Use these links to rapidly review the documentTABLE OF CONTENTS PART IV Table of Contents

---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED JUNE 30, 2003

Commission file number 0-20839

DUPONT PHOTOMASKS, INC.(Exact name as specified in our charter)

|Delaware
(State or Other Jurisdiction of Incorporation or Organization) |  | 74-2238819
(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------- |  | -----------------------------------------------

131 Old Settlers Boulevard
Round Rock, Texas 78664(Address of our principal executive offices)

Our
telephone number, including area code: (512) 310-6500

Securities
registered pursuant to Section 12(b) of the Act None

Securities
registered pursuant to Section 12(g) of the Act: Common stock ($.01 par value)
Preferred share purchase rights

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past
90 days.    Yes ý    No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.    o

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    Yes ý    No o

Aggregate
market value of voting stock held by nonaffiliates as of December 31, 2002, was approximately $418.4 million. As of September 5, 2003, 18,129,932 shares of the
common stock, $.01 par value, were outstanding.

Documents Incorporated by Reference(Specific pages incorporated are indicated under the applicable Item herein):

|                                                                                     |  | Incorporated by
Reference in Part No.
|------------------------------------------------------------------------------------ |  | -------------------------------------
|Our proxy statement filed in connection with our 2003 Annual Meeting of Stockholders |  | III                                  

---

---

---

DUPONT PHOTOMASKS, INC.

Unless otherwise indicated, "we," "us" and "our" mean DuPont Photomasks, Inc. and "DuPont" means E. I. du Pont de Nemours and Company or one of its
subsidiaries. We have licensed from DuPont use of the tradename "DuPont" and the DuPont in Oval logo. All other trademarks or tradenames referred to in this document are the property of their
respective owners. References in this document to "$" or "dollars" are to United States of America, or U.S., currency. Our fiscal year ends June 30.

TABLE OF CONTENTS



|         |          |  |                                                                                       | Page
|-------- | -------- |  | ------------------------------------------------------------------------------------- | ----
|PART I   |          | 
|         | Item 1.  |  | Business                                                                              |     
|         | Item 2.  |  | Properties                                                                            |     
|         | Item 3.  |  | Legal Proceedings                                                                     |     
|         | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |     
|PART II  |          | 
|         | Item 5.  |  | Market for Our Common Equity and Related Stockholder Matters                          |     
|         | Item 6.  |  | Selected Financial Data                                                               |     
|         | Item 7.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |     
|         | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                            |     
|         | Item 8.  |  | Financial Statements and Supplementary Data                                           |     
|         | Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |     
|         | Item 9A. |  | Controls and Procedures                                                               |     
|PART III |          | 
|         | Item 10. |  | Directors and Executive Officers                                                      |     
|         | Item 11. |  | Executive Compensation                                                                |     
|         | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                        |     
|         | Item 13. |  | Certain Relationships and Related Transactions                                        |     
|         | Item 14. |  | Principal Accountant Fees and Services                                                |     
|PART IV  |          | 
|         | Item 15. |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |     
|         |          |  | Signatures                                                                            |     

Note on Incorporation by Reference

Throughout this report, various information and data are incorporated by reference to portions of our 2003 annual meeting and proxy statement. Any reference in
this report to disclosures in our 2003 annual meeting and proxy statement shall constitute incorporation by reference of that specific material into this Form 10-K.

i

---



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, that involve a number of risks and uncertainties. Such forward looking statements are generally accompanied by words such as "intend," "may,"
"plan," "expect," "believe," "should," "would," "could," "anticipate," or other words that convey uncertainty of future events or outcomes. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by the
forward-looking statements. Such risks and uncertainties include, without limitation, the following:



These
risks and uncertainties are beyond our control and, in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those
indicated by the forward-looking statements.

The
forward-looking statements are made as of the release date hereof, and we disclaim any intention or obligation to update or revise any forward-looking statements or to update the
reasons why the actual results could differ materially from those projected in the forward-looking statements, whether as a result of new information, future events or otherwise.

ii

---



PART I

Item 1. Business

The Company

We are a leading global provider of microimaging solutions. We develop and produce advanced photomasks, a key enabling technology used in the manufacture of
semiconductor and other microelectronic devices. We also develop electronic design automation, or EDA, software. We were incorporated in Texas on June 25, 1985, and were reincorporated in
Delaware on December 31, 1995. Our principal executive offices are located at 131 Old Settlers Boulevard, Round Rock, Texas 78664, and our telephone number at this location is
(512) 310-6500. Our website is located at http://www.photomask.com. We make available free of charge through our website our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after we electronically file such material, or furnish it to, the SEC. The information contained or incorporated in our website is not part of this
document.

Photomasks

We are one of the largest photomask manufacturers in the world. Photomasks are high-purity quartz or glass plates containing precision images of
integrated circuits and are used as masters by semiconductor manufacturers to optically transfer these images onto semiconductor wafers. Photomasks are a necessary component in the production of
semiconductors, and advanced photomask technologies are critical to enabling the manufacture of increasingly complex semiconductor devices. We manufacture a broad range of photomasks based on
customer-supplied design data, including photomasks that meet the highly demanding design specifications required by
leading semiconductor manufacturers. We believe that our focus on developing photomasks for leading edge semiconductor designs using our advanced photomask manufacturing processes provides us with a
competitive advantage.

During
fiscal 2003, we sold our products to over 400 customers and customer sites in more than 20 different countries. Based on revenue, our top 20 customers during fiscal 2003 were:
Agere Systems, AMD, AMI, Atmel, Chartered Semiconductor, Cypress, Hewlett-Packard, Hynix, IBM, Infineon, LSI Logic, Maxim Integrated Products, Micron Technology, Motorola, National Semiconductor,
Philips, Samsung, STMicroelectronics, Texas Instruments and UMC.

A
key element of our strategy is to continue to develop and expand our strategic relationships with leading semiconductor manufacturers. These strategic relationships take on many forms,
including individual joint development programs with customers such as Cypress and Xilinx to joint venture relationships such as the Advanced Mask Technology Center GmbH & Co. KG, or AMTC, our
photomask research and development joint venture with AMD and Infineon. These collaborative relationships enable us to share the cost of developing leading-edge photomask technology and
expand our customer relationships through, in most cases, supply agreements. We believe that our strategic relationships will help us to solidify our market position and provide us the opportunity to
remain a leading supplier of advanced photomasks.

We
have a global manufacturing network with manufacturing facilities in seven countries in North America, Europe and Asia. We believe that the strategic location of our facilities
provides us with a competitive advantage by placing us close to major centers of semiconductor production.

Electronic Design Automation Software

In March 2002, we acquired the assets of BindKey Technologies, Inc., or BindKey, an EDA, or electronic design automation, software company.
Integrated circuit, or IC, design engineers use EDA software to design an IC, which can then be transferred onto our photomasks. We recently introduced, with selected beta site customers, software
tools that enhance the manufacturability of leading edge ICs. We believe our EDA software, which is focused on design for manufacturability, or DFM, will significantly reduce the design cycle time of
ICs. Furthermore, we plan to introduce new products that are designed to enhance manufacturing yields by creating IC designs that are intended to simplify the manufacturing process.

1

---

We
believe that continued increases in the complexity and cost of IC designs will require advanced EDA tools such as those we are developing. We intend to increase our focus on the
development of integrated microimaging solutions which will help solve next generation IC design problems by incorporating insight from leading-edge photomask development into EDA tools.

Industry Background

Integrated circuit designs consist of a series of separate patterns, each of which must be transferred onto a different photomask. The resulting series of
photomasks is then used to successively image the circuit patterns onto the semiconductor wafer. As a result, photomasks are a necessary component in the typical production of semiconductors.
Furthermore, as the semiconductor industry continues to build smaller and more powerful integrated circuits, advanced photomask technologies such as phase shift masks and photomasks designed with
optical proximity correction features, have become critical.

Historically,
photomasks were generally designed and manufactured internally by semiconductor manufacturers in captive production facilities. However, over time, the vast majority of
semiconductor manufacturers have divested their captive photomask operations and chosen to rely on merchant photomask manufacturers for their photomask needs. This trend was accelerated by a number of
factors, including the increasing complexity and pace of technological change in the photomask industry, the emergence of reliable merchant photomask manufacturers and a trend by semiconductor
manufacturers to focus capital resources on their core business.

As
a result of the increasing use of advanced photomask technologies and the captive to merchant supply trend, the available market for merchant photomask manufacturers like us has grown
substantially. According to an industry source, the total worldwide market for photomasks has grown from approximately $1.4 billion in calendar 1995 to approximately $2.5 billion in
calendar 2002. We estimate the photomask market served by merchant manufacturers was approximately 70% of the worldwide market in 2002.

As
the share of the photomask market served by merchant manufacturers has increased, semiconductor manufacturers have become increasingly reliant on global manufacturers that can
reliably deliver advanced photomasks. Consequently, many semiconductor manufacturers have developed strategic relationships with leading merchant photomask manufacturers to maintain a consistent
source of high quality photomasks.

We
believe that, over the long-term, semiconductor manufacturers will continue to introduce smaller and more powerful integrated circuits. As a result, chip complexity is
expected to continue increasing, which in turn will keep advanced photomasks in the role of a critical enabling technology. Additionally, we believe that increasing complexity will require greater
integration of the IC design and fabrication steps. Over time, we expect the average selling prices of photomasks to increase, reflecting the increased technology embedded in photomasks required to
build more advanced semiconductor devices. As such, we believe that this trend will be the primary driver of photomask
industry growth in the future, which according to an industry source is expected to be approximately 12 percent per year on average through calendar year 2008.

An
expanding field of DFM software tools is emerging as a way to help streamline the steps required to produce a chip. DFM software tools are designed to enhance manufacturing yields by
creating IC designs that are intended to simplify the manufacturing process. We believe the use of these tools will grow over time and become a more integral part of the entire value chain at advanced
design rules.

2

---

Strategy

Our objective is to be the world's premier global provider of microimaging solutions, by providing the finest service and most advanced technology to our
customers through the following strategies:



3

---



Products and Technology

Photomasks

Photomasks, also called masks or reticles, are high-purity quartz or glass plates containing precise, microscopic images of integrated circuits that
are used as
masterssimilar to negatives in a photographic processto optically transfer the image of circuit patterns onto semiconductor wafers during the fabrication process. In
producing a semiconductor, a photomask is usually placed in a photolithography tool, called a stepper, to make numerous reproductions of the pattern image on semiconductor wafers. This reproduction is
typically accomplished by passing light through the photomask onto a photoresist that has been spin-coated onto the surface of the semiconductor wafer. The areas of the photoresist that
have been exposed to light are then dissolved by chemical developers and subjected to further processing, such as etching, ion implantation and metal deposition. Successive steps of lithography,
deposition and processing gradually create the multiple layers of conducting, semiconducting and insulating patterns that make up the millions of transistors found in a modern semiconductor device.

We
manufacture photomasks in accordance with semiconductor design and specification data provided on a confidential basis by our customers. The final design of each integrated circuit
results in a set of precise individual circuit patterns to be imaged onto a series of typically 15 to 40 separate photomasks. The complete set of patterned photomasks is required to manufacture the
customer's integrated circuit design. Upon receipt of a customer's circuit design, we convert the design to pattern data, which controls an electron beam or laser beam that exposes the circuit pattern
onto a thin layer of photosensitive polymer, called a photoresist, covering the opaque chrome layer (or other material such as molysilicide) of the photoblank. Chemical developers dissolve the exposed
areas and the thin chrome layer of the photoblank is etched to replicate the customer design pattern on the photomask. Subsequently, the photomask is inspected for defects, its critical dimensions are
confirmed and any defects are repaired. Pellicles, which are protective covers for photomasks, are then mounted onto the mask and the mask is delivered to the customer.

We
manufacture a broad range of photomasks for varying customer applications, including applications requiring the use of leading-edge photomasks. We manufacture these
products using multiple production techniques, including electron beam and laser beam exposure as well as lower cost optical exposure techniques.

We
have developed advanced photomask products for customers using leading-edge lithography technologies in three categories:



The
demand for these products has grown during the past five years as customers search for more cost-effective, less capital-intensive methods for improving current
semiconductor fabrication yields and shrinking feature sizes. All three of these product categories provide opportunities for semiconductor manufacturers to produce more advanced products with
existing lithography equipment. Therefore, we expect these advanced photomasks to enable semiconductor manufacturers to delay significant capital investment in new generation steppers.

4

---

Materials

Photomasks are manufactured from photoblanks. The photomask is protected from particle contamination by an ultra-thin, frame-mounted transparent film
called a pellicle. The pellicle, when mounted on the photomask, creates a sealed, contamination-free environment for the photomask pattern. During fiscal 2002, we stopped producing
photoblanks internally. We believe that our knowledge of materials used in the production of photoblanks and pellicles gives us a competitive advantage in managing the supply, quality and cost of our
principal component materials.

Electronic Design Automation Software

In March 2002, we acquired the assets of and hired the employees of BindKey. We are developing a suite of software tools that ensures manufacturability of
deep subwavelength designs during the design phase and we believe that these products will significantly reduce the design cycle time of integrated circuits. In the future, we plan to launch new
products that enhance yields by creating chip designs that are easier to manufacture.

Global Manufacturing and Operations

Since 1991, we have operated globally with established manufacturing facilities in North America, Europe and Asia. In Europe, we have a manufacturing facility
located in Corbeil-Essonnes, France. We are in the process of closing our older manufacturing facilities in Hamburg, Germany and Rousset, France and consolidating production into our other facilities.
We, along with our AMTC joint venture partners, currently have a new facility in the start-up phase of production located in Dresden, Germany. In Asia, we operate manufacturing facilities
in Ichon, Korea and Singapore, and we operate joint venture manufacturing facilities in Shanghai, China and Hsinchu, Taiwan. We serve semiconductor manufacturers in Japan through our support office in
Tokyo, Japan and primarily through our manufacturing facilities in Korea and China. For financial information about the results of our operating segments for each of the last three fiscal years, see
Note 18 of Notes to the Consolidated Financial Statements included in "Item 8Financial Statements and Supplementary Data."

We
believe that our global presence is important for meeting the supply needs of multi-national customers on a timely basis. Moreover, each of our manufacturing facilities is connected
by our global software, computing and network system, which allows these facilities to transfer confidential customer design data and manufacturing instructions rapidly and coordinate manufacturing
responsibility with our other facilities. By being able to transfer information throughout the world with this network, we can better optimize resources, thereby lowering production costs while
providing effective customer service on a local level.

Virtually
all of our manufacturing sites are ISO 9002 or QS9000TE and ISO 14001 qualified. We manufacture photomasks in clean rooms designed to provide a contamination-free,
temperature and humidity controlled environment. These clean rooms are similar to those used in the manufacture of semiconductors. Our historical emphasis on product research and development has
carried over to process technology and has resulted in the development of production facilities equipped with state-of-the-art manufacturing equipment.

Backlog

Our backlog was $7.4 million, $10.1 million and $7.3 million as of June 30, 2001, 2002 and 2003, respectively. We do not believe that
backlog is a meaningful indicator of future sales, and there can be no assurance that the backlog at any point in time will translate into sales in subsequent periods.

5

---

Customers

We are a primary photomask supplier to many of the leading global semiconductor manufacturers. While the vast majority of our sales are to customers in the
semiconductor industry, we also supply photomasks for producing disk drive heads, MEMS, displays, and biochips. Our largest semiconductor customers include the following:

|Agere Systems
Agilent Technologies
AMD
AMI
Atmel
Chartered
Cypress |  | Hewlett-Packard
Hynix Semiconductor
IBM
Infineon
LSI Logic
Maxim Integrated Products
Micron Technology |  | Motorola
National Semiconductor
Philips
Samsung
STMicroelectronics
Texas Instruments
UMC
|------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------

In
fiscal 2001, Texas Instruments and IBM accounted for approximately 16 percent and 10 percent of our revenue, respectively. In fiscal 2002, Texas Instruments and UMC
accounted for approximately 13 percent and 10 percent of our revenue, respectively. In fiscal 2003, Texas Instruments accounted for approximately 10 percent of our revenue. Our
ten largest customers, in the aggregate, accounted for more than 50 percent of our revenue in fiscal 2003.

We
have supply agreements with some of our customers, including AMD, Cypress, IBM, Infineon, Micron Technology, Motorola, UMC and Xilinx. During their term, most of these agreements
generally provide us with a minimum volume or percentage of purchases, subject to various conditions such as quality of our service and timeliness of delivery.

In
addition, we have received advance payments from customers for future delivery of photomasks to be used in the production of leading-edge semiconductor devices. We also
have entered into joint technology development agreements with AMD, Cypress, Infineon, and Xilinx.

Worldwide Sales and Support

Each photomask is unique and we work closely with each customer to define and communicate the precise specifications required by the customer. We sell and service
our products principally through our employees based at our manufacturing sites throughout the world.

We
have established customer service centers inside some of our customers' design centers and semiconductor wafer fabrication facilities. Employees located at these centers routinely
interact with customer engineers to improve the accuracy of the customers' design data and documentation and ensure that customers' orders receive the appropriate priority at the manufacturing
facility and that routine problems are resolved promptly. We believe that these centers located in customers' facilities reduce errors and returns and improve on-time delivery, each of
which improves customer satisfaction.

Competition

The photomask industry is highly competitive and most of our customers utilize more than one photomask supplier. Because of our global presence, we compete with
various merchant manufacturers in each geographic region in which we operate. We have three primary competitors in each of North America and Europe, and five primary competitors in Asia.

Some
of our competitors may expand operations to meet the needs of customers and take advantage of new growth opportunities. Also, captive photomask operations sometimes are divested by
their owners to merchant manufacturers.

We
believe that with the increasing importance of leading-edge photomask technology in the semiconductor manufacturing process, the ability to manufacture these advanced
photomasks will
be an important competitive factor. On-time delivery of defect-free photomasks at competitive prices historically has also been an important competitive factor in our industry.
We also believe that our ability to develop the most advanced photomasks provides a more cost-effective alternative to the development of captive manufacturing operations, which require
significant capital investments and operating costs to develop the requisite manufacturing expertise.

6

---

Research and Development Initiatives

The photomask industry has been, and is expected to continue to be, characterized by rapid technological change. We have historically made significant investments
in research and development to improve our technological position.

We,
independently and through our participation in joint ventures and other joint technology development agreements with customers and suppliers, intend to continue to invest in research
and development to enhance our technological capabilities. We focus our research and development in four areas:



We
participate in research and development joint ventures, strategic alliances and joint technology development agreements, including:



During
fiscal 2003, our research and development expense was $29.7 million, compared with $30.3 million for fiscal 2002 and $32.2 million for fiscal 2001.

7

---



Intellectual Property

We believe that the success of our business depends more on our proprietary technology, information, processes and know-how than on patents or
trademarks. Much of our proprietary information and technology relating to our manufacturing processes is not patented and may not be patentable. However, aspects of our photomask technologies are
protected by a number of patents and patent applications. While we consider our patents to be valuable assets, we do not believe that our competitive position is dependent on patent protection or that
our operations are dependent on any individual patent. Instead, we believe that the success of our business depends primarily on our ability to maintain a lead over our competitors in developing our
proprietary technology, information, processes and know-how. Nevertheless, we attempt to protect our intellectual property rights with respect to our products and manufacturing processes
through patents and trade secrets when appropriate as part of our ongoing research, development and manufacturing activities. We also rely on non-disclosure agreements with employees and
vendors to protect our proprietary processes.

Employees

As of June 30, 2003, we employed approximately 1,660 people worldwide.

Environmental Matters

Our operations and our ownership of real property are subject to various environmental laws and regulations that govern, among other things, the discharge of
pollutants into the air and water and the handling, use, storage, disposal and clean-up of solid and hazardous wastes. Compliance with such laws and regulations requires that we incur
capital expenditures and operating costs in connection with our ongoing operations. In addition, such laws and regulations may impose liabilities on owners and operators of businesses and real
property without regard to fault and such liabilities may be joint and several with other parties. More stringent environmental laws and regulations may be enacted in the future, which may require us
to expend additional amounts on environmental compliance or may require modifications in our operations. Although we are unable to predict the extent of our future liability with respect to any
environmental matters, we believe, based upon current information, that environmental liabilities will not be material to our financial position or results of operations. DuPont has agreed to
indemnify us for any environmental contamination present on our manufacturing sites at June 13, 1996, the date of our initial public offering, or present at any such site due to the generation,
use, treatment, storage, release, emission, discharge or disposal of hazardous
waste or hazardous materials before such date. The Environmental Protection Agency is reviewing a groundwater contamination issue at our Danbury, Connecticut site under voluntary corrective action.
Any such contamination is believed to be offsite or historical, and, if that is the case, any environmental liabilities would be covered by the indemnification agreement with DuPont.

Risk Factors

You should carefully consider the following risks when considering forward-looking statements. The risks described below are not the only
ones that we face. Our business, operating results or financial condition could be materially adversely affected by any of the following factors. You should also refer to the other information
included or incorporated by reference in this annual report, including our consolidated financial statements and related notes.

Our operations are dependent on the activities of semiconductor manufacturers.

Substantially all of our sales are derived from semiconductor manufacturers. The semiconductor industry is highly cyclical and has been subject to significant
economic downturns at various times. The semiconductor industry suffered a sharp decline in orders and revenue in calendars 2001 and 2002, and this weakness has continued in calendar 2003. The outlook
for the semiconductor industry is uncertain, and it is very difficult to predict how long the current downturn will last. A continued downturn or further downturns in the semiconductor industry could
lead to a further decrease in the demand for photomasks. Our investment in new facilities and equipment is based, in part, on the anticipated expansion plans and growth of the semiconductor industry.
From time to time, semiconductor industry demand and technology have developed more slowly than originally anticipated. A lack of development in the semiconductor industry in a location in which we
operate or establish new facilities could have a material adverse effect on our business.

8

---

In
addition, the demand for photomasks may decrease, even when there is growth in the demand for semiconductors, due to a number of factors, including the following:



Our financial results are affected by factors outside of our control.

Our quarterly and annual operating results are affected by a wide variety of factors that could adversely affect revenue or profitability or lead to significant
variability of our operating results. Since our business is characterized by short-term orders and shipment schedules without a significant backlog for products, substantially all of our
revenue in any quarter is dependent upon orders received during that quarter, which limits our ability to quickly respond to a changing business environment. In addition, our operating results could
be affected by the following factors:



Moreover,
we are limited in our ability to reduce costs quickly in response to any revenue shortfalls due to our significant fixed costs. As a result of the foregoing factors, we may
experience material adverse fluctuations in our future operating results on a quarterly or annual basis. Results of operations in any period, therefore, should not be considered indicative of the
results to be expected for any future periods.

We have recently incurred losses from operations and we may incur additional losses in future periods.

We
have recently incurred losses from our operations. We cannot assure you that we will achieve or sustain profitability or positive cash flows from operating activities in the future.
Our failure to achieve or sustain profitability in the future could adversely affect the market price of our common stock.

9

---

We may not obtain sufficient capital to fund our needs.

We will need to continue to make significant capital expenditures to enhance our manufacturing capability in order to keep pace with rapidly changing
technologies. Based on our current operating plans, we or our joint ventures may require external financing from time to time to fund capital expenditures. We cannot assure you that we or our joint
ventures will be able to obtain the additional capital required on reasonable terms, or at all, or that any such lack of capital will not have a material adverse effect on our financial condition and
results of operations.

We
have also entered into substantial additional commercial commitments, some of which extend over multiple years, in respect of our joint ventures and certain other parties. These
guarantees and additional commercial commitments are not reflected on our consolidated balance sheets but are detailed in "Item 7Management's Discussion and Analysis of Financial
Condition and Results of Operations" of this annual report.

In
the event of a fundamental change in our company, each holder of our convertible subordinated notes due July 2004 and May 2008 will have the right to require us to
redeem those notes, and we cannot assure you that we will have sufficient funds to pay the redemption price for all the notes tendered by the holders (although DuPont would be required to pay the
redemption price under its guarantee in regard to the July 2004 notes). In that case, our failure to redeem tendered notes would constitute an event of default under the indentures for the
notes, and may constitute a default under the terms of other indebtedness that we may enter into from time to time.

Our operating results may be adversely affected by under-utilized production capacity.

Our
operations require us to incur significant fixed costs. Accordingly, decreases in sales volume significantly affect our operating profits when our production capacity is not fully
utilized. Our results of operations could be adversely affected to the extent that such capacity is not utilized.

We face risks associated with manufacturing difficulties and costs.

Our complex manufacturing processes require the use of expensive and technologically sophisticated equipment and materials and are continuously modified in an
effort to improve manufacturing yields
and product quality. Minute impurities or other difficulties and capability issues in the manufacturing process can lower manufacturing yields and make products unmarketable. Moreover, manufacturing
leading-edge photomasks is relatively more complex and time-consuming than manufacturing high-volume, less advanced photomasks, and may lead to general delays in
the manufacturing of all levels of photomasks. We have, on occasion, experienced manufacturing process and equipment difficulties and capacity limitations that have delayed our ability to deliver
products within the time frames contracted for by our customers.

We
have also experienced an increase in production costs due to production complexities. This has resulted in an increase in the price of photomasks that may result in reduced demand. We
cannot assure you that we will not experience these or other manufacturing difficulties, or be subject to increased costs or production capacity constraints, any of which could result in a loss of
customers or could otherwise have a material adverse effect on our financial condition and results of operations.

We may be unable to effectively manage our manufacturing operations.

We regularly move existing production lines among different plants. If we do not adequately manage these changes and improvements, the productivity of our plants
could suffer, which could cause us to lose sales or customers and we may also incur additional expenses.

10

---

Rapid technological change could render our products obsolete or our manufacturing processes ineffective.

Rapid
technological change and new product introductions and enhancements characterize the photomask and semiconductor industries. In particular, as semiconductor feature sizes continue
to decrease, the demand for more technologically advanced photomasks is likely to increase. We believe we must continue to enhance our existing products and develop and manufacture new products and
upgrades with improved capabilities to satisfy this anticipated demand. Our inability to anticipate, respond to or utilize changing technologies could have a material adverse effect on our financial
position or results of operations. Likewise, our inability to keep up with technical and manufacturing requirements for photomasks, which continue to require decreasing feature size, could have a
material adverse effect on our financial condition or results of operations.

Technological
advances achieved by a competitor or a customer could lead to the commercial availability of alternate methods of transferring circuit designs onto semiconductor wafers
without the use of photomasks. These alternatives, including direct-write lithography, could have a material adverse effect on our financial position or results of operations. Direct-write lithography
writes the circuit
pattern directly onto the semiconductor wafer without the use of a photomask. Although this direct-write method is currently too slow for high-volume, commercial device manufacturing, a
significant advance in this technology or other technologies which transfer circuit designs without the use of photomasks would have a material adverse effect on our financial condition or results of
operations.

In
addition, changes in semiconductor designs, such as field-programmable gate arrays, application-specific standard products and other semiconductor designs that displace
application-specific integrated circuits, could reduce photomask unit volumes in the future. Such a reduction in volumes could decrease our revenue from photomask sales.

Our market is highly competitive and subject to pricing pressures.

The photomask industry is highly competitive and most of our customers use more than one photomask supplier. Our significant competitors include other merchant
manufacturers of photomasks, including:



Our
competitors can be expected to continue to develop and introduce new and enhanced products, any of which could cause a decline in market acceptance of our products or a reduction in
our prices as a result of intensified price competition. We also compete with captive photomask operations. As the semiconductor industry has matured, many semiconductor manufacturers have divested or
closed their
captive photomask operations. We cannot assure you that this trend will continue or that it will not reverse, thereby reducing the demand for photomasks produced by merchant photomask suppliers such
as us and increasing competition to the extent excess captive capacity is used to supply non-captive needs. We cannot be certain that semiconductor manufacturers will not form new captive
operations to ensure that their photomask needs are met, particularly for advanced and leading-edge photomasks. Certain of our competitors have greater financial, technical, marketing or
other resources, any of which could provide them with a competitive advantage over us.

11

---

Our
ability to compete in the photomask market is primarily based on:



Our international operations present special risks.

Approximately 42%, 50% and 53% of our revenue in fiscal 2001, 2002 and 2003, respectively, was derived from sales in non-U.S. markets. We expect
revenue derived from non-U.S. markets to continue to represent a significant portion of our total revenue in the future. Our non-U.S. operations are subject to certain risks
inherent in conducting business abroad, including:



Changes
in the relative values of currencies occur from time to time and may, in certain instances, have a material adverse effect on our results of operations. Our consolidated
financial statements reflect remeasurement of items denominated in non-U.S. currencies to U.S. dollars, our functional currency. We monitor our exchange rate exposure and attempt to reduce
this exposure by hedging through forward contracts. We cannot be certain that these forward contracts or any other hedging activity will be available or adequate to eliminate, or even mitigate, the
impact of our exchange rate exposure. Further, we cannot assure you that these risks will not have a material adverse impact on our liquidity and results of operations in the future.

12

---

We face risks associated with software development and marketing.

Our success in EDA software depends upon our ability to develop and commercialize our EDA software, to develop new software products and to enhance our current
versions of software. We must effectively compete within the highly competitive software industry. Changes in accounting regulations and related interpretations and policies, particularly regarding
revenue recognition, may require us to defer recognizing revenue or require us to change our business practices. We might experience significant undetected errors or "bugs" in our products. We also
cannot be certain that we will be able to develop, commercialize or market EDA software, or that we will be able to license these products to customers on commercially reasonable terms. Furthermore,
we might not receive significant revenue from our research and development efforts.

Our
production facilities could be damaged or disrupted by a natural disaster, labor strike, war, terrorism or political unrest.

A
number of our facilities are in seismically active areas. Although we have obtained property damage and business interruption insurance, a major catastrophe such as an earthquake or
other natural disaster at any of our sites, or political unrest, war, terrorism, labor strikes or work stoppages in any of the areas where we conduct operations, could result in a prolonged
interruption of our business. Any disruption resulting from these events could cause significant delays in shipments of our products and the loss of sales and customers, and we do not know whether our
insurance would adequately compensate us for any of these events.

We depend on a few significant customers.

Our ten largest customers, in the aggregate, accounted for more than 50% of our revenue in each of fiscal 2001, 2002 and 2003. In fiscal 2001, Texas Instruments
and IBM accounted for approximately 16% and 10% of revenue, respectively. In fiscal 2002, Texas Instruments and UMC accounted for approximately 13% and 10% of our revenue, respectively. In fiscal
2003, Texas Instruments accounted for approximately 10% of our revenue. As of June 30, 2003, Infineon accounted for approximately 21% of accounts receivable, trade. No other customer
represented more than 10% of accounts receivable, trade as of June 30, 2003. The loss of, or a significant reduction of orders from, any of these customers could have a material adverse effect
on our results of operations. While we believe we have strategic relationships with a number of our customers, our customers place orders on an as-needed basis and generally can change or
cancel their orders without significant penalty. In addition, recently there has been a trend toward outsourcing semiconductor manufacturing to foundries. To the extent we do not have strategic
relationships with these foundries, this trend could have a material adverse effect on our financial condition or results of operations.

We depend on a limited number of equipment manufacturers.

We rely on a limited number of photomask equipment manufacturers to develop and supply the equipment we use. These equipment manufacturers currently require lead
times of as long as 10 to 14 months between the order and the delivery of certain photomask imaging and inspection equipment. The failure of such manufacturers to develop or deliver such
equipment on a timely basis could have a material adverse effect on our financial condition or results of operations. In addition, the manufacturing equipment necessary to produce advanced photomasks
could become prohibitively expensive or might not operate as effectively as intended.

We depend on a limited number of raw materials suppliers.

Any disruption in our supply relationships or increases in prices, particularly related to photoblanks, could result in delays or reductions in product shipments
by us or increases in product costs that could have a material adverse effect on our financial condition or results of operations. In the event of such a disruption, we cannot assure you that we could
develop alternative sources within reasonable time frames, or if developed, that these sources would provide supplies at prices comparable with those charged by our suppliers before the disruption.

13

---

We depend on a limited number of management and technical personnel.

Our continued success depends, in part, upon key managerial, engineering and technical personnel as well as our ability to continue to attract and retain
additional qualified personnel. In the past, some key personnel have left us to pursue other opportunities. The loss of any key personnel could have a material adverse effect on our financial
condition or results of operations. There can be no assurance that we can retain our key managerial, engineering and technical employees. Our growth may be dependent on our ability to attract new
highly skilled and qualified personnel and to integrate them into our operations. There can be no assurance that our recruiting efforts to attract and retain these personnel will be successful.

We may not successfully integrate or realize the intended benefits of future acquisitions and joint ventures.

We
may in the future pursue acquisitions of businesses, products and technologies, or enter into joint venture arrangements, that could complement or expand our business. The negotiation
of potential acquisitions or joint ventures as well as the integration of an acquired business, product or technology could require us to incur significant costs and cause diversion of management's
time and resources. Future acquisitions by us could result in the following consequences:



The
success of these transactions will depend, in part, on our ability to:



We may be unable to enforce or defend our ownership and use of proprietary technology.

We
believe that the success of our business depends more on our proprietary technology, information and processes and know-how than on patents or trademarks. Much of our
proprietary information and technology relating to manufacturing processes is not patented and may not be patentable. We cannot assure you that:



We
may become involved in infringement claims or legal proceedings by or against third parties with respect to current or future patents, copyrights, trademarks, products or processes.
Any such claims or litigation, with or without merit, to enforce or protect our intellectual property rights or to defend our
company against claimed infringement of the rights of others could result in substantial costs, diversion of resources and product shipment delays or could force us to enter into royalty or license
agreements rather than dispute the merits of these claims. Any of the foregoing could have a material adverse effect on our financial condition or results of operations.

14

---

We may be unprepared for changes in environmental laws and regulations.

We are subject to numerous environmental laws and regulations which impose various environmental controls on, among other things, the discharge of pollutants into
the air and water and the handling, use, storage, disposal and clean-up of solid and hazardous wastes. Changes in these laws and regulations may have a material adverse effect on our
financial condition or results of operations. Any failure by us to adequately comply with such laws and regulations could subject us to significant future liabilities.

We have risks associated with operating global information systems.

Our manufacturing operations are dependent on an enterprise-wide software system and related infrastructure. While these systems have been designed to
achieve high availability, we cannot assure you that disruptions to our operations caused by system failures will not occur.

E.I. du Pont de Nemours and Company, or DuPont, has influence on all stockholder votes and other matters.

DuPont
owned approximately 20.1% percent of our outstanding common stock as of June 30, 2003. As a result, DuPont will continue to have influence on most matters submitted to our
stockholders, including proposals regarding:



This
concentration of ownership may discourage a potential acquirer from making an offer to buy our company that other stockholders might find favorable which, in turn, could adversely
affect the market price of our common stock. Additionally, DuPont has the right, under certain circumstances, to terminate our use of the DuPont tradename and logo, and its exercise of that right
could adversely affect us.

Our certificate of incorporation and bylaws have anti-takeover provisions, and we have a stockholders' rights plan.

Provisions
of our certificate of incorporation and bylaws, Delaware law and our stockholders' rights plan could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. The combination of these provisions may inhibit a non-negotiated merger or other business combination.

Recent Developments

In July 2003, we signed a multi-year pellicle supply agreement with Micro Lithography, Inc., or MLI. In connection with the supply
agreement, we are closing our pellicle production facility in Danbury, Connecticut, ending production in September 2003. Our global workforce will be reduced by approximately 5 percent,
or approximately 96 positions once this initiative is complete. To account for the projected cost of the Danbury site closure and global workforce reduction, we will record charges in the first and
second quarters of fiscal 2004 totaling between $1.7 million and $2.2 million (which are net of proceeds of $1.7 million from the sale of certain pellicle assets and technology)
related to employee severance, asset disposals and related costs. As a result of this action, we expect to realize a reduction in expenses of approximately $1.0 million per quarter beginning in
the second half of fiscal 2004.

15

---

Item 2. Properties

We conduct manufacturing operations throughout the world. Virtually all of our operations are ISO 9002 or QS9000TE and ISO 14001 qualified. We believe that our
facilities are adequate and suitable for their respective uses. The table below presents certain information relating to our manufacturing and support facilities.

|Location      |                                                         | Type of Interest |                | Use
|------------- | ------------------------------------------------------- | ---------------- | -------------- | ---
|North America |                                                         |                  |                |    
|              | Danbury, Connecticut                                    |                  | Owned          |    
|              | Gresham, Oregon (facilities held for sale; land leased) |                  | Owned/Leased   |    
|              | Kokomo, Indiana                                         |                  | Owned          |    
|              | Round Rock, Texas                                       |                  | Owned          |    
|              | Round Rock, Texas                                       |                  | Owned          |    
|              | Round Rock, Texas                                       |                  | Owned          |    
|              | Santa Clara, California                                 |                  | Leased         |    
|              | Sunnyvale, California                                   |                  | Leased         |    
|Europe        |                                                         |                  |                |    
|              | Corbeil-Essonnes, France                                |                  | Leased         |    
|              | Dresden, Germany                                        |                  | Jointly Owned  |    
|              | Hamburg, Germany                                        |                  | Leased         |    
|              | Rousset, France                                         |                  | Owned          |    
|Asia          |                                                         |                  |                |    
|              | Hsinchu, Taiwan                                         |                  | Jointly Leased |    
|              | Ichon, Korea                                            |                  | Owned          |    
|              | Shanghai, China                                         |                  | Jointly Leased |    
|              | Singapore (facilities owned; land leased)               |                  | Owned/Leased   |    

We
own most of the manufacturing equipment in our facilities. Facilities and property that are leased have terms that begin to expire in calendar years 2003 (Santa Clara, Sunnyvale and
Hsinchu), 2004 (Shanghai), 2009 (Corbeil-Essones), 2012 (Dresden and Gresham) and 2059 (Singapore). We also maintain customer service data centers in leased facilities, including centers in
Burlington, Vermont, Colorado Springs, Colorado, Dallas, Texas, Hillsboro, Oregon, Melbourne, Florida and Tokyo, Japan.

We
consider the productive capacity of the facilities operated by each of the segments adequate and suitable for the requirements of each group. The extent of utilization of such
facilities varies from location to location and from time to time during the year.

A
number of our facilities are in seismically active areas. Although we have obtained property damage and business interruption insurance, a major catastrophe such as an earthquake or
other natural disaster at any of our sites could result in a prolonged interruption of our business.

Item 3. Legal Proceedings

We are subject to litigation in the normal course of business. We believe the effect, if any, of an unfavorable settlement of such litigation would not have a
material adverse effect on our financial condition, results of operations, cash flows or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders

None.

16

---



PART II

Item 5. Market for Our Common Equity and Related Stockholder Matters

Our common stock is quoted on the NASDAQ National Market under the symbol "DPMI." The following table sets forth, for the periods indicated, the high and low sale
prices per share of our common stock as reported on the NASDAQ National Market.

|                          |                | High |   | Low  
|------------------------- | -------------- | ---- | - | -----
|Year Ended June 30, 2002: |                |      |   |      
|                          | First Quarter  |      | $ | 48.65
|                          | Second Quarter |      |   | 45.59
|                          | Third Quarter  |      |   | 54.30
|                          | Fourth Quarter |      |   | 54.25
|Year Ended June 30, 2003: |                |      |   |      
|                          | First Quarter  |      | $ | 33.05
|                          | Second Quarter |      |   | 29.04
|                          | Third Quarter  |      |   | 26.84
|                          | Fourth Quarter |      |   | 23.75

We
have not paid any dividends on our capital stock and do not intend to pay any cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings
to finance future growth of our business. Future dividends, if any, will be determined by our board of directors. As of our record date on September 5, 2003 we had 79 shareholders of record.

The
information required to be disclosed by Item 201(d) of Regulation S-K is disclosed in Item 12 of this annual report

Item 6. Selected Financial Data

The following tables set forth our selected consolidated financial data. The consolidated balance sheet data as of June 30, 2002 and 2003 and the
consolidated income statement data for each of the three years ended June 30, 2003 has been derived from the audited consolidated financial statements appearing elsewhere in this document. The
consolidated financial data for the years ended June 30, 1999 and 2000 and as of June 30, 1999, 2000 and 2001 has been derived from audited consolidated financial statements not
appearing in this document. The following consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in this document.

17

---

|                                                                                                             |                                                            | Year Ended June 30, |        
|------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------- | ------------------- | -------
|
|
|Income Statement Data:                                                                                       |                                                            |                     |        
|Revenue, net                                                                                                 |                                                            | $                   | 264,015
|Cost of goods sold                                                                                           |                                                            |                     | 187,427
|Selling, general and administrative expense                                                                  |                                                            |                     | 33,944 
|Research and development expense                                                                             |                                                            |                     | 16,835 
|Special charges                                                                                              |                                                            |                     |       
|Impairment of long-lived assets                                                                              |                                                            |                     |       
|                                                                                                             |                                                            |                     |        
|Operating profit (loss)                                                                                      |                                                            |                     | 25,809 
|Income (loss) on warrants, net                                                                               |                                                            |                     |       
|Gain on sales of assets                                                                                      |                                                            |                     |       
|Other income (expense), net                                                                                  |                                                            |                     | (717   
|                                                                                                             |                                                            |                     |        
|Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle |                                                            |                     | 25,092 
|Provision for (benefit from) income taxes                                                                    |                                                            |                     | 7,763  
|                                                                                                             |                                                            |                     |        
|Income (loss) before minority interest and cumulative effect of change in accounting principle               |                                                            |                     | 17,329 
|Minority interest in income of joint ventures                                                                |                                                            |                     | (59    
|                                                                                                             |                                                            |                     |        
|Income (loss) before cumulative effect of change in accounting principle                                     |                                                            |                     | 17,270 
|Cumulative effect of change in accounting principle                                                          |                                                            |                     |       
|                                                                                                             |                                                            |                     |        
|Net income (loss)                                                                                            |                                                            | $                   | 17,270 
|                                                                                                             |                                                            |                     |        
|Basic earnings (loss) per share:                                                                             |                                                            |                     |        
|                                                                                                             | Before cumulative effect of change in accounting principle |                     | $      
|                                                                                                             | After cumulative effect of change in accounting principle  |                     | $      
|Weighted average shares outstanding                                                                          |                                                            |                     | 15,299 
|Diluted earnings (loss) per share:                                                                           |                                                            |                     |        
|                                                                                                             | Before cumulative effect of change in accounting principle |                     | $      
|                                                                                                             | After cumulative effect of change in accounting principle  |                     | $      
|Weighted average shares outstanding                                                                          |                                                            |                     | 15,780 

|                                      |  | June 30,
|------------------------------------- |  | --------
|
|Balance Sheet Data:                   |  |         
|Cash and cash equivalents             |  | $       
|Working capital                       |  |         
|Property and equipment, net           |  |         
|Total assets                          |  |         
|Long-term borrowings                  |  |         
|Long-term borrowings, related parties |  |         
|Long-term convertible notes           |  |         

---

18

---

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated
financial statements and related notes included elsewhere in this document. All references to years are to our fiscal years, which end on June 30.

Overview

Based on worldwide revenue, we are one of the largest photomask manufacturers in the world. We sell our products to over 400 customers and customer sites in more
than 20 different countries. Essentially all of our sales are to customers in the semiconductor manufacturing industry. We manufacture a broad range of photomasks based on customer-supplied design
data. We operate globally with established manufacturing facilities in North America, Europe and Asia.

We
believe that over the long-term, the market for photomasks in the semiconductor manufacturing process will increase due to the following trends:



Photomask
manufacturing operations are capital intensive. Accordingly, at a given threshold of manufacturing capacity, a high proportion of our operating costs are fixed and remain
relatively constant as sales volume increases or decreases. To the extent that we have under-utilized production capacity, operating profit increases or decreases significantly as sales volume
increases or decreases.

19

---

Results of Operations

The following table sets forth selected consolidated financial information expressed as a percentage of revenue, net for the periods indicated.

|                                                                                                             |  | Year Ended June 30, |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------- | -
|
|Revenue, net                                                                                                 |  | 100.0               | %
|Cost of goods sold                                                                                           |  | 67.8                |  
|Selling, general and administrative expense                                                                  |  | 11.9                |  
|Research and development expense                                                                             |  | 7.9                 |  
|Special charges                                                                                              |  | 8.9                 |  
|Impairment of long-lived assets                                                                              |  |                    |  
|                                                                                                             |  |                     |  
|Operating profit (loss)                                                                                      |  | 3.5                 |  
|Income (loss) on warrants, net                                                                               |  | 2.6                 |  
|Gain on sale of assets                                                                                       |  |                    |  
|Other income (expense), net                                                                                  |  | 0.5                 |  
|                                                                                                             |  |                     |  
|Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle |  | 6.6                 |  
|Provision for (benefit from) income taxes                                                                    |  | 1.3                 |  
|                                                                                                             |  |                     |  
|Income (loss) before minority interest and cumulative effect of change in accounting principle               |  | 5.3                 |  
|Minority interest in income of joint ventures                                                                |  | (1.5                | )
|                                                                                                             |  |                     |  
|Income (loss) before cumulative effect of change in accounting principle                                     |  | 3.8                 |  
|Cumulative effect of change in accounting principle                                                          |  | (0.1                | )
|                                                                                                             |  |                     |  
|Net income (loss)                                                                                            |  | 3.7                 | %
|                                                                                                             |  |                     |  

Year Ended June 30, 2003 Compared to Year Ended June 30, 2002

Revenue, net.Revenue, net is comprised primarily of photomask sales to semiconductor manufacturers. Revenue, net decreased
5.5 percent from $341.9 million in 2002 to $323.1 million in 2003. From 2002 to 2003, revenue, net produced in North America decreased from $171.6 million to
$152.0 million, in Europe increased from $62.0 million to $63.4 million and in Asia decreased from $108.3 million to $107.7 million. The decreases were attributable
to a decline in average selling prices partially offset by an increase in unit demand. Revenue, net was also negatively impacted by work stoppages in Europe and by a customer that required us to
re-certify one of our facilities in Asia.

Cost of Goods Sold.Cost of goods sold consists of materials, labor, depreciation and overhead. Cost of goods sold increased
7.8 percent from $272.0 million in 2002 to $293.3 million in 2003. Gross profit margin decreased from 20.5 percent in 2002 to 9.2 percent in 2003. The decrease in
gross profit margin resulted primarily from a decline in revenue due to lower average selling prices, costs associated with the consolidation of trailing edge production in Europe, the
ramp-up of our advanced production facility in Dresden, Germany and increased depreciation. These increases in cost of goods sold were partially offset by benefits realized from our cost
reduction programs. We expect that gross profit margins will experience near term pressure primarily as a result of the start-up costs for our Dresden, Germany manufacturing facility and
consolidation costs in Europe. Over the long term, we expect gross profit margins to improve as a result of lower costs resulting from our
consolidation efforts in Europe and impairment of long-lived assets during 2003. See Notes 14 and 15 of Notes to the Consolidated Financial Statements included in "Item
8Financial Statements and Supplementary Data."

20

---

Selling, General and Administrative Expense.Selling, general and administrative expense includes salaries of sales and
administrative personnel, marketing expense, general and administrative expense and product distribution expense. Selling, general and administrative expense increased 6.6 percent from
$41.2 million in 2002 to $43.9 million in 2003. Selling, general and administrative expense as a percentage of revenue increased from 12.0 percent in 2002 to 13.6 percent
in 2003. The increase in selling, general and administrative expense was primarily a result of the completion and implementation of new information systems, the ramp-up of our Dresden,
Germany facility and full year ownership of BindKey offset by lower costs associated with the divestiture of the photoblanks business and cost containment efforts. We expect selling, general and
administrative expense will increase in the near term as a result of increasing costs for the ramp-up of our facility in Dresden, Germany and BindKey.

Research and Development Expense.Research and development expense consists primarily of employee costs, cost of consumed
materials, depreciation, engineering related costs and our share of costs of the RTC and AMTC joint ventures. Research and development expense decreased 2.1 percent from $30.3 million in
2002 to $29.7 million in 2003. As a percentage of revenue, research and development expense increased slightly from 8.9 percent in 2002 to 9.2 percent in 2003. The decrease in
cost was attributable to reduced costs associated with the modification and extension of our agreement with the RTC partners offset partially by an increase in BindKey's EDA software development
expenses and start-up expenses for the AMTC. We expect research and development expense will increase as we incur our share of the costs from the ramp-up of the AMTC in the
fiscal 2004.

Special Charges.In 2002, we recorded pre-tax special charges totaling $7.4 million related to cost
reduction programs and acquired In Process Research & Development, or IPR&D. These initiatives were completed as of March 31, 2002 and the related liabilities were completely settled as
of September 30, 2002. The special charges of $2.0 million related to employee severance were the result of eliminating 68 employment positions, primarily manufacturing, in North America
and Europe. The special charges of $5.1 million related to asset disposals and related costs resulted primarily from decommissioning trailing-edge production equipment. In
connection with the acquisition of the assets of BindKey in March 2002, approximately $0.3 million of the purchase price was allocated to IPR&D. The amount attributed to IPR&D was
expensed at the date of acquisition as the projects had not reached technological feasibility nor had any alternative future use. As a result of these actions, we realized a reduction in expenses of
approximately $4.5 million during 2003.

In
2003, we recorded special charges totaling $26.1 million related to employee severance, asset disposals and related costs, and lease termination costs. The special charges
related to North America, Europe and Asia were $7.2 million, $18.6 million and $0.3 million, respectively. These special charges were the result of programs that were implemented
to reduce costs. The integration and consolidation initiatives in North America were completed as of March 31, 2003 and the related liabilities were substantially settled as of June 30,
2003. We plan to vacate the owned manufacturing facility in Rousset, France and the leased manufacturing facility in Hamburg, Germany, complete the consolidation initiatives in Europe and settle the
related liabilities, including severance, by December 31, 2003. The integration and consolidation initiatives in Asia were completed as of March 31, 2003 and the related liabilities were
completely settled as of June 30, 2003. As a result of these actions, we expect to realize a reduction in expenses of approximately $10.0 million during fiscal 2004.

A
summary of the related accrued liabilities is shown below (in millions):

|                                        |  | Employee
Severance |      | Asset Disposals
and Related Costs |   | Lease
Termination and
Other Costs |   | Total |     
|--------------------------------------- |  | ------------------ | ---- | --------------------------------- | - | --------------------------------- | - | ----- | ----
|Charges during 2002                     |  | $                  | 2.0  |                                   | $ | 5.1                               |   | $     | 0.3 
|Utilized in 2002                        |  |                    | (1.9 | )                                 |   | (5.0                              | ) |       | (0.3
|                                        |  |                    |      |                                   |   |                                   |   |       |     
|Remaining liability as of June 30, 2002 |  |                    | 0.1  |                                   |   | 0.1                               |   |       |    
|Charges during 2003                     |  |                    | 13.3 |                                   |   | 10.6                              |   |       | 2.2 
|Utilized in 2003                        |  |                    | (2.0 | )                                 |   | (9.4                              | ) |       | (0.3
|                                        |  |                    |      |                                   |   |                                   |   |       |     
|Remaining liability as of June 30, 2003 |  | $                  | 11.4 |                                   | $ | 1.3                               |   | $     | 1.9 
|                                        |  |                    |      |                                   |   |                                   |   |       |     

21

---

Impairment of Long-Lived Assets.During 2003, we recorded a charge of $43.2 million for
reductions in the carrying value of certain long-lived assets held and used in operations. At fiscal year end and in accordance with SFAS No. 144, we performed a periodic review and
evaluation of the carrying value of long-lived assets and determined that, based on revised market assumptions reflecting the sustained industry downturn and the continued
under-utilization of production equipment, the carrying value of certain production facilities and equipment in North America and Asia exceeded the current fair value. Asset impairment tests were
performed at the facility site location level which is the lowest level for which separately identifiable cash flows exist. The periodic review and evaluation of the carrying value of the
long-lived assets was performed with the assistance of independent valuation specialists. The fair value of assets that were subject to impairment were determined using both the cost,
market and income approaches. As a result of our impairment of long-lived assets, we also expect depreciation expense to be lower by approximately $2.0 million to
$2.5 million per quarter subsequent to June 30, 2003.

Income (Loss) on Warrants, net.During 2002, we realized losses of $0.2 million upon the exercise of all remaining
warrants of a strategic partner and sale of the underlying securities. We held no warrants during 2003.

Gain on Sale of Assets.Gain on sale of assets represents the gain recognized upon a sale of property and equipment. In
March 2002, we sold all of our photoblank manufacturing assets located in Poughkeepsie, New York, to Schott Lithotec AG, or Schott. We also entered into a supply agreement with Schott for a
significant portion of our future purchases of photoblanks. The total proceeds of $31.6 million were allocated $26.5 million to the assets sold and $5.1 million to the supply
agreement based on the projected cash flows that will be generated by the supply agreement, discounted to present value. This transaction resulted in a pre-tax gain of approximately
$10.4 million. The supply agreement also allows us to be paid additional amounts totaling $10.0 million during fiscal 2004 if specified purchase levels are achieved by March 31,
2004.

Other Income (Expense), net.Other income (expense), net includes interest expense, interest income and exchange gains and
losses. Other income (expense), net was $1.2 million in 2002 and $(0.9) million in 2003. The decrease was primarily due to lower interest income reflective of lower interest rates and exchange
losses from foreign currency movements.

Provision for (Benefit from) Income Taxes.The provision for (benefit from) income taxes differs from the amounts computed by
applying the federal statutory rate of 35 percent to income (loss) before income taxes and minority interest as a result of our reduced tax rates in certain Asian jurisdictions, our inability
to record deferred tax benefits for net operating losses generated in certain tax jurisdictions and our need to place valuation allowances on certain other deferred tax assets as discussed below.

During
2003, we recorded valuation allowances against our net deferred tax assets in North America and the majority of those in Europe (primarily related to net operating loss
carryforwards). The restructuring in Germany also resulted in a charge for a valuation allowance of $1.8 million during 2003. The valuation allowances were recorded under the provisions of SFAS
No. 109,Accounting for Income Taxes, which requires an assessment of positive and negative evidence when determining the need for valuation
allowances. Historical evidence, such as the operating results in North America and Europe during the most recent three-year period, is weighted more heavily in this assessment as compared
to future expected results because of the uncertainty of actually achieving forecasted results. Our cumulative North America losses and Europe losses in the most recent three-year period
represent sufficient negative evidence to require valuation allowances against our North America and Europe net deferred tax assets. We intend to maintain valuation allowances until sufficient
positive evidence exists to support their reversal.

During
2003, we received income tax refunds of $23.3 million by carrying North America net operating losses back to prior years. Also, our decision to carryback certain losses in
France resulted in a tax benefit of $3.2 million.

Minority Interest in Income of Joint Ventures.Minority interest in income of joint ventures reflects our partners' share of
the earnings of our consolidated joint venture operations, which currently include our Shanghai, China and Hsinchu, Taiwan operations. The minority interest share of our income of joint ventures was
$6.9 million for 2002 and $1.8 million for 2003. The decrease was a result of lower revenue and increased production costs.

22

---

Year Ended June 30, 2002 Compared to Year Ended June 30, 2001

Revenue, net.Revenue, net decreased 16.2 percent from $407.9 million in 2001 to $341.9 million in 2002.
Demand for advanced photomasks, those with design technology of 0.18 micron and below, grew from 27 percent to 40 percent of our revenue, during 2001 and 2002, respectively. Total unit
volume demand
declined 4 percent primarily as a result of our customers' response to the significant downturn in the semiconductor industry during the year. Average selling prices decreased 13 percent
as a result of traditional product lifecycle declines in selling prices of certain technologies and customer-initiated pressures and competitive pressures. Additionally our customers that maintain
internal photomask operations reduced outsourcing during the year, reducing demand for higher-priced leading edge products. From 2001 to 2002, revenue, net produced in North America decreased from
$235.3 million to $171.6 million because of the decrease in average selling price and unit volumes. Revenue, net produced in Europe decreased from $83.2 million to
$62.0 million because of the decrease in average selling price and unit volumes. Revenue, net produced in Asia increased from $89.5 million to $108.3 million due primarily to an
increase in average selling price and unit volumes. Increased unit volume in Asia was a result of improved local demand combined with production transferred from North America and Europe.

Cost of Goods Sold.Cost of goods sold decreased 1.7 percent from $276.7 million in 2001 to
$272.0 million in 2002. The decrease resulted primarily from decreased production volumes, benefits realized from our cost reduction programs and the overall efficiencies gained through the
global reorganization of our manufacturing organization implemented in the quarter ended June 30, 2001. These reductions were partially offset by increased depreciation expense resulting from
new investments in advanced production capabilities. Gross profit decreased from $131.3 million during 2001 to $69.9 million during 2002. As a percentage of revenue, cost of goods sold
increased from 67.8 percent in 2001 to 79.5 percent in 2002 primarily as a result of lower revenue.

Selling, General and Administrative Expense.Selling, general and administrative expense decreased 15.4 percent from
$48.6 million during 2001 to $41.2 million during 2002. This was primarily a result of the cost reduction programs implemented in the quarter ended June 30, 2001. Selling, general
and administrative expense as a percentage of revenue, net increased from 11.9 percent for 2001 to 12.0 percent for 2002 as a result of lower revenue partially offset by the benefits
realized from the cost reduction programs.

Research and Development Expense.Research and development expense decreased 6.0 percent from $32.2 million
during 2001 to $30.3 million during 2002. The decrease was primarily as a result of synergies realized due to the reorganization of our technical group. Research and development expense as a
percentage of revenue, net increased from 7.9 percent for 2001 to 8.9 percent for 2002. The increase was due primarily to lower revenue.

Special Charges.In 2002, we recorded pre-tax special charges totaling $7.4 million related to cost
reduction programs and acquired IPR&D. These initiatives were completed as of March 31, 2002 and the related liabilities were completely settled as of September 30, 2002. The special
charges of $2.0 million related to employee severance were the result of eliminating 68 employment positions, primarily manufacturing, in North America and Europe. The special charges of
$5.1 million related to asset disposals and related costs resulted primarily from decommissioning trailing-edge production equipment. In connection with the acquisition of the
assets of BindKey in March 2002, approximately $0.3 million of the purchase price was allocated to IPR&D. The amount attributed to IPR&D was expensed at the date of acquisition as the
projects had not reached technological feasibility nor had any alternative future use.

Income (Loss) on Warrants, net.During 2002, we realized losses of $0.2 million upon the exercise of all remaining
warrants of a strategic partner and sale of the underlying securities.

Gain on Sale of Assets.In March 2002, we sold all of our photoblank manufacturing assets located in Poughkeepsie, New
York, to Schott. We also entered into a supply agreement with Schott for a significant portion of our future purchases of photoblanks. The total proceeds of $31.6 million were allocated
$26.5 million to the assets sold and $5.1 million to the supply agreement based on the projected cash flows that will be generated by the supply agreement, discounted to present value.
This transaction resulted in a pre-tax gain of approximately $10.4 million. The value of the supply agreement will be amortized ratably as a reduction of cost of goods sold over the
term of the agreement.

Other Income (Expense), net.Other income (expense), net was $2.0 million in 2001 and $1.2 million in 2002. The
change was caused by a decrease in interest income of $1.6 million, due to substantially lower interest rates, partially offset by favorable decreases in net foreign exchange losses of
$0.7 million.

23

---



Provision for (Benefit from) Income Taxes.Our tax expense is based on the statutory rates in effect in the countries in
which we operate. Certain of our operations in Asia are subject to various tax holidays. Certain tax holidays may be extended if specific conditions are met. Our effective tax rate for 2002 was a tax
benefit of 189 percent versus a tax expense of 25 percent for 2001. Our effective tax rate varied from the prior year because of shifts in the geographic distribution of earnings and
losses between high and low tax rate countries partially due to the special charges recorded in North America. Additionally, the tax rate was impacted by an adjustment to release the previously
provided valuation allowance against certain capital losses, which became realizable upon recognition of the capital gain on the sale of our photoblank manufacturing assets. Our effective tax rate
varied from the federal statutory rate because a substantial portion of our Asian manufacturing operations in Korea, China, Taiwan and Singapore operate at a reduced tax rate or free of tax under
various tax holidays.

Minority Interest in Income of Joint Ventures.The minority interest impact of our joint venture manufacturing facilities was
$6.2 million in 2001 compared to $6.9 million in 2002, reflecting the partners' share of income from our joint ventures. The increase was primarily the result of increased profitability
in our China joint venture.

Liquidity and Capital Resources

Our working capital was $133.3 million as of June 30, 2002 and $213.4 million as of June 30, 2003. The increase in working capital was
due principally to an increase in cash from the issuance of $125.0 million of convertible subordinated notes on May 5, 2003, offset by capital expenditures. Cash and cash equivalents
were $138.9 million as of June 30, 2002 and $250.4 million as of June 30, 2003. Cash provided by operating activities was $62.7 million in fiscal 2002 and
$55.8 million in 2003. The decrease in cash provided by operating activities was primarily a result of reduced profits in fiscal 2003 as compared to fiscal 2002.

Cash
used in investing activities, consisting primarily of capital expenditures, was $75.1 million in fiscal 2002 and $67.4 million in fiscal 2003. The decrease in cash
used in investing activities resulted from lower capital expenditures and payments for acquisitions. Management expects capital expenditures for fiscal 2004 to be approximately $65.0 million.
Capital expenditures have been and will be used primarily to advance our technical capability. In addition, we may in the future pursue additional acquisitions of businesses, products and
technologies, or enter into joint venture arrangements, that could complement or expand our business. Any material acquisition or joint venture could result in a decrease to our working capital
depending on the amount, timing and nature of the consideration to be paid.

Cash
provided from financing activities was $8.1 million in fiscal 2002 and $122.7 million in fiscal 2003. Proceeds from borrowings, net of issuance costs, increased
$124.7 million in fiscal 2003 due to the issuance of $125.0 million convertible subordinated notes on May 5, 2003. Additionally, our employees purchased $2.8 million of
common stock under our employee plans.

In
July 2000, we issued and sold $100.0 million aggregate principal amount of convertible subordinated notes. The notes were sold at par less an underwriting discount of
2 percent and we received net proceeds of $97.6 million. The notes are due in July 2004, with no stated interest, are convertible at any time into shares of our common stock at a
conversion price of $106.26 per share, are unconditionally guaranteed by DuPont and are not callable by us. We have reserved 941,088 shares of our common stock for conversion of the convertible
subordinated notes. In the event of a fundamental change in our company, each holder of notes will have the right to require us to redeem, in cash, any or all of such holder's notes at a price equal
to 100 percent of the principal amount to be redeemed. A fundamental change generally is any transaction in which all or substantially all of our common stock is exchanged for, converted into,
acquired for or constitutes the right to receive, consideration which is not all or substantially all common stock listed on a national securities exchange or approved for quotation on the NASDAQ
National Market. If a fundamental change were to occur, we cannot assure you that we will have sufficient funds to pay the redemption price for all the notes tendered by the holders, although DuPont
would be required to pay the redemption price under its guarantee. In that case, our failure to redeem tendered notes would constitute an event of default under the indenture for the notes, and may
constitute a default under the terms of other indebtedness that we may enter into from time to time. Debt issue costs of $2.4 million related to these notes are included in
non-current other assets on the accompanying consolidated balance sheets and are amortized using the straight-line method, which approximates the interest method, to interest
expense over the scheduled maturity period.

24

---

On
May 5, 2003, we issued and sold $125.0 million aggregate principal amount of convertible subordinated notes in a private placement. The notes were sold at par less an
underwriting discount of 2.625 percent and we received net proceeds of $121.2 million. The notes are due May 15, 2008, will accrue interest at an annual rate of
1.25 percent and are convertible at any time into shares of our common stock at a conversion price of $25.595 per share. Interest on the notes is payable semi-annually on
May 15 and November 15 of each year beginning November 15, 2003. We have reserved 4,883,762 shares of our common stock for conversion of the convertible subordinated notes. If a
change of control occurs, each holder of notes will have the right to require us to redeem, in cash, any or all of such holder's notes at a price equal to 100 percent of the principal amount to
be redeemed. A change of control is any transaction in which a person or group becomes the beneficial owner of 50% or more of our common stock or has the power to elect a majority of our board of
directors, any consolidation, merger or similar transaction in which our shareholders immediately prior to the transaction hold less than a majority of the outstanding voting stock of the surviving
corporation and the consideration in the merger or consolidation is not common stock listed on a national securities exchange or approved for quotation on the NASDAQ National Market, or the holders of
our capital stock approve any plan or proposal for our liquidation or dissolution. A change of control will not be deemed to have occurred if the last sale price of our common stock for any five
trading days during the ten trading days immediately preceding the change of control is at least equal to 105% of
the conversion price of the notes. If a change of control were to occur, we cannot assure you that we will have sufficient funds to pay the redemption price for all the notes tendered by the holders.
In that case, our failure to redeem tendered notes would constitute an event of default under the indenture for the notes, and may constitute a default under the terms of other indebtedness that we
may enter into from time to time. Debt issue costs of $3.8 million related to these notes are included in non-current other assets on the accompanying consolidated balance sheet and
are amortized using the straight-line method, which approximates the interest method, to interest expense over the scheduled maturity period. In connection with the issuance of the notes,
we entered into a Registration Rights Agreement and filed a shelf registration statement covering resales of the notes and the common stock issuable upon conversion of the notes. If we fail to comply
with certain of our obligations under the Registration Rights Agreement, additional interest will accrue on the affected notes at an annual rate of 0.5 percent. Also in connection with the
issuance of the notes, we amended our Rights Agreement dated January 30, 2001, to provide that the issuance of the notes to the initial purchasers would not cause the initial purchasers to be
Acquiring Persons (as defined in the Rights Agreement) under the Rights Agreement and therefore no Distribution Date (as defined in the Rights Agreement) under the Rights Agreement would occur as a
result of the issuance of the notes to the initial purchasers.

Our
ongoing cash requirements will be for capital expenditures, acquisitions, research and development and working capital. Management believes that cash on hand and any cash provided by
operations will be sufficient to meet our cash requirements for at least the next 12 months. Thereafter, based on our current operating plans, we may require external financing from time to
time to fund our capital expenditure requirements. There can be no assurance that alternative sources of financing will be available if our capital requirements exceed cash flow from operations. There
can be no assurance that we will be able to obtain any additional financing required to fund our capital needs on reasonable terms, or at all.

The
following summarizes our contractual cash obligations as of June 30, 2003 (in millions):

|                                    |                                    | Payments Due by Fiscal Period
|----------------------------------- | ---------------------------------- | -----------------------------
|
|Short-term and long-term borrowings |                                    | $                            
|Long-term convertible notes         |                                    |                              
|Capital lease obligations           |                                    |                              
|Operating leases                    |                                    |                              
|Other long-term obligations         |                                    |                              
|                                    |                                    |                              
|                                    | Total contractual cash obligations |                              
|                                    |                                    |                              

25

---

The
following summarizes our other commercial commitments as of June 30, 2003 (in millions):

|                             |                              | Amount of Commitment Expiration by Fiscal Period
|---------------------------- | ---------------------------- | ------------------------------------------------
|
|Guarantees                   |                              | $                                               
|Other commercial commitments |                              |                                                 
|                             |                              |                                                 
|                             | Total commercial commitments |                                                 
|                             |                              |                                                 

Guarantees
include our portion of certain equipment leases of the RTC with future minimum lease payments aggregating approximately $2.9 million as of June 30, 2003.

We,
along with AMD and Infineon, have established the Maskhouse Building Administration GmbH & Co., or BAC, which is the owner of a
state-of-the-art photomask research manufacturing facility in Dresden, Germany. We have guaranteed one-third of the BAC's construction bridge loan. The
75.0 million Euro construction bridge loan was executed in June 2002 with an original maturity date of June 13, 2003 and was amended and extended in May 2003 as described
below. The construction bridge loan had 65.0 million Euro ($74.2 million as of June 30, 2003) outstanding as of June 30, 2003. During December 2002, the BAC and AMTC
executed a facility agreement that included a term loan of 75.0 million Euro ($85.7 million as of June 30, 2003) and a revolving credit facility of 120.0 million Euro
($137.0 million as of June 30, 2003). As of June 30, 2003, there were no outstanding balances under either the term loan or revolving credit facility. The term loan will be used
to repay the construction bridge loan and the revolving credit facility will be used for equipment purchases. We have guaranteed one-third of the term loan, or up to 25.0 million
Euro ($28.6 million as of June 30, 2003), until the BAC building is occupied and lease payments begin. We have also guaranteed up to 32.0 million Euro ($36.5 million as of
June 30,
2003) of the revolving credit facility. Each of these guarantees includes certain other costs as defined in the loan agreements. We will be required to honor our guarantees upon the occurrence of an
event of default as defined in the loan agreements.

Both
the term loan and the revolving credit facility include a condition precedent requiring European Union approval of certain terms prior to initial drawdown. In May 2003, the
construction bridge loan and the revolving credit facility were amended to provide access to funds on an interim basis pending receipt of the European Union approval. The construction bridge loan was
amended to extend the final maturity from June 13, 2003 to September 30, 2003, In combination with the maturity date extension, construction bridge loan commitments of
10.0 million Euro were voluntarily canceled by the BAC, leaving total commitments of 65.0 million Euro as of May 2003. Also during May 2003, the revolving credit facility
was amended to allow up to 52.0 million Euro ($59.4 million as of June 30, 2003) to be accessed on an interim basis through September 2003. There were no amendments to our
guarantees in association with the amendments to the construction bridge loan and revolving credit facility. There were no outstanding balances associated with the interim revolving credit facility
commitments as of June 30, 2003. In July 2003, we received approval from the European Union. As a result, we expect the term loan and the revolving credit facility to be funded and the
construction bridge loan to be repaid during the first quarter of fiscal 2004.

In
May 2002, we entered into an agreement to acquire photomask production equipment from Infineon's internal photomask manufacturing operations in Munich, Germany and become
Infineon's strategic photomask supplier. In consideration for the acquisition of certain photomask production assets and the agreement to supply Infineon with photomasks over the 10-year
term of the agreement, we agreed to pay Infineon $53.5 million over a seven-year period ending in March 2009. We made the first $10.0 million payment associated with
the agreement in April 2003. In addition, we agreed to purchase from Infineon additional photomask production equipment for approximately $28.1 million payable over a
five-year period ending in December 2006. We expect to fund all payments to Infineon from cash provided by operations; however, we may elect to satisfy up to approximately
$30.2 million of these amounts by issuing shares of our common stock.

26

---

In
addition to the commitments in the tables above, we are also committed to fund approximately 25 percent of the costs related to the maintenance and overhead of the leased
equipment of the RTC through June 2004. Additionally, we are committed to fund a portion of the operating cash requirements of the AMTC. We expect our portion to be approximately
33 percent through September 2003 and to vary between approximately 22 percent to 26 percent thereafter. We will lease approximately 50 percent of the BAC's
photomask research and manufacturing facility for a term of 10 years.

We
have also established a profit sharing plan with the BindKey employees. Over the next three years, BindKey employees may earn amounts annually based on the annual
after-tax earnings
of BindKey. In addition and upon the termination of the final year subject to the profit sharing plan, the employees may earn as much as an additional $120.0 million based on the
after-tax earnings of BindKey in the final year. Any amounts earned in relation to the profit sharing plan will be expensed in the period earned.

In
addition, in March 2002 we sold all of our photoblank manufacturing assets located in Poughkeepsie, New York, to Schott Lithotec AG, or Schott. We also entered into a supply
agreement with Schott for a significant portion of our future purchases of photoblanks.

We
also have various purchase commitments incidental to the normal course of business, including non-refundable deposits to purchase equipment. In the aggregate, such
commitments are not at prices in excess of current market.

Critical Accounting Policies

Our critical accounting policies are as follows:







27

---









28

---





Other Matters

In the ordinary course of business, we engage in transactions with related parties including DuPont, the RTC, AMTC, BAC and certain of our non-North
America employees. Transactions with DuPont relate primarily to agreements entered into in 1996. Additionally, $1.4 million and $1.9 million of our revenue in China for fiscal 2001 and
2002, respectively, was transacted through a DuPont subsidiary in order to facilitate the collection of accounts receivable. We conduct a portion of our research and development projects by funding
our proportionate share of the research efforts of the RTC and AMTC joint ventures. Additionally, we have receivables from certain of our non- North America employees related primarily to
housing and automobile loans.

In
June 2002, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standard, or SFAS No. 146,Accounting for
Costs Associated with Exit or Disposal Activities. SFAS No. 146 provides guidance on the accounting for recognizing, measuring and reporting of costs associated with
exit and disposal activities, including restructuring activities. SFAS No. 146 adjusts the timing of when a liability for termination benefits is to be recognized based on whether the employee
is required to render future service. A liability for costs to terminate an operating lease or other contract before the end of its term is to be recognized when the entity terminates the contract or
ceases using the rights conveyed by the contract. All other costs associated with an exit or disposal activity are to be expensed as incurred. SFAS No. 146 requires the liability to be measured
at its fair value with subsequent changes in fair value to be recognized each reporting period utilizing an interest allocation approach. SFAS No. 146 nullifies the guidance of the Emerging
Issues Task Force, or EITF, Issue No. 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). The pronouncement is effective for exit or disposal activities initiated after December 31, 2002 and had no impact on our
consolidated financial condition or results of operations.

In
November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 requires certain guarantees to be measured at fair value upon issuance and recorded as a liability. In addition, FIN 45
expands current disclosure requirements regarding guarantees issued by an entity, including tabular presentation of the changes affecting an entity's aggregate product warranty liability. Certain
provisions of FIN 45 are effective December 15, 2002: others are effective after December 31, 2002. The adoption of FIN 45 had no impact on our consolidated financial condition or
results of operations.

In
December 2002, the FASB issued SFAS No. 148,Accounting for Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB Statement
No. 123. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends certain provisions of SFAS No. 123 to require that disclosure of the pro forma effect of applying the fair value method of accounting for
stock-based compensation be prominently displayed in an entity's accounting policy in annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years
ending after December 15, 2002. The adoption of SFAS No. 148 had no impact on our consolidated financial condition or results of operations.

In
January 2003, the FASB issued FIN No. 46,Consolidation of Variable Interest Entities("VIE"). FIN No. 46 requires
that if a company holds a controlling financial interest in a VIE, the assets, liabilities and results of the VIE's activities should be consolidated in the entity's financial statements. We do not
expect that the adoption of FIN No. 46 will have a material impact on our consolidated financial condition or results of operations.

29

---

In
January 2003, the Securities and Exchange Commission ("SEC") issued a final rule requiring enhanced disclosure of material off-balance sheet transactions,
arrangements, and other relationships with unconsolidated entities that may have a material current or future effect on financial condition, changes in financial condition, results of operations,
liquidity, capital expenditures, capital resources, or significant components of revenue or expenses. The rule also requires a tabular disclosure of future payments due under contractual commitments.
The disclosure requirements for off-balance sheet transactions, arrangements and other relationships are required for fiscal years ending on or after June 15, 2003. The adoption of
this pronouncement had no impact on our consolidated results of operations or financial condition. The tabular disclosure requirements for future payments due under contractual commitments are
required for fiscal years ending on or after December 15, 2003. We do not expect the tabular disclosure requirements to have a material impact on our consolidated financial condition or results
of operations.

In
April 2003, the FASB issued SFAS No. 149,Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except to
the extent the provisions of this statement relate to previously effective SFAS No.133 implementation issues and for hedging relationships designated after June 30, 2003. We do not expect that
the adoption of SFAS No. 149 will have a material impact on our consolidated financial condition or results of operations.

In
May 2003, the FASB issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this pronouncement had
no impact on our consolidated financial condition or results of operations.

Foreign Currency Exposure.Non-North America operations are subject to certain risks inherent in conducting
business abroad, including price and currency exchange controls, fluctuation in the relative value of currencies and restrictive governmental actions. Changes in the relative value of currencies occur
from time to time and may, in certain instances, have a material effect on our consolidated results of operations. Our consolidated financial statements reflect remeasurement of items denominated in
non-U.S. currencies to U.S. dollars, our functional currency. Exchange gains or losses are included in income in the period in which they occur. We monitor our exchange rate exposure and
attempt to reduce such exposure by hedging. We have entered into forward contracts in currencies of the countries in which we conduct business in order to reduce such exposure. There can be no
assurance that such forward contracts or any other hedging activity will be available or adequate to eliminate, or even mitigate, the impact of our exchange rate exposure. There can be no assurance
that such risks will not have a material adverse impact on our liquidity and consolidated results of operations in the future.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency exchange rates. As of June 30,
2003, we had $100.0 million in non-interest bearing convertible subordinated notes, $125.0 million in 1.25% convertible subordinated notes and $13.1 million in
interest bearing borrowings of which $11.5 million were
short-term borrowings. As a result, changes in the interest rate market would change the estimated fair value of our long-term convertible notes and other interest bearing
borrowings. We believe that a 10 percent change in interest rates would not have a material effect on our business, financial condition, results of operations or cash flows.

30

---

Foreign
currency exposures are primarily due to non-North America operations which are subject to certain risks inherent in conducting business abroad, including price and
currency exchange controls, fluctuation in the relative value of currencies and restrictive governmental actions. Changes in the relative value of currencies occur from time to time and may, in
certain instances, have a material effect on our results of operations. Any exchange rate fluctuations can affect our margins since we may have imbalances between some foreign currency denominated
revenue and expenses. Our consolidated financial statements reflect remeasurement of items denominated in non-U.S. currencies to U.S. dollars, our functional currency. Exchange gains or
losses are included in income in the period in which they occur. We monitor our exchange rate exposure and attempt to reduce such exposure by hedging. We have entered into forward contracts in
currencies of the countries in which we conduct business in order to reduce such exposure. As of June 30, 2003, the fair value of our forward foreign exchange contracts outstanding was
$29.1 million with an unrealized loss recorded in the consolidated income statement of $0.4 million for 2003. These instruments may involve elements of credit and market risk in excess
of the amounts recognized in the consolidated financial statements. We believe that a 10 percent change in exchange rates would not have a material effect on our business, financial condition,
results of operations or cash flows. We monitor our positions and the credit quality of counter-parties, consisting primarily of major financial institutions, and do not anticipate nonperformance by
any counter-party, although nonperformance could occur. There can be no assurance that such forward contracts or any other hedging activity will be available or adequate to eliminate, or even
mitigate, the impact of our exchange rate exposure. There can be no assurance that such risks will not have a material adverse impact on our liquidity and results of operations in the future.

Financial Risk Management

Our international revenue are subject to inherent risks, including fluctuations in local economies; difficulties in staffing and managing foreign operations;
greater difficulty in accounts receivable collection; costs and risks of localizing products for foreign countries; unexpected changes in regulatory requirements, tariffs and other trade barriers;
difficulties in the repatriation of earnings; and burdens of complying with a wide variety of foreign laws. Some of our sales outside of North America are denominated in local currencies, and
accordingly, we are subject to the risks associated with fluctuations in currency rates. In general, increases in the value of the dollar against foreign currencies decrease the U.S. dollar value of
foreign sales requiring us either to increase our price in the local currency, which could render our product prices noncompetitive, or to suffer reduced revenue and gross margins as measured in U.S.
dollars. Our foreign currency-hedging program is not designed to hedge the margin risks associated with foreign exchange rate changes. Our hedging is comprised of foreign currency forward exchange
contracts utilized to mitigate the risks associated with foreign
currency fluctuations on certain balance sheet exposures. However, the hedging program will not eliminate all of our foreign exchange risks.

The
marketplace for our products dictates that we maintain inventories of raw materials. Therefore, inventory obsolescence is a risk for us due to frequent engineering changes, shifting
customer demand, the emergence of new industry standards and rapid technological advances including the introduction by our competitors or us of products embodying new technology. While we maintain
valuation allowances for excess and obsolete inventory and management continues to monitor the adequacy of such valuation allowances, there can be no assurance that such valuation allowances will be
sufficient.

As
of June 30, 2003, we had outstanding foreign short-term borrowings, including capital lease obligations, totaling $11.4 million. As of June 30, 2003,
we did not have any relationships with any unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Accordingly, we are not exposed to any financing,
liquidity, market or credit risk that could arise if we were engaged in such relationships.

31

---

As
of June 30, 2003 we had $100.0 million of convertible subordinated notes outstanding due in July 2004. The notes have no stated interest, are convertible at any
time into shares of our common stock at a conversion price of $106.26 per share, are unconditionally guaranteed by DuPont and are not callable by us. In the event of a fundamental change in our
company, each holder of notes will have the right to require us to redeem, in cash, any or all of such holder's notes at a price equal to 100 percent of the principal amount to be redeemed. A
fundamental change generally is any transaction in which all or substantially all of our common stock is exchanged for, converted into, acquired for or constitutes the right to receive, consideration
which is not all or substantially all common stock listed on a national securities exchange or approved for quotation on the NASDAQ National Market. If a fundamental change were to occur, we cannot
assure you that we will have sufficient funds to pay the redemption price for all the notes tendered by the holders, although DuPont would be required to pay the redemption price under its guarantee.
In that case, our failure to redeem tendered notes would constitute an event of default under the indenture for the notes, and may constitute a default under the terms of other indebtedness that we
may enter into from time to time.

In
addition, we issued and sold $125.0 million aggregate principal amount of convertible subordinated notes in a private placement in May 2003. The notes are due
May 15, 2008, will accrue interest at an annual rate of 1.25 percent and are convertible at any time into shares of our common stock at a conversion price of $25.595 per share. Interest
on the notes is payable semi-annually on May 15 and November 15 of each year beginning November 15, 2003. If a change of control occurs, each holder of notes will have
the right to require us to redeem, in cash, any or all of such holder's notes at a price equal to 100 percent of the principal amount to be redeemed. A change of control is any
transaction in which a person or group becomes the beneficial owner of 50% or more of our common stock or has the power to elect a majority of our board of directors, any consolidation, merger or
similar transaction in which our shareholders immediately prior to the transaction hold less than a majority of the outstanding voting stock of the surviving corporation and the consideration in the
merger or consolidation is not common stock listed on a national securities exchange or approved for quotation on the NASDAQ National Market, or the holders of our capital stock approve any plan or
proposal for our liquidation or dissolution. If a change of control were to occur, we cannot assure you that we will have sufficient funds to pay the redemption price for all the notes tendered by the
holders. In that case, our failure to redeem tendered notes would constitute an event of default under the indenture for the notes, and may constitute a default under the terms of other indebtedness
that we may enter into from time to time. In connection with the issuance of the notes, we entered into a Registration Rights Agreement and filed a shelf registration statement covering resales of the
notes and the common stock issuable upon conversion of the notes. If we fail to comply with certain of our obligations under the Registration Rights Agreement, additional interest will accrue on the
affected notes at an annual rate of 0.5 percent.

Item 8. Financial Statements and Supplementary Data

The information required by this Item is included in Part IV, Item 14 (a) (1) and (2).

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Our chief executive officer and our chief financial officer, based on their evaluation of the effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d -15(e) under the Securities and Exchange Act of 1934) as of the end of the period covered by this report on Form 10-K of
DuPont Photomasks, Inc., believe that our disclosure controls and procedures were effective. There were no significant changes in internal control over financial reporting or in other factors
during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

32

---

PART III

Information with respect to the following Items is incorporated by reference to our proxy statement to be filed in connection with our 2003 annual meeting of
stockholders. However, information regarding executive officers is listed below pursuant to General Instruction G of this Form 10-K.

Item 10. Directors and Executive Officers

EXECUTIVE OFFICERS

The following table sets forth as of June 30, 2003, the name, age and position with DuPont Photomasks of each person who is an executive officer of DuPont
Photomasks.

|Name               |  | Age |  | Position(s)                                                 
|------------------ |  | --- |  | ------------------------------------------------------------
|Marshall C. Turner |  | 61  |  | Chairman of our Board and Chief Executive Officer           
|Craig W. Kokjohn   |  | 51  |  | Executive Vice PresidentWorldwide Operations               
|James W. Boeckman  |  | 41  |  | Executive Vice President, General Counsel and Secretary     
|James R. Northup   |  | 42  |  | Executive Vice PresidentWorldwide Sales                    
|Satish Rishi       |  | 43  |  | Executive Vice PresidentFinance and Chief Financial Officer

Marshall C. Turneris Chairman of our Board and became our Chief Executive Officer in June 2003. Mr. Turner is a director of
the AllianceBernstein Technology Fund, Inc. He is also the Chairman of the Board of the Smithsonian's National Museum of Natural History, and a director of the George Lucas Educational
Foundation. From 1981 through 1998, he was a founding general partner of Taylor & Turner Associates, Ltd., the general partner of several venture partnerships. He served on an interim
basis from June 1999 to May 2000 as the Chairman of our Board of Directors and Chief Executive Officer. He holds a Bachelor's Degree in Mechanical Engineering and a Master's Degree in
Product Design from Stanford University, and a Master's Degree in Business Administration from Harvard University. He has been one of our directors since April 1996.

Craig W. Kokjohnis our Executive Vice PresidentWorldwide Operations. In 1973, Mr. Kokjohn began his career at DuPont
in the electronics business unit, where he held a variety of technical sales and sales management, technical service management, and product management positions. In December 1988,
Mr. Kokjohn joined us as the general manager of our Kokomo facility. In addition, he subsequently held executive-level sales positions as Vice PresidentU.S. Sales, Vice
PresidentU.S. Operations and Executive Vice PresidentGlobal Sales. He holds a Bachelor's Degree in Chemical Engineering from the University of Iowa.

James W. Boeckmanis our Executive Vice President, General Counsel and Secretary and joined us in July 2002. Prior to joining us,
he was a partner in the Corporate and Securities Practice Group of Vinson & Elkins L.L.P. for five years and served as co-chair of the firm's Technology Transactions and Licensing
practice group. Prior to joining Vinson & Elkins L.L.P., Mr. Boeckman served as Senior Regional Counsel for the Asia-Pacific region for Electronic Data Systems Corporation.
Mr. Boeckman graduated summa cum laude with a B.A. from Westminster College and with high honors from The University of Texas School of Law.

James R. Northupis our Executive Vice PresidentWorldwide Sales and joined us in January 2002. A 19-year
industry veteran, Mr. Northup most recently served as President and Chief Executive Officer of Gray Scale Technologies, a privately held company that develops and markets gray-scale
processing and photoblank technology for phase shift masks. Previous to that, he spent 10 years at Photronics, Inc., a supplier of photomasks, where his last position was President. He
began his career in semiconductor fab operations at AT&T Technologies and Spectrum Technologies. Mr. Northup holds a B.S. with honors in chemical engineering from the University of Rhode
Island.

33

---



Satish Rishiis our Executive Vice PresidentFinance and Chief Financial Officer and joined us in November 2001. Most
recently, he served as Vice President and Assistant Treasurer at Dell Computer Corporation. Previous to Dell, Mr. Rishi spent 13 years at Intel Corporation, where he held financial
management positions of increasing responsibility, both in the United States and overseas. His last position at Intel was Assistant Treasurer. Mr. Rishi holds an M.B.A. from the University of
California at Berkeley and a B.S. with honors in mechanical engineering from Delhi University in Delhi, India.

Our
executive officers are appointed annually by our Board of Directors in accordance with our Bylaws.

In
June 2003 our Board of Directors approved a code of ethics for our senior executives, including our principal executive officer, principal financial officer, and principal
accounting officer or controller (as those terms are used in the applicable SEC rules). A copy of our code of ethics is filed as an exhibit to this annual report. The code of ethics supplements our
existing business ethics policies and procedures that are applicable to all of our employees

Further
information required by this Item is incorporated by reference to the Proxy Statement under the sections captioned "Election of Directors" and "Compliance With
Section 16(a) of the Exchange Act."

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to the Proxy Statement under the sections captioned "Executive Compensation and Other
Information", "Director Compensation" and "Employment Contracts."

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference to the Proxy Statement under the section captioned "Beneficial Ownership of Securities."

Item 13. Certain Relationships and Related Transactions

The information required by this Item is incorporated by reference to the Proxy Statement under the section captioned "Transactions and Relationship Between Us
and DuPont."

Item 14. Principal Accountant Fees and Services

The information required by this Item is incorporated by reference to the Proxy Statement under the section captioned "Ratification of Selection of Independent
Accountants."

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)   The
following documents are filed as a part of this Form 10-K:



|                                                |  | Page(s)    
|----------------------------------------------- |  | -----------
|Report of Independent Auditors                  |  | F-1        
|Consolidated Income Statements                  |  | F-2        
|Consolidated Balance Sheets                     |  | F-3        
|Consolidated Statements of Cash Flows           |  | F-4        
|Consolidated Statements of Stockholders' Equity |  | F-5        
|Notes to Consolidated Financial Statements      |  | F-6 to F-27
|Consolidated Financial Statements Schedule:     |  |            
|Schedule II  Valuation and Qualifying Accounts |  | F-28       

34

---



|Exhibit
Number |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1.1          |  | Certificate of Incorporation of the Company, as amended and restated on April 3, 1996. (A)                                                                                                                                                                                                                                                                                                                                                       
|3.1.2          |  | Amendment to the Certificate of Incorporation of the Company. (E)                                                                                                                                                                                                                                                                                                                                                                                
|3.2            |  | Bylaws, as amended on October 26, 1999. (E)                                                                                                                                                                                                                                                                                                                                                                                                      
|3.2.1          |  | Amendments to the Bylaws Of DuPont Photomasks, Inc. as approved by the Board Of Directors on June 23, 2003.                                                                                                                                                                                                                                                                                                                                      
|4.1            |  | Specimen Certificate for Common Stock. (A)                                                                                                                                                                                                                                                                                                                                                                                                       
|4.2            |  | Form of Indenture, between DuPont Photomasks, Inc. and Chase Bank of Texas, N.A., as trustee, including the form of Convertible Subordinated Notes due July 24, 2004 attached as Exhibit A thereto. (K)                                                                                                                                                                                                                                          
|4.3            |  | Indenture, between DuPont Photomasks, Inc. and JPMorgan Chase Bank, as trustee, including Form of 1.25% Convertible Subordinated Notes due 2008 (144A Global Note and Reg S. Global Note). (I)                                                                                                                                                                                                                                                   
|4.4            |  | Rights Agreement, dated as of January 30, 2001, between DuPont Photomasks, Inc. and EquiServe Trust Company, N.A., as Rights Agent, together with the following exhibits thereto: Exhibit A-Form of Certificate of
Designation of Series A Junior Participating Preferred Stock of DuPont Photomasks, Inc.; Exhibit B-Form of Right Certificate; Exhibit C-Summary of Rights to Purchase Shares of Preferred Stock of DuPont Photomasks, Inc. (J)
|4.5            |  | Amendment No. 1 to Rights Agreement, between DuPont Photomasks, Inc. and EquiServe Trust Company, N.A., as Rights Agent, dated as of April 29, 2003. (I)                                                                                                                                                                                                                                                                                         
|4.6            |  | Registration Rights Agreement among DuPont Photomasks, Inc., Credit Suisse First Boston LLC and Lehman Brothers Inc. dated as of May 5, 2003. (I)                                                                                                                                                                                                                                                                                                
|10.1           |  | Transitional Administrative Services Agreement between the Company and E.I. du Pont de Nemours and Company dated as of January 1, 1996. (A)                                                                                                                                                                                                                                                                                                      
|10.2           |  | Environmental Indemnification Agreement between the Company and E. I. du Pont de Nemours dated April 30, 1996. (A)                                                                                                                                                                                                                                                                                                                               
|10.3           |  | Amended Bonus Plan, as adopted by the Company's Board of Directors on October 28, 1996. (B)                                                                                                                                                                                                                                                                                                                                                      
|10.4           |  | Second Amended and Restated Non-employee Directors Stock Option Plan as adopted by the Company's Board of Directors on July 27, 1998. (C)                                                                                                                                                                                                                                                                                                        
|10.5           |  | Amended and Restated Stock Performance Plan as adopted by the Company's Board of Directors on June 9, 1997. (B)                                                                                                                                                                                                                                                                                                                                  
|10.6           |  | Founders Stock Option Plan, as adopted by the Company's Board of Directors on March 26, 1996. (A)                                                                                                                                                                                                                                                                                                                                                
|10.7           |  | Registration Rights Agreement between the Company and DuPont Chemical and Energy Operations, Inc. dated as of December 31, 1995. (A)                                                                                                                                                                                                                                                                                                             
|10.8           |  | Tax Indemnification Agreement among the Company, DuPont Chemical and Energy Operations, Inc. and E. I. du Pont de Nemours and Company dated May 14, 1996. (A)                                                                                                                                                                                                                                                                                    
|10.9           |  | Research, Development and Consulting Agreement between the Company and E. I. du Pont de Nemours and Company dated as of January 1, 1996. (A)                                                                                                                                                                                                                                                                                                     
|10.10          |  | Business Transfer Agreement between DuPont Korea, Ltd. and DuPont Photomasks Korea, Ltd. dated December 22, 1995. (A)                                                                                                                                                                                                                                                                                                                            
|10.11          |  | Corporate Tradename and Trademark Agreement between the Company and E. I. du Pont de Nemours and Company dated May 7, 1998. (C)                                                                                                                                                                                                                                                                                                                  
|10.11.1        |  | Amendment to Corporate Tradename and Trademark Agreement between the Company and E. I. du Pont de Nemours and Company dated March 5, 2001.                                                                                                                                                                                                                                                                                                       
|10.12          |  | Amended 1997 Stock Option and Restricted Stock Plan as adopted by the Company's Board of Directors on September 2, 1999. (D)                                                                                                                                                                                                                                                                                                                     
|10.13          |  | 1998 Employee Stock Purchase Plan as adopted by the Company's Board of Directors on July 27, 1998. (C)                                                                                                                                                                                                                                                                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  

35

---

|10.14 |  | 2000 Employment Agreement with Peter S. Kirlin dated May 2, 2000. (F)                                                                                                                                                                                                               
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.15 |  | 2000 Employment Agreement with Preston M. Adcox dated July 19, 2000. (F)                                                                                                                                                                                                            
|10.16 |  | DuPont Research Agreement dated April 21, 2000 (Portions of this exhibit have been omitted pursuant to a request for confidential treatment). (F)                                                                                                                                   
|10.17 |  | Teflon AF Agreement dated July 1, 2000 (Portions of this exhibit have been omitted pursuant to a request for confidential treatment). (F)                                                                                                                                           
|10.18 |  | Blank Supply Agreement dated March 31, 2002 (Portions of this exhibit have been omitted pursuant to a request for confidential treatment). (G)                                                                                                                                      
|10.19 |  | DPI Dresden Equipment Purchase and DPI/IFX Supply Agreement dated May 15, 2002, as amended, by and among DuPont Photomasks, Inc., Blitz 02-210 GmbH and Infineon Technologies AG. (Portions of this exhibit have been omitted
pursuant to a request for confidential treatment). (G)
|10.20 |  | 2002 Employment Agreement with James Northup dated December 27, 2001. (H)                                                                                                                                                                                                           
|10.21 |  | 2002 Employment Agreement with Satish Rishi dated October 11, 2001. (H)                                                                                                                                                                                                             
|10.22 |  | 2003 Employment Agreement with Marshall C. Turner dated September 10, 2003                                                                                                                                                                                                          
|10.23 |  | Form of Indemnification Agreement between the Company and its Directors and Officers                                                                                                                                                                                                
|11    |  | Statement re Computation of Per Share Earnings (Loss)                                                                                                                                                                                                                               
|14    |  | Code of Ethics for Senior Executives of DuPont Photomasks, Inc.                                                                                                                                                                                                                     
|21    |  | List of principal subsidiaries of the Company                                                                                                                                                                                                                                       
|23    |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                               
|31    |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                         
|32    |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                     

A
letter above indicates an exhibit previously filed with the Securities and Exchange Commission as an exhibit to the filing described below and is incorporated herein by
reference.

|Letter |  | Definition                                                                                               
|------ |  | ---------------------------------------------------------------------------------------------------------
|(A)    |  | Registration Statement on Form S-1, Registration No. 333-33869 ("IPO Registration Statement").           
|(B)    |  | Annual Report on Form 10-K for the year ended June 30, 1997 ("1997 Form 10-K").                          
|(C)    |  | Annual Report on Form 10-K for the year ended June 30, 1998 ("1998 Form 10-K").                          
|(D)    |  | Annual Report on Form 10-K for the year ended June 30, 1999 ("1999 Form 10-K").                          
|(E)    |  | Form 8-A12 G/A on June 23, 2000 ("2000 Form 8-A").                                                       
|(F)    |  | Annual Report on Form 10-K for the year ended June 30, 2000 ("2000 Form 10-K").                          
|(G)    |  | Annual Report on Form 10-K for the year ended June 30, 2001 ("2001 Form 10-K").                          
|(H)    |  | Annual Report on From 10-K for the year ended June 30, 2002 ("2002 Form 10-K").                          
|(I)    |  | Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 ("March 31, 2003 Form 10-Q").
|(J)    |  | Form 8-A12B on January 30, 2001 ("2001 Form 8-A12B").                                                    
|(K)    |  | Amendment No. 2 to Form S-3 filed on July 19, 2000 ("Amendment No. 2 to Form S-3").                      



Our
report on Form 8-K, dated April 15, 2003, reporting our announcements on April 11, 2003 and April 15, 2003, respectively, regarding
(i) our preliminary financial results for the fiscal quarter ended March 31, 2003 and certain other information and (ii) our financial results for the fiscal quarter ended
March 31, 2003 and certain other information.

Our
report on Form 8-K, dated April 30, 2003, reporting our announcement on April 29, 2003 regarding (i) our intention to offer
$100.0 million aggregate principal amount of convertible subordinated notes due 2008 in a private placement (the "Offering") and (ii) our pricing of the previously announced Offering and
that the size of the Offering had increased from $100.0 million to $105.0 million.

Our
report on Form 8-K, dated May 5, 2003, reporting our announcement on May 5, 2003, regarding our completion of the private placement of
$125.0 million aggregate principal amount of our convertible subordinated notes due 2008.

36

---



Our report on Form 8-K, dated June 26, 2003, reporting our announcement on June 25, 2003, that (i) Peter S. Kirlin, Ph.D., had resigned as
chairman and chief executive officer and that the board of directors elected Marshall C. Turner as chairman of the board and chief executive officer and (ii) revenue for the fourth quarter of
fiscal 2003, ending June 30, 2003, was currently tracking to the low end of the range of previous guidance, or $80.0 million, and our plans to report full fourth quarter results on
Wednesday, July 23, 2003.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this report to be signed on our behalf by
the undersigned, thereunto duly authorized.

|Date: September 10, 2003 |  | DUPONT PHOTOMASKS, INC.
|------------------------ |  | -----------------------
|                         |  | By:                    

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on our behalf and in the capacities and on the dates
indicated:

|Name                                                              |  | Title                                                                                                       |  | Date              
|----------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ------------------
|                                                                  |  |                                                                                                             |  |                   
|/s/MARSHALL C. TURNERMarshall C. Turner                           |  | Chairman of our Board and Chief Executive Officer (Principal Executive Officer)                             |  | September 10, 2003
|/s/SATISH RISHISatish Rishi                                       |  | Executive Vice President  Finance and Chief Financial Officer (Principal Financial and Accounting Officer) |  | September 10, 2003
|/s/PRESTON M. ADCOXPreston M. Adcox                               |  | Director                                                                                                    |  | September 10, 2003
|/s/ROBERT J. BOEHLKERobert J. Boehlke                             |  | Director                                                                                                    |  | September 10, 2003
|/s/ISABELLA C.M. CUNNINGHAM, PH.D.Isabella C.M. Cunningham, Ph.D. |  | Director                                                                                                    |  | September 10, 2003
|/s/E. JAMES PRENDERGASTE. James Prendergast                       |  | Director                                                                                                    |  | September 10, 2003
|/s/SUSAN VLADUCHICK SAMSusan Vladuchick Sam                       |  | Director                                                                                                    |  | September 10, 2003
|/s/JOHN C. SARGENTJohn C. Sargent                                 |  | Director                                                                                                    |  | September 10, 2003
|/s/WILLIAM T. SIEGLEWilliam T. Siegle                             |  | Director                                                                                                    |  | September 10, 2003

37

---



Report of Independent Auditors

To the Board of Directors and Stockholders of DuPont Photomasks, Inc.:

In
our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) on page 34 present fairly, in all material respects, the financial position of
DuPont Photomasks, Inc. and its subsidiaries at June 30, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended
June 30, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a)(2) on page 35 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial
statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As
discussed in Note 1 to the consolidated financial statements, in fiscal year 2001 the Company changed its revenue recognition for certain product shipments.

/s/ PricewaterhouseCoopers LLP

Austin, Texas
July 22, 2003

F-1

---



DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES        CONSOLIDATED INCOME STATEMENTS        (Dollars in thousands, except share data)

|                                                                                                             |                                                            | Year Ended June 30, |        
|------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------- | ------------------- | -------
|
|Revenue, net                                                                                                 |                                                            | $                   | 407,946
|Cost of goods sold                                                                                           |                                                            |                     | 276,657
|Selling, general and administrative expense                                                                  |                                                            |                     | 48,621 
|Research and development expense                                                                             |                                                            |                     | 32,220 
|Special charges                                                                                              |                                                            |                     | 36,101 
|Impairment of long-lived assets                                                                              |                                                            |                     |       
|                                                                                                             |                                                            |                     |        
|Operating profit (loss)                                                                                      |                                                            |                     | 14,347 
|Income (loss) on warrants, net                                                                               |                                                            |                     | 10,687 
|Gain on sale of assets                                                                                       |                                                            |                     |       
|Other income (expense), net                                                                                  |                                                            |                     | 2,017  
|                                                                                                             |                                                            |                     |        
|Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle |                                                            |                     | 27,051 
|Provision for (benefit from) income taxes                                                                    |                                                            |                     | 5,275  
|                                                                                                             |                                                            |                     |        
|Income (loss) before minority interest and cumulative effect of change in accounting principle               |                                                            |                     | 21,776 
|Minority interest in income of joint ventures                                                                |                                                            |                     | (6,177 
|                                                                                                             |                                                            |                     |        
|Income (loss) before cumulative effect of change in accounting principle                                     |                                                            |                     | 15,599 
|Cumulative effect of change in accounting principle                                                          |                                                            |                     | (481   
|                                                                                                             |                                                            |                     |        
|Net income (loss)                                                                                            |                                                            | $                   | 15,118 
|                                                                                                             |                                                            |                     |        
|Basic earnings (loss) per share:                                                                             |                                                            |                     |        
|                                                                                                             | Before cumulative effect of change in accounting principle |                     | $      
|                                                                                                             |                                                            |                     |        
|                                                                                                             | After cumulative effect of change in accounting principle  |                     | $      
|                                                                                                             |                                                            |                     |        
|                                                                                                             | Weighted average shares outstanding                        |                     |        
|                                                                                                             |                                                            |                     |        
|Diluted earnings (loss) per share:                                                                           |                                                            |                     |        
|                                                                                                             | Before cumulative effect of change in accounting principle |                     | $      
|                                                                                                             |                                                            |                     |        
|                                                                                                             | After cumulative effect of change in accounting principle  |                     | $      
|                                                                                                             |                                                            |                     |        
|                                                                                                             | Weighted average shares outstanding                        |                     |        
|                                                                                                             |                                                            |                     |        

The accompanying notes are an integral part of these consolidated financial statements.

F-2

---



DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        (Dollars in thousands, except share data)

|                                                  |                                                                                                                             | June 30,
|------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | --------
|
|ASSETS                                            |                                                                                                                             |         
|Current assets:                                   |                                                                                                                             |         
|                                                  | Cash and cash equivalents                                                                                                   |         
|                                                  | Accounts receivable, trade, net                                                                                             |         
|                                                  | Accounts receivable, related parties                                                                                        |         
|                                                  | Inventories, net                                                                                                            |         
|                                                  | Deferred income taxes                                                                                                       |         
|                                                  | Prepaid expenses and other current assets                                                                                   |         
|                                                  |                                                                                                                             |         
|Total current assets                              |                                                                                                                             |         
|Assets held for sale                              |                                                                                                                             |         
|Property and equipment, net                       |                                                                                                                             |         
|Accounts receivable, related parties              |                                                                                                                             |         
|Deferred income taxes                             |                                                                                                                             |         
|Other assets, net                                 |                                                                                                                             |         
|                                                  |                                                                                                                             |         
|Total assets                                      |                                                                                                                             | $       
|                                                  |                                                                                                                             |         
|LIABILITIES AND STOCKHOLDERS' EQUITY              |                                                                                                                             |         
|Current liabilities:                              |                                                                                                                             |         
|                                                  | Accounts payable, trade                                                                                                     |         
|                                                  | Accounts payable, related parties                                                                                           |         
|                                                  | Short-term borrowings                                                                                                       |         
|                                                  | Income taxes payable                                                                                                        |         
|                                                  | Other accrued liabilities                                                                                                   |         
|                                                  |                                                                                                                             |         
|Total current liabilities                         |                                                                                                                             |         
|Long-term borrowings                              |                                                                                                                             |         
|Long-term convertible notes                       |                                                                                                                             |         
|Deferred income taxes                             |                                                                                                                             |         
|Other liabilities                                 |                                                                                                                             |         
|Minority interest in net assets of joint ventures |                                                                                                                             |         
|                                                  |                                                                                                                             |         
|Total liabilities                                 |                                                                                                                             |         
|                                                  |                                                                                                                             |         
|Commitments and contingencies                     |                                                                                                                             |         
|Stockholders' equity:                             |                                                                                                                             |         
|                                                  | Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued and outstanding                                   |         
|                                                  | Common stock, $.01 par value; 100,000,000 shares authorized; 17,927,294 and 18,064,964 issued and outstanding, respectively |         
|                                                  | Additional paid-in capital                                                                                                  |         
|                                                  | Retained earnings                                                                                                           |         
|                                                  |                                                                                                                             |         
|Total stockholders' equity                        |                                                                                                                             |         
|                                                  |                                                                                                                             |         
|Total liabilities and stockholders' equity        |                                                                                                                             | $       
|                                                  |                                                                                                                             |         

The
accompanying notes are an integral part of these consolidated financial statements.

F-3

---



DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (Dollars in thousands)

|                                                                                         |                                                               | Year Ended June 30,                           |        
|---------------------------------------------------------------------------------------- | ------------------------------------------------------------- | --------------------------------------------- | -------
|
|Cash flows from operating activities:                                                    |                                                               |                                               |        
|Net income (loss)                                                                        |                                                               | $                                             | 15,118 
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                               |                                               |        
|                                                                                         |                                                               | Depreciation and amortization                 |        
|                                                                                         |                                                               | Special charges                               |        
|                                                                                         |                                                               | Impairment of long-lived assets               |        
|                                                                                         |                                                               | Gain on sale of assets                        |        
|                                                                                         |                                                               | Tax benefit from employee stock options       |        
|                                                                                         |                                                               | (Income) loss on warrants, net                |        
|                                                                                         |                                                               | Minority interest in income of joint ventures |        
|                                                                                         |                                                               | Deferred income taxes                         |        
|                                                                                         |                                                               | Other                                         |        
|                                                                                         |                                                               | Changes in assets and liabilities:            |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|Cash flows from investing activities:                                                    |                                                               |                                               |        
|                                                                                         | Additions of property and equipment, net                      |                                               |        
|                                                                                         | Proceeds from sales of warrants and investments               |                                               |        
|                                                                                         | Proceeds from sale of assets                                  |                                               |        
|                                                                                         | Payments for acquisitions and investments                     |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|Cash flows from financing activities:                                                    |                                                               |                                               |        
|                                                                                         | Proceeds from borrowings, net                                 |                                               |        
|                                                                                         | Payments of borrowings                                        |                                               |        
|                                                                                         | Proceeds from borrowings, related parties                     |                                               |        
|                                                                                         | Payments of borrowings, related parties                       |                                               |        
|                                                                                         | Proceeds from issuance of common stock, net                   |                                               |        
|                                                                                         | Proceeds from issuance of common stock under employee plans   |                                               |        
|                                                                                         | Decrease in minority interest in net assets of joint ventures |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               |                                               |        
|Effect of exchange rate changes on cash                                                  |                                                               |                                               | (1,589 
|                                                                                         |                                                               |                                               |        
|Net increase in cash and cash equivalents                                                |                                                               |                                               | 96,387 
|Cash and cash equivalents at beginning of year                                           |                                                               |                                               | 42,203 
|                                                                                         |                                                               |                                               |        
|Cash and cash equivalents at end of year                                                 |                                                               | $                                             | 138,590
|                                                                                         |                                                               |                                               |        
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                        |                                                               |                                               |        
|                                                                                         | Cash paid (received) for:                                     |                                               |        
|                                                                                         |                                                               | Interest                                      |        
|                                                                                         |                                                               |                                               |        
|                                                                                         |                                                               | Taxes, net                                    |        
|                                                                                         |                                                               |                                               |        

The accompanying notes are an integral part of these consolidated financial statements.

F-4

---



DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        (Dollars in thousands)

|                            |                                                    | Common Stock |           |   |     |    |   | Accumulated
Other
Comprehensive
Income |         |   |        
|--------------------------- | -------------------------------------------------- | ------------ | --------- | - | --- | -- | - | -------------------------------------- | ------- | - | -------
|
|
|Balance as of June 30, 2000 |                                                    | 15,767,813   |           | $ | 158 |    | $ | 179,591                                |         | $ | 135,906
|                            | Contribution of capital                            |              |          |   |     |   |   |                                        | 11,121  |   |        
|                            | Issuance of common stock under employee plans      |              | 616,862   |   |     | 6  |   |                                        | 16,252  |   |        
|                            | Issuance of common stock                           |              | 1,422,222 |   |     | 14 |   |                                        | 103,799 |   |        
|                            | Net income                                         |              |          |   |     |   |   |                                        |        |   |        
|                            | Unrealized gain on warrants                        |              |          |   |     |   |   |                                        |        |   |        
|                            | Reclassification of gain on warrants to net income |              |          |   |     |   |   |                                        |        |   |        
|                            |                                                    |              |           |   |     |    |   |                                        |         |   |        
|Balance as of June 30, 2001 |                                                    | 17,806,897   |           |   | 178 |    |   | 310,763                                |         |   | 151,024
|                            | Contribution of capital                            |              |          |   |     |   |   |                                        | 357     |   |        
|                            | Issuance of common stock under employee plans      |              | 120,397   |   |     | 1  |   |                                        | 3,310   |   |        
|                            | Net income                                         |              |          |   |     |   |   |                                        |        |   |        
|                            |                                                    |              |           |   |     |    |   |                                        |         |   |        
|Balance as of June 30, 2002 |                                                    | 17,927,294   |           |   | 179 |    |   | 314,430                                |         |   | 155,054
|                            | Issuance of common stock under employee plans      |              | 137,670   |   |     | 2  |   |                                        | 2,790   |   |        
|                            | Net loss                                           |              |          |   |     |   |   |                                        |        |   |        
|                            |                                                    |              |           |   |     |    |   |                                        |         |   |        
|Balance as of June 30, 2003 |                                                    | 18,064,964   |           | $ | 181 |    | $ | 317,220                                |         | $ | 41,544 
|                            |                                                    |              |           |   |     |    |   |                                        |         |   |        

The accompanying notes are an integral part of these consolidated financial statements.

F-5

---



DUPONT PHOTOMASKS, INC. AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (Dollars in thousands, except share data)

1.     Organization and Summary of Significant Accounting Policies

Business:DuPont Photomasks, Inc., or the Company, was incorporated in Texas on June 25, 1985, and was
reincorporated in Delaware on December 31, 1995. Our principal business is the manufacture and sale of photomasks, high-purity quartz or glass plates containing precision images of
integrated circuits, to semiconductor manufacturers.

Principles of Consolidation:The consolidated financial statements include the accounts of the Company and our controlled and
wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. The minority interest impact is reflected in minority interest in income of
joint ventures and is the partners' share of controlled joint venture operations. We currently have four joint ventures that are not controlled. They consist of the DPI Reticle Technology Center,
L.L.C., or RTC, that is 25 percent owned, DuPont Dai Nippon Engineering that is 50 percent owned, the Advanced Mask Technology Center GmbH & Co. KG, or AMTC, that is
33 percent owned, and the Maskhouse Building Administration GmbH & Co. KG, or BAC, that is 33 percent owned; all are recorded using the equity method of accounting. Investments of
$2,850 and $5,069 in the AMTC as of June 30, 2002 and 2003, respectively, and investments of $2,819 and $6,713 in the BAC as of June 30, 2002 and 2003, respectively, are recorded in
other assets, net. We have no investments in the RTC and DuPont Dai Nippon Engineering. We record our share of the costs related to the RTC, AMTC and BAC in cost of goods sold and research and
development expense.

Revenue Recognition:Product revenue is recognized when both title and risk of loss transfers to the customer, provided that
no significant obligations remain. Discounts and rebates are recorded as a reduction of
revenue during the period they are earned by the customer. Provision is made for an estimate of product returns based on historical experience and is recorded as a reduction in revenue. Customarily,
our shipping terms are FOB or FCA shipping point; however, our final terms depend upon the negotiations with our customers.

Effective
July 1, 2000, the Company changed its accounting for revenue recognition in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin, or SAB,
No. 101,Revenue Recognition in Financial Statements. Previously, the Company had recognized revenue at the date of shipment. Under the new
accounting method adopted retroactive to July 1, 2000, the Company now recognizes product revenue when both title and risk of loss transfers to the customer, which generally occurs when the
product reaches its destination, provided that no significant obligations remain. The cumulative effect of the change on prior years' retained earnings resulted in a charge to income for 2001 of $481
(net of income taxes of $187).

Cash and Cash Equivalents:Cash and cash equivalents include highly liquid investments with maturities of three months or
less at the date of acquisition.

Investments:The Company's investments, other than those considered derivative instruments, are classified as
available-for-sale securities and reported at fair value. Unrealized gains and losses are reported, net of taxes, as a component of stockholders' equity. Unrealized losses are
charged against income when a decline in fair value is determined to be other than temporary. A decline in the market value of any available-for-sale security below cost that
is deemed to be other than temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. The specific
identification method is used to determine the cost of securities sold. Realized gains and losses on available for sale investments are included in other income (expense), net in the accompanying
consolidated income statements when realized. As of June 30, 2002, there were $36 of investments reflected in the accompanying consolidated balance sheet. As of June 30, 2003, there were
$179 of investments reflected in the accompanying consolidated balance sheet. Investments which are considered derivative instruments are carried at fair value. Changes in fair value are recorded
through current earnings.

F-6

---

Derivative Instruments and Hedging Activities:Derivative financial instruments are used to mitigate the risks associated
with currency fluctuations on certain international revenue and balance sheet exposures, and are, therefore, held primarily for purposes other than trading. These instruments may involve elements of
credit and market risk in excess of the amounts recognized in the consolidated financial statements. We monitor our positions and the credit quality of counter-parties, consisting primarily of major
financial institutions, and do not anticipate nonperformance by any counter-party.

The
derivatives we held as of June 30, 2003 do not qualify for hedge accounting treatment and all of the changes in fair value are included in other income (expense), net in the
period in which they occur.

Accounts Receivable, Trade, net:We provide an allowance for doubtful accounts based upon an estimate of uncollectible
accounts. Accounts receivable, trade are net of allowances for doubtful accounts of $1,243 and
$1,012 as of June 30, 2002 and 2003, respectively. We recorded bad debt expense (recovery) of $862, $(255) and $245 in selling, general and administrative expense for fiscal 2001, 2002
and 2003, respectively.

Inventories, net:Inventories, net, which are substantially all raw materials, are stated at the lower of cost or market.
Cost is determined using standard costs, which approximate the first in, first out, or FIFO, method. Cost includes the acquisition cost of purchased components, parts and subassemblies, labor and
overhead. Market with respect to raw materials, is replacement cost and, with respect to work-in-process and finished goods, is net realizable value. Inventories are net of
allowances for obsolescence and shrinkage of $646 and $703 as of June 30, 2002 and 2003, respectively.

Property and Equipment, net:Property and equipment are stated at cost. Property and equipment under capital leases are
stated at the present value of future minimum lease payments. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets ranging
from three to seven years for equipment and 10 to 20 years for buildings. Property and equipment held under capital leases and leasehold improvements are amortized using the
straight-line method over the shorter of the estimated useful lives of the assets or the estimated remaining term of the lease. The gross value of property and equipment and related
accumulated depreciation are eliminated at the date of disposal, and the resulting gain or loss is included in income. Assets held for sale relate to our Gresham, Oregon facility and other equipment.
We are actively marketing these assets and will sell the assets after appropriate evaluation of all proposals. Maintenance and repairs are charged to operations; replacements and betterments are
capitalized.

Goodwill and Other Intangible Assets, net:Intangible assets, net are included in other assets, net and aggregate $20,871 and
$15,099 as of June 30, 2002 and 2003, respectively. They are amortized using the straight-line method over their estimated useful lives ranging from two to eight years. Accumulated
amortization was $16,632 and $22,405 as of June 30, 2002 and 2003, respectively. The accompanying consolidated income statements reflect amortization expense of $5,509, $5,284 and $5,773 for
2001, 2002, and 2003, respectively. Goodwill aggregated $1,993 as of June 30, 2002 and 2003, respectively. Goodwill is not amortized, but instead tested for impairment at least annually in
accordance with the provisions of Statement of Financial Accounting Standard No. 142,Goodwill and Other Intangible Assets.

Accounts Payable, Trade:Included in accounts payable, trade as of June 30, 2002 and 2003, are bank overdrafts of
$6,297 and $3,111, respectively, due to outstanding checks and the timing of cash replenishments. The remaining balance represents trade liabilities with due dates of less than one year.

Customer Prepayments:Customer prepayments, included in other accrued liabilities and other liabilities, are refundable
deposits made by our customers to prepay for future purchases to be made at the then current pricing of our products. The prepayment is applied in accordance with the customer's contract and is based
on the delivered volume multiplied by the then current price of the specific purchases. The unused portion of the prepayment, if any, will be refunded to the customer if purchases aggregating the
amount of the prepayment have not been made within a mutually agreed-upon period.

Fair Value of Financial Instruments:The carrying amounts reflected in the accompanying balance sheets for cash and cash
equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, short-term borrowings and other liabilities approximate fair value due to the
short-term nature of the instruments. As of June 30, 2003, we estimated the fair value of our long-term convertible notes to be $224,219 based on third-party broker
quotes.

F-7

---

Selling, General and Administrative Expense:Included in selling, general and administrative expense are shipping and
handling costs of $5,181, $4,863 and $4,357, for 2001, 2002 and 2003, respectively.

Research and Development Expense:Research and development costs are expensed as incurred. Research and development costs
consist primarily of employee costs, cost of consumed materials, depreciation, engineering related costs and our share of costs of the RTC and AMTC joint ventures.

Foreign Currencies:We have determined that the United States, or U.S., dollar is the functional currency of our worldwide
operations. Monetary assets and liabilities denominated in non-U.S. currencies are remeasured at current rates into U.S. dollars and the resulting exchange gains and losses are included in
income in the period they occur. Nonmonetary assets and liabilities are remeasured by using historical exchange rates, the rates in effect when the transactions occurred, and the resulting exchange
gains and losses are included in income in the period they occur. Net transaction gains (losses) were $291, $(517) and $(580) for 2001, 2002 and 2003, respectively. Net remeasurement
gains (losses) were $(1,306), $273 and $(551) for 2001, 2002 and 2003, respectively.

Income Taxes:We account for income taxes using an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, all expected
future events are considered other than enactments of changes in tax laws or rates. Valuation allowances are established as necessary to reduce deferred tax assets in the event that realization of the
assets is considered unlikely.

Comprehensive Income:Comprehensive income is comprised of two components, net income (loss) and other comprehensive income.
Other comprehensive income consists of unrealized gains and losses on certain debt and equity securities, if any.

Use of Estimates:The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires us to make estimates and assumptions, based upon all known facts and circumstances, that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates.

Impairment of Long-Lived Assets:Statement of Financial Accounting Standard, or SFAS, No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, provides a single accounting model for long-lived assets to be
disposed of. SFAS No. 144 also changes the criteria for classifying an asset as held for sale; and broadens the scope of businesses to be disposed of that qualify for reporting as discontinued
operations and changes the timing of recognizing losses on such operations. We adopted SFAS No. 144 on July 1, 2002. The adoption of SFAS No. 144 had no impact on our consolidated
financial condition or results of operations.

In
accordance with SFAS No. 144, long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the
carrying value of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated future cash flows, an impairment
charge is recognized by the amount by which the carrying value of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented on the balance sheet and
reported at the lower of the carrying value or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be
presented separately in the appropriate asset and liability sections of the balance sheet.

Prior
to the adoption of SFAS No. 144, we accounted for long-lived assets in accordance with SFAS No. 121,Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of.

See
note 15 in regard to the charge of $43,243 recorded during 2003 for reductions in the carrying value of certain long-lived assets held and used in operations.

Reclassifications:Certain prior year balances have been reclassified to conform to current year presentation.

F-8

---

Employee Plans:We apply the intrinsic-value-based method of accounting prescribed by Accounting Principles Board, or APB,
Opinion No. 25,Accounting for Stock Issued to Employees, and related interpretations including Financial Accounting Standards Board, or FASB,
Interpretation No. 44,Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25, to
account for our stock performance plans. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.
We also have an Employee Stock Purchase Plan. SFAS No. 123,Accounting for Stock Based Compensation, established accounting and disclosure
requirement alternatives which involve using a different accounting method for expensing the calculated value of option awards. As allowed by SFAS No. 123, we have elected to continue to apply
the intrinsic-value-based method of accounting described above, and have adopted only the disclosure requirements of SFAS No. 123. We use the Black-Scholes model to calculate pro forma expense
for disclosure purposes. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable.
Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. We use projected volatility rates which are based upon historical volatility
rates. Because our employee stock options and Employee Stock Purchase Plan shares have characteristics significantly different from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in our management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock
options and Employee Stock Purchase Plan shares.

SFAS
No. 148,Accounting for Stock-Based CompensationTransition and Disclosure, an amendment of FASB Statement
No. 123, amends the disclosure requirements of SFAS No. 123. The following
table illustrates the effect on net income (loss) if the fair-value-based method had been applied to our stock-based employee compensation plans in each period.

|                                   |                                                                                                                                       | 2001 |   | 2002    |   | 2003 |        
|---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ------- | - | ---- | -------
|Net income (loss):                 |                                                                                                                                       |      |   |         |   |      |        
|                                   | As reported                                                                                                                           |      | $ | 15,118  |   | $    | 4,030  
|                                   | Deduct total stock-based employee compensation expense determined under the Black-Scholes valuation method for all awards, net of tax |      |   | (21,096 | ) |      | (15,905
|                                   |                                                                                                                                       |      |   |         |   |      |        
|                                   | Pro forma net loss                                                                                                                    |      | $ | (5,978  | ) | $    | (11,875
|                                   |                                                                                                                                       |      |   |         |   |      |        
|Basic earnings (loss) per share:   |                                                                                                                                       |      |   |         |   |      |        
|                                   | As reported                                                                                                                           |      | $ | 0.87    |   | $    | 0.23   
|                                   |                                                                                                                                       |      |   |         |   |      |        
|                                   | Pro forma                                                                                                                             |      | $ | (0.34   | ) | $    | (0.66  
|                                   |                                                                                                                                       |      |   |         |   |      |        
|Diluted earnings (loss) per share: |                                                                                                                                       |      |   |         |   |      |        
|                                   | As reported                                                                                                                           |      | $ | 0.83    |   | $    | 0.22   
|                                   |                                                                                                                                       |      |   |         |   |      |        
|                                   | Pro forma                                                                                                                             |      | $ | (0.34   | ) | $    | (0.66  
|                                   |                                                                                                                                       |      |   |         |   |      |        

Stock options to acquire 1,189,243, 2,128,690, and 4,121,925 shares for 2001, 2002, and 2003, respectively, were not included in the computations
of diluted EPS because the effect of including these stock options would have been anti-dilutive. For the years ended June 30, 2002 and 2003, respectively, the effect of the
convertible notes were not included in the computations of diluted EPS because the effect of including the convertible notes would have been anti-dilutive. These options and the
convertible notes may become dilutive in the future.

Recently Issued Accounting Pronouncements:In June 2002, the FASB issued SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities. SFAS No. 146 provides guidance on the accounting for recognizing, measuring and
reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS No. 146 adjusts the timing of when a liability for termination benefits is to be
recognized based on whether the employee is required to render future service. A liability for costs to terminate an operating lease or other contract before the end of its term is to be recognized
when the entity terminates the contract or ceases using the rights conveyed by the contract. All other costs associated with an exit or disposal activity are to be expensed as incurred. SFAS
No. 146 requires the liability to be measured at its fair value with subsequent changes in fair value to be recognized each reporting period utilizing an interest allocation approach. SFAS
No. 146 nullifies the guidance of the Emerging Issues Task Force, or EITF, Issue No. 94-3,Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). We have adopted SFAS No. 146 for events initiated subsequent to December 31, 2002 (see
note 14).

F-9

---

In
November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires certain guarantees to be measured at fair value upon issuance and recorded as a liability.
In addition, FIN 45 expands current disclosure requirements regarding guarantees issued by an entity, including tabular presentation of the changes affecting an entity's aggregate product warranty
liability. Certain provisions of FIN 45 are effective December 15, 2002; others are effective after December 31, 2002 (see note 19 and 20). The adoption of FIN 45 had no impact on
our consolidated financial condition or results of operations.

In
December 2002, the FASB issued SFAS No. 148,Accounting for Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB Statement
No. 123. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends certain provisions of SFAS No. 123 to require that disclosure of the pro forma effect of applying the fair value method of accounting for
stock-based compensation be prominently displayed in an entity's accounting policy in annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years
ending after December 15, 2002 and are included in the notes to these consolidated financial statements (see note 1). The adoption of SFAS No. 148 had no impact on our
consolidated financial condition or results of operations.

In
January 2003, the FASB issued FIN No. 46Consolidation of Variable Interest Entities ("VIE"), which requires that if a
company holds a controlling financial interest in a VIE, the assets, liabilities and results of the VIE's activities should be consolidated in the entity's financial statements. We do not expect that
the adoption of FIN No. 46 will have a material impact on our consolidated financial condition or results of operations.

In
April 2003, the FASB issued SFAS No. 149,Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except to
the extent the provisions of this statement relate to previously effective SFAS No. 133 implementation issues and for hedging relationships designated after June 30, 2003. We do not
expect that the adoption of SFAS No. 149 will have a material impact on our consolidated financial condition or results of operations.

In
May 2003, the FASB issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this pronouncement had
no impact on our consolidated financial condition or results of operations.

2.     Derivative Instruments and Hedging Activities

Forward foreign exchange contracts are utilized to mitigate the risks associated with currency fluctuations on certain foreign currency balance sheet exposures,
and are, therefore, held primarily for purposes other than trading. These foreign exchange contracts do not qualify for hedge accounting under SFAS No. 133, as amended. Unrealized gains and
losses resulting from the impact of currency exchange rate movements on forward foreign exchange contracts designated to offset certain non-U.S. dollar denominated assets and liabilities
are recognized as other income or expense in the accompanying consolidated income statements in the period in which the exchange rates change. These gains and losses offset the foreign currency
exchange gains and losses on the underlying exposures being hedged. The aggregate fair value of our forward foreign exchange contracts outstanding was $29,103 as of June 30, 2003 with an
unrealized loss recorded in other income (expense), net in the consolidated income statement of $404 for 2003.

F-10

---

During
2002, we exercised all of the remaining warrants of a strategic partner and sold the underlying securities resulting in a realized loss using the specific identification costing
method of $238 in the accompanying consolidated income statement. These warrants were considered available-for-sale securities through the quarter ended December 31,
2000, but qualified for treatment as derivative instruments during the quarter ended March 31, 2001 as they became convertible to cash. Prior to their treatment as derivatives, changes in the
fair value of the warrants were recorded as part of accumulated other comprehensive income. Subsequently, the warrants were marked to market through current earnings. The change in the classification
of the warrants to derivative instruments resulted in a reduction of accumulated other comprehensive income of $8,355 in the accompanying consolidated statement of stockholders' equity. During 2001,
we exercised the warrants and sold the underlying securities resulting in a realized gain using the specific identification costing method of $9,005 in the accompanying consolidated income statement.
Additionally, unrealized holding gains of $1,682 for warrants were recorded in the accompanying consolidated income statement during 2001, calculated using estimated fair values based on third-party
broker quotes.

3.     Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of foreign currency forward contracts, cash and cash
equivalents and trade accounts receivable.

Our
counter-parties in foreign currency forward contracts are primarily major financial institutions. We do not anticipate nonperformance by these counterparties. We maintain cash and
cash equivalents with various financial institutions located in many countries worldwide. We maintain our cash primarily in demand deposits, time deposits, other short term investments, commercial
paper and money-market accounts. Cash equivalents are maintained with high-quality institutions that are regularly monitored by management.

Essentially
all of our sales are to customers in the semiconductor manufacturing industry. We assess the financial strength of our customers before extending credit to reduce the risk of
loss as we generally do not require collateral. Two of our customers each represented more than 10 percent of revenue in 2001; one customer represented approximately 16 percent of
revenue and the other represented approximately 10 percent of revenue. This revenue was reported primarily in our North America and Europe segments. Two of our customers represented
approximately 13 percent and 10 percent of revenue, respectively, in 2002. This revenue was reported in North America, Europe and Asia. One of our customers represented approximately
10 percent of revenue in 2003. This revenue was reported in North America, Europe and Asia. No customer represented more than 10 percent of accounts receivable, trade as of
June 30, 2002. One customer represented approximately 21 percent of accounts receivable, trade as of June 30, 2003.

4.     Acquisitions and Investments

In March 2002, we acquired the assets and hired the employees of BindKey Technologies, Inc. a privately held electronic design automation, or EDA,
software company headquartered in Santa Clara, California and established a new wholly-owned subsidiary, BindKey Acquisition Corporation, or BindKey. The acquisition was accounted for under the
purchase method of accounting. The purchase price of $4,800 was allocated to the net assets acquired based on relative fair values, including $57 of equipment, $1,993 of goodwill, $2,700 of other
intangibles, $300 of in-process research and development, or IPR&D, and $250 of assumed liabilities. The results of operations of the business and the estimated fair value of the assets
and liabilities acquired have been included in our consolidated financial statements since the date of acquisition. On a pro forma basis, as if the assets had been acquired at the beginning of 2001
and 2002, respectively, revenue, net income and earnings per share would not differ materially from the amounts reported in the consolidated financial statements for 2001 and 2002, respectively.

We
have established a profit sharing plan with the BindKey employees. Over the next three years, BindKey employees may earn amounts annually based on the annual after-tax
earnings of BindKey. In addition and upon the termination of the final year subject to the profit sharing plan, the employees may earn as much as an additional $120,000 based on the
after-tax earnings of BindKey in the final year. Any amounts earned in relation to the profit sharing plan will be expensed in the period earned.

F-11

---

In
May 2002, we entered into an agreement to acquire photomask production equipment from Infineon Technology A.G.'s, or Infineon, internal photomask manufacturing operations in
Munich, Germany and become Infineon's strategic photomask supplier. In consideration for the acquisition of certain photomask production assets and the agreement to supply Infineon with photomasks
over the 10 year term of the agreement, we agreed to pay Infineon $53,500 over a seven-year period ending in March 2009. We made the first $10,000 payment associated with the
agreement in April 2003. The amounts we have agreed to pay Infineon have been allocated to the assets acquired based on the relative fair values of the equipment and supply agreement. The
supply contract will be amortized over its useful life of ten years as a reduction of revenue and the equipment will be depreciated on a straight-line basis over the individual estimated
useful lives of the equipment and recorded in cost of goods sold. In addition, we agreed to purchase from Infineon additional photomask production equipment for approximately $28,100 payable over a
five-year period ending in December 2006. Also, we will receive equipment on consignment from Infineon with a fair value of approximately $7,700. This equipment will be capitalized
and depreciation recorded on a straight-line basis over its useful life to cost of goods sold. We
expect to fund all payments to Infineon from cash provided by operations; however, we may elect to satisfy up to approximately $30,200 of these amounts by issuing shares of our common stock.

5.     Sale of Assets

In March 2002, we sold all of our photoblank manufacturing assets located in Poughkeepsie, New York, to Schott Lithotec AG, or Schott. We also entered into
a supply agreement with Schott for a significant portion of our future purchases of photoblanks. The total proceeds of $31,578 were allocated $26,478 to the assets sold and $5,100 to the supply
agreement based on the projected cash flows that will be generated by the supply agreement, discounted to present value. This transaction resulted in a pre-tax gain of $10,350 which is
included in gain on sale of assets in the accompanying consolidated income statement for 2002. The value of the supply agreement will be amortized ratably as a reduction of cost of goods sold over the
term of the agreement. The supply agreement also allows us to be paid additional amounts totaling $10,000 during fiscal 2004 if specified purchase levels are achieved by March 31, 2004.

6.     Related Party Transactions

Effective January 1996, we entered into several transitional agreements with E.I. duPont de Nemours and Company, or DuPont. DuPont agreed to make available
for our use certain information systems, provide human resource services including payroll, provide sourcing services and provide tax services. These agreements provide us with infrastructure support
until we determine such support is no longer necessary. Additionally, we have entered into research, development and consulting agreements with DuPont, which call for DuPont to provide certain
materials and services primarily relating to the development of materials required for advanced photomasks. Payment terms generally provide for current payment upon delivery of the materials or
services. We believe that amounts charged to us for these functions and services provided by DuPont have been at fair value and are principally included in general and administrative expense and
research and development expense. Charges for services under these agreements were $2,127, $1,625 and $80 for 2001, 2002 and 2003, respectively. Additionally, a portion of our sales in China are
transacted through a DuPont subsidiary in order to facilitate the collection of receivables. Revenue invoiced through DuPont for collection purposes was $1,416, $1,912, and $35 for 2001, 2002 and
2003, respectively.

Accounts
receivable, related parties includes receivables from our employees of $1,202 (current $38, non-current $1,164) and $1,105 (current $57, non-current
$1,048) as of June 30, 2002 and 2003, respectively, which relate principally to housing and automobile loans to non-North America employees. The remainder represents receivables for
services performed and goods sold to or invoiced through various DuPont entities and other related parties, including the RTC and AMTC. Sales to related parties were $681, $873, and $92 for 2001, 2002
and 2003, respectively.

Accounts
payable, related parties represents payables to DuPont for benefits and taxes paid on our behalf by DuPont, amounts payable under the transitional agreements with DuPont and
amounts payable to the AMTC and BAC.

DuPont
also guarantees certain debt as discussed in note 10.

F-12

---

7.     Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

June 30,2002

2003Taxes receivable

$
28,503

$
5,740Prepaid expenses and deposits


2,701


2,688Other


2,953


4,277Prepaid expenses and other current assets

$
34,157

$
12,705


8.     Property and Equipment, net and Assets Held for Sale

Property and Equipment, net consist of the following:

June 30,2002

2003Construction-in-progress

$
55,673

$
57,570Land


5,835


5,835Buildings


141,477


135,859Equipment


618,297


623,728821,282


822,992Less: accumulated depreciation and amortization


(364,005
)

(443,410
)Property and equipment, net

$
457,277

$
379,582


Construction-in-progress
is comprised of the construction of new facilities, equipment in the installation process and current development of information
technology infrastructure. Capital leases of $541 as of June 30, 2003 are included in construction-in-progress. Capital leases of $3,503 as of June 30, 2002 and
2003, respectively, are included in buildings. Capital leases of $3,196 and $1,697 are included in equipment as of June 30, 2002 and 2003, respectively. Accumulated amortization on capital
leases was $3,553 and $3,730 as of June 30, 2002 and 2003, respectively. The accompanying consolidated income statements reflect depreciation and amortization expense related to property and
equipment of $73,683, $86,882 and $94,223 for 2001, 2002 and 2003, respectively.

Assets
held for sale consist of buildings of $4,840 and $4,840 and equipment of $30 and $247 as of June 30, 2002 and 2003, respectively.

F-13

---

9.     Other Accrued Liabilities

Other accrued liabilities consist of the following:

June 30,2002

2003Customer prepayments

$
21,146

$
9,806Accrued compensation and benefits


13,003


13,693Accrued special charges


184


14,660Other


16,613


11,200Other accrued liabilities

$
50,946

$
49,359


10.   Long-Term Convertible Notes, Borrowings and Lease Obligations

In July 2000, we issued and sold $100,000 aggregate principal amount of convertible subordinated notes. The notes were sold at par less an underwriting
discount of 2 percent and we received net proceeds of $97,600. The notes are due in July 2004, with no stated interest, are convertible at any time into shares of our common stock at a
conversion price of $106.26 per share, are unconditionally guaranteed by DuPont and are not callable by us. We have reserved 941,088 shares of our common stock for conversion of the convertible
subordinated notes. In the event of a fundamental change in our Company, each holder of notes will have the right to require us to redeem, in cash, any or all of such holder's notes at a price equal
to 100 percent of the principal amount to be redeemed. A fundamental change generally is any transaction in which all or substantially all of our common stock is exchanged for, converted into,
acquired for or constitutes the right to receive, consideration which is not all or substantially all common stock listed on a national securities exchange or approved for quotation on the NASDAQ
National Market. If a fundamental change were to occur, we cannot assure you that we
will have sufficient funds to pay the redemption price for all the notes tendered by the holders, although DuPont would be required to pay the redemption price under its guarantee. In that case, our
failure to redeem tendered notes would constitute an event of default under the indenture for the notes, and may constitute a default under the terms of other indebtedness that we may enter into from
time to time. Debt issue costs of $2,400 related to these notes are included in non-current other assets on the accompanying consolidated balance sheets and are amortized using the
straight-line method, which approximates the interest method, to interest expense over the scheduled maturity period.

F-14

---

On
May 5, 2003, we issued and sold $125,000 aggregate principal amount of convertible subordinated notes in a private placement. The notes were sold at par less an underwriting
discount of 2.625 percent and we received net proceeds of $121,219. The notes are due May 15, 2008, will accrue interest at an annual rate of 1.25 percent and are convertible at
any time into shares of our common stock at a conversion price of $25.595 per share. Interest on the notes is payable semi-annually on May 15 and November 15 of each year
beginning November 15, 2003. We have reserved 4,883,762 shares of our common stock for conversion of the convertible subordinated notes. If a change of control occurs, each holder of notes will
have the right to require us to redeem, in cash, any or all of such holder's notes at a price equal to 100 percent of the principal amount to be redeemed. A change of control is any transaction
in which a person or group becomes the beneficial owner of 50% or more of our common stock or has the power to elect a majority of our board of directors, any consolidation, merger or similar
transaction in which our shareholders immediately prior to the transaction hold less than a majority of the outstanding voting stock of the surviving corporation and the consideration in the merger or
consolidation is not common stock listed on a national securities exchange or approved for quotation on the NASDAQ National Market, or the holders of our capital stock approve any plan or proposal for
our liquidation or dissolution. A change of control will not be deemed to have occurred if the last sale price of our common stock for any five trading days during the ten trading days immediately
preceding the change of control is at least equal to 105% of the conversion price of the notes. If a change of control were to occur, we cannot assure you that we will have sufficient funds to pay the
redemption price for all the notes tendered by the holders. In that case, our failure to redeem tendered notes would constitute an event of default under the indenture for the notes, and may
constitute a default under the terms of other indebtedness that we may enter into from time to time. Debt issue costs of $3,781 related to these notes are included in non-current other
assets on the accompanying consolidated balance sheet and are amortized using the straight-line method, which approximates the interest method, to interest expense over the scheduled
maturity period. In connection with the issuance of the notes, we entered into a Registration Rights Agreement and filed a shelf registration statement covering resales of the notes and the common
stock issuable upon conversion of the notes. If we fail to comply with certain of our obligations under the Registration Rights Agreement, additional interest will accrue on the affected notes at an
annual rate of 0.5 percent. Also in connection with the issuance of the notes, we amended our Rights Agreement dated January 30, 2001, to provide that the issuance of the notes to the
initial purchasers would not cause the initial purchasers to be Acquiring Persons (as defined in the Rights Agreement) under the Rights Agreement and therefore no Distribution Date (as defined in the
Rights Agreement) under the Rights Agreement would occur as a result of the issuance of the notes to the initial purchasers.

Borrowings
consist of the following:

June 30,2002

2003Capital lease obligations: 6.6% to 7.9%, due through fiscal 2011

$
3,174

$
2,678Government borrowings: 0.0% government borrowings due through fiscal 2006


680


790Bank borrowings: up to 2.4% due through fiscal 2004


10,805


10,40814,659


13,876Less: short-term borrowings


(11,795
)

(11,903
)Long-term borrowings

$
2,864

$
1,973


Interest
expense of $1,437, $1,416, and $1,641 for 2001, 2002 and 2003, respectively, was recorded in other income (expense), net, in the accompanying consolidated income statements. The
weighted average interest rate of a line of credit classified as bank borrowings was 3.85% and 2.4% as of June 30, 2002 and 2003, respectively.

F-15

---

As
of June 30, 2003, future principal payments of long-term convertible notes and borrowings, excluding capital lease obligations, for years ending June 30 are
as follows:

2004

$
10,7922005


100,0002006


4062007


2008


125,000Outstanding long-term convertible notes and borrowings, excluding capital lease obligations

$
236,198


As
of June 30, 2003, minimum lease payments for noncancelable lease obligations for each of the following fiscal years ending June 30, are as follows:

Capital Leases

Operating Leases2004

$
1,259

$
3,7392005


244


2,4332006


244


2,0512007


244


1,8562008


244


1,740Thereafter


1,078


3,656Minimum lease payments


3,313

$
15,475Less: interest


(635
)Present value of future minimum lease payments

$
2,678


Operating
lease expense included in the consolidated income statements was $3,571, $3,041, and $3,931 for 2001, 2002 and 2003, respectively.

11.   Equity Transactions

In July 2000, we completed a public offering of 3.2 million shares of our common stock, of which 1.4 million shares represented original
issuance by us and 1.8 million shares represented the sale of outstanding shares by DuPont. The stock was sold to the public at $77 per share, resulting in net offering proceeds to us of
$103,813 for the original issuance.

In
2002 and 2003, our DuPont Photomasks Taiwan, Limited subsidiary, or DPI Taiwan, paid stock dividends to its stockholders and stock bonuses to certain employees. The stock dividends
resulted in no dilution of our ownership in DPI Taiwan.

12.   Stock Purchase Rights

On January 30, 2001, our Board of Directors declared a dividend of one preferred share purchase right for each outstanding share of common stock held of
record as of the close of business on February 20, 2001. Under certain circumstances, a right entitles the registered holder to purchase from us one one-thousandth of a share of
Series A Junior Participating Preferred Stock at a price of $400.00 per one one-thousandth of a share of Series A Junior Participating Preferred Stock, subject to adjustment.

F-16

---

The
rights become exercisable upon the earlier of: (i) ten days following a public announcement that a person or group other than DuPont acquires 15 percent or more of our
outstanding shares of common
stock (33 percent for DuPont on an as converted basis assuming full conversion of all securities convertible in shares of common stock), (ii) ten business days following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer which would result in the beneficial ownership by a person or group other than DuPont of 15 percent or more of our
outstanding shares of common stock, or (iii) a change in control of DuPont and DuPont then beneficially owns or tenders for 15 percent or more of our outstanding shares of common stock.

The
rights expire on January 30, 2011 and may be redeemed by us for $0.01 per right at any time before the rights become exercisable.

In
connection with the issuance of our notes in May 2003 (see note 10), we amended our Rights Agreement to provide that the issuance of the notes to the initial purchasers
would not cause the initial purchasers to be Acquiring Persons (as defined in the Rights Agreement) and therefore no Distribution Date (as defined in the Rights Agreement) would occur as a result of
the issuance of the notes to the initial purchasers.

13.   Employee Plans

Stock Performance Plans

We have several stock performance plans whereby options to purchase shares of common stock or shares of restricted stock have been or can be granted to directors,
officers, employees and consultants. Generally, option exercise prices are equal to the fair market value at the date of grant. Restricted stock grants do not require the payment of any cash
consideration by the recipient. Matters such as vesting periods and expirations are determined on a plan-by-plan or grant-by-grant basis; vesting
generally occurs over three to five years and stock options generally have a ten year life. As of June 30, 2001, 2002 and 2003, there were 2,018,534, 3,530,133 and 3,021,107 shares,
respectively, reserved for future grant or issuance under our stock plans. A summary of stock option activity for the years ended June 30, is as follows:

|                             |  | 2001      |   | 2002 |       | 2003
|---------------------------- |  | --------- | - | ---- | ----- | ----
|
|Balance at beginning of year |  | 2,945,428 |   | $    | 36.79 |     
|Options granted              |  | 723,951   |   | $    | 60.04 |     
|Options forfeited            |  | (148,804  | ) | $    | 44.43 |     
|Options exercised            |  | (682,113  | ) | $    | 24.82 |     
|                             |  |           |   |      |       |     
|Balance at end of year       |  | 2,838,462 |   | $    | 45.19 |     
|                             |  |           |   |      |       |     
|Exercisable at end of year   |  | 1,171,856 |   | $    | 31.38 |     
|                             |  |           |   |      |       |     

F-17

---

Additional
information related to stock options as of June 30, 2003 is as follows:

|                 |  | Options Outstanding |  | Options Exercisable
|---------------- |  | ------------------- |  | -------------------
|
|$17.00 to $19.18 |  | 177,515             |  | $                  
|$20.25 to $34.75 |  | 1,299,778           |  | $                  
|$35.56 to $49.52 |  | 1,668,474           |  | $                  
|$50.02 to $73.18 |  | 1,142,967           |  | $                  
|$77.18 to $86.40 |  | 6,900               |  | $                  
|                 |  |                     |  |                    
|                 |  | 4,295,634           |  | $                  
|                 |  |                     |  |                    

A
summary of restricted stock activity for the years ended June 30, is as follows:

|                             |  | 2001   |   | 2001
|---------------------------- |  | ------ | - | ----
|
|Balance at beginning of year |  | 2,327  |   | $   
|Restricted stock granted     |  |       |   | $   
|Restricted stock forfeited   |  |       |   | $   
|Unrestricted stock issued    |  | (1,400 | ) | $   
|                             |  |        |   |     
|Balance at end of year       |  | 927    |   | $   
|                             |  |        |   |     

Stock Purchase Plan

We have an Employee Stock Purchase Plan to allow our employees to participate in our future. The Employee Stock Purchase Plan is a payroll deduction plan which
permits employees who are employed on the purchase date to purchase shares, on an after-tax basis, of our common stock at 15 percent below market prices at the end of each purchase
period. Our plan currently has a two-year offering period with four interim purchase periods of six months. The plan has a look-back feature as well as a reset feature.

F-18

---

Fair Value Disclosures

The fair value of financial instruments, including options and stock purchase rights, can be estimated using option-pricing models, for example, the Black-Scholes
or a binomial model, which may result in differing fair values. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. We use projected volatility rates
which are based upon historical volatility rates. Because our employee stock options and Employee Stock Purchase Plan shares have characteristics significantly different from those of traded options,
and because changes in the subjective input assumptions can materially affect the fair value estimate, in our management's opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of our employee stock options and Employee Stock Purchase Plan shares. The weighted average fair value of stock options utilizing the Black-Scholes model at the date of grant
was $36.12, $24.35, and $14.50 per option for options granted in 2001, 2002 and 2003, respectively. Additionally, the weighted average fair value of the purchase rights under the Employee Stock
Purchase Plan at the date of grant for 2001, 2002, and 2003 was $30.59, $11.38 and $10.18 per
right, respectively. The weighted average fair value of options and purchase rights under the Employee Stock Purchase Plan was determined based on the Black Scholes pricing model, utilizing the
following assumptions:

2001

2002

2003Expected term:Stock option

5 Years

5 Years

5 YearsEmployee Stock Purchase Plan

6 Months

6 Months

6 MonthsExpected dividend yield

0%

0%

0%Volatility

69%

68%

68%Risk free interest rate:Stock option

5.3%

4.3%

2.9%Employee Stock Purchase Plan

5.6%

2.7%

1.3%


Retirement Plan

We have a 401(k) retirement plan, or 401(k) Plan, for all of our eligible North America employees, as defined in the 401(k) Plan document. The 401(k) Plan
qualifies under Section 401(k) of the Internal Revenue Code as a salary reduction plan. Employees may elect to contribute a certain percentage of their salary on a pre-tax and
post-tax basis. Employees are immediately
fully vested in both their contributions and in employer contributions, as defined in the 401(k) Plan document. The 401(k) Plan is a defined contribution plan with employer matching dollar for dollar
on the first three percent of salary contributions and fifty cents for each dollar of salary contributions on the next two percent. Company matching contributions to the 401(k) Plan totaled $1,992,
$2,003 and $1,775 for 2001, 2002 and 2003, respectively.

Deferred Compensation Plan

In April 2002, we implemented a Deferred Compensation Plan. This plan is intended to be an unfunded and nonqualified deferred compensation arrangement that
will provide deferred compensation benefits to a select group of management or highly compensated employees and our Board of Directors. Enrollment in the plan is voluntary. There is no company
matching contribution. The plan coordinates with our 401(k) plan to insure the maximum benefit elected is achieved. If an event triggering the payment of the participant's accrued benefit including
the participant's disability, death, termination of employment, resignation from the Board of Directors, or a change of control occurs, then the participant's accrued benefit shall be paid either in a
cash lump sum on their benefits starting date, or if the accrued benefit is $50 or greater, in equal installments over a five year period. At our discretion, the form of payment will be determined by
one of our authorized officers (except that such authorized officer shall not have the authority to make a decision regarding their own form of payment). As of June 30, 2003, there was
approximately $179 invested in the deferred compensation plan.

F-19

---

14.   Special Charges

As the semiconductor market continued its third year of global downturn, we continued our evaluation of the overall business climate in general and our industry
in particular which resulted in our conclusion that we had excess capacity that was unwarranted. Given the change in the business climate, we identified certain manufacturing operations to be
consolidated and certain equipment to be sold or abandoned. For those assets to be sold, we evaluated the expected proceeds from anticipated asset sales against our carrying values. Assets which we
abandoned were written down to estimated salvage value.

In
2002, we recorded pre-tax special charges totaling $7,393 related to cost reduction programs and acquired IPR&D. These initiatives were completed as of March 31,
2003 and the related liabilities were completely settled as of September 30, 2002. The special charges related to employee severance were the result of eliminating 68 employment positions in
North America and Europe. The employee severances were primarily manufacturing positions and also included administrative personnel. The special charges related to asset disposals and related costs
resulted primarily from decommissioning trailing-edge production equipment. In connection with the acquisition of the assets of BindKey in March 2002, approximately $300 of the
purchase price was allocated to IPR&D. The amount attributed to IPR&D was expensed at the date of acquisition as the projects had not reached technological feasibility nor had any alternative future
use.

In
2003, we recorded pre-tax special charges totaling $26,135 related to employee severance, the disposal of long-lived assets and related costs, and lease
termination costs. The special charges related to North America, Europe and Asia were $7,191, $18,645 and $299, respectively. These special charges were the result of programs that were implemented to
reduce costs. The integration and consolidation initiatives in North America were completed as of March 31, 2003 and the related liabilities were substantially settled as of June 30,
2003. We plan to vacate the leased manufacturing facility in Hamburg, Germany, complete the consolidation initiatives in Europe and settle the related liabilities, including severance obligations, by
December 31, 2003. The integration and consolidation initiatives in Asia were completed as of March 31, 2003 and the related liabilities were completely settled as of June 30,
2003.

A
summary of the related accrued liabilities is shown below:

|                                        |  | Employee
Severance |        | Asset
Disposals and
Related
Costs |   | Lease
Termination
and Other
Costs |   | Total |      
|--------------------------------------- |  | ------------------ | ------ | --------------------------------- | - | --------------------------------- | - | ----- | -----
|Charges during 2002                     |  | $                  | 1,981  |                                   | $ | 5,112                             |   | $     | 300  
|Utilized in 2002                        |  |                    | (1,866 | )                                 |   | (5,043                            | ) |       | (300 
|                                        |  |                    |        |                                   |   |                                   |   |       |      
|Remaining liability as of June 30, 2002 |  |                    | 115    |                                   |   | 69                                |   |       |     
|Charges during 2003                     |  |                    | 13,272 |                                   |   | 10,625                            |   |       | 2,238
|Utilized in 2003                        |  |                    | (1,983 | )                                 |   | (9,387                            | ) |       | (289 
|                                        |  |                    |        |                                   |   |                                   |   |       |      
|Remaining liability as of June 30, 2003 |  | $                  | 11,404 |                                   | $ | 1,307                             |   | $     | 1,949
|                                        |  |                    |        |                                   |   |                                   |   |       |      

15.   Impairment of Long-Lived Assets

In 2003, we recorded a pre-tax charge of $43,243 for reductions in the carrying value of certain long-lived assets held and used in
operations. At year end and in accordance
with SFAS No. 144, we performed a periodic review and evaluation of the carrying value of long-lived assets and determined that, based on revised market assumptions reflecting the
sustained industry downturn and the continued under-utilization of production equipment, the carrying value of certain production facilities and equipment in North America and Asia exceeded the
current fair value. Asset impairment tests were performed at the facility site location level which is the lowest level for which separately identifiable cash flows exist. The periodic review and
evaluation of the carrying value of the long-lived assets was performed with the assistance of independent valuation specialists. The fair value of assets that were subject to impairment
were determined using both the cost, market and income approaches.

F-20

---

16.   Earnings (Loss) Per Share

Basic earnings (loss) per share, or basic EPS, is computed by dividing net income (loss) by the weighted number of common shares outstanding during each period.
Diluted earnings (loss) per share, or diluted EPS, is computed by dividing net income (loss) after adjustments for the effect of the convertible notes (if dilutive) by the weighted average number of
common shares and common share equivalents outstanding (if dilutive) during each period. Common share equivalents include stock options and assumed conversion of the convertible notes. The number of
common share equivalents outstanding relating to stock options is computed using the treasury stock method and the number of common share equivalents outstanding relating to the convertible notes is
computed using the if converted method.

The
reconciliation of the denominators used to calculate the basic EPS and diluted EPS are as follows:

Year Ended June 30,2001

2002

2003Weighted average shares outstandingbasic

17,393,505

17,877,016

18,016,103Plus: Common share equivalents

1,168,050

257,704

Weighted average shares outstandingdilutive

18,561,555

18,134,720

18,016,103


Stock
options to acquire 1,189,243, 2,128,690 and 4,121,925 shares for 2001, 2002, and 2003, respectively, were not included in the computations of diluted EPS because the effect of
including these stock options would have been anti-dilutive. For 2002 and 2003, respectively, the effect of the convertible notes were not included in the computations of diluted EPS
because the effect of including the convertible notes would have been anti-dilutive. These options and the convertible notes may become dilutive in the future.

17.   Provision for (Benefit from) Income Taxes

The provision for (benefit from) income taxes consists of the following:

Year Ended June 30,2001

2002

2003Current:Federal

$
2,653

$
(22,759
)
$
519State


423


104


283Non-U.S.


10,889


4,521


(4,604
)Deferred:Federal


(5,047
)

14,103


665State


(763
)

(1,132
)

(2,888
)Non-U.S.


(2,880
)

(3,401
)

3,782Provision for (benefit from) income taxes

$
5,275

$
(8,564
)
$
(2,243
)


F-21

---

The
provision for (benefit from) income taxes differs from the amount computed by applying the federal statutory rate to income (loss) before income taxes and cumulative effect of change
in accounting principle as a result of the following:

Year Ended June 30,2001

2002

2003Tax at 35% statutory federal tax rate

$
7,306

$
(1,587
)
$
(39,888
)Difference in tax rate for non-U.S. operations


53


(2,262
)

(857
)Foreign tax exemptions


(2,046
)

(3,912
)

203Tax credits


(933
)




(2,467
)Change in valuation allowance


1,532


499


45,198State benefit, net of federal


(221
)

(668
)

(1,693
)Other


(416
)

(634
)

(2,739
)Provision for (benefit from) income taxes

$
5,275

$
(8,564
)
$
(2,243
)


Deferred
tax assets (liabilities) consist of the following:

June 30,2002

2003Deferred tax assets:Basis differences in property, plant and equipment, inventory and accounts receivable

$
1,985

$
1,613Loss carryovers


11,628


48,030Accrued liabilities


3,563


3,730Intangible assets


3,574


4,688Stock option timing difference


296


66Accrued special charges


6,001


21,187Tax credits and other


3,891


7,582Deferred tax assets


30,938


86,896Deferred tax liabilities:Basis differences in property, plant and equipment


(19,447
)

(31,500
)Other


(6,383
)

(6,651
)Deferred tax liabilities


(25,830
)

(38,151
)Valuation allowance


(5,917
)

(51,115
)Net deferred tax liability

$
(809
)
$
(2,370
)


A
substantial portion of our Asian manufacturing operations in Korea, China, Taiwan, and Singapore operate at a reduced tax rate or free of tax under various tax holidays which expire in
whole or in part during 2003 through 2010. Certain tax holidays may be extended if specific conditions are met.

Income
(loss) before income taxes and cumulative effect of change in accounting principle included $26,206, $13,441, and $(44,358) related to foreign operations for 2001, 2002 and 2003,
respectively.

F-22

---

During
2003, we recorded valuation allowances against our net deferred tax assets in North America. We have net operating loss carryforwards in North America of $53,200 that expire in
20 years. For losses generated in North America during 2002, we were able to obtain refunds of taxes previously paid of $18,636 due to recent changes in the tax law that allowed us to carry the
loss back to the previous five years. As of June 30, 2003, foreign subsidiaries had net operating loss carryforwards for income tax purposes of $52,000 which may be carried forward one to five
years in some cases and indefinitely in
others. For financial reporting purposes, valuation allowances were established against the deferred tax assets relating to these net operating loss carryforwards.

We
have investment tax credits in Taiwan that expire in one to four years. We have foreign tax credits in North America that expire in one to five years. We have a credit for the
alternative minimum tax in North America which does not expire.

Undistributed
earnings of certain subsidiaries are considered indefinitely reinvested. We have not provided deferred tax liabilities for additional income taxes that would result from
repatriation of these earnings. However, if all of the approximately $128,000 of undistributed earnings were repatriated as of June 30, 2003, we would accrue approximately $43,000 in additional
tax expense.

We
have entered into a tax indemnification agreement with DuPont. The amount due from DuPont under the tax indemnification agreement was not material as of June 30, 2003.

18.   Segment Information

The Company conducts operations worldwide and is managed on a geographic basis, with those geographic segments being North America, Europe and Asia. The North
America segment consists only of the U. S., the Europe segment includes France and Germany and the Asia segment includes China, Japan, Korea, Taiwan and Singapore. Segment information as of or for the
years ended June 30 is as follows:

|                                   |  | North America |         | Europe |   | Asia    |   | Eliminations |         | Total |  
|---------------------------------- |  | ------------- | ------- | ------ | - | ------- | - | ------------ | ------- | ----- | -
|2001                               |  |               |         |        |   |         |   |              |         |       |  
|Revenue, net                       |  | $             | 235,287 |        | $ | 83,200  |   | $            | 89,459  |       | $
|Transfers between geographic areas |  |               | 23,493  |        |   | 12,131  |   |              | 26,814  |       |  
|                                   |  |               |         |        |   |         |   |              |         |       |  
|                                   |  | $             | 258,780 |        | $ | 95,331  |   | $            | 116,273 |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  
|Net income (loss)                  |  | $             | (9,915  | )      | $ | 5,372   |   | $            | 19,661  |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  
|Identifiable assets                |  | $             | 366,832 |        | $ | 113,944 |   | $            | 286,676 |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  
|2002                               |  |               |         |        |   |         |   |              |         |       |  
|Revenue, net                       |  | $             | 171,636 |        | $ | 62,002  |   | $            | 108,273 |       | $
|Transfers between geographic areas |  |               | 20,852  |        |   | 1,875   |   |              | 27,099  |       |  
|                                   |  |               |         |        |   |         |   |              |         |       |  
|                                   |  | $             | 192,488 |        | $ | 63,877  |   | $            | 135,372 |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  
|Net income (loss)                  |  | $             | (10,493 | )      | $ | (13,184 | ) | $            | 27,707  |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  
|Identifiable assets                |  | $             | 338,314 |        | $ | 102,883 |   | $            | 331,598 |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  
|2003                               |  |               |         |        |   |         |   |              |         |       |  
|Revenue, net                       |  | $             | 152,042 |        | $ | 63,405  |   | $            | 107,671 |       | $
|Transfers between geographic areas |  |               | 10,340  |        |   | 266     |   |              | 18,697  |       |  
|                                   |  |               |         |        |   |         |   |              |         |       |  
|                                   |  | $             | 162,382 |        | $ | 63,671  |   | $            | 126,368 |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  
|Net income (loss)                  |  | $             | (72,848 | )      | $ | (42,265 | ) | $            | 1,603   |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  
|Identifiable assets                |  | $             | 331,115 |        | $ | 120,839 |   | $            | 347,353 |       | $
|                                   |  |               |         |        |   |         |   |              |         |       |  

F-23

---

Sales outside the U. S. of products manufactured in and exported from the U. S. are not significant. Products are transferred between geographic
areas on a basis intended to approximate the market value of such products.

19.   Warranties

Provision is made for an estimate of product warranty claims based on historical experience and is recorded as an increase to cost of goods sold in the
accompanying consolidated income statements. Warranty liabilities are accounted for in other accrued liabilities in the accompanying consolidated balance sheets.

Changes
in our warranty liability were as follows:

|                         |  | Balance as of
June 30, 2002 |     | Accruals for
Warranties Issued |   | Obligations
Honored during
the Period |  | Balance as of
June 30, 2003
|------------------------ |  | --------------------------- | --- | ------------------------------ | - | ------------------------------------- |  | ---------------------------
|Year ended June 30, 2003 |  | $                           | 250 |                                | $ | 1,393                                 |  | $                          
|                         |  |                             |     |                                |   |                                       |  |                            

20.   Commitments and Contingencies

We have various purchase commitments incidental to the normal course of business, including non-refundable deposits to purchase equipment. In the
aggregate, such commitments are not at prices in excess of current market.

We
are subject to litigation in the normal course of business. We believe the effect, if any, of an unfavorable settlement of such litigation would not have a material adverse effect on
our financial condition, results of operations, cash flows, or liquidity.

We
guarantee a portion of certain equipment leases of the RTC. Our portion of the future minimum lease payments of the RTC aggregated $2,889 as of June 30, 2003. We are also
committed to fund approximately 25 percent of the costs related to the maintenance and overhead of the leased equipment through June 2004.

We,
along with Infineon and AMD, have established joint ventures in Dresden, Germany to conduct leading edge photomask research and pilot manufacturing. The ventures consist of the AMTC
and the BAC. The AMTC will conduct photomask research and pilot manufacturing. The BAC is the owner of a state-of-the-art photomask research and manufacturing
facility. We lease approximately 50 percent of the facility from the BAC for advanced photomask manufacturing and the remainder will be leased by the AMTC. Both leases will be for
10-year terms. In addition, we are committed to funding a portion of the operating cash requirements of the AMTC under the research and development reimbursement and capacity utilization
obligations. We expect our portion to be approximately 33 percent through September 2003 and to vary between approximately 22 percent to 26 percent thereafter.

We
have also guaranteed one-third of the BAC's construction bridge loan. The 75,000 Euro construction bridge loan was executed in June 2002 with an original maturity
date of June 13, 2003 and was amended and extended in May 2003 as described below. The construction bridge loan provides for interest at EURIBOR plus 1.5 percent over its term.
The construction bridge loan had 65,000 Euro ($74,235 as of June 30, 2003) outstanding as of June 30, 2003. Each of the partners of the joint venture executed guarantees for
one-third of the total outstanding debt, up to 25,000 Euro ($28,552 as of June 30, 2003) and certain additional costs as defined in the construction bridge loan agreement, for as
long as any obligation remains outstanding on the construction bridge loan. We will be required to honor our guarantee if the BAC fails to make timely payments under the construction bridge loan;
breaches certain financial covenants; fails to construct the facility as planned; becomes insolvent; or in any other way defaults under the construction bridge loan agreement. We will also be required
to honor our guarantee if any of the owners of the BAC breach certain terms of the joint venture agreement, become insolvent or cease doing business, experience a material adverse change affecting
their obligations under the guarantee, fail to pay their respective indebtedness in excess of
50,000 Euro ($57,104 as of June 30, 2003), or otherwise experience an event constituting a default under the construction bridge loan agreement.

F-24

---

In
December 2002, the BAC executed a 75,000 Euro ($85,656 as of June 30, 2003) term loan agreement for the repayment of the construction bridge loan. The term loan provides
for interest at EURIBOR plus 1.5 percent over its term. Repayment of the term loan is scheduled for approximately equal quarterly payments beginning in the quarter following the first
utilization date and continuing through June 2012. There was no outstanding balance under the term loan as of June 30, 2003. Each of the partners of the joint venture executed guarantees
for up to one-third of the total outstanding debt, or 25,000 Euro and certain additional costs as defined in the term loan agreement until the occupancy of the building and rental payments
begin. Thereafter, we have no guarantee related to the term loan unless the lenders become liable to return monies received in payment of the indebtedness as a result of any bankruptcy, composition or
similar proceedings affecting the BAC. We will be required to honor our guarantee if the BAC fails to make timely payments under the term loan; breaches certain financial covenants; becomes insolvent;
or in any other way defaults under the term loan agreement. We will also be required to honor our guarantee if any of the owners of the BAC breach certain terms of the joint venture agreement, become
insolvent or cease doing business, experience a material adverse change affecting their obligations under the guarantee, fail to pay their respective indebtedness in excess of 50,000 Euro ($57,104 as
of June 30, 2003), or otherwise experience an event constituting a default under the term loan agreement.

Also
in December 2002, the AMTC executed a 120,000 Euro ($137,049 as of June 30, 2003) revolving credit facility to be used for equipment purchases. The revolving credit
facility provides for interest at EURIBOR plus 1.2 percent over the term of any loans drawn under the revolving credit facility. Repayment of each loan must be made on its maturity date. The
maturity date of any loans drawn under the revolving credit facility is the earlier of December 2007 or the termination of the joint venture agreement resulting from a change in ownership for
the AMTC. There were no outstanding balances under this revolving credit facility as of June 30, 2003. Each of the partners of the joint venture executed guarantees for up to 32,000 Euro
($36,546 as of June 30, 2003) and certain additional costs as defined in the revolving credit facility agreement for as long as any obligation remains outstanding under the revolving credit
facility. We will be required to honor our guarantee if the AMTC fails to make timely payments under the revolving credit facility; breaches certain financial covenants; becomes insolvent; or in any
other way defaults under the revolving credit facility. We will also be required to honor our guarantee if any of the owners of the AMTC breach certain terms of the joint venture agreement, become
insolvent or cease doing business, experience a material adverse change affecting their obligations under the guarantee, fail to pay their respective indebtedness in excess of 50,000 Euro ($57,104 as
of June 30, 2003), or otherwise experience an event constituting a default under the revolving credit facility. The revolving credit facility was amended in May 2003 as described below.

Both
the term loan and the revolving credit facility include a condition precedent requiring European Union approval of certain terms prior to initial drawdown. In May 2003, the
construction bridge loan and the revolving credit facility were amended to provide access to funds on an interim basis pending
receipt of the European Union approval. The construction bridge loan was amended to extend the final maturity from June 13, 2003 to September 30, 2003. In combination with the maturity
date extension, construction bridge loan commitments of 10,000 Euro were voluntarily canceled by the BAC, leaving total commitments of 65,000 Euro as of May 2003. Also during May 2003,
the revolving credit facility was amended to allow up to 52,000 Euro ($59,388 as of June 30, 2003) to be accessed on an interim basis through September 2003. There were no amendments to
our guarantees in association with the amendments to the construction bridge loan and revolving credit facility. The interim revolving credit facility commitments provide for interest at EURIBOR plus
1.5 percent over the term of any loans drawn under the interim commitments. Any outstanding balances drawn under the interim revolving credit facility commitments mature on September 30,
2003. No amounts may be outstanding under the interim revolving credit facility commitments at any time after the utilization date for the revolving credit facility. There were no outstanding balances
under the interim revolving credit facility commitments as of June 30, 2003. In July 2003, we received approval from the European Union. As a result, we expect the term loan and the
revolving credit facility to be funded, and the construction bridge loan to be repaid, during the first quarter of fiscal 2004.

We
have established a profit sharing plan with the BindKey employees. Over the next three years, BindKey employees may earn amounts annually based on the annual after-tax
earnings of BindKey. In addition and upon the termination of the final year subject to the profit sharing plan, the employees may earn as much as and additional $120,000 based on the
after-tax earnings of BindKey in the final year. Any amounts earned in relation to the profit sharing plan will be expensed in the period earned.

F-25

---

In
May 2002, we entered into an agreement to acquire photomask production equipment from Infineon's internal photomask manufacturing operations in Munich, Germany and become
Infineon's strategic photomask supplier. In consideration for the acquisition of certain photomask production assets and the agreement to supply Infineon with photomasks over the 10 year term
of the agreement, we agreed to pay Infineon $53,500 over a seven-year period ending in March 2009. We made the first $10,000 payment associated with the agreement in
April 2003. In addition, we agreed to purchase from Infineon, additional photomask production equipment for approximately $28,100 payable over a five-year period ending in
December 2006. We expect to fund all payments to Infineon from cash provided by operations; however, we may elect to satisfy up to approximately $30,200 of these amounts by issuing shares of
our common stock.

In
March 2002, we sold all of our photoblank manufacturing assets located in Poughkeepsie, New York, to Schott. We also entered into a supply agreement with Schott for a
significant portion of our future purchases of photoblanks.

Our
operations and our ownership of real property are subject to various environmental laws and regulations that govern, among other things, the discharge of pollutants into the air and
water and the
handling, use, storage, disposal and clean-up of solid and hazardous wastes. Compliance with such laws and regulations requires that we incur capital expenditures and operating costs in
connection with our ongoing operations. In addition, such laws and regulations may impose liabilities on owners and operators of businesses and real property without regard to fault and such
liabilities may be joint and several with other parties. More stringent environmental laws and regulations may be enacted in the future, which may require us to expend additional amounts on
environmental compliance or may require modifications in our operations. Although we are unable to predict the extent of our future liability with respect to any environmental matters, we believe,
based upon current information, that environmental liabilities will not be material to our financial condition or results of operations. DuPont has agreed to indemnify us for any environmental
contamination present on our manufacturing sites at June 13, 1996, the date of our initial public offering, or present at any such site due to the generation, use, treatment, storage, release,
emission, discharge or disposal of hazardous waste or hazardous materials before such date. The Environmental Protection Agency is reviewing a groundwater contamination issue at our Danbury,
Connecticut site under voluntary corrective action. Any such contamination is believed to be offsite or historical, and, if that is the case, any environmental liabilities would be covered by the
indemnification agreement with DuPont.

21.   Subsequent Event

In July 2003, we signed a multi-year pellicle supply agreement with Micro Lithography, Inc., or MLI. In connection with the supply
agreement, we are closing our pellicle production facility in Danbury, Connecticut, ending production in September 2003. Our global workforce will be reduced by approximately 5 percent,
or approximately 96 positions once this initiative is complete. To account for the projected cost of the Danbury site closure and global workforce reduction, we will record charges in the first and
second quarters of fiscal 2004 totaling between $1,700 and $2,200 (which are net of proceeds of $1,700 from the sale of certain pellicle assets and technology) related to employee severance, asset
disposals and related costs.

F-26

---

22.   Unaudited Quarterly Financial Data

Unaudited quarterly financial data for 2002 and 2003 is as follows:

|                                            |  | Quarter |           
|------------------------------------------- |  | ------- | ----------
|
|2002                                        |  |         |           
|Revenue, net                                |  | $       | 77,461    
|Gross profit                                |  | $       | 10,197    
|Operating profit (loss)                     |  | $       | (5,723    
|Net income (loss)                           |  | $       | (2,983    
|Basic earnings (loss) per share             |  | $       | (0.17     
|Diluted earnings (loss) per share           |  | $       | (0.17     
|Basic weighted average shares outstanding   |  |         | 17,835,283
|Diluted weighted average shares outstanding |  |         | 17,835,283
|2003                                        |  |         |           
|Revenue, net                                |  | $       | 84,240    
|Gross profit                                |  | $       | 13,506    
|Operating loss                              |  | $       | (3,988    
|Net loss                                    |  | $       | (5,495    
|Basic loss per share                        |  | $       | (0.31     
|Diluted loss per share                      |  | $       | (0.31     
|Basic weighted average shares outstanding   |  |         | 17,970,356
|Diluted weighted average shares outstanding |  |         | 17,970,356

F-27

---



SCHEDULE II        DUPONT PHOTOMASKS, INC.        VALUATION AND QUALIFYING ACCOUNTS  (Dollars in thousands)

|                             |                                             | Balance at
Beginning of
Period |   | Charged to
(Benefit to)
Costs and
Expenses |  | Deductions |      | Balance at
End of
Period
|---------------------------- | ------------------------------------------- | ------------------------------ | - | ------------------------------------------ |  | ---------- | ---- | ------------------------
|Deducted from asset account |                                             |                                |   |                                            |  |            |      |                         
|                             | Allowance for doubtful accounts receivable: |                                |   |                                            |  |            |      |                         
|                             | Year ended June 30, 2003                    |                                | $ | 1,243                                      |  | $          | 245  |                         
|                             |                                             |                                |   |                                            |  |            |      |                         
|                             | Year ended June 30, 2002                    |                                | $ | 1,556                                      |  | $          | (255 | )                       
|                             |                                             |                                |   |                                            |  |            |      |                         
|                             | Year ended June 30, 2001                    |                                | $ | 2,482                                      |  | $          | 862  |                         
|                             |                                             |                                |   |                                            |  |            |      |                         
|Deducted from asset account |                                             |                                |   |                                            |  |            |      |                         
|                             | Reserve for inventories:                    |                                |   |                                            |  |            |      |                         
|                             | Year ended June 30, 2003                    |                                | $ | 646                                        |  | $          | 135  |                         
|                             |                                             |                                |   |                                            |  |            |      |                         
|                             | Year ended June 30, 2002                    |                                | $ | 932                                        |  | $          | (17  | )                       
|                             |                                             |                                |   |                                            |  |            |      |                         
|                             | Year ended June 30, 2001                    |                                | $ | 1,126                                      |  | $          | 400  |                         
|                             |                                             |                                |   |                                            |  |            |      |                         

---

F-28

---

EXHIBIT INDEX

|Exhibit
Number |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1.1          |  | Certificate of Incorporation of the Company, as amended and restated on April 3, 1996. (A)                                                                                                                                                                                                                                                                                                                                                       
|3.1.2          |  | Amendment to the Certificate of Incorporation of the Company. (E)                                                                                                                                                                                                                                                                                                                                                                                
|3.2            |  | Bylaws, as amended on October 26, 1999. (E)                                                                                                                                                                                                                                                                                                                                                                                                      
|3.2.1          |  | Amendments to the Bylaws Of DuPont Photomasks, Inc. as approved by the Board Of Directors on June 23, 2003.                                                                                                                                                                                                                                                                                                                                      
|4.1            |  | Specimen Certificate for Common Stock. (A)                                                                                                                                                                                                                                                                                                                                                                                                       
|4.2            |  | Form of Indenture, between DuPont Photomasks, Inc. and Chase Bank of Texas, N.A., as trustee, including the form of Convertible Subordinated Notes due July 24, 2004 attached as Exhibit A thereto. (K)                                                                                                                                                                                                                                          
|4.3            |  | Indenture, between DuPont Photomasks, Inc. and JPMorgan Chase Bank, as trustee, including Form of 1.25% Convertible Subordinated Notes due 2008 (144A Global Note and Reg S. Global Note). (I)                                                                                                                                                                                                                                                   
|4.4            |  | Rights Agreement, dated as of January 30, 2001, between DuPont Photomasks, Inc. and EquiServe Trust Company, N.A., as Rights Agent, together with the following exhibits thereto: Exhibit A-Form of Certificate of
Designation of Series A Junior Participating Preferred Stock of DuPont Photomasks, Inc.; Exhibit B-Form of Right Certificate; Exhibit C-Summary of Rights to Purchase Shares of Preferred Stock of DuPont Photomasks, Inc. (J)
|4.5            |  | Amendment No. 1 to Rights Agreement, between DuPont Photomasks, Inc. and EquiServe Trust Company, N.A., as Rights Agent, dated as of April 29, 2003. (I)                                                                                                                                                                                                                                                                                         
|4.6            |  | Registration Rights Agreement among DuPont Photomasks, Inc., Credit Suisse First Boston LLC and Lehman Brothers Inc. dated as of May 5, 2003. (I)                                                                                                                                                                                                                                                                                                
|10.1           |  | Transitional Administrative Services Agreement between the Company and E.I. du Pont de Nemours and Company dated as of January 1, 1996. (A)                                                                                                                                                                                                                                                                                                      
|10.2           |  | Environmental Indemnification Agreement between the Company and E. I. du Pont de Nemours dated April 30, 1996. (A)                                                                                                                                                                                                                                                                                                                               
|10.3           |  | Amended Bonus Plan, as adopted by the Company's Board of Directors on October 28, 1996. (B)                                                                                                                                                                                                                                                                                                                                                      
|10.4           |  | Second Amended and Restated Non-employee Directors Stock Option Plan as adopted by the Company's Board of Directors on July 27, 1998. (C)                                                                                                                                                                                                                                                                                                        
|10.5           |  | Amended and Restated Stock Performance Plan as adopted by the Company's Board of Directors on June 9, 1997. (B)                                                                                                                                                                                                                                                                                                                                  
|10.6           |  | Founders Stock Option Plan, as adopted by the Company's Board of Directors on March 26, 1996. (A)                                                                                                                                                                                                                                                                                                                                                
|10.7           |  | Registration Rights Agreement between the Company and DuPont Chemical and Energy Operations, Inc. dated as of December 31, 1995. (A)                                                                                                                                                                                                                                                                                                             
|10.8           |  | Tax Indemnification Agreement among the Company, DuPont Chemical and Energy Operations, Inc. and E. I. du Pont de Nemours and Company dated May 14, 1996. (A)                                                                                                                                                                                                                                                                                    
|10.9           |  | Research, Development and Consulting Agreement between the Company and E. I. du Pont de Nemours and Company dated as of January 1, 1996. (A)                                                                                                                                                                                                                                                                                                     
|10.10          |  | Business Transfer Agreement between DuPont Korea, Ltd. and DuPont Photomasks Korea, Ltd. dated December 22, 1995. (A)                                                                                                                                                                                                                                                                                                                            
|10.11          |  | Corporate Tradename and Trademark Agreement between the Company and E. I. du Pont de Nemours and Company dated May 7, 1998. (C)                                                                                                                                                                                                                                                                                                                  
|10.11.1        |  | Amendment to Corporate Tradename and Trademark Agreement between the Company and E. I. du Pont de Nemours and Company dated March 5, 2001.                                                                                                                                                                                                                                                                                                       
|10.12          |  | Amended 1997 Stock Option and Restricted Stock Plan as adopted by the Company's Board of Directors on September 2, 1999. (D)                                                                                                                                                                                                                                                                                                                     
|10.13          |  | 1998 Employee Stock Purchase Plan as adopted by the Company's Board of Directors on July 27, 1998. (C)                                                                                                                                                                                                                                                                                                                                           
|10.14          |  | 2000 Employment Agreement with Peter S. Kirlin dated May 2, 2000. (F)                                                                                                                                                                                                                                                                                                                                                                            
|10.15          |  | 2000 Employment Agreement with Preston M. Adcox dated July 19, 2000. (F)                                                                                                                                                                                                                                                                                                                                                                         
|10.16          |  | DuPont Research Agreement dated April 21, 2000 (Portions of this exhibit have been omitted pursuant to a request for confidential treatment). (F)                                                                                                                                                                                                                                                                                                
|10.17          |  | Teflon AF Agreement dated July 1, 2000 (Portions of this exhibit have been omitted pursuant to a request for confidential treatment). (F)                                                                                                                                                                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  

---

|10.18 |  | Blank Supply Agreement dated March 31, 2002 (Portions of this exhibit have been omitted pursuant to a request for confidential treatment). (G)                                                                                                                                      
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.19 |  | DPI Dresden Equipment Purchase and DPI/IFX Supply Agreement dated May 15, 2002, as amended, by and among DuPont Photomasks, Inc., Blitz 02-210 GmbH and Infineon Technologies AG. (Portions of this exhibit have been omitted
pursuant to a request for confidential treatment). (G)
|10.20 |  | 2002 Employment Agreement with James Northup dated December 27, 2001. (H)                                                                                                                                                                                                           
|10.21 |  | 2002 Employment Agreement with Satish Rishi dated October 11, 2001. (H)                                                                                                                                                                                                             
|10.22 |  | 2003 Employment Agreement with Marshall C. Turner dated September 10, 2003                                                                                                                                                                                                          
|10.23 |  | Form of Indemnification Agreement between the Company and its Directors and Officers                                                                                                                                                                                                
|11    |  | Statement re Computation of Per Share Earnings (Loss)                                                                                                                                                                                                                               
|14    |  | Code of Ethics for Senior Executives of DuPont Photomasks, Inc.                                                                                                                                                                                                                     
|21    |  | List of principal subsidiaries of the Company                                                                                                                                                                                                                                       
|23    |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                               
|31    |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                         
|32    |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                     

|Letter |  | Definition                                                                                               
|------ |  | ---------------------------------------------------------------------------------------------------------
|(A)    |  | Registration Statement on Form S-1, Registration No. 333-33869 ("IPO Registration Statement").           
|(B)    |  | Annual Report on Form 10-K for the year ended June 30, 1997 ("1997 Form 10-K").                          
|(C)    |  | Annual Report on Form 10-K for the year ended June 30, 1998 ("1998 Form 10-K").                          
|(D)    |  | Annual Report on Form 10-K for the year ended June 30, 1999 ("1999 Form 10-K").                          
|(E)    |  | Form 8-A12 G/A on June 23, 2000 ("2000 Form 8-A").                                                       
|(F)    |  | Annual Report on Form 10-K for the year ended June 30, 2000 ("2000 Form 10-K").                          
|(G)    |  | Annual Report on Form 10-K for the year ended June 30, 2001 ("2001 Form 10-K").                          
|(H)    |  | Annual Report on From 10-K for the year ended June 30, 2002 ("2002 Form 10-K").                          
|(I)    |  | Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 ("March 31, 2003 Form 10-Q").
|(J)    |  | Form 8-A12B on January 30, 2001 ("2001 Form 8-A12B").                                                    
|(K)    |  | Amendment No. 2 to Form S-3 filed on July 19, 2000 ("Amendment No. 2 to Form S-3").                      

---