<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              ---------------------

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

    For the quarterly period ended December 31, 2000.

                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

    For the period from ________ to ________.

    Commission File Number 0-11348

                           SILICON VALLEY GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
 <S>                                   <C>
         DELAWARE                                 94-2264681
 (State of incorporation)              (IRS Employer Identification No.)
</TABLE>

             101 METRO DRIVE, SUITE #400, SAN JOSE, CALIFORNIA 95110
               (Address of principal executive offices) (Zip Code)

                                 (408) 441-6700
              (Registrant's telephone number, including area code)

                                      NONE
      (Former name, former address and former fiscal year, if changed since
                                  last report)

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

        The number of shares outstanding of the Registrant's Common Stock as of
January 26, 2001 was 34,892,475.

================================================================================



<PAGE>   2

                           SILICON VALLEY GROUP, INC.

                                      INDEX


<TABLE>
<CAPTION>
                                                                     PAGE NO.
                                                                     --------
        <S>                                                          <C>
PART I. FINANCIAL INFORMATION

        Consolidated Condensed Balance Sheets as of December 31,
        2000 and September 30, 2000                                      3

        Consolidated Condensed Statements of Income for the
        Quarters Ended December 31, 2000 and 1999                        4

        Consolidated Condensed Statements of Cash Flows for
        the Quarters Ended December 31, 2000 and 1999                    5

        Notes to Consolidated Condensed Financial Statements             6

        Management's Discussion and Analysis of Financial
        Condition and Results of Operations                              9

        Quantitative and Qualitative Disclosures about Market Risk      21


PART II.  OTHER INFORMATION                                             22


SIGNATURES                                                              24
</TABLE>



                                        2
<PAGE>   3

PART I.  FINANCIAL INFORMATION
SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)          DECEMBER 31,     SEPTEMBER 30,
                                                                2000             2000
                                                                ----             ----
                                                            (UNAUDITED)
<S>                                                         <C>              <C>
ASSETS

Current Assets:
     Cash and equivalents                                     $  79,934       $ 105,954
     Short-term investments                                      11,005          20,987
     Accounts receivable (net of allowance of $5,151 and
         $4,973 respectively)                                   252,707         218,936
     Inventories                                                322,692         287,594
     Prepaid expenses and other assets                           13,571          12,269
     Deferred income taxes                                       30,168          31,789
                                                              ---------       ---------
          Total current assets                                  710,077         677,529
Property and equipment, net                                     201,010         198,697
Deposits and other assets                                        23,369          14,100
Goodwill, net                                                     2,007           2,046
                                                              ---------       ---------
Total                                                         $ 936,463       $ 892,372
                                                              =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                         $  72,152       $  65,640
     Accrued liabilities                                        163,031         153,119
     Current portion of long-term debt                            1,317           1,285
     Income taxes payable                                        12,198          11,974
                                                              ---------       ---------
          Total current liabilities                             248,698         232,018
                                                              ---------       ---------
Long-term debt                                                   23,658          24,768
                                                              ---------       ---------
Deferred and other liabilities                                   14,385          10,393
                                                              ---------       ---------
Stockholders' Equity:
     Convertible preferred stock - shares
          Outstanding: 15,000                                    14,976          14,976
     Common stock - shares outstanding:
          December 31, 2000: 34,829,350
          September 30, 2000: 34,547,167                        436,154         429,986
     Retained earnings                                          201,054         181,749
     Accumulated other comprehensive loss                        (2,462)         (1,518)
                                                              ---------       ---------
     Total stockholders' equity                                 649,722         625,193
                                                              ---------       ---------
TOTAL                                                         $ 936,463       $ 892,372
                                                              =========       =========
</TABLE>

See accompanying notes to consolidated condensed financial statements.



                                        3
<PAGE>   4

SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
                                                     QUARTERS ENDED
                                                      DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)          2000             1999
                                                  ----             ----
<S>                                             <C>             <C>
Net sales                                       $ 255,048       $ 179,801
Cost of sales                                     148,481         104,780
                                                ---------       ---------
Gross profit                                      106,567          75,021
Operating expenses:
     Research, development and related
            engineering                            34,277          30,139
     Marketing, general and administrative         43,295          36,392
                                                ---------       ---------
Operating income                                   28,995           8,490
Interest and other income, net                        682           2,290
Interest expense                                     (427)           (713)
                                                ---------       ---------
Income before income taxes                         29,250          10,067
Provision for income taxes                          9,945           3,825
                                                ---------       ---------
Net income                                      $  19,305       $   6,242
                                                =========       =========
Net income per share - basic                    $    0.56       $    0.19
                                                =========       =========
Shares used in per share
     computations - basic                          34,688          33,337
                                                =========       =========
Net income per share - diluted                  $    0.52       $    0.18
                                                =========       =========
Shares used in per share
     computations - diluted                        37,273          34,637
                                                =========       =========
</TABLE>


See accompanying notes to consolidated condensed financial statements.



                                        4
<PAGE>   5

SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                        QUARTERS ENDED
                                                                         DECEMBER 31,
(IN THOUSANDS)                                                       2000             1999
                                                                     ----             ----
<S>                                                                <C>             <C>
Cash flows from operating activities:
   Net income                                                      $  19,305       $   6,242
   Reconciliation to net cash provided by (used for)
   operating activities:
     Depreciation and amortization                                    13,192          12,087
     Amortization of goodwill                                             39              70
     Deferred income taxes                                             1,621           3,419
     Tax benefit of stock option transactions                          1,840              --
     Changes in assets and liabilities:
       Accounts receivable                                           (33,771)         21,418
       Refundable income taxes                                            --             854
       Inventories                                                   (35,098)         (8,732)
       Prepaid expenses and other assets                              (1,302)         (1,620)
       Deposits and other assets                                      (9,269)           (787)
       Accounts payable                                                6,512           3,230
       Accrued liabilities                                            13,518           5,308
       Income taxes payable                                              224            (607)
                                                                   ---------       ---------
     Net cash provided by (used for) operating activities            (23,189)         40,882
                                                                   ---------       ---------
Cash flows from investing activities:
  Purchases of short-term investments, available for sale                 --          (9,039)
  Maturities of short-term investments, available for sale             9,386           6,585
  Purchases of property and equipment                                (16,239)         (9,782)
                                                                   ---------       ---------
  Net cash used for investing activities                              (6,853)        (12,236)
                                                                   ---------       ---------

Cash flows from financing activities:
  Sale of common stock                                                 4,328              68
  Repayment of debt                                                     (271)           (318)
                                                                   ---------       ---------
  Net cash provided by (used for) financing activities                 4,057            (250)
                                                                   ---------       ---------
Effect of exchange rate changes on cash                                  (35)            (62)
                                                                   ---------       ---------
Increase (decrease) in cash and equivalents                          (26,020)         28,334

Cash and equivalents:
  Beginning of period                                                105,954          98,278
                                                                   ---------       ---------
  End of period                                                    $  79,934       $ 126,612
                                                                   =========       =========
</TABLE>

See accompanying notes to consolidated condensed financial statements.



                                        5
<PAGE>   6

SILICON VALLEY GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The accompanying consolidated condensed financial statements have been prepared
by the Company without audit and reflect all adjustments, consisting only of
normal recurring adjustments, which in the opinion of management are necessary
to present fairly the financial position and the results of operations for the
interim periods. The statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X. The interim
condensed consolidated financial statements and notes thereto should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 2000. Results for fiscal 2001 interim periods are not necessarily
indicative of results to be expected for the fiscal year ending September 30,
2001.

The Company uses a 52-53 week fiscal year ending on the Friday closest to
September 30. Both fiscal 2001 and 2000 contain 52 weeks.

The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries, after elimination of significant intercompany
transactions and balances. All operating units are aggregated into one segment
because of their similarities in the nature of product and services, production
processes, types of customers and distribution method.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
condensed financial statements and accompanying notes. The Company regularly
assesses those estimates and, while actual results may differ, management
believes that the estimates are reasonable.


2. PENDING MERGER WITH ASM LITHOGRAPHY HOLDING N.V.

On October 1, 2000, the Company signed a definitive merger agreement with ASM
Lithography Holding N.V. ("ASML"), whereby ASML will acquire the Company in an
all stock transaction. Under the terms of the merger agreement, the Company will
become a wholly owned subsidiary of ASML, and the Company's stockholders will
receive 1.286 ordinary shares of ASML for each share of the Company's common
stock. The transaction is intended to be accounted for as a pooling of
interests. On November 6, 2000, the Company received early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
clearing the merger for United States antitrust purposes and on February 7,
2001, the stockholders of the Company approved the merger. Consummation of the
merger remains subject to completion of the Exon-Florio review process and the
satisfaction of other customary closing conditions. The merger is expected to
close during the first half of calendar 2001.



                                        6
<PAGE>   7

3. INVENTORIES

Inventories are comprised of:

<TABLE>
<CAPTION>
                              DECEMBER 31,    SEPTEMBER 30,
                                  2000            2000
                                  ----            ----
                                   (IN THOUSANDS)
<S>                           <C>             <C>
    Raw materials               $156,297        $128,467
    Work-in-process              159,303         152,393
    Finished goods                 7,092           6,734
                                --------        --------
                                $322,692        $287,594
                                ========        ========
</TABLE>

4. NET INCOME PER SHARE

Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted net
income per share reflects the potential dilution that could occur if securities
to issue common stock (convertible preferred stock and common stock options)
were exercised or converted into common stock.

Weighted average options to purchase 1,573,000 shares of common stock at a
weighted average exercise price of $29.89 per share were outstanding at December
31, 2000 but were not included in the computation of diluted earnings per share
because their exercise price exceeded the market price and therefore, the effect
would be antidilutive.

The following table sets forth the computation of basic and diluted net income
per share:

<TABLE>
<CAPTION>
                                                            QUARTERS ENDED
                                                              DECEMBER 31,
      (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)             2000           1999
                                                           ----           ----
<S>                                                      <C>            <C>
   Numerator:
     Net income                                          $19,305        $ 6,242
                                                         -------        -------
   Denominator:
     Denominator for basic net income per share -
       Weighted average shares outstanding                34,688         33,337
     Employee stock options and convertible
       preferred Stock                                     2,585          1,300
                                                         -------        -------
   Denominator for diluted net income per share -
     adjusted weighted average shares outstanding         37,273         34,637
                                                         =======        =======
   Basic net income per share                            $  0.56        $  0.19
                                                         =======        =======
   Diluted net income per share                          $  0.52        $  0.18
                                                         =======        =======
</TABLE>


5. REVENUE RECOGNITION

The Company recognizes revenue from sales of products based on existing
technologies when the customer takes title to the product, generally at the time
of shipment. Costs to install equipment in the customers' facilities are accrued
at the time the product revenue is recognized. The Company recognizes revenue
prior to installation as the installation costs, and the related estimated fair
value, are insignificant relative to the sales price and gross profit of the
transaction. In addition, the Company has a long history of successful
installations within a short timeframe of delivery and the cost to complete
installation does not vary materially from one instance to another. Revenue is
deferred on initial shipments of new products based on new technologies until
after customer acceptance.

During the quarters ended December 31, 2000 and 1999, the Company recognized net
sales of approximately $31,000,000 and $4,000,000 from a customer who accepted
and took title to the related equipment and agreed to



                                        7
<PAGE>   8

normal payment terms, but requested that the Company store the equipment until
future shipment dates. At December 31, 2000 the Company was storing
approximately $31,000,000 of such equipment with scheduled shipment dates
through April 2001. Product liability and installation costs are accrued in the
period that sales are recognized.


6. COMPREHENSIVE INCOME

Components of comprehensive income include net income , unrealized gains
(losses) on investments, unrealized gains (losses) on derivatives and foreign
currency translation adjustments. For the quarters ended December 31, 2000 and
1999, the components of total comprehensive income are as follows:

<TABLE>
<CAPTION>
                                                         QUARTERS ENDED
                                                          DECEMBER 31,
(IN THOUSANDS)                                        2000             1999
                                                      ----             ----
<S>                                                 <C>              <C>
   Net income                                       $ 19,305         $  6,242
   Net unrealized gain (loss) on investments            (596)             312
   Net unrealized (loss) on derivatives
   and foreign currency translation adjustments         (348)             (39)
                                                    --------         --------
   Other comprehensive income                           (944)             273
                                                    --------         --------
   Total comprehensive income                       $ 18,361         $  6,515
                                                    ========         ========
</TABLE>

7. DERIVATIVE FINANCIAL INSTRUMENTS

Effective October 1, 1999, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires that all
derivative financial instruments be recognized in the financial statements and
measured at fair value. Changes in the fair value are recognized periodically in
either income or stockholders' equity as a component of comprehensive income
(loss), depending on whether the derivative is being used to hedge changes in
fair value or cash flows. The adoption of SFAS 133 did not have a material
effect on the Company's financial results. The Company principally uses
derivative financial instruments to manage foreign exchange and interest rate
risks. The Company's risk management policy is to enter into such contracts only
when pre-existing or probable risk exists that the Company wishes to reduce or
eliminate. No derivative contracts are entered into for speculative purposes.

There were no gains or losses due to hedge ineffectiveness for the quarters
ended December 31, 2000 and 1999.


8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements". SAB 101 provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements of all public registrants. SAB
101, as amended, requires implementation by the Company no later than the fourth
quarter of fiscal 2001. Accordingly, any revenues that do not meet SAB 101's
guidance will be deferred and recorded as revenue in future periods, including
such revenue previously reported for the first three quarters of fiscal 2001
that do not meet the criteria of SAB 101. Changes in the Company's revenue
recognition policy resulting from the implementation of SAB 101 would be
reported as a change in accounting principle as of October 1, 2000.

The Company has not yet determined the effect of adopting SAB 101 on its
financial statements because this will require information regarding the number
of incomplete installations as of December 31, 2000 and September 30, 2001. Such
information for September 30, 2001 can not be reasonably estimated at this time.



                                        8
<PAGE>   9

                           SILICON VALLEY GROUP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are subject to
certain risks and uncertainties, including those discussed below, as well as
risk factors included in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2000, that could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. Forward-looking statements are indicated by an asterisk (*) following
the sentence in which such statement is made. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

The semiconductor equipment industry is a cyclical business frequently caused by
oversupply of product from our customers, progression of equipment technology,
global and or regional economic events and other factors. Recently we have seen
market uncertainty in the semiconductor industry as we have received requests
from customers to reschedule orders and to a lesser extent to cancel orders.
Although there is concern for the short-term strength of semiconductor and
semiconductor equipment business, we believe the industry will continue to
expand, but not at the growth rate experienced in the past year.* However, we
can not assure you that the semiconductor industry will not experience a
prolonged period of order reschedules and cancellations which could negatively
impact our growth, profitability and shipments for fiscal 2001.* Please review
the section entitled "Risks Inherent in Our Business" for a discussion of the
factors which could impact industry strength and our profitability.

On October 2, 2000, we announced that we had entered into an Agreement and Plan
of Merger with ASM Lithography, Inc. ("ASML"). To date, we have received early
termination of the Hart-Scott-Rodino antitrust waiting period and approval by
our stockholders of the merger. We expect to complete the transaction with ASML
sometime in the first half of 2001. Completion of the transaction is subject to
certain regulatory approvals related to Exon-Florio and other customary closing
conditions.

NET SALES

Our net sales for the first fiscal quarter ended December 31, 2000 were
$255,048,000, an increase of 42% over first quarter net sales for the preceding
fiscal year of $179,801,000 and an increase of 6% over fourth quarter fiscal
2000 sales of $239,904,000. The increase in net sales compared to the first
quarter of fiscal 2000 is primarily the result of increased shipments of
Lithography, Track and Thermal products. The increase in net sales over the
preceding quarter is principally the result of increased Lithography shipments
offset in part by reduced Thermal shipments.

Our international net sales (based on shipment destination) as a percentage of
total net sales for the quarters ended December 31, 2000, December 31, 1999 and
September 30, 2000 were 28%, 61% and 39%, respectively. The decrease in our
international net sales during the first quarter of fiscal 2001 primarily
relates to increased domestic shipments of Lithography products and reduced
shipments of Thermal products to Asia Pacific.

During the quarters ended December 31, 2000 and 1999, we recognized
approximately $31,000,000 and $4,000,000 respectively of net sales to one
customer who accepted and took title to the related equipment, and agreed to
normal payment terms, but requested that we store the equipment until
predetermined shipment dates. At



                                        9
<PAGE>   10

December 31, 2000, we were storing approximately $31,00,000 of such equipment
from this customer. The customer has scheduled the shipment dates for this
equipment through April 2001.

We rely on a few customers for a substantial percentage of our net sales. In
fiscal 2000, our largest customer accounted for 49% of net sales compared to 56%
in fiscal 1999. We believe for the foreseeable future we will continue to rely
on a few major customers for a substantial percentage of our net sales.*

BOOKINGS

New bookings during the first quarter of fiscal 2001 were $232,256,000, a 13%
increase over new bookings of $205,028,000 during the first quarter of fiscal
2000 and a 29% decrease from new bookings of $325,074,000 during our preceding
quarter. Our backlog at December 31, 2000 was $681,150,000 compared to
$382,682,000 at December 31,1999 and $733,542,000 at September 30, 2000. Our
backlog at December 31, 2000 is net of customer reschedules and cancellations of
approximately $30,000,000. Our backlog consists of only those orders to which a
purchase order number has been assigned by our customer, with substantially all
of the terms and conditions agreed upon and for which delivery have been
specified within twelve months. Our backlog at December 31, 2000 includes orders
for 83 Micrascan photolithography systems. Additionally, we have orders for 28
Micrascan systems with scheduled delivery dates outside our twelve-month backlog
window.

GROSS MARGIN

Our gross margin was 42% during the first quarters of fiscal years 2001 and
2000, compared to 44% during the fourth quarter of fiscal 2000. The decline in
our gross margin during the first quarter when compared to our gross margin
during the fourth quarter of the prior fiscal year is primarily the result of
increased Lithography product material and related costs.


RESEARCH AND DEVELOPMENT

Our research, development and related engineering ("R&D") expenses consist
primarily of personnel, material and outside contract costs associated with our
product development activities and are net of funding we receive from outside
parties under various development agreements. Funding is typically payable upon
our attainment of one or more development milestones specified in the agreement.
Neither our spending, nor our recognition of the funding related to the
development milestones is ratable over the term of the agreements.

During the first quarter of fiscal 2001, our R&D expenses were $34,277,000 (13%
of net sales), compared to $30,139,000 (17% of net sales) during the year
earlier quarter and $34,254,000 (14% of net sales) during the fourth quarter of
fiscal 2000. Such R&D amounts are net of funding we recognized under joint
development agreements of $1,242,000, $2,370,000 and $1,282,000 during the first
quarter of fiscal 2001 and the first and fourth quarters of fiscal 2000,
respectively. Our R&D expense increased over the first quarter of fiscal 2000
primarily due to reduced funding having been recognized against R&D expenses and
increased spending on Thermal, Track and Lithography new product initiatives.
The decrease in R&D as a percentage of net sales primarily reflects the
significant period-to-period increase in net sales.


MARKETING , GENERAL AND ADMINISTRATIVE

Our marketing, general and administrative ("MG&A") expenses consist primarily of
product support, administrative and selling and marketing costs. MG&A expenses
were $43,295,000 (17% of net sales) during the first quarter of fiscal 2001,
compared to $36,392,000 (20% of net sales) and $47,676,000 (20% of net sales)
during the first and fourth quarters of fiscal 2000, respectively. The increase
in MG&A over the first quarter of the preceding fiscal year is primarily due to
product support costs required to support increased shipments and



                                       10
<PAGE>   11

increased expenses related to the pending merger with ASML. The decrease in our
MG&A from the fourth quarter of fiscal 2000 is primarily the result of lower
administrative expenses due in part to a favorable Value Added Tax settlement
partially offset by increased product support costs. The decrease in our MG&A as
a percentage of net sales primarily reflects the significant period-to-period
increase in net sales.

INTEREST AND OTHER INCOME

Interest and other income for our first quarter of fiscal 2001 was $682,000
compared to $2,290,000 during the first quarter of fiscal 2000 and $1,735,000
during the fourth quarter of fiscal 2000. The decrease in interest and other
income between fiscal 2001 and fiscal 2000 periods is primarily due to foreign
exchange losses resulting from strengthening of the U.S. dollar against the
Japanese Yen and the Euro.

INTEREST EXPENSE

Our interest expense during the first quarter of fiscal 2001 was $427,000
compared to $713,000 during the first quarter of fiscal 2000 and $309,000 during
the fourth quarter of fiscal 2000.

TAX EXPENSE

We recorded a 34% tax provision during the first quarter of fiscal 2001,
compared to a 36% provision during fiscal 2000. Changes in our effective tax
rate are due primarily to expected changes in our profitability and geographic
distribution of our pretax income.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents and short-term investments at December 31, 2000
totaled $90,939,000, a decrease of $36,002,000 from our September 30, 2000
balance of $126,941,000.

Our operating activities consumed $23,189,000 in cash during the quarter ended
December 31, 2000. Cash utilized in operations result primarily from increased
accounts receivable and inventory balances offset in part by net income and
increased accrued liabilities and payables.

We used $6,853,000 in net cash for investing activities during the quarter ended
December 31, 2000 resulting primarily from capital equipment purchases of
$16,239,000 offset in part by maturities of temporary investments of $9,386,000.

Net cash provided by financing activities was $4,057,000 during the quarter
ended December 31, 2000 resulting primarily from proceeds due to the exercise of
employee stock options.

In connection with the proposed merger with ASM Lithography, we would be
obligated to make payments under certain employment agreements with four
officers totaling approximately $15 million; however, three of these officers
have entered into separation and consulting agreements with ASM Lithography that
supercede our obligations under the employment agreements.

We have an unsecured $150,000,000 bank revolving line of credit agreement. Our
line of credit agreement was amended to extend its expiration until September
30, 2001. Advances under the line bear interest at the bank's prime rate or
0.65% to 1.50% over LIBOR. Our agreement, as amended, includes covenants
regarding liquidity, profitability, leverage, and coverage of certain charges
and minimum net worth and prohibits the payment of cash dividends to our
shareholders. We are in compliance with the covenants as amended. At December
31, 2000, we had outstanding irrevocable letters of credit for $8,000,000 under
this line.



                                       11
<PAGE>   12

We believe that we have sufficient working capital and available bank credit to
sustain our operations and research and development activities, to the extent
such activities are not funded by third parties for the next twelve months.*

RISKS INHERENT IN OUR BUSINESS

OUR OPERATING RESULTS WILL FLUCTUATE.

We have previously experienced quarterly fluctuations in our operating results.
Our operating results may in the future vary from quarter to quarter due to a
number of factors, not all of which we control. These factors include:

        -   our ability to introduce new products

        -   the mix of our product shipments

        -   our sales volume

        -   our geographic mix of shipments

        -   our competitors' activities

        -   merger and acquisition activity

        -   international events

        -   economic conditions affecting our customers' demand

        -   exchange rate fluctuations

        -   difficulties obtaining materials or components on a timely basis

Many of these factors are beyond out control and, whether or not we manage these
risks effectively, we will likely experience variability in our quarterly
operating results in the future.


WE RELY ON A FEW CUSTOMERS AND IF WE LOSE ANY OF THESE CUSTOMERS OR IF ANY OF
THESE CUSTOMERS CANCEL OR DELAY SHIPMENTS OF OUR PRODUCTS, OUR OPERATING RESULTS
WILL BE MATERIALLY ADVERSELY AFFECTED.

We rely on a limited number of customers for the majority of our net sales. In
fiscal 2000, our largest customer accounted for 49% of our net sales. We believe
that, for the foreseeable future, we will continue to rely on a limited number
of customers for the majority of our net sales.* The loss of any single customer
can have a large negative impact on our sales. For example, due to the delay and
subsequent cancellation of our 200-APS Track product, our largest Track customer
decided to purchase systems with similar capabilities from another supplier. We
expect that this decision will continue to have a harmful effect on our future
Track product sales. If we lose any other significant customers or experience
additional reductions in orders by a significant customer for any reason, our
business, profitability and our cash flow will be harmed.*

The risk of losing a single customer is heightened by the fact that we sell a
relatively small number of systems to a few customers during each fiscal quarter
at a high per system sales price. Our expenses for the most part are fixed in
the short term and are based in part on our expectations for future revenues. As
a result, our operating results for a quarter may be impacted because we can not
adjust our expenses if:

        -   our customers cancel or reschedule their orders or shipments,

        -   we experience production or shipping delays,

        -   we do not receive anticipated customer orders or

        -   we ship fewer systems than we anticipate



                                       12
<PAGE>   13

WE HAVE SIGNED AN AGREEMENT TO MERGE WITH ASM LITHOGRAPHY HOLDING N.V. AND
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT OUR STOCK PRICE AND
FUTURE BUSINESS AND OPERATIONS.

On October 2, 2000, we announced the signing of a merger agreement with ASM
Lithography Holding N.V. whereby ASM Lithography will acquire us in an all stock
transaction. Under the terms of the merger agreement, we will become a wholly
owned subsidiary of ASM Lithography, and our stockholders will receive 1.286
ordinary shares of ASM Lithography for each share of our common stock.
Completion of the merger is subject to regulatory approvals related to
Exon-Florio and other customary conditions. We expect the merger to close during
the first half of calendar 2001.*

If the merger is not completed for any reason, we may be subject to a number of
material risks, including the following:

        -   if for any reason we decide to terminate the merger, we may be
            required to pay ASM Lithography a termination fee of $47,000,000,
            which amounts to approximately 2.75% of the total value of the
            merger consideration to be received by our stockholders as of the
            time the merger was publicly announced on October 2, 2000.

        -   the price of our common stock may decline to the extent that the
            current market price of our common stock reflects a market
            assumption that the merger will be completed

        -   costs related to the merger, such as legal and accounting fees, must
            be paid and expensed even if the merger is not completed

        -   uncertainty related to the merger may damage relationships with our
            employees which may adversely affect our ability to attract and
            retain key personnel

        -   our customers may delay, defer or cancel purchasing decisions.


THE SEMICONDUCTOR INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE. IF WE
DO NOT CONSTANTLY DEVELOP NEW PRODUCTS TO KEEP PACE WITH THE TECHNOLOGICAL
CHANGE AND MEET OUR CUSTOMERS' DEMAND WE WILL LOSE CUSTOMERS AND OUR BUSINESS
WILL SUFFER.

Our products and processes are affected by rapid technological change and can
quickly become obsolete. We believe our future success depends on our ability to
continue to enhance our existing products and their process capabilities. We
must develop and manufacture new products with improved process capabilities
that enable our customers to fabricate more advanced semiconductors with
increased efficiency. We are developing new technology products in our Track,
Thermal and Lithography operations that are expected to be capable of processing
or will be able to be upgraded in the field for processing 300mm wafers. Our
failure to successfully introduce these or any other new products in a timely
manner would result in the loss of our competitive position and could reduce the
sale of our existing products.* In addition, new product introductions could
contribute to quarterly fluctuations in our operating results as orders for new
products commence and increase the potential for a decline in orders of our
existing products, particularly if new products are delayed.*

We believe that advanced logic devices, DRAMs and ASICs will require
increasingly finer line widths.* Therefore, we must continue our development of
future systems capable of processing wafers faster, printing line widths finer
than .10 micron and processing 300mm wafers at a progressively lower cost of
ownership. If we fail to develop the advanced technology required by our
customers at progressively lower costs of ownership and supply sufficient
quantities to a worldwide customer base we will experience a material adverse
impact on our net sales and profitability.*

Furthermore, much of our current growth in demand is for our legacy products to
satisfy customer requirements to expand their production needs. In order for us
to continue growing and to meet expected technology requirements of our
customers, we must timely introduce, manufacture and obtain sufficient orders of
our products. If we are not able to effectively transition from our legacy
products to our new products, including 300mm versions, our financial condition
and results of operations could be materially harmed.*



                                       13
<PAGE>   14

WE HAVE EXPERIENCED DELAYS IN THE INTRODUCTION OF OUR PRODUCTS WHICH, IN THE
PAST, HAVE CAUSED US TO LOSE CUSTOMERS. IF WE EXPERIENCE SIMILAR DELAYS IN THE
INTRODUCTION OF OUR FUTURE PRODUCTS, OUR CUSTOMERS MAY DECIDE TO PURCHASE FROM
OUR COMPETITORS INSTEAD, AND OUR BUSINESS WILL SUFFER.

We have experienced delays in the introduction of new products and product
enhancements due to technical, manufacturing and other difficulties and we may
experience similar delays in the future. For example, in September 1998, we
terminated future development of our previously announced 200-APS Track product
and concentrated our efforts on completing the development of our next
generation product, the ProCell. During June of 1999 we introduced the ProCell
product which we initially shipped to a customer during our third quarter of
fiscal 2000. We believe if there are delays in delivering initial quantities of
the ProCell product, or any new product to multiple customers, this would result
in customers purchasing our competitors' equipment.* This could harm industry
acceptance of our ProCell product or any of our products. If we are unable to
timely produce the ProCell or any other next generation product or the market
does not accept such products our business and results of operations will be
harmed.*

In June 1999, five participants withdrew from our 193-nanometer development
program and declined delivery of initial tools. These participants withdrew in
part due to delays in our product development and due to changes in their
technical requirements for our product. We are responding to this change in
requirement by accelerating development of a very high numerical aperture
version of our 193-nanometer product. Very high numerical aperture or "VHNA"
technology is the physical attribute of the lense to achieve higher resolution
and smaller line widths. We also are enhancing the VHNA version of our 193
product to optimize cost of ownership and to address a broader market. We
believe that the timing of our development and introduction of the VHNA version
of our 193 product will meet our customer's volume production requirements of
130-nanometer nodes.* However, we can not assure you that we will introduce this
product on time or that customers will commit to this product for their
production needs. If we are unsuccessful in the introduction of this product or
in obtaining sufficient orders for this product from our customers, future
profitability could be harmed.*

Our customers usually select either a single supplier or a primary supplier for
their equipment needs. We believe that significant delays in delivering
quantities of newly developed products to multiple customers, due to engineering
or manufacturing difficulties, could result in our customers electing to
purchase our competitors equipment for their production requirements.* Due to
the delay and subsequent termination of our 200-APS Track product in September
1998, and delays in our initial shipment of the ProCell until June 2000, our
competitors have increased their Track market share. It has become increasingly
difficult for us to regain Track market position. Our inability to produce new
products on time or any failure of our products to achieve market acceptance
could materially harm our business and results of operations.*

NEW PRODUCT INTRODUCTIONS ARE FREQUENTLY ACCOMPANIED BY A NEGATIVE IMPACT ON
GROSS PROFITS. IF WE FAIL TO SUCCESSFULLY INTRODUCE NEW PRODUCTS OR TO ACHIEVE
LONG TERM EFFICIENCIES FOLLOWING THE INTRODUCTION OF NEW PRODUCTS, THEN OUR
GROSS PROFITS MAY BE MATERIALLY ADVERSELY AFFECTED IN THE LONG TERM.

The unit cost of our products has historically been the highest when they are
newly introduced into production and have at times had a negative impact on our
gross profit, results of operations and cash flow. Cost reductions and
enhancements come over time through:

        -   engineering improvements,

        -   economies of scale,

        -   improvements in our manufacturing process and

        -   improved serviceability of our products.

Additionally, the unfavorable effect of new products on profitability and cash
flow can be exacerbated when there is intense competition in the marketplace. We
can not assure you that initial shipments of our new products will not adversely
effect our profit or cash flow or that we will be able to improve our gross
profit, results of operations and cash flow.*



                                       14
<PAGE>   15

WE HAVE INVESTED HEAVILY IN OUR 193 NANOMETER MICRASCAN STEP AND SCAN
TECHNOLOGY. IF THE MARKET FOR THIS TECHNOLOGY DOES NOT DEVELOP AS WE EXPECT OR
IF OUR COMPETITORS PRODUCE 193 NANOMETER TECHNOLOGY MORE TIMELY AND EFFECTIVELY
THAN US, OUR RESULTS OF OPERATIONS MAY BE MATERIALLY ADVERSELY AFFECTED.

We believe that the photolithography exposure equipment market is one of the
largest segments of the semiconductor processing equipment industry.* The
development of a market for our Micrascan step-and-scan photolithography
products is highly dependent on the continued trend towards finer line widths in
integrated circuits and the ability of our competitors to keep pace with this
trend. We believe that as devices increase in complexity and size and require
line widths below 0.3 micron, the technical advantages of our step-and-scan
systems, as compared to our competitors steppers, will enable our customers to
achieve finer line widths with improved critical dimension control resulting in
higher yields of faster devices.*

We believe that the transition of our customers to step-and-scan systems has
accelerated.* We also believe that our customers will require volume quantities
of production equipment as advanced as the current and pending versions of our
Micrascan to produce both critical and to some degree sub-critical layers of
semiconductor devices.* Currently, competitive step-and-scan equipment capable
of producing .25 micron line widths and below is available from competitors. Our
customer's technological advancements are requiring our products to produce
line-widths to satisfy 130-nanometer and 100-nanometer nodes requiring the use
of new laser and photoresist technology. We currently have under development a
193-nanometer product to address these requirements which we expect will be
available in mid-2001.* Our current plans are to have machines available as
bridge tools, capable of being upgraded on our customer's factory floor from a
200mm to a 300mm machine.* If our competitor's 248-nanometer steppers are able
to further enhance existing technology to achieve finer line widths or, if they
are successful in timely supplying 193-nanometer step-and-scan systems in
sufficient quantities to erode the competitive and technological advantages of
our 193-nanometer Micrascan, demand for our Micrascan products may not fully
develop.*

WE FACE INTENSE COMPETITION.

The semiconductor equipment industry is very competitive. We face substantial
competition throughout the world in all of our products. Many of our competitors
have greater financial resources than we do. The trend toward consolidation in
our industry has made it increasingly important for us to have the financial
resources necessary to compete on a worldwide basis across a broad range of
product offerings, to fund customer service and support and to invest in both
product and process research and development. Significant competitive factors
include;

        -   technology,

        -   cost of ownership, a formula that includes: initial price, system
            throughput and reliability and time to maintain or repair,

        -   familiarity with particular manufacturers' products,

        -   established relationships between suppliers and customers,

        -   product availability and

        -   technological differentiation.

We do encounter intense price competition, particularly in Asia and have
experienced difficulty establishing new relationships with certain customers who
have long-standing relationships with other suppliers. We believe that outside
Japan and the Pacific Rim we compete favorably with respect to most of these
competitive factors.*

We believe we will continue to face severe price competition globally from our
competitors, the majority of whom are Japanese corporations.* We may continue to
be forced to compete for customers on the basis of reduced prices, which could
reduce our net sales and gross margins and adversely impact our cash flow.*



                                       15
<PAGE>   16

IF WE CANNOT SUCCESSFULLY SELL OUR PRODUCTS TO THE JAPANESE AND PACIFIC RIM
MARKETS OUR MARKET SHARE AND FUTURE GROWTH WILL SUFFER

Historically our customers have been heavily concentrated in the United States
and Europe. The Japanese and Pacific Rim markets (including fabrication plants
located in other parts of the world which are operated by Japanese and Pacific
Rim semiconductor manufacturers or their partners) represent a large portion of
the overall market for our products. We believe that our Japanese competitors
have a significant advantage resulting from their dominance of the Japanese and
Pacific Rim semiconductor equipment market.* This advantage provides our
competitors with the sales and technology base to compete more effectively
throughout the rest of the world. As we are not engaged in any significant
collaborative effort with any Japanese or Pacific Rim semiconductor
manufacturers we may be at a competitive disadvantage to our Japanese
competitors who are engaged in collaborative efforts with such semiconductor
manufacturers. To date we have not had significant success in penetrating either
of these markets particularly with our photolithography equipment. We believe
that for us to succeed in the long term we must substantially increase our share
of the Japanese and Pacific Rim markets if we are to compete as a global
supplier.* Further, in many instances, Japanese and Pacific Rim semiconductor
manufacturers fabricate devices such as dynamic random access memory devices
with potentially different economic cycles than those affecting the sales of
devices manufactured by the majority of our U.S. and European customers. If we
fail to gain customers in these markets it may limit the worldwide market share
available to us and increase our risk of industry or geographic downturns and
would adversely affect our business.*

We are attempting to compete throughout the Pacific Rim against competitors
having greater market share and more established service and support
infrastructures. We have invested in the staffing and facilities we believe are
necessary to sell, service and support customers in the Pacific Rim including a
36,000 square foot customer demonstration facility in Kawasaki City, Japan.
However, we anticipate that we will continue to face significant price and
technological competition.* There can be no assurance that our Pacific Rim
operations will be profitable, even if we are successful in obtaining
significant sales into this region. *

We are focused on increasing our penetration into Korea and Taiwan, but to date
have had limited success in securing volume orders from customers in this area.
Many of our customers, who often have long standing relationships with our
competitors, are outsourcing their manufacturing to foundries located in Taiwan.
If we are not successful in selling in to these markets, it could have a harmful
effect on our net sales, profitability and cash flow.*

IF WE DO NOT SUCCESSFULLY INTEGRATE THE SEMICONDUCTOR EQUIPMENT GROUP WE
PURCHASED FROM WATKINS-JOHNSON COMPANY, OUR NET SALES, PROFITABILITY AND CASH
FLOW COULD BE HARMED.

We completed our acquisition of the Semiconductor Equipment Group of
Watkins-Johnson on July 6, 1999. We may not realize the intended benefits from
the acquisition due to the following:

        -   we may experience difficulty with integrating the operations and
            personnel of the Semiconductor Equipment Group,

        -   we may require additional financial resources to fund the
            operations,

        -   we may be unable to maximize our financial and strategic position by
            the incorporation or development of the acquired technology and
            products,

        -   if we are unable to continue to attract and retain key personnel,

        -   if we are unable to integrate the acquired products, technology and
            information systems from engineering, sales, product development and
            marketing perspectives and

        -   if we are unable to consolidate functions and facilities

We believe we must successfully transition our Semiconductor Equipment Group
products to incorporate process improvements such as single wafer processing and
scalability from 200mm to 300mm wafer capability.* We can not assure you that we
will not experience difficulties or delays in transitioning our products, which
could materially harm our net sales, profitability and cash flow.*



                                       16
<PAGE>   17

Our acquisition included the assumption of certain liabilities of the
Semiconductor Equipment Group, which may prove more costly than we have
anticipated. As an example, certain environmental remediation steps were put in
place in Scotts Valley. We can not assure you that additional environmental
hazards, liabilities or actions to streamline the operations may not result in
future charges which may have a material adverse impact on our profitability and
cash flow.*

WE MANUFACTURE OUR PRODUCTS IN LOCATIONS SUBJECT TO NATURAL DISASTERS AND
UNCERTAIN ENERGY SUPPLIES.

Our California facilities are located in seismically active regions. We
manufacture our Track products in San Jose, California and substantially all of
our Thermal products in Orange and Scotts Valley, California. Our Tinsley
optical components are manufactured in Richmond California. Our photolithography
exposure products are manufactured in Wilton and Ridgefield, Connecticut. If we
lose the use of any of our facilities as a result of a natural disaster, we
would experience a material adverse effect on our operating results and cash
flow.*

Our California facilities are subject to an ongoing energy crisis being faced by
that state. As a result of a variety of factors relating to increased energy
demand and difficulties experienced with energy deregulation in the state of
California, businesses and residences in California are subject to uncertain
power supplies, rolling power blackouts and extremely high energy costs. If we
are not able to secure a consistent energy supply for our manufacturing and
corporate facilities at manageable rates our ability to timely and cost
effectively manufacture our products may be seriously harmed.* The uncertainty
and risks related to the California energy crises are expected to last for the
foreseeable future.*

WE ARE SUBJECT TO A NUMBER OF ENVIRONMENTAL REGULATIONS. IF WE FAIL TO COMPLY
WITH THESE REGULATIONS WE MAY FACE PENALTIES OR DELAYS IN PRODUCTION THAT COULD
CAUSE US TO LOSE CUSTOMERS.

We are subject to a number of governmental regulations related to our discharge
or disposal of toxic and hazardous chemicals used in our manufacturing process.
We believe that in general we are in compliance with these regulations and that
we have obtained or expect to obtain shortly all necessary environmental permits
to conduct our business.* The failure to comply with present or future
regulations could result in fines or penalties being assessed against us,
interruption of our production or in our customers refusing to accept our
products.*

Our Scotts Valley, California facility is subject to an environmental
remediation plan being monitored by various governmental agencies.
Watkins-Johnson Company purchased a guaranteed fixed price remediation contract
from a third party environmental consultant to remediate the groundwater
contamination at the facility. The remediation agreement obligates the third
party to perform all of the obligations and responsibilities of Watkins-Johnson
Company. We can not assure you that the third party consultant will have the
financial resources or technical expertise to execute under the remediation
agreement or that environmental regulatory agencies will not ultimately look to
us to remediate the groundwater contamination at the site.*

In 1996, we purchased from Perkin Elmer, approximately 50 acres of land and a
201,000 square foot building thereon located in Ridgefield, Connecticut. At the
time we purchased this property, we were aware that certain groundwater and soil
contamination was present and that the property was subject to a clean-up order
being performed by Perkin Elmer under the jurisdiction of the Connecticut
Department of Environmental Protection. Agreements we have with Perkin Elmer
provide that Perkin Elmer has sole responsibility for all obligations or
liabilities related to the clean-up order. We believe we are adequately
indemnified by Perkin Elmer, but, if for some reason Perkin Elmer was unable to
comply or did not comply with the clean-up order, we could be required to do
so.*



                                       17
<PAGE>   18

IF WE CANNOT SUCCESSFULLY SUPPLY LARGE VOLUMES OF MICRASCAN PRODUCTS TO MULTIPLE
CUSTOMERS, WE MAY LOSE CUSTOMERS AND MARKET SHARE AND AS A RESULT OUR BUSINESS
WILL SUFFER.

We believe that our ability to supply systems in volume to multiple customers
will be a major factor in customer decisions to commit to our Micrascan
technology.* Based upon the expected future demand for our advanced lithography
step-and-scan products, we have increased our Micrascan production capacity and
in particular our optical manufacturing floor space. In 1996, we purchased from
Perkin Elmer a 243,000 square foot facility (subsequently increased to 276,000
square feet) we occupied in Wilton, Connecticut and an additional 201,000 square
foot building, which we now occupy, in Ridgefield, Connecticut. While we have
invested in significant capital improvements related to the buildings purchased
and the equipment required to expand our Micrascan production and optical
manufacturing capabilities, we have not invested in all of the metrology and
other equipment required to complete our expansion and maximize our
manufacturing capacity. We plan to continue to increase capacity to produce
optical components, which will enable us to quickly respond to our customer's
requirements.*

As we continue to expand our manufacturing infrastructure, this will require our
continued recruitment, training and retention of a high quality workforce, as
well as the achievement of manufacturing results on a scale greater than we have
been successful at in the past. If we are unsuccessful in managing this
expansion it could result in production delays and a subsequent loss of future
orders and customers. In particular, we believe that significant delays in
delivering quantities of our Micrascan products could result in customers
electing to install competitive equipment in their facilities. These factors
could impede acceptance of our Micrascan products on an industry-wide basis
resulting in our profit being adversely affected by the increase in fixed costs
and operating expenses with out a commensurate increase in net sales.*

The time required for us to build our Micrascan systems is significant. For us
to be successful, we will need to build more systems faster and reduce the cycle
time required to build projection optics. To accomplish these objectives we will
require;

        -   additional trained personnel,

        -   additional raw materials and components,

        -   improved manufacturing and testing techniques and

        -   continued development of our vendor supply infrastructure

We also must continue building our factory, field service and technical support
organization staffing and infrastructure to support anticipated customer
requirements.* We can not assure you that we will not experience manufacturing
difficulties or encounter problems in our attempt to increase or upgrade
operations or that the anticipated customer requirements will not be reached.*

Our Tinsley Laboratories, Inc. subsidiary designs, provides research and
manufactures precision optical components, assemblies and systems, primarily for
our photolithography products. Tinsley provides technology and expertise
relating to aspherical lenses, a key component of our photolithography products.
The adaptation of certain of Tinsley's manufacturing processes by us and
Tinsley's commencement of the fabrication of non-aspherical lenses is important
to our ability to supply large volumes of photolithography products. However,
there is no certainty that Tinsley's manufacturing technology is scaleable, or
that such expertise can be transferred to us without substantial time or
expense, if at all.* The inability of us to transfer these technology's and
manufacturing processes for use in a substantially larger scale or the inability
of Tinsley to manufacture non-aspherical lenses in sufficient quantities could
adversely affect our ability to supply large volumes of Micrascan products.*

OUR MICRASCAN PRODUCTS UTILIZE CERTAIN MATERIAL AND COMPONENTS PROVIDED BY SOLE
SOURCE SUPPLIERS.

There are certain raw materials, components and subassemblies that we obtain
either from single sources or from a limited group of qualified suppliers.
Although to date we have not experienced significant delays in our production
due to unavailability or delays in procurement of component parts or raw
materials, disruption of these



                                       18
<PAGE>   19

sources could occur which could at least temporarily harm our operating results.
Moreover, if we experience prolonged delays in obtaining certain components,
this could materially harm our business, operating results and damage
relationships with our customers.*

The raw material for a proprietary component of the optical system for our
Micrascan product is available from only one supplier. This supplier has
expanded their capacity to meet our projected long-term requirements and has
created and stored agreed upon quantities of safety stock. Additionally, a
version of our Micrascan III system utilizes an Excimer laser that is
manufactured in volume by only one supplier. In fiscal 1999 we qualified an
additional source of lasers for current and future versions of our Micrascan
products, allowing the potential for the integration of such lasers into our
system. If our suppliers are unable to meet their commitments and provide
acceptable quantities of material, we would be unable to manufacture the
quantity of products we require to meet our customers anticipated future demand,
which may have a material adverse effect on our business, revenue and
profitability.*

Calcium fluoride is a raw material that has historically been in short supply
and is integral to the production of optics capable of producing quality line
widths of .10 micron and below. The optical system for our MSV, 193 HNA product
and our 157-nanometer lithography product, currently under development, utilizes
calcium fluoride.* We have qualified a supplier and have put in place a Supply
Agreement with this supplier for the production and supply of calcium fluoride.
We can not assure you that this supplier will be able to supply the quality or
quantity of calcium fluoride necessary for us to meet expected customer demand.*
Failure to secure adequate supplies of calcium fluoride could have a material
adverse effect on our business and operating results.*

WE DEPEND ON OUTSIDE RESEARCH AND DEVELOPMENT FUNDING TO ASSIST IN DEVELOPING
OUR ADVANCED MICRASCAN TECHNOLOGY. IF WE LOSE THIS FUNDING OR ARE UNSUCCESSFUL
IN RECEIVING OUTSIDE FUNDING FROM OTHER SOURCES OUR OPERATING RESULTS WILL BE
ADVERSELY AFFECTED.

In fiscal 1999, we entered into an agreement with Intel for the development of
157-nanometer lithography technology. This agreement obligates us, among other
things, to develop and sell to Intel a predetermined number of initial tools.
Intel has agreed to provide advanced payments for the development and
manufacture of these machines, based upon predetermined milestones. At September
30, 2000, $2,000,000 of development funding from Intel has been recognized and
offset against R&D expense. Separately, in 1999 Intel invested approximately
$15,000,000 in us in the form of the purchase of Series 1 Convertible Preferred
Stock. We are obligated to dedicate a certain amount of our 157-nanometer unit
production output to Intel and are required to use the proceeds from the Series
1 Preferred investment and funds received under the agreement for the
development of technology for use on 157-nanometer lithography equipment. We can
not assure you that we will be successful in developing 157-nanometer technology
or that we will be able to manufacture significant quantities of machines to
satisfy our obligations to Intel or other customers.* We can not assure you that
we will be able to fund from operations the development program or that we will
be able to obtain future outside funding beyond that which we are currently
receiving.* If we fail to receive such funds or if we are required to increase
our own funds to fund development, our research and development expenses would
increase and our operating income would be reduced correspondingly.*

THE FUTURE PROFITABILITY OF OUR LITHOGRAPHY OPERATION IS UNCERTAIN.

If we are to attain our objective of being a volume supplier of advanced
photolithography products to multiple customers, we must expand our customer
base to include additional customers who order production-quantities of
products. We believe the costs associated with these and other factors make it
difficult for SVGL to operate profitably in the future*:

        -   our continued development of our Micrascan technology,

        -   our expansion of SVGL's manufacturing capacity,

        -   our related increase in manpower and customer support,



                                       19
<PAGE>   20

        -   increased competition and

        -   developing and manufacturing current and future Micrascan products,
            in particular the projection optics.

WE ARE DEPENDENT ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL.

Our future success is dependent to a large extent on the continued contributions
of our executive officers and key management and technical personnel. In
particular, our future growth in SVGL is dependent on our ability to attract and
retain key skilled employees, particularly those related to the optical segment
of our business.

We have agreements with each of our executive officers to help ensure the
officers' continued service to us in the event of a change-in-control. Each of
our executive officers, key management and technical personnel would be
difficult to replace. The loss of the services of one or more of our executive
officers or key personnel, or the inability to continue to attract qualified
personnel could delay our product development initiatives or otherwise have a
material adverse effect on our business, financial condition and operating
results.

WE ARE SUBJECT TO LEGAL PROCEEDINGS, WHICH MAY HAVE A MATERIALLY ADVERSE IMPACT
ON OUR FINANCIAL RESULTS.

On or about August 12, 1998, Fullman initiated a lawsuit in the United States
District Court for the District of Oregon alleging claims for fraudulent
conveyance, constructive trust and declaratory relief in connection with a
settlement we had previously entered into resolving claims against a Thailand
purchaser of our equipment. In its complaint against us, Fullman, allegedly
another creditor of the Thailand purchaser, alleges damages of approximately
$11,500,000 plus interest. We successfully moved to transfer the case to the
United States District Court for the Northern District of California. The court
granted our motion for summary judgement, dismissing the plaintiffs claims on
February 1, 2001 and denied plaintiffs motion for summary judgement. The
plaintiff has thirty days in which to appeal the grant of summary judgement.

We believe we have meritorious defenses to any appeal and intend to conduct a
vigorous defense if the summary judgement is appealed by the plaintiff. However,
an unfavorable outcome in this matter could have a material adverse effect on
our financial condition.*

In addition to the above, from time to time, we are party to various legal
actions arising out of the normal course of business, none of which is expected
to have a material effect on our financial position or operating results.*

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements". SAB 101 provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements of all public registrants. SAB
101, as amended, requires implementation by the Company no later than the fourth
quarter of fiscal 2001. Accordingly, any revenues that do not meet SAB 101's
guidance will be deferred and recorded as revenue in future periods, including
such revenue previously reported for the first three quarters of fiscal 2001
that do not meet the criteria of SAB 101. Changes in the Company's revenue
recognition policy resulting from the implementation of SAB 101 would be
reported as a change in accounting principle as of October 1, 2000. Under the
Company's existing revenue recognition policy, revenue from sales of products
based on existing technologies is recognized when the customer takes title to
the product, generally at the time of shipment. Costs to install equipment in
the customers' facilities are accrued at the time the product revenue is
recognized. The Company has historically recognized revenue prior to
installation as the installation costs, and the related estimated fair value,
are insignificant relative to the sales price and gross profit of the
transaction. In addition, the Company has a long history of successful
installations within a short timeframe of delivery and the cost to complete
installation does not vary materially from one instance to another. Revenue is
deferred on initial shipments of new products based on new technologies until
after customer



                                       20
<PAGE>   21

acceptance. SAB 101 permits companies to treat the installation of equipment as
a separate earnings process if such installation is not essential to the
functionality of the equipment. The Company has concluded that, in most cases,
installation is not essential to the functionality of its equipment. The
equipment is generally available as a standard product with options, the
installation does not significantly alter the equipment's capabilities and, in
certain instances, other companies are available to perform the installation. In
those instances where installation is essential to the functionality, the
Company will defer revenue until after the installation is complete. In any
case, the installation obligation would not be considered inconsequential under
SAB 101 because under most of the Company's contracts the timing of payment of a
portion of the sales price coincides with installation. The Company believes
that it has an enforceable claim for that portion of the sales price not related
to the fair value of the installation should it not fulfill the installation
obligation in those cases where installation is not essential to the
functionality of the equipment. The Company believes that the portion of the
sales price paid after installation bears no relationship to the fair value of
the installation services. For example, while the installation effort does not
vary materially from customer to customer, individual customer arrangements may
vary from 100 percent of the sale due upon shipment to 80 percent due upon
shipment and 20 percent due after installation. Accordingly, under SAB 101 the
Company will defer the fair value of the installation services until
installation is complete. The Company will determine the fair value of such
services based on its prices for similar services to customers (e.g., service
repairs and maintenance) and, where applicable, prices charged by third parties
for such installation services.

The Company has not yet determined the effect of adopting SAB 101 on its
financial statements because this will require information regarding the number
of incomplete installations as of December 31, 2000 and September 30, 2001. Such
information for September 30, 2001 can not be reasonably estimated at this time.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial market risks, including changes in foreign currency
exchange rates and interest rates. We attempt to minimize our currency
fluctuation risk by actively managing the balances of current assets and
liabilities denominated in foreign currencies. A 10% change in the foreign
currency exchange rates would not have a material impact on our results of
operations.*

We purchase foreign exchange contracts to hedge certain of our existing firm
commitments (primarily Yen denominated). We recognize gains and losses on these
contracts to income when the related transaction being hedged is recognized. As
the effect of movements in currency exchange rates on forward exchange contracts
generally offsets the related effects on the underlying items being hedged,
these financial instruments are not expected to subject us to risks that
otherwise result from changes in currency exchange rates.*

We have investments in marketable debt securities that are subject to interest
rate risk. However, due to the short-term nature of our debt investments and our
ability to hold our fixed income investments to maturity, the impact of a 10%
interest rate change would not have a material impact on the value of such
investments.* We have a $2,000,000 investment in a marketable debt security
issued by Pacific Gas & Electric Co., which after December 31, 2000, has
experienced a decline in market value due to the California energy crisis. We
believe that it is more likely than not that we will eventually receive the full
carrying amount of our investment and any impairment in the short term will not
be material to our results of operations, cash flows or financial position.*

We have fixed rate debt obligations, which range between 2.2% to 12% with a
weighted average of 3.1% and maturity dates through February 2011. Certain of
our manufacturing facilities are leased under operating lease agreements under
which the monthly rent payments adjust based on LIBOR. Monthly rent payments are
variable at 0.75% to 2.0% over LIBOR. For one of the leases, we have entered
into an interest rate swap contract to fix the interest rate and therefore, the
lease payment. For the other lease, we have income and cash flow exposure to the
extent that LIBOR changes. The impact of a 10% change in interest rates would
not have a material impact on the amount of our lease payment.*



                                       21
<PAGE>   22

                           PART II. OTHER INFORMATION

                           SILICON VALLEY GROUP, INC.


ITEM 1. LEGAL PROCEEDINGS.

        On or about August 12, 1998, Fullman initiated a lawsuit in the United
        States District Court for the District of Oregon alleging claims for
        fraudulent conveyance, constructive trust and declaratory relief in
        connection with a settlement we had previously entered into resolving
        claims against a Thailand purchaser of our equipment. In its complaint
        against us, Fullman, allegedly another creditor of the Thailand
        purchaser, alleges damages of approximately $11,500,000 plus interest.
        We successfully moved to transfer the case to the United States District
        Court for the Northern District of California. The court granted our
        motion for summary judgement, dismissing the plaintiffs claims on
        February 1, 2001 and denied plaintiffs motion for summary judgement. The
        plaintiff has thirty days in which to appeal the grant of summary
        judgement.

        On July 8, 1999, we filed a complaint for copyright infringement to
        protect our investment and intellectual property from six third party
        vendors. We subsequently settled or withdrew complaints against five of
        the defendants. Our complaint alleged that the named defendant has
        infringed upon certain of our copyrights on our 8X series equipment by
        duplicating or modifying software in the refurbishment and sale of
        replacement boards. Our complaint further asks for preliminary and
        permanent injunction against the defendants' further infringement of our
        copyrights and sale of infringing systems and boards, and for an award
        of damages. This defendant filed a counterclaim against us in response
        to our complaint. We entered into a settlement agreement with the final
        defendant/counter claimant on January 11, 2001.

        In addition to the above, the Company, from time to time, is party to
        various legal actions arising out of the normal course of business, none
        of which is expected to have a material effect on the Company's
        financial position or operating results.

ITEM 2. CHANGES IN SECURITIES.

        None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

        None.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        None.



ITEM 5. OTHER INFORMATION.

        None.



                                       22
<PAGE>   23

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        (a) Exhibits.

        10.24(1) Agreement and Plan of Merger By and Between ASM Lithography
                 N.V., Alma Holding, Inc., Alma (Merger), Inc and Silicon valley
                 Group, Inc.

        27.0     Financial Data Schedule for the fiscal quarter ended December
                 31, 2000.

        (1)      Incorporated by reference to Registrant's statement filed under
                 the Securities Act of 1933 on form 8-K, dated October 13, 2000,
                 file no. 0-11348.

        (b) Reports on Form 8-K.

            The Company filed a report on 8-K on October 13, 2000, in connection
            with the agreement and plan of merger by and among ASM Lithography
            Holding N.V., Alma Holding, Inc., Alma (Merger), Inc. and the
            Company, dated October 1,2000.

            The Company filed a report on 8-K on December 12, 2000, in
            connection with the issuance of a press release as to its financial
            results for the quarter ended September 30, 2000, and for the fiscal
            year ended September 30, 2000.

            The Company filed a report on 8-K on January 8, 2001, in connection
            with a press release announcing that the Company and ASM Lithography
            Holding N.V. voluntarily requested the withdrawal of their filing in
            connection with the Exon-Florio review process in order to provide
            more time to address certain United States government inquires
            regarding the pending merger.

            The Company filed a report on 8-K on February 6, 2001, in connection
            with a press release announcing that the Company and ASM Lithography
            Holding N.V. have refiled their petition in connection with the
            Exon-Florio review.



                                       23
<PAGE>   24

                           SILICON VALLEY GROUP, INC.
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                        SILICON VALLEY GROUP, INC.
                                        --------------------------
                                                     (Registrant)



Date: February 8, 2001                  By: /s/ Papken S. Der Torossian
                                           -------------------------------------
                                           Papken S. Der Torossian
                                           Chief Executive Officer and
                                           Chairman of the Board


Date: February 8, 2001                  By: /s/ Russell G. Weinstock
                                           -------------------------------------
                                           Russell G. Weinstock
                                           Vice President Finance and
                                           Chief Financial Officer



                                       24
<PAGE>   25

<TABLE>
<CAPTION>
                                  EXHIBIT INDEX


EXHIBIT NO.                            DESCRIPTION
-----------                            -----------
<S>           <C>
10.24(1)      Agreement and Plan of Merger By and Between ASM Lithography
              N.V., Alma Holding, Inc., Alma (Merger), Inc and Silicon valley
              Group, Inc.

27.0          Financial Data Schedule for the fiscal quarter ended December
              31, 2000.

(1)           Incorporated by reference to Registrant's statement filed under
              the Securities Act of 1933 on form 8-K, dated October 13, 2000,
              file no. 0-11348.
</TABLE>



                                       25