ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

Consolidated Six-Year SummaryTokyo Electron Limited and its Subsidiaries
Years ended March 31, 2003, 2002, 2001, 2000, 1999 and 1998

Thousands of
U.S. dollars
2003
Net sales .................................................................... $ 3,831,782-

Millions of yen
2003

2002

2001

2000

1999

1998

¥460,580-¥417,825-¥723,880-¥440,729-¥313,820-¥455,585-

Semiconductor production equipment1 ..................

3,034,022-

364,689-

325,715-

619,001-

355,103-242,240-

380,184-

Computer network1................................................

143,035-

17,193-

17,031-

14,054-

12,357-

12,878-15,262-

Electronic components ..........................................

643,762-

77,380-73,658-89,211-

72,051-

57,734-60,139-Other.....................................................................

10,963-

1,318-

1,421-

1,614-

1,218-

968---

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

9,308-

1,119-(18,310)

121,086-

35,816-

6,383-

63,296-

Income (loss) before income taxes .............................

(191,435)(23,010)(22,919)

99,132-

29,689-6,038-

62,834-

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

(345,715)(41,554)(19,938)

62,012-

19,848-1,866-

30,009-Domestic sales ...........................................................

1,584,968-

190,513-

186,516-

299,272-

183,987-

149,838-

230,550-

Overseas sales........................................................... 2,246,814-

270,067-

231,309-424,608-

256,742-

163,982-

225,035-

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

227,736-

27,374-

26,294-

21,679-19,446-

17,921-

12,652-

Capital expenditures2..................................................

102,824-

12,359-30,946-49,403-18,999-23,478-33,302-R&D expenses ...........................................................

416,993-

50,123-53,827-52,911-37,135-

26,842-

26,813-

Total assets................................................................ 4,366,899-

524,901-

556,915-

729,511-499,499-

414,903-493,600-

Total shareholders’ equity...........................................

252,904-

307,579-

333,281-273,603-257,716-

261,009-

10,053-

10,171-

10,236-

8,946-

7,835-

7,287-

10.70-¥ 174.68---

168.43-

2,104,029-

Number of employees ................................................
U.S. dollars
Net income (loss) per share of common stock:Yen

3

Basic ..................................................................... $ -------(1.98)-

Diluted4 .................................................................

--¥ (238.57)¥ (113.85)¥ 353.76-¥ 113.53-----

344.75-110.64-¥

Cash dividends per share of common stock:
Actual....................................................................

0.07-

8.00-

8.00-

38.00-

14.00-

12.00-

30.00-

Adjusted3...............................................................

0.07-

8.00-

8.00-

38.00-

14.00-

12.00-

30.00-

Number of shares outstanding (thousands) ................

175,698-

175,691-

175,691-

175,660-

174,624-

174,569-

Number of shareholders .............................................

49,259-37,116-42,781-

7,147-

8,576-

9,562-

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

(14.8)

(6.2)

20.4-

7.5-

0.7-

12.8-

Percent
Operating income margin ...........................................

0.2-

(4.4)

16.7-

8.1-

2.0-

13.9-

Shareholders’ equity ratio ...........................................

48.2-

55.2-

45.7-

54.8-

62.1-

52.9-

Asset turnover (times) ................................................

0.85-

0.65-

1.18-

0.96-

0.69-

1.03-

¥ 45,815-¥ 41,080-¥ 70,719-¥ 40,054-¥ 62,520-

U.S. dollars
Net sales per employee ............................................ $381,158-

Thousands of yen¥ 49,265-

1 The FPD, Flat Panel Display, Department has been included in Semiconductor Production Equipment. The Computer Systems division was renamed the Computer Network division as ofApril 1, 2000.
2 Capital expenditures before 1999 represent the gross increase in property, plant and equipment, intangible assets and other depreciable assets. Capital expenditures from 2000 only represent
the gross increase in property, plant and equipment.
3 From 2003, the Company began applying "Accounting Standards regarding Net Income per Share (Business Accounting Standards No.2)" and "Practical Guidelines for Applying AccountingStandards regarding Net Income per Share (Practical Guidelines for Applying Accounting Standards No.4)" released by the Accounting Standards Board of Japan (ASBJ).
4 Dilution is not assumed for the years ended March 2003, 2002 and 1999.

27

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

Consolidated Balance Sheets
Tokyo Electron Limited and its Subsidiaries
March 31, 2003 and 2002ASSETS

Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Cash and cash equivalents (Note 3) .....................................................

¥ 52,982-¥ 48,409-$ 440,784-

Marketable securities (Note 4) ..............................................................

--

10-

--

Trade notes and accounts receivable ...................................................

182,218-

167,982-

1,515,953-

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

(342)

(620)

(2,844)Inventories (Note 5)...............................................................................

111,810-

127,352-

930,201-

Deferred tax assets (Note 9) .................................................................

4,152-

3,402-

34,539-Prepaid expenses and other current assets .........................................

5,619-

6,888-

46,746-

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

356,439-

353,423-

2,965,379-

Investments in securities (Note 4).........................................................

7,216-

9,535-

60,036-

Deferred tax assets (Note 9) .................................................................

9,362-

22,591-

77,890-Intangible and other assets .................................................................

32,273-36,855-

268,493-

Total investments and other assets .................................................

48,851-

68,981-

406,419-

Land ......................................................................................................

19,718-19,908-164,047-

Buildings................................................................................................

110,950-

114,586-

923,046-

Machinery and equipment.....................................................................

97,937-

95,615-

814,781-Construction in progress .......................................................................

2,480-

5,139-

20,632-

Total property, plant and equipment................................................

231,085-

235,248-

1,922,506-

Less: Accumulated depreciation ...........................................................

111,474-

100,737-

927,405-

Net property, plant and equipment ..................................................

119,611-

134,511-995,101-

Total assets ...............................................................................................

¥524,901-¥556,915-$4,366,899-

Current assets:

Investments and other assets:

Property, plant and equipment:

See accompanying Notes to Consolidated Financial Statements.
28

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

LIABILITIES AND SHAREHOLDERS' EQUITY

Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Current liabilities:
8,729-¥ 13,924-

Current portion of long-term debt (Note 7) ............................................

37,404-

26,387-311,177-

Commercial paper .................................................................................

35,000-10,000-291,181-

Trade notes and accounts payable .......................................................

48,279-41,053-

401,656-

Accrued income taxes...........................................................................

3,645-

1,663-

30,325-

Allowance for employees’ bonuses .....................................................

3,629-

2,463-

30,193-

Provision for loss on restructuring.........................................................

8,577---

71,358-

Accrued expenses and other current liabilities .....................................

15,443-14,012-

128,475-

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

160,706-

109,502-

1,336,988-

Long-term debt, less current portion (Note 7).......................................

70,230-105,452-

584,271-

Allowance for retirement and severance benefits (Note 8)..................

36,392-

32,984-

302,762-

Other non-current liabilities ...................................................................

1,074-

1,340-

8,937-

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

268,402-249,278-

2,232,958-

Minority interest........................................................................................

3,595-

58-

29,912-47,223-47,214-

392,872-

Additional paid-in capital (Note 10) .......................................................

70,285-70,276-584,736-

Retained earnings .................................................................................

147,465-

190,195-

1,226,828-

Unrealized gains on securities ..............................................................

(59)

1,171-(490)

Foreign currency translation adjustments .............................................

1,229-

3,738-

10,220-Treasury stock at cost (Note 11) ...........................................................

(13,239)(5,015)(110,137)

Total shareholders’ equity................................................................

252,904-

307,579-

2,104,029-

Total liabilities and shareholders’ equity...............................................

¥524,901-¥556,915-$4,366,899-

Short-term borrowings (Note 7).............................................................

¥$

72,623-

Shareholders’ equity:
Common stock (Note 10) ......................................................................
Authorized: 300,000,000 shares
Issued: 175,697,930 at March 31, 2003
175,691,903 at March 31, 2002

2,034,755 at March 31, 2003
605,867 at March 31, 200229

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

Consolidated Statements of Operation
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2003, 2002 and 2001

Thousands of
U.S. dollars

Millions of yen

2003

2002

2001

2003

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

¥460,580-¥417,825-¥723,880- $3,831,782-

Cost of sales.....................................................................

326,540-

302,270-

458,902-2,716,637-

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

134,040-

115,555-

264,978-

1,115,145-

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

132,921-

133,865-

143,892-

1,105,837-

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

1,119-(18,310)

121,086-

9,308-

Interest and dividend income ...........................................

191-

351-

669-

1,591-

Interest expenses .............................................................

(1,601)(1,960)(2,378)(13,321)

Restructuring costs (Note 12) ..........................................

(12,055)----(100,295)(Note 13) ...................................................................

(8,577)----(71,358)

Devaluation of investments in securities ..........................

(739)(1,236)(1,552)(6,147)

retirement benefit accounting standards (Note 8) ......

----(15,975)--

Other, net .........................................................................

(1,348)(1,764)(2,718)(11,213)

Income (loss) before income taxes ...................................

(23,010)(22,919)

99,132-(191,435)

Current .............................................................................

4,806-

2,612-

50,589-39,982-

Deferred ...........................................................................

13,726-(5,602)(13,490)

114,198-

Minority interest .....................................................................

12-

8-

21-

100-

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

¥ (41,554)¥ (19,938)

Other income (expenses):

Amount transferred to provision for loss on restructuring

Amortization of discrepancy arising from adoption ofProvision for income taxes (Note 9):

Per share of common stock:

Yen

U.S. dollars

Net income (loss) — basic ...............................................

¥ (238.57)¥ (113.85)

Net income — diluted.......................................................

----

344.75---

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

8.00-

8.00-

38.00-

0.07-

See accompanying Notes to Consolidated Financial Statements.

30¥ 62,012- $ (345,715)¥ 353.76- $(1.98)

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

Consolidated Statements of Shareholders' Equity
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2003, 2002 and 2001

Thousands of
U.S. dollars

Millions of yen

2003

2002

2001

2003

Balance at beginning of year............................................

¥ 47,214-¥ 47,213-

Conversion of convertible bonds (Note 10)......................

9-

1-

50-

79-

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

47,223-47,214-47,213-392,872-

Balance at beginning of year............................................

70,276-70,275-70,225-

584,657-

Conversion of convertible bonds (Note 10)......................

9-

1-

50-

79-

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

70,285-70,276-70,275-584,736-

190,195-

214,920-

157,876-

1,582,323-

result of a public offering by a consolidated subsidiary.......

219-

--

--

1,826-Net income (loss) for year ................................................

(41,554)(19,938)

62,012-(345,715)

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

(1,395)(4,031)(4,734)(11,606)

Bonuses to directors ........................................................

--

(756)

(234)

--

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

147,465-

190,195-

214,920-

1,226,828-

Unrealized holding gains arising during the period ..........

(59)

1,171-

1,658-(490)

Foreign currency translation adjustments .......................

1,229-

3,738-

2,734-

10,220-Treasury stock, at cost (Note 11) .......................................

(13,239)(5,015)(3,519)(110,137)¥252,904-¥307,579-

Common stock¥ 47,163- $ 392,793-

Additional paid-in capital

Retained earnings
Balance at beginning of year............................................
Increase due to the change in the equity holding as a

Unrealized gains on securities(2001: 407,556 shares; 2002: 605,867 shares
2003: 2,034,755 shares)
Total shareholders' equity ..................................................

¥333,281- $2,104,029-

See accompanying Notes to Consolidated Financial Statements.

31

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

Consolidated Statements of Cash Flows
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2003 and 2002

Millions of yen

Cash flow from operating activities:(Loss) before income taxes.........................................................................
Depreciation and amortization ....................................................................
Increase in allowance for retirement and severance benefits.....................
Increase (decrease) in allowance for employees’ bonuses ........................
Interest expenses ........................................................................................
Loss on disposal of fixed assets .................................................................
Devaluation of investments in securities .....................................................
Restructuring costs (Note 12) .....................................................................
Amount transferred to provision for loss on restructuring (Note 13) ...........
(Increase) decrease in trade notes and accounts receivable .....................
(Increase) decrease in inventories ..............................................................
Increase (decrease) in accounts payable ...................................................
(Increase) decrease in prepaid consumption tax ........................................
Others..........................................................................................................
Subtotal ......................................................................................................
Receipts from interest and dividends ..........................................................
Interest paid.................................................................................................
Income taxes paid .......................................................................................
Net cash provided by operating activities..............................................
Cash flow from investing activities:
Payment for purchase of property, plant and equipment............................
Payment for acquisition of intangible assets...............................................
Others..........................................................................................................
Net cash (used in) investing activities....................................................
Cash flow from financing activities:(Decrease) in short-term borrowings ..........................................................
Increase (decrease) in commercial paper...................................................
Proceeds from long-term debt.....................................................................
Repayment of long-term debt......................................................................
Proceeds from issuance of bonds...............................................................
Redemption of unsecured bonds ................................................................
Purchase of treasury stock..........................................................................
Dividends paid.............................................................................................
Proceeds from a public offering of a subsidiary ..........................................
Others..........................................................................................................
Net cash (used in) financing activities....................................................
Effect of exchange rate changes on cash and cash equivalents .....................
Net increase (decrease) in cash and cash equivalents ..............................
Cash and cash equivalents at beginning of year..............................................
Cash and cash equivalents at end of year (Note 3) ....................................
See accompanying Notes to Consolidated Financial Statements.

32

Thousands of
U.S. dollars

2003

2002

2003

¥(23,010)
27,3743,4161,1661,6051,70773912,0558,577(13,662)(3,890)10,352(926)(2,103)
23,400191(1,670)(527)
21,394-¥(22,919)
26,2943,164(8,501)
1,9808511,236--131,25128,359(34,166)
3,901(8,425)
123,025351(1,970)(43,848)
77,558-$(191,435)
227,73628,4229,70013,35414,1976,147100,29571,358(113,658)(32,363)
86,122(7,705)(17,490)
194,6801,586(13,893)(4,386)
177,987-(7,028)(2,780)2,538(7,270)(31,006)(5,390)607(35,789)(58,472)(23,125)
21,115(60,482)(4,829)25,0003,000(7,183)-(20,000)(8,224)(1,395)3,751(4)(9,884)3334,57348,409¥ 52,982-(34,796)(40,172)(20,000)
207,9873724,958(3,018)(59,762)
6,095--(166,389)(1,496)(68,416)(4,030)(11,606)-31,203(6)(32)(57,214)(82,229)(1,437)2,769(16,882)
38,04565,291402,739¥ 48,409- $ 440,784-

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

Notes to Consolidated Financial Statements
Tokyo Electron Limited and its Subsidiaries

1. Basis of Presentation of Consolidated Financial
Statements
The accompanying consolidated financial statements of Tokyo
Electron Limited (hereinafter “the Company”) and its subsidiaries
have been prepared from those that have been filed with the Ministryof Finance of Japan as required by the Securities and Exchange Law
and that conform with accounting principles generally accepted inJapan.
Foreign subsidiaries maintain their books in conformity withfinancial standards of the countries of their domicile.
For the convenience of readers outside Japan, the presentation of
the consolidated financial statements and the information contained
therein have been modified in some respects.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accounts of theCompany and all of its 28 subsidiaries.
The investments in affiliates in which the Company's ownership is
20% to 50% are accounted for by the equity method.
All significant inter-company accounts, transactions and unrealized
profits or losses have been eliminated in consolidation.
The fiscal year of all entities ends on March 31, except for one
foreign subsidiary, which uses December 31 year end, and no
significant transactions were noted between the different fiscal year
ends.
U.S. dollar amounts included herein are solely for the convenienceof readers and are presented at the rate of ¥120.20 to $1.00, theapproximate rate at March 31, 2003. The translation should not be
construed as a representation that the Japanese yen amounts shown
could be converted into U.S. dollars at that or any other rate.

(e) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation ofbuildings, machinery and equipment is computed on the decliningbalance method for the Company and its consolidated domestic
subsidiaries at rates based on the estimated useful lives of assets,
while the straight-line method is mainly applied for its consolidated
foreign subsidiaries over the estimated useful lives of their assets.

(f) Retirement and severance benefits
The Company and its consolidated domestic subsidiaries provide areserve for employees' retirement benefits based on the projected
benefit obligation and pension assets on the consolidated accountsettlement date. Prior year employment benefit obligations arecharged to income on a straight-line basis, beginning from theconsolidated fiscal year in which they are incurred, over a fixed
number of years (four years) within the average remaining years ofservice of employees when the differences occur. Actuarial
differences are charged to income on a straight-line basis, beginningfrom the year after they are recognized, over a fixed number of years(four years) within the average remaining years of service of
employees when the differences occur.
The annual provision for accrued retirement benefits for directors
and corporate auditors of the Company and its consolidated domestic
subsidiaries is also calculated to state the liability at the amount thatwould be required if all directors and corporate auditors retired at theend of the consolidated fiscal year according to internal regulation.

(g) Provision for loss on restructuring
The Company and its consolidated domestic subsidiaries havebooked provision for loss on restructuring in the year ended March 31,
2003 in preparation for losses that the companies expect to incur infuture due to the implementation of their business restructuring plan.

(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies aretranslated into Japanese yen at the rate prevailing at the balance
sheet date, except for those hedged by forward exchange contracts,
which are translated at the contracted rates.
Income and expense items are translated at the rates thatapproximate those rates prevailing at the time of the transactions.
The financial statements of foreign subsidiaries have beentranslated in accordance with the accounting standards in Japan.

(c) Marketable securities and investments in securities
Securities with market prices are valued at market based onmarket prices on the fiscal year-end. Other securities are valued atcost using the weighted average method.
The differences between the book and market prices of marketablesecurities are charged to shareholders’ equity. The cost of soldsecurities is calculated using the weighted average method.

(d) Inventories
Inventories other than raw materials are stated principally at cost,
cost being determined principally by the individual method. Raw
materials are stated principally at cost, cost being determinedprincipally by the moving-average method.

(h) Leases
Finance lease transactions, unless the lessee practically acquires
legal title to the leased asset, are treated as operating leasetransactions.

(i) Income taxes
The Company and its consolidated subsidiaries record deferred tax
assets and liabilities on temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes andthe amounts used for income tax purposes.

(j) Derivatives
The Company makes use of derivatives only to reduce exchange
risk of foreign currencies. The amount of derivatives is limited to theextent of foreign currency assets, debt and actual orders, and theCompany does not trade in derivatives for speculative purposes.
Derivatives are valued at market based on market prices on thefiscal year-end.

(k) Valuation of assets and liabilities of consolidated
subsidiaries
Assets and liabilities of consolidated subsidiaries are valued using
the full mark-to-market method.

33

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分(l) Amortization of consolidated goodwill

6. Pledged Assets

Consolidated goodwill is evaluated on an individual basis andamortized not exceeding 20 years, and the balance is included in the
Intangible and other assets.

The Company and its consolidated subsidiaries did not hold any
assets pledged as collateral at March 31, 2003 and 2002.

7. Short-Term Borrowings and Long-Term Debt(m) Per share information
Net income per share is computed based on the weighted average
number of shares of common stock outstanding during each year.
From 2003, the Company began applying "Accounting Standards
regarding Net Income per Share (Business Accounting Standards
No.2)" and "Practical Guidelines for Applying Accounting Standards
regarding Net Income per Share (Practical Guidelines for Applying
Accounting Standards No.4)" released by the Accounting Standards
Board of Japan (ASBJ)
Dividends per share have been presented on an accrual basis andinclude, in each fiscal year ended March 31, dividends approved or to
be approved after such March 31 but applicable to the year thenended.

3. Cash and cash equivalents

2003

2003

Thousands of
U.S. dollars

2002

2003
$128,794-

0.90% unsecured convertible
bonds due 2003 ...............................

¥15,481-¥ 15,500-

2.00% unsecured bonds due 2002......

--

20,000---1.39% unsecured bonds due 2004......

20,000-20,000-166,389-

0.85% unsecured bonds due 2003......

20,000-20,000-166,389-

1.30% unsecured bonds due 2005......

30,000-30,000-249,584-

4,500-

4,500-

37,438-warrants due 2006 ...........................

Thousands of
U.S. dollars

2002

Millions of yen

1.59% unsecured bonds with

Cash and cash equivalents at March 31, 2003 and 2002 are as
follows:
Millions of yen

Short-term borrowings are represented by 365-day notes issued by
the Company and its consolidated subsidiaries to banks and boreinterest at the average annual rate of 1.15% at March 31, 2003 and1.12% 2002, Long-term debt at March 31, 2003 and 2002 is asfollows:

2003

0.86% unsecured bonds withwarrants due 2007 ...........................

5,500-

5,500-

45,757-

Other loans from banks .......................

12,153-

16,339-101,097-

Cash and deposits ...............................

¥52,982¥48,409-$440,784 -Current portion.....................................

(37,404)(26,387)(311,177)

Time deposits due over 3 month .........

-

--

-

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

¥70,230-¥105,452-$584,271-

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

¥52,982¥48,409-$440,784 -4. Marketable Securities and Investments in Securities
Marketable securities at March 31, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen
Mutual funds ........................................

A summary of terms and conditions of the unsecured convertible
bonds at March 31, 2003 is as follows:
0.90% unsecured convertible bonds due 2003
Bond amount ............................................................. ¥15,481 million
Interest rate................................................................ 0.90%

2003

2002

2003

Issued stocks ............................................................. Common stock¥ - ----¥10----$ - - ---

Conversion price........................................................ ¥3,150 per sharesubject to adjustment

Investments in securities at March 31, 2003 and 2002 are as
follows:

in certain events.
Convertible period...................................................... June 1, 1994-September

Thousands of
U.S. dollars

Millions of yen

29, 2003

A summary of terms and conditions of the bonds with warrants at
March 31, 2003 is as follows:
1.59% unsecured bonds with warrants due 2006

2003

2002

2003

¥5,710 -¥8,545-$47,502-

Mutual funds ........................................

117-

115-

975-

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

1,389-

875-

11,559-Bond amount ............................................................. ¥4,500 million

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

¥7,216 -¥9,535-$60,036-

Interest rate................................................................ 1.59%

Listed stock..........................................

Issued stocks ............................................................. Common stock

5. Inventories

Exercise price ............................................................ ¥14,070

Inventories at March 31, 2003 and 2002 are as follows:
Millions of yen

Exercise period .......................................................... July 1, 2002-June 8, 2006
Thousands of
U.S. dollars

0.86% unsecured bonds with warrants due 2007

2003

2002

2003

¥63,206-¥ 63,730-$525,844 -Bond amount .............................................................. ¥5,500 million
Interest rate................................................................. 0.86%

raw materials and supplies ..............

48,604-

63,622-404,357-

Issued stocks .............................................................. Common stock
Exercise price ............................................................. ¥9,608

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

¥111,810 -¥127,352-$930,201 -Exercise period ........................................................... July 1, 2003-June 7, 2007

Finished products ................................
Work in process,34

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

8. Retirement and Severance Benefits

9. Income Taxes

The Company and its consolidated domestic subsidiaries havenoncontributory retirement and severance benefit plans that provide
for pension or lump-sum payment benefits to employees who retire or
terminate their employment for reasons other than dismissal forcause. In addition, the majority of the employees of the Company andits consolidated domestic subsidiaries are covered by a contributory
pension plan, whose benefits are based on length of service andcertain other factors and include a portion representing thegovernment social security welfare pension.
Certain consolidated foreign subsidiaries have a noncontributory
retirement and severance benefit plan that provides for pension or
lump-sum payment benefits to employees who retire or terminate
their employment for reasons other than dismissal for cause.
The funded status of the defined benefit plans, a substantial
portion of which consists of domestic benefit plans, as of March 31,
2003 and 2002 is as follows:Significant components of the deferred tax assets and liabilities of
the Company and its consolidated subsidiaries as of March 31, 2003
and 2002 are as follows:

Thousands of
U.S. dollars

2003

2002

2003

Tax loss carryforwards ........................

¥13,394-¥17,100-$111,432-

Allowance for retirement benefits ......

11,417-

9,252-

94,982-

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

6,993-

944-

58,176-

Provision for loss on restructuring .......

3,549---

29,525-2,451---

20,394-

1,273-

1,931-

10,58910,572-

Deferred tax assets

Excess of depreciation
and amortization ..............................
Elimination of unrealized
gain on inventories ...........................
Elimination of unrealized gain
on fixed assets .................................

1,271-

738-

2003

2002

2003

Allowance for bonuses ........................

1,165---

9,689-¥(67,714)¥(59,125)$(563,344)

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

3,014-

5,034-

25,079-Millions of yen
Benefit obligation ..................................

Thousands of
U.S. dollars

Millions of yen

Fair value of plan assets.......................

20,631-

18,021-

171,639-

Subtotal of deferred tax assets............

44,527-34,999-370,438-

Unrecognized benefit obligation ...........

(47,083)(41,104)(391,705)

Valuation allowance.............................

(30,724)(3,979)(255,605)

Unrecognized actuarial difference ........

13,622-9,390-

113,330-

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

13,803-31,020-114,833-

Unrecognized decrease of benefit........

(1,857)--(15,449)

Deferred tax liabilities¥(35,318)¥(31,714)$(293,824)

Amount recognized in the
consolidated balance sheets (note) ..

Allowance for extraordinary

Note: The annual provision for accrued retirement benefits for directors and corporate auditors(¥1,074 million in 2003, and ¥1,270 million in 2002) is not included.

Net pension cost of the plans is as follows:
Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Service cost ..........................................
Interest cost ..........................................

¥5,1641,688-¥4,3691,621-$42,96314,040-

Expected return on plan assets............
Amortization of unrecognized actuarial

(541)

(467)

(4,498)difference ..........................................
Amortization of decrease of benefit

2,456(619)544--

20,435(5,149)

Net pension cost ...................................

¥8,148-¥6,067-$67,791-

Significant assumptions of domestic pension plans used todetermine these amounts are as follows:
2003
Allocation method of benefit obligation ......................

2002

Straight-line method

Discount rate...............................................................

2.50%

3.00%

Expected rate of return on plan assets ......................

3.00%

3.00%

Amortization life of prior service cost .........................

4 years-

4 years

4 years

depreciation......................................

(523)

(754)

(4,349)Other ....................................................

(407)(4,315)(3,386)

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

(930)(5,069)(7,735)Net deferred tax assets .....................

¥12,873-¥25,951-$107,098-

Along with the promulgation on March 31, 2003 of the Law toPartially Revise the Regional Tax Law, etc. (Law No. 9, 2003), thelegal effective tax rate used in the calculation of all deferred tax
assets and liabilities (limited to those deferred taxes that will be
realized on April 1, 2004 or later) was changed to 40.69% from42.05%. As a result, deferred tax assets (after deducting deferred tax
liabilities) at the end of the current fiscal year decreased by ¥118
million, deferred provision for income taxes increased by ¥116 million,
and the net unrealized gain (loss) on securities declined by ¥2 million.

10. Shareholders’ Equity
The Company issued 6,027 shares and 634 shares of common
stock in 2003 and 2002, respectively, in connection with conversion of
convertible bonds.
Conversion of convertible bonds into common stock has beenaccounted for in accordance with the provisions of the JapaneseCommercial Code by crediting one-half of the conversion price to thecommon stock account and the additional paid-in capital accountrespectively.

Amortization life of unrecognizedactuarial difference..................................................
Amortization life of unrecognizedtransition obligation ................................................. Fully recognized in the fiscal
year ended March 31, 200135

ah4537_アニュアルレポート(ワード).doc 03/8/4 18 時 1 分

11. Share Repurchase Under Stock Option Program
The Company and its consolidated subsidiaries have a stock
option plan to further increase directors’ and employees' incentive
and motivation to raise corporate performance with the aim of
maximizing corporate value. A summary of share repurchases under
the stock option plan during the year ended March 31, 2003 is asfollows:
Number ofsharesMillions ofyen

Thousands of
U.S. dollars

Outstanding at
beginning of the year ........................

603,000----¥4,991----$41,526--

Purchased.............................................

- ----- ----- --Exercised ..............................................

- ----- ----- --Outstanding at end of the year .............

603,000----¥4,991----$41,526--

Note: The Company has 1,431,755 shares (¥8,248 million) of treasury stock other than the above.

Lease payments and depreciation computed by the straight-line
method over the lease terms with no residual value and imputed
interest expense were ¥171 million in the year ended March 31, 2003and ¥69 million in the year ended March 31, 2002.
Future minimum operating lease payments:
Millions of yen
Due within one year..............................

Thousands of
U.S. dollars

2003

2002

2003

¥1,434---¥ 868---$11,927-

Due over one year ................................

1,582---

1,976---

13,162-

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

¥3,016---¥2,844---$25,089-

15. Segment Information
The Company and its consolidated subsidiaries operate in a single
segment.

16. Contingent Liabilities
12. Restructuring costs
These costs are for the devaluation and disposal, etc. of assets
due to the consolidation or the closure of operating bases inaccordance with the implementation of the business restructuring
plan.

13. Amount transferred to provision for loss on
restructuring
This amount was transferred to provision for loss on restructuring
in preparation for losses expected to be incurred in future due to theimplementation of the business restructuring plan.

14. Leases
Pro-forma information of leased property such as acquisition cost,
accumulated depreciation, obligation under finance lease, anddepreciation expense of finance leases that do not transfer ownershipof leased property to the lessee on an "as if capitalized" basis for theyears ended March 31, 2003 and 2002 is as follows:
Leased assets not recorded in the consolidated balance sheets:
Millions of yen
Acquisition cost.....................................

Thousands of
U.S. dollars

2003

2002

2003

¥999---¥876---$8,309-

Accumulated depreciation ....................

255---

69---

2,117-Net leased property ..............................

¥744---¥807---$6,192-Future minimum lease payments:
Millions of yen
Due within one year..............................

Thousands of
U.S. dollars

2003

2002

2003

¥171---¥171---$1,424-Due over one year ................................

573---

636---

4,768-

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

¥744---¥807---$6,192-36

The Company and its consolidated subsidiaries did not hold any
contingent liabilities at March 31, 2003.

Independent Auditors’ Report

To the Board of Directors, Tokyo Electron Limited
We have examined the consolidated balance sheets of Tokyo Electron Limited and its consolidated subsidiaries as of March 31, 2003 and 2002, the related statements of income and shareholders’ equity foreach of the three years in the period ended March 31, 2003, and the statements of cash flows for theyears ended March 31, 2003 and 2002, all expressed in yen. Our examinations were made in accordancewith auditing standards generally accepted in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated statements present fairly the financial position of Tokyo Electron Limited
and its consolidated subsidiaries at March 31, 2003 and 2002, the results of their operations for each of
the three years in the period ended March 31, 2003, and their cash flows for the years ended March 31,
2003 and 2002, in conformity with accounting principles generally accepted in Japan applied on a consistent basis.
The amounts expressed in U.S. dollars have been translated on the basis described in Note 2-a.

Tokyo, Japan
June 20, 2003

Masatoshi Yoshino

Eiji Miyashita

Fumihiko Sugiura

Certified Public Accountant

Certified Public Accountant

Certified Public Accountant

Tokyo Electron 37