As filed with the Securities and Exchange Commission on June 26, 2014

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F‘

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934È

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2014
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report……….
For the transition period fromtoCommission file number: 1-15236

OR

‘
‘

KABUSHIKI
KAISHA ADVANTEST(Exact name of registrant as specified in its charter)
ADVANTESTCORPORATION(Translation of registrant’s name into English)
Japan(Jurisdiction of incorporation or organization)
Shin-Marunouchi Center Building
1-6-2, Marunouchi
Chiyoda-ku
Tokyo 100-0005
Japan(Address of principal executive offices)
Hiroshi Nakamura, (81-3) 3214-7500, (81-3) 3214-7711,
Shin-Marunouchi Center Building
1-6-2, Marunouchi
Chiyoda-ku
Tokyo 100-0005
Japan(Name, telephone, facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class:Name of each exchange on which registered:
American Depositary Shares*
The New York Stock Exchange
Common Stock***
American Depositary Receipts evidence American Depositary Shares, each American Depositary Share representing one share of the registrant’s Common
Stock.
** No par value. Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities andExchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report:Title of class:
Outstanding as of March 31, 2014:
Common Stock
174,197,942
American Depositary Shareseach representing one share of Common Stock
1,226,091
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days: Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files).: Yes È No ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer È
Accelerated filer ‘
Non-accelerated filer ‘
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP È

International Financial Reporting Standards as issued
Other ‘By the International Accounting Standards Board ‘
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected tofollow. Item 17 ‘ Item 18 ‘
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No ÈTABLE OF CONTENTS
PagePART IITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS . . . . . . . . . . . .

1

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

ITEM 3.

KEY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CAPITALIZATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REASONS FOR THE OFFER AND USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1
3
3
4

INFORMATION ON THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

4.A.
4.B.
4.C.
4.D.

HISTORY AND DEVELOPMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BUSINESS OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ORGANIZATIONAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTY, PLANTS AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15
16
38
38

ITEM 4A.

UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS . . . . . . . . . . . . . . . . . . . . . . .

39

OPERATING RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES . . . . . . . . . . . . . . . . . . . .
TREND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OFF-BALANCE SHEET ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . .
SAFE HARBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39
53
55
56
56
57
57

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . .

57

DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BOARD PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHARE OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57
62
62
64
65

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . .

67

7.A. MAJOR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.B. RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.C. INTERESTS OF EXPERTS AND COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67
69
69

3.A.
3.B.
3.C.
3.D.
ITEM 4.

5.A.
5.B.
5.C.
5.D.
5.E.
5.F.
5.G.
ITEM 6.
6.A.
6.B.
6.C.
6.D.
6.E.
ITEM 7.

ITEM 8.

FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70

8.A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION . . . . . . . .
8.B. SIGNIFICANT CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70
70

ITEM 9.
9.A.
9.B.
9.C.
9.D.

THE OFFER AND LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70

OFFER AND LISTING DETAILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70
71
71
71

i

Page

9.E.
9.F.

DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPENSES OF THE ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71
71

ITEM 10.

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MEMORANDUM AND ARTICLES OF ASSOCIATION . . . . . . . . . . . . . . . . . . . . . . . . . . .
MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXCHANGE CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIVIDENDS AND PAYING AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
STATEMENT BY EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DOCUMENTS ON DISPLAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUBSIDIARY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71
71
79
80
81
86
86
86
87

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . .

87

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES . . . . . . . . . . . . .

89

DEBT SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WARRANTS AND RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AMERICAN DEPOSITARY SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

89
89
89
89

10.A.
10.B.
10.C.
10.D.
10.E.
10.F.
10.G.
10.H.
10.I.

12.A.
12.B.
12.C.
12.D.

PART IIITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES . . . . . . . . . . . . . . . . . .

91

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91

ITEM 15.

CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91

ITEM 16.

[RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92

ITEM 16B.

CODE OF ETHICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES . . . . .

93

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93

ITEM 16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT . . . . . . . . . . . . . . . . . . . . .

94

ITEM 16G.

CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

94

ITEM 16H.

MINE SAFETY DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96PART IIIITEM 17.

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97

ITEM 18.

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97

ITEM 19.

EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

98ii

As used in this annual report, the term “fiscal” preceding a year means the twelve-month period ended
March 31 of the year subsequent to the year referred to. For example, “fiscal 2013” refers to the twelve-month
period ended March 31, 2014. All other references to years refer to the applicable calendar year.
In parts of this annual report, certain amounts reported in Japanese yen (¥) have been translated into U.S.
dollars ($) for the convenience of readers. Unless otherwise noted, the rate used for this translation was$1.00 = ¥102.92. This was the approximate exchange rate in Japan on March 31, 2014.
Unless otherwise noted, all references and discussions of the financial position of Advantest Corporation(the “Company”) and its consolidated subsidiaries (collectively, “Advantest”), results of operations and cash
flows in this annual report are made with reference to Advantest’s consolidated financial statements prepared inaccordance with accounting principles generally accepted in the United States, or U.S. GAAP. The segment sales
figures included in this annual report are presented before eliminating intercompany transactions.
See “Information on the Company—Business Overview—Glossary” for a description of certain technicalterms used in this annual report.

Cautionary Statement with Respect to Forward-Looking Statements
This annual report contains “forward-looking statements” that are based on Advantest’s current
expectations, estimates and projections. These statements include, among other things, the discussion ofAdvantest’s business strategy, outlook and expectations as to market and business developments, production andcapacity plans. Generally, these forward-looking statements can be identified by the use of forward-looking
terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” “should” and similar
expressions. Forward-looking statements are subject to known and unknown risks, uncertainties and other factorsthat may cause Advantest’s actual results, levels of activity, performance or achievements to be materiallydifferent from those expressed or implied by such forward-looking statements, including:•changes in demand for the products and services produced and offered by Advantest’s customers,
including semiconductors, communications services and electronic goods;•

circumstances relating to Advantest’s investment in technology, including its ability to timely develop
products that meet the changing needs of semiconductor manufacturers and communications network
equipment and components makers and service providers;•the environment in which Advantest purchases materials, components and supplies for the production of
its products, including the availability of necessary materials, components and supplies during asignificant expansion in the market in which Advantest operates; and•changes in economic conditions, competitive environment, currency exchange rates or political stability
in the major markets where Advantest produces, distributes or sells its products.

These risks, uncertainties and other factors also include those identified in “Operating and Financial Review
and Prospects,” “Key Information—Risk Factors” and “Information on the Company” set forth elsewhere in thisannual report.

iii

PART IITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
3.A. SELECTED FINANCIAL DATA
You should read the U.S. GAAP selected consolidated financial information presented below together with“Operating and Financial Review and Prospects” and Advantest’s consolidated financial statements together with
the notes included in this annual report.
U.S. GAAP Selected Consolidated Financial Data
The following selected financial data have been derived from Advantest’s audited consolidated financial
statements. These consolidated financial statements were prepared under U.S. GAAP. Advantest’s U.S. GAAP
audited consolidated financial statements for fiscal 2011, fiscal 2012 and fiscal 2013 were included in its
Japanese Securities Reports filed with the Director General of the Kanto Local Finance Bureau.
2010

Year ended March 31,
2011
2012
2013
(in millions, except per share and share data)

2014

2014
(in thousands,
exceptper share andshare data)

Consolidated Statement of
Income Data:
Net sales . . . . . . . . . . . . . . . . .
¥53,225¥99,634¥141,048 ¥
132,903¥111,878 $1,087,038
Operating income (loss) . . . . .
(11,639)
6,111
837
80
(36,369) (353,372)
Income (loss) before income
taxes and equity in earnings(loss) of affiliatedcompany . . . . . . . . . . . . . . . . .
(9,926)
5,551(3,442)(1,293)(35,501) (344,938)
Net income (loss) . . . . . . . . . . . .
(11,454)
3,163(2,195)(3,821)(35,540) (345,317)
Net income (loss) per share
Basic . . . . . . . . . . . . . . . . . . . .
(64.09)18.03(12.67)(22.03)(204.10)(1.98)
Diluted . . . . . . . . . . . . . . . . . .
(64.09)18.03(12.67)(22.03)(204.10)(1.98)
Basic weighted average shares
outstanding . . . . . . . . . . . . . . . 178,722,505 175,481,854 173,271,717 173,478,054 174,134,457 174,134,457
Diluted weighted average shares
outstanding . . . . . . . . . . . . . . . 178,722,505 175,495,458 173,271,717 173,478,054 174,134,457 174,134,457

1

2010

2011

As of March 31,
2012
2013
(in millions)

2014

2014
(in thousands)

Consolidated Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥188,663 ¥180,312 ¥219,226 ¥225,515 ¥229,856 $2,233,346
Short term debt . . . . . . . . . . . . . . . . . . . . . . . . .
——25,000———
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . .
———25,00025,000242,907
Convertible bonds . . . . . . . . . . . . . . . . . . . . . . .
————30,149292,936
Common stock . . . . . . . . . . . . . . . . . . . . . . . . .
32,36332,36332,36332,36332,363
314,448
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . 150,242 138,132 131,552 141,241 116,252 1,129,538
As of March 31,
2011
2012
2013
(in millions, except per share data)

2010

2014

2014
(in thousands)

Other Data:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . ¥ 3,425 ¥ 3,793 ¥ 6,984 ¥ 12,592 ¥ 5,626 $Research and development expenses . . . . . . . .
17,896
21,19730,30333,062
32,670Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,746)(693) 12,302(2,215) (3,776)
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,824(5,828) (37,670) (11,498) (4,711)
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,803) (12,028)
9,887(2,914) 27,202
Operating margin(1) . . . . . . . . . . . . . . . . . . . . .
(21.87%) 6.13%
0.59%
0.06% (32.5%)
Net income margin(2) . . . . . . . . . . . . . . . . . . . .
(21.52%) 3.17% (1.56%) (2.88%) (31.8%)

54,664317,431(36,689)(45,773)
264,302(1) Operating income as a percentage of net sales.
(2) Net income as a percentage of net sales.
Dividends
The Company normally pays cash dividends semiannually, at mid-year and at year-end. Pursuant to its
articles of incorporation, the Company can make dividend payments pursuant to a resolution of its Board of
Directors, but the articles do not preclude the Company from making dividend payments pursuant to ashareholders resolution. The year-end dividend is paid to shareholders of record as of March 31 pursuant to theresolution of either the Board of Directors or the ordinary general shareholders’ meeting held usually in Juneevery year. The interim dividend is paid to shareholders of record as of September 30, pursuant to a resolution of
the Board of Directors, usually in December.
The following table sets forth the dividends paid by the Company for each of the periods shown, which are
the six months ended on that date. The U.S. dollar equivalent for the dividends shown are based on the exchange
rate in Japan on each record date shown.
Six months ended/Record date

Dividend per Share
Yen
Dollars

September 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.0
5.0
5.0
5.0
5.0
10.0
10.0
10.0
10.0
5.0

0.06
0.05
0.06
0.06
0.07
0.12
0.13
0.11
0.10
0.05

The payment and the amount of any future dividends are subject to the level of Advantest’s future earnings,
its financial condition and other factors, including statutory restrictions on the payment of dividends.
2

Exchange Rates
In parts of this annual report, certain Japanese yen amounts have been translated into U.S. dollars for theconvenience of investors. Unless otherwise noted, the rate used for the translation was $1.00 = ¥102.92. This was
the approximate exchange rate in Japan on March 31, 2014.
The following table sets forth, for the periods and dates indicated, information concerning the noon buying
rate for Japanese yen announced by the Federal Reserve Bank of New York, expressed in Japanese yen per$1.00. The noon buying rate as of June 13, 2014 was $1.00 = 102.06. The Company does not intend to imply that
the Japanese yen or U.S. dollar amounts referred to in this annual report could have been or could be converted
into U.S. dollars or Japanese yen, as the case may be, at any particular rate, or at all.
Fiscal year ended March 31,

At endof period

Average(of month-end rates)(¥ per $1.00)

High

Low

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 93.40
82.76
82.41
94.16
102.98¥ 92.49
85.00
78.86
83.26
100.46¥100.71
94.68
85.26
96.16
105.25¥ 86.12
78.74
75.72
77.41
92.96

Month ended

High
Low
(¥ per $1.00)

December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
3.C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.

3¥105.25104.87102.71103.38103.94102.34¥101.82102.20101.11101.36101.43101.26

3.D. RISK FACTORS
Risks Related to Advantest’s Business
Advantest’s business and results of operations are subject to significant demand volatility in thesemiconductor industry
Advantest’s business depends largely upon the capital expenditures of semiconductor industrial, design andmanufacturing companies, fabless semiconductor companies, foundries and test houses. These companies, inturn, determine their capital expenditure and investment levels largely based on current and anticipated market
demand for semiconductors and products incorporating semiconductors. Such demand is influenced significantly
by the overall condition of the global economy. Historically, the percentage reduction in capital expenditures bysemiconductor manufacturers during downturns in the semiconductor industry, including investment insemiconductor test systems, has typically been much greater than the percentage reduction in worldwide sales ofsemiconductors. The semiconductor industry has been highly cyclical with recurring periods of excess inventory,
which often have had a severe effect on the semiconductor industry’s demand for semiconductor test systems,
including those of Advantest. In particular, the market for memory semiconductors shows higher demand
volatility as compared to the market for non memory semiconductors. Advantest derives significant sales fromtest systems for memory semiconductors in the Semiconductor and Component Test Systems; in fiscal 2013, net
sales of test systems for memory semiconductors increased by 14.5% to 32.1% from 17.6% in fiscal 2012.
Therefore, any downturn in the memory semiconductor market may continue to adversely affect Advantest’sbusiness and results of operations.
The worldwide semiconductor market contracted by 9.0% in 2009 compared to the previous year,
continuing to reflect the global economic downturn that stemmed from the financial crisis. After the negative
growth in 2009, the market significantly recovered in 2010, growing by 31.8% compared to 2009, primarily due
to a surge in demand for electronic equipment in developing nations. In 2011, due to the global economic
recession and natural disasters such as the Great East Japan Earthquake and the floods in Thailand reducing
production activities of electronic products, the semiconductor market only increased by 0.4% compared to 2010.
In 2012, the semiconductor market decreased by 2.7% compared to 2011, due to factors such as the prolonged
stagnation in the European economy caused by the debt crisis in the Southern European countries and theslowdown in the Chinese economy, which had been supporting the global economy. In 2013, the semiconductor
market increased by 4.8% compared to 2012, due to an overall steady demand for semiconductors, despite somevariations among products. Worldwide sales of non memory semiconductors in 2009 decreased by 10.3%
compared to 2008, primarily as a result of the impact of the global economic downturn stemming from thefinancial crisis that started in 2008. In 2010, worldwide sales of non memory semiconductors increased by 26.0%
compared to 2009, primarily due to robust demand for smartphones, tablet-type devices, and other consumer
electronics. In 2011, worldwide sales of non memory semiconductors further increased by 4.4% compared to2010, due to continuing robust demand for smartphones, tablet-type devices, and similar devices. In 2012,
although sales of communications semiconductors and LCD drivers semiconductors, among others, remained
strong due to continued robust demand in the mobile devices market, worldwide sales of non memory
semiconductors decreased by 1.8% compared to 2011 due to the downturn in sales of other electronic devices. In
2013, worldwide sales of non memory semiconductors increased by 1.7% compared to 2012 due to a steadydemand for tablet-type devices and smartphones. Although the markets for personal computers and cellular
phones including smartphones remained steady in 2009, worldwide sale of memory semiconductors declined by
3.3% compared to 2008, reflecting the global economic downturn, resulting in negative growth. In 2010,
primarily due to a steady demand for mobile DRAM test systems for mobile devices, worldwide sales of memory
semiconductors increased by 55.4% compared to 2009. In 2011, worldwide sales decreased by 12.7% compared
to 2010 due to a drop in the price of DRAM triggered by a downturn in demand for PCs and similar devices. In
2012, sales continued to decrease by 6.2% compared to 2011 due to the ongoing weakness in demand for PCs
and similar devices. In 2013, sales increased by 17.6% compared to 2012 due to, among other factors, anincreased demand for DRAM and LPDDR for products such as low end smartphones.
4The significant volatility in demand for semiconductors is affected by various factors such as:•

the overall state of the global economy;•levels of investment in communications infrastructure and trends of demand in communication devices
such as tablet-type devices and smartphones;•

demand in personal computer and data server industries;•

consumer demand for digital consumer products such as flat-panel TVs, DVD/Blu-ray disc recorders,portable audio players and electronic books;•

demand in the automobile industry; and•trends in the semiconductor industry.

In fiscal 2009, the semiconductor manufacturers gradually resumed capital expenditures as semiconductor
prices rose and equipment utilization rates climbed. Despite the gradual recovery in fiscal 2009, Advantest’s net
sales in fiscal 2009 decreased by 30.6%, as compared to fiscal 2008, to ¥53,225 million, primarily due to thedrop in orders seen in the second half of fiscal 2008. In fiscal 2010, despite a difficult business environment withfactors such as continuing appreciation of the Japanese yen and intensified price competition, Advantest seized
the positive growth opportunity in the semiconductor market and strived to expand orders and revenues. As aresult of the above, Advantest’s net sales in fiscal 2010 increased by 87.2% as compared to fiscal 2009, to¥99,634 million, and Advantest recorded a net income of ¥3,163 million in fiscal 2010. In fiscal 2011, Advantest
expanded sales to meet areas of increasing demand growth such as test equipment for application processors,
CMOS image sensors, and other non memory semiconductor sectors. In addition, after the completion of theacquisition of Verigy Ltd. (“Verigy”) in July 2011, Advantest has enhanced sales promotion to customers in the
U.S. and Europe and has provided products tailored to better meet increasing customer demand in thecommunications semiconductor market. As a result of the above, Advantest’s net sales in fiscal 2011 increased
by 41.6%, as compared to fiscal 2010, to ¥141,048 million. However, cumulative costs associated with the
Verigy acquisition and impairment losses on investment securities led to a year-on-year decline in earnings, andAdvantest recorded a net loss in fiscal 2011 of ¥2,195 million. In this environment, Advantest actively marketed
semiconductor testing equipment for mobile communications-related semiconductor applications—the largest
segment for testing equipment—and as a result, the company successfully gained market share. However, thegain in market share could not fully offset the decrease in demand for semiconductor testing equipment resulting
from capital expenditure constraints of semiconductor manufacturers experiencing a slowdown in thesemiconductor market. As a result of the above, Advantest’s net sales in fiscal 2012 decreased by 5.8%, ascompared to fiscal 2011, to ¥132,903 million. The product mix in sales also worsened, leading to a net loss infiscal 2012 of ¥3,821 million. In Advantest’s core line of semiconductor test equipment, difficult businessclimate prevailed as a result of significant constraints in capital investments by some of Advantest’s major
customers since last summer, for non memory test systems. As a result of the above, Advantest’s net sales infiscal 2013 decreased by 15.8%, as compared to fiscal 2012, to ¥111,878 million. From a profit and loss
perspective, in addition to the decline in net sales, an increase in costs denominated in foreign currency due to thecontinuing depreciation of the yen, and recognizing inventory valuation losses and impairment losses for longlived assets due to changes in the business environment, resulted in a net loss of ¥35,540 million.
Advantest believes that its results are significantly affected by the significant volatility in demand in thesemiconductor industry. While Advantest is unable to predict future trends in the semiconductor industry, if there
is a significant downturn in the semiconductor industry, Advantest’s financial condition and results of operations
will be adversely affected. With respect to semiconductor prices in recent years, even though prices for certain
products such as DRAM appear to have bottomed out, if the prices decline as a result of over-supply ofsemiconductors, semiconductor manufacturers’ earnings could deteriorate, resulting in their further restraint
towards capital expenditures, and Advantest’s results of operations could be adversely affected.

5

If Advantest does not introduce new products meeting its customers’ technical requirements in a timely
manner and at competitive prices, its products may become obsolete and its financial condition and results ofoperations may suffer
Advantest sells its products to several industries that are characterized by rapid technological changes,
frequent introduction of new products and services, varying and unpredictable product lifecycles and evolving
industry standards. Advantest anticipates that future demand for its products will be driven, in large part, by
technological innovation in semiconductor technology, which creates new testing requirements that are notadequately addressed by currently-installed semiconductor test systems. Customer needs in response to thesetechnological innovations, and their need for greater cost-effectiveness and efficiency to respond to the market
environment, include:•

test solutions of non memory semiconductors that incorporate more advanced memory semiconductors,
logic and analog circuits;•

test solutions of power semiconductors that control small and large motor drives;•

solutions for complexed IC incorporating RF, logic and memory chips in a single package in order toachieve IC with advanced 3D integration as well as downsizing and technical advantages, with TSVtechnology;•

mechatronics-related products which transport devices faster, more accurately and more stably;•

test solutions of testing technologies that employ self-test circuit designs incorporated into
semiconductor chips;•

test solutions of testing technologies that employ test circuit designs for Device Under Test (DUT);•

introduction of mechatronics products that respond to reduced testing time resulting from advances incustomers’ back-end testing;•prompt response and quick repair in the event of failure;•total solutions that allow customers to reduce their testing costs; and•solutions for measurement and observation of state-of-the-art photomasks.

Advantest also believes demand for its products, including semiconductor and component test systems, isaffected by the level of demand for personal computers, high-speed wireless and wireline data services, digitalconsumer products and communication devices, such as tablet-type devices and smartphones, and data servers. It
is likely that advances in technologies used in those products and services will require new testing systems.
Without the timely introduction of semiconductor test systems capable of effectively testing and measuring
equipment that use these new technologies, Advantest’s products and services may become technologicallyobsolete over time.
A failure by Advantest to meet its customers’ technical requirements at competitive prices or to deliver
conforming equipment in a timely manner may result in its products being replaced by those of a competitor oran alternative technology solution. Furthermore, Advantest’s inability to provide a product that meets requested
performance criteria at an acceptable price when required by its customers would severely damage its reputation
with such customers and may adversely affect future sales efforts with respect to such customers.
Advantest’s dependence on certain subcontractors and its dependence on a sole source or a limited number ofsuppliers for its components and parts may prevent it from delivering products that meet specifications on atimely basis
Advantest relies on subcontractors to perform some of the assembly requirements for its products. In
addition, many of the components used in Advantest’s semiconductor and component test systems and6mechatronics systems are produced by suppliers based on Advantest’s specifications. Advantest’s reliance onthese subcontractors and suppliers gives it less control over the manufacturing process and exposes it tosignificant risks, especially inadequate manufacturing capacity, late delivery, substandard quality, lack of labor
availability and high costs. In addition, Advantest depends on a sole source or a limited number of suppliers for a
portion of its components and parts. Advantest does not maintain long-term supply agreements with most of its
suppliers, and it purchases most of its components and parts through individual purchase orders. If a supplierbecomes unable to provide components or parts in the volumes needed and at acceptable prices, or if a supplier
withdraws from business thereby stopping production or sales of custom or general components and parts that
Advantest uses or will use in the future, Advantest would have to identify and procure acceptable replacements.
Advantest may lose its capacity to supply test systems if it becomes unable to procure acceptable replacements.
Furthermore, the markets for semiconductors and other specialized components have, in the past, experienced
periods of inadequate supply to meet demand. Moreover, there may be a shortage of components if a large scale
natural disaster or electricity shortage occurs. The process of selecting subcontractors or suppliers and of
identifying suitable replacement components and parts is lengthy and may result in Advantest being unable todeliver products meeting customer requirements in a timely manner. Advantest has, in the past, been unable todeliver its products according to production schedules primarily due to the inability of suppliers to supply
components and parts based on Advantest’s specifications and by other shortages in components and parts.
Moreover, a deterioration in the financial position of Advantest’s subcontractors or suppliers reflecting thedecline in the economic environment may result in certain subcontractors and suppliers being unable to meet
Advantest’s requirements.
Advantest faces substantial competition in its businesses and, if Advantest does not maintain or expand its
market share, its business may be harmed
Advantest faces substantial competition throughout the world. Advantest’s primary competitors in thesemiconductor and component test system market include, among others, Teradyne, Inc., LTX-Credence
Corporation, UniTest Inc. and EXICON Ltd. In the mechatronics system related market, Advantest also
competes with Delta Design, Inc., TechWing, Inc., Seiko Epson Corporation and Mirae Corporation in test
handler devices, and with TSE Co., Ltd., Semes Co., Ltd. and SL-link Co., Ltd.in device interfaces. Some ofAdvantest’s competitors have greater financial and other resources than Advantest.
Advantest faces many challenges in its businesses, including increased pressure from customers to produce
semiconductor and component test systems and mechatronics systems that reduce testing costs. For device
interfaces, acquisition of vendors that supply core technical components by Advantest’s competitors, or leakageof the manufacturing technology of printed circuit boards, may result in reduced testing costs by customers or
difficulty by Advantest to realize its products’ full performance.
To compete effectively and maintain and expand its market share, Advantest must continue to enhance its
business processes to lower the cost of its products, or introduce enhancements that lower overall testing costs.
Advantest also expects its competitors to continue to introduce new products with improvements in price andperformance, as well as increasing their customer service and support offerings, and Advantest expects newmarket participants to launch low-price testers. Significant increases in competition may erode Advantest’s profit
margin and weaken its earnings.
Advantest may not be able to meet the targets set in its strategies and medium-term business plan
Advantest had embarked on “ACT2014”, a medium-term business plan setting certain goals for the fiscal
year ending 31 March 2015, but as a result of the impact of the global economic recession, the volatility of thesemiconductor industry and other factors that arose after the medium-term business plan’s announcement,
Advantest’s results for fiscal 2014 is expected to significantly fall short of the plan’s initial targets. The
attainment of medium-term goals is subject to various internal and external factors, including the general
economic and market conditions in which Advantest and its customers operate, the level of competition, the level7

of corporate capital expenditure, the level of demand for Advantest’s products and fluctuations in exchange rates.
As a result, any announced goals and targets (as amended from time to time) should not be treated as forecasts offuture results. There can be no assurance that Advantest’s strategies to accomplish the medium-term businessplan and implementation of such strategies will be successful, that the implementation of its strategies will havethe intended effects, that the medium-term business plan or other targets (whether quantitative or qualitative, andas amended from time to time) will be met, or that such goals, targets and aims will not be changed in the future
by Advantest’s management.
Failure by Advantest to meet demand for its products upon a sudden expansion of the markets forsemiconductor and component test systems and mechatronics systems may adversely affect its future market
share and financial results
Advantest procures components and parts used in its products from suppliers, but such suppliers havetypically adjusted their production capacity through the reduction of production lines and personnel. If the market
for semiconductor and component test systems and mechatronics systems were to suddenly expand, Advantest
would require significant increases in production capabilities including personnel, as well as materials,
components and supplies from suppliers, in order to fully capitalize on such expansion. The failure of Advantest
to adjust to such unanticipated increases in demand for its products during the period of recovery in demand
could result in Advantest losing one or more of its existing large-volume customers or losing the opportunity toestablish a strong relationship with potential large-volume customers with which it currently does little or nobusiness. Such failure may adversely affect Advantest’s future market share and its financial results.
Advantest’s largest customers currently account for a significant part of its net sales and, in addition to therisk of Advantest’s business being harmed by the loss of one or more of these customers or changes in theircapital expenditures, Advantest may not be able to recover its accounts receivables if its largest customers
experience a deterioration in their financial position
Advantest’s success depends on its continued ability to develop and manage relationships with its major
customers. A small number of such major customers currently account for a significant portion of its net sales.
Sales to Advantest’s largest customer as a percentage of its total sales were approximately 29% in fiscal 2011,
approximately 14% in fiscal 2012 and approximately 15% in fiscal 2013. Sales to Advantest’s five largest
customers accounted for approximately 56% in fiscal 2011, approximately 37% in fiscal 2012 and approximately
36% in fiscal 2013. The loss of one or more of these major customers or changes in their capital expenditures
could materially harm Advantest’s business. Furthermore, if Advantest’s major customers experience
deterioration in their financial position and are unable to fulfill their payment obligations to Advantest inaccordance with the applicable terms, Advantest’s business, results of operations and financial position may be
adversely affected.
Advantest’s product lines are facing significant price pressure
Price pressure on Advantest’s businesses is adversely affecting Advantest’s operating margins. Irrespectiveof the trend in the demand for semiconductors, there is ongoing price pressure on semiconductors, which puts
continuous pressure on the market price for products in the Semiconductor and Component Test System Segment
and Mechatronics System Segment. Especially with the ongoing slowdown in the semiconductor industry, pricepressure is salient. During these periods, semiconductor manufacturers and test houses, which are Advantest’s
customers, seek to increase their production capacities while minimizing their capital expenditures. In addition,
increased competition in the market for digital consumer products, personal computers, mobile devices such astablet-types devices and smartphones and the market for data servers have driven down prices of these goods,
subsequently creating significant price pressure on Advantest’s product lines. If prices of semiconductors
continue to decline, customers may postpone capital expenditures on new equipment by remodeling or adapting
the usage of existing equipment. If price pressure further increases in the future, Advantest’s financial condition
and results of operations may be adversely affected.
8Advantest may not recoup costs incurred in the development of new products
Enhancements to existing products and the development of new generations of products are, in most cases,
costly processes. Furthermore, because the decision to purchase semiconductor and component test systems
products and mechatronics systems generally involves a significant commitment of capital, the sale of thisequipment typically involves a lengthy sales period and requires Advantest to expend substantial funds and sales
efforts to secure the sale. Advantest’s enhancements or new generations of products may not generate net sales inexcess of development and sales costs if, for example, these new enhancements or products are quickly renderedobsolete by changing customer preferences, the introduction by Advantest’s competitors of products embodying
new technologies or features, the introduction by Advantest’s customers of new products that require different
testing functions or the failure of the market for Advantest’s customer’s products to grow at the rate, or to thelevels, anticipated by Advantest. This risk is believed to be particularly acute with respect to test systems for non
memory semiconductors because, in general, new non memory semiconductor product lines are introduced tomarket more frequently than new memory semiconductor product lines. In some cases, Advantest must anticipate
industry trends and develop products in advance of the commercialization of its customers’ products. Thisrequires Advantest to make significant investments in product development well before it determines thecommercial viability of these innovations. If Advantest’s customers fail to introduce their devices in a timely
manner or the market rejects their devices, Advantest may not recover its investments in product development
through sales in significant volume.
The market for Advantest’s major products is highly concentrated, and Advantest may not be able to increase
sales of its products because of limited opportunities
The market for test systems for memory semiconductors in the Semiconductor and Component Test System
Segment is highly concentrated, with a small number of large semiconductor manufacturers, foundries and test
houses accounting for a large portion of total sales in the semiconductor and component test system industry.
Advantest believes that this market concentration could become even more severe in the future as larger
semiconductor device manufacturers, foundries and test houses acquire smaller semiconductor market
participants, and as corporate restructuring, such as elimination and consolidation of businesses, progresses.
Advantest’s ability to increase sales will depend in large part upon its ability to obtain or increase orders fromlarge-volume customers. Furthermore, in the event there is an over-supply of semiconductor and component test
system products on the second-hand market reflecting, among others, restructuring within the industry, Advantest
faces an additional risk of losing its sales opportunities.
Fluctuations in exchange rates could reduce Advantest’s profitability
The majority of Advantest’s net sales derive from products sold to customers located outside of Japan. Of
Advantest’s fiscal 2013 net sales, 89.1% were from products sold to overseas customers. Most of Advantest’s
products are manufactured in Japan, but approximately 61% of Advantest’s net sales in fiscal 2013 were derived
from currencies other than the Japanese yen, predominantly the U.S. dollar. If the Japanese yen becomes strong
relative to foreign currencies (mostly U.S. dollar and, to a much lesser extent, other currencies), it would increase
the prices of Advantest products as stated in U.S. dollars and in those other currencies, which could hurt sales inthose countries.
With respect to the Euro, if the weakening of the Japanese yen continues, there may be a negative impact on
Advantest’s profitability since there are currently more costs incurred in Euro than net sales derived in Euro.
In addition, significant fluctuations in the exchange rate between the Japanese yen and foreign currencies,
especially the U.S. dollar, could require Advantest to lower its prices with respect to foreign sales of its productsthat are priced in Japanese yen, and reduce the Japanese yen equivalent amounts of its foreign sales for productsthat are based in U.S. dollars or other foreign currencies, thereby reducing its profitability overall. Thesefluctuations could also cause prospective customers to push out or delay orders because of the increased relative
cost of Advantest’s products. In the past, there have been significant fluctuations in the exchange rate between
the Japanese yen and the foreign countries in which Advantest’s sales are denominated.
9

Furthermore, Advantest’s consolidated financial statements for a particular period or for a particular date
will be affected by changes in the prevailing exchange rates of the currencies in which subsidiaries of Advantest
prepare their financial statements against the Japanese yen. Foreign exchange rate fluctuations may have aneffect on those amounts not denominated in yen which are translated into yen in Advantest’s consolidated
financial statements, and depending on the direction of the foreign exchange fluctuation, may have an adverse
effect on Advantest’s reported financial position, results of operations and net assets.
If Advantest’s main facilities for research and development, production or information technology systems for
its businesses, or the facilities of its subcontractors and suppliers, were to experience catastrophic loss, its
results of operations would be seriously harmed
Advantest’s main facilities for research and development for its Semiconductor and Component Test
Systems and Mechatronics System Segments production, as well as many of Advantest’s service bases, arelocated in Japan and particularly concentrated in Gunma Prefecture and Saitama Prefecture. In addition, the main
system server and the network hub are maintained in system centers approved by the Information System
Management System, or ISMS, and local network servers are located in certain operations offices in Japan. As
most recently evidenced by the Great East Japan Earthquake in March 2011, Japan is a region that is susceptible
to frequent earthquakes.
If Advantest’s facilities, particularly its semiconductor and component test system manufacturing factories,
were to experience a catastrophic loss, it would materially disrupt Advantest’s operations, delay production,
shipments and revenue, and result in large expenses to repair or replace the facilities. Advantest has insurance tocover most potential losses at its manufacturing facilities, other than those that result from earthquakes. However,this insurance may not be adequate to cover all possible losses. Similar disruptions to Advantest’s business may
occur if the facilities of Advantest’s subcontractors and suppliers or if the facilities of Advantest’s information
system network were to experience a catastrophic loss.
Advantest has prepared itself for crises such as large-scale natural disasters, and each department of Advantest has
documented its own disaster-response procedures and manuals. Furthermore, in order to prevent any disruption of its
core businesses, or in case of suspension, to re-start the suspended businesses, including the recovery of importantfacilities, in the shortest possible time, Advantest formulated and implemented a “Business Continuity Plan.” However,
if such Business Continuity Plan is not effective, Advantest’s core businesses could be disrupted at a time of crisis,such as large-scale natural disasters, and could take a substantial amount of time to recover.
Advantest may not realize the full anticipated benefits of the integration with Verigy
Advantest acquired Verigy in July 2011 and fully integrated with Verigy in April 2012. Advantest believes thatthe integration with Verigy enables it to better satisfy customer needs through the development and sale of a wider
variety of high quality products, and to better address customer needs through technological innovation that is
supported by a stable financial base, leading to continued growth amidst a rapidly changing semiconductor market.
However, integrating the business of two different companies is complex, and unifying certain operatingprocesses will require more time. Furthermore, the integration may not realize the anticipated benefits even if
operating processes are successfully unified. The difficulties in integrating the two businesses may arise during
various stages of the integration, including the following:•

consolidation of the two companies’ differing research and development, manufacturing, sales,
maintenance processes and their systems;•

the elimination of inefficiencies that may arise out of overlapping departments and processes between
the two companies; and•the integration of two companies with differing corporate cultures and languages.
10

If difficulties arise in connection with the integration, including those mentioned above, Advantest’s futurefinancial results may be adversely affected.
Advantest has also granted stock options to employees that Advantest took over from Verigy in July 2011.
If the employees exercise their stock options on a large scale, voting rights of Advantest’s shareholders, total
assets per share and share price may be diluted as a result.
Advantest’s business is subject to economic, political and other risks associated with international operations
and sales
Advantest’s business is subject to risks associated with conducting business internationally because it
manufactures and sells its products, and purchases parts and components from, around the world. In fiscal 2013,
73.0% of Advantest’s total net sales came from Asia (excluding Japan), a majority of which consisted of sales in
Taiwan, the People’s Republic of China (“China”) and Korea, 9.6% from the Americas and 6.5% from Europe.
Advantest anticipates that net sales from international operations will continue to represent a substantial portionof its total net sales. In addition, some of Advantest’s distribution and support subsidiaries are located in theAmericas, Europe, and Asian countries, including Taiwan, Singapore, Korea and China, and some of Advantest’s
suppliers and factories are also located overseas, such as Korea and Malaysia. Accordingly, Advantest’s future
results could be harmed by a variety of factors, including:•political and economic instability, including economic and political disruptions, disputes, naturalcalamities, epidemics or other risks related to countries where Advantest procures its components andparts or manufactures and sells its products;•

trade protection measures and import or export licensing requirements;•

potentially negative consequences from changes in tax laws;•

risks with respect to international taxation, including transfer pricing regulations;•difficulty in staffing and managing widespread operations;•differing protection of intellectual property;•

difficulties in collecting accounts receivable because of distance and different legal rules;•

risks with respect to social and political crises and issues resulting from terrorism, war and deteriorationin the political and/or economic relationships between Japan and other countries, among others; and•risks with respect to decline in the quality of procurement and manufacturing where Advantest’s
suppliers or manufacturing facilities are located in countries that do not have developed infrastructuresin mechanical processing and assembly.

Advantest recorded a significant amount of goodwill and other long-lived assets which may become impairedin the future
Advantest may be required to record an impairment charge for the difference between the carrying amountof long-lived assets and the implied fair value of long-lived assets if circumstances indicate that impairment may
have occurred and the carrying amount of the assets may not be recoverable.
In fiscal 2013, Advantest took into account its changing business environment and reconsidered its future
expected cash flows. As a result, it recognized impairment losses relating to property, plant and equipment andintangible fixed assets in the amount of ¥13,495 million.
Advantest has recorded a significant amount of goodwill on its consolidated balance sheet in accordancewith U.S. GAAP and goodwill is tested for impairment at least annually. If the testing performed indicates that11

the carrying amount of reporting unit goodwill exceeds, the implied fair value of that goodwill, Advantest
recalculates the fair value of each reporting unit goodwill and an impairment loss shall be recognized in an
amount equal to that excess. Therefore, depending on the expected future cash flow of long-lived assets orbusiness operations to which goodwill relates, Advantest may be required to record a significant impairment
charge, which could have a material adverse effect on Advantest’s financial condition and results of operations.
Advantest may not be able to recover its capital expenditures
Advantest continues to make capital expenditures. From fiscal 2012 through fiscal 2013, Advantest built a
new factory in South Korea in order to increase its share of sales to major Korean customers. The factory began
operating in May 2013. Advantest may not be able to recover the capital expenditures for such projects within theassumed timeframe, or at all, if it cannot achieve the assumed volume of sales due to customers cutting back on
capital expenditures or if intense competition with competitors results in a reduction in unit prices. In such event,the asset would be subject to impairment, which may have an adverse impact on Advantest’s profitability.
If a natural disaster comparable to the Great East Japan Earthquake were to occur, Advantest’s business may
suffer
If a natural disaster comparable to the Great East Japan Earthquake, which struck on March 11, 2011, wereto occur, resulting in suppliers’ facilities being destroyed, the supply of public utilities such as electricity, gas,
and water to suppliers’ facilities being cut, or there is a shortage of necessary energy supply for domestic
industry, Advantest may not be able to procure necessary components or parts, and may be unable to meetmarket demand for the supply of its products. Furthermore, market trends for the semiconductor industry, andfinished products that are closely related to semiconductors, such as household electrical appliances, various
computer equipment and automobiles, may become uncertain. Advantest’s business may be adversely affected asa result of these factors.
If a large quantity of radioactive material is released as a result of substantial damage to a nuclear power
plant caused by an aftershock or a tsunami similar to the accident that occurred at the Fukushima Daiichi Nuclear
Power Station, and Advantest’s products are contaminated with radioactive substances, the radiation levels where
Advantest’s major production facilities are located exceed national radiation standards, or electricity supply
becomes unstable for long periods of time due to a shut-down of nuclear plants, Advantest may be unable to meetmarket demand for the supply of its products, or the competitiveness of its products may be impaired andAdvantest’s business may be adversely affected.
Advantest’s business may be negatively affected by factors relating to its marketing and sales capabilities andits branding
Advantest’s business may be negatively affected by factors relating to its marketing and sales capabilities
and its branding, including:•the long selling process involved in the sale of semiconductor and component test systems andmechatronics system;•

the relatively small number of total units sold in the semiconductor and component test system andmechatronics system market;•

order cancellations or postponement of capital expenditures by customers;•

delays in collection of accounts receivable, increases in losses resulting from bad debt or increases inprovisions for doubtful receivables, reflecting the financial condition of customers;•

increases in required provisions for product warranty costs and write-downs of inventory; and•any real or perceived decrease in performance and reliability of Advantest products, which could lead toa decline in Advantest’s reputation.
12

Chemicals used by Advantest may become subject to more stringent regulations, and Advantest may berequired to incur significant costs in adapting to new requirements
Advantest uses chemicals in the manufacturing of its products, the manufacture, processing and distributionof which are subject to environmental related laws, regulations and rules of Japanese governmental agencies, aswell as by various industry organizations and other regulatory bodies in other countries. These regulatory bodies
may strengthen existing regulations governing chemicals used by Advantest and may also begin to regulate otherchemicals used by Advantest. While Advantest is taking measures to eliminate toxic substances included in parts
used to manufacture its products, Advantest uses solder, which contains lead for mounting electronic parts andcomponents for its products, in order to ensure the reliability of its products as a matter of priority. Further, as amethod to cool some of its semiconductor and component test systems and mechatronics systems, Advantest uses
fluorinated liquid which use is not currently regulated by laws. Advantest believes that it is in compliance withregulations with respect to the use of chemicals by promoting environmental policies for its products with thefocus on ensuring the safety and the reliability of its products; however, Advantest must be prepared to adapt toregulatory requirements in all relevant countries as requirements change. Advantest may be required to incur
significant cost in adapting to new requirements. Any failure by Advantest to comply with applicablegovernment or industry regulations could result in restrictions on its ability to carry on with or expand sales of its
products.
Advantest could suffer significant liabilities, litigation costs or licensing expenses or be prevented from sellingits products if it is infringing the intellectual property of third parties
Advantest may be unknowingly infringing the intellectual property rights of third parties and may be held
responsible for that infringement. To date, Advantest has not been the subject of a material intellectual property
claim. However, any future litigation regarding patents or other intellectual property infringement could be costly
and time consuming and divert management and key personnel from Advantest’s business operations. If
Advantest loses a claim, it may be forced to pay significant damages, pay license fees, modify its products orprocesses, stop making products or stop using processes. A license could be very expensive to obtain or may not
be available at all. Changing Advantest’s products or processes to avoid infringing the rights of third parties may
be costly or impractical.
Advantest may be unable to protect its proprietary rights due to the difficulty of Advantest gaining access to,and investigating, the products believed to infringe Advantest’s intellectual property rights
Advantest relies on patents, utility model rights, design rights, trademarks and copyrights obtained invarious countries to actively protect its proprietary rights. For instance, with respect to the device interface
market, Advantest has taken legal action based on its patent and utility model rights against manufacturers thatsell replicas of Advantest’s products and, in some instances, has obtained injunctions against sales of such
replicas. However, in general, it is difficult for Advantest to gain access to, and investigate, the products believedto infringe its intellectual property rights. Therefore, Advantest cannot ensure that its intellectual property rights
will provide meaningful protection of its proprietary rights. Nevertheless, Advantest is focused on protecting its
intellectual property rights from third party infringement and will continue to monitor and enforce its rights.
The technology labor market is very competitive, and Advantest’s business may suffer if Advantest is unable tohire and retain engineers and other key personnel
Advantest’s future success depends partly on its ability to attract and retain highly qualified engineers for its
research and development and customer service and support divisions. If Advantest fails to hire and retain asufficient number of these personnel, it may not be able to maintain and expand its business. Advantest may needto revise its compensation and other personnel related policies to retain its existing officers and employees andattract and retain the additional personnel that it expects to require.

13

Damage, interference or interruption to Advantest’s information technology networks and systems could
hinder business continuity and lead to substantial costs or harm Advantest’s reputation
Advantest relies on various information technology networks and systems, some of which are managed bythird parties, to process, transmit and store electronic information, including confidential data, and to carry out
and support a variety of business activities, including manufacturing, research and development, supply chain
management, sales and accounting. Advantest has the Information Security Committee and Legal and General
Affairs Department to create policies on information security measures. The IT section builds and operates theinformation and technology network and system based on the above-mentioned policies. However, attacks byhackers or computer viruses, wrongful use of the information security system, careless use, accidents or disasters
could undermine the defenses established by Advantest and disrupt business continuity, which could not onlyrisk leakage or tampering of information but could also result in a legal claim, litigation, damages liability or an
obligation to pay fines. If this were to occur, Advantest’s reputation could be harmed, Advantest could incur
substantial costs, and it may have a material adverse effect upon Advantest’s financial condition and results ofoperation.
Product defects and any damages stemming from Advantest’s product liability could harm Advantest’s
reputation among existing and potential customers and could have a material adverse effect upon Advantest’sbusiness results and financial condition
Advantest manufactures its products in accordance with internationally accepted quality control standards
such as ISO 9000. However, Advantest cannot guarantee that there are no defects in its products. Advantest
maintains product liability insurance, but cannot guarantee that such insurance will sufficiently cover the ultimate
amount of damages with respect to Advantest’s liabilities. Large scale accidents due to product defects or any
discovery of defects in its products could harm Advantest’s reputation for not adequately addressing defects,
could cause Advantest to incur higher costs, could result in claims for damages and could have a material adverse
effect upon Advantest’s business results and financial condition.
Risks Related to Ownership of American Depositary Shares (“ADSs”) or Common StockJapanese yen-dollar fluctuations could cause the market price of the ADSs to decline and reduce dividend
amounts payable to ADS holders as expressed in U.S. dollars
Fluctuations in the exchange rate between the Japanese yen and the U.S. dollar may affect the U.S. dollar
equivalent of the Japanese yen price of the shares on the Tokyo Stock Exchange and, primarily reflecting theforegoing, are likely to affect the market price of the ADSs. The Company has historically paid dividends on its
shares twice a year. If the Company declares cash dividends, dividends on the shares represented by the ADSs
will be paid to the depositary in Japanese yen and then converted by the depositary into U.S. dollars. Therefore,
exchange rate fluctuations could also affect the dividend amounts payable to ADS holders following conversion
into U.S. dollars of dividends paid in Japanese yen on the shares represented by the ADSs.
A holder of ADSs has fewer rights than a shareholder has, and must act through the depositary to exercise
those rights
The rights of shareholders under Japanese law to take actions, including voting their shares, receiving
dividends and distributions, bringing derivative actions, examining Advantest’s accounting books and records
and exercising appraisal rights, are available only to holders of record on the Company’s register of shareholders.
Because the depositary, through its custodian agents, is the registered holder of the shares underlying the ADSs,
only the depositary can exercise those rights in connection with the deposited shares. The depositary will makeefforts to vote the shares underlying a holder’s ADSs as instructed by the holder and will pay to the holder thedividends and distributions collected from Advantest. However, in the holder’s capacity as an ADS holder, that
holder will not be able to bring a derivative action, examine Advantest’s accounting books and records orexercise appraisal rights through the depositary.
14

There are restrictions on the withdrawal of shares from the Company’s depositary receipt facility
Under the Company’s ADS program, each ADS represents the right to receive one share. To withdraw any
shares, a holder of ADSs has to surrender for cancellation American Depositary Receipts, or ADRs, evidencing
100 ADSs or any integral multiple thereof. Each ADR bears a legend to that effect. As a result, holders of ADSs
are unable to withdraw fractions of shares or units or receive any cash settlement from the depositary in lieu of
withdrawal of fractions of shares or units. Holders of shares representing less than one unit, or 100 shares, may
require the Company to repurchase those shares, whereas holders of ADSs representing less than one unit ofshares are unable to exercise this right because the holders of these ADSs are unable to withdraw the underlying
shares. Under the Company’s ADS program, an ADS holder cannot cause the depositary to require the Company
to repurchase fractions of shares or units on its behalf. For a further discussion of the ADSs and the ADS
program, see “Description of American Depositary Receipts” set forth in the Company’s registration statement
on Form F-1 filed with the Securities and Exchange Commission on July 22, 2002. For a further discussion of theJapanese unit share system, see “Additional Information—Memorandum and Articles of Association—The Unit
Share System.”
Enforcement of Civil Liabilities
The Company is a limited liability, joint-stock corporation incorporated under the laws of Japan. Almost allof the Company’s directors, executive officers and audit & supervisory board members reside in Japan.
Substantially all of the Company’s assets and the assets of these persons are located in Japan. It may not be
possible, therefore, for investors to effect service of process within the U.S. upon the Company or these persons
or to enforce against the Company or these persons judgments obtained in U.S. courts predicated upon the civil
liability provisions of the federal securities laws of the U.S. The Company’s Japanese counsel, Nagashima Ohno
& Tsunematsu, has advised the Company that there is doubt as to the enforceability in Japan, in original actions
or in actions for enforcement of judgments of U.S. courts, of liabilities predicated solely upon the federal
securities laws of the U.S.
ITEM 4. INFORMATION ON THE COMPANY
4.A. HISTORY AND DEVELOPMENT OF THE COMPANY
The Company commenced operations in July 1954, and was incorporated in December 1954 under the nameTakeda Riken Industry Co., Ltd. as a limited liability, joint-stock company in Japan under the Commercial Codeof Japan. At the time of incorporation, Takeda Riken’s primary business was the design, manufacture and sale ofmeasuring instruments for Japanese electronics manufacturers. Takeda Riken started focusing on semiconductor
test equipment for the semiconductor industry in 1968 and was the first to domestically produce semiconductor
test equipment in 1972. In 1971, Takeda Riken entered into its first distribution agreement with a foreign
distributor and, in 1973, established its first representative office in the U.S. to gather information on technology
and distribution and to establish dealer relationships. These two milestones launched the Company’s long-termgoal of becoming a global manufacturer of testing and measuring products. Takeda Riken has been listed on theTokyo Stock Exchange since February 1983. Takeda Riken changed its registered name to Kabushiki Kaisha
Advantest in October 1985.
Advantest applies its capital expenditures chiefly to developing new products, streamlining production,
expanding its production capacity and capital leases to its customers. Advantest’s capital expenditures were¥7.0 billion, ¥12.6 billion and ¥5.6 billion in fiscal 2011, 2012 and 2013, respectively. The fiscal 2012 amountincludes capital expenditures to build the new factory in Korea.
On July 4, 2011, Advantest acquired all of the outstanding shares of common stock of Verigy at US$ 15.00
per share, pursuant to which Verigy became a wholly-owned subsidiary of Advantest. The total purchase pricewas ¥78.7 billion. In April 2012, Advantest reorganized its subsidiaries and fully integrated with Verigy.

15

The Company’s principal executive offices are located at Shin-Marunouchi Center Building, 1-6-2,
Marunouchi, Chiyoda-ku, Tokyo 100-0005 Japan. The Company’s telephone number in Japan is(81-3) 3214-7500.
The Company’s agent in the United States is Advantest America Inc., located at 3061 Zanker Rd., San Jose,CA 95134 U.S.A.
4.B. BUSINESS OVERVIEW
Overview
As of June 26, 2014, Advantest is comprised of the Company and its 32 consolidated subsidiaries.
Advantest conducts its business in the following segments:•

Semiconductor and Component Test System Segment;•

Mechatronics System Segment, focusing on peripheral devices, including test handlers and device
interfaces; and•Services, Support and Others Segment.

Semiconductor and Component Test System Segment
The Semiconductor and Component Test System Segment provides customers with test system products forthe semiconductor industry and the electronic component industry. The products in this segment include test
systems for memory semiconductors and test systems for non memory semiconductors. The test systems for non
memory semiconductors are divided into test systems for SoC semiconductors, LCD driver integrated circuits
and semiconductors used in car electronics.
Mechatronics System Segment
The Mechatronics System Segment focuses on peripheral devices to the semiconductor and component test
systems. This business includes test handlers applying mechatronics technologies, which handle semiconductor
devices and automate testing, device interfaces with measured devices, and operations related to nanotechnology.
Services, Support and Others Segment
The Services, Support and Others Segment consists of comprehensive customer solutions provided inconnection with the Semiconductor and Component Test System and Mechatronics System Segments, support
services, an equipment lease business and new businesses such as Terahertz systems.
Sales by Segment
The following table illustrates net sales by each segment for the last three fiscal years.

Segment

Fiscal 2011
Sales
(in millions)%

Semiconductor and Component Test System
Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mechatronics System Segment . . . . . . . . . . . . . . . .
Services, Support and Others Segment . . . . . . . . . .
Intercompany transactions elimination . . . . . . . . . .

¥105,608
20,61618,807(3,983)74.9 ¥101,119
14.6
13,65313.3
20,077(2.8)(1,946)76.1 ¥ 73,017
10.3
14,98415.1
24,151
(1.5)
(274)

65.3
13.4
21.6
(0.3)

Total Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥141,048

100.0% ¥132,903

100.0% ¥111,878

100.0%

16

Fiscal 2012
Sales
(in millions)%Fiscal 2013
Sales
(in millions)%Industry Overview
Advantest offers products in semiconductor and component test systems, mechatronics systems, andservices, support and others. Advantest’s main customers are industrial, design and manufacturing companies,
fabless semiconductor companies, foundries and test houses. Advantest believes that the following factors
promote growth of the business carried out by its main customers:•

the move to lower-cost, smaller, faster and more powerful and energy-efficient semiconductors andelectronic components;•

the increase in demand for communication devices such as tablet-type devices and smartphones;•

the increase in demand for higher performance data servers and personal computers;•

the increase in demand for digital consumer products such as flat-panel TVs, DVD/Blu-ray discrecorders, portable audio players, electronic books and application products for automobiles;•

the increasing levels of wireless high-speed data transmission worldwide reflecting the expansion of themobile device industry;•

the increasing demand for electronic devices that incorporate semiconductor and communications
technologies in developing countries;•

the development of higher speed and high capacity communications infrastructure; and•the increase in demand for electronic components including semiconductors and sensors, in response totechnological advancement of automobiles such as electric vehicles (EV) and hybrid electric vehicles(HEV).

Advantest believes that these factors will continue to provide long-term growth opportunities for Advantest
because they lead to additional capital expenditures by its customers, resulting in an expansion of businesses for
Advantest. However, the capital expenditures of Advantest’s customers may be adversely affected by thefollowing factors:•

the level of demand for semiconductors and electronic components;•

advancements in semiconductor and electronic component technology; and•changes in semiconductor and electronic component manufacturing processes.

Demand for Semiconductors and Electronic Components
Demand for semiconductor and component test systems and mechatronics systems is closely related to thevolume of semiconductors and electronic components produced and the resulting capital expenditure ofsemiconductor manufacturers and others.
Semiconductors are generally classified as either memory semiconductors or non memory semiconductors.
Memory semiconductors are used in electronic systems to store data and programs. Non memory semiconductors
include various semiconductors that incorporate non memory circuits, which include logic and analog circuits.
Logic circuits process digital data to control the operations of electronic systems. Analog circuits process analog
signals translated from real world phenomena such as sound, light, heat and motion. SoC semiconductors are asubset of non memory semiconductors that combine digital circuits with analog, memory and RF circuits, among
others, on a single semiconductor chip. SoC semiconductors are used in a variety of sophisticated products,
including wireless communications, fiber optic equipment and digital consumer products.
Semiconductor sales have increased significantly over the long-term. However, semiconductors, particularly
memory semiconductors, have experienced significant cyclical variations in growth rates. According to World
Semiconductor Trade Statistics (WSTS), worldwide semiconductor sales in 2009 decreased compared to the17previous year, by approximately $22.3 billion or 9.0% to approximately $226.3 billion, mainly due to the slow
economy persisting since the previous year. Sales in 2010 increased compared to the previous year, byapproximately $72.0 billion or 31.8% to approximately $298.3 billion, mainly due to increased demand forelectronic components in developing nations. Sales in 2011 increased compared to the previous year, byapproximately $1.2 billion or 0.4% to approximately $299.5 billion, mainly due to the global economic recession
and natural disasters such as the Great East Japan Earthquake and the floods in Thailand reducing production
activities of electronic products. Sales in 2012 decreased compared to the previous year, by approximately $8.0
billion or 2.7% to approximately $291.6 billion, because the effects of the debt crisis in Southern European
countries brought about a further sense of stagnation. Sales in 2013 increased compared to previous year, byapproximately $14.0 billion or 4.8% to approximately $305.6 billion, due to an overall steady demand forsemiconductors, despite some variations among products. The following table sets forth the size of the market for
memory semiconductors, non memory semiconductors and all semiconductors between 2009 and 2013 and the
projected market size between 2014 and 2016 as compiled and estimated by WSTS as of June 2014.
Actual Year ended December 31,
2009

2010

2011

Projections for Years ending December 31,

2012

2013

2014

2015

2016

(in millions)

Memory . . . . . . . . . . . . . . . . . . . . . .
Non memory . . . . . . . . . . . . . . . . . .

$ 44,797
181,516$ 69,614
228,701$ 60,749
238,772$ 56,995
234,567$ 67,043
238,541$ 72,094
253,285$ 72,659
263,489$ 76,453
274,021

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

$226,313$298,315$299,521$291,562$305,584$325,379$336,148$350,474

The non memory semiconductor market is not as volatile as the memory semiconductor market because nonmemory semiconductors are used in a larger variety of consumer products and equipment. In periods of rapid
decline in the semiconductor market, the capital expenditures of semiconductor manufacturers, including theirpurchases of semiconductor test systems, generally decline at a faster pace than the decline in semiconductor
sales. In addition, following a downturn in the semiconductor market or a decline in the price of semiconductors,
investment is generally restrained until semiconductor manufacturers determine that the market for
semiconductors is experiencing a substantive recovery and accordingly, sales of semiconductor test systems
generally do not experience significant increase. Advantest believes these trends will continue in the future.
The semiconductor market experienced negative growth in 2008 for the first time in seven years primarily
due to the global economic crisis and further declined in 2009 reflecting the conditions continuing from theprevious year. The market significantly recovered in 2010 compared to the previous year, due to a surge indemand for electronic equipment in developing nations. In 2011, the market only increased slightly compared tothe previous year due to the global economic recession and natural disasters such as the Great East Japan
Earthquake and the floods in Thailand reducing production activities of electronic products. The market for
memory semiconductors decreased by 6.2% in 2012 as compared with 2011 but increased by 17.6% in 2013 ascompared with 2012, after which it is expected to grow by approximately 7.5% in 2014, by approximately 0.8%
in 2015 and by approximately 5.2% in 2016, according to estimates by WSTS. WSTS expects that the market for
memory semiconductors will grow to approximately $76.5 billion in 2016. Advantest believes that demand formemory semiconductors will be generated in the foreseeable future by the prevalence of DDR3-SDRAM, thenext generation DDR4-SDRAM, flash memory and other high-end semiconductors. The market for non memory
semiconductors decreased by 1.8% in 2012 as compared with 2011 but increased by 1.7% in 2013 as comparedwith 2012, after which it is expected to grow by approximately 6.2% in 2014, by approximately 4.0% in 2015
and by approximately 4.0% in 2016, according to estimates by WSTS. WSTS expects that the market for non
memory semiconductors will grow to approximately $274.0 billion in 2016. Advantest believes that the demand
for non memory semiconductors will depend on consumer products such as smartphones and tablet-type devices,and will continue to grow in the foreseeable future, led by the further prevalence of, and new developments in,digital consumer products and personal computers, accompanied by data servers.
Advancements in Semiconductor and Electronic Component Technology
Advantest believes that demand for semiconductor and component test systems and mechatronics systems is
also affected by the rate of change and development in semiconductor and electronic component technology.
Current changes in the semiconductor and electronic component industry relate to the innovation of digitalconsumer products and communications technologies.
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Furthermore, Advantest believes that technical innovation and a growth in demand for semiconductors usedin vehicles, such as electronic control units and on-board LANs, in connection with the increasing use ofelectronics in the automobile industry may have a big impact on the semiconductor industry and electronic
components industry.
Demand for faster semiconductors and electronic components that are smaller in size, incorporate morefunctions and require less power to operate is being driven by:•increase in demand for, and improvements in technology for, communication devices, such as tablettype devices and smartphones, and data servers;•

growing demand for, and continuous improvements in, personal computers and digital consumer
products, such as flat-panel TVs, DVD/Blu-ray disc recorders, digital cameras, electronic books andmobile phone handsets;•requirements of communications network equipment, such as network routers, switches and basestations, as well as wireless handsets and other Internet access devices, to enable advances in Internet
hardware and software applications, increases in infrastructure performance and simplification andminiaturization of Internet access devices;•

proliferation of the internet and related devices, and increases in capacity and speed of data servers as
they evolve; and•advancement in technology which controls energy in a highly efficient manner and the move fromvehicles with internal combustion engines to hybrid or electric vehicles partially or wholly driven byelectric motors in response to society’s increasing call for environmental measures and greater energy
efficiency.

Demand for personal computers, data servers, smartphones and tablet-type devices with higher performanceand capabilities are also driving changes in the memory semiconductor sector. This demand is causing
manufacturers to shift to the production of the DDR4-SDRAM high-speed data transfer memory semiconductor,
and to further expand production of lower power LPDDR2/3 for mobile devices and large capacity andnonvolatile and high-speed read or writable flash memory semiconductors. Advantest believes that this shift iscreating demand for test systems for memory semiconductors capable of handling these new types of memory
semiconductors, as well as contributing to a reduction in testing costs. In addition, Advantest believes that
additional demand for mechatronics systems, including test handlers and device interfaces connecting
semiconductor devices and semiconductor test systems, will be created and will grow in line with advances insemiconductor technologies.
The development of SoC semiconductors with smaller size, higher performance and lower power
consumption has created demand for sophisticated semiconductor and component test systems that cansimultaneously test SoC semiconductors’ logic, analog and memory circuits. Further innovations in non memory
semiconductor technologies including SoC semiconductor technology are expected, and Advantest believes these
innovations will create demand for new, high-performance semiconductor and component test systems optimized
for use with these advanced semiconductors.
Advantest believes that the integration of non memory semiconductors into a range of digital consumer
products will drive demand for test systems for non memory semiconductors which contribute to the reduction of
testing costs. Non memory semiconductors are often customized for applications in specific products, which
results in a large variety of non memory semiconductors that are often produced in relatively smaller volumes.
Changes in Semiconductor and Electronic Component Manufacturing Processes
Semiconductor and electronic component manufacturers are promoting production outsourcing,technological innovation in manufacturing processes and testing technology to improve productivity.
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Production Outsourcing
In recent years, semiconductor manufacturing and testing processes have become more complex and capitalintensive. Primarily reflecting the foregoing, an increasing portion of the manufacturing and testing functions arebeing subcontracted out, not only by fabless companies, but also by industrial, design and manufacturing
companies which had previously designed and manufactured semiconductors, in order to reduce capital
expenditures. This trend has resulted in an increase in the number of test houses that accept test process
outsourcing and foundries that accept manufacturing process outsourcing. Foundries either perform testing inhouse or outsource their testing needs to test houses. This trend towards production outsourcing, particularly totest houses, has increased the number of potential customers for semiconductor test system manufacturers,
although it has not significantly affected the total demand for Advantest’s products. In addition, Advantest
believes that it is most appropriate to use semiconductor and component test systems which have been designed
using module structure, which enables the formation of semiconductor test systems that can meet the multiple
needs of the customers of test houses and foundries. Outsourcing has also been utilized for electronic component
manufacturing.
Technological Innovation in Manufacturing Processes
Recent innovations in semiconductor manufacturing processes are miniaturization, shift to 450 millimeter
wafers and three-dimensional mounting. Wafers are circular flat pieces of silicon from which multiple
semiconductor chips are made using photo-etching and other manufacturing processes. By using 450 millimeter
wafers, manufacturers are able to increase the number of chips produced per wafer by 2.25 times when compared
to production using 300 millimeter wafers if the size of chips are the same. From the latter half of 2010, as aresult of a rapid expansion of the mobile device market which resulted in an increase in the manufacture of low
power memory, focus has been on capital expenditures related to 300 millimeter wafers. Research anddevelopment into 450 millimeter wafers for use in high added-value, high-end semiconductors is taking hold, andfuture roll-out of this next-generation technology for mobile devices is expected.
New Testing Technologies
Semiconductor designers and manufacturers are striving to further reduce costs in connection with
manufacturing semiconductors, especially the cost of testing semiconductors. Thus, there is a stronger demand forsemiconductor test systems that can simultaneously test more semiconductors and accommodate a larger number ofpins at higher speeds and with high throughput capabilities. On the other hand, there is an increasing pressure on
semiconductor test systems to be energy efficient, smaller in size and less expensive. In order to respond to thisdemand, semiconductor test system manufacturers are taking measures to reduce semiconductor test system costsby making the development and manufacturing process of semiconductor test systems more efficient, strengthening
peripheral devices such as test handlers and device interfaces and improving service and support systems. Certain
semiconductors are now tested in a simplified manner in which self-test technologies are designed into circuits, orare tested in a manner that is close to actual operation by using firmware used to operate final products or even soldwithout being tested. Furthermore, semiconductors that use TSV (Through-Silicon Via) technology, a via thatpenetrates the Si chip, has reached the stage of practical application. Advantest believes that it has become
increasingly important for semiconductor test systems to ensure the reliability of semiconductors since
semiconductors are expected to become more complex and advanced going forward.
Advantest believes that semiconductor and electronic component manufacturing processes will continue to
evolve. The introduction of new manufacturing processes will likely result in test costs constituting a higher
percentage of the total cost of manufacturing and, therefore; increase price pressure on the semiconductor test
system industry. Furthermore, advances in the semiconductor and electronic component industry will require
semiconductor test systems with new and more sophisticated testing functions. Advantest believes that thesetrends provide it with an opportunity to distinguish itself from its competitors through the delivery of new
products that are priced and designed to meet the specific needs of its customers.
20

Business Strategy
Advantest is currently facing a challenging business environment primarily due to the recent downturn inthe global economy and weakened demand for semiconductors. In order to create a stable foundation amidst the
fast-changing and challenging semiconductor market, on July 4, 2011, Advantest acquired Verigy, pursuant towhich Verigy became a wholly-owned subsidiary of Advantest. In April 2012, Advantest reorganized its
subsidiaries and fully integrated with Verigy. Furthermore Advantest has established the following core businessgoals to achieve mid- to long-term growth:•

focusing on the development of semiconductor test systems which can respond to changes incapabilities of memory and non memory semiconductors;•

increasing its market share for test systems for non memory semiconductors and maintaining its large
market share for test systems for memory semiconductors;•

increasing its market share for test handlers for memory and non memory semiconductors;•

developing, designing and supplying high quality device interfaces in a shorter period of time;•

reducing product cost of goods to withstand price pressures on products;•

enhancing its operating efficiency to improve profitability through promotion of production innovations
and operational expense improvements such as IT integration and consolidation of business premises;•

cost-cutting from optimizing payroll costs;•

strengthening its ability to provide comprehensive solutions to satisfy customer needs; and•promoting the development and establishment of new businesses in the measuring instruments fieldoutside of its semiconductor-related business.

To achieve these goals, Advantest plans to:Continue to address industry trends, identify customer needs and deliver new products ahead of its competitors
Advantest will continue to work closely with major semiconductor manufacturers beginning in the productdesign stage of semiconductor and component test systems to understand customer needs relating to emerging
technologies and applications. Based on this knowledge and its technological expertise, Advantest seeks todevelop more advanced semiconductor and component test systems, test handlers, device interfaces andcomprehensive solutions ahead of its competitors. For example, Advantest is pursuing the following strategies:•

developing semiconductor and component test systems with increased test speeds and throughput
capabilities and test handlers in line with the technological development of memory semiconductors andnon memory semiconductors;•

proactively developing products to address the recent shift in emphasis in the semiconductor industry
towards front-end testing of dies;•

actively applying high-frequency analog technology developed for measuring instruments for thewireless communications market to test systems for non memory semiconductors including test systems
for SoC semiconductors;•

in addition to Advantest’s existing technologies, actively utilizing Verigy’s technologies, including thehigh-frequency test technology or the per-site processor architecture, and promoting productdevelopment that utilizes the strengths of both companies;•

developing testing solutions for complexed IC incorporating RF, logic and memory chips in a single
package in order to achieve IC with advanced 3D integration as well as downsizing and technicaladvantages with TSV technology;21

•offering semiconductor and component test systems and device interfaces with high throughput in orderto test recent devices incorporating interfaces with data rates of several gigabits per second; and•developing device interfaces that can optimize the performance of semiconductor and component test
systems and test handlers in responding to semiconductors with higher speed and large pin counts.

Strengthen the test system business for non memory semiconductors
Advantest believes that in 2013 the market for test systems for non memory semiconductors wasapproximately four times the size of the market for test systems for memory semiconductors. Advantest has
therefore devoted its resources to develop test systems and modules for non memory semiconductors to meet thedemands of a large number of manufacturers for the testing of a wide variety of non memory semiconductors.
Advantest is utilizing the test module structure in test systems for non memory semiconductors. Advantest
believes the primary benefits of these test module structures are reduced testing costs. In addition, Advantest
hopes that the reduction in testing costs, and thus the lowering of overall manufacturing costs of non memory
semiconductors, will help foster further demand for non memory semiconductors to be used in digital consumer
products and other products.
Furthermore, through its integration with Verigy, Advantest aims to utilize the strengths of both companies
to rapidly develop efficient, low cost products to break into the low-end non memory device market and highspeed telecommunications market that were previously difficult to enter into.
Focus sales and support efforts on key customer accounts
Advantest believes that a small number of large industrial, design and manufacturing companies, fablesssemiconductor companies, foundries and test houses account for a large portion of total sales in thesemiconductor and component test system industry. Advantest sells semiconductor and component test systems
and mechatronics systems to many of these customers and supports them on a regular basis. Advantest is seeking
to continue to expand its business with these key customers and develop new relationships with the remaining
potential major customers. Many of Advantest’s sales and support offices are located near the corporate
headquarters or main research and development and manufacturing facilities of these key customers. In addition,
in Europe, the U.S. and Asia, Advantest is further expanding its customer base and strengthening technicalsupport and services. These offices also facilitate Advantest’s efforts to continue conducting collaborative
development activities with leading semiconductor manufacturers.
Advantest acquired and integrated Verigy
In July 2011, Advantest acquired Verigy, a leading manufacturer of semiconductor test systems. The
purposes of and achievements from this acquisition and business combination are mainly threefold, as set out
below.
(1) Highly Complementary Technology and Products
Building on Advantest’s strength in memory semiconductor test systems and mass production lines andVerigy’s strength in non memory semiconductor test systems and research and development, Advantest expects
to drive technological innovation in the more comprehensive field of automatic semiconductor test equipment.
Advantest is also working to enhance growth and profitability by reallocating resources currently devoted toareas of duplicative research and development, with a goal of accelerating Advantest’s combined technicalcapabilities and developing new business.

22

(2) Customer Relationships
Advantest now has a wide and comprehensive range of products, which enables it to provide customers withthe most advanced collection of test solutions, such as improved test efficiency and reduced cost. Expanding
Advantest’s scale of operations is also expected to enhance Advantest’s ability to provide long-term andconsistent service to Advantest’s customers.
(3) Global Business Development
Advantest has strengthened its customer base by expanding it globally. Advantest is also accelerating its
globalization efforts at the operation level by acquiring excellent human resources on a global scale.
Products
As of fiscal 2013, Advantest’s main products are products developed, manufactured and sold in the
Semiconductor and Component Test System Segment, Mechatronics System Segment and Services Support andOthers Segment. They are as follows:
Semiconductor and Component Test Systems Segment
Semiconductor and component test systems are used during the semiconductor and electronic component
manufacturing process to confirm that a semiconductor functions properly. Semiconductor and component test
systems consist of test systems for memory semiconductors and test systems for non memory semiconductors.
The following table sets forth the amount of net sales of Advantest’s semiconductor and component test
systems, for memory and non memory semiconductors for the periods presented.
Category

Fiscal 2011

Fiscal 2012
(in millions)Fiscal 2013

Test systems for memory semiconductors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Test systems for non memory semiconductors . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 25,913
79,695¥ 17,751
83,368¥23,40349,614

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

¥105,608¥101,119¥73,017

Test Systems for Memory Semiconductors
Advantest’s test systems for memory semiconductors are test systems designed to test high-speed/highperformance and low power consumption DRAM semiconductors used in personal computers, data servers,
smartphones and tablet-type devices as well as flash memory semiconductors used in digital consumer products
and communication devices such as smartphones.
Test systems for memory semiconductors consist of a mainframe and one or more test heads. During testing,a device interface is attached to the test head. During the front-end testing process, wafers are loaded by a proberand are connected to the test system for memory semiconductors through the device interface. Electric signals
between the die and the test systems for memory semiconductors are transmitted through probe pins located in
the device interface and tested. After front-end testing is completed, the wafer is diced into separate dies andproperly functioning dies are packaged. During back-end testing, test handlers are used to load these packaged
devices onto the test heads, and electric signals are transmitted between the devices and the test heads via thedevice interface and tested. The test results are analyzed by the test systems for memory semiconductors’
hardware circuits and software programs. Customized software programs for each semiconductor are required toanalyze the semiconductor tests and test data.

23

Characteristics of the performance and other characteristics of test systems for memory semiconductors thatare important to customers include:
Throughput. Throughput is measured by the number of semiconductors that can be tested by test systems formemory semiconductors during a specified time.
Test Speed. Test speed is the speed at which the test systems for memory semiconductors test
semiconductors during testing. Test speed is measured in terms of hertz (Hz), or Bits Per Second (bps).
Timing Accuracy. Timing accuracy is the test system for memory semiconductors’ accuracy of control over
the timing of testing signals generated.
Maximum Pin Count. Maximum pin count is the number of channels for test signals (at the maximum) usedby test systems for memory semiconductors.
Size. Smaller machines reduce the amount of floor space occupied and electricity consumed by the test
systems for memory semiconductors.
Temperature. Semiconductor manufacturers perform tests on semiconductors at varying temperatures toensure proper operation under extreme conditions.
Compatibility . Test systems for memory semiconductors that are compatible with predecessor systems cut
down on the time required to develop new test programs and otherwise allow for effective utilization bycustomers of existing resources.
Quality. Quality is determined by the reliability of test results produced and whether the equipment canmaintain stable operation under different testing environments.
Advantest estimates that its market share in test systems for memory semiconductors was approximately
57%, 63% and 57% in 2011, 2012 and 2013, respectively, as a result of increasing capital expenditure in test
systems for DRAM semiconductors. Advantest has a substantially larger market share in test systems for DRAM
memory semiconductors than in test systems for flash memory semiconductors. Advantest is currently seeking toincrease its market share in test systems for flash memory semiconductors.
Advantest’s main product lines of test systems for memory semiconductors are the T5500 series, theT5300 series, the T5700 series, HSM series and V6000 series.
T5500 Series. The T5588 is a test system for mass production suitable for testing speeds of up to 800 Mbps for
DDR3-SDRAM cell testing and LPDDR. The T5503 and T5503HS are memory semiconductor test systems suitable
for the mass production of DDR3-SDRAM, DDR4-SDRAM, LPDDR3 and LPDDR4 (1 Gbps-4 Gbps class highspeed memory semiconductors). The T5511, which is the top of the range model in the T5500 series, is a memory
semiconductor test system which can handle testing speeds of up to 8 Gbps and is suitable for the evaluation andproduction of ultra-high-speed memory semiconductors such as DDR4-SDRAM and GDDR. The T5500 series are
Advantest’s best-selling line of test systems used for the back end testing of DRAM semiconductors.
T5300 Series. The T5383 is a test system for the front-end testing of DRAM semiconductors and for the backend testing of flash memory semiconductors. The T5383, which is capable of simultaneously testing up to 384
devices, is a test system with a maximum testing rate of 286 MHz/572 Mbps, which is twice the testing rate ofAdvantest’s previous model. This allows for DRAM wafer testing “at speed” testing, or testing for KGD, and backend testing for flash memory semiconductors, at high-speed and with high-throughputs capabilities. The T5385,
which is capable of simultaneously testing up to 768 devices with a maximum testing rate of 266 MHz/533 Mbps,
succeeds the T5383. The T5300 series is Advantest’s best-selling test systems for memory semiconductors productline for front-end testing of DRAM semiconductors and for back-end testing of flash memory semiconductors.
24T5700 Series. Because variations in memory cell characteristics must be kept within a defined range, frontend testing for flash memory semiconductors require more types of testing than is required in front-end testingfor DRAM semiconductors. Accordingly, front-end testing for flash memory semiconductors contributes tohigher testing costs. Furthermore, although the volume of production with respect to NAND-type flash memory
semiconductors is increasing, prices have fallen substantially and there is a demand for higher efficiency for test
systems. As a result, by specializing in NAND-type flash memories Advantest introduced the T5773 memory test
system, which enabled a significant reduction in testing costs compared to existing products. The T5700 series
will provide effective solutions that will enable everything from design to mass production of flash memories.
HSM Series. The HSM series are test systems for the research and development and mass production ofhigh-speed DRAM. The products in this series are capable of test speeds from 2 Gps to 8 Gps. Products can be
upgraded by exchanging certain parts or modules, allowing users to set up an optimal system in a timely manner
for minimal cost as memory device speeds increase.
V6000 Series. The V6000 series are test systems for the research and development and mass production of
flash memory. The V6000 series as a test system for flash memories is capable of industry class-leading test
speeds of 880 Mbps. The test systems are made so that they can be attached to both wafer probers and handlers,and can be switched to back end or front end lines depending on the user’s needs. As the test systems havemultiple test controllers, they can realize high productivity in MCP-type memory device testing as well as flash
memory.
Test Systems for Non Memory Semiconductors
Advantest’s main line of test systems for non memory semiconductors relates to test systems for SoC
semiconductors, test systems for LCD driver integrated circuits, test systems for image sensor and test systems
for semiconductors used in car electronics. Test systems for SoC semiconductors test SoC semiconductors thatcombine circuits such as digital, analog, memory and RF circuits on a single semiconductor chip. Test systems
for LCD driver integrated circuits test semiconductors with specific functions, such as LCD driver integrated
circuits that display images on LCD panels. The factors that are important to customers in the performance andother characteristics of test systems for memory semiconductors described above also apply to test systems fornon memory semiconductors. Advantest’s market share in test systems for non memory semiconductors wasapproximately 47% in 2011 and approximately 50% in 2012. The market share dropped to approximately 39% in
2013, however, due to a drop in capital expenditure spending by some of Advantest’s major customers.
Advantest’s main product lines of test systems for non memory semiconductors are the T2000, theV93000 series and the T6300 series.
T2000. In 2003, Advantest introduced to the market the T2000 test systems for non memory semiconductors
which used the test module structure. Advantest believes that the development of modules for the T2000
compatible semiconductor test systems for non memory semiconductors and the increase in product lineup will
increase Advantest’s market share in test systems for non memory semiconductors. Main compatible component
modules for the T2000 include modules designed for digital testing, power supply testing, analog testing, powerdevice testing, image sensor testing and RF testing. Mainframes for the T2000 may be chosen to meet customers’
needs. Furthermore, Advantest developed the EPP (Enhanced Performance Package) which is a new system
option. Advantest believes that introducing EPP compatible modules into the market will help customers reduce
testing costs and testing development time.
V93000 Series. The V93000 series are non memory semiconductor test systems using a test module
structure. These products feature test processor per pin architecture and scalable platform and as a result ofhigher performance and lower test costs, Advantest believes that these products are capable of expanding theirshare of the non memory semiconductor test system market. The main modules in the lineup are the top of theline 12.8 Gbps digital module, 6 GHz BW analog module, 6 GHz RF module and DC module.
25

T6300 Series. The T6300 series are test systems for LCD driver integrated circuits used with high-definition
LCD displays. A maximum of 3,072 LCD testing pins may be used with the T6373 system. The system cansimultaneously test multiple LCD driver integrated circuits.
Mechatronics System Segment
The main products in the Mechatronics System Segment are test handlers which handle semiconductor
devices and automate the testing, and device interfaces which are the interfaces with devices being tested.
Test Handlers
Test handlers are used with semiconductor and component test systems to handle, condition temperature,contact and sort semiconductors and other electronic components during the back-end testing of thesemiconductor manufacturing process.
Advantest’s test handlers are sold primarily in conjunction with the sale of its semiconductor andcomponent test systems. A majority of Advantest’s test handlers for memory semiconductors, measured in units,
are sold to customers of Advantest’s semiconductor and component test systems. Advantest’s test handlers arecompatible with the semiconductor and component test systems of its competitors.
Test handlers are designed with different characteristics for memory and non memory semiconductors.
Memory semiconductors require relatively long test times. Advantest’s test handlers for memory semiconductors
handle up to 768 semiconductors per test head at a time. Non memory semiconductors, including SoC
semiconductors, require relatively short test times. Advantest’s test handlers for non memory semiconductors
require short time and handle up to 32 semiconductors at a time.
Test Handlers for Memory Semiconductors. The M6242 test handler for test systems for memory
semiconductors, including DDR3-SDRAM, can handle up to 768 semiconductors at a time. The maximum
throughput is 42,200 semiconductors per hour through the use of a new high-speed handling technology thatshortens the time between tests to approximately half of the time associated with Advantest’s ordinary model. In
addition, the M6242 has a built-in temperature control device which can minimize the temperature fluctuation
within a 1.5°C range for temperatures between -10°C and 100°C. Advantest also has other test handler productline for test systems for memory semiconductors that meet varying cost and functional needs of its customers.
Test Handlers for Non Memory Semiconductors. Advantest’s test handlers for non memory semiconductors,
including SoC semiconductors, are the M4841, the M4742A and the M4871, among others. With a rate of
32 semiconductors at a time, the M4841 can handle approximately twice as many semiconductors at a time as
Advantest’s previous model. The M4841’s maximum throughput of up to 18,500 semiconductors per hour istriple the maximum throughput of the previous model. Furthermore, the M4841 is also capable of testing in awide range of temperatures, from as low as -55°C or as high as 155°C.
The M4742A realizes a reduction in contact pitch exchange time in handling of various products,
visualization of operation screen, visibility check of internal devices, and improvement of operability, hence
contributing to higher productivity.
The M4871 integrates Advantest’s proven technology from its existing product lines with advanced, newfunctions including visual alignment with high throughput, active thermal control using Advantest’s Dural Fluid
design capability and a new handler data visualization framework that enables users to conduct real-timemonitoring of a test cell’s production status from any network-enabled connection. The M4871’s visualalignment capability is most suited to handle fine-pitch devices with both top- and bottom-side contacts.
Precision alignment also enables faster set-up and calibration, helping to increase productivity. In addition, thedefrosting cycle time for low-temperature testing is dramatically reduced with the M4871 system, which canoperate over a broad range of temperatures.
26

In addition, as a common feature in Advantest’s test handlers for memory/non memory semiconductors,
numerous functions to improve operating rate are installed.
Device Interfaces
Device interfaces are components which transmit test signals between the device being tested and thesemiconductor and component test system. These components are divided into motherboards, socket boards,
performance boards and sockets all of which transmit signals to compatible components of a device under test;
components compatible with a test handler device; and device interfaces and change kits with a device handlingmechanisms and contact mechanisms, and probe card for front-end testing.
Advantest develops and manufactures device interfaces for semiconductor and component test systems andsupplies device interfaces such as high performance and high density connectors, socket boards and sockets tomeet the demands of next- generation semiconductors that are becoming more high-speed and more diversified.
Advantest believes that the rate at which new semiconductor designs are introduced to market will continue toincrease in the long term, and customers’ requests to accelerate development of main parts of device interfacesthat are compatible with such new semiconductor designs will increase accordingly.
Motherboards: For test systems for memory semiconductors, Advantest provides motherboards capable ofhandling a maximum of 512 semiconductors at a time. For test systems for non memory semiconductors,
Advantest provides motherboards that are compatible with a maximum of 3,072 signals. Advantest also provides
motherboards designed for use in front-end testing.
Socket Boards and Performance Boards: Advantest provides custom manufacturing of socket boards andperformance boards for each device under test in accordance with customers’ specifications.
Sockets: Advantest provides sockets for test systems for memory semiconductors. Advantest provides lowinductance (0.4nH) sockets and fine pitch (0.4mm) sockets for semiconductors that are becoming more highspeed and more compact in size, and sockets with finer pitch (0.35mm and 0.3 mm) will be introduced in 2014.
Change Kits: Advantest provides carrying and contacting mechanism components compatible with eachdevice under test for test handlers for memory semiconductors and test handlers for non memory semiconductors.
Probe Card: Advantest provides probe card used for the front-end testing for memory semiconductors.
Advantest competes with numerous small and independent electronics manufacturers in providing device
interfaces for its semiconductor and component test systems. However, Advantest believes that as the complexityof the testing requirements of next-generation semiconductors increases, Advantest will enjoy competitive
advantages by applying its technical knowledge, such as high speed signal transmission, derived from designingand manufacturing semiconductor and component test systems to device interfaces. It will also enjoy such
advantages by handling delivery of its products to customers, providing customer support, and offering productswith lower prices as a result of cost reductions.
E-Beam Lithography systems and MVM-SEM® (3D-SEM)
F7000 Series. The F7000 series utilizes electron beams to write fine-pitch patterns directly onto substrates.
It offers best in class levels of throughput at the 1Xnm node, where semiconductor R&D demand is now focused.
The F7000 supports substrates of diverse materials, sizes and shapes, and is optimized for diverse applications
such as advanced LSIs, photonics, MEMS (microelectromechanical systems) and other nano-processes.

27

E3600 Series. The E3640 series is a new entry in Advantest’s widely-adopted E3600 Series of MVM-SEM®
systems for photomasks. The E3640 delivers significantly improved measurement accuracy and higher
throughput and its industry-best pattern measurement capability supports the coming shift to the 1Xnm node forsemiconductor volume production. In addition to photomasks, the E3640 also offers enhanced metrology
performance for EUV (extreme ultraviolet) masks, NIL (nanoimprint lithography) templates, and patterned
media.
E3300 Series. The E3310 series is breakthrough MVM-SEM® for wafers, which has further advanced thetechnology used in E3630 MVM-SEM® for photomasks. While mass production of devices using 3D structuralprocess such as FinFET (fin-shaped field effect transistor) is expected in the future, the E3310 which enables
multidimensional observation and length measurement for wafers provides process development at the 1Xnm
node and a stable, high-accuracy measurement solution for mass production at the 22nm node and beyond,contributing to reduced process TAT (turnaround time) and higher productivity.
Services, Support and Others Segment
Terahertz Spectroscopic / Imaging Systems
Terahertz waves lie between microwaves and light with frequency of 0.1-10THz on the electromagnetic
spectrum and can be used to perform non-destructive analysis inside substance which is difficult to carry out
using ultrasonic waves or infrared rays. In addition, as terahertz waves have adequate spatial resolution, they are
ideal for practical imaging analysis.
TAS7500 Series. The TAS7500 series is a family of compact and multipurpose terahertz spectroscopic /imaging systems. These systems perform non-destructive analysis of pharmaceuticals, chemicals,
communications materials, etc. with ease and at high speed. In addition to non-destructive analysis applications,
the TAS7500 series is also an optimal choice for terahertz related research, leveraging high-precision detection
technology to provide best-in-class sampling performance.
TAS7400 Series. The TAS7400 series is a series of low-cost, all-purpose spectroscopy systems that enable
spectroscopic measurements using terahertz waves. The tools are capable of performing non-destructive analysis
on a wide variety of sample types, making them applicable to a broad range of fields from life sciences toelectronics, where precise chemical and material characterization is critical. The systems can also be utilized forbasic research applications.
System-Level Test Systems
NEO-SSD. Advantest has entered the market for testing advanced PCI Express (PCIe) 3.0 NVMe SSDs forenterprise and consumer applications with the versatile NEO-SSD platform, on which Advantest is building afamily of test solutions that began receiving orders from customers in the third quarter of the fiscal year ending
31 March 2014. The configurable NEO-SSD platform is capable of supporting multiple protocols, and addresses
SSD system-level test requirements by providing a wide range of test capabilities, including engineering
validation, design verification, reliability demonstration and production testing.
w2bi. In June 2013, Advantest completed its acquisition of w2bi.COM, INC. (“w2bi”), a provider of systemlevel test automation software for mobile devices, making w2bi a wholly-owned subsidiary of Advantest’s US
subsidiary, Advantest America, Inc. The acquisition enabled Advantest to offer software that is essential insystem-level testing for mobile devices and enter the market for mobile device testing that is expected to grow in
the future.

28

Customers
Advantest’s semiconductor and component test systems and mechatronics systems are shipped anddelivered to world’s leading industrial, design and manufacturing companies and fabless semiconductor
companies, as well as foundries and test houses. Sales to INTEL Corporation and Samsung Electronics Co., Ltd.
in fiscal 2011, INTEL Corporation in fiscal 2012 and Samsung Electronics Co., Ltd. in fiscal 2013 accounted for
10% or more of Advantest’s net sales in each of those respective years. Advantest’s five largest customers, all ofwhich are semiconductor and component test system customers, accounted for approximately 56% of net sales infiscal 2011, approximately 37% in fiscal 2012 and approximately 36% in fiscal 2013.
Geographic SalesOf Advantest’s fiscal 2013 net sales, 89.1% were derived from products sold to customers located outside
Japan. The following table sets forth Advantest’s net sales by geographic area, as well as net sales by geographic
area as a percentage of total net sales, for Advantest’s last three fiscal years. Net sales are classified into
geographic areas based on the location to which the products are shipped.

MarketFiscal 2011
Net Sales(in millions)%Fiscal 2012
Net Sales(in millions)%Fiscal 2013
Net Sales(in millions)%Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia (excluding Japan) . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 16,095
88,19629,742
7,015

11.4
62.5
21.1
5.0

¥ 14,045
89,214
20,5839,061¥ 12,22181,661
10,7207,276

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

¥141,048

100.0% ¥132,903

10.6
67.1
15.5
6.8

100.0% ¥111,878

10.9
73.0
9.6
6.5
100.0%

Japan. Advantest’s Japanese non memory semiconductor market share in 2013 decreased to approximately 46%
from approximately 54% in 2012 as a result of significant constraints in capital investments by some ofAdvantest’s major customers. Advantest’s Japanese memory semiconductor market share in 2013 increased toapproximately 58% from approximately 35% in 2012. Advantest is working to maintain and expand its large
market share in Japan by continuing to work closely with its major customers to identify their needs during theearly stages of their product development cycles. Since fiscal 2011 Japan’s semiconductor manufacturers havebeen increasingly outsourcing its manufacturing to Taiwan, Korea and China rather than investing in-house, andAdvantest has also been actively pursuing outsourcing its manufacturing support overseas.
Asia (excluding Japan). Advantest’s Asian non memory semiconductor market share (excluding Japan) in 2013
decreased to approximately 37% from approximately 45% in 2012 as a result of significant constraints in capital
investments by some of Advantest’s major customers. Advantest’s Asian memory semiconductor market share in2013 decreased to approximately 57% from approximately 66% in 2012. Asia is the largest market for
semiconductor and component test systems and mechatronics systems, with industrial, design and manufacturing
companies and fabless semiconductor companies, assembly makers and test houses located in Taiwan, Korea,
China and Singapore accounting for a majority of semiconductor production in Asia. Advantest views its
relationships with these companies as critical to its semiconductor and component test system and mechatronics
system business. Many Japanese, U.S. and European semiconductor manufacturers have shifted production toAsia, either to subsidiaries or foundries and test houses. Capital expenditure decisions for subsidiaries are usually
made at the Company’s headquarters. Foundries and test houses, a majority of which are located in Taiwan, often
consult with their customers before investing in semiconductor and component test systems. Therefore,
Advantest’s performance in Asia will also depend on its ability to maintain strong relationships with customers inJapan, the U.S. and Europe. In addition, some of Advantest’s customers have partnered with semiconductor
manufacturers in Asia and outsourced manufacturing processes, thus further increasing the reliance on net sales
to the Asia geographic market.

29

Americas. Advantest’s marketing efforts in this region are centered in the United States, which accounted forapproximately 10% of its total sales in fiscal 2013. Advantest’s market share of semiconductor and component
test systems sold in the U.S. in 2013 decreased to approximately 48% from approximately 64% in 2012 as aresult of significant constraints in capital investments by some of Advantest’s major customers. Semiconductor
and component test systems are marketed and sold in the Americas primarily through Advantest’s subsidiary,
Advantest America, Inc.
Europe. Sales in Europe constituted approximately 7% of Advantest’s sales in fiscal 2013. Advantest’s market
share of semiconductor and component test systems sold in Europe in 2013 decreased to approximately 43%
from approximately 59% in 2012 as a result of significant constraints in capital investments by some ofAdvantest’s major customers. Advantest’s principal European markets are Germany, Italy and France.
Sales and Marketing
Advantest sells its semiconductor and component test systems and mechatronics systems globally.
Advantest’s direct sales department includes engineers who have in-depth knowledge of the customer’s businessand technology needs. Currently, Advantest has sales offices in Japan, Taiwan, Singapore and other parts of Asia,
the Americas and Europe. Advantest maintains its sales and support centers in close physical proximity to key
customer sites to identify its customers’ needs in the early stage of product development and to provide required
support in a timely fashion. Advantest is also strengthening its relationships with test houses through limited
minority investments as a part of its sales and marketing strategy. In addition, Advantest offers operating lease
contracts for semiconductor and component test systems through its subsidiary, Advantest Finance Inc.
Advantest believes that the best marketing strategy is to demonstrate the ability to develop products thatmeet the customer’s specific needs, produce and deliver them in the required time and quantity, and support thecustomer and the product with sufficient technical and maintenance support. Advantest holds exhibitions fromtime to time to demonstrate and market its products to target customers. Advantest also markets its products byparticipating in industry trade shows and advertising in trade magazines.
Support and Customer Service
Advantest’s support and customer service programs are designed to respond to all of the semiconductor
testing-related needs of its customers. Advantest provides its services through its worldwide network of sales andcustomer support offices. These services consist of the following elements:•

Testing Technology Support. Advantest engineers work with customers from the design phase of new
products to the development of testing methods and device interfaces. Advantest also supports
customers’ initiatives to reduce costs at the large-scale production phase by proposing procedures toimprove production yield and throughput, and offering advice in connection with the operation ofsemiconductors and component test systems and other test products.

•

Application Software Support. Each different semiconductor design requires customized software
programs for analysis of test data. As a part of its solution services, Advantest engineers assist
customers in designing device interface, application software and test programs that optimize production
throughput, reliability and capacity.

•

Procurement Support. The procurement process for semiconductor and component test systems andmechatronics systems is time consuming and complicated. Semiconductor and component test systems
consist of a combination of multiple components, including test handlers or probers, device interfaces
and software. Advantest sales personnel and engineers work with customers to identify thesemiconductor and component test systems and mechatronics systems and related optional functions
that best address their needs.

30•Installation and Warranty Support. The introduction of a new line of semiconductors by amanufacturer typically requires either the purchase of new semiconductor and component test systems
and mechatronics systems or warranty support for the customer’s existing system. Upon the sale of a
new system, Advantest’s engineers provide installation services and work with the customer to integrate
the purchased system with the customer’s existing manufacturing infrastructure.

•

Training Support. Advantest engineers prepare customer training materials related to the operation andmaintenance of Advantest’s semiconductor and component test systems and mechatronics systems, andoffer their customers suitable training on-site and at Advantest’s facilities in a timely manner.

•

Maintenance Support. Advantest’s maintenance support services consist of:•Call Center Support. Advantest previously offered call center support services for hardware andsoftware in Japan. However, as a result of the integration with Verigy, Advantest now offers callcenter support services to customers in Japan, Singapore, the U.S. and Germany.

•Internet Support. The Advantest customer support website offers maintenance tips and access to a
database with possible solutions to semiconductor and component test system problems. Advantest
customers can also make online requests for maintenance work and check the status of equipment
sent in for repair through Advantest’s web page.

•

Repairs and Parts. Requests for repairs or parts can be made through the Advantest website or byphone. In addition, Advantest has in place a system that aims to deliver parts anywhere in the world
within 4 hours, 24 hours or 72 hours, based on maintenance contracts, etc., the customers’ requests
and the urgency of the request. Equipment for maintenance is located in Germany, Singapore, theU.S. and Japan to supplement each other in the event of a major natural disaster. To provide forquick and efficient repairs, Advantest’s repair factories in Japan serve as the hub, and those inGermany, Singapore, the U.S., Korea, Taiwan and China also undertake repairs of test boards.

•

System Monitoring. Advantest can build system monitoring functions into semiconductor andcomponent test systems. These functions allow Advantest’s engineers and customers to monitor theoperating status as well as the status and history of malfunctions of semiconductor and component
test systems, enabling rapid and efficient repairs.

•

Worldwide Presence. Advantest provides maintenance support through customer support centers inJapan; other parts of Asia, including Korea, China, Taiwan and Singapore; the Americas andEurope.

Manufacturing and Supplies
Advantest’s principal factories at which semiconductor and component test systems and mechatronics
systems are manufactured are its Gunma Factory and Gunma Factory 2 located in Gunma Prefecture, Japan,
Cheonan Factory in Korea and Jabil Circuit Sdn Bhd’s Penang Factory in Malaysia to which manufacturing is
outsourced. Printed circuit boards, on which electronic parts and other components are mounted, for use in theseproducts are manufactured at the Gunma Factory 2. The Gunma Factory assembles final products and conducts
tests. The Cheonan Factory procures components and parts, assembles final products and conducts tests for test
handlers and device interfaces. Jabil Circuit Sdn Bhd’s Penang Factory produces mainly V93000 series printed
circuit boards and assembles the final products and conducts tests. The Gunma Factory is highly automated, andtesting and production systems within the factory are interconnected by a sophisticated local area network using
advanced data management software. This network allows Advantest factory managers to check on the status ofsystems under production at any given time.
Advantest uses a sophisticated enterprise resource planning (“ERP”) system that processes new information ona real time basis and converts sales order information into production specifications and manufacturing plans. Thissystem also interconnects Advantest’s multiple production and warehousing facilities to its information network.
31

Advantest has integrated many production processes in an effort to improve upon the existing production
system with a view to attaining a shorter production cycle, cost reduction and reduction of inventories.
Advantest is reducing its electricity consumption and setting up its own electricity generator in order toavoid manufacturing disruptions as a result of possible future blackouts.
Advantest purchases substantially all of its components and parts from outside suppliers.
If the production or sale of custom or general components or parts that Advantest uses or plans to use in the
future use is terminated for reasons such as a supplier’s withdrawal from business, Advantest may lose its
capacity to supply its test systems.
The average costs of components and parts used by Advantest during the last three fiscal years haveremained relatively stable. Advantest believes this relative price stability results from the fact that Advantest
negotiates the terms of the purchase orders directly with its suppliers and the fact that the prices of the made-toorder components set forth in the purchase orders are primarily influenced by the technical specifications of therelevant components and parts.
Device interfaces, one of Advantest’s products in its Mechatronics System Segment, are manufactured inJapan as well as overseas, including in Korea, Taiwan and Malaysia, in order to reduce lead time and reduce
manufacturing costs.
Seasonality
As Advantest’s sales levels of semiconductor and component test systems and mechatronics systems are notdependent on any particular season and are subject, in large part, to sales levels of the semiconductors in themarket that can fluctuate significantly from year to year, Advantest does not traditionally experience seasonality
in the sense of higher sales during any certain period of the year as compared to other periods of the year.
Competition
Advantest faces substantial competition throughout the world in all of their business segments. In particular,
competition in the semiconductor and component test system market is currently intensifying, which may lead torestructuring within the industry and certain companies may be eliminated or consolidated. Advantest believes
that the principal factors of competition are:•Performance. The performance of products is determined by their accuracy, test speed, throughput andability to test semiconductors with large pin counts. High performance products reduce the customer’s
cost of testing.

•Reliability. Products that operate with minimal downtime allow semiconductor production andengineering work to proceed without frequent intervention and provides more cost-effective operation.

•

Delivery Time. Semiconductor manufacturers require timely delivery of products, especially in periodsof high demand.

•

Price. The need for more sophisticated products often translates into higher testing costs forsemiconductor manufacturers. In addition, primarily as a result of increased efficiency in the
fabrication process and lower market prices for semiconductors, test costs have come to represent ahigher proportion of the total cost of manufacturing. Advantest currently faces significant pricepressure on its Semiconductor and Component Test System Segment.

•

System Architecture. Product architecture that is modular expands the product life because the system
can be adapted to meet the customer’s new requirements, while largely retaining compatibility withexisting test programs.
32•

Software. Products that use software that is easier to use and more powerful reduce the amount ofengineering resources needed to develop and operate test programs.

•

Customer Support. Customer-specific applications programs, worldwide service and customer training
contribute to the efficient use of products and minimize the customer’s cost of testing.

•

Qualified Technical Personnel. Having in place a team of highly qualified engineers and othercustomer service and support personnel is essential for securing sales and maintaining and developing
strong relationships with key customers.

According to a report issued by a research company, from 2009 to 2010, Teradyne, Inc. held the highest
share in the semiconductor test systems industry. In 2011 and 2012, Advantest achieved the highest share. In
2013 Teradyne, Inc. held the highest share and Advantest held the second largest share followed by LTXCredence Corporation.
Some of Advantest’s other competitors include UniTest Inc. and EXICON Ltd. In addition, Advantest also
competes in the mechatronics system market with, among others, Delta Design, Inc., TechWing Inc., Seiko
Epson Corporation and Mirae Corporation for test handlers, and TSE Co., Ltd., Semes Co., Ltd. and SL-link Co.,
Ltd. for device interfaces. In addition, in the Services, Support and Others Segment, Advantest has been
competing with companies providing similar services. It also has been suggested by customers that Advantest
competes with start-up companies with newer technologies or products in the market for both the test systems formemory semiconductors and test systems for non memory semiconductors.
Licenses and Intellectual Property Rights
Advantest has a policy of seeking licenses and intellectual property rights worldwide on technology
considered of particular strategic importance. While Advantest does not consider any one or group of licenses
and intellectual property rights to be so important that their expiration or termination would materially affect
Advantest’s business, Advantest considers all of its licenses and intellectual property rights to be important.
Legal Proceedings
Based on information currently available to Advantest, Advantest believes that its losses from any pending
legal proceedings would not have a material adverse effect on Advantest’s financial position, operating results or
cash flows.
Corporate Social Responsibility / Environmental
Advantest established and implemented the “Advantest Group Environmental Management Plan”. Under
this management plan, in addition to improving its environmental management systems, Advantest is supportingits customers’ environmental management by developing new products with lower power consumption anddealing with top priority environmental issues, for example by taking measures to prevent global warming.
Advantest’s primary environmental activities are as follows:•

ISO 14001 Certification. Advantest has received ISO 14001 Uniform Certification for its main
domestic manufacturing and research and development facilities. With respect to its overseas
manufacturing and research and development activities, principal facilities in Asia, Europe and North
America regions are receiving ISO 14001 Uniform Certification.

•

Environmental Measures for Products. In order to actively develop environmentally friendly lines of
products, Advantest conducts environmental assessments of all its new products from theirdevelopment stages.

33•Reduce Waste. Advantest has worked to reduce waste by implementing a recycling program andintroducing liquid waste disposal capabilities at its facilities, among others.

•

Use of Safe Components. Advantest has established an internal procurement standard for parts andcomponents and has procured parts and components for its new products that do not contain specified
toxic substances.

•

Prevention of Global Warming. Through the use of energy efficient equipment and the re-evaluation of
manufacturing processes, Advantest strives to reduce levels of carbon dioxide emissions resulting fromenergy consumption relating to its business activities.

As one of its activities designed to contribute to society and to the environment, Advantest implements
reforestation of seedlings, both in Japan and overseas.
Advantest has been addressing issues of social contribution activities and environmental issues from a
global perspective. With increased attention in recent years on corporate ethics, Advantest believes that it should
focus even more on the issue of CSR (Corporate Social Responsibility). Accordingly, Advantest has established a
CSR & Environmental Affairs Promotion Office and seven committees (Disclosure Committee, Personnel
Mediation Committee, Information Security Committee, Internal Control Committee, Corporate Ethics
Committee, Product Liability Committee and Safety and Health Committee), and engages in corporate social
responsibility efforts.

34

Glossary
3D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Three-dimensional.
Analog circuits . . . . . . . . . . . . . . . . . . . . Circuits on a semiconductor that monitor, condition, amplify ortransform analog signals, which are signals that vary continuously
over a wide range of values. Analog circuits process analog signals
translated from real world phenomena such as sound, light, heat andmotion.
CD-SEM . . . . . . . . . . . . . . . . . . . . . . . . . Critical-dimension measuring scanning electron microscope.
DDR-SDRAM . . . . . . . . . . . . . . . . . . . . . Double Data Rate Synchronous Dynamic Random Access Memory.
Memory semiconductor that can be read from, or written to, at double
the rate of traditional SDRAM semiconductors.
DDR2-SDRAM . . . . . . . . . . . . . . . . . . . . Advanced DDR-SDRAM semiconductors that can be read from, or
written to, at a significantly higher rate than DDR-SDRAM
semiconductors.
DDR3-SDRAM . . . . . . . . . . . . . . . . . . . . DDR-SDRAM semiconductors that be read from, or written to, at asignificantly higher rate than DDR2-SDRAM semiconductors.
DDR4-SDRAM . . . . . . . . . . . . . . . . . . . . The next generation advanced DDR-SDRAM semiconductors thatcan be read from, or written to, at a significantly higher rate than
DDR3-SDRAM semiconductors.
Digital circuits . . . . . . . . . . . . . . . . . . . . . Circuits that perform binary arithmetic functions on data represented
by a series of on/off states.
DRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . Dynamic Random Access Memory. Devices that store a large volumeof data and can read and write data freely. Because of their volatile
characteristics, periodic re-writing of data is required to maintainmemory information.
EB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electron beam.
Foundries . . . . . . . . . . . . . . . . . . . . . . . . . Semiconductor manufacturing service providers that manufacture
semiconductors based on their customers’ semiconductor designs.
Fabless . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturers that outsource their entire production to external
entities, instead of having their own manufacturing facilities.
Flash memory . . . . . . . . . . . . . . . . . . . . . Memory devices that electrically erase or write data freely. Devices
with nonvolatile memory which is maintained even when the power isturned off.
GDDR . . . . . . . . . . . . . . . . . . . . . . . . . . . Graphics DDR. DDR memory standard specifically designed for use
in RAM video cards.
Gbps . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gigabits per second.

35

Integrated circuit . . . . . . . . . . . . . . . . . . . An electric part made of a combination of many transistors on asilicon wafer.
LCD driver integrated circuits . . . . . . . . Integrated circuits that operate LCD (Liquid Crystal Display).
Logic circuits . . . . . . . . . . . . . . . . . . . . . . Circuits that perform binary arithmetic functions.
LPDDR . . . . . . . . . . . . . . . . . . . . . . . . . . Low Power DDR memory.
LPDDR 2 . . . . . . . . . . . . . . . . . . . . . . . . . DDR2 memory that has higher speed and lower power consumption
than LPDDR.
LPDDR 3 . . . . . . . . . . . . . . . . . . . . . . . . . DDR3 memory that has higher speed and lower power consumption
than LPDDR2.
LSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Large-scale integration.
Mbps . . . . . . . . . . . . . . . . . . . . . . . . . . . . Megabits per second.
Memory circuits . . . . . . . . . . . . . . . . . . . Circuits that store data and programs.
MCP . . . . . . . . . . . . . . . . . . . . . . . . . . . . Multi Chip Package. A package which combines multiple chips withdifferent functions.
MCU . . . . . . . . . . . . . . . . . . . . . . . . . . . . Micro Controller Unit. An integrated circuit that contains allnecessary functions required for a small-scale computer system.
MPU . . . . . . . . . . . . . . . . . . . . . . . . . . . . Microprocessor unit. A microprocessor that incorporates most or allof the functions of a computer’s central processing unit on a single
integrated circuit.
MVM-SEM® . . . . . . . . . . . . . . . . . . . . . . MVM stands for Multi Vision Metrology and SEM stands for
Scanning Electron Microscope. “MVM-SEM” is an Advantestregistered trademark.
NAND . . . . . . . . . . . . . . . . . . . . . . . . . . . A type of flash memory that is primarily used for data storage due to
its large storage capability.
nm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nanometer.
Per site processor architecture . . . . . . . . . Computing architecture that can control test functions, at each target
device for testers that simultaneously measure multiple devices.
Photomask . . . . . . . . . . . . . . . . . . . . . . . . An original plate on which circuit patterns using photolithographic
technology are etched on silicon substrates during the manufacturing
processes of semiconductor integrated circuit (SIC) and liquid crystal
displays, among others.
SDRAM . . . . . . . . . . . . . . . . . . . . . . . . . . Synchronous Dynamic Random Access Memory—DRAM that issynchronized with the system bus.
SEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scanning electron microscope.
36

SoC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . System on a Chip. A chip that integrates functions, including logic,
memory and signaling, that are conventionally executed with multiple
chips and requires smaller space and significantly less electricity.
Scalable platform . . . . . . . . . . . . . . . . . . . Platform that can be optimally structured for small systems through tolarge systems, depending on the size/type of the target devices and thenumber of devices being measured simultaneously.
Test houses . . . . . . . . . . . . . . . . . . . . . . . Providers of semiconductor test services.
Test processor per pin architecture . . . . . Architecture which is able to perform test functions using sequencers
mounted on a single pin.
Testing for KGD . . . . . . . . . . . . . . . . . . . Known Good Die. Testing for KGD is conducted to guarantee that
semiconductor bare chips are in good quality.
Terahertz (THz) waves . . . . . . . . . . . . . . Terahertz waves lie between microwaves and light with frequency of
0.1-10THz on the electromagnetic spectrum.
TSV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Through-Silicon Via) A technique for mounting semiconductors
which are electronic components. Involves a vertical electrodepassing through a silicon semiconductor chip.

37

4.C. ORGANIZATIONAL STRUCTURE
As of June 26, 2014, Advantest had 9 Japanese subsidiaries and 23 overseas subsidiaries. The following
table sets forth for each of Advantest’s principal subsidiaries, the country of incorporation and the principal
activities of the subsidiary.
Country ofIncorporation

Name of Subsidiary

Advantest Laboratories Ltd. . . . . . . . . . . . . . . . . . Japan
Advantest Finance Inc. . . . . . . . . . . . . . . . . . . . . . Japan
Advantest America, Inc. . . . . . . . . . . . . . . . . . . . . U.S.
Advantest Europe GmbH . . . . . . . . . . . . . . . . . . . . Germany
Advantest Taiwan Inc. . . . . . . . . . . . . . . . . . . . . . . Taiwan
Advantest (Singapore) Pte. Ltd. . . . . . . . . . . . . . . Singapore
Advantest Korea Co., Ltd. . . . . . . . . . . . . . . . . . . . Korea
Advantest (China) Co., Ltd. . . . . . . . . . . . . . . . . . . China*

Principal Activities

Research and development of measuring andtesting technologies
Leasing Advantest’s products and sales ofsecond-hand products
Development and sales of Advantest’s products
Development and sales of Advantest’s products
Sales of Advantest’s products
Sales of Advantest’s products
Sales support of Advantest’s products
Sales support of Advantest’s products

Each of the subsidiaries listed above is a direct or indirect wholly-owned subsidiary of the Company.

Advantest’s consolidated subsidiary, Japan Engineering Co., Ltd. merged into the Company as of April 1,
2014.
4.D. PROPERTY, PLANTS AND EQUIPMENT
Set forth below is a list of each of Advantest’s material properties, the use and location of the property andthe approximate size of the property on which the facility is located.
Name

Location

Approximate
Size (m2)Use

Gunma R&D Center . . . . . . . . . . . Gunma, Japan

195,888

Research and development ofsemiconductor and component test systems
and mechatronics systems

Saitama R&D Center . . . . . . . . . . . Saitama, Japan

56,978

Research and development for andmanufacturing of mechatronics systems

Kitakyushu R&D Center . . . . . . . . Fukuoka, Japan

5,461

Research and development ofsemiconductor and component test systems

Advantest Laboratory and Sendai Miyagi, Japan
Factory . . . . . . . . . . . . . . . . . . . .

66,904

Gunma Factory . . . . . . . . . . . . . . . Gunma, Japan

88,512

Basic technology research, and research forand manufacturing of key devices installed
in semiconductor and component test
systems
Manufacture of semiconductors andcomponent test systems and test handlers

Gunma Factory 2 . . . . . . . . . . . . . . Gunma, Japan

93,112

Manufacture of semiconductor andcomponent test systems and device
interfaces

Advantest Korea Co., Ltd.
ChungcheongnamCheonan factory . . . . . . . . . . . . do, Korea

39,605

Manufacture of test handlers, probe cards,
etc.

In addition to the above-mentioned manufacturing facilities, Advantest has a manufacturing facility in
Malaysia, sales offices and customer support centers in various regions of the world, and owned or leased
research facilities in Japan, the U.S., Germany and China. Advantest owns each of its significant properties.
38

Advantest considers all of its principal manufacturing facilities and other significant properties to be in goodcondition and adequate to meet the needs of its operations. Advantest does not maintain internal records of theexact productive capacity and extent of utilization of its manufacturing facilities. It would require unreasonable
effort and expense to determine this information because Advantest alters the volume, quantity and nature of its
manufactured products as necessary in response to changes in demand and other market conditions, and revamps
its manufacturing processes to take advantage of technological innovations. However, Advantest believes that its
manufacturing facilities are currently operating at utilization levels that are substantially in line with prevailingmarket demand for its products.
Advantest believes that there are no material environmental issues that may affect utilization of its assets.
Advantest has prepared itself for crises such as large-scale natural disasters, and each department of Advantest
has drafted its own disaster procedures and manuals. Furthermore, in order to prevent any disruption of its corebusinesses, or in case of suspension, to re-start the suspended businesses, including the recovery of importantfacilities, in the shortest possible time, Advantest has developed and implemented its “Business Continuity Plan”.
However, if such Business Continuity Plan is not effective, Advantest’s core businesses could be disrupted at a timeof crisis, such as large-scale natural disasters, and could take a substantial amount of time to recover.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A. OPERATING RESULTS
The following discussion and analysis of Advantest’s financial condition and results of operations should beread with “Key Information—Selected Financial Data” and the audited consolidated financial statements forfiscal 2011, 2012 and 2013 as well as the notes to such consolidated financial statements appearing elsewhere inthis annual report. These consolidated financial statements have been prepared in accordance with U.S. GAAP.
Overview
Advantest manufactures and sells semiconductor and component test systems and mechatronics-related
products such as test handlers and device interfaces. Advantest also engages in research and development
activities and provides maintenance and support services associated with these products.
The Semiconductor and Component Test System Segment provides customers with test system products forthe semiconductor industry and the electronic parts industry. Product lines in the Semiconductor and Component
Test System Segment include test systems for memory semiconductors and non memory semiconductors. Test
systems for non memory semiconductors include test systems for SoC semiconductors, test systems for LCD
driver ICs and test systems for semiconductors used in car electronics. This business segment is the mostimportant segment, accounting for 65.3% of Advantest’s net sales in fiscal 2013.
The Mechatronics System Segment provides product lines such as test handlers, mechatronic-applied
products for handling semiconductor devices, device interfaces that serve as interfaces with the devices that aremeasured and operations related to nano-technology products. This business segment accounted for 13.4% ofAdvantest’s net sales in fiscal 2013.
The Services, Support and Others Segment consists of comprehensive customer solutions provided inconnection with the Semiconductor and Component Test Systems and Mechatronics System Segments, support
services, equipment lease business and others. This business segment accounted for 21.6% of Advantest’s net
sales in fiscal 2013.
39

Semiconductor and Component Test System Segment
The market for semiconductor and component test systems is subject to high demand volatility, is competitive,and depends on capital expenditures of customers. Their capital expenditures depend, to a large extent, on:•demand for semiconductors and electronic components;•

innovation in semiconductor and electronic component technology; and•changes in semiconductor and electronic component manufacturing processes.

In the business environment in which the Semiconductor and Component Test System Segment operates, alack of strong demand for key end-products, such as PCs and smartphones, that drives semiconductor production
volumes led manufactures to continue to hold off on investing to expand their production capacities.
In this environment, in Advantest’s core line of semiconductor test equipment, difficult business climate
prevailed as a result of significant constraints in capital investments by some of Advantest’s major customers
since last summer for non memory test systems.
As a result of the above, net sales of the Semiconductor and Component Test Systems Segment totaled¥73,017 million in fiscal 2013, a 27.8% decrease compared to that of fiscal 2012. For a detailed discussion ofthese factors, see “Information on the Company—Business Overview—Industry Overview.”
In the Semiconductor and Component Test System segment, non memory test systems continued to face
adverse conditions due to prolonged production volume corrections and inventory adjustments by suppliers oflogic semiconductors for PCs and high-end smartphones—the key demand drivers in this sector, resulting insignificant constraints in capital investments by some of Advantest’s major customers.
Demand for test systems for the memory semiconductor business in the Semiconductor and Component Test
Systems Segment rose as demand for DRAM and NAND flash memory devices continued to firm up, resulting incustomers’ continuing appetite for capacity expansion, which drove increased demand for new test systems.
Advantest believes that price pressure with respect to semiconductor and component test systems tends to be
the strongest during periods when semiconductor manufacturers are subject to price pressure despite an increasein demand for their products. Advantest continues to face significant price pressure. Even when thesemiconductor industry experienced a recovery, increased competition in the market for digital consumer
products and personal computers drove down prices of these goods, subsequently creating significant pricepressure on its products and restriction on capital expenditure.
Mechatronics System Segment
In the Mechatronics System Segment, strong customer interest in the new nanotechnology products andsuccessful cultivation of new customers for device interfaces helped to grow net sales and orders.
Mainly as a result of the above, net sales of the Mechatronics System Segment totaled ¥14,984 million in
fiscal 2013, a 9.7% increase compared to that of fiscal 2012.
Services, Support and Others Segment
In the Services, Support and Others Segment, Advantest has focused on maintenance services such as
installation and repair of Advantest’s products and lease and rental services of its products as a part ofAdvantest’s effort to provide customers with comprehensive solutions. In the Services, Support and Others
segment, ongoing efforts to improve the profitability of the segment led to successes such as an increased numberof annual maintenance contracts. Some of the new businesses also contributed to net sales in fiscal 2013.
40

As a result of the above, net sales of the Services, Support and Others Segment totaled ¥24,151 million in
fiscal 2013, a 20.3% increase compared to that of fiscal 2012.
Research and Development
Research and development expenses represent a significant portion of Advantest’s annual operating
expenses. Advantest’s research and development expenses were ¥30,303 million in fiscal 2011, ¥33,062 million
in fiscal 2012 and ¥32,670 million in fiscal 2013. Consequently research and development expenses were 21.5%,
24.9% and 29.2% of net sales, in fiscal 2011, 2012 and 2013, respectively.
Personnel
As of March 31, 2014, Advantest had a total of 4,625 full-time employees, an increase of 50 persons, or
1.1%, compared to March 31, 2013.
Advantest plans to continue its periodic recruitment of new graduates as part of its mid-to long-term growthstrategy. Advantest expects that a majority of these new hires will join the Semiconductor and Component Test
System Segment and Mechatronics System Segment to support the growth of Advantest’s businesses. Other newhires are expected to join Advantest’s maintenance support division or administrative divisions. The addition ofthese new hires may increase Advantest’s future selling, general and administrative expenses and its research anddevelopment expenses.
Currency Fluctuations
Advantest is affected to some extent by fluctuations in foreign currency exchange rates. Advantest is principally
exposed to fluctuations in the value of the Japanese yen against the U.S. dollar and currencies of other countries
where Advantest does business Advantest’s consolidated financial statements, which are presented in Japanese yen,
are affected by foreign currency exchange fluctuations through both translation risk and transaction risk.
Translation risk is the risk that Advantest’s consolidated financial statements for a particular period or for aparticular date will be affected by changes in the prevailing exchange rates of the currencies in which
subsidiaries of the Company prepare their financial statements against the Japanese yen. Even though thefluctuations of currencies against the Japanese yen can be substantial and, therefore, significantly impact
comparisons with prior accounting periods and among various geographic markets, the translation effect is areporting consideration and does not reflect Advantest’s underlying results of operations.
Transaction risk is the risk that the currency structure of Advantest’s costs and liabilities will deviate fromthe currency structure of sales proceeds and assets.
Advantest enters into foreign exchange forward contracts to reduce its transaction risk. This has reduced, but
not eliminated, the effects of foreign currency exchange rate fluctuations against the Japanese yen, which in someyears can be significant.
Generally, the weakening of the Japanese yen against other foreign currencies, particularly the U.S. dollar,
has a positive effect on Advantest’s operating income and net income. The strengthening of the Japanese yen
against other foreign currencies, particularly the U.S. dollar, has a negative impact in operating income and net
income. The Euro, however, may have the opposite effect as compared with other foreign currencies since there
are currently more costs incurred in Euro than net sales derived in Euro.
In fiscal 2011, the appreciation of the yen continued, going from the low ¥80s to the dollar to the high ¥70s
to the dollar after the second quarter and at one point reaching the ¥76 mark in the third quarter, the highest level
since World War II. However, by the end of fiscal 2011, the Japanese yen had returned to the low ¥80s to the41

dollar. In fiscal 2012, the appreciation of the yen continued, starting from the low ¥80s to the dollar andstrengthened to the high ¥70s to the dollar in the second quarter. However, in the third quarter the Japanese yen
started to depreciate and returned to the low ¥90s to the dollar by the end of fiscal 2012. In the first quarter offiscal 2013, the Japanese yen depreciated from low ¥90s to the dollar to ¥103 to the dollar, and then appreciatedto low ¥90s to the dollar. In the second quarter, the Japanese yen stayed at high ¥90s to the dollar, and in the third
quarter depreciated to ¥105 to the dollar. In the fourth quarter, however, the Japanese yen stayed at low ¥100s to
the dollar as a result of the market’s concerns over currencies in emerging markets and tensions in Ukraine.
Advantest’s business is subject to risks associated with doing business internationally, and its business could
be impacted by certain governmental, economic, fiscal, monetary, taxation or political policies or factors,
including trade protection measures and import or export licensing requirements, that may materially affect,
directly or indirectly, Advantest’s operations or its future results.
Critical Accounting Policies and Estimates
Advantest has made a number of estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities in preparing its consolidated financial statements inconformity with U.S. GAAP. Critical accounting policies are accounting policies that require the application ofmanagement’s most difficult, subjective or complex judgments and often require management to make estimates
about the effect of matters that are inherently uncertain and may change in subsequent periods. The following is
not intended to be a comprehensive list of all of Advantest’s accounting policies. Advantest’s significant
accounting policies are more fully described in Note 1 to the audited consolidated financial statements included
elsewhere in this annual report. In many cases, U.S. GAAP specifically dictates the accounting treatment of aparticular transaction, with no need for judgment in its application. There are also areas in which management’s
judgment in selecting an available alternative could produce materially different results. Set forth below is a
description of accounting policies under U.S. GAAP that Advantest has identified as critical to understanding its
business and the reported financial results and condition of the Company.
Revenue Recognition
GeneralAdvantest recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurredor the services have been rendered, the sales price is fixed or determinable and collection of the related
receivable is reasonably assured.
Sales of Products
Sales of products which require installation are recognized when the related installation is completed andother sales recognition criteria are met since the installation is essential to the functionality of the equipment.
When customer acceptance is uncertain, revenue is deferred until customer acceptance has been received. Whenthe final payment is subject to customer acceptance, a portion of revenue for the final payment is deferred until
an enforceable claim has become effective.
Sales of products and component which do not require installation service by Advantest is recognized upon
shipment if the terms of the sale are free on board (“FOB”) shipping point or upon delivery if the terms are FOB
destination which coincide with the passage of title and risk of loss.
Long-term Service contracts
Revenue from fixed-price, long-term service contracts is recognized on the straight-line basis over thecontract term.
42

Leasing Income
Revenue from operating leases is primarily recognized on the straight-line basis over the lease term.
Multiple deliverables
Advantest’s revenue recognition policies provide that, when a sales arrangement contains multiple elements
such as hardware and software products and services, Advantest allocates revenue to each element based on aselling price hierarchy and recognizes revenue when the criteria for revenue recognition have been met for eachelement. The selling price for a deliverable is based on its vendor-specific objective evidence (“VSOE”), if
available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price, if neither VSOE nor
TPE is available.
Inventories
Advantest’s inventories consist of on-hand inventory, including inventory located at customer sites, andinventory that is on-order and subject to a contract that is non-cancelable. Advantest states its inventories at thelower of cost or market. Cost is determined using the average cost method. Advantest determines the market forfinished goods by determining net realizable value and for raw materials by identifying replacement cost.
Advantest reviews its inventories and determines the appropriate amount of any inventory write-downs
periodically based on these reviews. Write-downs occur from the discontinuation of product lines, inventory inexcess of estimated usage, the release of new products which renders inventory obsolete and declines in net
realizable value of Advantest’s inventory leased to customers. Advantest recognizes inventory write-downs incost of sales. Advantest may be required to take additional charges for excess and obsolete inventory in fiscal
2014 or other future periods if future weakness in its businesses causes further reductions to Advantest’s
inventory valuations. In addition, unexpected changes in testing technology can render Advantest’s inventories
obsolete. Advantest evaluates its inventory levels based on its estimates and forecasts of demand for its products.
Advantest’s inventories decreased by ¥1,649 million, or 5.2%, during fiscal 2013 to ¥30,200 million as ofMarch 31, 2014.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally using the straight-line method over estimated useful lives of the assets.
The depreciation period for significant assets ranges from 15 years to 50 years for buildings, 4 years to
10 years for machinery and equipment, and 2 years to 5 years for tools, furniture and fixtures.
Depreciation expense was ¥4,326 million, ¥5,778 million and ¥6,106 million for the fiscal years 2011, 2012
and 2013, respectively.
Impairment of Long-Lived Assets
Advantest evaluates the impairment of long-lived assets including certain identifiable intangibles withdefinite useful lives by reviewing for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by theamount by which the carrying amount of the assets exceeds the fair value of the assets.

43

In fiscal 2011 and 2012, Advantest recognized an impairment loss of ¥920 million and ¥134 million,
respectively, on certain building and land asset that was reclassified as assets held for sale. As a result of lower
than expected future cash flows and changes in the business environment impact on profits, during fiscal 2013,
Advantest recognized impairment losses of ¥1,099 million and ¥11,671 million on property, plant and equipment
and intangible assets, respectively, included in the Semiconductor and Component Test System Segment. In
addition, Advantest recognized impairment losses of ¥497 million and ¥228 million on property, plant andequipment and intangible assets, respectively, included in the Mechatronics System Segment.
Business Combinations
Advantest allocates the fair value of purchase consideration to the tangible assets acquired, liabilities
assumed and intangible assets acquired, including in-process research and development (“IPR&D”), based on
their estimated fair values. The excess of the fair value of purchase consideration over the fair values of theseidentifiable assets and liabilities is recorded as goodwill. Advantest basically engages independent third-party
appraisal firms to assist us in determining the fair values of assets acquired and liabilities assumed. Suchvaluations require management to make significant estimates and assumptions, especially with respect tointangible assets.
Critical estimates in valuing certain intangible assets include but are not limited to future expected cash
flows and discount rates. Management’s estimates of fair value are based upon assumptions believed to bereasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ fromestimates.
Goodwill and Intangible Assets
Advantest reviews goodwill and intangible assets with indefinite lives for impairment annually during thefourth quarter and whenever events or changes in circumstances indicate the carrying value of an asset may not
be recoverable.
In July 2012, the FASB amended the accounting guidance to simplify how entities test indefinite-lived
intangible assets for impairment which improve consistency in impairment testing requirements among longlived asset categories. The guidance permits an assessment of qualitative factors to determine whether it is more
likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets
in which this assessment concludes it is more likely than not that the fair value is more than its carrying value,
the guidance eliminates the requirement to perform quantitative impairment testing as outlined in the previously
issued standards. The guidance was adopted by Advantest in the first quarter beginning April 1, 2013. The
adoption of the guidance did not have a significant impact on its consolidated results of operations and financial
condition.
The provisions of the accounting standard for goodwill and other intangibles allow Advantest to first assess
qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment
test. For our annual goodwill impairment test in the fourth quarter of fiscal 2013, Advantest performed aquantitative test for all of the reporting units. In the first step, Advantest compares the fair value of each reporting
unit to its carrying value. Advantest’s reporting units are consistent with the reportable segments identified in
Note 19 to the Consolidated Financial Statements. Advantest determines the fair value of its reporting units basedon an income approach. Under the income approach, Advantest calculates the fair value of a reporting unit basedon the present value of estimated future cash flows. If the fair value of the reporting unit exceeds the carrying
value of the net assets assigned to that unit, goodwill is not impaired and Advantest is not required to perform
further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of thereporting unit, then Advantest must perform the second step of the impairment test in order to determine theimplied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its
implied fair value, then Advantest records an impairment loss equal to the difference.
44Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant
estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins
used to calculate projected future cash flows and risk-adjusted discount rates. Advantest bases its fair value
estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual
future results may differ from those estimates. In addition, Advantest makes certain judgments and assumptions
in allocating corporate assets and liabilities to determine the carrying values for each of its reporting units.
Advantest’s annual goodwill impairment analysis indicated no impairments of goodwill. In order to evaluate
the sensitivity of the fair value calculations on the goodwill impairment analysis, Advantest applied ahypothetical and approximate 10% decrease to the fair value of each reporting unit. As a result of the sensitivity
analysis, as of March 31, 2014, Advantest does not have any reporting units that are at risk that the carrying
amount of the reporting unit would reasonably likely exceed its fair value.
Intangible assets primarily consist of customer relationships and other intangible assets. Advantest has
estimated the weighted average amortization period for the customer relationships relating to services to be 7
years. The weighted average amortization period for all intangible assets is approximately 6 years.
Trade Receivables
Advantest’s trade receivables, less allowance for doubtful accounts was ¥20,404 million as of March 31,
2014, as compared with ¥26,953 million as of March 31, 2013. Advantest maintains allowances for doubtful
accounts for estimated losses resulting from the inability of its customers to make required payments. Advantest
provides an allowance for doubtful accounts for all specific accounts receivable that it judges are probable of not
being collected.
Advantest periodically reviews its estimated allowances for doubtful accounts taking into account thecustomer’s payment history, assessing the customer’s current financial position and considering otherinformation that is publicly available and the customer’s credit worthiness. Additional reviews are undertaken
upon significant changes in the financial condition of Advantest’s customers and the semiconductor industry.
Increases in allowance for doubtful accounts are charged to selling, general and administrative expenses.
At the end of fiscal 2013, Advantest increased its allowance for doubtful accounts by ¥74 million to¥128 million, from fiscal 2012. A reversal of allowances made for accounts receivable that are later collected,
depending upon the recovered financial status of its customers and Advantest’s collection efforts, will decrease
the selling, general and administrative expenses for the accounting period during which such collection takes
place. Conversely, additional allowances may be necessary in the future if conditions in the industries of some ofAdvantest’s customers do not improve in the near-term.
Accrued Warranty Expenses
Advantest’s products are generally subject to a product warranty. In addition, under certain circumstances,
Advantest is responsible for the repair of defective components and parts. Advantest provides an allowance for
estimated product warranty expenses when product revenue is recognized as part of its selling, general andadministrative expenses. The allowance for estimated product warranty expenses represents management’s best
estimate at the time of sale of the total costs that Advantest will incur to repair or replace components or parts
that fail while still under warranty. Advantest records its allowance for estimated product warranty expenses
based on the historical ratio of actual repair expenses to corresponding sales, and any facts and circumstancesthat occurred. The foregoing evaluations are inherently uncertain as they require estimates as to maintenancecosts and failure rates related to different product lines. Consequently, actual warranty costs may differ from theestimated amounts and could result in additional product warranty expenses. If actual warranty costs significantly
exceed the amount of Advantest’s allowance for product warranty expenses, it would negatively affect the future
results of operations of Advantest.
45

Accrued warranty expenses were ¥1,589 million at March 31, 2014, a decrease of ¥300 million from¥1,889 million at March 31, 2013.
Convertible Bonds
Advantest is not required to bifurcate any of the embedded features contained in the ¥30,000 million zero
coupon convertible bonds due 2019 (bonds with stock acquisition rights), which was issued in March 2014, foraccounting purposes.
Stock-Based Compensation
Advantest applies the fair-valued-based method of accounting for stock-based compensation and recognizes
stock-based compensation expense in the consolidated statements of operations. The cost of employee services
received in exchange for an award of equity instrument is measured based on the grant-date fair value of thestock options granted to employees. The cost is recognized on a straight line basis over the period during which
an employee is required to provide service in exchange for the award. The Black Scholes pricing model is used toestimate the value of the stock options.
Expected dividend yield is determined by the Company’s dividend ratio of the past and other associatedfactors. Risk free interest rate is determined by Japanese government bond yield for the period corresponding to
expected life. Expected volatility is determined by historical volatility and trend of the Company’s share prices,and other associated factors. Expected life is determined by the Company’s option exercise history, post vesting
employment termination behavior for similar grants, and other pertinent factors.
Advantest has recorded ¥583 million, ¥861 million and ¥1,283 million as stock-based compensation
expense in fiscal 2011, 2012 and 2013, respectively.
Accrued Pension and Severance Cost
The Company and certain of its Japanese subsidiaries have unfunded retirement and severance plans (pointbased benefits system). Under a point-based benefits system, the benefits are calculated based on accumulated
points allocated to employees each year according to their job classification and their performance. The
Company and certain of its Japanese subsidiaries also have a defined benefit corporate pension plan covering
substantially all employees. Under the cash balance pension plan, the benefits are calculated based on
accumulated points allocated to employees each year according to their job classification and their performancewith a certain interest rate calculated based on the upper and lower limit of a market interest rate.
Certain overseas subsidiaries also have defined benefit pension plans covering substantially all of theiremployees. Benefits payable under the plans are based on employee compensation levels and years of service.
The retirement benefit costs are estimated from actuarial valuations. Inherent in these valuations are key
assumptions in estimating pension costs including mortality, withdrawal, retirement, changes in compensation,
discount rate and expected return on plan assets. Advantest is required to estimate the key assumptions by taking
into account various factors including personnel demographics, current market conditions and expected trends ininterest rates. Advantest determines the discount rate by looking to available information about rates implicit inreturn on high-quality fixed-income governmental and corporate bonds. Accordingly, the discount rate is likely
to change from period to period based on these ratings. A decrease in the discount rate results in an increase inactuarial pension benefit obligations. Increases and decreases in the pension benefit obligation affect the amountof the actuarial gain or loss which is amortized into income over the service lives of employees. Changes in the
key assumptions may have a material effect on Advantest’s financial position and results of operations.
Management believes that estimation of the key assumptions is reasonable under the various underlying factors.

46

Pension related adjustments (net of tax) recognized in other comprehensive income (loss) for fiscal 2011,2012 and 2013 were (¥6,328 million), (¥1,779 million), and ¥342 million respectively. Pension related
adjustments of (¥6,328 million) for fiscal 2011 were recognized due to the reduction of discount rate used todetermine benefit obligations for Japanese plans and losses on plan assets.
Advantest has recorded ¥2,251 million, ¥3,166 million and ¥3,426 million as benefit cost in fiscal 2011,2012 and 2013, respectively.
Deferred Tax Assets
In assessing the realizability of deferred tax assets, management considers whether it is more likely than notthat some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment. Based upon projections for futuretaxable income over the periods in which the deferred tax assets are deductible including management’s
expectations of future semiconductor market and semiconductor and component test systems market prospects
and other factors, management believes it is more likely than not that Advantest will realize the benefits of thesedeductible differences, net of valuation allowance. The valuation allowance in fiscal 2013 was increased by¥3,762 million primarily due to increase of net operating loss carry forwards (“NOL”). The net (decreases)
increases in valuation allowance decreased (¥1,894) million and increased ¥8,884 million for fiscal years 2011
and 2012, respectively.
At March 31, 2013, Advantest has recorded on its consolidated balance sheet, deferred tax assets of¥69,414 million of which ¥38,912 million represents NOL. Advantest has also recorded a valuation allowance of¥59,072 million, and as a result, net deferred tax assets were ¥10,342 million. At March 31, 2014, Advantest hasrecorded on its consolidated balance sheet, deferred tax assets of ¥74,022 million of which ¥49,097 million
represents NOL. Advantest has also recorded a valuation allowance of ¥62,834 million, and as a result, netdeferred tax assets were ¥11,188 million. NOL carry forwards utilized were ¥25 million, ¥14,728 million and¥2,712 million in fiscal years 2011, 2012 and 2013 respectively.
Although Advantest’s management believes that the amount of net deferred tax assets may be realized, this
could change in the near term if estimates of future taxable income are revised and effect on the Company’s
consolidated financial position and results of operations could be significant.
Income Taxes
Advantest recognizes the financial statement effects of tax positions when they are more likely than not,based on technical merits, that the tax positions will be sustained upon examination by the tax authorities.
Benefits from tax positions that meet the more-likely-than-not recognition threshold are measured at the largest
amount of benefit that is greater than 50 percent likelihood of being realized upon settlement. Advantest
recognizes interest and penalty accruals related to unrecognized tax benefits in income tax provision in the
consolidated statements of operations.
Fair Value
Investment securities
The fair value of available-for-sale equity securities is based on quoted market prices at the reporting date
for those investments.

47

Plan assets
Plan assets are comprised principally of listed equity securities, pooled funds, hedge funds and investments
in life insurance company’s general accounts. Listed equity securities are based on quoted market prices on thereporting date for those investments. Pooled funds and hedge funds are valued at their net asset values which arecalculated by the sponsors of the funds. Investments in life insurance company’s general accounts are valued atconversion value.
Recently Issued Accounting Guidance
In May 2014, the FASB issued the accounting guidance for revenue from contracts with customers. This
guidance supersedes vertually all existing revenue recognition requirements under US GAAP and requires anentity to apply the five steps to recognize revenue from contracts with customers unless the contracts are in thescope of other US GAAP requirements. Additionally, an entity should disclose quantitatively and qualitatively
sufficient information including contract with customers, significant judgments and changes in judgments, andassets recognized from the costs to obtain or fulfill a contract. The entity should apply the amendments in thisguidance using one of the following two methods; retrospectively to each prior reporting period presented or
retrospectively with the cumulative effect of initially applying this guidance recognized at the date of the initial
application. The guidance is effective for annual reporting periods beginning after December 15, 2016, includinginterim periods within that reporting period. Early application is not permitted. The guidance is required to be
adopted by Advantest in the first quarter beginning April 1, 2017. Advantest is currently evaluating the effectthat this adoption will have on its consolidated results of operations and financial condition.
Results of Operations—Fiscal 2013 Compared with Fiscal 2012
Net Sales
Advantest’s net sales decreased by ¥21,025 million, or 15.8%, compared with fiscal 2012, to¥111,878 million in fiscal 2013. This was primarily due to significant constraints in capital investments by someof Advantest’s major customers since last summer, particularly for non memory test systems. It is estimated thatthe fluctuations in exchange rates during fiscal 2013 contributed to an increase of Advantest’s net sales by¥12,083 million in fiscal 2013.
The following is a discussion of net sales for Advantest’s Semiconductor and Component Test System,
Mechatronics System and Services, Support and Others Segments. Net sales amounts discussed include
intercompany sales between segments.
Semiconductor and Component Test System Segment
In fiscal 2013, net sales of Advantest’s Semiconductor and Component Test System Segment accounted for
65.3% of total net sales. Net sales of Advantest’s Semiconductor and Component Test System Segment for fiscal
2013 decreased by ¥28,102 million, or 27.8%, compared with fiscal 2012, to ¥73,017 million. It is estimated thatfluctuations in exchange rates during fiscal 2013 contributed to an increase of Advantest’s net sales in its
Semiconductor and Component Test System Segment by ¥7,229 million. Net sales of test systems for non
memory semiconductors in fiscal 2013 decreased by ¥33,754 million, or 40.5%, compared with fiscal 2012 to¥49,614 million. This decrease was mainly as a result of significant constraints in capital investments by some ofAdvantest’s major customers due to prolonged production volume corrections and inventory adjustments forlogic semiconductors for PCs and high-end smartphones.
Net sales of test systems for memory semiconductors in fiscal 2013 increased by ¥5,652 million, or 31.8%,
compared with fiscal 2012 to ¥23,403 million. This increase was mainly because demand for DRAM and NAND
flash memory devices continued to firm up, and memory test systems benefited from customers’ continuing
appetite for capacity expansion, which drove increased demand for new test systems.
48Mechatronics System Segment
Net sales of the Mechatronics System Segment including test handlers and device interfaces increased by¥1,331 million, or 9.7%, compared to fiscal 2012 to ¥14,984 million in fiscal 2013. This increase was mainly due
to a strong customer interest in the new nanotechnology products and successful cultivation of new customers fordevice interfaces, which helped to grow net sales and orders.
Services, Support and Other Segment
Net sales of the Services, Support and Other Segment increased by ¥4,074 million, or 20.3%, compared withfiscal 2012 to ¥24,151 million in fiscal 2013, mainly due to ongoing efforts to improve the profitability of thesegment, which led to successes such as an increased number of annual maintenance contracts. Some of the new
businesses also contributed to net sales. The main businesses in the Services, Support and Others Segment weremaintenance services, leasing and rentals and new businesses.
Geographic Markets
Advantest experienced a decrease of 15.8% in net sales in fiscal 2013, which was primarily due to decreasein sales in the Americas.
Net sales in Japan decreased by ¥1,824 million, or 13.0%, compared with fiscal 2012 to ¥12,221 million in
fiscal 2013. This decrease was mainly due to a reduced demand for digital household appliances resulting insignificant constraints in capital investments by some of Advantest’s major customers that led to a drop in
demand for non memory test systems.
Net sales in the Americas decreased by ¥9,863 million compared with fiscal 2012 to ¥10,720 million in
fiscal 2013. This decrease was mainly due to the weakening of the PC market resulting in significant constraints
in capital investments by some of Advantest’s major customers that led to a drop in sales of non memory test
systems. It is estimated that fluctuations in exchange rates during fiscal 2013 contributed to an increase of
Advantest’s net sales in the Americas by approximately ¥1,707 million, primarily due to the appreciation of the
U.S. dollar against the Japanese yen.
Net sales in Europe decreased by ¥1,785 million compared to fiscal 2012 to ¥7,276 million in fiscal 2013.
This decrease was mainly due to the weakening of the high-end smartphone sales resulting in significant
constraints in capital investments by some of Advantest’s major customers that led to a drop in sales of nonmemory test systems. It is estimated that fluctuations in exchange rates during fiscal 2013 contributed to anincrease of Advantest’s net sales in Europe by approximately ¥1,219 million.
Net sales in Asia (excluding Japan) decreased by ¥7,553 million, or 8.5%, compared with fiscal 2012 to¥81,661 million in fiscal 2013. Net sales in Korea and Taiwan decreased by ¥783 million, or 2.5%, and¥2,479 million, or 6.9%, compared with fiscal 2012, respectively. This decrease was mainly due to theweakening of the high-end smartphone sales resulting in constraints in capital investments by Advantest’s
customers that led to a drop in sales of non memory test systems. Net sales in China and the rest of Asia
(excluding Japan, Taiwan and Korea) decreased by ¥4,291 million, or 19.9%, compared with fiscal 2012. Thisdecrease was mainly due to the weakening of the PC market resulting in significant constraints in capital
investments by some of Advantest’s major customers that led to a drop in sales of non memory test systems. It isestimated that fluctuations in exchange rates during fiscal 2013 contributed to an increase of Advantest’s net
sales in Asia by approximately ¥8,837 million.
Advantest’s overseas sales as a percentage of total sales was 89.1% and 89.4% for fiscal 2013 and 2012,
respectively.

49

Operating Expenses
In fiscal 2013, Advantest’s operating expenses increased by ¥15,424 million, or 11.6%, compared withfiscal 2012 to ¥148,247 million. The main reasons for operating expense increasing despite the decrease in net
sales are as follows.
In fiscal 2013, cost of sales decreased by ¥1,438 million, or 2.2%, compared to fiscal 2012 to¥62,545 million. This decrease was mainly due to a ¥21,025 million decrease in net sales. The decrease,
however, has partially offset by the recording of inventory valuation losses of ¥3,952 million and impairment
losses for long-lived assets of ¥427 million in the third quarter.
In fiscal 2013, research and development expenses decreased by ¥392 million, or 1.2%, compared tofiscal 2012 to ¥32,670 million.
In fiscal 2013, selling, general and administrative expenses increased by ¥4,186 million, or 11.7%,
compared to fiscal 2012 to ¥39,964 million. This increase was mainly due to the continuing depreciation of theJapanese yen, which resulted in an increase of cost that is denominated in foreign currencies.
In fiscal 2013, aside from the recording of the cost of sales, Advantest recorded a one-time expense for
impairment loss in an amount of ¥13,068 million as impairment charge.
Operating Income (Loss)
In fiscal 2013, operating income decreased by ¥36,449 million compared to fiscal 2012, resulting in a lossof ¥36,369 million.
Other Income and Expenses
In fiscal 2013, interest and dividend income decreased by ¥14 million, or 6.6%, compared with fiscal 2012to ¥199 million.
In fiscal 2013, interest expenses increased by ¥8 million compared with fiscal 2012 to ¥140 million.
In fiscal 2013, gain on sale of investment securities increased by ¥1,008 million compared with fiscal 2012to ¥1,396 million.
In fiscal 2013, other expense improved by ¥1,255 million compared with fiscal 2012, to an expense of¥587 million. This improvement was mainly due to a decrease in foreign currency exchange loss of ¥772 million
compared with fiscal 2012 as a result of the appreciation of the U.S. dollar against Japanese yen. Currency
exchange profits/losses represent the difference between the value of foreign currency-denominated sales,translated at prevailing exchange rates, and either (i) the value of sales settled during the same fiscal year,
including those settled using foreign exchange forward contracts, or (ii) the value of cash and cash equivalents,
accounts receivable and payables outstanding remeasured at the exchange rate in effect as of March 31, 2014.
Income Taxes (Benefit)
In fiscal 2013, Advantest’s effective tax rate was 0.2%, while the tax rate for fiscal 2012 was 192.8%. The
statutory tax rate of the Company and its domestic consolidated subsidiaries was 37.7% for fiscal 2013. For a
more detailed discussion on income taxes of Advantest in fiscal 2013 and fiscal 2012, see Note 13 to Advantest’s
consolidated financial statements.

50

Net Income (Loss)
As a result of the foregoing, in fiscal 2013, Advantest’s net income decreased by ¥31,719 million comparedto fiscal 2012, resulting in a loss of ¥35,540 million.
Other Comprehensive Income (Loss)
In fiscal 2013, Advantest’s other comprehensive income (loss), net of tax, decreased by ¥3,390 million comparedto fiscal 2012 to an income of ¥12,255 million. This was mainly due to a decrease of ¥4,695 million in foreign currencytranslation adjustments from an income of ¥17,250 million in fiscal 2012, resulting in an income of ¥12,555 million in
fiscal 2013. The decrease, however, was partially offset by an improvement of ¥2,121 million in pension related
adjustments from a loss of ¥1,779 million in fiscal 2012, resulting in an income of ¥342 million in fiscal 2013.
Results of Operations—Fiscal 2012 Compared with Fiscal 2011
In April 2012, Advantest reorganized its international subsidiaries to create a new structure based on aprinciple of one company per country, and fully integrated with Verigy. Therefore, in fiscal 2012, it was difficult
to calculate the amount of the effect of the integration with Verigy because operations were carried out in an
integrated manner in each country. Additionally, Verigy’s results of operations for the first quarter of fiscal 2011
are not included in Advantest’s results of operations because it was prior to the acquisition.
Net Sales
Advantest’s net sales decreased by ¥8,145 million, or 5.8%, compared with fiscal 2011, to ¥132,903 million
in fiscal 2012. This was primarily due to a slowdown in the semiconductor market and resultant capital
expenditure restrictions made by semiconductor manufacturers. It is estimated that the fluctuations in exchange
rates during fiscal 2012 contributed to an increase of Advantest’s net sales by ¥3,374 million in fiscal 2012.
The following is a discussion of net sales for Advantest’s Semiconductor and Component Test System,
Mechatronics System and Services, Support and Others Segments. Net sales amounts discussed include
intercompany sales between segments.
Semiconductor and Component Test System Segment
In fiscal 2012, net sales of Advantest’s Semiconductor and Component Test System Segment accounted for
76.1% of total net sales. Net sales of Advantest’s Semiconductor and Component Test System Segment for fiscal
2012 decreased by ¥4,489 million, or 4.3%, compared with fiscal 2011, to ¥101,119 million. It is estimated thatfluctuations in exchange rates during fiscal 2012 contributed to an increase of Advantest’s net sales in its
Semiconductor and Component Test System Segment by ¥2,691 million.
Net sales of test systems for non memory semiconductors in fiscal 2012 increased by ¥3,673 million, or4.6%, compared with fiscal 2011 to ¥83,368 million. This increase was mainly due to a steady growth in the salesof V93000 series test systems for SoC semiconductors.
Net sales of test systems for memory semiconductors in fiscal 2012 decreased by ¥8,162 million, or 31.5%,
compared with fiscal 2011 to ¥17,751 million. This decrease was mainly due to a reduced demand for memory
test systems caused by a fall in demand for PCs.
Mechatronics System Segment
Net sales of the Mechatronics System Segment including test handlers and device interfaces decreased by¥6,963 million, or 33.8%, compared to fiscal 2011 to ¥13,653 million in fiscal 2012. This decrease was mainly
due to a drop in memory test system demand. Device interface and test handler product demand, which is highly
correlated to memory test system business, also fell.
51Services, Support and Other Segment
Net sales of the Services, Support and Other Segment increased by ¥1,270 million, or 6.8%, compared withfiscal 2011 to ¥20,077 million in fiscal 2012, mainly due to stable growth in demand for support services. The
main businesses in the Services, Support and Others Segment were maintenance services and leasing and rentals.
Geographic Markets
Advantest experienced a decrease of 5.8% in net sales in fiscal 2012, which was primarily due to decreaseof sales in the Americas.
Net sales in Japan decreased by ¥2,050 million, or 12.7%, compared with fiscal 2011 to ¥14,045 million in
fiscal 2012. This decrease was mainly due to a reduced demand for digital household appliances, resulting in adrop in demand for T2000 test systems.
Net sales in the Americas decreased by ¥9,159 million compared with fiscal 2011 to ¥20,583 million in
fiscal 2012. This decrease was mainly due to a drop in sales of the T2000 for MPU testers resulting from thecounter effect of the major capital expenditures in fiscal 2011, and the weakening of the PC market in fiscal
2012. It is estimated that fluctuations in exchange rates during fiscal 2012 contributed to an increase of
Advantest’s net sales in the Americas by approximately ¥619 million, primarily due to the appreciation of the
U.S. dollar against the Japanese yen.
Net sales in Europe increased by ¥2,046 million compared to fiscal 2011 to ¥9,061 million in fiscal 2012.
This increase was mainly due to increased sales of the V93000. It is estimated that fluctuations in effect ofchanges in exchange rates during fiscal 2012 contributed to an increase of Advantest’s net sales in Europe byapproximately ¥291 million.
Net sales in Asia (excluding Japan) increased by ¥1,018 million, or 1.2%, compared with fiscal 2011 to¥89,214 million in fiscal 2012. Net sales in Korea and Taiwan increased by ¥2,090 million, or 7.0% and¥8,235 million, or 29.8%, compared with fiscal 2011, respectively. This increase was mainly due to increased
capital expenditures in a variety of semiconductors for communication devices such as smartphones. Net sales in
China and the rest of Asia (excluding Japan, Taiwan and Korea) decreased by ¥9,307 million, or 30.1%,
compared with fiscal 2011. This decrease resulted from decreased sales of the T2000 for MPU testers. It isestimated that fluctuations in exchange rates during fiscal 2012 contributed to an increase of Advantest’s net
sales in Asia by approximately ¥2,362 million.
Advantest’s overseas sales as a percentage of total sales was 89.4% and 88.6% for fiscal 2012 and 2011,
respectively.
Operating Expenses
In fiscal 2012, Advantest’s operating expenses decreased by ¥7,388 million, or 5.3%, compared with fiscal
2011 to ¥132,823 million.
In fiscal 2012, cost of sales decreased by ¥8,317 million, or 11.5%, compared to fiscal 2011 to ¥63,983
million. This decrease was mainly due to a ¥8,145 million decrease in net sales and the accounting for¥3,532 million in one-time costs associated with acquisition accounting for Verigy in fiscal 2011.
In fiscal 2012, research and development expenses increased by ¥2,759 million, or 9.1%, compared to fiscal
2011 to ¥33,062 million. This increase in research and development expenses was mainly due to increased costs
for materials for future product development.

52

In fiscal 2012, selling, general and administrative expenses decreased by ¥1,830 million, or 4.9%, comparedto fiscal 2011 to ¥35,778 million. This decrease was mainly due to personnel expenses and costs of¥3,819 million applicable to the acquisition of Verigy in fiscal 2011.
Operating Income
In fiscal 2012, operating income decreased by ¥757 million, compared to fiscal 2011, to a profit of ¥80
million.
Other Income and Expenses
In fiscal 2012, interest and dividend income decreased by ¥110 million, or 34.1%, compared with fiscal
2011 to ¥213 million.
In fiscal 2012, interest expenses decreased by ¥21 million compared with fiscal 2011 to ¥132 million.
In fiscal 2012, impairment loss on investment securities decreased by ¥1,854 million compared with fiscal
2011 to ¥400 million.
In fiscal 2012, other expense decreased by ¥1,141 million, compared with fiscal 2011, to ¥1,054 million.
This decrease was mainly due to a decrease in foreign currency exchange loss of ¥892 million compared withfiscal 2011 as a result of the appreciation of the U.S. dollar against Japanese yen. Currency exchange profits/losses represent the difference between the value of foreign currency-denominated sales, translated at prevailingexchange rates, and either (i) the value of sales settled during the same fiscal year, including those settled using
foreign exchange forward contracts, or (ii) the value of cash and cash equivalents, accounts receivable andpayables outstanding remeasured at the exchange rate in effect as of March 31, 2013.
Income Taxes
In fiscal 2012, Advantest’s effective tax rate was 192.8%, while the tax rate for fiscal 2011 was -36.0%. The
statutory tax rate of the Company and its domestic consolidated subsidiaries was 37.8% for fiscal 2012. For a
more detailed discussion on income taxes of Advantest in fiscal 2012 and fiscal 2011, see Note 13 to Advantest’s
consolidated financial statements.
Net Income
As a result of the foregoing, in fiscal 2012, Advantest’s net income decreased by ¥1,626 million comparedto fiscal 2011, to a loss of ¥3,821 million.
Other Comprehensive Income (Loss)
In fiscal 2012, Advantest’s other comprehensive income (loss), net of tax, improved by ¥19,949 million
compared to fiscal 2011, to an income of ¥15,645 million. This improvement was mainly due to an increase of¥15,828 million in foreign currency translation adjustments from an income of ¥1,422 million in fiscal 2011 to
an income of ¥17,250 million in fiscal 2012.
5.B. LIQUIDITY AND CAPITAL RESOURCES
In accordance with Advantest’s funding and treasury policy (including funding for capital expenditures),which is overseen and controlled by its Accounting Department, Advantest funds its cash needs through cashfrom operating activities and cash and cash equivalents on hand, and is able to procure funds as necessary by
issuance of debt and equity securities in domestic and foreign capital markets and bank loans.
53

If conditions in the semiconductor industry, and thus the semiconductor and component test system
industry, experience a downturn in the medium term, Advantest may need to fund future capital expenditures andother working capital needs through the incurrence of additional debt or dilutive issuances of equity securities.
Advantest issued ¥25.0 billion in corporate bonds in Japan on May 25, 2012, and repaid the short-term loans
from banks used to fund the acquisition of Verigy. Furthermore, Advantest issued Zero Coupon Convertible
Bonds (bonds with stock acquisition rights) in the aggregate principal amount of ¥30.0 billion on March 14,
2014, with a maturity date of March 14, 2019.
Advantest’s cash and cash equivalents balance increased by ¥23,329 million in fiscal 2013 to¥68,997 million as of March 31, 2014. As of March 31, 2014, approximately 46% of Advantest’s cash and cash
equivalents were held in Japanese yen. This large increase from 20% of Advantest’s cash and cash equivalents
held in Japanese yen on March 31, 2013 resulted from the issuance of ¥30.0 billion in Zero Coupon Convertible
Bonds (bonds with stock acquisition rights) in March, 2014.
Net loss in operating activities was ¥35,540 million. As a result of a decrease of ¥7,891 million in tradereceivables and an adjustment of noncash items such as impairment losses and depreciation, net cash used inoperating activities was ¥3,776 million in fiscal 2013. Net cash provided by operating activities worsened by¥1,561 million in fiscal 2013 compared to ¥2,215 million in net cash used in operating activities in fiscal 2012.
The main reason for the worsening in fiscal 2013 was a decrease in net sales, which resulted in an increase of net
loss, which was partially offset by the decrease in trade receivables and increase in trade accounts payable.
Net cash used in investing activities was ¥4,711 million in fiscal 2013, which was a decrease of¥6,787 million compared to net cash used in investing activities in the amount of ¥11,498 million in fiscal 2012.
The main reason for the decrease in fiscal 2013 was primarily due to payments made to purchase tangible fixed
assets, such as in connection with the building of the Cheonan Factory in Korea, in the amount of¥11,386 million in fiscal 2012, whereas the amount paid for tangible fixed assets in fiscal 2013 was ¥5,511
million.
Net cash provided by financing activities was ¥27,202 million in fiscal 2013, an improvement of¥30,116 million compared to net cash used in financing activities in the amount of ¥2,914 million in fiscal 2012.
Such improvement was primarily attributable to not having any increase in borrowings in fiscal 2012, as the¥25.0 billion obtained from issuing corporate bonds was used to repay short-term loans from banks in the amountof ¥25.0 billion, and to issuance of Zero Coupon Convertible Bonds (bonds with stock acquisition rights) in theaggregate principal amount of ¥30.0 billion in fiscal 2013.
Net effect of exchange rate changes on cash and cash equivalents was favorable by ¥4,614 million in fiscal
2013, an improvement of ¥537 million compared to fiscal 2012.
Advantest has entered into agreements for committed lines of credit with several banks to ensure thatnecessary financing may be procured efficiently. From March 26, 2012, the term of a commitment line
agreement is three years and Advantest can elect to obtain a two year loan at the end of the term. A commitmentline agreement generally has financial covenants. For Advantest, it is annually required to maintain certain
minimum net asset levels. Also it is required to maintain a BBB- rating or above with Rating and Investment
Information, Inc. (R&I). Advantest’s unused commitment lines totaled ¥10.0 billion as of March 31, 2014. R&I’s
issuer rating of Advantest as of March 31, 2014 is A-, but R&I announced on January 29 2014 that it has changed
its rating outlook of Advantest from stable to negative.
Advantest has various retirement and severance plans for employees, including non-contributory defined
benefit retirement and severance plans consisting primarily of the Employees Provident Fund (“EPF”) plan. As
mentioned in Note 16 to the consolidated financial statements, in the balance sheet as of March 31, 2014, theamount of ¥28,641 million has been recognized as accrued severance and pension costs. Advantest has
54contributed to the EPF plan in accordance with local statutory requirements. Advantest’s cash funding
requirements would be affected by any changes in interest rates, rate of returns on plan assets and government
regulations. The contributions paid by Advantest under the EPF were ¥1,785 million in fiscal 2012 and¥1,901 million in fiscal 2013. Advantest expects to contribute ¥1,470 million under the EPF in fiscal 2014.
5.C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
Research and Development and Product Enhancement
In order to support technology on the leading-edge, Advantest undertakes research and development
initiatives to develop products which play a central role in the area of measuring technologies to support
electronics, information and communications, and semiconductor manufacturing. Advantest’s research anddevelopment focuses on the development of new products and the improvement of existing products. In
particular, in the Semiconductor and Component Test System Segment, a large and ongoing investment inresearch and development is necessary in order to maintain market competitiveness and to provide many types of
products that meet the various needs of the customers. Advantest also conducts research of basic technologies.
Advantest’s expenditures for research and development were approximately ¥30.3 billion in fiscal 2011,
approximately ¥33.1 billion in fiscal 2012 and approximately ¥32.7 billion in fiscal 2013. Advantest employs
over 1,000 engineers and other personnel in its research and development division.
The contents and achievements to date of Advantest’s current research and development activities include:
Basic Technology•

development of constituent technologies in the field of terahertz waves;•development of constituent technologies, including high speed, energy-saving micro switches and highspeed samplers used in semiconductor and component test systems and millimeter wave measuring
instruments;•

development of methods to detect timing jitters in high bit-rate signals; and•development of compound semiconductor devices, including less-distortion devices used forsemiconductor and component test systems.

Semiconductor and Component Test System Segment•

development of semiconductor and component test systems that enable testing of super high speed
memory semiconductors at actual motion speed;•

development of semiconductor and component test systems that enhance the functionality of testing of
DRAM semiconductors and flash memory semiconductors and require less floor space;•development of semiconductor and component test systems that have the capacity to simultaneously test
multiple complex SoC semiconductors with large pin counts and require less floor space;•development of semiconductor and component test systems with specialized applications;•development of measurement modules for devices that operate at extremely high frequencies and for
networks that carry extremely high density transmissions;•development of high speed transmission technologies for high speed large pin counts and high speedtransmission signal contact technologies; and•development of application software for interface between the semiconductor designing environmentand semiconductor and component test systems, as well as development of software to analyze defective
semiconductors.
55

Mechatronics System Segment•

development of test handlers for memory semiconductors enabling measuring of multiple
semiconductors for high throughput testing;•development of test handlers for SoC semiconductors that respond to diversified device types andpackages; and•development of real Active Thermal Control technology with high speed response for high powerdevices.

Advantest has research and development facilities in Japan, the U.S., Europe and China.
Advantest promotes joint development efforts between its various research facilities to capitalize on thecapabilities of its researchers worldwide. Advantest’s research and development team for semiconductor andcomponent test systems in Japan works closely with Advantest research and development teams in the U.S. andEurope for the development of hardware and software.
Advantest is currently engaged in the research and development of electron-beam, or e-beam, lithography
technology used to draw circuit patterns directly on semiconductor wafers, as well as the research anddevelopment of electron-beam length measuring systems used to measure the microscopic size of the circuit
pattern of a photomask. Due to their throughput limitations, e-beam lithography systems are currently only usedin the production of high value-added semiconductors with limited production volumes and semiconductor
prototypes. Advantest believes that further research and development will be necessary in order to attain highprecision technologies for the leading semiconductor design and manufacturing process, in addition to thedevelopment of technologies for throughput responding to the demand for next generation equipment.
For a description of Advantest’s patents, licenses and other intellectual property, see “Information on the
Company—Business Overview—Licenses and Intellectual Property Rights.”
5.D. TREND INFORMATION
For a discussion of the trends that affect Advantest’s business and financial condition and results ofoperations, see “Information on the Company—Business Overview,” “Operating and Financial Review—Operating Results” and “Operating and Financial Review and—Liquidity and Capital Resources.”
5.E. OFF-BALANCE SHEET ARRANGEMENTS
As of March 31, 2014, Advantest had no material off-balance sheet arrangements.
Advantest does not participate in transactions that derecognize assets or liabilities through unconsolidated
entities, structured finance or special purpose entities that were created for the purpose of facilitating off-balance
sheet arrangements or other limited purposes.

565.F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The following table reflects Advantest’s current obligations and commitments to make future payments
under contracts, contractual obligations and commercial commitments as of March 31, 2014.

Contractual Cash Obligation

Total

Payments due by PeriodLess than
1 year
1-3 years 3-5 years(in millions)

More than
5 years

Short-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ —Long-Term Debt, including current portion . . . . . . . . . . . . .
55,000Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,368
Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,195

¥ —
—
834
5,195

¥

—
¥ —
10,00045,000
1,086
604
—
—

¥—
—
844
—

Total Contractual Cash Obligations . . . . . . . . . . . . . . . . . . .

¥6,029¥11,086¥ 844¥63,563¥45,604

The contractual cash obligation table excludes our long-term deferred tax liabilities because we cannot makea reliable estimate of the timing of cash payments. For details see Note 13, “Income Taxes.”
5.G. SAFE HARBOR
All information that is not historical in nature disclosed under “Item 5. Operating and Financial Review andProspects—Off-Balance Sheet Arrangements” and “—Tabular Disclosure of Contractual Obligations” is deemed
to be a forward-looking statement. See “Cautionary Statement with Respect to Forward-Looking Statements.”
ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A. DIRECTORS AND SENIOR MANAGEMENT
Directors and Audit & Supervisory Board Members
Directors and audit & supervisory board members of the Company as of June 25, 2014 and their respective
business experience are listed below.
Name (Date of birth)

Toshio Maruyama(April 17, 1948)

Position(Group executive/function)

Date ofcommencement

Chairman of the Board
and Representative
Director

4/1973
6/19896/1995
6/19996/20016/20036/20056/20096/20125/2013Haruo Matsuno(February 14, 1960)

Representative Director,
President and CEO

4/19841/20086/20086/200957

Business experience

Joined Advantest Corporation
Director
Managing Director
Senior Managing Director
Senior Vice President, ATE Sales Group
Representative Director and President
Representative Director, President and COO
Representative Director, President and CEO
Chairman of the Board and Representative
Director (present position)
Audit & Supervisory Board Member, PFU
LIMITED (present position)
Chairman of Semiconductor Equipment
Association of Japan (present position)
Joined Advantest Corporation
Senior Vice President, Production Group
Executive Officer
Representative Director, President and CEO(present position)

Name (Date of birth)

Position(Group executive/function)

Yasushige Hagio
Director(November 24, 1947)

Date ofcommencement

4/1972
4/1982
4/1998
12/20036/20046/2006
Osamu Karatsu(April 25, 1947)

Director

4/1975
6/1991
6/1997

4/19994/20006/2012
Seiichi Yoshikawa(March 22, 1946)

Director

7/19696/20006/20043/20119/20126/2013
Shinichiro Kuroe(March 30, 1959)

Director,
Corporate Vice President
Products andTechnology

4/19812/20036/20056/20084/20096/20096/20106/20118/20126/201358

Business experience

Assistant Judge, Tokyo District Court
Judge, Tokyo District Court
Instructor, Legal Training and ResearchInstitute
Chief of the Shizuoka District Court
Registered as an attorney-at-Law
Joined Seiwa Patent office & Law (present
position)
Director, Advantest Corporation (present
position)
Joined Nippon Telegraph and Telephone
Public Corporation
Executive Manager, LSI Laboratories, Nippon
Telegraph and Telephone Corporation
Vice President and Director, Advanced
Telecommunications Research InstituteInternational
Principal Consultant, SRI Consulting K.K.
Chief Executive Director, SRI International,Japan
Director, Advantest Corporation (present
position)
Joined Fujitsu Limited
Director, Fujitsu Laboratories Ltd.
Managing Director, Fujitsu Laboratories Ltd.
Chairman, QD Laser, Inc.
Principal Fellow, Center for Research andDevelopment Strategy, Japan Science andTechnology Agency (present position)
Director, Advantest Corporation (present
position)
Joined Advantest Corporation
General Manager, Memory Tester Business
Division
Executive Officer
Vice President, Sales and Marketing Group
Senior Vice President, SoC Tester BusinessGroup
Senior Vice President, Test System BusinessGroup
Director, Managing Executive Officer
Technology Development Group and Test
System Business Group
Test System Business
Strategic Business
Executive Vice President, Strategic Business
Unit
Products and Technology (present position)
Executive Vice President, Marketing Group
Director, Corporate Vice President (present
position)

Name (Date of birth)

Position(Group executive/function)

Sae Bum Myung
Director, Managing(September 16, 1954) Executive Officer
Sales and Marketing

Date ofcommencement

4/19896/20066/20086/20118/2012Hiroshi Nakamura(December 4, 1957)

Director, Managing
Executive Officer
Corporate
Administration

4/19816/20026/20066/20076/20086/20096/20106/2012

Yoshiaki Yoshida(February 8, 1958)

Director, Managing
Executive Officer
Corporate Planningand Corporate
Communications

4/19996/20006/20066/20076/20083/20096/20094/20126/20126/201359

Business experience

Joined Advantest Corporation
Representative Director and President,
Advantest Korea Co., Ltd.
Executive Officer
Asia Sales, Sales and Marketing Group
Director, Managing Executive Officer(present position)
Sales and Marketing (present position)
Executive Vice President, Sales andMarketing Group
Executive Vice President, Sales Group(present position)
Joined Advantest Corporation
Manager, Accounting Department, Corporate
Affairs Group
Executive Officer
Vice President, Corporate Affairs Group
Senior Vice President, Financial Group
Vice President, Corporate Administration
Group
Managing Executive Officer
Executive Vice President, Corporate
Administration Group (present position)
Director, Managing Executive Officer(present position)
Corporate Administration (present position)
Joined Advantest Corporation
Representative Director, Advantest FinanceInc.
Executive Officer
Vice President, Corporate Planning Group
Executive Vice President, Corporate PlanningGroup
Senior Vice President (Officer), New Concept
Product Initiative
Managing Executive Officer
Leader, Power Device Enabling Group(present position)
Assistant Director (Administration), CSR &Environmental
Affairs Promotion Center (present position)
Director, Managing Executive Officer(present position)
Corporate Planning and Corporate
Communications (present position)
Executive Vice President, Corporate Relations
Group (present position)
Director, Fujitsu Interconnect Technologies
Limited (present position)

Name (Date of birth)

Yuichi Kurita(July 28, 1949)

Position(Group executive/function)

Standing Audit &Supervisory Board
MemberDate ofcommencement

4/19733/20014/20026/20036/20046/20056/20076/20084/20096/20096/20106/2012
Akira Hatakeyama
Standing Audit &(December 20, 1950) Supervisory Board
Member4/19734/20016/20056/20086/2011

Megumi Yamamuro(March 8, 1948)

Audit & Supervisory
Board Member

4/1974
4/1984
4/1988
4/19977/2004

10/2004
6/20056/20066/200910/20106/201360

Business experience

Joined Fujitsu Limited
Joined Advantest Corporation
Manager, Finance Department
Executive Officer
Vice President, Corporate Affairs Group
Vice President, Corporate Affairs Group(overseeing Finance)
Senior Vice President, Corporate Relations
Group
Senior Vice President, Corporate PlanningGroup
Director, Managing Executive Officer
Corporate Affairs
Corporate Administration
Senior Vice President, Corporate
Administration Group
Assistant Director (Administration),
Environmental Management Center
In Charge of Corporate Ethics Office
Assistant Director (Administration), CSR &Environmental Affairs Promotion Center
Corporate Planning and Administration
Director, Senior Executive Officer
Standing Audit & Supervisory Board Member(present position)
Joined Advantest Corporation
Representative Director, President and CEO,Japan Engineering Co., Ltd.
Executive Officer
AdvisorStanding Audit & Supervisory Board Member(present position)
Assistant Judge, Tokyo District Court
Judge, Tokyo District Court
Instructor, Legal Training and Research Institute
Judge, Tokyo High Court
Registered as an attorney-at-Law
Joined CAST Law P.C. (currently URYU &ITOGA) (present position)
Professor, The University of Tokyo Graduate
School of Law and Politics
Audit & Supervisory Board Member, Fujitsu
Limited (present position)
Audit & Supervisory Board Member,
Advantest Corporation (present position)
Audit & Supervisory Board Member, NIFTY
Corporation (present position)
Professor, The University of Nihon Graduate
School of Law
Audit & Supervisory Board Member, Yachiyo
Industry Co., Ltd. (present position)

Name (Date of birth)

Position(Group executive/function)

Masamichi Ogura(June 30, 1946)

Audit & Supervisory
Board Member

Date ofcommencement

4/19696/20006/20024/20036/20036/20046/20066/20086/2011Business experience

Joined Fujitsu Limited
Director, Fujitsu Limited
Managing Executive Officer, Fujitsu Limited
Senior Executive Officer, Fujitsu Limited
Director, Senior Executive Officer, Fujitsu
Limited
Audit & Supervisory Board Member, Fujitsu
General Limited (present position)
Vice President and Representative Director,
Fujitsu LimitedStanding Audit & Supervisory Board
Member, Fujitsu Limited
Audit & Supervisory Board Member,
Advantest Corporation (present position)

The Company’s Executive Officers (excluding officers who also hold the position of Director) under theoperating officer system, as voluntarily disclosed in Japan as follows.
Name

Position(Group executive/function)

Assignment in the Company

Hideaki ImadaManaging
Executive Officer
New Business Relations

Senior Vice President (Officer), New Concept ProductInitiativeHans-Juergen Wagner

Managing
Executive Officer
SoC Test Business Groups

Managing Director (R&D, CTO), Advantest Europe
GmbH

Takashi Sugiura

Executive Officer

Executive Vice President, Quality Assurance Group

Takashi Sekino

Executive Officer

Senior Vice President (Officer) (Advanced Technology),
Technology Development Group

Soichi Tsukakoshi

Executive Officer

Executive Vice President, Production Group

Josef Schraetzenstaller

Executive Officer

Managing Director (CEO), Advantest Europe GmbH

R. Keith Lee

Executive Officer

Director, President and CEO, Advantest America, Inc.

Makoto Nakahara

Executive Officer

Senior Vice President (Officer), Sales Group

Toshiyuki Okayasu

Executive Officer

Executive Vice President, SoC Test Business Group
Executive Vice President, Technology Development
Group

CH Wu

Executive Officer

Chairman of the Board, President and CEO, Advantest
Taiwan Inc.

Kazuhiro Yamashita

Executive Officer

Executive Vice President, System Solution Group

Kenji Sato

Executive Officer

Senior Vice President (Officer), Sales Group

Takayuki Nakamura

Executive Officer

Division Manager, Nanotechnology Business Division

Wilhelm Radermacher

Executive Officer

Vice President and General Manager V93000 SoC,
Advantest Europe GmbH

61

Position(Group executive/function)

Name

Assignment in the Company

Masuhiro Yamada

Executive Officer

Executive Vice President, Memory Test Business Group

Satoru Nagumo

Executive Officer

Executive Vice President, ASD Test & Measurement
System Business Group

Isao Sasaki

Executive Officer

Executive Vice President, Field Service Group

Koichi Tsukui

Executive Officer

Senior Vice President (Officer), New Concept ProductInitiative

Keith Hardwick

Executive Officer

Chief Financial Officer, Advantest America, Inc.

None of the persons listed above was selected as director, audit & supervisory board member or executive
officer pursuant to an arrangement or understanding with Advantest’s major shareholders, customers, suppliers
or others. There are no family relationships between any of the persons listed above.
6.B. COMPENSATION
Executive Compensation
The aggregate amount of compensation of all of the Company’s directors and audit & supervisory board
members was approximately ¥542 million during fiscal 2013. Of the foregoing, the aggregate amount ofcompensation for the Company’s directors (outside corporate directors excluded) was ¥449 million (¥307 million
in fixed compensation and ¥142 million in qualifying stock options), ¥46 million for the Company’s audit &supervisory board members (outside audit & supervisory board members excluded) (¥41 million in fixedcompensation and ¥5 million in qualifying stock options) and ¥47 million for outside directors and outside
audit & supervisory board members (¥36 million in fixed compensation and ¥11 million in qualifying stock
options). The amount of compensation for Director Toshio Maruyama was ¥100 million (¥68 million in fixedcompensation and ¥32 million in qualifying stock options).
Compensation for directors and audit & supervisory board members was authorized by resolutions of thegeneral meeting of shareholders on June 27, 2007 and to the extent compensation is within the authorized range,
further authorization is not required. For a description of the Company’s equity-based compensation plans, see“—Share Ownership.”
The amounts of compensation for directors and audit & supervisory board members set forth above includes
fixed compensation paid to one outside director who retired from their positions as of the closing of the 71st
ordinary general meeting of shareholders, which was held on June 26, 2013.
6.C. BOARD PRACTICES
Directors
The Board of Directors has the ultimate responsibility for the administration of the affairs of the Company.
The Company’s articles of incorporation limit the number of directors to ten. Directors are elected at a general
meeting of shareholders, and the standard term of directors is one year. Directors may serve any number ofconsecutive terms. The Board of Directors elects one or more representative directors from among its members,
each of whom has the authority individually to represent the Company. From among its members, the Board of
Directors may elect the chairman and the vice chairman. None of the directors of the Company has a service
contract with the Company that provides for benefits upon termination of service.
Pursuant to the Company Law of Japan (hereinafter in Item 6.C., “Company Law”) and the Company’s
articles of incorporation, and to the extent permitted by the laws and regulations, the Company may, byresolution of the Board of Directors, exempt liabilities of its directors (including persons who have previously
62served as the Company’s directors) for failing to perform their duties. The Company may enter into contracts
with outside directors to limit their liabilities for a failure to perform their duties, provided that the maximum
amount of liabilities under such contracts shall be the total of the amounts provided in each item of Article 425,
Paragraph 1 of the Company Law.
Audit & Supervisory Board Members
The Company’s articles of incorporation provide for no more than five audit & supervisory board members
and the Company currently has two Standing Audit & Supervisory Board Members and two outside audit &supervisory board members. Audit & supervisory board members are elected at the general meeting ofshareholders and the standard term of office of audit & supervisory board members is four years. Under theCompany Law, at least half of the audit & supervisory board members are required to be persons who have notbeen a director, accounting counselor (if an accounting counselor is a corporation, an employee of suchcorporation who executes its duties), executive officer, manager, or employee of the Company or any of its
subsidiaries at any time in the past. Audit & supervisory board members may not at the same time be directors,
accounting counselors (if an accounting counselor is a corporation, an employee who executes its duties),
executive officers, managers, or employees of the Company or any of its subsidiaries. The Company increased
the number of required outside audit & supervisory board members from one to two at the general meetings ofshareholders held in June 2003 in order to strengthen the auditing function of the audit & supervisory board.
Audit & supervisory board members are under a statutory duty to oversee the administration of the Company’s
affairs by its directors, to audit its financial statements to be submitted by its Board of Directors to the general
meetings of the shareholders and to report their opinions thereon. They are also required to attend the meetings ofthe Board of Directors and to express their opinions, but are not entitled to vote.
Audit & supervisory board members constitute the audit & supervisory board. The audit & supervisoryboard has a statutory duty to prepare and submit an audit report to the directors each year. An audit &supervisory board member may note his or her opinion in the audit report if his or her opinion is different fromthe opinion expressed in the audit report. The audit & supervisory board is empowered to establish audit policy,
methods to investigate the state of business operations and assets and other matters relating to the execution ofduties by audit & supervisory board members.
Pursuant to the Company Law and the Company’s articles of incorporation, and to the extent permitted by
the laws and regulations, the Company may, by resolution of the Board of Directors, exempt liabilities of its
audit & supervisory board members (including persons who have previously served as the Company’s audit &supervisory board members) for failing to perform their duties. The Company may enter into contracts withoutside audit & supervisory board members to limit their liabilities for a failure to perform their duties, provided
that the maximum amount of liabilities under such contracts shall be the total of the amounts provided in each
item of Article 425, Paragraph 1 of the Company Law.

63

6.D. EMPLOYEES
Set forth below is a table listing the total number of full-time employees and a breakdown of persons
employed by main category of activity and by geographic location, as of March 31, 2012, March 31, 2013 andMarch 31, 2014.
As of March 31,
2012
2013
2014

Full-Time Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
By Category of Activity:
Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
By Geographic Location:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia (excluding Japan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,464

4,575

4,625

444
474
499
475
398
469
1,123 1,214 1,229
829
806
779
1,510 1,628 1,649
83
55
0
2,504 2,500 2,507
816
892
911
585
587
542
559
596
665

Most regular employees of the Company and its subsidiaries in Japan are members of one of the four labor
unions. None of Advantest’s overseas employees is a member of a union. Advantest considers its labor relations
with all of its workers to be good.
During the fiscal years ended March 31, 2012, 2013 and 2014, Advantest had an annual average of 279, 330
and 278 temporary employees, respectively.

646.E. SHARE OWNERSHIPThe following table sets forth the beneficial ownership of shares of common stock of the Company as ofMarch 31, 2014 of each of the Company’s directors, audit & supervisory board members and executive officers
as of March 31, 2014 and of directors, audit & supervisory board members and executive officers newly elected
in June 2014.
Name of Record/Beneficial Owner

Number of Shares

Toshio Maruyama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Haruo Matsuno . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yasushige Hagio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Osamu Karatsu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seiichi Yoshikawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shinichiro Kuroe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sae Bum Myung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hiroshi Nakamura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yoshiaki Yoshida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yuichi Kurita . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Akira Hatakeyama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Megumi Yamamuro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masamichi Ogura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hideaki Imada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hans-Juergen Wagner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takashi Sugiura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takashi Sekino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Soichi Tsukakoshi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Josef Schraetzenstaller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
R. Keith Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Makoto Nakahara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Toshiyuki Okayasu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CH Wu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kazuhiro Yamashita . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenji Sato . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takayuki Nakamura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wilhelm Radermacher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masuhiro Yamada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Satoru Nagumo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Isao Sasaki . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Koichi Tsukui . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Keith Hardwick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

242,155
247,454
22,821
10,791
6,293
147,620
129,584
133,973
107,335
75,78827,652
21,131
15,000123,187
260,485
113,778
104,739
98,51896,00066,00085,463
91,14564,00056,00066,51542,68951,68540,42339,00027,00027,00017,000Each of the persons listed above owns less than one percent of the issued and outstanding shares of common
stock of the Company.
The number of shares owned by the Company’s directors, audit & supervisory board members andexecutive officers include options that are currently exercisable for 2,541,685 shares of the Company’s common
stock. For a description of these options, see “Stock Option Plan” below. The number of shares of common stock
owned by the Company’s directors, audit & supervisory board members and executive officers reflects thenumber of shares that are owned through the director and audit & supervisory board member stock ownershipassociation and allocated to an individual director, audit & supervisory board member or executive officer. For a
description of this association, see “—Stock Ownership Associations.” For a description of the unit share system,
see “Additional Information—The Unit Share System.”
65

Stock Option PlanAt the meeting of Board of Directors held in June 2010, June 2011, July 2011, June 2012 and June 2013, theBoard of Directors of the Company approved stock option plans for selected directors, audit & supervisory board
members, executive officers and employees of Advantest. The Board of Directors of the Company also approved
the compensation amount of stock acquisition rights to be granted as stock options to directors and audit &supervisory board members of the Company. The following table shows selected information related to thesestock options.

Date of grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shares to be issued/ delivered . . . . . . . . . . . . .
Issuance price per unit (100 shares) . . . . . . . . . . . . . . . . .
Exercise price per share . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning of exercise period . . . . . . . . . . . . . . . . . . . . . .
End of exercise period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of directors, audit & supervisory board members
and executive officers of the Company . . . . . . . . . . . . .
Number of other employees . . . . . . . . . . . . . . . . . . . . . . .

Twenty-fourth series

Twenty-fifth series

Twenty-sixth series

July 12, 2010
308,000¥53,500¥2,089April 1, 2011
March 31, 2015

July 12, 2011
988,000¥49,600¥1,529April 1, 2012
March 31, 2016

August 16, 2011
658,000¥26,100¥1,529April 1, 2012
March 31, 2016

23
0

23
228

5
55

Twenty-seventh series Twenty-eighth series

Date of grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shares to be issued/ delivered . . . . . . . . . . . . .
Issuance price per unit (100 shares) . . . . . . . . . . . . . . . . .
Exercise price per share . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning of exercise period . . . . . . . . . . . . . . . . . . . . . .
End of exercise period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of directors, audit & supervisory board members
and executive officers of the Company . . . . . . . . . . . . .
Number of other employees . . . . . . . . . . . . . . . . . . . . . . .

July 12, 2012
2,521,000¥34,700¥1,207
April 1, 2013
March 31, 2017

July 12, 2013
2,763,000¥46,000¥1,669April 1, 2014
March 31, 2018

28
321

30
354

The Company acquired Verigy in July 2011. As one of the conditions precedent to such acquisition, theCompany has assumed the stock options which had been granted by Verigy to the directors and employees of
Verigy and its subsidiaries at the time of the acquisition, and has granted them stock options with terms andconditions that are substantively the same as those under which the relevant stock options were granted by
Verigy. The Board of Directors of the Company in July 2011 passed a resolution to grant to the directors andemployees of Verigy and its subsidiaries the stock options to be issued by the Company. The following tableshows selected information related to these stock options.
Plan first ~ Plan
eighty-ninth

Date of grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shares to be issued/ delivered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Issuance price per unit (100 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning of exercise period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
End of exercise period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of directors, audit & supervisory board members and executive officers of theCompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of other employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66

July 20, 2011
2,387,046 (total
89 types of stock
options)¥4 ~ ¥854$7.84 ~ $34.76
July 20, 2011
July 29, 2011 ~January 31, 2018
0386 (total 89 types ofstock options)Employee Stock Purchase Program
Since August 1, 2002, eligible employees of Advantest America, Inc. and its U.S. subsidiaries are able toparticipate in an employee stock purchase program. Since January 1, 2013, any employee except for employees
in Japan and certain countries are eligible to participate in an employee stock purchase program. Under the
program, each eligible employee may authorize payroll deductions of up to 15% of their base salary toward thepurchase of ADRs representing shares of common stock of the Company. In addition, each subsidiary that
employs the eligible employee will make an additional contribution equal to 15% of each eligible employee’s
payroll deductions toward the purchase of the ADRs.
Stock Ownership Associations
The Company’s director and audit & supervisory board member stock ownership association is apartnership formed by the current and former directors, executive officers and audit & supervisory board
members of the Company for the purpose of acquiring the Company’s shares of common stock. Only current
directors, executive officers and audit & supervisory board members and company advisors that formerly weredirectors, audit & supervisory board members and executive officers of the Company may join the director andaudit & supervisory board member stock ownership association. The Company established its director andaudit & supervisory board member stock ownership association in 1983. Any member of the association may
request that record ownership of the stock held by that member be transferred, in lots of a single unit, to thatmember. As of March 31, 2014, 20 current and former directors, executive officers, audit & supervisory board
members and company advisors were members of the director, executive officer and audit & supervisory board
member stock ownership association, and the association held 58,116 shares of the Company’s common stock.
The Company also has an employee stock ownership association for other employees in Japan. As of March 31,
2014, the association had 734 members and held 624,516 shares of the Company’s common stock.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. MAJOR SHAREHOLDERS
As of March 31, 2014, 174,197,942 shares of the Company’s common stock were outstanding. Beneficial
ownership of the Company’s common stock in the table below was prepared from publicly available records ofthe filings made by the Company’s shareholders regarding their ownership of the Company’s common stock
under the Financial Instruments and Exchange Law of Japan.
Under the Financial Instruments and Exchange Law of Japan, any person who becomes, beneficially andsolely or jointly, a holder, including, but not limited to, a deemed holder who manages shares for another holder
pursuant to a discretionary investment agreement, of more than 5% of the shares with voting rights of a company
listed on a Japanese stock exchange (including ADSs representing such shares) must file a report concerning theshareholding with the Director of the relevant local finance bureau. A similar report must be filed, with certain
exceptions, if the percentage of shares held by a holder, solely or jointly, of more than 5% of the total issued
shares of a company increases or decreases by 1% or more, or if any change to a material matter set forth in any
previously filed reports occurs.
Based on publicly available information, the following table sets forth the beneficial ownership of holders ofmore than 5% of the Company’s common stock as of the dates indicated in the reports described below.
Name of Beneficial Owner

Fujitsu Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Bank of Tokyo-Mitsubishi UFJ, Ltd., and its related entities . . . . . . . . .
Nomura Securities Co., Ltd. and its related entities . . . . . . . . . . . . . . . . . . . .
Sumitomo Mitsui Trust Bank, Limited and its related entities . . . . . . . . . . . .
Morgan Stanley MUFG Securities Co., Ltd. and its related entities . . . . . . . .
67

Number of Shares

Percentage of
Outstanding Shares

20,142,792
16,706,237
16,470,424
15,116,824
10,270,059

10.09%
8.37%
8.11%
7.57%
5.13%

The number of shares owned by Fujitsu Limited is based on a report filed under the Securities and Exchange
Law of Japan stating that Fujitsu held or was deemed to hold beneficially, as of February 23, 2005,
20,142,792 shares of the Company’s common stock. This figure includes 20,142,600 shares of the Company’scommon stock held by the trustee of a retirement benefit plan of Fujitsu. Fujitsu retained beneficial ownership ofthese 20,142,600 shares of common stock.
The number of shares owned by The Bank of Tokyo-Mitsubishi UFJ, Ltd. and its related entities is based onreports filed under the Financial Instruments and Exchange Law of Japan stating that The Bank of TokyoMitsubishi UFJ, Ltd. and its related entities held or were deemed to hold beneficially, as of February 24, 2014,
16,706,237 shares of the Company’s common stock.
The number of shares owned by Nomura Securities Co., Ltd. and its related entities is based on reports filed
under the Financial Instruments and Exchange Law of Japan which state that Nomura Securities Co., Ltd. and its
related entities held or were deemed to hold beneficially, as of March 14, 2014, 16,470,424 shares of theCompany’s common stock.
The number of shares owned by Sumitomo Mitsui Trust Bank, Limited and its related entities is based onreports filed under the Financial Instruments and Exchange Law of Japan stating that Sumitomo Mitsui Trust
Bank, Limited and its related entities held or were deemed to hold beneficially, as of June 19, 2014, 15,116,824
shares of the Company’s common stock.
The number of shares owned by Morgan Stanley MUFG Securities Co., Ltd. and its related entities is basedon reports filed under the Financial Instruments and Exchange Law of Japan which state that Morgan Stanley
MUFG Securities Co., Ltd. and its related entities held or were deemed to hold beneficially, as of February 28,
2014, 10,270,059 shares of the Company’s common stock.
Based on information made publicly available on or after April 1, 2011, the following table describes
transactions resulting in a 1% or more change in the percentage ownership held by major beneficial owners of theCompany’s common stock.

Name of Shareholder
The Sumitomo Trust and Banking
Co., Ltd. and its related entities . . .
Manning & Napier Advisors, Inc. . . .
Manning & Napier Advisors, Inc. . . .
Manning & Napier Advisors, Inc. . . .
Manning & Napier Advisors, Inc. . . .
Mitsubishi UFJ Financial Group, Inc.
and its related entities . . . . . . . . . .
Nomura Securities Co., Ltd. and its
related entities . . . . . . . . . . . . . . . .
Sumitomo Mitsui Trust Bank,
Limited. and its related entities . . .
Nomura Securities Co., Ltd. and its
related entities . . . . . . . . . . . . . . . .
Mitsubishi UFJ Financial Group, Inc.
and its related entities . . . . . . . . . .
Nomura Securities Co., Ltd. and its
related entities . . . . . . . . . . . . . . . .
Mitsubishi UFJ Financial Group, Inc.
and its related entities . . . . . . . . . .
Mitsubishi UFJ Financial Group, Inc.
and its related entities . . . . . . . . . .
Nomura Securities Co., Ltd. and its
related entities . . . . . . . . . . . . . . . .

Date ofTransaction

Shares Owned
Prior toTransaction

Percentage

Number of
SharesChangedShares Owned
After theTransaction

Percentage

April 15, 2011
May 27, 2011
August 15, 2011
August 18, 2011
August 23, 2011—14,274,147
16,710,647
14,141,527
12,096,627

—
7.15%
8.37%
7.09%
6.06%

—
2,436,500(2,569,120)(2,044,900)(2,440,100)

13,703,400
16,710,647
14,141,527
12,096,627
9,656,527

6.87%
8.37%
7.09%
6.06%
4.84%

December 12, 2011

13,569,645

6.80%

2,671,146

16,240,791

8.14%

April 13, 2012——

10,074,023

5.05%

July 31, 2012

13,703,400

6.87%

2,066,700

15,770,100

7.90%

October 31, 2012

10,074,023

5.05%

2,738,313

12,812,336

6.42%

May 13, 201316,240,791

8.14%

2,281,003

18,521,794

9.26%

May 31, 201312,428,891

6.23%(2,015,565)

10,413,326

5.22%

August 12, 2013

18,521,794

9.26%(2,047,994)

16,473,800

8.24%

October 28, 2013

16,473,800

8.24%

3,305,315

19,779,115

9.89%

January 15, 2014

10,413,326

5.22%

3,209,107

13,622,433

6.83%

68

—

Name of Shareholder
Deutsche Bank London Office and its
related entities . . . . . . . . . . . . . . . . .
Deutsche Bank London Office and its
related entities . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Financial Group, Inc.
and its related entities . . . . . . . . . . .
Morgan Stanley MUFG Securities Co.,
Ltd. and its related entities . . . . . . . .
Nomura Securities Co., Ltd. and its
related entities . . . . . . . . . . . . . . . . .

Date ofTransaction

Shares Owned
Prior toTransaction

Percentage—

Number of
SharesChanged

Percentage

11,443,399

5.73%

January 31, 2014—

February 14, 2014

11,443,399

5.73%(2,081,473)

9,361,926

4.69%

February 24, 2014

19,779,115

9.89%(3,072,878)

16,706,237

8.37%

February 28, 2014——

10,270,059

5.13%

March 14, 2014

13,622,433

2,847,991

16,470,424

8.11%

—
6.83%

—

Shares Owned
After theTransaction

As of March 31, 2014, the Company had 174,197,942 outstanding shares of common stock. According to
JPMorgan Chase Bank, depositary for the Company’s ADSs, as of March 31, 2014, 1,226,091 shares of theCompany common stock were held in the form of ADRs and there were 1,090 ADR holders of record in the U.S.
According to the Company’s register of shareholders, as of March 31, 2014, there were 45,508 holders ofcommon stock of record worldwide. As of March 31, 2014, there were 91 record holders of the Company’scommon stock with addresses in the U.S., whose shareholdings represented 5.7% of the outstanding common
stock on that date. Because some of these shares were held by brokers or other nominees, the number of record
holders with addresses in the U.S. might not fully show the number of beneficial owners in the U.S.
None of the Company’s shares of common stock entitles the holder to any preferential voting rights.
Advantest knows of no arrangements the operation of which may at a later time result in a change ofcontrol.
7.B. RELATED PARTY TRANSACTIONSBusiness Relationships
Advantest sells products to and purchases parts from Fujitsu Limited (“Fujitsu”), which owns approximately
12% of the voting rights of the company. Advantest sells products to Fujitsu and its subsidiaries in arm’s-lengthtransactions. Advantest purchases parts from Fujitsu and its subsidiaries after receiving competitive bids fromseveral suppliers. Advantest derived net sales of ¥802 million in fiscal 2013 from the sale of products to Fujitsu
and its subsidiaries. Advantest purchased parts from Fujitsu and its subsidiaries in the amount of ¥2,800 million
in fiscal 2013. Advantest had receivables from Fujitsu and its subsidiaries in the amount of ¥114 million as ofMarch 31, 2014. Advantest had payables to Fujitsu and its subsidiaries in the aggregate amount of ¥1,336 million
as of March 31, 2014 Advantest expects to continue to engage in arm’s-length transactions with Fujitsu and its
subsidiaries in the future.
Mr. Yamamuro, an audit & supervisory board member of the Company since 2006, currently serves as anaudit & supervisory board member of Fujitsu Limited. Mr. Ogura, an audit & supervisory board member of theCompany since 2011, served as a full-time standing audit & supervisory board member of Fujitsu Limited until
June 23, 2014.
Loans
As of March 31, 2014, the Company has no outstanding loans to its directors and executive officers.
7.C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.

69

ITEM 8. FINANCIAL INFORMATION
8.A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
1-4. Consolidated Financial Statements. Advantest’s audited consolidated financial statements are included
under “Item 18—Financial Statements.” Except for Advantest’s consolidated financial statements included under
Item 18, no other information in this annual report has been audited by Advantest’s independent registered public
accounting firm.
5. Not applicable.
6. Export Sales. See “Information on the Company—Business Overview—Geographic Sales.”7. Legal and Arbitration Proceedings. See “Information on the Company—Business Overview—Legal
Proceedings.”
8. Dividend Policy. See “Key Information—Selected Financial Data—Dividends.”
8.B. SIGNIFICANT CHANGES
See “Operating and Financial Review and Prospects,” “Key Information—Risk Factors” and “Informationon the Company—Business Overview—Industry Overview” for a discussion of significant adverse changes since
the date of Advantest’s latest annual financial statements.
ITEM 9. THE OFFER AND LISTING
9.A. OFFER AND LISTING DETAILSThe following table sets forth for the periods shown the reported high and low sales prices of theCompany’s common stock on the Tokyo Stock Exchange and the ADSs on the New York Stock Exchange.
Tokyo Stock Exchange
Price Per Share
High
Low

New York Stock Exchange
Price Per ADS
High
Low

Fiscal year ended March 31,

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥2,615
2,516
1,663
1,525
1,887

¥1,423
1,179
671
838
988

$28.07
26.89
19.95
17.22
18.11

$15.14
15.86
8.89
10.81
9.91

¥1,386
1,261
1,374
1,525
1,887
1,710
1,343
1,315

¥ 952
914
838
1,156
1,246
1,121
1,061
988

$17.22
15.60
16.12
16.59
18.11
17.00
13.06
12.24

$12.44
12.11
10.81
12.52
13.56
11.65
11.19
9.91

Financial quarter ended/ending

June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70Tokyo Stock Exchange
Price Per Share
High
Low

New York Stock Exchange
Price Per ADS
High
Low

Month ended

December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,327
1,315
1,143
1,123
1,218
1,165

¥1,207
1,079
1,008
988
1,068
1,063

$12.91
12.24
11.18
10.88
11.74
11.38

$11.92
10.57
10.25
9.91
10.69
10.58

9.B. PLAN OF DISTRIBUTION
Not applicable.
9.C. MARKETSThe Company’s common stock is traded on the First Section of the Tokyo Stock Exchange. In April 2000,
the Company’s common stock was added to the Nikkei Stock Average, which is an index of 225 selected stocks
from the First Section of the Tokyo Stock Exchange.
Since September 17, 2001, ADSs evidenced by ADRs have been traded and listed on the New York Stock
Exchange through a sponsored ADR facility operated by JPMorgan Chase Bank, as depositary. Each ADS
represents one share of the Company’s common stock.
9.D. SELLING SHAREHOLDERS
Not applicable.
9.E. DILUTION
Not applicable.
9.F. EXPENSES OF THE ISSUE
Not applicable.
ITEM 10.

ADDITIONAL INFORMATION

10.A. SHARE CAPITAL
Not applicable.
10.B. MEMORANDUM AND ARTICLES OF ASSOCIATION
Set forth below is information relating to the Company’s common stock, including brief summaries of therelevant provisions of the Company’s articles of incorporation and share handling regulations and of theCompany Law of Japan (the “Company Law,” hereinafter in Item 10.B. the same) and related legislation, all as
currently in effect.

71General
The Company’s authorized number of shares to be issued is 440,000,000 shares. The number of theCompany’s issued share capital as of March 31, 2014, including treasury shares, was 199,566,770. All of theissued shares are fully paid and non-assessable.
The Company’s share registration agent is Mitsubishi UFJ Trust and Banking Corporation, located at 4-5,
Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan. The shares have no par value.
The registered holder of deposited shares underlying the ADSs is the depositary for the ADSs. Accordingly,
holders of ADSs will not be able to directly assert their shareholders’ rights against the Company.
In January 2009, the share certificates of all Japanese companies listed on stock exchanges in Japan,
including the common stock of the Company, were delisted and became subject to a new book-entry transfer
system. Under the new system, the Company’s shares are administered by being recorded in a shareholder’stransfer account book at the Japan Securities Depositary Center, Inc. (“JASDEC”), which is a book-entry transfer
institution, or at securities firms, banks and other account management institutions. JASDEC will provide theCompany with information pertaining to the Company’s shareholders that it has collated from each of therelevant account management institutions as of March 31 and September 30, or at such time as the Company
makes a request for information pertaining to its shareholders based on justifiable grounds. The Company willrecord or register such information received from JASDEC on its register of shareholders.
Shareholders wishing to assert the minority rights and other rights set forth in Article 147, Paragraph 4 of
the Law on Book-Entry Transfer of Corporate Bonds, Stock and Other Securities must submit an individual
shareholder notice to the account management institution at which such shareholder has opened a transfer
account. The account management institution will promptly inform JASDEC of such individual shareholder
notice and JASDEC will, in turn, provide information pertaining to the shareholder (the individual shareholder
notice) to Advantest through its share registration agent.
In order for a transfer of shares to become effective, the amount of shares transferred must be recorded on
the transfer account books. Moreover, the Company requires that a transfer of shares must be recorded in its
shareholders’ register in order for such transfer to be perfected.
Objects and Purposes
Article 2 of the Company’s articles of incorporation states that its objective is to engage in the following
business activities:•

the manufacture and sale of electric, electronic and physicochemical appliances and their applied
equipment;•

the manufacture and sale of medical equipment;•

the manufacture and sale of appliances, equipment and software related to each of the foregoing items;•

the lease and rental of equipment, appliances and other products incidental to each of the foregoing
items;•

the temporary personnel service business; and•any and all businesses incidental to any of the foregoing items.

72

Dividends
Dividends—General
Under its articles of incorporation, the Company’s fiscal year closes on March 31 of each year, and year-end
dividends, if any, are paid to shareholders (or registered pledgees thereof) of record at that date.
Under the Company Law, subject to certain limitation on the distributable surplus, dividends, if any, may be
paid to shareholders and pledgees of shares of record as of a record date as set forth by the Company’s articles ofincorporation or as determined by the Board of Directors from time to time. Dividends shall be paid by way of
distribution of surplus. Dividends may be distributed in cash, or in kind subject to certain conditions being met.
The Company may make distribution of dividends by a resolution of a general meeting of shareholders or by aresolution of the Board of Directors.
Dividends—Interim cash dividends
In addition to year-end cash dividends, pursuant to Article 459, Paragraph 1, Item 4 of the Company Law,
the Board of Directors may by resolution declare, an interim cash surplus dividend to shareholders, and pledgesof record at September 30 of each year.
Dividends—Legal reserve
When a stock company like the Company makes distribution of surplus, it shall set aside in its legal reserveor additional paid-in capital an amount equal to 10 percent of the amount of the surplus to be decreased as aresult of such distribution of surplus in accordance with the provisions set forth in an ordinance of the Ministry ofJustice.
Dividends—Distributable amountUnder the Company Law, the Company is permitted to make distribution of surplus to the extent that theaggregate book value of the assets to be distributed to shareholders does not exceed the Distributable Amount (asdefined below) as at the effective date of such distribution of surplus.
The amount of surplus at any given time shall be the amount of the Company’s assets and the book value of
the Company’s treasury stock after subtracting the amounts of the following items (1) through (4) as they appear on
the Company’s non-consolidated balance sheet as at the end of the Company’s last fiscal year, and after reflecting
the changes in the Company’s surplus after the end of the Company’s last fiscal year, by adding the amounts of thefollowing items (5), (6) and (7) and/or subtracting the amounts of the following items (8), (9) and (10):(1) its liabilities;(2) its stated capital;(3) its additional paid-in capital and legal reserve;(4) other amounts as provided for by an ordinance of the Ministry of Justice;(5) (if the Company transferred its treasury stock after the end of the last fiscal year) the amount of thetransfer price of its treasury stock after subtracting the book value thereof;(6) (if the Company decreased its stated capital after the end of the last fiscal year) the amount of decrease
in its stated capital (excluding the amount transferred to the additional paid-in capital or legal reserve);(7) (if the Company decreased its additional paid-in capital or legal reserve after the end of the last fiscal
year) the amount of decrease in its additional paid-in capital or legal reserve (excluding the amounttransferred to the stated capital);73

(8) (if the Company cancelled its treasury stock after the end of the last fiscal year) the book value of its
treasury stock so cancelled;(9) (if the Company distributed surplus to shareholders after the end of the last fiscal year) the amount of
the assets distributed to shareholders by way of such distribution of surplus; and(10) other amounts as provided for by an ordinance of the Ministry of Justice including (if the Company
reduced the surplus and increased its stated capital, additional paid-in capital or legal reserve after theend of the last business year) the amount of such reduction and (if the Company has distributed thesurplus to the shareholders after the end of the last fiscal year) the amount set aside in additional paidin capital or legal reserve (if any) as required by the ordinances of the Ministry of Justice.
The Distributable Amount of the Company at any given time shall be the aggregate amount of (a) the
surplus and (b) the amount of the transfer price of its treasury stock in the same period, after subtracting theamounts of the following items:(1) the book value of its treasury stock;(2) (if the Company transferred its treasury stock after the end of the last fiscal year) the amount of thetransfer price of its treasury stock; and(3) other amounts as provided for by an ordinance of the Ministry of Justice including (if the sum of onehalf of goodwill and the deferred assets exceeds the total of stated capital, additional paid-in capital andlegal reserve, each such amount being that appearing on the non-consolidated balance sheet as of theend of the last fiscal year) all or certain part of such exceeding amount as calculated in accordance withthe ordinances of the Ministry of Justice.
In addition, if the Company elects to become a company that uses its consolidated balance sheet forcalculating distributable dividends (thus, becomes “a company subject to regulations in respect of dividends
determined based on consolidated accounts”), the Company would be required to deduct the excess amountcalculated in the following manner from the distributable amount of surplus. Such excess amount is determinedas (x) the total amount of the amount of shareholders’ equity on unconsolidated balance sheet at the end of thelast fiscal year and other amounts as provided for by an ordinance of the Ministry of Justice exceeds (y) the total
amount of the amount of shareholders’ equity on its consolidated balance sheet at the end of its last fiscal year
and other amounts as provided for by an ordinance of the Ministry of Justice.
If the Company prepares extraordinary financial statements (as described below) and such extraordinary
financial statements are approved at a meeting of the Board of Directors or the shareholders (if the Company
Law so requires), the Company would be required to adjust the distributable amount for surplus by considering
the profits and losses and the amount in respect of issuance of treasury stock during the period covered in such
extraordinary financial statements.
The Company may prepare extraordinary unconsolidated financial statements that consist of a balance sheet
as of a date within the fiscal year immediately following the last fiscal year (an extraordinary settlement date)and profit and loss covering a period of the first day of the current fiscal year up to such extraordinary settlement
date. Such extraordinary financial statements prepared in the foregoing manner must be audited by audit &supervisory board members and accounting auditors.
Dividends—Ex-dividend date and prescription
In Japan, the ex-dividend date and the record date for dividends precede the date of determination of theamount of the dividend to be paid. The market price of shares generally becomes ex-dividend on the third
business day before the record date.

74

Under the articles of incorporation, the Company is not required to pay any cash dividends unclaimed for aperiod of three years after the date on which the dividends first become payable.
For information as to Japanese taxes on dividends, see “—Taxation—Japanese Taxation.”
Capital Accounts
The amount of the issue price of new shares (with certain exceptions) is required to be accounted for asstated capital, although the Company may account for an amount not exceeding one-half of the issue price asadditional paid-in capital.
Under the Company Law, a resolution of general meetings of shareholders is generally required for suchtransfer of the additional paid-in capital and legal reserve to the stated capital.
The Company may also reduce the sum of its legal reserve and additional paid-in capital by resolution of ageneral meeting of shareholders. Under the Company Law, the Company may reduce the sum of its legal reserve
and additional paid-in capital without the limitation of the amount to be reduced as mentioned above.
All or any part of the surplus which may be distributed as dividends may also be transferred to stated capitalby resolution of a general meeting of shareholders.
Stock Split
The Company may at any time split the outstanding shares into a greater number of shares by resolution of
the Board of Directors. The Company must give public notice of the stock split, specifying a record date for thestock split, not less than two weeks prior to the record date.
Consolidation of Shares
The Company may at any time consolidate shares in issue into a smaller number of shares by a special
shareholders resolution (See “Voting Rights”). When a consolidation of shares is to be made, the Company must
give public notice or notice to each shareholder within two weeks from the date of entry into force. The
Company must disclose the reason for the consolidation of shares at the general meeting of shareholders.
The Unit Share System
GeneralConsistent with the requirements of the Company Law, the Company’s articles of incorporation provide that
100 shares constitute one “unit.” Although the number of shares constituting a unit is included in the articles ofincorporation, any amendment to the articles of incorporation reducing (but not increasing) the number of sharesconstituting a unit or eliminating the provisions for the unit of shares may be made by a resolution of the Boardof Directors rather than by a special shareholders resolution, which is otherwise required for amending thearticles of incorporation. The number of shares constituting one unit, however, cannot exceed 1,000 shares orone-200th of the number of the Company’s issued share capital (including treasury stock).
Voting Rights under the Unit Share System
Under the unit share system, shareholders shall have one voting right for each unit of shares that they hold.
Any number of shares less than a full unit will carry no voting rights.

75Repurchase by the Company of Shares Constituting Less Than a Full Unit
A holder of shares constituting less than a full unit may require the Company to purchase those shares attheir market value in accordance with the provisions of the Company’s share handling regulations.
Request by a Holder of Shares of Sales by the Company of Shares to Constitute a Full Unit
The Company’s articles of incorporation provide that a holder of shares constituting less than a full unit may
request the Company to sell to such holder such amount of shares which will, when added together with theshares constituting less than a full unit, constitute a full unit of shares in accordance with the provisions of theCompany’s share handling regulations.
Effect of the Unit Share System on Holders of ADRs
A holder who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole unit ofshares of common stock. Although, as discussed above, under the unit share system holders of less than a unit
have the right to require the Company to purchase their shares, holders of ADRs evidencing ADSs that represent
other than integral multiples of whole units are unable to withdraw the underlying shares of common stock
representing less than a unit and, therefore, are unable, as a practical matter, to exercise the rights to require theCompany to purchase such underlying shares. As a result, access to the Japanese markets by holders of ADRs
through the withdrawal mechanism will not be available for dispositions of shares of common stock in lots lessthan a unit. The unit share system does not affect the transferability of ADSs, which may be transferred in lots ofany size.
General Meeting of Shareholders
The Company holds its ordinary general meeting of shareholders within three months after the end of a
fiscal year and normally in June of each year in Tokyo, Japan. In addition, the Company may hold anextraordinary general meeting of shareholders whenever necessary by giving at least two weeks’ advance notice.
Under the Company Law, notice of any shareholders’ meeting must be given to each shareholder having voting
rights or, in the case of a non-resident shareholder, to his resident proxy or mailing address in Japan inaccordance with the Company’s share handling regulations, at least two weeks before the date of the meeting.
The record date for an ordinary general meeting of shareholders is March 31 each year.
Any shareholder holding at least 300 voting rights or 1% of the total number of voting rights for a period of
six months or longer may propose a matter to be considered at a general meeting of shareholders by submitting arequest to a representative director of the Company at least eight weeks before the date of such meeting.
Voting Rights
A holder of shares constituting one or more whole units is entitled to one voting right per unit of sharessubject to the limitations on voting rights set forth in the following paragraph. In general, under the Company
Law, a resolution can be adopted at a general meeting of shareholders by a majority of voting rights represented
at the meeting. The Company Law and the Company’s articles of incorporation require a quorum for the electionof directors and audit & supervisory board members of not less than one-third of the voting rights of allshareholders. The Company’s shareholders are not entitled to cumulative voting in the election of directors. A
corporate shareholder whose outstanding shares are directly or indirectly owned by the Company or, due to othercauses, whose management is being controlled in substance by the Company as provided for by an ordinance ofthe Ministry of Justice, does not have voting rights.
Shareholders may exercise their voting rights through proxies if those proxies are also shareholders who
have voting rights.
76

The Company Law provides that a quorum of at least one-third of voting rights of shareholders that are
eligible to vote must be present at a shareholders’ meeting to approve any material corporate actions, such as:(1) amendment of the articles of incorporation (except in cases in which a shareholders’ resolution is not
required);(2) acquisition of its own shares from a specific party;(3) consolidation of shares;(4) any issue or transfer of new or treasury shares at a “specially favorable” price (or any issue of stockacquisition rights, or bonds with stock acquisition rights at “specially favorable” conditions) to any
persons other than shareholders;(5) the removal of an audit & supervisory board member;(6) the exemption of liability of a director or audit & supervisory board member with certain exceptions;(7) a reduction of stated capital meeting certain conditions;(8) a distribution of in-kind dividends which meets certain requirements;(9) dissolution, merger or consolidation with certain exceptions in which a shareholders’ resolution is not
required;(10) the transfer of the whole or a material part of the business;(11) the taking over of the whole of the business of any other corporation with certain exceptions in which ashareholders’ resolution is not required;(12) share exchange or share transfer for the purpose of establishing 100% parent-subsidiary relationships
with certain exceptions in which a shareholders’ resolution is not required; or(13) separating of the corporation with certain exceptions in which a shareholders’ resolution is not
required.
At least two-thirds of voting rights eligible to vote that are represented at the meeting must approve these actions.
The voting rights of holders of ADSs are exercised by the depositary based on instructions from those
holders. With respect to voting by holders of ADRs, see “Description of American Depositary Receipts” set forthin the Company’s registration statement on Form F-1 filed with the Securities and Exchange Commission on
July 22, 2002.
Rights to be Allotted Shares
Holders of shares have no preemptive rights under the Company’s articles of incorporation. Under theCompany Law, the Board of Directors may, however, determine that shareholders shall be given rights to be
allotted shares in connection with a particular issue or transfer of new or treasury shares, or stock acquisitionrights. In this case, the rights must be given on uniform terms to all shareholders as of a specified record date byat least two weeks’ prior public notice to shareholders of the record date.
Rights to be allotted new or treasury shares are non-transferable. A shareholder, however, may be allocatedstock acquisition rights for free, in which case such stock acquisition rights may be transferred to a third party.
Stock Acquisition Rights
Subject to certain requirements, the Company may issue stock acquisition rights by resolution of the Boardof Directors. Except where the issue would be on “especially favorable” terms, the issue of stock acquisition77

rights may be authorized by a resolution of the Board of Directors. Holders of stock acquisition rights may
exercise their rights to acquire a certain number of shares within the exercise period as prescribed in the terms of
their stock acquisition rights. Upon exercise of stock acquisition rights, the Company will be obliged to issue therelevant number of new shares or alternatively to transfer the necessary number of existing shares held by it.
Liquidation Rights
In the event of a liquidation of the Company, the assets remaining after payment of all debts, liquidation
expenses and taxes will be distributed among the shareholders in proportion to the respective numbers of shares
they own.
Liability to Further Calls or Assessments
All of the Company’s currently outstanding shares, including shares represented by the ADSs, are fully paid
and non-assessable.
Record Date
March 31 of each year is the record date for the Company’s year-end dividends, if declared. A holder ofshares constituting one or more whole units who is registered as a holder on the Company’s register ofshareholders at the close of business as of March 31 is entitled to exercise shareholders’ voting rights at theordinary general meeting of shareholders with respect to the fiscal year ending on that March 31. September 30
of each year is the record date for interim dividends, if declared. In addition, the Company may set a record datefor determining the shareholders entitled to other rights and for other purposes by giving at least two weeks’public notice.
The shares generally trade ex-dividend or ex-rights in the Japanese stock exchanges on the third business
day before a record date (or if the record date is not a business day, the fourth business day prior thereto), for the
purpose of dividends or rights offerings.
Repurchase by the Company of Shares
The Company may acquire its own shares (i) through a stock exchange on which such shares are listed or by
way of tender offer (pursuant to an ordinary resolution of a general meeting of shareholders or a resolution of theBoard of Directors), (ii) by purchase from a specific party (pursuant to a special resolution of a general meetingof shareholders), or (iii) from a subsidiary of the Company (pursuant to a resolution of the Board of Directors).
When such acquisition is made by the Company from a specific party other than a subsidiary of the Company,
any other shareholder may make a demand to a representative director, more than five calendar days prior to therelevant shareholders’ meeting, that the Company also purchase the shares held by such shareholder. However,under the Company Law, the acquisition of its own shares at a price not exceeding the then market price to beprovided under an ordinance of the Ministry of Justice will not trigger the right of any shareholder to include
him/her as the seller of his/her shares in such proposed purchase. Any such acquisition of shares must satisfy
certain requirements and shall be integrated into regulations governing financial resources relating to the
distribution of distributable surplus to shareholders. See “Additional Information—Memorandum and Articles of
Association—Dividends—Distributable amount.”
Shares acquired by the Company may be held by it for any period or may be cancelled by resolution of theBoard of Directors. The Company may also transfer to any person the shares held by it, subject to a resolution of
the Board of Directors, and subject also to other requirements similar to those applicable to the issuance of newshares. The Company may also utilize its treasury stock for the purpose of transfer to any person upon exercise ofstock acquisition rights or for the purpose of acquiring another company by way of merger, share exchange or
corporate split through exchange of treasury stock for shares or assets of the acquired company.
78

The Company Law generally prohibits any subsidiary of the Company from acquiring shares of theCompany.
Disposal of the Shares by the Company
The Company is not required to send notices to a shareholder if notices to such shareholder fail to arrive
continuously for five years or more at the registered address of the shareholder in the Company’s register ofshareholders or at the address otherwise notified to the Company.
In addition, the Company may dispose of the Shares at the then market price of the Shares by a resolution of
the Board of Directors and after giving at least three months’ prior public notice as well as individual notice tothe shareholder at the registered address of the shareholder in the Company’s register of shareholders or to theaddress otherwise notified to the Company, and hold or deposit the proceeds for the shareholder, the location ofwhich is unknown, if (i) notices to the shareholder fail to arrive continuously for five years or more at theregistered address of the shareholder in the Company’s register of shareholders or at the address otherwise
notified to the Company, and (ii) the shareholder fails to receive surplus dividends on the Shares continuously forfive years or more at the address registered in the Company’s register of shareholders or at the address otherwise
notified to the Company.
Acquisition or Disposition of Shares
Under the Foreign Exchange and Foreign Trade Law and the cabinet orders and ministerial ordinances
thereunder (collectively, the “Foreign Exchange Regulations”), all aspects of regulations on foreign exchange
and trade transactions are, with minor exceptions relating to inward direct investments (which are not generally
applicable to the Company’s shares), only subject to post transaction reporting requirements. Acquisitions anddispositions of shares of common stock or ADSs by non-residents of Japan (including foreign corporation notresident in Japan) are generally not subject to this reporting requirement. However, the Minister of Finance has
the power to impose a licensing requirement for transactions in limited circumstances.
Dividends and Proceeds of Sales
Under the Foreign Exchange Regulations as currently in effect, dividends paid on, and the proceeds of salesin Japan of, shares held by non-residents of Japan may in general be converted into any foreign currency andrepatriated abroad. The acquisition of shares by non-residents of Japan by way of stock splits is not subject to anyof the foregoing notification or reporting requirements.
Reporting of Substantial Shareholdings
Pursuant to the Financial Instruments and Exchange Law of Japan and regulations thereunder, a person orgroup of persons beneficially holding more than 5% of the total shares with voting rights (for this purpose sharesissuable upon exercise of stock acquisition rights held by the person or persons are counted in the calculation of
the holding and the total shares in issue) of a company listed on any Japanese stock exchange is required to filewith the director of a competent local finance bureau, within five business days a report containing the identity ofsuch person or persons, the purpose of such holding and certain other information prescribed by regulations. A
similar report must also be made (with certain exceptions) if the percentage of such holding subsequently
increases or decreases by 1% or more or if any change occurs in material matters set out in reports previously
filed.
10.C. MATERIAL CONTRACTS
All contracts concluded by the Company during the two years preceding this filing were entered into in theordinary course of business.
7910.D. EXCHANGE CONTROLSThe Foreign Exchange Regulations govern the acquisition and holding of shares of capital stock of theCompany by “exchange non-residents” and by “foreign investors.” The Foreign Exchange Regulations currently
in effect do not, however, affect transactions between exchange non-residents to purchase or sell shares outside
Japan using currencies other than Japanese yen.
Exchange non-residents are:•individuals who do not reside in Japan; and•corporations whose principal offices are located outside Japan.

Generally, branches and other offices of non-resident corporations that are located within Japan are regarded
as residents of Japan. Conversely, branches and other offices of Japanese corporations located outside Japan are
regarded as exchange non-residents.
Foreign investors are:•individuals who are exchange non-residents;•

corporations that are organized under the laws of foreign countries or whose principal offices are locatedoutside of Japan; and•corporations (1) of which 50% or more of the total voting rights of their shares are held by individuals
who are exchange non-residents or corporations (a) that are organized under the laws of foreigncountries or (b) whose principal offices are located outside of Japan or (2) a majority of whose officers,
or officers having the power of representation, are individuals who are exchange non-residents.

In general, the acquisition of shares of a Japanese company (such as the shares of capital stock of theCompany) by an exchange non-resident from a resident of Japan is not subject to any prior filing requirements.
In certain limited circumstances, however, the Minister of Finance may require prior approval of an acquisitionof this type. While prior approval, as described above, is not required, in the case where a resident of Japantransfers shares of a Japanese company (such as the shares of capital stock of the Company) for consideration
exceeding ¥100 million to an exchange non-resident, the resident of Japan who transfers the shares is required toreport the transfer to the Minister of Finance within 20 days from the date of the transfer, unless the transfer was
made through a bank, securities company or financial futures trader licensed under Japanese law.
If a foreign investor acquires shares of a Japanese company that is listed on a Japanese stock exchange (suchas the shares of capital stock of the Company) and, as a result of the acquisition, the foreign investor, in
combination with any existing holdings, directly or indirectly holds 10% or more of the issued shares of therelevant company, the foreign investor must file a report of the acquisition with the Minister of Finance and anyother competent Ministers having jurisdiction over that Japanese company within 15 days from and including thedate of the acquisition, except where the offering of the company’s shares was made overseas. In limited
circumstances, such as where the foreign investor is in a country that is not listed on an exemption schedule in
the Foreign Exchange Regulations, a prior notification of the acquisition must be filed with the Minister ofFinance and any other competent Ministers, who may then modify or prohibit the proposed acquisition.
Under the Foreign Exchange Regulations dividends paid on, and the proceeds of sales in Japan of, shares
held by non-residents of Japan may in general be converted into any foreign currency and repatriated abroad.
Under the terms of the deposit agreement pursuant to which the Company’s ADSs are issued, the Depositary is
required, to the extent that in its judgment it can convert Japanese yen on a reasonable basis into dollars andtransfer the resulting dollars to the U.S., to convert all cash dividends that it receives in respect of deposited
shares into dollars and to distribute the amount received (after deduction of applicable withholding taxes) to theholder of ADSs.
80

10.E. TAXATION
The following discussion is a general summary of the principal U.S. federal income and Japanese national
tax consequences of the acquisition, ownership and disposition of the shares of common stock of the Company(the “Shares”) or ADSs. This summary does not purport to address all the material tax consequences that may be
relevant to the holders of the Shares or ADSs, and does not take into account the specific circumstances of any
particular investors, some of which (such as tax-exempt entities, banks, insurance companies, broker-dealers,
traders in securities that elect to use a mark-to-market method of accounting for their securities holdings,
regulated investment companies, real estate investment trusts, investors liable for alternative minimum tax,
partnerships and other pass-through entities, investors that own or are treated as owning 10% or more of theCompany’s voting stock, investors that hold the Shares or ADSs as part of an arbitrage, options trading, hedge,
conversion or constructive sale transaction or other integrated transaction and U.S. Holders (as defined below)
whose functional currency is not the U.S. dollar) may be subject to special tax rules. This summary is based on
the federal income tax laws and regulations of the United States and the national tax laws of Japan, judicial
decisions and published rulings and administrative pronouncements as in effect on the date hereof, as well as on
the current income tax convention between the United States and Japan (the “Treaty”), as described below, all ofwhich are subject to change (possibly with retroactive effect), and/or to differing interpretations.
For purposes of this discussion, a “U.S. Holder” is any beneficial owner of the Shares or ADSs that, for U.S.
federal income tax purposes, is:(1) an individual who is a citizen or resident of the United States;(2) a corporation or other entity organized in or under the laws of the United States or any State thereof or
the District of Columbia;(3) an estate the income of which is subject to U.S. federal income tax without regard to its source; or(4) a trust that is subject to the primary supervision of a U.S. court and the control of one or more U.S.
persons, or that has a valid election in effect under applicable Treasury regulations to be treated as a
U.S. person.
An “Eligible U.S. Holder” is a U.S. Holder that:(1) is a resident of the United States for purposes of the Treaty;(2) does not maintain a permanent establishment in Japan (a) with which the Shares or ADSs are
effectively connected and through which the U.S. Holder carries on or has carried on a business or(b) of which the Shares or ADSs form part of the business property; and(3) is eligible for benefits under the Treaty with respect to income and gain derived in connection with the
Shares or ADSs.
If a partnership (including any entity treated as a partnership for U.S. federal income taxation purposes)
holds the Shares or ADSs, the tax treatment of a partner generally will depend upon the status of the partner andthe activities of the partnership. A partner of a partnership holding the Shares or ADSs is urged to consult its tax
advisor.
This summary does not address any aspects of U.S. federal tax law other than income taxation and does notdiscuss any aspects of Japanese tax law other than income taxation as limited to national taxes, inheritance andgift taxation and securities transfer taxation. This summary also does not cover any state or local, or non-U.S.,
non-Japanese tax considerations. Investors are urged to consult their tax advisors regarding the U.S. federal,state, local and Japanese and other tax consequences of acquiring, owning and disposing of Shares or ADSs. In
particular, where relevant, investors are urged to confirm their status as Eligible U.S. Holders with their tax
advisors and to discuss with their tax advisors any possible consequences of their failure to qualify as Eligible
U.S. Holders.
81This summary is also based in part upon the representations of the depositary and the assumption that eachobligation in the deposit agreement referred to in “Description of American Depositary Receipts” set forth in the
Company’s registration statement on Form F-1 filed with the Securities and Exchange Commission on July 22,
2002, and in any related agreement, will be performed under its terms.
In general, for purposes of the Treaty, and for U.S. federal and Japanese national income tax purposes,
owners of ADRs evidencing ADSs will be treated as the owners of the Shares represented by those ADSs, andexchanges of the Shares for ADSs, and exchanges of ADSs for the Shares, will not be subject to U.S. federal or
Japanese income tax.
This discussion below is intended for general information only and does not constitute a complete analysisof all tax consequences relating to ownership of Shares or ADSs. Investors in Shares or ADSs should consult
their own tax advisors concerning the tax consequences of their particular situations.
Japanese Taxation
The following is a summary of the principal Japanese tax consequences (limited to national taxes) to holdersof the Shares and of ADRs evidencing ADSs representing the Shares who are either individuals who are notresidents of Japan or non-Japanese corporations, without a permanent establishment in Japan (“non-resident
Holders”).
Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese withholding tax on
dividends paid by Japanese corporations. Stock splits in themselves are, in general, not a taxable event.
In the absence of an applicable tax treaty, convention or agreement reducing the maximum rate of Japanese
withholding tax or allowing exemption from Japanese withholding tax, the rate of Japanese withholding tax
applicable to dividends paid by Japanese corporations to non-residents of Japan or non-Japanese corporations isgenerally 20.42%. With respect to dividends paid on listed shares issued by a Japanese corporation (such as the
Shares) to any corporate or individual shareholders (including those shareholders who are non-Japanese
corporations or non-residents of Japan, such as non-resident Holders), other than any individual shareholder who
holds 5% or more of the total issued shares of the relevant Japanese corporation, the aforementioned 20.42%
withholding tax rate is reduced to (i) 7.147% for dividends due and payable on or after January 1, 2013 and on or
before December 31, 2013, and (ii) as a general rule, 15.315% for dividends due and payable on or afterJanuary 1, 2014. At the date of this annual report, Japan has income tax treaties, conventions or agreements
whereby the above-mentioned 20.42% withholding tax rate is reduced, in most cases to 15% for portfolio
investors with, among other countries, Australia, Belgium, Canada, Denmark, Finland, Germany, Ireland, Italy,
Luxembourg, New Zealand, Norway, Singapore, Spain, Sweden and Russia, and 10% for portfolio investors
under the income tax treaty with, among others, France, the U.K., India, Australia, China, Pakistan, Vietnam,
Poland, Romania, the Netherlands, Switzerland, Kuwait, Portuguese Republic and the United States.
Under the Treaty, the maximum rate of Japanese withholding tax which may be imposed on dividends paidby a Japanese corporation to an Eligible U.S. Holder that is a portfolio investor is generally reduced to 10% of
the gross amount actually distributed and Japanese withholding tax with respect to dividends paid by a Japanese
corporation to an Eligible U.S. Holder that is a pension fund is exempt from Japanese taxation by way of
withholding or otherwise, unless such dividends are derived from the carrying on of a business, directly or
indirectly, by such pension fund.
If the maximum tax rate provided for in the income tax treaty applicable to dividends paid by the Company
to any particular non-resident Holder is lower than the withholding tax rate otherwise applicable under Japanese
tax law or any particular non-resident Holder is entitled to a reduced rate or exemption from Japanese income tax
with respect to such dividends under the income tax treaty applicable to such particular non-resident Holder, suchnon-resident Holder who is entitled to a reduced rate of, or exemption from, Japanese withholding tax on82

payment of dividends on the Shares by the Company is required to submit an Application Form for Income Tax
Convention Regarding Relief from Japanese Income Tax on Dividends (together with any other required forms
and documents) in advance through the Company to the relevant tax authority before the payment of dividends.
A standing proxy for non-resident Holders of a Japanese corporation may provide this application service. With
respect to ADSs, this reduced rate or exemption is applicable if the Depositary or its agent submits two
Application Forms (one before payment of dividends, the other within eight months after the Company’s fiscal
year-end or semi-fiscal year-end). To claim this reduced rate or exemption, any relevant non-resident Holder of
ADSs will be required to file a proof of taxpayer status, residence and beneficial ownership (as applicable) and toprovide other information or documents as may be required by the Depositary. A non-resident Holder who isentitled, under an applicable income tax treaty, to a reduced treaty rate lower than the withholding tax rateotherwise applicable under Japanese tax law or an exemption from the withholding tax, but failed to submit therequired application in advance will be entitled to claim the refund of withholding taxes withheld in excess of therate under an applicable tax treaty (if such non-resident Holder is entitled to a reduced treaty rate under theapplicable income tax treaty) or the whole of the withholding tax withheld (if such non-resident Holder is entitled
to exemption under the applicable income tax treaty) from the relevant Japanese tax authority.
Gains derived from the sale of the Shares or ADSs outside Japan by a non-resident Holder holding such
Shares or ADSs as a portfolio investor are, in general, not subject to Japanese income tax or corporation tax.
Eligible U.S. Holders are not subject to Japanese income or corporation tax with respect to such gains under theTreaty.
Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired
the Shares or ADSs as a legatee, heir or donee even though neither the individual nor the deceased nor donor is aJapanese resident.
Holders of the Shares or ADSs should consult their tax advisors regarding the effect of these taxes and, inthe case of U.S. Holders, the possible application of the Estate and Gift Tax Treaty between the U.S. and Japan.
U.S. Federal Income Taxation
U.S. Holders
The following discussion is a summary of the principal U.S. federal income tax consequences to U.S.
Holders that hold Shares or ADSs as capital assets (generally, for investment purposes).
Taxation of Dividends
Subject to the passive foreign investment company (“PFIC”) rules discussed below, the gross amount of any
distribution made by the Company in respect of Shares or ADSs (without reduction for Japanese withholding
taxes) will constitute a taxable dividend to the extent paid out of current or accumulated earnings and profits of
the Company, as determined under U.S. federal income tax principles. The U.S. dollar amount of such a dividend
generally will be included in the gross income of a U.S. Holder, as ordinary income, when the dividend isactually or constructively received by the U.S. Holder, in the case of Shares, or by the depositary, in the case of
ADSs. Dividends paid by us will not be eligible for the dividends-received deduction generally allowed to U.S.
corporations in respect of dividends received from other U.S. corporations.
Dividends received on shares or ADSs of certain foreign corporations by non-corporate U.S. investors may
be subject to U.S. federal income tax at lower rates than other types of ordinary income if certain conditions are
met. Dividends received by non-corporate U.S. Holders with respect to Shares or ADSs are expected to beeligible for these reduced rates of tax. U.S. Holders should consult their own tax advisors regarding the eligibilityof such dividends for a reduced rate of tax.

83

The U.S. dollar amount of a dividend paid in Japanese yen will be determined based on the Japanese yen/
U.S. dollar exchange rate in effect on the date that dividend is included in the gross income of the U.S. Holder,
regardless of whether the payment is converted into U.S. dollars on such date. If the Japanese yen received as adividend is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in such
Japanese yen equal to its U.S. dollar value on the date of receipt. Generally, any gain or loss resulting fromcurrency exchange fluctuations during the period from the date the dividend payment is included in the grossincome of a U.S. Holder through the date that payment is converted into U.S. dollars (or the U.S. Holder
otherwise disposes of the Japanese yen) will be treated as U.S. source ordinary income or loss. U.S. Holders
should consult their own tax advisors regarding the calculation and U.S. federal income tax treatment of foreign
currency gain or loss.
To the extent, if any, that the amount of any distribution received by a U.S. Holder in respect of Shares or
ADSs exceeds the Company’s current and accumulated earnings and profits, as determined under U.S. federal
income tax principles, the distribution first will be treated as a tax-free return of capital to the extent of the U.S.
Holder’s adjusted tax basis in those Shares or ADSs, and thereafter will be treated as U.S. source capital gain.
Distributions of additional Shares that are made to U.S. Holders with respect to their Shares or ADSs andthat are part of a pro rata distribution to all of the Company’s shareholders generally will not be subject to U.S.
federal income tax.
For U.S. foreign tax credit purposes, dividends included in gross income by a U.S. Holder in respect of Sharesor ADSs will constitute income from sources outside the United States, and will generally be “passive category
income” or, for certain U.S. Holders, “general category income”. Subject to generally applicable limitations under
U.S. federal income tax law and the Treaty, any Japanese withholding tax imposed in respect of the Company
dividend may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, or if the U.S.
Holder does not elect to claim a foreign tax credit for any foreign taxes paid during the taxable year, as a deduction
from such U.S. Holder’s taxable income. Special rules generally will apply to the calculation of foreign tax credits
in respect of dividend income that qualifies for preferential tax rates of U.S. federal income tax. Additionally,
special rules may apply to individuals whose foreign source income during the taxable year consists entirely of“qualified passive income” and whose creditable foreign taxes paid or accrued during the taxable year do not exceed$300 ($600 in the case of a joint return). Further, under some circumstances, a U.S. Holder that:(i)has held Shares or ADSs for less than a specified minimum period, or(ii) is obligated to make payments related to the Company dividends,
will not be allowed a foreign tax credit for Japanese taxes imposed on the Company dividends. Investors are
urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular
circumstances.
Taxation of Capital Gains
In general, upon a sale or other taxable disposition of Shares or ADSs, a U.S. Holder will recognize gain orloss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized on
the sale or other taxable disposition and the U.S. Holder’s adjusted tax basis in those Shares or ADSs. A
U.S. Holder generally will have an adjusted tax basis in the Shares or ADSs equal to their U.S. dollar cost.
Subject to the PFIC rules discussed below, gain or loss recognized on the sale or other taxable disposition
generally will be capital gain or loss and, if the U.S. Holder’s holding period for those Shares or ADSs exceeds
one year, will be long-term capital gain or loss. Non-corporate U.S. Holders, including individuals, are currently
eligible for preferential rates of U.S. federal income tax in respect of long-term capital gain. Under U.S. federal
tax law, the deduction of capital losses is subject to limitations. Any gain or loss recognized by a U.S. Holder inrespect of the sale or other disposition of Shares or ADSs generally will be treated as derived from U.S. sources
for foreign tax credit purposes.
84

Deposits and withdrawals of Shares in exchange for ADSs will not result in the realization of gain or loss
for U.S. federal income tax purposes.
PFIC
A non-U.S. corporation generally will be classified as a PFIC for U.S. federal income tax purposes in any
taxable year in which, after applying look-through rules, either (1) at least 75% of its gross income is passive
income, or (2) on average at least 50% of the gross value of its assets is attributable to assets that produce passive
income or are held for the production of passive income. Passive income for this purpose generally includes
dividends, interest, royalties, rents and gains from commodities and securities transactions. The PFIC
determination is made annually and generally is based on the value of a non-U.S. corporation’s assets (including
goodwill) and the composition of its income for the relevant tax year.
Based on current estimates of its income and assets, the Company does not believe that it will be a PFIC for
its current taxable year, and intends to continue its operations in such a manner that it will not become a PFIC in
the future. However, because the PFIC determination is made annually at the close of the taxable year, theCompany can provide no assurance that it will not become a PFIC in the current or any future taxable year due tochanges in its asset or income composition, a decrease in the price of its Shares (which is used as a measure of
goodwill as an active asset) or for other reasons. If the Company becomes a PFIC, U.S. Holders could be subject
to additional U.S. federal income taxes on gain recognized with respect to the Shares or ADSs and on certain“excess” distributions (generally distributions in excess of 125% of the average distribution over a three-year
period, or, if shorter, the holding period for the Shares or ADSs). In addition, an interest charge may apply to the
portion of the U.S. federal income tax liability on such gains or distributions treated under the PFIC rules as
having been deferred by the U.S. Holder. Moreover, dividends that a non-corporate U.S. Holder receives fromthe Company will not be eligible for the reduced U.S. federal income tax rates applicable to dividends describedabove if the Company is a PFIC either in the taxable year of the distribution or the preceding taxable year. The
Company will inform U.S. Holders if it believes that it will be classified as a PFIC in any taxable year. If a
U.S. Holder holds Shares or ADSs in any taxable year in which the Company is a PFIC, such U.S. Holder
generally will be required to file an information statement or form specified by the U.S. Department of theTreasury with the U.S. Internal Revenue Service (“IRS”) on an annual basis, subject to certain exceptions basedon the value of PFIC stock held.
U.S. Holders are urged to consult their tax advisors concerning the U.S. federal income tax consequences ofholding Shares or ADSs if the Company were considered a PFIC in any year.
Non-U.S. Holders
The following discussion is a summary of the principal U.S. federal income tax consequences to beneficial
holders of Shares or ADSs that are neither U.S. Holders nor partnerships, nor entities taxable as partnerships for,
U.S. federal income tax purposes (“Non-U.S. Holders”).
A Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax in respect of
distributions in respect of the Shares or ADSs unless the distributions are effectively connected with the conduct
by the Non-U.S. Holder of a trade or business within the United States (and, if an applicable tax treaty requires,are attributable to a U.S. permanent establishment or fixed base of such Non-U.S. Holder).
A Non-U.S. Holder generally will not be subject to U.S. federal income tax in respect of gain recognized ona sale or other taxable disposition of Shares unless (i) the gain is effectively connected with a trade or businessconducted by the Non-U.S. Holder within the United States (and, if an applicable tax treaty requires, isattributable to a U.S. permanent establishment or fixed base of such Non-U.S. Holder), or (ii) the Non-U.S.
Holder is an individual who was present in the United States for 183 or more days in the taxable year of thedisposition and other conditions are met.
85

Income that is effectively connected with a U.S. trade or business of a Non-U.S. Holder (and, if anapplicable income tax treaty applies, is attributable to a U.S. permanent establishment or a fixed base of such
Non-U.S. Holder) generally will be taxed in the same manner as the income of a U.S. Holder. In addition, undercertain circumstances, any effectively connected earnings and profits realized by a corporate Non-U.S. Holder
may be subject to additional “branch profits tax” at the rate of 30% or at a lower rate that may be prescribed by
an applicable income tax treaty.
Backup Withholding and Information Reporting
In general, except in the case of certain exempt recipients, information reporting requirements will apply to
dividends paid to a U.S. Holder in respect of Shares or ADSs, and to the proceeds received by a U.S. Holder
upon the sale, exchange or redemption of Shares or ADSs within the United States or through certain U.S.related financial intermediaries. Furthermore, backup withholding (currently at a rate of 28%) may apply to suchpayments or proceeds if a U.S. Holder fails to provide an accurate tax identification number and makeappropriate certifications in the required manner.
Dividends paid to a Non-U.S. Holder in respect of Shares or ADSs, and proceeds received upon the sale,exchange or redemption of Shares or ADSs by a Non-U.S. Holder generally are exempt from information
reporting and backup withholding under current U.S. federal income tax law. However, a Non-U.S. Holder may
be required to provide certification under penalty of perjury to ensure that exemption. Persons required toestablish their exempt status generally must provide such certification on IRS Form W-9, entitled Request for
Taxpayer Identification Number and Certification, in the case of U.S. Holders, and on IRS Form W-8BEN,
entitled Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (or otherappropriate IRS Form W-8), in the case of Non-U.S. Holders.
Backup withholding is not an additional tax. The amount of backup withholding imposed on a payment may
generally be refunded or allowed as a credit against the holder’s U.S. federal income tax liability provided thatthe required information is properly and promptly furnished to the IRS in a timely manner.
Certain U.S. Holders who are individuals that hold certain foreign financial assets (which may include theShares or ADSs) are required to report information relating to such assets, subject to certain exceptions. U.S.
Holders should consult their tax advisors regarding the effect, if any, of this reporting requirement on theirownership and disposition of the Shares or ADSs.
THE SUMMARY OF U.S. FEDERAL INCOME AND JAPANESE NATIONAL TAX CONSEQUENCESSET OUT ABOVE IS INTENDED FOR GENERAL INFORMATION PURPOSES ONLY. INVESTORS IN
THE SHARES OR ADSs ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITHRESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING OR DISPOSING OF
SHARES OR ADSs BASED ON THEIR PARTICULAR CIRCUMSTANCES.
10.F. DIVIDENDS AND PAYING AGENTS
Not applicable.
10.G. STATEMENT BY EXPERTS
Not applicable.
10.H. DOCUMENTS ON DISPLAY
The Company files annual reports on Form 20-F and furnishes quarterly and other periodic reports on Form
6-K with the Commission. You may read and copy any reports, statements or other information on file at the86public reference facilities maintained by the Commission at 100F Street, N.E., Room 1580, Washington,
D.C. 20549 or by accessing the Commission’s home page (http://www.sec.gov). Copies of the Company’s annual
reports on Form 20-F, semi-annual and other periodic reports on Form 6-K are also available on its website athttps://www.advantest.com/US/investors/irLibrary/index.htm. The ADSs are listed on the New York Stock
Exchange under the symbol “ATE,” and the Company’s reports and other information may also be inspected at
the New York Stock Exchange, 20 Broad Street, New York, New York 10005. In addition, copies of contracts
referred to in this annual report may be inspected at the principal executive offices of the Company, located atShin Marunouchi Center Building, 1-6-2, Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan.
10.I. SUBSIDIARY INFORMATION
Not applicable.
ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKAdvantest is exposed to market risk from changes in foreign currency exchange rates, interest rates andequity security prices and credit.
Foreign Currency Exchange Rate Risk
The tables below summarize information as of March 31, 2014 and March 31, 2013 on instruments andtransactions that are sensitive to foreign currency exchange rates, including assets and liabilities denominated in
U.S. dollars, Euros, New Taiwan dollars and Korean won, and forward contracts. The information in each table ispresented in Japanese yen equivalents, which is the Company’s reporting currency.
Foreign Currency Denominated Assets and Liabilities
Foreign currency denominated assets and liabilities that are sensitive to exchange rates between such foreign
currency and the Japanese yen are presented by denominated currency. All of these assets and liabilities arestated at fair value.
As of March 31, 2014
Assets and Liabilities Denominated in
U.S.$
Euro
NT$
KRW
(in millions)Cash, cash equivalents and short-term investments . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payables and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥20,060 ¥8,260 ¥ 372 ¥1,535
10,84557
407
1,160(6,709)(204) (237)(662)
As of March 31, 2013
Assets and Liabilities Denominated in
U.S.$
Euro
NT$
KRW
(in millions)Cash, cash equivalents and short-term investments . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payables and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

87¥20,646 ¥7,407 ¥2,106 ¥3,208
14,405103362
912(5,186)
(296)
(208)
(527)

Other foreign currency denominated assets and liabilities that are sensitive to exchange rates between suchforeign currency and a currency other than the Japanese yen are presented on a combined basis below. All of theassets and liabilities are stated at fair value.
As of March 31, 2014
Yen Value of Cross Currency Assets and Liabilities(in millions)

Cash and cash equivalents and short-term investments . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payables and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 6,960
633(1,947)
As of March 31, 2013
Yen Value of Cross Currency Assets and Liabilities(in millions)

Cash and cash equivalents and short-term investments . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payables and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 2,278373(1,450)Foreign Exchange Contracts
Advantest uses foreign exchange forward contracts and currency options to manage currency exposure,
resulting from changes in foreign currency exchange rates, on planned foreign currency transactions and tradereceivables. Foreign exchange contracts have terms of a year. Foreign exchange forward contracts are presented
by the notional balances with weighted average exchange rates. Advantest has no foreign exchange forward
contracts as of March 31, 2014 and all of the foreign exchange forward contracts outstanding as of March 31,
2013 are listed below.
As of March 31, 2013
Average
Contract
Contractual
Amounts Fair Value Exchange Rate(in millions)

To sell Japanese yen/receive Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥147

¥15

¥109.362

Interest Rate Risk
Advantest had ¥25.0 billion in corporate bonds with fixed interest rates outstanding as of March 31, 2014
and 2013.
Securities Value Risk
The table below shows the acquisition price and fair value of securities that Advantest holds as of March 31,
2014 and March 31, 2013. Advantest does not hold or issue financial commodities with the purpose to trade.
Advantest holds equity or debt securities as available-for-sale securities.
As of March 31, 2013
As of March 31, 2014
Acquisition Price Fair Value Acquisition Price Fair Value(in millions)Marketable Securities . . . . . . . . . . . . . . . . . . . . . . . . . . .

88¥3,079¥5,455¥2,055¥3,272ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A. DEBT SECURITIES
Not applicable.
12.B. WARRANTS AND RIGHTS
Not applicable.
12.C. OTHER SECURITIES
Not applicable.
12.D. AMERICAN DEPOSITARY SHARESFees and Charges for Holders of American Depositary Receipts
JPMorgan Chase Bank, N.A. (“Depositary”), as depositary of the Company’s ADS, collects the following
fees from holders of ADRs or intermediaries acting in their behalf. The Depositary may sell (by public or privatesale) sufficient securities and property received prior to such deposit to pay such fees.
(a) Depositing or substituting the underlying shares
Each person to whom ADSs are issued, will be charged U.S. $5.00 for each 100 ADSs (or portion thereof)
issued or delivered (as the case may be).
(b) Receiving or distributing dividends
A fee of U.S. $0.02 or less per ADS (or portion thereof) for any cash distribution made.
(c) Selling or exercising rights
A fee for the distribution or sale of securities, being in an amount equal to the fee for the execution anddelivery of ADSs which would have been charged U.S.$5.00 for each 100 ADSs (or portion thereof) as a resultof the deposit of such securities (treating all such securities as if they were shares of stock).
(d) Withdrawing an underlying security
Each person surrendering ADSs for withdrawal of deposited securities or whose ADSs are cancelled or
reduced for any other reason will be charged U.S. $5.00 for each 100 ADSs (or portion thereof) reduced,
cancelled or surrendered (as the case may be).
(e) Transferring, splitting or grouping receipts
A fee of U.S. $1.50 per ADR or ADRs for transfers made.
(f)

General depositary services, particularly those charged on an annual basis

A fee of U.S. $0.02 per ADS (or portion thereof) per year for the services performed by the Depositary inadministering the ADRs (which fee shall be assessed against holders as of the record date or dates set by the
Depositary not more than once each calendar year and shall be payable at the sole discretion of the Depositary bybilling such holders or by deducting such charge from one or more cash dividends or other cash distributions).

89

(g) Expenses of the Depositary
Such fees and expenses incurred by the Depositary (including without limitation expenses incurred onbehalf of holders in connection with foreign exchange control regulations or any law or regulation relating toforeign investments) in connection with the delivery of deposited securities or otherwise to comply with the
Depositary’s or its custodian’s compliance procedures, applicable law, rule or regulation.
(i)stock transfer or other taxes and other governmental charges (which are payable by holders or
persons depositing stock);(ii) cable, telex and facsimile transmission and delivery charges incurred at the request of persons
depositing, or Holders delivering stock, ADRs or deposited securities (which are payable by such
persons or holders);(iii) transfer or registration fees for the registration or transfer of deposited securities on any applicableregister in connection with the deposit or withdrawal of deposited securities;(iv) expenses of the Depositary in connection with the conversion of foreign currency into U.S.
dollars; and(v) any other charge payable by any of the Depositary, any of the Depositary’s agents, including,
without limitation, the custodian, or the agents of the Depositary’s agents in connection with theservicing of the stock or other deposited securities.
Fees and Other Payments Made by the Depositary to the Company
The Depositary has agreed to reimburse certain reasonable expenses of the Company related to theCompany’s ADR program and incurred by the Company in connection with the ADR program. In fiscal 2013,
the Company received the following payments from JPMorgan Chase Bank, N.A., as depositary of theCompany’s ADS.
Category of Expenses (Direct Payments)

Amount Reimbursed for FY2013

Listing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investor relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

US$38,000.00
US$50,000.00

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

US$88,000.00

90

PART IIITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES(a) Disclosure Controls and Procedures
Advantest performed an evaluation of the effectiveness of the design and operation of its disclosure controls
and procedures as of March 31, 2014. Disclosure controls and procedures are designed to ensure that the material
financial and non-financial information required to be disclosed in the reports that Advantest files, or submits,
under the Exchange Act is accumulated and communicated to its management including the chief executive
officer and principal accounting and financial officer to allow timely decisions regarding required disclosure. The
disclosure controls and procedures also ensure that the reports that it files or submits under the Exchange Act arerecorded, processed, summarized and reported within the time periods specified in the Commission’s rules andforms. The evaluation was performed under the supervision of Advantest’s Representative Director, President
and CEO and Director and Senior Executive Officer. Advantest’s disclosure and controls and procedures provide
reasonable assurance that its objectives will be met. Managerial judgment was necessary to evaluate the costbenefit relationship of possible controls and procedures. Advantest’s Representative Director, President and CEO
and Director and Senior Executive Officer have concluded that Advantest’s disclosure controls and procedures
are effective at the reasonable assurance level.
(b) Management’s Annual Report on Internal Control Over Financial Reporting
The management of Advantest is responsible for establishing and maintaining adequate internal control overfinancial reporting. Advantest’s internal control system was designed to provide reasonable assurance withrespect to the preparation of financial statements in accordance with U.S. GAAP and the reliability of suchfinancial statements.
Internal control over financial reporting has inherent limitations underlying internal control systems andmisstatements may not be prevented or detected. Furthermore, if the evaluation results regarding theeffectiveness of internal control are expected to remain the same going forward, it is important to recognize that
there are risks, under which changes in circumstances may lead the controls in place to be inadequate or that theextent to which policies or procedures are complied with may lower.
Advantest’s management assessed the effectiveness of the company’s internal control over financial
reporting as of March 31, 2014. In making this assessment, it used the criteria set forth in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992
framework). Based on this assessment, management has concluded that, as of March 31, 2014, Advantest’s
internal control over financial reporting was effective.
Ernst & Young ShinNihon LLC, Advantest’s independent registered public accounting firm, has issued anattestation report on the effectiveness of our internal control over financial reporting as of March 31, 2014. This
report appears in Item 18.
(c) Attestation Report of the Independent Registered Public Accounting Firm
This report appears in Item 18.
91

(d) Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the year ended
March 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control overfinancial reporting.
ITEM 16.

[RESERVED]ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTThe Company’s audit & supervisory board has determined that Masamichi Ogura is an “audit committee
financial expert” as defined by Item 16.A. of Form 20-F. Mr. Ogura met the independence requirements, as theterm is defined under the New York Stock Exchange listing standards. For details regarding Mr. Ogura’s
business experiences, see “6.A. DIRECTORS AND SENIOR MANAGEMENT.”
ITEM 16B. CODE OF ETHICS
The Company has adopted a code of ethics that applies to its directors and executive officers, including its
principal executive officer, principal financial officer, principal accounting officer or controller, or persons
performing similar functions. A copy of the Company’s code of ethics was attached to the annual report on
Form 20-F for fiscal 2003 and is attached as an exhibit to this Form 20-F for reference.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Ernst & Young ShinNihon LLC served as the Company’s independent registered public accounting firm forfiscal 2011, 2012 and 2013. The audited financial statements for these fiscal years are included in the respective
year’s annual report filed on Form 20-F.
The chart below sets forth the aggregate fees for professional services and other services rendered to
Advantest by Ernst & Young ShinNihon LLC and its member firms in fiscal 2012 and 2013.
Fiscal 2012 Fiscal 2013
(in millions)Audit Fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-Related Fees(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Fees(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Fees(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥358
—
30
—

¥373
—
46
14

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

¥388

¥433

(1) Audit Fees consist of fees billed for the annual audit services engagement and other audit services, which
are those services that only the external auditor reasonably can provide, and include the group audit;
statutory audits; the issuance of consents; and assistance with and review of documents filed with the SEC.
(2) Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to theperformance of the audit or review of the Company’s financial statements or that are traditionally performedby the external auditor, and include consultations concerning financial accounting and reporting standards;
and review of security controls and operational effectiveness of systems.
(3) Tax Fees include fees billed for tax compliance services, including the preparation of original and amended
tax returns and claims for refund; tax consultations, such as assistance in connection with tax audits andadvice related to transfer pricing, and requests for rulings or technical advice from taxing authorities; andexpatriate tax services.
(4) All Other Fees include fees billed for training; and process improvement and advice.

92

Policies and Procedures of the Audit & Supervisory Board
Below is a summary of the current policies and procedures of the audit & supervisory board for the preapproval of audit and permissible non-audit services performed by Advantest’s independent public accountants.
Under the policy, the audit & supervisory board authorizes general pre-approval of audit and permissible
non-audit services for the following fiscal year. Upon the general pre-approval of the audit & supervisory board,
no specific pre-approval for audit and permissible non-audit services is required so long as those services fallwithin the scope of the general pre-approval provided.
Applications to provide services that require specific pre-approval by the audit & supervisory board will be
submitted to the audit & supervisory board.
The audit & supervisory board makes further determination as to whether or not to revise the general preapproval for the applicable fiscal year. Such request may include adding to or subtracting from any audit or
permissible non-audit services listed in the general pre-approval. The performance of audit and permissible nonaudit services and the payment of fees are subject to the review by the audit & supervisory board once every
fiscal year.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESThe Company does not have an audit committee. The Company is relying on the general exemption
contained in Rule 10A-3(c)(3) under the Exchange Act, which provides an exemption from the NYSE’s listing
standards relating to audit committees for foreign companies like the Company that have an audit & supervisoryboard. The Company’s reliance on Rule 10A-3(c) (3) does not, in its opinion, materially adversely affect theability of its audit & supervisory board to act independently and to satisfy the other requirements of Rule 10A-3.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
The following table sets forth Advantest’s purchases of its common stock during fiscal 2013:(c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs2(d) Maximum Number of
Shares thatMay Yet Be Purchased
Under the Plans
or Programs

Period(a) Total Number of
Shares Purchased1(b) Average Price
Paid per Share
(Yen)

2013
April 1 – April 30 . . . . . . . . . . . . . . . . . .
May 1 – May 31 . . . . . . . . . . . . . . . . . . .
June 1 – June 30 . . . . . . . . . . . . . . . . . . .
July 1 – July 31 . . . . . . . . . . . . . . . . . . . .
August 1 – August 31 . . . . . . . . . . . . . . .
September 1 – September 30 . . . . . . . . . .
October 1 – October 31 . . . . . . . . . . . . . .
November 1 – November 30 . . . . . . . . . .
December 1 – December 31 . . . . . . . . . .

80
46
220
156
42
132
84
116
118

¥1,338
1,576
1,582
1,622
1,291
1,242
1,114
1,269
1,283

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

2014
January 1 – January 31 . . . . . . . . . . . . . .
February 1 – February 28 . . . . . . . . . . . .
March 1 – March 31 . . . . . . . . . . . . . . . .

102
292
70

1,256
1,142
1,054

N/A
N/A
N/A

N/A
N/A
N/A

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

1,458¥1,321

N/A

N/A

93

1

2

All purchases are made through repurchase of shares constituting less than one unit, which is 100 shares ofcommon stock, or through repurchase of shares pursuant to a resolution of Board of Directors. The purchaseof shares that are a fraction of a unit are made in accordance with the provisions of the Company’s sharehandling regulations. The Company is required to comply with such requests pursuant to the Company Law.
See “Additional Information—Memorandum and Articles of Association—The Unit Share System.”
The Company can repurchase its shares through stock exchanges where the Company’s shares are listed or
pursuant to a takeover bid when there is a resolution of Board of Directors in accordance to Article 41 of the
Articles of Incorporation.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G.

CORPORATE GOVERNANCE

Significant Differences in Corporate Governance Practices between the Company and U.S. Companies
Listed on the New York Stock Exchange
Pursuant to home country practices exemptions granted by the New York Stock Exchange, or the NYSE, theCompany is permitted to follow certain corporate governance practices complying with Japanese laws,
regulations and stock exchange rules in lieu of NYSE’s listing standards. The SEC approved changes to the
NYSE’s listing standards related to corporate governance practices of listed companies in November 2003, as
further amended in November 2004. The Company is exempted from the approved changes, except forrequirements that (a) the Company’s audit & supervisory board satisfy the requirements of Rule 10A-3 under the
U.S. Securities Exchange Act of 1934 as amended, or the Exchange Act, (b) the Company must disclosesignificant differences in the corporate governance practices followed by the Company as compared to thosefollowed by domestic companies under the NYSE listing standards, (c) the Company’s CEO must notify the
NYSE of any non-compliance with (a) and (b), and (d) the Company must submit annual and interim written
affirmations to the NYSE. The Company’s corporate governance practices and those followed by domestic
companies under the NYSE listing standards, or NYSE Corporate Governance, have the following significant
differences:
1. Directors. The Company currently has three outside directors on its Board of Directors. Unlike NYSE
Corporate Governance, the Company Law of Japan and related legislation (hereinafter in Item 16G., the“Company Law”), do not require Japanese companies with audit & supervisory board such as the Company tohave any outside directors on its Board of Directors. While NYSE Corporate Governance requires that the nonmanagement directors of each listed company meet at regularly scheduled executive sessions without
management, the Company currently has no non-management director on its Board of Directors. Unlike NYSE
Corporate Governance, the Company Law does not require, and accordingly the Company does not have, aninternal corporate organ or committee comprised of only outside directors.
2. Committees. The Company has not established committees responsible for director nomination,
corporate governance and executive compensation as required by NYSE Corporate Governance, but it has
adopted a system of audit & supervisory board members based on the Company Law and integrated such system
into the Company’s corporate governance structure. In addition, in connection with such system of audit &supervisory board members, the Company has elected to establish a nomination and compensation committee,
which is an optional committee under the Company Law.
Pursuant to the Company Law, the Company’s Board of Directors nominates and submits a proposal for
appointment of directors for shareholder approval. The shareholders vote on such nomination at the Company’s
general meeting of shareholders. The Company Law requires that the respective total amount of remuneration,
among others, (remuneration, bonus, and other consideration for services related to employment) to be paid to all94directors and all audit & supervisory board members must be determined by a resolution of the general meetingof shareholders, unless their remuneration is provided for in the articles of incorporation. The distribution of
remuneration among directors is broadly delegated to the Company’s Board of Directors and the distribution of
remuneration among audit & supervisory board members is determined by the audit & supervisory board.
3. Audit Committee. The Company avails itself of paragraph (c)(3) of Rule 10A-3 of the Exchange Act,
which provides a general exemption from the audit committee requirements to a foreign private issuer with anaudit & supervisory board, subject to certain requirements which continue to be applicable under Rule 10A-3.
Consistent with the requirements of the Company Law, the Company elects its audit & supervisory board
members through a resolution adopted at a general meeting of shareholders. The Company currently has four
audit & supervisory board members, which exceeds the minimum number of audit & supervisory board members
required pursuant to the Company Law.
Unlike NYSE Corporate Governance, the Company Law, among others, does not require audit &supervisory board members to establish an expertise in accounting nor are they required to present other special
knowledge and experience. Under the Company Law, the audit & supervisory board may determine audit policy,
methods to investigate the state of business operations and assets and other matters relating to the execution ofduties by audit & supervisory board members, prepare audit & supervisory board members’ reports and giveconsent to proposals of the nomination of audit & supervisory board members and accounting auditors.
The Company currently has two audit & supervisory board members who satisfy the requirements of“outside audit & supervisory board member” under the Company Law. Unlike NYSE Corporate Governance,
under the Company Law, at least one-half of the audit & supervisory board members of the Company must be“outside audit & supervisory board members,” which is a person who was not a director, an accounting counselor(if an accounting counselor is a corporation, an employee of such corporation who carries out its duties),
executive officer, general manager, or any other employee of the Company or any of its subsidiaries at any timein the past. Audit & supervisory board members may not at the same time be directors, an accounting counselor(if an accounting counselor is a corporation, an employee who carries out its duties), executive officer, generalmanager, or any other employee of the Company or any of its subsidiaries.
4. Corporate Governance Guidelines. The Company is required to adopt or disclose corporate governanceguidelines under Japanese laws and regulations, including the Company Law and the Financial Instruments andExchange Law of Japan or rules of Tokyo stock exchange. Pursuant to the Company Law, the Company isrequired to decide to implement a structure as required by an ordinance of the Ministry of Justice (the “Internal
Control System”) in order to ensure directors’ compliance with applicable laws and regulations and theCompany’s articles of incorporation while executing their duties and joint stock companies’ proper business
operation, and is required to disclose the decision to implement the Internal Control System, policies and theconditions of its corporate governance in its business report, annual securities report and certain other disclosure
documents in accordance with the Company Law, the Financial Instruments and Exchange Law, and applicableCabinet ordinances and rules of Tokyo stock exchange in respect of timely disclosure.
5. Code of Business Conduct and Ethics. Unlike NYSE Corporate Governance, under Japanese law(including the Company Law and the Financial Instruments and Exchange Law of Japan), and the rules of theTokyo stock exchange, the Company is not required to adopt a code of business conduct and ethics for directors,
officers and employees. Accordingly, the Company is not required to adopt and disclose a code of businessconduct and ethics for these individuals. However, in accordance with the Company Law, the Company has
decided to implement the Internal Control System as a structure to ensure that director’s execution of their duties
at meetings of the Board of Directors complies with applicable laws and regulations and the Company’s articles
of incorporation. Furthermore, the Company has established a code of ethics consistent with Section 406 of the
Sarbanes-Oxley Act.
95

6. Shareholder Approval of Equity Compensation Plans. Unlike NYSE Corporate Governance, in whichmaterial revisions to equity-compensation plans of the listed companies are subject to shareholder approval,
pursuant to the Company Law, if a joint stock company desires to adopt an equity-compensation plan for
directors as compensation to directors other than cash, such company is generally required to obtain shareholder
approval by an “ordinary resolution.” In addition to the above approval, in the past, when the Company
previously desired to adopt an equity-compensation plan under which stock acquisition rights are granted onfavorable terms to the recipient under the plan (except where such rights are granted to all of its shareholders on a
pro-rata basis at the same time), the Company obtained shareholder approval by a “special resolution” of ageneral meeting of shareholders, where the quorum is one-third of the total number of voting rights and theapproval of at least two-thirds of the voting rights represented at the meeting is required.
ITEM 16H.

MINE SAFETY DISCLOSURE

None.

96

PART IIIITEM 17.

FINANCIAL STATEMENTS

Not applicable.
ITEM 18.

FINANCIAL STATEMENTS

The following financial statements are filed as part of this annual report on Form 20-F.

97

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-2

Consolidated Balance Sheets as of March 31, 2013 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-4

Consolidated Statements of Operations
for the years ended March 31, 2012, 2013 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-6

Consolidated Statements of Comprehensive Income (Loss)for the years ended March 31, 2012, 2013 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-7

Consolidated Statements of Stockholders’ Equity
for the years ended March 31, 2012, 2013 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-8

Consolidated Statements of Cash Flowsfor the years ended March 31, 2012, 2013 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-9Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-10

All schedules are omitted as permitted by the rules and regulations of the Securities and Exchange Commission,as the required information is presented in the notes to consolidated financial statements, or the schedules are notapplicable.

F-1

Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Advantest Corporation
We have audited the accompanying consolidated balance sheets of Advantest Corporation and subsidiaries
as of March 31, 2013 and 2014, and the related consolidated statements of operations, comprehensive income(loss), stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2014. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we 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 reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Advantest Corporation and subsidiaries at March 31, 2013 and 2014, and theconsolidated results of their operations and their cash flows for each of the three years in the period ended
March 31, 2014, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), Advantest Corporation’s internal control over financial reporting as of March 31, 2014, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (1992 framework) and our report dated June 26, 2014 expressed an
unqualified opinion thereon.
/s/ Ernst & Young ShinNihon LLC
Tokyo, Japan
June 26, 2014

F-2

Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Advantest Corporation
We have audited Advantest Corporation and subsidiaries’ internal control over financial reporting as ofMarch 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria).
Advantest Corporation and subsidiaries’ management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that amaterial weakness exists, testing and evaluating the design and operating effectiveness of internal control basedon the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financial statements in accordancewith generally accepted accounting principles, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.
In our opinion, Advantest Corporation and subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of March 31, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated balance sheets of Advantest Corporation and subsidiaries as of March 31, 2013
and 2014, and the related consolidated statements of operations, comprehensive income (loss), stockholders’equity, and cash flows for each of the three years in the period ended March 31, 2014 and our report dated
June 26, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young ShinNihon LLC
Tokyo, Japan
June 26, 2014
F-3

ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2013 and 2014
Yen (Millions)
2013
2014

AssetsCurrent assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 45,668
Trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,953Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,849Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,319

68,997
20,40430,2005,218

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

112,789

124,819

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,923
41,36815,833
41,6707,932

3,741
39,925
3,545
46,846
10,980Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥225,515

229,856

See accompanying notes to consolidated financial statements.
F-4

ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2013 and 2014
Yen (Millions)
2013
2014

Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 10,380
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,910
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,436
Accrued warranty expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,889
Customer prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,198
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,087

12,353
6,775
1,089
1,589
2,488
2,313

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,90026,607

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued pension and severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,000—26,785
4,589

25,00030,14928,641
3,207

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

84,274

113,604

Commitments and contingent liabilities
Stockholders’ equity:
Common stock,
Authorized 440,000,000 shares; issued 199,566,770 shares . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, 25,773,688 shares in 2013 and 25,368,828 shares in 2014, at cost . . .

32,36332,36342,801
43,906
170,626 130,740(6,929)5,326(97,620) (96,083)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

141,241

116,252

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥225,515

229,856

See accompanying notes to consolidated financial statements.
F-5

ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended March 31, 2012, 2013 and 2014
Yen (Millions)
2013

2014

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥141,048
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,300132,903
63,983111,878
62,545Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68,74868,92049,333

Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,30337,608—33,06235,778—32,67039,964
13,068Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

837

80

(36,369)

Other income (expense):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on investment securities . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

323
(153)
—
(2,254)(2,195)

213
(132)
388
(400)
(1,442)

199
(140)
1,396
—
(587)

Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4,279)(1,373)

868

Income (loss) before income taxes and equity in earnings (loss) ofaffiliated company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,442)(1,293)(35,501)

Income taxes (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings (loss) of affiliated company . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,240)
7

2,493
(35)

61
22

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ (2,195)(3,821)(35,540)

Yen
2013

2014

(22.03)(22.03)(204.10)(204.10)

2012

2012

Net income (loss) per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ (12.67)(12.67)

See accompanying notes to consolidated financial statements.
F-6

ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
Years ended March 31, 2012, 2013 and 2014
2012

Yen (Millions)
2013
2014

Comprehensive income (loss)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥(2,195) (3,821) (35,540)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .
1,422 17,250 12,555
Net unrealized gains (losses) on investment securities:
Net unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
602
174
(642)
Pension related adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,328) (1,779)
342
Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4,304) 15,645

12,255

Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥(6,499) 11,824(23,285)

See accompanying notes to consolidated financial statements.
F-7

ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended March 31, 2012, 2013 and 2014

Common stock
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the year
Stock option compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total changes in the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the year
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total changes in the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss)
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the year
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the year
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total changes in the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the year
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock option compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total changes in the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

Yen (Millions)
2013

2014

¥ 32,363—
32,36332,363—32,36332,363—32,36340,62842,28042,801

1,652
—
1,652
42,280

861
(340)
521
42,801

1,283
(178)
1,105
43,906

183,009

179,081

170,626(2,195)(3,821) (35,540)(1,733)(3,468)(3,480)(0)(1,166)(866)(3,928)(8,455) (39,886)
179,081 170,626 130,740(18,270)(22,574)(6,929)(4,304)(22,574)

15,645(6,929)12,2555,326(99,598)(99,598)(97,620)(1)
1
0(99,598)

(1)
1,979
1,978
(97,620)

(2)
1,539
1,537
(96,083)

138,132

131,552

141,241(2,195)(4,304)(1,733)
1,652
—
(1)
1
(6,580)(3,821)
15,645(3,468)
861
(340)
(1)
813
9,689

(35,540)
12,255(3,480)
1,283
(178)
(2)
673
(24,989)¥131,552

141,241

116,252

See accompanying notes to consolidated financial statements.
F-8

ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 2012, 2013 and 2014

2012

Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock option compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities, net of effect of acquisition:
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued warranty expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued pension and severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:(Increase) decrease in short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of available-for-sales securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of subsidiary, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease of other investment in equity method investee . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from distribution of equity method investee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Increase (decrease) in short term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of convertible bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of senior convertible notes of acquired subsidiary . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . .
Net effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Net change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental data:
Cash paid during the year for:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ (2,195)(3,821) (35,540)

6,838(3,663)
583
2,254
—
—

8,063
693
861
400
(388)
—

8,268
(1,897)
1,283—(1,396)
13,495

616
4,613
902
39
(659)
164
(1,815)975
3,650
12,302(1,004)(566)(6,475)(4,529)
677
(302)
611
841
2,724
(2,215)

7,891
2,806
1,114
(1,376)
(424)
(348)
(966)
998
2,316
(3,776)

14,387—
10,717287(57,145)
—
620
—
—
—
89
32
(5,931) (11,386)
(329)
(443)
(78)
12
(37,670) (11,498)—
2,354(1,273)—135
379(5,511)(830)
35(4,711)

25,466 (25,000)—
25,000——(13,835)—(1,729) (3,460)
(15)
546
9,887
(2,914)(1,624)
4,077(17,105) (12,550)
75,323 58,218¥ 58,218 45,668——
30,150—(3,474)526
27,202
4,614
23,32945,66868,997¥ 3,267
153

2,711
140

See accompanying notes to consolidated financial statements.
F-9

Yen (Millions)
2013
2014

1,519
87

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements(1) Description of Business and Summary of Significant Accounting Policies and Practices(a) Description of Business
The Company and its consolidated subsidiaries (collectively, “Advantest”) manufacture and sell
semiconductor and component test system products and mechatronics-related products such as test handlers anddevice interfaces. Advantest also engages in research and development activities and provides maintenance andsupport services associated with these products.
Description of the business by segment is as follows:
The semiconductor and component test system segment provides customers with test system products forthe semiconductor industry and the electronic parts industry. Product lines provided in the semiconductor andcomponent test system segment include test systems for memory semiconductors for memory semiconductor
devices and test systems for SoC (“System-on-a-Chip”) semiconductors for non memory semiconductor devices.
The mechatronics system segment provides product lines such as test handlers, mechatronic-applied
products for handling semiconductor devices, device interfaces that serve as interfaces with the devices that aremeasured and operations related to nano-technology products.
The services, support and others segment consists of comprehensive customer solutions provided inconnection with the above segments, support services, equipment lease business and others.
(b) Principles of Consolidation
Advantest’s consolidated financial statements include financial statements of the Company and its
subsidiaries, all of which are wholly-owned. Investment in an affiliated company over which Advantest has theability to exercise significant influence, but does not hold a controlling financial interest, is accounted for by theequity method. All significant intercompany balances and transactions have been eliminated in consolidation.
(c) Cash Equivalents
Cash equivalents consist of deposits and certificates of deposit with an original maturity of three months orless from the date of purchase. Advantest considers all highly liquid debt instruments with original maturities ofthree months or less to be cash equivalents.
(d) Allowance for Doubtful Accounts
Advantest recognizes an allowance for doubtful accounts to ensure that trade receivables are not overstated
due to uncollectability, which represents Advantest’s best estimate of the amount of probable credit losses inAdvantest’s existing trade receivables. An allowance for doubtful accounts is provided at an amount calculated
based on historical write off experience and a specific allowance for estimated amounts considered to beuncollectable after reviewing individual factors such as the customer’s current financial position, significant
changes in the semiconductor industry, other information that is publicly available and the customer’s credit
worthiness.
(e) Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the average cost method.
F-10

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(f) Investment Securities
Investment securities consist of marketable and non-marketable equity securities. Fair value is determinedbased on quoted market prices, projected discounted cash flow or other valuation techniques as appropriate.
Marketable Equity Securities
Advantest classifies its marketable equity securities as available-for-sale.
Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from earnings and are reported as a component ofaccumulated other comprehensive income (loss) until realized. A decline in the fair value of any available-forsale security below cost that is deemed to be other than temporary results in an impairment loss. The impairment
loss is charged to earnings and a new cost basis for the security is established. Dividend and interest income arerecognized when earned.
On a periodic basis, Advantest evaluates the available-for-sale securities for possible impairment. Factors
considered in assessing whether an indication of other than temporary impairment exists include: the degree ofchange in ratio of market prices per share to book value per share at the date of evaluation compared to theacquisition date, the financial condition and prospects of each investee company, industry conditions in which
the investee company operates, the period of time the fair value of an available-for-sale security has been below
the cost basis of the investment and other relevant factors. Advantest generally has the intention and ability toretain available-for-sale securities which it determines that their impairment is not other than temporary for aperiod of time sufficient to allow for any anticipated recovery in market value. The impairment to be recognizedis measured based on the amount by which the carrying amount of the investment exceeds the fair value of theinvestment.
The cost of a security sold or the amount reclassified out of accumulated other comprehensive income (loss)
into earnings is determined by the average cost method.
Non-marketable Equity Securities
Non-marketable equity securities are carried at cost. On a periodic basis, Advantest evaluates theseinvestments for possible impairment. Non-marketable equity securities that have impairment indicators were
evaluated to determine whether the investments were impaired and the impairment, if any, is other than
temporary. If the impairment is other than temporary, Advantest recognizes an impairment loss to reduce thecarrying amount to the fair value and a new cost basis for the security is established.
(g) Derivative Financial Instruments
All derivative instruments in the consolidated balance sheets are stated at fair value. The accounting forchanges in the fair value (that are, gains or losses) of a derivative instrument depends on the objective for holding
such instrument and whether it meets the criteria for designation as a cash flow hedge or a fair value hedge. If
certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures tochanges in fair values, cash flows, or foreign currencies.
If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized inearnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the
F-11

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
risk being hedged. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on thederivative instrument is reported initially as a component of other comprehensive income (loss) and subsequently
reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from theassessment of hedge effectiveness as well as the ineffective portion of the gain or loss are reported in earnings
immediately. If the derivative instrument is not designated as a hedge, the gain or loss is recognized in earnings
in the period of change.
(h) Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally using the straight-line method over estimated useful lives of the assets.
The depreciation period for major assets ranges from 15 years to 50 years for buildings, 4 years to 10 years
for machinery and equipment, and 2 years to 5 years for tools, furniture and fixtures.
(i) Goodwill and Intangible Assets
Goodwill and intangible assets with indefinite useful lives are not amortized but are tested for impairment atleast annually. Intangible assets with definite useful lives are amortized on a straight-line basis over theirrespective estimated useful lives and reviewed for impairment.
Business combinations are accounted for using the acquisition method. Advantest allocates the purchaseprice to the assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition,
including intangible assets that can be identified. The purchase price in excess of the fair value of the net assets isrecorded as goodwill. Acquisition costs are expensed as incurred.
Intangible assets consist of customer relationships and other intangible assets. Advantest has estimated theweighted average amortization period for the customer relationships relating to services to be 7 years. The
weighted average amortization period for all intangible assets is approximately 6 years.
(j) Impairment of Long-Lived Assets
Advantest reviews impairment of long-lived assets including identifiable intangibles with definite useful
lives whenever events or changes in circumstances indicate that the carrying amount of an asset may not berecoverable. In such circumstances, if the carrying value of the asset is less than the estimated undiscounted cash
flows expected to be generated by the asset or asset group, Advantest recognizes an impairment loss. The
impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds thefair value.
(k) Accrued Warranty Expenses
Advantest’s products are generally subject to warranty, and Advantest provides an allowance for such
estimated costs when product revenue is recognized. To provide for future repairs during warranty periods,
estimated repair expenses over the warranty period are accrued based on the historical ratio of actual repair
expenses to corresponding sales, and any facts and circumstances that occurred.
F-12

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(l) Convertible Bonds
Advantest is not required to bifurcate any of the embedded features contained in the ¥30,000 million zero
coupon convertible bonds due 2019 (bonds with stock acquisition rights), which was issued in March 2014, foraccounting purposes.
(m) Accrued Pension and Severance Costs
The Company and certain of its subsidiaries have retirement and severance defined benefit plans covering
substantially all of their employees. Prior service benefit and cost, and actuarial gains and losses are recognizedin accumulated other comprehensive income (loss) and are amortized using the straight-line method over the
average remaining service period of active employees. The funded status, which is the difference between the fairvalue of plan assets and the projected benefit obligations, of pension plans is recognized in the consolidatedbalance sheet, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax.
The adjustment to accumulated other comprehensive income (loss) represents the unrecognized actuarial loss andunrecognized prior service cost. These amounts will be subsequently recognized as net periodic benefit cost
pursuant to Advantest’s accounting policy for amortizing such amounts.
(n) Revenue Recognition
GeneralAdvantest recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurredor the services have been rendered, the sales price is fixed or determinable and collection of the related
receivable is reasonably assured.
Sales of Products
Sales of products which require installation are recognized when the related installation is completed andother sales recognition criteria are met since the installation is essential to the functionality of the equipment.
When customer acceptance is uncertain, revenue is deferred until customer acceptance has been received. Whenthe final payment is subject to customer acceptance, a portion of revenue for the final payment is deferred until
an enforceable claim has become effective.
Sales of products and components which do not require installation service by Advantest is recognized upon
shipment if the terms of the sale are free on board (FOB) shipping point or upon delivery if the terms are FOB
destination which coincide with the passage of title and risk of loss.
Long-term Service Contracts
Revenue from fixed-price, long-term service contracts is recognized on the straight-line basis over thecontract term.
Leasing Income
Revenue from operating leases is primarily recognized on the straight-line basis over the lease term.

F-13

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Multiple Deliverables
Advantest’s revenue recognition policies provide that, when a sales arrangement contains multiple elements,
such as hardware and software products and services, Advantest allocates revenue to each element based on aselling price hierarchy and recognizes revenue when the criteria for revenue recognition have been met for eachelement. The selling price for a deliverable is based on its vendor specific objective evidence (“VSOE”), if
available, third party evidence (“TPE”) if VSOE is not available, or estimated selling price if neither VSOE nor
TPE is available.
(o) Shipping and Handling Costs
Shipping and handling costs totaled ¥1,409 million, ¥1,564 million and ¥1,591 million for the years ended
March 31, 2012, 2013 and 2014, respectively, and are included in selling, general and administrative expenses in
the consolidated statements of operations.
(p) Research and Development Expenses
Research and development costs are expensed as incurred.
(q) Advertising Costs
Advertising costs totaled ¥178 million, ¥497 million and ¥341 million for the years ended March 31, 2012,2013 and 2014, respectively, and are expensed as incurred.
(r) Stock-Based Compensation
Advantest applies the fair-valued-based method of accounting for stock-based compensation and recognizes
stock-based compensation expense in the consolidated statements of operations. The cost of employee services
received in exchange for an award of equity instruments is measured based on the grant-date fair value of thestock options granted to employees. The cost is recognized on the straight line basis over the period during which
an employee is required to provide service in exchange for the award. The Black Scholes pricing model is used toestimate the value of stock options.
Expected dividend yield is determined by the Company’s dividend ratio of the past and other associatedfactors. Risk free interest rate is determined by Japanese government bond yield for the period corresponding to
expected life. Expected volatility is determined by historical volatility and trend of the Company’s share prices,and other associated factors. Expected life is determined by the Company’s option exercise history, post vesting
employment termination behavior for similar grants, and other pertinent factors.
(s) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases, and operating loss carryforwards and tax
credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply totaxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Advantest records a valuation allowance to reduce the deferred tax assets to theamount that is more likely than not to be realized.
F-14

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Advantest establishes reserves for uncertain tax positions when it is more likely than not, based on technicalmerits, that the tax positions will be sustained upon examination by the tax authorities. Benefits from tax
positions that meet the more-likely-than-not recognition threshold are measured at the largest amount of benefit
that is greater than 50 percent likelihood of being realized upon settlement. Advantest recognizes interest andpenalty accruals related to unrecognized tax benefits in income taxes in the consolidated statements ofoperations.
(t) Net Income (Loss) per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average
number of shares outstanding during the year. Diluted net income per share reflects the maximum possible
dilution from conversion, exercise, or contingent issuance of securities. All potentially dilutive securities are
excluded from the calculation in a situation where there is a net loss attributable to Advantest’s stockholders.
(u) Foreign Financial Statements
The financial statements of foreign operations whose functional currency is a local currency are translated
into Japanese Yen. Assets and liabilities are translated at the period-end exchange rates and revenues andexpenses are translated at the average exchange rate for the period. Resulting translation adjustments are shown
as a component of other comprehensive income (loss).
The financial statements of foreign operations whose functional currency is Japanese Yen are remeasured
into Japanese Yen. All exchange gains and losses from remeasurement of monetary assets and liabilities
denominated in the local currency are included in other income (expense) for the period in which theremeasurement is made.
(v) Foreign Currency Transactions
Assets and liabilities denominated in foreign currencies at the balance sheet date are translated by using theapplicable current rate prevailing at that date. All revenue and expenses associated with foreign currencies aretranslated by using the rate of exchange prevailing when such transactions occur. Those gains (losses) are
included in other income (expense) in the accompanying consolidated statements of operations.
Foreign exchange gains (losses) were (¥2,319) million, (¥1,427) million and (¥655) million for the years
ended March 31, 2012, 2013 and 2014, respectively.
(w) Use of Estimates
Management of Advantest has made a number of estimates and assumptions relating to the reporting ofassets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the periods to prepare these consolidated
financial statements in conformity with accounting principles generally accepted in the United States (“U.S.
GAAP”). Significant items subject to such estimates and assumptions include valuation of trade receivables,
inventories, goodwill, long-lived assets and deferred tax assets, various accruals such as accrued warranty
expenses, and assets and obligations related to employees retirement and severance plans. Actual results could
differ from those estimates.

F-15

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(x) New Accounting Standards
In July 2012, the FASB amended the accounting guidance to simplify how entities test indefinite-lived
intangible assets for impairment which improve consistency in impairment testing requirements among longlived asset categories. The guidance permits an assessment of qualitative factors to determine whether it is more
likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets
in which this assessment concludes it is more likely than not that the fair value is more than its carrying value,
the guidance eliminates the requirement to perform quantitative impairment testing as outlined in the previously
issued standards. The guidance was adopted by Advantest in the first quarter beginning April 1, 2013. The
adoption of the guidance did not have a significant impact on its consolidated results of operations and financial
condition.
In February 2013, the FASB finalized the accounting guidance for reporting of amounts reclassified out ofaccumulated other comprehensive income. This new guidance requires an entity to provide information about theamounts reclassified out of accumulated other comprehensive income by component. The guidance was adopted
by Advantest in the first quarter beginning April 1, 2013. The adoption of the guidance did not have a significant
impact on its consolidated results of operations and financial condition.
In May 2014, the FASB issued the accounting guidance for revenue from contracts with customers. This
guidance supersedes virtually all existing revenue recognition requirements under U.S. GAAP and requires anentity to apply the five steps to recognize revenue from contracts with customers unless the contracts are in thescope of other U.S. GAAP requirements. Additionally, an entity should disclose quantitatively and qualitatively
sufficient information including contract with customers, significant judgments, and assets recognized from thecosts to obtain or fulfill a contract. The entity should apply the amendments in this guidance using one of thefollowing two methods; retrospectively to each prior reporting period presented or retrospectively with the
cumulative effect of initially applying this guidance recognized at the date of the initial application. The guidanceis effective for annual reporting periods beginning after December 15, 2016, including interim periods within thatreporting period. Early application is not permitted. The guidance is required to be adopted by Advantest in thefirst quarter beginning April 1, 2017. Advantest is currently evaluating the effect that this adoption will have on
its consolidated results of operations and financial condition.
(y) Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform tothe current year presentation.
(2) Trade Receivables
Trade receivables at March 31, 2013 and 2014 were as follows:
Yen (Millions)
2013
2014

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 2,570
24,437

1,448
19,084

Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,00754

20,532
128¥26,953

20,404

F-16

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(3) Allowance for Doubtful Accounts
Changes in the allowance for doubtful accounts for the years ended March 31, 2012, 2013 and 2014 were as
follows:
2012

Yen (Millions)
2013
2014

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 67
8
—

75
(13)
(8)

54
74
0

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 75

54

128

(4) Inventories
Inventories at March 31, 2013 and 2014 were composed of the following:
Yen (Millions)
2013
2014

Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 6,485
11,37813,986

6,509
11,467
12,224¥31,849

30,200(5) Property, Plant and Equipment
Property, plant and equipment at March 31, 2013 and 2014 were composed of the following:
Yen (Millions)
2013
2014

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tools, furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥14,557
26,21324,071
16,191
4,205

14,82231,30422,08815,444
1,099

Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

85,23743,86984,757
44,832¥41,368

39,925

Depreciation expense was ¥4,326 million, ¥5,778 million and ¥6,106 million for the years ended March 31,
2012, 2013 and 2014, respectively.
During the year ended March 31, 2014, as a result of lower than expected future cash flows and changes inthe business environment including a larger-than-expected contraction in the semiconductor test equipment
market, chiefly in the smartphone semiconductor test space, Advantest recognized impairment losses of¥1,099 million and ¥497 million in its semiconductor and component test system segment and its mechatronics
system segment, respectively. The total impairment loss of ¥1,596 million was included in cost of sales andimpairment charge in the accompanying consolidated statements of operations.
F-17

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(6) Goodwill and Intangible Assets
The components of intangible assets excluding goodwill at March 31, 2013 and 2014 were as follows:
Yen (Millions)
2013
2014
Gross carrying Accumulated Gross carrying Accumulated
amountamortization
amountamortization

Intangible assets subject to amortization:
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . .
Patented technologies . . . . . . . . . . . . . . . . . . . . . . .
Developed technologies . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 2,306
2,549
4,995
7,524
2,005

1,624
573
1,037
1,652
473

¥1,623
1,184
—
—
640

852
482
—
—
336

19,379

5,359

3,447

1,670

1,589
224

—
—

1,544
224

—
—

1,813

—

1,768

—

¥21,192

5,359¥5,215

1,670

Intangible assets not subject to amortization:
In-process technologies . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets:
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

Aggregate amortization expense for the years ended March 31, 2012, 2013 and 2014 was ¥2,512 million,¥2,285 million and ¥2,162 million, respectively. Estimated amortization expense for the next five years ending
March 31 is ¥655 million in 2015, ¥742 million in 2016, ¥625 million in 2017, ¥575 million in 2018, and¥196 million in 2019, respectively.
During the year ended March 31, 2014, as a result of lower than expected future cash flows and changes inthe business environment including a larger-than-expected contraction in the semiconductor test equipment
market, chiefly in the smartphone semiconductor test space, Advantest recognized impairment losses of¥11,671 million and ¥228 million in its semiconductor and component test system segment and its mechatronics
system segment, respectively. The total impairment loss of ¥11,899 million was included in cost of sales andimpairment charge in the accompanying consolidated statements of operations.
Changes in the carrying amount of goodwill for the years ended March 31, 2013 and 2014 were as follows:
Yen (Millions)2013
Semiconductor
and Component
Test System
Business

Mechatronics
SystemBusiness

Services,
Supportand Others

Total

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥21,9113,069——

14,5852,105

36,496
5,174

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24,980—16,69041,670

F-18

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Yen (Millions)2014
Semiconductor
and Component
Test System
Business

Mechatronics
SystemBusiness

Services,
Support andOthers

Total

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥24,980
—
2,295

—
—
—

16,6901,252
1,629

41,6701,252
3,924

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,275—

19,571

46,846

Advantest performed its annual impairment test for goodwill at the reporting unit level and identified no
impairments at March 31, 2012, 2013 and 2014.
(7) Investment Securities
Marketable equity securities are classified as available-for-sale securities. The acquisition cost, grossunrealized gains, gross unrealized losses and fair value at March 31, 2013 and 2014 were as follows:

Acquisition
cost

Noncurrent:
Available-for-sale:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 3,079

Acquisition
cost

Noncurrent:
Available-for-sale:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Yen (Millions)
2013
Gross
Gross
unrealized unrealized
gains
losses2,377

1

Yen (Millions)
2014
Gross
Gross
unrealized unrealized
gains
losses¥ 2,055

1,244

27

Fair
value

5,455

Fair
value

3,272

Equity securities consist primarily of stocks issued by Japanese listed companies.
Proceeds from the sale of available-for-sale securities and gross realized gains on available-for-sales
securities for the year ended March 31, 2012 were ¥10,717 million and ¥19 million. Gross realized losses on thesale of available-for-sale securities for the year ended March 31, 2012 were insignificant. Proceeds from the saleof available-for-sale securities and gross realized gains on available-for-sale securities for the year ended
March 31, 2013 were ¥425 million and ¥388 million. No losses were realized on the sale of available-for-salesecurities for the year ended March 31, 2013. Proceeds from the sale of available-for-sale securities and grossrealized gains on available-for-sale securities for the year ended March 31, 2014 were ¥2,482 million and ¥1,396
million. No losses were realized on the sale of available-for-sale securities for the year ended March 31, 2014.
F-19

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
For the years ended March 31, 2012 and 2013, Advantest recognized impairment losses of ¥1,259 millionand ¥388 million, respectively, on available-for-sale securities, which were considered other-than-temporarily
impaired and wrote them down to the fair value. There were no impairment losses on available-for-salesecurities, which were not considered other-than-temporarily impaired for the year ended March 31, 2014.
Gross unrealized losses on available-for-sale securities and the fair value of the related securities,
aggregated by length of time that individual securities have been in a continuous unrealized loss position, at
March 31, 2013 and 2014, were as follows:
Yen (Millions)2013
Less than 12 months
12 months or longer
Gross
Gross
unrealized
unrealized
Fair
Fair
losseslossesvalue
value

Noncurrent:
Available-for-sale:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥—

—

5

1

Yen (Millions)2014
Less than 12 months
12 months or longer
Gross
Gross
Fair
unrealized
Fair
unrealized
value
lossesvalue
lossesNoncurrent:
Available-for-sale:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥289

27

—

—

Advantest maintains non-marketable equity securities, which are recorded at cost. The carrying amounts ofnon-marketable equity securities were ¥468 million and ¥469 million at March 31, 2013 and 2014, respectively.
Advantest had not estimated the fair value of other non-marketable equity securities aggregating ¥460 millionand ¥469 million at March 31, 2013 and 2014, respectively, since it was not practicable to estimate the fair valueof the investments due to the lack of readily determinable fair values and difficulty in estimating fair value
without incurring excessive cost. Non-marketable equity securities that had impairment indicators were evaluatedto determine whether the investments were impaired and the impairment, if any, was other than temporary. For
the years ended March 31, 2012 and 2013, non-marketable equity securities with a purchase cost of¥1,395 million and ¥20 million were written down to their estimated fair values of ¥400 million and ¥8 million,
resulting in other-than-temporary impairment charges of ¥995 million and ¥12 million, respectively, which were
included in impairment losses on investment securities in the accompanying consolidated statements ofoperations. No impairment indicators were recognized and, accordingly, no impairment losses were recorded on
non-marketable equity securities for the year ended March 31, 2014.
(8) Derivative Financial Instruments
Advantest uses derivative instruments primarily to manage exposures to foreign currency. The primaryobjective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes inforeign currency. The instruments are not designated for trading or speculative purposes. Derivative financial
F-20

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
instruments contain an element of risk in the event the counterparties are unable to meet the terms of theagreements. However, Advantest minimizes risk exposure by limiting the counterparties to major internationalbanks and financial institutions meeting established credit guidelines. Management of Advantest does not expect
any counterparty to default on its obligations and, therefore, does not expect to incur any losses due tocounterparty default on its obligations. Advantest generally does not require or place collateral for thesederivative financial instruments.
In accordance with U.S. GAAP, Advantest recognizes derivative instruments as either assets or liabilities on
the balance sheet at fair value. Changes in fair value of the derivatives are recorded as other income (expense).
Derivatives not designated as hedging instruments
Derivatives not designated as hedging instruments consist primarily of forward contracts to reduce
Advantest’s risk associated with exchange rate fluctuations, as gains and losses on these contracts are intended tooffset exchange losses and gains on underlying exposures. Changes in fair value of foreign exchange contracts
are recognized in earnings under the caption of other income (expense).
Advantest had foreign exchange contracts to exchange currencies among Japanese yen, US dollar and Euro
during the year ended March 31, 2013 and 2014. The notional amounts of outstanding forward contracts forforeign currency sales were ¥147 million at March 31, 2013. However, there were no outstanding forward
contracts for foreign currency purchases and sales as of March 31, 2014.
Fair Value of Derivative Contracts
Fair values of derivatives not designated as hedging instruments at March 31, 2013 and 2014 were as
follows:
Derivatives not designated as hedging instruments
Yen (Millions)
March 31, 2013
March 31, 2014
Balance Sheet Location
Fair Value
Balance Sheet Location
Fair Value

AssetsForeign exchange contracts . . . . .

Other current assets¥16

Other current assets—

Liabilities
Foreign exchange contracts . . . . .

Other current liabilities¥ 0

Other current liabilities—

Effect of derivative instruments on the consolidated statements of operations
Derivatives not designated as hedging instruments
The effects of derivatives not designated as hedging instruments on the consolidated statements ofoperations for the years ended March 31, 2012, 2013 and 2014 were as follows:
Yen (Millions)
Amount of gain (loss) recognized inincome on derivatives
Location of gain (loss) recognized
in income on derivatives
2012
2013
2014

Foreign exchange contracts . . . . . . . . . . . . . . . . . . .

Other income (expense)
F-21

¥630

(96)

96

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(9) Fair Value Measurement
Disclosure about the fair value of Financial Instruments
The following table presents the carrying amounts and estimated fair values of Advantest’s financial
instruments at March 31, 2013 and 2014. Fair value estimates are made at a specific point in time based on
relevant market information and information about the financial instrument. These estimates are subjective innature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Yen (Millions)
2013
2014
Carrying
Fair
Carrying
Fair
amountvalue
amountvalue

Financial assets:
Investment securities
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 5,455
16

5,455
16

¥ 3,272—

3,272—

Financial liabilities:
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

025,000—025,026——25,00030,149—24,97531,518The carrying amounts of available-for-sale securities are included in the consolidated balance sheets underinvestment securities. The carrying amounts of foreign exchange contracts are included in other current assets
and other current liabilities.
The following methods and assumptions are used to estimate the fair value of each class of financial
instruments:
Cash and cash equivalents, trade receivables and trade accounts payable: The carrying amounts
approximate fair value because of the short maturity of these instruments.
Available-for-sale securities: The fair values of available-for-sale equity securities are based on quoted
market prices at the reporting date for those investments.
Foreign exchange contracts: The fair value of foreign exchange contracts are estimated by obtaining quotes
from financial institutions.
Corporate bonds and convertible bonds: The fair values of corporate bonds and convertible bonds are
estimated using quoted market prices, and are classified as Level 2.
Fair Value Hierarchy
U.S. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market for the asset or liability in an orderlytransaction between market participants at the measurement date. Additionally the inputs to valuation techniques
used to measure fair value are prioritized into the following three levels:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date.
F-22

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Level 2—Observable inputs other than quoted prices included within Level 1 for the asset or liability, either
directly or indirectly.
Level 3—Unobservable inputs for the asset or liability.
Assets / Liabilities Measured at Fair Value on a Recurring Basis
As of March 31, 2013 and 2014, carrying amount of assets and liabilities that were measured at fair value on
a recurring basis by level was as follows:

Total

Yen (Millions)
Fair Value Measurements at
March 31, 2013
QuotedSignificant
Prices in
Other
Significant
ActiveObservable Unobservable
Markets
Inputs
Inputs(Level 1)(Level 2)(Level 3)

AssetsAvailable-for-sale equity securities . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥5,455
16

5,455
—

—
16

—
—

Total assets measured at fair value . . . . . . . . . . . . . . . . . . . . . .

5,471

5,455

16

—

Liabilities
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0

—

0

—

0

—

0

—

Total liabilities measured at fair value . . . . . . . . . . . . . . . . . . . .

¥

Total

Yen (Millions)
Fair Value Measurements at
March 31, 2014
QuotedSignificant
Prices in
Other
Significant
ActiveObservable Unobservable
Markets
Inputs
Inputs(Level 1)(Level 2)(Level 3)

AssetsAvailable-for-sale equity securities . . . . . . . . . . . . . . . . . . . . . .

¥3,272

3,272

—

—

Total assets measured at fair value . . . . . . . . . . . . . . . . . . . . . .

3,272

3,272

—

—

Adjustments to fair value of available-for-sale equity securities are recorded as an increase or decrease, netof tax, in accumulated other comprehensive income (loss) except where losses are considered to be other than
temporary, in which case the losses are recorded in impairment losses on investment securities. Changes in fairvalue of foreign exchange contracts are recorded as other income (expense).

F-23

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Assets / Liabilities Measured at Fair Value on a Nonrecurring Basis
As of March 31, 2013 and 2014, carrying amounts of assets and liabilities, which were measured at fairvalue on a nonrecurring basis by level during the years ended March 31, 2013 and 2014, were as follows:

Total

Yen (Millions)
Fair Value Measurements at
March 31, 2013
QuotedSignificant
Prices in
Other
Significant
ActiveObservable Unobservable
Markets
Inputs
Inputs(Level1)(Level 2)(Level 3)

AssetsNon-marketable equity securities . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥
8
1,337

—
—

—
—

8
1,337

Total assets measured at fair value . . . . . . . . . . . . . . . . .

1,345

—

—

1,345

Total gains (losses) for assets held as of March 31,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12)
(134)

(146)

Total

Yen (Millions)
Fair Value Measurements at
March 31, 2014
QuotedSignificant
Prices in
Other
Significant
ActiveObservable Unobservable
Markets
Inputs
Inputs(Level 1)(Level 2)(Level 3)

AssetsProperty, plant and equipment . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥—
—

—
—

—
—

—
—

Total assets measured at fair value . . . . . . . . . . . . . . . . .

—

—

—

—

Total gains (losses) for assets held as of March 31,
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total gains(losses) for
the year
ended
March 31,2013

Total gains(losses) for
the year
ended
March 31,2014

(1,596)(11,899)(13,495)

As of March 31, 2013, Advantest reclassified certain land measured at fair value on a nonrecurring basis of¥1,337 million as asset held for sale. As of March 31, 2013, Advantest reclassified certain land of ¥1,144 million
as asset held for sale. The assets held for sale were included in other current assets on the consolidated balance
sheets. As a result of lower than expected future cash flows and changes in the business environment impact on
profits, for the year ended March 31, 2014, Advantest recognized impairment losses of ¥13,495 million onproperty, plant and equipment and intangible assets. The impairment loss was included in cost of sales andimpairment charge in the accompanying consolidated statements of operations.
Advantest recognized impairment losses of non-marketable equity securities when their fair values were
below the carrying amounts and the decline in fair values was considered to be other than temporary. The nonmarketable equity securities are valued using the market and income approaches. The fair value of nonmarketable equity securities is based on quoted prices in markets that are not active at the reporting date, orpresent value of expected future cash flows for those investments. The fair value was determined based on athird-party appraisal using similar assets and sales. The property, plant and equipment and the intangible assets
are valued using the income approaches based on present value of expected future cash flows. The fair value isclassified as Level 3 because significant unobservable inputs were involved in the fair value measurements.
F-24

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(10) Leases—Lessor
Advantest provides leases that enable its customers to use its semiconductor test systems. All leases areclassified as operating leases. Lease terms range from 1 year to 5 years, and certain of the lease agreements arecancelable. The gross amount of machinery and equipment and the related accumulated depreciation underoperating leases as of March 31, 2013 and 2014 were as follows:
Yen (Millions)
2013
2014

Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥9,419
5,840

8,354
6,661

¥3,5791,693

Depreciation of machinery and equipment held under operating leases is included with depreciation
expense. These assets are included in property, plant and equipment.
Future minimum lease income under noncancelable operating leases as of March 31, 2014 is as follows:Year ending March 31

Yen (Millions)2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥

664
154
—
—
—
—

Total minimum lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥818(11) Leases—Lessee
Advantest has several noncancelable operating leases, primarily for office space and office equipment. Rent
expense, including rental payments for cancelable leases, for the years ended March 31, 2012, 2013 and 2014was ¥1,565 million, ¥1,800 million and ¥2,039 million, respectively.
Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms
in excess of one year) as of March 31, 2014 are as follows:Year ending March 31

Yen (Millions)2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥

3,368
585

Less sublease income to be received in the future under noncancelable subleases . . . . . . . . . . . . . .
Net minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-25

834
721
365
332
272
844

¥

2,783

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(12) Corporate Bonds and Convertible Bonds
The carrying values of corporate bonds and convertible bonds at March 31, 2013 and 2014 were as follows:
Yen (Millions)
2013
2014

Unsecured 0.416% bonds, due May 25, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured 0.606% bonds, due May 25, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥10,000¥15,000

10,00015,000

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥25,000

25,000Unsecured zero coupon convertible bonds, due March 14, 2019 . . . . . . . . . . . . . . . . . . . . . . . . ¥Add unamortized premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥——30,000149

Convertible bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—30,149¥As of March 31, 2013, the Company had no convertible bonds. In March 2014, the Company issued¥30,000 million zero coupon convertible bonds due 2019 (the “Zero Coupon Convertible Bonds”). The
bondholders are entitled to stock acquisition rights effective from April 1, 2014 to February 28, 2019. The initialconversion price is ¥1,655 per common share. Aside from the standard anti-dilution provisions, the conversion
price is reduced for a certain period before an early redemption is triggered upon the occurrence of certain
corporate events including a merger, corporate split, delisting and squeeze-out event. The reduced amount of theconversion price will be determined by a formula which is based on the effective date of the reduction and theCompany’s common stock price. The reduced conversion price ranges from ¥1,123 to ¥1,655 per common share.
The conversion price is also adjusted for dividends in excess of 15 yen per common share per fiscal year. The
bondholders may require the Company to redeem the Zero Coupon Convertible Bonds, on or after a reduction in
the conversion price is triggered, at 100.0% of its principal amount, together with a redemption premium which
begins at 3.0% of the principal amount and ends at zero, amortized on a straight-line basis over the term of theZero Coupon Convertible Bonds. In addition, the Company has the option to redeem all of the Zero Coupon
Convertible Bonds outstanding at 100.0% of the principal amount, if less than 10.0% of the original issuance isoutstanding.
The combined aggregate amounts of maturities for corporate bonds and convertible bonds as of March 31,
2014, by year payable, were as follows:Year ending March 31

Yen (Millions)2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-26

¥

—
10,000—15,00030,000—¥55,000ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(13) Income Taxes
The components of income (loss) before income taxes and equity in earnings (loss) of affiliated company
and provision (benefit) for income taxes as shown in the consolidated statements of operations were as follows:
2012

Income (loss) before income taxes and equity in earnings (loss) of affiliatedcompany:
The Company and domestic subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Yen (Millions)2013¥(2,775) (16,721) (29,581)(667) 15,428(5,920)¥(3,442)

Provision (benefit) for income taxes:
Current:
The Company and domestic subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
The Company and domestic subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2014(1,293) (35,501)

2012

Yen (Millions)
2013

2014

555
1,841

411
1,243

248
2,027

(1,513)(2,123)

(272)
1,111

545
(2,759)¥(1,240)

2,493

61

¥

The Company and its domestic subsidiaries are subject to a number of income taxes, which in the aggregate
resulted in statutory income tax rates of 40.4%, 37.8% and 37.7% for the years ended March 31, 2012, 2013 and2014, respectively.
Following the promulgation on March 31, 2014 of “Act for Partial Amendment of the Income Tax Act, etc.”(Act No. 10 of 2014), the Company is no longer subject to Special Reconstruction Corporation Tax for the
consolidated fiscal year starting from April 1, 2014. Following enactment of the act, the effective statutory tax
rate used to measure deferred tax assets and liabilities was changed from 37.8% to 35.4% for temporary
differences expected to be eliminated in the fiscal year beginning on April 1, 2014. The amendment did not havea significant impact on its consolidated results of operations and financial condition.
Prior to the acquisition, Verigy was a Singapore corporation and had negotiated tax incentives with theSingapore Economic Development Board (“EDB”), an agency of the Government of Singapore, which had been
approved by Singapore’s Ministry of Finance and Ministry of Trade and Industry. Subsequent to the acquisition,
our reorganization of subsidiaries in Singapore was developed, and such tax incentives were terminated on
March 31, 2012. New tax incentives were granted by the EDB effective April 1, 2012. Under the new incentive, amajority of the income earned in Singapore during the incentive periods is subject to reduced rates of Singapore
income tax. The incentive expired on March 31, 2014. The Singapore corporate income tax rates that would

F-27

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
apply, absent of the incentive, is 17% for the fiscal years ended March 31, 2013 and 2014. Due to the low levelof taxable income attributable to Singapore, the impact on income taxes was immaterial for the fiscal years ended
March 31, 2013 and 2014.
A reconciliation of the Japanese statutory income tax rate and the effective income tax rate as a percentage
of income before income taxes was as follows:
2012

Statutory rates for expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects on income taxes resulting from:
Earnings of foreign subsidiaries taxed at different rates from the statutory ratein Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses not deductible for tax purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expiration of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of enacted changes in tax laws and rates on Japanese tax . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2013

2014

(40.4)% (37.8)% (37.7)%
12.3(319.8)(60.9) (176.5)
4.3
11.3
9.5
16.6
(20.0)(6.0)(92.1)
704.3
149.9
—
1.4
0.7
(36.0)% 192.8%

8.6
15.8
0.5
0.1
0.2
10.5
3.7
(1.5)
0.2%

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets anddeferred tax liabilities at March 31, 2013 and 2014 were presented below.
Yen (Millions)
2013
2014

Deferred tax assets:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued warranty expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued pension and severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expenses capitalized for tax purposes . . . . . . . . . . . . . . . . .
Operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains on marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-28¥ 3,327
3,708
614
474
9,212
9,455
1,358
1,001
2,470
2,381
38,912 49,097
3,340
3,614
8,122
2,368
2,059
1,924
69,414 74,022(59,072) (62,834)
10,342 11,188(2,558)
(805)
(689)
(43)
(4,095)¥ 6,247

(567)
(316)
(769)
(157)
(1,809)9,379

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Management of Advantest intends to reinvest undistributed earnings of the Company’s certain foreignsubsidiaries for an indefinite period of time. As a result, no deferred tax liabilities has been recognized on
undistributed earnings of these subsidiaries not expected to be remitted in the foreseeable future, aggregating¥9,697 million and ¥13,049 million at March 31, 2013 and 2014, respectively. Deferred tax liabilities will berecognized when Advantest expects that it will realize those undistributed earnings in a taxable manner, such as
through receipt of dividends or sale of the investments. The related deferred tax liability would have been
¥1,426 million and ¥1,922 million at March 31, 2013 and 2014, respectively.
Included in other current assets and other assets were deferred tax assets of ¥7,639 million and¥10,247 million at March 31, 2013 and 2014, respectively.
Included in other current liabilities and other liabilities were deferred tax liabilities of ¥1,392 million and¥868 million at March 31, 2013 and 2014, respectively.
At March 31, 2014, Advantest had total net operating loss carry forwards for income tax purposes of¥145,173 million which are available to reduce future taxable income. Net operating loss carry forwards of¥124,252 million attributable to the Company and domestic subsidiaries in Japan will expire during the years
ending March 31, 2015 through 2023. Other net operating loss carry forwards of ¥17,912 million have no
expiration dates and the remaining other net operating loss carry forwards of ¥3,009 million will expire
predominately during the years ending March 31, 2032. Net operating loss carryforwards utilized during theyears ended March 31, 2012, 2013 and 2014 were ¥25 million, ¥14,728 million and ¥2,712 million, respectively.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than notthat some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment. Based upon projections for futuretaxable income including management’s expectations of future semiconductor market and semiconductor andcomponent test systems market prospects over the periods in which the deferred tax assets are deductible andother factors, management believes it is more likely than not that Advantest will realize the benefits of thesedeductible tax differences, net of valuation allowance.
The changes in valuation allowance for the years ended March 31 were as follows:
2012

Yen (Millions)
2013
2014

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥52,082 50,188 59,072
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
8,884
3,762
Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,894
—
—
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥50,188

59,072

62,834

For the year ended March 31, 2012, the valuation allowance decreased due to reductions in deferred tax
assets associated with change of tax rate in Japan. For the year ended March 31, 2013 and 2014, valuation
allowance increased primarily due to an increase in net operating loss carryforwards.
The management believes the amount of the deferred tax assets, net of valuation allowance were considered
realizable.
F-29

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
However, the amount of the deferred tax assets considered realizable could be changed in the future if
estimates of future taxable income are revised. This could result in the significant impact on the Company’s
consolidated financial position and results of operations.
Unrecognized tax benefits for the years ended March 31, 2012, 2013 and 2014 were as follows:
Yen (Millions)
2013
2014

2012

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ —1,484 1,418
Acquisition of verigy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,671
—
—
Increase for tax positions of previous years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
148
84
84
Increase for tax positions of current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57
00
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(47)
(58)
0
Lapse of the applicable statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(341) (248) (274)Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) 156
124
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,484

1,418

1,352

Although Advantest believes its estimates and assumptions of unrecognized tax benefits are reasonable,
uncertainty regarding the final determination of tax audits, settlements and any related litigation could affect theeffective tax rate in the future periods. The total amount of unrecognized tax benefits that would reduce theeffective tax rate, if recognized, is ¥1,352 million at March 31, 2014. As of March 31, 2014, Advantest does notexpect changes in its tax positions that would significantly increase or decrease unrecognized tax benefits within
next 12 months. Both interest and penalties accrued are included in other liabilities in the accompanying
consolidated balance sheets, and both interest and penalties are included in the income tax provision in theaccompanying consolidated statements of operations are immaterial.
Advantest files income tax returns in Japan and various foreign tax jurisdictions. As of March 31, 2014,
Advantest open tax years are from 2007 in Japan, 2012 in Taiwan, and 2009 in the United States.

F-30

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(14) Other Comprehensive Income (Loss)
The accumulated balances for each classification of other comprehensive income (loss), net of tax, for theyears ended March 31, 2012, 2013 and 2014 were as follows:
Yen (Millions)
Foreigncurrencytranslation
adjustments

Net unrealized
gains (losses)
on investment
securities

Pensionrelatedadjustment

Net unrealized
gains (losses)
on derivative
instruments

Accumulated
othercomprehensive
income (loss)

Balance at March 31, 2011 . . . . . . . . . . . . .

¥(14,738)

773(4,305)—(18,270)

Change during the year . . . . . . . . . . . . . . . .
Reclassification adjustments . . . . . . . . . . . .

864
558

(216)
818

(6,565)
237

(55)
55

(5,972)
1,668

1,422

602

(6,328)—(4,304)

Balance at March 31, 2012 . . . . . . . . . . . . .

¥(13,316)

1,375(10,633)—(22,574)

Change during the year . . . . . . . . . . . . . . . .
Reclassification adjustments . . . . . . . . . . . .

17,250—165
9(2,251)472——

15,164481

17,250174(1,779)—15,645

Balance at March 31, 2013 . . . . . . . . . . . . .

¥ 3,934

1,549(12,412)—(6,929)Change during the year . . . . . . . . . . . . . . . .
Reclassification adjustments . . . . . . . . . . . .

12,555
—

260
(902)

(603)
945

—
—

12,212
43

12,555

(642)

342

—

12,255¥ 16,489907(12,070)—

5,326

Balance at March 31, 2014 . . . . . . . . . . . . .

F-31

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
The related tax effects allocated to each component of other comprehensive income (loss) for the years
ended March 31, 2012, 2013 and 2014 were as follows:
Before-tax
amountYen (Millions)Tax (expense)or benefit

Net-of-tax
amount¥ 1,422

—

1,422

(509)

293

(216)

1,267

(449)

818

Net unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension related adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

758(7,191)

(156)
863

602
(6,328)Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ (5,011)

707(4,304)¥17,250—

17,250

321

(156)

165

(1)

10

9

Net unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension related adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

320(1,908)

(146)
129

174
(1,779)Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥15,662(17)

15,645¥12,555—

12,555

361

(101)

260

(1,396)

494

(902)

Net unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension related adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,035)
165

393
177

(642)
342

Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥11,685570

12,255

Year ended March 31, 2012:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) arising during the year . . . . . . . . . . . . . . .
Less reclassification adjustments for net gains (losses) realized inearnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended March 31, 2013:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) arising during the year . . . . . . . . . . . . . . .
Less reclassification adjustments for net gains (losses) realized inearnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended March 31, 2014:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) arising during the year . . . . . . . . . . . . . . .
Less reclassification adjustments for net gains (losses) realized inearnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-32

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Reclassifications out of accumulated other comprehensive income (loss) for the year ended March 31, 2014
was as follow:
Yen (Millions)Year ended March 31, 2014
Amount reclassified
from accumulated othercomprehensive income
Affected line items in consolidated(loss) *(1)statements of income

Unrealized gains and losses on investment
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pension liability adjustments
Amortization of actuarial loss . . . . . . . . . . . . . . . .
Amortization of prior service . . . . . . . . . . . . . . . .
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amount reclassified, net of tax . . . . . . . . . . . . . . .

¥ (1,396)
494

Other income (expense): Other, net
Income taxes(902)

Net income (loss)

1,264
(168)
(151)

(2)
(2)
Income taxes

945

Net income¥ 43(1) Amounts in parentheses indicate a gain in the consolidated statements of operations.
(2) The accumulated other comprehensive income components are included in the computation of net periodic
pension cost (see note 16 for additional details).
(15) Stock-Based Compensation
Advantest has stock-based compensation plans using stock options as incentive plans for directors,
executive officers, corporate auditors and selected employees. Stock options have been issued to directors,
executive officers, corporate auditors and certain employees of the Company and its subsidiaries under stock
option plans approved by the Board of Directors. Options were generally granted with an exercise prices of per
share that were equal to the higher of (1) 1.05 times the average price of the Company’s common shares of thepreceding month on the date of grant and (2) the closing price of the Company’s common shares traded on theTokyo Stock Exchange on the date of grant. The options have an exercise period of 4 years.
In connection with the acquisition of Verigy, the Company assumed the stock options previously granted to
Verigy directors and employees. Therefore, replacement options were granted for all 89 types of stock options
arrangements previously granted to the directors and employees of Verigy and its subsidiaries under a stock
option plan approved by the Board of Directors of Advantest. The terms and conditions of the granted options aresubstantially the same as those for the Verigy stock options. The number of granted shares totaled 2,387,046.
Options were granted with exercise prices from ¥807 to ¥3,577 per share. All options are exercisable from
July 20, 2011. The options have expiration dates from July 29, 2011 to January 31, 2018.
The exercise price of the stock options is subject to adjustment, if there is a stock split or consolidation ofshares, or if new shares are issued or treasury stocks are sold at a price that is less than the market price.

F-33

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Stock option activity during the years ended March 31, 2012, 2013 and 2014 was as follows:
2012

Number ofshares2013
Weighted
average
exercise
price

Number ofshares2014
Weighted
average
exercise
price

Number ofshares

Weighted
average
exercise
price

Outstanding at beginning of year . . . . . . . . . 1,948,000 ¥3,392
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,033,046
1,399
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . .
——Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (595,840) 5,302
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . (497,000) 2,396

4,888,206 ¥1,616
2,521,000
1,207(522,297)
880(592,354) 2,590(589,856) 1,461

5,704,699 ¥1,418
2,763,000
1,669(406,318) 1,237(669,605) 2,056(297,437) 2,090

Outstanding at end of year . . . . . . . . . . . . . .

4,888,206

1,616

5,704,699

1,418

7,094,339

1,523

Exercisable at end of year . . . . . . . . . . . . . .

3,585,206¥1,6483,222,699¥1,5804,442,339¥1,437

Stock based compensation expense recognized was ¥583 million, ¥861 million and ¥1,283 million, which
was included in selling, general and administrative expenses for the years ended March 31, 2012, 2013 and 2014,
respectively. The recognized tax benefits were ¥153 million, ¥235 million and ¥324 million for the years ended
March 31, 2012, 2013 and 2014, respectively. In addition, the stock options, granted during the fiscal years ended
March 31, 2007 and 2008 subsequent to a change in Japanese tax law effective April 1, 2006, expired unused
during the fiscal year ended March 31, 2013 and 2014, and the related deferred tax assets of ¥214 million and¥19 million were reversed, respectively. As of March 31, 2012, 2013 and 2014, a valuation allowance wasrecorded against substantially all related deferred tax assets.
The weighted average fair value per share for stock options that were granted during the years ended
March 31, 2012, 2013 and 2014 were ¥448, ¥347 and ¥460, respectively. These figures were calculated based on
the Black Scholes option pricing model by using the following weighted average estimates:
2012

Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.4%
Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.5%Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49.3%
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 years

2013

2014

1.1%
0.1%
50.7%
3.9 years

1.1%
0.2%
44.7%
2.8 years

No stock options were exercised during the year ended March 31, 2012. Cash proceeds from options
exercised for the years ended March 31, 2013 and 2014 was ¥472 million and ¥494 million, respectively. The
total fair value of shares vested during the years ended March 31, 2012, 2013 and 2014 was ¥1,244 million,¥583 million and ¥ 861 million, respectively. No intrinsic value of options exercised was recognized for the years
ended March 31, 2012. The total intrinsic values of options exercised for the year ended March 31, 2013 and2014 was ¥131 million and ¥151, respectively.

F-34

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
At March 31, 2014, all of the outstanding stock options were as follows:
Outstanding

Exercisable
Weighted
averageremaining
contractuallife

Number ofoptions

Weighted
average
exercise
price

Weighted
averageremaining
contractuallife

Exercise price

Number ofoptions

Weighted
average
exerciseprice¥897 - ¥1,668 . . . . . . . . . . . . . . . . . . . . . . .
¥1,669 - ¥3,529 . . . . . . . . . . . . . . . . . . . . .

3,767,889
3,326,450

1,327
1,746

2.6 years
3.5 years

3,767,889
674,450

1,327
2,051

2.6 years
1.4 years

7,094,339

1,523

3.0 years

4,442,339

1,437

2.4 years

The aggregate intrinsic value for the options outstanding and exercisable at March 31, 2014 was ¥4 million.
(16) Accrued Pension and Severance Costs
The Company and certain of its Japanese subsidiaries have unfunded retirement and severance plans (pointbased benefits system). Under a point-based benefits system, the benefits are calculated based on accumulated
points allocated to employees each year according to their job classification and their performance. The
Company and its Japanese subsidiaries also have a defined benefit corporate pension plan covering substantiallyall employees. Under the cash balance pension plan, the benefits are calculated based on accumulated points
allocated to employees each year according to their job classification and their performance with a certain
interest rate calculated based on the upper and lower limit of a market interest rate.
Certain overseas subsidiaries also have defined benefit pension plans covering substantially all of theiremployees. Benefits payable under the plans are based on employee compensation levels and years of service.
Information about the retirement and severance plans of Advantest for the years ended March 31 was asfollows:
Yen (Millions)
2012
2013
2014
Japanese Non-Japanese Japanese Non-Japanese Japanese Non-Japanese
plans
plans
plans
plans
plans
plans

Components of net periodic benefit cost:Service cost . . . . . . . . . . . . . . . . . . . . . . ¥1,355Interest cost . . . . . . . . . . . . . . . . . . . . . .
748
Expected return on plan assets . . . . . . . .
(405)
Amortization of unrecognized:
Net actuarial (gain) or loss . . . . . . .
511
Prior service (benefit) cost . . . . . . .
(172)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18)
Net periodic benefit cost . . . . ¥2,019

F-35

227
242
(237)

1,487
689
(299)

345
348
(267)

1,735
565
(464)

377
448
(331)

—
—
—

790
(168)
—

241
—
—

919
(168)
—

345
—
—

232

2,499

667

2,587

839

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
The following table sets forth the plans’ benefit obligation, fair value of plan assets, funded status atMarch 31, 2013 and 2014.
Yen (Millions)
2013
2014
Japanese
Non-Japanese Japanese Non-Japanese
plans
plans
plans
plans

Change in benefit obligation:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 38,433
1,487
689
3,645
—
—
(665)
—

10,214
345
348
420
34
16
(548)
1,103

43,589
1,735
565
1,451
—
—
(708)
—

11,932
377
448
724
—
126
(90)
2,102

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . .

43,58911,932

46,632

15,619Change in plan assets:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . .
Actual return or (loss) on plan assets . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,995
1,759
—
2,010
(557)
—

4,636
26
131
297
(158)
504

23,207
1,868
—
2,244
(534)
—

5,436
40
126
271
(90)
954

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . .

23,207

5,436

26,785

6,737

Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥(20,382)(6,496)(19,847)(8,882)

Amounts recognized in the consolidated balance sheets at March 31, 2013 and 2014 were as follows:
Yen (Millions)
2013
2014
Japanese
Non-Japanese Japanese Non-Japanese
plans
plans
plans
plans

Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued pension and severance costs . . . . . . . . . . . . . . . . . . . .

¥

(196)
(20,186)(107)(6,389)(157)(19,690)(57)(8,825)(20,382)(6,496)(19,847)(8,882)

Pension related adjustments (before tax) recognized in accumulated other comprehensive income (loss) at
March 31, 2013 and 2014 were as follows:
Yen (Millions)
2013
2014
Japanese
Non-Japanese Japanese Non-Japanese
plans
plans
plans
plans

Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-36¥(11,517)
1,173(3,522)—(10,270)
1,005(4,436)—(10,344)(3,522)(9,265)(4,436)ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Changes in pension related adjustments (before tax) recognized in other comprehensive income (loss) for
the year ended March 31, 2013 and 2014 were summarized as follows:
Yen (Millions)
2013
2014
Japanese Non-Japanese Japanese Non-Japanese
plans
plans
plans
plans

Current year actuarial gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current year prior service benefit . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service benefit and other . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥(1,935)
790
—
(168)
—

(403)
241
—
—
(433)

328
919
—
(168)
—

(797)
345
—
—
(462)

(1,313)

(595)

1,079

(914)

The estimated prior service cost and actuarial loss for the defined benefit pension plans that will beamortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next year
are summarized as follow:
Yen (Millions)Japanese Non-Japanese
Plans
plans

Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 898
(168)

392
—

730

392

Pension plans with accumulated benefit obligations in excess of plan assets at March 31, 2013 and 2014
were summarized as follows:
Yen (Millions)
2013
2014
Japanese Non-Japanese Japanese Non-Japanese
plans
plans
plans
plans

Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥43,589
42,57323,207

11,932
10,076
5,436

46,632
45,693
26,785

15,61913,454
6,737

Other information about the retirement and severance plans of Advantest was as follows:
Measurement date:
The measurement date for the pension plans is March 31.
Assumptions:
Weighted-average assumptions used to determine benefit obligations as of March 31:
Japaneseplans

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-37

1.3%
3.0%

2013
Non-Japanese
plans

3.5%
2.6%

Japanese
plans

1.3%
2.6%

2014
Non-Japanese
plans

3.4%
2.8%

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Weighted-average assumptions used to determine net periodic benefit cost for the years ended March 31:

Japaneseplans

Discount rate . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . .
Rate of compensation increase . . . . . . .

2.2%
2.0%
3.0%

2012
Non-Japanese
plans

4.8%
6.6%
2.8%

Japanese
plans

2013
Non-Japanese
plans

1.8%
1.5%
3.0%

3.7%
5.7%
2.8%

Japanese
plans

2014
Non-Japanese
plans

1.3%
2.0%
3.0%

3.5%
5.9%
2.6%

Advantest determines the expected return based on the asset portfolio, historical returns and estimated future
returns.
Plan assets:
Advantest’s investment policies are designed to ensure adequate plan assets are available to provide future
payments of pension benefits to eligible participants by attaining necessary long-term total returns on plan assets.
Taking into consideration the expected returns, associated risks and correlations of returns between asset
categories in plan assets, Advantest determines an optimal combination of equity, debt securities and otherinvestments as Policy Asset Allocation (“PAA”). Plan assets are invested in accordance with PAA with mid-term
to long-term viewpoint, which is revised periodically to the extent considered necessary to achieve the expectedlong-term rate of return on plan assets.
Japanese benefit plans’ weighted-average asset allocation at March 31, 2013 and 2014 by asset category
were as follows:

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance company general accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2013

2014

Target

34.5%
30.1
9.5
13.0
12.9

37.9%
26.2
5.2
10.8
19.9

30.0%
35.0
2.0
13.0
20.0

100.0%

100.0%

100.0%

Non-Japanese benefit plans’ weighted-average asset allocation at March 31, 2013 and 2014 by asset
category were as follows:

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2013

2014

Target

42.8%
35.1
18.2
3.9

43.1%
25.0
28.9
3.0

43.5%
25.3
28.2
3.0

100.0%

100.0%

100.0%The three levels of inputs that may be used to measure fair value of plan assets are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets.
F-38

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Level 2: Observable inputs other than quoted prices included within Level 1 for the assets, either directly or
indirectly.
Level 3: Unobservable inputs for the assets.
Japanese benefit plans’ asset allocation at March 31, 2013 and 2014 by asset level were as follows:

Total

Yen (Millions)
Fair Value Measurements at
March 31, 2013
(Level 1) (Level 2) (Level 3)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities:
Japanese companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pooled funds (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities:
Pooled funds (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance company general accounts . . . . . . . . . . . . . . . . . . . . . . . . . .

2,202

2,202

—

—

1,379
6,633

1,379
—

—
6,633

—
—

6,975
2,993
3,025

—
—
—

6,975
1,980
3,025

—
1,013
—

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

23,207

3,581

18,613

1,013(a) These funds invested in listed equity securities consisting of approximately 60% Japanese listed companies
and 40% foreign listed companies.
(b) These funds invested in approximately 80% Japanese government bonds, 15% Japanese corporate bonds,
and 5% Japanese municipal bonds.
(c) These hedge funds invested in stock price index futures / options, bond futures / options, bonds and private
equity funds and others.

Total

Yen (Millions)
Fair Value Measurements at
March 31, 2014
(Level 1) (Level 2) (Level 3)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities:
Japanese companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pooled funds (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities:
Pooled funds (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance company general accounts . . . . . . . . . . . . . . . . . . . . . . . . . .

1,400

1,400

—

—

937
9,211

937
—

—
9,211

—
—

7,025
5,316
2,896

—
—
—

7,025
3,139
2,896

—
2,177
—

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

26,785

2,337

22,271

2,177(d) These funds invested in listed equity securities consisting of approximately 55% Japanese listed companies
and 45% foreign listed companies.
(e) These funds invested in approximately 80% Japanese government bonds, 15% Japanese corporate bonds,
and 5% Japanese municipal bonds.
(f) These hedge funds invested in stock price index futures / options, bond futures / options, bonds and private
equity funds and others.
F-39

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Level 1 assets are comprised principally of listed equity securities, which are valued based on quoted market
prices at the reporting date for those investments.
Level 2 assets are comprised principally of pooled funds and investments in life insurance company generalaccounts. Pooled funds are valued at their net asset values that are calculated by the sponsors of the funds.
Investments in life insurance company general accounts are valued at conversion value. Level 2 also includes
certain hedge funds that are redeemable in the near term at their net asset values.
Level 3 assets are comprised of hedge funds, which are valued at their net asset values that are calculated by
the sponsors of the funds.
Changes in the Level 3 plan assets for the years ended March 31, 2013 and 2014 were as follows:
Yen (Millions)
2013
2014
Hedge funds Hedge funds

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized / unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, issuances and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer in and / or out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,137
23
(147)
—

1,013
186
978
—

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,013

2,177

Non-Japanese benefit plan asset allocation at March 31, 2013 and 2014 by asset level were as follows:

Total

Cash and cash equivalents (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities:
Pooled funds (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities:
Pooled funds (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Yen (Millions)
Fair Value Measurements at
March 31, 2013
(Level 1) (Level 2) (Level 3)

992

992

—

—

2,326

—

2,326

—

1,910
208

—
—

1,910
208

—
—

5,436

992

4,444

—

(a) Cash equivalents were primarily in short-term investment funds, which consisted of short-term money
market instruments that were valued using quoted prices for similar assets and liabilities in active markets.
(b) These funds invested in listed equity securities consisting of foreign equities.

F-40

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(c) These funds invested in international bonds.

Total

Yen (Millions)
Fair Value Measurements at
March 31, 2014
(Level 1) (Level 2) (Level 3)

Cash and cash equivalents (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities:
Pooled funds (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities:
Pooled funds (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,949

1,949

—

—

2,901

—

2,901

—

1,687
200

—
—

1,687
200

—
—

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

6,737

1,949

4,788

—

(d) Cash equivalents were primarily in short-term investment funds, which consisted of short-term money
market instruments that were valued using quoted prices for similar assets and liabilities in active markets.
(e) These funds invested in listed equity securities consisting of foreign equities.
(f) These funds invested in international bonds.
Cash flows:
Advantest expects to contribute ¥1,422 million and ¥48 million to its Japanese defined benefit plans and
Non-Japanese benefit plans during the year ending March 31, 2015.
Estimated future benefit payments:
The following benefit payments, which reflect expected future service, as appropriate, are estimated asfollows:
Year ending March 31

Yen (Millions)Japanese Non-Japanese
plans
plans

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 through 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 788
915
1,011
1,153
1,335
9,045

F-41

138
118
250
173
215
2,934

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(17) Stockholders’ Equity
Changes in the number of shares issued and treasury stock during the years ended March 31, 2012, 2013 and2014 were as follows:
Total shares ofcommon stock

Shares oftreasury stock

Number of shares as of April 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

199,566,770

26,294,819

Purchase of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—

899
(328)

Number of shares as of March 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

199,566,770

26,295,390

Purchase of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
—

671
(522,297)(76)

Number of shares as of March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

199,566,770

25,773,688

Purchase of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
—

1,458
(406,318)—

Number of shares as of March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

199,566,770

25,368,828

The Companies Act of Japan provides that an amount equal to 10% of distributions paid by the Company
shall be appropriated as additional paid-in capital or a legal reserve until the total amount of the additional paidin capital and the legal reserve equals to 25% of common stock. Certain foreign subsidiaries are also required toappropriate their earnings to legal reserves under the laws of the respective countries.
Cash dividends for the years ended March 31, 2012, 2013 and 2014 represent dividends paid out during
those years. The accompanying consolidated financial statements do not include any provision for a dividend of¥5 per share, aggregating ¥871 million for the second-half of the year ended March 31, 2014, subsequently
proposed by the Board of Directors.
The amount available for future payment of dividends was determined under the Companies Act of Japanand amounted to ¥29,349 million at March 31, 2014.
(18) Accrued Warranty Expenses
Advantest issues contractual product warranties under which it generally guarantees the performance of
products delivered and services rendered for a certain period. Changes in accrued warranty expenses for the years
ended March 31, 2012, 2013 and 2014 were summarized as follows:
2012

Yen (Millions)
2013
2014

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Verigy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 1,754 2,129 1,889
209——
3,432 3,172 2,319(3,269) (3,474) (2,667)
3
62
48

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 2,129

F-42

1,889

1,589

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)(19) Operating Segment and Geographic Information
Advantest manufactures and sells semiconductor and component test system products and mechatronicsrelated products such as test handlers and device interfaces. Advantest also engages in research and development
activities and provides maintenance and support services associated with these products. Advantest’sorganizational structure consists of three reportable operating segments, which are the design, manufacturing,and sale of semiconductor and component test systems, mechatronics systems and services, support and others.
These reportable operating segments are determined based on the nature of the products and the markets.
Segment information is prepared on the same basis that Advantest’s management reviews financial informationfor operational decision making purposes.
The semiconductor and component test system segment provides customers with test system products forthe semiconductor industry and the electronic parts industry. Product lines provided in the semiconductor andcomponent test system segment include test systems for memory semiconductors for memory semiconductor
devices and test systems for SoC semiconductors for non memory semiconductor devices.
The mechatronics system segment provides product lines such as test handlers, mechatronic-applied
products, for handling semiconductor devices, device interfaces that serve as interfaces with the devices that aremeasured and operations related to nano-technology products.
The services, support and others segment consists of comprehensive customer solutions provided inconnection with the above segments, support services, equipment lease business and others.
Fundamental research and development activities and headquarters functions are represented by Corporate.

F-43

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Reportable operating segment information during the years ended March 31, 2012, 2013 and 2014 was asfollows:
Yen (Millions)
Semiconductor
and Component Mechatronics Services, Elimination
Test System
System
SupportandBusiness
Businessand Others Corporate

As of and for the year ended March 31, 2012:
Net sales to unaffiliated customers . . . . . . . . . .
Inter-segment sales . . . . . . . . . . . . . . . . . . . . . . .
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
Operating income (loss) before stock optioncompensation expenses . . . . . . . . . . . . . . . . . . . . .
Adjustment:
Stock based compensation expense . . . . . . . . . .

¥101,831
3,777

20,410206

18,807——141,048(3,983)—

105,608
2,658

20,616627

18,807
3,070(3,983) 141,048
483
6,838

9,845

(1,324)

1,614(8,715)Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
Operating income (loss) before stock optioncompensation expenses . . . . . . . . . . . . . . . . . . . . .
Adjustment:
Stock based compensation expense . . . . . .

837
2,398
93,603750
12,7893,492
30,713344
82,121¥ 99,719
1,400

13,107546

20,077——
132,903(1,946)—

101,119
3,423

13,653486

20,077
3,690(1,946) 132,903
464
8,063

10,956(4,614)775(6,176)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
Operating income (loss) before stock optioncompensation expenses . . . . . . . . . . . . . . . . . . . . .
Adjustment:
Stock based compensation expense . . . . . . . . . .

6,984
219,226

941
861

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for additions to long- lived assets . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of and for the year ended March 31, 2014:
Net sales to unaffiliated customers . . . . . . . . . .
Inter-segment sales . . . . . . . . . . . . . . . . . . . . . . .

1,420
583

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for additions to long- lived assets . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of and for the year ended March 31, 2013:
Net sales to unaffiliated customers . . . . . . . . . .
Inter-segment sales . . . . . . . . . . . . . . . . . . . . . . .

Total

80
3,530
99,168

4,565
18,242

4,356
36,065

141
72,040¥ 72,760
257

14,96717

24,151——
111,878(274)—

73,017
12,7703,711

14,984725
411

24,151—
3,716(274) 111,878—
13,495430
8,268(26,724)(5,063)

3,012(6,311)

12,592
225,515(35,086)
1,283

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . .

(36,369)

Expenditures for additions to long- lived assets . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,099
80,564F-44

1,562
19,423

1,826
38,046

139
91,8235,626
229,856

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Adjustments to operating income (loss) in Corporate principally represent corporate general andadministrative expenses and research and development expenses related to fundamental research activities thatare not allocated to operating segments.
Advantest uses the operating income (loss) before stock based compensation expenses for management’s
analysis of business segment results.
Additions to long-lived assets included in Corporate consist of purchases of software and fixed assets forgeneral corporate use.
Total assets included in Corporate consist of cash and cash equivalents, assets for general corporate use andassets used for fundamental research activities, which are not allocated to reportable segments.
One customer and its related entities mainly in the semiconductor and component test system segment andthe mechatronics system segment accounted for approximately 12%, 6% and 15% of total consolidated net sales
for the years ended March 31, 2012, 2013 and 2014, respectively. Another customer accounted for approximately
29%, 14% and 4% for the years ended March 31, 2012, 2013 and 2014, respectively.
Information as to Advantest’s net sales and property, plant and equipment in various geographical areas was
as follows:
Net sales to unaffiliated customers for the years ended March 31, 2012, 2013 and 2014 were as follows:
2012

Yen (Millions)
2013

2014

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,09529,742
7,015
88,196

14,045
20,583
9,061
89,214

12,221
10,7207,276
81,661

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

141,048

132,903 111,878

Net sales to unaffiliated customers are based on the customer’s location. Net sales indicated as Asia weregenerated in Taiwan, Korea and China and others in the amount of ¥27,591 million, ¥29,687 million and¥30,918 million for the year ended March 31, 2012, ¥35,826 million, ¥31,777 million and ¥21,611 million for theyear ended March 31, 2013, and ¥33,347 million, ¥30,994 million and ¥17,320 million for the year ended
March 31, 2014, respectively. Substantially all net sales indicated as Americas were generated in the UnitedStates of America.
Property, plant and equipment as of March 31, 2012, 2013 and 2014 were as follows:
2012

Yen (Millions)
2013
2014

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥28,234
1,073
1,582
3,317

27,336
2,693
2,106
9,233

24,7992,417
2,435
10,274

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

¥34,206

41,36839,925

F-45

ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Property, plant and equipment are those assets located in each geographic area.
Substantially all property, plant and equipment indicated as Americas were located in the United States ofAmerica. Substantially all property, plant and equipment indicated as Europe were located in Germany. Property,
plant and equipment in Asia were primarily located in Korea, Taiwan, China and Singapore.
(20) Related Party Transactions
Advantest sells products to and purchases raw materials from Fujitsu Limited, its 11.6% stockholder as ofMarch 31, 2014 and its group companies (collectively, “Fujitsu”). The terms of sales are the same as those withthird parties. Advantest purchases raw materials after receiving competitive bids from several suppliers.
Advantest also purchases various software products for internal use, information system related services,
research and development materials and services from Fujitsu. Advantest had the following transactions with
Fujitsu as of and for the years ended March 31:
2012

Sales of products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of software, hardware and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expenses, computer rentals, maintenance and otherexpenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Yen (Millions)
2013
2014

¥1,847
6,155
459
2,653
95

1,128
3,757
338
1,255
66

802
2,800
114
1,336
282

1,976

1,634

1,551

(21) Per Share Data
The following table sets forth the computation of basic and diluted net income (loss) per share as ofMarch 31:
Yen (Millions) except per share data
2012
2013
2014

Numerator:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥(2,195)(3,821)(35,540)

Denominator:
Basic weighted average shares of common stock
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of exercise of stock options . . . . . . . . . . . . . . .

173,271,717—

173,478,054—

174,134,457—

Diluted weighted average shares of common stock
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

173,271,717

173,478,054

174,134,457(22.03)(22.03)(204.10)(204.10)

Basic net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . .

F-46

¥

(12.67)(12.67)ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
At March 31, 2012, 2013 and 2014, Advantest had outstanding stock options convertible into 4,888,206,
5,704,699 and 7,094,339 shares of common stock, respectively, which were anti-dilutive and excluded from thecalculation of diluted net income per share but could potentially dilute net income per share in future periods.
The zero coupon convertible bonds issued in March 2014 were excluded from the calculation of diluted net
income per share for the fiscal year ended March 31, 2014 because the effect was anti-dilutive due to the loss forthe year ended March 31, 2014.
(22) Concentrations of credit risk
Advantest is exposed to credit risk in the event of default by financial institutions to cash and cash
equivalents, but such risk is considered mitigated by the high credit rating of the financial institutions.
At March 31, 2013 and 2014, Advantest had one foreign semiconductor customer with significant
receivables. Receivables from these customers accounted for 16% and 14% of consolidated trade receivables at
March 31, 2013 and 2014, respectively. Although Advantest does not expect that these customers will fail tomeet their obligations, Advantest is potentially exposed to concentrations of credit risk if these customers failed
to perform according to the terms of the contracts.
(23) Commitments and Contingent Liabilities
Advantest is involved in various claims and legal actions arising in the ordinary course of business. In theopinion of management, the ultimate disposition of these matters will not have a material adverse effect on
Advantest’s consolidated financial position, results of operations, or cash flows.
Outstanding commitments for the purchase of property, plant and equipment totaled ¥21 million and for thepurchase of parts and raw materials totaled ¥5,174 million at March 31, 2014.
Advantest maintains a commitment line agreement with a number of banks and pays commitment fees as
consideration in order to secure a financing source for business operations. The commitment agreement term
ends in March 2015, and the unused availability under this agreement as of March 31, 2014 amounted to ¥10,000
million.

F-47

ITEM 19.

EXHIBITS
Index to Exhibits

1.1

Amended and Restated Articles of Incorporation of the Registrant (English translation)

1.2

Regulations of the Board of Directors of the Registrant (English translation)

1.3

Regulations of the Audit & Supervisory Board of the Registrant (English translation)

2.1

Share Handling Regulations of the Registrant (English translation)*

2.2

Form of Deposit Agreement among the Registrant, JPMorgan Chase Bank (as successor to Morgan
Guaranty Trust Company of New York), as depositary, and the owners and beneficial owners fromtime to time of American Depositary Receipts**

2.3

Form of Amendment No. 1 to Deposit Agreement among the Registrant, JPMorgan Chase Bank, N.A.
as depositary, and all holders from time to time of American Depositary Receipts, including the Formof American Depositary Receipt***

2.4

Form of ADR (included in Exhibit 2.3)

8.1

List of Principal Subsidiaries (See “Organizational Structure” in “Information on the Company”)

11.1

Code of Ethics of the Registrant applicable to its directors and executive officers, including its
principal executive officer, principal financial officer, principal accounting officer or controller, or
persons performing similar functions****12.1

Certifications of the Registrant’s Representative Director, President and Chief Executive Officer andDirector and Managing Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

13.1

Certifications of the Registrant’s Representative Director, President and Chief Executive Officer andDirector and Managing Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act

15.1

Consents of Independent Registered Public Accounting Firm

101

Instance Document

101

Schema Document101

Calculation Linkbase Document

101

Labels Linkbase Document

101

Presentation Linkbase Document

101

Definition Linkbase Document

*
**
***
****

Incorporated by reference to the Company’s report on Form 20-F filed with the SEC on June 27, 2012
(file no. 1-15236).
Incorporated by reference to the Company’s registration statement on Form 20-F filed with the SEC on
September 4, 2001 (file no. 1-15236).
Incorporated by reference to the Post Effective Amendment to the Company’s registration statement on
Form F-6 filed with the SEC on September 12, 2006 (file no. 333-13886).
Incorporated by reference to the Company’s annual report on Form 20-F filed with the SEC on June 29,
2004 (file no. 1-15236).

98

SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual report on its behalf.
Date: June 26, 2014
ADVANTEST CORPORATION
By:
Name:
Title:/s/ HIROSHI NAKAMURA
Hiroshi Nakamura
Director, Managing Executive Officer

Exhibit 1.1(Translation)

ARTICLES OF INCORPORATIONADVANTEST CORPORATIONARTICLES OF INCORPORATIONCHAPTER I. GENERAL PROVISIONS
Article 1.

(Corporate Name)

The Company shall be called “Kabushiki Kaisha Advantest” in Japanese and shall be expressed in English
as “ADVANTEST CORPORATION”.
Article 2.

(Objective)

The objective of the Company shall be to engage in the following business activities:
1.

Manufacture and sale of electric, electronic and physicochemical appliances and their applied
equipment;

2.

Manufacture and sale of medical equipment;

3.

Manufacture and sale of appliances, equipment and software related to each of the foregoing items;

4.

Lease and rental of equipment and appliances, etc., incidental to each of the foregoing items;

5.

Workers dispatching business; and6.

Any and all business incidental to any of the foregoing items.

Article 3.

(Location of Head Office)

The Company shall have its head office in Nerima-ku, Tokyo.
Article 4.

(Method of Public Notice)

The method of the Company’s public notice shall be electronic method; provided that it may do so in the
Nikkei, in the event that the Company is unable to use electronic method due to accident or otherunavoidable reasons.
CHAPTER II. SHARESArticle 5.

(Total Number of Issuable Shares)

The total number of the Company’s issuable shares shall be four hundred and forty million(440,000,000) shares.
Article 6.

(Number of Shares Constituting One Unit of Shares)

The number of shares of the Company constituting one unit of shares shall be one hundred (100) shares.
Article 7.

(Rights Concerning Shares Constituting Less Than One Unit of Shares)

Shareholders of the Company may not exercise his/her rights relating to the shares constituting less than one
unit of shares that such shareholder holds other than those rights listed below or specified in these Articles
of Incorporation:(1) Each of the rights provided in Article 189, Paragraph 2 of the Company Law;
(2) The right to make a request pursuant to the provisions of Article 166, Paragraph 1 of the Company
Law; and(3) The right to receive an allocation of offered shares and offered stock acquisition rights pursuant to
the number of shares held by the shareholder.
Article 8.

(Additional Purchases of Shares Constituting Less Than One Unit of Shares)

A shareholder of the Company may, pursuant to the provisions of the Share Handling Regulations, requestthat the Company sell to such shareholder the number of shares that will constitute one unit of shares when
added to the number of shares constituting less than one unit of shares held by him/her.
Article 9.

(Share Handling Regulations)

Matters related to the handling of shares of the Company and fees therefor, other than those provided for inlaws and regulations or in these Articles of Incorporation, shall be governed by the Share Handling
Regulations to be prescribed by the Board of Directors.
Article 10.

(Share Registration Agent)

1.

The Company shall have a share registration agent.

2.

Share registration agent and the location of its handling office shall be determined by resolution of theBoard of Directors and the public notice thereof shall be given.

3.

Preparation of, and maintenance and other business concerning, the shareholders’ register and theregister for stock acquisition rights shall be commissioned to the share registration agent and shall not
be handled by the Company.

Article 11.

(Record Date)

1.

The record date for the voting rights at the ordinary general meeting of shareholders of the Company
shall be March 31 of each year.

2.

In addition to the case provided for in the preceding paragraph, whenever necessary, in accordancewith a resolution of the Board of Directors and upon giving prior public notice, the Company may set a
record date as necessary.
CHAPTER III. GENERAL MEETING OF SHAREHOLDERS

Article 12.

(Convocation of General Meeting of Shareholders)

The Ordinary General Meeting of Shareholders shall be convened within three (3) months after April 1 eachyear and the Extraordinary General Meeting of Shareholders shall be convened at any time whenevernecessary.
Article 13. (Internet Disclosure and Deemed Provision of Reference Documents for General Meeting of
Shareholders, etc.)
The Company may, in connection with the convocation of a general meeting of shareholders, deem theinformation concerning matters to be stated or indicated on the reference documents for a general meetingof shareholders, business report, statement of accounts and consolidated statement of account to have been
provided to the shareholders by disclosing such information through the Internet pursuant to the applicable
rules and the Ministerial Ordinance of the Ministry of Justice.

Article 14.

(Convener and Chairman of General Meeting of Shareholders)

1.

The General Meeting of Shareholders shall be convened by a Representative Director previously
determined by the Board of Directors in accordance with the resolution of the Board of Directors. In
case that such Representative Director is unable to act, one of other Directors shall take his/her place inthe order predetermined by the Board of Directors.

2.

A Representative Director previously determined by the Board of Directors shall act as the chairman of
the General Meeting of Shareholders, and should such Representative Director be unable to act, one ofother Directors shall take his/her place in the order predetermined by the Board of Directors.

Article 15.

(Method of Resolution)

1.

Unless otherwise provided for by laws and regulations or by the Articles of Incorporation, resolutionsof general meetings of shareholders shall be adopted by a majority vote of the total voting rights of theshareholders present at the meeting who are entitled to exercise their voting rights.

2.

Special resolutions of general meetings of shareholders set forth in Article 309, Paragraph 2 of theCompany Law shall be made at a meeting at which the shareholders holding one-third (1/3) or more of
the voting rights of all shareholders who are entitled to exercise their voting rights, and shall be
adopted by two-thirds (2/3) of votes thereof.

Article 16.

(Restriction on Voting by Proxy)1.

A shareholder may exercise his/her voting right by entrusting one proxy, who shall be anothershareholder, to exercise his/her voting rights.

2.

The Shareholder or proxy shall submit to the Company a document evidencing the authority of suchproxy for each General Meeting of Shareholders.

Article 17.

(Minutes of General Meeting of Shareholders)A summary of proceedings, results and other matters required by applicable laws and regulations regarding
a general meeting of shareholders shall be recorded in the minutes in writing or digitally.
CHAPTER IV. DIRECTORS AND THE BOARD OF DIRECTORS
Article 18.

(Establishment of the Board of Directors)

The Company shall establish the Board of Directors.
Article 19.

(Number of Directors)

The number of directors of the Company shall be no more than ten (10).
Article 20.

(Election of Directors)

1.

Directors shall be elected at the General Meeting of Shareholders.

2.

A resolution to elect a director shall be made at a meeting at which the shareholders holding one-third(1/3) or more of the voting rights of all shareholders who are entitled to exercise their voting rights, andshall be adopted by a majority of votes thereof.

3.

Cumulative voting shall not be used for election of Directors.

Article 21.

(Term of Office of Directors)

The term of office of a director shall expire at the close of the ordinary general meeting of shareholders
pertaining to the last fiscal year ending within one (1) year after appointment.
Article 22.

(Representative Directors and Directors with Titles)

1.

The Board of Directors shall by its resolution elect one or more representative directors.

2.

The Board of Directors may by its resolution elect a Chairman of the Board and a Vice Chairman of the Board.

Article 23.

(Convocation Notice and Resolutions of the Board of Directors)

1.

The convocation notice of the Board of Directors shall be dispatched to each Director and Audit &Supervisory Board member at least three (3) days prior to the date set for the meeting; provided,
however, that such period may be shortened in the case of urgency.

2.

The convocation notice as provided for in the preceding paragraph may be omitted when theunanimous consent of all the Directors and the Audit & Supervisory Board members is obtained.

3.

The resolution of the Board of Directors shall be adopted by a majority vote of the Directors present at
the meeting at which a majority of Directors are present.

4.

If a director submits a proposal to resolve a matter that is subject to resolution by the Board of
Directors and if all the directors (limited to those directors who are entitled to participate in the
resolution of such matter) consent to such proposal in writing or digitally (except when any Audit &Supervisory Board member objects to such proposal), the Company shall deem that there was a
resolution by the Board of Directors adopting such proposal.

Article 24.

(Regulations of the Board of Directors)

Any matters concerning the Board of Directors shall be governed by the Regulations of the Board of
Directors to be prescribed by the Board of Directors, in addition to the laws and ordinances or these Articles
of Incorporation.
Article 25.

(Minutes of Meeting of the Board of Directors)

A summary of proceedings, results and other matters required by laws and regulations regarding a meetingof the Board of Directors shall be recorded in the minutes in writing or digitally, and the directors andAudit & Supervisory Board members present at the meeting shall affix their names and seals thereto or put
their electronic signatures thereon.
Article 26.

(Remuneration, etc. of Directors)

Remuneration, bonuses and other financial interests received by directors from the Company ascompensation for undertaking their functions (“Remuneration, etc.”) shall be determined at a general
meeting of shareholders.
Article 27.
1.

(Exemption of Directors’ Liabilities)

Pursuant to the provisions of Article 426, Paragraph 1 of the Company Law and to the extent permitted
by laws and regulations, the Company may, by resolution of the Board of Directors, exempt liabilities
of its directors (including persons who have previously served as the Company’s directors) for failingto perform their duties.

2.

Pursuant to the provisions of Article 427, Paragraph 1 of the Company Law, the Company may enter
into contracts with its outside directors to limit their liabilities for a failure to perform their duties,
provided that the maximum amount of liabilities under such contracts shall be the total of the amounts
provided in each item of Article 425, Paragraph 1 of the Company Law.

Article 28.

(Counselors and Advisors)

The Board of Directors may by its resolution appoint one or more Counselors and Advisors, respectively.
CHAPTER V. AUDIT & SUPERVISORY BOARD AND ITS MEMBERS
Article 29.

(Audit & Supervisory Board and its members)

The Company shall have Audit & Supervisory Board and its members.
Article 30.

(Number of Audit & Supervisory Board members)

The number of Audit & Supervisory Board members of the Company shall be no more than five (5).
Article 31.

(Election of Audit & Supervisory Board members)

1.

Audit & Supervisory Board members shall be elected at the General Meeting of Shareholders.

2.

A resolution to elect an Audit & Supervisory Board member shall be made at a meeting at which theshareholders holding one-third (1/3) or more of the voting rights of the total shareholders who areentitled to exercise their voting rights, and shall be adopted by a majority of votes thereof.

Article 32.

(Term of Office of Audit & Supervisory Board members)

1.

The term of office of an Audit & Supervisory Board member shall expire at the close of the ordinary
general meeting of shareholders pertaining to the last fiscal year ending within four (4) years after his/her appointment.

2.

The term of office of an Audit & Supervisory Board member elected to fill a vacancy of another
Audit & Supervisory Board member, who has retired before such another Audit & Supervisory Board
member term of office expires, shall be until the term of office of such predecessor would expire.

Article 33.

(Standing Audit & Supervisory Board member(s))

The Audit & Supervisory Board shall by its resolution elect standing Audit & Supervisory Board
member(s).
Article 34.

(Convocation Notice of the Audit & Supervisory Board and Resolution Thereof)

1.

The convocation notice of the Audit & Supervisory Board shall be dispatched to each Audit &Supervisory Board member at least three (3) days prior to the date set for the meeting; provided,
however, that such period may be shortened in the case of urgency.

2.

The convocation notice as provided for in the preceding paragraph may be omitted when theunanimous consent of all the Audit & Supervisory Board members is obtained.

3.

The resolution of the Audit & Supervisory Board shall be adopted by a majority of Audit &Supervisory Board members, unless otherwise provided for by laws and ordinances.

Article 35.

(Regulations of the Audit & Supervisory Board)Any matters concerning the Audit & Supervisory Board shall be governed by the Regulations of the
Audit & Supervisory Board to be prescribed by the Audit & Supervisory Board in addition to the laws andordinances or these Articles of Incorporation.
Article 36.

(Minutes of Meeting of the Audit & Supervisory Board)

A summary of proceedings, results and other matters required by applicable laws and regulations regarding
a meeting of the Audit & Supervisory Board shall be recorded in the minutes in writing or digitally, and the
Audit & Supervisory Board members present at the meeting shall affix their names and seals thereto or put
their electronic signatures thereon.
Article 37.

(Remuneration, etc. of Audit & Supervisory Board members)

Remuneration, etc. of Audit & Supervisory Board members shall be determined at a general meeting ofshareholders.
Article 38.

(Exemption of Audit & Supervisory Board members’ Liabilities)

1.

Pursuant to the provisions of Article 426, Paragraph 1 of the Company Law and to the extent permitted
by laws and regulations, the Company may, by resolution of the Board of Directors, exempt theliabilities of its Audit & Supervisory Board members (including persons who have previously served as
the Company’s Audit & Supervisory Board members) for failing to perform their duties.

2.

Pursuant to the provisions of Article 427, Paragraph 1 of the Company Law, the Company may enter
into contracts with its outside Audit & Supervisory Board members to limit their liabilities for a failure
to perform their duties, provided that the maximum amount of liabilities under such contracts shall be
the total of the amounts provided in each item of Article 425, Paragraph 1 of the Company law.
CHAPTER VI. ACCOUNTING AUDITOR(S)

Article 39.

(Accounting Auditor(s))

The Company shall have accounting auditor(s).
CHAPTER VII. ACCOUNTING
Article 40.

(Fiscal Year)The fiscal year of the Company shall be one (1) year starting from April 1 of each year and ending on
March 31 of the following year.
Article 41.

(Organ to Decide Distribution of Retained Earnings, etc.)

Unless otherwise provided for in laws and regulations, the Board of Directors may, by its resolution, decide
the matters, such as distribution of retained earnings, that are provided in each item of Article 459,
Paragraph 1 of the Company Law.
Article 42.
1.

(Record Date for Distribution of Surplus)

The record date for the distribution of fiscal-year-end dividends of the Company shall be March 31 ofeach year.

2.

The record date for the distribution of an interim dividend of the Company shall be September 30 ofeach year.

3.

In addition to the record dates set forth in the preceding two paragraphs, the Company may distributeretained earnings by setting a record date.

Article 43.

(Expiration for Dividend Payment)

If the asset to be distributed as dividends is cash and if such cash is not received within three (3) years after
the date on which the Company commenced payment thereof, the Company shall be released from theobligation to make such payment.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.

EnactedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedAmendedJune 6, 1954;
May 20, 1964;
May 20, 1965;
May 30, 1969;
February 19, 1974;
April 9, 1974;
May 21, 1974;
August 15, 1974;
October 22, 1974;
December 25, 1974;
February 16, 1976;
June 28, 1982;
June 29, 1983;
June 28, 1985;
June 29, 1989;
June 27, 1991;
June 29, 1994;
June 29, 1995;
June 26, 1998;
June 29, 1999;
June 28, 2001;
June 27, 2002;
June 27, 2003;
June 25, 2004;
June 28, 2005;
June 27, 2006;
October 1, 2006;
June 25, 2009; andJune 26, 2013.

Exhibit 1.2(Translation)

REGULATIONS OF THE BOARD OF DIRECTORSADVANTEST CORPORATIONREGULATIONS OF THE BOARD OF DIRECTORS
Article 1.

(Purpose)

Except as otherwise provided for by laws and ordinances or the Articles of Incorporation, any mattersrelated to the Board of Directors of Advantest Corporation (the “Company”) shall be governed by theseregulations of the Board of Directors (the “Regulations”).
Article 2.

(Responsibilities)

The Board of Directors shall, in addition to making decisions on significant matters concerning theexecution of business and basic management policies, including the Internal Control System, oversee theexecution of duties of the Representative Director.
Article 3.

(Convocation)

The Ordinary Meeting of the Board of Directors shall be held once a month in principal, and theExtraordinary Meeting of the Board of Directors shall be held at any time whenever necessary.
Article 4.

(Place)The meeting of the Board of Directors shall be held at the head office of the Company; provided, however,that the place of the meeting may be changed whenever necessary.
Article 5.

(Convener and Chairperson)

The Chairperson of the Board shall convene and act as the chairperson of the meeting of the Board of
Directors. Should the Chairperson of the Board be unable to act, another director shall take his/her place inaccordance with an order of priority previously determined by the Board of Directors.
Article 6.

(Request for Convocation)

1.

A director may, by submitting a matter to be discussed at a meeting of the Board of Directors to theConvener stipulated in the preceding Article, request that a meeting of the Board of Directors beconvened.

2.

An Audit & Supervisory Board member may, where it is deemed necessary, request the Convener
stipulated in the preceding Article to convene a meeting of the Board of Directors.

Article 7.

(Procedure for Convocation)

1.

Notice for convocation of the meeting of the Board of Directors shall be dispatched in writing to eachdirector and Audit & Supervisory Board member at least three (3) days prior to the date set for the
meeting; provided, however, that such period may be shortened or the meeting may be convened orally
or electronically if the convocation is urgently required.

2.

If the consent of all directors and Audit & Supervisory Board members is obtained, the meeting of theBoard of Directors may be held without taking the procedure for convocation.

Article 8.
1.

(Matters to be Resolved)
Matters which are required to be resolved by the Board of Directors are stipulated in the annex hereto.

-2-

Article 9.

(Method of Adopting Resolutions)

1.

Resolutions of the Board of Directors shall be adopted by a majority vote of the directors present at themeeting at which a majority of directors are present. In the event of a tie, the chairperson of the meeting may
defer the resolution and submit the same proposal again at the following meeting of the Board of Directors.

2.

Any director having a special interest in the matter to be resolved may not exercise his or her voting
rights.

Article 10.

(Omission of Resolutions)

If the chairperson of the meeting submits a resolution in respect of a matter that is subject to a resolution by
the Board of Directors, if all directors (limited to those directors who are entitled to participate in resolving
such matter) consent to such resolution in writing or electronically, and no Audit & Supervisory Board
member objects to such resolution, such resolution shall be deemed approved by the Board of Directors.
Article 11.

(Matters to be Reported)

1.

The Representative Director or the director in charge shall report to the Board of Directors on the statusof execution of business during such period.

2.

The Representative Director may, where it is deemed necessary in a report pursuant to the previous
paragraph, cause another person responsible for the execution of the relevant business to report on thestatus of such matter.

3.

Any director who intends to engage in i) transactions which will compete with the business of theCompany or ii) transactions with the Company, shall disclose the important facts to and obtainapprovals from the Board of Directors, and shall report the important facts concerning the transactions
to the Board of Directors without delay after the completion thereof.

4.

Matters which are required to be reported to the Board of Directors are stipulated in the annex hereto.

Article 12.

(Appointment and Dismissal of Executive Officers)

1.

The Board of Directors may appoint executive officers and assign the performance of operations ofbusiness of the Company to them.

2.

The Board of Directors may appoint, from the executive officers, one (1) person for the office ofPresident of Executive Officers, and several persons for the office of Vice-President of Executive
Officers, Senior Executive Officer and Managing Executive Officer, respectively, by its resolution.

3.

Basic matters such as the appointment, authority, duties and retirement of executive officers shall beseparately determined by the Regulations of Executive Officers.

Article 13.

(Attendance of Related Persons)

If the Chairperson deems it necessary for deliberation at a meeting of the Board of Directors, he or she may
have any executive officer responsible for business related to any of the proposals and/or other persons he or
she deems appropriate to attend the meeting and express his or her opinions and/or provide explanations.
Article 14.
1.

(Minutes)

The substance of the proceedings of the meeting of the Board of Directors, the results thereof and othermatters provided for in relevant laws and regulations shall be recorded in the minutes and the directors
and Audit & Supervisory Board members present at the meeting shall affix their names and seals
thereto or put their electronic signatures thereon.
-3-

2.

The minutes shall be kept at the head office of the Company for the period of ten (10) years.

Article 15.

(Notification to Directors and Audit & Supervisory Board members Not Present)

Directors and Audit & Supervisory Board members who were not present at a meeting of the Board of
Directors shall be notified of the substance of the proceedings and the results thereof.
Article 16.

(Amendment)

Any amendment to these Regulations shall be made by a resolution of the Board of Directors.

SUPPLEMENTARY PROVISION
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Amended and Enacted
Amended and Enacted
Amended and Enacted
Amended and Enacted
Amended and Enacted
Amended and Enacted
Amended and Enacted
Amended and Enacted
Amended and Enacted
Amended and Enacted

May 1, 2012
January 1, 2008
June 27, 2006
May 1, 2006;
June 27, 2003;
June 27, 2002;
June 28, 2001;
May 1, 1998;
April 1, 1992; andOctober 1, 1990.

-4-

ANNEX

MATTERS TO BE RESOLVED
1. Matters provided for by laws and ordinances or the Articles of Incorporation:(1) Convocation of the General Meeting of Shareholders and proposals to be referred thereto (Article 298 of
the Company Law (“CL”));(2) Determination and the order of directors to act as the Convener and the Chairperson at the General
Meeting of Shareholders;(3) Establishment and amendment of the Regulations of Board of Directors;(4) Development of the Internal Control System (CL362);(5) Appointment or dismissal of the Representative Director or directors with titles (CL362);(6) The amount of remuneration, among others, and time of payment of remuneration to directors upon
resolution of the General Meeting of Shareholders;(7) Approval of the transactions by directors which will compete with the business of the Company and thetransactions between directors and the Company (CL365);(8) Exemption of directors’ and Audit & Supervisory Board members’ liabilities under the Articles ofIncorporation (CL362);(9) Appointment or dismissal of a Counselor or an Advisor;(10) Approval of accounting documents, business reports and annexed specifications thereof (CL436);(11) Matters concerning distribution of surplus and related matters (CL459);(12) Establishment of a record date;(13) Matters concerning a share split and amendment to the Articles of Incorporation with respect to anincrease of the total number of issuable shares corresponding to such share split (CL183, CL184);(14) Allotment of shares without consideration (CL186);(15) Acquisition of treasury shares under the Articles of Incorporation (CL165);(16) Retirement of treasury shares of the Company (CL178);(17) Matters concerning the issuance of offering shares (CL201);(18) Decrease of the number of shares constituting one unit of shares or abolishment of the provisions which
define such number (CL195);(19) Matters concerning the issuance of bonds, stock acquisition rights and bonds with stock acquisition rights(CL362, 240);(20) Sale of shares owned by non est shareholders (CL197);(21) Establishment and amendment of the Share Handling Regulations;(22) Appointment of the share registration agent and its handling office;(23) Any and all other significant matters under the laws and ordinances or the Articles of Incorporation.

-5-

2. Important Execution of Business

Threshold for approval(1) Matters concerning budgets and settlement ofaccounts;• budget for the first and second half of the fiscal year,
financial statements for the fiscal year, interim period
and quarterly period, etc.

(2) Matters concerning material contracts, businessalliances or lawsuits;(3) Matters concerning other important execution ofbusiness.
3. Disposal or Acquisition of Important Assets andLoans of Large Amount(1) Establishment, merger, transfer, dissolution,liquidation, capital increase or capital decreaseof affiliate or joint venture;All;(2) Acquisition or sale of businesses;

All;(3) Capital subscription or investment;

One hundred million yen (¥100,000,000) or more per
each;(4) Acquisition, sale or lease of fixed assets or trade Three hundred million yen (¥300,000,000) or more perrights;each (including land and buildings);(5) Disposal of fixed assets or inventory;

One hundred million yen (¥100,000,000) or more per
each;(6) Loans and borrowings;

Three hundred million yen (¥300,000,000) or more per
each;(7) Leasing;

Five million yen (¥5,000,000) or more per month pereach;(8) Creation of security right;

One hundred million yen (¥100,000,000) or more per
each;(9) Guarantee of liabilities;

Thirty million yen (¥30,000,000) or more per each;(10) Depreciation or waiver of credit; andThirty million yen (¥30,000,000) or more per each; and(11) Donation.

Thirty million yen (¥30,000,000) or more per each.
(note) These items also cover subsidiaries . However,other than (1), these items do not apply to matters within
the Advantest group.

4. Important corporate organization and personal affairs(1) Amendment to corporate organization;• Groups or Divisions (only in the case where there are
no upper Groups).

(2) Appointment or dismissal of executive officers,
or amount of remuneration, and time of paymentof remuneration thereto;-6-(3) Personnel changes; and• Assignment of business responsibilities to directors
and corporate executive officers, or personnel
changes of representative directors of importantaffiliates.
(4) Appointment of directors or corporate executive
officers to an affiliate, other company or outsideorganization, or change thereof.

MATTERS TO BE REPORTED
1.

Monthly settlement of accounts (excluding those months in which the fiscal, interim or quarterly
settlement of accounts are subject to resolution)

2.

Matters subject to the resolution of the Board of Managing Executive Officers which are consideredmaterial by the Representative Director

3.

Matters which will have a material impact on the management of the Company

4.

Matters stipulated in Article 11, Paragraph 3 of the Regulations of the Board of Directors (competitivetransactions and conflict of interest transactions)

5.

Other matters in respect of which the Chairperson requests a report-7-

Exhibit 1.3(Translation)

REGULATIONS OF
THE AUDIT & SUPERVISORY BOARD

ADVANTEST CORPORATION-1-(TRANSLATION)REGULATIONS OF
THE AUDIT & SUPERVISORY BOARDOF
ADVANTEST CORPORATION(Kabushiki Kaisha Advantest)
Article 1.

(Purpose)

These Regulations stipulate matters concerning the Audit & Supervisory Board of Advantest Corporation(the “Company”) based on laws, regulations, and the Articles of Incorporation of the Company.
Article 2.

(Organization)

1.

The Audit & Supervisory Board shall consist of all Audit & Supervisory Board members.

2.

The Audit & Supervisory Board shall appoint standing Audit & Supervisory Board member(s).

3.

In addition to the preceding paragraph, the Audit & Supervisory Board shall appoint a chairperson of
meetings of the Audit & Supervisory Board.

Article 3.

(Purpose of the Audit & Supervisory Board)

The Audit & Supervisory Board shall receive reports, deliberate, or adopt resolutions on significant mattersconcerning audits; provided, however, that it shall not interfere with the execution of powers of each
Audit & Supervisory Board member.
Article 4.

(Duties of the Audit & Supervisory Board)

The Audit & Supervisory Board shall perform the following duties; provided, however, that decisions madepursuant to Item 3 below shall not interfere with the execution of powers of each Audit & Supervisory
Board member:(1) preparing audit reports;(2) appointing and dismissing standing Audit & Supervisory Board member(s); and(3) determining audit policy, methods to investigate the state of business operations and assets, andother matters relating to the execution of duties by Audit & Supervisory Board members.
Article 5.

(Appointment and Dismissal of Standing Audit & Supervisory Board Member(s))

The Audit & Supervisory Board shall, by its resolution, appoint standing Audit & Supervisory Board
member(s) from among the Audit & Supervisory Board members, or dismiss standing Audit & Supervisory
Board member(s).
Article 6.

(Chairperson)

1.

The Audit & Supervisory Board shall, by its resolution, appoint a chairperson of the Audit &Supervisory Board from among the Audit & Supervisory Board members.

2.

The chairperson of the Audit & Supervisory Board shall perform the duties set forth in Article 8,
Paragraph 1; provided, however, that it shall not interfere with the execution of powers of each Audit &Supervisory Board member.
-2-

Article 7.

(Meetings to be Held)

The meetings of the Audit & Supervisory Board shall be held at least once every three (3) months; provided,
however, that meetings may be held from time to time as necessary.
Article 8.

(Persons Entitled to Convene Meetings)

1.

The chairperson of the Audit & Supervisory Board shall convene and preside over the meetings of the
Audit & Supervisory Board.

2.

Each Audit & Supervisory Board member may request that the chairperson of the Audit & Supervisory
Board convene a meeting of the Audit & Supervisory Board.

3.

If despite such request in the preceding paragraph, the chairperson does not convene a meeting of the
Audit & Supervisory Board, the Audit & Supervisory Board member who made the request may
convene and preside over the meeting.

Article 9.

(Procedure for Convocation)

1.

Upon convening a meeting of the Audit & Supervisory Board, a convocation notice of a meeting of the
Audit & Supervisory Board shall be sent to each Audit & Supervisory Board member at least three(3) days prior to the date of the meeting; provided, however, that, in urgent cases, such period may be
shortened.

2.

With the consent of all Audit & Supervisory Board members, a meeting of the Audit & Supervisory
Board may be held without following the convocation procedures.

Article 10.

(Method of Adopting Resolutions)

1.

Resolutions of a meeting of the Audit & Supervisory Board shall be adopted by a majority vote of the
Audit & Supervisory Board members.

2.

In adopting resolutions, the Audit & Supervisory Board shall deliberate based on adequate materials.

Article 11.

(Resolution of Audit Policy and Others)

1.

Audit policy, audit plans, methods of audit, and allocation of audit duties among the Audit &Supervisory Board members, among others, shall be determined by a resolution of the Audit &Supervisory Board.

2.

In addition to the matters set out in the preceding paragraph, the Audit & Supervisory Board shallresolve any other matters deemed necessary to perform the duties of the Audit & Supervisory Board
members, including budgeting of audit expenses.

3.

In addition to the matters set out in the preceding paragraph, the Audit & Supervisory Board shallrequest that the directors resolve the contents of the following audit systems, and develop such
systems:(1) matters relating to employees who support the Audit & Supervisory Board members’ duties;(2) matters relating to the independence of the employees mentioned in the preceding item fromdirectors;(3) systems for directors and employees to report to the Audit & Supervisory Board members, andany other systems relating to reports to be provided to the Audit & Supervisory Board members;and-3-(4) any other systems for ensuring the effectiveness of the Audit & Supervisory Board members’audit activities.
Article 12.

(Regular Meetings with the Representative Director and Others)

1.

The Audit & Supervisory Board shall hold meetings with the representative directors on a regularbasis, and shall endeavor to deepen their mutual understanding and relationship of trust with therepresentative directors by, for example, exchanging opinions with the representative directors
regarding issues to be addressed by the company, the state of the development of the environment for
Audit & Supervisory Board member audits, important issues regarding audits, and any other relevant
matters, and by making requests as necessary.

2.

The Audit & Supervisory Board shall present explanations to the Representative Director and theBoard of Directors with respect to audit policy, audit plans, and the state of audit enforcement andresults from time to time.

3.

In addition to matters required by law, the Audit & Supervisory Board shall determine matters that thedirectors, executive officer, and employees should report to the Audit & Supervisory Board throughdiscussions with directors and executive officers, and the Audit & Supervisory Board shall receive suchreports.

Article 13.

(Reports to the Audit & Supervisory Board by Audit & Supervisory Board Members)

1.

Each Audit & Supervisory Board member shall report the state of his or her execution of duties to the
Audit & Supervisory Board regularly and from time to time, and at any time upon request by the
Audit & Supervisory Board.

2.

Any Audit & Supervisory Board member who has received a report from the accounting auditor,
director, executive officer, employees, such as those of the internal audit department, or any otherperson shall report the same to the Audit & Supervisory Board.

3.

The Audit & Supervisory Board may request reports from the accounting auditor, directors, executive
officers, employees, such as those of the internal audit department, and any other persons, whennecessary.

4.

With respect to Paragraphs 1, 2, and 3 above, if any of the Audit & Supervisory Board members, theaccounting auditor, directors, executive officers, employees, such as those of the internal audit
department, or other persons notify all of the Audit & Supervisory Board members with respect tomatters that such persons should report to the Audit & Supervisory Board, such matters shall not be
required to be reported to the Audit & Supervisory Board.

Article 14.

(Measures to be Taken in Response to Reports)

1.

If the Audit & Supervisory Board receives a report from any of the directors or executive officers to theeffect that a fact likely to cause material damage to the Company has been found, the Audit &Supervisory Board shall conduct the necessary investigations and take appropriate measures according
to the situation.

2.

The preceding paragraph shall be applied mutatis mutandis if the Audit & Supervisory Board receives areport from the accounting auditor to the effect that any misconduct by a director or executive officer
with respect to the execution of his or her duties or any other material facts which contravene theprovisions of laws, regulations, or the Articles of Incorporation of the Company have been found.

3.

Paragraph 1 shall be applied mutatis mutandis if the Audit & Supervisory Board receives a report fromthe directors, executive officer, or employees on the matters determined in prior deliberation with thedirectors or executive officer.
-4-Article 15.

(Preparation of Audit Report)

1.

The Audit & Supervisory Board shall prepare the audit report of the Audit & Supervisory Board basedon the audit reports prepared by each Audit & Supervisory Board member, and after deliberation
thereof.

2.

If the content of the audit reports of the Audit & Supervisory Board is different from the content of theaudit reports of each Audit & Supervisory Board member, and if requested by such Audit &Supervisory Board member, the Audit & Supervisory Board shall refer to the content of the audit
reports of such Audit & Supervisory Board member in the audit report of the Audit & Supervisory
Board.

3.

Each Audit & Supervisory Board member shall sign or affix his or her name and seal (electronic
signatures permitted) to the audit report of the Audit & Supervisory Board. Any standing Audit &Supervisory Board member, and outside Audit & Supervisory Board member, shall indicate such title
thereon.

4.

Provisions in the preceding Paragraphs 1, 2, and 3 shall be applied mutatis mutandis when the
Company prepares extraordinary financial statements or consolidated financial statements.

Article 16.
1.

(Consent Concerning Appointment of Audit & Supervisory Board Members and Others)

The following matters relating to the appointment of the Audit & Supervisory Board members shall be
determined by resolution of the Audit & Supervisory Board:(1) consenting to a proposal concerning appointment of the Audit & Supervisory Board member(s), tobe submitted to the General Meeting of Shareholders;(2) requesting that matters concerning appointment of Audit & Supervisory Board members be
included in the agenda of the General Meeting of Shareholders; and(3) requesting that proposals concerning the appointment of the Audit & Supervisory Board
member(s) be submitted to the General Meeting of Shareholders .

2.

The preceding paragraph shall apply mutatis mutandis to the appointment of substitute Audit &Supervisory Board members.

Article 17.
1.

(Consent Concerning Appointment of the Accounting Auditor and Others)

The following matters relating to the appointment, removal, or non-reappointment of the accounting
auditor shall be determined by a resolution of the Audit & Supervisory Board:(1) consenting to a proposal concerning appointment of the accounting auditor, to be submitted to theGeneral Meeting of Shareholders;(2) consenting to the inclusion of matters concerning the appointment or non-reappointment of theaccounting auditors, in the agenda General Meeting of Shareholders;(3) requesting that proposals concerning the appointment of the accounting auditor be submitted to
the General Meeting of Shareholders;(4) requesting that matters concerning the appointment, removal, or non-reappointment of theauditing auditors be included in the agenda of the General Meeting of Shareholders; and(5) appointing those persons who shall temporarily assume the duties of the accounting auditor in thecase of a vacancy in the position of accounting auditor.

-5-

2.

Consent to the removal of the accounting auditor based on the statutory grounds of removal shallrequire a unanimous resolution of the Audit & Supervisory Board members, and may be adopted after
deliberation by the Audit & Supervisory Board. In such case, an Audit & Supervisory Board member
appointed by the Audit & Supervisory Board shall report on such removal of the accounting auditor
and the reasons therefor, at the first General Meeting of Shareholders convened after the removal.

3.

The consent stipulated in the preceding paragraph may be obtained in writing or electronically, inurgent cases.

Article 18.

(Consent with Respect to Remuneration of and Other Matters related to the Accounting Auditor)

The Audit & Supervisory Board shall, by resolution, consent to the remuneration of and other mattersrelated to the accounting auditor or those who temporarily assume the duties of the accounting auditor.
Article 19.
1.

(Consent of the Audit & Supervisory Board Members Concerning Partial Exemption of Directors’
Liabilities and Others)

The following consents shall require a unanimous resolution of the Audit & Supervisory Board
members, and may be adopted after deliberation by the Audit & Supervisory Board:(1) consent to the submission of a proposal to the General Meeting of Shareholders concerning thepartial exemption of directors’ liabilities;(2) consent to the submission of proposals to a General Meeting of Shareholders concerning
amendments to the Articles of Incorporation to allow the partial exemption of directors’ liabilities
by resolution of the Board of Directors;(3) consent to the submission of proposals to the Board of Directors concerning the partial exemptionof directors’ liabilities pursuant to the provision of the Articles of Incorporation;(4) consent to the submission of proposals to a General Meeting of Shareholders concerning
amendments to the Articles of Incorporation to allow outside directors to enter into contracts with
the Company with respect to the partial exemption of directors’ liabilities; and(5) consent to the auxiliary participation by the Company in shareholder litigation to assist any
defendant director.

2.

The consent stipulated in the preceding paragraph may be obtained in writing or electronically, inurgent cases.

Article 20.

(Deliberation Pertaining to the Execution of Powers by Audit & Supervisory Board Members)

In case the Audit & Supervisory Board members shall execute their powers or perform their duties withrespect to the following matters, the Audit & Supervisory Board members may deliberate such matters at a
meeting of the Audit & Supervisory Board, in advance:(1) any explanation in response to questions submitted to Audit & Supervisory Board members by
any shareholder prior to a General Meeting of Shareholders;(2) any report to the Board of Directors, and requests for convocation of a meeting of the Board of
Directors, and other matters related thereto;(3) any results of any investigation concerning proposals or other documents to be submitted to a
General Meeting of Shareholders;(4) any claim filed to seek an injunction against the acts of directors outside of the purpose of theCompany, or otherwise in violation of any laws, regulations, or the Articles of Incorporation;-6-(5) any statement at a General Meeting of Shareholders concerning appointment, removal,
resignation, remuneration, and other matters related to the Audit & Supervisory Board members;(6) any matter concerning lawsuits between the Company and a director; and(7) any other matters, including filing of lawsuits.
Article 21.

(Deliberation with Respect to Remuneration and Other Matters Related to Audit & Supervisory
Board Members)

The Audit & Supervisory Board may deliberate with respect to remuneration and other matters related to the
Audit & Supervisory Board members, with the unanimous consent of the Audit & Supervisory Board
members.
Article 22.
1.

(Minutes)

The Audit & Supervisory Board shall prepare the minutes, containing the following matters, of ameeting of the Audit & Supervisory Board. The Audit & Supervisory Board members present at themeeting shall sign or affix their names and seals (electronic signatures permitted) to such minutes.
(1) Date and location of the meeting of the Audit & Supervisory Board (including the methods ofparticipation by Audit & Supervisory Board members, directors, or the accounting auditor, whowere not present at the location of the meeting);(2) A summary of the proceedings of the meeting, and the results thereof;(3) In case any opinions or comments were made at a meeting of the Audit & Supervisory Board withrespect to the following matters, an outline of such opinions or comments:(i)a report from a director to the effect that a fact likely to cause material damage to theCompany was found; and(ii) a report from the accounting auditor to the effect that any misconduct by a director or
executive officer with respect to the execution of their duties, or any other material facts
which contravene the provisions of laws, regulations, or the Articles of Incorporation of theCompany, were found.
(4) Names of directors, executive officers, or the accounting auditor who were present at the meetingof the Audit & Supervisory Board; and(5) Name of the chairperson of the Audit & Supervisory Board.
2.

In cases where a report to the Audit & Supervisory Board is not required pursuant to Article 13,
Paragraph 4, the Audit & Supervisory Board shall prepare minutes containing the following items:(1) the content of the matters which are not required to be reported to the Audit & Supervisory Board;(2) the date on which the report to the Audit & Supervisory Board is deemed not to be required;(3) the name of the Audit & Supervisory Board member who performed the duties concerning the
preparation of the minutes.

3.

The minutes referred to in the preceding Paragraphs 1 and 2 shall be kept at the head office of theCompany for ten (10) years.

-7-Article 23.

(Secretariat of the Audit & Supervisory Board)

The administration of the Audit & Supervisory Board, including the convocation, preparation of the minutesof a meeting of the Audit & Supervisory Board, and other operational matters of the Audit & Supervisory
Board, shall be handled by the Audit & Supervisory Board members’ staff.
Article 24.

(Code of the Audit of Audit & Supervisory Board Members’ Auditing Standards)

Matters regarding audits by the Audit & Supervisory Board and the Audit & Supervisory Board members
shall be governed by the Code of the Audit of Audit & Supervisory Board members’ Auditing Standards(Kansayaku Kansa Kijyun) defined by the Audit & Supervisory Board, in addition to the matters provided
by laws, regulations, the Articles of Incorporation of the Company, and these Regulations of the Audit &Supervisory Board.
Article 25.

(Amendment and Abolition of these Regulations)

Any amendment to, and abolition of, these Regulations shall be made by a resolution of the Audit &Supervisory Board.
SUPPLEMENTARY PROVISION
These Regulations shall come into force on June 20, 2014.
1.
2.
3.
4.
5.
6.

EnactedAmendedAmendedAmendedAmendedAmendedJune 30, 1994;
August 30, 2002;
June 27, 2006;
September 27, 2006;
August 29, 2007;andJune 20, 2014.
(End of Document)-8-

Exhibit 12.1
CERTIFICATION
I, Haruo Matsuno, certify that:1.

I have reviewed this annual report on Form 20-F of Advantest Corporation (the “registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to statea material fact necessary to make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the endof the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the period covered by the annual report that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Boardof Directors (and persons performing the equivalent function):(a) All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.

Date: June 26, 2014
ADVANTEST CORPORATION
By:
Name:
Title:/s/ HARUO MATSUNO
Haruo Matsuno
Representative Director, President and CEO

CERTIFICATION
I, Hiroshi Nakamura, certify that:1.

I have reviewed this annual report on Form 20-F of Advantest Corporation (the “registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to statea material fact necessary to make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the endof the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the period covered by the annual report that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Boardof Directors (and persons performing the equivalent function):(a) All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.

Date: June 26, 2014
ADVANTEST CORPORATION
By: /s/ HIROSHI NAKAMURA
Name:Hiroshi Nakamura
Title: Director, Managing Executive Officer

Exhibit 13.1
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
each of the undersigned officers of Advantest Corporation, a Japanese corporation (the “Company”), does hereby
certify that, to such officer’s knowledge:
1.

The accompanying Annual Report of the Company on Form 20-F for the period ended March 31, 2014 (the“Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of1934, as amended; and2.

The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company.

Date: June 26, 2014
By:

/S/

HARUO MATSUNO
Name:Haruo Matsuno
Title: Representative Director, President and CEO
Date: June 26, 2014
By: /S/ HIROSHI NAKAMURA
Name:Hiroshi Nakamura
Title: Director, Managing Executive Officer

Exhibit 15.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:(1) Registration Statement (Form S-8 No. 333-194133) pertaining to the Advantest Corporation Incentive
Stock Option Plan 2013,(2) Registration Statement (Form S-8 No. 333-184101) pertaining to the Advantest Corporation Incentive
Stock Option Plan 2012,(3) Registration Statement (Form S-8 No. 333-175704) pertaining to the Advantest Corporation 2011
Equity Incentive Plan (for Verigy Ltd.),(4) Registration Statement (Form S-8 No. 333-175666) pertaining to the Advantest Corporation Incentive
Stock Option Plan 2011,(5) Registration Statement (Form S-8 No. 333-169624) pertaining to the Advantest Corporation Incentive
Stock Option Plan 2009 and the Advantest Corporation Incentive Stock Option Plan 2010,(6) Registration Statement (Form S-8 No. 333-161977) pertaining to the Advantest Corporation Incentive
Stock Option Plan 2009,(7) Registration Statement (Form S-8 No. 333-153610) pertaining to the Advantest Corporation Incentive
Stock Option Plan 2008, and(8) Registration Statement (Form S-8 No. 333-97107) pertaining to the Advantest America Employee
Stock Purchase Program;of our reports dated June 26, 2014, with respect to the consolidated financial statements and the effectiveness ofinternal control over financial reporting of Advantest Corporation and subsidiaries, included in this Annual
Report (Form 20-F) of Advantest Corporation for the year ended March 31, 2014.
/s/ Ernst & Young ShinNihon LLC
Tokyo, Japan
June 26, 2014