Internal Control Director* External Director, External Statutory Auditor

Hiroshi Maeda *Statutory Auditor/
Attorney-at-Law,
Nishimura & Asahi

Executive officers
Chairman & CEO

Tetsuro Higashi
Vice Chairman of the Board

Tetsuo Tsuneishi

Assistant to Chairman & President, SPE
IR/ Legal and Intellectual Property/
Strategic Alliance

Kiyoshi Sato

Assistant to Chairman & President,
FPD/PVE

Senior Vice President

Yoshikazu Nunokawa

General Manager,
Finance/Export and Logistics Control

Kiyoshi Sunohara

General Manager,
Corporate Administration Division,
Compliance/Internal Control

Yutaka Nanasawa

General Manager,
HR/General Affairs/Accounting

Chiaki Yamaguchi

Hiroki Takebuchi

Tetsuro Hori

Hirofumi Murakami

Toshihiko Nishigaki

Yasuyuki Kuriki

Hideyuki Tsutsumi

Shunro Nagasawa

Masaaki Hata

Tsuguhiko Matsuura

General Manager,
Corporate Strategic Planning,
Human Resources Development

Masami Akimoto

General Manager, Development Division

Takashi Ito
President

Hiroshi Takenaka
Executive Vice President

Hirofumi Kitayama

Vice President

Takashi Nakamura

General Manager, PVE BU,
FPD/PVE Division

General Manager, Sales &Services Division

General Manager,
Legal/Intellectual Property

Deputy General Manager, Sales &Services (Services)

General Manager, Clean Track BU,
SPE Division
General Manager, Etching Systems BU,
SPE Division

General Manager,
Manufacturing Division (Quality)

General Manager,
Surface Preparation Systems BU,
SPE Division

Kenji Washino

Seisu Ikeda(Yoh)General Manager,
SPE Business Strategy Division

Hikaru Ito

General Manager,
SPE Division

Mitsuru Onozato

General Manager, Post Sales BU,
SPE Division

General Manager,
Thermal Processing Systems BU,
SPE Division

General Manager, Sales &Services, Korea
General Manager, Sales &Services, Asia
General Manager, FPD BU,
FPD/PVE Division

Shigetoshi Hosaka

General Manager,
Corporate Development,
Development Division

Takeshi Okubo

General Manager, Single Wafer
Deposition BU, SPE Division

General Manager,
FPD/PVE Division*BU stands for “business unit”

Annual Report 09

Tokyo Electron Limited

17

Environmental, Health and Safety Activities

Tokyo Electron’s corporate missions include placing the highest
priority on people’s health and safety and taking the global environment into account when conducting business activities.

Fundamental Policy
Tokyo Electron positions environmental, health and safety activities
as one of its most important management issues to achieve sustained corporate growth and continued development of society. With
that in mind, Tokyo Electron is committed to reducing environmentalloads across its activities, and to ensuring absolute safety in the
Company’s business premises and in those of its customers. Tokyo
Electron embodied these commitments in “TEL’s Credo and Principles on Environmental Preservation” and “TEL’s Safety and Health
Credo and Principles” formulated in 1998. The former statement
was reviewed and revised in May 2006 in light of the direction thebusiness was taking and the Company’s evolving approach to theseissues. Also, recognizing the need to deal with current global warming and climate change issues, in October 2007, Tokyo Electron
inaugurated an environmental steering committee in order to accelerate environmental response activities.
In May 2008, we codified Tokyo Electron’s environmental commitment, with “Technology for Eco Life” as the slogan guiding our environmental activities. One of the stipulated goals of this commitment is todevelop production equipment that will enable customers to cut the
total environmental load of their factories in half by 2015, and to cut theCompany’s own environmental load from business activities and logistics in half by the same date. In fiscal 2009, we researched the criteria
and roadmaps to establish in preparation for fulfilling this commitment.
In fiscal 2010, we intend to flesh out the details of the plans and standards for reaching our goal.

EHS Management
Since 1997, Tokyo Electron has developed and implemented environmental management systems based on ISO 14001 standards, mainly
for manufacturing operations, and obtained certification.

Adoption of Environmental Accounting
Tokyo Electron has introduced an environmental accounting systemthat quantifies the cost of its activities in respect of environmental
protection, and uses this as the basis for developing corporate
action policies.
For details of results for fiscal 2009, please refer to the Tokyo­Electron website.

Product-related Environmental Initiatives
Proactive Environmentally Conscious Product Design
As clearly set forth in our revised TEL’s Credo and Principles on
Environmental Preservation, Tokyo Electron believes that promotionof product designs sensitive to the environment is vital. Tokyo
Electron has positioned promotion of energy conservation in its
products, as well as reduction and replacement of hazardous chemicals, as priority issues.
1. Reducing Environmental Loads During Equipment Usage
In fiscal 2009, we established a roadmap for reducing environmentalloads in all business departments. When developing this roadmap,
we positioned reducing the energy requirements of our products,
addressing chemical substance-related matters, reducing thenumber of parts and processes required, reducing the use of processing gases and liquid chemicals, and improving the environmental performance of existing equipment as essential categories. We
also set reductions in the processes required to start up equipment
as a voluntary category. In line with reducing both materials andprocesses, we are reviewing them as a part of development andpromoting relevant improvements.
Tokyo Electron follows the SEMI S23 Guide for Conservation ofEnergy, Utilities and Materials Used by Semiconductor Manufacturing
Equipment that was adopted as the global standard by the semiconductor industry. Tokyo Electron assesses the energy consumption of
its products in accordance with these guidelines.

Items in the Environmental Road Map for Each Division
1. Reducing the energy consumption of our products
2. Addressing chemical substance-related matters
3. Reducing the number of parts and processes in our products
4. Reducing the use of processing gases and liquid chemicals
5. Improving the environmental performance of existing equipment

ISO-14001-Certified Plants and Offices
Company/plantTokyo Electron AT Limited
Tokyo Electron PS Limited
Tokyo Electron Tohoku Limited
Tokyo Electron Kyushu Limited
Tokyo Electron AT Limited
Tokyo Electron Device Limited

18

Plant
Sagami Plant

Certification date
December 10, 1997

Certification number
1110-1997-AE-KOB-RvA

Tohoku Plant
Kumamoto/Koshi/Ozu/Saga plants
Yamanashi Plant (Fujii/Hosaka area)
Miyagi Plant
Yokohama OfficeFebruary 19, 1998
March 26, 1998
May 15, 1998
March 1, 2005
July 14, 2004

1118-1998-AE-KOB-RvA
1120-1998-AE-KOB-RvA
1124-1998-AE-KOB-RvA
01245-2005-AE-KOB-RvA
EC04J0144

Tokyo Electron Limited  Annual Report 09

2. Hazardous Substances in Products
As an environmental measure, Tokyo Electron promotes efforts to
reduce hazardous chemical substances in its products. Chemical
substances found in the units and parts used in products are managed through a specialized database. One widely known measuretargeting such chemical substances is Europe’s RoHS*1 directive.
Although semiconductor and FPD production equipment are nottargets of the directive, we use it as a reference point in our drive tolimit the use of legally restricted chemical substances. This is inaddition to maintaining full compliance with compulsory laws andregulations such as the China RoHS directive.
Tokyo Electron has positioned those products in which at least
98.5% of the constituent parts meet standards stipulated by theEurope RoHS directive as “equipment with reduced chemical substances.” Shipment of these products has been ongoing since
October 1, 2008, with plans to gradually increase volume going forward. Tokyo Electron remains committed to further promoting thedevelopment and manufacture of eco-conscious products with theaim of becoming a more environmentally friendly company.
*1 Refers to the “Restriction of the use of certain Hazardous Substances in Electrical and Electronic Equipment” directive in Europe (2002/95/EC) and its amended version. With the
exception of certain applications excluded from its scope, this directive prohibits the inclusionof lead, mercury, cadmium, hexavalent chromium, PBB, and PBDE over a maximum prescribed amount in products. (European Directive 2002/95/EC on the restriction of the use ofcertain hazardous substances in electrical and electronic equipment)

Health and Safety Activities

In fiscal 2009, we reduced the number of injuries excluding thoserequiring first-aid alone across the Tokyo Electron Group by approximately 20% year on year, and injuries requiring first-aid by more than
40%. Promoting activities aimed at curbing the number of accidents
further will remain our policy going forward.

Communicating With Stakeholders
The Tokyo Electron Group actively promotes communication withall stakeholders. To develop environmental, health and safety initiatives, we believe that it is vital to share information as much as
possible with all parties related to our business activities and toreceive feedback.
One example is efforts to give back to local communities. Our
philosophy states, “We place the highest priority on gaining the trust
and acceptance of customers, suppliers, investors, and communities
around the world” and “We therefore strive to be a faithful and cooperative member of the communities and nations where we do business.” In line with this philosophy, we engage in activities tocontribute to society and build relationships of trust with governments
and local communities around our facilities. These activities are conducted both in Japan and overseas.
For further details, see “Environmental and Social Report 2009” (to be
published in September 2009).
http://www.tel.com/eng/citizenship/ehsreport.htm

Tokyo Electron promotes health and safety in all of its operations.
This includes giving top priority to the health and safety of ouremployees and customers and designing products with safety inmind. TEL’s Safety and Health Credo and Principles clearly state that
all employees are responsible for being constantly aware of healthand safety considerations in all their business activities.

Preventing Global Warming
Initiative for Coater/Developer CLEAN TRACK™ LITHIUS Pro™
A coater/developer is used to coat photoresist and develop the
exposed pattern simultaneously in the lithography process (where
the same photo development technology is applied) in manufacturing semiconductors. When we developed the CLEAN TRACK LITHIUS
Pro coater/developer by redesigning CLEAN TRACK™ LITHIUS™,
we concurrently worked to reduce the environmental impact of theoverall LITHIUS series. Specifically, we adopted a new exhaustsystem for hot plate chambers which directly uses exhaust air fromthe factory. We previously exhausted air by using compressed-air
powered ejectors. This shift enabled us to reduce the use of compressed air by 35% or more compared to the previous system. We
also worked to achieve a proper volume of nitrogen gas purge in thiscoater/developer, resulting in at least a 70% reduction in the use of
nitrogen gas. Through these improvements, the revised models’energy requirement per unit area of wafer was reduced by approximately 20%. When developing the new LITHIUS Pro, we incorporated energy-saving features, such as introducing an
inverter-equipped automatic control system for the humidifying
heater and the freezer within the temperature and humidity controller, and reducing the number of pumps used. As a result, LITHIUS
Pro requires 32% less electricity than the initial LITHIUS model. Itsenergy use per unit area of wafer was also slashed by 35% from theexisting LITHIUS model. We will continue to incorporate a greaternumber of energy efficient designs in all new products and adopt
such “green” features for existing models.

Annual Report 09

Tokyo Electron Limited

19

Intellectual Property Report

Process and mechatronics technologies used in the manufacture ofsemiconductors and flat panel displays represent Tokyo Electron’score technologies. Tokyo Electron devotes considerable resources todeveloping technologies that bolster the competitiveness of its products. As part of its efforts to drive growth, Tokyo Electron is promoting
three themes: (1) bolstering development of new technologies tocreate and expand sales of new products (2) enhancing cost competitiveness through highly efficient manufacturing, and (3) expanding operational scale by entering new businesses domains. In
pursuing these strategies, it is vital to protect the intellectual property
rights of independently developed proprietary technologies andproducts to ensure the smooth growth of businesses. The integrationof our intellectual property strategy with our technological and product strategies is thus important to realizing maximum benefits fromdevelopment efforts.
Recently, the needs of device manufacturers, our customers, havebeen diversifying, and they are also emphasizing reliable process
performance and higher productivity on products. Consequently, therole of equipment manufacturers such as Tokyo Electron in developing
semiconductor manufacturing technology is increasing. Within thiscontext, Tokyo Electron strives to bolster the protection of its intellectual property by actively filing patent applications for equipment
recipe, software technologies, process management technologies forvarious types of manufacturing equipment, and other technologies.

Policies on Acquiring and Managing Intellectual Property,
Managing Trade Secrets and Preventing Technology Leakage
Tokyo Electron has a set of internal rules that define the management of its intellectual property. Under these rules, Tokyo Electron
provides compensation for employees who have invented or createdsomething new through their work within the Company. We makelump-sum payments when applications are submitted for patents,
utility model rights, designs and other property rights. Compensationis also given if such creations are implemented at Tokyo Electron or
licensed to third parties.
Management of trade secrets is rigorous, conducted according toTokyo Electron’s “Internal Rules on Managing Technology and Marketing Information” and “Manual for Managing Technology and Marketing Information.” The provisions of these measures areapproximately equivalent to those of the government’s “Policies
Regarding Managing Trade Secrets” and “Policies Regarding the

Number of Patent Applications(Applications)

1,000

Status of Intellectual Property Application
The graph in this section shows the number of patent applications
filed worldwide by Tokyo Electron as of March 31, 2009. In addition
to filing applications for core technologies vital to our strategies ineach business division, we vigorously promote the development ofpatent portfolio that encompass peripheral technologies. We are also
strengthening our patent filings outside of Japan in step with market
and competitor trends in our business fields. Most notably in South
Korea, Tokyo Electron is ranked 6th among foreign companies in thenumber of patent applications filed (434 applications from January 1
to December 21, 2008), according to results announced by the
Korean Intellectual Property Office. These filings reflect South
Korea’s growing importance in our recent business strategies, as wellas our patent strategies in response to increased filings from Korean
semiconductor and FPD production equipment manufacturers.
As of March 31, 2009, Tokyo Electron held 3,336 patents in Japanand 8,544 patents overseas. As part of proper asset management, weperiodically assess the Company’s patent portfolio, relinquishing therights to any patents with limited potential for contributing to products
from Tokyo Electron or other companies.

Contribution of License-related Activities
In building and implementing our intellectual property rights strategy,
we do not view intellectual property rights acquired by filing applications and securing rights for proprietary products and developed
technologies as a source of income from licensing to other companies. Rather, we view this as a method of differentiating our own
products and bolstering our competitive advantages. Semiconductor
and FPD manufacturing technologies are becoming increasingly
advanced and sophisticated. To effectively develop new products
incorporating leading-edge technologies, and bring them to market
as quickly as possible, it is essential to utilize all available intellectual
properties. Tokyo Electron places high value on introducing cuttingedge technology, constantly enhancing the efficiency of research anddevelopment, and quickly launching new products. We also respect
the intellectual property rights of others, just as we do our own, andeffectively use them through licensing. Tokyo Electron is also exploring the feasibility of licensing or selling its proprietary technology tothird parties in other business fields and to cooperating partners.

External Recognition

800
600
400
200
0

05

06
U.S.

20

Prevention of Technology Leakage” (both issued by the Ministry of
Economy, Trade and Industry). Furthermore, to raise the effectivenessof trade secret management, Tokyo Electron runs an in-house training
program and monitors the subsequent status of trade secret handlingto ensure strict adherence to the rules.

South Korea

07
TaiwanTokyo Electron Limited  Annual Report 09

09

08
China

EuropeJapan

On April 18, 2008 (Inventors’ Day in Japan), Tokyo Electron wasawarded 2008 Minister of Economy, Trade and Industry’s Award forContribution to Intellectual Property by the Japan Patent Office. Tokyo
Electron was commended particularly for its high patent approval rateand high proportion of global applications, as well as for its efforts topursue strategic intellectual property initiatives led by the Vice Chairman of the Board, who is responsible for legal and intellectual propertyrelated activities.

Financial Section

22

Financial Review

30

Consolidated Eleven-year Summary

32

Consolidated Balance Sheets

34

Consolidated Statements of Income

35

Consolidated Statements of Changes in Net Assets

36

Consolidated Statements of Cash Flows37

Notes to Consolidated Financial Statements

47

Independent Auditors’ Report

Annual Report 09 Tokyo Electron Limited

21

FINANCIAL REVIEWThe Company adopted the following revised accounting standards and business segments.
n	Effective beginning fiscal 2005, the policy for revenue recognition of semiconductor and FPD production equipment was changed from the timeof shipment of products to, in principle, the time of confirmation of set-up and testing of products. The effect of this change decreased net sales,
operating income and income before income taxes and minority interests by ¥80,956 million, ¥20,541 million and ¥20,563 million, respectively,
for fiscal 2005, compared with the corresponding amounts which would have been recorded if the previous method had been applied.
n	Effective beginning fiscal 2005, the accounting treatment of after-sale repair expenses incurred during the warranty period for semiconductor and FPD production equipment was changed. In the past, the Company charged such expenses to income as incurred. Effectivefrom the fiscal year ended March 31, 2005, the Company provides accrued warranty expenses for estimated expenses, calculated on thebasis of after-sale repair expenses incurred in the past. The effect of this change decreased operating income and income before income
taxes and minority interests by ¥635 million and ¥13,106 million, respectively, for the year ended March 31, 2005, compared with thecorresponding amounts which would have been recorded if the previous method had been applied.
n	On October 1, 2006, Tokyo Electron’s computer networks division was transferred to Tokyo Electron Device Limited. Accordingly, sales
from computer networks, which were formerly included in the industrial electronic equipment segment, are now included as part of theelectronic components and computer networks segment (formerly the electronic components segment), effective from fiscal 2007.
n	Effective beginning fiscal 2009, the name of the former FPD production equipment division was changed to the FPD/PV production equipment division. In addition to production equipment for flat-panel displays, this division includes production equipment for photovoltaic
cells, a market Tokyo Electron entered in 2008.

Sales and Income
Operating environment
During fiscal 2009, the global economy was shaken by a financial crisis, which emerged from a wave of defaults on subprime loans in the U.S.,
but soon spread worldwide and caused a sharp economic downturn. The slump affected not only the U.S., but also caused a sudden drop in
economic growth in Europe, which had been growing steadily up to that point, and Asia, which had been registering buoyant growth. This sort ofsimultaneous downturn in all regions of the world is unprecedented.
The electronics industry, of which Tokyo Electron is a part, was forced to cut production levels as demand for PCs, mobile phones, digital homeelectronics and other electronic equipment stagnated due to the economic downturn. This reduced demand for the semiconductors used in electronicequipment, and pushed down unit prices. In response, semiconductor manufacturers postponed or cut back new capital investment plans.
These business conditions severely affected Tokyo Electron’s earnings results. Sales in the Company’s mainstay semiconductor production
equipment division were particularly affected, and both sales and profits fell far below fiscal 2008’s record high levels. However, the Company
responded promptly to changing conditions in the business environment: since early 2008, Tokyo Electron has been taking steps to cut fixed costs
and implement other measures to stabilize earnings. As a result, the Company was able to remain profitable for the full fiscal year.
Millions of Yen

2005

2006

2007

2008

2009

Net sales..............................................................................................

¥635,710¥673,686¥851,975¥906,092¥508,082

Gross profit..........................................................................................

175,913

189,732

272,649

311,298

137,408

Gross profit margin...............................................................................

27.7%

28.2%

32.0%

34.4%

27.0%

Selling, general and administrative expenses.........................................

111,930

114,029

128,670

142,800

122,697

Operating income.................................................................................

63,98375,703

143,979

168,498

14,711

Operating margin.................................................................................

10.1%

11.2%

16.9%

18.6%

2.9%

Income before income taxes.................................................................

55,77575,328144,414169,220

9,637

Net income..........................................................................................

61,601

48,006

91,263106,271

7,543

Effective from fiscal 2005, the Company made certain changes in accounting policies as discussed in this financial review.

22Tokyo Electron Limited

Annual Report 09

Sales
Net sales declined 43.9% year on year in fiscal 2009, to ¥508.1 billion, a slightly sharper drop than the 42.3% decline registered in fiscal 2002,
when the IT bubble collapsed. Domestic sales were down 35.5% year on year, to ¥208.9 billion, and overseas sales dropped 48.6%, to ¥299.2
billion. Overseas sales declined as a share of total consolidated sales, from 64.2% of the total in fiscal 2008 to 58.9% in fiscal 2009. Orders
received during the fiscal year declined by 50.9%, to ¥366.0 billion, and the orders backlog at the end of March fell 43.7% year on year, to¥182.8 billion. This was the second consecutive year-on-year decline for both orders and the orders backlog.

Gross Profit, SG&A Expenses and Operating Income
Cost of sales for the period was down 37.7% year on year, to ¥370.7 billion, and the cost of sales ratio stood at 73.0%, 7.4 percentage points
higher than in fiscal 2008. Tokyo Electron acted swiftly to cut fixed production costs, including outsourcing costs, but the ratio of fixed production
costs to sales increased as plant capacity utilization ratios were reduced, particularly in the latter half of the fiscal year. Gross profit decreased by
55.9% year on year, to ¥137.5 billion, and the gross profit margin dropped to 27.0%, from 34.4% in fiscal 2008.
Efforts to reduce SG&A expenses allowed Tokyo Electron to decrease this total cost by 14.1% year on year, to ¥122.7 billion. As a percentage ofconsolidated net sales, however, the SG&A ratio rose to 24.1%, from 15.8% in the previous year. Consequently, operating income fell 91.3% year
on year, to ¥14.7 billion, and the operating margin declined from 18.6% in fiscal 2008 to 2.9% in fiscal 2009.

Research & Development
R&D expenses are included as a portion of SG&A expenses. The Company views these expenses as the source of future growth and therefore
tries to maintain a high level of R&D investment even during periods of economic difficulty. Total R&D expenses amounted to ¥61.0 billion in fiscal
2009, down 7.7% year on year.
Breaking down these costs by division, R&D investment in the semiconductor production equipment business focused on the development of
new technology and new production equipment that helps to promote further chip miniaturization, and also responses to new materials for realizing higher speeds and lower electricity consumption. Development of equipment that uses an RLSA*1 plasma source is one example. Tokyo
Electron’s R&D investments focused not only on existing business segments, but also on the development of production equipment for OLED*2,
photovoltaic (solar power) cells and other new product segments.
*1 RLSA: Radial Line Slot Antenna*2 OLED: Organic Light-Emitting Diode■	Domestic (Previous policies)■	Overseas (Previous policies)■	Domestic (New policies)■	Overseas (New policies)

08

09

144.0

90

18.6

91.3

60
61.6

75.7

120

10

11.2

48.0

10.1

16.9

(Billions of Yen)

20

30

0
05

06

07

08

09

0

7.5

2.9
14.7

208.9

299.2

07

323.9

06

313.8

262.5

05

60

64.0

85.2

582.1

538.2
411.2

476.0
403.0
240.7
232.7

300

0

120

11.9

168.5

168.5

508.1

30

900

600

Net Income
(%)

106.3

180
906.1

1,200
852.0

(Billions of Yen)
673.7

Operating Income and Operating Margin(Billions of Yen)
716.7
635.7

Domestic and Overseas Sales

0
05

06

07

08

09

■	Operating Income (Previous policies)
Operating Margin (Previous policies)■	Operating Income (New policies)
Operating Margin (New policies)

Annual Report 09 Tokyo Electron Limited

23

Other Income (Expenses) and Net Income
During fiscal 2009, Tokyo Electron posted ¥7.4 billion in losses on provision of allowance for doubtful accounts and ¥2.4 billion in losses on devaluation of investment securities. As a result, other income (expenses) was a net expense of ¥5.1 billion. This contributed to a 94.3% drop inincome before income taxes and minority interests, to ¥9.6 billion. Net income for fiscal 2009 declined 92.9% year on year, to ¥7.5 billion, andnet income per share fell from ¥594.01 in fiscal 2008 to ¥42.15 per share in fiscal 2009.

Dividend Policy and Dividends
It is the policy of Tokyo Electron to pay dividends on the basis of business performance and earnings results. In principle, the dividend payout ratio
is set at 20% of consolidated net income.
In fiscal 2009, the Company paid an interim dividend of ¥20 per share and a year-end dividend of ¥4 per share, making the total dividend for theperiod ¥24 per share. If the Company had applied its basic dividend policy to results for the period, the year-end dividend would have been ¥0,since Tokyo Electron posted a loss in the second half. However, in the interest of ensuring continuity in shareholder returns, year-end dividends
were set at ¥4 per share.
Meanwhile, the Company uses retained earnings to fund research and development, capital investment, overseas business expansion andother activities aimed at stimulating future earnings growth.

Performance by Segment
Industrial Electronic Equipment Segment
Sales in the industrial electronic equipment segment (including inter-segment sales) were down 47.9% year on year in fiscal 2009, to ¥414.8
billion. Operating income fell 92.2%, to ¥12.8 billion and the operating margin declined to 3.1%, compared with 20.7% in fiscal 2008. Sales tooutside customers (excluding inter-segment sales) were down by 47.9% year on year, to ¥413.9 billion.
n Semiconductor Production Equipment
The market for memory ICs deteriorated in fiscal 2009, as global demand for semiconductor devices in general was reduced, causing manufacturers to cut back sharply on capital investment. As a result, the market for semiconductor production equipment registered a dramatic contraction, and Tokyo Electron’s sales to outside customers fell 55.2% year on year, to ¥325.4 billion.
Sales declined year on year in every region, with a particularly sharp drop of 80.7% in sales to Taiwan.

Cash Dividends per Share

(%)(Billions of Yen)

(Yen)

150

30

80

125
103

61.0

50

10

24

45

20

55

50

66.1
57.0

40

15.8

15.1

100

49.2

16.9

20
43.9

17.6

150

60

24.1
122.7

128.7

114.0

100

142.8

R&D Expenses(Billions of Yen)

111.9

Selling, General and Administrative Expenses andRatio to Net Sales

0

0
05

06

07

08

09

■ Selling, General and Administrative Expenses
Ratio to Net Sales

24

Tokyo Electron Limited

Annual Report 09

0

0
05

06

07

08

09

05

06

07

08

09

New products introduced during fiscal 2009 included a new, more efficient model of the CLEAN TRACKTM LITHIUS ProTM V coater/developer,
and the TriasTM SPAi Single Wafer Plasma Process System, which enables higher productivity and reduces environmental impact. The Company
also launched the NS300+, a new model of scrubber system, which offers higher performance. In addition, the Company established and demonstrated double-patterning technology by using a sequence of Tokyo Electron products, an adoption of which will be introduced from NAND flash
memory production.
Orders in this division dropped off sharply in the second half, resulting in a 57.4% year on year decline for the full fiscal year, to ¥214.5 billion.
The orders backlog fell 60.0%, to ¥73.8 billion.
n FPD/PV Production Equipment*
During fiscal 2009, capital investment for large-screen LCDs, used in flat-screen TVs, remained strong throughout the period, and sales tooutside customers rose 29.5% year on year, to ¥88.1 billion. However, the market for LCD panels began to weaken beginning in thesummer of 2008, depressing orders.
A sales breakdown by region showed particularly strong increases in sales to Korea and Taiwan. In the latter half of the fiscal year, Tokyo
Electron began shipping production equipment for large 10th-generation substrates.
The photovoltaic (PV) cell production equipment business encompasses the Company’s joint venture with Sharp Corp., which is developing
CVD systems for thin-film silicon PV. In addition, in February 2009 Tokyo Electron strengthened its business foundation by signing a contract
with Oerlikon Solar—a Swiss-based manufacturer of photovoltaic cell production equipment—to be Oerlikon’s exclusive sales representative in
the Asia and Oceania regions.
Orders in this division fell sharply in the latter half of the year, producing an overall orders decline of 53.4% year on year, to ¥60.6 billion. The
orders backlog at the end of the fiscal year was down 21.7%, to ¥99.6 billion.
* In 2009, the name of the former FPD (flat-panel display) Production Equipment Segment was changed to the FPD/PV (flat-panel display and photovoltaic cell) Production Equipment Segment.

n Others
Sales in the “Others” segment mainly include non-life insurance operations, travel services and other in-house services. Net sales in the segment fell 15.4% year on year in fiscal 2009, to ¥0.4 billion.

FPD/PV Production Equipment Sales(Billions of Yen)

800

120

325.4

200

0
05

06

07

08

09

Notes: 1.Since fiscal 2005, sales of FPD
production equipment havebeen shown separately fromSPE Division sales, in which
they were previously included.
2.Effective from fiscal 2005, theCompany made certain changes
in accounting policies as
discussed on page 22.

68.0

81.2

60

75.0

Notes: 1. Since fiscal 2005, sales of FPD
production equipment havebeen shown separately fromSPE Division sales, in which
they were previously included.
2.	Effective from fiscal 2005, theCompany made certain changes
in accounting policies as
discussed on page 22.

100.8

90

486.9

457.2

400

642.6

600

726.4

(Billions of Yen)

88.1

Semiconductor Production Equipment Sales

30

0
05

06

07

08

09

Annual Report 09 Tokyo Electron Limited25

Electronic Components and Computer Networks (Tokyo Electron Device Ltd.*)
Net sales in this segment (including inter-segment sales) declined 15.5% year on year in fiscal 2009, to ¥94.7 billion. Operating income fell
49.7%, to ¥1.8 billion, and the operating margin contracted to 1.9%, compared with 3.3% in fiscal 2008. Sales to outside customers were down
15.3% year on year, to ¥94.2 billion.
During the first half of the fiscal year, the semiconductor and electronic device business benefited from relatively strong demand for custom
ICs used in mobile phone base stations and memory chips used in PCs. However, market conditions deteriorated rapidly in the second half,pushing down sales. Earnings in the computer networks business were threatened by weak corporate earnings and the sluggish economy, whichcaused clients to restrain capital spending and postpone new IT-related investments.
* Tokyo Electron Device Ltd. is listed on the Second Section of the Tokyo Stock Exchange.

Business Segment Information
Millions of yen
Industrial
electronicequipment

Electronic
components
and computer
networks(1) Sales to external customers.................................................................

¥413,875(2) Intersegment sales or transfers............................................................

942

Total.........................................................................................................

414,817

2009:

Total

Eliminations
andcorporate

Consolidated¥94,207¥508,082¥     –

¥508,082

495

1,437

(1,437)–

94,702509,519(1,437)508,082

1. Net sales and operating income
Net sales

Operating expenses..................................................................................

401,974

92,861

494,835(1,464)493,371

Operating income.....................................................................................

¥ 12,843¥ 1,841¥ 14,684¥    27¥ 14,711

Assets......................................................................................................

¥631,062¥40,680¥671,742¥ (2,744)¥668,998

Depreciation and amortization expenses....................................................

22,860473

23,333–23,333

Capital expenditures, including intangible and other assets........................

19,468698

20,166–

20,166

2. Assets, depreciation and amortization expenses, impairment losses andcapital expenditures

Working Capital and Current Ratio

Interest-Bearing Debt, D/E Ratio

Equity and Equity Ratio(Billions of Yen)

(Times)(Billions of Yen)(%)

(Billions of Yen)

(%)

600

6.0

150

30

800

80

29.9
77.5

5.7

600

07

08

09

Tokyo Electron Limited

05

06

07

08

518.4

535.0

460.2

40

20

6.7
3.8

36.1

0
■	Interest-Bearing Debt
D/E Ratio

Annual Report 09

200

59.7

51.6
376.9

10
8.7
40.2

0
06

■ Working Capital
Current Ratio

26

50

56.8

400

332.2

99.5

416.4

2.0

0
05

17.3

60

67.5

20

100

3.2
2.7

2.6

4.0

65.1

2.4

315.9

200

288.6

384.5

441.4

400

09

0.7 0

0

0
05

■	Equity
Equity Ratio

06

07

08

09

Financial Position and Cash Flows
Assets, Liabilities and Net Assets
n Assets
As of March 31, 2009, total assets stood at ¥669.0 billion, a decline of ¥123.8 billion year on year.
Current assets decreased by ¥134.5 billion from the end of the previous year, to ¥505.7 billion, but liquidity on hand (cash and cash equivalents + short-term investments) was almost unchanged from the previous year, at ¥210.2 billion. On the other hand, lower sales resulted in a¥104.5 billion year-on-year drop in trade notes and accounts receivable, and inventories were down by ¥26.9 billion. The turnover period for tradenotes and accounts receivable was reduced from 90 days in fiscal 2008 to 86 days in fiscal 2009, but the inventory turnover period increased to
96 days, from 65 days in fiscal 2008, largely because many delivery dates were postponed at the client’s request.
Net property, plant and equipment declined by ¥4.2 billion year on year, to ¥99.9 billion, as ¥18.1 billion in fixed asset acquisitions were offset
by ¥23.1 billion in depreciation. Investments and other assets increased by ¥14.9 billion year on year, to ¥63.4 billion, which mainly reflected a¥17.1 billion increase in deferred tax assets.
n Liabilities and Net Assets
As of the end of March 2009, total liabilities stood at ¥139.7 billion, a decline of ¥107.8 billion year on year.
Current liabilities were reduced by ¥109.5 billion, from the end of fiscal 2008, to ¥89.3 billion. This reflected a ¥35.6 billion decline intrade notes and accounts payable, as well as the redemption of unsecured straight bond, amounting to ¥30.0 billion, and a ¥26.5 billion
decrease in income taxes payable. The balance of interest-bearing debt, which consists only of short-term borrowings, stood at ¥3.8 billion
as of March 31, 2009. As a result, Tokyo Electron reduced its debt/equity ratio to just 0.7%, compared with 6.7% at the end of March 2008.
Non-current liabilities increased by ¥1.7 billion, to ¥50.5 billion.
Net assets declined by ¥16.0 billion year on year, to ¥529.3 billion. This reflected a ¥7.5 billion increase from fiscal 2009 net income, a¥13.4 billion outflow in dividends paid, and a valuation and translation adjustment loss of ¥10.1 billion. As a result, the equity ratio rose from
67.5% at the end of March 2008 to 77.5% as of in March 31, 2009, and return on equity was reduced to 1.4%, from 21.4% in fiscal 2008.

Capital Expenditures*1 and Depreciation and Amortization*2
Total capital expenditures declined by 20.2% year on year in fiscal 2009, to ¥18.1 billion. Spending focused on evaluation and measuring equipment used for research and development of semiconductor and FPD/PV production equipment, as well as the construction of buildings. Depreciation rose by 7.7% year on year, to ¥23.1 billion.

ROE and ROA

Capital Expenditures and Depreciation and Amortization

Total liquidity on hand(%)(Billions of Yen)

(Billions of Yen)

30

250

203.6
134.4

100

140.0

23.1
18.1

22.7
21.4

150

115.4

10

11.7

18.8

19.2

21.5

20.2

200

13.3

10.7

20

21.4
13.5

10

21.7

9.9

20

21.8

20.3

27.1

30

06

07

210.2

*1 Capital expenditures represent only the gross increase in property, plant and equipment.
*2 Depreciation and amortization does not include amortization and losses on impairment of goodwill.

50

2.3

0

1.4

05

06

07

08

09

Return on equity ratio (ROE)
Return on assets ratio (ROA)
ROA=(Operating income+Interest and dividend
income)/Average total assets x100

0

0
05

06

07

■	Capital Expenditures■	Depreciation and Amortization

08

09

05

08

09

Total liquidity on hand=cash and cash equivalents+short-term investments

Annual Report 09 Tokyo Electron Limited27

Cash Flows
Cash flows from operating activities showed a net inflow of ¥81.0 billion, ¥36.0 billion less than in fiscal 2008. The main cash inflows included a¥9.6 billion inflow from income before income taxes and minority interests, ¥23.1 billion in depreciation and amortization, a ¥102.4 billion inflow
from reductions in trade notes and accounts receivable, and a ¥21.3 billion reduction in inventories. Major outflows included a ¥29.9 billion
reduction in trade notes and accounts payable and ¥40.8 billion expenditure on income taxes.
Cash flows from investing activities showed a ¥134.4 billion outflow from an increase in short-term investments, and a ¥17.2 billion outflow topurchase tangible fixed assets. As a result, there was a net outflow of ¥160.6 billion, compared with a ¥30.2 billion outflow in fiscal 2008.
Cash flows from financing activities included a ¥30.0 billion outflow to redeem the unsecured straight bond, and a ¥13.4 billion outflow for
dividends paid. The net outflow for fiscal 2009 was ¥46.0 billion, compared with a ¥27.0 billion outflow in fiscal 2008.
As a result, the balance of cash and cash equivalents at the end of March 2009 stood at ¥65.9 billion, a decline of ¥127.7 billion from the¥193.5 billion balance at the end of fiscal 2008. However, total liquidity on hand, which includes short-term investments as well as cash and cash
equivalents, increased by ¥6.6 billion year on year, from ¥203.6 billion at the end of March 2008 to ¥210.2 billion at the end of March 2009.

Business-related and Other Risks
The following are possible risks that may have an impact on Tokyo Electron’s business performance, stock price, or financial position.
(1) Impact From Changes in the Semiconductor Market
Tokyo Electron has achieved a high profit margin by concentrating resources in high-tech fields, including semiconductor production equipment, where
technological innovation is rapid but Tokyo Electron can effectively use its strengths. Although technological change is responsible for the semiconductor market’s rapid growth, Tokyo Electron has actively undertaken structural reforms to be able to generate profits under any circumstances, including
when the market contracts temporarily due to imbalance of supply and demand. However, order cancellations, excess capacity and personnel andincreased inventories resulting from an unexpectedly large market contraction could adversely affect Tokyo ­Electron’s business performance.
(2) Impact From Concentration of Transactions on Particular Customers
Tokyo Electron has been successful at increasing transactions with the leading semiconductor manufacturers worldwide, including those inJapan, through the provision of products featuring outstanding, cutting-edge technology and of services offering a high level of customer
satisfaction. However, Tokyo Electron’s sales may from time to time be temporarily concentrated on particular customers due to the timing oflarge capital investments of major semiconductor manufacturers. The resulting escalation in sales competition could adversely affect Tokyo
Electron’s business performance.
(3) Impact From Research and Development
Through ongoing and proactive R&D investment and activities in cutting-edge technologies—miniaturization, vacuum, plasma, thermal processing, coating/developing, cleaning, wafer-transfer and clean technologies—Tokyo Electron has created advanced technologies. At the same time,by quickly bringing to market new products incorporating these technologies, Tokyo Electron has successfully captured a high market share ineach of the product fields it has entered and generated a high profit margin. However, delays in the launch of new products and other factors
could adversely affect Tokyo Electron’s business performance.
(4) Safety-related Impacts
Tokyo Electron’s basic philosophy is to always bear in mind safety and health in the execution of business activities, including development, manufacturing, sales, services and management. In accordance with this philosophy, Tokyo Electron works actively and continuously to improve thesafety of its products and to eliminate any harmful impact on health. However, harm to customers, order cancellations or other circumstances
resulting from safety or other problems related to Tokyo Electron’s products could adversely affect Tokyo Electron’s business performance.

28

Tokyo Electron Limited

Annual Report 09

(5) Impact From Quality Issues
Tokyo Electron actively develops outstanding, cutting-edge technologies for incorporation in new products that are brought quickly to market. At thesame time, Tokyo Electron works to establish a quality assurance system, efforts that include obtaining ISO 9001 certification, as well as to establish
a world-class service system. These actions have resulted in a large number of customers adopting Tokyo Electron’s products. However, because
Tokyo Electron’s products are based on cutting-edge technologies, and due to other factors, many of the technologies developed are in unfamiliar
fields. The occurrence of unforeseen defects or other issues could adversely affect Tokyo Electron’s business performance.
(6) Impact of Intellectual Property Rights
In order to distinguish its products and make them more competitive, Tokyo Electron has promoted its R&D strategy for the early development of
cutting-edge technologies together with its business and intellectual property strategies. This approach has enabled Tokyo Electron to obtain solepossession of many proprietary technologies that have been instrumental to the Company’s ability to capture a high market share and generatehigh profit margins in each of its product fields. Tokyo Electron’s products incorporate and optimize many of these proprietary cutting-edge technologies. There may be cases in which, by avoiding the use of third-party technologies and intellectual property rights, Tokyo Electron’s businessperformance could be adversely affected.
(7) Impact of Fluctuating Foreign Exchange Rates
Success in the development of overseas operations has increased the share of sales generated overseas. As a rule, Tokyo Electron conducts
export transactions on a yen basis to avert exposure to foreign currency risks. However, some exports are denominated in foreign currencies. In
these cases, Tokyo Electron hedges foreign currency risk by using a forward foreign exchange contract when an order is received or by othermeans. However, foreign exchange rate risks can arise from fluctuations in prices due to sudden foreign exchange movements, which could havean indirect adverse effect on Tokyo Electron’s business performance.
(8) Other Risks
Tokyo Electron is actively engaged in reforming its corporate structure so that it can generate profits even when markets contract. These reforms
have entailed creating new high-growth and high-return businesses and pursuing higher earnings from existing businesses. At the same time,
Tokyo Electron has promoted activities to preserve the environment and worked to restructure its compliance and risk management systems.
However, as long as it conducts business activities, as with peer companies or companies in different industries, Tokyo Electron is subject to theeffect of many other factors. These include the world and regional economic environments, natural disasters, war, terrorism, unavoidable occurrences (such as infectious diseases), financial or stock markets, government or other regulations, supply systems of suppliers, market conditions
for products and real estate, the ability to recruit personnel in Japan and overseas, competition over standardization, and loss of key personnel.
Any of these factors could adversely affect Tokyo Electron’s business performance.

Annual Report 09 Tokyo Electron Limited

29

CONSOLIDATED Eleven-YEAR SUMMARYTokyo Electron Limited and Subsidiaries
As of and for the years ended March 31

Thousands of
U.S. dollars
2009

2008

2007

Net sales1 ...................................................................................... $5,172,371
Semiconductor production equipment ....................................... 3,312,461
896,946
FPD/PV production equipment2 .................................................
 Computer networks ...................................................................
– Electronic components and computer networks .........................
959,045 Other ........................................................................................
3,919
Operating income (loss) ................................................................
149,761
Income (loss) before income taxes ................................................
98,106
Net income (loss) . ........................................................................
76,7892009¥ 508,082
325,383
88,107–
94,207385
14,711
9,637
7,543¥ 906,092
726,440
68,016–111,181455
168,498
169,220
106,271¥ 851,975
642,625
100,766
19,16988,294
1,121
143,979
144,414
91,263

Domestic sales . ............................................................................
Overseas sales ..............................................................................

2,126,346
3,046,025

208,871299,211

323,946
582,146

313,816
538,159

Depreciation and amortization3 ......................................................
Capital expenditures4 ....................................................................
R&D expenses ..............................................................................

234,837
184,343
620,869

23,068
18,10860,98821,41322,70366,073

18,82027,12956,962

Total assets ...................................................................................
Total net assets (Total shareholders’ equity) ...................................

6,810,526
5,388,018

668,998529,265

792,818
545,245

770,514469,811

10,391

10,4299,528¥    42.15
42.07
2,896.55
24.00
180,61142,509¥  594.01
592.71
2,989.70
125.00180,611
43,324¥  511.27
509.84
2,573.72
103.00180,61141,289

1.4
2.9
77.5
0.70

21.4
18.6
67.5
1.16

21.8
16.9
59.7
1.19

¥   48,896¥  86,882¥  89,418

Number of employees ...................................................................
U.S. dollars

Net income (loss) per share of common stock:5
Basic ........................................................................................ $      0.43
0.43
 Diluted6 ....................................................................................
Net assets per share of common stock ..........................................
29.49
Cash dividends per share of common stock . .................................
0.24
Number of shares outstanding (thousands) ...................................
Number of shareholders ...............................................................

ROE . ............................................................................................
Operating margin ..........................................................................
Equity ratio ...................................................................................
Asset turnover (times) ...................................................................
U.S. dollars

Net sales per employee ................................................................. $  497,771

1 Until fiscal 2004, the FPD (Flat Panel Display) division was included in Semiconductor production equipment. From fiscal 2008, Computer networks is included in Electric components andcomputer networks.
2 From fiscal 2009, the FPD division was renewed to the FPD /PV production equipment division. The Photovoltaic Cell (PV) production equipment is included in FPD/PV production equipment.
3 Depreciation and amortization does not include amortization and loss on impairment of goodwill.
4 Capital expenditures until fiscal 1999 represent the gross increase in property, plant and equipment, intangible assets and other depreciable assets. Capital expenditures after fiscal 2000
only represent the gross increase in property, plant and equipment.
5 From fiscal 2003, the Company applied “Accounting Standards Regarding Net Income per Share (Business Accounting Standards No. 2)” and “Practical Guidelines for Applying Accounting Standards Regarding Net Income per Share (Practical Guidelines for Applying Accounting Standards No. 4)” released by the Accounting Standards Board of Japan (ASBJ).
6 Dilution is not assumed for the years ended March 2003, 2002 and 1999.
7 Effective from fiscal 2005, Tokyo Electron changed its method of revenue recognition upon receiving customer confirmation of product set-up and testing of products for Semiconductor and
FPD production equipment. The effect of this change decreased net sales, operating income and income before income taxes by ¥80,956 million, ¥20,541 million and ¥20,563 million,
respectively, for the year ended March 31, 2005, compared with the corresponding amounts which would have been recorded if the previous method had been applied.
8 Effective from fiscal 2005, Tokyo Electron changed its method to account for after-sale repair expenses by recording accrued warranty expenses for Semiconductor and FPD production
equipment. The effect of this change decreased operating income and income before income taxes by ¥635 million and ¥13,106 million, respectively, for the year ended March 31, 2005,
compared with the corresponding amounts which would have been recorded if the previous method had been applied.

30

Tokyo Electron Limited

Annual Report 09

Millions of yen
2006

2005

2004

2003

2002

2001

2000

1999

¥ 673,686
486,883
81,176
17,49786,881
1,249
75,70375,32848,006¥ 635,710
457,191
75,03815,96686,2491,266
63,98355,77561,601¥ 529,654
425,747–
18,44884,2291,230
22,28014,9368,297¥ 460,580
364,689–
17,19377,3801,318
1,119(23,010)(41,554)¥ 417,825
325,715–
17,03173,658
1,421(18,310)(22,919)(19,938)¥ 723,880
619,001–
14,054
89,211
1,614
121,086
99,13262,012¥ 440,729
355,103–
12,35772,051
1,218
35,816
29,68919,848¥ 313,820
242,240–
12,87857,734
968
6,383
6,038
1,866

262,532
411,154

232,678
403,032

242,318
287,336

190,513
270,067

186,516
231,309299,272
424,608

183,987
256,742

149,838
163,982

19,17013,33549,182

21,4639,876
43,88924,963
11,00744,15027,374
12,35950,123

26,29430,94653,827

21,67949,403
52,911

19,44618,99937,135

17,921
23,47826,842

663,243
376,900

644,320
332,165

561,632
275,800

524,901
252,904

556,915
307,579

729,511333,281

499,499273,603

414,903257,716

8,901

8,864

8,870

10,053

10,171

10,236

8,946

7,835

¥    46.37
45.78
1,543.73
10.00
180,61160,873¥  (238.57)–
1,456.23
8.00
175,698
49,259¥  (113.85)–
1,756.73
8.00
175,691
37,116¥ 353.76
344.75
1,901.38
38.00
175,691
42,781¥ 113.53
110.64
1,560.27
14.00
175,660
7,147¥     10.70–
1,477.93
12.00
174,624
8,576

3.1
4.2
49.1
0.97

(14.8)
0.2
48.2
0.85

(6.2)
(4.4)
55.2
0.65

20.4
16.7
45.7
1.18

7.5
8.1
54.8
0.96

0.7
2.0
62.1
0.69

¥   59,713¥ 45,815¥ 41,080¥ 70,719¥ 49,265¥   40,054

Yen¥ 267.61
267.32
2,112.30
55.00
180,611
46,272¥   343.63
343.54
1,863.28
45.00
180,61160,857

13.5
11.2
56.8
1.03

20.3
10.1
51.6
1.05

¥   75,687¥   71,718

Percent

Thousands of yen

Annual Report 09 Tokyo Electron Limited

31

CONSOLIDATED BALANCE SHEETSTokyo Electron Limited and Subsidiaries
As of March 31, 2009 and 2008ASSETS
2009

2008

2009

Current assets: Cash and cash equivalents ...................................................................................
Short-term investments ........................................................................................
 Trade notes and accounts receivable ....................................................................
Allowance for doubtful accounts ...........................................................................
 Inventories ...........................................................................................................
 Deferred income taxes . ........................................................................................
 Prepaid expenses and other current assets ...........................................................
  Total current assets . .........................................................................................

¥ 65,883
144,275
119,687(21)
134,242
11,48130,140505,687¥193,493
10,070224,171(63)
161,152
24,14027,271
640,234$  670,701
1,468,747
1,218,436(214)
1,366,609
116,879
306,831
5,147,989

Property, plant and equipment: Land ....................................................................................................................
Buildings . ............................................................................................................
 Machinery and equipment . ..................................................................................
 Construction in progress .......................................................................................
  Total property, plant and equipment ..................................................................
 Less: Accumulated depreciation ...........................................................................
  Net property, plant and equipment . ..................................................................

20,678
121,569
104,4734,708
251,428
151,522
99,906

20,729119,578
99,735
4,199
244,241
140,135
104,106

210,506
1,237,596
1,063,555
47,9282,559,585
1,542,523
1,017,062

Investments and other assets: Investment securities . ..........................................................................................
 Deferred income taxes . ........................................................................................
 Intangible assets ..................................................................................................
 Other assets .........................................................................................................
Allowance for doubtful accounts ...........................................................................
  Total investments and other assets ....................................................................
Total assets .............................................................................................................

9,131
31,94010,761
19,119(7,546)
63,405¥668,998

8,837
14,846
13,254
11,843(302)
48,478¥792,818

92,956
325,155
109,549
194,635(76,820)
645,475$6,810,526

See accompanying Notes to Consolidated Financial Statements.

32

Thousands of
U.S. dollars

Millions of yen

Tokyo Electron Limited

Annual Report 09

LIABILITIES AND NET ASSETS

Thousands of
U.S. dollars

Millions of yen

2009

2008

2009

Current liabilities:
Short-term borrowings ..........................................................................................
 Current portion of long-term debt . ........................................................................
 Trade notes and accounts payable ........................................................................
 Customer advances ..............................................................................................
 Income taxes payable ...........................................................................................
Accrued employees’ bonuses ...............................................................................
Accrued warranty expenses ..................................................................................
Accrued expenses and other current liabilities ......................................................
  Total current liabilities .......................................................................................

¥   3,807–
31,22728,562
1,751
4,965
6,116
12,84489,272¥   6,070
30,00066,79424,02928,23912,727
9,816
21,146
198,821$   38,756–
317,897
290,767
17,82550,54562,262
130,754908,806

Accrued pension and severance costs .....................................................................
Other liabilities .......................................................................................................
  Total liabilities ...................................................................................................

47,687
2,774
139,733

44,370
4,382
247,573

485,462
28,2401,422,508

54,961

54,961

559,514

78,114404,435(11,112)78,393410,867(11,370)795,215
4,117,225(113,122)(842)
67(7,236)
1,149
9,729
529,265

2,172
460
(530)
484
9,808
545,245(8,572)
682(73,664)
11,697
99,043
5,388,018¥668,998¥792,818$6,810,526

Contingent liabilities
Net assets:
Shareholders’ equity  Common stock .................................................................................................
    Authorized: 300,000,000 shares   Issued: 180,610,911 shares as of March 31, 2009 and 2008  Capital surplus . ................................................................................................
   Retained earnings . ...........................................................................................
  Treasury stock, at cost ......................................................................................
    1,643,398 and 1,678,927 shares as of   March 31, 2009 and 2008, respectively
Valuation and translation adjustments  Unrealized gains (losses) on investment securities ............................................
  Deferred gains on hedges .................................................................................
   Foreign currency translation adjustments ..........................................................
Share subscription rights . ...................................................................................
Minority interests . ...............................................................................................
  Total net assets .................................................................................................
Total liabilities and net assets . ...............................................................................

Annual Report 09 Tokyo Electron Limited

33

CONSOLIDATED STATEMENTS OF INCOME
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2009 and 2008

Thousands of
U.S. dollars

Millions of yen

2009

2008

2009

Net sales ...............................................................................................................
 Cost of sales .......................................................................................................
Gross profit ...........................................................................................................
Selling, general and administrative expenses ......................................................
Operating income . ................................................................................................

¥ 508,082
370,674
137,408
122,697
14,711¥ 906,092
594,794311,298
142,800
168,498$5,172,371
3,773,532
1,398,839
1,249,078
149,761

Other income (expenses): Interest and dividend income .............................................................................
 Interest expenses ...............................................................................................
Revenue from development grants .....................................................................
Gain on sale of property, plant and equipment ....................................................
Gain on reversal of forfeited warrants ..................................................................
 Provision of allowance for doubtful accounts .......................................................
 Loss on devaluation of investment securities .......................................................
 Loss on disposal of property, plant and equipment ..............................................
 Loss on impairment of property, plant and equipment .........................................
 Loss on impairment of goodwill ...........................................................................
 Other, net ...........................................................................................................
Income before income taxes and minority interests ..............................................

1,806
(175)
2,701
67
–
(7,361)(2,432)
(352)
–
–
672
9,637

1,491
(343)
2,170
2,365
467
(1)
(17)
(885)
(808)
(4,072)355
169,220

18,385(1,782)
27,497682–(74,936)(24,758)(3,584)––
6,841
98,106

Income taxes: Current ..............................................................................................................
 Deferred . ...........................................................................................................

4,553(2,762)56,5695,374

46,350(28,118)

Minority interests ...................................................................................................
Net income ...........................................................................................................

303¥    7,543

1,006¥ 106,271

3,085$   76,789

Per share of common stock: Net income — basic . .........................................................................................
 Net income — diluted ........................................................................................
 Net assets ..........................................................................................................
 Cash dividends . .................................................................................................
See accompanying Notes to Consolidated Financial Statements.

34

Tokyo Electron Limited

Annual Report 09

Yen¥    42.15
42.07
2,896.55
24.00

U.S. dollars¥ 594.01
592.71
2,989.70
125.00$     0.43
0.43
29.49
0.24

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTokyo Electron Limited and Subsidiaries
Years ended March 31, 2009 and 2008

Millions of yen
Shareholders’ equity

Balance as of March 31, 2007....
Cash dividends ..........................
Net income ................................
Repurchase of treasury stocks ...
Disposal of treasury stocks .........
Other, net ..................................
Balance as of March 31, 2008....
Effect of change in accounting
policies for foreign subsidiaries ...
Cash dividends ..........................
Net income ................................
Repurchase of treasury stocks ...
Disposal of treasury stocks .........
Effect of newly consolidated
subsidiaries ..............................
Other, net ..................................
Balance as of March 31, 2009....

Valuation and translation adjustments

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Unrealized
gains(losses) on
investment
securities¥ 54,961–––––¥ 54,961¥ 78,347–––
46–¥ 78,393¥ 328,027(23,431)106,271–––¥ 410,867¥ (12,168)
–
–
(40)
838
–
¥ (11,370)¥  5,853––––(3,681)¥  2,172¥ (177)––––637¥  460¥  5,333––––(5,863)¥    (530)¥    584
–
–
–
–
(100)
¥    484¥ 9,051––––757¥ 9,808¥ 469,811(23,431)106,271(40)
884(8,250)¥ 545,245

–
–
–
–
–

–
–
–
–
(279)

(552)
(13,420)
7,543
–
–

–
–
–
(38)
296

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

(552)
(13,420)
7,543
(38)
17

–
–
¥54,961––¥78,114(3)–¥404,435––¥(11,112)–(3,014)¥   (842)–(393)¥   67–(6,706)¥(7,236)–665¥1,149–(79)¥9,729(3)(9,527)¥529,265

Share
subscription
rightsMinority
interests

Total
net assets

Deferred
gains(losses) onhedgesForeigncurrencytranslation
adjustments

Sharesubscription
rightsMinority
interests

Total
net assets

Thousands of U.S. dollars
Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Valuation and translation adjustments

Treasurystock

Unrealized
gains(losses) on
investment
securities

Deferred
gains onhedgesBalance as of March 31, 2008.... $ 559,514 $ 798,055 $  4,182,704 $ (115,749) $  22,111 $  4,683
Effect of change in accounting
policies for foreign subsidiaries ...
––(5,619)–––Cash dividends ..........................
––(136,618)–––
Net income ................................
––
76,789–––Repurchase of treasury stocks ...
–
–
–
(387)
–
–
Disposal of treasury stocks .........
–(2,840)–3,014––
Effect of newly consolidated
subsidiaries ..............................
–
–
(31)
–
–
–
Other, net ..................................
––––(30,683) (4,001)
Balance as of March 31, 2009.... $559,514 $795,215 $4,117,225 $(113,122) $  (8,572) $      682

Foreigncurrencytranslation
adjustments$   (5,396) $   4,927
–
–
–
–
–

–
–
–
–
–

–
–
(68,268)
6,770$(73,664) $11,697$ 99,847 $  5,550,696
–
–
–
–
–

(5,619)(136,618)
76,789
(387)
174

–
(31)
(804)
(96,986)$99,043 $5,388,018

See accompanying Notes to Consolidated Financial Statements.

Annual Report 09 Tokyo Electron Limited

35

CONSOLIDATED STATEMENTS OF CASH FLOWSTokyo Electron Limited and Subsidiaries
Years ended March 31, 2009 and 2008

Thousands of
U.S. dollars

Millions of yen

Cash flows from operating activities: Income before income taxes and minority interests ............................................................
 Depreciation and amortization ...........................................................................................
Amortization of goodwill .....................................................................................................
 Loss on impairment of goodwill ..........................................................................................
 Loss on impairment of property, plant and equipment ........................................................
 Increase in accrued pension and severance costs . ............................................................
(Increase) decrease in prepaid pension expenses ..............................................................
 Increase in allowance for doubtful accounts . .....................................................................
 Decrease in accrued employees’ bonuses . ........................................................................
 Decrease in accrued warranty expenses ............................................................................
 Interest and dividend income ............................................................................................
 Interest expenses ..............................................................................................................
Gain on sale of property, plant and equipment ...................................................................
 Loss on disposal of property, plant and equipment .............................................................
 Loss on devaluation of investment securities ......................................................................
Gain on reversal of forfeited warrants .................................................................................
 Decrease in trade notes and accounts receivable ...............................................................
 Decrease in inventories .....................................................................................................
(Increase) decrease in prepaid consumption tax ................................................................
 Decrease in trade notes and accounts payable ..................................................................
 Increase in customer advances .........................................................................................
 Increase in specific doubtful receivables ............................................................................
 Other, net ..........................................................................................................................
Subtotal . ..........................................................................................................................
Receipts from interest and dividends .................................................................................
 Interest paid ......................................................................................................................
 Income taxes paid .............................................................................................................
Net cash provided by operating activities .........................................................................
Cash flows from investing activities: Purchases of short-term investments .................................................................................
 Proceeds from short-term investments . .............................................................................
 Payment for purchase of property, plant and equipment ....................................................
 Proceeds from sale of property, plant and equipment . .......................................................
 Payment for acquisition of intangible assets .......................................................................
 Payment for purchase of investment securities ..................................................................
 Other, net ..........................................................................................................................
Net cash used in investing activities ................................................................................
Cash flows from financing activities: Increase (decrease) in short-term borrowings ....................................................................
Redemption of unsecured bonds .......................................................................................
(Increase) decrease in treasury stock, net ..........................................................................
 Dividends paid ..................................................................................................................
Repayment of long-term debt ............................................................................................
 Other, net ..........................................................................................................................
Net cash used in financing activities . ..............................................................................
Effect of exchange rate changes on cash and cash equivalents . ............................................
Net increase (decrease) in cash and cash equivalents .........................................................
Cash and cash equivalents at beginning of year . ...................................................................
Effect of newly consolidated subsidiaries ...............................................................................
Cash and cash equivalents at end of year ............................................................................
See accompanying Notes to Consolidated Financial Statements.

36

Tokyo Electron Limited

Annual Report 09

2009

2008

2009

¥   9,637
23,068
242
–
–
3,401
52
7,333
(7,762)(3,346)(1,806)
175
(67)
352
2,432
–
102,413
21,282
4,509(29,942)
5,322(7,355)(9,620)120,320
1,749(202)(40,837)
81,030¥169,220
21,413
1,601
4,072
808
3,753
(4,036)–(1,404)(4,323)(1,491)343(2,365)
885
17
(467)
2,473
28,343(1,446)(27,373)2,130–(2,516)
189,6371,372(348)(73,722)
116,939$    98,106
234,837
2,464––
34,623529
74,651(79,019)(34,063)(18,385)
1,782
(682)
3,583
24,758–1,042,584
216,655
45,902(304,815)
54,179(74,875)(97,934)
1,224,880
17,805(2,056)(415,728)
824,901(353,804)
219,429(17,228)656(1,182)(7,815)(678)(160,622)(44,070)
34,000(19,338)
4,270(4,042)(458)(548)(30,186)(3,601,792)
2,233,829(175,384)
6,678(12,033)(79,558)(6,902)(1,635,162)(2,263)(30,000)(21)(13,420)–(312)(46,016)(2,069)(127,677)
193,49367¥  65,883

4,352(5,500)844(23,431)(3,000)(298)(27,033)(617)
59,103
134,390–¥193,493(23,038)(305,406)(214)(136,618)–(3,176)(468,452)(21,063)(1,299,776)
1,969,795682$   670,701

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tokyo Electron Limited and Subsidiaries

1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Tokyo Electron
Limited (hereinafter “the Company”) and its subsidiaries (hereinafter collectively referred to as “Tokyo Electron”) have been prepared in accordance withthe provisions set forth in the Financial Instruments and Exchange Law ofJapan and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial Reporting Standards.
Prior to the year ended March 31, 2009, the accounts of foreign subsidiaries
were based on their accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countries of domicile.
As mentioned in note 3 (a), the Company adopted “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (Practical Issues Task Force No. 18 issued by the
Accounting Standards Board of Japan) effective from April 1, 2008. As a resultof this adoption, the Company uses financial statements prepared by foreignsubsidiaries in accordance with International Financial Reporting Standards or
the U.S. generally accepted accounting principles for its consolidation process, except for certain items which are required to be adjusted in the consolidation process.
The accompanying consolidated financial statements have been restructured and translated into English from the statutory Japanese language consolidated financial statements. Some supplementary information included in
the statutory Japanese language consolidated financial statements, which is
not required for fair presentation, is not presented in the accompanying consolidated financial statements.
U.S. dollar amounts included herein are solely for the convenience of readers and are presented at the rate of ¥98.23 to $1.00, the approximate rate asof March 31, 2009. The translation should not be construed as a representation that the Japanese yen amounts shown could be converted into U.S.
dollars at that or any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its 32 and 30 subsidiaries for the years ended March 31, 2009 and2008, respectively.
Investments in affiliates in which the Company’s ownership is 20% to 50%
are accounted for by the equity method.
All significant inter-company accounts, transactions and unrealized profits orlosses have been eliminated in consolidation.
The fiscal year-end of all entities is March 31, except for 2 consolidated
foreign subsidiaries, which use a December 31 year-end, and adjustment ismade for any significant transactions between the different fiscal year-ends.

(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies are translated into
Japanese yen at the year-end rates, except for those hedged by forward
exchange contracts, which are translated at the contracted rates.
Revenue and expense items are translated at the rates that approximate thoseprevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries are translated into Japanese yen at the rates of exchange in effect at the balance sheet date, except forshareholders’ equity accounts, which are translated at the historical rates. Revenue and expense accounts of foreign subsidiaries are translated at average rates
of exchange in effect during the year. Resulting translation adjustments arepresented in net assets as a component of valuation and translation adjustments
and minority interests in the consolidated financial statements.
(c) Investment securities
Tokyo Electron examines the intent of holding each security and classify thosesecurities as trading securities, held-to-maturity debt securities or other securities. Tokyo Electron has no trading or held-to-maturity debt securities. Other
securities with market prices are valued at fair market value prevailing at thebalance sheet date. The differences between the book and market prices of othersecurities, net of applicable income taxes, are presented in net assets as a component of valuation and translation adjustments. Other securities without market
value are valued at cost using the weighted-average method.
The cost of sold securities is calculated using the weighted-average method.
(d) Inventories
As mentioned in note 3 (b), effective from April 1, 2008, the Company andits domestic subsidiaries adopted “Accounting Standard for Measurement of
Inventories” (Statement No. 9 issued by the Accounting Standards Boards ofJapan). Inventories other than raw materials are stated at the lower of cost,
determined by the specific identification method, or net realizable value, which
is defined as selling price less estimated additional manufacturing costs andestimated direct selling expenses, at March 31, 2009. Raw materials arestated at the lower of cost, determined principally by the moving-averagemethod, or net realizable value, which is defined as selling price less estimated additional manufacturing costs and estimated direct selling expenses,
at March 31, 2009. For the year ended March 31, 2008, inventories otherthan raw materials are stated principally at cost, which is determined principally by the specific identification method, and raw materials are stated principally at cost, which is determined principally by the moving-average method.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation of buildings,
machinery and equipment of the Company and its domestic subsidiaries is computed under the declining balance method, except for buildings acquired subsequent to March 31, 1998 which are depreciated under the straight-line method,
based on the estimated useful lives of assets. Foreign subsidiaries mainly apply
the straight-line method over the estimated useful lives of assets.
Estimated useful lives of property, plant and equipment are as follows:
Buildings
2 to 60 years
Machinery and equipment 2 to 17 years

Annual Report 09 Tokyo Electron Limited37

(f) Intangible assets
Intangible assets, which primarily comprise of capitalized costs for computer
software and goodwill, are amortized by the straight-line method over theirestimated useful lives. Capitalized costs for computer software for internal use
are amortized over a period of 2 to 5 years. Goodwill is evaluated on an individual basis and amortized over a period not exceeding 20 years.
(g) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of fixed assets to be held for use
in the business.
If the carrying value of a fixed asset is impaired, a loss is recognized based on
the amount by which the carrying value exceeds its recoverable amount, being
the higher of the net selling price or the value in use of the assets. Net selling
price is determined using the fair value less disposal costs and value in use isbased on the total amount of discounted cash flows estimated to be generated
from the continuing use of the individual assets or the asset group and thedisposal of the assets, respectively.
(h) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount determinedbased on the historical experience of bad debts with respect to ordinary
receivables, and an estimate of uncollectible amounts determined by reference to specific doubtful receivables from customers which are experiencing
financial difficulties.
(i) Accrued pension and severance costs
The Company and its domestic subsidiaries provide an accrual for defined
benefit employees’ pension and severance costs based on the projected benefit
obligation and fair value of pension assets on the account settlement date. Prior
service costs are charged to income on a straight-line basis, beginning from thefiscal year in which they are incurred, over a fixed number of years (4 years)
within the average remaining years of service of employees when the changes
occur. Actuarial differences are charged to income on a straight-line basis,beginning from the fiscal year after they are recognized, over a fixed number ofyears (4 years) within the average remaining years of service of employees
when the differences occur.
The provision for accrued pension and severance costs for directors andstatutory auditors of the Company and its domestic subsidiaries is calculated inaccordance with internal regulations.
The Company and certain domestic subsidiaries decided to discontinue thepayment of severance pay for directors and statutory auditors after April 1,
2005, and at the general shareholders’ meeting in June 2005, it was resolvedthat the severance pay for directors and statutory auditors until March 31,
2005 would be paid at the termination of their service and the decision regarding the payment amount for each director and statutory auditor was delegatedto the board of directors and statutory auditors. As discussed in note 9, theaccruals for severance costs for directors and statutory auditors are includedin accrued pension and severance costs in the consolidated balance sheets.
( j) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty, and Tokyo Electron
accrues such estimated costs when product revenue is recognized. To prepare
for future repairs during warranty periods, estimated after-sale repair expenses
over warranty periods are accrued based on the historical ratio of actual repair
expenses to corresponding sales.

38

Tokyo Electron Limited

Annual Report 09(k) Leases
Until the year ended March 31, 2008, noncancelable leases of the Company
and its domestic subsidiaries had been primarily accounted for as operatingleases (whether such leases were classified as operating or finance leases),
except for leases that transfer ownership to the lessee at the end of the lease,which had been accounted for as finance leases.
As mentioned in note 3 (c), effective from the year ended March 31, 2009,
the Company and its domestic consolidated subsidiaries adopted “AccountingStandard for Lease Transactions” (Statement No. 13 issued by the AccountingStandards Board of Japan) and “Guidance on Accounting Standard for Lease
Transactions” (Guidance No. 16 issued by the Accounting Standards Board ofJapan). As a result, the Company and its domestic subsidiaries capitalized
leased assets under finance lease commenced after March 31, 2008, and suchlease assets are depreciated using the straight-line method over the period oflease contract with zero residual value.
(l) Derivatives and hedge accounting
The Company and a domestic subsidiary make use of derivatives in order tomanage certain risks arising from adverse fluctuations in foreign currency
exchange rates. The amount of derivatives is limited to the extent of foreign
currency assets, liabilities and actual orders, and the Company and the domestic
subsidiary do not trade in derivatives for speculative purposes.
Derivatives are carried at fair value with changes in unrealized gain or loss
charged or credited to income, except for those which meet the criteria forhedge accounting. Unrealized gains or losses on hedging derivatives, net oftaxes, are reported in net assets as a component of valuation and translation
adjustments. Receivables and payables hedged by qualified forward foreignexchange contracts are translated at the corresponding foreign exchange
contract rates.
(m) Income taxes
Tokyo Electron records deferred tax assets and liabilities on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, which aremeasured using the enacted tax rates and laws which will be in effect when the
differences are expected to reverse.
(n) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display) / PV (Photovoltaiccell) production equipment is principally recognized at the time of the customer
confirmation of set-up and testing of products. Revenue from such equipment
not requiring substantial installation is recognized at the time of shipment.
Revenue from other products, such as electronic components, is recognized at
the time of shipment. Service revenue from maintenance is recognized ratably
over the term of the maintenance contract.
(o) Per share information
Net income per share and net assets per share are computed based on theweighted-average number of shares of common stock outstanding during
each year.
Dividends per share has been presented on an accrual basis and include, ineach fiscal year ended March 31, dividends approved or to be approved after
March 31 but applicable to the year then ended.

(p) Research and development expenses
Research and development expenses are charged to income as incurred andamounted to ¥60,988 million ($620,869 thousand) and ¥66,073 million for theyears ended March 31, 2009 and 2008, respectively.
(q) Cash equivalents
For purposes of the consolidated statements of cash flows, Tokyo Electron
considers all highly-liquid instruments purchased with original maturities ofthree months or less to be cash equivalents.
(r) Reclassifications
Certain reclassifications have been made to the prior year’s consolidated
financial statements to conform with the presentation used for the year ended
March 31, 2009.

4. Investment Securities
Investment securities, which solely comprise of other securities, as of March
31, 2009 and 2008 are as follows:
Millions of yen
2009:

Cost

Carrying value

Securities with market prices Equity securities �������������������������������������������������� ¥   8,790¥ 7,363

100

100 Unlisted stock������������������������������������������������������

764

754

 Other��������������������������������������������������������������������

914

914

Total������������������������������������������������������������������������ ¥ 10,568¥ 9,131 Other��������������������������������������������������������������������
Securities without market prices

Millions of yen

3. Changes in Accounting Policies(a) Accounting policies applied to foreign subsidiaries
Effective from April 1, 2008, the Company adopted “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (Practical Issues Task Force No. 18 issued by the
Accounting Standards Board of Japan). The change had no significant impact on
the consolidated financial statements.
(b) Accounting standard for measurement of inventories
Effective from April 1, 2008, the Company and its domestic subsidiaries
adopted “Accounting Standard for Measurement of Inventories” (Statement No.
9 issued by the Accounting Standards Board of Japan). The change had no
significant impact on the consolidated financial statements.
(c) Accounting standard for lease
Effective from the year ended March 31, 2009, the Company and its domestic consolidated subsidiaries adopted “Accounting Standard for Lease Transactions” (Statement No. 13 issued by the Accounting Standards Board of Japan)and “Guidance on Accounting Standard for Lease Transactions” (Guidance No.
16 issued by the Accounting Standards Board of Japan). The change had no
significant impact on the consolidated financial statements.
(d) Accounting policy for depreciation method
Effective from the year ended March 31, 2008, the Company and its domestic
subsidiaries changed their depreciation method for tangible fixed assets acquiredon or after April 1, 2007 in accordance with the revision of Japanese Corporate
Tax Law (Partial Revision of Income Tax Law, Law No. 6 of March 30, 2007;
Partial Revision of Income Tax Law Enforcement Ordinance, Cabinet Order No.
83 of March 30, 2007). As a result of this change, operating income andincome before income taxes and minority interests for the year ended March 31,
2008 decreased by ¥1,429 million, compared with the corresponding amounts
that would have been recorded under the previous accounting method.

2008:

Cost

Carrying value

Securities with market prices Equity securities �������������������������������������������������� ¥    4,504 Other ������������������������������������������������������������������

¥   8,139

100

101

 Unlisted stock������������������������������������������������������

579

579

 Other��������������������������������������������������������������������

18

18

Total�������������������������������������������������������������������������� ¥    5,201¥   8,837

Securities without market prices

Thousands of U.S. dollars
2009:

Cost

Carrying value

Securities with market prices Equity securities �������������������������������������������������� $ 89,484$74,957

1,018

1,018

 Unlisted stock������������������������������������������������������

7,777

7,676

 Other��������������������������������������������������������������������

9,305

9,305

Total������������������������������������������������������������������������ $107,584$92,956 Other��������������������������������������������������������������������
Securities without market prices

Loss on devaluation of investment securities with market prices for the year
ended March 31, 2009 was ¥2,013 million ($20,493 thousand). No loss ondevaluation of investment securities with market prices was recognized for theyear ended March 31, 2008.
No gain on sale of investment securities was recognized for the year ended
March 31, 2009. Gross realized gains on sale of investment securities were ¥135
million for the year ended March 31, 2008.

Annual Report 09 Tokyo Electron Limited39

5. Inventories

9. Accrued Pension and Severance Costs

Inventories as of March 31, 2009 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen
2009

Finished products���������������������������� ¥ 88,417
Work in process, raw materials
and supplies����������������������������������

2008

2009

¥ 97,722$  900,102

45,82563,430466,507

Total������������������������������������������������ ¥134,242¥161,152$1,366,609

The amount of change in inventory provision included in cost of sales in
consolidated statement of income for the year ended March 31, 2009 was¥6,398 million ($65,133 thousand). No significant amount of change in inventory provision was recognized for the year ended March 31, 2008.

6. Impairment of Property, Plant and Equipment
For assessing fixed asset impairment, the Company generally groups fixed
assets used for normal operations at a business unit level for which profits arereasonably controllable. Also, the Company assesses the recoverability of individual assets not used in normal operations or that are idle.
During the year ended March 31, 2008, the Company determined to close
certain domestic manufacturing facilities and impairment losses were recognized mainly for buildings of ¥808 million. These charges were presented inother income (expenses) in the consolidated statement of income for the year
ended March 31, 2008.
No impairment of property, plant and equipment was recognized for the year
ended March 31, 2009.

2009

Benefit obligation �������������������������������������� ¥(79,141)
Fair value of plan assets ����������������������������

Thousands of
U.S. dollars

34,298343,999(40,435)(461,671)
30,815

Unrecognized actuarial difference��������������

3,027

618

Unrecognized prior service cost������������������

226

1,114

2,301

Net amount recognized������������������������������ (42,097)(38,703)(428,555)

5,001

50,392

4,950

Accrued pension and   severance costs (Note 2)���������������������� (47,047)(43,704)(478,947)

Net amount recognized������������������������������ ¥(42,097)¥(38,703)$(428,555)

Net pension cost of the plans is as follows:
Thousands of
U.S. dollars

Millions of yen

0.72% unsecured bonds due 2008 . . 

¥       –

¥ 30,000$        –

2009

2008

2009

Current portion������������������������������������

–(30,000)–

Service cost ��������������������������������������������

¥5,217¥5,198$53,110

Total���������������������������������������������������� ¥       –¥      –

$        –Interest cost ��������������������������������������������

1,483

1,375

15,097

Expected return on plan assets����������������

(686)

(616)

(6,984)

Amortization of actuarial difference����������

(628)

(629)

(6,392)

Amortization of prior service cost��������������

888

950

9,040

Net pension cost��������������������������������������

¥6,274¥6,278$63,871

As of March 31, 2009, Tokyo Electron has unused lines of credit amounting
to ¥135,329 million ($1,377,675 thousand).

40

33,791

Notes: 1.The prepaid pension and severance costs as of March 31, 2009 and 2008 is included inother assets in the consolidated balance sheets.
2.The provision for accrued pension and severance costs for directors and statutory auditors(¥640 million ($6,515 thousand) as of March 31, 2009 and ¥666 million as of March 31,2008) is not included.

Short-term borrowings represent 365-day notes issued by Tokyo Electron tobanks and bore interest at an average annual rate of 0.80% and 1.26% as ofMarch 31, 2009 and 2008, respectively.
Long-term debt as of March 31, 2009 and 2008 is as follows:

2009

2009

$(805,670)

Funded status ������������������������������������������ (45,350) Prepaid pension and   severance costs (Note 1)����������������������

8. Short-term Borrowings and Long-term Debt

2008

2008

¥(74,733)

Amounts recognized in the consolidatedbalance sheets consist of:Tokyo Electron did not hold any assets pledged as collateral as of March 31,
2009 and 2008.

2009

Thousands of
U.S. dollars

Millions of yen

7. Pledged Assets

Millions of yen

The Company and its domestic subsidiaries have defined benefit plans (cashbalance plan and noncontributory retirement and severance benefit plans) covering substantially all their employees who meet eligibility requirements. The benefits
under the plans are based on length of service and certain other factors.
The cash balance plan provides for pension or lump-sum payment benefits toemployees who retire or terminate their employment for reasons other than dismissal for cause. Under the cash balance plan, each participant has an accountwhich is credited yearly based on the current rate of pay and market-related
interest rate. The noncontributory plans provide for lump-sum payment benefits toemployees who retire or terminate their employment for reasons other than dismissal for cause. Certain foreign subsidiaries have noncontributory retirement andseverance benefit plans that provide for pension or lump-sum payment benefits toemployees who retire or terminate their employment for reasons other than dismissal for cause.
The funded status of the defined benefit plans, a substantial portion of which
consists of domestic benefit plans, as of March 31, 2009 and 2008 is as follows:

Tokyo Electron Limited

Annual Report 09

Significant assumptions of domestic pension plans used to determine theabove amounts are as follows:

The Company and its wholly-owned domestic subsidiaries apply a consolidated tax filing system for corporate tax purposes.

2009 and 2008

Allocation method of benefit obligation ���������������������������������� Straight-line method
2.00%

Discount rate ������������������������������������������������������������������������
Expected rate of return on plan assets������������������������������������

2.00%

Amortization period of prior service cost ��������������������������������

4 years

Amortization period of actuarial difference������������������������������

4 years

10. Income Taxes
Significant components of the deferred tax assets and liabilities of Tokyo
Electron as of March 31, 2009 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen
2009

2008

2009

¥17,529$ 191,703

Deferred tax assets
Accrued pension and severance costs . . . . . .  ¥ 18,831
Net operating loss carryforwards . . . . . . . . 

14,515

1,564

147,765

Tax credit for research and development . . 

6,619

–

67,384

Devaluation of inventories . . . . . . . . . . . . . . 

5,707

3,158

58,098The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. For assessment of the realizability of deferred tax
assets, management considers the scheduled reversal of deferred tax liabilities,
future estimated taxable income, tax planning strategies and level of net operating loss carryforwards, if any, in accordance with accounting principles generally
accepted in Japan.
Based on the level of historical taxable income and future estimated taxable
income over the periods which the deferred tax assets are deductible, management believes Tokyo Electron will realize the benefits of these deferred tax
assets, net of valuation allowance, as of March 31, 2009 and 2008.
The Company is subject to a corporate tax, an inhabitants’ tax and a deductible enterprise tax, which in the aggregate resulted in a statutory income tax rateof approximately 40.69% for the years ended March 31, 2009 and 2008.
Significant components of the difference between the statutory and effective
tax rates for the years ended March 31, 2009 and 2008 are as follows:

Accrued employees’ bonuses . . . . . . . . . . . 

2,004

5,116

20,401Elimination of unrealized profit
in inventories . . . . . . . . . . . . . . . . . . . . . . . . 

1,980

9,018

20,158

Statutory tax rate in Japan  . . . . . . . . . . . . . . . . . . . . . .

Accrued warranty expenses . . . . . . . . . . . . .

1,922

3,146

19,566

Adjustments:

Allowance for doubtful accounts . . . . . . . . . 

1,461

–

14,873

Accrued business taxes . . . . . . . . . . . . . . . . 

–

2,418

–

0ther . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

6,751

5,995

68,726

Total gross deferred tax assets . . . . . . . . . . 

59,79047,944

608,674

Less valuation allowance . . . . . . . . . . . . . . . 

(10,472)(2,116)(106,607)

Total deferred tax assets . . . . . . . . . . . . . . . 

49,31845,828502,067

Deferred tax liabilities
Undistributed earnings offoreign subsidiaries . . . . . . . . . . . . . . . . . . . . 

(2,624)(4,026)(26,713)

Receivables for business taxes . . . . . . . . . . 

(2,025)–(20,615)

Prepaid pension and severance costs . . . . 

(1,972)(2,005)(20,075)

Reserves under Special Taxation(358)(1,003)Net unrealized gain on
investment securities . . . . . . . . . . . . . . . . . . 

Measures Law . . . . . . . . . . . . . . . . . . . . . . . 

–(1,470)–

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

(1,162)(1,475)(11,829)

Total gross deferred tax liabilities . . . . . . . . 

(8,141)(9,979)(82,877)

Net deferred tax assets . . . . . . . . . . . . . . . .  ¥ 41,177¥35,849$ 419,190(3,645)

2009

2008

40.69%

40.69%

Loss on investment in a subsidiary deductible fortax purposes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(67.56)–

Effect for elimination of unrealized profit in inventories  .

34.77

–

Change in valuation allowance  . . . . . . . . . . . . . . . . . . .

24.07

0.17

Increase (decrease) in deferred tax liabilities on
undistributed earnings of foreign subsidiaries  . . . . . . .

(14.54)0.30

Difference in statutory tax rates ofsubsidiaries  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10.04)(1.06)

Dividends from foreign subsidiaries  . . . . . . . . . . . . . . .

6.56

0.76

Expenses not deductible for tax purposes  . . . . . . . . . . .

4.30

0.54

Amortization of goodwill  . . . . . . . . . . . . . . . . . . . . . . . .

1.02

0.38

Tax credits for research and development costs, etc.  . .

–(5.33)

Loss on impairment of goodwill  . . . . . . . . . . . . . . . . . . .

–

0.98

Others, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.69)(0.82)

Effective tax rate  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18.58%

36.61%

Annual Report 09 Tokyo Electron Limited

41

11. Net Assets
Net assets comprises four subsections, which are shareholders’ equity, valuation and translation adjustments, share subscription rights and minority interests.
Under Japanese laws and regulations, the entire amount paid for new shares isrequired to be designated as common stock. However, a company may, by aresolution of the board of directors, designate an amount not exceeding one-halfof the price of the new shares as additional paid-in capital which is included incapital surplus.
In cases where dividend distribution of surplus is made, the lesser of anamount equal to 10% of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in capital and legal reserve must be set aside
as additional paid-in capital or legal reserve. Legal reserve is included in retained
earnings in the accompanying consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in capital used toeliminate or reduce a deficit generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal reserve may not be distributed as dividends. All additional paid-in capital and legal reserve may be transferred to othercapital surplus and retained earnings, respectively, which are potentially available
for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company inaccordance with Japanese laws and regulations.
At the general shareholders’ meeting on June 23, 2006, in accordance with theJapanese laws and regulations, the Company altered its articles to allow for the
distribution of earnings to shareholders on dates, other than the mid-term andyear-end by a resolution of the board of directors.
At the board of directors’ meeting held on May 14, 2009, the distribution of
cash dividends amounting to ¥715 million ($7,279 thousand) was resolved. Suchappropriations have not been accrued in the consolidated financial statements asof March 31, 2009 since they are recognized in the period in which they are
resolved at the board of directors’ meeting.

12. Share Subscription Rights
Tokyo Electron has two types of stock-based compensation plans as incentive
plans for directors and selected employees. The stock-based compensationplans include stock options (“Stock option plan”) and bonds with detachable
warrants (“Warrant plan”).

42

Tokyo Electron Limited

Annual Report 09

Stock option plan
The Company’s shareholders have approved annual stock option plans for
directors and selected employees since the year ended March 31, 1999. The
cumulative number of outstanding shares authorized up to the year ended
March 31, 2007 totaled 2,158,500, with a weighted-average exercise price of¥7,218. Options to purchase 100,400 shares of the Company were authorized
and granted at an exercise price of ¥1 for the year ended March 31, 2008.
Options to purchase 177,900 shares of the Company were authorized andgranted at an exercise price of ¥1 for the year ended March 31, 2009. The
options under the plans vest immediately with restriction on exercise up to 2 or
3 years after the date of grant, and have an exercise period of 8 to 20 years
from the date of grant.
Shareholders of Tokyo Electron Device Limited (“TED”), a domestic listed
subsidiary, have approved annual stock option plans for directors and selected
employees since the year ended March 31, 2005. As of April 1, 2007 andMarch 31, 2009, there were outstanding granted stock options for 650 shareswith a weighted-average exercise price of ¥308,698 ($3,142.60).
Warrant plan
In June 2001, the Company issued unsecured bond with detachable
warrants. Upon issuance of the unsecured bond with detachable warrants,
the Company purchased all of the detachable warrants and distributed themto directors and selected employees.
The warrants vested immediately with restriction on exercise up to 2 years
after the date of grant, and had an exercise period of 6 years from the date of
grant. For financial reporting purposes, these transactions were accounted foras an issuance of debt to third parties and separately as the issuance of
warrants to directors and selected employees.
By exercising the warrants, directors and selected employees could purchase the common stock of the Company, which amounted to 572,439
shares at an exercise price of ¥9,608 for warrants issued in June 2001, whichwere forfeited and a gain of ¥467 million recognized for the year ended
March 31, 2008.
As of April 1, 2007, there were outstanding granted stock options, including warrants, to purchase 2,581,477 shares of the Company, with a weightedaverage exercise price of ¥7,609. For the year ended March 31, 2008,
options to purchase 486,277 shares were forfeited and options to purchase139,100 shares were exercised. For the year ended March 31, 2009, options
to purchase 137,600 shares were forfeited and options to purchase 44,500
shares were exercised. As of March 31, 2009, there were outstanding granted
stock options to purchase 2,052,300 shares with a weighted-average exercise
price of ¥5,927 ($60.34).

13. Leases
As mentioned in note 2 (k), effective from the year ended March 31, 2009,
the Company and its domestic subsidiaries adopted “Accounting Standard forLease Transactions” and “Guidance on Accounting Standard for Lease Transactions”. Under the new standards, as permitted, finance leases which commenced on or before March 31, 2008, continue to be accounted for as
operating leases. Pro forma information of leased property acquired on or before
March 31, 2008 including acquisition cost, accumulated depreciation, obligation under finance leases, and depreciation expense of finance leases that do
not transfer ownership of leased property to the lessee on an “as if capitalized”
basis for the years ended March 31, 2009 and 2008, are as follows:
Leased assets not recorded in the consolidated balance sheets:
Thousands of
U.S. dollars

Millions of yen

subsidiary are exposed to credit risk in the event of nonperformance by thecounterparties to the derivative transactions, but any such risk is considered to
be immaterial because the Company and the domestic subsidiary only enter intotransactions with financial institutions with high credit ratings. Execution andmanagement of all derivative transactions are conducted pursuant to the internalmanagement rule for derivatives by the finance division and the effectiveness ofderivative transactions is reported on a semiannual basis to the board of directors.
Since the estimated fair value of the derivative financial instruments as ofMarch 31, 2009 is not significant, the disclosure of the fair value of derivatives
not classified as hedges is omitted without hedges. The estimated fair value ofthe derivative financial instruments as of March 31, 2008 was as follows:
Millions of yen
2008:

Contract
amountFair value

Unrealized
gains (losses)

2009

2008

2009

Sell U.S. dollars������������������������������������

¥7,239¥6,847¥392

Acquisition cost������������������������������������

¥1,040¥1,089$10,587

Buy U.S. dollars ����������������������������������

409

386

(23)

Accumulated depreciation��������������������

457

303

4,652

Net leased property������������������������������

¥  583¥  786$ 5,935

Future minimum lease payments:
Thousands of
U.S. dollars

Millions of yen

Due within one year ����������������������������

2009

2008

2009

¥  168¥  189$ 1,710Due over one year��������������������������������

415

597

4,225

Total����������������������������������������������������

¥  583¥  786$ 5,935

Lease payments relating to finance leases accounted for as operating leases
amounted to ¥175 million ($1,782 thousand) and ¥156 million, which approximated the corresponding depreciation on the respective leased property computed by the straight-line method over the lease terms for the years ended
March 31, 2009 and 2008, respectively.
Future minimum lease payments on non-cancelable operating leases:
Thousands of
U.S. dollars

Millions of yen

Due within one year ����������������������������

2009

2008

2009

¥1,673¥  661$17,031

Due over one year��������������������������������

841

628

8,562

Total����������������������������������������������������

¥2,514¥1,289$25,593

The contract amounts of the forward foreign exchange contracts presented
above exclude those entered into to hedge receivables and payables denominated in foreign currencies which have been translated and are reflected at theircorresponding contracted rates in the accompanying consolidated balance
sheets. In addition, the disclosure of the fair value of derivatives, which areaccounted for as hedges is omitted as of March 31, 2009 and 2008.

15. Other Income (Expenses)
Provision of allowance for doubtful accounts of ¥7,361 million ($74,936
thousand) for the year ended March 31, 2009 consists of estimated uncollectible amounts for specific doubtful receivables.
Loss on devaluation of investment securities of ¥2,432 million ($24,758
thousand) for the year ended March 31, 2009 mainly consists of devaluation of
securities of listed companies due to decline of the stock market price.
The Company recognized goodwill generated from the acquisition of Timbre
Technologies, Inc. (“TTI”) during the year ended March 31, 2001 and thisgoodwill was being amortized over 10 years. During the year ended March 31,
2008, the Company recognized loss on impairment of goodwill in the amount of¥4,072 million based on the revision to the future plan for TTI’s business.
Gain on sale of property, plant and equipment of ¥2,365 million for the year
ended March 31, 2008 mainly consists of gains on sale of land and buildings offoreign subsidiaries.

14. Derivative Financial Instruments
The Company and a domestic subsidiary enter into forward foreign exchange
contracts in order to hedge risks of adverse fluctuations in foreign currency
exchange rates associated with export-import transactions, but do not enter intosuch transactions for speculative purposes. The Company and the domestic

Annual Report 09 Tokyo Electron Limited

43

16. Segment Information
Business segment information as of and for the years ended March 31, 2009 and 2008 is as follows:
Millions of yen
Industrial
electronicequipment

2009:Electronic
components
and computer
networks

Eliminations
andcorporate

Total

Consolidated

1. Net sales and operating income
Net sales(1) Sales to external customers�������������������������������������������������������������������������������������

¥413,875¥94,207¥508,082¥     –

(2) Intersegment sales or transfers �������������������������������������������������������������������������������

942

495

1,437

(1,437)–

Total�����������������������������������������������������������������������������������������������������������������������������
Operating expenses�������������������������������������������������������������������������������������������������������

414,817
401,974

94,702
92,861

509,519494,835(1,437)(1,464)

508,082
493,371

Operating income���������������������������������������������������������������������������������������������������������

¥ 12,843¥ 1,841¥ 14,684¥    27¥ 14,711

Assets���������������������������������������������������������������������������������������������������������������������������

¥631,062¥40,680¥671,742¥ (2,744)¥668,998

Depreciation and amortization expenses�����������������������������������������������������������������������

22,860473

23,333–23,333

Capital expenditures, including intangible and other assets�������������������������������������������

19,468698

20,166–

20,166¥508,082

2. Assets, depreciation and amortization expenses, impairment losses andcapital expenditures

Millions of yen
Industrial
electronicequipment

2008:

Electronic
components
and computer
networks

Eliminations
andcorporate

Total

Consolidated

1. Net sales and operating income
Net sales(1) Sales to external customers�������������������������������������������������������������������������������������

¥794,911¥111,181¥906,092¥     –

(2) Intersegment sales or transfers �������������������������������������������������������������������������������

1,117

948

2,065

(2,065)–

Total�����������������������������������������������������������������������������������������������������������������������������
Operating expenses�������������������������������������������������������������������������������������������������������

796,028
631,220

112,129
108,470908,157
739,690(2,065)(2,096)

906,092
737,594

Operating income���������������������������������������������������������������������������������������������������������

¥164,808¥   3,659¥168,467¥    31¥168,498

Assets���������������������������������������������������������������������������������������������������������������������������

¥744,280¥ 51,459¥795,739¥(2,921)¥792,818

Depreciation and amortization expenses�����������������������������������������������������������������������

22,649365

23,014–23,014

Loss on impairment of goodwill�������������������������������������������������������������������������������������

4,072

–

4,072

–

4,072

Loss on impairment of property, plant and equipment ���������������������������������������������������

808

–

808

–

808

Capital expenditures, including intangible and other assets�������������������������������������������

26,924924

27,848–27,848¥906,092

2. Assets, depreciation and amortization expenses, impairment losses andcapital expenditures

44

Tokyo Electron Limited

Annual Report 09

Thousands of U.S. dollars
Industrial
electronicequipment

2009:Electronic
components
and computer
networks

Total

Eliminations
andcorporate

Consolidated

1. Net sales and operating income
Net sales(1) Sales to external customers�������������������������������������������������������������������������������������

$4,213,326$959,045$5,172,371$       –

(2) Intersegment sales or transfers �������������������������������������������������������������������������������

9,590

5,039

14,629(14,629)–

Total�����������������������������������������������������������������������������������������������������������������������������
Operating expenses�������������������������������������������������������������������������������������������������������

4,222,916
4,092,171964,084
945,343

5,187,000
5,037,514(14,629)(14,904)

5,172,371
5,022,610

Operating income���������������������������������������������������������������������������������������������������������

$  130,745$ 18,741$  149,486$    275$  149,761

Assets���������������������������������������������������������������������������������������������������������������������������

$6,424,331$414,130$6,838,461$(27,935)$6,810,526

Depreciation and amortization expenses�����������������������������������������������������������������������

232,719

4,815

237,534–

237,534

Capital expenditures, including intangible and other assets�������������������������������������������

198,1887,106

205,294–

205,294$5,172,371

2. Assets, depreciation and amortization expenses, impairment losses andcapital expenditures

Notes:1. Method of classifying business segments: Business segments are classified after considering similarities in types of products and service, as well as sales methods.
2. Major products in each business segment:
Business segment
Industrial electronic equipment
Electronic components and computer networks

Major products
Semiconductor production equipment, FPD production equipment, PV production equipment and others
Semiconductor products, boards, electronic components, computer networks and software

3. Depreciation expenses and capital expenditures include those for long-term prepaid expenses.
4. Changes in accounting policies(1)Accounting standard for measurement of inventories
Effective from April 1, 2008, the Company and its domestic subsidiaries adopted “Accounting Standard for Measurement of Inventories” (Statement No. 9 issued by the Accounting Standards
Board of Japan). The change had no significant impact on the consolidated financial statements and segment information.
(2)Accounting standard for lease transaction
Effective from the year ended March 31, 2009, the Company and its domestic subsidiaries adopted “Accounting Standard for Lease Transactions” (Statement No. 13 issued by the AccountingStandards Board of Japan) and “Guidance on Accounting Standard for Lease Transactions” (Guidance No. 16 issued by the Accounting Standards Board of Japan). The change had no significant
impact on the consolidated financial statements and segment information.
(3)Accounting policies applied to foreign subsidiaries
Effective from April 1, 2008, the Company adopted “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (Practical
Issues Task Force No. 18 issued by the Accounting Standards Board of Japan). The change had no significant impact on the consolidated financial statements and segment information.
(4)Accounting policy for depreciation method
Effective from the year ended March 31, 2008, the Company and its domestic subsidiaries changed their depreciation method for tangible fixed assets acquired on or after April 1, 2007 inaccordance with the revision of Japanese Corporate Tax Law (Partial Revision of Income Tax Law, Law No. 6 of March 30, 2007; Partial Revision of Income Tax Law Enforcement Ordinance,
Cabinet Order No. 83 of March 30, 2007). The effect of change increased operating expenses and decreased operating income for the industrial electronic equipment segment and the electronic
components and computer networks segment by ¥1,412 million and ¥17 million, respectively, for the year ended March 31, 2008, compared with the corresponding amounts that would havebeen recorded under the previous accounting method.

Geographical segment information as of and for the years ended March 31, 2009 and 2008 are as follows:
Millions of yen

2009:

Japan

Other regions

Total

Eliminations
andcorporate

Consolidated

1. Net sales and operating income
Net sales(1) Sales to external customers������������������������������������������������������������������������������������

¥435,434¥ 72,648¥  508,082¥       –

(2) Intersegment sales or transfers ������������������������������������������������������������������������������

47,183

41,40388,586(88,586)–

Total����������������������������������������������������������������������������������������������������������������������������
Operating expenses������������������������������������������������������������������������������������������������������

482,617475,295

114,051
108,975

596,668
584,270(88,586)(90,899)

508,082
493,371

Operating income��������������������������������������������������������������������������������������������������������

¥   7,322¥   5,076¥    12,398¥   2,313¥  14,711

2. Total assets��������������������������������������������������������������������������������������������������������������

¥638,047¥ 67,154¥  705,201¥ (36,203)¥668,998¥508,082

Millions of yen

2008:

Japan

Other regions

Total

Eliminations
andcorporate

Consolidated

1. Net sales and operating income
Net sales(1) Sales to external customers������������������������������������������������������������������������������������

¥ 806,193¥ 99,899¥ 906,092¥       –

(2) Intersegment sales or transfers ������������������������������������������������������������������������������

71,96054,186

126,146(126,146)–

Total����������������������������������������������������������������������������������������������������������������������������
Operating expenses������������������������������������������������������������������������������������������������������

878,153
718,193

154,085
142,760

1,032,238
860,953(126,146)(123,359)

906,092
737,594

Operating income��������������������������������������������������������������������������������������������������������

¥ 159,960¥ 11,325¥ 171,285¥   (2,787)¥ 168,498

2. Total assets��������������������������������������������������������������������������������������������������������������

¥ 752,739¥ 80,363¥ 833,102¥ (40,284)¥ 792,818¥ 906,092

Annual Report 09 Tokyo Electron Limited

45

Thousands of U.S. dollars

Japan

Other regions

Total

Eliminations
andcorporate(1) Sales to external customers������������������������������������������������������������������������������������

$4,432,801$  739,570$5,172,371$        –(2) Intersegment sales or transfers ������������������������������������������������������������������������������

480,332

421,490901,822(901,822)–

Total����������������������������������������������������������������������������������������������������������������������������
Operating expenses������������������������������������������������������������������������������������������������������

4,913,133
4,838,593

1,161,060
1,109,386

6,074,193
5,947,979(901,822)(925,369)

5,172,371
5,022,610

Operating income��������������������������������������������������������������������������������������������������������

$   74,540$     51,674$   126,214$    23,547$   149,761

2. Total assets��������������������������������������������������������������������������������������������������������������

$6,495,439$  683,640$7,179,079$(368,553)$6,810,526

2009:

Consolidated$5,172,371

1. Net sales and operating income
Net sales

Notes: 1. For the reporting of geographical segment information, net sales and operating income are separated based on the location of the Company and its subsidiaries. Assets are separated by geographic location.
2. Other regions comprises primarily the United States of America, Europe and Taiwan.
3. Changes in accounting policies(1)Accounting standard for measurement of inventories
Effective from April 1, 2008, the Company and its domestic subsidiaries adopted “Accounting Standard for Measurement of Inventories” (Statement No. 9 issued by the Accounting Standards
Board of Japan). The change had no significant impact on the consolidated financial statements and segment information.
(2)Accounting standard for lease transaction
Effective from the year ended March 31, 2009, the Company and its domestic subsidiaries adopted “Accounting Standard for Lease Transactions” (Statement No. 13 issued by the AccountingStandards Board of Japan) and “Guidance on Accounting Standard for Lease Transactions” (Guidance No. 16 issued by the Accounting Standards Board of Japan). The change had no significant
impact on the consolidated financial statements and segment information.
(3)Accounting policies applied to foreign subsidiaries
Effective from April 1, 2008, the Company adopted “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (Practical
Issues Task Force No. 18 issued by the Accounting Standards Board of Japan). The change had no significant impact on the consolidated financial statements and segment information.
(4)Accounting policy for depreciation method
Effective from the year ended March 31, 2008, the Company and its domestic subsidiaries changed their depreciation method for tangible fixed assets acquired on or after April 1, 2007 inaccordance with the revision of Japanese Corporate Tax Law (Partial Revision of Income Tax Law, Law No. 6 of March 30, 2007; Partial Revision of Income Tax Law Enforcement Ordinance,
Cabinet Order No. 83 of March 30, 2007). The effect of change increased operating expenses and decreased operating income for the Japan segment by ¥1,429 million, for the year ended
March 31, 2008, compared with the corresponding amounts that would have been recorded under the previous accounting method.

Domestic and overseas net sales by destination for the years ended March
31, 2009 and 2008 are as follows:
Millions of yen

Net sales

2009

Japan������������������������������������������������� ¥208,871
Taiwan �����������������������������������������������
80,327

Thousands of
U.S. dollars

2008

2009

¥323,946$2,126,346

272,221817,744

Korea�������������������������������������������������

72,507

90,940738,135

United States of America���������������������

65,537

108,760

667,179

Others���������������������������������������������������

80,840110,225

822,967

Total����������������������������������������������������� ¥508,082¥906,092$5,172,371

Notes: 1. For the reporting of domestic and overseas sales, overseas sales (other than Japan)
include export sales of the Company and its domestic subsidiaries and sales of foreignsubsidiaries, except for export sales to Japan.
2. Other comprises primarily Singapore, China and Israel.

46

Tokyo Electron Limited

Annual Report 09

Independent Auditors’ Report

To the Board of Directors ofTokyo Electron Limited:

We have audited the accompanying consolidated balance sheets of Tokyo Electron Limited and subsidiaries as of March
31, 2009 and 2008, and the related consolidated statements of income, changes in net assets and cash flows for theyears then ended, expressed in Japanese yen. These consolidated financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements basedon our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Tokyo Electron Limited and subsidiaries as of March 31, 2009 and 2008, and the results of their operations andtheir cash flows for the years then ended, in conformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31,
2009 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar
amounts and, in our opinion, such translation has been made on the basis described in note 1 to the consolidated
financial statements.

Tokyo, Japan
June 19, 2009

Annual Report 09 Tokyo Electron Limited

47

GROUP COMPANIESAs of March 31, 2009, the Tokyo Electron Group was made up of the parent company and 32 subsidiaries.

Company

Main business

JAPAN
Consolidated subsidiaries
Tokyo Electron AT Limited

Manufacture and development

Tokyo Electron Kyushu Limited

Manufacture and development

Tokyo Electron Tohoku Limited

Manufacture and development

Tokyo Electron TS Limited

Manufacture and development

Tokyo Electron Technology Development Institute, Inc.

Manufacture and development

Tokyo Electron Software Technologies Limited

Development

Tokyo Electron PV Limited

Development

Tokyo Electron FE Limited

Field engineering

Tokyo Electron PS Limited

Refurbishment, modification and relocation

Tokyo Electron Device Limited

Sales

Tokyo Electron BP Limited

Logistics, leasing, facility management, etc.

Tokyo Electron Agency Limited

Nonlife insurance

PAN ELECTRON LTD.

Sales

AMERICA
Consolidated subsidiaries
Tokyo Electron U.S. Holdings, Inc.

Holding company

Tokyo Electron America, Inc.

Sales and field engineering

Tokyo Electron Massachusetts, LLC

Manufacture and development

Tokyo Electron Arizona, LLC

Manufacture and development

Timbre Technologies, Inc.

Manufacture and development

TEL Technology Center, America, LLC

Development

TEL Epion Inc.

Development

TEL Venture Capital, Inc.

Identification and evaluation of new technologies

EUROPE
Consolidated subsidiaries
Tokyo Electron Europe Limited

Sales and field engineering

Tokyo Electron Deutschland GmbH

Field engineering

Tokyo Electron Israel Limited

Field engineering

ASIA
Consolidated subsidiaries

48

Tokyo Electron Korea Limited

Sales and field engineering

Tokyo Electron Korea Solution Limited

Refurbishment, modification and relocation

Tokyo Electron Taiwan Limited

Sales and field engineering

Tokyo Electron (Shanghai) Limited

Sales and field engineering

Tokyo Electron (Shanghai) Logistic Center Limited

Logistics

Tokyo Electron Device Hong Kong Limited

Sales

Tokyo Electron Device Singapore Pte. Ltd.

Sales

Tokyo Electron India Private Limited

Sales and field engineering

Tokyo Electron Limited

Annual Report 09

Investor Information(As of March 31, 2009)

Corporate Name and Head Office:

URL:

Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, Japan

http://www.tel.com

Principal Shareholders:Established:	November 11, 1963

Annual General Meeting of Shareholders:June

Common Stock:
Stock trading unit
Authorized	Issued and outstanding	Number of shareholders

100 shares
300,000,000 shares
180,610,911 shares
42,509Common Stock Listed on:

Number ofshares held
(thousands)

Votingshare
ratio (%)

22,50914,755
8,727
6,926
3,760
3,000
2,986
2,937
2,810
2,544

12.46
8.16
4.83
3.83
2.08
1.66
1.65
1.62
1.55
1.40

The Master Trust Bank of Japan, Ltd. (trust account)
Japan Trustee Services Bank, Ltd. (trust account)
Tokyo Broadcasting System, Inc.
Japan Trustee Services Bank ,Ltd. (trust acount 4G)
State Street Bank and Trust Company 505225
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Trust & Custody Services Bank, Ltd. (Investment trust account)
BBH for VIP Contrafund Info tech sub
JP Morgan Securities Japan Co., Ltd.
Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension

Shares of less than one thousand have been rounded down in the “Number of shares held”

The Tokyo Stock Exchange 1st Section (#8035)

Distribution of Ownership Among Shareholders:

Independent Auditors:
	KPMG AZSA & Co.

Administrator of Shareholders’ Register:
The Chuo Mitsui Trust and Banking Co., Ltd.
33-1 Shiba 3-chome, Minato-ku, Tokyo 105-8574, JapanFor Further Information, Contact:
	Investor Relations
Corporate Communications Department
Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, Japan
Tel: +81-3-5561-7003
Fax: +81-3-5561-7400

n Japanese financial institutions and securities companies
73,325,281 shares 40.60%
n Foreign institutions and others
77,898,333 shares 43.13%
n	Individuals and others
16,958,499 shares	  9.39%
n Other Japanese corporations
10,785,400 shares	  5.97%
n Treasury stock
1,643,398 shares	  0.91%

Stock Price and Trading Volume(Yen)(Thousands of shares)

10,0008,000
Stock price

6,000

4,000

2,000

120,000

Trading volume

60,00000FY2005

FY2006

FY2007

FY2008FY2009Annual Report 09

Tokyo Electron Limited49

Tokyo Electron Limited    Annual Report 2009

World Headquarters
Akasaka Biz Tower, 3-1 Akasaka 5-chome,
Minato-ku, Tokyo 107-6325, Japan
Tel. +81-3-5561-7000 http://www.tel.com

Printed in Japan on recycled paper
PR47–107