**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 20-F/A**

 

**(Amendment No. 1)**

 

| **o**      | **REGISTRATION STATEMENT PURSUANT  TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                                                                                                                                                                                        |
| **OR**     |
| ** ** | ** **                                                                                                                                                                                                                                                                                                        |
| **x**      | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2009**                                                                                                                                                             |
| ** ** | ** **                                                                                                                                                                                                                                                                                                        |
| **OR**     |
| ** ** | ** **                                                                                                                                                                                                                                                                                                        |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                           |
| ** ** | **For  the transition period from                        to                        ** |
| ** ** | ** **                                                                                                                                                                                                                                                                                                        |
| **OR**     |
| ** ** | ** **                                                                                                                                                                                                                                                                                                        |
| **o**      | **SHELL COMPANY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                        |

 

Dateof event requiring this shell company report . . . . . . . . . . . . . . . . ... .

 

Commissionfile number: 000-51196

 
| **AIXTRON Aktiengesellschaft**                                                                                                      |
|-------------------------------------------------------------------------------------------------------------------------------------|
| (Exact name of Registrant as specified in its charter)                                                                              |
|                                                                                                                                |
| **Federal Republic of Germany**                                                                                                     |
| (Jurisdiction of incorporation or organization)                                                                                     |
|                                                                                                                                |
| **Kaiserstr. 98  52134 Herzogenrath  Federal Republic of Germany**                                                                  |
| (Address of principal executive offices)                                                                                            |
|                                                                                                                                |
| **Guido Pickert, +49 241 8909-444, +49 241  8909-445, Aixtron AG, Kaiserstr. 98, 52134 Herzogenrath, Federal Republic of  Germany** |
| (Name, Telephone, E-mail and/or Facsimile number and Address of  Company Contact Person)                                            |

 

Securitiesregistered or to be registered pursuant to Section 12(b) of the Act:

 
| **American Depositary Shares, each representing  one Ordinary Share**

**Ordinary shares, no par value (not for trading,  but only in connection with the listing of its American Depositary Shares on The  NASDAQ Global Select Market)** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (Title of Class)                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                       |
| **The NASDAQ Global Select Market**                                                                                                                                                                                                        |
| (Name of each Exchange on which registered)                                                                                                                                                                                                |

 

Securitiesregistered or to be registered pursuant to Section 12(g) of the Act: **None**

 

----

 

Securitiesfor which there is a reporting obligation pursuant to Section 15(d) of the Act:**None**

 

Indicatethe number of outstanding shares of each of the issuer's classes of capital orcommon stock as of December 31, 2009:
| 100,667,177  ordinary shares, no par value. |   |
|---------------------------------------------|--------|
|                                        |   |

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.

o Yes   x No

 

Ifthis report is an annual or transition report, indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934.

o Yes   x No

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports) and (2) has been subject tosuch filing requirements for the past 90 days.

x Yes   o No

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files)

o Yes   o No

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of acceleratedfiler and large accelerated filer in Rule 12b-2 of the Exchange Act. (Checkone):

 

| Large accelerated filer x |   | Accelerated filer o |   | Non-accelerated filer o |
|---------------------------|--------|---------------------|--------|-------------------------|

 

Indicateby check mark which basis of accounting the registrant has used to prepare thefinancial statements included in this filing.

 

| U.S. GAAP o |   | International Financial Reporting Standards as issued  by the International Accounting Standards Board x |   | Other o |
|-------------|--------|----------------------------------------------------------------------------------------------------------|--------|---------|

 

If“Other” has been checked in response to the previous question, indicate bycheck mark which financial statement item the registrant has elected to follow.

o Item 17   o Item 18

 

Ifthis is an annual report, indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

 

----

 

**EXPLANATORYNOTE**

 

This Form 20-F/A(the “Amended Filing”) is being filed by Aixtron  Aktiengesellschaft (the “Company” or “AIXTRON”)to amend its Annual Report on Form 20-F for the year ended December 31,2009 (the “Original Filing”), filed with the Securities and Exchange Commission(the “SEC”) on March 10, 2010, to set forth Item 15, Item 18 and Item 19to replace Item 15, Item 18 and Item 19 in their entirety, respectively, in theOriginal Filing.  All other items remainunchanged from the Original Filing.

 

As disclosed below, Item15 of this Amended Filing is filed to (i) includeDeloitte & Touche  GmbH’sattestation report on the effectiveness of the Company’s internal controls overfinancial reporting, which was inadvertently omitted from the Original Filing, (ii) revisethe Company’s conclusion regarding the effectiveness of its disclosure controlsand procedures as of the end of the period covered by this report, (iii) removethe definition of disclosure controls and procedures in the Company’s disclosureregarding its officers’ conclusions about the effectiveness of the Company’sdisclosure controls and procedures and (iv) remove the definition ofinternal control over financial reporting in the Company’s disclosure regardingits conclusion about the effectiveness of its internal control over financialreporting.

 

As disclosed below, Item18 of this Amended Filing is filed to revise the report of independent registered public accounting firm to (i) opine on the December 31, 2009, 2008 and 2007consolidated statements of financial position and (ii) correct theconformed signature to the report ofindependent registered public accounting firm.

 

As disclosed below, Item19 of this Amended Filing is filed to (i) updatethe Sections 302 and 906 certificationsand (ii) revise the consent of independent registered public accountingfirm to refer to the report ofindependent registered public accounting firm dated March 10, 2010.

 

Except as otherwisestated herein, no other information contained in the Original Filing has beenupdated by this Amended Filing and no disclosures have been updated to reflectevents that occurred at a later date.  This Amendment should be readin conjunction with the Company’s SEC filings made subsequent to the OriginalFiling.

 

----

 

**Item 15:    Controlsand Procedures**

 

**DisclosureControls and Procedures**

 

Managementof AIXTRON conducted an evaluation, under thesupervision and with the participation of AIXTRON’sChief Executive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of AIXTRON’s disclosure controlsand procedures (as defined in Rule 13a-15(e) under the Exchange Act).

 

Basedon such evaluation, AIXTRON’s Chief Executive OfficerPaul Hyland and Chief Financial Officer Wolfgang Bremehad concluded that disclosure controls and procedures were effective. However,in light of the fact that AIXTRON’s Managementinadvertently omitted the required attestation report on the effectiveness ofthe Company’s internal controls over financial reporting issued by Deloitte &Touche GmbH from the Original Filing, the Company ishereby revising its conclusion regarding its disclosure controls and proceduresas of the end of the period covered by this report and instead is concludingthat those disclosure controls and procedures were not effective at December 31,2009.

 

The Company has remediedthis failure in the effectiveness of its disclosure controls and procedures byfiling the required attestation report on the effectiveness of the Company’sinternal controls over financial reporting in the Amended Filing.  TheCompany has also implemented additional controls and procedures designed toensure that the disclosures provided by the Company meet the then-currentrequirements of the applicable filing made under the Exchange Act.

 

**Management’sReport on Internal Control over Financial Reporting**

 

AIXTRON’s Management is responsible for establishing andmaintaining adequate internal control over financial reporting, as such term isdefined in Rule 13a-15(f) under the Exchange Act, for AIXTRON. Under the supervision and with the participationof AIXTRON’s Chief Executive Officer and ChiefFinancial Officer, AIXTRON’s Management conducted anevaluation of the effectiveness of AIXTRON’s internalcontrol over financial reporting based upon the framework in “InternalControl—Integrated Framework” issued by the Committee of SponsoringOrganizations of the Treadway Commission as of theend of the period covered by this report.

 

Basedon that evaluation, Management has concluded that AIXTRON’sinternal control over financial reporting was effective as of December 31,2009.

 

Deloitte &Touche GmbH, an independent registered publicaccounting firm, has audited the Consolidated Financial Statements included inthis annual report on Form 20-F and, as part of the audit, has issued anattestation report, included herein, on the effectiveness of AIXTRON’s internal control over financial reporting.

 

----

 

**AttestationReport of the Registered Public Accounting Firm**

 

To The Supervisory Board

 

AIXTRON AG

 

Herzogenrath, Germany

 

We have audited theinternal control over financial reporting of AIXTRON  Aktiengesellschaft and subsidiaries (the “Company”) as of December 31,2009, based on the criteria established in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the TreadwayCommission. The Company’s management is responsible for maintaining effectiveinternal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in theaccompanying Management Report On Internal Control OverFinancial Reporting. Our responsibility is to express an opinion on the Company’sinternal control over financial reporting based on our audit.

 

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control overfinancial reporting was maintained in all material respects. Our audit includedobtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, testing and evaluating thedesign and operating effectiveness of internal control based on the assessedrisk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for ouropinion.

 

A company’s internalcontrol over financial reporting is a process designed by, or under thesupervision of, the company’s principal executive and principal financialofficers, or persons performing similar functions, and effected by the company’sboard of directors, management, and other personnel to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Because of the inherentlimitations of internal control over financial reporting, including thepossibility of collusion or improper management override of controls, materialmisstatements due to error or fraud may not be prevented or detected on atimely basis. Also, projections of any evaluation of the effectiveness of theinternal control over financial reporting to future periods are subject to therisk that the controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

 

In our opinion, theCompany maintained, in all material respects, effective internal control overfinancial reporting as of December 31, 2009, based on the criteriaestablished in Internal Control — Integrated Framework issued by the Committeeof Sponsoring Organizations of the TreadwayCommission.

 

We have also audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated financial statements as of and for the yearended December 31, 2009 of the Company and our report dated March 10,2010 expressed an unqualified opinion on those financial statements.

 

----

 
| */s/ Deloitte & Touche  GmbH Wirtschaftsprüfungsgesellschaft* |   |
|-----------------------------------------------------------------------------|--------|
|                                                                        |   |
| ***Deloitte & Touche****GmbH*                                      |   |
|                                                                        |   |
| *Wirtschaftsprüfungsgesellschaft*                                      |   |
|                                                                        |   |
| *Duesseldorf**, Germany, March 10, 2010*                               |   |

 

----

 

**Changesin Internal Control over Financial Reporting**

 

Duringthe year ended December 31, 2009 there have been no changes in ourinternal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

**InherentLimitations of Disclosure Controls and Procedures in Internal Control overFinancial Reporting**

 

Itshould be noted that any system of controls, however well-designed andoperated, can provide only reasonable, and not absolute, assurance that theobjectives of the system will be met. In addition, the design of any controlsystem is based in part upon certain assumptions about the likelihood of futureevents.

 

----

 

**Item 18:  FinancialStatements**

 

See pages F-1 toF-62 of the Amended Filing which are incorporated herein by reference.

 

## **Item 19:  Exhibits**

 
| **Exhibit  Number** | ** ** | **Description of Exhibit**                                                                                                                                                                                                                                                                                        |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                                                                              |
| 1.1                 |       | Articles of Association  (*Satzung*)  as amended January 19, 2010.*                                                                                                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                              |
| 4.2                 |       | Manufacturing License  and Technical Services Agreement, dated as of August 10, 1989, between AIXTRON  Aktiengesellschaft and Laboratoires  D’Electronique  Philips (incorporated by reference to Exhibit 10.2 to Form F-4,  dated February 8, 2005, File No. 333-122624).          |
|                |       |                                                                                                                                                                                                                                                                                                              |
| 4.3                 |       | Exclusive Patent and  Know-How License Agreement among AIXTRON  Aktiengesellschaft, Centre National de la Recherche  Scientifique and the Institut National Polytechnique  de Grenoble (incorporated by reference to Exhibit 10.3 to Form F-4,  dated February 8, 2005, File No. 333-122624). |
|                |       |                                                                                                                                                                                                                                                                                                              |
| 8.1                 |       | List of Subsidiaries  (incorporated by reference to the list of significant subsidiaries set forth  in this report under the caption “Item 4. Information on the  Company—Organizational Structure.”)*                                                                                        |
|                |       |                                                                                                                                                                                                                                                                                                              |
| 11.1                |       | Code of Ethics, revised  in 2007 (incorporated by reference to Exhibit 11.1 to Form 20-F,  dated March 13, 2008, File No. 000-51196).                                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                                              |
| 12.1                |       | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.**                                                                                                                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                              |
| 12.2                |       | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.**                                                                                                                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                              |
| 13.1                |       | Certification 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.**                                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                              |
| 15.1                |       | Consent of  Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft.**                                                                                                                                                                                                                          |

 

----

| *      |   | Previously filed as an  exhibit to the Original Filing. |
|--------|--------|---------------------------------------------------------|
|   |   |                                                    |
| **     |   | Filed herewith.                                         |

 

----

##  

## **SIGNATURES**

##  

The registrant herebycertifies that it meets all of the requirements for filing on Form 20-F(as amended by this Form 20-F/A Amendment No. 1) and that it has dulycaused and authorized the undersigned to sign this annual report on its behalf.

 

Date:  June 21, 2010

 

 
|   | AIXTRON  AKTIENGESELLSCHAFT |
|--------|-----------------------------|
|   |                        |   |
|   |                        |   |
|   | /s/ PAUL  HYLAND       |
|   |                        | ** ** |
|   | Name:                       | **Paul  Hyland** |
|   |                        | ** ** |
|   | Title:                      | **Chairman,  President and Chief Executive Officer** |
|   |                        |   |
|   |                        |   |
|   | /s/ WOLFGANG  BREME    |
|   |                        | ** ** |
|   | Name:                       | **Wolfgang  Breme** |
|   |                        | ** ** |
|   | Title:                      | **Executive  Vice President and Chief Financial Officer** |

 

----

 

**Report of Independent Registered Public AccountingFirm**

 

To The Supervisory Board

 

AIXTRON AG

 

Herzogenrath, Germany

 

We have audited the accompanying consolidatedstatement of financial position of AIXTRON Aktiengesellschaft and subsidiaries(the “Company”) as of December 31, 2009, 2008 and 2007 and the relatedconsolidated income statement, consolidated statement of cash flows andconsolidated statement of changes in equity, for each of the three years in theperiod ended December 31, 2009. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

 

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statementspresent fairly, in all material respects, the financial position of AIXTRONAktiengesellschaft and subsidiaries as of December 31, 2009, 2008 and 2007and the results of their operations and their cash flows for each of the threeyears in the period ended December 31, 2009, in conformity withInternational Financial Reporting Standards as issued by the InternationalAccounting Standards Board (IASB).

 

We also have audited, in accordance with the standardsof the Public Company Accounting Oversight Board (United States), the Company’sinternal control over financial reporting as of December 31, 2009, basedon the criteria established in Internal Control—Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission and ourreport dated March 10, 2010 expressed an unqualified opinion on theCompany’s internal control over financial reporting.

 
| */s/ Deloitte & Touche GmbH  Wirtschaftsprüfungsgesellschaft* |   |
|-----------------------------------------------------------------------------|--------|
|                                                                        |   |
| ***Deloitte & Touche****GmbH*                                      |   |
|                                                                        |   |
| *Wirtschaftsprüfungsgesellschaft*                                      |   |
|                                                                        |   |
| Duesseldorf, Germany,  March 10, 2010                                  |   |

 

----

 

**CONSOLIDATEDINCOME STATEMENT**

 
| ** **                                                                     | ** ** | **Notes**  | ** ** | **2009**               | ** ** | **2008**    | ** ** | **2007**   | ** ** |
|--------------------------------------------------------------------------------|------------|------------|------------|------------------------|------------|-------------|------------|------------|------------|
| ** **                                                                     | ** ** | ** ** | ** ** | **(in EUR thousands)** | ** ** |
| Revenues                                                                       |       | 3          |       | 302,857                |       | 274,404     |       | 214,815    |       |
| Cost  of sales                                                                 |       |       |       | 168,143                |       | 161,525     |       | 129,779    |       |
| **Gross profit**                                                               |       |       | ** ** | **134,714**            | ** ** | **112,879** | ** ** | **85,036** | ** ** |
| Selling  expenses                                                              |       |       |       | 25,465                 |       | 27,842      |       | 27,163     |       |
| General  administration expenses                                               |       |       |       | 21,288                 |       | 17,997      |       | 16,030     |       |
| Research  and development costs                                                |       | 5          |       | 32,917                 |       | 28,286      |       | 26,532     |       |
| Other  operating income                                                        |       | 6          |       | 10,046                 |       | 5,192       |       | 6,612      |       |
| Other  operating expenses                                                      |       | 7          |       | 2,365                  |       | 11,457      |       | 1,280      |       |
| **Operating result**                                                           |       |       | ** ** | **62,725**             | ** ** | **32,489**  | ** ** | **20,643** | ** ** |
| Finance  Income                                                                |       |       |       | 1,283                  |       | 3,189       |       | 1,857      |       |
| Finance  Expense                                                               |       |       |       | 27                     |       | 23          |       | 99         |       |
| **Net Finance Income**                                                         |       | 9          | ** ** | **1,256**              | ** ** | **3,166**   | ** ** | **1,758**  | ** ** |
| **Result before taxes**                                                        |       |       | ** ** | **63,981**             | ** ** | **35,655**  | ** ** | **22,401** | ** ** |
| Taxes  on income                                                               |       | 10         |       | 19,215                 |       | 12,661      |       | 5,151      |       |
| **Profit/loss attributable to the equityholders of AIXTRON AG  (after taxes)** |       |       | ** ** | **44,766**             | ** ** | **22,994**  | ** ** | **17,250** | ** ** |
| Basic  earnings per share (€)                                             |       | 23         |       | 0.49                   |       | 0.26        |       | 0.20       |       |
| Diluted  earnings per share (€)                                           |       | 23         |       | 0.48                   |       | 0.25        |       | 0.19       |       |

 

See accompanying notes toconsolidated financial statements.

 

F-1

----

 

**CONSOLIDATED STATEMENT OF OTHERCOMPREHENSIVE INCOME**

 
| ** **                                                                        | ** ** | **2009**               | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------------|------------|------------|------------|------------|------------|
| ** **                                                                        | ** ** | **(in EUR thousands)** | ** ** |
| **Profit or Loss**                                                                | ** ** | **44,766**             | ** ** | **22,994** | ** ** | **17,250** | ** ** |
| Losses/gains  from derivative financial instruments before taxes                  |       | (1,417                 | )          | (1,707     | )          | 961        |       |
| Currency  translation adjustment                                                  |       | 1,306                  |       | (5,372     | )          | (9,932     | )          |
| Deferred  taxes                                                                   |       | 302                    |       | 515        |       | (289       | )          |
| **Other comprehensive income**                                                    | ** ** | **191**                | ** ** | **(6,564** | **)**      | **(9,260** | **)**      |
| **Total comprehensive income attributable to equity holders  of AIXTRON AG** | ** ** | **44,957**             | ** ** | **16,430** | ** ** | **7,990**  | ** ** |

 

See accompanyingnotes to consolidated financial statements.

 

F-2

----

 

**CONSOLIDATEDSTATEMENT OF FINANCIAL POSITION**

 
| ** **                                                                                       | ** ** | **Note**   | ** ** | **12/31/2009**         | ** ** | **12/31/2008** | ** ** | **12/31/2007** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------|------------|------------------------|------------|----------------|------------|----------------|------------|
| ** **                                                                                       | ** ** | ** ** | ** ** | **(in EUR thousands)** | ** ** |
| **Assets**                                                                                       |       |       |       |                   |       |           |       |           |       |
| Property,  plant and equipment                                                                   |       | 12         |       | 37,758                 |       | 39,324         |       | 35,121         |       |
| Goodwill                                                                                         |       | 13         |       | 58,275                 |       | 58,719         |       | 58,974         |       |
| Other  intangible assets                                                                         |       | 13         |       | 7,766                  |       | 10,255         |       | 12,508         |       |
| Investment  property                                                                             |       | 14         |       | 0                      |       | 4,908          |       | 4,908          |       |
| Other  non-current assets                                                                        |       | 15         |       | 644                    |       | 672            |       | 745            |       |
| Deferred  tax assets                                                                             |       | 16         |       | 13,869                 |       | 3,161          |       | 4,773          |       |
| Tax  assets                                                                                      |       | 17         |       | 373                    |       | 420            |       | 437            |       |
| **Total non-current assets**                                                                     |       |       | ** ** | **118,685**            | ** ** | **117,459**    | ** ** | **117,466**    | ** ** |
| Inventories                                                                                      |       | 18         |       | 89,552                 |       | 77,086         |       | 60,013         |       |
| Trade  receivables less allowance k€ 717 (2008: k€ 2,289; 2007: k€ 567) |       | 19         |       | 49,265                 |       | 38,814         |       | 33,490         |       |
| Current  tax assets                                                                              |       | 11         |       | 59                     |       | 59             |       | 59             |       |
| Other  current assets                                                                            |       | 19         |       | 14,341                 |       | 10,947         |       | 9,025          |       |
| Other  financial assets                                                                          |       | 20         |       | 90,000                 |       | 3,000          |       | 4,831          |       |
| Cash  and cash equivalents                                                                       |       | 21         |       | 211,192                |       | 67,462         |       | 71,943         |       |
| **Total current assets**                                                                         |       |       | ** ** | **454,409**            | ** ** | **197,368**    | ** ** | **179,361**    | ** ** |
| **Total assets**                                                                                 |       |       | ** ** | **573,094**            | ** ** | **314,827**    | ** ** | **296,827**    | ** ** |
| **Liabilities and shareholders’ equity**                                                    |       |       |       |                   |       |           |       |           |       |
| Subscribed  capital Number of shares: 99,587,927 (2008: 89,692,328;  2007: 89,138,905) |       |       |       | 99,588                 |       | 89,692         |       | 89,139         |       |
| Additional  paid-in capital                                                                      |       |       |       | 260,413                |       | 106,445        |       | 102,562        |       |
| Retained  earnings                                                                               |       |       |       | 67,092                 |       | 30,507         |       | 13,845         |       |
| Income  and expenses recognised in equity                                                        |       |       |       | (13,564                | )          | (13,755        | )          | (7,192         | )          |
| **Total shareholders’ equity**                                                              |       | 22         | ** ** | **413,529**            | ** ** | **212,889**    | ** ** | **198,354**    | ** ** |
| Employee  benefits                                                                               |       | 26         |       | 1,064                  |       | 845            |       | 878            |       |
| Other  non-current liabilities                                                                   |       |       |       | 70                     |       | 67             |       | 71             |       |
| Other  non-current provisions                                                                    |       | 26         |       | 790                    |       | 1,210          |       | 1,496          |       |
| Deferred  tax liabilities                                                                        |       |       |       | 275                    |       | 0              |       | 0              |       |
| **Total non-current liabilities**                                                                |       |       | ** ** | **2,199**              | ** ** | **2,122**      | ** ** | **2,445**      | ** ** |
| Trade  payables                                                                                  |       | 27         |       | 21,419                 |       | 18,782         |       | 23,761         |       |
| Advance  payments from customers                                                                 |       |       |       | 87,918                 |       | 52,566         |       | 49,988         |       |
| Other  current provisions                                                                        |       | 26         |       | 28,666                 |       | 20,481         |       | 16,473         |       |
| Other  current liabilities                                                                       |       | 27         |       | 2,265                  |       | 1,866          |       | 1,303          |       |
| Current  tax liabilities                                                                         |       |       |       | 17,064                 |       | 6,085          |       | 4,254          |       |
| Deferred  revenues                                                                               |       |       |       | 34                     |       | 36             |       | 249            |       |
| **Total current liabilities**                                                                    |       |       | ** ** | **157,366**            | ** ** | **99,816**     | ** ** | **96,028**     | ** ** |
| **Total liabilities**                                                                            |       |       | ** ** | **159,565**            | ** ** | **101,938**    | ** ** | **98,473**     | ** ** |
| **Total liabilities and shareholders’ equity**                                              |       |       | ** ** | **573,094**            | ** ** | **314,827**    | ** ** | **296,827**    | ** ** |

 

See accompanyingnotes to consolidated financial statements.

 

F-3

----

 

**CONSOLIDATEDSTATEMENT OF CASH FLOWS**

 
| ** **                                                                           | ** ** | **Note**   | ** ** | **2009**               | ** ** | **2008**    | ** ** | **2007**    | ** ** |
|--------------------------------------------------------------------------------------|------------|------------|------------|------------------------|------------|-------------|------------|-------------|------------|
| ** **                                                                           | ** ** | ** ** | ** ** | **(in EUR thousands)** | ** ** |
| **Cash inflow from operating activities**                                            |       |       |       |                   |       |        |       |        |       |
| Net  income for the year (after taxes)                                               |       |       |       | 44,766                 |       | 22,994      |       | 17,250      |       |
| **Reconciliation between profit and cash inflow/outflow from  operating activities** |       |       |       |                   |       |        |       |        |       |
| Expense  from share-based payments                                                   |       |       |       | 2,149                  |       | 1,808       |       | 1,250       |       |
| Impairment  expense                                                                  |       |       |       | 0                      |       | 0           |       | 332         |       |
| Depreciation  and amortization expense                                               |       |       |       | 12,368                 |       | 10,753      |       | 9,748       |       |
| Net  result from disposal of property, plant and equipment                           |       |       |       | (1,207                 | )          | 68          |       | 36          |       |
| Deferred  income taxes                                                               |       |       |       | (10,412                | )          | 2,314       |       | 620         |       |
| Other  non-cash expenses                                                             |       |       |       | (472                   | )          | 98          |       | 2,888       |       |
| **Change in**                                                                        |       |       |       |                   |       |        |       |        |       |
| Inventories                                                                          |       |       |       | (11,713                | )          | (20,087     | )          | (9,601      | )          |
| Trade  receivables                                                                   |       |       |       | (10,506                | )          | (6,811      | )          | (8,086      | )          |
| Other  assets                                                                        |       |       |       | (4,283                 | )          | (3,930      | )          | (4,045      | )          |
| Trade  payables                                                                      |       |       |       | 2,539                  |       | (3,192      | )          | (5,518      | )          |
| Provisions  and other liabilities                                                    |       |       |       | 19,265                 |       | 8,040       |       | 8,295       |       |
| Deferred  revenues                                                                   |       |       |       | (6                     | )          | (215        | )          | (243        | )          |
| Non-current  liabilities                                                             |       |       |       | 55                     |       | (376        | )          | (452        | )          |
| Advance  payments from customers                                                     |       |       |       | 34,939                 |       | 4,393       |       | 20,390      |       |
| **Cash inflow from operating activities**                                            |       |       | ** ** | **77,482**             | ** ** | **15,857**  | ** ** | **32,864**  | ** ** |
| **Cash inflow/outflow from investing activities**                                    |       |       |       |                   |       |        |       |        |       |
| Cash  from acquisitions                                                              |       |       |       | 0                      |       | 0           |       | 80          |       |
| Cost  related to the acquisitions                                                    |       |       |       | 0                      |       | (392        | )          | (458        | )          |
| Capital  expenditures in property, plant and equipment                               |       |       |       | (8,912                 | )          | (11,617     | )          | (6,090      | )          |
| Capital  expenditures in intangible assets                                           |       |       |       | (1,008                 | )          | (1,251      | )          | (2,029      | )          |
| Proceeds  from disposal of fixed assets                                              |       |       |       | 7,787                  |       | 0           |       | 0           |       |
| Bank  deposits with a maturity of more than 90 days                             |       | 20         |       | (87,000                | )          | 1,831       |       | (2,050      | )          |
| **Cash inflow/outflow from investing activities**                                    |       |       | ** ** | **(89,133**            | **)**      | **(11,429** | **)**      | **(10,547** | **)**      |
| **Cash inflow from financing activities**                                            |       |       |       |                   |       |        |       |        |       |
| Dividend  paid to shareholders                                                       |       |       |       | (8,181                 | )          | (6,331      | )          | 0           |       |
| Proceeds  from issue of equity shares                                                |       |       |       | 161,749                |       | 2,628       |       | 5,171       |       |
| **Cash inflow from financing activities**                                            |       |       | ** ** | **153,568**            | ** ** | **(3,703**  | **)**      | **5,171**   | ** ** |
| Effect  of changes in exchange rates on cash and cash equivalents                    |       |       |       | 1,813                  |       | (5,206      | )          | (2,296      | )          |
| Net  change in cash and cash equivalents                                             |       |       |       | 143,730                |       | (4,481      | )          | 25,192      |       |
| Cash  and cash equivalents at the beginning of the period                            |       |       |       | 67,462                 |       | 71,943      |       | 46,751      |       |
| **Cash and cash equivalents at the end of the period**                               |       | 21         | ** ** | **211,192**            | ** ** | **67,462**  | ** ** | **71,943**  | ** ** |
| Interest  paid                                                                       |       |       |       | (9                     | )          | (119        | )          | (85         | )          |
| Interest  received                                                                   |       |       |       | 778                    |       | 3,141       |       | 1,850       |       |
| Income  taxes paid                                                                   |       |       |       | (16,903                | )          | (3,105      | )          | (988        | )          |
| Income  taxes received                                                               |       |       |       | 122                    |       | 59          |       | 376         |       |

 

See accompanyingnotes to consolidated financial statements.

 

F-4

----

 

**CONSOLIDATEDSTATEMENT OF CHANGES IN EQUITY**

 
| ** **                                   | ** ** | **Subscribed  capital  under  IFRS** | ** ** | **Additional  paid-in-  capital** | ** ** | **Currency  translation** | ** ** | **Derivative  financial  instruments** | ** ** | **Retained  Earnings/  Accumulated  deficit** | ** ** | **Shareholders’  equity  attributable to  the owners of  AIXTRON AG  Total** | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|-----------------------------------|------------|---------------------------|------------|----------------------------------------|------------|-----------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|
| ** **                                   | ** ** | **(in EUR thousands)**               | ** ** |
| Balance  at January 1, 2007             |       | 87,836                               |       | 97,444                            |       | 1,549                     |       | 519                                    |       | (3,406                                        | )          | 183,942                                                                                |       |
| Net  income for the period                   |       |                                 |       |                              |       |                      |       |                                   |       | 17,250                                        |       | 17,250                                                                                 |       |
| Expense  for stock options                   |       |                                 |       | 1,250                             |       |                      |       |                                   |       |                                          |       | 1,250                                                                                  |       |
| Exercise  stock options                      |       | 1,303                                |       | 3,868                             |       |                      |       |                                   |       |                                          |       | 5,171                                                                                  |       |
| Currency  translation                        |       |                                 |       |                              |       | (9,932                    | )          |                                   |       |                                          |       | (9,932                                                                                 | )          |
| Derivative  financial instruments net of tax |       |                                 |       |                              |       |                      |       | 672                                    |       |                                          |       | 672                                                                                    |       |
| Balance  at December 31, 2007           |       | 89,139                               | *          | 102,562                           |       | (8,383                    | )          | 1,191                                  |       | 13,845                                        | *          | 198,354                                                                                | *          |
| Balance  at January 1, 2008             |       | 89,139                               | *          | 102,562                           |       | (8,383                    | )          | 1,191                                  |       | 13,845                                        | *          | 198,354                                                                                | *          |
| Net  income for the period                   |       |                                 |       |                              |       |                      |       |                                   |       | 22,994                                        |       | 22,994                                                                                 |       |
| Dividends  to shareholders                   |       |                                 |       |                              |       |                      |       |                                   |       | (6,332                                        | )*         | (6,332                                                                                 | )          |
| Issue  of shares for stock options           |       |                                 |       | 1,808                             | *          |                      |       |                                   |       |                                          |       | 1,808                                                                                  |       |
| Issue  of Shares                             |       | 553                                  |       | 2,075                             |       |                      |       |                                   |       |                                          |       | 2,628                                                                                  |       |
| Currency  translation                        |       |                                 |       |                              |       | (5,372                    | )          |                                   |       |                                          |       | (5,372                                                                                 | )          |
| Derivative  financial instruments net of tax |       |                                 |       |                              |       |                      |       | (1,191                                 | )          |                                          |       | (1,191                                                                                 | )          |
| Balance  at December 31, 2008           |       | 89,692                               | *          | 106,447                           | *          | (13,755                   | )          | 0                                      |       | 30,507                                        | *          | 212,889                                                                                | *          |

 

F-5

----

 
| ** **                                   | ** ** | **Subscribed  capital  under  IFRS** | ** ** | **Additional  paid-in-  capital** | ** ** | **Currency  translation** | ** ** | **Derivative  financial  instruments** | ** ** | **Retained  Earnings/  Accumulated  deficit** | ** ** | **Shareholders’  equity  attributable to  the owners of  AIXTRON AG  Total** | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|-----------------------------------|------------|---------------------------|------------|----------------------------------------|------------|-----------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|
| ** **                                   | ** ** | **(in EUR thousands)**               | ** ** |
| Balance  at January 1, 2009             |       | 89,692                               | *          | 106,447                           | *          | (13,755                   | )          | 0                                      |       | 30,507                                        | *          | 212,889                                                                                | *          |
| Net  income for the period                   |       |                                 |       |                              |       |                      |       |                                   |       | 44,766                                        |       | 44,766                                                                                 |       |
| Dividends  to shareholders                   |       |                                 |       |                              |       |                      |       |                                   |       | (8,181                                        | )          | (8,181                                                                                 | )          |
| Expense  for stock options                   |       |                                 |       | 2,140                             |       |                      |       |                                   |       |                                          |       | 2,140                                                                                  |       |
| Issue  of shares for stock options           |       | 916                                  |       | 3,196                             |       |                      |       |                                   |       |                                          |       | 4,112                                                                                  |       |
| Issue  of Shares                             |       | 8,980                                |       | 148,657                           |       |                      |       |                                   |       |                                          |       | 157,637                                                                                |       |
| Currency  translation                        |       |                                 |       | (26                               | )          | 1,306                     |       |                                   |       |                                          |       | 1,280                                                                                  |       |
| Derivative  financial instruments net of tax |       |                                 |       |                              |       |                      |       | (1,115                                 | )          |                                          |       | (1,115                                                                                 | )          |
| Balance  at December 31, 2009           |       | 99,588                               |       | 260,414                           | *          | (12,449                   | )          | (1,115                                 | )          | 67,091                                        | *          | 413,529                                                                                | *          |

 

----

*                                         rounded

 

See accompanyingnotes to consolidated financial statements.

 

F-6

----

 

**NOTESTO THE CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.****                                     ****General principles**

 

AIXTRON AG (“AIXTRON AG”)is incorporated as a stock corporation (“Aktiengesellschaft”) under the laws ofthe Federal Republic of Germany. The Company is domiciled at Kaiserstraße 98, 52134Herzogenrath, Germany. AIXTRON AG is registered in the commercial register ofthe District Court (“Amtsgericht”) of Aachen under HRB 7002.

 

The consolidatedfinancial statements of AIXTRON AG and its subsidiaries (“AIXTRON” or “Company”)have been prepared in accordance with, and fully comply with

 

·                  International Financial Reporting Standards (IFRS), and theinterpretations as published by the International Accounting Standards Board(IASB); and also

 

·                  International Financial Reporting Standards (IFRS) as adopted for usein the European Union; and also

 

·                  the requirements of Section 315a of HGB (German Commercial Law).

 

AIXTRON is a leadingprovider of deposition equipment to the semiconductor andcompound-semiconductor industry. The Company’s technology solutions are used bya diverse range of customers worldwide to build advanced components forelectronic and opto-electronic applications based on compound, silicon, ororganic semiconductor materials. Such components are used in fibre opticcommunication systems, wireless and mobile telephony applications, optical andelectronic storage devices, computing, signalling and lighting, displays, aswell as a range of other leading-edge technologies.

 

These consolidatedfinancial statements have been prepared by the Executive Board and have beensubmitted to the Supervisory Board for its meeting held on March 10, 2010.

 

**2.****                                     ****Significant accountingpolicies**

 

**(a)****                                 ****Companies included inconsolidation**

 

Companies included inconsolidation are the parent company, AIXTRON AG, and 7 significant companies,in which AIXTRON AG has a 100% direct shareholding or control. The balancesheet date of all consolidated companies is December 31. A list of allsignificant consolidated companies is shown in note 33.

 

**(b)****                                 ****Basis of accounting**

 

The consolidatedfinancial statements are presented in Euro (EUR). The amounts are rounded tothe nearest thousand Euro (kEUR). Some items in the statement of financialposition and income statement have been combined under one heading to improvethe clarity of presentation. Such items are disclosed and commented onindividually in the notes.

 

The financial statementshave been prepared on the historical cost basis, except for the revaluation ofcertain financial instruments.

 

F-7

----

 

The preparation offinancial statements in conformity with IFRS requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosures of contingent assets and liabilities at the balancesheet date and the reported amounts of income and expenses during the reportedperiod. Actual results may differ from these estimates.

 

The estimates andunderlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate is revised if thisrevision affects only that period, or in the period of the revision and futureperiods if the revision affects both current and future periods. Judgementswhich have a significant effect on the Company’s financial statements aredescribed in Note 39.

 

The accounting policiesset out below have been applied consistently to all periods presented in theseconsolidated financial statements.

 

The accounting policieshave been applied consistently by each consolidated company.

 

**(c)****                                 ****Bases of consolidation**

 

**(i)****                                   ****Subsidiaries**

 

Entities over which AIXTRON AG has control are treatedas subsidiaries (see note 33). Control exists when the Company has thepower, directly or indirectly, to govern the financial and operating policiesof an entity so as to obtain benefits from its activities. The financialstatements of subsidiaries are included in the consolidated financialstatements from the date that controlling influence commences.

 

**(ii)****                               ****Transactions eliminatedon consolidation**

 

All intercompany income and expenses, transactions andbalances have been eliminated in the consolidation.

 

**(d)****                                 ****Foreign currency**

 

The consolidatedfinancial statements have been prepared in Euro (EUR). In the translation offinancial statements of subsidiaries outside the Euro-Zone the local currenciesare used as functional currencies of these subsidiaries. Assets and liabilitiesof these subsidiaries are translated to EUR at the exchange rate ruling at thebalance sheet date. Revenues and expenses are translated to EUR at averageexchange rates for the year or at average exchange rates for the period betweentheir inclusion in the consolidated financial statements and the balance sheetdate. Net equity is translated at historical rates. The differences arising ontranslation are disclosed in income and expenses recognised in equity.

 

Exchange gains and lossesresulting from fluctuations in exchange rates in the case of foreign currencytransactions are recognised in the income statement in “other operating income”or“other operating expenses”.

 

F-8

----

 

**(e)****                                 ****Property, plant andequipment**

 

**(i)****                                   ****Acquisition ormanufacturing cost**

 

Items of property, plant and equipment are stated atcost, plus ancillary charges, less accumulated depreciation (see below) andimpairment losses (see accounting policy (k)).

 

Costs of internally generated assets include not onlycosts of material and personnel, but also a share of directly attributableoverhead costs.

 

Where parts of an item of property, plant andequipment have different useful lives, they are accounted for as separate itemsof property, plant and equipment.

 

**(ii)****                               ****Subsequent costs**

 

The Company recognises in the carrying amount of an itemof property, plant and equipment the cost of replacing components orenhancement of such an item when that cost is incurred if it is probable thatthe future economic benefits embodied in the item will flow to the Company andthe cost of the item can be measured reliably. All other costs such as repairsand maintenance are expensed as incurred.

 

**(iii)****                           ****Government grants**

 

Government grants related to the acquisition ormanufacture of owned assets are deducted from original cost at date ofcapitalisation.

 

**(iv)****                              ****Depreciation**

 

Depreciation is charged on a straight-line basis overthe estimated useful lives of each part of an item of property, plant andequipment. The estimated useful lives are as follows:

 
| · |   | Buildings                                 |   | 25 years   |   |
|--------|--------|-------------------------------------------|--------|-----------------|--------|
|   |   |                                      |   |            |   |
| · |   | Machinery and equipment                   |   | 3-14 years      |   |
|   |   |                                      |   |            |   |
| · |   | Other plant, factory and office equipment |   | 3-14 years |   |

 

**(f)****                                   ****Intangible assets**

 

**(i)****                                   ****Goodwill**

 

All business combinations are accounted for byapplying the purchase method. In respect of business acquisitions that haveoccurred since January 1, 2004, goodwill represents the difference betweenthe cost of the acquisition and the fair value of the net identifiable assetsacquired. In respect of acquisitions prior to this date, goodwill, determinedunder the previous accounting principles (US-GAAP), applied until 2004, and hascontinued to be recognised at its then carrying amount.

 

Goodwill is stated at cost less any accumulatedimpairment loss. Goodwill is allocated to cash-generating units and is testedannually for impairment (see accounting policy (k)).

 

F-9

----

 

**(ii)****                               ****Research and development**

 

Expenditure on research activities, undertaken withthe prospect of gaining new technical knowledge and understanding usingscientific methods, is recognised as an expense as incurred.

 

Expenditure on development comprises costs incurredwith the purpose of using scientific knowledge technically and commercially. Asnot all criteria of IAS 38 are met or are only met at a very late pointwithin the development process, for reasons of materiality AIXTRON did notcapitalise such costs.

 

**(iii)****                           ****Other intangible assets**

 

Other intangible assets that are acquired by theCompany are stated at cost less accumulated amortisation (see below) andimpairment losses (see accounting policy (k)).

 

Intangible assets acquired through businesscombinations are stated at their fair value at the date of purchase (seenote 4).

 

Expenditure on internally generated goodwill,trademarks and patents is expensed as incurred.

 

**(iv)****                              ****Subsequent expenditure**

 

Subsequent expenditure on capitalised intangibleassets is capitalised only when it increases the future economic benefitsembodied in the specific asset to which it relates. All other expenditure isexpensed as incurred.

 

**(v)****                                  ****Amortisation**

 

Amortisation is charged on a straight-line basis overthe estimated useful lives of intangible assets, except for goodwill. Goodwillis tested annually in respect of its recoverable amount. Other intangibleassets are amortised from the date they are available for use. The estimateduseful lives are as follows:

 
| · |   | Software                                          |   | 2-5 years  |   |
|--------|--------|---------------------------------------------------|--------|-----------------|--------|
|   |   |                                              |   |            |   |
| · |   | Patents and similar rights                        |   | 5-18 years |   |
|   |   |                                              |   |            |   |
| · |   | Customer base and product and technology know how |   | 6-7 years  |   |

 

**(g)****                                ****Investment property**

 

Investment properties aremeasured using the cost model.

 

**(h)****                                ****Financial Instruments**

 

**(i)****                                   ****Financial Assets**

 

Financial assets are classified into the followingspecific categories: financial assets ‘at fair value through the profit or loss’(FVTPL), ‘held to maturity investments’, and ‘loans and receivables’. 

 

F-10

----

 

The classification depends on the nature and purposeof the financial assets and is determined at the time of initial recognition.

 

Investments are recognised at the contract date, andare initially measured at fair value, plus transaction costs, except for thosefinancial assets classified as at fair value through profit or loss, which areinitially measured at fair value.

 

**(ii)****                               ****Financial assets atFVTPL**

 

Financial assets are classified as at FVTPL where theasset is either

 

·                  held for trading or

 

·                  it is designated as at FVTPL.

 

Financial assets at FVTPL are stated at fair value,with any resultant gain or loss recognised in profit or loss. The fair value isthe estimated amount that a bank would receive or pay to terminate thederivative contracts at the reporting date, taking into account currentexchange rates, volatility and the credit-worthiness of the counterparties(mark-to-market).

 

**(iii)****                           ****Held to maturityinvestments**

 

Investments with fixed or determinable payments andfixed maturity dates that the Company intends to hold to maturity areclassified as held to maturity investments. Held to maturity investments arerecorded at amortised cost using the effective interest rate method less anyimpairment, with revenue recognised on an effective yield basis.

 

**(iv)****                              ****Trade receivables**

 

Trade receivables and other receivables that havefixed or determinable payments that are not quoted on an active market areclassified as loans and receivables. Loans and receivables are measured atamortised cost using the effective interest rate method, less any impairment.

 

**(v)****                                  ****Impairment of financialassets**

 

Financial assets are assessed for indicators ofimpairment at each balance sheet date. Financial assets are impaired wherethere is objective evidence that, as a result of one or more events thatoccurred after the initial recognition of the financial asset, the estimatedfuture cash flows of the investment have been impacted. The carrying amount ofthe financial asset is reduced by the impairment loss directly for allfinancial assets with the exception of trade receivables, where the carryingamount is reduced through the use of an allowance account. When a tradereceivable is considered uncollectible, it is written off against the allowanceaccount. Subsequent recoveries of amounts previously written off are creditedagainst the allowance account. Changes in the carrying amount of the allowanceaccount are recognised in profit or loss.

 

If, in a subsequent period, the amount of the impairmentloss decreases and the decrease can be related objectively to an eventoccurring after the impairment was recognised, the previously recognisedimpairment loss is reversed through profit or loss to the extent that thecarrying amount of the investment at the date the impairment is reversed doesnot exceed what the amortised cost would have been had the impairment not beenrecognised.

 

F-11

----

 

**(vi)****                              ****Cash and cashequivalents**

 

Cash and cash equivalents comprise cash on hand anddeposits with banks with a maturity of up to three months at inception.

 

**(vii)****                          ****Equity instruments**

 

Equity instruments, including share capital, issued bythe company are recorded at the proceeds received, net of direct issue costs.

 

**(viii)****                      ****Financial liabilities**

 

Financial liabilities are classified as eitherfinancial liabilities “at FVTPL” or “other financial liabilities”.

 

**(ix)****                             ****Financial liabilities atFVTPL**

 

Financial liabilities are classified as at FVTPL wherethe liability is either

 

·                  held for trading or

 

·                  it is designated as at FVTPL.

 

Financial liabilities at FVTPL are stated at fairvalue, with any resultant gain or loss recognised in profit or loss. The fairvalue is the estimated amount that a bank would receive or pay to terminate thederivative contracts at the reporting date, taking into account currentexchange rates, volatility and the credit-worthiness of the counterparties(mark-to-market).

 

**(x)****                                 ****Other financialliabilities**

 

Other financial liabilities, including borrowings, areinitially measured at fair value, net of transaction costs. Other financialliabilities are subsequently measured at amortised cost using the effectiveinterest rate method, with interest expense recognised on an effective yieldbasis.

 

**(xi)****                             ****Derivative financialinstruments and hedge accounting**

 

The Company’s activities expose it primarily to thefinancial risks of changes in foreign exchange currency rates (seenote 28). The Company uses foreign exchange forward contracts to hedgethese exposures. The Company does not use derivative financial instruments forspeculative purposes. The use of financial derivatives is governed by policiesapproved by the Executive Board, which provide written principles on the use offinancial derivatives.

 

Changes in the fair value of derivative financialinstruments that are designated as effective hedges of future cash flows arerecognised directly in equity and the ineffective portion is recognisedimmediately in the income statement.

 

Changes in fair value of derivative financialinstruments that do not qualify for hedge accounting are recognised in theincome statement as they arise.

 

F-12

----

 

Hedge accounting is discontinued when the derivativefinancial instrument expires or is sold, terminated, or exercised, or no longerqualifies for hedge accounting. At that time, any cumulative gain or loss onthe derivative financial instrument recognised in equity is retained in equityuntil the forecasted transaction occurs. If a hedged transaction is no longerexpected to occur, the net cumulative gain or loss recognised in equity istransferred to net profit or loss for the period.

 

**(i)****                                   ****Inventories**

 

Inventories are stated atthe lower of cost and net realisable value. Net realisable value is theestimated selling price in the ordinary course of business, less the estimatedcost of completion and selling expenses. Cost is determined using weightedaverage cost.

 

The cost includesexpenditures incurred in acquiring the inventories and bringing them to theirexisting location and condition. In the case of work in progress and finishedgoods, cost includes direct material and production cost, as well as anappropriate share of overheads based on normal operating capacity.

 

Allowance for slowmoving, excess and obsolete, and otherwise unsaleable inventory is recordedbased primarily on either the Company’s estimated forecast of product demandand production requirement for the next twelve months or historical trailingtwelve month usage. When there has been no usage of an inventory item during aperiod of twelve months, the Company writes down such inventories based onprevious experience.

 

**(j)****                                   ****Operating Result**

 

Operating result isstated before finance income, finance expense and tax.

 

**(k)****                               ****Impairment of property,plant and equipment and intangible assets**

 

Goodwill purchased aspart of a business acquisition is tested annually for impairment, irrespectiveof whether there is any indication of impairment. For impairment test purposes,the goodwill is allocated to cash-generating units. Impairment losses arerecognised to the extent that the carrying amount exceeds the higher of netrealisable value or value in use (recoverable amount) of the cash-generatingunit.

 

Property, plant andequipment as well as other intangible assets are tested for impairment, wherethere is any indication that the asset may be impaired. Impairment losses onsuch assets are recognised, to the extent that the carrying amount exceedseither the net realisable value that would be obtainable from a sale in an arm’slength transaction, or the value in use.

 

In assessing value inuse, the estimated future cash flows are discounted to their present valueusing a pre-tax discount rate that reflects current market assessments and therisks associated with the asset.

 

Impairment losses arereversed if there has been a change in the estimates used to determine therecoverable amount. Reversals are made only to the extent that the carryingamount of the asset does not exceed the carrying amount that would have beendetermined if no impairment loss had been recognised.

 

An impairment loss inrespect of goodwill is not reversed.

 

F-13

----

 

**(l)****                                   ****Earnings per share**

 

Basic earnings per shareare computed by dividing net income (loss) by the weighted average number ofissued common shares and AIXTRON ADS (see note 23) for the year. Dilutedearnings per share reflect the potential dilution that could occur if optionsissued under the Company’s stock option plans were exercised and convertiblebonds were converted, unless such conversion had an anti-dilutive effect.

 

**(m)****                             ****Employee benefits**

 

**(i)****                                   ****Defined contributionplans**

 

Obligations for contributions to defined contributionpension plans are recognised as an expense in the income statement as incurred.

 

**(ii)****                               ****Defined benefit plans**

 

The obligation from defined benefit plans iscalculated by estimating the amount of future benefit that employees haveearned in return for their service in prior periods; that benefit is discountedto determine its present value. The calculation is performed by a qualifiedactuary using the projected unit credit method.

 

Actuarial gains and losses are recognised in theincome statement at each balance sheet date.

 

**(iii)****                           ****Share-based paymenttransactions**

 

The stock option programs allows members of theExecutive Board, management and employees of the Company to acquire shares/ADS(see note 25) of the Company. These stock option programs are accountedfor by AIXTRON according to IFRS 2. The fair value of options grantedafter November 7, 2002 is recognised as personnel expense with acorresponding increase in the additional paid-in capital. The fair value iscalculated at grant date and spread over the period during which the employeesbecome unconditionally entitled to the options. The fair value of the optionsgranted is measured using a binomial lattice model, taking into account theterms and conditions upon which the options were granted. In the calculation ofthe personnel expense options forfeited are taken into account.

 

**(n)****                                ****Provisions**

 

A provision is recognisedin the balance sheet when the Company has a present legal or constructiveobligation as a result of a past event, and it is probable that an outflow ofeconomic benefits will be required to settle this obligation. If the effect ismaterial, provisions are determined by discounting the expected future cashflows at a pre-tax interest rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks associated with theliability.

 

**(i)****                                   ****Warranties**

 

The Company offers one to two year warranties on allof its products. Warranty expenses generally include cost of labor, materialand related overhead necessary to repair a product free of charge during thewarranty period, and are recorded as a selling expense. The specific terms andconditions of those warranties may vary depending on the equipment sold, theterms of the 

 

F-14

----

 

contract and the locations from which they are sold.The Company establishes the costs that may be incurred under its warrantyobligations and records a liability in the amount of such costs at the timerevenue is recognised. Factors that affect the Company’s warranty liabilityinclude the historical and anticipated rates of warranty claims and cost perclaim.

 

The Company accrues material and labor cost forsystems shipped based upon historical experience. The Company periodicallyassesses the adequacy of its recorded warranty provisions and adjusts theamounts as necessary.

 

**(ii)****                               ****Onerous contracts**

 

A provision for onerous contracts is recognised whenthe expected benefits to be derived by the Company from a contract are lowerthan the unavoidable cost of meeting its obligations under the contract.

 

**(o)****                                 ****Revenue**

 

Revenue is generated fromthe sale and installation of equipment, spare parts and maintenance services.The sale of equipment involves a customer acceptance test at AIXTRON’sproduction facility. After successful completion of this test, the equipment isdismantled and packaged for shipment. Upon arrival at the customer site theequipment is reassembled and installed, which is a service generally performedby AIXTRON engineers. AIXTRON gives no general rights of return, discounts,credits or other sales incentives within its terms of sale. However,occasionally some customers of AIXTRON have specifically negotiated terms andconditions of business.

 

Revenues from the sale ofproducts that have been demonstrated to meet product specification requirementsare recognised upon shipment to the customer, if a full customer acceptancetest has been successfully completed at the AIXTRON production facility and thesignificant risks and rewards of ownership has passed to the customer.

 

Revenue relating to theinstallation of the equipment at the customer’s site is recognised when theinstallation is completed and the final customer acceptance has been confirmed.The portion of the contract revenue deferred until completion of theinstallation services is determined based on either the fair value of theinstallation services or, if the company determines that there may be a riskthat the economic benefits of installation services may not flow to thecompany, the portion of the contract amount that is due and payable uponcompletion of the installation. Fair value of the installation services isdetermined based on an estimate of the materials and time required to completethe installation.

 

Revenue related toproducts where meeting the product specification requirements has not yet beendemonstrated, or where specific rights of return have been negotiated, isrecognised only upon final customer acceptance.

 

Revenue on the sale ofspare parts is recognised when title and risk passes to the customer, generallyupon shipment. Revenue from maintenance services is recognised as the servicesare provided.

 

F-15

----

 

**(p)****                                 ****Expenses**

 

**(i)****                                   ****Cost of sales**

 

Cost of sales includes such direct costs as materials,labor and related production overheads.

 

**(ii)****                               ****Research and development**

 

Research and development costs are expensed asincurred. Project funding received from governments (e.g. state funding)and the European Union is recorded in other operating income, if the Researchand Development costs are incurred and provided that the conditions for thefunding have been met.

 

**(iii)****                           ****Operating lease payments**

 

Payments made under operating leases are recognised asexpense on a straight-line basis over the term of the lease.

 

**(q)****                                 ****Other operating income**

 

**Government grants**

 

Government grants awarded for project funding arerecorded in “Other operating income” if the Research and Development costs areincurred and provided that the conditions for the funding have been met.

 

**(r)****                                 ****Tax**

 

The tax expenserepresents the sum of the tax currently payable and deferred tax.

 

Deferred tax assets andliabilities are recorded for all temporary differences between tax andcommercial balance sheets and for losses brought forward for tax purposes aswell as for tax credits of the companies included in consolidation. Thedeferred taxes are calculated, based on tax rates applicable at the balancesheet date or known to be applicable in the future. Effects of changes in taxrates on the deferred tax assets and liabilities are recognised upon adoptionof the amended law.

 

A deferred tax asset isrecognised only to the extent that it is probable that future taxable profitscan be set off against tax credits and tax loss carry forwards. Deferred taxassets are reduced to the extent that it is no longer probable that the relatedtax benefit can be realised. The recoverability of deferred tax assets isreviewed at least annually.

 

**(s)****                                 ****Segment reporting**

 

A business segment is adistinguishable component of the Company that is engaged in business activitiesand whose operating results are reviewed regularly by the Executive Board.Internally reported product lines are combined for group reporting into onebusiness segment, as they show similar economic characteristics and meet theother criteria defined in IFRS 8.12.

 

Accounting standardsapplied in segment reporting are in accordance with the general accountingpolicies as explained in this section.

 

F-16

----

 

**(t)****                                   ****Cash flow statement**

 

The cash flow statementis prepared in accordance with IAS 7. Cash flows from operating activitiesare prepared using the indirect method. Cash inflows and cash outflows fromtaxes and interest are included in cash flows from operating activities.

 

**(u)****                                ****Recently issuedaccounting standards**

 

The company adoptedIFRS 8—Operating Segments during 2009. Amendments to the followingstandards were also adopted during 2009:

 

·                  IFRS 1 and IAS 27 Cost of an Investment in an subsidiary

 

·                  IFRS 3 and IAS 27—Business Combinations

 

·                  IFRS 2 Vesting Conditions and Cancellations

 

·                  IFRS 7 Enhancing disclosures about Fair Value and Liquidity Risk

 

·                  IAS 1 Presentation of Financial Statements

 

·                  IAS 23 Borrowing Cost

 

·                  IAS 32 and IAS 1 Puttable Financial Instruments andObligations arising on Liquidation

 

·                  IAS 39 Embedded Derivatives

 

·                  Various Improvements to IFRS.

 

During 2009 fiveinterpretations issued by the International Financial Reporting InterpretationCommittee (IFRIC) became effective. IFRIC 9 Embedded Derivatives;IFRIC 13—Customer Loyalty Programmes; IFRIC 15—Agreements for theConstruction of Real Estate; IFRIC 16—Hedges of a Net Investment in aForeign Operation; IFRIC 18—Transfers of Assets from Customers. Theadoption of these interpretations, new and amended standards has not led to anychanges in the company’s accounting policies. The amendments to IFRS 3 andIAS 27 have been adopted earlier than required.

 

The following list showsIFRS standards, amendments to IFRS and to IFRIC`s not compulsory and notapplicable to reporting periods ended on December 31, 2009. Thesestandards were not applied earlier than required. AIXTRON is currentlyanalysing the impact of the new standards on its consolidated financialstatements. The Company does not expect the adoption of these standards to havea material impact on its consolidated financial statements.

 
| **IFRS 9**              | * * | *Financial Instruments:  Classification and measurement*Issued: November 2009                                                                           |
|------------------------------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                   | * * | * *                                                                                                                                                     |
| **Amendment to IFRS 1** | * * | *Revisions to IFRS 1 on  First-time Adoption of IFRSs,  Additional Exemptions for First-time Adopters*  Issued: December 2008 and August 2009 |

 

F-17

----

 
| **Amendment to IFRS 2**   | * * | *Group Cash-settled Share-based  Payments*Issued:  June 2009                          |
|--------------------------------|----------|--------------------------------------------------------------------------------------------|
| ** **                     | * * | * *                                                                                   |
| **Amendment to IAS 24**   | * * | *Related Party Disclosures*  Issued: November 2009                                    |
| ** **                     | * * | * *                                                                                   |
| **Amendment to IAS 32**   | * * | *Classification of Rights Issues*  Issued: October 2009                               |
| ** **                     | * * | * *                                                                                   |
| **Amendment to IAS 39**   | * * | *Eligible Hedged Items*  Issued: July 2008                                            |
| ** **                     | * * | * *                                                                                   |
| **Various**                    | * * | *Improvements to IFRSs*  Issued: April 2009                                           |
| ** **                     | * * | * *                                                                                   |
| **IFRIC 12**              | * * | *Service Concession Arrangements*  Issued: November 2006                              |
| ** **                     | * * | * *                                                                                   |
| **Amendment to IFRIC 14** | * * | *Prepayments of a Minimum Funding  Requirement*  Issued: December 2009                |
| ** **                     | * * | * *                                                                                   |
| **IFRIC 17**              | * * | *Distribution of Non-cash Assets to  Owners*  Issued: November 2008                   |
| ** **                     | * * | * *                                                                                   |
| **IFRIC 19**              | * * | *Extinguishing Financial  Liabilities with Equity Instruments*  Issued: December 2009 |

 

**3.****                                     ****Segment reporting**

 

The Group has adoptedIFRS 8 *Operating Segments*with effect from January 1, 2009. IFRS 8 requires operating segmentsto be identified on the basis of internal reports about components of the Groupthat are regularly reviewed by the Executive Board, as chief operating decisionmaker, in order to allocate resources to the segments and to assess theirperformance.

 

In accordance withIFRS 8.12, AIXTRON has aggregated operating segments where they havesimilar economic characteristics and where the segments are similar in theother respects required by the standard. Consequently, the company has only onereportable segment.

 

The company’s reportablesegment is based around the category of goods and services provided for thecompound and silicon semi-conductor industries.

 

**Segmentrevenues and results**

 
| ** **                                        | ** ** | **2009**               | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------------|------------|------------------------|------------|----------|------------|----------|------------|
| ** **                                        | ** ** | **(in EUR thousands)** | ** ** |
| Equipment revenues                                |       | 275,008                |       | 247,370  |       | 186,921  |       |
| Spares and service revenue                        |       | 27,849                 |       | 27,033   |       | 27,894   |       |
| Revenue from transactions with external customers |       | 302,857                |       | 274,404  |       | 214,815  |       |
| Segment profit                                    |       | 62,725                 |       | 32,489   |       | 20,643   |       |
| Investment revenue                                |       | 1,283                  |       | 3,189    |       | 1,857    |       |
| Finance Costs                                     |       | (27                    | )          | (22      | )          | (99      | )          |
| Profit before tax                                 |       | 63,981                 |       | 35,656   |       | 22,401   |       |

 

F-18

----

 

**NOTESTO THE CONSOLIDATED FINANCIAL STATEMENTS**

 

**3.****                                     ****Segment reporting**

 

Details of depreciationand amortisation expense can be found in notes 12 and 13.

 

The accounting policiesof the reportable segment are identical with the Group’s accounting policies asdescribed in note 2. Segment profit represents the profit earned by thesegment without the allocation of investment revenue, finance costs and incometax expense. This is the measure reported to the Executive Board for thepurpose of resource allocation and assessment of performance.

 

**Segmentassets and liabilities**

 
| ** **                              | ** ** | **31 December  2009** | ** ** | **31 December  2008** | ** ** |
|-----------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                              | ** ** | **(in EUR thousands)**     | ** ** |
| Semi-conductor equipment segment assets |       | 257,601                    |       | 240,637                    |       |
| Unallocated assets                      |       | 315,493                    |       | 74,190                     |       |
| **Total group assets**                  | ** ** | **573,094**                | ** ** | **314,827**                | ** ** |

 

For the purpose ofmonitoring segment performance and allocating resources between segments allassets are allocated to reportable segments other than tax assets, cash, otherfinancial assets and investment property. All liabilities are allocated tosegments apart from tax liabilities and post-employment benefit liabilities.

 
| ** **                                   | ** ** | **31 December  2009** | ** ** | **31 December  2008** | ** ** |
|----------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                                   | ** ** | **(in EUR thousands)**     | ** ** |
| Semi-conductor equipment segment liabilities |       | 141,162                    |       | 94,988                     |       |
| Unallocated liabilities                      |       | 18,403                     |       | 6,950                      |       |
| **Total group liabilities**                  | ** ** | **159,565**                | ** ** | **101,938**                | ** ** |

 

Additions to Property,Plant and Equipment, to Goodwill and to Intangible assets, and the depreciationand amortization expenses are given in notes 12, 13 and 14. Othernon-current assets reduced by k€ -75 during 2009 (k€ -90in 2008).

 

Information concerningother material items of income and expense for personnel expenses and R&Dexpenses can be found in notes 5 and 8.

 

**Geographicalinformation.**

 

The Group’s revenue fromcontinuing operations from external customers and information about itsnon-current assets by geographical location are detailed below. Revenues fromexternal customers are attributed to individual countries based on the countryin which it is expected that the products will be used.

 

F-19

----

 
| ** ** | ** ** | **2009**               | ** ** | **2008**    | ** ** | **2007**    | ** ** |
|------------|------------|------------------------|------------|-------------|------------|-------------|------------|
| ** ** | ** ** | **(in EUR thousands)** | ** ** |
| Asia       |       | 250,034                |       | 238,156     |       | 174,133     |       |
| Europe     |       | 41,498                 |       | 18,464      |       | 18,786      |       |
| USA        |       | 11,325                 |       | 17,784      |       | 21,896      |       |
| **Total**  | ** ** | **302,857**            | ** ** | **274,404** | ** ** | **214,815** | ** ** |

 

Sales from external customersattributed to Germany, Aixtron’s country of domicile, and to other countrieswhich are of material significance are as follows:

 
| ** ** | ** ** | **2009**               | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------|------------|------------------------|------------|----------|------------|----------|------------|
| ** ** | ** ** | **(in EUR thousands)** | ** ** |
| Germany    |       | 31,937                 |       | 9,168    |       | 7,360    |       |
| Korea      |       | 110,140                |       | 40,082   |       | 58,729   |       |
| Taiwan     |       | 102,071                |       | 137,040  |       | 55,801   |       |

 

Sales to two customersamounted to 29% and 10% of total Group revenues respectively in 2009, in 2008sales to three customers each amounted to 12% of revenues, and in 2007 sales toone customer amounted to 15% of revenues.

 
| ** **               | ** ** | **Non-current assets**  | ** ** |
|--------------------------|------------|-------------------------|------------|
| ** **               | ** ** | **December  31,  2009** | ** ** | **December  31,  2008** | ** ** |
| ** **               | ** ** | **(in EUR thousands)**  | ** ** |
| Asia                     |       | 805                     |       | 702 |   |
| Europe excluding Germany |       | 11,366                  |       | 11,034 |   |
| Germany                  |       | 38,102                  |       | 43,478 |   |
| USA                      |       | 54,542                  |       | 59,144 |   |
| **Total group assets**   | ** ** | **104,815**             | ** ** | **114,358** | ** ** |

 

Non-current assets excludedeferred tax assets, financial instruments, post-employment benefit assets andrights arising under insurance contracts.

 

**4.****                                     ****Acquisition ofsubsidiaries**

 

All acquisitions areaccounted for using the purchase method of accounting.

 

On October 4, 2007AIXTRON Ltd, Cambridge UK, acquired 100% of the issued share capital ofNanoinstruments Ltd. The consideration was an initial payment ofk€ 430 on October 4, 2007, a second 

 

F-20

----

 

payment of k€ 430 on January 2, 2008 andfurther payments of up to k€ 2,578, depending on the level of future salesup to December 31, 2011. Nanoinstruments Ltd. manufactures PECVDequipment for the production of carbon nanotubes and nanowires. The businesswas transferred to AIXTRON Ltd. on the October 4, 2007.

 

The net assets acquiredand the consideration was:

 
| ** **                      | ** ** | **Carrying  amount**   | ** ** | **Fair value  adjustment** | ** ** | **Acquisition  cost** | ** ** |
|---------------------------------|------------|------------------------|------------|----------------------------|------------|-----------------------|------------|
| ** **                      | ** ** | **(in EUR thousands)** | ** ** |
| Intangible assets               |       | 0                      |       | 823                        |       | 823                   |       |
| Inventories                     |       | 40                     |       | 0                          |       | 40                    |       |
| Trade and other receivables     |       | 3                      |       | 0                          |       | 3                     |       |
| Cash and cash equivalents       |       | 80                     |       | 0                          |       | 80                    |       |
| **Acquired assets**             | ** ** | **123**                | ** ** | **823**                    | ** ** | **946**               | ** ** |
| Trade and other payables        |       | (83                    | )          | 0                          |       | (83                   | )          |
| Current tax liabilities         |       | (8                     | )          | 0                          |       | (8                    | )          |
| Deferred tax liabilities        |       | 0                      |       | (228                       | )          | (228                  | )          |
| **Acquired liabilities**        | ** ** | **(91**                | **)**      | **(228**                   | **)**      | **(319**              | **)**      |
| **Net assets**                  | ** ** | **32**                 | ** ** | **595**                    | ** ** | **627**               | ** ** |
| Goodwill arising on acquisition |       |                   |       |                       |       | 278                   |       |
| Total purchase price            | ** ** | ** **             | ** ** | ** **                 | ** ** | **905**               | ** ** |

 
| ** **                        | ** ** | **(in EUR  thousands)** | ** ** |
|-----------------------------------|------------|-------------------------|------------|
| **Satisfied by:**                 |       |                    |       |
| Cash paid October 4, 2007    |       | 458                     |       |
| Cash payable January 2, 2008 |       | 447                     |       |
|                              | ** ** | **905**                 | ** ** |

 

F-21

----

 

*Netcash outflow arising on acquisition*

 
| ** **                               | ** ** | **2007**                | ** ** | **2008** | ** ** |
|------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                               | ** ** | **(in EUR  thousands)** | ** ** |
| Cash consideration                       |       | 430                     |       | 377      |       |
| Directly attributable cost paid          |       | 28                      |       | 15       |       |
| Less: cash and cash equivalents acquired |       | (80                     | )          | 0        |       |
|                                     | ** ** | **378**                 | ** ** | **392**  | ** ** |

 

Cash consideration paidin 2008 differs from the amount payable as at 31 December 2007because of currency exchange rate translation differences.

 

**5.****                                     ****Research and development**

 

Research and developmentcosts, before deducting project funding received, were k€ 32,917,k€ 28,286 and k€ 26,532 for the years ended December 31, 2009,2008 and 2007 respectively.

 

After deducting projectfunding received and not repayable, net expenses for research and developmentwere k€ 29,637, k€ 28,286 and k€ 26,532 for the years ended December 31,2009, 2008 and 2007 respectively.

 

Research and developmentexpenses in 2009 include impairment expenses for property, plant and equipmentin the amount of k€ 0 (2008: k€ 0; 2007: k€ 332). (seenotes 12 and 13 for details).

 

**6.****                                     ****Other operating income**

 
| ** **                                                         | ** ** | **2009**               | ** ** | **2008**  | ** ** | **2007**  | ** ** |
|--------------------------------------------------------------------|------------|------------------------|------------|-----------|------------|-----------|------------|
| ** **                                                         | ** ** | **(in EUR thousands)** | ** ** |
| Research and development funding                                   |       | 3,280                  |       | 1,918     |       | 2,729     |       |
| Income from resolved contract obligations                          |       | 3,498                  |       | 45        |       | 675       |       |
| Income from the reversal of provisions and the  write-off of debts |       | 1,596                  |       | 490       |       | 1,727     |       |
| Gain from the disposal of fixed assets                             |       | 1,262                  |       | 56        |       | 185       |       |
| Compensation payments                                              |       | 16                     |       | 2         |       | 2         |       |
| Foreign exchange gains                                             |       | 119                    |       | 2,485     |       | 889       |       |
| Other                                                              |       | 275                    |       | 196       |       | 405       |       |
|                                                               | ** ** | **10,046**             | ** ** | **5,192** | ** ** | **6,612** | ** ** |

 

The total amount ofexchange gains and losses (see also note 7) recognised in profit or loss wasa loss of k€ -1,409, (2008 loss k€ -6,954; 2007 gaink€ 314).

 
| ** **                                                | ** ** | **2009**               | ** ** | **2008**   | ** ** | **2007** | ** ** |
|-----------------------------------------------------------|------------|------------------------|------------|------------|------------|----------|------------|
| ** **                                                | ** ** | **(in EUR thousands)** | ** ** |
| Foreign exchange gains                                    |       | 119                    |       | 2,485      |       | 889      |       |
| Foreign exchange losses (see note 7)                 |       | (1,528                 | )          | (9,439     | )          | (575     | )          |
| Net foreign exchange gains (losses)                       | ** ** | **(1,409**             | **)**      | **(6,954** | **)**      | **314**  | ** ** |
| Gains (losses) arising on financial instruments at  FVTPL |       | 340                    |       | (1,819     | )          | 1,165    |       |
| Other foreign exchange gains (losses)                     |       | (1,749                 | )          | (5,135     | )          | (851     | )          |
|                                                      | ** ** | **(1,409**             | **)**      | **(6,954** | **)**      | **314**  | ** ** |

 

F-22

----

 

**NOTESTO THE CONSOLIDATED FINANCIAL STATEMENTS**

 

**7.****                                     ****Other operating expenses**

 
| ** **                                                           | ** ** | **2009**                         | ** ** | **2008**   | ** ** | **2007**  | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------|------------|------------|------------|-----------|------------|
| ** **                                                           | ** ** | **(in EUR thousands)** | ** ** |
| Foreign exchange losses                                              |       | 1,528                            |       | 9439       |       | 575       |       |
| Losses from the disposal of fixed assets                             |       | 55                               |       | 3          |       | 6         |       |
| Additions to allowances for receivables or write-off  of receivables |       | 449                              |       | 1953       |       | 481       |       |
| Other                                                                |       | 333                              |       | 62         |       | 218       |       |
|                                                                 | ** ** | **2,365**                        | ** ** | **11,457** | ** ** | **1,280** | ** ** |

 

**8.****                                     ****Personnel expense**

 
| ** **                                             | ** ** | **2009**               | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|--------------------------------------------------------|------------|------------------------|------------|------------|------------|------------|------------|
| ** **                                             | ** ** | **(in EUR thousands)** | ** ** |
| Payroll                                                |       | 43,738                 |       | 36,914     |       | 36,373     |       |
| Social insurance contributions                         |       | 4,629                  |       | 4,380      |       | 4,241      |       |
| Decrease/Increase in defined benefit plan  obligations |       | 219                    |       | (33        | )          | (106       | )          |
| Expense for defined contribution plans                 |       | 970                    |       | 896        |       | 824        |       |
| Stock option expense                                   |       | 2,149                  |       | 1,808      |       | 1,247      |       |
|                                                   | ** ** | **51,705**             | ** ** | **43,965** | ** ** | **42,579** | ** ** |

 

**9.****                                     ****Net finance income**

 
| ** **                                  | ** ** | **2009**               | ** ** | **2008**  | ** ** | **2007**  | ** ** |
|---------------------------------------------|------------|------------------------|------------|-----------|------------|-----------|------------|
| ** **                                  | ** ** | **(in EUR thousands)** | ** ** |
| Interest income from financial assets       |       | 1,283                  |       | 3,189     |       | 1,857     |       |
| Interest expense from financial liabilities |       | (27                    | )          | (23       | )          | (99       | )          |
| Net finance income                          | ** ** | **1,256**              | ** ** | **3,166** | ** ** | **1,758** | ** ** |

 

**10.****                              ****Income taxexpense/benefit**

 

The following table showsincome tax expenses and income recognised in the consolidated income statement

 

F-23

----

 
| ** **                                            | ** ** | **2009**               | ** ** | **2008**   | ** ** | **2007**  | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|------------|------------|-----------|------------|
| ** **                                            |       | **(in EUR thousands)** |       |
| **Current tax expense (+)/current tax  income (-)**   |       |                   |       |       |       |      |       |
| for current year                                      |       | 29,261                 |       | 11,168     |       | 5,022     |       |
| adjustment for prior years                            |       | 131                    |       | (821       | )          | 13        |       |
| **Total current tax expense**                         | ** ** | **29,392**             | ** ** | **10,347** | ** ** | **5,035** | ** ** |
| **Deferred tax expense (+)/deferred  tax income (-)** |       |                   |       |       |       |      |       |
| from temporary differences                            |       | (4,561                 | )          | 3,862      |       | 3,718     |       |
| —Income/expense from changes in local tax rate   |       | (16                    | )          | 81         |       | 1,518     |       |
| from reversals and write-downs                        |       | (5,600                 | )          | (1,629     | )          | (5,120    | )          |
| **Total deferred tax expense**                        | ** ** | **(10,177**            | **)**      | **2,314**  | ** ** | **116**   | ** ** |
| **Taxes on income**                                   | ** ** | **19,215**             | ** ** | **12,661** | ** ** | **5,151** | ** ** |

 

Income before taxes onincome and income tax expense relate to the following regions:

 
| ** **                     | ** ** | **2009**               | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|--------------------------------|------------|------------------------|------------|------------|------------|------------|------------|
| ** **                     | ** ** | **(in EUR thousands)** | ** ** |
| **Income before income taxes** |       |                   |       |       |       |       |       |
| Germany                        |       | 88,822                 |       | 31,819     |       | 12,892     |       |
| Outside Germany                |       | (24,841                | )          | 3,836      |       | 9,509      |       |
| **Total**                      | ** ** | **63,981**             | ** ** | **35,655** | ** ** | **22,401** | ** ** |
| **Income tax expense**         |       |                   |       |       |       |       |       |
| Germany                        |       | 15,336                 |       | 8,580      |       | 1,769      |       |
| Outside Germany                |       | 3,879                  |       | 4,081      |       | 3,382      |       |
| **Total**                      | ** ** | **19,215**             | ** ** | **12,661** | ** ** | **5,151**  | ** ** |

 

The Company’s effectivetax rate is different from the German statutory tax rate of 30.20% (2008:30,91%; 2007: 39.45%) which is based on the German corporate income tax rate(including solidarity surcharge and trade tax)

 

The following table showsthe reconciliation from the expected to the reported tax expense:

 

F-24

----

 
| ** **                                                                 | ** ** | **2009**               | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|----------------------------------------------------------------------------|------------|------------------------|------------|------------|------------|------------|------------|
| ** **                                                                 | ** ** | **(in EUR thousands)** | ** ** |
| Net result before taxes                                                    | ** ** | **63,981**             | ** ** | **35,655** | ** ** | **22,401** | ** ** |
| Income tax expense (German tax rate)                                       |       | 19,322                 |       | 11,021     |       | 8,837      |       |
| Effect from differences to foreign tax rates                               |       | (2,392                 | )          | (1,722     | )          | (1,166     | )          |
| Non-deductible expenses                                                    |       | 506                    |       | 419        |       | 251        |       |
| Non-consideration of tax claims from loss  carryforwards                   |       | 977                    |       | 4,773      |       | (204       | )          |
| Reversal of Allowance/write-off against deferred tax  assets               |       | 103                    |       | (1,629     | )          | (5,120     | )          |
| Expense from changes in local tax rate                                     |       | (16                    | )          | 0          |       | 1,518      |       |
| Effect of the use of loss carryforwards                                    |       | (168                   | )          | (135       | )          | (243       | )          |
| Non-deductible impairment and amortisation of:                             |       |                   |       |       |       |       |       |
| Goodwill, acquired customer relations and product  and technology know how |       | 716                    |       | 883        |       | 873        |       |
| Effect of permanent differences                                            |       | 175                    |       | 18         |       | 216        |       |
| Other                                                                      |       | (8                     | )          | (967       | )          | 189        |       |
| **Taxes on income**                                                        | ** ** | **19,215**             | ** ** | **12,661** | ** ** | **5,151**  | ** ** |
| **Effective tax rate**                                                     | ** ** | **30.0**               | **%**      | **35.5**   | **%**      | **23.0**   | **%**      |

 

**11.****                              ****Current tax receivablesand payables**

 

As of December 31,2009 the current tax receivables and payables, i.e. those actuallyincurred because the amount of tax paid in the current or in prior periods waseither too high or too low, are k€ 59 (2008: k€ 59) andk€ 17,064 (2008: k€ 6,085) respectively.

 

F-25

----

 

**12.****                              ****Property, plant andequipment**

 

**Developmentof property, plant and equipment**

 
| ** **                             | ** ** | **Land and  buildings** | ** ** | **Technical  equipment  and  machinery** | ** ** | **Other plant,  factory and  office  equipment** | ** ** | **Assets  under  construction** | ** ** | **Total**  | ** ** |
|----------------------------------------|------------|-------------------------|------------|------------------------------------------|------------|--------------------------------------------------|------------|---------------------------------|------------|------------|------------|
| ** **                             | ** ** | **(in EUR thousands)**  | ** ** |
| **Cost**                               |       |                    |       |                                     |       |                                             |       |                            |       |       |       |
| Balance at January 1, 2008        |       | 30,974                  |       | 31,450                                   |       | 9,632                                            |       | 3,353                           | ** ** | **75,409** | ** ** |
| Acquisitions                           |       | 2,577                   |       | 5,155                                    |       | 1,846                                            |       | 2,039                           | ** ** | **11,617** | ** ** |
| Disposals                              |       | 0                       |       | 1,456                                    |       | 619                                              |       | 50                              | ** ** | **2,125**  | ** ** |
| Transfers                              |       | 454                     |       | 2,732                                    |       | 0                                                |       | (3,186                          | )          | **0**      | ** ** |
| Effect of movements in exchange rates  |       | (242                    | )          | 97                                       |       | (12                                              | )          | 71                              | ** ** | **(86**    | **)**      |
| Balance at December 31, 2008      | ** ** | **33,763**              | ** ** | **37,978**                               | ** ** | **10,847**                                       | ** ** | **2,227**                       | ** ** | **84,815** | ** ** |
| Balance at January 1, 2009        |       | 33,763                  |       | 37,978                                   |       | 10,847                                           |       | 2,227                           | ** ** | **84,815** | ** ** |
| Acquisitions                           |       | 864                     |       | 3,945                                    |       | 2,091                                            |       | 1,891                           | ** ** | **8,791**  | ** ** |
| Disposals                              |       | 11,968                  |       | 2,272                                    |       | 1,770                                            |       | 630                             | ** ** | **16,640** | ** ** |
| Transfers                              |       | 5,432                   |       | 1,064                                    |       | 9                                                |       | (1,597                          | )          | **4,908**  | ** ** |
| Effect of movements in exchange rates  |       | 54                      |       | (118                                     | )          | 22                                               |       | 0                               | ** ** | **(42**    | **)**      |
| Balance at December 31, 2009      | ** ** | **28,145**              | ** ** | **40,597**                               | ** ** | **11,199**                                       | ** ** | **1,891**                       | ** ** | **81,832** | ** ** |
| **Depreciation and impairment losses** |       |                    |       |                                     |       |                                             |       |                            |       |       |       |
| Balance at January 1, 2008        |       | 11,478                  |       | 20,804                                   |       | 8,006                                            |       | 0                               | ** ** | **40,288** | ** ** |
| Depreciation charge for the year       |       | 1,449                   |       | 4,938                                    |       | 904                                              |       | 0                               | ** ** | **7,291**  | ** ** |
| Disposals                              |       | 0                       |       | 1,454                                    |       | 604                                              |       | 0                               | ** ** | **2,058**  | ** ** |
| Effect of movements in exchange rates  |       | (133                    | )          | 103                                      |       | 0                                                |       | 0                               | ** ** | **(30**    | **)**      |
| Balance at December 31, 2008      | ** ** | **12,794**              | ** ** | **24,391**                               | ** ** | **8,306**                                        | ** ** | **0**                           | ** ** | **45,491** | ** ** |
| Balance at January 1, 2009        |       | 12,794                  |       | 24,391                                   |       | 8,306                                            |       | 0                               | ** ** | **45,491** | ** ** |
| Depreciation charge for the year       |       | 1,471                   |       | 6,270                                    |       | 998                                              |       | 0                               | ** ** | **8,739**  | ** ** |
| Disposals                              |       | 6,371                   |       | 1,965                                    |       | 1,725                                            |       | 0                               | ** ** | **10,061** | ** ** |
| Effect of movements in exchange rates  |       | 32                      |       | (138                                     | )          | 11                                               |       | 0                               | ** ** | **(95**    | **)**      |
| Balance at December 31, 2009      | ** ** | **7,926**               | ** ** | **28,558**                               | ** ** | **7,590**                                        | ** ** | **0**                           | ** ** | **44,074** | ** ** |
| **Carrying amounts**                   |       |                    |       |                                     |       |                                             |       |                            |       |       |       |
| At January 1, 2008                |       | 19,496                  |       | 10,646                                   |       | 1,626                                            |       | 3,353                           | ** ** | **35,121** | ** ** |
| At December 31, 2008              |       | 20,969                  |       | 13,587                                   |       | 2,541                                            |       | 2,227                           | ** ** | **39,324** | ** ** |
| At January 1, 2009                |       | 20,969                  |       | 13,587                                   |       | 2,541                                            |       | 2,227                           | ** ** | **39,324** | ** ** |
| At December 31, 2009              |       | 20,219                  |       | 12,039                                   |       | 3,609                                            |       | 1,891                           | ** ** | **37,758** | ** ** |

 

**Depreciation**

 

Depreciation expenseamounted to k€ 8,739 for 2009 and was k€ 7,291 and k€ 6,573 for2008 and 2007 respectively.

 

**Impairments**

 

During 2009 there were noimpairments necessary.

 

**Governmentgrants**

 

In 2009, the cost ofmachinery and equipment was reduced by k€ 0 (2008: k€ 1,643, 2007: 17),because of government grants. Of that amount, k€ (2008: k€ 0, 2007:k€ 0) has been accrued as receivable and k€ 0 (2008:k€ 1,643, 2007: k€ 17) was paid in cash.

 

**Constructionin progress**

 

Construction in progressrelates to self-built systems for development laboratories.

 

F-26

----

 

**NOTESTO THE CONSOLIDATED FINANCIAL STATEMENTS**

 

**13.****                              ****Intangible assets**

 

**Developmentof intangible assets**

 
| ** **                             | ** ** | **Goodwill**           | ** ** | **Other  intangible  assets** | ** ** | **Total**   | ** ** |
|----------------------------------------|------------|------------------------|------------|-------------------------------|------------|-------------|------------|
| ** **                             | ** ** | **(in EUR thousands)** | ** ** |
| **Cost**                               |       |                   |       |                          |       |        |       |
| Balance at January 1, 2008        |       | 76,649                 |       | 36,825                        | ** ** | **113,474** | ** ** |
| Acquisitions                           |       | 0                      |       | 1,251                         | ** ** | **1,251**   | ** ** |
| Disposals                              |       | 0                      |       | 3                             | ** ** | **3**       | ** ** |
| Effect of movements in exchange rates  |       | (715                   | )          | 481                           | ** ** | **(234**    | **)**      |
| Balance at December 31, 2008      | ** ** | **75,934**             | ** ** | **38,554**                    | ** ** | **114,488** | ** ** |
| Balance at January 1, 2009        |       | 75,934                 |       | 38,554                        | ** ** | **114,488** | ** ** |
| Acquisitions                           |       | 0                      |       | 1,008                         | ** ** | **1,008**   | ** ** |
| Disposals                              |       | 0                      |       | 0                             | ** ** | **0**       | ** ** |
| Effect of movements in exchange rates  |       | (460                   | )          | (362                          | )          | **(822**    | **)**      |
| Balance at December 31, 2009      | ** ** | **75,474**             | ** ** | **39,200**                    | ** ** | **114,674** | ** ** |
| **Depreciation and impairment losses** |       |                   |       |                          |       |        |       |
| Balance at January 1, 2008        |       | 17,675                 |       | 24,317                        | ** ** | **41,992**  | ** ** |
| Depreciation charge for the year       |       | 0                      |       | 3,462                         | ** ** | **3,462**   | ** ** |
| Effect of movements in exchange rates  |       | (460                   | )          | 520                           | ** ** | **60**      | ** ** |
| Balance at December 31, 2008      | ** ** | **17,215**             | ** ** | **28,299**                    | ** ** | **45,514**  | ** ** |
| Balance at January 1, 2009        |       | 17,215                 |       | 28,299                        | ** ** | **45,514**  | ** ** |
| Depreciation charge for the year       |       | 0                      |       | 3,508                         | ** ** | **3,508**   | ** ** |
| Effect of movements in exchange rates  |       | (16                    | )          | (373                          | )          | **(389**    | **)**      |
| Balance at December 31, 2009      | ** ** | **17,199**             | ** ** | **31,434**                    | ** ** | **48,633**  | ** ** |
| **Carrying amounts**                   |       |                   |       |                          |       |        |       |
| At January 1, 2008                |       | 58,974                 |       | 12,508                        | ** ** | **71,482**  | ** ** |
| At December 31, 2008              |       | 58,719                 |       | 10,255                        | ** ** | **68,974**  | ** ** |
| At January 1, 2009                |       | 58,719                 |       | 10,255                        | ** ** | **68,974**  | ** ** |
| At December 31, 2009              |       | 58,275                 |       | 7,766                         | ** ** | **66,041**  | ** ** |

 

F-27

----

 

**Amortisationand impairment expenses for other intangible assets**

 

Amortisation andimpairment expenses for other intangible assets are recognised in the incomestatement as follows:

 
| ** **                      | ** ** | **2009**               | ** ** | **2008**       | ** ** | **2007**         | ** ** |
|---------------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|
| ** **                      | ** ** | **Amortisation**       | ** ** | **Impairment** | ** ** | **Amortisation** | ** ** | **Impairment** | ** ** | **Amortisation** | ** ** | **Impairment** | ** ** |
| ** **                      | ** ** | **(in EUR thousands)** | ** ** |
| Cost of sales                   |       | 1,175                  |       | 0              |       | 1,188            |       | 0 |   | 1,194 |   | 0 |   |
| Selling expenses                |       | 1,303                  |       | 0              |       | 1,231            |       | 0 |   | 1,322 |   | 0 |   |
| General administration expenses |       | 458                    |       | 0              |       | 326              |       | 0 |   | 182 |   | 0 |   |
| Research and development costs  |       | 572                    |       | 0              |       | 717              |       | 0 |   | 477 |   | 0 |   |
|                            | ** ** | **3,508**              | ** ** | **0**          | ** ** | **3,462**        | ** ** | **0** | ** ** | **3,175** | ** ** | **0** | ** ** |

 

In the fiscal years 2009,2008 and 2007, no impairment losses were required

 

No reversals were made in2009, 2008 or 2007.

 

The amortisation expectedto be charged on other intangible assets in the future years is as follows:

 
| ** ** | ** ** | **(in EUR  thousands)** | ** ** |
|------------|------------|-------------------------|------------|
| 2010       |       | 3,658                   |       |
| 2011       |       | 2,301                   |       |
| 2012       |       | 824                     |       |
| 2013       |       | 438                     |       |
| 2014       |       | 352                     |       |

 

The actual amortisationcan differ from the expected amortisation.

 

**Impairmentof goodwill**

 

At the end of 2009 theGroup assessed the recoverable amounts of goodwill and determined that therewas no impairment of goodwill (2008: k€ 0; 2007: k€ 0). Therecoverable amount of the activities was assessed by reference to thecash-generating units’ value in use.

 

F-28

----

 

The composition of thecash generating units used to determine the value in use has changed comparedwith 2008. In 2008 three distinct cash-generating units were identified withinthe compound semi-conductor technologies business unit, these have now beenmerged into one. The reason for the change is because the increasingintegration and inter-dependence of the companies means that they are no longeridentifiable as separate cash-generating units.

 

Silicon Semi-conductor technologies

 
| ** **                                  | ** ** | **2009**               | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------|------------|------------------------|------------|----------|------------|----------|------------|
| ** **                                  | ** ** | **(in EUR thousands)** | ** ** |
| Silicon semi-conductor cash generating unit |       | 46,821                 |       | 47,913   |       | 45,507   |       |

 

The recoverable amount ofthis cash-generating unit is determined through a value in use calculationwhich uses cash flow projections based on financial budgets and forecastsapproved by the Executive Board covering the period up to 2020 and a discountrate of 9.41% (2008: 9.52%). The period up to 2020 was chosen because ittakes into account the whole product life cycle.

 

Cash flow projectionsduring the budget period are based on the budgeted gross margins and sellingprices. Cash flows beyond that period have been forecast based on an analysis,by external parties, of historical trends in the economic cycles affecting themarket for semi-conductor equipment. Assumptions concerning working capitalwere, based on management’s best estimates; inventory turns of 3, receivablesoutstanding for 125 days, accounts payable of 100 days. A sustainablesales growth rate of 2% has been forecast throughout the forecasted periodwhich does not exceed management’s estimates of the long term growth trend. Thedirectors believe that any reasonably possible change in the key assumptions onwhich recoverable amount is based would not cause the aggregate carrying amountto exceed the aggregate amount recoverable from the cash-generating unit.

 

Compound Semi-conductor technologies

 
| ** **                                   | ** ** | **2009**               | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------------------------|------------|------------------------|------------|----------|------------|----------|------------|
| ** **                                   | ** ** | **(in EUR thousands)** | ** ** |
| Compound semi-conductor cash generating unit |       | 11,454                 |       | 10,805   |       | 13,467   |       |

 

The recoverable amount ofthis cash-generating unit is also determined through a value in use calculationwhich uses cash flow projections based on financial budgets approved by theExecutive Board covering the period to the end of 2010 and a discount rate of9.41% (2008: 9.52%). An exchange rate of USD 1.50 to € 1 wasassumed.

 

The directors believethat any reasonably possible change in the key assumptions on which recoverableamount is based would not cause the aggregate carrying amount to exceed theaggregate amount recoverable from the cash-generating unit.

 

F-29

----

 

**14.****                              ****Investment property**

 

The investment propertyin Herzogenrath, Germany was reclassified as land and buildings during 2009 andis included in that category at the end of the year. The transfer was madebecause the company identified that the land will be used to build additionalfacilities for the company.

 

The net book value at31 December 2008 of investment property amounted to k€ 4.908. In2008 the investment property was regarded as undeveloped land held for apurpose not yet determined. The carrying amount was determined using the costmodel. The fair value was equal to the carrying amount. The fair value of theland at December 31, 2008 was determined using related standard landvalues.

 

**15.****                              ****Other non-current assets**

 

Other non-current assetstotalling k€ 644 (2008: k€ 672) include mainly rent deposits forbuildings.

 

**16.****                              ****Deferred tax assets andliabilities**

 

**Recogniseddeferred tax assets and liabilities**

 

Deferred tax assets andliabilities are attributable to the following:

 
| ** **                              | ** ** | **Assets**             | ** ** | **Liabilities** | ** ** | **Net**  | ** ** |
|-----------------------------------------|------------|------------------------|------------|-----------------|------------|----------|------------|
| ** **                              | ** ** | **2009**               | ** ** | **2008**        | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                              | ** ** | **(in EUR thousands)** | ** ** |
| Property, plant and equipment           |       | (113                   | )          | 0               |       | (57      | )          | (208 | ) | (170 | ) | (208 | ) |
| Trade receivables                       |       | 2,602                  |       | 823             |       | 0        |       | 0 |   | 2,602 |   | 823 |   |
| Inventories                             |       | 5,903                  |       | 3,484           |       | 4        |       | 0 |   | 5,907 |   | 3,484 |   |
| Employee benefits                       |       | 92                     |       | 49              |       | (222     | )          | 0 |   | (130 | ) | 49 |   |
| Deferred revenues                       |       | 25                     |       | 26              |       | 0        |       | (190 | ) | 25 |   | (164 | ) |
| Currency translation differences        |       | 0                      |       | 2               |       | 0        |       | 0 |   | 0 |   | 2 |   |
| Provisions and other liabilities        |       | (642                   | )          | 38              |       | 0        |       | (646 | ) | (642 | ) | (608 | ) |
| Customer advances                       |       | 0                      |       | 257             |       | 0        |       | 0 |   | 0 |   | 257 |   |
| Other                                   |       | (163                   | )          | 29              |       | 0        |       | (348 | ) | (163 | ) | (319 | ) |
| Tax loss carryforwards                  |       | 5,605                  |       | 138             |       | 0        |       | 0 |   | 5,605 |   | 138 |   |
| Derivative financial instruments        |       | 560                    |       | 0               |       | 0        |       | (293 | ) | 560 |   | (293 | ) |
| Deferred tax assets (+) liabilities (-) |       | 13,869                 |       | 4,846           |       | (275     | )          | (1,685 | ) | 13,594 |   | 3,161 |   |

 

Deferred tax assets arerecognised at the level of individual consolidated companies, in which a losswas realised in the current or preceding financial year, only to the extentthat realisation in future periods is probable. The nature of the evidence usedin assessing the probability of realisation includes 

 

F-30

----

 

forecasts, budgets and the recent profitability of therelevant entity. The carrying amount of deferred tax assets for entities whichhave made a loss in either the current or preceding year was k€ 6,070(2008: k€ 0). Forecast transactions are expected to give rise totaxable profits in 2010 in the entities where deferred tax assets have beenrecognised.

 

Deferred taxes for taxlosses in the amount of k€ 21,168 (2008: k€ 20,552) and ondeductible temporary differences in the amount of k€ 0,(2008: k€ 3,849) were not recognised. Tax losses in the amount ofk€ 270 can be used indefinitely (2008: k€ 913), k€ 0 expireby 2014 (2008: 10,038, by 2013) and k€ 20,898 expire after 2014 (2008: k€ 9,601after 2013).

 

The following table showsthe development of temporary differences during the financial year:

 
| ** **                       | ** ** | **Balance  at  January 1,  2008** | ** ** | **Recognised  in income  statement** | ** ** | **Directly  recognised  in equity** | ** ** | **Balance at  December 31,  2008** | ** ** |
|----------------------------------|------------|----------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|-----------------------------------------|------------|
| ** **                       | ** ** | **(in EUR thousands)**                 | ** ** |
| Property, plant and equipment    |       | 84                                     |       | (292                                 | )          | 0                                   | ** ** | **(208**                                | **)**      |
| Trade receivables                |       | 105                                    |       | 718                                  |       | 0                                   | ** ** | **823**                                 | ** ** |
| Inventories                      |       | 1,019                                  |       | 2,465                                |       | 0                                   | ** ** | **3,484**                               | ** ** |
| Provisions for pensions          |       | 69                                     |       | (20                                  | )          | 0                                   | ** ** | **49**                                  | ** ** |
| Deferred revenues                |       | (38                                    | )          | (126                                 | )          | 0                                   | ** ** | **(164**                                | **)**      |
| Currency adjustment              |       | 0                                      |       | (185                                 | )          | 185                                 | ** ** | **0**                                   | ** ** |
| Provisions and other liabilities |       | (137                                   | )          | (473                                 | )          | 0                                   | ** ** | **(609**                                | **)***     |
| Customer advances                |       | (251                                   | )          | 508                                  |       | 0                                   | ** ** | **258**                                 | *****      |
| Other                            |       | (474                                   | )          | 157                                  |       | 0                                   | ** ** | **(317**                                | **)**      |
| Derivative financial instruments |       | (494                                   | )          | (314                                 | )          | 514                                 | ** ** | **(293**                                | **)***     |
| Tax loss carryforwards           |       | 4,890                                  |       | (4,753                               | )          | 0                                   | ** ** | **138**                                 | *****      |
|                             | ** ** | **4,773**                              | ** ** | **(2,315**                           | **)**      | **699**                             | ** ** | **3,161**                               | *****      |

 

F-31

----

 
| ** **                       | ** ** | **Balance  at  January 1,  2009** | ** ** | **Recognised  in income  statement** | ** ** | **Directly  recognised  in equity** | ** ** | **Balance at  December 31,  2009** | ** ** |
|----------------------------------|------------|----------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|-----------------------------------------|------------|
| ** **                       | ** ** | **(in EUR thousands)**                 | ** ** |
| Property, plant and equipment    |       | (208                                   | )          | 45                                   |       | 0                                   | ** ** | **(163**                                | **)**      |
| Trade receivables                |       | 823                                    |       | 1,780                                |       | 0                                   | ** ** | **2,603**                               | ** ** |
| Inventories                      |       | 3,484                                  |       | 2,471                                |       | 0                                   | ** ** | **5,955**                               | ** ** |
| Provisions for pensions          |       | 49                                     |       | (180                                 | )          | 0                                   | ** ** | **(131**                                | **)**      |
| Deferred revenues                |       | (164                                   | )          | 193                                  |       | 0                                   | ** ** | **29**                                  | ** ** |
| Currency adjustment              |       | 0                                      |       | 9                                    |       | (47                                 | )          | **(38**                                 | **)**      |
| Provisions and other liabilities |       | (609                                   | )*         | (34                                  | )          | 0                                   | ** ** | **(643**                                | **)**      |
| Customer advances                |       | 258                                    | *          | (257                                 | )          | 0                                   | ** ** | **1**                                   | ** ** |
| Other                            |       | (317                                   | )          | 177                                  |       | 0                                   | ** ** | **(140**                                | **)**      |
| Derivative financial instruments |       | (293                                   | )*         | 551                                  |       | 302                                 | ** ** | **560**                                 | ** ** |
| Tax loss carryforwards           |       | 138                                    | *          | 5,424                                |       | 0                                   | ** ** | **5,562**                               | ** ** |
|                             | ** ** | **3,161**                              | *****      | **10,179**                           | *****      | **255**                             | ** ** | **13,594**                              | *****      |

 

----

*                                         rounded to the related numbers in thetable

 

**17.****                              ****Long-term receivablesfrom current tax**

 

Long term receivablesfrom current tax include a receivable from corporate tax which will be refundedover a period of eight years. The amount included in long term receivables isfor the amounts receivable after more than one year from the balance sheetdate.

 

F-32

----

 

**NOTESTO THE CONSOLIDATED FINANCIAL STATEMENTS**

 

**18.****                              ****Inventories**

 
| ** **                               | ** ** | **2009**                | ** ** | **2008**   | ** ** |
|------------------------------------------|------------|-------------------------|------------|------------|------------|
| ** **                               | ** ** | **(in EUR  thousands)** | ** ** |
| Raw materials and supplies               |       | 29,504                  |       | 26,406     |       |
| Work in process                          |       | 56,781                  |       | 36,911     |       |
| Finished goods and services completed    |       | 86                      |       | 89         |       |
| Inventories at customers’ locations |       | 3,181                   |       | 13,680     |       |
|                                     | ** ** | **89,552**              | ** ** | **77,086** | ** ** |

 
| ** **                                             | ** ** | **2009**                | ** ** | **2008** | ** ** |
|--------------------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                             | ** ** | **(in EUR  thousands)** | ** ** |
| Write-down of inventories during the year              |       | 5,890                   |       | 4,587    |       |
| Inventories measured at net realisable value           |       | 6,877                   |       | 9,378    |       |
| Inventories recognised as an expense during the period |       | 121,296                 |       | 128,075  |       |
| Reversals of write-downs recognised during the year    |       | 2,081                   |       | 872      |       |

 

**19.****                              ****Trade receivables andother current assets**

 
| ** **                                                                                    | ** ** | **2009**                | ** ** | **2008**   | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                                    | ** ** | **(in EUR  thousands)** | ** ** |
| Trade receivables                                                                             |       | 49,982                  |       | 41,103     |       |
| Allowances for doubtful accounts                                                              |       | (717                    | )          | (2,289     | )          |
| **Trade receivables—net**                                                                | ** ** | **49,265**              | ** ** | **38,814** | ** ** |
| Prepaid expenses                                                                              |       | 794                     |       | 733        |       |
| Reimbursement of research and development costs                                               |       | 1,140                   |       | 1,533      |       |
| Advance payments for inventory                                                                |       | 1,181                   |       | 359        |       |
| VAT refund claims                                                                             |       | 5,132                   |       | 1,543      |       |
| Other assets                                                                                  |       | 1,917                   |       | 2,390      |       |
| Derivatives that are designated and effective as  hedging instruments carried at fair value   |       | 692                     |       | 0          |       |
| Financial assets carried at fair value through the  profit or loss (FVTPL) (see Note 28) |       | 3,485                   |       | 4,389      |       |
| **Total other current assets**                                                                | ** ** | **14,341**              | ** ** | **10,947** | ** ** |
|                                                                                          | ** ** | **63,606**              | ** ** | **49,761** | ** ** |

 

F-33

----

 

Additions to allowanceson trade receivables are included in other operating expenses, releases ofallowances are included in other operating income. Allowances on receivablesdeveloped as follows:

 
| ** **                        | ** ** | **2009**                | ** ** | **2008**  | ** ** |
|-----------------------------------|------------|-------------------------|------------|-----------|------------|
| ** **                        | ** ** | **(in EUR  thousands)** | ** ** |
| Allowance at January 1       |       | 2,289                   |       | 567       |       |
| Translation adjustments           |       | 11                      |       | 2         |       |
| Impairment losses recognised      |       | 928                     |       | 1,953     |       |
| Used                              |       | (1,225                  | )          | (8        | )          |
| Impairment losses reversed        |       | (1,286                  | )          | (225      | )          |
| **Allowance at December 31** | ** ** | **717**                 | ** ** | **2,289** | ** ** |

 

Due to the worldwidespread of risks, there is a diversification of the credit risk for tradereceivables. Generally, the Company demands no securities for financial assets.In accordance with usual business practice for capital equipment however, theCompany mitigates its exposure to credit risk by requiring payment byirrevocable letters of credit and substantial payments in advance from mostcustomers as conditions of contracts for sale of major items of equipment.

 

At the balance sheet datetwo customers accounted for 33% and 17% respectively of the company’s net tradereceivables, no other single customer accounted for more than 10% of tradereceivables. In 2008 two customers accounted for 22% and 18% respectively oftrade receivables, no other customer accounted for more than 10% ofreceivables. In determining concentrations of credit risk the company definescounterparties as having similar characteristics if they are connectedentities.

 

Included in the Company’strade receivable balance are debtors with a carrying amount of k€ 1,592(2008: k€ 5,975) which are past due at the reporting date for which theCompany has not provided. As there has not been a significant change in creditquality and, although the company has no collateral, the amounts are stillconsidered recoverable.

 

In determining thefinancial assets which may be individually impaired the Company has taken intoaccount the likelihood of recoverability based on the past due nature ofcertain receivables, and our assessment of the ability of all counter-partiesto perform their obligations.

 

F-34

----

 
| ** **                      | ** ** | **2009**                | ** ** | **2008** | ** ** |
|---------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                      | ** ** | **(in EUR  thousands)** | ** ** |
| 1-90 days past due         |       | 1,794                   |       | 5,910    |       |
| More than 90 days past due |       | 515                     |       | 2,354    |       |

 

**20.****                              ****Other financial assets**

 

Other financial assets ofk€ 90,000 (2008: k€ 3,000) are fixed deposits with banks with amaturity of more than three months at inception of the contracts.

 

**21.****                              ****Cash and cashequivalents**

 
| ** **                | ** ** | **2009**                | ** ** | **2008**   | ** ** |
|---------------------------|------------|-------------------------|------------|------------|------------|
| ** **                | ** ** | **(in EUR  thousands)** | ** ** |
| Cash-in-hand              |       | 7                       |       | 7          |       |
| Short term deposits       |       | 21,000                  |       | 0          |       |
| Bank balances             |       | 190,185                 |       | 67,455     |       |
| Cash and Cash equivalents | ** ** | **211,192**             | ** ** | **67,462** | ** ** |

 

Cash and cash equivalentscomprise short-term bank deposits with an original maturity of 3 months orless. The carrying amount and fair value are the same.

 

Bank balances included k€ 0given as security (2008: k€ 0) at December 31, 2009.

 

**22.****                              ****Shareholders’ Equity**

 

**Subscribedcapital**

 
| ** **                                     | ** ** | **2009**    | ** ** | **2008**   | ** ** |
|------------------------------------------------|------------|-------------|------------|------------|------------|
| January 1                                 |       | 89,692,328  |       | 89,138,905 |       |
| Exercise of employee stock options             |       | 915,662     |       | 553,423    |       |
| Capital Increase                               |       | 8,979,937   |       | 0          |       |
| Issued capital at December 31, under IFRS |       | 99,587,927  |       | 89,692,328 |       |
| Treasury shares                                |       | 1,079,250   |       | 1,202,288  |       |
| Stated share capital at December 31       |       | 100,667,177 |       | 90,894,616 |       |
| (see also note 25)                        |       |        |       |       |       |

 

The share capital of thecompany consists of no-par value shares and was fully paid-up during 2009 and2008. Each share represents a portion of the share capital in the amount of € 1.00.

 

Treasury shares werecontributed into a trust, as part of the Genus acquisition for the exercise ofGenus stock and other options and for conversion of bonds.

 

F-35

----

 

AIXTRON AG cannot disposeof the trust assets. Contrary to German Commercial Code and company law, IFRS(SIC 12) prescribes an allocation of the trust assets to AIXTRON AG. Inthe IFRS financial statements the shares held in this trust are therefore shownas treasury shares and deducted from the nominal share capital.

 

Authorised capital I hasremained unchanged compared to December 31, 2008. 8,979,937 shares ofauthorised capital II were issued by the company on October 29, 2009.Theseshares were issued at € 17.75 each and produced net proceeds ofk€ 157,637.

 

At December 31,2009, AIXTRON AG’s Executive Board is authorised to increase, with the consentof the Supervisory Board, AIXTRON’s stated share capital at any time or fromtime to time on or before May 17, 2010 by up to € 35,919,751 byissuing against either cash contribution or contribution in kind new registeredno-par value shares with a proportional amount of € 1.00 per share in theshare capital (Authorised Capital I). In this event, the shareholders must begranted a pre-emptive right. However, the Executive Board is authorised, withthe consent of the Supervisory Board, to exclude, in whole or in part, theshareholders’ pre-emptive right.

 

The Executive Board isalso authorised, with the consent of the Supervisory Board, to define therights embodied in a share and the other conditions and terms of the issuanceof shares.

 

**Additionalpaid-in capital**

 

Paid-in capital mainlyincludes the premium on increases of subscribed capital as well as cumulativeexpense for share-based payments.

 

**Incomeand expenses recognised in equity**

 
| ** **                                     | ** ** | **Currency  translation** | ** ** | **Derivative  financial  instruments** | ** ** | **Total** | ** ** |
|------------------------------------------------|------------|---------------------------|------------|----------------------------------------|------------|-----------|------------|
| ** **                                     | ** ** | **(in EUR thousands)**    | ** ** |
| Balance at December 31, 2006              |       | 1,549                     |       | 519                                    |       | 2,068     |       |
| Change in currency translation                 |       | (9,932                    | )          | 0                                      |       | (9,932    | )          |
| Change in unrealised gains/losses before taxes |       | 0                         |       | 961                                    |       | 961       |       |
| Deferred taxes                                 |       | 0                         |       | (289                                   | )          | (289      | )          |
| Balance at December 31, 2007              |       | (8,383                    | )          | 1,191                                  |       | (7,192    | )          |
| Change in currency translation                 |       | (5,372                    | )          | 0                                      |       | (5,372    | )          |
| Change in unrealised gains/losses before taxes |       | 0                         |       | (1,706                                 | )*         | (1,706    | )          |
| Deferred taxes                                 |       | 0                         |       | 515                                    |       | 515       |       |
| Balance at December 31, 2008              |       | (13,755                   | )          | 0                                      |       | (13,755   | )          |
| Change in currency translation                 |       | 1,306                     |       | 0                                      |       | 1,306     |       |
| Change in unrealised gains/losses before taxes |       | 0                         |       | (1,417                                 | )          | (1,417    | )          |
| Deferred taxes                                 |       | 0                         |       | 302                                    |       | 302       |       |
| Balance at December 31, 2009              |       | (12,449                   | )          | (1,115                                 | )          | (13,564   | )          |

 

F-36

----

 

----

*rounded

 

The foreign currencytranslation adjustment comprises all foreign exchange differences arising fromthe translation of the financial statements of foreign subsidiaries whosefunctional currency is not the Euro.

 

The item “derivativefinancial instruments”comprises the gain or loss on foreign currency hedgecontracts deferred in equity.

 

**23.****                              ****Earnings per share**

 

**Basic earningsper share**

 

The calculation of thebasic earnings per share at December 31, 2009, is based on theweighted-average number of common shares outstanding during the reportingperiod.

 

**Dilutedearnings per share**

 

The calculation of thediluted earnings per share at December 31, 2009 is based on theweighted-average number of outstanding common shares and ADS and of commonshares and ADS with a possible dilutive effect resulting from share optionsbeing exercised under the share option plan and in connection with theconversion of issued convertible bonds and other options.

 
| ** **                                                                      | ** ** | **2009**   | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **Earnings per share**                                                          |       |       |       |       |       |       |       |
| Net profit/loss attributable to the shareholders of  AIXTRON AG in k€      |       | 44,766     |       | 22,994     |       | 17,250     |       |
| Weighted average number of common shares and ADS at  December 31           |       | 91,609,912 |       | 89,478,415 |       | 88,163,952 |       |
| **Basic earnings per share (€)**                                           | ** ** | **0.49**   | ** ** | **0.26**   | ** ** | **0.20**   | ** ** |
| **Earnings per share (diluted)**                                                |       |       |       |       |       |       |       |
| Net profit/loss attributable to the shareholders of  AIXTRON AG in k€      |       | 44,766     |       | 22,994     |       | 17,250     |       |
| Weighted average number of common shares and ADS at  December 31           |       | 91,609,912 |       | 89,478,415 |       | 88,163,952 |       |
| Dilutive effect of share options                                                |       | 1,405,764  |       | 1,016,486  |       | 783,934    |       |
| Weighted average number of common shares and ADS at  December 31 (diluted) |       | 93,015,677 |       | 90,494,901 |       | 88,947,886 |       |
| **Diluted earnings per share (€)**                                         | ** ** | **0.48**   | ** ** | **0.25**   | ** ** | **0.19**   | ** ** |

 

F-37

----

 

The following securitiesissued were not included in the computation of the diluted earnings per share,as their effect would be anti-dilutive:

 
| ** **    | ** ** | **2009**             | ** ** | **2008**  | ** ** | **2007**  | ** ** |
|---------------|------------|----------------------|------------|-----------|------------|-----------|------------|
| ** **    | ** ** | **Number of shares** | ** ** |
| Share options |       | 1,970,222            |       | 2,631,692 |       | 2,151,017 |       |

 

**24.****                              ****Employee benefits**

 

**Definedcontribution plan**

 

The Company grantsretirement benefits to qualified employees through various defined contributionpension plans. The expenses incurred for defined contribution plans mainlyarise from two pension plans in subsidiaries. The contributions made do notexceed 10% of qualified employees’ base salaries. In 2009 the expenserecognised for defined contribution plans amounted to k€ 970 (2008:k€ 896, 2007: k€ 824).

 

F-38

----

 

**NOTES TOTHE CONSOLIDATED FINANCIAL STATEMENTS**

 

**24.****                              ****Employee benefits**

 

**Defined benefit plan**

 

The Company’s net obligation in respect of defined benefit pensionplans reflects commitments to two former members of the Executive Board ofAIXTRON AG. These are final salary plans. Provisions for pensions developed asfollows:

 

**Expense recognised in the consolidated incomestatement**

 
| ** **                 | ** ** | **2009**               | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------|------------|------------------------|------------|----------|------------|----------|------------|
| ** **                 | ** ** | **(in EUR thousands)** | ** ** |
| Interest expense           |       | 87                     |       | 47       |       | 44       |       |
| Actuarial gains and losses |       | 132                    |       | (80      | )          | (149     | )          |
|                       | ** ** | **219**                | ** ** | **(33**  | **)**      | **(105** | **)**      |

 

The expense for pensions developed as follows:

 
| ** **                                                                                      | ** ** | **2009**               | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| ** **                                                                                      | ** ** | **(in EUR thousands)** | ** ** |
| Present value of net obligations at January 1                                                   |       | 845                    |       | 878      |       | 983      |       | 978      |       | 703      |       |
| Income/Expense recognised in consolidated income  statement (see below)                         |       | 219                    |       | (33      | )          | (105     | )          | 5        |       | 275      |       |
| Present value of net obligations at December 31 =  Total provisions for pensions at December 31 | ** ** | **1,064**              | ** ** | **845**  | ** ** | **878**  | ** ** | **983**  | ** ** | **978**  | ** ** |

 

In the income statement, the expense (2008 and 2007: income) of k€ 219(2008: k€ 33; 2007: k€ 105; 2006: k€ 5; 2005: k€ 275) isrecognised in general administration expense.

 

The following table shows the principal actuarial assumptions:

 
| ** **                          | ** ** | **2009**                  | ** ** | **2008**                  | ** ** |
|-------------------------------------|------------|---------------------------|------------|---------------------------|------------|
| Biometrical calculation assumptions |       | Heubeck tables 2005G |       | Heubeck tables 2005G |       |
| Interest rate at December 31   |       | 5.20                      | %          | 6.00                      | %          |
| Expected salary increase            |       | 0.00                      | %          | 0.00                      | %          |
| Expected pension increase           |       | 2.00                      | %          | 2.00                      | %          |

 

In the three years ending 2009 no payments were made under these plans.The value of the obligations from pension plans is determined annually at December 31.

 

F-39

----

 

**25.****                              ****Share-based payment**

 

The Company has different fixed option plans which reserve shares ofcommon stock and AIXTRON American Depository Shares (ADS) for issuance tomembers of the Executive Board, management and employees of the Company. EachAIXTRON ADS represents the beneficial ownership in one AIXTRON common share.The following is a description of these plans:

 

**AIXTRON stock option plan 1999**

 

In May 1999, options were authorized to purchase 3,000,000 sharesof common stock (after giving effect to capital increases, stock splits, andthe EURO conversion). The stock options can be exercised when 15 yearshave elapsed since their issue. Under the terms of the 1999 plan, options weregranted at prices equal to the average closing price over the last 20 tradingdays on the Frankfurt Stock Exchange before the grant date. Under this plan1,133,744 options for the purchase of 1,802,952 common shares were outstandingas of December 31, 2009.

 

**AIXTRON stock option plan 2002**

 

In May 2002, options were authorized to purchase 3,511,495 sharesof common stock. The options are exercisable in equal instalments of 25% peryear after the second anniversary of the date of grant, subject to certainconditions. Options expire ten years from date of grant. Under the terms of the2002 plan, options are granted at prices equal to the average closing priceover the last 20 trading days on the Frankfurt Stock Exchange before the grantdate, plus 20%. No grants were issued with a strike price less than fair marketvalue. A total of 960,984 options to purchase the same number of common stockwere outstanding under this plan as of December 31, 2009.

 

**AIXTRON stock option plan 2007**

 

Options were granted to purchase shares of common stock. 50% of thegranted options may be executed after a waiting period of not less than twoyears, further 25% after three years and the remaining 25% after at least fouryears. The options expire 10 years after they have been granted. Under theterms of the 2007 plan, options are granted at prices equal to the averageclosing price over the last 20 trading days on the Frankfurt Stock Exchangebefore the grant date, plus 20%.

 

Options were granted as follows:

 
| 2007 |   | 759,100 |   |
|------|--------|---------|--------|
| 2008 |   | 779,000 |   |
| 2009 |   | 778,850 |   |

 

**Genus stock option plan 2000**

 

With the acquisition of Genus, Inc. the company adopted the GenusIncentive Stock Option Plan 2000. Under this plan at the date of acquisitionoptions were authorized to purchase the equivalent of 2,013,487 AIXTRON ADS.Options granted before October 3, 2003 vest over a three-year-period andexpire five years from the date of grant. Options granted after October 3,2003 vest over a four-year-period and expire in ten years from the date ofgrant.

 

F-40

----

 

A total of 6,935 options to purchase AIXTRON ADS were outstanding underthis plan as of December 31, 2009. Upon exercise of options new shares areissued from the trust (see note 22).

 

**Summary of stock option transactions**

 

**AIXTRON share options**

 
| ** **                      | ** ** | **2009**               | ** ** | **2008**                    | ** ** |
|---------------------------------|------------|------------------------|------------|-----------------------------|------------|
| ** **                      | ** ** | **Number  of  shares** | ** ** | **Average  exercise price** | ** ** | **Number  of  shares** | ** ** | **Average  exercise price** | ** ** |
| ** **                      | ** ** | ** **             | ** ** | **(EUR)**                   | ** ** | ** ** | ** ** | **(EUR)** | ** ** |
| Balance at January 1       |       | 5,149,197              |       | 13.76                       |       | 5,003,027 |   | 13.76 |   |
| Granted during the year         |       | 778,850                |       | 24.60                       |       | 779,000 |   | 4.17 |   |
| Exercised during the year       |       | 792,624                |       | 5.00                        |       | 450,403 |   | 5.00 |   |
| Forfeited during the year       |       | 136,737                |       | 8.76                        |       | 182,427 |   | 8.54 |   |
| Outstanding at December 31 |       | 4,998,686              |       | 16.52                       |       | 5,149,197 |   | 13.76 |   |
| Exercisable at December 31 |       | 799,520                |       | 19.51                       |       | 768,134 |   | 20.53 |   |

 

**Genus share options**

 
| ** **                      | ** ** | **2009**               | ** ** | **2008**                    | ** ** |
|---------------------------------|------------|------------------------|------------|-----------------------------|------------|
| ** **                      | ** ** | **Number  of  shares** | ** ** | **Average  exercise price** | ** ** | **Number  of  shares** | ** ** | **Average  exercise price** | ** ** |
| ** **                      | ** ** | ** **             | ** ** | **(USD)**                   | ** ** | ** ** | ** ** | **(USD)** | ** ** |
| Balance at January 1       |       | 142,499                |       | 5.96                        |       | 247,099 |   | 5.95 |   |
| Exercised during the year       |       | 123,038                |       | 5.95                        |       | 103,070 |   | 5.68 |   |
| Expired during the year         |       | 12,526                 |       | 5.81                        |       | 1,530 |   | 4.69 |   |
| Outstanding at December 31 |       | 6,935                  |       | 7.33                        |       | 142,499 |   | 5.96 |   |
| Exercisable at December 31 |       | 6,935                  |       | 7.33                        |       | 142,499 |   | 5.96 |   |

 

The intrinsic value of options exercised amounted to kUSD 734.

 

F-41

----

 

**AIXTRON stock options as of December 31, 2009**

 
| **Exercise price (EUR)** | ** ** | **Outstanding** | ** ** | **Exercisable** | ** ** | **Average  option life** | ** ** |
|--------------------------|------------|-----------------|------------|-----------------|------------|--------------------------|------------|
| ** **               | ** ** | ** **      | ** ** | ** **      | ** ** | **(in years)**           | ** ** |
| 3.10                     |       | 30,150          |       | 30,150          |       | 3.50                     |       |
| 3.83                     |       | 829,225         |       | 162,175         |       | 6.50                     |       |
| 4.17                     |       | 763,200         |       | 0               |       | 9.00                     |       |
| 6.17                     |       | 101,609         |       | 101,609         |       | 4.50                     |       |
| 7.48                     |       | 602,180         |       | 0               |       | 7.50                     |       |
| 10.09                    |       | 702,100         |       | 0               |       | 8.00                     |       |
| 18.70                    |       | 406,824         |       | 406,824         |       | 4.50                     |       |
| 24.60                    |       | 769,450         |       | 0.00            |       | 10.00                    |       |
| 26.93                    |       | 398,900         |       | 0               |       | 6.50                     |       |
| 67.39                    |       | 395,048         |       | 98,762          |       | 5.50                     |       |
|                     | ** ** | **4,998,686**   | ** ** | **799,520**     |       |                     |       |

 

**Genus stock options as of December 31, 2009**

 
| **Average exercise price (USD)** | ** ** | **Outstanding** | ** ** | **Exercisable** | ** ** | **Average  option life** | ** ** |
|----------------------------------|------------|-----------------|------------|-----------------|------------|--------------------------|------------|
| ** **                       | ** ** | ** **      | ** ** | ** **      | ** ** | **(in Years)**           | ** ** |
| 3.55                             |       | 1,000           |       | 1,000           |       | 4.9                      |       |
| 5.08                             |       | 325             |       | 325             |       | 4.4                      |       |
| 7.20                             |       | 4,590           |       | 4,590           |       | 4.3                      |       |
| 12.35                            |       | 1,020           |       | 1,020           |       | 3.9                      |       |
|                             | ** ** | **6,935**       | ** ** | **6,935**       |       |                     |       |

 

**Assumptions used to calculate fair values andshare-based payment expenses**

 

The fair value of services received in return for stock options grantedis measured by reference to the fair value of the stock options granted. Thefair value of the stock options is determined on the basis of a binomiallattice model. In accordance with IFRS 2 the measurement includes onlyoptions which were granted after November 7, 2002. In 2009, the personnelexpenses from share-based payments were k€ 2,149 (2008: k€ 1,808; 2007: k€1,247). As at December 31, 2009 an amount of k€ 8,412 relating tostock options granted prior to that date has not yet been recognised as apersonnel expense. This amount will be charged over the period to 2014. Theexpected allocation of the expense is as follows: 2010: k€ 3,345, 2011: k€2,890, 2012: k€ 1,466 and after 2013: k€ 711.

 

F-42

----

 

**AIXTRON share options granted**

 
| ** **                  | ** ** | **in 2009**       | ** ** | **in 2008**      | ** ** | **in 2007**       | ** ** |
|-----------------------------|------------|-------------------|------------|------------------|------------|-------------------|------------|
| Fair  value on grant date   |       | 8.62 €  |       | 1.77 € |       | 4.34 €  |       |
| Price  per share            |       | 19.00 € |       | 4.30 € |       | 8.69 €  |       |
| Exercise  price             |       | 24.60 € |       | 4.17 € |       | 10.09 € |       |
| Expected  volatility        |       | 56.38             | %          | 52.69            | %          | 52.48             | %          |
| Option  life                |       | 10.0 years   |       | 10.0 years  |       | 10.0 years   |       |
| Expected  dividend payments |       | 0.00 €  |       | 0.00 € |       | 0.00 €  |       |
| Risk-free  interest rate    |       | 3.44              | %          | 4.04             | %          | 4.06              | %          |

 

The expected volatility is based on historical volatility.

 

**26.****                              ****Provisions**

 

Development and breakdown of provisions:

 
| ** **                        | ** ** | **01.01.2009**         | ** ** | **Exchange  rate  differences** | ** ** | **Usage**  | ** ** | **Reversal** | ** ** | **Addition**          | ** ** | **31.12.  2009** | ** ** | **thereof  short term** | ** ** |
|-----------------------------------|------------|------------------------|------------|---------------------------------|------------|------------|------------|--------------|------------|-----------------------|------------|------------------|------------|-------------------------|------------|
| ** **                        | ** ** | **(in EUR thousands)** | ** ** |
| Employee benefits                 |       | 845                    |       | 2                               |       | 0          |       | 0            |       | 217                   |       | 1,064            |       | 0                       |       |
| Provisions for personnel expenses |       | 4,450                  |       | 32                              |       | 3,529      |       | 796          |       | 8,005                 |       | 8,162            |       | 8,162                   |       |
| Warranties                        |       | 3,014                  |       | 43                              |       | 1,339      |       | 189          |       | 3,181                 |       | 4,710            |       | 4,710                   |       |
| Onerous contracts                 |       | 1,530                  |       | (25                             | )          | 0          |       | 402          |       | 79                    |       | 1,182            |       | 392                     |       |
| Provisions for commissions        |       | 3,373                  |       | 19                              |       | 3,447      |       | 28           |       | 4,085                 |       | 4,002            |       | 4,002                   |       |
| Hedges                            |       | 2,476                  |       | 48                              |       | 2,508      |       | 16           |       | 2,502                 |       | 2,502            |       | 2,502                   |       |
| Other                             |       | 6,848                  |       | 34                              |       | 5,953      |       | 266          |       | 8,235                 |       | 8,898            |       | 8,898                   |       |
| **Total**                         | ** ** | **22,536**             | ** ** | **153**                         | ** ** | **16,776** | ** ** | **1,697**    | ** ** | **26,304**            | ** ** | **30,520**       | ** ** | **28,666**              | ** ** |
|                              |       |                   |       |                            |       |       |       |         |       | **thereof long term** | ** ** | **1,854**        | ** ** |
|                              |       |                   |       |                            |       |       |       |         |       |                  |       |             | ** ** | **30.520**              | ** ** |

 

**Employee benefits**

 

The employee benefits are commented on in note 24.

 

**Provisions for personnel expenses**

 

These include mainly provisions for holiday not yet taken and bonuses.

 

F-43

----

 

**Provisions for onerous contracts**

 

These include provisions for contracts connected with obligations,including rent payable and contract risks.

 

**Fair value of derivative financial instruments**

 
| ** **                                                                                  | ** ** | **2009**                | ** ** | **2008**  | ** ** |
|---------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------|------------|
| ** **                                                                                  | ** ** | **(in EUR  thousands)** | ** ** |
| Derivatives that are designated and effective as  hedging instruments carried at fair value |       |                    |       |      |       |
| Forward foreign currency contracts                                                          |       | 1,692                   |       | 0         |       |
| Financial assets carried at fair value through the  profit or loss (FVTPL)                  |       |                    |       |      |       |
| Foreign currency options                                                                    |       | 810                     |       | 1,829     |       |
| Forward foreign currency contracts                                                          |       | 0                       |       | 647       |       |
| **Fair value of derivative  financial instruments**                                         | ** ** | **2,502**               | ** ** | **2,476** | ** ** |

 

**Other provisions**

 

Other provisions consist mainly of provisions for goods and servicesreceived but not yet invoiced at the end of the year.

 

**27.****                              ****Trade payables and othercurrent liabilities**

 

The liabilities consist of the following:

 
| ** **                                              | ** ** | **2009**                | ** ** | **2008**   | ** ** |
|---------------------------------------------------------|------------|-------------------------|------------|------------|------------|
| ** **                                              | ** ** | **(in EUR  thousands)** | ** ** |
| Trade payables                                          |       | 21,419                  |       | 18,782     |       |
| Other liabilities from grants                           |       | 1,352                   |       | 583        |       |
| Wage and church tax due, social security  contributions |       | 685                     |       | 534        |       |
| VAT due                                                 |       | 173                     |       | 165        |       |
| Other liabilities                                       |       | 55                      |       | 584        |       |
|                                                    |       | 2,265                   |       | 1,866      |       |
|                                                    | ** ** | **23,684**              | ** ** | **20,648** | ** ** |

 

The carrying amount of trade payables and other current liabilitiesapproximates their fair value. Trade payables generally fall due for paymentwithin 90 days of receipt of the relevant goods or services.

 

F-44

----

 

**28.****                              ****Financial instruments**

 

Details of the significant accounting policies and methods, the basisof measurement that are used in preparing the financial statements and theother accounting policies that are relevant to an understanding of thefinancial statement are disclosed in note 2 to the financial statements.

 

**Financial risk management objectives**

 

The Group seeks to minimise the effects of any risk that may occur fromany financial transaction. Key aspects are the exposures to liquidity risk,credit risk, interest rate risk and currency risk arising in the normal courseof the Company’s business.

 

The AIXTRON Group’s central management co-ordinates access to domesticand international financial institutions and monitors and manages the financialrisks relating to the operations of the Group through internal risk reportswhich analyse exposure to risk by likelihood and magnitude. These risks coverall aspects of the business, including financial risks, and the risk managementsystem is in accordance with the corporate governance recommendations specifiedin the German Corporate Governance Code.

 

Derivative financial instruments are used to hedge exposure tofluctuations in foreign exchange rates.

 

**Liquidity risks**

 

Liquidity risk is the risk that the Group is unable to meet itsexisting or future obligations due to insufficient availability of cash or cashequivalents. Managing liquidity risk is one of the central tasks of AIXTRON AG.In order to be able to ensure the Group`s solvency and flexibility at all timescash and cash equivalents are projected on the basis of regular financial andliquidity planning.

 

As at December 31, 2009 the group had no borrowings (2008 nil).Financial liabilities of k€ 23,684 (2008 k€ 20,648) consisting of tradepayables and other liabilities and are shown in Note 27, together with ananalysis of their maturity.

 

As at December 31, 2009 the Group had k€ 211,192 cash and cashequivalents (2008 k€ 67,462) and a further k€ 90,000 of fixed deposits withbanks (2008 k€ 3,000).

 

**Credit risks**

 

Financial assets generally exposed to a credit risk are tradereceivables (see note 19) and cash and cash equivalents.

 

The Company`s cash and cash equivalents are kept with banks that have agood credit standing. Central management of the Group assesses thecounter-party risk of each financial institution dealt with and sets limits tothe Group`s exposure to those institutions. These credit limits are reviewedfrom time to time so as to minimise the default risk as far as possible and toensure that concentrations of risk are managed.

 

The maximum exposure of the Group to credit risk is the total amount ofreceivables, financial assets and cash balances as described in notes 19,20 and 21.

 

F-45

----

 

**Market risks**

 

The Company’s activities expose it to the financial risks of changes inforeign currency exchange rates and interest rate risks. The Company does notuse derivative financial instruments to manage its exposure to interest raterisk. Cash deposits are made with the company’s bankers at the market ratesprevailing at inception of the deposit for the period and currency concerned.There has been no change to the Company’s exposure to market risk or the mannerin which it manages and measures the risk.

 

**Foreign currency risk**

 

The Company enters into a variety of derivative financial instrumentsto manage its exposure to foreign currency risk, including forward exchangecontracts to hedge the exchange rate risk arising on the export of equipment. Themain exchange rates giving rise to the risk are those between theUS Dollar, Pound Sterling and Euro.

 

The carrying amounts of the Group’s foreign currency denominatedmonetary assets and monetary liabilities at the reporting date are as follows:

 
| ** ** | ** ** | **Liabilities** | ** ** | **Assets** | ** ** |
|------------|------------|-----------------|------------|------------|------------|
| ** ** | ** ** | **2009**        | ** ** | **2008**   | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** ** | ** ** | **(kEUR)**      | ** ** | **(kEUR)** | ** ** | **(kEUR)** | ** ** | **(kEUR)** | ** ** |
| US Dollars |       | (3,782          | )          | (21,345    | )          | 65,587 |   | 33,885 |   |
| GB Pounds  |       | (3,785          | )          | (6,276     | )          | 18,719 |   | 19,747 |   |

 

Exposures are reviewed on a regular basis and are managed by theCompany through sensitivity analysis.

 

**Foreign currency sensitivity analysis**

 

The Company is mainly exposed to US Dollar and Pound Sterling exchangerate risks through its worldwide activities.

 

The following table details the company’s sensitivity to a10 percent change in the value of the Euro against the Dollar and Pound. Apositive number indicates an increase in profit and other equity, a negativenumber indicates a reduction in profit and other equity.

 
| ** **                           | ** ** | **USD Currency  Effect** | ** ** | **GBP Currency  Effect** | ** ** |
|--------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| **Increase in value of Euro by 10%** | ** ** | **2009**                 | ** ** | **2008**                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                           | ** ** | **(kEUR)**               | ** ** | **(kEUR)**               | ** ** | **(kEUR)** | ** ** | **(kEUR)** | ** ** |
| Profit or loss                       |       | (9,483                   | )          | 1,574                    |       | (132 | ) | 40 |   |
| Other equity                         |       | 3,788                    |       | (5,241                   | )          | 5,428 |   | (2,804 | ) |

 

F-46

----

 
| ** **                           | ** ** | **USD Currency  Effect** | ** ** | **GBP Currency  Effect** | ** ** |
|--------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| **Decrease in value of Euro by 10%** | ** ** | **2009**                 | ** ** | **2008**                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                           | ** ** | **(kEUR)**               | ** ** | **(kEUR)**               | ** ** | **(kEUR)** | ** ** | **(kEUR)** | ** ** |
| Profit or loss                       |       | 13,120                   |       | 249                      |       | (132 | ) | (10 | ) |
| Other equity                         |       | (3,788                   | )          | 5,241                    |       | (5,428 | ) | 2,804 |   |

 

The effect on profit or loss of changes in currency rates differsbetween increases and decreases in rates because of the asymmetrical effect ofchanges in valuation of option contracts.

 

The sensitivity analysis represents the foreign exchange risk at theyear end date only. It is calculated by revaluing the Group’s financial assetsand liabilities, existing at 31 December, denominated in US Dollarsor British Pounds, by 10%. It does not represent the effect of a 10% change inexchange rates sustained over the whole of the financial year, only the effectof a different rate occuring on the last day of the year.

 

**Forward foreign exchange contracts**

 

The company enters forward foreign exchange contracts with banks tocover receipts from highly probable forecast sales denominated in US Dollars.

 

The following table details the forward foreign currency contractsoutstanding as at the reporting date:

 

F-47

----

 
| ** **                                        | ** ** | **Foreign**  | ** ** | **Contract** | ** ** | **Fair Value** | ** ** |
|---------------------------------------------------|------------|--------------|------------|--------------|------------|----------------|------------|
| ** **                                        | ** ** | **Currency** | ** ** | **Amount**   | ** ** | **Assets**     | ** ** | **Liabilities** | ** ** |
| ** **                                        | ** ** | **2009**     | ** ** | **2008**     | ** ** | **2009**       | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                        | ** ** | **(kUSD)**   | ** ** | **(kUSD)**   | ** ** | **(kEUR)**     | ** ** | **(kEUR)** | ** ** | **(kEUR)** | ** ** | **(kEUR)** | ** ** | **(kEUR)** | ** ** | **(kEUR)** | ** ** |
| **Cash flow hedges**                              |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Sell US Dollars buy Euros                         |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Less than 3 months                           |       | 39,000       |       | —       |       | 27,294         |       | — |   | 594 |   | — |   | (385 | ) | — |   |
| 3 to 12 months                               |       | 76,000       |       | —       |       | 51,752         |       | — |   | 98 |   | — |   | (1,307 | ) | — |   |
| Sell US Dollars buy GB pounds                     |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Less than 3 months                           |       | —       |       | —       |       | —         |       | — |   | — |   | — |   | — |   | — |   |
| 3 to 12 months                               |       | —       |       | —       |       | —         |       | — |   | — |   | — |   | — |   | — |   |
| **Fair Value Hedges through the  Profit or Loss** |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Options to sell US Dollars buy Euros              |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Less than 3 months                           |       | 75,000       |       | 32,000       |       | 50,714         |       | 22,448 |   | 568 |   | 611 |   | — |   | — |   |
| 3 to 12 months                               |       | 210,000      |       | 100,000      |       | 140,000        |       | 70,320 |   | 2,917 |   | 3,778 |   | — |   | — |   |
| Options to sell US Dollars buy GB pounds          |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Less than 3 months                           |       | —       |       | —       |       | —         |       | — |   | — |   | — |   | — |   | — |   |
| 3 to 12 months                               |       | —       |       | —       |       | —         |       | — |   | — |   | — |   | — |   | — |   |
| Opions to sell Euros buy US Dollars               |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Less than 3 months                           |       | 15,000       |       | 15,000       |       | 11,538         |       | 10,345 |   | — |   | — |   | (17 | ) | (247 | ) |
| 3 to 12 months                               |       | 60,000       |       | 45,000       |       | 44,444         |       | 31,034 |   | — |   | — |   | (793 | ) | (1,582 | ) |
| Sell US Dollars buy GB Pounds                     |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Less than 3 months                           |       | —       |       | 4,000        |       | —         |       | 2,083 |   | — |   | — |   | — |   | (779 | ) |
| Sell GB Pounds buy US Dollars                     |       |         |       |         |       |           |       |   |   |   |   |   |   |   |   |   |   |
| Less than 3 months                           |       | —       |       | 4,000        |       | —         |       | 2,730 |   | — |   | 132 |   | — |   | — |   |

 

**Foreign currency cash flow hedges**

 

At 31st December 2009, the aggregate amount of unrealisedlosses on forward foreign exchange contracts deferred in the hedging reserverelating to the exposure on anticipated future transactions is k€ 1,115 (2008:k€ 0).

 

The unrealised gains of k€ 0 (31 December 2007: k€ 1,191)included in income and expenses recognised in equity as of December 31,2008 were fully reversed and recognised in income statement at maturity date ofthe contracts in the financial year. The losses actually realised in 2009 werek€ 0 (2008: losses k€ 223).

 

**Foreign currency option contracts**

 

The company has also entered into option contracts to hedge theexchange rate risk on US Dollar sales proceeds in 2010. The contracts areclassified as at fair value through the profit and loss account.

 

F-48

----

 

Unrealised gains of k€ 983 (2008: unrealised gains k€ 1,913) on forwardexchange contracts are recognised in Other Operating Income in the profit andloss statement.

 

**Fair values**

 

Cash and cash equivalents, Loans and receivables and Held to maturityinvestments or at amortised cost are stated at amortised cost. At FVTPL andHedging derivatives are classed as at fair value through profit or loss.

 

The fair values and the carrying amounts of the financial instrumentsshown in the balance sheet are shown in the following table. Financial assetsare classified into categories.

 
| **FINANCIAL ASSETS  2009**                     | ** ** | **Cash and  cash  equivalents** | ** ** | **Loans and  receivables** | ** ** | **Held  to-maturity  investments** | ** ** | **At  FVTPL** | ** ** | **Hedging  Derivatives** | ** ** | **Total  Carrying  amount  and  fair value** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|------------------------------------|------------|---------------|------------|--------------------------|------------|----------------------------------------------|------------|
| ** **                                     | ** ** | **(kEUR)**                      | ** ** | **(kEUR)**                 | ** ** | **(kEUR)**                         | ** ** | **(kEUR)**    | ** ** | **(kEUR)**               | ** ** | **(kEUR)**                                   | ** ** |
| Cash and cash equivalents                      |       | 211,192                         |       | 0                          |       | 0                                  |       | 0             |       | 0                        |       | 211,192                                      |       |
| Fair value of derivative financial instruments |       | 0                               |       | 0                          |       | 0                                  |       | 3,485         |       | 0                        |       | 3,485                                        |       |
| Other financial assets                         |       | 0                               |       | 0                          |       | 90,000                             |       | 0             |       | 0                        |       | 90,000                                       |       |
| Other non-current assets                       |       | 0                               |       | 645                        |       | 0                                  |       | 0             |       | 0                        |       | 645                                          |       |
| Trade receivables                              |       | 0                               |       | 49,265                     |       | 0                                  |       | 0             |       | 692                      |       | 49,957                                       |       |
| **Total**                                      | ** ** | **211,192**                     | ** ** | **49,910**                 | ** ** | **90,000**                         | ** ** | **3,485**     | ** ** | **692**                  | ** ** | **355,279**                                  | ** ** |

 
| **FINANCIAL  LIABILITIES 2009**                | ** ** | **Cash and  cash  equivalents** | ** ** | **Loans and  receivables** | ** ** | **At  amortised  cost** | ** ** | **At  FVTPL** | ** ** | **Hedging  Derivatives** | ** ** | **Total  Carrying  amount  and  fair value** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|-------------------------|------------|---------------|------------|--------------------------|------------|----------------------------------------------|------------|
| ** **                                     | ** ** | **(kEUR)**                      | ** ** | **(kEUR)**                 | ** ** | **(kEUR)**              | ** ** | **(kEUR)**    | ** ** | **(kEUR)**               | ** ** | **(kEUR)**                                   | ** ** |
| Other current liabilities                      |       | 0                               |       | 0                          |       | 0                       |       | 0             |       | 0                        |       | 0                                            |       |
| Fair value of derivative financial instruments |       | 0                               |       | 0                          |       | 0                       |       | 2,502         |       | 0                        |       | 2,502                                        |       |
| Trade payables                                 |       | 0                               |       | 0                          |       | 21,419                  |       | 0             |       | 0                        |       | 21,419                                       |       |
| Advance payments from customers                |       | 0                               |       | 0                          |       | 87,918                  |       | 0             |       | 1,692                    |       | 89,610                                       |       |
| **Total**                                      | ** ** | **0**                           | ** ** | **0**                      | ** ** | **109,337**             | ** ** | **2,502**     | ** ** | **1,692**                | ** ** | **113,531**                                  | ** ** |

 

F-49

----

 
| **FINANCIAL ASSETS  2008**                     | ** ** | **Cash and  cash  equivalents** | ** ** | **Loans and  receivables** | ** ** | **Held  to-maturity  investments** | ** ** | **At  FVTPL** | ** ** | **Hedging  Derivatives** | ** ** | **Total  Carrying  amount  and  fair value** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|------------------------------------|------------|---------------|------------|--------------------------|------------|----------------------------------------------|------------|
| ** **                                     | ** ** | **(kEUR)**                      | ** ** | **(kEUR)**                 | ** ** | **(kEUR)**                         | ** ** | **(kEUR)**    | ** ** | **(kEUR)**               | ** ** | **(kEUR)**                                   | ** ** |
| Cash and cash equivalents                      |       | 67,462                          |       | 0                          |       | 0                                  |       | 0             |       | 0                        |       | 67,462                                       |       |
| Fair value of derivative financial instruments |       | 0                               |       | 0                          |       | 0                                  |       | 4,389         |       | 0                        |       | 4,389                                        |       |
| Other financial assets                         |       | 0                               |       | 0                          |       | 3,000                              |       | 0             |       | 0                        |       | 3,000                                        |       |
| Other non-current assets                       |       | 0                               |       | 673                        |       | 0                                  |       | 0             |       | 0                        |       | 673                                          |       |
| Trade receivables                              |       | 0                               |       | 38,814                     |       | 0                                  |       | 0             |       | 0                        |       | 38,814                                       |       |
| **Total**                                      | ** ** | **67.462**                      | ** ** | **39.487**                 | ** ** | **3.000**                          | ** ** | **4.389**     | ** ** | **0**                    | ** ** | **114.338**                                  | ** ** |

 

F-50

----

 

**NOTES TOTHE CONSOLIDATED FINANCIAL STATEMENTS**

 

**28.****                              ****Financial instruments**

 
| **FINANCIAL  LIABILITIES 2008**                | ** ** | **Cash and  cash  equivalents** | ** ** | **Loans and  receivables** | ** ** | **At  amortised  cost** | ** ** | **At  FVTPL** | ** ** | **Hedging  Derivatives** | ** ** | **Total  Carrying  amount  and  fair value** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|-------------------------|------------|---------------|------------|--------------------------|------------|----------------------------------------------|------------|
| ** **                                     | ** ** | **(kEUR)**                      | ** ** | **(kEUR)**                 | ** ** | **(kEUR)**              | ** ** | **(kEUR)**    | ** ** | **(kEUR)**               | ** ** | **(kEUR)**                                   | ** ** |
| Other current liabilities                      |       | 0                               |       | 2                          |       | 0                       |       | 0             |       | 0                        |       | 2                                            |       |
| Fair value of derivative financial instruments |       | 0                               |       | 0                          |       | 0                       |       | 2,476         |       | 0                        |       | 2,476                                        |       |
| Trade payables                                 |       | 0                               |       | 0                          |       | 18,782                  |       | 0             |       | 0                        |       | 18,782                                       |       |
| Advance payments from customers                |       | 0                               |       | 0                          |       | 52,566                  |       | 0             |       | 0                        |       | 52,566                                       |       |
| **Total**                                      | ** ** | **0**                           | ** ** | **2**                      | ** ** | **71,348**              | ** ** | **2,476**     | ** ** | **0**                    | ** ** | **73,826**                                   | ** ** |

 

**Derivatives**

 

The fair value is the estimated amount that a financial institutionwould receive or pay to terminate the derivative contracts at the reportingdate, taking into account current exchange rates, volatility and thecredit-worthiness of the counterparties (mark-to-market).

 

**Trade receivables/payables**

 

For trade receivables/payables due within less than one year, the fairvalue is taken to be the nominal value. All other receivables/payables are discountedto determine the fair value.

 

**29.****                              ****Operating leases**

 

**Leases as lessee**

 

Non-cancellable operating lease rentals are payable as follows:

 
| ** ** | ** ** | **(in EUR  thousands)** | ** ** |
|------------|------------|-------------------------|------------|
| 2010       |       | 3,261                   |       |
| 2011       |       | 2,894                   |       |
| 2012       |       | 2,257                   |       |
| 2013       |       | 722                     |       |
| 2014       |       | 418                     |       |
| after 2014 |       | 169                     |       |
|       |       | **9,721**               |       |

 

F-51

----

 

The Company leases certain office and plant facilities, officefurniture and motor vehicles under various operating leases. Under most of thelease commitments for office and plant facilities the Company has options torenew the leasing contracts. The leases typically run for a period between oneand fifteen years. None of the leases include contingent rentals.

 

The expenses for leasing contracts were k€ 2,922, k€ 2,174 and k€ 1,944for 2009, 2008 and 2007 respectively.

 

**30.****                              ****Capital commitments**

 

As of December 31, 2009, the Company had entered into purchasecommitments with suppliers in the amount of k€ 75,759 (2008: k€ 15,886) forpurchases within the next 12 months. Commitments for capital expendituresare k€ 336 (2008: k€ 1,834) as of December 31, 2008.

 

**31.****                              ****Contingencies**

 

The Company is involved in various legal proceedings or can be exposedto a threat of legal proceedings in the normal course of business. TheExecutive Board regularly analyses these matters, considering any possibilitiesof avoiding legal proceedings or of covering potential damages under insurancecontracts and has recognised, where required, appropriate provisions. It is notexpected that such matters will have a material effect on the Company’s netassets, results of operations and financial position.

 

International Rectifier Corporation (“I.R.”), of El Segundo,California, USA filed a complaint on September 8, 2008 in the U.S.District Court for the Central District of California against seven of I.R.’sformer employees, including I.R.’s founder and former CEO Alex Lidow, as wellas five companies, including AIXTRON AG. I.R.’s complaint alleged that I.R.’sseven former employees misappropriated, divulged to a business named EfficientPower Conversion Corporation (“EPCC”) and illegally used trade secrets of I.R.relating to Gallium Nitride Technology (“GaN”). I.R. also alleged that some ofthe companies, including AIXTRON aided the seven main defendants by providingadditional information relevant to the technology at issue. In February 2009,the U.S. District Court dismissed the two U.S. federal claims in the caseagainst the defendants and declined to exercise its discretionary jurisdictionover the remaining claims, which all arose under California law. Having had itslawsuit dismissed in the U.S. District Court, I.R. re-filed essentially thesame lawsuit in California state court in March 2009 based on theCalifornia state claims alone, and alleged five causes of action againstAIXTRON. After multiple rounds of motions to dismiss, I.R. dropped some of itsclaims against the defendants, and the California court dismissed additionalclaims. Two of I.R.’s claims, one for alleged misappropriation of trade secretsand one for alleged breach of contract, remain in the case against AIXTRON AG.The lawsuit seeks USD 61m in damages jointly and severally against all ofthe defendants, plus exemplary damages and attorneys’ fees and legal costsagainst AIXTRON AG, and punitive damages against other defendants.

 

AIXTRON AG fully rejects the allegations contained in I.R.’s Californialawsuit and is vigorously defending itself against the two remainingclaims raised in I.R.’s California action against AIXTRON AG.

 

F-52

----

 

Furthermore, AIXTRON AG filed an action in the Aachen Landgericht inGermany (case no. 41 O 121/08) for a negative declaratoryjudgment against I.R. with the aim of establishing in Germany, and in the U.S.,that all allegations and claims that I.R. raised against AIXTRON AG areunfounded (the “German action”). In the German action, I.R. counterclaimed forinjunctive relief and damages. In April 2009, the Aachen Landgerichtissued a judgment in favor of AIXTRON AG and against I.R. on all of AIXTRON AG’sclaims and all of I.R.’s counterclaims in the German action. The time for I.R.to appeal from the judgment in the German action has expired, and the judgmentin favor of AIXTRON AG and against I.R. in the German action is now final andres judicata.

 

AIXTRON AG reserves the right to seek recovery from I.R. of any and allcosts and damages that might result from I.R.’s unjustified allegationsand the proceedings brought by I.R. against AIXTRON AG.

 

**32.****                              ****Related parties**

 

**Identity of related parties**

 

Related parties of the Company are members of the Executive Board andmembers of the supervisory board.

 

**Remuneration of Executive Board**

 

Active members of the executive board are remunerated as follows:

 
| ** **                   | ** ** | **2009**                | ** ** | **2008**  | ** ** |
|------------------------------|------------|-------------------------|------------|-----------|------------|
| ** **                   | ** ** | **(in EUR  thousands)** | ** ** |
| Short-term employee benefits |       | 5,149                   |       | 2,507     |       |
| **Total cash remuneration**  | ** ** | **5,149**               | ** ** | **2,507** | ** ** |
| Share-based payment          |       | 1,344                   |       | 276       |       |
| **Total remuneration**       | ** ** | **6,493**               | ** ** | **2,783** | ** ** |

 

The following table shows the remuneration of the Executive Board foreach individual member in 2009:

 
| **Executive  Board Member** | ** ** | **Fixed  remuneration** | ** ** | **Variable  remuneration** | ** ** | **Total  monetary  Remuneration** | ** ** | **Number  of granted  Options** | ** ** | **Option  Value at  grant date** | ** ** | **Total  Remuneration** | ** ** |
|-----------------------------|------------|-------------------------|------------|----------------------------|------------|-----------------------------------|------------|---------------------------------|------------|----------------------------------|------------|-------------------------|------------|
| ** **                  | ** ** | **(kEUR)**              | ** ** | **(kEUR)**                 | ** ** | **(kEUR)**                        | ** ** | **(No.)**                       | ** ** | **(kEUR)**                       | ** ** | **(kEUR)**              | ** ** |
| Paul Hyland                 |       | 434                     |       | 1,791                      |       | 2,225                             |       | 52,000                          |       | 448                              |       | 2,673                   |       |
| Wolfgang Breme              |       | 309                     |       | 1,119                      |       | 1,428                             |       | 52,000                          |       | 448                              |       | 1,876                   |       |
| Dr. Bernd Schulte      |       | 377                     |       | 1,119                      |       | 1,496                             |       | 52,000                          |       | 448                              |       | 1,944                   |       |
| **Total**                   | ** ** | **1,120**               | ** ** | **4,029**                  | ** ** | **5,149**                         | ** ** | **156,000**                     | ** ** | **1,344**                        | ** ** | **6,493**               | ** ** |

 

F-53

----

 

**Remunerationof Supervisory Board**

 

Remuneration of the members of the Supervisory Board consists of thefollowing:

 
| ** **                                   | ** ** | **2009**                | ** ** | **2008** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                   | ** ** | **(in EUR  thousands)** | ** ** |
| Fixed remuneration                           |       | 153                     |       | 153      |       |
| Variable remuneration                        |       | 384                     |       | 264      |       |
| Attendance fee                               |       | 30                      |       | 30       |       |
| **Remuneration of Supervisory Board  total** | ** ** | **567**                 | ** ** | **447**  | ** ** |

 

The following table shows the remuneration of the Supervisory Board in2009 for each individual member:

 
| **Supervisory Board Member**                                                | ** ** | **Fixed** | ** ** | **Variable** | ** ** | **Attendance  Fee** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------|------------|--------------|------------|---------------------|------------|-----------|------------|
| Kim Schindelhauer* (Chairman of the Supervisory  Board)                     |       | 54        |       | 136          |       | 6                   | ** ** | **196**   | ** ** |
| Dr. Holger Jürgensen* (Deputy Chairman of the  Supervisory Board) |       | 27        |       | 68           |       | 6                   | ** ** | **101**   | ** ** |
| Prof. Dr. Wolfgang Blättchen* (Chairman of  the Audit Committee)  |       | 18        |       | 45           |       | 12                  | ** ** | **75**    | ** ** |
| Karl-Hermann Kuklies                                                        |       | 18        |       | 45           |       | 0                   | ** ** | **63**    | ** ** |
| Prof. Dr. Rüdiger von Rosen                                       |       | 18        |       | 45           |       | 0                   | ** ** | **63**    | ** ** |
| Joachim Simmroß*                                                       |       | 18        |       | 45           |       | 6                   | ** ** | **69**    | ** ** |
|                                                                        | ** ** | **153**   |       | 384          |       | 30                  | ** ** | **567**   | ** ** |

 

----

*                                         member of the audit committee

 

The remuneration of the Supervisory Board is included in otheroperating expenses (see note 7).

 

The Remuneration Report which is included in the audited CorporateGovernance report contains further details regarding the remuneration ofExecutive Board and Supervisory Board (see page 22 of the Annual Report).

 

**33.****                              ****Consolidated entities**

 

AIXTRON AG controls the following significant subsidiaries:

 

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| ** **                        | ** ** | ** **                | ** ** | **Share of  capital in %** | ** ** |
|-----------------------------------|------------|---------------------------|------------|----------------------------|------------|
| ** **                        | ** ** | **Country**               | ** ** | **2009**                   | ** ** | **2008** | ** ** |
| AIXTRON Inc                       |       | USA                       |       | 100                        |       | 100 |   |
| AIXTRON Ltd.                 |       | England &  Wales |       | 100                        |       | 100 |   |
| AIXTRON Korea Co. Ltd.  |       | South  Korea              |       | 100                        |       | 100 |   |
| AIXTRON Taiwan Co. Ltd. |       | Taiwan                    |       | 100                        |       | 100 |   |
| AIXTRON AB                        |       | Sweden                    |       | 100                        |       | 100 |   |
| AIXTRON KK                        |       | Japan                     |       | 100                        |       | 100 |   |
| Genus trust *                     |       | USA                       |       | n.a.                       |       | n.a. |   |

 

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*                                         The shares in Genus trust are attributed , asbeneficial owner, to AIXTRON, as control exists due to the trust relationshipwith AIXTRON AG (see note 22).

 

**34.****                              ****Events after the reportingperiod**

 

There are no events which have occurred after the balance sheet date,of which the directors have knowledge, which would result in a differentassessment of the Company’s net assets, results of operation and financialposition.

 

**35.****                              ****Auditors’ fees**

 

Fees expensed in the income statement for the services of the groupauditor Deloitte & Touche are as follows:

 
| ** **                      | ** ** | **2009**                | ** ** | **2008** | ** ** |
|---------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                      | ** ** | **(in EUR  thousands)** | ** ** |
| for audit                       |       | 640                     |       | 691      |       |
| for other confirmation services |       | 94                      |       | 56       |       |
| for tax advisory services       |       | 142                     |       | 208      |       |
| for other services              |       | 9                       |       | 2        |       |
|                            | ** ** | **885**                 | ** ** | **957**  | ** ** |

 

Included in the total amount of fees are fees for the Group auditorDeloitte & Touche GmbH, Wirtschaftsprüfungsgesellschaft,Duesseldorf, in the amount of k€ 409 for audit (2008: k€ 437),k€ 94 for other confirmation services (2008: k€ 56), k€ 113 fortax services (2008: k€ 59) and k€ 9 for other services (2008:k€ 2).

 

**36.****                              ****Employees**

 

Compared to last year, the average number of employees during thecurrent year was as follows:

 

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**Employees by Function**

 
| ** **                          | ** ** | **2009**                              | ** ** | **2008** | ** ** |
|-------------------------------------|------------|---------------------------------------|------------|----------|------------|
| ** **                          | ** ** | **(average  number   for  the year)** | ** ** |
| Sales and Service                   |       | 208                                   |       | 208      |       |
| Research and Development            |       | 197                                   |       | 195      |       |
| Manufacturing                       |       | 141                                   |       | 134      |       |
| Administration                      |       | 90                                    |       | 80       |       |
| **Employees (§ 314 HGB)** | ** ** | **636**                               | ** ** | **617**  | ** ** |
| Executive board members             |       | 3                                     |       | 3        |       |
| Apprentices                         |       | 16                                    |       | 11       |       |
| **Total Employees**                 | ** ** | **655**                               | ** ** | **631**  | ** ** |

 

**37.****                              ****Statement of compliance withthe German Corporate Governance Code**

 

In 2009, Executive and Supervisory Boards have made the declaration ofcompliance in accordance with Section 161 of AktG and this is permanentlyavailable to shareholders on the Company’s web site www.aixtron.com.

 

**38.****                              ****Supervisory Board andExecutive Board**

 

Composition of the Supervisory Board as of December 31, 2009

 

·                  Dipl.-Kfm. Kim Schindelhauer, Aachen,businessman (Chairman of the Supervisory Board since 2002)

 

·                  Dr. Holger Jürgensen, Aachen, physicist(Deputy Chairman of the Supervisory Board since 2002)

 

·                  Prof. Dr. Wolfgang Blättchen, Leonberg,business consultant, Executive Board of Blättchen & Partner AG,Leonberg (member of the Supervisory Board since 1998)

 

·                  Membership of Supervisory Boards andcontrolling bodies:

 

·                  HAUBROK AG, Düsseldorf—Deputy Chairman of theSupervisory Board—

 

·                  APCOA Parking AG,Leinfelden-Echterndingen—member of the Supervisory Board—

 

·                  Datagroup IT Services Holding AG,Pliezhausen—member of the Supervisory Board

 

·                  Mr. Karl-Hermann Kuklies, Duisburg,businessman (member of the Supervisory Board since 1997)

 

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·                  Prof. Dr. Rüdiger von Rosen,Frankfurt/Main, businessman, Deutsches Aktieninstitut e.V.,Frankfurt/Main—Managing member of the Executive Board (member of theSupervisory Board since 2002)

 

·                  Membership of Supervisory Boards andcontrolling bodies:

 

·                  PriceWaterhouseCoopers AG,Wirtschaftsprüfungsgesellschaft, Frankfurt/Main—member of the SupervisoryBoard—

 

·                  Prime Time Entertainment AG, Mörfelden—DeputyChairman of the Supervisory Board—

 

·                  Dipl.-Kfm. Joachim Simmroß, Hanover,businessman (member of the Supervisory Board since 1997)

 

·                  Membership of Supervisory Boards andcontrolling bodies:

 

·                  CommerzUnternehmensbeteiligungs-Aktiengesellschaft, Frankfurt/Main—member of theSupervisory Board—

 

·                  WeHaCo UnternehmensbeteiligungsgesellschaftmbH, Hanover—member of the Advisory Board—

 

·                  BAG Health Care GmbH, Lich—member of theAdvisory Board—

 

·                  HANNOVER Finanz GmbH Beteiligungen undKapitalanlagen, Hanover—member of the Advisory Board—(until 06.30.2009)

 

·                  Astyx GmbH, Ottobrunn—member of theAdvisory Board—

 

The following gentlemen are members of the Company’s Executive Board:

 

·                  Paul Hyland, Aachen, businessman, Chairman,President and Chief Executive Officer since 2002

 

·                  Dr. Bernd Schulte, Aachen, physicist,Executive Vice President and Chief Operating Officer since 2002

 

·                  Dipl.-Kfm. Wolfgang Breme, Aachen,businessman, Executive Vice President and Chief Financial Officer since 2005

 

·                  Membership of Supervisory Boards andcontrolling bodies:

 

·                  Deutsches Aktieninstitut e.V.,Frankfurt/Main—member of the Executive Board—

 

**39.****                              ****Critical accountingjudgments and key sources of estimation and uncertainty**

 

The preparation of AIXTRON’s Consolidated Financial Statements requiresthe Company to make certain estimates, judgments and assumptions that theCompany believes are reasonable based upon the information available. Theseestimates and assumptions affect the reported amounts and 

 

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relateddisclosures and are made in order to fairly present the Company’s financialposition and results of operations. The following accounting policies aresignificantly impacted by these estimates and judgments that AIXTRON believesare the most critical to aid in fully understanding and evaluating its reportedfinancial results include the following:

 

Revenue Recognition

 

Revenue is generally recognised in two stages for the supply ofequipment to customers, partly on delivery and partly on final installation andacceptance (see note 2 (o)). The Company believes, based on pastexperience, that this method of recognising revenue fairly states the revenuesof the Company. The judgements made by management include an assessment of thepoint at which substantially all of the risks and rewards of ownership havepassed to the customer.

 

Goodwill

 

As stated in the accounting policies, the Company tests at leastannually whether goodwill has suffered impairment. If there is an indication,the recoverable amount of the cash generating unit has to be estimated. This isthe greater of the fair value less costs to sell and the value in use. Thedetermination of the value in use involves making judgements and estimatesrelated to the projection and discounting of future cash flows. Although theCompany believes the assumptions used to calculate recoverable amount areappropriate, any unforeseen changes in these assumptions could result inimpairment charges to goodwill which could adversely affect the futurefinancial position and opera-ting results.

 

Valuation of Inventories

 

Inventories are stated at the lower of cost and net realisable value.This requires the Company to make judgments concerning obsolescence ofmaterials. This evaluation requires estimates, including both forecastedproduct demand and pricing environment, both of which may be susceptible tosignificant change.

 

In future periods, write-downs of inventory may be necessary due to (1) reduceddemand in the markets in which the Company operates, (2) technologicalobsolescence due to rapid developments of new products and technologicalimprovements, or (3) changes in economic or other events and conditionsthat impact the market price for the Company’s products. These factors couldresult in adjustment to the valuation of inventory in future periods, andsignificantly impact the Company’s future operating results.

 

Income Taxes

 

At each balance sheet date, the Company assesses whether therealisation of future tax benefits is sufficiently probable to recognisedeferred tax assets. This assessment requires the exercise of judgement on thepart of management with respect to future taxable income. The recorded amountof total deferred tax assets could be reduced if estimates of projected futuretaxable income are lowered, or if changes in current tax regulations areenacted that impose restrictions on the timing or extent of the Company’sability to utilize future tax benefits.

 

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