TOKYO ELECTRON

May 12, 2010

Consolidated Financial Review
for the Year Ended March 31, 2010
Company name:
URL:
Telephone number:
Stock exchange listing:Tokyo Electron Limited
http://www.tel.com(03) 5561-7000
Tokyo Stock Exchange 1st Section (Code 8035)

Notes: 1. The accompanying financial statements have been prepared in accordance with accounting
principles and practices generally accepted in Japan.
2. Amounts are rounded down to the nearest million yen.

1. Financial highlights for the year ended March 31, 2010
Year ended
March 31, 2009
March 31, 2010
Net sales (Millions of yen)
508,082
418,636
Operating income (Millions of yen)
14,710(2,180)Ordinary income (Millions of yen)
20,5552,558
Net income (Millions of yen)
7,543
(9,033)
Net income per share (Yen)
42.15(50.47)
Fully diluted net income per share (Yen)
42.07
Return on equity
1.4
(1.8)
Ordinary income to total assets
2.8
0.4
Operating income to net sales
2.9
(0.5)
Profit/loss on equity method: Year ended 3/31/10: - million yen
Year ended 3/31/09: - million yen(1) Operating results (Cumulative)(2) Financial position

Total assets (Millions of yen)
Net assets (Millions of yen)
Equity ratio (%)
Net assets per share (Yen)
Equity: 511,818 million yen (as of March 31, 2010)
518,387 million yen (as of March 31, 2009)

As ofMarch 31, 2009
668,998529,265
77.5
2,896.55

As ofMarch 31, 2010
696,351
523,36973.5
2,859.37(Millions of yen)

(3) Cash flow

Year ended
March 31, 2009
March 31, 2010
81,03048,284(160,621)
9,613(46,015)(287)
65,883
123,939

Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash and cash equivalents at end of period

1TOKYO ELECTRON
2. Dividends
Year ended
March 31, 2009

Year ended
March 31, 2010

20.00
4.00
24.00

4.00
8.00
12.00

Year ended
March 31, 2009

Year ended
March 31, 2010

4,294
56.9
0.8

2,147
0.4

1Q-end dividend per share (Yen)
2Q-end dividend per share (Yen)
3Q-end dividend per share (Yen)
Year-end dividend per share (Yen)Annual dividend per share (Yen)

Total dividend (Millions of yen)
Payout ratio (%)
Dividend on equity (%)

Year ending
March 31, 2011
(Forecast)
25.00
37.00
62.00
Year ending
March 31, 2011
(Forecast)
20.2-

3. Earnings forecasts for the year ending March 31, 2011
Note: Percentages for full business year indicated changes from the previous term, and for interim period indicatedchanges from the previous interim period.
Six months ending
Year ending
September 30, 2010
March 31, 2011%
315,000 104.7
33,00034,00022,000122.91-

Net sales (Millions of yen)
Operating income (Millions of yen)
Ordinary income (Millions of yen)
Net income (Millions of yen)
Net income per share (Yen)

660,000
79,00080,00055,000307.27%57.7-

4. Others(1) Important changes in subsidiaries. : None
(Changes on specific subsidiaries with changes in scope of consolidation)(2) Changes in principles, procedures and display of accounting method concerning consolidated statement policies.
1. Changes in accounting policies: None
2. Other changes: None
(3) Number of shares outstanding (common stock)
1. Number of shares issued
As of March 31, 2010: 180,610,911 shares
As of March 31, 2009: 180,610,911 shares
2. Number of shares of treasury stock
As of March 31, 2010: 1,614,225 shares
As of March 31, 2009: 1,643,398 shares

2

TOKYO ELECTRON(Reference) Non-consolidated financial review for the year ended March 31, 2010
1. Financial highlights for the year ended March 31, 2010
(1) Operating results
Note: Percentages indicate changes from the previous fiscal year.
Year ended
March 31, 2009
Net sales (Millions of yen)
Operating income (Millions of yen)
Ordinary income (Millions of yen)
Net income (Millions of yen)
Net income per share (Yen)
Fully diluted net income per share (Yen)

389,458
8,405
14,979
9,922
55.45
55.33

March 31, 2010%(49.3)(90.3)(84.4)(80.7)-

318,236(16,111)(13,985)(16,838)(94.08)-

As ofMarch 31, 2009
486,594
349,04871.5
1,943.93

As ofMarch 31, 2010
533,081
334,495
62.5
1,859.91%(18.3)-(2) Financial position

Total assets (Millions of yen)
Net assets (Millions of yen)
Equity ratio (%)
Net assets per share (Yen)
Equity: 332,917 million yen (as of March 31, 2010)
347,899 million yen (as of March 31, 2009)

Explanations on the appropriate use of earnings forecast:
The performance forecasts and estimates stated in this Financial Review are based on certain assumptions judged to be reasonable
at the present time in light of information currently available. Consequently, actual operating results may differ substantially from the
projections in the financial review.

3

TOKYO ELECTRON

Operating Results(1) Analysis of Operating Results(i) Business Environment during the Fiscal Year Ended March 31, 2010
During the fiscal year under review, conditions on the global economy as a whole remained adverse
because of the financial crisis and economic recession, but the economic stimulus measures implemented
by various countries did result in a moderate recovery in the second half of the year. Europe and theUnited States remained sluggish overall, but recovery was seen in Asia, particularly in China.

In Japan,although the unemployment rate remained high and other conditions were unfavorable, exports andindustrials experienced growth, resulting in a stemming of the decline in capital investment and steady
improvement.
The electronics industry, in which the Tokyo Electron group conducts its business, faced stagnant demand
for final products because of the economic downturn, but demand for PCs, mobile phones, flat-panel
televisions, and other products recovered.

Semiconductor and FPD related markets improved as pricesrose in conjunction with higher demand, but capital investment has not yet made a full-scale recovery andthe business environment remains severe.

(ii) Overview of Profits and Losses during the Fiscal Year Ended March 31, 2010
Faced with these challenging circumstances, the Group has redoubled its efforts to reduce fixed costs andworked to improve profitability, but sales were down in the main semiconductor production equipment
business, causing a decline in financial results compared to the previous fiscal year.

In the second half,

however, orders in the semiconductor production equipment business recovered, and there was an
improvement in the business environment in the fourth quarter (January to March 2010), including a returnto profitability. Profits and losses for the fiscal year were as follows.
Consolidated net sales for the fiscal year decreased by 17.6% compared to the previous fiscal year, to418,636 million yen.

Domestic net sales decreased by 22.1%, to 162,608 million yen, and overseas net

sales decreased 14.4%, to 256,028 million yen, with overseas net sales accounting for 61.2% ofconsolidated net sales.

Consolidated orders for the fiscal year increased 30.7%, to 478,440 million yen,

and consolidated order backlogs rose 32.7%, to 242,637 million yen.
Cost of sales for the fiscal year dropped 16.3%, to 310,320 million yen, and gross profit decreased 21.2%,
to 108,316 million yen. As a result, gross profit margin decreased by 1.1 percentage points, to 25.9%.
Selling, general, and administrative (SG&A) expenses decreased 9.9%, to 110,496 million yen, with theirratio to consolidated net sales increasing by 2.3 percentage points to 26.4%.
As a result, operating losses were 2,180 million yen (compared to operating income of 14,710 million yen in
the previous fiscal year), ordinary income decreased by 87.6%, to 2,558 million yen, with non-operating

4

TOKYO ELECTRON

income and expenses at 5,331 million yen and 591 million yen, respectively.
Loss on impairment and related expenses were reported in association with higher site efficiency, resulting
in 10,326 million yen in unusual or infrequent loss (compared to 10,918 million yen in unusual or infrequentloss in the previous fiscal year).
Losses before income taxes for the fiscal year were 7,767 million yen (compared to 9,636 million yen inincome before income taxes in the previous fiscal year), and the net loss was 9,033 million yen (comparedto 7,543 million yen in net income in the previous fiscal year).
As a result, net loss per share was 50.47 yen (42.15 yen for the previous fiscal year).

(iii) Overview of Operations during the Fiscal Year Ended March 31, 2010 by Business Segment

Industrial Electronic Equipment Business Segment
Net sales from external customers for this segment during the fiscal year decreased by 19.3% compared tothe previous fiscal year, to 334,163 million yen.

(a) Semiconductor Production Equipment Division
The global downturn in semiconductor demand since the year before last has caused a curtailment of
capital investment.

As a result, net sales to external customers in this division fell to 262,391 million yen,down 19.4% from the previous fiscal year.

Despite this, demand for semiconductors rose, bolstered by

global expansion of PCs, mobile phones, flat-panel televisions, and digital networks; the businessenvironment took a turn for the better in the second half, including an increase in capital investment bysemiconductor manufacturers.
Developments concerning new products during the fiscal year under review include the market launch of
several new products including Tactras™ RLSA™ Etch, an etch system that uses a revolutionary
breakthrough plasma technology; Trias™ e+, a new platform for single-wafer CVD; and NX Ti and NX TiN,
next-generation metal CVD modules.

(b) FPD/PV (Flat Panel Display/Photovoltaic Cell) Production Equipment Division
As a result of curtailed and postponed capital investment by FPD panel manufacturers, net sales to externalcustomers in this division declined to 71,361 million yen, down 19.0% from the previous fiscal year.
However, demand for flat-panel televisions is rising rapidly, particularly in China, and there are signs thatFPD panel manufacturers will increase production capacity.
division is expected.

Consequently, a full-scale recovery in thisIn the photovoltaic cell production equipment business, the market underwent a

temporary slowdown including postponements of investment because of the economic slump, but it isexpected to grow in the future because of the environmental measures being implemented worldwide.

5

TOKYO ELECTRON(c) Others
Consolidated net sales for this division increased by 6.8% compared to the previous fiscal year, to 410
million yen.

Electronic Components and Computer Networks Business Segment
In the semiconductor and electronic devices business, economic stimulus measures had an impact on
semiconductor products relating to consumer products, including digital home electronics such as flat-panel
televisions and peripheral devices; and business was good through the first half of the fiscal year.

In

addition, efforts to increase sales to both existing and new customers resulted in higher sales of
special-purpose ICs and microprocessors.

In addition, sales of semiconductor products for industrial

equipment and computers, which had been slumping, started to pick up towards the end of the fiscal year.
In the computer systems-related business, companies remain cautious about IT investment and sales ofstorage related products have been slow, but demand for maintenance services was strong.
As a result of these developments, net sales from external customers in this segment during the fiscal year
under review were down 10.3% from the previous fiscal year to 84,473 million yen.

(For reference）
Consolidated
Year ended March 31, 2010
Net Sales
Industrial Electronic Equipment
Semiconductor Production Equipment
Japan
U.S.
EuropeKorea
TaiwanChina
S.E.Asia
ＦＰＤ/PV Production Equipment
OthersElectronic Components & Computer Networks
Operating Income (Loss)
Ordinary Income (Loss)Net Income (Loss)

1Q
68,91550,47030,437
4,932
12,430
2,833
2,861
5,917
483
979
19,94389
18,445(14,388)(14,021)(11,035)

2Q
84,97562,621
51,69910,812
8,364
2,315
8,823
16,6192,106
2,656
10,799121
22,354(7,232)(5,191)(5,125)（Millions of yen）
Year ended
First
SecondFull Year
March 31, 2009
Half
3Q
4Q
Half
153,891 114,289 150,456 264,745 418,636
508,082
113,091 93,260 127,811 221,072 334,163
413,874
82,136 76,511 103,743 180,254 262,391
325,383
15,745 10,675 17,753 28,429 44,174
105,334
20,795 13,273 21,487 34,760 55,555
65,374
5,148
2,433
3,355
5,788 10,937
30,389
11,684 13,391 19,640 33,032 44,716
37,546
22,537 27,913 26,344 54,258 76,795
49,308
2,589
3,149
1,877
5,026
7,616
11,087
3,635
5,675 13,283 18,959 22,595
26,34330,743 16,686 23,931 40,618 71,361
88,107
211
63
136
199
410
384
40,799 21,028 22,644 43,673 84,473
94,207(21,620)
5,521 13,918 19,439 (2,180)
14,710(19,212)
6,573 15,198 21,771
2,558
20,555(16,161)(58)
7,186
7,127 (9,033)
7,543

Note: Offset elimination has been carried out on the dealing between segments.

6

TOKYO ELECTRON(iv) Projected Operating Results for the Next Fiscal Year Ending March 31, 2011
Even though the economic environment remains somewhat instable, we expect the trend towards recovery
to continue.

In the semiconductor market, we expect capital investment by semiconductor manufacturers

to increase against a backdrop of rising demand for final products.

Given these circumstances, the Groupwill continue to focus on developing technologies and bolstering manufacturing, with that aim of establishinga commanding position.

The financial forecast for the next fiscal year (the fiscal year ending March 31,2011) is set forth below.

Consolidated Forecast
Year ending March 31, 2011
Net Sales
Industrial
Electronic Semiconductor Production Equipment
Equipment FPD/PV Production Equipment
OthersElectronic Components & Computer Networks
Operating Income
Ordinary Income
Net Income(Billions of yen, Y/Y change)
InterimFull Year
315.0
104.7%
660.0
57.7%
272.0
140.5%
570.0
70.6%
240.0
192.2%
501.0
90.9%
32.0
4.1%
69.0
-3.3%
0.0
0.0
43.0
5.4%
90.0
6.5%
33.0
79.0
34.0
80.0
22.0
55.0
-

(2) Analysis of Financial Conditions(i) Financial Conditions
Current assets at the end of the fiscal year rose 47,252 million yen from the end of the previous fiscal year,
to 552,939 million yen.

The major factors influencing this result were a 33,783 million yen increase in cash

and deposits and certificates of deposit included in securities, and a 15,144 million yen increase in deferredincome taxes.
Tangible fixed assets decreased by 7,778 million yen from the end of the previous fiscal year, to 92,127
million yen.
Intangible fixed assets decreased by 5,174 million yen from the end of the previous fiscal year, to 5,586
million yen.
Investments and other assets decreased 6,945 million yen from the end of the previous fiscal year, to45,698 million yen.
As a result, total assets increased by 27,353 million yen from the end of the previous fiscal year, to 696,351
million yen.
Current liabilities increased by 29,889 million yen from the end of the previous fiscal year, to 119,161 million
yen. Major factor in the increase was an increase in trade notes and accounts payable of 27,965 millionyen.
Long-term liabilities increased by 3,359 million yen from the end of the previous fiscal year, to 53,820 million

7

TOKYO ELECTRONyen.
Net assets were down 5,895 million yen from the end of the previous fiscal year, to 523,369 million yen as aresult of posting a net loss of 9,033 million yen, 715 million yen in deductions for payment of the year-end
dividend for the previous fiscal year and 715 million yen for payment of the interim dividend, and otherfactors. The equity ratio was 73.5%.

(ii) Cash Flow
The balance of cash and cash equivalents at the end of the fiscal year increased from 65,883 million yen at
the end of the previous fiscal year by 58,056 million yen to 123,939 million yen.

The combined balance of

cash and cash equivalents plus time deposits and negotiable certificates of deposit with deposit terms ofover three months, which are not included in cash and cash equivalents, increased from 210,156 million
yen at the end of the previous fiscal year by 33,783 million yen to 243,939 million yen. Cash flows during
the fiscal year under review were as follows.

Cash flow from operating activities during the fiscal year was 48,284 million yen, 32,745 million yen lower
than the previous fiscal year.

Major positive factors included depreciation and amortization of 20,001

million yen, loss on impairment of 7,553 million yen, and an increase in accounts payable of 27,975 million
yen.

The major negative factors were a 7,767 million yen net loss before income taxes, a decrease incustomer advances of 6,380 million yen, an increase in accounts receivable of 4,890 million yen, and anincrease in inventories of 4,868 million yen.
Cash flow from investing activities was a positive 9,613 million yen, compared to the negative 160,621
million yen in the previous year; mainly as a result of 24,347 million yen in income from a net decrease intime deposits and 14,194 million yen in payment for purchase of tangible fixed assets.
Cash flow from financing activities was 287 million yen, primarily as a result of the payment of 1,431 million
yen in dividends. Cash flow from financing activities in the previous fiscal year was 46,015 million yen.

Fiscal year ended
March 31, 2009
77.5
97.4
0.0
401.23Equity ratio (%)
Equity ratio at market value (%)
Interest-bearing debt to cash flow ratio (times)
Interest coverage ratio (times)
Equity ratio: (Equity / Total assets) x 100

Equity ratio at market value: (Market capitalization / Total assets) x 100
Interest-bearing debt to cash flow ratio: Interest-bearing debt / Cash flow from operating activities
Interest coverage ratio: Cash flow from operating activities / Interest expenses* All indicators are calculated using financial figures on a consolidated basis.

8

Fiscal year ended
March 31, 2010
73.5
159.4
0.1
1047.59

TOKYO ELECTRON* Market capitalization is calculated based on the following formula: Closing stock price at fiscal year-end × Number of shares
outstanding at fiscal year-end after deduction of treasury stock.
* Cash flow from operating activities corresponds to the cash flow from operating activities in the consolidated statement of cash
flow. Interest-bearing debt includes all liabilities for which the Company is paying interest among the liabilities reported on the
consolidated balance sheet. Interest expenses correspond to the interest paid in the consolidated statement of cash flow.

(3) Basic Policy for Profit Allocation and Payment of Dividends for Current and Next Fiscal Years
The dividend policy of the Company is to link dividend payments to business performance and earnings on
an ongoing basis.

Its basic policy for returning profits to shareholders is to maintain a payout ratio ofaround 20% based on consolidated net income.

In addition, a portion of income will be retained as aninternal reserve so the Company can actively invest in the areas of R&D, capital, overseas business, M&As
for future growth, with the aim enhancing its corporate value.
In the fiscal year ended March 31, 2010 under review, although the Company posted a loss in the first half,
we declared an interim dividend of four yen per share in order to meet our shareholders’ expectations forcontinually earning stable dividends; and we also intend to pay a year-end dividend of eight yen per sharefor the same reason and in light of performance in the second half.
As a result, the dividend for the entire fiscal year including the interim dividend is 12 yen per share.
Plans call for the dividend for the next fiscal year (the fiscal year ending March 31, 2011) to be 62 yen per
share for the entire year (a 25 yen interim dividend and a 37 yen year-end dividend), in accordance with theoutlook for the year’s net income.
(4) Business-related and Other Risks

The following are possible risks that may have an impact on the Company’s operating results, stock prices,or financial position.

(i) Impact from Changes in the Semiconductor Market
The Company has been able to achieve a high profit margin by concentrating resources in the high-techfield, including semiconductor production equipment, where technologies undergo rapid change and theCompany is able to display its strength.

The semiconductor market may enjoy broad growth throughtechnological change, while on the other hand, the size of the market may temporarily contract due to an
imbalance of supply and demand.

Therefore, the Company has been actively involved in businessstructural reforms to be able to generate profit even when such rapid changes take place.

However, thepossibility does exist that business results will be negatively impacted by an unexpectedly broad contractionin the size of the market, resulting in order write-offs, excess capacity and head-count, or increased
inventories.

9

TOKYO ELECTRON(ii) Impact from Transactions Concentrated on Particular Customers
The Company has been successful in expanding its business transactions with the world’s leading
semiconductor manufacturers both inside and outside of Japan by providing products equipped withsuperior, cutting-edge technology and offering a service system with high customer satisfaction.

However,since the Company’s net sales may at times be temporarily concentrated on particular customers due to thetiming of large-scale capital investments by major semiconductor manufacturers, there is the possibility of anegative impact on business results from intensified sales competition.

(iii) Impact from Research and Development
The Company has created cutting-edge technologies through its ongoing implementation of proactive R&D
investment

andactivities,

includingminiaturization,

vacuum,coating/developing, cleaning, wafer-transfer, and clean technologies.

plasma,thermal-processing,

By promptly introducing new

products on the market that are equipped with these technologies, the Company has successfully obtained
a large market share in each of the product fields, along with a high profit margin.

However, the possibility

does exist that the ill-timed introduction of new products may have a negative impact on the Company’s
performance.

(iv) Safety-related impact
The Company always carries out operations, including development, manufacturing, sales, services, andadministration, with the necessity of paying attention to safety and health in mind.

In accordance with thisbasic principle, the Company is making an active and continued effort to improve the safety of its products
and eliminate any harmful impact on health.

If damage were to be caused to customers or orders were to

be canceled, or some other unexpected event were to occur due to a problem arising from the safety of theCompany’s products or other causes, it would likely adversely affect the performance of the Company.

(v) Impact from Quality Issues
The Company has been proactively developing superior, cutting-edge technologies utilized in new productsthat are promptly introduced onto the market, while at the same time establishing a quality assurance
system, including obtaining ISO 9001 certification.

The Company has also worked to establish aworld-class service system, and this has resulted in a large number of customers adopting our products.
However, because of the cutting-edge nature of our technologies, in addition to other factors, many of thetechnologies developed are in unknown fields, and the possibility exists that business results may be
negatively affected by the unforeseen appearance of defective products.

(vi) Impact of Intellectual Property Rights
In order for the Company to set its products apart from rival products and enhance its competitive strength,

10

TOKYO ELECTRON

the Company has promoted an R&D strategy for the prompt development of cutting-edge technologies,
together with business and intellectual property strategies. This has made it possible for the Company toobtain many of its own proprietary technologies, thereby successfully ensuring a large market share andhigh profit margin in each product field.

However, partly because the Company’s products use many of theconsolidated and optimized cutting-edge technologies, there may be cases where a negative impact on
business results arises from avoiding the use of third-party technologies and intellectual property rights.

(vii) Impact of Fluctuating Foreign Exchange Rates
By succeeding in actively developing overseas operations, the Company has increased the proportion of its
overseas sales.

As a rule, the Company carries out export transactions on a yen-basis in order to avert

exchange-related risks, but there are some exports involving foreign currency.

In these cases, theCompany employs an exchange risk hedge, such as a forward exchange contract at the time an order isplaced.

However, since for overseas customers, exchange-related risks can arise from fluctuations inprices due to drastic exchange fluctuations, this may have an indirectly negative impact on the Company’s
performance.

(viii) Other Risks
The Company has been active in creating new high-growth and high-revenue businesses, pursuing evenhigher revenue in existing businesses, and improving its structure so that it can earn profits even as themarket shrinks.

It has also worked to promote environmental protection activities and restructure its

compliance and risk management systems.

However, to the extent that the Company performs its

operations, it is subject - just like other companies in the same or different industries - to the impact fromfactors that include the global or local economic environment, natural disasters, wars, terrorism,
unavoidable incidents (such as infectious diseases), financial or stock markets, government regulation,
provision systems of suppliers, market conditions for products and real estate, securing of personnel
domestically or overseas, competition over standardization, loss of important personnel, etc., and thus it
can be assumed that the Company’s business performance will be negatively affected at times by suchfactors.

Note: The financial forecasts and estimates stated in this interim financial review are based on certain assumptions judged to bereasonable at the present time in light of information currently available concerning economic conditions in Japan and overseas,fluctuations in foreign exchange rates, and other factors that may have an impact on performance.
They are therefore susceptible to the impact of many uncertainties, including market conditions, competition, the launching of
new products (and their success or failure), and global conditions in the semiconductor production equipment business.
Consequently, actual sales and profits may differ substantially from the projections stated in this financial review.

11

TOKYO ELECTRONManagement Policy(1) Basic Management Policy
The basic management policy of the Group is to raise its corporate value through profit-oriented operations
by placing the highest priority on customers, enhancing product and technology development capabilities,
and invigorating its workforce.

Under this basic fundamental policy, the Group will engage in the development of vibrant and internationallycompetitive companies with high growth potential and profitability that are attractive to investors.

(2) Management Tasks
The Group is active primarily in the electronics industry, which is subject to rapid technological innovation;and it has adopted the following fundamental principles: Provide valuable technologies and services to theworld as a top supplier in cutting-edge fields, in order to enhance people’s health and quality of life; exercise
greater leadership with regard to environmental issues and the development of a society that nurtures
people’s dreams; and become a vibrant, optimistic company that shares a sense of mission with all its
employees.
To implement these fundamental principles, we have adopted the following concrete management policies.
1.

Be an innovative company that creates groundbreaking technologies.
(Continuously conduct research and development and nurture personnel who can establish a select2.

few outstanding technical groups.)
Be a highly-competitive global leader.
(Create structures that allow the Company to exercise global leadership in terms of technological and3.

cost competitiveness.)
Offer solutions that best meet customer needs(Provide the customers with the optimal goods and services at all times in response to their individual

4.

needs.)
Contribute globally environmental measures(Develop technologies to reduce environmental impact and curtail power consumption, and contributeto addressing environmental issues.)

Tokyo Electron has been in business for nearly half a century, with a focus on the production equipment
industry, during which time it has supported social infrastructure development by playing a leading role on a
global scale within that industry.

Moving forward, we will continue to exercise leadership by making thefollowing issues our top priorities.
1.

Reinforce Research and Development
Continuous research and development is essential for creating technological innovation andproviding new products that are a step ahead of those of our competitors.

We are actively

expanding our research and development capabilities through measures that include the creation of a
new technology center in Taiwan last year and the launch of new collaborative programs with

12

TOKYO ELECTRON

research institutions in Europe and the United States. We have also developed an etch system thatuses a new type of plasma source and made the preparations needed to increase our sales. We willcontinue to focus our efforts on the development of highly-competitive new products that meetcustomer needs.

In addition, the Company is using the semiconductor and FPD production

equipment technologies that it has established over many years to cultivate and develop new
businesses, with the aim of providing valuable products.

One such initiative was the launch of thephotovoltaic cell production equipment business in 2008.
2.

Reinforce Manufacturing Capabilities
We are reorganizing our domestic bases with the aim of creating structures that integrate
development and manufacturing; and we have decided to commence construction of the new plant in
Taiwacho, Miyagi Prefecture that was previously postponed.

At the new plant, scheduled to becompleted in 2011, we will establish new production methods that reduce the cost and lead time of
manufacturing while also enhancing quality managements.
3.

Strengthening the Offering of Optimal Solutions
We are deepening each of our partnerships with customers, starting with the earlier stages of thebusiness process, including not only the areas of sales and services structures but also development.
We are also enhancing our ability to provide customers with proposals that meet a wide range of theirneeds by combining our equipment products as a means of flexibly and promptly responding tochanges in the business environment.

4.

Measures to Address Environmental Issues
We are conducting activities designed to reduce internal environmental impact and working tocontribute to environmental measures in the semiconductor industry and throughout the entire
industry by developing production equipment that can halve environmental impact at customer plants
by the year 2015.

To help foster the personnel who will carry out these activities, companywide skills development programs
will continue to be implemented and linked to future growth.

In addition, with respect to our financial

situation, although we have adequate shareholders’ equity and cash on hand, we will continue our effort tostreamline inventory levels, reduce manufacturing lead times, maintain and enhance profitability, along withother ongoing measures to maximize cash flow and reinforce our solid financial footing.
In the areas of compliance, corporate ethics, and risk management, which we have always given the utmost
attention, we will assess and analyze various risks that the Group faces and implement the necessary
countermeasures under the direction of the Company executives responsible for compliance and internal
controls. We will also reinforce such measures based on internal control policies adopted pursuant toBoard of Directors resolutions.
The Group will continue, on the basis of its profit-oriented management, to further enhance its corporate
value by means of placing the customers first, improving product and technology development capabilities,
strengthening international competitiveness, and motivating employees.

13

TOKYO ELECTRON

Consolidated Balance Sheet(Millions of yen)
As ofMarch 31, 2009

As ofMarch 31, 2010ASSETS
Current assets
Cash and deposit

51,15656,939Trade notes and accounts receivable

119,687

124,462

Securities

159,001

187,000

Merchandise and finished goods

88,416

87,201Work in process

29,306

37,793

Raw materials and supplies

16,51813,455

Deferred income taxes

11,48026,625

Others30,13919,638

(20)

(176)

505,687

552,939

121,568

120,429

Accumulated depreciation(71,308)(75,001)

Buildings and structures, net

50,25945,42872,58670,036

Accumulated depreciation(54,999)(56,854)

Machinery and carriers, net

17,587

13,182

Land

20,67826,355Construction in progress

4,708

3,739

Allowance for doubtful accounts
Total current assets
Long-term assets
Tangible fixed assets
Buildings and structures

Machinery and carriers

Others
Accumulated depreciation
Others, net
Total tangible fixed assets

31,88628,906(25,213)(25,484)

6,672

3,421

99,906

92,127

Intangible fixed assets
Others

10,7605,586

Total intangible fixed assets

10,7605,586

Investment securities

9,131

14,720

Deferred income taxes

31,93920,505

Others19,11817,924

Allowance for doubtful accounts(7,545)(7,452)

Investments and other assets

Total investments and other assets
Total long-term assets
Total assets

14

52,64445,698163,311

143,412

668,998

696,351

TOKYO ELECTRON(Millions of yen)
As ofMarch 31, 2009

As ofMarch 31, 2010

LIABILITIESCurrent liabilities
Trade notes and accounts payable

24,39352,359Accrued employees' bonuses

4,965

6,043

Accured warranty expenses

6,115

5,267

Others

53,79855,490Total current liabilities

89,272

119,161

47,04649,906Long-term liabilities
Accrued pension and severance costs
Others

3,413

3,913

Total long-term liabilities

50,46053,820139,732

172,982

Common stock

54,961

54,961

Capital surplus

78,11478,034Retained earnings

404,435

393,970

Treasury stock(11,111)(10,900)

Total shareholders' equity

526,398

516,065

(842)

2,504

66

(67)

Translation adjustments(7,235)(6,683)

Total valuation and translation adjustments(8,011)(4,247)

Subscription rights to shares

1,148

1,578

Minority interests

9,729

9,973

Total net assets

529,265

523,369

668,998

696,351

Total liabilities
NET ASSETS
Shareholders' equity

Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

Total liabilities and net assets

15

TOKYO ELECTRON

Consolidated Statement of Income(Millions of yen)
Year ended
March 31, 2009

Year ended
March 31, 2010

Net sales

508,082

418,636

Cost of sales

370,673

310,320Gross profit

137,408

108,316

Salaries and allowances

19,042

18,084

Provision for accrued bonuses

1,269

1,765

Provision for retirement allowances

1,998

2,358

Other personal expenses

7,044

6,400

Selling, general & administrative expenses

Depreciation and amortization

5,872

5,605

Research and development expenses

60,98754,074

Others

26,481

22,208

Total selling, general & administrative expenses

122,697

110,496

14,710(2,180)Operating income (loss)
Non-operating income
Interest income

1,707

993

Revenue from development grants

2,700

1,842

Others

2,400

2,494

Total non-operating income

6,809

5,331

175

-

Non-operating expenses
Interest expenses-

185

Lease expenses of fixed assets

266

103

Loss on sale of trade notes and accounts receivable

132-

Others389

302

Loss on revaluation of investment securities

Total non-operating expenses

964

591

20,5552,558

Gain on sale of fixed assets

67

282

Others18

17

Total unusual or infrequent profit

85

299

Ordinary income
Unusual or infrequent profit

Unusual or infrequent loss
Provision of allowance for doubtful accounts

7,360

Loss on retirement or sale of fixed assets

352

977

Loss on impairment

-

7,553

Expenses for integration and closure of business bases

-

1,908

2,432

-

212

-

Loss on revaluation of investment securities
Office relocation expenses
Others

-

646

186

Total unusual or infrequent loss

11,004

10,626

Income (loss) before income taxes

9,636(7,767)

Provision for income taxes and enterprise taxes

4,552

5,747

Deferred income taxes(2,762)(5,020)Total income taxes

1,790

726

Minority interests

303

539

Net income (loss)

7,543(9,033)16

Consolidated Statements of Changes in Net Assets

TOKYO ELECTRON(Millions of yen)
Year ended
March 31, 2009

Year ended
March 31, 2010

54,961
54,961

54,961
54,961

78,392(278)
78,114

78,114(79)
78,034

410,866

404,435(551)-(13,420)7,543(2)404,435(1,431)(9,033)393,970(11,369)(38)
296(11,111)(11,111)(58)
270(10,900)

532,850

526,398(551)-(13,420)
7,543
(38)
17
(2)
526,398(1,431)(9,033)(58)
190
516,065

Shareholders' equity
Common stock
Balance at beginning of period
Balance at end of period

Capital surplus
Balance at beginning of period
Disposal of treasury stock
Balance at end of period

Retained earnings
Balance at beginning of period
Changes in accounting treatment
by subsidiaries outside Japan
Cash dividends
Net income (loss)
Effect of changes in scope of consolidation
Balance at end of period

Treasury stock
Balance at beginning of period
Purchase of treasury stock
Disposal of treasury stock
Balance at end of period

Total shareholders' equity
Balance at beginning of period
Changes in accounting treatment
by subsidiaries outside Japan
Cash dividends
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Effects of changes in scope of consolidation
Balance at end of period

17Consolidated Statements of Changes in Net Assets

TOKYO ELECTRON(Millions of yen)
Year ended
March 31, 2009

Year ended
March 31, 2010

Valuation and Translation Adjustments
Valuation difference on available-for-sale securities
Balance at beginning of period
Net change
Balance at end of period

2,172(3,014)
(842)

(842)
3,346
2,504

Deferred gains or losses on hedges
Balance at beginning of period
Net change
Balance at end of period

460
(393)
66

66
(134)
(67)

Translation adjustments
Balance at beginning of period
Net change
Balance at end of period(529)(6,705)(7,235)(7,235)551(6,683)

Total Valuation and Translation Adjustments
Balance at beginning of period
Net change
Balance at end of period

2,102(10,114)(8,011)(8,011)
3,764(4,247)

483
664
1,148

1,148
429
1,578

9,807
(78)
9,729

9,729
244
9,973

545,244529,265(551)-(13,420)
7,543
(38)
17
(2)
(9,527)529,265(1,431)(9,033)
(58)
190
4,438
523,369

Subscription rights to shares
Balance at beginning of period
Net change
Balance at end of period

Minority interests
Balance at beginning of period
Net change
Balance at end of period

Total net assets
Balance at beginning of period
Changes in accounting treatment
by subsidiaries outside Japan
Cash dividends
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Effects of changes in scope of consolidation
Net change except shareholders' equity
Balance at end of period

18

TOKYO ELECTRON

Consolidated Cash Flow
Year ended
March 31, 2009

(Millions of yen)
Year ended
March 31, 2010

Cash flow from operating activities
Income (loss) before income taxes
Depreciation and amortization
Loss on impairment
Increase in accrued pension and severance costs (decrease)
Increase in allowance for doubtful accounts (decrease)
Increase in accured employees' bonuses (decrease)
Increase in accrued warranty expenses (decrease)
Interest and dividend revenue
Interest expenses
Foreign currency translation loss (gain)
Loss on disposal of fixed assets
Loss on revaluation of investment securities (gain)
Office relocation expenses
Decrease in trade notes and accounts receivable (increase)
Decrease in inventories (increase)
Increase in accounts payable (decrease)
Decrease in prepaid consumption tax (increase)
Increase in customer advances (decrease)
Decrease in specific doubtful receivables (increase)
OthersSubtotal
Receipts from interest and dividends
Interest paid
Income taxes paid or refund (paid)
Net cash generated by operating activities

9,636
23,0683,426
7,333(7,761)(3,345)(1,805)
175
103
350
2,432
212
102,412
21,282(29,942)
4,509
5,321
(7,355)(9,734)
120,319
1,749(201)(40,836)
81,030(7,767)20,001
7,553
2,828
120
1,078
(836)
(1,055)916(4,890)(4,868)27,975568(6,380)(139)
6,377
41,480
1,171
(46)
5,679
48,284(353,803)
219,429(17,227)655(1,182)(7,815)(677)(160,621)(449,000)
473,347(14,194)
488
(786)
(241)
9,613

(2,262)(30,000)(20)(13,420)(311)(46,015)

1,299

Cash flow from investing activities
Payment into time deposits
Proceeds from time deposits
Payment for purchase of tangible fixed assets
Proceeds from sale of tangible fixed assets
Payment for purchase of intangible fixed assets
Payment for purchase of investment securities
OthersNet cash used in investing activities

Cash flow from financing activities
Net increase in short-term borrowings (decrease)
Redemption of straight bonds
Net decrease in treasury stock (increase)
Dividends paid
OthersNet cash generated by financing activities

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents (decrease)
Cash and cash equivalents at beginning of period
Cash and cash equivalents from newly consolidated subsidiaries
Cash and cash equivalents at end of period

19(2,068)(127,676)
193,49267
65,883131(1,431)
(286)
(287)
445
58,05665,883
123,939

TOKYO ELECTRON

Segment Information(1) Information by business segment(Millions of yen)
Year ended March 31, 2010 (4/1/09 - 3/31/10)
Industrial
Electronic
Equipment

Electronic
Components
andComputer
Networks

334,163

84,473

418,636-

418,636

785

672

1,457

(1,457)-334,948

85,145420,094(1,457)

418,636

339,218

83,065422,283(1,466)

420,817(4,269)2,079(2,189)9(2,180)Total

Eliminations
andConsolidated
Corporate

1. Net sales, operating income and expenses
Net sales(1) Sales to external customers(2) Intersegment sales or transfers
Total
Operating expenses
Operating income (loss)
2. Assets, depreciation expenses, loss on impairment
and capital expenditure
Assets654,025

45,649699,674(3,322)

696,351

Depreciation expenses

19,758

485

20,244-

20,244

Loss on impairment

7,553

-

7,553

-

7,553

Capital expenditure

16,069121

16,191-

16,191

Note: 1. Method of classifying businesses: Businesses are classified after considering similarities in type of product,function, or method of sales.
2. Major products in each business segment:
Business segment
Industrial Electronic Equipment
Electronic Components and Computer Networks

Major products
Semiconductor Production Equipment, FPD Production Equipment,
Photovoltaic Cell Production Equipment, Others
Semiconductor Products, Other Electronic Components, Computer
Networks, and Software

20

TOKYO ELECTRON

Segment Information(2) Information by geographic segment(Millions of yen)
Year ended March 31, 2010 (4/1/09 - 3/31/10)
Other
Regions

Japan

Total

Eliminations
andConsolidated
Corporate

1. Net sales, Operating income and expenses
Net sales(1) Sales to external customers

369,382

49,254

418,636-

418,636(2) Intersegment sales or transfers

31,85526,08957,944(57,944)-

Total
Operating expenses
Operating income (loss)
2. Assets

401,237

75,343

476,581(57,944)418,636

402,435

74,026476,462(55,645)

420,817(1,198)

1,316

118

(2,299)(2,180)665,51767,453732,971(36,619)696,351

Note: 1. National and regional categories are determined on the basis of geographic proximity.
2. Main countries and territories in other regions: U.S., Taiwan, Korea(3) Overseas sales(Millions of yen)
Year ended March 31, 2010 (4/1/09 - 3/31/10)
Overseas sales
Consolidated net sales
Proportion of overseas sales
in consolidated net sales (%)

Taiwan91,473

U.S.
55,640Korea
52,948Others55,965

Total
256,028
418,636

21.9

13.3

Note: 1. National and regional categories are determined on the basis of geographic proximity.
2. Main countries in others: Singapore, China, Israel
3. Overseas sales indicates net sales in countries and territories except Japan.

21

12.6

13.4

61.2