Annual Report 2004
Year ended March 31, 2004

ACCELERATIONAHEADTOKYO ELECTRON LIMITEDProfile

Established in 1963, Tokyo Electron (TEL or the Company) is aworld-leading supplier of semiconductor production equipment(SPE) and related services for the semiconductor industry. The
Company develops, manufactures and markets a broad lineup of
products, including coater/developers, plasma etch systems,
thermal processing systems, single wafer CVD systems, cleaningsystems, wafer probers and others.
Tokyo Electron also uses its accumulated expertise in SPE todevelop, manufacture and market coater/developers andetch/ash systems for the manufacture of Flat Panel Display(FPD). Most of the Company’s semiconductor and FPD
production systems hold leading shares in their respective
markets.
Tokyo Electron also maintains a strong presence as a
distributor, providing a wide array of semiconductor
production systems, storage area network and Internet related
products for broadband solutions, and electronic components
in Japan from other leading suppliers. With a network
spanning 12 countries on three continents, Tokyo Electron
provides superior products and services to its customers, andsuperior returns to its shareholders.

Contents

Disclaimer regarding Forward-looking Statements

Financial Highlights
To Our Shareholders
TEL at a Glance
Close-up
Commitment to Environment, Health and Safety
Intellectual Property Report
Corporate Governance

1
2
6
8
14
16
18

Financial Section
Management’s Discussion and Analysis
Consolidated Six-year Summary
Financial Statements
Independent Auditors' Report

20
27
28
37

Corporate Directory
Investor Information

38
39

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

Financial Highlights
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2004, 2003 and 2002

Thousands of
U.S. Dollars (Note 1)

Millions of Yen (Note 1)

2004

2003

2002

2004

¥529,654¥460,580¥417,825$5,013,762

FOR THE YEAR
Net sales
Operating income (loss)

22,2801,119(18,310)

210,902

Income (loss) before income taxes

14,936(23,010)(22,919)

141,382

Net income (loss)

8,297(41,554)(19,938)

78,544¥0046.37¥ (238.57)¥ (113.85)

45.78

–

–

0.43

10.00

8.00

8.00

0.09

Total assets¥561,632¥524,901¥556,915$5,316,467

Total shareholders’ equity

275,800

252,904

307,579

2,610,748

Net income (loss) per share of common stock (Note 2):(Yen and U.S. Dollars):
Basic
Diluted (Note 3)
Cash dividends per share of common stock

$0

00.44

AT YEAR-END

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥105.64=$1. Per share figures are stated in yen and dollars.
2. Net income per share is computed based on the weighted average number of shares of common stock outstanding during each fiscal year.
3. Dilution is not assumed for the years ended March 2003 and 2002.

800

150

80

120

60

600

8.3

-41.6

-19.9

62.0

19.8

22.3

1.1

Net Income / Net Income per Share
(Billions of Yen / Yen)
-18.3

121.1

35.8

529.7

460.6

417.8

Operating Income(Billions of Yen)
723.9

440.7

Net Sales(Billions of Yen)

400

353.76

300

40
90

200
113.53

20
400

46.37

60
0

100
0

30
-100

-20

200

-113.85

0
0

-40

-30
00

01

02

03

04

-200
-238.57

-60
00

01

02

03

04

00

01

02

03

-300
04

Net Income
Net Income per Share

Annual Report 2004

1

To Our Shareholders

The past fiscal year was an exciting year for us at Tokyo Electron, as we witnessed
the semiconductor industry emerge from its long recession and enter a recovery
phase. Full-blown market penetration of digital consumer electronics, such as digital
cameras, DVD recorders, and FPD television sets, in addition to replacement
demand for next-generation personal computers and mobile phones, boosted
demand for semiconductor devices. Amid the notable growth of economies in Asia,
which now strongly influence the overall global economy, Japanese semiconductor
manufacturers focused their business resources on their areas of strength, building
momentum. Reflecting this strategy, capital investment sentiment began to build
and shifted more to Asia.
Under these circumstances, the Company’s performance also rebounded strongly inthe second half, resulting in annual consolidated net sales rising 15%, to ¥529.7
billion. Profitability jumped as well. Operating income climbed to ¥22.3 billion from
¥1.1 billion and net income surged to ¥8.3 billion from a loss of ¥41.6 billion in theprior fiscal year. As a result, net income per share amounted to ¥46.37, and annual
cash dividends were ¥10.0 per share.
Strengthening our Leading Position in the Industry
Along with broadening applications of semiconductors in digital consumer electronics
and mobile devices, the demand for higher integration, faster speed, and lower
energy consumption is steadily increasing. At our customers’ semiconductor plants,
full-scale, volume IC production based on 90 nanometer design rules is beginning.
Based on technology capabilities that rank at the very pinnacle of our industry, we arecontributing to the manufacture of our customers’ leading-edge devices bydeveloping highly differentiated products backed by our high-quality support services.
Semiconductor manufacturers are now investing in equipment for 300mm wafer
facilities. Anticipating that this trend would further strengthen, we developed 300mm
wafer equipment and have been promoting it for the past several years.

Kiyoshi Sato
President & CEO

Moreover, centered on our Process Technology Center in Nirasaki, Yamanashi
Prefecture, we have been proceeding with joint development projects with leading
semiconductor manufacturers from around the world, with the goal of supplying ourcustomers with the most appropriate solutions for emerging and leading-edge
processes. Consequently, 300mm wafer equipment now accounts for more than
50% of our semiconductor production equipment sales. According to our surveys, inthe fiscal year under review, our semiconductor production equipment held top
share of the market in many of our product categories.
Also in the past fiscal year, the Company established TEL Technology Center,
America, LLC (TTCA), in Albany, New York, as its center for research anddevelopment in North America. TTCA will handle a variety of research anddevelopment projects for both next generation processes and the semiconductor
manufacturing equipment needed by leading chip manufacturers worldwide. Thisdevelopment effort will involve a number of partners ranging from chip
manufacturers to equipment suppliers and academia.

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Strengthening our Leading
Position in the Industry
In the future, we will continue to demonstrate technological leadership as a multiproduct supplier of semiconductor production equipment and strengthen our ability
to unify and incorporate leading-edge technologies by aggressively launching new
products in the global market.
Among digital electronics products, growth expectations are particularly high for the
LCD television market. This is good news for TEL, as our FPD production equipment
is essential for the production of the TFT-LCDs used in these televisions. FPD
manufacturers are currently increasing their capital investments in facilities that canprocess large glass substrates, causing orders for our related equipment to continue
at record levels. Since further innovations are expected in advanced display
technologies, we are also looking forward to business expansion in this field.
In our Electronic Components Division, which is operated by our subsidiary Tokyo
Electron Device Ltd., we market high-value-added products of world’s device
manufacturers that have application in digital electronic and mobile phone devices,along with our technology support services. In this area, we are also working to
expand sales of semi-custom design services and develop our own original products,
along with tremendous efforts in application engineering.
Following the collapse of the IT bubble, our Computer Network Division achieved
sales growth despite stagnation in the communications and network-relatedindustries. The key to this success was customer recognition of the superiority oftechnical support, system design, and other technology capabilities behind theleading-edge products we distribute. In fact, it could be said that these adverse
business conditions resulted in a strengthening of our position in the industry. In thecomputer network field, we expect to expand sales and improve profitability of ourbusiness, including higher service revenues along with the Japanese macro
economy recovery and overall CAPEX increase.
Business Structural Reforms
Commencing with the fiscal year under review, TEL has moved ahead with acompanywide structural reform plan aimed at preparing the Company, over the next
one-to-two years, for its next growth stage. Among our top priorities are eliminating
the excessive inventories built-up during the IT bubble and downsizing personnel
appropriately for current conditions. In addition, we are seeking further cost
reductions and shortening of production lead times to meet the requirements of enduse applications targeting the consumer market.

Annual Report 20043

Building Higher Profitability
During the last fiscal year, we took thorough measures to reduce inventories,
disposing unnecessary items in Japan and overseas, and refurbishing or converting
products that could be sold. As a result, despite an increase in work in processduring the second half due to higher production rates, we cut our inventory assets
and improved our inventory turnover to 72 days from 89 days as a result of the firstyear of structural reforms. In our personnel program, we initiated measures todecrease the number of employees worldwide by around 1,000, decreasing our
fixed costs.
To reduce costs and shorten production lead times, we set goals for each Business
Unit. Guided by these targets, we made fundamental revisions of our procurement,
design, manufacturing, and logistics. We are also implementing a system forshortening production lead times at all plants. As we are facing substantial growth inproduction volume this fiscal year, we are convinced that reducing production leadtimes at our plants will be an especially important factor in achieving higher
production volumes without increasing fixed costs.
Although our restructuring efforts have progressed favorably during the past fiscal
year, we are still merely at the halfway point. In the current fiscal year, we are
redoubling our efforts in the second phase of the program, aiming to achieve agile
management capabilities, as well as a low-cost structure to deal with the sudden
fluctuations in our business cycles.
Building Higher Profitability
In addition to our business structural reforms, we recognize further improvement of
profitability as a top priority management issue at Tokyo Electron.
Over the past few years, we have invested approximately 10% of oursemiconductor production equipment sales in research and development, targetinghigh-value-added products. This focus is now steadily producing results. Our new
thermal processing system, TELFORMULA™, which customers started using forvolume production about two years ago, combines the advantages of a hot-wallthermal furnace with quick turnaround time. The model has earned a strong
reputation among customers for high-end thermal processing applications.
The new coater/developer, CLEAN TRACKTM LITHIUSTM, which we began
manufacturing in volume during the past fiscal year, has also been a success. Fittedwith embedded measurement devices and software technology, this model
incorporates functions that enable improved process stability. As such, the model iscompatible with the processes of 90 nanometer and beyond design rule, which are

4

Tokyo Electron

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now beginning in earnest in the semiconductor industry. CLEAN TRACK LITHIUS isalready winning high praise from many customers, and shipments in the current
fiscal year are anticipated to equal those of the Company’s best-selling model
CLEAN TRACK ACT® series. Both of these new products are contributing to greater
profitability based on the high-value-added content they offer customers incomparison with previous models. Clearly, the demands of the market have spreadbeyond shrinking device sizes, diversifying to the application of new structures andmaterials. We believe that this field holds many opportunities to introduce new
equipment, and are determined to successively launch new products.
To buffer ourselves from the silicon cycles, establishment of a business style
ensuring stable earnings is in progress, and as part of that process, we are
expanding our services and refurbishing business. As capital investment in 300mm
equipment grows, there have been many requests from customers using 200mm
and lower equipment for relocation and refurbishing services. We will focus more on
this refurbishing business under our subsidiary Tokyo Electron FE Ltd., which is
responsible for field engineering services. We are currently creating a plan to expand
the sales of this business by 50% over the next few years.
Accelerate Innovations in Semiconductor Technology andTarget a Truly High-Quality Company
Present applications for semiconductors go beyond personal computers and mobile
phones, extending to storage-related devices, such as flash memory, and to sensors
and microcontrollers used in automobiles. Along with higher communication speeds,
the growing popularity of advanced mobile device functions, and the full-fledged
start to digital terrestrial television broadcasting, there will be explosive growth in thevolume of information being processed and accumulated globally. Naturally, this is
expected to stimulate further expansion in the semiconductor market. Current
semiconductor technology has only taken the first few steps toward its potential
goal. Although facing various technological and economic hurdles, I have no doubtthat technological innovations will enable semiconductor technology to continue to
evolve. Determined to be one of the drivers of the technological innovations, theCompany will continue to pursue and supply the highest quality in the industry inboth our technology and support services. As a result, we hope to fulfill and exceed
the expectations of our shareholders, customers, employees, regional communities,
and all other stakeholders. In meeting these challenges, we look forward to thecontinued support of our shareholders. I would like to thank our shareholders for the
support you have given us, and invite you to share in the benefits as we make ourvision for the future reality.
June 2004

Kiyoshi Sato
President & CEO

Annual Report 2004

5

TEL at a Glance

Semiconductor Production Equipment
Tokyo Electron develops andmanufactures a broad rangeof superior semiconductor
production equipment, andcomplements its original
lineup by distributing highvalue-added products fromother suppliers.

•Original Products
Coater/Developer
Spin-on Dielectric Coater
Mask Coater/Developer
Plasma Etch System
Thermal Processing System
Single Wafer CVD System
Plasma Processing System
Cleaning System
Scrubber System
Wafer Prober
Dicing Frame Prober
Optical Digital Profilometry•Distributed Products
FIB System (FEI Company)
Film Metrology Tool
(Rudolph Technologies, Inc.)
Yield Management Software(Yield Dynamics, Inc.)
X- ray Diffraction Measurement Equipment(Bede Scientific Instruments Ltd.)

80.4%

Semiconductor & FPD
Production Equipment

Coater/Developer
CLEAN TRACKTM LITHIUSTM

Plasma Etch System
TeliusTM

Thermal Processing System
TELFORMULATM

Single Wafer CVD System
TriasTM

Carrierless Cleaning System
UW300Z

Wafer Prober
P-12XLn+

Flat Panel Display (FPD) Production Equipment
Leveraging the technology
and expertise accumulated
from its semiconductor
production equipment
business, Tokyo Electron has
created a strong lineup ofleading-edge FPD production
equipment.

•FPD Coater/Developer•FPD Plasma Etch/Ash System

FPD Coater/Developer
CL1300

6

Tokyo Electron

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FPD Plasma Etch/Ash System
SE-1300

Computer Network
In order to fulfill its goal ofproviding solutions tailored touser needs, Tokyo Electron
distributes storage area
network and Internet related
products for broadband
solutions to offer
comprehensive systemsolutions.

•Internet solutions•Network security solutions•SAN solutions•Business network solutions•Aerospace products

Brocade Communications
Systems, Inc.
Fibre Channel Integrated
Fabric Switch

Extreme Networks, Inc.
Gigabit Ethernet Switch

F5 Networks, Inc.
Secure Remote Access Controller

3.5%

Computer Network

Computer/Networks
Advanced Digital Information Corporation
Brocade Communications Systems, Inc.
DataPower Technology, Inc.
Emulex Corporation
Extreme Networks, Inc.
F5 Networks, Inc.
GoAhead Software Inc.
Hewlett-Packard Japan, Ltd.
Hitachi, Ltd.
Isilon Systems, Inc.
Juniper Networks, Inc.
McDATA CorporationnCipher Corporation Ltd.

NeoScale Systems, Inc.
TimesTen Performance Software, Inc.
VERITAS Software Corporation
Z Microsystems Inc.
Aerospace Products
BAE SYSTEMS
Conax Florida Corp.
Scot Inc.
H. Koch & Sons Corp.
Irvin Aerospace Inc.
ITT Aerospace Controls Corp.
Pacific Cast Technologies

Electronic Components
Tokyo Electron selects andoffers the world’s bestproducts from leading
suppliers. With a full productlineup and flexible technicalsupport, the Company
provides total solutions tomeet diversified user needs.
Operations are handled bysubsidiary Tokyo Electron
Device Ltd.

•Semiconductor products•Board computer products•Software•Other electronic components

Fujitsu Ltd.

15.9%

Electronic Components

Advanced Micro Devices, Inc.
Agilent Technologies, Inc.
Cavium Networks, Inc.
Conexant Systems, Inc.
Cosel Co., Ltd.
Digital Electronics Corp.
Emuzed, Inc.
Eudyna Devices Inc.
Freescale Semiconductor, Inc.
Fujifilm Microdevices Co., Ltd.
Fujitsu Ltd.
Fujitsu Display Technologies Corp.
Fujitsu Media Devices Ltd.
Infineon Technologies AG
Integrated Device Technology, Inc.

Xilinx, Inc.

Intel Corp. (Dialogic Product)Intersil Corp.
Kopin Corp.
Legerity, Inc.
Linear Technology Corp.
Metrowerks, Inc.
Microsoft Corp.
3M (Minnesota Mining andManufacturing Com.)
Motorola, Inc.
ON Semiconductor Corp.
PFU Ltd.
Phoenix Technologies Ltd.
Pixelworks, Inc.
Potentia Semiconductor Corp.

In addition to the sales of our three divisions, others sales contributed 0.2 percent of net sales.
Product names and company names are trademarks or registered trademarks of their respective holders.

Pixelworks, Inc.

Ramtron International Corp.
SafeNet, Inc.
Shinko Electric Industries Co., Ltd.
SiberCore Technologies Inc.
Silicon Integrated Systems Corp.
Texas Instruments Inc.
Tokyo Electron Device Ltd.
Tundra Semiconductor Corp.
VenturCom, Inc.
Winchester Electronics
Woodhead Industries, Inc.
Xicor, Inc.
Xilinx, Inc.
Zarlink Semiconductor Inc.
ZettaCom, Inc.

Annual Report 2004

7

Close-up

Achievements



Semiconductor production equipment (SPE) — an industry that enters a new stage of
growth on upturns in the silicon cycle. Having been through what is said to be theworst slump in the history of the semiconductor industry, our industry is now in the
midst of a notable recovery, and the direction and potential of new markets are
becoming visible. Against this backdrop, Tokyo Electron (TEL)’s establishedtechnological strengths and strategic marketing are helping its performance growth
outstrip that of the recovery in the industry.

A Performance Rebound that Exceeds that ofMarket Recovery

18.4% growth

During the calendar year 2003, TEL’s Wafer Fab Equipment sales surged 18.4% from the same period in 2002, substantiallyoutperforming the 3.6% growth in the global Wafer Fab Equipment market. Starting from the second half of 2003, the semiconductor
manufacturers began to invest robustly in memory chips and in chips for digital consumer electronics, one of the key drivers of the
future. Our overwhelming technology leadership in these arenas enabled us to fully enjoy the benefits of the recovery.

CY2003 Growth of Wafer Fab Equipment Shipments Worldwide(Billions of U.S. Dollars)

15

+2.2%
11.8

10

5

12.0

+18.4%
1.7

0

CY2002

2.0

Tokyo Electron

CY2003

Top 10 suppliers

Source: Gartner Dataquest (April, 2004) GJ04312
Equipment sales only, excludes service and spare parts sales

Notes: 1. Growth rates described here are based on surveys by Gartner Dataquest.
2. TEL’s Wafer Fab Equipment sales are equivalent to its Semiconductor Production Equipment sales excluding the sales of wafer probers.

Composition of SPE Regional Sales
100%
8.2

80%

22.6

8.7

20.4
29.1

8.0

Europe11.9

North America

8.8

China, Southeast Asia

11.1

6.6

60%

7.7

23.6

6.8
21.2

Taiwan

18.4
18.6

40%

20%

9.7

31.7

14.4
7.1

15.7

29.7

26.7

33.3

Japan

0%
FY2001

FY2002

FY2003

FY2004

Note: Sales of FPD production equipment are included.

8

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Korea

Asia

TEL Basic Data

Booming SPE Sales in Asia

CY2003 Growth of Wafer Fab Equipment Shipments in Japan and Asia/Pacific79.6 % growth in Japan
16.6 % growth in Asia/Pacific(Billions of U.S. Dollars)

60

+0.9%

Japan

Asia/Pacific4.81 4.86+46.2%
40
3.14

20+79.6%
0.35+16.6%

2.15

0.70 0.82

0.62

CY20020

Our high presence in Asia, including Japan, made it possible
for us to achieve our high-level recovery during the past year.
On the threshold of the 21st century, many semiconductor
manufacturers began shifting their mass-production bases toAsia to enable low cost production. Moreover, Japanese
semiconductor manufacturers regained momentum byrevising their product strategies.

CY2003
Tokyo
Electron

Tokyo
Electron

Top 10suppliers

Top 10suppliers

These trends propelled TEL’s performance upward thanks toour powerful marketing/sales and service network in Asia.

Source: Gartner Dataquest (April, 2004) GJ04313
Equipment sales only, excludes service and spare parts sales

The Wafer Fab Equipment market in CY2003 grew 34.0% inJapan, and 3.4% in the rest of Asia. TEL’s sales growth inthese regions significantly outperformed the average growth.

Note: Growth rates described here are based on surveys by Gartner Dataquest.

Equipment for Handling 300mm Wafers –No.1 Market Share in Multi-segments

No. 1

Market Shares of TEL Products for 300mm Wafers
Coater/developer
FY2002300mm product sales

FY2004

Thermalprocessing
systemDielectricetchsystemCleaning system

Metal CVD
system
0%

25%

Wafer
prober50%

75%

To reduce overall chip manufacturing costs, semiconductor
manufacturers have now shifted their capital investment
from 200mm to 300mm wafer equipment. Anticipating thefull-scale start of the 300mm era in the wake of the market
recovery, we have been focusing our efforts on building acompetitive 300mm product lineup. Over the past two
years, all of TEL’s 300 mm wafer products havesubstantially increased their market shares as shown in thechart.

100%

300mm product market share
Note: Product market shares are based on surveys by TEL

Proportion of New Orders Received
200mm Equipment Vs. 300mm Equipment
100%

80%

60%

55

52

45

48

FY2002

FY200340

200mm equipment

60

300mm equipment

83

40%

20%
17

0%
FY2001

FY2004

Annual Report 20049

AchievementsAfter the collapse of the IT bubble, TEL carried out various groupwide restructuring
measures to downsize costs and surplus assets to accommodate with current scaleof the business. We accelerated all our business cycles through such efforts asshortening production leadtime and development period, aiming to be able torespond quickly to changes in market needs and achieve high operating efficiency.

Inventory Turnover Accelerated by 39 Days
(FY2002 Vs. FY2004)-39 days

To improve TEL’s cash flow, we have thoroughly pursued inventory reduction. While working to restore the healthy status of
inventories by writing-off obsolete ones, we also strengthened efforts to sell our accumulated in-stock products. As a result,inventory assets fell by ¥22.2 billion compared with the end of FY2002. The inventory turnover period contracted dramatically to 72
days from 111 days. The reduction of production leadtime project currently under way is also proceeding smoothly, and our near-termgoal 60 days is well within sight.

Inventories and Inventory Turnover(Days)
111
89
72(Billions of Yen)

529.7

500

460.6
(Billions of Yen)

417.8

150
127.4

250

111.8

105.2

0
FY2002TEL Basic Data

FY2003

100

Inventory
Turnover Period

50

Consolidated
Net Sales

0

Inventories at
end of FY

FY2004

Selling, General and Administrative Expenses and Percentage to Sales
(%)
32.1
28.9
22.3
(Billions of Yen)

529.7

500

460.6
(Billions of Yen)

417.8

150
133.9

132.9
117.9

250

100
50

0

0
FY2002

10

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FY2003

FY2004

SG&A Expenses
Percentage to Sales
Consolidated
Net Sales
SG&A Expenses

Note:
From FY2004, some of fieldengineering related expenses
previously included in SG&A
expenses were reclassified to costof goods sold. Disregarding thereclassification for the purpose ofcomparison with performances inprevious fiscal years yields an
SG&A to net sales ratio of 25.0%.

Fixed Cost Reduced by 14 Billion Yen(FY2004)

14 billion yen

Over the last three years, we have been reducing our fixed costs, which had increased along with the sharp growth in the market up to
2000. In FY2004, we cut fixed costs by ¥14 billion mainly through reductions in labor costs and depreciation expenses. In addition, we
reduced our R&D costs by adhering to “selection-and-focus” strategies. Among the measures taken were an exit from a business nolonger core for us and consolidation of our production bases in Japan and the United States. Furthermore, commencing with the past fiscal
year, we have been reviewing and optimizing our manufacturing processes with the goal of decreasing manufacturing costs by 30% overthree years.

Operational Efficiency Boosted(FY2001/3Q Vs. FY2004/4Q)

18.5% up

Number of Employee and Consolidated Net Sales per Person(Millions of Yen)
59.7

60
50

45.8
(Billions of Yen)

41.1

529.7

500

40

460.6
417.8
10,171

10,053
8,870

250

0
FY2002

FY2003

Consolidated
Net Sales
per Person

FY2004

Consolidated
Net Sales
Number of
Employee

Our production levels began to rise sharply from the second halfof the past fiscal year, along with the beginnings of a recovery inthe capital investment sentiment of semiconductor
manufacturers. In response, TEL shortened production leadtimes
by revising its product designs and manufacturing processes—
and was successful in expanding production volume without
adding personnel. Consolidated net sales for the third quarter ofthe fiscal year ended March 2001, our record sales year, and forthe fourth quarter of the past fiscal year were both around thelevel of ¥180 billion. However, we were able to get through thisproduction ramp-up period with approximately 1,400 lessworkers than three years ago. This represents an 18.5%
increase in operational efficiency with substantial improvementin productivity from the third quarter of FY2001.

Quarterly Operating Margin
(%)
30

20
12.2
8.3

10

5.1

2.6

1.5

3.4

0
0.5

-1.6

-10

-6.7

-20

-9.4

-15.2
-23.3

-30

FY2002

FY2003

Annual Report 2004

FY2004

11

The Challenge to Become a Highly Profitable Company



As a medium-to-long-term goal, TEL has set itself the challenge of building a highprofit structure that meets world-class standards. By implementing a growth strategy
to expand sales, the source of profits, while also proceeding simultaneously with acost reduction program, TEL aims to become a company that earns large returns
when the market is robust, yet maintains stable returns during correction periods.

Setting a Growth Strategy that Adjusts to Market Changes
In the past, TEL has achieved growth by evolving in response to advances in the electronics industry or changes in the external environment.
Now, yet another new trend has occurred in our business environment. In addition to personal computers and mobile devices, the key
drivers of growth in the semiconductor market over the past decade, a new wave of digital consumer electronics has emerged as anotherdriving force.
In setting a growth strategy that responds to this new wave in the market, TEL is moving forward to its next stage of development. Becauseof the short cycle between generations of digital consumer products, manufacturing equipment for semiconductors used in these end
products needs to be scalable and adaptable to enable a shorter chip manufacturing cycle. Moreover, high-speed and highly-functional
semiconductors that will make PC and mobile communications stress-free and more fun to use, require new evolutional manufacturing
technologies. In response, TEL is accelerating the development of new products and new process technologies that meet the diversifying
and increasingly sophisticated needs of semiconductor manufacturers.

TEL Four Decades of Innovations(Billions of Yen)
800

600

Spread of Internet
Applications

Mainframe computer

PC

Mobilephone

Digital consumer electronics
Automotive, etc

TEL consolidated net sales
Globalization

400
Distributor and manufacturerof original products
200

Further growth
driven by
new applications

Trading company withtechnological services
0
FY 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

TEL Basic Data

FY2004 Technology Highlights• Volume production commenced of CLEAN TRACKLITHIUS, a new model of coater/developer• Liquid immersion technology alliance formed• MEMS business marketing started• Mask coater/developer CLEAN TRACK ACT M launched

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www.tel.com

A prediction – The Semiconductor Market will Grow 41 percent in Four Years(CY2003 Vs. CY2007)
The driving force behind the growth in the semiconductor
market in the latter half of the 1990s was the expansion in the
personal computer market along with the spread of theInternet and the growth in the mobile phone market. The
future growth in the market is expected to be more robust,
driven by not only the personal computer and mobile phonemarkets, but by more digital electronics products, automotive
electronics, and other new applications for semiconductors.
We should also consider that quantity growth of semiconductor
chips and bit growth of memories will far outstrip the sales
growth rate.

Semiconductor Demand Forecast by End-applications(Billions of U.S. Dollars)

250

235

218

207

191

200

166

150

141

100
50
0
2002

2003

2004

2005
2006
Forecasts

Industrial & others
Automotive
Communication
PC, other data processing
Consumer electronics

2007

Source: JEITA (May, 2004)

Operating Margin Target is to Surpass Previous Record and
Go on to Attain World-class Heights in Profitability
As expressed by the term “cyclical growth”, semiconductorrelated industry is a business that grows through acontinuous process of boom and bust. With the broadeningof the fields in which semiconductors are used, the volatility
is expected to subside—but the cycle will remain. Facingthese circumstances, TEL’s target is to first surpass its
highest recorded operating margin, and then go on to attainnew world-class heights in profitability as its ultimate goal.
In its drive toward this goal, TEL will:

TEL Operating Margin
(%)
25
20

16.7%

15
10
Structuralreform50• strengthen its R&D, further differentiating its existingproducts and accelerating its new product launches;• reinforce its post-sales service business, expanding
profitability; and• continue to pursue the structural reforms begun last year,
maintaining its lean structure.

-5
FY 86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

SPE Industry
recession

recession

recession

recession

By carrying out with these strategies, the Company is aiming
to achieve a high-profit structure on a global level.

New Products of Recent Years

2000

2002

2002

2004

2004

Plasma Etch System
TeliusThermal Processing
SystemTELFORMULA

Plasma Processing
SystemTrias SPA

Coater/Developer
CLEAN TRACKLITHIUS

Mask
Coater/Developer
CLEAN TRACK ACT M

Annual Report 2004

13

Commitment to Environment, Health and Safetycomparisons of old and new models show a reduction in
the environmental burden of new equipment. Utilization ofthis assessment in our product development process also
allows us to achieve continuous improvement inenvironmental aspects of our products.

Activities to Reduce Environmental Impact
Tokyo Electron recognizes that the protection of theenvironment and a commitment to sustained environmental
improvement are top priority issues for mankind as well as
issues to be considered in business management. At theCompany, achieving social prosperity in harmony with theenvironment is always first and foremost in our minds.
Through the environmental activities described below, we
are aiming to become a company with overall trust from its
stakeholders. The following is an explanation of some of
our achievements in the environmental field.

Below we introduce an example of LCA implementation bycomparing the new thermal processing system,
TELFORMULA with the conventional model, ALPHA ()-303i.
Lead-Free Solder Movement
Based on the European Union (EU) directive, the use of
mercury, cadmium, lead and other hazardous substances inelectrical and electronic equipment will be banned inEurope after June 2006. Although semiconductor
production equipment does not fall under this directive, theCompany is voluntarily and systematically manufacturing
our products lead free as part of our efforts to forestall
further pollution.

LCA Initiative
The Company uses Life Cycle Assessment (LCA) to
quantitatively assess a product’s environmental burden
during the course of its life at each stage: from raw
materials through manufacturing, transport, use, anddisposal. For major types of equipment, it has been proventhat following the implementation of a LCA program,Comparison of Energy Consumption (C02 Equivalent) between ALPHA ()-303i and TELFORMULA
Electricity

N2

Water Coolant

ExhaustConsumables

Dry Air

Process Gas(T-CO2)Total

ALPHA ()-303i

463.1

215.6

43.5

44.1

1,217.4

8.7

1.6

1,994.1

TELFORMULA

259.5

96.9

72.2

40.6

36.5

33.4

2.3

541.4

Lead-Free Implementation Plan
• Restriction of lead use in EU : Cancer and soil pollution prevention– WEEE:07/2005, RoHS:07/2006 — for electric and electronic equipment– Many Japanese electric manufacturers stopped using lead by the end of 2003
Semiconductor equipment is out of scope, but procurements of components including lead will be difficult in the near future.
• Various lead-free soldering technology : Sn-Ag-Cu, Sn-Zn-**, etc.
– Potential affection for melting point and adhesiveness• To be achieved with a quality and reliability guarantee of lead-free component• The Company’s Policy: Implement from the start of 300mm equipment production

Items

1Q

Lead-free task team started activity
Plan announcement to venderTechnology and material examination to apply
Vender investigation and cooperation plan
Promotion plan to OEM makerEvaluation of PWB and ASSY (unit)
Evaluation of PWB and ASSY (built-in)
Preparation for production
Start production

14

Tokyo Electron

www.tel.com

FY2003
2Q
3Q

4Q

1Q

FY2004
2Q
3Q

4Q

1Q

FY20052Q
3Q

4Q

FY2006
1Q

Environmental Report
The Company has been publishing environmental reports
since 2002. We believe that it is important to provide thepublic as much information as possible about ourenvironmental activities to strengthen communications by
sharing it. The results for the fiscal year ended March 2004
will be available in the Environmental Report 2004, to be
published in autumn 2004.

Green Procurement
Almost all of our materials and parts for the manufacturingof semiconductor manufacturing equipment are sourced
from suppliers. It is essential to have the cooperation of
suppliers, in order to effectively use “Green procurement”
to source materials in a manner that reduces environmental
damage. To promote their cooperation, the Company
issues a Green Procurement Guideline, distributes it tosuppliers throughout Japan, and holds green-procurement
seminars. As a leader in our industry, we are actively
working to introduce trainer education programs to help
educate suppliers about green procurement as well as
create other educational systems.

Safety Activities
Based on giving top priority to the safety and health of ouremployees, customers, and everyone involved with theCompany’s business, we established the TEL Group Credo
and Principles on Environment, Safety and Health in 1998.
These guidelines clearly state that employees are
responsible for being constantly aware of safety and healthconsiderations in each and every business activity. For
thorough implementation of these guidelines, we proceedwith risk assessments of our shipped products and each
assembly and start-up process. Where safety risk is judged
to be high, we take systematic steps to reduce it. We arealso making efforts to discover and eliminate dangers in ourwork processes by anticipating them prior to those
processes.

Reducing Industrial Waste and Recycling
The Company has set a goal of reducing industrial wastefrom its manufacturing-related operations in Japan as close
to zero as possible by the fiscal year ending March 2005.
Targeting zero emissions, we are proceeding with industrial
waste reduction and recycling measures. Specific activities
include the separation of wastes at each operation into
categories for collection, the introduction of processing
equipment for effluents, finding recycling companies, andimproving industrial processes which do not produce
industrial wastes. Through these activities, our recycling
ratio has been steadily rising as more effective use is madeof our resources.

Industrial Waste Output and Recycling Ratio(Tons)
6,000

(%)
100
93.1

5,000

77.4

4,772
4,238

80
Environmental Report 2003

69.7

4,000

59.9
55.2
49.7

3,000
40.9

3,938

60

3,268

3,657
3,179

3,189

40

2,000
15.3

20

1,000

847

0

0
1997

1998

1999

2000

Amount of industrial waste

2001

2002

2003

2004

Recycle ratio
Green Procurement Guideline

Annual Report 200415

Intellectual Property Report

Tokyo Electron devotes a great deal of effort into

Contribution of License-Related Activities

developing technologies to bolster the competitivenessIntellectual property acquired by filing applications andof its products. Without protection of its intellectual

securing rights for the Company’s proprietary products andproperty rights, however, the Company would not be

development technologies are primarily effective not as

able to lay claim to those independently developed

source of income from licensing to competitors and othertechnologies and products as proprietary assets. It is

companies, but as a method of differentiating our products

precisely the integration of our intellectual property

and technologies and achieving a competitive advantage.

strategy with its technology and product strategies thatallows the Company to realize maximum benefit fromTechnology for the semiconductor and FPD fields are

its development efforts. Accordingly, the Company has

becoming increasingly advanced and sophisticated. To

positioned intellectual property strategy as one of its

efficiently develop new products incorporating leading-edge

most important strategies. To enable us to effectively

technologies, and launch them quickly to the market, it isuse superior technologies of other companies and ouressential to effectively utilize all available intellectual

products to market quickly, the Company places a highproperties, whether the Company’s or those of otherpriority on license-in activities.

companies.

Policies on Acquiring and Managing Intellectual
Property, Managing Trade Secrets, and Preventing
Technology Leakage
The Company has a set of internal rules that define themanagement of its intellectual property. The Company’s
procedures for acquiring and managing intellectual property
are on a comparable level to those mentioned in the
Policies Regarding the Acquisition and Management ofIntellectual Properties issued by the Ministry of Economy,
Trade and Industry of Japan.
According to these rules, the Company provides incentives
for inventors and creators within the Company. We
established awards to honor inventors and creators andpays lump-sum payments at the time of submission orregistration of applications for patents, utility model rights,
designs and others. Bonuses are also issued as incentives
if these creations are implemented at the Company andbonuses scaled to their earning record if such licenses andother rights are sold outside.
Management of trade secrets is handled according to theCompany’s “Internal rules on Managing Technology andMarketing Information” and its “Manual for managing
Technology and Marketing Information.” The provisions ofthese documents are similar to those of the government’s
Policies Regarding Managing Trade Secrets and Policies
Regarding the Prevention of Technology Leakage.

16

Tokyo Electron

www.tel.com

Along with the globalization of production bases foremphasizing the filing of applications for intellectual

semiconductors and flat panel displays, the Company isproperty rights in countries around the world.

Number of Patent Applications
Applications(Overseas)

Applications(Domestic)

500

1,000

400

800

300

600

200

400

100

200

0

0
1998

1999

2000

2001

2002

2003

2004

U.S.
South Korea
TaiwanJapan

EuropeChinaIntellectual Property by Major Country (at March 31, 2004)

Patent

Japan

U.S.

Korea

TaiwanChina

Germany

France

Other

Total

2,453

1,875

772

969

19

103

57

350

6,598

Utility Model

64

0

2

40

6

0

0

0

112

Design

156

62

99

59

41

27

44

165

653

Trade mark
Total

196

25

37

65

21

16

15

274

649

2,869

1,962

910

1,133

87

146

116

789

8,012

Efficient Acquisition of Intellectual Property Rights

proportion of elite patents in its U.S. patent portfolio during

According to the Japanese Patent Office, the approval rate

the five-year period from 1996 to 2000. An elite patent isfor patents filed by the Company in 2001 was 73.9%,

the one that ranks in the top 5% of the most frequently

ranking 10th highest in Japan.

cited patents in its technological field. This ranking reflects
the efficient acquisition of rights for superior patents, which

Furthermore, according to a survey by CHI Research Inc., a

is contributing to strengthen the Company’s global

U.S. intellectual property asset research company, thecompetitiveness.

Company ranked No. 1 in the world for the highest

Annual Report 200417

Corporate GovernanceFundamental Stance on Corporate GovernanceAmid progressive globalization of business management,
the fundamental policy and purpose of our corporate
governance activities is to achieve thorough adherence to
our corporate ethics and laws and regulations, to establish
and strengthen our internal control and risk management
systems, and to maintain transparency and objectivity in ourbusiness. Our ultimate goal is to promote management thatis focused on building corporate value for shareholders andall other stakeholders.

The following is an outline of the Company’s corporate
governance organization.
Corporate Governance Organization Chart
Annual Shareholders’ Meeting

Board ofDirectors

At the annual shareholders’ meeting held in June 2002, theCompany shortened the term of office for directors to one
year from two to enable a faster response to changes in ourbusiness environment and to further clarify management
responsibilities.

18

Tokyo Electron

www.tel.com

Independent Auditor

President
Audit and
improvement
reportRequest for
Improvement

Audit

Executive Officers
ReportRequest for
Improvement
Audit

Risk Management Function

ReportOther Activities
As a company with shareholder-oriented management, theCompany discloses personal compensation received by our
two representative directors in our “Notice of Annual
General Meeting of Shareholders” from the standpoint of
the importance of shareholders’ acknowledging ourbusiness activities as being transparent.

Statutory Auditors

Confirms the progressof improvement
and gives instructions

Corporate Governance Measures
In the past the Company has separated the functions of ourboard of directors and executive body. In April 2003,
however, the Company further clarified their roles byintroducing an executive officers system, enabling anorganization that is quicker in formulating and implementing
strategies. The major functions of the board of directors are
now clearly defined as 1) deciding basic management
policies, 2) considering and deciding fundamental businessstrategies proposed by executive officers, and 3)
overseeing and assessing group management.
Compensation and Nomination Committees
Aiming to implement improvements in corporate
governance from within our own company organization, theCompany has created Compensation and Nomination
Committees within our board of directors. The
Compensation Committee determines compensation forthe president, while the Nomination Committee, composedof three directors other than the president, selects
candidates to be elected as directors at the annual
shareholders’ meeting and a candidate to be elected aspresident by the board of directors.

Nomination Committee
Compensation Committee
Chief Business Ethics Director

Monitoring

Monitoring

Internal Audit Dept.

ReportCheckand balance
Business Depts.

Audit

Administrative Depts.

Audit

Internal Control and Risk Management Systems
Our guiding principles are to maintain a high standard ofbusiness ethics throughout our activities and comply withlaws and international regulations. Accordingly, theCompany has appointed a director in charge of businessethics and established a code of ethics to thoroughly
implement business ethics companywide.
Reaffirming the importance of establishing proper internal
control and risk management systems, the Company has
upgraded the internal auditing functions of the Internal
Audit Department and established a new section within the
General Affairs Department responsible for managing
business, operating and other risks. Moreover, efforts arebeing made to develop the internal regulations required to
manage these risks, and to carry out activities to educate
and raise employees’ awareness of these issues.

Board of Directors, Statutory Auditors and Executive Officers (As of June 22, 2004)

Board of Directors and Statutory Auditors
Board of Directors

Statutory Auditors

Tetsuro Higashi

Taketoshi Itoyama

1

Chairman of the Board

Tetsuo Tsuneishi 2

Takeo Tanaka

Vice Chairman of the Board

Kiyoshi Sato

Fujio Kimura

President & CEO

Mamoru Hara

Hiroshi Maeda

Executive Vice President

Hirosuke Ishibashi

Mitsui, Yasuda, Wani & Maeda
13

Kengo Kuroiwa 2
Chairman of the Board, Tokyo Electron AT Limited

Masao Kubodera 2
Corporate Director, Tokyo Electron AT Limited

Yukio Sunahara 1
Tetsuro Higashi

Tetsuo Tsuneishi

Executive Chairman, SRL, Inc.

Notes:
1 Member of Compensation Committee
2 Member of Nomination Committee
3 Chief Business Ethics Director

Jinzaburo Sakamoto

Chiaki Yamaguchi

VP & General Manager, Field Engineeringand President, Representative Director,
Tokyo Electron FE Ltd.

VP & General Manager,
Business Development & Account Management, Asia

Satoshi Nakashima

VP & General Manager,
Business Development & Account Management, Japanand Branch Manager, Osaka Branch / Kyushu Branch

Chairman, Tokyo Broadcasting System, Inc.

Toshiyuki Kondo

Executive Officers

VP & General Manager, Manufacturing

Yoshifumi Tahara
VP & General Manager,
Technology & Development, Development -Vacuumand Senior Vice President, Tokyo Electron AT Ltd.

Yutaka Nanasawa
VP & General Manager, HR / Financeand Director, Personnel Dept.

Yoshiteru Harada

Kiyoshi Sato

Mamoru Hara

Takahiro Komatsu

Kiyoshi Sunohara
VP & General Manager,
Business Development & Account Management,
North America & Europe

Noriyuki Kuga
VP & Deputy General Manager,
FPD Division (Administration)

VP & General Manager,
General Affairs / Accounting / Order Process / Legal /Administration, Osaka

Katsuyuki Amano

Takao Kodama

Yoichi Ishikawa

VP & General Manager, IT Center

VP & General Manager, Marketingand Director, Marketing Dept.

Hikaru Ito
VP & General Manager, Clean Track BU

VP & General Manager, Computer Network Division
and Director, Computer Network Dept.

Hiroshi Tomita
VP & General Manager, MEMS Business

Kiyoshi Sato

Takashi Ito

President & CEO

VP & General Manager, Etch Systems BU

Masami Akimoto

Mamoru Hara

Yasuyuki Kuriki

Executive Vice President, Administration

VP & General Manager,
Technology & Development-Atmospheric Pressureand Executive Officer, Tokyo Electron Kyushu Ltd.

Mitsuru Onozato

VP & General Manager, Thermal Processing Systems BU
and Senior Executive VP & Representative Director,
Tokyo Electron AT Ltd.

Senior Vice President, FPD
and General Manager, FPD Division

Kenji Washino

Ryuichi Komatsubara

VP & General Manager, Cleaning Systems BU

Senior Vice President, Business Planning
and General Manager, Test Systems BU

Hiroshi Takenaka

Makoto Mizokuchi

Keiichi Furugaki

Senior Vice President,
Business Development & Account Management, Japan

VP & General Manager, Business Development & AccountManagement, Korea and President, Tokyo Electron Korea Ltd.

VP & General Manager, Single Wafer Deposition BU*BU: Business Unit

Annual Report 2004

19

Management’s Discussion and Analysis

Company’s core SPE Division grew 16.7 percent, to 425.7
billion yen, primarily by favorable growth in sales tosemiconductor and FPD manufacturers in Asia, including
Japan. The sales growth of Computer Network andElectronic Components divisions also contributed to overallsales expansion.

Sales and Income
Business Environment
In the fiscal year ended March 31, 2004, despite theuncertain factors affecting the global economy, such as thegrowing tension in Iraq and the spread of severe acuterespiration syndrome (SARS) at the beginning of the fiscal
year, the U.S. economy remained firm thanks to thebenefits of tax cuts and other positive factors. In Asia, theChinese economy continued to grow and the economies of
Taiwan and Korea also rallied. Japan’s economy posted amild recovery; corporate performances improved regardlessof the negative impact of the appreciation in the yen andother pressures, and capital investment and exports
advanced mainly led by the manufacturing industry.

Domestic sales increased 27.2 percent to 242.3 billion yen
and overseas sales rose 6.4 percent to 287.3 billion yen. As
a result, the contribution of overseas sales to net sales
decreased to 54.2 percent from 58.6 percent in theprevious fiscal year.
Consolidated orders received for the fiscal year increased
42.5 percent from the previous fiscal year to 653.6 billion
yen. The order backlogs at the fiscal year-end increased
82.3 percent to 274.7 billion yen.

During the fiscal year, there was robust demand in theelectronics market where the Company participates.
Growth of the market was supported by replacement
demand stimulated by new models of personal computers(PCs) and mobile phones with embedded cameras and the
expanding market for digital consumer products, such as
DVD recorders, digital cameras, and flat panel televisions.
As a result, the rate of capacity utilization rose forsemiconductor manufacturers, many of which have theirproduction bases in Japan and other Asian countries, andfurther increase in capacity was pursued, beginning at the
middle of the fiscal year.

Performance by Division
Semiconductor Production Equipment Division
Triggered by the bursting of the bubble in the IT market, theglobal electronics industry, and especially thesemiconductor-related industry, experienced a serious
downturn for approximately two years. At the beginning of
2003, replacement demand for PCs and mobile phones
began to grow and the digital consumer products market
began to emerge. These trends prompted a sharp recovery
in capital investment sentiment among semiconductor
manufacturers producing devices related to these markets.
In particular, subsequent orders from semiconductor
manufacturers in Japan began to rise beginning in the

Sales
Under these circumstances, consolidated net sales for the
fiscal year ended March 31, 2004 increased 15.0 percent
from the prior fiscal year to 529.7 billion yen. Sales of theThousands of
U.S. Dollars

Millions of Yen (percentage of net sales)

2004

2003

2002

2004

Net sales¥529,654 (100.0)¥460,580 (100.0)¥417,825 (100.0)$5,013,762

Cost of sales

389,499(73.5)

326,540(70.9)

302,270(72.3)

3,687,037

Gross profit

140,155(26.5)

134,040(29.1)

115,555(27.7)

1,326,725

SG&A expenses

117,875(22.3)

132,921(28.9)

133,865(32.1)

1,115,823

Operating income (loss)

22,280

(4.2)

1,119

(0.2)

(18,310)–

210,902

Other income (expenses)(7,344)–(24,129)–(4,609)–(69,520)

Income (loss) before income taxes

14,936(2.8)(23,010)–(22,919)–

141,382

Provision for income taxes

6,124

(1.2)

18,532(4.0)(2,990)–57,962

Minority interest

515

(0.1)

12

(0.0)

8

(0.0)

4,876

Net income (loss)

8,297

(1.6)

(41,554)–(19,938)–

78,544

20

Tokyo Electron

www.tel.com

Focusing on individual products, the sales of major products
such as coater/developers, etch systems, thermal
processing systems, single wafer CVD systems, wafer
probers, cleaning systems and FPD production equipment
rose during the fiscal year. Among the latest products,
TELFORMULA, a new thermal processing tool, and CLEAN
TRACK LITHIUS, a new coater/developer, posted strong
sales.

spring of 2003, since Japanese semiconductor
manufacturers are especially strong in the fields of image
sensors for digital cameras and LCD drivers. Accordingly,
semiconductor manufacturers, particularly Asian, started toincrease capital investment in their fabs and equipment inresponse to the increased demand for memory and PCrelated devices.
Consolidated orders of the SPE Division for the fiscal year
amounted to 549.8 billion yen, rising 51.3 percent from theprevious fiscal year. Consolidated sales climbed 16.7
percent to 425.7 billion yen. Contribution to consolidated
sales also rose, increasing to 80.4 percent from 79.2
percent. Japanese and overseas FPD manufacturers also
increased their capital investment, building new factories
and capacity based on the long-term growth expectations
for the flat panel television market. As a result, sales of FPD
production equipment, which are also included in thisdivision, expanded compared with the previous fiscal year.
Looking at performance by region, capital investment insemiconductor devices for digital consumer products was
active in Japan, causing sales to rise 45.7 percent, to 141.9
billion yen. In Korea, capital investment in memory devices
and FPD products increased, boosting sales 7.2 percent, to61.4 billion yen. Capital investment in the semiconductor
industry in Taiwan recovered from a recent weak spell,
supporting a 49.9 percent increase in sales, to 100.5 billion
yen. On the other hand, sales in the U.S. market fell 31.9
percent, to 50.6 billion yen due to continuing low capital
investment by major semiconductor manufacturers in thisregion.

425.7

364.7

325.7

619.0

355.1

SPE Division’s Sales by Geographic Region(Billions of Yen)

600

150
141.9

700
424.6

800

Computer Network Division
Net sales of the Computer Network (CN) Division advanced
7.3 percent, to 18.4 billion yen. The division’s business isprincipally based on providing customers with storage area
networks (SAN: high speed network that interconnects
external data storage devices, and internal storage devices
and computers), and broadband solutions.
Among SAN-related products, which generated about 37
percent of CN Division sales, Brocade Communications
Systems, Inc.’s fibre channel fabric switches and Emulex
Corporation’s fibre channel host bus adapters steadily
expanded their sales. NeoScale Systems, Inc.’s backup
data encryption systems, which the division started
distributing in recognition of the growing importance of
security for data storage systems, are now being adopted
as a solution for preventing data leaks. The division is set
to begin sales of Advanced Digital Information Corp.’s

SPE Division’s Sales(Billions of Yen)

529.7

460.6

417.8

723.9

440.7

Domestic and Overseas Sales(Billions of Yen)

In terms of wafer sizes, capital investment in 300mm wafer
manufacturing lines continued to increase among
semiconductor manufacturers in Asia, including Japan. In
total, the sales contribution of 300mm equipment
accounted for approximately 60 percent of our SPE sales.

600
500

01

Japan
Overseas

04

100.5

20.6
19.9

20.1
17.6

57.3
61.4

74.3

100
0

00

50.6

28.0
33.9

03

242.3

190.5

02

0

200

67.0

97.4

287.3

270.1

231.3
186.5

184.0

200

300
50

299.3

400

256.7

100
400

0
00

01

02

03

04

Japan
2003

North
EuropeAmerica

Korea

TaiwanChina Southeast
Asia

2004

Annual Report 2004

21

(ADIC) tape libraries, which hold the top share of the global
open-system tape automation market, as part of theirstrategy to offer expanded solutions including data storageand management.
Among network-related products, a newly added securesocket layer-virtual private network (SSL-VPN) product fromF5 Networks, one of the division’s core product lines,
expanded sales in a new market.
During the fiscal year, the division added Ruff Systems
HDV, a new version of its own proprietary high-definition
video picture and sound broadcasting systems, that enables
the Internet Protocol transmission of video camera images
processed with a high-definition video standard which ismore economical than high-definition television (HDTV)
cameras. The division believes that having made HighVision image transmission over broadband networks areality, it has the possibility to contribute to the diffusion of
HDTV content for professionals and consumers.
Electronic Components Division
Net sales of Electronic Components Division, including
sales of semiconductors, board products, software andgeneral electronic components, rose 8.9 percent to 84.2
billion yen. During the fiscal year, the division concentrated
on sales of high-value-added products that require technicalsupport services. In addition, the division expanded its
product line-up, working to add new products in particular.
The division also expanded its sales network, opening sales
offices in Nagaoka and Okayama, Japan to provide better
customer service.

Sales of board products, such as motherboards, VME
boards, and others sold well during the fiscal year. Sales ofsoftware rose as well, benefiting from by expanding salesof operating system software for embedded system
devices. On the other hand, sales of general electronic
components slightly declined despite the efforts to increase
sales of panel PCs and power switches for consumer
electronic devices.
The division is aggressively developing its design anddevelopment services for custom ICs, motherboards andsoftware. In response to the increased number of orders
received for these services, in January 2004, the Company
established a subsidiary in Shanghai, China, to expand its
capacity. In the development of original products, thedivision has been one of the quickest to respond to largescale integrated circuit (LSI) market needs, developing
products such as high-definition simultaneous separator

89.2

73.7

77.4

84.2

20

72.1

18.4

EC Division’s Sales(Billions of Yen)
17.2

17.0

14.1

12.4

CN Division’s Sales(Billions of Yen)

Semiconductor products accounted for 88 percent ofdivisional net sales. During the fiscal year, the division
worked to expand sales of high-value-added items, such as
Xilinx, Inc.’s programmable logic devices (PLDs), use ofwhich is expanding in consumer electronics products suchas flat panel televisions, and Linear Technology
Corporation’s analog ICs for power sources of mobile
devices. Furthermore, the sales of Texas Instruments,
Inc.’s products that the division began distributing in 2002
increased due to growth in sales of semiconductor testing
equipment, ATMs and other industrial devices.
Consequently, sales of semiconductor products rose 8.5
percent compared with the prior fiscal year.

00

01

02

03

04

100

80
15
60
10
40
5
20

0

0
00

22

01

Tokyo Electron

02

03

04

www.tel.com

development period, R&D expenses decreased 11.9 percent
to 44.1 billion yen, year-on-year. R&D expenses wereallocated strategically to the development of 65 nanometerand-beyond design rule process technology and equipment,
as well as new product development. Operating income
increased 21.2 billion yen to 22.3 billion yen from 1.1 billion
yen in the previous fiscal year.

LSIs for picture devices for LCD projectors, plasma
televisions and other displays, and host controllers for SD
memory cards used extensively in mobile phones.
As a result, sales of the division amounted to 84.2 billion
yen, up 8.9 percent from the previous fiscal year.
Making efforts to understand customer needs, and to
pursue further growth in its design, development andoriginal products business, the division will focus onproviding thorough technical support for high-value-added
products such as custom, dedicated, or analog ICs.

Non-operating Income and Expenses and Net
IncomeNet non-operating expenses improved 16.8 billion yen fromthe previous fiscal year, to 7.3 billion yen. The decline in
non-operating expenses primarily resulted from a reduction
in restructuring expenses from 20.6 billion yen to 2.5 billion
yen, down 18.1 billion yen from the prior fiscal year. Income
before income taxes, therefore, increased 37.9 billion yen
from the prior fiscal year to 14.9 billion yen.

Cost of Sales, SG&A Expenses and Operating
IncomeAlthough gross profit increased 4.6 percent to 140.2 billion
yen, cost of sales increased 19.3 percent to 389.5 billion
yen, thus gross profit margin decreased 2.6 percentage
points to 26.5 percent compared with the previous fiscal
year. There were reductions in production costs and anincrease in plant utilization rates due to higher businessvolume, however, the gross profit margin decreasedslightly influenced to some extent by a change in the fieldengineering-related contracts of some of our services
subsidiaries.

Net income improved 49.9 billion yen to 8.3 billion yen, andnet income per share improved from minus 238.57 yen to46.37 yen. The Company increased cash dividends by 2.0
yen per share to 10.0 yen per share; the payout ratio was
47.4 percent on a non-consolidated basis.

Selling, general and administrative expenses (SG&A)
decreased 11.3 percent to 117.9 billion yen, and SG&A to
net sales declined from 28.9 percent to 22.3 percent. Basedon efforts to focus on selected R&D projects to shorten

10

8

8

14

44.1

50.1

53.8

52.9

37.1

22.3

150

38

Cash Dividends per Share &Payout Ratio (Yen / %)R&D Expenses(Billions of Yen)
1.1

-18.3

121.1

35.8

Operating Income(Billions of Yen)

40

60

50
47.4

120

40
30

90

40

30.2
30
20

60

20
30

21.6

20
10

10

0
-30
01

02

03

04

0

0

0
00

00

01

02

03

04

00

01

02

03

04

Cash Dividends per Share
Payout Ratio(Non-consolidated basis)
Note: The payout ratio of FY2002 and FY2003 are notindicated due to net loss on a non-consolidated basis.

Annual Report 200423

prices. Therefore, total assets increased 36.7 billion yen
year-on-year to 561.6 billion yen.

Financial Position and Cash Flows
Financial Position

Current liabilities decreased 19.2 billion yen year-on-year to141.5 billion yen. Major factors behind this decrease wereredemption of 35.0 billion yen worth of commercial paper
and the maturity of the second unsecured convertible
bonds, regardless of the increase of trade notes andaccounts payable due to increased procurement necessary
for higher production levels.

Current assets at March 31, 2004 increased 46.5 billion yen
year-on-year, to 403.0 billion yen. Among the main factors
in this change were a 63.3 billion yen rise in trade notes andaccounts receivable along with greater sales, and a 10.3
billion yen decrease in cash and cash equivalents due toincrease of working capital. Even though work-in-processincreased due to the ramp-up of manufacturing, inventory
decreased 6.6 billion yen to 105.2 billion yen year-on-year
due to finished goods reduction efforts. Excluding otheraccounts receivables, trade notes and accounts receivable
turnover based at the end of fiscal year lengthened to 159
days, from 135 days the prior fiscal year because of theincrease of regional sales, which have a relatively longcollection period for accounts receivable. Inventory
turnover, however, improved to 72 days, compared with 89days in the previous fiscal year.

Long-term debt increased 32.7 billion yen year-on-year to140.4 billion yen due to a 20 billion yen 10th unsecured
bond issue and a 30 billion yen 11th unsecured bond issue.
Shareholders’ equity increased 22.9 billion yen to 275.8
billion yen, principally due to the conversion of convertible
bonds and greater retained earnings resulting from theincrease in net income. As a percentage of total assets,shareholders’ equity rose to 49.1 percent from 48.2 percent
the previous fiscal year. Return on average total
shareholders’ equity was 3.1 percent.

Property, plant and equipment decreased 10.8 billion yen
year-on-year to 108.8 billion yen. During the fiscal year, theCompany placed an investment of 11.0 billion yen inproperty, plant and equipment, primarily for the purchase ofevaluation equipment and IT-related investments.

Cash FlowsNet cash provided by operating activities amounted to 7.9
billion yen, decreasing from 21.4 billion yen, year-on-year.
The positive main factors included income before income
taxes amounting to 14.9 billion yen, depreciation andamortization totaling 25.0 billion yen, and increases inaccount payable amounting to 29.2 billion yen. On theInvestments and other assets increased 1.0 billion yen to49.9 billion yen. The main factor in the increase ininvestments and other assets was the increase of the fairvalue of marketable securities due to improvement of stock

Debt-to-Equity Ratio(Times)

261.5

195.7

243.9

228.7

50

309.8

Working Capital & Current Ratio(Billions of Yen / Times)

11.0

12.4

30.9

49.4

19.0

Capital Expenditure for Property,
Plant and Equipment (Billions of Yen)

350

5

1.0

4

0.8

3

0.6

2

0.4

1

0.2

0

0

300
40
250
30

3.2

0.62
2.8

200
150

20

2.6

2.3

2.2

0.60

0.51
0.46

0.45

100
10
50
0

0
00

01

02

03

04

00

01

02

Working Capital
Current Ratio

24

Tokyo Electron

www.tel.com

03

04

00

01

02

03

04

fiscal year. The Company had outlays during the fiscal year
related to commercial papers and redemption of the eighth
unsecured bond issue, repayment of short-termborrowings, and payment of dividends. These outlays wereoffset, however, by proceeds from the 20 billion yen 10th
unsecured bond issue and the 30 billion yen 11th
unsecured bond issue.

contrary, negative factors included increases in accounts
receivable amounting to 61.8 billion yen.
Net cash used in investing activities was 8.5 billion yen,increasing from 7.3 billion yen the previous fiscal year.
Investment in property, plant and equipment totaling 7.5
billion yen was mainly comprised of the purchase of
equipment for R&D.

Cash and cash equivalents at the end of the year were 42.7
billion yen, down 10.3 billion yen from 53.0 billion yen at theend of the previous fiscal year.

Net cash used in financing activities amounted to 10.3
billion yen compared with 9.9 billion yen in the previous

Thousands of
U.S. Dollars

Millions of Yen (percentage of total assets)

Total assets

2004

2003

2004

¥561,632 (100.0)¥524,901 (100.0)$5,316,467

Cash and cash equivalents

42,650(7.6)

52,982(10.1)

403,727

Trade notes and accounts receivable

245,554(43.7)

182,218(34.7)

2,324,439

Inventories

105,187(18.7)

111,810(21.3)

995,712Investments and other assets

49,869(8.9)

48,851(9.3)

472,064

Property, plant and equipment

108,789(19.4)

119,611(22.8)

1,029,805

Total liabilities

2,668,356

281,885(50.2)

268,402(51.1)

Short-term borrowings

6,815

(1.2)

8,729

(1.7)

64,514

Trade notes and accounts payable

78,009(13.9)

48,279(9.2)

738,440

Accrued income taxes

3,273

(0.6)

3,645

(0.7)

30,983Long-term debt, less current portion

98,476(17.5)

70,230(13.4)

932,181

Shareholders’ equity

275,800(49.1)

252,904(48.2)

2,610,748

01

33.3

00

6.4

25
20.4

-14.2

400

83.7

275.8

252.9

307.6

Net Cash Flow
(Billions of Yen)
39.3

100

333.3

Shareholder’s Equity & ROE(Billions of Yen / %)273.6

Shareholder's Equity Ratio
(%)

02

03

04

100

20

300

80

80

15
200
10

60

100

55.2

54.8

49.1
40

60

5
40

0

48.2

45.7

3.1

7.5

0
-5

20

-10

20

-6.2

0
-15
-14.8

0
00

01

02

03

04

00

01

02

03

Shareholder’s Equity
Return on Equity

-20
04

-20

Net Cash Flow =Net Income + Depreciation and Amortization

Annual Report 2004

25

Business-related and Other Risks
The following are possible risks that may have an impact on
the Company’s operating results, stock prices, or financial
position.
(1) Impact of fluctuating foreign exchange rates
Success in the development of our overseas operations has
increased the Company’s portion of overseas sales. As arule, the Company carries out export transactions on a yenbasis in order to avert exchange-related risks, yet there aresome exports involving foreign currencies. In these cases,
the Company employs an exchange risk hedge, such as aforward exchange contract when an order is placed.
However, since for overseas customers, exchange-relatedrisks can arise from fluctuations in prices due to drastic
exchange fluctuations, it may have indirect negative impact
on the Company’s performance.
(2) Impact from research and development
Through the ongoing implementation of proactive R&D
investment and activities for cutting-edge
technologies––miniaturization, vacuum, plasma, thermalprocessing, coating/developing, cleaning, wafer-transfer,and clean technologies––the Company has created cuttingedge technologies. Promptly introducing new products on
the market that are equipped with these technologies, theCompany has successfully obtained a large market share ineach of the product fields, as well as a high profit margin.
However, the possibility does exist that the ill-timed launchof new products may have a negative impact on the
Company’s performance.
(3) Impact from changes in semiconductor market
The Company has achieved a high profit margin byconcentrating resources in the high-tech field, including
semiconductor production equipment, where technologies
undergo rapid changes and the Company is able to display
its strength. Although the semiconductor market enjoys
broad growth through technological change, the Company
has actively undertaken structural reforms to be able togenerate profit under any circumstance, such as, when thesize of the market temporarily contracts due to imbalanceof supply and demand. However, the possibility does exist
that business results and cash flow may receive a negative
impact from an unexpectedly broad contraction in the sizeof the market, resulting in order write-offs, over capacityand personnel, or increased inventories.
(4) Impact from transactions concentrated on particularcustomers
Providing products equipped with superior, cutting-edge
technology and offering a system of high customer
satisfaction, the Company has been successful in
expanding its business transactions with the world’s

26Tokyo Electron

www.tel.com

leading semiconductor manufacturers both inside andoutside of Japan. Yet, since the Company’s net sales may
at times be temporarily concentrated on particularcustomers due to the timing of large-scale capital
investments, there is the possibility of a negative impact on
business results from intensified sales competition.
(5) Impact from quality issues
The Company has been proactively developing superior,cutting-edge technologies utilized in new products that arepromptly introduced to the market, while establishing aquality assurance system, including obtaining ISO 9001
certification at the same time. The Company has also worked
to establish a world-class service system, resulting in a large
number of customers adopting our products. However,
because they are cutting-edge technology products, inaddition to other factors, many of the technologies
developed are in unknown fields, and the possibility existsthat business results may be negatively affected by theoccurrence of unforeseen defective products.
(6) Impact of intellectual property rights
In order to set the Company’s products apart and enhance
its competitive strength, the Company has promoted its
R&D strategy for the prompt development of cutting-edge
technologies, together with its business and intellectual
property strategies. This has made it possible to obtainmany of the Company’s own proprietary technologies,
thereby successfully ensuring a large market share and highprofit margin in each product field. However, partly because
the Company’s products use many of the consolidated andoptimized cutting-edge technologies, there may be cases
where a negative impact on business results arises fromavoiding the use of a third party’s technology andintellectual property rights.
(7) Other risks
Seeking the creation of new high-growth, high-return
businesses, while pursuing higher revenues from existing
businesses, the Company has been actively involved in
making improvements to corporate structure so that profit
can be generated even during contractions in market size,
and also overhauled its risk management system. However,to the extent that the Company performs its operations, likeother companies in the same or different industries, it issubject to the impact from factors such as global or local
economic environment, natural disasters, wars, terrorism,
unavoidable incidents (such as infectious diseases),financial or stock markets, government regulation, provisionsystems of suppliers, market conditions for products andreal estate, securing of personnel domestically or overseas,
competition over standardization, loss of important
personnel, etc., and at times it can be assumed that suchfactors may have a negative impact on the Company’sbusiness performance.

ai8008-00-01_Web 用_野村 IR 様_東京ｴﾚｸﾄﾛﾝ㈱ｱﾆｭｱﾙﾚﾎﾟｰﾄ(英文).doc 04/7/13 18 時 23 分 P27

Consolidated Six-Year SummaryTokyo Electron Limited and its Subsidiaries
Years ended March 31,2004, 2003, 2002, 2001, 2000,and 1999

Thousands of
U.S. dollars

Millions of yen

2004
Net sales .................................................................... $ 5,013,762

2004

2003

2002

2001

2000

1999

¥529,654¥460,580-¥417,825-¥723,880-¥440,729-¥313,820-

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

4,030,173

425,747

364,689-

325,715-

619,001-

355,103-242,240-

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

174,629

18,44817,193-

17,031-

14,054-

12,357-

12,878-

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

797,32284,22977,380-73,658-89,211-

72,051-

57,734-

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

11,6381,230

1,318-

1,421-

1,614-

1,218-

968-

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

210,902

22,2801,119-(18,310)

121,086-

35,816-

6,383-

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

141,382

14,936(23,010)(22,919)

99,132-

29,689-6,038-Net income (loss) .......................................................

78,544

8,297(41,554)(19,938)

62,012-

19,848-1,866-

Domestic sales ...........................................................

2,293,810

242,318

190,513-

186,516-

299,272-

183,987-

149,838-

Overseas sales...........................................................

2,719,952

287,336

270,067-

231,309-424,608-

256,742-

163,982-

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

236,302

24,96327,374-

26,294-

21,679-19,446-

17,921-

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

104,191

11,007

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

417,927

44,15050,123-53,827-52,911-37,135-

26,842-

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

5,316,467

561,632

524,901-

556,915-

729,511-499,499-

414,903-

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

2,610,748

275,800

252,904-

307,579-

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

8,870

10,053-

10,171-

10,236-

8,946-

7,835-

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

3

Basic ..................................................................... $0.44

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

0.43

¥

46.37

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

45.78

--

--

344.75-110.64-¥10.70--Cash dividends per share of common stock:
Actual....................................................................

0.09

10.00

8.00-

8.00-

38.00-

14.00-

12.00-

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

0.09

10.00

8.00-

8.00-

38.00-

14.00-

12.00-

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

180,611

175,698-

175,691-

175,691-

175,660-

174,624-

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

60,87349,259-37,116-42,781-

7,147-

8,576-

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

3.1(14.8)

(6.2)

20.4-

7.5-

0.7-

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

4.2

0.2-

(4.4)

16.7-

8.1-

2.0-

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

49.1

48.2-

55.2-

45.7-

54.8-

62.1-

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

0.97

0.85-

0.65-

1.18-

0.96-

0.69-

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

U.S. dollars
Net sales per employee ............................................ $ 565,249

Thousands of yen¥ 70,719-

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

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Consolidated Balance Sheets
Tokyo Electron Limited and its Subsidiaries
March 31, 2004 and 2003

ASSETS

Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

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

¥ 42,650-¥ 52,982-$ 403,727-

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

245,554-

182,218-

2,324,439-

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

(155)

(342)

(1,464)Inventories (Note 5)...............................................................................

105,187-

111,810-995,712-Deferred tax assets (Note 9) .................................................................

2,943-

4,152-

27,863-

Prepaid expenses and other current assets .........................................

6,795-

5,619-

64,321-

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

402,974-

356,439-

3,814,598-

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

10,874-

7,216-

102,931-

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

10,203-9,362-

96,587-

Intangible and other assets .................................................................

28,792-32,273-

272,546-

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

49,869-48,851-

472,064-

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

19,577-

19,718-185,319-

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

108,718-

110,950-

1,029,136-

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

92,379-97,937-874,466-

Construction in progress .......................................................................

2,552-

2,480-

24,162-

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

223,226-

231,085-

2,113,083-

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

114,437-

111,474-

1,083,278-

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

108,789-

119,611-

1,029,805-

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

¥561,632-¥524,901-$5,316,467-

Current assets:

Investments and other assets:

Property, plant and equipment:

See accompanying Notes to Consolidated Financial Statements.

28

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LIABILITIES AND SHAREHOLDERS' EQUITY

Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Current liabilities:
Short-term borrowings (Note 7).............................................................

¥

6,815-¥

8,729-$

64,514-Current portion of long-term debt (Note 7) ............................................

21,754-37,404-205,923-

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

--

35,000---Trade notes and accounts payable .......................................................

78,009-48,279-738,440-

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

3,273-

3,645-

30,983-

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

6,376-

3,629-

60,357-

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

--

8,577---

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

25,245-

15,443-238,975-

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

141,472-

160,706-

1,339,192-

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

98,476-

70,230-932,181-

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

38,275-36,392-362,319-

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

3,662-

1,074-

34,664-

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

281,885-

268,402-2,668,356-

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

3,947-

3,595-

37,363-54,961-47,223-

520,269-

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

78,023-70,285-738,576-

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

154,343-

147,465-

1,461,025-

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

2,396-(59)

22,676-

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

(720)

1,229-(6,815)

Treasury stock at cost (Note 11) ...........................................................

(13,203)(13,239)(124,983)

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

275,800-

252,904-

2,610,748-

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

¥561,632-¥524,901-$5,316,467-

Shareholders’ equity:
Common stock (Note 10) ......................................................................
Authorized: 300,000,000 shares
Issued: 180,610,911 at March 31, 2004
175,697,930 at March 31, 2003

2,022,343 at March 31, 2004
2,034,755 at March 31, 2003

29

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Consolidated Statements of Operation
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2004, 2003 and 2002

Thousands of
U.S. dollars

Millions of yen

2004

2003

2002

2004

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

¥529,654-¥460,580-¥417,825- $5,013,762-

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

389,499-

326,540-

302,270-3,687,037-

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

140,155-

134,040-

115,555-

1,326,725-

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

117,875-

132,921-

133,865-

1,115,823-

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

22,280-1,119-(18,310)

210,902-

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

200-

191-

351-

1,894-

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

(1,326)(1,601)(1,960)(12,557)

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

(2,540)(12,055)--(24,050)(Note 13) .....................................................................

--(8,577)----

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

(470)

(739)

(1,236)(4,447)

Impairment of goodwill (Note 14) .....................................

(1,933)----(18,300)

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

(1,275)(1,348)(1,764)(12,060)

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

14,936-(23,010)(22,919)

141,382-

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

5,108-

4,806-

2,612-

48,346-

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

1,016-

13,726-(5,602)9,616-

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

515-

12-

8-

4,876-

8,297-¥ (41,554)

Other income (expenses):

Amount transferred to provision for loss on restructuring

Provision for income taxes (Note 9):

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

¥Per share of common stock:
Net income (loss) — basic ...............................................

¥ (19,938) $Yen

U.S. dollars

46.37-¥ (238.57)

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

45.78-

--

--

0.43-

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

10.00-

8.00-

8.00-

0.09-

See accompanying Notes to Consolidated Financial Statements.

30¥

78,544-¥ (113.85) $0.44-

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Consolidated Statements of Shareholders' Equity
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2004, 2003 and 2002

Thousands of
U.S. dollars

Millions of yen

2004

2003

2002

2004

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

¥ 47,223-¥ 47,214-

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

7,738-

9-1-

73,248-

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

54,961-47,223-47,214-

520,269-

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

70,285-70,276-70,275-665,328-

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

7,738-

9-1-

73,248-

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

78,023-70,285-70,276-

738,576-

147,465-

190,195-

214,920-

1,395,918-

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

--

219-

--

--

Net income (loss) for year ................................................

8,297-(41,554)(19,938)

78,544-

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

(1,409)(1,395)(4,031)(13,338)

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

(10)

--

(756)

(99)

Loss on disposal of treasury stocks .................................

(0)

--

--

(0)

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

154,343-

147,465-

190,195-

1,461,025-

the period ....................................................................

2,396-(59)

1,171-

22,676-

Net change in foreign currency translation adjustments(720)

1,229-

3,738-(6,815)

Treasury stock, at cost (Note 11) .......................................

(13,203)(13,239)(5,015)(124,983)¥275,800-¥252,904-

Common stock¥ 47,213- $ 447,021-

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
Net change in unrealized holding gains arising during(2002: 605,867 shares; 2003: 2,034,755 shares
2004: 2,022,343 shares)
Total shareholders' equity ..................................................

¥307,579- $2,610,748-

See accompanying Notes to Consolidated Financial Statements.

31

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Consolidated Statements of Cash Flows
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2004 and 2003

Millions of yen

Cash flow from operating activities:
Income(loss) before income taxes ..............................................................
Depreciation and amortization ....................................................................
Increase in allowance for retirement and severance benefits.....................
Increase 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) in trade notes and accounts receivable .....................................
(Increase) in inventories..............................................................................
Increase in accounts payable......................................................................
(Increase) decrease in prepaid consumption tax ........................................
Others..........................................................................................................
Subtotal ......................................................................................................
Receipts from interest and dividends ..........................................................
Interest paid.................................................................................................
Payment for special retirement benefits......................................................
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 ................................................................
(Increase) decrease in 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

2004

2003

2004

¥ 14,93624,9631,8912,7651,3331,2574702,540-(61,789)(5,326)29,1543339,94422,471193(1,307)(6,513)(6,961)
7,883-¥(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-$141,382236,30217,90026,17112,61711,8994,44724,050-(584,902)(50,417)275,9733,15894,135212,7151,827(12,369)(61,658)(65,892)
74,623-(7,530)(3,200)2,186(8,544)(7,028)(2,780)2,538(7,270)(71,280)(30,297)
20,695(80,882)(1,464)(35,000)-(1,922)
49,767(20,005)
35(1,409)-(273)(10,271)600(10,332)
52,982¥ 42,650-(4,829)25,0003,000(7,183)-(20,000)(8,224)(1,395)3,751(4)(9,884)3334,57348,409¥ 52,982-(13,860)(331,314)-(18,198)
471,102(189,370)
335(13,338)-(2,582)(97,225)
5,675(97,809)
501,536$403,727-

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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 its 27 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 two
foreign subsidiaries, which use 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 ¥105.64 to $1.00, theapproximate rate at March 31, 2004. 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 service costs are charged to income on astraight-line basis, beginning from the consolidated fiscal year inwhich they are incurred, over a fixed number of years (four years)
within the average remaining years of service of employees when the
differences occur. Actuarial differences are charged to income on astraight-line basis, beginning from the year after they are recognized,
over a fixed number of years (four years) within the averageremaining 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 booked
provision for loss on restructuring in the year ended March 31, 2003
in preparation for losses that the companies expected to incur infuture due to the implementation of their business restructuring plan.

(b) Foreign currency translation(h) Leases

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.

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.

(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 without market
value are valued at cost 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.

(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.

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

(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

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6. Pledged Assets

Goodwill is evaluated on an individual basis and amortized notexceeding 20 years, and the balance is included in the Intangible andother assets.

The Company and its consolidated subsidiaries did not hold any
assets pledged as collateral at March 31, 2004 and 2003.

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 March 31 but applicable to the year then ended.

3. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2004 and 2003 are as
follows:
Thousands of
U.S. dollars

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 1.13% at March 31, 2004 and1.15% at March 31, 2003. Long-term debt at March 31, 2004 and2003 is as follows:
Thousands of
U.S. dollars

Millions of yen
2004

2003

2004

0.90% unsecured convertible
bonds due 2003 ...............................
1.39% unsecured bonds due 2004......

¥--¥15,481-$

20,000-20,000-189,322---

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

--

20,000---1.30% unsecured bonds due 2005......

30,000-30,000-283,983-

0.42% unsecured bonds due 2006......

20,000---189,322-

0.72% unsecured bonds due 2008......

30,000---283,983-

4,500-

4,500-

42,59852,064-

1.59% unsecured bonds withwarrants due 2006 ...........................
0.86% unsecured bonds with

2004

2003

2004

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

¥ 42,650-¥52,982-$403,727-

warrants due 2007 ...........................

5,500-

5,500-

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

--

--

--

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

10,230-12,153-

96,832-

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

¥ 42,650-¥52,982-$403,727-

Current portion.....................................

(21,754)(37,404)(205,923)

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

¥98,476-¥70,230-$932,181-

4. Investments in Securities
Investments in securities at March 31, 2004 and 2003 are as
follows:
Thousands of
U.S. dollars

Millions of yen

A summary of terms and conditions of the bonds with warrants at
March 31, 2004 is as follows:
1.59% unsecured bonds with warrants due 2006
Bond amount ............................................................. ¥4,500 million

2004

2003

2004

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

¥ 9,308-¥5,710-$ 88,109-

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

116-

117-

1,099-

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

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

1,450-

1,389-

13,723-

Exercise period .......................................................... July 1, 2002-June 8, 2006

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

¥ 10,874-¥7,216-$102,931-

Interest rate................................................................ 1.59%
Issued stocks ............................................................. Common stock

0.86% unsecured bonds with warrants due 2007

5. Inventories

Bond amount .............................................................. ¥5,500 million
Interest rate................................................................. 0.86%

Inventories at March 31, 2004 and 2003 are as follows:
Millions of yen
Finished products ................................

Thousands of
U.S. dollars

2004

2003

2004

¥ 49,759-¥ 63,206-$471,022-

Work in process,raw materials and supplies ..............

55,428-48,604-

524,690-

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

¥105,187-¥111,810-$995,712-

34

Issued stocks .............................................................. Common stock
Exercise price ............................................................. ¥9,608
Exercise period ........................................................... July 1, 2003-June 7, 2007

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8. Retirement and Severance Benefits
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.
Based on the enforcement of Defined Benefit Corporate Pension
Law, Tokyo Electron Employees' Pension Fund, established by theCompany, was permitted by the Minister of Health, Labor and Welfare
on January 1, 2004 to be released from its future obligation for
payments for the substitutional portion of the Welfare Pension
lnsurance Scheme.
The funded status of the defined benefit plans, a substantial
portion of which consists of domestic benefit plans, as of March 31,
2004 and 2003 is as follows:
Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

Benefit obligation ..................................
Fair value of plan assets.......................

¥(75,682)
23,686-¥(67,714)
20,631-$(716,413)
224,213-

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

(51,996)(47,083)(492,200)

Unrecognized actuarial difference ........
Unrecognized prior service cost ...........

13,929492-

13,622(1,857)

131,8534,658-

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

¥(37,575)¥(35,318)$(355,689)

Note: The annual provision for accrued retirement benefits for directors and corporate auditors( ¥ 700 million in 2004, and ¥1,074 million in 2003) is not included.

The amount of pension plan assets expected to be transferredback to the government (minimum legal reserve) was measured at¥10,323 million as of March 31, 2004. If the payment of the amount
was made on that date, the expected gain in accordance withparagraph 44-2 of the JICPA Accounting Committee Report No.13,"Practical Guideline for Accounting of Retirement Benefits (Interim
Report)" would be ¥6,032 million.

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

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

¥ 5,9091,733-¥5,1641,688-$ 55,93816,401-

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

(206)
4,034-(541)
2,456-(1,953)38,193-

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

2004
Allocation method of benefit obligation ......................

2003

Straight-line method

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

2.00%

2.50%

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

1.00%

3.00%

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

4 years

4 years

Amortization life of actuarial difference ......................

4 years

4 years

Amortization life of transition obligation...................... Fully recognized in the fiscal
year ended March 31, 2001

9. Income Taxes
Significant components of the deferred tax assets and liabilities of
the Company and its consolidated subsidiaries as of March 31, 2004
and 2003 are as follows:
Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

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

¥17,735-¥13,394-$167,880-

Allowance for retirement benefits ......

13,470-11,417-

127,507-

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

3,570-

6,993-

33,794-and amortization ..............................

2,963-

2,451-

28,045-

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

2,579-

1,165-

24,413-

1,286-

1,271-

12,1751,970-

Deferred tax assets

Excess of depreciation

Elimination of unrealized gain
on fixed assets .................................
Elimination of unrealized
gain on inventories ...........................

208-

1,273-

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

--

3,549---

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

3,304-

3,014-

31,278-Subtotal of deferred tax assets............

45,115-44,527-427,062-

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

(31,431)(30,724)(297,526)

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

13,684-

13,803-

129,536-

Deferred tax liabilities
Allowance for extraordinary
depreciation......................................

(1,877)(523)(17,771)

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

(1,894)(407)(17,926)

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

(3,771)(930)(35,697)

Net deferred tax assets .....................

¥ 9,913-¥12,873-$ 93,839-

10. Shareholders’ Equity

Net pension cost of the plans is as follows:

Amortization of prior service cost

Significant assumptions of domestic pension plans used todetermine these amounts are as follows:

(35)

(619)

(333)

¥ 11,435-¥8,148-$108,246-

The Company issued 4,912,981 shares and 6,027 shares ofcommon stock in 2004 and 2003, respectively, in connection with theconversion 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.

35

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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, 2004 is asfollows:
Number ofsharesMillions ofyen

Thousands of
U.S. dollars

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

603,000-¥4,991-$47,249-

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

--

--

--

Exercised ..............................................

20,000-90-860-

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

583,000-¥4,901-$46,389-

Note: The Company has 1,439,343 shares (¥8,302 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 ¥178 million in the year ended March 31, 2004and ¥171 million in the year ended March 31, 2003.
Future minimum operating lease payments:
Millions of yen
Due within one year..............................

Thousands of
U.S. dollars

2004

2003

2004

¥ 721-¥ 1,434-$ 6,830-

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

700-

1,582-

6,622-

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

¥ 1,421-¥ 3,016-$13,452-

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

17. 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. Impairment of Goodwill
The impairment of goodwill was fully recognized as an
extraordinary loss in this fiscal year due to the devaluation in thesubsidiary.

15. 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, 2004 and 2003 is as follows:
Leased assets not recorded in the consolidated balance sheets:
Millions of yen
Acquisition cost.....................................

Thousands of
U.S. dollars

2004

2003

2004

¥ 1,014-¥ 999-$ 9,600-

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

412-

255-

3,906-Net leased property ..............................

¥ 602-¥ 744-$ 5,694-

Future minimum lease payments:
Millions of yen
Due within one year..............................

Thousands of
U.S. dollars

2004

2003

2004

¥ 176-¥ 171-$ 1,667-

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

426-

573-

4,027-

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

¥ 602-¥ 744-$ 5,694-

36

The Company and its consolidated subsidiaries did not hold any
contingent liabilities at March 31, 2004.

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, 2004 and 2003, the related statements of income and shareholders’ equity
for each of the three years in the period ended March 31, 2004, and the statements of cash flows for theyears ended March 31, 2004 and 2003, all expressed in yen. Our examinations were made in accordancewith auditing standards generally accepted in Japan and, accordingly, included such tests of theaccounting records and such other auditing procedures as we considered necessary in thecircumstances.
In our opinion, the consolidated statements present fairly the financial position of Tokyo Electron Limited
and its consolidated subsidiaries at March 31, 2004 and 2003, the results of their operations for each of
the three years in the period ended March 31, 2004, and their cash flows for the year ended March 31,
2004 and 2003, in conformity with accounting principles generally accepted in Japan applied on aconsistent basis.
The amounts expressed in U.S. dollars have been translated on the basis described in Note 2-a.

Tokyo, Japan
June 22, 2004

Masatoshi Yoshino

Eiji Miyashita

Fumihiko Sugiura

Certified Public Accountant

Certified Public Accountant

Certified Public Accountant

Annual Report 200437

Corporate Directory(As of June 22, 2004)

Japan

TOKYO ELECTRON LIMITEDWorld Headquarters
TBS Broadcast Center
3-6 Akasaka 5-chome, Minato-ku, Tokyo 107-8481
Tel: +81-3-5561-7000
Fax: +81-3-5561-7400
URL: http://www.tel.com
Branch & Regional Offices
Fuchu Technology Center, Osaka Branch Office,
Kyushu Branch Office,Yamanashi Regional Office,Nagoya Sales OfficeTOKYO ELECTRON AT LIMITED
Head Office • Miyagi Plant
1-1 Nekohazama, Nemawari, Matsushima-machi,
Miyagi-gun, Miyagi 981-0203
Fujii Plant
2381-1 Kitagejo, Fujii-cho,Nirasaki City, Yamanashi 407-8511
Hosaka Plant
650 Mitsuzawa, Hosaka-cho,Nirasaki City, Yamanashi 407-0192
Tohoku Plant
52 Matsunagane, Iwayado,
Esashi City, Iwate 023-1101
Kansai Technology Center
1-8 Fuso-cho, Amagasaki City, Hyogo 660-0891

TOKYO ELECTRON KYUSHU LIMITED
Head Office • Saga Plant
1375-41 Nishi-Shinmachi, Tosu City, Saga 841-0074
Kumamoto Plant
2655 Tsukure, Kikuyo-machi,
Kikuchi-gun, Kumamoto 869-1197
Ozu Plant
272-4 Takaono, Ozu-machi,
Kikuchi-gun, Kumamoto 869-1232
Koshi Plant
1-1 Fukuhara, Koshi-machi,
Kikuchi-gun, Kumamoto 861-1116

TOKYO ELECTRON SOFTWARETECHNOLOGIES LIMITED30-7 Sumiyoshi-cho 2-chome,
Fuchu City, Tokyo 183-8705
Sapporo Technology Center
Yamanashi Station
Kyushu Station

TOKYO ELECTRON DEVICE LIMITEDTOKYO ELECTRON DEUTSCHLAND GmbH

1 Higashikata-cho, Tsuzuki-ku,
Yokohama City, Kanagawa 224-0045
Branch Offices
Kitakanto Branch: Nagaoka Sub-branch,
Tokyo Sub-branch
Osaka Branch:
Kyoto Sub-branch,
Okayama Sub-branch
Sales Offices
Sendai, Mito, Tachikawa, Yokohama, Matsumoto,
Nagoya, Fukuoka

Carl-Zeiss-Ring 5, 85737, Ismaning, Germany
Branch Offices
Alsdorf, DresdenTOKYO ELECTRON BP LIMITED30-7 Sumiyoshi-cho 2-chome,
Fuchu City, Tokyo 183-8705
Logistic Center Narita
Logistic Center Yokohama

TOKYO ELECTRON AGENCY LIMITED30-7 Sumiyoshi-cho 2-chome,
Fuchu City, Tokyo 183-8705

AmericaTOKYO ELECTRON U.S. HOLDINGS, INC.
2400 Grove Blvd., Austin, Texas 78741 U.S.A.

www.tel.com

TOKYO ELECTRON ISRAEL LIMITED
5 Habarzel St., Gat 2000 Industrial Zone,
Kiryat Gat, Israel
Branch OfficeMigdal HaEmek

TOKYO ELECTRON FRANCE S.A.R.L.
Batiment Alicante 1, Chemin de la Dhuy,
38240 Meylan, France
Branch Offices
Paris, Rousset

Asia

325-230 Dongchun-Dong, Yongin City,
Kyonggi-do, 449-120 Korea
Branch Offices
Cheonan, Cheongju, Gumi, Icheon, Kiheung,
PucheonTOKYO ELECTRON TAIWAN LIMITEDTOKYO ELECTRON MASSACHUSETTS, LLC
123 Brimbal Ave., Beverly,
Massachusetts 01915 U.S.A.
Branch Offices
Austin, Burlington, Dallas, Fishkill, Portland,
Santa Clara

TEL TECHNOLOGY CENTER,
AMERICA, LLC

7FI, No.18, Pu-Ding Rd., Hsin-chu City,
Taiwan 300, R.O.C.

TOKYO ELECTRON (SHANGHAI) LIMITED
No.555 Gaosi Rd., Zhangjiang Hi-Tech Park,
Shanghai 201203 China
Branch Offices
Beijing, Suzhou, Tianjin

NanoFab300 South 255 Fuller Rd., Albany,
New York 12203 U.S.A.

TOKYO ELECTRON (SHANGHAI)
LOGISTIC CENTER LIMITEDSUPERCRITICAL SYSTEMS, INC.

Level 1, No.126 Hedan Rd., Waigaoqiao FTZ,
Pudong, Shanghai 201206 China

2953 Bunker Hill Lane, Suite 301 Santa Clara,
California 95054 U.S.A.

EuropeTOKYO ELECTRON EUROPE LIMITED
Pioneer, Crawley Business Quarter, Fleming Way,
Crawley, West Sussex RH10 9QL, England, U.K.

Centro Direzionale Colleoni, Via Cardano 2, 20041
Agrate Brianza, Milan, Italy
Branch Offices
Avezzano, Catania

Tokyo Electron

IRE-TEX Building, Collinstown,
Leixlip, Co. Kildare, Ireland

TOKYO ELECTRON KOREA LIMITEDTOKYO ELECTRON ITALIA S.p.A.

38

TOKYO ELECTRON IRELAND LIMITED

2400 Grove Blvd., Austin, Texas 78741 U.S.A.
Branch Offices
Albuquerque, Boise, Burlington, Colorado Springs,
Dallas, Fishkill, Los Angeles, Manassas,
Marlborough, Phoenix, Portland, Richmond,Santa Clara

TIMBRE TECHNOLOGIES, INC.

30-7 Sumiyoshi-cho 2-chome,
Fuchu City, Tokyo 183-8705
District Offices
Fuchu, Osaka, Miyagi, Iwate, Tsuruoka,
Aizuwakamatsu, Mito, Nirasaki, Toyama, Kuwana,Tsu, Higashi-Hiroshima, Kikuyo, Ozu, Koshi,
Nagasaki, Oita, Saga, Fukuyama, Saijo

Kerkenbos 1015, Unit C,
6546BB Nijmegen, The Netherlands

TOKYO ELECTRON AMERICA, INC.

2120 West Guadalupe Rd., Gilbert,
Arizona 85233 U.S.A.

TOKYO ELECTRON FE LIMITEDTOKYO ELECTRON NEDERLAND B.V.

Investor Information(As of March 31, 2004)

Corporate Name:Tokyo Electron Limited

Common Stock Listed on:
The Tokyo Stock Exchange 1st Section (#8035)

Established:
November 11, 1963

Transfer Agent for Common Stock:
The Chuo Mitsui Trust and Banking Co., Ltd.
33-1 Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Annual General Meeting of Shareholders:June

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

For further information, contact:
Investor Relations
Corporate Communications Department
Tokyo Electron Limited
3-6 Akasaka 5-chome, Minato-ku
Tokyo 107-8481
Tel: +81-3-5561-7003
Fax: +81-3-5561-7400
E-mail: ir@corp.tel.co.jp
http://www.tel.com

100 shares
300,000,000 shares
180,610,911 shares
60,873Distribution of ownership among shareholders
Japanesefinancial institutions
73,220,703 shares(40.54%)

Other Japanese
corporations
15,512,619 shares(8.59%)
Individuals andothers25,273,684 shares(13.99%)Foreign institutions
and others
66,603,905 shares(36.88%)

Quarterly Stock Price Range(Yen)
12,000(Calendar Years)

10,000

8,000

6,000

4,000

2,000

0
1Q

2Q

3Q

2001

4Q

1Q

2Q

3Q

2002

4Q

1Q

2Q

3Q

2003

4Q

1Q
2004

Annual Report 2004

39

TOKYO ELECTRON LIMITED
Annual Report 2004

Printed in Japan on recycled paper
42AG-016