TOKYO ELECTRON ANNUAL REPORT 2017

PAGE15CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Interview with the CEO
Message from the CFO

Review of Operations
and Business Outlook

Message from the Chairman of the Board
Messages from the Outside Directors
Corporate Governance
CSR-Oriented Operations
Directors, Audit & Supervisory Board Members and Executive Officers

Corporate Governance
CSR-Oriented Operations

Corporate Data

Financial Section

Messages from the Outside Audit & Supervisory Board Members

CSR-Oriented Operations
CSR Policy

Participation in International CSR Initiatives

Tokyo Electron considers CSR to be the embodiment of itsCorporate Philosophy, which has been firmly upheld since
the Company’s founding. Tokyo Electron pursues sustainable operations from the viewpoints of corporate governance, legal and regulatory compliance and business ethics
while creating new value through its products and services.

Based on these efforts, the Company implements CSR
activities to help address social issues. Tokyo Electron willcontinue to pursue CSR activities to build stakeholder trust,
improve corporate value and, by doing so, promote thegrowth of a sustainable and dream-inspiring society.

Tokyo Electron is a member of the UN Global Compact, aglobal CSR initiative, and the EICC, an electronic industry
CSR alliance. The Company complies with these initiatives’
codes of conduct and principles in areas regarding such

issues as human rights, labor, environment, safety andhealth, ethics and corruption prevention. By doing so, Tokyo
Electron strives to maintain a sustainable management
platform.

The Ten Principles of the UN Global Compact

Corporate Philosophy
We strive to contribute to the development of a dream-inspiring society through our leading-edge technologies and reliable
service and support.

HumanRights

Materialissues

Through business activities

Contribution tothe solution ofsocial problems

Creation of new value

Advancement ofdream-inspiring
society

Improvement ofcorporate value

Environment

Treat workers withdignity and respect

Principle 5: the effective abolition of child labour; andPrinciple 8: undertake initiatives to promote greater environmentalresponsibility; andPrinciple 9: encourage the development and diffusion of environmentally friendly technologies.

AntiCorruption

Environment
Environmental
conservation

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 7: Businesses should support a precautionary approach toenvironmental challenges;

Pay taxes

Distribution of profit

CSR-oriented operations

LaborManagementSystem

Principle 6: the elimination of discrimination in respect of employment
and occupation.

Reinvest

Distribute to shareholders
and employees

Principle 2: make sure that they are not complicit in human rights
abuses.
Principle 3: Businesses should uphold the freedom of association and theeffective recognition of the right to collective bargaining;

LabourSustainable operations

EICC Framework (Five Sections)

Principle 1: Businesses should support and respect the protection ofinternationally proclaimed human rights; andHealth &Safety
Assessmentand managementof risks

Ethics
Maintain
the highest ethicalstandards

Principle 10: Businesses should work against corruption in all its forms,including extortion and bribery.

CSR Promotion Framework
Tokyo Electron implements CSR activities on a global basis,including domestic and overseas affiliates, from a mediumto long-term perspective. To back up these CSR activities,
the Company has established the following three bodies
composed of members from top management to department representatives. The CSR Management Council is convened twice annually and functions as the Group’s highest
decision-making body for CSR-related issues. The council

approves Group-wide policy and considers the most important CSR matters. Also assembling twice a year, the CSR
Global Promotion Committee sets CSR targets and implements of global projects. Furthermore, at the CSR Monthly
Meeting, representatives from each division share information related to CSR activities as part of a responsive framework for promoting CSR initiatives across divisions.

Body

Participants

FunctionsMeeting frequency

CSR Management Council• Chairman of the Board• President & CEO• Directors and general managers• Approve Group-wide CSR policy• Discuss important CSR matters

Twice annually

CSR Global Promotion Committee • Chief CSR Promotion Director• Set CSR targets• Heads of related departments• Implement global projects• CSR officers of affiliates and overseas companies

Twice annually

CSR Monthly MeetingMonthly• Persons in charge of CSR at each division• Share information on CSR activities• Discuss cross-divisional CSR initiatives

Stakeholder Engagement

Identifying Material Issues

Building firm stakeholder trust is essential to raising corporate value. To help stakeholders more deeply understandthe progress of the Company’s business initiatives and thefuture direction of its business, Tokyo Electron discloses
highly transparent information in a fair and timely manner
through regular briefings and its corporate website. The
Company also works to accurately understand the opinions
and demands of stakeholders and to reflect these in its
business activities through dialog, surveys and designatedcontact points. We will continue to actively promote stakeholder engagement, using it to appropriately inform decision making in the course of everyday business activities,
and thus further raise corporate value.

Based on the expectations and requests communicated bystakeholders and on the social and environmental challenges
surrounding the sustainability of its businesses, Tokyo
Electron has identified issues that are material to the medium- and long-term improvement of its corporate value.
Accordingly, CSR goals have been set to address these issues.

Material Issues
Enhancing product competitivenessIn the industries in which Tokyo Electron operates, technological innovation advances very quickly. The Company
must keep pace with this innovation while continuously
offering high-value-added products that accommodate
next-generation technologies. By globally engaging in cutting-edge technological development, the Company releases competitive products in a timely manner.

TOKYO ELECTRON ANNUAL REPORT 2017

PAGE

16

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO
Message from the CFO

Review of Operations
and Business Outlook

Message from the Chairman of the Board
Messages from the Outside Directors
Corporate Governance
CSR-Oriented Operations
Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceCSR-Oriented Operations

Financial Section

Corporate Data

Messages from the Outside Audit & Supervisory Board Members

CSR-Oriented Operations
Reinforcing responsiveness to customers
As new markets emerge—most notably those created by
the internet of things (IoT)—customer demands are­diversifying, and expectations for equipment performanceare rising. Accurately understanding customer needs anddelivering solutions that meet these needs is crucial. We
strive to reinforce our responsiveness to customers so thatthey will see us as an irreplaceable strategic partner.
Strengthening earnings power
Profit is the engine that advances business activities. TheCompany works to continuously generate profit by providing high-value-added products and services, and improving
business processes. The ongoing generation of profit drives

virtuous cycles, including reinvestment in business and thereturn of value to shareholders, employees and society atlarge, helping to make both the Company and society moresustainable.
Invigorating people and workplaces
People are an especially important management resource.
Employees who feel purpose in their work and take pride in
their company help to increase productivity and power corporate development. By promoting diverse work styles and helping employees build their careers, we are increasing employee
engagement and invigorating our people and workplaces.

Fiscal 2018 CSR Goals
For the fiscal year ending March 2018, Tokyo Electron has set 17 goals related to 5 material issues and is working to achieve them.
Material issues

ThemesMain fiscal 2018 goals

Medium-term
goals

Enhancing productcompetitivenessTechnological innovation aimed
at creating value• Ensure that 5% or more (three-year moving average) of all
equipment models are new products for next-generation
technologies.
• Maintain the previous year’s global patent application rate.

Create highly
competitive
next-generation
products

Environmental contribution ofproducts

Reduce per-wafer consumption of energy and pure water by 10%
by fiscal 2019 (as compared with fiscal 2014).

Reinforcing
responsiveness tocustomers

Strengthening
earnings power

Accurate grasp of customer needs Get 3 points (“Satisfied”) or more on 100% of customer
satisfaction survey items.
Solutions that create value forcustomers• Increase Tokyo Electron’s value to customers.
• Increase field solutions business sales from the fiscal 2017 level.

High quality products• Reduce quality improvement costs from the fiscal 2017 level.

Increase added value of processes • Revise business processes to reduce man-hours used for sales
operations from the fiscal 2017 level.

Invigorating people Human rights and diversity
and workplaces
Work-life balance

Becomean irreplaceable
strategic
partner

Improve
operational
efficiency• Retain 100% of new employees for at least three years.
• Reach 70% paid vacation usage.
• Increase the use of the Group’s “Pep Up” healthcare platform  
from the fiscal 2017 level.

Maximizedreams anddrive

Corporate governance• Improve on issues identified in evaluations of the effectivenessof the Board of Directors.
• Revise the internal reporting system (set up new external
hotlines, revise range of persons covered, etc.).

Build amanagementfoundation forincreasing value

Safety management

Ensure that the number of workplace injuries per 200,000 work
hours (the total case incident rate) is less than 0.5.

Environmental management• Reduce energy consumption by 1% on a per-unit basis* from thefiscal 2017 level.
• Maintain water consumption at the fiscal 2012 level (on aper-unit basis*).

Human resource development
HealthEstablishinga sustainablemanagementfoundation* Per-unit basis: Energy consumption (environmental burden) divided by values closely
associated with energy consumption, such as production volume, number of employees or total floor area

Supply chain management

Implement supply chain CSR assessments for 80% or more ofsuppliers (procurement volume basis).

Relevant
SDGs

Establishing a sustainable management foundation
The establishment of a solid management foundation that
underpins corporate activities is key to sustainable growth.
To create new value through our business and help addresssocial issues, we steadily operate a highly effective governance structure. By doing so, the Company implementssound, highly transparent management.

analysts and institutional investors, IR conferences in andoutside Japan, and individual meetings.
The spokespersons for the IR Department hold individual
meetings with investors and periodically relay the opinionsof investors at these events to the CEO and CFO so that
feedback can be of use in management.

Shareholders’ Meeting
Promoting Dialog with Investors
Basic StanceTokyo Electron endeavors to provide opportunities for constructive dialog with growing numbers of investors aroundthe world to contribute to the Company’s sustainablegrowth and increase corporate value over the medium andlong term. Furthermore, to the extent that this is reasonable and possible, the Company places emphasis on having
the CEO and CFO communicate with investors throughdirect dialog.

IR Activities
Striving to maintain dialog with investors, Tokyo Electron
maintains a dedicated Investor Relations Department under
the direct control of the CEO.
The CEO and CFO serve as spokespersons for theCompany at such events as earnings release conferences
and medium-term management plan briefings for securities

Tokyo Electron schedules its shareholders’ meeting to avoid
days on which many such meetings are concentrated andmails a Notice of Annual General Meeting of Shareholders
to shareholders more than three weeks in advance of themeeting as part of its measures to vitalize these meetings
and to promote smooth and efficient voting. In addition,
shareholders are free to cast their votes via the internet,
and the Company participates in the web based voting
platform for institutional investors operated by ICJ, Inc.
To supplement the above shareholder meeting-related
initiatives, Tokyo Electron’s website carries the notices, resolutions, voting results and presentation materials of shareholders’ meetings.
For more details, please refer to the Tokyo Electron
Corporate Governance Guidelines.
http://www.tel.com/ir/policy/cg/document/index_02.pdf

Third-Party Recognition
Tokyo Electron’s medium- and long-term initiatives to increase its corporate value have been recognized by worldleading socially responsible investment (SRI) institutions.
In fiscal 2017, Tokyo Electron was selected for inclusion in the DJSI* Asia Pacific 2016. The Company also received theBronze Class distinction in the RobecoSAM Sustainability Award 2017. Furthermore, the Company was once again
selected as a constituent of the U.K.-based FTSE Group’s FTSE4Good** Global Index.
* DJSI (Dow Jones Sustainability Indices): Environmental, social and governance (ESG) investment indices developed by U.S.-based S&P Dow Jones Indices LLC and Switzerland-based RobecoSAM AG.
The Asia Pacific index covers companies in that region.
** FTSE4Good: An index related to environmental performance and corporate social responsibility developed by the U.K.-based FTSE Group