ANNUAL REPORT 2001
Year ended March 31, 2001

People.
Technology.
Commitment.

Established in 1963, Tokyo Electron (TEL) is a world-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

PORT 2001

oxidation/diffusion/LP-CVD systems, metal CVD and PVD systems, coater/developers,

01

spin-on dielectric (SOD) coaters, etch systems, cleaning systems, wafer probers and waferlevel burn-in & test systems.
Tokyo Electron also uses its accumulated expertise in SPE to develop, manufacture andmarket coater/developers and etch/ash systems for the manufacture of TFT-LCD panels.
Most of the Company’s semiconductor and TFT-LCD production systems hold the leading
share in their respective markets.
Tokyo Electron also maintains a strong presence as a distributor, providing a wide arrayof 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 13 countries on three continents, Tokyo Electron provides
superior products and services to its customers, and superior returns to its shareholders.

CONTENTS
1
2
5
9
16
20
24
25
36
37

Financial Highlights
To Our Shareholders
Interview with President Tetsuro Higashi
People. Technology. Commitment.
Review of Operations
Management’s Discussion and Analysis
Board of Directors, Statutory Auditors and Corporate Senior Staff
Financial Section
Corporate Directory
Investor Information

Forward-Looking Statements
This publication contains forward-looking statements based on projections and estimates that involve
many variables. Tokyo Electron operates in an extremely competitive business environment and in anindustry characterized by rapid changes in technology and supply-demand balance. Certain risks anduncertainties could cause the Company's results to differ materially from any projections and estimatespresented in this publication.

To k y o E l e c t ro n a t a G l a n c e

Semiconductor Production Equipment
Tokyo Electron develops and manufactures a broad rangeof superior semiconductor production equipment, andcomplements its original lineup by distributing high-valueadded products from other suppliers.

Percentage of consolidated net
sales by sector for the year ended
March 31, 2001

2.0%

0.2%

12.3%

Computer Network
Other● Oxidation/diffusion/LP-CVD systems● Single wafer CVD systems● PVD systems (Sputtering systems)● Coater/developers● Spin-on dielectric coaters● Etch systems● Carrierless cleaning systems● Scrubber systems● Fully automatic wafer probers● Wafer-level burn-in & test systems

Coater/developer system
CLEAN TRACK ACT®12

Distributed Products

Semiconductor & LCD
Production Equipment
Electronic Components

Original Products

85.5%

FEI Company● FIB systems
Rudolph Technologies, Inc.
● Film metrology tools
ISOA, Inc.
● Macro Inspection System
Yield Dynamics, Inc.
● Yield Management Software

Single wafer CVD system
Trias™

Etch system
Telius™

NuTool Inc.
● Cu ECD System(Electro Chemical Mechanical Deposition)

LCD Production Equipment
Leveraging the technology and expertise accumulated
from its semiconductor production equipment business,
Tokyo Electron has created a strong lineup of leadingedge LCD production equipment.
Original Products● LCD coater/developer systems● LCD plasma etch/ash systems

LCD coater/developer system
CS800

Semiconductor Production Equipment

Computer Network

Electronic Components

In order to fulfill its goal of providing

Tokyo Electron selects and offers thesolutions tailored to user needs, Tokyo

world’s best products from leading

Electron distributes storage area network

suppliers. With a full product lineup andand Internet related products for broad-flexible technical support, the Company

band solutions to offer comprehensive

provides total solutions to meetsystem solutions.

diversified user needs. Operations arehandled by wholly owned subsidiary● Computer systems● Network products● SAN products● Data management software● Defense/Aerospace products
Oxidation/diffusion/LP-CVD system
ALPHA(α)-303i

Fully automatic wafer prober
P-12XLTokyo Electron Device Ltd.
● Semiconductor devices● Board products● Components● Software
Semiconductor
devices

Brocade Communications
Systems, Inc.
Fibre Channel Integrated
Fabric Switch
Board
products
Extreme Networks, Inc.
Gigabit ETHERNET Switch
Carrierless cleaning system
UW300Z

Wafer-level burn-in & test system
WX-8● Advanced Digital Information Corp.
● BAE SYSTEMS● BF Goodrich Aerospace● Brocade Communications Systems, Inc.
● Ciprico, Inc.
● Conax Florida Corp.
● Cycomm International, Inc.
● Emulex Corporation● Extreme Networks, Inc.
● F5 Networks, Inc.
● Gadzoox Networks, Inc.
● Genroco, Inc.
● H. Koch & Sons Co.
● Hewlett-Packard Co.
● Hitachi, Ltd.
● ITT Aerospace Controls Corp.
● L-3 Communications Corp.
● LuxN, Inc.
● Marconi Communications, Inc.
● nCipher Corporation plc.
● NetScaler, Inc.
● Silicon Graphics, Inc.
● Sony Corp.
● TimesTen Performance Software, Inc.
● Tivoli Systems, Inc.
● VERITAS Software Corp.

LCD Production Equipment

LCD plasma etch/ash system
HT-800Notes: 1. The Computer Systems division was
renamed the Computer Network
division as of April 1, 2000.
2. Product names and company names
are trademarks or registeredtrademarks of their respective holders.

● Advanced Micro Devices, Inc● Agilent Technologies, Inc.
● Conexant Systems, Inc.
● Cosel Co., Ltd.
● Dallas Semiconductor Corp.
● Dialogic Corp. (an Intel Company)● Digital Electronics Corp.
● Eicon Technology Corp. (Trisignal Div.)● Fujifilm Microdevices Co., Ltd.
● Fujitsu Ltd.
● Fujitsu Quantum Devices Ltd.
● Fujitsu Media Devices Ltd.
● Integrated Device Technology, Inc.
● Intersil Corp.
● Intoto Inc.
● Legerity Inc.
● Linear Technology Corp.
● Litton Winchester/Retconn● Metrowerks, Inc.
● Microsoft Corp.
● Mindspeed Technologies● Motion Engineering, Inc.
● Motorola, Inc.
● ON Semiconductor● Phoenix Technologies Ltd.
● Pixelworks, Inc.
● Portwell, Inc.
● Ramtron International Corp.
● Robinson Nugent, Inc.
● Shinko Electric Industries Co., Ltd.
● Siber Core Technologies Inc.
● Tokyo Electron Device Ltd.
● Trillium Digital Systems, Inc.
● Tundra Semiconductor Corp.
● Valence Semiconductor, Inc.
● VenturCom, Inc.
● WESTTEK, L. L. C.
● Woodhead Industries, Inc. (SST Div.)● Xicor, Inc.
● Xilinx, Inc.
● Zarlink Semiconductor Inc.

Financial Highlights
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2001, 2000 and 1999

Thousands of
U.S. dollars (Note 1)

Millions of yen (Note 1)

2001

2000

1999

2001

Net sales ............................................................................ ¥723,880¥440,729¥313,820$5,842,455

Operating income............................................................... 121,086

35,816

6,383

977,292

FOR THE YEAR

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

99,132

29,6896,038

800,094

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

62,012

19,8481,866

500,499

Basic .............................................................................. ¥ 353.76¥ 113.53

Net income per share of common stock (Note 2):
¥

10.70

$

2.86

Diluted (Note 3)...............................................................

344.75110.64

10.70

2.78

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

38.00

14.00

12.00

0.31

Total assets ........................................................................ ¥729,511¥499,499¥414,903$5,887,903

Total shareholders’ equity................................................... 333,281

273,603257,716

2,689,923

AT YEAR-END

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥123.90=$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 year ended March 1999.

NET SALES(¥ Billions)

2001

723.9

2000
1999

440.7
313.8

1998
1997

455.6
432.8

NET INCOME(¥ Billions)

2001

62.0

2000
1999

19.8
1.9

1998

30.0

1997

30.0

NET INCOME PER SHARE (BASIC)

2001

353.76

2000
1999
1998
1997

(¥)

113.5310.70
174.68181.97

TOKYO ELECTRON LIMITED1

To O u r S h a re h o l d e r s

As always, during the fiscal year ended March 2001, Tokyo Electron(TEL) focused on generating high shareholder value. Consolidated
net sales gained 64.2 percent year-on-year to ¥723.9 billion, while
operating income increased 3.4 times to ¥121.1 billion. Both net
sales and operating income substantially exceeded previous
records, making fiscal 2001 Tokyo Electron’s best year ever.
Rapid diffusion of Internet- and mobile-related products drove
expansion in the semiconductor market, supporting strong
demand for Tokyo Electron’s core semiconductor and liquid
crystal display (LCD) production equipment that surpassed projections. Particularly, solid performance in the United States, withsales more than doubling, enabled us to increase our share of thesemiconductor production equipment market, which made amajor contribution to Tokyo Electron’s overall results. Moreover, the Computer Network division and theElectronic Components division generated double-digit growth under a product strategy that emphasizes theinformation and communications sectors. This also contributed measurably to overall performance.
Consolidated net income tripled to ¥62.0 billion, and basic net income per share totaled ¥353.76. Return on
equity (ROE) rose to 20.4 percent, another record that indicates the success of management’s strategies for
maximizing corporate value. Cash dividends per share were ¥38.00, a ¥24.00 increase from the prior year.

Focusing Investment on Growth Sectors
During the past fiscal year, Tokyo Electron geared up operations to stay abreast of surging orders. With
demand for the Company’s products rising sharply, Tokyo Electron devoted substantial effort to expanding
production capability in order to deliver on its commitments to customers. We also executed a cost reduction
project that included the deployment of information technologies (IT) with the aim of shortening lead time. We
are now halfway through this project, which is designed to result in significantly higher productivity as we movetoward its completion at the end of 2002. Tokyo Electron also invested ¥52.9 billion in research and development, a 42.5 percent increase year-on-year, as we worked to create the core technologies of tomorrow. We
have assembled a development portfolio that devotes the highest percentage of investment to date to the highgrowth sectors of the future.
Acquisitions are another component of our product strategy based on high-potential product segments.
During the fiscal year, Tokyo Electron purchased two companies in the United States that have given the
Company access to highly promising and innovative technologies. The acquisition of Supercritical Systems
gives Tokyo Electron a breakthrough cleaning technology for sub-100nm nodes. The purchase of Timbre
Technologies strengthens Tokyo Electron’s ability to add value to its product lineup with metrology solutions
for Advanced Process Control. These two acquisitions will support Tokyo Electron’s drive to further build its
position in the semiconductor production equipment market.

2

TOKYO ELECTRON LIMITEDInvestments during a Market Downturn Lay the Foundation for Future Growth
While 2001 carried the excitement of the beginning of a new century, it also brought with it a turbulent market
for semiconductor production equipment. Inventories of semiconductors for personal computers and cellular
phones rose and economic growth cooled in the United States, the world’s largest consumer market.
Moreover, demand for digital consumer appliances, which are expected to be a new growth driver replacing
PCs, has not grown enough to create a significant market. The world’s semiconductor manufacturers curtailed
investment as a result.
While these trends are making the year ending March 2002 especially challenging, Tokyo Electron will
implement thorough measures to cut costs during this period. We are also increasing our emphasis on continuing to implement concerted measures, such as the cost reduction project mentioned previously, to build apowerful earnings structure. Moreover, our staunch commitment to developing next-generation technologies
will play a critical role in our ability to benefit from the next phase of market expansion. We intend to maintainhigh-level investment in research and development during the current fiscal year, despite the difficult period weare experiencing.

Driving the Information and Communications Revolution of the Twenty-first Century
Over the mid- to long-term, we are standing by our projection that the semiconductor and LCD production
equipment business will continue to substantially outperform other industries because they are essential to the
IT revolution. The growing importance of the Internet and increased mobility throughout society has only justbegun, and the broadband era is now dawning. These trends will drive strong demand for semiconductors andLCDs, which in turn will fuel a rapid rebound in global capital investment in the products we manufacture.
In addition, the Computer Network and Electronic Components divisions have quickly reoriented theirproduct portfolios toward information and communications, and will continue to devote their resources to areas
with the strongest growth potential.
Our ongoing emphasis on maintaining or achieving number-one positions in each of our selected arenas
should make Tokyo Electron a ¥1 trillion company over the next few years. Our objective is to further
strengthen our corporate capabilities by contributing to the information and communications revolution.

Earn the Trust of Global Capital Markets by Defending Shareholder Interests
A worldwide network of sales and service bases and the creation of manufacturing and development bases in
the United States are representative of Tokyo Electron’s progress since 1994 in implementing its global
strategy. One result is that about 70 percent of the Semiconductor Production Equipment division’s sales now
come from outside Japan, demonstrating our increased global presence. This is indicative of the importancewe place on overseas operations and on reforming corporate systems in order to be accepted internationally.
We are determined to earn the trust of global capital markets, and so have been a leader among Japanese
corporations in implementing policies to embrace corporate governance. These efforts have included reorga-

TOKYO ELECTRON LIMITED

3

nizing the Board of Directors, establishing the Compensation Committee, disclosing the compensation of
corporate officers, and implementing a stock option program.
New initiatives in the past fiscal year included the establishment within the Board of Directors of theNomination Committee to select director and chief executive officer candidates. The creation of a process forselecting statutory auditors that ensures their autonomy was another advance in the past fiscal year. Tokyo
Electron also began quarterly reporting in 2000 as part of our commitment to ensuring access to information.
Tokyo Electron’s dedication to managing in the interest of shareholders has recently received the recognition of numerous investor relations institutions and the investors they represent. In March 2001, Tokyo Electron
received the Excellence in Corporate Governance award from Institutional Shareholder Services of the UnitedStates, which is the world’s leading provider of proxy voting and corporate governance consulting services.
Tokyo Electron was one of just five companies worldwide to receive this recognition of outstanding corporate
governance, and became the second Japanese corporation to receive the award. We intend to maintain the
superior standards that this award represents.

People. Technology. Commitment.
Tokyo Electron has adopted a new, globally oriented corporate message at the start of the twenty-first century:
People. Technology. Commitment. Chosen after soliciting the opinions of employees worldwide, these threethemes have been an integral part of Tokyo Electron’s history and clarify our corporate culture and management philosophy both internally and externally. People are our greatest asset. They support our customers bycreating innovative technologies and value-added products. Keeping our promises allows us to earn the trustof customers, which is the basis of our future.
We believe in the boundless possibilities of people and technology, and our goal is to be a company that
continually creates true value. I would like to thank our shareholders for the support they have given us, andinvite you to share in the benefits as we make our vision for the future a reality.

Tetsuro Higashi
C.E.O., President
June 2001

4

TOKYO ELECTRON LIMITED&
Q A

I n t e r v i e w w i t h P re s i d e n t Te t s u ro H i g a s h i

Where is the market heading over the next five years?
Broadband technology, a part of the IT revolution, will become increasingly pervasive. It
will enable extremely high-speed delivery of images and sound that will be more realistic
than anything to date. Various applications will develop around broadband, including
digital consumer appliances. This in turn will create an urgent need for intelligent
semiconductors and LCD panels. These industries, and in turn the production equipment
they require, will post double-digit growth over the mid- to long-term, despite inevitable
short-term downturns. It’s a market with a very bright future.

Given this outlook, what are Tokyo Electron’s strengths and approaches toachieving growth?
Tokyo Electron supplies the equipment for producing advanced semiconductors and
LCDs. Through our Computer Network and Electronic Components divisions, we are alsoa leading distributor, using our technological expertise to market superior semiconductor
chips and systems from around the world for mobile and Internet-related applications. In
other words, all of Tokyo Electron’s operations are involved in fundamental segments of
the IT revolution. We intend to grow by maintaining a leading market share in many ofthese segments and acquiring leadership in others.
The key to success as a supplier of semiconductor
production equipment is process integration capabilities. This entails supplying comprehensive solutions for
multiple adjoining processes using a number of our
products, or even incorporating those of othercompanies. Few competitors can match our processintegration capabilities because of the breadth of our
product lineup.
Advanced Process Control technology adds value
to process integration. Customers have always managed yield. Process control capability
incorporated in equipment and between equipment will support stable and higher yields.
The ability to deliver integrated process control capability will be a key factor differentiating suppliers of semiconductor production equipment. Few companies in the world cando this. We intend to expand sales by devoting even more effort to this area.

TOKYO ELECTRON LIMITED5

Do the organizational innovations implemented in April 2001 reflect the direction Tokyo
Electron is taking in its business?
Litho-Cell Group
Coater/developer

Etch System

Formerly, the Semiconductor Production
Equipment division was organized into productspecific business units. Under the current reorgaTest & Integrated Process Control Groupnization, with the exception of LCD production
equipment, the division has been broadly divided
Single Wafer
Oxidation/diffusion
Cleaning
Deposition System
LP-CVD System
Systeminto three groups: the Litho-Cell Group, the Test &Thin Film & Cleaning Group
Integrated Process Control Group and the Thin
Film & Cleaning Group. This reorganization is significant in two major ways. First, it
clarifies our core competencies in semiconductor production equipment. Second, it
defines a matrix for implementation of key process integration that provides substantial
value to the market, which we believe to be strategically important.

A megatrend in the semiconductor industry is the shift to 300mm wafers, which has
started at several chip manufacturers. What is the status of Tokyo Electron’s 300mm
equipment?
Currently, the 200mm equipment market is contracting,influenced by the global slowdown in capital investment. Bookings for Tokyo Electron’s 300mm equipment,
however, are firm. We have already readied our lineup of
300mm equipment, with the result that 300mm orders
now account for nearly 20 percent of total SPE orders.
We expect that number to further increase during thecurrent fiscal year.
A key strength in winning orders is that ouroutstanding support system assists customers inmaking the shift to the 300mm platform. We have created the world’s largest applicationlaboratory, our new Process Technology Center in Nirasaki, Japan, for 300mm equipment,
an advanced facility where 300mm production concepts are in actual use. The Center
enables us to work in close cooperation with customers to determine their particularneeds for 300mm equipment. The shift toward 300mm provides a valuable opportunity tofurther increase the market share of Tokyo Electron’s products.

6

TOKYO ELECTRON LIMITEDWill attaining leadership in additional market segments require external acquisitionof technologies?
There are three ways to obtain new technology. We can develop it ourselves, but if it is a
crucial technology related to our core business and we
decide that acquisition is faster, we’ll take that route.
The third way is strategic alliances, which we typically
employ to complement our own core technologies. A
good example is the partnership we formed last yearwith NuTool of the United States, which supplies
innovative copper electroplating technology forinterconnects.

How does Tokyo Electron handle the well-known upward and downward swings in thesemiconductor production equipment market?
The cyclical nature of our main market is not going to disappear, and we must ensure wehave a highly efficient and flexible organization to handle it. Right now, we are executing
a three-year project that will cut the lead time from order to delivery in half. While thisproject will not insulate us against the current downswing, its completion will result in thecreation of a structure that promotes highly efficient use of assets.
We have turned the difficult environment to our advantage so far. Companies thathave successfully met the technological and management challenges posed by thecyclicality of the market have generated strong growth and, thus, the industry has
developed. Tough times engender innovation: Mainstream technology tends to become
outdated, and new technologies come to the forefront. In such a period of change, weaggressively innovate our technology and approaches to management.
Without a doubt, 300mm equipment will come to the forefront. Also, demand will
increase for equipment designed to be scalable and adaptable to changes in the volume
and variety of products, such as System LSIs. We will continue improving our 300mm
equipment while promoting new-concept production equipment that radically shortens
production time. The latter includes Telius™, a 300mm etcher, and TELFORMULA™,
which offers ultra-high-speed thermal processing for both mini and mega fabs. Tokyo
Electron does not intend to scale back R&D investment during the current downswing.

TOKYO ELECTRON LIMITED

7

What directions will the Computer Network and Electronic Components
divisions take?
We will further focus on growth sectors. The Computer Network division is emphasizingcore broadband technologies such as storage area networks and Internet technologies.
The Electronic Components division is concentrating on high-value-added products
such as communications-related devices and System LSIs. In these businesses, Tokyo
Electron is not simply a distributor, but functions as a group with a technological
specialty. Customers hold this characteristic in high regard. We will make the most ofthese unique businesses as we successfully strengthen our accumulated engineeringand design capabilities.

What management tasks lie ahead?
While there are many things I would like to accomplish, I have recently started to thinkthat we need to be truly globalized for further growth. Our globalization program over the
past several years has been a key factor in increasing
earnings. Up to this point, globalization for Tokyo
Electron has meant expanding our network of operating bases outward from Japan. The process must
become centripetal in order to incorporate the best
global practices into management. In this light, forexample, certain functions of headquarters could be
diffused overseas. Now is the time for framing specificconcepts toward our second phase of globalization.
We will also strengthen technical support in Southeast
Asian countries, including China, which is poised to become a large growth market.
Recently, Tokyo Electron has been receiving awards from best-of-class customers
worldwide in recognition of our excellence as a supplier, indicating the broad
acceptance we have received for the quality of our products and support. This kind ofrecognition both affirms our success at raising corporate value and striving toward
global excellence, and inspires us to aim even higher.

8

TOKYO ELECTRON LIMITEDTOKYO ELECTRON LIMITED9

Tokyo Electron was founded on a simple philosophy: the prosperity andrespect of our customers, partners, shareholders, and employees. We
encourage community involvement, exercising responsibility by promoting safety and environmental conservation. As a people-centeredcompany, we strongly believe in encouraging the creativity and unlimited
potential of people. With offices around the world, Tokyo Electron
respects all cultures and their unique values. Accordingly, the Company
is made up of dedicated people with a spirit of service andPeople.
passion for their work.

Entrepreneurship

Respect
10

TOKYO ELECTRON LIMITEDEnvironment, health & safety

Entrepreneurship

Since its establishment, Tokyoand develop environmentally

Electron has maintained its

friendly products. Seven Tokyo

entrepreneurial corporate culture.

Electron Group plants in Japan

Everyone is encouraged to takehave obtained ISO 14001 certifi-

on new challenges, and no one iscation, an international standard

criticized for failing. This “can-do”

for environmental management

spirit forms the foundation forsystems. In addition, all board

business growth, and helps

members and employees of

employees constantly focus on

Tokyo Electron recognize that

how to best achieve customer

health and safety considerations

satisfaction and generate profits.

underlie every aspect of their jobs

Tokyo Electron demonstrates

as well as the development of theits global environmental
awareness through ongoing

Company as a whole.

Tokyo Electron’s first Environmental Report,
published in 2000, details the Company’s
progress in reducing environmental impact andpromoting conservation in a variety of areas.

Milestones inEnvironmental Protection
To 1995:

Carried out studies for an environmental
management system. Eliminated CFC usage.

efforts to reduce waste, improve

1996:

Established first Tokyo Electron Environmental Committee.

the recycling rate, promote energy

1997-1999: Obtained ISO 14001 certification of the environmental

Implemented environmental management system.

and resource conservation as wellas the safe handling of chemicals,management systems at seven main domestic plants.
1999:

Created Product EHS Roadmap.

2000:

Began environmental accounting.

TOKYO ELECTRON LIMITED11

Tokyo Electron provides a wide variety of highly competitive
products, utilizing original development and technological capabilities, and an unparalleled service system. These factors havepropelled us to leadership in the technology marketplace. In the
future, we are determined to keep ahead of industry developments
by designing technologies for the next generation and beyond.
Furthermore, we will continue to provide our customers with thevalue they expect by producing original technology andTechnology.
the highest-quality products.

Shift toward 300mm
12TOKYO ELECTRON LIMITEDComprehensive,
integrated solutions

Tokyo Electron’s state-of-the-art

manufacturers must rapidly ramp

Process Technology Center is

up production in order to acceler-

involved in the development of

ate their products’ time-to-market.

technologies essential for next-

Tokyo Electron has responded togeneration wafer processing, such

this customer need by developing

as processes for 300mm wafers

production equipment thatand finer design rules, as well as

shortens production cycle time.

advanced clean technology. In

The high-value-added technology

addition, the Center is focusing on

supplied by the Company

the development of processcontributes to both customer

integration in order to provide

performance and society at large.

The new Process Technology Center in Nirasaki,
Japan, is an advanced facility that supports theshift to 300mm equipment.

customers with comprehensive
solutions incorporating multiple
products, rather than singleprocess solutions.
As the use of semiconductors
in digital consumer appliances
increases, semiconductor

Production line for the CLEAN TRACK ACT® 8
coater/developer, a best-selling Tokyo Electron
product for manufacturing leading-edge semiconductors.

TOKYO ELECTRON LIMITED13

We firmly believe that Tokyo Electron’s future is built on a foundationof trust. It is essential that we make efficient use of our resources tocontinue leading the digital age and that we take responsibility forfulfilling our promises, without fail. To that end, we are firmly committed to the future success of our customers, shareholders, partners,
and local communities.

Commitment.
Customer success
14

TOKYO ELECTRON LIMITEDEarning trust
Corporate value
Tokyo Electron is committed to

employed a variety of methods tofulfilling its promises to customers.

achieve this objective. The

The results of this commitment canCompany’s overall management

be seen in our successful develop-

system has been separated into

ment overseas during the past

two sections: the Board ofseveral years. Numerous semicon-

Directors, which decides basic

ductor and LCD manufacturers

management policies and oversees

have been added to Tokyo

the management of the Company,

Electron’s customer list in a shortand the Corporate Senior Staff,

period of time. This is due not only

which formulates and implements

to our superior products and strong

business strategies. Moreover, we

technological support capabilities,

established the Compensation

but also to the trust we have

Committee and the Nomination

earned among customers around

Committee to improve management

the world.

transparency. Our global stock

Raising the quality of Tokyo

option program aligns the interests

Electron as a corporation is a wayof key employees worldwide withof showing our commitment to ourthose of shareholders. We intend toshareholders and employees

continue innovating to further

around the world, and we haveincrease corporate value.

Tokyo Electron has received many awards inrecognition of its commitment to providing
outstanding products and support to customers
around the world.

TOKYO ELECTRON LIMITED

15

Review of Operations

Semiconductor Production Equipment
Since the second half of 1999, demand has risen sharply for semiconductor chips and LCD panels used in
network and mobile related products such as PCs and mobile phones, while 2000 witnessed a substantial
increase in capital investment by semiconductor and LCD manufacturers worldwide. As a result, orders for
the Semiconductor Production Equipment (SPE) division for the fiscal year ended March 31, 2001 increased
20.6 percent year-on-year to ¥627.6 billion.
Resurgent demand has made improving production capability a pressing issue, and the Company has
successfully expanded it. Consequently, net sales for the SPE division rose 74.3 percent to a record-breaking¥619.0 billion. The division accounted for 85.5 percent of total consolidated net sales, up from 80.6 percent in
the previous fiscal year.
However, inventory adjustments for semiconductors and slow growth in the U.S. economy have cast ashadow over the semiconductor market since late 2000, and capital investment by semiconductor manufacturers began to contract in early 2001. While orders began to show signs of slowing at the beginning of theyear, revenues for the period under review were supported by sufficient backlog.

Review by Geographic Region
SPE division sales expanded in every region in which Tokyo Electron operates. Sales in Japan jumped 97.2
percent to ¥196.5 billion, accounting for 31.7 percent of total net sales in the division. This was the highest
percentage among all regions, exceeding Taiwan, which
SPE SALES BY GEOGRAPHIC REGION(¥ Billions)last year surpassed Japan in net sales for the first time in
the Company’s history. Sales in North America more

196.5

Japan
North
America

140.2
65.5

33.6

low compared to other regions, due to the fact that

59.9

Korea

the U.S. continues to expand. In Taiwan, sales rose 29.9
percent to ¥131.1 billion. Year-on-year sales growth was

50.5

Europe36.8
131.1

TaiwanOther

than doubled to ¥140.2 billion, as our market share in

99.7

101.0
40.9
18.6

capital investment by Taiwanese semiconductor
foundries during the previous fiscal year exceeded that ofother regions. In addition, sales in Europe increased 50.4
percent to ¥50.5 billion, sales in Korea rose 62.7 percent■ 2001■ 2000

Sales of third-party products imported into
Japan are included in Japan sales.

to ¥59.9 billion and sales in other regions soared 120.0
percent to ¥40.9 billion.

Review by Product
Sales in all product categories increased year-on-year, with CLEAN TRACK ACT ® 8 series coater/developer
systems and UNITY ® series etching systems generating particularly strong gains. These products—which
already command an impressive share of the world market—recorded sales growth exceeding the market
average, resulting in an even larger market share.
One feature of capital investment during the fiscal year was that manufacturers of DRAM chips and flash
memory resumed building new production lines. α-series oxidation/diffusion/LP-CVD systems directly
benefited from this development, as sales reached their highest levels in three years. The Company is currently
Note: Product names and company names are trademarks or registered trademarks of their respective holders.

16

TOKYO ELECTRON LIMITEDdeveloping TELFORMULA™, a new ultra-fast thermal processing system that speeds up the production cycle
through small-batch and sequential processes designed to be adaptable to changes in the volume and variety
of products, such as System LSIs.
Single wafer CVD systems MB 2-730 and the UNITY ® series experienced significant year-on-year sales
growth. While maintaining its strengths in front-end-of-line (FEOL), the Company plans to expand its range ofapplications to back-end-of-line (BEOL) interconnect processes, which are expected to have excellent growthpotential.
SPE SALES(¥ Billions)

Sales of cleaning systems and wafer probers also
increased substantially. The new PR200Z cleaning

2001

619.0

2000
1999

355.1
242.2

1998

380.2

1997

355.9

system, which incorporates unique cleaning technology
for BEOL interconnect processes, supported increased
revenue during the past fiscal year. The product’s launch
has earned Tokyo Electron the second-highest market
share among manufacturers of cleaning systems

worldwide. Orders have been solid for P12XL, a wafer prober model capable of handling 300mm wafers. This
high-accuracy, high-load resistance model is a step ahead of the competition and is building toward 300mm
market leadership.
The CLEAN TRACK ACT ® series of spin-on dielectric (SOD) coaters for BEOL multilayer processes, which
was launched only two years ago, has been introduced in the advanced R&D lines of almost all of the world’s
leading semiconductor manufacturers. It is currently being evaluated on the basis of its performance.
Sales of LCD production equipment increased 68.3 percent year-on-year to ¥71.8 billion, setting a record
for the second year in a row. The trend in recent years has been toward increasing substrate size.
During the past fiscal year, Tokyo Electron began shipments of 300mm equipment to semiconductor
manufacturers that have taken the lead in switching to 300mm wafers.

Acquisition of U.S. Companies, Supercritical Systems, Inc. and Timbre Technologies, Inc.
During the past fiscal year, Tokyo Electron purchased two U.S. companies in order to obtain access to theirinnovative technologies. Supercritical Systems, Inc., acquired in October 2000, possesses promising supercritical cleaning technology for semiconductors with sub-100nm design rules. Timbre Technologies, Inc., which
was purchased in February 2001, has developed Optical Digital Profilometry (ODP), a method of metrology thatwill enable Tokyo Electron to incorporate the Advanced Process Control capability required for future markets
into its semiconductor production lines. Use of this technology will allow the Company to offer an array of highvalue-added products to its customers.

Partnership with U.S. Company, NuTool Inc.
In November 2000, Tokyo Electron formed a partnership with NuTool Inc., a U.S.-based supplier of advanced
copper electroplating systems. The Company has started global marketing, sales and support of the systems,
except in certain Southeast Asian countries. NuTool™ 2000 deposits a planar copper film with completefeature fill, independent of aspect ratio, and low field thickness. This alliance has given rise to a new businessmodel that will make the best use of Tokyo Electron’s powerful global sales and support engine and its longstanding expertise in the distribution business. The Company is flexible enough to work towards similar
alliances with leading equipment suppliers.

TOKYO ELECTRON LIMITED

17

Computer Network
F5 Networks, Inc.
• Server Load Balancer
nCipher Corporation plc.
• Hardware Security Module• SSL Accelerator
LuxN, Inc.
• DWDM Equipment
Sony Corp.
• High Performance Tape Library

Net sales for the Computer Network (CN) division increased 13.7 percent to ¥14.1 billion, the result of firm
growth in sales of IT-related equipment as part of the division’s continuing emphasis on the market forInternet business. Sales of network-related products and storage area network (SAN)-related products wereparticularly strong.
In the network-related products segment, sales of Gigabit Ethernet switches from Extreme Networks
increased 1.7 times over the previous fiscal year, while sales of server load balancing equipment from F5
Networks expanded rapidly with the increase of Internet business sites. In addition, factors such as theimplementation of digital signature regulations brought the importance of security to the forefront, supporting
rapid growth in sales of security products from nCipher, which Tokyo Electron began handling in theprevious fiscal year.
COMPUTER NETWORK SALES(¥ Billions)

Progress in broadband network creation has added
urgency to the need to increase data storage capacity

2001

and growth in internet Data Center (iDC) business. As a

14.1

2000

12.4

1999

result, sales of Brocade Communications Systems’

12.9

Fibre Channel switches, which are key to constructing

1998

15.3

1997

14.4

SANs, increased 5.3 times year-on-year. Moreover,increasing data volume has heightened the need fordata administration, which supported growth in sales of SAN administration software from Veritas Softwareand tape drives from Sony.
The division has oriented its product portfolio toward meeting emerging needs, with emphasis on marketing leading-edge information technologies. During the past fiscal year, the division began handling dense
wavelength division multiplex (DWDM) equipment from LuxN that accelerates the progress of broadband.
Furthermore, the division develops and markets original products using engineering capability accumulated
through service and support for the world’s leading edge products. One such product, Ruff Systems™,
enables transmission of high-quality, uncompressed video, and has begun attracting attention in the
broadcasting and hospital sectors.
Looking forward, Internet technology and SANs will remain a primary focus. The division intends to begin
handling products that will serve as next-generation portals.
Notes: 1. The Computer Systems division was renamed the Computer Network division as of April 1, 2000.
2. Product names and company names are trademarks or registered trademarks of their respective holders.

18

TOKYO ELECTRON LIMITEDElectronic Components
ELECTRONIC COMPONENTS SALES(¥ Billions)

Net sales for the Electronic Components (EC) division
increased 23.8 percent to ¥89.2 billion, a record for the

2001

89.2

2000
1999
1998
1997

72.1
57.7
60.1
62.5

second consecutive year. The division focused on
products for high-growth sectors including mobile
communications, Internet appliances, infrastructure
equipment required for next-generation mobile phones,
and digital consumer appliances such as DVD and car

navigation systems. Vigorous marketing of these high-value-added products that require technical support
has been a primary factor supporting growth.
Semiconductor devices accounted for 87 percent of net sales. Sales growth was strong for semi-custom
ICs, primarily programmable logic devices (PLDs), application-specific integrated circuits (ASICs) for
communications-related applications, and various kinds of ICs including flash memory for mobile communications. Sales of Xilinx’s semi-custom IC products were particularly strong, more than doubling year-on-year.
New products that the division began handling during the past three years more than doubled in sales
year-on-year, and expanded to account for 10 percent of net sales. In particular, sales of image processor
ICs from Pixelworks nearly quadrupled. In the past fiscal year, the division added vitality to its product portfolio by signing contracts to represent suppliers with strong capabilities in developing products for the growthmarkets of information and communications-related products, and digital consumer appliances.
The division also employs its broad experience to design and develop original products and provide LSI
design services that meet customer needs. In the past fiscal year, orders for ASIC and PLD design increased,
and demand is projected to continue expanding. The division is therefore promoting refinements andexpansion of its design and development organization to improve its ability to respond to increased demand.
Coupled with moves to strengthen original product development capabilities and technical support, these
initiatives should give the division a firm foundation as a technology-specific trading company.
In addition, the division is expanding its ability to market new products and further strengthen customercentered sales. Improvements during the past fiscal year included the establishment of the Corporate
Marketing Group and refinements in the Sales Promotion Group. Moves to deploy IT to further raise
operational efficiency included a shift to mobile computing in the Sales Division and support for business-tobusiness (B2B) commerce with secondary trading companies.

Note: Product names and company names are trademarks or registered trademarks of their respective holders.

TOKYO ELECTRON LIMITED19M a n a g e m e n t ’s D i s c u s s i o n a n d A n a l y s i s

Sales and Income
Sales
For the year ended March 31, 2001, consolidated net
sales increased 64.2 percent from the prior fiscal year to arecord ¥723.9 billion (US$5,842 million), as semiconductor and LCD manufacturers invested to meet a sharp risein demand for IT-related products such as personal
computers, mobile phones, network-related products anddigital appliances. Geographically, domestic sales grew
62.7 percent to ¥299.3 billion and overseas sales gained
65.4 percent to ¥424.6 billion. Sales outside of Japan
have exceeded domestic sales for the past three fiscal
years. By division, Semiconductor Production Equipment(SPE) sales, which include sales of LCD production
equipment, increased 74.3 percent to ¥619.0 billion.
Computer Network (CN) sales rose 13.7 percent to ¥14.1
billion, and Electronic Components (EC) sales gained 23.8
percent to ¥89.2 billion.
Domestic and Overseas Sales(¥ Billions)

299.3

424.6

2001

723.9
184.0

256.7

2000

440.7
149.8

164.0

1999

313.8
230.6

225.0

1998

455.6
256.8

1997

176.0
432.8

Japan

Overseas

Orders received for the SPE division increased 20.6
percent to ¥627.6 billion, with order growth particularly
strong during the first half of the fiscal year. Order backlog
for the SPE division rose 3.4 percent to ¥258.1 billion, but
weakening order flow in the second half of the fiscal year
indicates a worsening of the business environment during
the year ending March 2002.
Changes in exchange rates have no material effect onTokyo Electron’s results because exports from Japan are
generally denominated in yen. However, a weaker yen visa-vis the U.S. dollar typically lowers prices from thepurchaser’s perspective, which raises Tokyo Electron’scompetitiveness. While some settlements are denominated in dollars, exchange risk is hedged using forward
exchange contracts concluded individually at the time oforder. The ratio of U.S. dollar-denominated transactions
involving equipment imported to Japan is comparatively
low and did not have a material effect in the year ended
March 31, 2001.

Cost of Sales, SG&A Expenses and Operating Income
Cost of sales increased 51.0 percent to ¥458.9 billion, arate of increase well below the rate of sales growth.
Consequently, cost of sales as a percentage of net sales
improved to 63.4 percent from 68.9 percent for the priorfiscal year. Gross profit increased 93.6 percent to ¥265.0
billion and the gross margin rose 5.5 points to 36.6
percent, reflecting the rise in production volume and thefavorable effects of Tokyo Electron’s drive to improve
productivity and reduce costs.
Net Sales, Gross Profit & Operating Income
121.1

265.0

2001

723.9
35.8

136.9

2000

440.7
6.4

87.9

1999

313.8
63.8

150.8

60.4

135.2

1998

455.6

1997

Net sales

432.8

Gross profit

R&D Expenses(¥ Billions)

2001

52.9

2000

37.1

1999

26.8

1998
1997

2. The Computer Systems division was renamed the Computer Network division as of April 1, 2000.

TOKYO ELECTRON LIMITED

Operating income

Selling, general and administrative expenses increased
42.4 percent to ¥143.9 billion, also substantially below therate of sales growth due to Tokyo Electron’s concerted
efforts to control costs. Research and development
expenses, which are included in SG&A expenses,
increased 42.5 percent to ¥52.9 billion. R&D was focusedon development of technologies for the 0.13-0.10µm
design rule generation, 300mm wafer equipment, andnew business areas. Consistent and substantial R&D
spending, even during market slowdowns, has been a
key factor supporting Tokyo Electron’s ability to further
promote a competitive advantage in the products andservices it provides. The Company intends to maintainR&D spending despite projected market weakness during
the year ending March 2002 in order to benefit fully whenthe market recovers.
Operating income increased 238.1 percent to ¥121.1
billion as sales growth strongly outpaced expense
increases. The operating margin was 16.7 percent,compared to 8.1 percent for the prior fiscal year.

Notes: 1. Years in all graphs refer to fiscal years ended March 31.

20(¥ Billions)

26.8
21.0

Other Income (Expenses) and Net Income
Net other expenses increased sharply to ¥22.0 billion,
primarily because a difference due to the application of
new accounting standards for retirement benefits resulted
in a charge of ¥16.0 billion at the beginning of the fiscal
year. While Tokyo Electron had planned on amortizing thisamount over a two-year period, the Company opted totake a one-time charge to earnings during the past fiscal
year. Income before income taxes increased 233.9
percent to ¥99.1 billion.
Net income increased 212.4 percent to ¥62.0 billion,
and fully diluted net income per share increased to¥344.75 from ¥110.64. Tokyo Electron increased cash
dividends by ¥24.00 per share to ¥38.00 per share; thepayout ratio was 10.74 percent, which is in line with theCompany’s historical norm.
Net Income per Share (Diluted)

(¥)

2001

344.752000
1999

110.6410.70

1998

168.43

1997

172.74

Financial Position and Cash Flows
Financial Position
Current assets at March 31, 2001 increased 46.1 percent
from a year earlier to ¥548.2 billion as both trade notes
and accounts receivable and inventories expanded inreflection of the increase in sales. Inventory turnover
improved to 5.27 times compared with 4.39 times in theprevious fiscal year. Trade notes and accounts receivable
turnover was 3.03 times, compared to 2.79 times for theprior fiscal year.
Current liabilities increased 62.8 percent to ¥238.4
billion. Factors included increased short-term borrowings
outstanding at the balance sheet date, an increase intrade notes and accounts payable due to the ramp-up in
production to meet higher demand, and higher accrued
income taxes. Working capital increased to ¥309.8
billion, and while the current ratio decreased to 2.3 to 1
from 2.6 to 1 a year earlier, it continues to indicate ample
liquidity. The current ratio decreased in large part
because Tokyo Electron funded working capital requirements externally with short-term debt to promptly
respond to rapid increases in demand.
Debt-to-Equity Ratio

Cash Dividends per Share & Payout Ratio(Times)(¥ / %)
0.55

2001
10.74

2001

38.00

0.42

2000

12.35

2000

14.00

0.47

1999
112.14

1999

12.00

0.52

1998

17.34

1998

30.00

0.56

1997

14.01

1997

Cash dividends per share

28.00

Payout ratio

Note: Debt-to-equity ratio = (Average short-term debt + Average longterm debt)/Average shareholders’ equity

Working Capital & Current Ratio(¥ Billions / Times)

2.30

2001

309.8
2.56

2000

228.7
4.21

1999

221.7
2.58

1998

228.4
2.89

1997

Working capital

191.2

Current ratio

Property, plant and equipment increased 27.6 percent
to ¥124.7 billion over a year earlier. During the fiscal year,
Tokyo Electron invested ¥49.4 billion in property, plantand equipment, consisting primarily of production facilities for coater/developers at Tokyo Electron Kyushu,
expansion of production capacity for etchers at Tokyo
Electron Yamanashi, purchase of equipment for evaluation, capitalization of the Company’s own equipment,
and investment in IT.
TOKYO ELECTRON LIMITED21

Capital Expenditures for Property,
Plant and Equipment(¥ Billions)Shareholders’ Equity Ratio

(%)

45.7

2001
2001
2000
1999

2000
62.1

19.0

1999
52.9

16.9

1998

1998
1997

54.8

49.4

28.7

53.6

1997

21.0

Investments and other assets increased 121.6
percent to ¥56.5 billion. Factors included the acquisitionof Supercritical Systems, Inc. and Timbre Technologies,
Inc., which generated consolidated goodwill of ¥19.0
billion that will be amortized within a reasonable periodof time not exceeding 20 years. Total assets increased
46.0 percent to ¥729.5 billion, primarily because of therise in current assets.
Tokyo Electron increased long-term debt 87.8 percent
from a year earlier to ¥126.3 billion, primarily through theissue of unsecured bonds totaling ¥50.0 billion.
Shareholders’ equity increased 21.8 percent to¥333.3 billion, due to an increase in retained earnings.
As a percentage of total assets, shareholders’ equity
was 45.7 percent, compared to 54.8 percent a year
earlier. Return on average total shareholders’ equity
improved to a record high of 20.4 percent from 7.5
percent a year earlier.

Shareholders’ Equity & ROE(¥ Billions / %)
20.4

2001

333.3
7.5

2000

273.6
0.7

1999

257.7
12.8

1998

261.0
15.4

1997

207.5

Shareholders’ equity

Return on equity

The balance of equity-linked bonds outstanding at
March 31, 2001 was ¥20.0 billion. The potential numberof shares if all convertible bonds and bonds with warrants
had been converted and executed at the balance sheet
date represented 3.0 percent of total common stock
issued and outstanding.

Millions of yen(percentage of net sales)

2001

22

Thousands of
U.S. dollars

2000

1999

2001

Net sales ........................................... ¥723,880 (100.0)¥440,729 (100.0)¥313,820 (100.0)$5,842,455

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

458,902(63.4)

303,839(68.9)

225,962(72.0)

3,703,810

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

264,978(36.6)

136,890(31.1)

87,858(28.0)

2,138,645

SG&A expenses ................................

143,892(19.9)

101,074(23.0)

81,475(26.0)

1,161,353

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

121,086(16.7)

35,816

(8.1)

6,383

(2.0)

977,292

Other income (expenses)...................

(21,954)—(6,127)

–

(345)

–

(177,198)

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

99,132(13.7)

29,689

(6.7)

6,038

(1.9)

800,094

Provision for income taxes.................

37,099

(5.1)

9,836

(2.2)

4,167

(1.3)

299,428

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

21

(0.0)

5

(0.0)

5

(0.0)

167

Net income........................................ ¥ 62,012(8.6)¥ 19,848

(4.5)

1,866

(0.6)

$ 500,499

TOKYO ELECTRON LIMITED¥Cash Flows
Operating activities used net cash of ¥29.4 billion; in theprior fiscal year, operating activities generated net cash of¥25.1 billion. Net cash flow, defined as the sum of net
income and depreciation and amortization, increased 2.1
times to ¥83.7 billion due to the increase in net income.
Net changes in assets and liabilities, however, tend torepresent a use of cash during periods of revenue growth
because Tokyo Electron generally incurs costs andexpends cash in advance of receiving cash from its
customers. In the past fiscal year, increases in trade notes
and accounts receivable and in inventories were theprimary factors reducing net cash generated by operating
activities. Income taxes paid also increased significantly.
Investing activities used net cash of ¥62.4 billion, up
3.9 times from ¥16.2 billion in the prior fiscal year.
Payment for purchase of property, plant and equipment
increased 2.7 times to ¥39.2 billion. Capital investments
were directed mainly toward capacity expansion and theacquisition of equipment for evaluation. In addition, theCompany deployed ¥18.9 billion during the fiscal year toacquire two companies in the United States, as
discussed earlier.

Net Cash Flow(¥ Billions)

2001

83.7

2000

39.3

1999

19.8

1998

42.7

1997

40.1

Net cash generated by financing activities more thantripled to ¥77.2 billion. Tokyo Electron increased shortterm borrowings by ¥23.9 billion and issued unsecured
bonds totaling ¥50.0 billion. Redemption of unsecured
bonds totaling ¥30.0 billion was offset by an equivalent
net increase in commercial paper.
Cash and cash equivalents at the end of the year
totaled ¥65.3 billion, down 17.9 percent from ¥79.5 billion
at the end of the prior fiscal year as Tokyo Electron
supplemented external funding with internal capital
resources.

Millions of yen(percentage of total assets)

2001
Total assets .............................................................................. ¥729,511 (100.0)

Thousands of
U.S. dollars

2000

2001

¥499,499 (100.0)$5,887,903

Cash and cash equivalents.......................................................

65,320(9.0)

79,519(15.9)

527,205

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

302,953(41.5)

175,153(35.0)

2,445,143

Inventories ................................................................................

161,981(22.2)

112,481(22.5)

1,307,351

Investments and other assets...................................................

56,549(7.8)

25,522(5.1)

456,412

Property, plant and equipment .................................................

124,721(17.1)

97,726(19.6)

1,006,623

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

396,172(54.3)

225,862(45.2)

3,197,512

Short-term borrowings .............................................................

48,462(6.6)

23,998(4.8)

391,139

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

87,350(12.0)

62,574(12.5)

705,007

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

41,440(5.7)

11,843(2.4)

334,464

Long-term debt, less current portion ........................................

126,348(17.3)

67,278(13.5)

1,019,757

Shareholders’ equity................................................................. ¥333,281(45.7)¥273,603(54.8)$2,689,923

TOKYO ELECTRON LIMITED23

B o a rd o f D i re c t o r s , S t a t u t o r y A u d i t o r s
a n d C o r p o r a t e S e n i o r S t a ff
(as of June 27, 2001)

Corporate Senior Staff
Tetsuro Higashi
C.E.O., President

Tetsuo Tsuneishi
Corporate Officer, Executive Vice President

Takeo Tanaka
Corporate Officer, Senior Vice President

Mitsutaka Yoshida
Corporate Officer, Senior Vice President

Yuichi Honda
Executive Manager, Finance, Accounting, Order Process

Mitsuru Onozato
Executive Manager, Litho-Cell Group, Etch Systems B.U.

Makoto Mizokuchi
Executive Manager, Business Development &Account Management Group

Kousuke Ishii
General Manager, Test & Integrated Process Control Group

Ryuichi Komatsubara
General Manager, Thin Film & Cleaning Group

Masao Kubodera
General Manager, Technology Development Group

Takaaki Matsuoka
General Manager, Corporate Marketing

Left to right: Mitsutaka Yoshida, Tetsuro Higashi, Tetsuo Tsuneishi, Takeo Tanaka

Takashi Nakamura
Corporate Staff, Personnel, General Affairs

Hideyuki Takamori
General Manager, Clean Track B.U.

Yoshinori Inoue
General Manager, Test Systems B.U.

Board of Directors

Yasuyuki Kuriki
General Manager, Diffusion Systems B.U.

Tetsuro Higashi

Junichi Inoue 2

C.E.O., President
Tokyo Electron Limited

ChairmanTokyo Electron AT Limited

Tetsuo Tsuneishi

Yukio Sunahara

General Manager, LCD Systems B.U.

Corporate Officer
Executive Vice President
Tokyo Electron Limited

President
Tokyo Broadcasting System, Inc.

Takayoshi Ida

Takeo Tanaka 1, 2
Corporate Officer
Senior Vice President
Tokyo Electron Limited

General Manager, Cleaning Systems B.U.

Hiroshi Tomita
General Manager, Business Development &Account Management Group, Japan

Kiyoshi Sunohara

Statutory Auditors
Hirosuke Ishibashi
Tokyo Electron Limited

Mitsutaka Yoshida

Haruo Iwatsu

General Manager, Business Development &Account Management Group, North America/Europe

Hironobu Sato
General Manager, Business Development &Account Management Group, Asia

Kengo Kuroiwa
President, Tokyo Electron Tohoku Limited

Corporate Officer
Senior Vice President
Tokyo Electron Limited

Yoriaki Miyoshi

Keiichiro Kuriyama 1

Tokyo Electron Limited

ChairmanTokyo Electron Device Limited

Hiroshi Maeda

President, Tokyo Electron EE Limited

Mitsui, Yasuda, Wani & Maeda

Keiichi Furugaki

Tokyo Electron Limited

Yasuo Inoue

Takanori Suzuki

Megumi Yamashiro

President, Tokyo Electron AT Limited
President, Tokyo Electron Kyushu Limited

Mamoru Hara

Kuniyuki Matsuba 2, 3

President, Tokyo Electron FE Limited

ChairmanTokyo Electron FE Limited

Toshiaki Sunagawa

Hiroshi Takashima 1
ChairmanTokyo Electron Kyushu Limited

President, Tokyo Electron Device Limited

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

Barry R. Rapozo
President, Tokyo Electron America, Inc.

Gerald Thurgood
President, Tokyo Electron Europe Limited

T.K. Kwak
President, Tokyo Electron Korea Limited

Archie Hwang
President, Tokyo Electron Taiwan Limited“B.U.” indicates Tokyo Electron’s productspecific business unit.

24

TOKYO ELECTRON LIMITEDC o n s o l i d a t e d S i x - Ye a r S u m m a r yTokyo Electron Limited and its Subsidiaries
Years ended March 31, 2001, 2000, 1999, 1998, 1997 and 1996

Thousands of
U.S. dollars

Millions of yen

2001

2001

2000

1999

1998

1997

1996

Net sales ....................................................... $5,842,455 ¥723,880 ¥440,729 ¥313,820 ¥455,585 ¥432,785 ¥401,775
334,983
Semiconductor production equipment1 ....... 4,995,973 619,001 355,103 242,240 380,184 355,877
113,430
14,054
12,357
12,87815,262
14,40814,314Computer network1...................................
Electronic components ..............................
720,02189,211
72,051
57,73460,13962,50052,478Other.........................................................
13,031
1,614
1,218
968
–
–
–
Operating income.........................................
977,292 121,086
35,816
6,383
63,296
60,38967,754
Income before income taxes .........................
800,094
99,132
29,6896,038
62,83460,48765,098Net income ...................................................
500,499
62,012
19,8481,866
30,00929,97530,964
Domestic sales ..............................................
Overseas sales...............................................

2,415,433
3,427,022

299,272
424,608

183,987
256,742

149,838
163,982

230,550
225,035

256,808
175,977

264,660
137,115

Depreciation and amortization......................
Capital expenditures2 ....................................
R&D expenses...............................................

174,970
398,729
427,043

21,67949,403
52,911

19,44618,99937,135

17,921
23,47826,842

12,65233,302
26,813

10,16718,456
20,9887,730
25,606
17,277

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

5,887,903
2,689,923

729,511333,281

499,499273,603

414,903257,716

493,600
261,009

387,077
207,476

400,050
180,842

10,236

8,946

7,835

7,287

6,277

5,616

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

Net income per share of common stock:3
Basic.......................................................... $Diluted4 .....................................................
Cash dividends per share of common stock:
Actual........................................................
Adjusted3 ...................................................

Yen

2.86 ¥ 353.76 ¥ 113.53 ¥2.78
344.75110.6410.70 ¥ 174.68 ¥ 181.97 ¥ 188.05
10.70
168.43172.74178.250.31
0.31

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

38.00
38.00

14.00
14.00

12.00
12.00

30.00
30.00

28.00
25.45

24.00
21.82

175,691
42,781

175,660
7,147

174,624
8,576

174,569
9,562

150,189
11,097

149,706
12,676

15.4
14.0
53.6
1.10

18.5
16.9
45.2
1.12

Percent

ROE ........................................................................................
Operating income margin .......................................................
Shareholders’ equity ratio .......................................................
Asset turnover (times) .............................................................

20.4
16.7
45.7
1.18

7.5
8.1
54.8
0.96

U.S. dollars

0.7
2.0
62.1
0.69

12.8
13.9
52.9
1.03

Thousands of yen

Net sales per employee ................................ $ 570,775 ¥ 70,719 ¥ 49,265 ¥ 40,054 ¥ 62,520 ¥ 68,948 ¥ 71,541
1 Results are retroactively restated due to a structural reorganization in fiscal 1997. The LCD Department, formerly part of Computer Network, has been included in
Semiconductor Production Equipment. The Computer Systems division was renamed the Computer Network division as of April 1, 2000.
2 Capital expenditures before 1999 represent the gross increase in property, plant and equipment, intangible assets and other depreciable assets. Capital expendituresfrom 2000 only represent the gross increase in property, plant and equipment.
3 Per share amounts prior to the year ended March 1998 have been restated to reflect a 1.1-for-1 stock split.
4 Dilution is not assumed for the year ended March 1999.

TOKYO ELECTRON LIMITED

25

Consolidated Balance Sheet
Tokyo Electron Limited and its Subsidiaries
March 31, 2001 and 2000

ASSETS

Thousands of
U.S. dollars

Millions of yen

2001

2000

2001

Current assets:
Cash and cash equivalents (Note 4).................................................
Marketable securities (Note 5).........................................................
Trade notes and accounts receivable...............................................

¥ 65,320–
302,953¥ 79,519
835
175,153$ 527,205–
2,445,143

Allowance for doubtful accounts ....................................................
Inventories (Note 6).........................................................................
Deferred tax assets (Note 10) ..........................................................
Prepaid expenses and other current assets ......................................
Total current assets .....................................................................

(1,720)161,981
12,6597,048
548,241(1,029)112,4815,306
2,892
375,157(13,885)
1,307,351
102,169
56,885
4,424,868

Investments and other assets:
Investments in securities (Note 5) ....................................................
Intangible and other assets .............................................................
Total investments and other assets..............................................

11,59944,95056,5499,010
16,512
25,522

93,616
362,796456,412

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

–

1,094

–

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

19,698
106,753
84,607853
211,911
87,190124,721¥729,511

16,554
89,79567,520877
174,746
77,02097,726¥499,499

158,984
861,603682,867
6,887
1,710,341
703,718
1,006,623$5,887,903

See accompanying Notes to Consolidated Financial Statements.

26

TOKYO ELECTRON LIMITEDLIABILITIES AND SHAREHOLDERS’ EQUITY

Thousands of
U.S. dollars

Millions of yen

2001

2000

2001

Current liabilities:
Short-term borrowings (Note 8) ......................................................
Current portion of long-term debt (Note 8) ....................................
Commercial paper ..........................................................................
Trade notes and accounts payable ..................................................

¥ 48,462
2,970
30,00087,350¥ 23,998
32,699–62,574$ 391,139
23,968242,131705,007

Accrued income taxes .....................................................................
Allowance for employees’ bonuses .................................................
Accrued expenses and other current liabilities.................................
Total current liabilities .................................................................

41,44010,94817,271
238,441

11,843
7,375
7,969
146,458

334,464
88,366
139,392
1,924,467

Long-term debt, less current portion (Note 8)...............................
Allowance for retirement and severance benefits (Note 9) .........
Other non-current liabilities ...........................................................
Total liabilities..............................................................................

126,348
29,807
1,576
396,172

67,278
11,581545
225,862

1,019,757
240,570
12,7183,197,512

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

58

34

468

47,21347,163381,055

70,275214,920
1,658
2,734(3,519)333,281¥729,511

70,225
157,876––(1,661)
273,603¥499,499

567,189
1,734,628
13,38522,071(28,405)
2,689,923$5,887,903

Shareholders’ equity:
Common stock, par value ¥50 per share (Note 11).........................
Authorized: 300,000,000 shares
Issued and outstanding: 175,691,269 at March 31, 2001
175,659,848 at March 31, 2000
Additional paid-in capital (Note 11).................................................
Retained earnings ..........................................................................
Unrealized gains on securities .........................................................
Foreign currency translation adjustments ........................................
Treasury stock at cost (Note 12) ......................................................
Total shareholders’ equity ...........................................................
Total liabilities and shareholders’ equity ..................................

TOKYO ELECTRON LIMITED

27

Consolidated Statement of Income
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2001, 2000 and 1999

Thousands of
U.S. dollars

Millions of yen

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

2001

2000

1999

2001

¥723,880
458,902
264,978
143,892
121,086¥440,729
303,839
136,890
101,074
35,816¥313,820
225,962
87,85881,475
6,383$5,842,455
3,703,810
2,138,645
1,161,353
977,292

Other income (expenses):
Interest and dividend income .......................................
Interest expenses ..........................................................
Patent royalties for prior years ......................................
Devaluation of golf memberships.................................
Devaluation of investments in securities .......................
Amortization of discrepancy arising from adoption ofretirement benefit accounting standards (Note 9) .....
Other, net ....................................................................
Income before income taxes .......................................

669(2,378)–(35)(1,552)276(1,960)(1,575)(1,253)–898(2,003)
–
–
–

5,400
(19,195)–(285)(12,530)(15,975)(2,683)99,132–(1,615)29,689

–
760
6,038

(128,932)(21,656)
800,094

Provision for income taxes (Note 10):
Current.........................................................................
Deferred.......................................................................

50,589(13,490)

14,545(4,709)4,167–

408,302(108,874)

Minority interest ..............................................................
Net income ....................................................................

21¥ 62,0125¥ 19,848

5
1,866

167
$ 500,499

Per share of common stock:
Net income — basic.....................................................
Net income — diluted..................................................
Cash dividends.............................................................

¥ 353.76
344.7538.00¥ 113.53
110.64
14.00

10.70
10.70
12.00

$

See accompanying Notes to Consolidated Financial Statements.

28

TOKYO ELECTRON LIMITED¥Yen

U.S. dollars

¥

2.86
2.78
0.31

C o n s o l i d a t e d S t a t e m e n t o f S h a re h o l d e r s ’ E q u i t yTokyo Electron Limited and its Subsidiaries
Years ended March 31, 2001, 2000 and 1999

Thousands of
U.S. dollars

Millions of yen

Common stock
Balance at beginning of year........................................
Conversion of convertible bonds (Note 11) ..................
Balance at end of year .................................................
Additional paid-in capital
Balance at beginning of year........................................
Conversion of convertible bonds (Note 11) ..................
Balance at end of year .................................................
Retained earnings
Balance at beginning of year........................................
Increase (decrease) resulting from change inreporting entity, net..................................................
Cumulative effect of applying deferred tax accounting ..
Net income for year .....................................................
Cash dividends ............................................................
Bonuses to directors.....................................................
Balance at end of year .................................................
Unrealized gains on securities
Unrealized holding gains arising during the period ......
Foreign currency translation adjustments .................
Treasury stock, at cost (Note 12) .................................

2001

2000

1999

2001

¥ 47,16350
47,213¥ 45,532
1,631
47,163¥ 45,445
87
45,532$ 380,656
399
381,055

70,22550
70,27568,594
1,631
70,22568,50787
68,594

566,790399
567,189

157,876

144,715

147,082

1,274,218––
62,012(4,734)(234)
214,920(7,309)2,717
19,848(2,095)–
157,876

(210)
–
1,866
(3,665)(358)
144,715––
500,499(38,200)(1,889)1,734,628

1,658
2,734
(3,519)––(1,661)––(1,125)

13,38522,071(28,405)¥333,281¥273,603¥257,716$2,689,923(1999: 247,191 shares; 2000: 303,761 shares
2001: 407,556 shares)

Total shareholders’ equity...........................................
See accompanying Notes to Consolidated Financial Statements.

TOKYO ELECTRON LIMITED

29

Consolidated Statement of Cash Flows
Tokyo Electron Limited and its Subsidiaries
Years ended March 31, 2001 and 2000

Millions of yen

2001
Cash flow from operating activities:
Income before income taxes................................................................... ¥ 99,132
Depreciation and amortization ...............................................................
21,679
Increase in allowance for retirement and severance benefits ..................
18,228
Increase in allowance for employees’ bonuses........................................
3,482
Interest expenses ....................................................................................
2,381
Loss on disposal of fixed assets...............................................................
2,492
Devaluation of investments in securities .................................................
1,552
Loss from devaluation of golf memberships ...........................................
35
Increase in trade notes and accounts receivable ..................................... (121,669)
Increase in inventories ............................................................................ (53,666)
Increase in accounts payable ..................................................................
9,709
Increase in prepaid consumption tax ......................................................
(4,859)Others ....................................................................................................
13,282
Subtotal..................................................................................................
(8,222)
Receipts from interest and dividends ......................................................
671
Interest paid ...........................................................................................
(2,295)
Income taxes paid................................................................................... (19,596)
Net cash provided by (used in) operating activities ........................ (29,442)
Cash flow from investing activities:
Payment for purchase of property, plant and equipment ....................... (39,155)
Payment for acquisition of intangible assets ...........................................
(4,568)
Payment for purchase of newly consolidated subsidiaries....................... (18,867)
Others ....................................................................................................
231
Net cash used in investing activities ................................................. (62,359)
Cash flow from financing activities:
Increase in short-term borrowings ..........................................................
23,927
Increase (decrease) in commercial paper.................................................
30,000
Proceeds from long-term debt................................................................
8,671
Repayment of long-term debt ................................................................
(3,757)
Proceeds from issuance of bonds ...........................................................
54,938
Redemption of unsecured bonds............................................................ (30,000)
Increase in treasury stock........................................................................
(1,859)Dividends paid........................................................................................
(4,733)
Others ....................................................................................................
(5)
Net cash provided by financing activities.........................................
77,182
Effect of exchange rate changes on cash and cash equivalents ..................
391
Net increase (decrease) in cash and cash equivalents......................... (14,228)
Cash and cash equivalents at beginning of year.........................................
79,519Cash and cash equivalents of newly consolidated subsidiaries at beginning of year..
–
Cash and cash equivalents at end of year (Note 4) .............................. ¥ 65,291
See accompanying Notes to Consolidated Financial Statements.
30

TOKYO ELECTRON LIMITED

Thousands of
U.S. dollars

2000

2001

¥ 29,689
19,446
2,153
3,175
1,964
2,149
–
1,253
(31,675)(27,196)
22,416(3,542)
10,69530,527280(1,923)(3,757)25,127$ 800,094
174,970
147,118
28,103
19,214
20,112
12,530285(981,992)(433,137)
78,365(39,218)
107,197(66,359)
5,413(18,525)(158,160)(237,631)(14,577)(4,100)–2,485(16,192)(316,021)(36,871)(152,282)
1,872(503,302)

13,022(10,000)
5,700(2,477)
19,899–(454)(2,095)(25)
23,570(469)
32,036
46,761722¥ 79,519

193,113242,131
69,986(30,325)
443,406(242,131)(15,001)(38,200)(39)
622,940
3,158(114,835)
641,798–$ 526,963

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 and its subsidiaries (hereinafter “the Company”)
have been prepared from those that have been filed with the
Ministry of Finance of Japan as required by the Securities and(d) Inventories
Inventories other than raw materials are stated principally at cost,
cost being determined principally by the individual method.
Raw materials are stated principally at cost, cost being determinedprincipally by the moving-average method.

Exchange Law and that conform with accounting principles generally
accepted in Japan.

(e) Property, plant and equipment

For the convenience of readers outside Japan, however, theProperty, plant and equipment are stated at cost. Depreciation ofpresentation of the consolidated financial statements and thebuildings, machinery and equipment is computed on the declining-

information contained therein have been modified in some respects.

balance method for the Parent Company and its domestic
subsidiaries at rates based on the estimated useful lives of assets,

2. Summary of Significant Accounting Policies

while the straight-line method is mainly applied for foreign(a) Principles of consolidation

subsidiaries over the estimated useful lives of their assets.

The consolidated financial statements include the accounts of theCompany and all of its 30 subsidiaries (28 in 2000).
All significant inter-company accounts, transactions and unreal-(f) Retirement and severance benefits
The Company and its consolidated domestic subsidiaries provide aized profits or losses have been eliminated in consolidation. The

reserve for employees' retirement benefits based on the projectedfiscal years of all the subsidiaries end on March 31, the fiscal year-

benefit obligation and pension assets on the consolidated accountend of the Parent Company.

settlement date. The entire difference stemming from the accounting

U.S. dollar amounts included herein are solely for the conveniencechange (¥15,975 million) implemented from the fiscal year startingof readers and are made at the rate of ¥123.90 to $1.00, theApril 1, 2000 has been charged to income in the fiscal year ended

approximate current rate at March 31, 2001. The translation should

March 31, 2001. Actuarial differences are charged to income on a

not be construed as a representation that the Japanese yen amounts

straight-line basis, beginning from the year after they are recognized,

shown could be converted into U.S. dollars at that or any other rate.

over a fixed number of years (four years) within the average remaining
years of service of employees when the differences occur.

(b) Foreign currency translation
In accordance with the revised Japanese accounting standards

The annual provision for accrued retirement benefits for directors
and corporate auditors of the Company and its consolidated

effective April 1, 2000, all assets and liabilities denominated indomestic subsidiaries is also calculated to state the liability at theforeign currencies are translated into Japanese yen at the rate

amount that would be required if all directors and corporate auditors

prevailing at the balance sheet date, except for those hedged byretired at the end of the consolidated fiscal year according toforward exchange contracts, which are translated at the contracted

internal regulation.

rates.
The financial statements of foreign subsidiaries have beentranslated in accordance with the accounting standards in Japan.
Foreign currency translation adjustments previously classified in(g) Leases
Finance lease transactions, unless the lessee practically acquires legal
title to the leased asset, are treated as operating lease transactions.

the Assets section have been reclassified in the Shareholders’ equity
section starting from April 1, 2000 in accordance with the revised
Japanese accounting standards effective April 1, 2000.

(h) Income taxes
The Company records deferred tax assets and liabilities on
temporary differences between the carrying amounts of assets and(c) Marketable securities and investments in securities
In accordance with the revised Japanese accounting standards

liabilities for financial reporting purposes and the amounts used forincome tax purposes.

effective April 1, 2000, securities with market prices are valued atmarket based on market prices on the consolidated account settlement date. Other securities are valued at cost using the weighted
average method.
The differences between the book and market prices ofmarketable securities are charged to shareholders’ equity. The costof sold securities is calculated using the weighted average method.

(i) 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 the
consolidated account settlement date.
TOKYO ELECTRON LIMITED31

(j) Valuation of assets and liabilities of consolidated

5. Marketable Securities and Investments in Securities

subsidiaries

Marketable securities at March 31, 2001 and 2000 were as follows:

Assets and liabilities of consolidated subsidiaries are valued using

Thousands of
U.S. dollars

Millions of yen

the full mark-to-market method.
Listed stock ...............................

(k) Amortization of consolidated goodwill

2001

2000

2001

¥

¥825

$

–

$

–

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

Consolidated goodwill is evaluated on an individual basis andamortized within a reasonable number of years not exceeding 20
years.

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

¥

–
–

10

–

¥835

–

Based on the Company’s assessment of the purpose of holding securities, ¥835 million of securities have been reclassified from “Marketable(l) Per share information
Net income per share is computed based on the weighted average
number of shares of common stock outstanding during each year.

securities” to “Investments in securities” as of April 1, 2000.
Investments in securities at March 31, 2001 and 2000 were as follows:

Dividends per share have been presented on an accrual basis andThousands of
U.S. dollars

Millions of yen

include, in each fiscal year ended March 31, dividends approved or

2001

2000

2001

to be approved after such March 31 but applicable to the year then

Listed stock ............................... ¥10,577¥8,086$85,364

ended.

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

113

114

916

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

909

810

7,336

Total................................... ¥11,599¥9,010$93,616

3. Acquisitions
The Company has acquired all the shares of stock of Supercritical
Systems, Inc. and Timbre Technologies, Inc. The assets and liabilitiesof the newly acquired companies are as follows:

6. Inventories
Inventories at March 31, 2001 and 2000 were as follows:

Supercritical Systems, Inc.:
Millions of yen

Thousands of
U.S. dollars

2001

2001

Current assets ..........................................

¥

5

$

45

Fixed assets ..............................................

3

21

Consolidated goodwill..............................

2,974

24,005

Total acquisition cost of Supercritical Systems, Inc.

2,982

24,071

Cash or cash equivalents of Supercritical Systems, Inc.
Net acquisition cost of Supercritical Systems, Inc.

(4)
¥2,978(32)$24,039

Thousands of
U.S. dollars

Millions of yen

2001

2000

2001

Finished products ...................... ¥ 58,878 ¥ 38,909 $ 475,207
Work in process,raw materials and supplies ... 103,103

73,572

832,144

Total................................... ¥161,981 ¥112,481 $1,307,351
7. Pledged Assets
The Company did not hold any assets pledged as collateral at
March 31, 2001 and 2000.

Timbre Technologies, Inc.:
Millions of yen

Thousands of
U.S. dollars

2001

2001

Short-term bank loans are represented by 365-day notes issued

8. Short-Term Borrowings and Long-Term Debt

1,249

by the Company to banks and bore interest at the average annual

Fixed assets ..............................................

59

479

rate of 1.08% at March 31, 2001. Long-term debt at March 31,

Consolidated goodwill..............................

16,001

129,147

Current liabilities. .....................................

(216)(1,742)

Total acquisition cost of Timbre Technologies, Inc.

15,999129,133

Cash or cash equivalents of Timbre Technologies, Inc.
Net acquisition cost of Timbre Technologies, Inc.

(110)
¥15,889(890)$128,243

Current assets ..........................................

¥

155

$

4. Cash and cash equivalents
Cash and cash equivalents at March 31, 2001 were as follows:2001 and 2000 was as follows:
Thousands of
U.S. dollars

Millions of yen

2001

2000

2001

0.90% unsecured convertible
bonds due 2003 ...................... ¥ 15,502 ¥ 15,601 $ 125,117
2.45% unsecured bonds due 2000.

–

30,000–2.00% unsecured bonds due 2002.

20,00020,000161,420

1.39% unsecured bonds due 2004.

20,00020,000161,420

Millions of yen

Thousands of
U.S. dollars

0.85% unsecured bonds due 2003.

20,000–161,420

2001

2001

1.30% unsecured bonds due 2005.

30,000–242,131

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

¥65,320$527,205

1.59% unsecured bonds withTime deposits due over 3 month. ..........
Total .....................................................

(29)¥65,291(242)$526,963

warrants due 2006...................

4,500

–

36,320

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

19,316

14,376

155,896

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

(2,970) (32,699)(23,967)

Total...................................... ¥126,348 ¥ 67,278 $1,019,757
32

TOKYO ELECTRON LIMITEDThe 0.90% unsecured convertible bonds due 2003 are convertible
at the option of holders into common stock through September 29,

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

2003. At March 31, 2000, the conversion price was ¥3,150.00 per

Allocation method of benefit obligation ....... Straight-line method

share, subject to adjustment in certain events.

Discount rate ......................................... 3.50%

A summary of terms and conditions of the bonds with warrants is

Expected rate of return on plan assets ... 3.00%

as follows:

Amortization life of prior service cost .....

Bond amount ................................... ¥4,500 million

Amortization life of unrecognizedactuarial difference ............................. 4 years

Interest rate ...................................... 1.59%
Issued stocks..................................... Common stock, ¥50 par value
Exercise price .................................... ¥14,070
Exercise period.................................. July 1, 2002-June 8, 2006–

Amortization life of unrecognizedtransition obligation............................ Fully recognized in the fiscal year
ended March 31, 2001
10. Income Taxes

9. Retirement and Severance Benefits

Significant components of the deferred tax assets and liabilities of

The Company and its consolidated domestic subsidiaries havenoncontributory retirement and severance benefit plans that provide

the Company as of March 31, 2001 and 2000 were as follows:for pension or lump-sum payment benefits to employees who retire

Thousands of
U.S. dollars

Millions of yen

or terminate their employment for reasons other than dismissal for

2001

2000

2001

cause. In addition, the majority of the employees of the Company

Deferred tax assets

are covered by a contributory pension plan, whose benefits are

Allowance for retirement benefits . ¥ 8,180¥ 838$ 66,024

based on length of service and certain other factors and include a
portion representing the government social security welfare pension.

Elimination of unrealized
gain on inventories ..................

5,283

3,172

42,638

Some consolidated foreign subsidiaries have a noncontributory

Enterprise taxes payable..............

3,912

1,007

31,571

retirement and severance benefit plan that provides for pension orTax loss carryforwards.................

2,447

4,882

19,747lump-sum payment benefits to employees who retire or terminate

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

2,101

1,350

16,959their employment for reasons other than dismissal for cause.
The funded status of the defined benefit plans, a substantial

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

1,362

1,173

10,992

portion of which consists of domestic benefit plans, as of March 31,

Devaluation of golf memberships.

527

519

4,255

2001 is as follows:

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

3,371

2,188

27,210Subtotal of deferred tax assets....

27,183

15,129219,396

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

(2,479)(5,936)(20,010)

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

24,704

9,193

199,386

Retained earnings offoreign subsidiaries ..................

(1,974)–(15,930)

Revaluation of investment
in securities..............................

(1,455)–(11,742)

Allowance for extraordinary depreciation.

(884)(1,028)(7,136)

Revision of allowance for
doubtful accounts due tooffsetting credits and debts .....

(282)

(314)

(2,281)

Allowance for domestic
market development
for imported products..............

–

(252)

–

Millions of yen

Thousands of
U.S. dollars

2001

2001

Benefit obligation..................................... ¥(46,449)$(374,890)

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

15,575

125,710

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

(30,874)(249,180)

Unrecognized net transition obligation .....

––

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

2,175
–

17,554–

Amount recognized in the consolidatedbalance sheets (note).............................

(28,699)

Prepaid benefit cost..................................

––

Allowance for retirement and severance benefits. ¥(28,699)$(231,626)(231,626)

Note: The annual provision for accrued retirement benefits for directors andcorporate auditors (¥1,108 million) is not included.

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

Thousands of
U.S. dollars

2001

2001

Service cost ..............................................

¥ 3,942$ 31,821

Interest cost .............................................

1,418

11,443

Expected return on plan assets .................

(419)(3,383)

Amortization of unrecognized transition obligation

15,975

128,930

Amortization of unrecognized actuarial difference..
Amortization of unrecognized prior service cost .

–
–

–
–

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

¥20,916$168,811

Deferred tax liabilities

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

(130)

(173)

(1,049)Total deferred tax liabilities ...

(4,725)(1,767)(38,138)

Net deferred tax assets ........... ¥19,979¥7,426$161,248

TOKYO ELECTRON LIMITED33

The differences between the aggregate statutory tax rate and theLeased assets not recorded in the consolidated balance sheets:

effective tax rate of the Company for financial statement purposes
2001

2000

42.05%

42.05%

carryforward from prior year ...............

(4.42)(4.27)Tax rate difference ...................................

(1.50)(1.42)Tax credits and others ..............................

(1.22)(2.57)

Domestic statutory tax rate.......................
Non-recognition of tax loss

2001

2000

2001

Acquisition cost.........................

¥35

¥52

$280

Accumulated depreciation.........

31

37

247

Net leased property...................

¥ 4

¥15

$ 33

Future minimum lease payments (Machinery and Equipment) :Permanent differences such as non-taxable
dividend income..................................

Thousands of
U.S. dollars

Millions of yen

for the year ended March 31, 2001 and 2000 were as follows:

Thousands of
U.S. dollars

Millions of yen(0.54)(1.87)

Recognition of effective tax rate on retained

2001

2000

2001

Due within one year..................

¥4

¥11

$33

earnings of foreign subsidiaries ...........

1.99

–

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

–

4

–

Expenses not deductible for tax purposes .

0.53

0.86

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

¥4

¥15

$33

Others......................................................

0.53

0.35

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

37.42%

33.13%

Lease payments and depreciation computed by the straight-line
method over the lease terms with no residual value and imputed
interest expense were ¥6 million in the year ended March 31, 2001

11. Shareholders’ Equity
The Company issued 31,421 shares and 1,035,853 shares ofand ¥11 million in the year ended March 31, 2000.

common stock in 2001 and 2000, respectively, in connection with

Future minimum operating lease payments:

conversion of convertible bonds.
accounted for in accordance with the provisions of the JapaneseCommercial Code by crediting one-half of the conversion price to boththe common stock account and the additional paid-in capital account.
12. Share Repurchase Under Stock Option Program
The Company has a stock option plan to further increase directors’
and corporate senior staff’s incentive and motivation to raise corporate
performance with the aim of maximizing corporate value. A summaryof share repurchases under the stock option plan during the year
ended March 31, 2001 is as follows:

Thousands of
U.S. dollars

Millions of yen

Conversion of convertible bonds into common stock has been

2001

2000

2001

Due within one year..................

¥ 474

¥ 98

$ 3,825

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

1,503

76

12,136

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

¥1,977¥174$15,961

14. Segment Information
The Company does not disclose segment information as it
operates in a single segment.
15. Contingent Liabilities
The Company did not hold any contingent liabilities at March 31,

Number ofsharesMillions ofyen

Thousands of
U.S. dollars

2001 and 2000.
16. Subsequent Event

Outstanding at
beginning of the year........... 299,000¥1,612$13,006

Purchased ................................. 144,000

2,104

16,978On June 8, 2001, 0.86% unsecured bonds with warrants due

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

(32,000)(146)(1,174)2007 were issued as approved at the Board Meeting held on May

Expired or forfeited ...................

(3,600)

(53)

(424)

16, 2001. This was in relation to the stock-based compensation plan

Outstanding at end of the year ... 407,400¥3,517$28,386

introduced and implemented as of the same date of the issuance ofNote: The Company has 156 shares (¥2 million) of treasury stock other than for the
purpose of the stock option plan.

the bonds with warrants. Under this plan, the bond portion (¥5,500
million) was sold to the public and the warrant portion (¥631,950
thousand) was repurchased by the Company and granted to its

13. Leases
Information relating to finance leases, excluding those leases for

eligible employees worldwide as an incentive linked to theCompany’s future stake. A summary of terms and conditions of thewhich the ownership of the leased assets is considered to bebonds with warrants are as follows:transferred to the lessee, as of and for the years ended March 31,

Bond amount ................................... ¥5,500 million

2001 and 2000, was as follows:

Interest rate ...................................... 0.86%
Issued stocks..................................... Common stock, ¥50 par value
Exercise price .................................... ¥9,608
Exercise period.................................. July 1, 2003 – June 7, 2007

34

TOKYO ELECTRON LIMITED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, 2001 and 2000, the related statements of income and shareholders’ equity for eachof the three years in the period ended March 31, 2001, and the statements of cash flows for the years ended
March 31, 2001 and 2000, all expressed in yen. Our examinations were made in accordance with auditing
standards generally accepted in Japan and, accordingly, included such tests of the accounting records and suchother auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated statements present fairly the financial position of Tokyo Electron Limited andits consolidated subsidiaries at March 31, 2001 and 2000, the results of their operations for each of the three
years in the period ended March 31, 2001, and their cash flows for the year ended March 31, 2001 and 2000, in
conformity with accounting principles generally accepted in Japan applied on a consistent basis.
The amounts expressed in U.S. dollars have been translated on the basis described in Note 2-a.

Tokyo, Japan
June 27, 2001

Masatoshi Yoshino
Certified Public Accountant

Eiji Miyashita
Certified Public Accountant

Fumihiko Sugiura
Certified Public Accountant

TOKYO ELECTRON LIMITED35

C o r p o r a t e D i re c t o r y(as of June 27, 2001)

JAPANTOKYO ELECTRON LIMITEDWorld Headquarters
TBS Broadcast Center
3-6 Akasaka 5-chome, Minato-ku, Tokyo 107-8481
Tel: 03-5561-7000
Fax: 03-5561-7400
URL: http://www.tel.co.jp/tel-e/
Regional Offices
Fuchu Technology Center, Kansai Technology Center,
Osaka Branch Office, Kyushu Branch Office, Tohoku
Regional Office, Yamanashi Regional Office, Nagoya
Sales OfficeTOKYO ELECTRON TOHOKU LIMITED
Tohoku Plant
52 Matsunagane, Iwayado
Esashi City, Iwate 023-1101
Sagami Plant
2-41 Machiya 1-chome, Shiroyama-machi
Tsukui-gun, Kanagawa 220-0101

TOKYO ELECTRON AT LIMITED*Fujii Plant
2381-1 Kitagejo, Fujii-cho
Nirasaki City, Yamanashi 407-8511
Hosaka Plant
650 Mitsusawa, Hosaka-cho
Nirasaki City, Yamanashi 407-0192
Miyagi Plant
1-1 Nekohazama, Nemawari, Matsushima-machi
Miyagi-gun, Miyagi 981-0203

TOKYO ELECTRON KYUSHU LIMITED
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 EE LIMITED
2-41 Machiya 1-chome, Shiroyama-machi
Tsukui-gun, Kanagawa 220-0101

TOKYO ELECTRON SAPPORO LIMITED
Marumasu Building No.18
Nishi 1-chome, Kita 7-jo, Kita-ku
Sapporo City, Hokkaido 060-0807

TOKYO ELECTRON FE LIMITED30-7 Sumiyoshi-cho 2-chome
Fuchu City, Tokyo 183-8705
District Offices
Osaka, Kumamoto, Iwate, Tsuruoka, Sendai,
Aizuwakamatsu, Takasaki, Mito, Nirasaki, Toyama,
Joetsu, Kuwana, Fukuyama, Higashi-Hiroshima, Saijo,
Oita, Nagasaki, Kikuyo, Kagoshima

TOKYO ELECTRON DEVICE LIMITED
1 Higashikata-cho, Tsuzuki-ku
Yokohama City, Kanagawa 224-0045
Sales Offices
Yokohama, Utsunomiya, Mito, Kumagaya, Kanda,
Tachikawa, Matsumoto, Nagoya, Osaka, Fukuoka

TOKYO ELECTRON LEASING CO., LTD.
30-7 Sumiyoshi-cho 2-chome
Fuchu City, Tokyo 183-8705

TOKYO ELECTRON LIMITEDTOKYO ELECTRON EUROPE LIMITED
Crawley OfficePremiere House
Betts Way, London Road
Crawley, West Sussex, RH10 2GB England
Branch Offices
European Distribution Centre, Livingston

TOKYO ELECTRON ITALIA S.p.A.
TOKYO ELECTRON LOGISTICS LIMITED30-7 Sumiyoshi-cho 2-chome
Fuchu City, Tokyo 183-8705

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

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

TOKYO ELECTRON DEUTSCHLAND GmbHAMERICATOKYO ELECTRON AMERICA, INC.
Austin Office
2400 Grove Boulevard
Austin, Texas 78741
Branch Offices
Albuquerque, Beverly, Boise, Burlington, Colorado
Springs, Dallas, Fishkill, Eugene, Los Angeles,
Manassas, Marlborough, Orlando, Phoenix, Portland(Maine), Portland (Oregon), Richmond, Roseville,
Santa ClaraTOKYO ELECTRON OREGON, LLC

Munich Office
Carl-Zeiss-Ring 585737, Ismaning, Germany
Branch OfficeDresdenTOKYO ELECTRON SWITZERLAND LIMITED
Chemin de Buchaux 38
CH-2022, Bevaix, Switzerland

TOKYO ELECTRON NEDERLAND B.V.
Kerkenbos 10-15, Unit C
6546 BB Nijmegen, The Netherlands

TOKYO ELECTRON FRANCE S.A.R.L.

5350 N.E. Dawson Creek Drive
Hillsboro, Oregon 97124

Les Jardins d’Enterprise Batiment Aicante
1, Chemin de la Dhuy
38240 Meylan, Grenoble, France

TOKYO ELECTRON TEXAS, INC.

TOKYO ELECTRON ISRAEL LIMITED

2500 Montopolis Drive
Austin, Texas 78741

TOKYO ELECTRON MASSACHUSETTS, INC.
123 Brimbal Avenue
Beverly, Massachusetts 01915
Branch Offices
Santa Clara, Portland

TOKYO ELECTRON PHOENIX LABORATORIES, INC.
1829 W. Drake Drive, Suite 103
Tempe, Arizona 85283

S Habarzel St., Gat 2000 Industrial Zone
Kiryat Gat, Israel

TOKYO ELECTRON ESPAÑA S.L.
TOKYO ELECTRON IRELAND LIMITED
c/o Intel Ir5 Mfg.
Collinstown Industrial Park
Leixlip, Co. Kildare, Ireland

ASIATOKYO ELECTRON ARIZONA, INC.
2120 West Guadalupe Road
Gilbert, Arizona 85233

SUPERCRITICAL SYSTEMS, INC.
4160-A Technology Drive
Fremont, California 94538

TIMBRE TECHNOLOGIES, INC.
5341 Randall Place
Fremont, California 94538* The new name of the company formed by the merger of Tokyo Electron Yamanashi Limited
and Tokyo Electron Miyagi Limited on April 1, 2001.

36

EUROPETOKYO ELECTRON KOREA LIMITED
Pundang Office325-230, Dongchun-ri
Suji-up, Yongin-city
Kyonggi-do, 449-840 Korea
Branch Offices
Cheongju, Gumi, Icheon, Kiheung, Pucheon

TOKYO ELECTRON TAIWAN LIMITED
7Fl, No. 18 Puding Road
Hsin-chu, Taiwan, R.O.C.

TOKYO ELECTRON LIMITED
Shanghai Office
30Fl, No. 28 Xin Jin Quao Rd.
Pudong 201206, China

Investor Information(as of March 31, 2001)

Corporate Name:Tokyo Electron Limited

Established:

November 11, 1963

Common Stock:

Par value¥50
Authorized 300,000,000 shares
Issued and outstanding 175,691,269 shares

Number of Shareholders:

42,781

Transfer Agent for
Common Stock:

Chuo Mitsui Trust and Banking Co., Ltd.
33-1 Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Common Stock Listed on:

The Tokyo Stock Exchange 1st Section (#8035)

Quarterly Stock Price Range(¥)
22,000(Years ended March 31)

20,00018,00016,00014,00012,00010,000
8,000
6,000
4,000
2,000
0

FY 99/Q1

Q2

Investor Relations:

Q3

Q4

FY 00/Q1

Q2

Q3

Q4

FY 01/Q1

Q2

Q3

Q4

Tokyo Electron Limited
Investor Relations Group
3-6 Akasaka 5-chome
Minato-ku, Tokyo 107-8481
Tel: 81-3-5561-7003
Fax: 81-3-5561-7394
E-mail: ir@corp.tel.co.jp

TOKYO ELECTRON LIMITED37

World Headquarters
TBS Broadcast Center, 3-6 Akasaka 5-chome, Minato-ku,
Tokyo 107-8481 Tel: 81-3-5561-7000 Fax: 81-3-5561-7400
Visit TEL on the World Wide Web at http://www.tel.co.jp/tel-e/Printed in Japan on recycled paper
39AG-061