UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                  For the Fiscal Year Ended September 30, 1999

                                       OR

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

                    For the Transition Period From ___ to ___

                         Commission File Number 0-25424

                                 SEMITOOL, INC.
             (Exact Name of Registrant as Specified in Its Charter)

              MONTANA                                        81-0384392
  -------------------------------                       -------------------
  (State or other jurisdiction of                        (I.R.S. Employer
   incorporation or organization)                       Identification No.)

                                 Semitool, Inc.
                655 West Reserve Drive, Kalispell, Montana 59901

                                 (406) 752-2107

          (Address, including zip code, and telephone number, including
             area code, of registrant's principal executive offices)

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par
value

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 [  ]

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

The   approximate   aggregate   market   value  of  the  voting  stock  held  by
non-affiliates of the registrant on December 6, 1999 (based on the last reported
sale price on the Nasdaq National Market as of such date) was $87,985,927.

The number of shares of the registrant's Common Stock, no par value, outstanding
as of  December 6, 1999 was 13,814,498.


                       DOCUMENTS INCORPORATED BY REFERENCE

There is  incorporated  by reference  in Part III of this Annual  Report on Form
10-K the information  contained in the  registrant's  definitive proxy statement
for its annual meeting of shareholders to be held February 8, 2000.


<PAGE>


                                     PART I

Item 1.   Business

INTRODUCTION

Statements  contained  in this  Annual  Report on Form 10-K which are not purely
historical facts are  forward-looking  statements  within the meaning of Section
21E of the  Securities  Exchange  Act of 1934,  as  amended,  including  without
limitation,  statements regarding trends in the semiconductor  industry,  future
product development,  strategic business development, pursuit of new and growing
markets, competition,  patent filings, results from operations, and the adequacy
of  manufacturing  facilities,  and are  subject to the safe  harbor  provisions
created by that statute.  A forward-looking  statement may contain words such as
"will  continue to be," "will be,"  "continue  to,"  "expect  to,"  "anticipates
that," "to be" or "can impact."

Management  cautions that  forward-looking  statements  are subject to risks and
uncertainties that could cause the Company's actual results to differ materially
from  those  projected  in such  forward-looking  statements.  These  risks  and
uncertainties  include,  but are not  limited  to,  the  cyclical  nature of the
semiconductor  industry in general,  lack of market acceptance for new products,
decreasing  demand for the Company's  existing  products,  impact of competitive
products and pricing,  product development,  commercialization and technological
difficulties,  capacity  and  supply  constraint  difficulties  and other  risks
detailed under the heading "Risk Factors" and elsewhere herein.

The Company's  future  results will depend on its ability to continue to enhance
its existing products and to develop and manufacture new products and to finance
such  activities.  There can be no assurance that the Company will be successful
in the  introduction,  marketing  and  cost-effective  manufacture  of  any  new
products or that the Company  will be able to develop and  introduce in a timely
manner new products or enhancements to its existing products and processes which
satisfy customer needs or achieve widespread market acceptance.

The Company  undertakes no obligation  to update  forward-looking  statements to
reflect  subsequent  events,  changed   circumstances,   or  the  occurrence  of
unanticipated  events.  Reference is hereby made to the  consolidated  financial
statements, in Part IV of this Form 10-K, and the accompanying notes for segment
information  as to  net  sales  from  external  customers,  income  (loss)  from
operations and total assets.

THE COMPANY

Semitool,  Inc.  ("Semitool" or the "Company") was organized in 1979. We operate
two business segments, Semiconductor Equipment and Software Control Systems. The
Software  Control Systems segment  resulted from a February 1996 acquisition and
operates under the name Semy Engineering, Inc.

The  Semiconductor  Equipment segment designs,  manufactures,  markets and sells
capital  equipment  and  related  parts  and  services   primarily  for  use  in
semiconductor  manufacturing  facilities  ("Fabs")  for  silicon  wafer  surface
preparation and cleaning and the electrochemical deposition of various metals on
the wafer.  Our  equipment  is also used to  manufacture  materials  and devices
fabricated  with  similar  processes,  including  thin film  heads used for disk
drives,  flat panel displays,  multichip modules,  ink jet print heads,  compact
disc masters,  solder bumping for advanced device packaging,  high speed gallium
arsenide communication devices,  micro  electromechanical  systems, smart cards,
systems on a chip,  and hard disk media.  The  process  steps  performed  by our
products occur repeatedly  throughout the semiconductor  fabrication  cycle, and
constitute an integral part of the front-end manufacturing process for virtually
every  semiconductor  produced  today.  This  equipment  is  designed to provide
improved  yields through higher  process  uniformity and reduced  contamination,
increased  throughput  through advanced  processes which reduce cycle times, and
lower direct costs through  reduced  consumables  usage and smaller  footprints,
thereby providing our customers lower overall costs of ownership.

The  Software  Control  Systems  segment  develops,  markets and sells  software
control systems for data collection,  equipment monitoring, and advanced process
control  for most types of  equipment  used in a fab's  front-end  manufacturing
process.  These  systems  provide the user with the  capability to use real-time
process data to adjust  processes  and plan  equipment  maintenance  to maximize
product yield and tool uptime, thereby reducing unit costs.

The products of both  segments are marketed and sold  worldwide  through our own
sales force and manufacturer's representatives.

INDUSTRY BACKGROUND

The fabrication of semiconductor  devices is a complex process involving several
distinct phases repeated  numerous times during the  fabrication  process.  Each
production phase requires different processing technology and equipment, and the
Company believes no one semiconductor  equipment  supplier currently produces an
entire  state-of-the-art   fabrication  system.  Rather,   semiconductor  device
manufacturers   typically   construct   fabrication   facilities   by  combining
manufacturing  equipment produced by several different suppliers,  each of which
performs specific functions in the manufacturing process.

Industries that use semiconductors are demanding  increasingly  complex,  higher
performance devices. Fabrication of these devices requires increasing the number
of process steps and reducing  feature  sizes,  necessitating  narrower  process
tolerances.  These factors, together with the industry's history of migration to
larger wafer sizes and a greater number of semiconductor  devices on wafers have
led to a substantial increase in wafer value at each step in the process.

The  semiconductor  industry is characterized by continuing  change and evolving
technologies. Traditionally,  semiconductor devices have used aluminum alloys to
connect  the  millions  of  transistors  that  make up  each  device.  As  these
interconnects become increasingly smaller, an electrical conductor with superior
conductivity  is needed and copper is evolving as a replacement  for aluminum as
the wiring for advanced devices. This major interconnect  technology development
requires specialized  production  equipment using an electrochemical  deposition
process.

Because of the  increasing  cost of  equipping  fabrication  facilities  and the
greater  number of devices  manufactured  on each wafer,  the  Company  believes
semiconductor  manufacturers are placing greater  importance on the overall cost
of ownership of each piece of process equipment.  The principal elements of cost
of ownership are yield,  throughput,  and direct costs. Yield, or the percentage
of good devices per wafer,  is primarily  determined by operating  contamination
levels and process  uniformity.  Achieving  high yields becomes more critical to
manufacturers as their per wafer investment increases. Throughput, or the number
of wafers  processed  by a  particular  tool in a given  period,  is primarily a
function of the time  required to complete a process cycle and the handling time
between  process steps.  Major  components of direct  operating cost include the
amount of consumables used in the manufacturing  process,  the cost of the clean
room space occupied by the equipment (i.e., the "footprint"), the purchase price
of the equipment, and other operating costs such as repairs and maintenance.

The  Company  believes  that  semiconductor   device  manufacturers  are  asking
equipment  suppliers  to  take  an  increasingly  active  role  in  meeting  the
manufacturers'  technology  requirements  and cost  constraints by  researching,
developing,  and  supporting  the products and  processes  required to fabricate
advanced  products.  Certain  manufacturers are seeking strategic  relationships
with  equipment  suppliers  for  specific  process  steps  on  existing  and new
products. As a result,  equipment companies are being asked to provide equipment
with  integrated  processes,   advanced  process  expertise,   superior  product
performance,  reduced overall cost of ownership,  and worldwide customer support
to meet the needs of device manufacturers.

THE SEMITOOL STRATEGY

The key elements of the Company's business strategy are as follows:

         Develop  Innovative  Solutions.  The Company is committed to developing
new  products  and  processes,  new  applications  for  existing  products,  and
enhancing   existing   products  to  address  evolving   process   requirements.
Accordingly, the Company devotes substantial resources to product innovation and
collaborative development efforts.

         Offer a Broad Range of Products to  Customers in Diverse  Markets.  The
Company  focuses  on  offering  a broad  range  of  products  including  surface
preparation and cleaning tools,  electrochemical  deposition equipment,  thermal
processing   equipment,   and   software   control   systems  to   semiconductor
manufacturers for use in diverse process applications. The Company leverages its
technology and expertise to provide solutions to manufacturers of other products
that are fabricated  using similar  processes,  such as thin film heads used for
disk  drives,  flat panel  displays,  multichip  modules,  ink jet print  heads,
compact disc masters,  solder bump bonding,  and hard disk media.  Some of these
other  applications  involve  substrates  with surfaces  larger than the current
typical semiconductor substrates.

         Capitalize on  Manufacturing  Expertise.  The  Company's  manufacturing
strategy is to identify and perform  internally  those  manufacturing  functions
which add value to the Company's  products.  The Company  believes it achieves a
number of  competitive  advantages  from its  selective  vertical  manufacturing
integration,  including the ability to achieve cost and quality benefits, and to
bring quickly new products and product enhancements to market.

         Focus on Low Overall Cost of Equipment Ownership.   The Company designs
and  manufactures  process  equipment  and  develops  processes  with a focus on
providing its customers with a low overall cost of ownership.  Additionally, the
Company  sells  software  control  systems  that have the ability to monitor and
control multiple tools used in the fab's front-end manufacturing processes.

         Address Worldwide  Markets.  We market and sell our products  worldwide
with  emphasis on Europe and Asia as our  principal  international  markets.  We
believe the  strength of our  international  sales and service  organization  is
important to our continued success in these markets. To facilitate our worldwide
marketing   strategy,   we  have  dedicated   international  sales  and  support
organizations in England,  France, Germany, Italy, Japan, Korea, Singapore,  and
Taiwan.

SEMITOOL'S PRODUCTS AND SOLUTIONS

Semiconductor Equipment Segment

         Surface Preparation and Cleaning

Our surface preparation and cleaning equipment uses centrifugal spray technology
to process  wafers  and  substrates  by  exposing  them to a  user-programmable,
sequenced spray of chemicals inside an enclosed chamber. Spray technology avoids
non-uniformity  of process by applying  the process  chemicals  via spray.  This
technique enhances chemical reaction on the substrate  surface,  which increases
process  reliability  and shortens  process  cycle times.  The enclosed  process
chamber  technology  also allows for more  efficient use and disposal of process
chemicals  through  recirculation,   reclamation,  and  filtration  as  well  as
increased  operator  safety.  We sell both manually  loaded and fully  automated
wafer-handling batch platforms that cluster multiple chemical processing modules
for  silicon  wafers  and  other  substrates,   thereby   increasing  yield  and
throughput,  and  providing a complete  process  solution in a single unit.  Our
surface preparation equipment is used to apply our proprietary HydrOzone process
which  provides a  cost-effective,  environmentally  friendly  solution to wafer
cleaning.

         Batch Processing Tools

Batch tools  process  multiple  wafers,  usually 25 or 50, in a carrier which is
rotated on axis inside the process  chamber.  The process  chamber is sealed and
chemicals are  sequentially  dispensed into the chamber via spray manifolds in a
closed-loop  system.  Chemical  spray is applied to the wafer  surfaces  as they
spin. This technique enhances chemical reaction on the substrate surface,  which
increases   process   reliability  and  shortens  process  cycle  times.   After
application of the process chemicals, deionized ("DI") water is sprayed into the
chamber to stop the  chemical  reaction  and to remove  chemical  residues.  The
wafers, carrier, and chamber are then dried by centrifugal spinning coupled with
convection  of warm  nitrogen,  either  in the  same  process  chamber  or in an
adjacent  rinser/dryer  module.  These  batch  tools use acids and  solvents  to
address  applications  such as photoresist  stripping,  pre-diffusion  cleaning,
oxide etching, polymer removal, and chemical milling. We believe our batch spray
chemical  processing  and  cleaning  tools  offer  significant  advantages  over
conventional  wet-benches.  Advantages include higher yields by providing better
process uniformity and lower particulate contamination,  increased throughput by
providing  shorter  process cycle times,  and reduced  direct costs by providing
more effective use of chemicals and smaller footprints, thereby lowering overall
cost of ownership.

Spectrum  and  Magnum  are  Semitool's   automated  batch  multi-module  surface
processing  products.  These tools cluster the Company's solvent,  acid and spin
rinser/dryer  capabilities  into a single  automated  unit.  They offer standard
mechanical  interface ("SMIF") loading  capabilities and a touch screen computer
interface  customized for ease of operation.  Spectrum represents a more compact
version of Semitool's  automated spray  technology which through advanced design
has  retained  high  productivity  and  performance  standards  and is easier to
retrofit into existing  semiconductor  fabs.  Both of these  multi-module  batch
tools provide  customers with the flexibility to mix and match process  modules,
including  immersion  modules  as  appropriate,  thereby  providing  them with a
complete  surface   processing   solution  to  meet  their  particular   process
requirements. The Spectrum and Magnum possess significant competitive advantages
over both  stand-alone  tools and other  automated  products.  This includes the
ability to replace two or more wet-benches with a single, smaller footprint tool
and thereby provide increased yields and increased throughput per square foot of
clean room space. Each product comes bundled with the Company's software control
system client package. Selling price ranges from $900,000 to $3.0 million.

Our  manually  loaded batch spray  chemical  processing  and  cleaning  products
include the Spray Acid Tool and the Spray Solvent  Tool.  The Spray Acid Tool is
used in  applications  using acids and all of its areas exposed to chemicals are
made  entirely of teflon and other  acid-proof  materials.  Spray  Solvent Tools
dissolve  and strip the  lithographic  media  from  substrate  surfaces,  remove
polymer residues,  or develop  lithographic  images on substrate  surfaces.  The
purchase  price of the Company's  manual batch chemical  processing  tools range
from $225,000 to $850,000, depending on configuration.

Our  manually  loaded  Spin  Rinser/Dryer  is a batch  tool used  primarily  for
removing  chemical residue from substrate  surface with "DI" water, and utilizes
the same enclosed chamber,  spray processing and centrifugal drying technologies
employed in the Company's other batch tools. The Spin Rinser/Dryer  incorporates
a "DI" water  resistivity  monitor to ensure the required level of  cleanliness.
The  purchase  price of the Spin  Rinser/Dryer  ranges from $15,000 to $100,000,
depending on configuration.

         Single Substrate Processing Tools

Single substrate processing equipment employs chemical spray and allows multiple
chemistries to be used within a self-cleaning,  enclosed process chamber.  These
tools enable customers to conduct  sequential surface processing steps, and then
within  the same  chamber,  rinse and  centrifugally  dry  substrates  with heat
assistance, thereby reducing contamination during and between process steps. The
tool can be configured with up to 10 process chambers and includes the Company's
software control system.

Our Equinox tool  addresses the needs of customers  employing  single  substrate
processing  for  critical  applications.  The  Equinox  provides  a  variety  of
processes,  including  immersion,  spray, vapor and infrared heating, to address
cleaning,  stripping,  etching, developing,  micro-machining and plating. All of
these processes are performed with the substrate  suspended  device side down in
an enclosed  process  chamber.  This face down  positioning  allows for enhanced
liquid,  vapor,  or gas delivery of the process to the  substrate,  resulting in
greater process uniformity and reduced contamination.  The Equinox is a flexible
platform  allowing  customers to cluster  multiple process  technologies  into a
single  tool to  perform  sequential  processes.  The  Equinox  has been used to
process ceramic  substrates,  thin film heads and photo masks in addition to its
customary  silicon and gallium  arsenide  wafer  applications.  The price of the
Equinox ranges from $300,000 to $1.3 million, depending on configuration.

The  Millennium  single  wafer  processor  complements  the Equinox  product and
provides a revolutionary  approach to single wafer surface preparation through a
unique  Capsule  process  chamber.  This  chamber  provides  process  control to
specific  areas on either or both  surfaces  of the  wafer  for  critical  clean
applications.  Wafer  backside  cleaning  for copper  interconnect  is a primary
application  and the capsule heads can be included in the  configuration  of the
Company's  electrochemical  deposition  tools.  The  Millennium  is based on the
Company's   proven  linear  platform  which  is  designed  for  high  throughput
manufacturing.  The Capsule takes advantage of a  spin-assisted  surface tension
effect to tightly control surface  processing and provide clean,  dry wafers for
further  fabrication  steps.  The price range for  Millennium  will be from $1.0
million to $1.3 million depending on the  configuration.  The Company expects to
begin shipping the Millennium in the first half of fiscal 2000.

         Wafer Carrier Cleaning Systems

Our Storm wafer carrier cleaning system cleans and dries the wafer carriers in a
unique rinsing/drying process. A solution is sprayed inside the process chamber,
cleaning  wafer boxes or cassettes  and is then  followed by a "DI" water rinse.
The boxes and cassettes are then dried using centrifugal force and warm filtered
air. Storm monitors the humidity inside the process chamber to ensure consistent
drying  results.  We believe  Storm  removes  particles  more  effectively  than
conventional  technology  and has a low  cost of  ownership.  Storm  also  has a
patented  loading  feature  that allows  through-the-wall  installation  whereby
unwashed  boxes and  cassettes  can be loaded into the chamber  from outside the
clean room and then  unloaded  directly  into the clean room after the  cleaning
cycle has been  completed.  This feature  enables  customers  to avoid  bringing
contaminated  boxes and cassettes into clean areas.  The price of a Storm ranges
from $150,000 to $400,000, depending on configuration.

         Electrochemical Deposition

Semitool introduced its first electrochemical deposition (ECD) tool in 1993. Our
ECD tools are being used in production for gold,  platinum,  solder,  and copper
deposition  and for research and  development  applications  with other  metals.
Semitool  developed the first high  throughput  copper plating tool, the LT-210,
for the semiconductor industry.

Copper has many  advantages over aluminum  alloys that have  traditionally  been
used for device interconnects.  Copper will significantly minimize the number of
metal layers required,  reduce heat dissipation,  reduce manufacturing cost, and
increase chip speed.  Copper has lower  electrical  resistance  than aluminum so
much  smaller  lines of  copper  have the same  current-carrying  capability  as
today's  aluminum  interconnects.  A  limited  number  of  semiconductor  device
manufacturers  have begun  delivering  devices  with copper  interconnects.  The
Company believes the emerging copper  interconnect  market will be a high-growth
market  when  the  semiconductor   industry  begins  widespread   production  of
semiconductor copper interconnect based devices.

Other  applications  for  electrochemical  deposition  have  emerged such as the
deposition of gold  interconnects on gallium arsenide in the manufacture of high
speed  communication  devices and solder bump application to semiconductors  for
flip chip  attachment.  Flip chip attachment makes the die attach operation much
more efficient than conventional wire bonding processes, may become increasingly
necessary as the number of inputs and outputs per chip increase,  and provides a
higher level of performance than is otherwise available.  ECD provides technical
capability  while  maintaining low cost solder  application.  The manufacture of
thin  film  heads  and  ink  jet  print  heads  also  utilizes   electrochemical
deposition.

Semitool offers two models of fully automated single wafer processing tools that
are designed for  electrochemical  deposition.  The Equinox  platform,  a radial
tool, is designed for  flexibility to handle  process  development or production
applications.  Its versatility in configuration  allows multiple chemistries and
processes to be performed in the same tool. The LT-210c uses a small  footprint,
linear  configuration   designed  for  high  throughput  and  high  productivity
manufacturing. The LT-210c employs two track robots to feed process chambers and
has optional  automatic  on-line  electrolyte  analysis  and control  systems to
ensure constant  solution  concentration  for  repeatability of deposition,  and
various  proprietary  systems to ensure  uniformity of plating across the wafer.
The LT-210c  consistently  deposits  films with  superior step  coverage,  lower
electrical  resistance,  at a lower cost and at a rate  faster  than is possible
with conventional  vacuum deposition  systems.  The Company's ECD tools range in
price from $575,000 to $2.2 million.

         Thermal

Thermal processing generally addresses the  oxidation/diffusion and low pressure
chemical  vapor  deposition  (LPCVD)  steps  of  the  semiconductor  fabrication
process.  The  Company's  VTP 1500 and EXPRESS  vertical  furnaces  address this
market and provide a process chamber with a high degree of thermal uniformity to
achieve excellent process results.

         Spare Parts and Services

The Company supports its  Semiconductor  Equipment  products through the sale of
product   upgrade  kits,   spare  part  kits  and  spare  part  components  from
strategically  located warehouses around the world. Customer service and process
engineers  assist and train our customers in performing  preventive  maintenance
and service on Semitool  equipment  and  developing  process  applications.  The
Company currently  provides one, two or three year warranty on new equipment and
a 90-day warranty on parts. In addition, we offer a variety of process, service,
and  maintenance  programs  that may be  purchased.  A number of customers  have
purchased  maintenance  contracts  whereby the Company's  service employees work
full-time at the customer's facility.

Software Control Systems Segment

         Software Control Systems

In February 1996, the Company acquired Semy Engineering, Inc., a manufacturer of
software control systems.

A  state-of-the  art  semiconductor  fab  contains  numerous  pieces of  complex
equipment  used in its front-end  manufacturing  process and each one performs a
complicated process. Monitoring and controlling the processes to avoid operating
outside of prescribed  parameters are critical to achieving high product yields,
high quality  devices,  and high machine uptime through  preventive  maintenance
scheduling.  The segment's software control products address these needs through
a communication  software  interface  coupled with equipment  specific  software
modules  to link most types of  manufacturing  equipment  used in the  front-end
manufacturing  process for integrated circuits.  The Unix based software system,
utilizing  specially equipped computer  workstations,  performs data collection,
statistical process analysis and control, preventive maintenance scheduling, and
process recipe management for either a single tool or multiple, networked tools.
The  system  can be  interfaced  with a  semiconductor  manufacturer's  computer
integrated  manufacturing system. Spare parts, service and maintenance contracts
are also provided.

CUSTOMERS, SALES AND MARKETING

Our  customers  include  leading  worldwide  semiconductor  manufacturers.   The
following is a  representative  list of the Company's  largest United States and
international  customers,  which had purchases of approximately  $2.0 million or
more in fiscal 1999:

<TABLE>
<CAPTION>

<S>  <C>                               <C>                          <C>
     Advanced Micro Devices            Lucent Technologies          Seagate
     Conexant Systems                  Maxim Integrated Products    Sony
     Fujitsu                           Motorola                     STMicroelectronics
     IBM                               Nan Ya Technologies          Tokyo Electron, Limited
     Infineon                          NEC                          United Microelectronics
     Integrated Device Technologies    Philips Semiconductor        Unitive Electronics
     Intel                             Samsung                      Whiteoak Semiconductor

</TABLE>

We believe that our worldwide sales, service and customer support  organizations
are important to the long-term success of our customer relationships.

International  sales,  primarily in Europe and Asia accounted for  approximately
53%,  38% and  36% of  total  sales  for  fiscal  years  1999,  1998  and  1997,
respectively.  The Company  markets and sells its products in the United  States
through its sales  organization  which  includes  direct sales  personnel  and a
limited number of independent sales  representatives.  The Company currently has
sales and service offices located throughout the United States and Europe. Also,
the Company has a direct  sales and  customer  support  organization  located in
Japan,  Singapore  and  Korea  with  independent  manufacturing  representatives
serving Taiwan.

To  enhance  our sales  capabilities,  we  maintain  demonstration  and  process
development laboratories at our Kalispell,  Montana facility and a demonstration
laboratory in Japan.

Field  service  personnel and  application  engineers  service  customers in the
United States,  Europe,  Japan and Asia,  directly  providing  warranty service,
post-warranty service, and equipment installations.  Field service engineers are
located  in  nine  sites  throughout  the  United  States,  including  dedicated
site-specific  engineers  at certain  customer  locations  pursuant  to customer
agreements.  To further ensure customer satisfaction,  the Company also provides
service and maintenance training as well as process application training for its
customers'  personnel  on a  fee  basis.  The  Company  maintains  an  extensive
inventory  of spare parts  strategically  located  throughout  the world,  which
allows the Company to provide same day or overnight delivery in most instances.

BACKLOG

Consolidated  orders backlog  increased  86.7% to $57.5 million at September 30,
1999,  from  approximately  $30.8  million  at  September  30,  1998,  which had
decreased  51.7% from $63.8 million at September 30, 1997. At September 30, 1999
and 1998,  Semiconductor  Equipment segment orders backlog represented 97.6% and
94.1%, respectively, of consolidated orders backlog.

We  include  in  backlog  those  customer  orders  for  which  we  have  written
authorization and for which shipment is scheduled within the next twelve months.
Orders are generally  subject to  cancellation or rescheduling by customers with
limited or no penalty.  As the result of systems ordered and shipped in the same
quarter,  possible  changes in customer  delivery,  cancellations,  and shipment
delays,  the backlog at any particular  date and the new orders bookings for any
particular  period  are not  necessarily  indicative  of  actual  sales  for any
succeeding period.

MANUFACTURING

Most of the Semiconductor Equipment manufacturing is conducted at our facilities
located  in  Kalispell,   Montana.  Our  vertically   integrated   manufacturing
operations include metals and plastics  fabrication and finishing  capabilities;
component  parts and final  product  assembly;  and  extensive  product  testing
capabilities.  Manufacturing  personnel  work closely  with product  development
engineers  to  ensure  that  products  are  engineered  for   manufacturability,
affording a smooth transition from prototype to full scale production. Component
and product  prototyping is performed  internally,  and design  engineers  often
receive prototypes of newly designed parts from  manufacturing  within 24 hours.
Software  Control  Systems  operations  are  conducted at our  Phoenix,  Arizona
facility.

RESEARCH AND DEVELOPMENT

The  market  for  semiconductor  equipment  and  software  control  systems  are
characterized by rapid technological  change and product innovation.  We believe
that continued timely  development of products for both existing and new markets
is necessary to remain competitive.  Therefore,  we devote significant resources
to programs  directed at developing  new and enhanced  products,  as well as new
applications for existing  products.  We maintain  extensive  demonstration  and
process development laboratories at our facilities in Montana, including a clean
room for  testing  and  developing  products.  Research  and  development  (R&D)
personnel work directly with customers to provide process solutions, develop new
processes and to design and evaluate new equipment.

Expenditures  for R&D, which are expensed as incurred,  during fiscal 1999, 1998
and 1997 were approximately  $20.9 million,  $24.5 million and $21.2 million and
represented 17.0%, 13.6% and 10.9% of net sales, respectively.

COMPETITION

The  markets in which we compete  are highly  competitive.  We face  substantial
competition  from  established  competitors,   certain  of  which  have  greater
financial, marketing, technical and other resources, broader product lines, more
extensive  customer support  capabilities,  and larger sales  organizations  and
customer  bases.  We may also face  competition  from new  domestic and overseas
market entrants.  Significant competitive factors in the semiconductor equipment
market and other  markets in which we compete  include  system  performance  and
flexibility,  cost of  ownership,  the  size of  each  manufacturer's  installed
customer  base,  customer  service and support,  and breadth of product line. We
believe that we compete favorably on the basis of these factors.

The primary competition to our Semiconductor  Equipment segment's batch chemical
spray products is currently from wet-bench chemical processing equipment. We are
also  aware of at least  two other  competing  manufacturers  of spray  chemical
processors.  As the demand for more  precise and  reliable  chemical  processing
increases, we anticipate greater competition in the centrifugal spray technology
area.  We are also aware of  vertical  furnaces  produced by at least four other
manufacturers  which compete with our thermal processing  equipment.  The single
substrate  processing market in which our Equinox competes and the wafer carrier
cleaning  market in which our Storm  competes  are  highly  fragmented  markets.
Semitool is  competing  in the  electrochemical  deposition  market with Applied
Materials,  Inc. and Novellus Systems,  Inc., both larger than the Company,  and
with several  smaller  companies.  Our Software  Control Systems segment has one
major competitor for its products.

We expect our  competitors to continue to improve the design and  performance of
their products.  There can be no assurance that our competitors will not develop
enhancements to, or future generations of, competitive  products that will offer
superior price or performance  features,  or that new processes or  technologies
will not emerge that render our products  less  competitive  or  obsolete.  As a
result of the substantial  investment  required to integrate  capital  equipment
into a production line, we believe that once a manufacturer has selected certain
capital equipment from a particular  vendor,  the manufacturer  generally relies
upon  that  vendor  to  provide  equipment  for  the  specific  production  line
application  and  may  seek to rely  upon  that  vendor  to meet  other  capital
equipment  requirements.  Accordingly,  we may be at a competitive  disadvantage
with respect to a particular  customer if that customer  utilizes a competitor's
manufacturing  equipment.  Increased  competitive  pressure  could lead to lower
prices for our products,  thereby  adversely  affecting our business,  financial
condition,  results of operations or cash flows.  There can be no assurance that
we will be able to compete successfully in the future.

PATENTS AND OTHER INTELLECTUAL PROPERTY

Our success depends in significant part on the technically  innovative  features
of our products.  We currently hold numerous  United States  patents,  some with
pending  foreign  counterparts,  have several United States patent  applications
pending  and  intend  to  file  additional   patent   applications  as  we  deem
appropriate.  There can be no assurance  that patents will be issued from any of
our pending applications or that existing or future patents will be sufficiently
broad to protect our  technology.  While we attempt to protect our  intellectual
property rights through patents, copyrights and non-disclosure agreements, there
can be no  assurance  that we will be able to protect  our  technology,  or that
competitors  will not be able to develop similar  technology  independently.  In
addition, the laws of certain foreign countries may not protect our intellectual
property to the same extent as the laws of the United  States.  Moreover,  there
can be no assurance  that our existing or future patents will not be challenged,
invalidated or circumvented,  or that the rights granted thereunder will provide
meaningful  competitive  advantages to us. In any of such events,  our business,
financial  condition,  results of  operations  or cash flows could be  adversely
affected.

There has been substantial  litigation  regarding patent and other  intellectual
property rights in semiconductor-related  industries.  Although we are not aware
of any  infringement  by our  products of any patents or  proprietary  rights of
others,  further  commercialization  of our  products  could  provoke  claims of
infringement from third parties. In August, 1998, we filed suit against Novellus
Systems,  Inc. in the United States District Court for the Northern  District of
California (Case No. C-98-3089DLJ),  alleging infringement of two of our patents
relating to single substrate processing tools used in electrochemical deposition
of  copper  onto   semiconductor   wafers.  We  are  seeking  damages  for  past
infringement,  a permanent injunction,  treble damages for willful infringement,
pre-judgment  interest and attorneys  fees.  Novellus  answered the complaint by
denying all allegations,  counterclaiming for declaratory judgment of invalidity
and non-infringement. Discovery is continuing and no trial date has been set.

In the future,  litigation may be necessary to enforce  patents issued to us, to
protect trade  secrets or know-how  owned by us or to defend us against  claimed
infringement  of the rights of others and to determine the scope and validity of
the  proprietary   rights  of  others.  Any  such  litigation  could  result  in
substantial  cost and  diversion  of effort by us,  which by itself could have a
material  adverse  effect  on our  business,  financial  condition,  results  of
operations or cash flows.  Further,  adverse  determinations  in such litigation
could  result  in our loss of  proprietary  rights,  subject  us to  significant
liabilities to third parties,  require us to seek licenses from third parties or
prevent us from manufacturing or selling our products, any of which could have a
material  adverse  effect  on our  business,  financial  condition,  results  of
operations or cash flows.

EMPLOYEES

At September 30, 1999,  the Company had 978 full time employees and 93 temporary
contract  employees  worldwide.  This  includes  487  in  manufacturing,  361 in
marketing,  sales and field service, 140 in research and development,  and 83 in
general  administration.  The Company's worldwide employment has remained nearly
constant since the end of the last fiscal year. None of the Company's  employees
are  represented  by a labor union and the Company has never  experienced a work
stoppage or strike. The Company considers its employee relations to be good.

RISK FACTORS

         Introduction

The risks detailed in this section as well as risks and uncertainties  discussed
elsewhere  in this  annual  report on Form  10-K and in our  other  SEC  filings
constitute some of the risks common in the semiconductor  equipment  industry or
risks specific to Semitool.  Shareholders or potential  shareholders should read
these risks  carefully to better  understand  the  potential  volatility  of our
results  and  volatility  in our  share  price.  The fact  that some of the risk
factors may be the same or similar to our past filings means only that the risks
are present in multiple periods.  We believe that many of the risks detailed are
part of doing business in the semiconductor  equipment  industry and will likely
be present in all periods  reported.  The fact that certain risks are endemic to
the industry does not lessen the significance of the risk.

         Cyclical Nature of the Semiconductor Industry

Our business  depends  primarily on the capital  expenditures  of  semiconductor
manufacturers,  who  correspondingly  depend on the demand for final products or
systems that use such devices.  The  semiconductor  industry is cyclical and has
historically experienced periodic downturns characterized by oversupply and weak
demand,  which often have had a material adverse effect on capital  expenditures
by  semiconductor  manufacturers.   These  downturns  generally  have  adversely
affected  the  business  and  operating   results  of  semiconductor   equipment
suppliers,  including our own. In addition, the need for continued investment in
research and  development,  marketing and customer support may limit our ability
to  reduce  expenses  in  response  to  future  downturns  in the  semiconductor
industry.  The  semiconductor  device  industry  is  presently  experiencing  an
apparent  recovery in terms of product demand and volatility in terms of product
pricing.

         Fluctuations in Future Operating Results

Our business and results of operations have fluctuated significantly in the past
and we expect them to fluctuate significantly on a quarterly and annual basis in
the future.  During a particular  quarter, a significant portion of our revenues
are often  derived  from the sale of a  relatively  small number of high selling
price  systems.  The  number of such  systems  sold in,  and the  results  for a
particular  quarter or year can vary  significantly due to a variety of factors,
including  the  timing  of  significant   orders,  the  timing  of  new  product
announcements  by us  or  our  competitors,  patterns  of  capital  spending  by
customers,  market  acceptance  of new and  enhanced  versions of our  products,
changes in pricing by us, our competitors or suppliers, the mix of products sold
and cyclicality in the semiconductor industry and other industries served by us.
In  addition,  the  cancellation  or  rescheduling  of  customer  orders  or any
production  difficulty  could adversely  impact shipments which would negatively
impact our business and results of operations for the period or periods in which
such  cancellation  or  rescheduling  occurs.  In light of these factors and the
cyclical  nature  of the  semiconductor  industry,  we  expect  to  continue  to
experience  significant  fluctuations in quarterly and annual operating results.
Moreover,  many of our expenses are fixed in the short-term which, combined with
the need for  continued  investment in research and  development,  marketing and
customer support,  limits our ability to reduce expenses  quickly.  As a result,
declines in net revenues  could have a material  adverse effect on our business,
financial condition, results of operations or cash flows.

         Dependence on Product Development

Our Semiconductor Equipment and Software Control Systems segments are subject to
rapid technological  change as well as evolving industry  standards.  We believe
that our future  success  will  depend in part upon our  ability to  continue to
enhance our existing products and process capabilities,  to continue to decrease
the overall cost of ownership  of our  products,  and to continue to develop and
manufacture  new products with improved  process  capabilities  which conform to
evolving  industry  standards.  As a  result,  we  expect  to  continue  to make
significant  investments in research and development.  Although  historically we
have had adequate funds from  operations to devote to research and  development,
there can be no assurance that such funds will be available in the future or, if
available,  that they will be adequate. Also, we must manage product transitions
successfully,  since announcements or introductions of new products by us or our
competitors could adversely affect sales of our existing products.  There can be
no  assurance  that we will be able to develop  and  introduce  new  products or
enhancements  to our  existing  products on a timely  basis or in a manner which
satisfies customer needs or achieves  widespread market acceptance.  The failure
to do so could adversely affect our business,  financial  condition,  results of
operations or cash flows.

         Market Acceptance of New Products

We believe  that our growth  prospects  depend in large part upon our ability to
gain customer  acceptance of our products and technology.  Market  acceptance of
new  products  depends  upon  numerous  factors,  including  compatibility  with
existing  manufacturing  processes  and  products,   perceived  advantages  over
competing  products and the level of customer service  available to support such
products.  Moreover,  manufacturers  often rely on a limited number of equipment
vendors  to meet  their  manufacturing  equipment  needs.  As a  result,  market
acceptance of our new products may be adversely affected to the extent potential
customers  utilize  a  competitor's  manufacturing  equipment.  There  can be no
assurance  that growth in sales of new products will continue or that we will be
successful in obtaining broad market acceptance of our systems and technology.

         Competition

The  markets in which we compete  are highly  competitive.  We face  substantial
competition  from  established  competitors,   certain  of  which  have  greater
financial, marketing, technical and other resources, broader product lines, more
extensive  customer support  capabilities,  and larger sales  organizations  and
customer  bases.  We may also face  competition  from new  domestic and overseas
market entrants.  Significant competitive factors in the semiconductor equipment
market and other  markets in which we compete  include  system  performance  and
flexibility,  cost of  ownership,  the  size of  each  manufacturer's  installed
customer  base,  customer  service and support,  and breadth of product line. We
believe  that we compete  favorably on the basis of these  factors.  In order to
remain competitive,  we must maintain a high level of investment in research and
development,   marketing,  and  customer  service  while  controlling  operating
expenses.  There can be no assurance that we will have  sufficient  resources to
continue  to make such  investments  or that our  products  will  continue to be
viewed as  competitive as a result of  technological  advances by competitors or
changes  in  semiconductor  processing  technology.  Our  competitors  may  also
increase  their  efforts to gain and retain  market  share  through  competitive
pricing. Such competitive pressures may necessitate significant price reductions
by us or result in lost  orders  which  could  adversely  affect  our  business,
financial condition, results of operations or cash flows.

We expect our  competitors to  continue to improve the design and performance of
their products.  There can be no assurance that our competitors will not develop
enhancements to, or future generations of, competitive  products that will offer
superior price or performance features,  or that new processes,  or technologies
will not emerge that render our products  less  competitive  or  obsolete.  As a
result of the substantial  investment  required to integrate  capital  equipment
into a production line, we believe that once a manufacturer has selected certain
capital equipment from a particular  vendor,  the manufacturer  generally relies
upon  that  vendor  to  provide  equipment  for  the  specific  production  line
application  and  may  seek to rely  upon  that  vendor  to meet  other  capital
equipment  requirements.  Accordingly,  we may be at a competitive  disadvantage
with respect to a particular  customer if that customer  utilizes a competitor's
manufacturing  equipment.  There  can be no  assurance  that  we will be able to
compete successfully in the future.

         Environmental Regulations

We are subject to a variety of governmental regulations related to the discharge
or disposal of toxic,  volatile or  otherwise  hazardous  chemicals  used on our
premises.  We believe that we are in material  compliance with these regulations
and that we have  obtained all  necessary  environmental  permits to conduct our
business.  Nevertheless,  current  or future  regulations  could  require  us to
purchase  expensive  equipment or to incur other substantial  expenses to comply
with  environmental  regulations.  Any  failure by us to control  the use of, or
adequately  restrict the discharge or disposal of,  hazardous  substances  could
subject us to future liabilities, result in fines being imposed on us, or result
in the suspension of production or cessation of our manufacturing operations.

         International Business

Approximately  53%,  38% and 36% of our sales for  fiscal  1999,  1998 and 1997,
respectively,  were  attributable  to customers  outside the United  States.  We
expect sales  outside the United  States to continue to represent a  significant
portion of future  sales.  Sales to  customers  outside  the  United  States are
subject to various  risks,  including  exposure  to currency  fluctuations,  the
imposition of governmental  controls,  the need to comply with a wide variety of
foreign and United States export laws, political and economic instability, trade
restrictions,  changes in tariffs and taxes, and longer payment cycles typically
associated with international sales. Our international sales activities are also
subject to the  difficulties  of  managing  foreign  subsidiary  operations  and
managing overseas distributors or representatives, and difficulties of staffing.
In addition,  because a majority of our  international  sales are denominated in
United  States  Dollars,  our  ability to compete  overseas  could be  adversely
affected by a strengthening United States Dollar. Moreover, although we endeavor
to  meet  technical   standards   established  by  foreign   standards   setting
organizations,  there can be no  assurance  that we will be able to comply  with
changes in foreign standards in the future.  Our inability to design products to
comply with foreign  standards or any  significant  or prolonged  decline in our
international sales could have a material adverse effect on Semitool's business,
financial condition, results of operations or cash flows.

         Patents and Other Intellectual Property

Our success depends in significant part on the technically  innovative  features
of our products.  We currently hold numerous  United States  patents,  some with
pending  foreign  counterparts,  have several United States patent  applications
pending  and  intend  to  file  additional   patent   applications  as  we  deem
appropriate.  There can be no assurance  that patents will issue from any of our
pending  applications  or that existing or future  patents will be  sufficiently
broad to protect our  technology.  While we attempt to protect our  intellectual
property rights through patents, copyrights and non-disclosure agreements, there
can be no  assurance  that we will be able to protect  our  technology,  or that
competitors  will not be able to develop similar  technology  independently.  In
addition, the laws of certain foreign countries may not protect our intellectual
property to the same extent as the laws of the United  States.  Moreover,  there
can be no assurance  that our existing or future patents will not be challenged,
invalidated or circumvented,  or that the rights granted thereunder will provide
meaningful  competitive  advantages to us. In any of such events,  our business,
financial  condition,  results of  operations  or cash flows could be  adversely
affected.

There has been substantial  litigation  regarding patent and other  intellectual
property rights in semiconductor-related  industries.  Although we are not aware
of any  infringement  by our  products of any patents or  proprietary  rights of
others,  further  commercialization  of our  products  could  provoke  claims of
infringement from third parties.  In the future,  litigation may be necessary to
enforce  patents  issued to us, to protect trade secrets or know-how owned by us
or to defend us  against  claimed  infringement  of the  rights of others and to
determine the scope and validity of the proprietary  rights of others.  Any such
litigation could result in substantial cost and diversion of effort by us, which
by itself  could  have a material  adverse  effect on our  financial  condition,
results of operations or cash flows.  Further,  adverse  determinations  in such
litigation  could  result  in our  loss of  proprietary  rights,  subject  us to
significant liabilities to third parties, require us to seek licenses from third
parties or prevent us from  manufacturing or selling our products,  any of which
could have a  material  adverse  effect on our  business,  financial  condition,
results of operations or cash flows.

         Dependence on Key Personnel

Our success  depends to a significant  extent upon the efforts of certain senior
management  and  technical  personnel,   particularly  Raymon  F.  Thompson  our
Chairman.  Our future  success  will  depend in large  part upon our  ability to
attract  and  retain  highly  skilled  technical,   managerial,   and  marketing
personnel.  Competition  for such personnel is high and, while to date we do not
believe that our  geographic  location has hindered us in  recruiting  qualified
personnel, no assurance can be given that our location will not adversely affect
future recruiting of key personnel.  The loss of the services of Mr. Thompson or
of one or more other key management or technical personnel,  or the inability to
attract and retain additional  qualified  personnel,  could adversely affect our
business,  financial  condition,  results of operations or cash flows. We do not
carry key man life insurance on Mr. Thompson.

         Dependence on Key Customers

Semitool's ten largest customers accounted for 51%, 55% and 52% of our net sales
in fiscal 1999,  1998 and 1997,  respectively.  Although the  composition of our
largest  customers has changed from year to year,  the loss of, or a significant
curtailment  of purchases by one or more of our key  customers  could  adversely
affect our business, financial condition, results of operations or cash flows.

         Dependence on Key Suppliers

Certain components and subassemblies  included in our products are obtained from
a single source or a limited group of  suppliers.  Although we have  selectively
vertically integrated our manufacturing  operations,  the loss of, or disruption
in  shipments  from,  certain  sole or  limited  source  suppliers  could in the
short-term  adversely affect our business and results of operations.  We believe
that we could either manufacture components or secure an alternate supplier with
no long-term  material adverse effect on our business or operations.  Further, a
significant  increase  in the  price  of one or more of these  components  could
adversely  affect our business,  financial  condition,  results of operations or
cash flows.

         Effect of Certain Anti-Takeover Provisions

Our  Articles  of  Incorporation  authorize  our  Board  of  Directors  to issue
Preferred  Stock  in one or  more  series  and to fix the  rights,  preferences,
privileges  and  restrictions  granted  to or imposed  upon any wholly  unissued
shares of  Preferred  Stock and to fix the  number  of shares  constituting  any
series and the  designations  of such series,  without further vote or action by
the  shareholders.  Although  we have no  present  plans to issue any  Preferred
Stock, we view the authorized  Preferred Stock as a potential financing vehicle.
The Board of  Directors  may issue  Preferred  Stock with voting and  conversion
rights  which could  adversely  affect the voting power of the holders of Common
Stock.  Any  issuance  of  Preferred  Stock  may have the  effect  of  delaying,
deferring or preventing a change in control of Semitool.

         Volatility of Stock Price

Our  Common  Stock has  experienced  in the past,  and could  experience  in the
future,  substantial  price  volatility  as a  result  of a number  of  factors,
including quarter to quarter  variations in the actual or anticipated  financial
results,  announcements  by us, our  competitors  or our  customers,  government
regulations,  developments  in the industry and general  market  conditions.  In
addition, the stock market has experienced extreme price and volume fluctuations
which have affected the market price of many technology  companies in particular
and which have at times  been  unrelated  to the  operating  performance  of the
specific companies whose stock is traded. Broad market fluctuations,  as well as
economic conditions  generally and in the semiconductor  industry  specifically,
may adversely affect the market price of Semitool's Common Stock.

         Year 2000

Our Year 2000 (Y2K) readiness project is complete.  The project consisted of six
major  phases:  planning,  assessment,  testing,  repairs/reinstallations,   and
contingency planning.

The following areas went through each of the above phases:

      Products.  Other  than some  spare  parts,  many of our  products  include
      software  both  internally  developed and  purchased  from  vendors.  Some
      equipment also includes numerous sub-systems with embedded software.  Much
      of this software is customized to meet customers' specific needs.

      IT System.  These systems include our business and manufacturing  systems,
      computer-aided  design,  e-mail and others.  The majority of these systems
      were developed by software vendors,  are not highly  customized,  and have
      been  updated to Y2K  compliant  revisions  per the vendor.  We  performed
      end-to-end  testing  where we deemed such testing  necessary  and found no
      compliance issues.

      Non-IT  Systems.  These systems include but are not limited to controllers
      on machinery used in production, the heating and air conditioning systems,
      communication systems, and electronic security devices.

      Customers/Suppliers.  We  worked  with  our  customers  and  suppliers  to
      determine  Y2K  readiness  and  insure  that  goods and  services  will be
      delivered  timely and that  transaction  processing is proper.  We do have
      electronic data interface (EDI) transactions with some customers; however,
      these EDI  transactions  are provided by third parties who have  certified
      their Y2K readiness.

Contingency  plans  have been  formulated  in the  event  that  significant  Y2K
compliance  issues remain  undetected.  These plans make the assumption that our
major  facilities  continue to receive  essential  services such as electricity,
natural gas, communications,  sewer and water. Such assumptions are based on our
vendor's  assurances that these services will not be  interrupted.  The plans do
attempt to minimize  damage to property in the event any of these  services  are
unavailable.

The cost incurred thus far with regard to Y2K consists mainly of personnel costs
for IT, non-IT, product software and customers/suppliers issues. We do not track
Y2K costs as a separate  cost.  Total  estimated  costs are not  anticipated  to
exceed $250,000.

All  mission  critical IT systems  have been  tested and are  believed to be Y2K
ready,  however, due to the inherent  uncertainty  surrounding the Y2K issue, we
cannot  anticipate  all  of  the  possible  problems  that  may  occur.  Adverse
consequences from Y2K issues may materially effect our warranty  liability,  the
value of our  capitalized  software and the carrying  value of our  inventory as
well as our financial  condition,  results of operations or cash flows.  The Y2K
problems  could also subject us to  litigation  which may include  consequential
damages.

Item 2.  Properties

We own a number of facilities  around the world. We have two facilities  located
on sites in Kalispell, Montana. The building and land for our European sales and
customer service  headquarters is located in Cambridge,  England and is owned by
us. Also,  we own the building  and land located in  Coopersburg,  Pennsylvania,
which serves as a manufacturing  facility for our Rhetech,  Inc. subsidiary.  In
early fiscal 1999, we purchased a building and land in Phoenix, Arizona to house
our Semy Engineering,  Inc. (Semy) subsidiary. During the year, we sold the land
in Scottsdale,  Arizona, which had been purchased in fiscal 1998 with the intent
to build a facility to house Semy.  We believe that our  existing  manufacturing
facilities will be adequate to meet our requirements for the foreseeable  future
and that suitable additional or substitute space will be available as needed. We
also lease various other smaller  facilities  worldwide  which are used as sales
and customer service centers.

We are subject to a variety of governmental regulations related to the discharge
or  disposal  of toxic,  volatile,  or  otherwise  hazardous  chemicals  used on
Semitool's  premises.  We believe that we are in material  compliance with these
regulations  and that we have  obtained all necessary  environmental  permits to
conduct our business. Nevertheless,  current or future regulations could require
us to purchase  expensive  equipment or to incur other  substantial  expenses to
comply with environmental regulations.  Any failure by us to control the use of,
or adequately restrict the discharge or disposal of, hazardous  substances could
subject us to future liabilities, result in fines being imposed on us, or result
in the suspension of production or cessation of our manufacturing operations.

Item 3.  Legal Proceedings

In August,  1998,  we filed suit against  Novellus  Systems,  Inc. in the United
States  District  Court  for the  Northern  District  of  California  (Case  No.
C-98-3089DLJ),  alleging  infringement of two of our patents  relating to single
substrate  processing  tools used in  electrochemical  deposition of copper onto
semiconductor  wafers.  We seek  damages  for  past  infringement,  a  permanent
injunction,  treble damages for willful infringement,  pre-judgment interest and
attorneys  fees.  Novellus  answered the  complaint by denying all  allegations,
counterclaiming  for  declaratory  judgment of invalidity and  non-infringement.
Discovery is continuing and no trial date has been set.

A lawsuit brought by Mitsubishi Silicon America Corporation, successor to Siltec
Corporation  (Case No.  CV-98-826AA)  was  filed on July 7,  1998 in the  United
States Federal District Court for the District of Oregon against us. The lawsuit
alleges breach of warranties and seeks damages and attorney's  fees in excess of
$5 million.  We believe the lawsuit to be without merit and are  contesting  the
action vigorously. However, given the inherent uncertainty of litigation and the
stage of discovery,  there can be no assurance that the ultimate outcome will be
in our favor.  Further,  regardless  of the  ultimate  outcome,  there can be no
assurance that the diversion of management's attention, and any costs associated
with the  lawsuit,  will not have a  material  adverse  effect on our  financial
condition, results of operations or cash flows.

We are subject to other legal  proceedings  and claims  which have arisen in the
ordinary course of our business and have not been finally adjudicated.  Although
there can be no assurance as to the ultimate disposition of these matters, it is
the opinion of our  management,  based upon the  information  available  at this
time, that the currently  expected outcome of these matters,  individually or in
the  aggregate,  will not have a  material  adverse  effect  on our  results  of
operations, financial condition or cash flows.

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

No matters  were  submitted  to the  shareholders  for a vote  during the fourth
quarter of the fiscal year.


<PAGE>


                                     Part II

Item 5.  Market for Semitool's Common Stock and Related Shareholder Matters

The Company's Common Stock is traded under the symbol "SMTL"  principally on the
Nasdaq  National  Market.  The  approximate  number of shareholders of record at
December  6,  1999 was 208 and the  reported  last sale  price of the  Company's
common stock on the Nasdaq  National  Market was $11.75.  The high and low sales
prices for the Company's common stock reported by the Nasdaq National Market are
shown below.


                            Common Stock Price Range
                                   Fiscal Year
                               Ended September 30,
                                      1999                            1998
                           High            Low             High            Low

First Quarter             $8.50           $4.25           $26.25          $12.00
Second Quarter            $9.38           $6.00           $14.75          $11.63
Third Quarter            $10.00           $6.00           $14.50           $7.88
Fourth Quarter           $13.88           $8.38            $9.63           $5.13


Since the Company's initial public offering of Common Stock in February of 1995,
it has never  declared or paid any cash  dividend nor has any intent to do so in
the near future.

Item 6.  Selected Financial Data

This  summary  should be read in  conjunction  with the  consolidated  financial
statements and related notes included elsewhere herein.

<TABLE>
<CAPTION>

                   Summary Consolidated Financial Information
                      (in thousands, except per share data)

                                                                 Year Ended September 30,
                                                 1999         1998         1997         1996         1995

<S>                                            <C>          <C>          <C>          <C>          <C>
Statement of Operations Data:
Net sales                                      $122,528     $180,501     $193,952     $174,204     $128,326
Gross profit                                     57,648       90,979       91,090       84,631       65,858
Income (loss) from operations                   (12,741)       8,087       20,432       24,182       20,927
Net income (loss)                                (6,745)       4,805       12,523       15,136       14,885

Pro forma Statement of Operations Data:
Income (loss) from operations (1)               (12,741)       8,087       20,432       24,182       22,599
Net income (loss) (2)                            (6,745)       4,805       12,523       15,136       14,403
Basic earnings (loss) per share                   (0.49)        0.35         0.92         1.11         1.19
Diluted earnings (loss) per share                 (0.49)        0.35         0.91         1.09         1.15
Average number of basic common shares            13,797       13,783       13,676       13,651       12,080
Average number of diluted common shares          13,797       13,904       13,833       13,858       12,563

Balance Sheet Data:
Working capital                                  52,308       52,408       50,047       43,797       37,209
Total assets                                    131,884      127,990      131,725      114,954       88,067
Short-term debt                                  10,541        3,596        4,393        4,374          924
Long-term debt and capital leases                 3,911        3,836        3,364        3,637        4,011
Shareholders' equity (3)                         81,025       86,694       81,580       68,003       52,813

</TABLE>

(1) Pro forma income from operations has been determined by eliminating for 1995
payments for technology rights that ceased in February 1995, upon closing of the
initial public offering of the Company's common stock.

(2) Between  October 1, 1986 and  February 1, 1995,  the  Company  elected to be
taxed under the provisions of Subchapter S of the Code. Under those  provisions,
the  Company  had not been  subject to federal  corporate  income  taxation.  In
connection  with the  closing of the  Company's  initial  public  offering,  the
Company  terminated  its S  corporation  status.  Pro forma net  income has been
determined by assuming  that the Company had been taxed as a C  corporation  for
federal income tax purposes for 1995.  The pro forma  provision for income taxes
has been calculated by using statutory rates for federal and state taxes applied
to pro forma income before income taxes,  net of actual research and development
credits generated. The pro forma effective tax rate in fiscal 1995 was 37.1%.

(3) Prior to the termination of S corporation status, dividends were paid by the
Company only in amounts sufficient to cover  shareholders' tax liabilities other
than the final distribution of prior accumulated S Corporation earnings. The per
share dividend information has therefore not been presented.


<PAGE>


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

CAUTION - FORWARD LOOKING STATEMENTS

Statements contained in this "Management's  Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Annual Report on Form
10-K which are not purely historical facts are forward-looking statements within
the meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended,
including without  limitation,  statements  regarding use of sales,  service and
support  organizations,  the contribution of  international  sales to net sales,
fiscal  year 2000 sales,  gross  margins,  research  and  development,  costs of
manufacturing,  interest expense, future balances, the sufficiency of funds, and
effects  of new  accounting  standards,  and  are  subject  to the  safe  harbor
provisions  created by that  statute.  A  forward-looking  statement may contain
words such as "will  continue to be," "will be,"  "continue  to,"  "expect  to,"
"anticipates that," "to be" or "can impact."

Management  cautions that  forward-looking  statements  are subject to risks and
uncertainties that could cause the Company's actual results to differ materially
from  those  projected  in such  forward-looking  statements.  These  risks  and
uncertainties  include,  but are not  limited  to,  the  cyclical  nature of the
semiconductor  industry in general,  lack of market acceptance for new products,
decreasing  demand for the Company's  existing  products,  impact of competitive
products and pricing,  product development,  commercialization and technological
difficulties,  capacity  and  supply  constraint  difficulties  and other  risks
detailed herein.

The Company's  future  results will depend on its ability to continue to enhance
its existing products and to develop and manufacture new products and to finance
such  activities.  There can be no assurance that the Company will be successful
in the  introduction,  marketing  and  cost-effective  manufacture  of  any  new
products or that the Company  will be able to develop and  introduce in a timely
manner new products or enhancements to its existing products and processes which
satisfy customer needs or achieve widespread market acceptance.

The Company  undertakes no obligation  to update  forward-looking  statements to
reflect  subsequent  events,  changed   circumstances,   or  the  occurrence  of
unanticipated events.

OVERVIEW

The following  discussion and analysis  should be read in  conjunction  with the
Company's  financial  statements and related notes,  included  elsewhere in this
document. References to fiscal years are to years ended September 30.

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No.  131
"Disclosures about Segments of an Enterprise and Related Information" (SFAS 131)
for fiscal 1999. The Company's reportable segments have been determined based on
the nature of its operations, products offered to customers and information used
by the chief  operating  decision maker as defined by SFAS 131. For fiscal 1999,
the Company's two reportable  segments are Semiconductor  Equipment and Software
Control Systems.

The  Semiconductor  Equipment  segment is the Company's  largest segment and its
primary  products  are  capital  equipment  for   semiconductor   wafer  surface
preparation and cleaning, and electrochemical  deposition of various metals on a
wafer surface.  The  manufacturing  process for integrated  circuits may include
over several  hundred steps and following  many of those steps the silicon wafer
surface  must be  cleaned,  a  deposited  film  stripped  off the surface or the
surface etched.  The  Semiconductor  Equipment  segment's  largest product line,
surface preparation and cleaning equipment, can perform many of these steps. The
segment's electrochemical  deposition products are used to deposit various types
of metals on the surface of a wafer for varied applications including copper for
interconnect.  The unit selling  prices for this  segment's  products range from
$15,000 to approximately  $3.0 million with some  predominance of selling prices
in the upper portion of the price range. Due to this  predominance of relatively
high unit selling prices, a significant  portion of the Company's revenue in any
given  period is often  derived  from the sale of a  relatively  small number of
units.

The Software  Control Systems  segment's  primary product is a software  control
system comprised of a communication  software  interface  coupled with equipment
specific software modules to link most types of manufacturing  equipment used in
a semiconductor manufacturing facility ("fab") front-end process. The Unix based
software system utilizing specially equipped computer workstations performs data
collection,  statistical  process analysis and control,  preventive  maintenance
scheduling,  and process recipe management for either a single tool or multiple,
networked   tools.   The  system  can  be   integrated   with  a   semiconductor
manufacturer's computer integrated manufacturing system.

Both of Semitool's  segments sell their products to semiconductor  manufacturers
worldwide  and  believe  their  sales,  service and  support  organizations  are
important to the long-term success of their customer relationships, particularly
as customers  increasingly  demand equipment and integrated  process  solutions.
Worldwide  sales,  service and support are primarily  provided  through  Company
employees in the United States, Europe, Japan, Korea, Singapore, and Taiwan with
some limited use of  independent  sales  representatives  and  distributors.  In
fiscal 1999, the Company's sales distribution  by  geographical  area was United
States,  47.2%,  Europe,  24.0%, Japan,  18.7%, and Asia,  including all others,
10.1% compared to 61.7%, 26.5%, 8.6% and 3.2%, respectively, for the prior year.
The Company  anticipates that international sales will continue to account for a
significant portion of net sales, although the percentage of international sales
and the geographical distribution may fluctuate from period to period.

From time to time,  the  Company  has  experienced,  and  expects to continue to
experience, significant fluctuations in its results of operations,  particularly
on a  quarterly  basis.  The  Company's  expense  levels  are  based  in part on
expectations of future sales. If sales levels in a particular period do not meet
expectations, operating results will be adversely affected. A variety of factors
have an influence on the  Company's  operating  results in a particular  period.
These  factors  include  specific  economic   conditions  in  the  semiconductor
industry,  the timing of the  receipt of orders from major  customers,  customer
cancellations  or delays of shipments,  specific  feature requests by customers,
production  delays or  manufacturing  inefficiencies,  management  decisions  to
commence  or  discontinue  product  lines,  the  Company's  ability  to  design,
introduce and manufacture  products on a  cost-effective  and timely basis,  the
introduction of new products by the Company or its competition, the selection of
the Company's or its competitors'  products by semiconductor  manufacturers  for
new  generations  of  facilities  or  expansions,  the  timing of  research  and
development expenditures,  exchange rate fluctuations, and expenses attendant to
acquisitions,  strategic  alliances  and further  development  of marketing  and
service capabilities.

RESULTS OF OPERATIONS

The following table sets forth the Company's  consolidated results of operations
for the periods indicated expressed as a percentage of net sales:

<TABLE>
<CAPTION>

                                                                YEAR ENDED SEPTEMBER 30,
                                                    ------------------------------------------------
                                                         1999              1998             1997
                                                    -------------    -------------     -------------

<S>                                                 <C>              <C>               <C>
Statement of Operations Data:
     Net sales                                              100.0%           100.0%            100.0%
     Cost of Sales                                           53.0             49.6              53.0
                                                    -------------    -------------     -------------
     Gross Profit                                            47.0             50.4              47.0
                                                    -------------    -------------     -------------

     Operating expenses:
         Selling, general and administrative                 40.4             32.3              25.5
         Research and development                            17.0             13.6              10.9
                                                    -------------    -------------     -------------
            Total operating expenses                         57.4             45.9              36.4
                                                    -------------    -------------     -------------
     Income (loss) from operations                          (10.4)             4.5              10.6
     Other income (expense), net                              1.5             (0.5)             (0.1)
                                                    -------------    -------------     -------------
     Income (loss) before income taxes                       (8.9)             4.0              10.5
     Income taxes                                            (3.4)             1.4               4.0
                                                    -------------    -------------     -------------
     Net income (loss)                                       (5.5)             2.6%              6.5%
                                                    =============    =============     =============

</TABLE>

Net Sales.  Fiscal 1999 consolidated sales declined 32.1% to $122.5 million from
last year's $180.5  million and compares to $194.0  million in fiscal 1997.  The
overall  net  sales  decline  in  each  of  the  past  two  years  is  primarily
attributable  to the  reduction of capital  equipment  spending by the Company's
customers  in response  to excess  manufacturing  capacity in the  semiconductor
industry,  the Asian economic  decline and, to a lesser extent,  the effect of a
shift of marketing and sales  resources from the Company's  Thermal  products to
other product lines with expected  higher  potential.  Partially  offsetting the
sales decline from these factors in both years was a small  increase in Software
Control Systems segment sales.

Semiconductor  Equipment  segment  sales fell 35.1% to $109.6  million in fiscal
1999 from $168.9  million in fiscal  1998,  and that year was 8.4% below  fiscal
1997. The Semiconductor  Equipment segment's product lines relative contribution
to consolidated  net sales for fiscal 1999 and 1998,  respectively,  are Surface
Preparation and Cleaning, 53.5% and 58.2%, Electrochemical Deposition, 16.7% and
13.7%,  and Parts,  Service and Other,  19.4% and 21.7%. The fiscal 1999 segment
sales decline is due to lower sales in all product lines which was primarily the
result of the semiconductor industry downturn. However, the sales decline in the
Company's  Thermal  products,  which is included in Other,  was greater due to a
shift of marketing  and sales  resources  away from that product line. In fiscal
1998,  segment net sales were $15.5 million  below the prior year's sales.  That
year's  decrease  was  primarily  attributable  to the Surface  Preparation  and
Cleaning and Thermal product lines sales decrease which was partially  offset by
increased  sales of  Electrochemical  Deposition  products  and Spare  Parts and
Service.

Fiscal  1999  Electrochemical  Deposition  product  sales  for all  metal  types
declined $4.2 million from the prior year, but the  percentage  decline for this
product line was  significantly  lower than the percentage  decline of all other
product lines in this segment.  Electrochemical deposition sales for fiscal 1998
were $24.6 million, up from $6.4 million in fiscal 1997.  Essentially all of the
fiscal  1998  sales  increase  was  from  sales  of  tools  for  copper  plating
applications.

Software  Control  Systems  segment  sales for fiscal  1999 were  $13.3  million
including  intersegment sales of $413,000.  Fiscal 1999 segment sales, excluding
intersegment  sales,  increased 11.1% compared to the previous year's comparable
sales  increase  of  21.7%,   which  included  a  fab-wide,   front-end   system
installation  for one customer.  This year's sales increase is  attributable  to
growing product acceptance and increasing market activity.

There is some industry  expectation that foundries,  manufacturers  that produce
semiconductors for companies that need additional  manufacturing  capacity or do
not have fabs,  will make  significant  capital  investment  in the next several
years.  Likewise,  there is a  similar  industry  expectation,  that as the Asia
Pacific economic  conditions  improve,  capital investment will increase in that
geographic area. Both of these market expectations, if they develop, may support
a recovery in the  semiconductor  industry.  Based on the current  semiconductor
market outlook,  management expects fiscal year 2000 sales to exceed fiscal year
1999's sales and that  profitability  will  improve,  although,  there can be no
assurance that this will be the case.

Consolidated  orders backlog  increased 86.7% to approximately  $57.5 million at
September  30, 1999,  from  approximately  $30.8  million at September 30, 1998,
which had decreased  51.7% from $63.8  million at September 30, 1997.  New order
bookings  were similar in total  amount for both fiscal 1999 and 1998,  however,
the timing of orders  booked was  reversed.  Fiscal  1999  second half new order
bookings were approximately $94.5 million compared to $54.8 million for the same
period  in the  prior  year.  At  September  30,  1999 and  1998,  Semiconductor
Equipment segment orders backlog represented 97.6% and 94.1%,  respectively,  of
consolidated orders backlog.

The  Company  includes  in its backlog  those  customer  orders for which it has
written authorization and for which shipment is scheduled within the next twelve
months.  Orders  are  generally  subject  to  cancellation  or  rescheduling  by
customers  with  limited or no  penalty.  As the result of systems  ordered  and
shipped in the same quarter,  possible  changes in customer  delivery  schedule,
cancellations,  and shipment delays,  the backlog at any particular date and the
new orders bookings for any particular period are not necessarily  indicative of
actual sales for any succeeding period.

Gross Profit.  Consolidated  gross profit as a percentage of net sales in fiscal
1999 was 47.0%,  down from 50.4% in fiscal 1998 and nearly unchanged from fiscal
1997.  The  decrease in gross margin in the current  year is  attributable  to a
number of factors,  including  the effect of lower  operating  levels and higher
obsolete inventory write-offs in the Semiconductor  Equipment segment, and sales
mix in both segments.  The fiscal 1998 increase in gross margin is  attributable
to a number of factors including the effect of efficiencies earlier in that year
which were partially  offset later in the year by excess capacity  costs,  lower
material costs in the  semiconductor  equipment  segment,  and sales mix in both
segments.

The  Company's  gross margin has been,  and will  continue to be,  affected by a
variety of factors, including the costs to manufacture, service, and support new
and enhanced products, as well as the mix and average selling prices of products
sold.  The  Company  anticipates  that the cost to  manufacture  and support new
products  will improve over time,  but it also expects to continue to design and
sell  additional  models of its existing  products and new  products,  which may
adversely affect the anticipated improvement.

Selling,   General  and  Administrative.   Consolidated  selling,   general  and
administrative  (SG&A)  expenses  were $49.5  million,  or 40.4% of net sales in
fiscal 1999, down $8.8 million in absolute  dollars but up as a percent of sales
from fiscal 1998's $58.4 million,  or 32.3% of net sales.  This absolute decline
in SG&A  expense  is the net  result of overall  lower  Semiconductor  Equipment
segment SG&A costs  resulting from cost reductions and lower sales volumes which
decreases  were  partially  offset by higher legal  expenses  related to current
litigation, and an increase in Software Control Systems SG&A costs due to higher
sales and an expanded sales and support organization.

The fiscal 1998 $8.9 million consolidated SG&A expense increase from fiscal 1997
reflects  primarily  the  full-year  effect of the  Company's  1997  decision to
transition to a company-staffed  sales and customer support organization in most
of the Asian  marketplace,  the larger  domestic and European  customer  service
organization,  and a fourth  quarter  $1.3  million  bad debt  provision  for an
international  receivable,  all  associated  with  the  Semiconductor  Equipment
segment.

A substantial portion of the Company's SG&A expense is fixed in the short-term.

Research and  Development.  Research and development  (R&D) expenses  consist of
salaries, project materials, laboratory costs, consulting fees, depreciation and
other costs associated with the Company's research and development  efforts. The
Company's consolidated research and development expenses in absolute dollars and
as a percent  of net sales  for  fiscal  years  1999,  1998 and 1997 were  $20.9
million,  or  17.0%,  $24.5  million  or  13.6%,  and  $21.2  million  or 10.9%,
respectively.  R&D expense for fiscal 1999 was 14.9% below fiscal 1998's expense
level which had increased 15.9% from fiscal 1997. During these periods, projects
in the  Semiconductor  Equipment segment included the development of the LT-210c
linear  copper  plating  tool,  the  development  of the high  throughput  fully
automated  Spectrum,  the Millennium platform with its unique Capsule processing
chamber,  and the HydrOzone cleaning process,  among others.  Additionally,  the
Software Control Systems segment undertook a major product upgrade and expansion
in fiscal 1998,  which is ongoing.  The  Semiconductor  Equipment  segment's R&D
activities   are  focused  on  the  Surface   Preparation   and   Cleaning   and
Electrochemical Deposition product lines.

The Company is committed to technology leadership in the semiconductor equipment
industry and expects to continue to fund research and  development  expenditures
with a multiyear  perspective.  Such funding has resulted in fluctuations in R&D
expenses  from  period  to  period  in  the  past.  The  Company   expects  such
fluctuations  to  continue  in the  future,  both in  absolute  dollars and as a
percentage of net sales, primarily due to the timing of expenditures, changes in
the level of net sales and the number of projects.

Other  Income  (Expense).  Interest  income  on  short-term  investment  of cash
balances was  $243,000 in fiscal 1999  compared to $64,000 and $97,000 in fiscal
years 1998 and 1997, respectively.  Interest expense in fiscal 1999 was $401,000
compared to $559,000 in fiscal 1998.  The decline in interest  expense in fiscal
1999 was due to lower average  borrowings during the year in response to reduced
operating levels.  Interest expense is expected to increase in fiscal year 2000.
In fiscal 1999, Other, net includes $468,000 from gains on sales of property and
foreign  currency  exchange  gains of $1.2  million.  The foreign  exchange gain
consists  of net gains  and  losses  resulting  from the  re-measurement  of our
accounts  denominated in non-U.S.  currencies  into U.S.  Dollars,  which is our
functional  currency,  and net gains and  losses on forward  contracts.  The net
exchange gain was due primarily to  fluctuations  of the U.S. Dollar against the
Japanese  Yen.  Other  expense in fiscal 1998  includes a $483,000  write-off of
capitalized costs associated with a canceled building project.

Income  Taxes.  The fiscal 1999 income tax  benefit,  as a result of this year's
loss, was $4.2 million  compared to the $2.5 million  provision for income taxes
in fiscal 1998.  The  effective  tax rates for fiscal years 1999,  1998 and 1997
were 38.4%, 34% and 38% respectively. The Company expects its effective tax rate
to be 33% for fiscal year 2000.

LIQUIDITY AND CAPITAL RESOURCES

Cash used in operating activities in fiscal 1999 was $9.8 million as compared to
$15.0 million  generated by operations in fiscal 1998. In fiscal 1999,  cash was
used in  operations  because of  substantial  increases in  inventory,  accounts
receivable, income tax refund receivable, and a decrease in accrued warranty and
installation  partially  offset by an  increase  in  accounts  payable and other
accrued liabilities.

As of September 30, 1999,  the Company had $38.4 million of accounts  receivable
and $41.7 million of inventory, compared to $34.9 million of accounts receivable
and $36.4 million of inventory at September 30, 1998. The Company expects future
accounts  receivable and inventory  balances to fluctuate with net sales.  As is
customary in the semiconductor  manufacturing  equipment industry,  products are
generally built to fill specific customer orders, with typical order fulfillment
times ranging from four to six weeks for certain  products to six months or more
for more complex  products.  Accordingly,  while the  Company's  finished  goods
inventory  accounts for slightly over 14% of total inventory,  overall inventory
levels tend to fluctuate with the level and type of orders received.  Currently,
the tools with the longest average cycle times are the  Semiconductor  Equipment
segment's automated batch tools and single substrate processor.

Cash provided by investing  activities  in fiscal 1999 was $739,000  compared to
$12.5  million used in fiscal 1998.  The sale of property  provided cash of $3.4
million in fiscal 1999 and cash used to purchase  plant,  property and equipment
declined from $9.8 million in 1998 to $2.0 million in 1999.  Major  purchases of
plant, property and equipment during 1999 include the purchase of a building for
the Software  Control  Systems  segment  operations.  Investments  in intangible
assets used cash of $654,000 in fiscal 1999  compared to $2.8  million cash used
in fiscal 1998 which includes $2.2 million for Software  Control Systems segment
software   development   costs,   which  were  capitalized  once   technological
feasibility was reached, and $600,000 for patents and trademarks.

Financing  activities  in fiscal 1999  consisted  primarily  of $7.2  million of
additional net borrowings under the Company's line of credit to fund operations.

As of September 30, 1999, the Company's principal sources of liquidity consisted
of  approximately  $4.8  million  of cash and cash  equivalents,  $14.8  million
available  under the Company's $25 million  revolving line of credit,  which was
amended during the fourth  quarter of fiscal 1999.  The credit  facility is with
Bank of America and bears  interest at the bank's  prime  lending  rate or LIBOR
plus  1.5%.  The  revolving  line of  credit  expires  on April 1,  2001 and all
principal  amounts  owing are due by April 1,  2004.  The credit  agreement  has
various  restrictive  covenants,  including a prohibition against pledging or in
any way encumbering current or operating assets during the term of the agreement
and the maintenance of various financial ratios.

The  Company  believes  that cash and cash  equivalents,  funds  generated  from
operations,  and funds available under its bank lines will be sufficient to meet
the  Company's  planned  capital  requirements  during  the next  twelve  months
including the spending of approximately $5.0 million to purchase property, plant
and  equipment.  The Company  believes  that  success in its  industry  requires
substantial  capital in order to maintain the  flexibility  to take advantage of
opportunities  as they arise.  The Company may, from time to time, as market and
business  conditions  warrant,  invest in or acquire  complementary  businesses,
products  or  technologies.  The Company  may effect  additional  equity or debt
financings to fund such activities or to fund greater than  anticipated  growth.
The sale of additional equity securities or the issuance of equity securities in
a business combination could result in dilution to the Company's shareholders.

LITIGATION

In August,  1998,  we filed suit against  Novellus  Systems,  Inc. in the United
States  District  Court  for the  Northern  District  of  California  (Case  No.
C-98-3089DLJ),  alleging  infringement of two of our patents  relating to single
substrate  processing  tools used in  electrochemical  deposition of copper onto
semiconductor  wafers.  We seek  damages  for  past  infringement,  a  permanent
injunction,  treble damages for willful infringement,  pre-judgment interest and
attorneys  fees.  Novellus  answered the  complaint by denying all  allegations,
counterclaiming  for  declaratory  judgment of invalidity and  non-infringement.
Discovery is continuing and no trial date has been set.

A lawsuit brought by Mitsubishi Silicon America Corporation, successor to Siltec
Corporation  (Case No.  CV-98-826AA)  was  filed on July 7,  1998 in the  United
States Federal District Court for the District of Oregon against us. The lawsuit
alleges breach of warranties and seeks damages and attorney's  fees in excess of
$5 million.  We believe the lawsuit to be without merit and are  contesting  the
action vigorously. However, given the inherent uncertainty of litigation and the
stage of discovery,  there can be no assurance that the ultimate outcome will be
in our favor.  Further,  regardless  of the  ultimate  outcome,  there can be no
assurance that the diversion of management's attention, and any costs associated
with the  lawsuit,  will not have a  material  adverse  effect on our  financial
condition, results of operations or cash flows.

We are subject to other legal  proceedings  and claims  which have arisen in the
ordinary course of our business and have not been finally adjudicated.  Although
there can be no assurance as to the ultimate disposition of these matters, it is
the opinion of our  management,  based upon the  information  available  at this
time, that the currently  expected outcome of these matters,  individually or in
the  aggregate,  will not have a  material  adverse  effect  on our  results  of
operations, financial condition or cash flows.


NEW ACCOUNTING PRONOUNCEMENTS

In  fiscal  1999,  the  Company  adopted  SFAS No.  130 (SFAS  130),  "Reporting
Comprehensive   Income."  This  statement   requires  the  Company  to  disclose
accumulated  other  comprehensive  income  or loss as a  separate  component  of
shareholders'  equity.  Prior period financial statements have been reclassified
to reflect application of this statement.

In June 1998,  Statement of Financial  Accounting  Standards No. 133 (SFAS 133),
"Accounting for Derivative  Instruments and Hedging Activities" was issued. SFAS
No.  133   establishes   accounting  and  reporting   standards  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts (collectively referred to as derivatives), and for hedging activities.
It  requires  that an entity  recognize  all  derivatives  as  either  assets or
liabilities in the statement of financial position and measure those instruments
at fair value.  SFAS No. 133 is effective  for the Company in fiscal  2001.  The
Company has not yet  determined  the effect the adoption of this  standard  will
have on the financial condition or results of operations of the Company.

In March  1998,  the  AICPA  issued  Statement  of  Position  98-1  (SOP  98-1),
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use." SOP 98-1  requires  companies  to  capitalize  certain  costs of
computer software  developed or obtained for internal use. SOP 98-1 is effective
for the Company in fiscal 2000. The Company does not believe the  application of
this  standard  will have a  material  effect on the  results of  operations  or
financial condition of the Company.

YEAR 2000

Our Year 2000 (Y2K) readiness project is complete.  The project consisted of six
major  phases:  planning,  assessment,  testing,  repairs/reinstallations,   and
contingency planning.

The following areas went through each of the above phases:

      Products.  Other  than some  spare  parts,  many of our  products  include
      software  both  internally  developed and  purchased  from  vendors.  Some
      equipment also includes numerous sub-systems with embedded software.  Much
      of this software is customized to meet customers' specific needs.

      IT System.  These systems include our business and manufacturing  systems,
      computer-aided  design,  e-mail and others.  The majority of these systems
      were developed by software vendors,  are not highly  customized,  and have
      been  updated to Y2K  compliant  revisions  per the vendor.  We  performed
      end-to-end  testing  where we deemed such testing  necessary  and found no
      compliance issues.

      Non-IT  Systems.  These systems include but are not limited to controllers
      on machinery used in production, the heating and air conditioning systems,
      communication systems, and electronic security devices.

      Customers/Suppliers.  We  worked  with  our  customers  and  suppliers  to
      determine  Y2K  readiness  and  insure  that  goods and  services  will be
      delivered  timely and that  transaction  processing is proper.  We do have
      electronic data interface (EDI) transactions with some customers; however,
      these EDI  transactions  are provided by third parties who have  certified
      their Y2K readiness.

Contingency  plans  have been  formulated  in the  event  that  significant  Y2K
compliance  issues remain  undetected.  These plans make the assumption that our
major  facilities  continue to receive  essential  services such as electricity,
natural gas, communications,  sewer and water. Such assumptions are based on our
vendor's  assurances that these services will not be  interrupted.  The plans do
attempt to minimize  damage to property in the event any of these  services  are
unavailable.

The cost incurred thus far with regard to Y2K consists mainly of personnel costs
for IT, non-IT, product software and customers/suppliers issues. We do not track
Y2K costs as a separate  cost.  Total  estimated  costs are not  anticipated  to
exceed $250,000.

All  mission  critical IT systems  have been  tested and are  believed to be Y2K
ready,  however, due to the inherent  uncertainty  surrounding the Y2K issue, we
cannot  anticipate  all  of  the  possible  problems  that  may  occur.  Adverse
consequences from Y2K issues may materially effect our warranty  liability,  the
value of our  capitalized  software and the carrying  value of our  inventory as
well as our financial  condition,  results of operations or cash flows.  The Y2K
problems  could also subject us to  litigation  which may include  consequential
damages.


Item 7a. Quantitative and Qualitative Disclosures About Market Risk

Market Risks

Market risks relating to the Company's  operations result primarily from changes
in interest rates and changes in foreign currency exchange rates.

Interest Rate Sensitivity

The Company as of September 30, 1999 has approximately $4.3 million in long term
debt and approximately $10.2 million in short-term debt. The Company's long-term
debt bears  interest  at a fixed  rate.  As a result,  changes in the fixed rate
interest  market  would  change  the  estimated  fair  value of its  fixed  rate
long-term debt. The Company believes that a 10% change in the long term interest
rate  would not have a material  effect on the  Company's  financial  condition,
results  of  operations  or cash  flows.  The  Company's  short-term  debt bears
interest  at a variable  rate.  Based on the $10.2  million of  short-term  debt
outstanding  as of September 30, 1999, a 10% change in interest  rates would not
have a  material  affect  on  the  Company's  financial  condition,  results  of
operations or cash flows.

Foreign Currency Exchange Rate Sensitivity

All of our  non-U.S.  operations  are  subject to inherent  risks in  conducting
business abroad,  including fluctuation in the relative value of currencies.  We
manage this risk and attempt to reduce such exposure  through an economic  hedge
by entering into short-term forward exchange contracts. At September 30, 1999 we
held  forward  contracts  to  purchase  Japanese  Yen with a face value of $10.6
million, a market value of $11.2 million and an unrealized loss of approximately
$600,000.  The impact of movements in currency exchange rates on forward foreign
exchange  contracts  generally  offsets  the  impact  on  related   transactions
denominated  in yen.  The effect of a 10% change in  foreign  exchange  rates on
hedged  transactions  involving  Japanese Yen forward exchange contracts and the
underlying  transactions  would  not  be  material  to the  Company's  financial
condition,  results of  operations  or cash flows.  The Company does not hold or
issue derivative financial instruments for trading or speculative purposes.


<PAGE>


Item 8.  Financial Statements and Supplementary Data

The  financial  statements  and  supplementary  data listed in Item 14(a)(1) and
14(a)(2) of this Form 10-K are incorporated  into this Item 8 of Part II of this
Form 10-K.

Unaudited Quarterly Consolidated Financial Data
Amounts In Thousands, Except Per Share Data

<TABLE>
<CAPTION>

                                                                          Quarter
                                                       First         Second          Third          Fourth
<S>                                              <C>             <C>             <C>             <C>
1999
Net sales                                        $    30,422     $    25,816     $    29,838     $    36,452
Gross profit                                          14,737          11,927          14,622          16,362
Net income (loss)                                     (1,141)         (2,967)         (2,735)             98
Basic and diluted earnings (loss) per share            (0.08)          (0.22)          (0.20)           0.01

1998
Net sales                                        $    47,002     $    45,241     $    46,572     $    41,686
Gross profit                                          23,904          23,842          24,109          19,124
Net income (loss)                                      2,604           1,415           1,489            (703)
Basic and diluted earnings per share                    0.19            0.10            0.11           (0.05)

</TABLE>

The fourth  quarter  fiscal year 1998  results  were  significantly  impacted by
pretax charges  totaling $2.8 million,  or $0.13 per diluted share relating to a
provision  for the loss on an  international  customer  receivable,  a  customer
return,  costs associated with a canceled building project, and severance costs,
partially offset by a reduction of the Company's  effective income tax rate that
increased net income by $263,000, or $0.02 per diluted share.

The fourth quarter results include a reduction in the Company's effective income
tax rate that increased net income by $479,000, or $0.03 per diluted share.


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

None.


<PAGE>


                                    PART III

Item 10. Executive Officers and Directors

The following table sets forth certain information with respect to the executive
officers and directors of the Company:

       Name                    Age                    Position
       ----                    ---                    --------
 Raymon F. Thompson             58   Chairman of the Board
 Fabio Gualandris               40   President and Chief Executive Officer
 Timothy C. Dodkin              50   Senior Vice President
                                     Managing Director, Semitool Europe, Ltd.
 William A. Freeman             56   Senior Vice President and Chief Financial
                                     Officer
 Gary L. Spray                  53   Vice President, Worldwide Sales
 Kazuyo N. Heinink              49   Vice President, Marketing
 Gregory L. Perkins             56   Vice President, Operations
 Larry A. Viano                 45   Treasurer, Principal Accounting Officer and
                                     Controller
 Howard E. Bateman (1)          65   Director
 Richard A. Dasen (2)           57   Director
 Daniel J. Eigeman (2)          65   Director
 Calvin S. Robinson (1)(2)      79   Director and Secretary
-----------

(1)      Member of the Compensation and Stock Option Committee.
(2)      Member of the Audit Committee.

The  following  sets forth the  background  of each of the  Company's  executive
officers and directors,  including the principal occupation of those individuals
for the past five years:

Raymon F. Thompson  founded the Company in 1979 and has served as Chairman since
the Company's  inception.  Mr.  Thompson  previously  served as Chief  Executive
Officer and President.  In 1979, Mr. Thompson designed,  patented and introduced
the first on-axis rinser/dryer for the semiconductor industry.

Fabio  Gualandris  has served as the  Company's  President  and Chief  Executive
Officer since joining the Company in 1998. Since 1984, Mr. Gualandris has served
in various  positions  with SGS  Thompson  and  STMicroelectronics,  the world's
leading supplier of analog integrated  circuits and one of the top ten worldwide
semiconductor  suppliers.  Most recently,  from 1996 to 1998, he was Director of
the Automotive Business Unit of the Dedicated Products Group. From 1991 to 1996,
he served as Director of Operations  for a submicron  semiconductor  fabrication
facility.  Mr.  Gualandris  has a doctorate  in physics  from Milan  University,
Milan,  Italy, and has authored  several papers on semiconductor  technology and
research and development and production management. He also holds four patents.

Timothy  C.  Dodkin  joined  the  Company  in 1985 and  served as the  Company's
European  Sales Manager from 1985 to 1986.  Since 1986, Mr. Dodkin has served as
Managing  Director of Semitool  Europe,  Ltd. Prior to joining the Company,  Mr.
Dodkin worked at Cambridge Instruments,  a semiconductor equipment manufacturer,
for ten years in national and international sales.

William A. Freeman  joined the Company in 1998, and is Senior Vice President and
Chief  Financial  Officer.  Prior to joining the  Company  and since  1995,  Mr.
Freeman was an independent management  consultant.  Prior to 1995, he worked for
22 years at Zurn Industries, Inc., a diversified manufacturing, engineering, and
construction  company.  At Zurn,  Mr.  Freeman  served  in  division  management
positions before being appointed Senior Vice President - Chief Financial Officer
in 1986,  and  President  in 1991.  Mr.  Freeman  also  serves  on the  Board of
Directors of NPC International, Inc., a Nasdaq-listed company.

Gary Spray has served as the Company's Vice  President of Worldwide  Sales since
joining the  Company in July 1999.  Prior to joining the Company and since 1995,
Mr. Spray served as Vice  President of Sales and  Marketing for IPEC Planar (now
Speedfam-IPEC)  located in  Phoenix,  Arizona.  From 1992 to 1995,  he served as
Worldwide  Director of Sales and Marketing  and then Director of U.S.  Sales for
General Signal Corporation,  where he provided leadership in worldwide marketing
and sales for their semiconductor equipment division.

Kazuyo N. Heinink  joined the Company in August 1999 and serves as the Company's
Vice  President of Marketing.  Prior to joining the Company and since 1998,  Ms.
Heinink  served as Director  of  Marketing  for IPEC Planar (now  Speedfam-IPEC)
before  being  appointed  Vice  President  of  Global  Account   Management  for
Speedfam-IPEC  in 1999. From 1990 to 1998, she served in various  positions with
MEMC  Electronic  Materials,   Inc.,  including  Vice  President  of  Marketing,
Commercial Director for North America and Worldwide Manager for their expitaxial
products.

Gregory L. Perkins joined the Company in 1990 as Vice  President,  Manufacturing
and, since 1994, has served as the Company's Vice President,  Operations.  Prior
to joining the Company,  Mr.  Perkins  served as General  Manager for  Modulair,
Inc., a manufacturer of clean rooms, from 1987 to 1990.

Larry A. Viano joined the Company in 1985 and serves as the Company's treasurer,
principal  accounting  officer and controller.  Mr. Viano serves on the Board of
Directors  of  Semitool  Europe,  Ltd.  and  Semitool  Japan KK. Mr.  Viano is a
Certified Public Accountant.

Howard E. Bateman has served on the Company's Board of Directors since 1990. Mr.
Bateman formerly owned and operated  Entech, a Pennsylvania  company that was an
independent sales representative for the Company's products from 1979 to 1996.

Richard A. Dasen has served on the Company's Board of Directors since 1984. From
1974 to 1992, Mr. Dasen owned and managed Evergreen Bancorporation, a multi-bank
holding company. Since 1992, Mr. Dasen has been an independent businessman.

Daniel J. Eigeman has served on the  Company's  Board of  Directors  since 1985.
From 1971 to 1993, Mr. Eigeman was President of Eigeman,  Hanson & Co., P.C., an
accounting  firm, and since 1993 has been a shareholder  of  Junkermier,  Clark,
Campanella, Stevens, P.C., CPAs. Mr. Eigeman currently serves as director of CPA
Mutual Insurance of America, Inc.

Calvin S. Robinson  has served as a director of the Company since 1982 and since
February of 1996 has served as the Company's Secretary. Mr. Robinson has been of
counsel to Crowley, Haughey, Hanson, Toole & Dietrich, P.L.L.P. since 1989. This
firm has provided legal services to the Company since 1979. Mr. Robinson is also
a director of Winter Sports, Inc.

The executive  officers are elected each year by the Board of Directors to serve
for a one-year term of office.

The information  concerning  compliance with Section 16(a) of the Securities and
Exchange Act of 1934, as amended,  required  under this item is contained in the
Company's Proxy Statement to be filed in connection with its 2000 Annual Meeting
of Shareholders under the caption "Section 16(a) Beneficial  Ownership Reporting
Compliance" and is incorporated herein by reference.


Item 11.  Executive Compensation

The  information  concerning  compensation  of executive  officers and directors
required  under this item is contained in the  Company's  Proxy  Statement to be
filed in  connection  with its 2000  Annual  Meeting of  Shareholders  under the
caption "Executive Compensation," and is incorporated herein by reference.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

The information  concerning certain principal holders of securities and security
ownership  of  executive  officers  and  directors  required  under this item is
contained in the Company's  Proxy  Statement to be filed in connection  with its
2000 Annual Meeting of  Shareholders  under the caption  "Security  Ownership of
Certain  Beneficial  Owners  and  Management"  and  is  incorporated  herein  by
reference.


Item 13.  Certain Relationships and Related Transactions

The  information  concerning  certain  relationships  and  related  transactions
required  under this item is contained in the  Company's  Proxy  Statement to be
filed in  connection  with its 2000  Annual  Meeting of  Shareholders  under the
caption "Certain Transactions," and is incorporated herein by reference.


<PAGE>


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as a part of this report:

1.  Financial Statements:

         Report of Independent Accountants

         Consolidated Balance Sheets at September 30, 1999 and
                  September 30, 1998

         Consolidated Statements of Operations for the Years Ended
                  September 30, 1999, September 30, 1998, and
                  September 30, 1997

         Consolidated  Statements  of  Changes in  Shareholders'  Equity
                  for the Years Ended September 30, 1999, September 30, 1998
                  and September 30, 1997

         Consolidated Statements of Cash Flows for the Years Ended
                  September 30, 1999, September 30, 1998 and
                  September 30, 1997

         Consolidated Statements of Comprehensive Income (Loss) for the
                  Years Ended September 30, 1999, September 30, 1998, and
                  September 30, 1997

         Notes to Consolidated Financial Statements

2.  Financial Statement Schedules:

         Schedule II - Valuation and Qualifying Accounts

3.  EXHIBITS:

(a) The exhibits  listed below are filed as part of this Annual Report on Form
    10-K or are incorporated herein by reference:

EXHIBIT NO.                               DESCRIPTION
-----------                               -----------

3.1           Restated Articles of Incorporation of the Company (1)
3.5           Amended Bylaws of Semitool, Inc. (4)
3.6           Amended Bylaws of Semitool, Inc. (5)
3.7           Amended Bylaws of Semitool, Inc. (8)
10.12         Agreement  between the Company and the Semitool European Companies
              (1)
10.13         Aircraft Lease Agreement, dated April 1, 1996, between the Company
              and Mr. Thompson (2)
10.16         Business Loan Agreement, dated September 30, 1997, between the
              Company and the Bank of America NT & SA doing business as Seafirst
              Bank (3)
10.17         Promissory Note, dated September 29, 1997, between the Company and
              the Bank of America  National Trust and Savings Association  doing
              business as Seafirst Bank (3)
10.18         Loan Modification Agreement, dated September 29, 1997 between the
              Company and The Bank of America National Trust And Savings
              Association doing business as Seafirst Bank (3)
10.19         Loan Modification Agreement, dated October 2, 1997 between the
              Company and the Bank of America National Trust And Savings
              Association doing business as Seafirst Bank (3)
10.20         Loan Modification Agreement, dated October 2, 1997 between the
              Company and the Bank of America National Trust And Savings
              Association doing business as Seafirst Bank (3)
10.21         Promissory Note, dated March 26, 1998 between Rhetech, Inc. and
              CoreStates Bank, N.A. (4)
10.22         Mortgage, Assignment of Leases and Security Agreement, dated
              March 26, 1998 between Rhetech, Inc. and CoreStates Bank, N.A. (4)
10.23         Promissory Note, dated March 26, 1998 between Rhetech, Inc. and
              CoreStates Bank, N.A. (4)
10.24         Mortgage, Assignment of Leases and Security Agreement, dated
              March 26, 1998 between Rhetech, Inc. and CoreStates Bank, N.A. (4)
10.25         Employment Agreement between William A. Freeman and
              Semitool, Inc. dated February 20, 1998. (4)
10.26         Employment Agreement between Fabio Gualandris and
              Semitool, Inc. dated April 21, 1998. (6)
10.27         Business Loan  Agreement,  dated  September 30, 1998,  between the
              Company and the Bank of America NT & SA doing business as Seafirst
              Bank (6)
10.28         Promissory Note, dated September 30, 1998, between the Company and
              the Bank of America National Trust and Savings  Association  doing
              business as Seafirst Bank (6)
10.29         First Amendment to Business Loan Agreement between Bank of America
              NT&SA doing business as Seafirst Bank and Semitool, Inc. (7)
10.30         Employment Agreement between Gary Spray and Semitool, Inc. dated
              May 5, 1999. (7)
10.31         Employment Agreement between Kazuyo N. Heinink and Semitool, Inc.
              dated July 29, 1999. (8)
21.1          Subsidiaries of Registrant (8)
27            Financial data schedule (8)
99.2          Amended and Restated Semitool, Inc. 1994 Stock Option Plan (4)


(1) Incorporated herein by reference to the identically numbered exhibits to the
Company's Registration  Statement on Form S-1 (File No. 33-87548),  which became
effective on February 2, 1995.

(2) Incorporated herein by reference to the identically numbered exhibits to the
Company's Annual Report on Form 10-K, date of report September 30, 1996.

(3) Incorporated herein by reference to the identically numbered exhibits to the
Company's Annual Report on Form 10-K, date of report September 30, 1997.

(4) Incorporated herein by reference to the identically  numbered exhibit to the
Company's Quarterly Report on form 10-Q, date of report March 31, 1998.

(5) Incorporated herein by reference to the identically  numbered exhibit to the
Company's Quarterly Report on form 10-Q, date of report June 30, 1998.

(6) Incorporated herein by reference to the identically  numbered exhibit to the
Company's Annual Report on Form 10-K, date of report September 30, 1998.

(7) Incorporated herein by reference to the identically  numbered exhibit to the
Company's Quarterly Report of Form 10-Q, date of report June 30, 1999.

(8) Filed herewith.

(B) Reports on Form 8-K. During the fourth quarter of fiscal 1999, there were no
    Form 8-K's filed by the Company.

(C) Exhibits.  The Exhibits listed in Item 14(a)(3)(a)  hereof are filed as part
    of this Annual Report on Form 10-K or incorporated herein by reference.

(D) Financial Statement Schedules.  See Item 14(a)(2) above.


<PAGE>


                                   Signatures

Pursuant to the  requirements of Section 13 or 15(d) 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.

Dated:  December 17, 1999               SEMITOOL, INC.




                                       By: /s/Fabio Gualandris
                                           ----------------------------------
                                           Fabio Gualandris
                                           President and Chief Executive Officer


<PAGE>


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

    Signature                              Title                  Date



/s/Fabio Gualandris
-------------------------
Fabio Gualandris            President and Chief Executive      December 17, 1999
                            Officer
                            (Principal Executive Officer)



/s/William A. Freeman
-------------------------
William A. Freeman          Senior Vice President              December 23, 1999
                            and Chief Financial Officer



/s/Larry A. Viano
-------------------------
Larry A. Viano              Controller, Treasurer and          December 17, 1999
                            Principal Accounting Officer



/s/Raymon F. Thompson
-------------------------
Raymon F. Thompson          Chairman of the Board              December 17, 1999



/s/Howard E. Bateman
-------------------------
Howard E. Bateman                      Director                December 22, 1999



/s/Richard A. Dasen
-------------------------
Richard A. Dasen                       Director                December 22, 1999



/s/Timothy C. Dodkin
-------------------------
Timothy C. Dodkin           Director and                       December 22, 1999
                            Senior Vice President



/s/Daniel J. Eigeman
-------------------------
Daniel J. Eigeman                      Director                December 22, 1999



/s/Calvin S. Robinson
-------------------------
Calvin S. Robinson          Director and Secretary             December 22, 1999


<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Shareholders
Semitool, Inc.

In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing under Item 14(a)(1)  present  fairly,  in all material  respects,  the
financial position of Semitool,  Inc. and its subsidiaries at September 30, 1999
and September 30, 1998, and the results of their operations and their cash flows
for each of the three years in the period ended September 30, 1999 in conformity
with accounting principles generally accepted in the United States. In addition,
in our opinion,  the financial  statement schedule listed in the index appearing
under Item 14(a)(2) presents fairly, in all material  respects,  the information
set  forth  therein  when  read in  conjunction  with the  related  consolidated
financial  statements.   These  financial  statements  and  financial  statement
schedule are the responsibility of the Company's management;  our responsibility
is to express an opinion on these financial  statements and financial  statement
schedule  based on our audits.  We conducted  our audits of these  statements in
accordance  with auditing  standards  generally  accepted in the United  States,
which require that we plan and perform the audit to obtain reasonable  assurance
about whether the financial  statements  are free of material  misstatement.  An
audit includes examining,  on a test basis,  evidence supporting the amounts and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.

                                       /s/PricewaterhouseCoopers LLP

Boise, Idaho
November 3, 1999


<PAGE>

<TABLE>
<CAPTION>

                                 SEMITOOL, INC.
                           CONSOLIDATED BALANCE SHEETS
                           September 30, 1999 and 1998
                             (Amounts in Thousands)

                                     ASSETS

                                                                       1999            1998
                                                                   -----------     -----------
<S>                                                                <C>             <C>
Current assets:
   Cash and cash equivalents                                       $     4,789     $     7,287
   Trade receivables, less allowance for doubtful accounts
      of $271 and $1,542                                                38,366          34,855
   Inventories                                                          41,667          36,435
   Income tax refund receivable                                          3,944              --
   Prepaid expenses and other current assets                             2,607           2,052
   Deferred income taxes                                                 5,928           6,379
                                                                   -----------     -----------
         Total current assets                                           97,301          87,008
Property, plant and equipment, net                                      30,336          36,302
Intangibles, less accumulated amortization of $3,574 and $2,399          3,406           3,965
Other assets, net                                                          841             715
                                                                   -----------     -----------
         Total assets                                              $   131,884     $   127,990
                                                                   ===========     ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Note payable to bank                                            $    10,160     $     3,000
   Accounts payable                                                     14,602           8,987
   Accrued commissions                                                   1,018             935
   Accrued warranty and installation                                     9,045          11,970
   Accrued payroll and related benefits                                  3,691           4,240
   Other accrued liabilities                                             3,974           2,414
   Customer advances                                                     2,119           2,380
   Long-term debt and capital leases, due within one year                  381             596
   Payable to shareholder                                                    3              78
                                                                   -----------     -----------
         Total current liabilities                                      44,993          34,600
Long-term debt and capital leases, due after one year                    3,911           3,836
Deferred income taxes                                                    1,955           2,860
                                                                   -----------     -----------
     Total Liabilities                                                  50,859          41,296
                                                                   -----------     -----------

Commitments and contingencies (Note 9)

Shareholders' equity:
   Preferred stock, no par value, 5,000 shares authorized, no
      shares issued and outstanding                                         --              --
   Common stock, no par value, 30,000 shares authorized,
      13,814 and 13,792 shares issued and outstanding
      in 1999 and 1998                                                  41,464          41,248
   Retained earnings                                                    39,009          45,754
   Accumulated other comprehensive income (loss)                           552            (308)
                                                                   -----------     -----------
         Total shareholders' equity                                     81,025          86,694
                                                                   -----------     -----------
         Totalliabilities and shareholders' equity                 $   131,884     $   127,990
                                                                   ===========     ===========

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

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                 SEMITOOL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the years ended September 30, 1999, 1998 and 1997
              (Amounts in Thousands, Except for Per Share Amounts)

                                                    1999            1998            1997
                                                 -----------     -----------     -----------
<S>                                              <C>             <C>             <C>
Net sales                                        $   122,528     $   180,501     $   193,952
Cost of sales                                         64,880          89,522         102,862
                                                 -----------     -----------     -----------

Gross profit                                          57,648          90,979          91,090
                                                 -----------     -----------     -----------

Operating expenses:
    Selling, general and administrative               49,515          58,356          49,479
    Research and development                          20,874          24,536          21,179
                                                 -----------     -----------     -----------
       Total operating expenses                       70,389          82,892          70,658
                                                 -----------     -----------     -----------

Income (loss) from operations                        (12,741)          8,087          20,432
                                                 -----------     -----------     -----------

Other income (expense):
    Interest income                                      243              64              97
    Interest expense                                    (401)           (559)           (499)
    Other, net                                         1,954            (312)            168
                                                 -----------     -----------     -----------
                                                       1,796            (807)           (234)
                                                 -----------     -----------     -----------
Income (loss) before income taxes                    (10,945)          7,280          20,198
Income taxes                                          (4,200)          2,475           7,675
                                                 -----------     -----------     -----------

Net income (loss)                                $    (6,745)    $     4,805     $    12,523
                                                 ===========     ===========     ===========

Earnings (loss) per share:
Basic                                            $     (0.49)    $      0.35     $      0.92
Diluted                                          $     (0.49)    $      0.35     $      0.91

Weighted average common shares:
Basic                                                 13,797          13,783          13,676
Diluted                                               13,797          13,904          13,833

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

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                 SEMITOOL, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
              For the years ended September 30, 1999, 1998 and 1997
                             (Amounts in Thousands)

                                                 COMMON STOCK
                                            -----------------------
                                                                                   Accumulated
                                              Number                                  Other
                                                of                     Retained   Comprehensive
                                              Shares       Amount      Earnings   Income (loss)    Total
                                            --------------------------------------------------------------
<S>                                         <C>          <C>          <C>          <C>          <C>
Balance October 1, 1996                         13,656   $   39,577   $   28,426   $       --   $   68,003
     Net income                                     --           --       12,523           --       12,523
     Exercise of stock options                     100        1,013           --           --        1,013
     Other comprehensive  income                    --           --           --           41           41
                                            ----------   ----------   ----------   ----------   ----------

Balance September 30, 1997                      13,756       40,590       40,949           41       81,580
     Net income                                     --           --        4,805           --        4,805
     Exercise of stock options                      36          342           --           --          342
     Income tax effect of nonqualified
       stock options                                --          316           --           --          316
     Other comprehensive loss                       --           --           --         (349)        (349)
                                            ----------   ----------   ----------   ----------   ----------

Balance September 30, 1998                      13,792       41,248       45,754         (308)      86,694
     Net income                                     --           --       (6,745)          --       (6,745)
     Exercise of stock options                      22          216           --           --          216
     Other comprehensive income                     --           --           --          860          860
                                            ----------   ----------   ----------   ----------   ----------

Balance September 30, 1999                      13,814   $   41,464   $   39,009   $      552   $   81,025
                                            ==========   ==========   ==========   ==========   ==========


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

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                 SEMITOOL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the years ended September 30, 1999, 1998 and 1997
                             (Amounts in Thousands)

                                                                     1999         1998        1997
                                                                  ---------    ---------    ---------
<S>                                                               <C>          <C>          <C>
Operating activities:
  Net income (loss)                                               $  (6,745)   $   4,805    $  12,523
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
      (Gain) loss on disposition of assets                             (157)         623            6
      Depreciation and amortization                                  10,351       10,423        6,077
      Provisions for losses on accounts receivable                       51        1,318           (9)
      Deferred income tax                                              (454)         308         (719)
      Change in:
          Trade receivables                                          (1,902)       3,993       (1,653)
          Inventories                                                (7,995)       2,593      (10,649)
          Income tax refund receivable                               (3,944)          --           --
          Prepaid expenses and other current assets                    (353)        (282)         552
          Shareholder payable                                           (75)          71          (26)
          Other assets, net                                            (422)         113         (262)
          Accounts payable                                            3,760       (7,234)        (442)
          Accrued commissions                                            83         (915)          99
          Accrued warranty and installation                          (2,939)       2,150        1,823
          Accrued payroll and related benefits                         (589)      (1,924)       1,132
          Other accrued liabilities                                   1,788          972          435
          Customer advances                                            (264)         660       (2,035)
          Income taxes payable                                           --       (2,670)       1,652
                                                                  ---------    ---------    ---------
             Net cash provided by (used in) operating
             activities                                              (9,806)      15,004        8,504
                                                                  ---------    ---------    ---------

Investing activities:
  Purchases of property, plant and equipment                         (1,988)      (9,759)      (6,174)
  Increase in intangible assets                                        (654)      (2,826)      (1,122)
  Proceeds from sale of property                                      3,381           63           42
                                                                  ---------    ---------    ---------
             Net cash provided by (used in) investing
             activities                                                 739      (12,522)      (7,254)
                                                                  ---------    ---------    ---------

Financing activities:
  Proceeds from exercise of stock options                               216          342        1,013
  Borrowings under line of credit                                    15,845       75,440       61,835
  Repayments under line of credit                                    (8,685)     (76,440)     (61,835)
  Proceeds from long-term debt                                           --        1,100          131
  Repayments of long-term debt and capital leases                      (636)        (410)        (385)
  Repayments of short-term debt                                        (413)        (255)          --
                                                                  ---------    ---------    ---------
             Net cash provided by (used in) financing
             activities                                               6,327         (223)         759
                                                                  ---------    ---------    ---------

Effect of exchange rate changes on cash and cash equivalnets            242          (32)          (7)
                                                                  ---------    ---------    ---------
Net increase (decrease) in cash and cash equivalents                 (2,498)       2,227        2,002
Cash and cash equivalents at beginning of year                        7,287        5,060        3,058
                                                                  ---------    ---------    ---------
Cash and cash equivalents at end of year                          $   4,789    $   7,287    $   5,060
                                                                  =========    =========    =========

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                 SEMITOOL, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
              For the years ended September 30, 1999, 1998 and 1997
                             (Amounts in Thousands)

                                                                     1999         1998         1997
                                                                   ---------    ---------    ---------
<S>                                                                <C>          <C>          <C>
Supplemental  disclosures of cash flow information:
  Cash paid (received) during the year for:
     Interest                                                      $     370    $     569    $     497
     Income taxes                                                       (431)       5,263        6,748

Supplemental disclosures of non-cash financing and
 investing activity:
     Inventory transferred to equipment                            $   3,367    $   2,033    $   6,434
     Assets acquired by incurring debt and capital leases                501          668           --
     Income tax effect of nonqualified stock options                      --          316           --

The accompanying notes  are an integral part of the consolidated financial statements

</TABLE>


<TABLE>
<CAPTION>

                                 SEMITOOL, INC.
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
              For the years ended September 30, 1999, 1998 and 1997
                             (Amounts in Thousands)

                                                             1999            1998           1997
                                                          -----------    -----------    -----------
<S>                                                       <C>            <C>            <C>
Net income (loss)                                         $    (6,745)   $     4,805    $    12,523
Foreign currency translation adjustment                           860           (349)            41
                                                          -----------    -----------    -----------
             Total comprehensive income (loss)            $    (5,885)   $     4,456    $    12,564
                                                          ===========    ===========    ===========

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

</TABLE>


<PAGE>


                                 SEMITOOL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    COMPANY ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

      Semitool,   Inc.   (Semitool)  and  subsidiaries  (the  Company)  designs,
      manufactures, markets and services equipment and software control products
      used in the  manufacture  of  semiconductors  as well  as  other  products
      requiring  similar  processes  including  thin film  heads,  compact  disc
      masters,  flat panel  displays  and hard disk  media.  The Company has two
      reportable segments, Semiconductor Equipment and Software Control Systems.
      Semitool has various  subsidiaries which operate various sales and service
      offices in certain geographic areas.

      Significant accounting policies followed by the Company are:

         Principles of Consolidation

         The consolidated  financial statements include the accounts of Semitool
         and  its  wholly-owned  subsidiaries:  Semitool  Europe  Ltd.,  (United
         Kingdom);   Semitool   Halbleitertechnik   Vertriebs  GmbH,  (Germany);
         Semitool France SARL;  Semitool Italia SRL; Semitool Japan KK; Semitool
         Korea, Inc.; Semitool (Asia) Pte Ltd., (Singapore); Semitool FSC, Inc.;
         Semy Engineering, Inc. (Semy) and Rhetech, Inc. (Rhetech).

         All significant  intercompany  accounts and transactions are eliminated
         in consolidation.

         Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         dates of the financial  statements and the reported amounts of revenues
         and expenses during the reporting  periods.  Actual results  inevitably
         will differ from those estimates,  and such differences may be material
         to the consolidated financial statements.

         Cash Equivalents

         The Company considers cash equivalents to consist of short-term, highly
         liquid  investments  with  remaining  maturities at time of purchase of
         three  months  or  less.   Substantially  all  of  its  cash  and  cash
         equivalents  are held by major  financial  institutions.  At times such
         balances may be in excess of the federal insurance limit.

         Inventories

         Inventories are carried at the lower of first-in, first-out (FIFO) cost
         or market. The Company periodically reviews its inventories to identify
         slow moving and obsolete  inventories to record such inventories at net
         realizable  values.  It  is  reasonably  possible  that  the  Company's
         estimates of net realizable values could change in the near term due to
         technological and other changes.

         Property, Plant and Equipment

         Property,  plant and  equipment  is stated  at cost.  Depreciation  and
         amortization is provided using the straight-line  method with estimated
         useful lives as follows:

            Buildings and improvements                           10-40 years
            Machinery and equipment                                2-5 years
            Furniture, fixtures and leasehold improvements         3-7 years
            Vehicles and aircraft                                 5-10 years

         Major additions and betterments are  capitalized.  Costs of maintenance
         and repairs which do not improve or extend the lives of the  respective
         assets are expensed currently.  When items are disposed of, the related
         costs and  accumulated  depreciation  are removed from the accounts and
         any gain or loss is recognized.

         Intangible Assets

         Intangible assets include,  among other things,  the cost of internally
         developed software and legal costs associated with obtaining patents.

         Costs  incurred  for  internally   developed   software   products  and
         enhancements  after  technological  feasibility and marketability  have
         been established for the related product are capitalized and are stated
         at the lower of cost or net realizable value.  Amortization is provided
         based on the  greater of the amount  computed  using (a) the ratio that
         current gross  revenues for a product bears to the total of current and
         anticipated  future  gross  revenues  for  that  product,  or  (b)  the
         straight-line  method over the remaining  economic life of the product,
         estimated  at three years.  Net  capitalized  software  costs were $1.3
         million  and  $2.4  million  as of  September  30,  1999  and  1998 and
         amortization  of such costs was  $1,105,000,  $877,000 and $491,000 for
         the years ended September 30, 1999, 1998 and 1997, respectively.

         The  cost of patents  is amortized  on a straight-line  basis  over the
         lesser of 17  years or the estimated product life.

         It is reasonably  possible that  estimates of future gross revenues for
         software products,  the estimated remaining product life, or both could
         change in the near term due to  technological  and other  changes which
         would  result  in a  reduction  in the  carrying  value of  capitalized
         software development costs and patents.

         Revenue Recognition

         Revenue from sales of products is generally  recognized at the time the
         product is shipped. Service contract revenue is recognized ratably over
         the period of the related contract. Software revenue is recognized when
         there is persuasive  evidence of an arrangement,  the software has been
         delivered,  the price is fixed, and determinable and  collectibility is
         probable in  accordance  with the AICPA's  Statement  of Position  97-2
         "Software Revenue Recognition".

         Accrued Warranty and Installation

         The  Company's  obligations  at time of shipment for  installation  and
         warranty  are accrued  concurrently  with the revenue  recognized.  The
         Company  has  made  a  provision  for  its  warranty  and  installation
         obligations  based upon historical  costs incurred for such obligations
         adjusted, as necessary,  for current conditions and factors. Due to the
         significant  uncertainties  and judgments  involved in  estimating  the
         Company's  warranty and installation  obligations,  including  changing
         product  designs and  specifications,  the ultimate amount incurred for
         warranty and installation  costs could change in the near term from the
         Company's current estimate.

         Foreign Currency

         Except for Semitool Japan KK, where the functional currency was changed
         to the yen during the fourth quarter of 1997,  the functional  currency
         for the Company's foreign  operations is the U.S. Dollar, in which most
         of  the  sales  and  purchases  are  denominated.   For  these  foreign
         operations,   realized   gains  and  losses   from   foreign   currency
         transactions and unrealized gains and losses from re-measurement of the
         financial  statements  of the foreign  operations  into the  functional
         currency are included in the consolidated statements of operations.

         In July 1997,  Semitool Japan KK, commenced  invoicing its customers in
         yen, and therefore,  the Company  changed the functional  currency from
         the U.S.  Dollar to the yen. The change in the functional  currency has
         been  accounted for  prospectively  commencing in the fourth quarter of
         1997.  Gains and (losses) of $1.2  million,  $(44,000)  and $(3,600) in
         1999,  1998,  and 1997 are  included in Other  Income  (Expense) in the
         Consolidated  Statements of Operations and unrealized  gains and losses
         from  re-measurement  of the  financial  statements  are reflected as a
         component of Other Comprehensive Income (Loss).

         Foreign Currency Exchange Contracts

         The Company uses foreign currency exchange  contracts,  which typically
         mature within one year, as part of an overall risk-management strategy.
         These  instruments  are  used  as  an  economic  hedge  of  receivables
         denominated in yen. Transaction gains and losses on these contracts and
         the related  receivables are recognized in the consolidated  statements
         of  operations.  The impact of movements in currency  exchange rates on
         forward foreign exchange contracts generally offsets the related impact
         on the  underlying  items  being  hedged,  and  therefore  net  foreign
         currency gains and losses on these  transactions  historically have not
         been material.  However,  during fiscal 1999,  significant  receivables
         were not hedged which  resulted in net foreign  currency  gains of $1.2
         million. In entering into these contracts,  the Company has assumed the
         risk that might arise from the possible  inability of counterparties to
         meet the terms of their  contracts.  The  Company  does not  expect any
         losses as a result of counterparty  defaults. The Company does not hold
         or issue  derivative  financial  instruments for trading or speculative
         purposes.

         As of  September  30, 1999 and 1998,  the Company had foreign  currency
         exchange  contracts to sell 1,191.6  million yen (US $11.2 million) and
         571.0  million  yen (US  $4.2  million),  respectively,  at  contracted
         forward rates maturing at various dates in fiscal years 2000 and 1999.

         Research and Development Costs

         Costs of research and development are expensed as incurred.

         Earnings Per Share

         Basic earnings per share is computed using the weighted  average number
         of common shares  outstanding.  Diluted  earnings per share is computed
         using the weighted  average  number of common  shares  outstanding  and
         common share  equivalents.  Common  equivalent  shares  result from the
         assumed  exercise of outstanding  stock options.  Diluted  earnings per
         share  excludes the effects of  antidilutive  stock options of 889,450,
         173,000 and 135,500 in fiscal 1999, 1998 and 1997, respectively.

         The  following  table sets forth the  computation  of basic and diluted
         earnings  (loss) per common  share for the years  ended  September  30,
         1999, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>

                                                                   1999        1998        1997
<S>                                                              <C>         <C>         <C>
         Numerator:
           Net income (loss) used for basic and diluted
           earnings (loss) per share                             $  (6,745)  $   4,805   $  12,523
                                                                 =========   =========   =========

         Denominator:
           Average common shares used for basic
           earnings (loss) per share                                13,797      13,783      13,676
           Effects of dilutive stock options                            --         121         157
                                                                 ---------   ---------   ---------

         Denominator for diluted earnings (loss) per share          13,797      13,904      13,833
                                                                 =========   =========   =========

</TABLE>

         Comprehensive Income

         In fiscal 1999, the Company adopted SFAS No. 130 (SFAS 130), "Reporting
         Comprehensive  Income." This statement requires the Company to disclose
         accumulated other comprehensive  income or loss as a separate component
         of shareholders'  equity.  Prior period financial  statements have been
         reclassified to reflect application of this statement.

         New Accounting Pronouncements

         In June 1998, Statement of Financial Accounting Standards No. 133 (SFAS
         133),  "Accounting for Derivative  Instruments and Hedging  Activities"
         was issued. SFAS No. 133 establishes accounting and reporting standards
         for derivative  instruments,  including certain derivative  instruments
         embedded in other contracts  (collectively referred to as derivatives),
         and for hedging  activities.  It requires that an entity  recognize all
         derivatives  as  either  assets  or  liabilities  in the  statement  of
         financial  position and measure those  instruments at fair value.  SFAS
         No. 133 is effective  for the Company in fiscal  2001.  The Company has
         not yet  determined  the effect the adoption of this standard will have
         on the financial condition or results of operations of the Company.

         In March 1998, the AICPA issued  Statement of Position 98-1 (SOP 98-1),
         "Accounting  for the Costs of Computer  Software  Developed or Obtained
         for Internal  Use." SOP 98-1 requires  companies to capitalize  certain
         costs of computer software  developed or obtained for internal use. SOP
         98-1 is effective for the Company in fiscal 2000.  The Company does not
         believe the application of this standard will have a material effect on
         the results of operations or financial condition of the Company.

2.    INVENTORIES:

      Inventories  at September 30, 1999 and 1998 are  summarized as follows (in
      thousands):

                                                         1999           1998

         Parts and raw materials                       $   23,930    $   22,334
         Work-in-process                                   11,852         8,344
         Finished goods                                     5,885         5,757
                                                       ----------    ----------

                                                       $   41,667    $   36,435
                                                       ==========    ==========


3.    PROPERTY, PLANT AND EQUIPMENT:

      Property, plant and equipment at September 30, 1999 and 1998 is summarized
      as follows (in thousands):
<TABLE>
<CAPTION>

                                                                  1999         1998
<S>                                                            <C>          <C>
         Buildings and improvements                            $  16,340    $  15,337
         Machinery and equipment                                  23,396       20,955
         Furniture, fixtures and leasehold improvements           10,812       11,534
         Vehicles and aircraft                                     5,406        6,702
                                                               ---------    ---------
                                                                  55,954       54,528
         Less accumulated depreciation and amortization          (29,849)     (24,240)
                                                               ---------    ---------
                                                                  26,105       30,288
         Land and land improvements                                4,231        6,014
                                                               ---------    ---------
                                                               $  30,336    $  36,302
                                                               =========    =========

</TABLE>

      Equipment under capital leases and accumulated  amortization  thereon were
      approximately  $501,000 and  $51,000,  respectively,  as of September  30,
      1999.

4.    NOTE PAYABLE TO BANK:

      The Company has an  uncollateralized  line of credit  totaling $25 million
      under an  agreement  with Bank of  America.  Borrowings  under the line of
      credit bear  interest at the bank's prime lending rate (8.25% at September
      30, 1999) or at LIBOR plus 1.5% with the line of credit  expiring on April
      1, 2001. The line of credit requires monthly interest payments only, until
      April 1, 2001  with the then  outstanding  balance  repayable  in  monthly
      principal and interest  payments over a three-year  period ending April 1,
      2004.  At  September  30,  1999,  there  were $10.2  million  of  advances
      outstanding on the line of credit.  The line of credit agreement  provides
      for a quarterly  commitment fee on any unused portion.  Additionally,  the
      agreement  has various  restrictive  covenants,  including  a  prohibition
      against  pledging or in any way  encumbering  current or operating  assets
      during the term of the agreement and the maintenance of various  financial
      ratios.


<PAGE>


5.    LONG-TERM DEBT AND CAPITAL LEASES:

      Long-term  debt and capital leases at September 30, 1999 are summarized as
      follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                                                     <C>
         Mortgage term note  payable in monthly  installments  of
            $23  including interest at a blended rate of 5.5%, maturing on
            September 1, 2014 (A)                                                       $    2,762
         Mortgage term note payable in monthly installments of
            $25 including interest at a blended rate of 4.7%, maturing on
            December 1, 1999 (A)                                                                71
         Mortgage term note payable to First Union National Bank in monthly
            installments of $6, including interest at 7.5% until
            March 30, 2005 and thereafter at the Bank's national commercial
            rate plus 1.0% per annum, maturing on March 30, 2008. (B)                          483
         Mortgage term note payable to the Pennsylvania Industrial
            Development Authority (PIDA) in monthly installments of $6,
            including interest at 4.25%, maturing on December 1, 2008. (B)                     522
         Capitalized lease obligation payable in monthly installments of
            779 yen (US $7), including interest at 3.2% and property taxes at
            1.4%, maturing on April 1, 2004.  Collateralized by equipment.                     361
         Capitalized lease obligation payable in monthly installments of
            215 yen (US $2), including interest at 2.2% and property taxes at
            1.4%, maturing on November 1, 2003.  Collateralized by equipment.                   93
                                                                                        ----------
                                                                                             4,292
         Less current portion                                                                  381
                                                                                        ----------
                                                                                        $    3,911
                                                                                        ==========

</TABLE>

      (A)   The mortgage term notes payable are collateralized by a first lien
            deed of trust on the Kalispell office and manufacturing facility and
            by all fixtures and personal property of the Company necessary for
            the operation of the facility.  The Montana State Board of
            Investments provided 80% of the financing with Bank of America
            providing the remaining 20%.  The notes are personally guaranteed by
            Raymon F. Thompson, the Company's chairman, and are subject to the
            restrictive covenants described in Note 4.

      (B)   The mortgage term note payable to  First  Union   National  Bank  is
            collateralized  by a first  lien  deed of trust on the  Coopersburg,
            Pennsylvania  office and manufacturing  facility and by all fixtures
            and personal property of Rhetech,  Inc.  necessary for the operation
            of  the  facility.  The  mortgage  term  note  payable  to  PIDA  is
            collateralized  by a second lien upon the  premises in  Coopersburg,
            Pennsylvania  upon which the Rhetech,  Inc. office and manufacturing
            facility resides,  and is subordinate only to the $540,000 mortgage,
            dated March 26, 1998, between Rhetech, Inc. and First Union National
            Bank.  The net book value of assets pledged under the agreements was
            $2.3 million at September 30, 1999.

      Principal  maturities  for long-term  debt and capital leases at September
      30, 1999, are summarized as follows (in thousands):

               Year Ending                           Notes            Capital
              September 30,                         Payable           Leases
              -----------------------------------------------------------------
                  2000                          $         287     $         112
                  2001                                    224               112
                  2002                                    242               112
                  2003                                    256               112
                  2004                                    271                55
              Thereafter                                2,558                --
              Less interest and property taxes             --               (49)
                                                -------------     -------------
                                                $       3,838     $         454
                                                =============     =============


<PAGE>


6.    EMPLOYEE BENEFIT AND STOCK OPTION PLANS:

      Semitool maintains a profit-sharing plan and trust under Section 401(k) of
      the Internal Revenue Code. Under the terms of the plan, U.S. employees may
      make voluntary  contributions to the plan. Semitool contributes a matching
      amount equal to 50% of the employee's  voluntary  contribution up to 5% of
      the  employee's   compensation.   Semitool  may  also  make   non-matching
      contributions to the plan,  which are determined  annually by the Board of
      Directors.  Total  profit  sharing  contribution  cost for  this  plan was
      approximately  $1,216,000,  $1,080,000  and $1,115,000 for the years ended
      September 30, 1999, 1998 and 1997, respectively.

      Semitool Europe Ltd. maintains a defined  contribution  pension agreement.
      This  pension  agreement  is open to all  employees  with more than  three
      months of service. The employer and employee contributions are invested in
      each  individual  member's  personal  pension  plan with a United  Kingdom
      insurance company. The employer has an obligation to make contributions at
      one-half of the contribution rate paid by the employee,  subject to a rate
      between 2.5% and 5.0% of the employee's salary. The total pension cost for
      this  plan  for  the  years  ended  September  30,  1999,  1998  and  1997
      approximated $23,000, $59,000 and $37,000, respectively.

      The Company's other foreign  subsidiaries do not operate their own pension
      plans, but retirement benefits are generally provided to employees through
      government plans operated in their respective countries.

      In December  1994,  the Board of  Directors  adopted and the  shareholders
      approved the Semitool,  Inc.  1994 Stock Option Plan (the Option Plan).  A
      total of 900,000  shares of common stock were reserved for issuance  under
      the Option Plan. In February  1997 and again in 1998 and 1999,  the Option
      Plan was  amended  to  increase  the  number of  shares  of  common  stock
      available for issuance  thereunder  by 200,000  shares per amendment for a
      total increase of 600,000.  The total shares  reserved for the Option Plan
      is 1,500,000 at September 30, 1999.  Options granted under the Option Plan
      generally become  exercisable at a rate of 5% per quarter commencing three
      months after the grant date.  Semitool  may grant  options that qualify as
      incentive  stock  options to employees and  nonqualified  stock options to
      employees,  officers, directors,  independent contractors and consultants.
      The Option Plan also provides for automatic  grants of nonqualified  stock
      options to  independent  directors.  The  Option  Plan will  terminate  in
      December 2004 unless terminated  earlier at the discretion of the Board of
      Directors. At September 30, 1999, 387,239 shares were available for future
      issuance  under the Option Plan.  Options are granted at an exercise price
      equal to the market price of the common stock and no compensation  expense
      has been recognized in 1999, 1998 or 1997 under the Option Plan.

      The  following  summary  shows stock  option  activity for the three years
      ended September 30, 1999:

                                                                      Weighted-
                                                                        Average
                                          Number of              Exercise Price
     Stock Option Activity                   Shares                   per Share
     ------------------------     -----------------           -----------------
     October 1, 1996                        635,810                      $10.12
     Granted                                163,000                      $10.54
     Exercised                              (99,937)                     $10.14
     Forfeited                             (100,550)                     $10.66
                                  -----------------           -----------------

     September 30, 1997                     598,323                      $10.14
     Granted                                429,500                      $11.28
     Exercised                              (36,509)                      $9.36
     Forfeited                             (125,640)                     $11.73
                                  -----------------           -----------------

     September 30, 1998                     865,674                      $10.51
     Granted                                145,500                       $9.17
     Exercised                              (22,475)                      $9.61
     Forfeited                              (99,249)                     $11.50
                                  -----------------           -----------------

     September 30, 1999                     889,450                      $10.20
                                  =================           =================


<PAGE>


      The following tables summarize information about stock options outstanding
      at September 30, 1999:

                                               Options Outstanding
                             ---------------------------------------------------
                                                        Weighted-
                                                          Average      Weighted-
                                                        Remaining        Average
                                         Number       Contractual       Exercise
     Range of                    Outstanding at              Life          Price
     Exercise Prices         September 30, 1999        (in years)      per Share
     ---------------------   ------------------   ---------------   ------------

      $6.31 -     $9.25                 410,675               6.6          $8.42
      $9.75 -    $14.63                 458,775               8.4         $11.58
     $15.00 -    $16.25                  20,000               7.2         $15.11
                             ------------------   ---------------   ------------
                                        889,450               7.5         $10.20
                             ==================   ===============   ============


                                               Options Exercisable
                             ---------------------------------------------------
                                                        Weighted-
                                                          Average      Weighted-
                                                        Remaining        Average
                                         Number       Contractual       Exercise
     Range of                    Exercisable at              Life          Price
     Exercise Prices         September 30, 1999        (in years)      per Share
     ---------------------   ------------------   ---------------  -------------

      $6.31 -     $9.25                 264,318               6.6          $8.61
      $9.75 -    $14.63                 142,450               8.4         $12.07
     $15.00 -    $16.25                  13,150               7.2         $15.15
                             ------------------   ---------------   ------------
                                        419,918               7.5          $9.99
                             ==================   ===============   ============


      The number and  weighted-average  exercise  prices of options  exercisable
      at September 30, 1999, 1998 and 1997 are summarized as follows:

                                                     1999       1998       1997

      Number exercisable                           419,918    299,467    196,637

      Weighted-average exercise price per share      $9.99     $10.07      $9.72

      The  exercise  and  sale of  certain  qualified  options  resulted  in the
      treatment of those options as nonqualified options for tax purposes.  As a
      result,  the Company received a tax benefit  associated with those options
      of $316,000 in 1998 which has been recorded as additional capital.

      The Company has adopted the  disclosure-only  provisions  of  Statement of
      Financial  Accounting  Standards  No. 123 (SFAS No. 123)  "Accounting  for
      Stock-Based  Compensation." Had compensation cost for the Option Plan been
      determined  based on the fair value consistent with the provisions of SFAS
      No. 123, the  Company's  net income  (loss) and earnings  (loss) per share
      would  have  been  changed  to the  pro  forma  amounts  shown  below  (in
      thousands, except for per share amounts):

                                                  1999       1998         1997

      Net income (loss):
         As reported                           $  (6,745)  $   4,805   $  12,523
         Pro forma                             $  (7,199)  $   4,526   $  12,275

      Diluted earnings (loss) per share:
         As reported                           $   (0.49)  $    0.35   $    0.91
         Pro forma                             $   (0.52)  $    0.33   $    0.89


      The fair  value of each  option  grant is  estimated  on the date of grant
      using  the   Black-Scholes   option-pricing   model  with  the   following
      weighted-average  assumptions  used for  grants  in 1999,  1998 and  1997,
      respectively:  dividend yield of 0% for all years;  expected volatility of
      70.0%,  66.0% and  67.8%;  risk-free  interest  rates of 5.44%,  5.49% and
      6.31%; and expected lives of 4.6, 4.9 and 4.6 years. The  weighted-average
      fair value of stock options  granted during the years ended  September 30,
      1999, 1998 and 1997, was $5.53, $6.69 and $6.31, respectively.

7.    INCOME TAXES:

      The provision for income taxes for the years ended September 30, 1999,
      1998 and 1997 consists of the following (in thousands):

                                           1999           1998         1997

         Federal:
              Current                   $   (3,973)   $    1,487    $    7,643
              Deferred                        (446)          231          (643)
         State:
              Current                         (374)          489           899
              Deferred                        (483)           77           (76)
         Foreign:
              Current                          601           191          (148)
              Deferred                         475            --            --
                                        ----------    ----------    ----------
                                        $   (4,200)   $    2,475    $    7,675
                                        ==========    ==========    ==========


      Domestic and foreign  components of income (loss) before income taxes for
      the years ended  September 30, 1999,  1998 and 1997 are as follows
      (in thousands):


                                         1999           1998           1997

         Domestic                    $   (12,074)   $     6,897    $     22,245
         Foreign                           1,129            383          (2,047)
                                     -----------    -----------    ------------
                                     $   (10,945)   $     7,280    $     20,198
                                     ===========    ===========    ============


      The components of the deferred tax assets and  liabilities as of September
      30, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                         1999          1998
<S>                                                                    <C>           <C>
         Deferred tax assets:
              Accrued warranty and installation                        $   2,786     $   3,900
              Net operating loss carryforwards                             1,451           708
              Research and experimentation credit carryforward               626            --
              Other accrued liabilities                                      596           700
              Inventory                                                      991           939
              Covenant not to compete                                        300           216
              Other                                                          125           149
                                                                       ---------     ---------
         Total deferred tax assets                                         6,875         6,612
         Less valuation allowance                                           (947)         (233)
                                                                       ---------     ---------
         Net deferred tax assets                                           5,928         6,379
                                                                       ---------     ---------

         Deferred tax liabilities:
              Depreciation and amortization                               (1,547)       (2,820)
              Other                                                         (408)          (40)
                                                                       ---------     ---------
         Total deferred tax liabilities                                   (1,955)       (2,860)
                                                                       ---------     ---------
         Net deferred tax asset                                        $   3,973     $   3,519
                                                                       =========     =========

</TABLE>

      The Company has established a valuation allowance of $947,000 at September
      30, 1999 and  $233,000 at  September  30, 1998 to reduce the  deferred tax
      asset related to the net operating  loss  carryforwards  in its Japanese &
      Asian subsidiaries.

      The Company has net operating  loss  carryforwards  of $1,397,000 in Japan
      that expire in fiscal years 2001 and 2002,  $1,388,000  in Singapore  that
      have no  expiration,  and $7,302,000 in various states that expire between
      2004 and 2019.  The  Company  has a research  and  experimentation  credit
      carryforward of $626,000 that expires in 2019.

      Cumulative  undistributed  earnings of foreign subsidiaries,  for which no
      U.S.  income  or  foreign  withholding  taxes  have  been  recorded,   was
      approximately $1,748,000 at September 30, 1999. Such earnings are expected
      to be reinvested indefinitely. Determination of the amount of unrecognized
      deferred tax liability  with respect to such earnings is not  practicable.
      The additional taxes payable on the earnings of foreign  subsidiaries,  if
      remitted,  would be  substantially  offset by U.S. tax credits for foreign
      taxes already paid.

      The differences  between the  consolidated  provision for income taxes and
      income  taxes  computed  using  income  before  income  taxes and the U.S.
      federal income tax rate for the years ended  September 30, 1999,  1998 and
      1997 are as follows (in thousands):

<TABLE>
<CAPTION>

                                                            1999        1998        1997
<S>                                                       <C>         <C>         <C>
         Amount computed using the statutory rate         $ (3,721)   $  2,475    $  7,069
         Increase (decrease) in taxes resulting from:
            State taxes, net of federal benefit               (747)        374         959
            Effect of foreign taxes                            196          73         569
            Research and experimentation credit               (626)       (790)       (863)
            Foreign sales corporation benefit                  (97)       (272)       (822)
            Increase in valuation allowance                    714         233          --
            Other, net                                          81         382         763
                                                          --------    --------    --------
                                                          $ (4,200)   $  2,475    $  7,675
                                                          ========    ========    ========

</TABLE>

8.    Related Party Transactions:

      Semitool  has  agreements  with Mr.  Raymon  F.  Thompson,  the  Company's
      chairman and a shareholder,  to lease  aircraft.  Under these  agreements,
      rent expense was approximately $474,000, $1,273,200 and $1,276,600 for the
      years ended  September 30, 1999, 1998 and 1997,  respectively.  The rental
      rate for  fiscal  2000 will be $57,000  per  month,  and the lease term is
      month-to-month.

      Periodically,  Semitool  advances  funds to Mr.  Thompson and pays certain
      expenses  for the benefit of Mr.  Thompson.  These  advances are offset by
      amounts  payable to Mr.  Thompson  under the  agreements  described in the
      preceding  paragraph.  Net  advances  to (from) Mr.  Thompson  are charged
      interest at the Company's borrowing rate for short-term funds.  Associated
      with these advances, Mr.

      Thompson paid the Company interest of $3,932 in 1998.

      Semitool  purchased  raw  materials  approximating  $441,000 and  $720,000
      for the years  ended  September  30,  1998 and 1997, respectively,  from a
      company  previously owned by Mr. Thompson.  Mr. Thompson sold his holdings
      of this company in December of 1997.


<PAGE>


9.    Commitments and Contingencies:

      The Company has various  operating  lease  agreements  for  equipment  and
      office space that expire through the year 2004. Total rent expense for the
      years ended September 30, 1999,  1998 and 1997,  exclusive of amounts paid
      to a related party as described in Note 8, was  approximately  $1,632,000,
      $2,099,000,  and $2,011,000,  respectively.  At September 30, 1999, future
      rental payments under these agreements are as follows (in thousands):

                        Year Ending
                        September 30,                Total
                        -------------                -----
                           2000                    $ 1,258
                           2001                        824
                           2002                        596
                           2003                        421
                           2004                         75
                                                   -------
                                                   $ 3,174
                                                   =======

      In August,  1998,  we filed suit  against  Novellus  Systems,  Inc. in the
      United States District Court for the Northern District of California (Case
      No. C-98-3089DLJ), alleging infringement of two of our patents relating to
      single substrate  processing tools used in  electrochemical  deposition of
      copper onto semiconductor wafers. We seek damages for past infringement, a
      permanent   injunction,   treble   damages   for   willful   infringement,
      pre-judgment  interest and attorneys fees. Novellus answered the complaint
      by denying all allegations,  counterclaiming  for declaratory  judgment of
      invalidity and non-infringement. Discovery is continuing and no trial date
      has been set.

      A lawsuit brought by Mitsubishi Silicon America Corporation,  successor to
      Siltec Corporation (Case No. CV-98-826AA) was filed on July 7, 1998 in the
      United States  Federal  District  Court for the District of Oregon against
      us.  The  lawsuit  alleges  breach of  warranties  and seeks  damages  and
      attorney's  fees in excess of $5  million.  We believe  the  lawsuit to be
      without merit and are contesting the action vigorously. However, given the
      inherent  uncertainty of litigation and the stage of discovery,  there can
      be no assurance that the ultimate  outcome will be in our favor.  Further,
      regardless  of the ultimate  outcome,  there can be no assurance  that the
      diversion of  management's  attention,  and any costs  associated with the
      lawsuit,  will  not  have a  material  adverse  effect  on  our  financial
      condition, results of operations or cash flows.

      We are subject to other legal  proceedings and claims which have arisen in
      the ordinary course of our business and have not been finally adjudicated.
      Although there can be no assurance as to the ultimate disposition of these
      matters,  it is the opinion of our management,  based upon the information
      available  at this  time,  that the  currently  expected  outcome of these
      matters,  individually  or in the  aggregate,  will  not  have a  material
      adverse effect on our results of operations,  financial  condition or cash
      flows.

10.   Preferred Stock:

      The Board of  Directors  has the  authority  to issue  preferred  stock of
      Semitool  in one  or  more  series  and to  fix  the  rights,  privileges,
      preferences  and  restrictions  granted  to or imposed  upon any  unissued
      shares of preferred  stock,  without  further vote or action by the common
      shareholders.

11.   Financial Instruments and Certain Concentrations:

      The  Company has  estimated  the fair value of its  financial  instruments
      including cash and cash equivalents,  payable to shareholder, note payable
      to bank  and  long-term  debt.  The  fair  value  estimates  are made at a
      discrete  point  in  time  based  on  relevant   market   information  and
      information  about the  financial  instruments.  Fair value  estimates are
      based  on  judgments   regarding   current   economic   conditions,   risk
      characteristics of various financial instruments, and other factors. These
      estimates are subjective in nature and involve  uncertainties  and matters
      of  significant  judgment  and,  therefore,   cannot  be  determined  with
      precision.   Changes  in  assumptions  could   significantly   affect  the
      estimates.  Accordingly,  the estimates are not necessarily  indicative of
      what the Company could realize in a current market exchange.

      The following methods and assumptions were used to estimate the fair value
      of each class of financial  instruments at September 30, 1999 and 1998 for
      which it is practicable to estimate that value:

         Cash and Cash Equivalents - The carrying value of cash and cash
         equivalents  approximates  fair value due to the nature of the cash
         investments.

         Payable to Shareholder - The carrying value of the shareholder  payable
         approximates  fair  value  due to the  fact  that the  note  carries  a
         variable interest rate.

         Note Payable to Bank - The  carrying  value of the note payable to bank
         approximates  fair  value  due  to the  fact  that  the  note  bears  a
         negotiated variable interest rate.

         Long-Term  Debt - The  fair  value  of  notes  payable  is based on the
         discounted value of contractual cash flows using an estimated  discount
         rate of 8.25% which the Company  could  currently  obtain for debt with
         similar remaining maturities.

      The estimated  fair value of financial  instruments  at September 30, 1999
      and 1998, consisted of the following (in thousands):


                                                1999                  1998
                                        Carrying    Fair      Carrying    Fair
                                         Amount     Value      Amount     Value
                                       ------------------    ------------------
         Cash and cash equivalents     $  4,789  $  4,789    $  7,287  $  7,287
         Payable to shareholder               3         3          78        78
         Note payable to bank            10,160    10,160       3,000     3,000
         Long-term debt                   3,838     3,321       4,432     3,927


      At  September  30, 1999 and 1998,  trade  receivables  of the Company were
      primarily  from  companies  in the  semiconductor  industry,  and included
      approximately  $24.5 million and $15.9 million,  respectively,  of foreign
      receivables.  Accordingly,  the  Company is exposed to  concentrations  of
      credit risk. The Company routinely  assesses the financial strength of its
      customers.

12.   Operating Segment and Geographic Information:

      The Company adopted  Statement of Financial  Accounting  Standards No. 131
      (SFAS  131),  "Disclosures  about  Segments of an  Enterprise  and Related
      Information" in 1999. SFAS 131 supersedes  SFAS 14,  "Financial  Reporting
      for Segments of a Business  Enterprise,"  replacing the "industry segment"
      approach  with  the  "management"   approach.   The  management   approach
      designates the internal organization that is used by management for making
      operating  decisions  and  assessing  performance  as  the  source  of the
      Company's  reportable  segments.  SFAS 131 also requires disclosures about
      product and services, geographic areas and major customers.

      The Company's reportable segments have been determined based on the nature
      of its operations,  products  offered to customers and information used by
      the chief  operating  decision maker as defined by SFAS 131. The Company's
      two reportable  segments are Semiconductor  Equipment and Software Control
      Systems.

      The  Semiconductor  Equipment  segment's primary products perform cleaning
      and  electroplating  processes.  The Software  Control  Systems  segment's
      primary  products  are  designed to provide a  communication  interface to
      monitor and control most of the front-end  process equipment in a fab. The
      Semiconductor   Equipment's   current   product   offerings   qualify  for
      aggregation   under  SFAS  131  as  the  products  are   manufactured  and
      distributed in the same manner, have similar economic  characteristics and
      are sold to the same customer base.

      Consolidated  sales to one major  customer of the Company's  Semiconductor
      Equipment segment  represented  10.9% of total  consolidated net sales for
      the year ended September 30, 1997. No other customer represented more than
      10% of total consolidated net sales for any period presented.

      The accounting policies of the segments are the same as those described in
      the "Summary of Significant  Accounting  Policies" note. Segment operating
      results are measured based on income (loss) from operations.  Intersegment
      sales are based on internal  transfer prices.  Intersegment  sales reflect
      sales of  products  from  the  Software  Control  Systems  segment  to the
      Semiconductor Equipment segment. Segment assets consist of assets that are
      identified to reportable segments.

Financial information by operating segment for 1999, 1998 and 1997 is summarized
as follows (amounts in thousands):

<TABLE>
<CAPTION>

                                                                Total
                          Equipment          Software          Software
                           Segment            Segment           Segment     Eliminations    Consolidated
<S>                       <C>          <C>        <C>          <C>             <C>            <C>
Net Sales                 External     External   Internal
1999                      $109,646      $12,882      $413      $13,295          $(413)        $122,528
1998                       168,902       11,599       181       11,780           (181)         180,501
1997                       184,421        9,531       984       10,515           (984)         193,952

Income (Loss) from
 Operations
1999                       (12,996)                                572           (317)         (12,741)
1998                         8,587                                (381)          (119)           8,087
1997                        18,346                               2,736           (650)          20,432

Segment Assets
1999                       125,162                               8,767         (2,045)         131,884
1998                       120,082                               9,986         (2,078)         127,990
1997                       128,030                               5,501         (1,806)         131,725

Capital Expenditures
 for Long-Lived Assets
1999                         5,404                               1,106                           6,510
1998                        10,171                               5,115                          15,286
1997                        12,395                               1,335                          13,730

Depreciation and
 Amortization Expense
1999                         8,657                               1,694                          10,351
1998                         9,010                               1,413                          10,423
1997                         5,215                                 862                           6,077

</TABLE>

Financial information by geographic location for 1999, 1998 and 1997 is
summarized as follows (amounts in thousands):

<TABLE>
<CAPTION>

                          United                                 Asia &
                          States        Europe       Japan        Other     Consolidated
<S>                      <C>           <C>          <C>          <C>          <C>
Net Sales, by
 customer location
1999                     $ 57,784      $29,346      $22,963      $12,435      $122,528
1998                      111,282       47,788       15,529        5,902       180,501
1997                      124,378       39,564       14,028       15,982       193,952

Property, Plant and
 Equipment, Net
1999                       24,742        3,640        1,695          259        30,336
1998                       31,512        4,275          198          317        36,302
1997                       30,054        3,370          221           40        33,685

</TABLE>


<PAGE>


                                  Exhibit Index

Exhibit No.                     Description
-----------                     -----------

3.1       Restated Articles of Incorporation of the Company (1)
3.5       Amended Bylaws of Semitool, Inc. (4)
3.6       Amended Bylaws of Semitool, Inc. (5)
3.7       Amended Bylaws of Semitool, Inc. (8)
10.12     Agreement  between the Company and the Semitool European
          Companies (1)
10.13     Aircraft Lease Agreement, dated April, 1996, between the Company and
          Mr. Thompson (2)
10.16     Business Loan Agreement, dated September 30, 1997, between the Company
          and the Bank of America NT & SA doing business as Seafirst Bank (3)
10.17     Promissory Note, dated September 29, 1997, between the Company and the
          Bank of America National Trust and Savings Association doing business
          as Seafirst Bank (3)
10.18     Loan Modification Agreement, dated September 29, 1997 between the
          Company and the Bank of America National Trust And Savings Association
          doing business as Seafirst Bank (3)
10.19     Loan Modification Agreement, dated October 2, 1997 between the Company
          and the Bank of America National Trust And Savings Association doing
          business as Seafirst Bank (3)
10.20     Loan Modification Agreement, dated October 2, 1997 between the Company
          and the Bank of America National Trust And Savings Association doing
          business as Seafirst Bank (3)
10.21     Promissory Note, dated March 26, 1998 between Rhetech, Inc. and
          CoreStates Bank, N.A. (4)
10.22     Mortgage Assignment of Leases and Security Agreement, dated March 26,
          1998 between Rhetech, Inc. and CoreStates Bank, N.A. (4)
10.23     Promissory Note, dated March 26, 1998 between Rhetech, Inc. and
          CoreStates Bank, N.A. (4)
10.24     Mortgage Assignment of Leases and Securities Agreement, dated
          March 26, 1998 between Rhetech, Inc. and CoreStates Bank, N.A. (4)
10.25     Employment Agreement between William A. Freeman and Semitool, Inc.
          dated February 20, 1998. (4)
10.26     Employment Agreement between Fabio Gualandris and Semitool, Inc.
          dated April 21, 1998. (6)
10.27     Business Loan Agreement,  dated September 30, 1998,  between the
          Company  and the  Bank of  America  NT & SA  doing  business  as
          Seafirst Bank (6)
10.28     Promissory Note, dated September 30, 1998, between the Company and the
          Bank of America National Trust and Savings Association doing business
          as Seafirst Bank (6)
10.29     First Amendment to Business Loan Agreement between Bank of America
          NT&SA doing business as Seafirst Bank and Semitool, Inc. (7)
10.30     Employment Agreement between Gary Spray and Semitool, Inc. dated
          May 5, 1999 (7)
10.31     Employment Agreement between Kazuyo N. Heinink and Semitool, Inc.
          dated July 29, 1999. (8)
21.1      Subsidiaries of Registrant (8)
27        Financial data schedule (8)
99.2      Amended and Restated Semitool, Inc. 1994 Stock Option Plan (4)


             (1)  Incorporated  herein  by  reference  to  the  identically
             numbered exhibits to the Company's  Registration  Statement on
             Form S-1  (File  No.  33-87548),  which  became  effective  on
             February 2, 1995.

             (2)  Incorporated  herein  by  reference  to  the  identically
             numbered exhibits to the Company's Annual Report on Form 10-K,
             date of report September 30, 1996.

             (3)  Incorporated  herein  by  reference  to  the  identically
             numbered exhibits to the Company's Annual Report on Form 10-K,
             date of report September 30, 1997.

             (4)  Incorporated  herein  by  reference  to  the  identically
             numbered  exhibit to the  Company's  Quarterly  Report on Form
             10-Q, dated of report March 31, 1998.

             (5)  Incorporated  herein  by  reference  to  the  identically
             numbered  exhibit to the  Company's  Quarterly  Report on form
             10-Q, date of report June 30, 1998.

             (6)  Incorporated  herein  by  reference  to  the  identically
             numbered  exhibit to the Company's Annual Report on Form 10-K,
             date of report September 30, 1998.

             (7)  Incorporated  herein  by  reference  to  the  identically
             numbered  exhibit to the  Company's  Quarterly  Report on Form
             10-Q, date of report June 30, 1999.

             (8)  Filed herewith.


<PAGE>


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<CAPTION>

               SCHEDULE II ---- VALUATION AND QUALIFYING ACCOUNTS
                      Three Years Ended September 30, 1999
                             (Amounts in Thousands)

                                                                    Additions
                                                             ----------------------
                                               Balance at    Charged to    Charged                   Balance
                                               beginning     Costs and     to Other                  at end
                                               of Period     Expenses      Accounts    Deductions    of Period
                                               ----------    ----------    --------    ----------    ---------
<S>                                              <C>          <C>          <C>          <C>          <C>
Year ended September 30, 1999:
 Deducted from asset accounts:
  Allowance for doubtful accounts                $  1,542     $     51     $     --     $  1,322 a   $    271
  Allowance for inventory obsolescence              1,000        2,260           --        2,921 b        339
  Allowance for deferred tax asset valuation          233          714           --           --          947

Year ended September 30, 1998:
 Deducted from asset accounts:
  Allowance for doubtful accounts                     224        1,318           --           --        1,542
  Allowance for inventory obsolescence                876          124           --           --        1,000
  Allowance for deferred tax asset valuation           --          233           --           --          233

Year ended September 30, 1997:
 Deducted from asset accounts:
  Allowance for doubtful accounts                     233           --           --            9 a        224
  Allowance for inventory obsolescence                548          328           --           --          876
  Allowance for deferred tax asset valuation           --           --           --           --           --


a)   Reduction of allowance for doubtful accounts and related receivable account
     to reflect the write-off of uncollectible receivables.

b)   Reduction of allowance  for  inventory obsolescence and related  inventory
     account to reflect the write-off of obsolete inventory.

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