May 13, 2008

Financial Review for the Year Ended March 31, 2008
Company name:
URL:
Telephone number:
Stock exchange listing:Code number:Company representative:
Person-in-charge:
Due date of annual general shareholder's meeting
Due date of starting delivery of dividends
Due date of submitting of financial statement

http://www.tel.com(03) 5561-7000
Tokyo Stock Exchange 1st Section
8035
Kiyoshi Sato, President & COO
Yukio Saeki, Director, Accounting Department
June 20, 2008
May 30, 2008
June 20, 2008

For reference only: The accompanying financial statements have been prepared in accordance with accounting
principles and practices generally accepted in Japan.
Note: All figures are rounded down to the nearest million yen.
1. Financial highlights for the year ended March 31, 2008 (4/1/07- 3/31/08)(1) Operating results
Note: Percentages indicated changes from the previous fiscal year.
Net salesYear ended 3/31/08
Year ended 3/31/07

Ordinary income
Millions of yen%

172,713
143,940

20.0
89.5

Millions of yen%

Millions of yen

906,091
851,975

6.4
26.5

168,498
143,978

Millions of yen%

106,271
91,262

16.4
90.1

Reference:
Profit/loss on equity method:Year ended 3/31/08:
Year ended 3/31/07:

%
17.0
90.2

Fully
OrdinaryNet
Operatingdiluted net Return on income toincome perincome toequityincome per
total
share
net sales
shareassets
Yen
Yen
%
%
%

Net income

Year ended 3/31/08
Year ended 3/31/07

Operating income

594.01511.27592.71509.84

21.4
21.8

22.1
20.1

18.6
16.9

- million yen(1,441) million yen(2) Financial position
Total assets
As of 3/31/08
As of 3/31/07

Millions of yen
792,817770,513

Net assets
Millions of yen
545,244469,810

Reference:
Equity:As of 3/31, 2008
As of 3/31, 2007

534,953 million yen
460,175 million yen

1

Net assets
per share

Equity ratio
%
67.5
59.7

Yen
2,989.70
2,573.72

(3) Cash flow
Cash flow from Cash flow from
Cash and cash
investingfinancingequivalents at the end ofactivities
activities
the period
Millions of yen
Millions of yen
Millions of yen
Millions of yen
116,939(30,186)(27,033)
193,492
54,296(25,293)(34,719)
134,389

Cash flow fromoperating activities
Year ended 3/31/08
Year ended 3/31/07
2. Dividend

Dividend per share
Six months ended
Year ended(Base date)
Yen
Yen
Year ended 3/31/07
42.0
61.0
Year ended 3/31/08
70.0
55.0
Year ending 3/31/09(Forecast)
19.0
43.0

Total
dividend
Yen Millions of yen
103.0
18,401125.0
22,365

Total

62.0

PayoutDividendratio
on equity
%
%
20.1
4.4
21.0
4.5

20.2

-

-

3. Financial forecast for the year ending March 31, 2009 (4/1/08 - 3/31/09)
Note: Percentages for full business year indicated changes from the previous term, and for interim periodchanges from the previous interim period.
Net sales
Six months ending 9/30/08
Year ending 3/31/09

Millions of yen
300,000
700,000

Operating income%(37.0)(22.7)Net income
Six months ending 9/30/08
Year ending 3/31/09

Millions of yen
17,00055,000Millions of yen
26,00084,000%(72.6)(50.1)

Ordinary income
Millions of yen
28,00088,000%(70.8)(49.0)Net income per share%(72.8)(48.2)

Yen
95.01
307.38

4. Others
1) Important changes in subsidiaries. (Changes on specific subsidiaries with changes in scope of consolidation): None
2) Changes in principles, procedures and display of accounting method concerning consolidated statement policies.
(Listed as changes in basis of presentation of consolidated financial statement )①Changes in accounting policies: Yes②Other changes: None
3)Number of shares outstanding (common stock)①Number of shares issued as of :March 31, 2008 180,610,911 shares
March 31, 2007 180,610,911 shares②Number of shares of treasury stock as of:March 31, 2008 1,678,927 shares
March 31, 2007 1,812,976 shares

2

(Reference) Non-consolidated financial review for the year ended March 31, 2008
1. Financial highlights for the year ended March 31, 2008 (4/1/07 - 3/31/08)(1) Operating results
Note: Percentages indicated changes from the previous fiscal year.
Net salesYear ended 3/31/08
Year ended 3/31/07

Millions of yen
767,505
720,163

Operating income
%
6.6
25.9

Net income
Year ended 3/31/08
Year ended 3/31/07

Millions of yen
51,471
51,699Millions of yen
86,23371,045

Ordinary income
%
21.4
87.6

Net income per shareYen
287.71
289.63

%
(0.4)
76.7

Millions of yen
95,926
76,664

Fully diluted net income
per share
Yen
287.08288.81(2) Financial position

As of 3/31/08
As of 3/31/07

Total assets

Net assets

Millions of yen
598,762594,933

Millions of yen
354,607327,715

Equity ratio
%
59.1
55.0

Net assets
per shareYen
1,979.10
1,829.61

Reference:
Equity:As of 3/31, 2008
As of 3/31, 2007

354,123 million yen
327,130 million yen

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 stated in the
Financial Review.

3

%
25.1
71.0

Operating Results and Financial Conditions

1. Business Environment during the Fiscal Year Ended March 31, 2008
An overview of the trends in the world economy during the fiscal year indicates that the U.S.
economy began to show signs of slowing down in the second half of the year due to thedeterioration of the housing market, financial turmoil, and other irregularities triggered by the
subprime mortgage problem. In Asia, the Chinese economy maintained its high level ofgrowth, and the Taiwanese, South Korean and other economies continued to be brisk.
Japanese economy continued to slowly expand, backed by increased exports, improved
corporate earnings, and steady capital investments; but the future of the economy isincreasingly uncertain, in part because of chaotic financial markets worldwide as well as the
sharp rises in the prices of oil and raw materials.

In the electronics industry, in which the Company operates, mobile and informationequipment sectors (including digital home appliances, mobile phones, and PCs) further
expanded, due in part to the effects of growing demand among emerging economies
centered on the BRIC countries.

Capital investment in the semiconductor related industry,

which incorporates those electronic devices, continued to be robust.

2. Overview of Profits and Losses during the Fiscal Year Ended March 31, 2008
Given this business environment, the Company continued to actively introduce and increase
sales of highly functional products using cutting-edge technology, and new records were set
for both revenue and profit margins. Profits and losses for the fiscal year are as described
below.

Consolidated net sales for the fiscal year grew 6.4% compared to the previous fiscal year, to906,091 million yen.

By region, sales of semiconductor production equipment in Taiwan,

Japan, and the U.S. continued to the strong.

As a result, domestic net sales rose 3.2%, to323,946 million yen, and overseas net sales increased 8.2%, to 582,145 million yen, withoverseas net sales accounting for 64.2% of consolidated net sales.

Consolidated orders

fell 23.8%, to 744,781 million yen, and consolidated backlogs of orders dropped 33.2%, to324,963 million yen.

Cost of sales for the fiscal year rose 2.7%, to 594,794 million yen, and gross profit increased
14.2%, to 311,297 million yen.

As a result, gross profit margin grew by 2.4 percentage

points, to 34.4%.

4Selling, general, and administrative (SG&A) expenses rose 11.0%, to 142,799 million yen,with their ratio to net sales increasing from 15.1% in the previous fiscal year to 15.8%.

As a result, operating income increased 17.0%, to 168,498 million yen.

Ordinary income

increased by 20.0%, to 172,713 million yen, with non-operating income and expenses at
5,131 million yen and 916 million yen, respectively.

In terms of margins, the operating

income margin grew by 1.7 percentage points, to 18.6%, and the ordinary income marginrose by 2.2 percentage points, to 19.1%.

During the fiscal year, the Company posted an extraordinary loss of 3,493 million yen,
compared to the extraordinary profit of 473 million yen in the previous fiscal year.

Income before income taxes for the fiscal year was 169,219 million yen, a 17.2% increaseover the previous fiscal year, and net income was 106,271 million yen, a 16.4% increase.

As a result, net income per share was 594.01 yen (511.27 yen for the previous fiscal year).

3. Overview of Operations during the Fiscal Year Ended March 31, 2008 by Business
Segment(1) Industrial Electronic Equipment Business
Due to strong sales of semiconductor production equipment, which is a key segment of theCompany, net sales from external customers for this segment during the fiscal year grew
6.8% compared to the previous fiscal year, to 794,910 million yen.

(a) Semiconductor production equipment
The need for semiconductors’ memory chips has increased dramatically due to the larger
capacity of DRAMs used for PCs and other devices and the use of flash memory chips for awider range of applications because of the enhanced functions of information andcommunications equipment (including mobile phone handsets).

Manufacturers of

cutting-edge semiconductors are actively involved in strategic capital investments, mainly toreinforce advanced processes for further circuit miniaturization and integration and 300-mm
wafer mass-production lines.

As a result, sales of the Company’s semiconductor

production equipment during the fiscal year continued to be strong, as in the previous fiscal
year.

Orders slowed down in the second half of the year due to sharp falls in the price ofsemiconductor memory, but the high level of backlogs of orders at the beginning of the fiscal
year contributed to sales chiefly during the first half of the year.

5This and other factors

boosted consolidated net sales for this segment by 13.0%, to 726,439 million yen, which isan all-time high.

By equipment type, sales of major products such as coater/developer systems, etchsystems, thermal processing systems, CVD systems, and cleaning systems achieved highgrowth, backed by semiconductor memory manufacturers’ strong appetite for capital
investments.

The Company, meanwhile, added new items to its product lineup, such as

the high-productivity thermal processing system TELINDYTM and the metal CVD system
TriasTM for next-generation contact applications, and introduced into the market the newhigh-performance, high-productivity single-wafer cleaning system CELLESTATM +.

(b) FPD production equipment
Due to the deterioration of the supply-demand balance for panels during the past year, theFPD production equipment market, which had experienced a high level of demand in theprevious fiscal year, underwent a temporary market correction.

As a result, consolidated

net sales for this segment during the fiscal year decreased by 32.5%, to 68,016 million yen.
Meanwhile, the market for flat-panel TV sets, PCs, and monitor equipment continued toachieve substantial growth, which reflected the continued recovery of the market for LCD
panels used for these devices. In this environment, manufacturers of leading-edge panels
planned to make large-scale capital investments this summer and thereafter in order to offer
larger and flatter panels that provide higher definition images and reduce power
consumption.

In this backdrop, this segment received a high level of orders, which would

lead directly to sales during the next fiscal year.

(c) Others
Consolidated net sales for this segment during the fiscal year decreased by 59.4%
compared to the previous fiscal year, to 454 million yen.

(2) Electronic Components and Computer Networks Business
The Company, which positions “industrial equipment” as the strategic priority market in thissegment, focused on sales of high-value-added devices such as custom andgeneral-purpose ICs (analog ICs), strove to expand consigned design services, and steppedup efforts to develop its own products (under the brand name “Inrevium”).

With respect tocomputer systems and networks and IT-related software, the Company made efforts tostrengthen its sales and maintenance service capabilities in order to provide customers withsolutions that optimally suit their corporate strategies.

6

In terms of development ofoperational bases, Tokyo Electron Device Limited, which is a consolidated subsidiary of theCompany, established its Singaporean subsidiary in January 2008 to bolster sales
structures in the ASEAN region and its domestic subsidiary in February 2008, in order to
upgrade its product lineups to meet customer needs and establish firm supply structures.

As a result, net sales from external customers in this segment during the fiscal year grew
3.5% compared to the previous fiscal year, to 111,181 million yen.

(For reference）
Consolidated

Net Sales
Industrial Electronic Equipment
Semiconductor Production Equipment
Japan
U.S.
EuropeKorea
TaiwanChina
S.E.Asia
ＦＰＤ Production Equipment
OthersElectronic Components & Computer Networks
Operating Income
Ordinary Income
Net Income

1Q
212,494
187,318
165,785
31,614
21,111
7,922
21,43262,517
13,848
7,338
21,400132
25,17543,034
41,17526,192

2Q
263,883
235,787
213,465
63,01531,367
6,524
19,68979,417
6,677
6,773
22,200121
28,09551,97054,62036,270First
Half
476,377
423,106
379,251
94,62952,47914,447
41,122
141,934
20,525
14,11243,600254
53,271
95,005
95,79562,463(Note)
Offset elimination has been carried out on the dealing between segments.

73Q
199,837
170,857
160,739
52,24822,302
4,157
15,581
53,6394,188
8,620
10,04869
28,98038,49939,76125,6004Q
229,876
200,947
186,449
45,05533,92518,324
16,50859,3985,150
8,086
14,367130
28,92934,99337,155
18,207

SecondFull YearHalf
429,714 906,091
371,804 794,910
347,188 726,439
97,304 191,934
56,228 108,708
22,48236,92932,08973,212
113,037 254,972
9,338
29,864
16,70730,81924,41568,016199
454
57,909 111,181
73,492 168,498
76,917 172,713
43,807 106,271（Millions of yen）
Year ended
March 31,851,975
744,512642,625
175,731
105,61347,963
106,168
141,794
29,65035,702
100,766
1,120
107,462
143,978
143,940
91,262

4. Projected Operating Results for the Next Fiscal Year Ending March 31, 2009
The future of the economic environment is becoming increasingly uncertain due tounfavorable developments triggered by the subprime mortgage problem in the United States.
The semiconductor-related markets are beginning to level off as the prices of DRAMs andflash memory chips are falling and their inventories are being adjusted, and semiconductor
manufacturers are expected to take a cautious stance when making investments in plantand equipment.

Under these circumstances, the Company continues to concentrate on

efforts to promote technological development and strengthen manufacturing capabilities forthe next phase of growth.

Financial forecasts for the next fiscal year are as follows.

Consolidated forecast
Net Sales Industrial Semiconductor Production Equipment
Electronic FPD Production Equipment
Equipment Others
Total
Electronic Components & Computer Networks
Total
Operation Income
Ordinary Income
Net Income

8(Billions of yen, Y/Y change)
InterimFull Year
208.0-45.2%
496.0-31.7%
38.0-12.8%
90.0
32.3%
0.5
96.2%
1.0
119.9%
246.5-41.7%
587.0-26.2%
53.5
0.4%
113.0
1.6%
300.0
-37.0%
700.0-22.7%
26.0-72.6%
84.0-50.1%
28.0-70.8%
88.0-49.0%
17.0-72.8%
55.0-48.2%

5. Financial Conditions and Cash Flow
(1) Financial Conditions
Current assets as of the end of the fiscal year grew by 29,870 million yen from the end of theprevious fiscal year, to 640,233 million yen. Major factors included an increase in cash on
hand (cash and cash equivalents, and certificate of deposit) of 69,173 million yen and adecrease in inventories of 33,688 million yen. In conjunction with revisions to the Accounting
Guidelines for Financial Instruments and other instructions, certificate of deposit will be
moved from “cash and cash equivalents” to “securities” effective as of the end of theconsolidated interim period.

Tangible fixed assets decreased by 824 million yen from the end of the previous fiscal year,
to 104,105 million yen.

Intangible fixed assets decreased by 6,145 million yen from the end of the previous fiscal
year, to 13,253 million yen.

Investments and other assets decreased by 596 million yen from the end of the previous
fiscal year, to 35,224 million yen.

As a result, total assets increased by 22,303 million yen from the end of the previous fiscal
year, to 792,817 million yen.

Current liabilities fell by 27,034 million yen from the end of the previous fiscal year, to
198,820 million yen.

Major factors included a decrease in trade notes and accounts

payable of 28,505 million yen, a decrease in income taxes payable of 17,418 million yen, adecrease due to redemption of the fifth issue of unsecured corporate bonds with
subscription rights worth 5,500 million yen, and an increase from a transfer from long-term
liabilities of the 11th issue of unsecured corporate bonds that will reach maturity within one
year that are worth 30,000 million yen.

Long-term liabilities fell by 26,095 million yen from the end of the previous fiscal year to
48,752 million yen, mainly as a result of the transfer to current liabilities of the 11th issue of
unsecured corporate bonds worth 30,000 million yen that will reach maturity within one year.

Shareholders’ equity increased by 83,683 million yen from the end of the previous fiscal year,
to 532,850 million yen as a result of an increase due to net income for the fiscal year of9

106,271 million yen and a decrease due to dividends from surplus earnings of 23,431 million
yen.

Net assets––determined by adding valuation and translation adjustments, subscription
rights to shares, and minority interests––increased by 75,434 million yen from the end of theprevious fiscal year, to 545,244 million yen.

The equity ratio was 67.5%.

(2) Cash Flow
Cash flow from operating activities during the fiscal year was 116,939 million yen, 62,642
million yen higher than the previous fiscal year.

Major positive factors included net income

before income taxes of 169,219 million yen, depreciation and amortization of 21,413 million
yen, and a decrease in inventories of 28,342 million yen.

The major negative factors werea decrease in accounts payable of 27,373 million yen and the payment of income taxes of
73,721 million yen.

Cash flow from investing activities was 30,186 million yen, the result primarily of purchase of
tangible fixed assets worth 19,338 million yen and a net increase in time deposits of 10,070
million yen.

Cash flow from financing activities was 27,033 million yen, chiefly the result of redemption of
the fifth issue of unsecured corporate bonds with subscription rights worth 5,500 million yen
and the payment of dividends of 23,431 million yen.

As a result, the balance of cash and cash equivalents at the end of the fiscal year increased
59,103 million yen, to 193,492 million yen, as compared to 134,389 million yen at the end of
the previous fiscal year.

The cash flow index trend is as follows.

Fiscal year ended
March 31, 2007

Fiscal year ended
March 31, 2008

Equity ratio (%)

59.7

67.5

Equity ratio at market value (%)

191.2

136.8

Debt redemption period (number of years)

0.7

0.3

119.90335.66

Interest coverage ratio (times)

10Equity ratio: (Equity / Total assets) x 100
Equity ratio at market value: (Market capitalization / Total assets) x 100
Debt redemption period: 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.
* Market capitalization is calculated based on the following formula: Closing stock price at
fiscal year-end x 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 forwhich the Company is paying interest among the liabilities reported on the consolidatedbalance sheet.

Interest expenses correspond to the interest paid in the consolidated

statement of cash flow.

6. 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 performanceand earnings on an ongoing basis. Its basic policy for returning profits to shareholders is tomaintain a payout ratio of around 20% based on consolidated net income.

In order to expand the Company’s business scope, internal capital reserves are usedeffectively for research and development, capital investment, and global businessexpansion. The priority is also placed on sound cash flow management and earnings
growth in order to respond to the support provided to the Company by shareholders.

Based on the basic profit allocation policy described above, taking into consideration its
performance for the current fiscal year and the shareholder-focused policy, the Company will
pay a dividend of 55 yen per share at the end of the fiscal year ended March 31, 2008 (125
yen for the whole year if the interim dividend of 70 yen is included––22 yen more than for theprevious fiscal year).

As a result, the payout ratio based on consolidated financial results is

21.0%.

For the next fiscal year ending March 31, 2009, based on the outlook described above, theCompany plans to pay a dividend of 62 yen per share for the whole year (19 yen for interim

11dividends and 43 yen for year-end dividends).

The consolidated payout ratio is expected to

be 20.2%.
7. Business-related and Other Risks
The following are possible risks that may have an impact on the Company’s operating
results, stock prices, or financial position.

(1) Impact of Fluctuating Foreign Exchange Rates
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 ona yen-basis in order to avert exchange-related risks, but there are some exports involving
foreign currency.

In these cases, the Company employs an exchange risk hedge, such asa forward exchange contract at the time an order is placed. However, since for overseas
customers, exchange-related risks can arise from fluctuations in prices due to drastic
exchange fluctuations, this may have an indirectly negative impact on the Company’s
performance.

(2) Impact from Research and Development
The Company has created cutting-edge technologies through its ongoing implementation ofproactive R&D investment and activities, including miniaturization, vacuum, plasma,thermal-processing, coating/developing, cleaning, wafer-transfer, and clean technologies.
By promptly introducing new products on the market that are equipped with thesetechnologies, 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 theill-timed introduction of new products may have a negative impact on the Company’s
performance.

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

The semiconductor

market may enjoy broad growth through technological change, while on the other hand, thesize of the market may temporarily contract due to an imbalance of supply and demand.
Therefore, the Company has been actively involved in business structural reforms to be able
to generate profit even when such rapid changes take place.

However, the possibility 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, or12increased inventories.

(4) 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 with superior, cutting-edge technology and offering a service system withhigh customer satisfaction.

However, since the Company’s net sales may at times be

temporarily concentrated on particular customers due to the timing of large-scale capital
investments by major semiconductor manufacturers, there is the possibility of a negative
impact on business results from intensified sales competition.

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

In accordance with this basic principle, the Company is making an active andcontinued 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 someother 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 theCompany.

(6) Impact from Quality Issues
The Company has been proactively developing superior, cutting-edge technologies utilized
in new products that 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 a world-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 businessresults may be negatively affected by the unforeseen appearance of defective products.

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

13

proprietary technologies, thereby successfully ensuring a large market share and high profit
margin in each product field.

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

(8) Other Risks
The Company has been active in creating new high-growth and high-revenue businesses,
pursuing even higher revenue in existing businesses, and improving its structure so that it
can earn profits even as the market 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 othercompanies in the same or different industries - to the impact from factors that include theglobal 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 such factors.

Note: The financial forecasts and estimates stated in this interim financial review are basedon certain assumptions judged to be reasonable at the present time in light of information
currently available concerning economic conditions in Japan and overseas, fluctuations inforeign 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), andglobal conditions in the semiconductor production equipment business.

Consequently,

actual sales and profits may differ substantially from the projections stated in this financial
review.

14

Management Policy

1. Basic Management Policy
The basic management policy of Tokyo Electron Limited (the Company) is to increase its
corporate value continuously even in any business environment by working to implement
four fundamental management initiatives: (1) a policy of placing customers first; (2)strengthening its product development and technology development capabilities; (3)invigorating its employees; and (4) profit-oriented operations.

Under this policy, the Company intends to promote efforts for creating a powerful, vibrantcompany with high global competitiveness, high growth, and high profitability, and make its
stock attractive to investors.

2. Management Tasks
The Company has gained a high level of trust from customers and has established a strong
reputation by providing products with state-of-the-art technologies and comprehensive
after-sales technical support.

It has also contributed to worldwide growth of thesemiconductor-related industries as a market leader.

Semiconductors and flat panel displays are found not only in PCs and mobile phones, but inmost everyday electronics devices, whether TVs, audio players, automotive devices, orhousehold electric appliances.

The use of these products has also begun expanding inemerging economies (including the BRIC countries) and rapid market growth is expected tocontinue.

Meanwhile, expectations towards equipment manufacturers such as ourselves from device
manufacturers, which are our customers, have diversified more than ever, not only withrespect to the supply of equipment and after-sales support but also for the development ofdevice manufacturing processes and other areas.

As a result, it is essential that theCompany continue to release production equipment that incorporates differentiation
technology capable of exhibiting process, mass-production, and energy-saving performanceat high levels.

Under these circumstances, the Company recognizes that responding flexibly and15

appropriately to the pace of change in markets and customer needs as well as the businessenvironment while taking measures to reinforce business foundations, expand the scope ofbusiness, and improve profitability are key management tasks.

To deal with such issues, the Company will reinforce technology and development activities
in major product areas and continue to market highly-competitive new products. We will
also work to reinforce manufacturing capabilities by improving product quality, reducing
manufacturing periods, and cutting manufacturing costs. In addition to those measures,
the Company will also focus on discovering and developing new fields that can become corebusinesses in the future and actively promoting businesses that propose solutions in areas
related to equipment.

With respect to finances, the Company will work to promptly collect accounts receivable andto keep inventory at a proper level, with the aim of maximizing cash flows to build thefoundations for robust future growth.

16Consolidated Balance Sheet
As ofMarch 31, 2007

As ofMarch 31, 2008

AmountAmount(Millions of yen)
Increase(Decrease)
Amount(%)(Assets)
Current assets

610,363

640,233

29,8704.9

134,389
228,68819
194,840
28,32524,225(127)

67,540224,170
136,022
161,151
24,14027,271(62)

160,150

152,584(7,566)(4.7)

Tangible fixed assets
Buildings and structures
Machinery and carriers
Tools, furniture and fixtures
Land
Construction in progress

104,930
52,935
18,263
7,174
20,495
6,061

104,105
52,297
18,4298,449
20,729
4,199

(824)

(0.8)

Intangible fixed assets
Goodwill
Others

19,3996,400
12,99813,253727
12,525(6,145)(31.7)

Investments and other assets
Investment securities
Deferred income taxes
OthersAllowance for doubtful accounts

35,821
14,642
13,6917,784(297)

35,224
8,837
14,846
11,843
(301)

(596)

(1.7)

770,513792,817

22,303

2.9

Cash and cash equivalents
Trade notes and accounts receivable
Securities
Inventories
Deferred income taxes
OthersAllowance for doubtful accounts
Long-term assets

Total assets

17

Consolidated Balance Sheet
As ofMarch 31, 2007

As ofMarch 31, 2008

AmountAmount(Millions of yen)
Increase(Decrease)
Amount(%)(Liabilities)
Current liabilities

225,854

198,820(27,034)(12.0)

83,8375,500
45,657
14,131
14,11462,61455,33230,00028,23912,726
9,815
62,706

74,84848,752(26,095)(34.9)

30,00040,0184,829

43,704
5,047

300,702247,572(53,130)(17.7)

Shareholders' equity
Common stock
Capital surplus
Retained earnings
Treasury Stock
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Translation adjustments
Subscription rights to shares
Minority interests

449,166
54,961
78,346
328,026(12,167)
11,008532,850
54,961
78,392
410,866(11,369)
2,102

83,68318.6(8,905)(80.9)

5,853
(177)
5,332
584
9,051

2,172
460
(529)
483
9,807

(100)
756

(17.2)
8.4

Total net assets

469,810545,244

75,434

16.1

Total liabilities and net assets

770,513792,817

22,303

2.9

Trade notes and accounts payable
Bonds due within 1 year
Income taxes payable
Accrued employees' bonuses
Accured warranty expenses
OthersLong-term liabilities
Straight bonds
Accrued pension and severance costs
OthersTotal liabilities(Net assets)

18

Consolidated Statement of Income
Year ended
March 31, 2007

Year ended
March 31, 2008

(Millions of yen)
Increase(Decrease)

AmountRatio tonet sales

AmountRatio tonet sales

AmountNet sales
Cost of sales
Gross profit

851,975
579,325
272,649

100.0
68.0
32.0

906,091
594,794311,297

100.0
65.6
34.4

54,116
15,46838,648

6.4
2.7
14.2

Selling, general & administrative expenses
Operating income

128,670
143,978

15.1
16.9

142,799
168,498

15.8
18.6

14,12824,519

11.0
17.0

19.1

28,772

20.0

18.7
6.3
0.6
0.1
11.7

24,80517.2

15,00816.4

Non-operating income
Interest income
Revenue from development grants
OthersNon-operating expenses
Interest expenses
Lease expenses of fixed assets
Foreign currency translation loss
Loss on equity method
OthersOrdinary income
Unusual or infrequent profit
Gain on sale of fixed assets
Gain on sale of investments in securities
Gain on sale of stocks of consolidated companies
Gain on reversal of subscription rights to shares
OthersUnusual or infrequent loss
Loss on proceeds or disposal of fixed assets
Loss on impairment
Amortization of goodwill
Head office relocation expenses
Loss on equity method
OthersIncome before income taxes
Provision for income taxes and enterprise taxes
Deferred income taxes
Minority interest
Net income

819
2,640
1,448

1,416
2,170
1,544

420
169
3,374
585
395
143,940

343
240
27
304
172,713

16.9

416
1,225
528
526
24

2,364
135
466
53

834
856
557

884
808
4,072
729
18

144,41460,132(7,534)553
91,262

19

17.0
7.1
(0.9)
0.1
10.7

169,219
56,5685,373
1,005
106,271(%)

Consolidated Statements of Net Assets(Millions of yen)

4/1/06-3/31/07
Shareholders' equity
Commonstock
Balance 3/31/06

Capitalsurplus78,07854,961Retainedearnings

Total
shareholders'equityTreasurystock(15,116)

249,938

367,861

Net increase/decrease during
the term under the review
Cash dividends(12,843)(12,843)

(331)

(331)

91,262

91,262

Bonuses to directors andstatutory auditors
Net income
Repurchases of treasury stocks
267

Disposal of treasury stocks
Net increase/decreaseduring the term
Total increase/decrease during
the term under the review
Balance 3/31/07

(64)

(64)

3,013

3,281

-

267

78,0882,949

81,30554,961

78,346

328,026(12,167)

449,166

Valuation and Translation Adjustments
Valuationdifference on
available-forsale securities

Balance 3/31/06

5,117

Deferred
gains orlosses onhedgesTranslation
adjustment

Total

Subscription
rightsto shares

3,921

9,038

1,013

-

Minority
interests

Total net
assets

4,721

382,635

Net increase/decrease during
the term under the review(12,843)

Cash dividends
Bonuses to directors andstatutory auditors(331)

Net income

91,262

Repurchases of treasury stocks(64)

Disposal of treasury stocks
Net increase/decreaseduring the term
Total increase/decrease during
the term under the review
Balance 3/31/07

3,281
735

(177)

1,411

1,969

(429)

4,329

5,869

735

(177)

1,411

1,969

(429)

4,329

87,175

5,853

(177)

5,332

11,008584

9,051

469,81020

Consolidated Statements of Net Assets(Millions of yen)

4/1/07-3/31/08
Shareholders' equity
Commonstock
Balance 3/31/07

Capitalsurplus54,961Retainedearnings

78,346

Total
shareholders'equityTreasurystock

328,026(12,167)

449,166

Net increase/decrease during
the term under the review
Cash dividends(23,431)(23,431)

Net income

106,271

106,271

Repurchases of treasury stocks
Disposal of treasury stocks

45

Net increase/decreaseduring the term
Total increase/decrease during
the term under the review
Balance 3/31/08

(40)

(40)

838

884

-

45

82,840797

83,68354,961

78,392

410,866(11,369)

532,850

Valuation and Translation Adjustments

Balance 3/31/07

Valuationdifference on
available-forsale securities

Deferred
gains orlosses onhedgesTranslation
adjustment

5,853

(177)

5,332

Total

Subscription
rightsto shares

Minority
interests

Total net
assets

11,008584

9,051

469,810Net increase/decrease during
the term under the review
Cash dividends(23,431)

Net income

106,271

Repurchases of treasury stocks(40)

Disposal of treasury stocks

884

Net increase/decreaseduring the term
Total increase/decrease during
the term under the review
Balance 3/31/08(3,680)637(5,862)(8,905)

(100)

756

(8,249)(3,680)637(5,862)(8,905)

(100)

756

75,434

2,172

460

(529)

2,102

483

9,807

545,24421

Consolidated Statement of Cash Flows(Millions of yen)

Year ended
Year ended
March 31, 2007 March 31, 2008
Amount
I

II

III

IV
V
VI
VII

AmountIncrease(Decrease)
AmountCash flow from operating activities
Income before income taxes
Depreciation and amortization
Loss on impairment
Amortization of goodwill
Increase in accrued pension and severance costs (decrease)
Decrease in prepaid pension expenses (increase)
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 equity method
Loss on sale of fixed assets (gain)
Loss on disposal of fixed assets
Loss on sale of investment securities (gain)
Gain on sales of stocks of consolidated companies
Head office relocation expenses
Gain on reversal of subscription rights to shares
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)
OthersSubtotal
Receipts from interest and dividends
Interest paid
Income taxes paid
Net cash generated by operating activities

144,414
18,820
1,974
1,975
(965)
3,900
1,613
(910)
420
519
1,441
(302)
719
(1,225)(528)(526)(58,352)(31,584)
17,236(1,774)(12,459)
7,274
91,681
853(452)(37,785)
54,296

169,219
21,413
808
5,672
3,754
(4,035)(1,404)(4,322)(1,491)343
694(2,332)
852
(135)
729
(466)
2,473
28,342(27,373)(1,446)2,130(3,789)189,6371,372(348)(73,721)116,939

24,805
2,592
808
3,698
1,779
(3,069)(5,304)(5,936)
(580)
(77)
174
(1,441)(2,030)
132
1,090
528
729
59
60,82559,927(44,609)328
14,589(11,064)
97,955518
104(35,936)
62,642

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 acquisition of intangible fixed assets
Proceeds from sale of investment securities
Payment for acquisition of consolidated companies
Proceeds from sales of stocks of consolidated companies
Loans to third parties
OthersNet cash used in investing activities(30,000)
30,000(25,153)
1,068(2,462)
2,460(4,524)
4,168
(388)
(462)
(25,293)(44,070)
34,000(19,338)
4,270(4,041)
150
(288)
(868)
(30,186)(14,070)
4,000
5,815
3,201
(1,579)(2,309)4,524(4,168)99(406)(4,892)

Cash flow from financing activities
Net increase in short-term borrowings (decrease)
Repayment of long-term borrowings
Redemption of straight bonds
Net decrease in treasury stock (increase)
Dividends paid
OthersNet cash generated by financing activities(404)(24,500)
3,216(12,843)(188)(34,719)

4,351(3,000)(5,500)843(23,431)(297)(27,033)

4,755(3,000)19,000(2,373)(10,587)
(108)
7,685

Foreign currency translation difference in cash and cash equivalents
Net increase in cash and cash equivalents (decrease)
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period

81(5,634)140,023
134,389(617)
59,103
134,389
193,492(698)
64,737(5,634)
59,10322

Segment Information
Information by business segment(Millions of yen)
Year ended March 31, 2008 (4/1/07 - 3/31/08)
Industrial
electronicequipment

Electronic
components
and computer
networks794,910111,181906,091

-

1,117

947

2,064

(2,064)

796,027

112,128

908,156(2,064)

906,091

631,220

108,470739,690(2,096)

737,593

164,807

3,658

168,46631

168,498744,280

51,458795,738(2,921)

792,817

26,720364

27,085-27,085

808

-

808

27,847-

27,847

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
2. Assets, depreciation expenses, loss on impairment
and capital expenditure
AssetsDepreciation expenses
Loss on impairment

808

Capital expenditure

26,923924

906,091-

Note: 1. Method of classifying businesses: Businesses are classified after considering similarities in type of product,function, or method of sale.
2. Major products in each business segment:
Business segment

Major products

Industrial electronic equipment

Semiconductor production equipment, FPD production equipment, other

Electronic components and computer networks

Semiconductor products, computer systems and networks, middlewareand software, other electronic components

3. Depreciation expenses and capital expenditure include long-term prepaid expenses and its depreciation.

23

Segment Information
Information by geographic segment(Millions of yen)
Year ended March 31, 2008 (4/1/07 - 3/31/08)
Japan

Other
regions

Total

Eliminations
andConsolidated
corporate

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

806,193

99,898906,091-(2) Intersegment sales or transfers

71,95954,186

126,146(126,146)

878,153

154,084

1,032,237(126,146)

906,091

Operating expenses

718,192

142,760

860,953(123,359)

737,593

Operating income

159,960

11,324

171,284(2,786)

168,498

752,739

80,363

833,102(40,284)

792,817Total

2. Assets

Note: 1. National and regional categories are determined on the basis of geographic proximity.
2. Main countries and territories in other regions: U.S., Europe, South Korea

24

906,091-

Executive Change (Effective June 20, 2008)
Candidate for Corporate Director
Masahiro Sakane (current Chairman of the Board at Komatsu Ltd.)(Note) Mr. Masahiro Sakane is a candidate for external corporate director as stipulated in Article
2 Item 5 of the Company Law.

25