##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 20-F



| ̈ | Registration Statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934.
|- | -----------------------------------------------------------------------------------------------

|x | Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | -------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2009

| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | -----------------------------------------------------------------------------------------

| ̈ | Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | --------------------------------------------------------------------------------------------

Date of event requiring this shell company report

For the transition period from              to

Commission File Number: 0-13355



ASM INTERNATIONAL N.V.

(Exact name of Registrant as specified in its charter)



The Netherlands

(jurisdiction of incorporation or organization)

Versterkerstraat 8, 1322 AP, Almere, the Netherlands

(Address of principal executive
offices)

Richard Bowers

Telephone: (602) 432-1713

Fax: (602) 470-2419

Email: dick.bowers@asm.com

Address: 3440 E. University Dr., Phoenix, AZ
85034, USA

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

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

|                                |  |                                          
|------------------------------- |  | -----------------------------------------
|Title of each class             |  | Name of each exchange on which registered
|Common Shares, par value  0.04 |  | The NASDAQ Stock Market LLC              

Securities
registered or to be registered pursuant to

Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to

Section 15(d) of the Act: None



Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the
annual report: 51,745,140 common shares; 0 preferred shares.

Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.    Yes  x    No   ̈

If this annual report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in
this filing:

U.S. GAAP  x    International Financial Reporting Standards as issued by the International

Accounting Standards Board   ̈    Other   ̈

If Other has been checked in response to the previous question, indicate by check mark which financial
statement item the registrant has elected to follow:

Item 17   ̈    Item 18   ̈

If this is an annual report, indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes   ̈    No  x









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TABLE OF CONTENTS



|                                           |  |                                                                              |  |   
|------------------------------------------ |  | ---------------------------------------------------------------------------- |  | --
|PART I.                                    |  |                                                                              |  |   
|                                           |  |                                                                             
|Item 1.                                    |  | Identity of Directors, Senior Management and Advisers                        |  | 3 
|                                           |  |                                                                             
|Item 2.                                    |  | Offer Statistics and Expected Timetable                                      |  | 3 
|                                           |  |                                                                             
|Item 3.                                    |  | Key Information                                                              |  | 3 
|                                           |  |                                                                             
|Item 4.                                    |  | Information on the Company                                                   |  | 18
|                                           |  |                                                                             
|Item 4a.                                   |  | Unresolved Staff Comments                                                    |  | 36
|                                           |  |                                                                             
|Item 5.                                    |  | Operating and Financial Review and Prospects                                 |  | 36
|                                           |  |                                                                             
|Item 6.                                    |  | Directors, Senior Management and Employees                                   |  | 53
|                                           |  |                                                                             
|Item 7.                                    |  | Major Shareholders and Related Party Transactions                            |  | 56
|                                           |  |                                                                             
|Item 8.                                    |  | Financial Information                                                        |  | 58
|                                           |  |                                                                             
|Item 9.                                    |  | The Offer and Listing                                                        |  | 58
|                                           |  |                                                                             
|Item 10.                                   |  | Additional Information                                                       |  | 59
|                                           |  |                                                                             
|Item 11.                                   |  | Quantitative and Qualitative Disclosures about Market Risk                   |  | 66
|                                           |  |                                                                             
|Item 12.                                   |  | Description of Securities Other Than Equity Securities                       |  | 69
|                                           |  |                                                                             
|PART II.                                   |  |                                                                              |  |   
|                                           |  |                                                                             
|Item 13.                                   |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 69
|                                           |  |                                                                             
|Item 14.                                   |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 69
|                                           |  |                                                                             
|Item 15.                                   |  | Controls and Procedures                                                      |  | 69
|                                           |  |                                                                             
|Item 16A.                                  |  | Audit Committee Financial Expert                                             |  | 69
|                                           |  |                                                                             
|Item 16B.                                  |  | Code of Ethics                                                               |  | 70
|                                           |  |                                                                             
|Item 16C.                                  |  | Principal Accountant Fees and Services                                       |  | 70
|                                           |  |                                                                             
|Item 16D.                                  |  | Exemptions from the Listing Standards for Audit Committees                   |  | 71
|                                           |  |                                                                             
|Item 16E.                                  |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       |  | 71
|                                           |  |                                                                             
|Item 16F.                                  |  | Change in Registrants Certifying Accountant                                 |  | 71
|                                           |  |                                                                             
|Item 16G.                                  |  | Corporate Governance                                                         |  | 71
|                                           |  |                                                                             
|PART III.                                  |  |                                                                              |  |   
|                                           |  |                                                                             
|Item 17.                                   |  | Financial Statements                                                         |  | 72
|                                           |  |                                                                             
|Item 18.                                   |  | Financial Statements                                                         |  | 72
|                                           |  |                                                                             
|Item 19.                                   |  | Exhibits                                                                     |  | 72
|                                           | 
|SIGNATURES                                 |  | S-1                                                                         
|                                           | 
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |  | F-1                                                                         
|                                           | 
|EX - 2.3                                   |  |                                                                             
|EX - 8.1                                   |  |                                                                             
|EX - 12.1                                  |  |                                                                             
|EX - 12.2                                  |  |                                                                             
|EX - 13.1                                  |  |                                                                             
|EX - 15.1                                  |  |                                                                             



2



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As used in this report, the terms we, us, our, ASMI,
and ASM International mean ASM International N.V. and its subsidiaries, unless the context indicates another meaning, and the term common shares means our common shares, par value  0.04 per share. Since we are a Netherlands company, the par value of our common shares is expressed in euros (). The terms United States and U.S. refer to the United States of America.



Forward Looking Safe Harbor Statement



Some of the information in this report constitutes forward-looking statements within the meaning of the United States federal securities laws,
including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements regarding future revenue, sales, income, expenditures, sufficiency of cash generated from operations,
maintenance of majority interest in ASM Pacific Technology Ltd. (ASM Pacific Technology), business strategy, product development, product acceptance, market penetration, market demand, return on investment in new products, product
shipment dates, restructurings, liquidity and financing matters, currency fluctuations, litigation involving intellectual property, shareholder matters, and outlooks. These statements may be found under Item 4, Information on the
Company, Item 5, Operating and Financial Review and Prospects and elsewhere in this report. Forward-looking statements are statements other than statements of historical fact and typically are identified by use of terms such
as may, could, should, project, believe, anticipate, expect, plan, estimate, forecast, potential, intend,
continue and similar words, although some forward-looking statements are expressed differently. You should be aware that these statements involve risks and uncertainties and our actual results could differ materially from those contained
in the forward-looking statements due to a number of factors, including the matters discussed in Item 4, Information on the Company and the risks discussed in Item 3.D., Risk factors. The risks described are not the
only ones facing ASMI. Some risks are not yet known and some that we do not currently believe to be material could later become material. Each of these risks could materially affect our business, revenues, income, assets, liquidity and capital
resources. All statements are made as of the date of this report, and we assume no obligation and do not intend to update or revise any forward-looking statements to reflect future developments or circumstances.



Item 1. Identity of Directors, Senior Management and
Advisers



Not applicable.



Item 2. Offer Statistics and Expected Timetable



Not applicable.



Item 3. Key Information



A. Selected consolidated financial data.



You should read the following selected financial data, presented under
USGAAP, in conjunction with Item 5, Operating and Financial Review and Prospects and Item 18, Financial Statements.



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|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | -------- | - |  | - | -------- | -
|                                                                                                   |  | Year ended December 31                |         
|                                                                                                   |  | 2005                                  |          |   | 2006 |   |          | 2007 |  |   | 2008     |   |  | 2009 |         
|                                                                                                   |  | EUR                                   |          |   | EUR  |   |          | EUR  |  |   | EUR      |   |  | EUR  |         
|                                                                                                   |  | (in thousands, except per share data) |         
|Consolidated Statements of Operations data:                                                        |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Net sales                                                                                          |  |                                       | 724,698  |   |      |   | 877,491  |      |  |   | 955,239  |   |  |      | 747,362  |   |  |   | 590,739  |  
|Cost of sales                                                                                      |  |                                       | (469,321 | ) |      |   | (538,674 | )    |  |   | (594,163 | ) |  |      | (477,100 | ) |  |   | (409,224 | )
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Gross profit                                                                                       |  |                                       | 255,377  |   |      |   | 338,817  |      |  |   | 361,076  |   |  |      | 270,262  |   |  |   | 181,515  |  
|Operating expenses:                                                                                |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Selling, general and administrative                                                                |  |                                       | (98,073  | ) |      |   | (120,654 | )    |  |   | (129,676 | ) |  |      | (126,591 | ) |  |   | (107,777 | )
|Research and development, net                                                                      |  |                                       | (89,829  | ) |      |   | (88,130  | )    |  |   | (83,468  | ) |  |      | (75,011  | ) |  |   | (62,806  | )
|Amortization of other intangible assets                                                            |  |                                       | (599     | ) |      |   | (553     | )    |  |   | (553     | ) |  |      | (475     | ) |  |   | (401     | )
|Impairment of goodwill                                                                             |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      | (1,395   | ) |  |   |         |  
|Restructuring expenses                                                                             |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      | (7,068   | ) |  |   | (35,687  | )
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Total operating expenses                                                                           |  |                                       | (188,501 | ) |      |   | (209,337 | )    |  |   | (213,697 | ) |  |      | (210,540 | ) |  |   | (206,671 | )
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Earnings (loss) from operations                                                                    |  |                                       | 66,876   |   |      |   | 129,480  |      |  |   | 147,379  |   |  |      | 59,722   |   |  |   | (25,156  | )
|Interest income                                                                                    |  |                                       | 5,746    |   |      |   | 5,902    |      |  |   | 6,113    |   |  |      | 4,047    |   |  |   | 1,018    |  
|Interest expense                                                                                   |  |                                       | (15,844  | ) |      |   | (11,726  | )    |  |   | (9,866   | ) |  |      | (7,745   | ) |  |   | (8,556   | )
|Gain (expense) resulting from early extinguishment of debt                                         |  |                                       | (319     | ) |      |   |         |      |  |   | (10,049  | ) |  |      | 7,956    |   |  |   | (1,759   | )
|Accretion interest expense convertible notes                                                       |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   | (4,286   | )
|Revaluation conversion option                                                                      |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   | (24,364  | )
|Foreign currency exchange gains (losses), net                                                      |  |                                       | (128     | ) |      |   | (1,250   | )    |  |   | (1,020   | ) |  |      | 785      |   |  |   | (1,384   | )
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Earnings (loss) from continuing operations before income taxes                                     |  |                                       | 56,331   |   |      |   | 122,406  |      |  |   | 132,557  |   |  |      | 64,765   |   |  |   | (64,487  | )
|Income tax expense                                                                                 |  |                                       | (6,666   | ) |      |   | (14,095  | )    |  |   | (19,245  | ) |  |      | (12,144  | ) |  |   | (3,786   | )
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Earnings (loss) from continuing operations before dilution on investment in subsidiary             |  |                                       | 49,665   |   |      |   | 108,311  |      |  |   | 113,312  |   |  |      | 52,621   |   |  |   | (68,273  | )
|Gain on dilution of investment in subsidiary                                                       |  |                                       | 2,781    |   |      |   | 1,255    |      |  |   | 3,010    |   |  |      | 4,088    |   |  |   | 956      |  
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Net earnings (loss) from continuing operations                                                     |  |                                       | 52,446   |   |      |   | 109,566  |      |  |   | 116,322  |   |  |      | 56,709   |   |  |   | (67,317  | )
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Loss from discontinued operations before income taxes(1)                                           |  |                                       | (48,464  | ) |      |   | (20,350  | )    |  |   |         |   |  |      |         |   |  |   |         |  
|Income tax expense                                                                                 |  |                                       | (641     | ) |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Net loss from discontinued operations                                                              |  |                                       | (49,105  | ) |      |   | (20,350  | )    |  |   |         |   |  |      |         |   |  |   |         |  
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Net earnings (loss)                                                                                |  |                                       | 3,341    |   |      |   | 89,216   |      |  |   | 116,322  |   |  |      | 56,709   |   |  |   | (67,317  | )
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Net earnings (loss) for allocation between shareholders of the parent and non controlling interest |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Allocation of net earnings (loss)                                                                  |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Shareholders of the parent                                                                         |  |                                       | (40,217  | ) |      |   | 34,334   |      |  |   | 60,977   |   |  |      | 18,411   |   |  |   | (106,561 | )
|Non-controlling interest                                                                           |  |                                       | 43,558   |   |      |   | 54,882   |      |  |   | 55,345   |   |  |      | 38,298   |   |  |   | 39,244   |  
|                                                                                                   |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Earnings per Share data:                                                                           |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Basic net earnings (loss) from continuing operations per share:                                    |  |                                      | 0.17     |   |      |  | 1.02     |      |  |  | 1.13     |   |  |     | 0.35     |   |  |  | (2.06    | )
|Basic net loss from discontinued operations per share:                                             |  |                                      | (0.93    | ) |      |  | (0.38    | )    |  |  |         |   |  |     |         |   |  |  |         |  
|Basic net earnings (loss) per share                                                                |  |                                      | (0.76    | ) |      |  | 0.64     |      |  |  | 1.13     |   |  |     | 0.35     |   |  |  | (2.06    | )
|Diluted net earnings (loss) from continuing operations per share:                                  |  |                                      | 0.17     |   |      |  | 1.02     |      |  |  | 1.07     |   |  |     | 0.35     |   |  |  | (2.06    | )
|Diluted net loss from discontinued operations per share:                                           |  |                                      | (0.93    | ) |      |  | (0.38    | )    |  |  |         |   |  |     |         |   |  |  |         |  
|                                                                                                   |  |                                       |          |   |     
|Diluted net earnings (loss) per share:                                                             |  |                                      | (0.76    | ) |      |  | 0.64     |      |  |  | 1.07     |   |  |     | 0.35     |   |  |  | (2.06    | )
|Basic weighted average number of shares (thousands)                                                |  |                                       | 52,638   |   |      |   | 53,403   |      |  |   | 53,968   |   |  |      | 52,259   |   |  |   | 51,627   |  
|Diluted weighted average number of shares (thousands)                                              |  |                                       | 52,638   |   |      |   | 53,575   |      |  |   | 65,076   |   |  |      | 52,389   |   |  |   | 51,627   |  
|                                                                                                   |  |                                       |          |   |     
|Other data:                                                                                        |  |                                       |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Number of common shares outstanding at year end (in thousands)                                     |  |                                       | 52,679   |   |      |   | 53,829   |      |  |   | 54,005   |   |  |      | 54,275   |   |  |   | 51,745   |  
|Dividends declared on common shares                                                                |  |                                       |         |   |      |   |         |      |  |  | 0.10     |   |  |      |         |   |  |   |         |  
|Number of preferred shares outstanding at year end                                                 |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      | 21,985   |   |  |   |         |  



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|                                 |  |                   |  |         |  |         |  |         |  |        
|-------------------------------- |  | ----------------- |  | ------- |  | ------- |  | ------- |  | -------
|                                 |  | As of December 31
|                                 |  | 2005              |  | 2006    |  | 2007    |  | 2008    |  | 2009   
|                                 |  | EUR               |  | EUR     |  | EUR     |  | EUR     |  | EUR    
|                                 |  | (in thousands)   
|Consolidated Balance Sheet data: |  |                   |  |         |  |         |  |         |  |        
|Cash and cash equivalents        |  | 135,000           |  | 193,872 |  | 167,923 |  | 157,277 |  | 293,902
|Total assets                     |  | 812,308           |  | 832,297 |  | 840,333 |  | 767,798 |  | 851,700
|Net current assets(2)            |  | 327,727           |  | 381,204 |  | 392,213 |  | 372,029 |  | 419,535
|Total debt                       |  | 257,400           |  | 228,500 |  | 186,936 |  | 153,682 |  | 265,430
|Capital stock                    |  | 2,107             |  | 2,153   |  | 2,160   |  | 2,171   |  | 2,070  
|Total shareholders equity       |  | 238,594           |  | 276,458 |  | 318,878 |  | 317,902 |  | 241,229



|(1) | The restructuring of ASM NuTool in 2005 followed by the sale of substantially all of the ASM NuTool patent portfolio to a third party in December 2006 required ASM NuTool to be
accounted for retroactively as discontinued operations under US GAAP in our Consolidated Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Net current assets is calculated as the difference between total current assets, including cash and cash equivalents, and total current liabilities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------



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Exchange Rate Information



The following table sets forth, for each period indicated, specified information regarding the U.S. dollar per euro
exchange rates based on the noon buying rate in New York City for cable transfers payable in euros as certified for customs purposes by the Federal Reserve Bank of New York, which is often referred to as the noon buying rate. Effective
January 1, 2009 the Federal Reserve Bank has discontinued publication of Foreign Exchange Rates. The information regarding the U.S. dollar per euro exchange rates will now be based on the rates of the European Central Bank, referred to as the
reference rate. On March 5, 2010, the reference rate was 1.3582 U.S dollars per euro.



U.S. Dollar per Euro Exchange Rate



|     |  |               |  |             |  |              |  |              |  |             |  |              |  |            
|---- |  | ------------- |  | ----------- |  | ------------ |  | ------------ |  | ----------- |  | ------------ |  | -----------
|     |  | September2009 |  | October2009 |  | November2009 |  | December2009 |  | January2010 |  | February2010 |  | March2010 1
|High |  | 1.4783        |  | 1.5020      |  | 1.5083       |  | 1.5120       |  | 1.4563      |  | 1.3984       |  | 1.3668     
|Low  |  | 1.4220        |  | 1.4537      |  | 1.4658       |  | 1.4276       |  | 1.3966      |  | 1.3489       |  | 1.3525     



|                       |  |                          |  |        |  |        |  |        |  |       
|---------------------- |  | ------------------------ |  | ------ |  | ------ |  | ------ |  | ------
|                       |  | Years Ended December 31,
|                       |  | 2005                     |  | 2006   |  | 2007   |  | 2008   |  | 2009  
|Average exchange rate2 |  | 1.2400                   |  | 1.2661 |  | 1.3797 |  | 1.4695 |  | 1.3963



|(1) | Through March 5, 2010.
|--- | ----------------------

|(2) | Average of the exchange rates on the last day of each month during the period presented.
|--- | ----------------------------------------------------------------------------------------



B. Capitalization and indebtedness.



Not applicable.



C. Reasons for the offer and use of proceeds.



Not applicable.



D. Risk factors.



You should carefully consider each of the risks and uncertainties described below and all other information contained in this Annual Report on
Form 20-F. In order to help assess the major risks in our business, we have identified many, but not all, of these risks, which may not be in order of likelihood or materiality. Due to the scope of our operations, a wide range of factors could
materially affect future developments and performance.



If
any of the following risks are realized, our business, financial condition, cash flow or results of operations could be materially and adversely affected, and as a result, the trading price of our common stock could be materially and adversely
impacted. These risk factors should be read in conjunction with other information set forth in this Report, including without limitation Item 5, Operating and Financial Review and Prospects, and our Consolidated Financial Statements and
related notes.



RISKS RELATED TO OUR INDUSTRY



The industry in which we operate is highly cyclical and is currently
slowly recovering from an unprecedented downturn which has negatively impacted our business.



We sell our products to the semiconductor manufacturing industry, which is subject to sudden, extreme, cyclical variations in product supply and
demand. Starting late in 2008 and continuing in 2009, this industry is experiencing a dramatic and unprecedented decline in demand for semiconductor devices due to the worldwide economic downturn, which has led to the announcement of significant
layoffs, plant closings, reduced capital expenditures and other cost reduction measures by semiconductor manufacturers. These conditions caused a substantial diminution in the demand for our products, which represent capital expenditures for our
customers although a pick up in demand was evident in the second half of 2009. In addition, these conditions may lead to consolidation in the semiconductor manufacturing industry, which could further reduce demand for our products in the future. As
with all such cycles, the timing, length and continued severity of this cycle cannot be predicted. The unprecedented nature of the current global financial crisis and economic downturn may result in changes in the semiconductor manufacturing
industry and the manner in which we must conduct our business, in ways that cannot now be predicted.



Semiconductor manufacturers may contribute to the severity of these cycles, including the current downturn, by misinterpreting the conditions in the
industry and over-investing or under-investing in



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semiconductor manufacturing capacity and equipment. In any event, the lag between changes in demand for semiconductor devices and changes in demand for our products by semiconductor manufacturers
accentuates the intensity of these cycles in both expansion and contraction phases. We may not be able to respond timely and effectively to these industry cycles.



Industry downturns historically have been characterized by reduced demand for semiconductor devices and equipment,
production over-capacity and a decline in average selling prices. During periods of declining demand, we must quickly and effectively reduce expenses. However, our ability to reduce expenses is limited by our need for continued investment in
engineering and research and development and extensive ongoing customer service and support requirements. In addition, in a downturn, our ability to reduce inventories quickly is limited by the long lead time for production and delivery of some of
our products, reduced sales, order cancellations and delays, and delays associated with reducing deliveries from our supplier pipeline. During an extended downturn a portion of our inventory may have to be written down as excess or obsolete if it is
not sold in a timely manner.



Industry upturns have been
characterized by fairly abrupt increases in demand for semiconductor devices and equipment and insufficient production capacity. During a period of increasing demand and rapid growth, we must be able to quickly increase manufacturing capacity to
meet customer demand and hire and assimilate a sufficient number of additional qualified personnel, and fund such increase of manufacturing capacity. Our inability to quickly respond in times of increased demand, because of the effect, for example,
of our current programs to reduce expenses and the rate of purchases from our suppliers, could harm our reputation and cause some of our existing or potential customers to place orders with our competitors rather than us.



Our industry is subject to rapid technological change and we may not be able to
forecast or respond to commercial and technological trends in time to avoid competitive harm.



Our future success depends upon commercial acceptance of products incorporating new technologies we are developing, such as new plasma enhanced and
atomic layer deposition processes, new epitaxy processes and new materials and chemistries. The semiconductor industry and the semiconductor equipment industry are subject to rapid technological change and frequent introductions of enhancements to
existing products which can result in significant write-downs and impairment charges and costs. Technological changes have had and will continue to have a significant impact on our business. Our operating results and our ability to remain
competitive are affected by our ability to accurately anticipate customer and market requirements and develop technologies and products to meet these requirements. Our success in developing, introducing and selling new and enhanced products depends
upon a variety of factors, including, without limitation:



| |  |  | successful innovation of processes and equipment;
| | - |  | -------------------------------------------------



| |  |  | accurate technology and product selection;
| | - |  | ------------------------------------------



| |  |  | timely and efficient completion of product design, development and qualification;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | timely and efficient implementation of manufacturing and assembly processes;
| | - |  | ----------------------------------------------------------------------------



| |  |  | successful product performance in the field;
| | - |  | --------------------------------------------



| |  |  | effective and timely product support and service; and
| | - |  | -----------------------------------------------------



| |  |  | effective product sales and marketing.
| | - |  | --------------------------------------



We may not be able to accurately forecast or respond to commercial and technical trends in the semiconductor industry or to the development of new
technologies and products by our competitors. Our competitors may develop technologies and products that are more effective than ours or that may be more widely accepted. We may also experience delays and technical and manufacturing difficulties in
future introductions or volume production of new systems or enhancements. Significant delays can occur between a products introduction and the commencement of volume production of that product. Any of these events could negatively impact our
ability to generate the return we intend to achieve on our investments in new products.



If we fail to adequately invest in research and development, we may be unable to compete effectively.



We have limited resources to allocate to research and development, and must allocate our resources among a wide variety of projects in our front-end
and back-end businesses. If we have insufficient cash flow from our businesses to support the necessary level of research and development, we will have to fund such expenditures by diminishing our cash balances, or utilizing our credit facilities or
reducing our level of research and development expenses.



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Because of intense competition in our industry, the consequences of failing to invest in strategic
developments are significant. In order to enhance the benefits obtained from our research and development expenditures, we have contractual and other relationships with independent research institutes. If we fail to adequately invest in research and
development or lose our ability to collaborate with these independent research entities, we may be unable to compete effectively in the front-end and back-end markets in which we operate.



We face intense competition from companies which have greater resources than we do, and potential competition from new companies
entering the market in which we compete. If we are unable to compete effectively with these companies, our market share may decline and our business could be harmed.



We face intense competition in both the front-end and back-end segments of the semiconductor equipment industry from other established
companies. Our primary competitors in the front-end business include amongst others Applied Materials, Novellus Systems, Tokyo Electron, Kokusai, and Jusung. Our primary competitors in the back-end business include amongst others Kulicke &
Soffa, ESEC, Shinkawa, Apic Yamada, BE Semiconductor Industries, Towa, Shinko and Mitsui. A number of our competitors have significantly greater financial, technological, engineering, manufacturing, marketing and distribution resources than we do.
Their greater capabilities in these areas may enable them to:



| |  |  | better withstand periodic downturns in the semiconductor industry, such as the present downturn;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | compete more effectively on the basis of price, technology, service and support;
| | - |  | --------------------------------------------------------------------------------



| |  |  | more quickly develop enhancements to and new generations of products; and
| | - |  | -------------------------------------------------------------------------



| |  |  | more effectively retain existing customers and attract new customers.
| | - |  | ---------------------------------------------------------------------



In addition, new companies may enter the markets in which we compete, further increasing competition in the semiconductor
equipment industry.



We believe that our ability to compete
successfully depends on a number of factors, including, without limitation:



| |  |  | our success in developing new products and enhancements;
| | - |  | --------------------------------------------------------



| |  |  | performance of our products;
| | - |  | ----------------------------



| |  |  | quality of our products;
| | - |  | ------------------------



| |  |  | ease of use of our products;
| | - |  | ----------------------------



| |  |  | reliability of our products;
| | - |  | ----------------------------



| |  |  | cost of ownership of our products;
| | - |  | ----------------------------------



| |  |  | our ability to ship products in a timely manner;
| | - |  | ------------------------------------------------



| |  |  | quality of the technical service we provide;
| | - |  | --------------------------------------------



| |  |  | timeliness of the services we provide;
| | - |  | --------------------------------------



| |  |  | responses to changing market and economic conditions; and
| | - |  | ---------------------------------------------------------



| |  |  | price of our products and our competitors products.
| | - |  | ----------------------------------------------------



Some of these factors are outside our control. We may not be able to compete successfully in the future, and increased
competition may result in price reductions, reduced profit margins, loss of market share, and inability to generate cash flows that are sufficient to maintain or expand our development of new products.



Industry Alliances May Not Select our Equipment



Increasingly, our customers are entering into alliances or other forms of
cooperation with one another to expedite the development of processes and other manufacturing technologies. One of the results of this cooperation may be the definition of a system or particular tool set for a certain function or a series of process
steps that uses a specific set of manufacturing equipment. These decisions could work to our disadvantage if a competitors equipment becomes the standard equipment for such function or process. Even if our equipment was previously used by a
customer, that equipment may be displaced in current and future applications by the equipment standardized through such cooperation. These forms of cooperation may have a material adverse effect on our business, financial condition and results of
operations.



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RISKS RELATED TO OUR BUSINESS



During 2009 we implemented a major restructuring plan, the execution of which involves risks to our business and financial results.



We are currently implementing major restructuring
plans. In particular, our PERFORM! program is designed to streamline our front-end global operations and reduce our cost base, and includes a focused effort on lowering our working capital requirements. This program involves the material
restructuring of our significant front-end operating, manufacturing and administrative units. These efforts and other initiatives will continue through 2010 and beyond as we transition to a more global sales organization, a more centralized and cost
efficient R&D function, the implementation of a global Enterprise Reporting Process (ERP) system, and the sharing of platforms among products. Changes of this magnitude across a broad spectrum of our front-end operations involve significant
risks to our operations, including the following:



| |  |  | adverse impact on our ability to provide customers with timely delivery and satisfactory service, both during and after the restructuring;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | loss of intellectual capital through layoffs or redirecting of R&D and other functions or the normal fallout from a restructuring;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | underestimation of cost or overestimation of benefit.
| | - |  | -----------------------------------------------------



We cannot assure you that we will be able to successfully manage these changes or that the changes will achieve the desired effect of streamlining
our operations and reducing our cost base. If the restructuring is not successful for any reason, including because the attendant costs are higher or benefits are lower than estimated, it could have a material adverse impact on our competiveness,
financial condition, results of operations and cash flows.



Our customers
are facing challenges in the current economic downturn and if they cannot perform their obligations to us our financial results will suffer.



We face increased payment and performance risk in economic downturns from our customers. If any of our customers become insolvent or commence
bankruptcy or similar proceedings, our receivables from such customers may become uncollectible. In order to promote sales, we may be required to provide extended payment terms, financing arrangements or other modified sale terms for some customers,
which will increase our sales expenses and further increase our exposure to customer credit risk, all in an environment of downward pressure on average selling prices. Even though we may be a secured creditor in these arrangements with rights in the
underlying equipment, the equipment may have only limited value upon a customer default, especially if activity in our markets remains at low levels, which may result in substantial write-downs upon any such default.



If we do not accurately evaluate our customers creditworthiness in
connection with sales financing arrangements involving increased exposure to customer payment risk, our bad debt expense will increase. If we are too cautious in our sales practices because of this, we may lose sales. In either case, our results of
operations and financial condition would be negatively affected.



We
derive a significant percentage of our revenue from sales to a small number of large customers, and if we are not able to retain these customers, or if they reschedule, reduce or cancel orders, or fail to make payments, our revenues would be reduced
and our financial results would suffer.



Our largest
customers account for a significant percentage of our revenues. Our largest customer accounted for 9.1% (which is 30.6% for our largest front-end customer and 6.0% for our largest back-end customer) and our ten largest customers accounted for 32.9%
(which is 61.4% for our ten largest front-end customers and 32.7% for our ten largest back-end customers) of our net sales in 2009. Sales to and the relative importance of these large customers have varied significantly from year to year and will
continue to fluctuate in the future. These sales also may fluctuate significantly from quarter to quarter. We may not be able to retain our key customers or they may cancel purchase orders or reschedule or decrease their level of purchases from us,
which would reduce our revenues and negatively affect our financial results. In addition, any difficulty in collecting amounts due from one or more key customers could harm our financial results.



We may need additional funds to finance our future growth and ongoing research and
development activities. If we are unable to obtain such funds, we may not be able to expand our business as planned.



In the past, we have experienced capital constraints that adversely affected our operations and ability to compete, particularly in our front-end
business. We may require additional capital to finance our future



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growth and fund our ongoing research and development activities particularly with regard to our front-end business. We have only limited ability to reallocate funds from our back-end business to
our front-end business and some limitations on our ability to reallocate funds among our front-end businesses.



If we raise additional funds through the issuance of equity securities, the percentage ownership of our existing shareholders would be diluted. If we
finance our capital requirements with debt, we may incur significant interest costs. Additional financing may not be available to us when needed or, if available, may not be available on terms acceptable to us, particularly in light of the current
global financial crisis that has dramatically affected the availability of bank and other sources of debt financing.



If we are unable to raise needed additional funds, we may have to reduce the amount we spend on research and development, slow down our introduction of
new products, reduce capital expenditures necessary to support future growth and/or take other measures to reduce expenses which could limit our growth and ability to compete.



Although we have recently renewed our line of credit and issued additional convertible notes, the risk of further
tightening of credit in the financial markets, particularly during downturn periods, may increase our financing costs and negatively impact our ability to finance our operations, which could negatively affect revenues and profitability.



Our products (primarily in the front-end) generally have long sales cycles and
implementation periods, which increase our costs in obtaining orders and reduce the predictability of our earnings.



Our products are technologically complex. Prospective customers generally must commit significant resources to test and evaluate our products and to
install and integrate them into larger systems. In addition, customers often require a significant number of product presentations and demonstrations, in some instances evaluating equipment on site, before reaching a sufficient level of confidence
in the products performance and compatibility with the customers requirements to place an order. As a result, our sales process is often subject to delays associated with lengthy approval processes that typically accompany the design and
testing of new products. Accordingly, the sales cycles of our products often last for many months or even years, thereby requiring us to invest significant resources in attempting to complete sales.



Long sales cycles also subject us to other risks, including
customers budgetary constraints, internal acceptance reviews and cancellations. In addition, orders expected in one quarter could shift to another because of the timing of customers purchase decisions. The time required for our customers
to incorporate our products into their systems can vary significantly with the needs of our customers and generally exceeds several months, which further complicates our planning processes and reduces the predictability of our earnings from
operations.



Our ability to compete could be jeopardized if we are unable
to protect our intellectual property rights from challenges by third parties; claims or litigation regarding intellectual property rights could require us to incur significant costs.



Our success and ability to compete depend in large part upon protecting our proprietary technology. We rely on a
combination of patent, trade secret, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology
from third party infringements or to protect us from the claims of others. In addition, patents issued to us may be challenged, invalidated or circumvented, rights granted to us under patents may not provide competitive advantages to us, and third
parties may assert that our products infringe their patents, copyrights or trade secrets. Third parties could also independently develop similar products or duplicate our products.



In addition, monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have
taken will prevent unauthorized use of our technology. The laws of some countries in which our products are or may be developed, manufactured or sold, including various countries in Asia, may not protect our products or intellectual property rights
to the same extent as do the laws of the Netherlands and the United States and thus make the possibility of piracy of our technology and products more likely in these countries. If competitors are able to use our technology as their own, our ability
to compete effectively could be harmed.



In past years,
there has been substantial litigation regarding patent and other intellectual property rights in semiconductor-related industries. 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.



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Claims that our products infringe the proprietary rights of others would force us to defend ourselves
and possibly our customers or suppliers against the alleged infringement. Such claims, if successful, could subject us to significant liability for damages and potentially invalidate our proprietary rights. Regardless of the outcome, patent
infringement litigation is time-consuming and expensive to resolve and diverts management time and attention.



Intellectual property litigation could force us to do one or more of the following, any one of which could severely harm our business with adverse
financial consequences:



| |  |  | forfeit our proprietary rights;
| | - |  | -------------------------------



| |  |  | stop manufacturing or selling our products that incorporate the challenged intellectual property;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | obtain from the owner of the infringed intellectual property right a license to sell, produce, use, have sold, have produced or have used the relevant
technology, which license may not be available on reasonable terms or at all or may involve significant royalty payments;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay damages, including treble damages and attorneys fees in some circumstances; or
| | - |  | -----------------------------------------------------------------------------------



| |  |  | redesign those products that use the challenged intellectual property.
| | - |  | ----------------------------------------------------------------------



We license the use of some patents from a competitor pursuant to a settlement agreement; if the agreement is terminated, our business
could be adversely affected.



In October 1997, we
entered into an agreement to settle mutual patent infringement litigation with Applied Materials, which was amended and restated in 1998, pursuant to which Applied Materials agreed to grant us a worldwide, non-exclusive and royalty-bearing license
to use all of the litigated patents and certain additional patents that were not part of the litigation. In return we agreed to pay Applied Materials a settlement fee and to grant it a worldwide, non-exclusive and royalty-free license to use a
number of our patents including but not limited to those patents which we were enforcing in the litigation. All licenses granted by Applied Materials to us expire at the end of the life of the underlying patents which expire at various times through
2014. Our obligation to pay certain royalties to Applied Materials continues until the expiration of the corresponding underlying patent. In addition, the settlement agreement included covenants for limited periods during which the parties would not
litigate the issue of whether certain of our products infringe any of Applied Materials patents that were not licensed to us under the settlement agreement. These covenants, which lasted for different periods of time for different products,
have expired. Upon the occurrence of an event of default or other specified events, including, among other things, our failure to pay royalties, a change of control of ASM International, and improper use of the licenses, Applied Materials may
terminate the settlement agreement, including the licenses included in the agreement.



As of December 18, 2007, we ceased paying royalties under certain Applied Materials patent licenses in respect of patents that we no longer practice. If it is determined that we still practice these
patents, we will owe royalty payments to Applied Materials on our sales of covered products since that time.



Under our license agreement with Applied Materials, we pay royalties based upon our sales of equipment that employs technology covered by the licensed
patents. We believe that we no longer practice patents applicable to certain equipment and ceased paying royalties on the sale of such equipment as of December 18, 2007 and gave written notice to Applied Materials in December 2007. The
agreement provides a process to address royalty issues in a prescribed manner: the first step is written notice of a royalty matter to a party; the second step is amicable resolution with the participation of an expert if desired by Applied
Materials; and the final step if not resolved by the parties is through binding arbitration. Initiation of this process is not considered a default event and the remedy is the payment of any unpaid royalties for equipment shipped after the written
notice that are ultimately agreed to by the parties or determined by arbitration. Applied Materials is verifying our position through the review by an independent expert. While we consider the matter closed, Applied Materials notified us in late
2009 that they are continuing to evaluate the matter and will contact us if they require additional information. Although we believe our position is correct, the outcome of any possible arbitration is uncertain and, if we are not successful, we
could be required to pay up to approximately US$ 4.2 million ( 2.9 million) for royalties as of December 31, 2009.



Additional litigation with Applied Materials regarding
other matters or the operation of the settlement agreement itself could occur. Litigation with Applied Materials, which has greater financial resources than we do, could negatively impact our earnings and financial position.



Our net earnings could be negatively impacted by currency fluctuations.



Our assets, liabilities and operating expenses and those of our
subsidiaries are to a large extent denominated in the currency of the country where each entity is established. Our financial statements,



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including our Consolidated Financial Statements, are expressed in euros. The translation exposures that result from the inclusion of financial statements of our subsidiaries that are expressed in
the currencies of the countries where the subsidiaries are located are not hedged. As a result, our assets, liabilities and operating expenses are exposed to fluctuations of various foreign currency exchange rates.



In addition, foreign currency fluctuations may affect the prices of our
products. Prices for our products for sales to our customers throughout the world are currently denominated in various foreign currencies including, but not limited to, U.S. dollar, euro, Japanese yen and Chinese yuan. If there is a significant
devaluation of the currency in a specific country, the prices of our products will increase relative to that countrys currency, and could increase relative to prices of our competitors, and our products may be less competitive in that country.
Also, we cannot be sure that our international customers will continue to be willing to place orders denominated in these currencies. If they do not, our revenue and earnings from operations could be subject to additional foreign exchange rate
fluctuations.



Although we monitor our exposure to currency
fluctuations, these fluctuations could negatively impact our financial position, net earnings and cash flow.



Substantially all of our equipment orders are subject to operating, performance, safety, economic specifications and other contractual obligations. We occasionally experience unforeseen difficulties in
compliance with these criteria, which can result in increased design, installation and other costs and expenses.



Substantially all of our equipment sales have specific commercial terms and are conditioned on our demonstration, and our customers acceptance,
that the equipment meets specified operating and performance criteria, either before shipment or after installation in a customers facility. We occasionally experience difficulties in adhering to and demonstrating compliance with such terms
and other contractual obligations, which can lead to unanticipated expenses for the performance of the contract or the redesign, modification and testing of the equipment and related software. To the extent this occurs in the future, our cost of
goods sold and earnings from operations will be adversely affected. If we are not able to demonstrate compliance with the particular contract or the performance and operating specifications in respect of specific equipment, we may have to pay
penalties to the customer, issue credit notes to the customer and/or take other remedial action, including payment of damages or adjusted pricing, any one of which could negatively affect our earnings from operations.



We are subject to various legal proceedings and claims, the outcomes of which are
uncertain. If we fail to accurately evaluate the probability of loss or the amount of possible losses, an adverse outcome may materially and adversely affect our financial condition and results of operations.



We are party to various legal proceedings and claims generally incidental
to our business, as disclosed in Note 20 of Notes to Consolidated Financial Statements included elsewhere in this report. For each of these proceedings and claims, our management evaluates, based on the relevant facts and legal principles, the
likelihood of an unfavorable outcome and whether the amount of the loss can be reasonably estimated, in connection with our determination of whether or not to record a charge to earnings. Significant subjective judgments are required in these
evaluations, including judgments regarding the validity of asserted claims and the likely outcome of legal, arbitration and administrative proceedings. The outcome of these proceedings is subject to a number of factors beyond our control. In
addition, estimates of the potential costs associated with legal, arbitration and administrative proceedings frequently cannot be subjected to any sensitivity analysis, as damage estimates or settlement offers by claimants may bear little or no
relation to the eventual outcome. Finally, in any particular proceeding, even where we believe that we would ultimately prevail, we may agree to settle or to terminate a claim or proceeding where we believe that doing so, when taken together with
other relevant commercial considerations, is more cost-effective than engaging in an expensive and protracted contest. If we do not accurately assess the probability of an unfavorable outcome or the range of possible loss, an unfavorable outcome
could have a material adverse impact on our financial condition and results of operations.



The Dutch Enterprise Court is reviewing certain matters in relation to ASMI and Stichting Continuïteit ASM International, the timeline and outcome of which are uncertain.



During 2008 two ASMI shareholders requested the Dutch Enterprise Court to
investigate certain matters in relation to the Company and Stichting Continuïteit ASM International. In August 2009 the Enterprise Court ordered an inquiry in respect of the affairs of the Company. The Court also ruled that there are no reasons
for any immediate measures and it therefore denied the appointment of a supervisory director with extensive powers as well as all other immediate measures requested by such shareholders. The inquiry will concern the period from January 1, 1996
to January 1, 1998 (inclusive) as far as it relates to the granting of the option to Stichting Continuïteit to subscribe for preferred shares in the Company and the



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period since January 1, 2006. The inquiry is currently ongoing. The Court has broad remedial authority should it determine that remedies are appropriate, including the authority to appoint
and dismiss members of the Management Board and the Supervisory Board.



If our products are found to be defective, we may be required to recall and/or replace them, which could be costly and result in a material adverse effect on our business, financial position and net earnings.



One or more of our products may be found to be defective after we have
already shipped the products in volume, requiring a product replacement or recall. We may also be subject to product returns and product liability claims that could impose substantial costs and have a material and adverse effect on our business,
financial position and net earnings.



Although we currently are a
majority shareholder of ASM Pacific Technology, we may not be able to maintain our majority interest, which, if other circumstances are such that we do not control ASM Pacific Technology, would prevent us from consolidating its results of operations
with ours. This event would have a significant negative effect on our consolidated earnings from operations.



We derive a significant portion of our net sales, earnings from operations and net earnings from the consolidation of the results of operations of ASM
Pacific Technology in our results. ASM Pacific Technology is a Cayman Islands limited liability company that is based in Hong Kong and listed on the Hong Kong Stock Exchange. As of December 31, 2009, we owned 52.59% of ASM Pacific Technology
through our wholly-owned subsidiary, ASM Pacific Holding B.V. and the remaining 47.41% was owned by the public. If we do not maintain our majority interest in ASM Pacific Technology, and if other circumstances are such that we do not control it
through other means, we would no longer be able to consolidate its results of operations in ours. Any such determination of whether we could continue to consolidate would be based on whether we still have a controlling financial interest
within the meaning of United States generally accepted accounting principles. If we were to become unable to consolidate the results of operations of ASM Pacific Technology with our results, the results of operations of ASM Pacific Technology would
no longer be included in our earnings from operations. Instead, our proportionate share of ASM Pacific Technologys earnings would be reflected as a separate line-item called share of results from investments in our Consolidated
Statements of Operations. We would no longer be able to consolidate the assets and liabilities of ASM Pacific Technology and would have to reflect the net investment in ASM Pacific Technology in the line-item investments in our
Consolidated Balance Sheet. This event would have a significant negative effect on our consolidated earnings from operations, although our net earnings would be reduced only to the extent of the reduction of our ownership interest in ASM Pacific
Technology.



The ASM Pacific Technology shares we own are
partly pledged as security to the banks providing us with our standby revolving credit facility. If an uncured default were to occur, consolidation of ASM Pacific Technology would cease regarding such pledged shares.



ASM Pacific Technology has an employee share incentive program pursuant to
which it can issue up to an aggregate of 5.0% of its total issued shares, excluding shares subscribed for or purchased under the program, to directors and employees. When ASM Pacific Technology issues shares pursuant to this program, our ownership
interest is diluted. If the current maximum amount of shares is issued under this program, our ownership interest would continue to be above 50.0%, although we expect that ASM Pacific Technology will increase the maximum number of shares issuable
under the program from time to time. Our interest could further be diluted if ASM Pacific Technology issues equity for other purposes. Any such decision by ASM Pacific Technology to issue additional shares requires the approval of shareholders in
general meeting in accordance with the listing rules of the Hong Kong Stock Exchange, which in effect makes such decision subject to our approval. We may need to purchase shares of ASM Pacific Technology or take other measures to maintain our
majority interest in the future. There is no assurance that we will have sufficient financial resources to do so at that time.



Although we are a majority shareholder, ASM Pacific Technology is not obligated to pay dividends to us and may take actions or enter into transactions that are
detrimental to us.



Certain directors of ASM Pacific
Technology are affiliates of ASM International. However, they are under no obligation to take any actions that are beneficial to us. Issues and conflicts of interest therefore may arise which might not be resolved in our best interest.



In addition, the directors of ASM Pacific Technology are under no
obligation to declare a payment of dividends to shareholders. As a shareholder of ASM Pacific Technology, we cannot compel the payment or amount of dividends. With respect to the payment of dividends, the directors must consider the financial
position of ASM Pacific Technology after the dividend. Cash dividends received from ASM Pacific Technology totaled  49.1 million,
 49.1 million and 
21.4, in 2007, 2008 and 2009, respectively. In the



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past, we have used these dividends in our front-end business. In November 2006, we announced our commitment that for at least the years 2007, 2008 and 2009 we would not use these cash dividends
to support our front-end business, but instead would use such dividends to retire outstanding convertible debt, repurchase our common shares, pay dividends on our common shares, or purchase shares of ASM Pacific Technology. We are currently
evaluating whether or not to modify or continue this policy regarding the use of such cash dividends for 2010 and beyond and expect to discuss the matter at our upcoming Annual General Meeting of Shareholders in May 2010. See Item 5,
Operating and Financial Review and ProspectsManagements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources.



The directors of ASM Pacific Technology owe their fiduciary duties to ASM
Pacific Technology, and may approve transactions to which we are a party only if the transactions are commercially beneficial to ASM Pacific Technology. Further, under the listing rules of the Hong Kong Stock Exchange, directors who are on the
boards of both ASM Pacific Technology and ASM International are not permitted to vote on a transaction involving both entities. This would disqualify all affiliates of ASM International who serve on the board of ASM Pacific Technology from voting on
any such transaction.



As a shareholder of ASM Pacific
Technology, we can vote our shares in accordance with our own interests. However, we may not be entitled to vote on transactions involving both us and ASM Pacific Technology under the listing rules of the Hong Kong Stock Exchange and the Hong Kong
Takeovers Code. In particular, under the Hong Kong Takeovers Code we would be excluded from voting on a takeover transaction requiring shareholders approval if we are interested in such transaction.



We may not be able to recruit or retain qualified personnel or integrate qualified
personnel into our organization. Consequently, we could experience reduced sales, delayed product development and diversion of management resources.



Our business and future operating results depend in part upon our ability to attract and retain qualified management, technical, sales and support
personnel for our operations on a worldwide basis. Competition for qualified personnel is intense, and we cannot guarantee that we will be able to continue to attract and retain qualified personnel particularly during sustained economic upturns in
the industry. Availability of qualified technical personnel varies from country to country, and may affect the operations of our subsidiaries in some parts of the world. Our operations could be negatively affected if we lose key executives or
employees or are unable to attract and retain skilled executives and employees as needed. In particular, if our growth strategies are successful, we may not have sufficient personnel to manage that growth and may not be able to attract the personnel
needed. Although we have agreements with some, but not all, employees restricting their ability to compete with us after their employment terminates, we do not maintain insurance to protect against the loss of key executives or employees. Our future
growth and operating results will depend on:



| |  |  | our ability to continue to broaden our senior management group;
| | - |  | ---------------------------------------------------------------



| |  |  | our ability to attract, hire and retain skilled employees; and
| | - |  | --------------------------------------------------------------



| |  |  | the ability of our officers and key employees to continue to expand, train and manage our employee base.
| | - |  | --------------------------------------------------------------------------------------------------------



We have in the past experienced intense competition for skilled personnel
during market expansions and believe competition will be intense if the semiconductor market experiences a sustained expansion. Consequently, we generally attempt to minimize reductions in skilled personnel in reaction to industry downturns, which
reduces our ability to lower costs by payroll reduction.



Because the
costs to semiconductor manufacturers of switching from one semiconductor equipment supplier to another can be high, it may be more difficult to sell our products to customers having a competing installed base, which could limit our growth in sales
and market share.



We believe that once a semiconductor
manufacturer has selected a suppliers equipment for a particular product line, that manufacturer generally continues to rely on that supplier for future equipment requirements, including new generations of similar products. Changing from one
equipment supplier to another is expensive and requires a substantial investment of resources by the customer. Accordingly, it is difficult to achieve significant sales to a customer using another suppliers equipment. Our inability to sell our
products to potential customers who use another suppliers equipment could adversely affect our ability to increase revenue and market share.



Our reliance on a limited number of suppliers and a single manufacturing facility in our front-end could result in disruption of our operations.



We outsource a portion of the manufacturing of our front-end business to
a limited number of suppliers. If our suppliers were unable or unwilling to deliver products in a timely manner to us in the quantities we



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require for any reason, including without limitation, capital constraints, natural disaster, labor unrest, capacity constraints, supply chain management problems or contractual disputes, we may
be unable to fill customer orders on a timely basis, which could negatively affect our customer relationships and financial performance. Many of our suppliers are facing economic challenges in the current depressed global economy, which increases
our risk of disruption from a suppliers failure to perform its obligations to us in a timely manner.



We have shifted an increasing portion of our front-end manufacturing to our Front-End Manufacturing Singapore (FEMS) facility, and expect to increase
the concentration of front-end manufacturing there in the future. If this facility experiences a manufacturing disruption for any reason, including without limitation, natural disaster, labor unrest, capacity constraints, supply chain management
problems or contractual disputes, our ability to timely meet our customers needs may be impaired, which would negatively affect our customer relationships and financial performance.



We operate worldwide; economic, political, military or other events in a country where we make significant sales or have significant
operations could interfere with our success or operations there and harm our business.



We market and sell our products and services throughout the world. A substantial portion of our manufacturing employees and operations are in the Peoples Republic of China and the success of our business
depends substantially on those operations. In addition, we have operating facilities in the Netherlands, the United States, Japan, Hong Kong, Singapore, Malaysia and South Korea. Our operations are subject to risks inherent in doing business
internationally, including, without limitation:



| |  |  | unexpected changes in regulatory or legal requirements or changes in one country in which we do business which are inconsistent with regulations in another
country in which we do business;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potentially adverse tax consequences;
| | - |  | -------------------------------------



| |  |  | fluctuations in foreign currency exchange rates and foreign currency controls;
| | - |  | ------------------------------------------------------------------------------



| |  |  | political conditions and instability, particularly in the countries in which our manufacturing facilities are located;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | economic conditions and instability;
| | - |  | ------------------------------------



| |  |  | terrorist activities;
| | - |  | ---------------------



| |  |  | human health emergencies, such as the outbreak of infectious diseases or viruses, particularly in the countries in which our manufacturing facilities are
located;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | tariffs and other trade barriers, including current and future import and export restrictions, and freight rates;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | difficulty in staffing, coordinating and managing international operations;
| | - |  | ---------------------------------------------------------------------------



| |  |  | burden of complying with a wide variety of foreign laws and licensing requirements;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | difficulty in protecting intellectual property rights in some foreign countries;
| | - |  | --------------------------------------------------------------------------------



| |  |  | limited ability to enforce agreements and other rights in some foreign countries;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | longer accounts receivable payment terms and practices in some countries; and
| | - |  | -----------------------------------------------------------------------------



| |  |  | business interruption and damage from natural disasters.
| | - |  | --------------------------------------------------------



To the extent that such disruptions slow the global economy or, more particularly, result in delays or cancellations of
purchase orders, our business and operating results could be materially and adversely affected.



Environmental laws and regulations may expose us to liability and increase our costs.



Our operations are subject to many environmental laws and regulations wherever we operate governing, among other things, air emissions, wastewater
discharges, the use and handling of hazardous substances, waste disposal and the investigation and remediation of soil and groundwater contamination. As with other companies engaged in similar activities, we face inherent risks of environmental
liability in our current and historical manufacturing activities. Costs associated with future environmental compliance or remediation obligations could adversely affect our business.



For example, the European Commission published in 2003 a directive on waste electrical and electronic equipment
(WEEE), which has been implemented in the Netherlands. In principle, the rules result in take- back obligations of manufacturers and/or the responsibility of manufacturers for the financing of the collection, recovery and
disposal of electrical and electronic equipment by requiring that European Union



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Member States adopt appropriate measures to minimize WEEE disposal and achieve high levels of collection and separation of WEEE. Producers of WEEE must provide for the financing of the
collection, treatment, recovery and environmentally sound disposal of WEEE. Another directive of the European Commission provides for a ban on the use of lead and some flame retardants in manufacturing electronic components. To the extent these and
other similar regulations in other countries apply to our business throughout the world, these measures could adversely affect our manufacturing costs or product sales by forcing us or our suppliers to change production processes or use more costly
materials.



Any acquisitions or investments we may make in the future
could disrupt our business and harm our financial condition.



We may consider from time to time additional investments in complementary businesses, products or technologies. We may not be able to successfully integrate these businesses, products, technologies or personnel that we might acquire in the
future, and accordingly we may not realize the anticipated benefits from such acquisitions. In particular, our operation of acquired businesses involves numerous risks, including without limitation:



| |  |  | problems integrating the purchased operations, technologies or products;
| | - |  | ------------------------------------------------------------------------



| |  |  | unanticipated costs and liabilities for which we are not able to obtain indemnification from the sellers;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | diversion of managements attention from our core business;
| | - |  | -----------------------------------------------------------



| |  |  | adverse effects on existing business relationships with customers;
| | - |  | ------------------------------------------------------------------



| |  |  | risks associated with entering markets in which we have no, or limited, prior experience;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | risks associated with installation, service and maintenance of equipment of which we have limited or no prior experience;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | limited technical documentation of the equipment developed in the acquired company; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | potential loss of key employees, particularly those of the acquired organizations.
| | - |  | ----------------------------------------------------------------------------------



In addition, in the event of any future acquisitions of such businesses,
products or technologies, we could:



| |  |  | issue shares that would dilute our current shareholders percentage ownership;
| | - |  | ------------------------------------------------------------------------------



| |  |  | incur debt;
| | - |  | -----------



| |  |  | assume liabilities;
| | - |  | -------------------



| |  |  | incur impairment expenses related to goodwill and other intangible assets; or
| | - |  | -----------------------------------------------------------------------------



| |  |  | incur substantial accounting write-offs.
| | - |  | ----------------------------------------



RISKS RELATED TO AN INVESTMENT IN OUR SHARES



Our founder and members of our Supervisory Board and Management Board control approximately 22.4% of our voting power which gives them significant influence over
matters voted on by our shareholders, including the election of members of our Supervisory Board and Management Board and makes it substantially more difficult for a shareholder group to remove or elect such members without the support of our
founder and members of the Supervisory Board and Management Board.



Our founder controlled approximately 22.1% of the voting power of our outstanding common shares as of December 31, 2009, and the members of our Supervisory Board and Management Board as a group controlled
approximately 0.3% of the voting power of our outstanding common shares as of that date. Accordingly, these persons have significant influence on the outcome of matters submitted to a shareholder vote, such as the election of the members of our
Supervisory Board and Management Board. Persons nominated by the Supervisory Board for appointment by the shareholders to the Supervisory Board or Management Board at a general meeting of shareholders will be elected if they receive a majority of
the votes cast at the meeting. Nominees to the Supervisory Board or Management Board who are not proposed by the Supervisory Board are appointed if they receive the affirmative vote of a majority of the votes cast at the meeting, provided such
affirmative votes represent more than half our issued capital. Members of the Supervisory and Management Boards may be removed only by the affirmative vote of a majority of the votes cast at a meeting, and, unless such removal is recommended by
the Supervisory Board, the affirmative votes must represent more than half our issued capital. This makes it difficult for a group of shareholders to remove or elect members of our Supervisory Board or Management Board without the support of our
founder and the Supervisory Board and Management Board. A proposal to amend the Articles of Association will be submitted for approval to the Annual General Meeting of Shareholders in May 2010, whereby the threshold for the affirmative votes
required to elect or to remove members of the Supervisory and Management Boards (constituting a majority of the votes cast) will be set at one third of our issued capital.



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Our anti-takeover provisions may prevent a beneficial change of control.



The Company has granted to Stichting Continuïteit ASM International
(Stichting), a non-membership organization with a board composed of three members independent of ASMI, the right to acquire and vote our preferred shares. The objective of Stichting is to serve the interests of the Company. To that
objective Stichting may, among other things, acquire, own and vote our preferred shares in order to maintain our independence and/or continuity and/or identity. This may prevent a change of control from occurring that shareholders may otherwise
support. On May 14, 2008, Stichting exercised this right in response to a perceived threat to our continuity and acquired shares of our preferred stock representing 29.9% of the total voting power of our outstanding capital shares at that time.
These shares were retired in 2009 and a new right was issued to Stichting to acquire and vote preferred shares in certain situations in the future. For additional information regarding Stichting, see Item 7, Major Shareholders and Related
Party Transactions.



The voting power of Stichting may
make it more difficult for a shareholder or a group of shareholders to cause us to enter into a change of control transaction not supported by Stichting, even if such transaction offers our shareholders an opportunity to sell their shares at a
premium over the market price.



We must offer a possible change of
control transaction to Applied Materials first.



Pursuant to our 1997 settlement agreement with Applied Materials, as amended and restated in 1998, if we desire to effect a change of control transaction, as defined in the settlement agreement, with a competitor of Applied Materials, we
must first offer the change of control transaction to Applied Materials on the same terms as we would be willing to accept from that competitor pursuant to a bona fide arms-length offer made by that competitor.



Our failure to maintain effective internal controls over financial reporting may
prevent our auditor from attesting to our evaluation of our controls.



We are subject to United States securities laws, including the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted by the U.S. Securities and Exchange Commission pursuant to the Act. Under
Section 404 of the Sarbanes-Oxley Act and the related regulations, we are required to perform an annual evaluation of our internal controls over financial reporting and submit a management report on such controls. In addition, we are required
to have our independent auditor publicly attest to our evaluation of internal controls over financial reporting.



If we fail to maintain effective internal controls over financial reporting, if we do not timely evaluate the effectiveness of internal controls over
financial reporting, or if our independent auditor cannot timely attest to our evaluation, we could be subject to regulatory scrutiny and decreased public confidence in our internal controls, which may adversely affect the market price of our common
shares.



Our stock price has fluctuated and may continue to fluctuate
widely.



The market price of our common shares has
fluctuated substantially in the past. Between January 1, 2009 and December 31, 2009, the sale price of our common shares, as reported on the NASDAQ Global Select Market, ranged from a low of US$ 6.30 to a high of US$ 25.75. The market
price of our common shares will continue to be subject to significant fluctuations in the future in response to a variety of factors, including the risk factors discussed in this report and the following, without limitation:



| |  |  | future announcements concerning our business or that of our competitors or customers;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | the introduction of new products or changes in product pricing policies by us or our competitors;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | litigation regarding proprietary rights or other matters;
| | - |  | ---------------------------------------------------------



| |  |  | changes in analysts earnings estimates and recommendations;
| | - |  | ------------------------------------------------------------



| |  |  | developments in the financial markets;
| | - |  | --------------------------------------



| |  |  | quarterly fluctuations in operating results;
| | - |  | --------------------------------------------



| |  |  | hedge fund and shareholder activist activities;
| | - |  | -----------------------------------------------



| |  |  | general economic, political and market conditions, such as recessions or foreign currency fluctuations; or
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | general conditions in the semiconductor and semiconductor equipment industries.
| | - |  | -------------------------------------------------------------------------------



In addition, public stock markets frequently experience substantial price and trading volume volatility, particularly in
the high technology sectors of the market. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to or disproportionately



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impacted by the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our common shares.



Our quarterly revenues and earnings from operations have varied significantly in the
past and may vary in the future due to a number of factors, including, without limitation:



| |  |  | cyclicality and other economic conditions in the semiconductor industry;
| | - |  | ------------------------------------------------------------------------



| |  |  | production capacity constraints;
| | - |  | --------------------------------



| |  |  | the timing of customer orders, cancellations and shipments;
| | - |  | -----------------------------------------------------------



| |  |  | the length and variability of the sales cycle for our products;
| | - |  | ---------------------------------------------------------------



| |  |  | the introduction of new products and enhancements by us and our competitors;
| | - |  | ----------------------------------------------------------------------------



| |  |  | the emergence of new industry standards;
| | - |  | ----------------------------------------



| |  |  | product obsolescence;
| | - |  | ---------------------



| |  |  | disruptions in sources of supply;
| | - |  | ---------------------------------



| |  |  | our ability to time our expenditures in anticipation of future orders;
| | - |  | ----------------------------------------------------------------------



| |  |  | our ability to fund our capital requirements;
| | - |  | ---------------------------------------------



| |  |  | changes in our pricing and pricing by our suppliers and competitors;
| | - |  | --------------------------------------------------------------------



| |  |  | our product and revenue mix;
| | - |  | ----------------------------



| |  |  | seasonal fluctuations in demand for our products;
| | - |  | -------------------------------------------------



| |  |  | foreign currency exchange rate fluctuations; e.g. appreciation of the euro versus the Japanese yen and U.S. dollar, which would negatively affect the
competitiveness of those manufacturing activities that are domiciled in countries whose currency is the euro; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | economic conditions generally or in various geographic areas where we or our customers do business.
| | - |  | ---------------------------------------------------------------------------------------------------



In addition, we derive a substantial portion of our net sales from
products that have a high average selling price and significant lead times between the initial order and delivery of the product. The timing and recognition of net sales from customer orders can cause significant fluctuations in our earnings from
operations from quarter to quarter. Gross margins realized on product sales vary depending upon a variety of factors, including the mix of products sold during a particular period, negotiated selling prices, the timing of new product introductions
and enhancements and manufacturing costs. A delay in a shipment near the end of a fiscal quarter or year, due, for example, to rescheduling or cancellations by customers or to unexpected manufacturing difficulties experienced by us, may cause sales
in a particular period to fall significantly below our expectations and may materially adversely affect our earnings from operations for that period. Further, our need to continue expenditures for research and development and engineering make it
difficult for us to reduce expenses in a particular quarter even if our sales goals for that quarter are not met. Our inability to adjust spending quickly enough to compensate for any sales shortfall would magnify the adverse impact of a sales
shortfall on our earnings from operations. In addition, announcements by us or our competitors of new products and technologies could cause customers to defer purchases of our existing systems, which could negatively impact our financial position
and net earnings.



As a result of these factors, our
revenues or earnings from operations may vary significantly from quarter to quarter. Any shortfall in revenues or earnings from operations from levels expected by securities analysts and investors could cause a decrease in the trading price of our
common shares.



Item 4. Information on the
Company



The information in this Item 4 should be
read in conjunction with the risks discussed under Item 3.D., Risk Factors.



A. History and development of the Company.



ASM International N.V. was incorporated on March 4, 1968 as a Netherlands naamloze vennootschap, or public limited liability company, and was previously known as Advanced Semiconductor Materials
International N.V. Our principal executive offices are located at Versterkerstraat 8, 1322 AP, Almere, the Netherlands. Our telephone number at that location is +31 8810 08810. Our authorized agent in the United States is our subsidiary, ASM America
Inc., a Delaware corporation, located at 3440 East University Drive, Phoenix, Arizona 85034.



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B. Business overview.



Introduction



Our Business



We are a semiconductor capital equipment supplier, We design, manufacture and sell equipment and services to our customers for the production of
semiconductor devices, or integrated circuits. The semiconductor capital equipment market is composed of three major market segments: wafer processing equipment, assembly and packaging equipment, and test equipment. ASMI is mainly active in the
wafer processing and assembly and packaging market segments. The wafer processing segment is referred to as front-end. Assembly and packaging is referred to as back-end.



Front-end production systems perform processes on round slices of silicon,
called wafers, which are 100mm or 300mm in diameter. During these processes, thin films, or layers, of various materials are grown or deposited onto the wafer, or modified in various ways such as through temperature treatment or etching. Some of
these films are electrically conductive, some are electrically insulating. By depositing multiple layers of films, multi-level, integrated electrical circuits are created. Many individual integrated circuits are created at one time on each wafer,
and these are referred to as dies or chips. After testing these individual circuits for correct performance, the dies on the processed wafer are separated, with each die of the same wafer containing the same circuitry.
Back-end production systems then assemble and connect one or more known good dies in a single package, to form a complex semiconductor device that will perform calculations, store data and interface with its environment.



Our front-end operations are conducted through wholly-owned subsidiaries,
the most significant being ASM Europe B.V. (ASM Europe), located in the Netherlands, ASM America, Inc. (ASM America), located in the United States, ASM Japan K.K. (ASM Japan), located in Japan, and ASM Front-End
Manufacturing Singapore Pte Ltd. (FEMS), located in Singapore.



Our back-end operations are conducted through our majority-owned subsidiary, ASM Pacific Technology Ltd. (ASM Pacific Technology), with principal operations in Hong Kong, the Peoples Republic of
China, Singapore, and Malaysia. At December 31, 2009, we owned 52.59% of the outstanding equity of ASM Pacific Technology.



The location of our front-end facilities allows us to interact closely with customers in the worlds major front-end geographic market segments:
Europe, North America, and Asia. The principal market we address in the front-end is a portion of the Deposition and Related Tools market segment, as defined by VLSI Research1. Our front-end segment accounted for 39.7% of our net sales in 2008 and 27.1% of our net sales in 2009.



Our back-end facilities are in close proximity to
where most customer assembly and packaging operations are located. The principal markets we address in back-end are portions of the IC Bonding Equipment, Packaging Equipment and IC Integrated Assembly Systems
segments as defined by VLSI Research2, which segments include assembly and packaging equipment for LEDs. We also manufacture and sell lead-frames
which are substrates connecting the various circuits on a chip to the devices in which the chips are installed. Our back-end segment accounted for 60.3% of our net sales in 2008 and 72.9% of our net sales in 2009.



Recent DevelopmentsFront-end Business



Front-end ManufacturingSingapore



In late 2004, we established FEMS in Singapore as a low-cost
manufacturing hub for front-end production. We established FEMS to manufacture generic subsystems and parts for our front-end products that we previously outsourced, in order to improve cost-effectiveness and strengthen our gross profit margin in
our front-end segment. As of the end of 2009, our Vertical Batch Furnaces are completely manufactured in FEMS, and we are in the process of transferring manufacturing responsibility to FEMS for all Single Wafer Products. Our plans are to complete
these transfers in 2010. As part of this process, our production facilities in Nagaoka, Japan and Phoenix, Arizona will be closed and our factory in Almere, the Netherlands was closed during the fourth quarter of 2009.



Almere Headquarters



In December 2008, we relocated our headquarters from Bilthoven to our
existing facility in Almere, the Netherlands. We are marketing our Bilthoven facility for sale.



|1 | www.vlsiresearch.com, VIC code 1460.00000, accessed February 1, 2010.
|- | ---------------------------------------------------------------------

|2 | www.vlsiresearch.com, VIC codes 1540.00000, 1550.00000 and 1560.00000, accessed February 1, 2010.
|- | -------------------------------------------------------------------------------------------------



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Product Portfolio Streamlining



In April 2008, we announced our plan to dispose of our rapid thermal processing line. This disposition was completed in
October 2009. We plan to move the functionality of all our Single Wafer Products onto the Eagle XP platform. Eventually, all other single wafer platforms will be phased out. Apart from abandoning the RTP market segment, this is not expected to
significantly affect our served available market.



Restructuring



During 2009, we restructured
our ASM Europe (ASME) operations by transferring all manufacturing in our Almere facility in the Netherlands to our FEMS operation in Singapore. This restructuring was completed and the Almere manufacturing facility was closed by the end of 2009.



In July 2009 we announced a major restructuring program
called PERFORM! The plan calls for globalization of manufacturing, sales and service, and platform R&D functions, and streamlining our front-end organization in two product groups; Thermal Products (including CVD/Diffusion and ALD/Epi Product
Lines) and Plasma Products (including PECVD and PEALD Product Lines). Spares and services will be organized in a third product group. In addition in July 2009 we announced various cost reduction initiatives, including:



| |  |  | Consolidation of the two lab facilities in Tokyo into one facility and marketing the closed facility for sale.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Consolidation of the two lab facilities in Phoenix into one facility.
| | - |  | ---------------------------------------------------------------------



| |  |  | Centralization of front-end training in Phoenix, Arizona.
| | - |  | ---------------------------------------------------------



| |  |  | Centralization of administrative support functions for front-end in Singapore at FEMS.
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Closure of certain manufacturing, R&D, sales and service locations.
| | - |  | -------------------------------------------------------------------



Recent DevelopmentsASM Pacific Technology Business



The global downturn started to negatively impact our back-end operations
in the second half of 2008. Accordingly, in the fourth quarter of 2008, and in 2009, we implemented significant cost reduction measures in our back-end segment, including a hiring freeze, elimination of overtime and plant shutdowns. In the second
half of 2009 our back-end revenue had recovered.



Industry Background and Major Business Trends



Semiconductor devices are the key enablers of the electronic age. Each semiconductor device can hold many individual components, most of which are transistors. For over 30 years now, the average number of
components per integrated semiconductor device, at the optimum cost-per-component, has been increased by a factor of two every 18 to 24 months. This trend is generally referred to as Moores law, after Gordon Moore who co-founded Intel.
Increases in complexity, along with simultaneous reductions in the cost-per-component, have mainly been achieved by reducing the size of individual transistors, so that a larger number of transistors fit within a given size die. Today, transistors
less than 45nm (1 nm is equal to one billionth of a meter) long are manufactured in high volume, and several billion transistors can be manufactured on a single die with an area of a few square centimeters.



A second development that has decreased the cost per device is the
increased size of the wafer (the silicon substrate upon which semiconductors are built), so that more devices can be produced within one production cycle. Today, almost all of the newly installed semiconductor device fabrication capacity employs
300mm wafers, with each wafer typically holding between a few dozen to several thousand individual circuits. The simultaneous increase in the complexity of devices, and the substantial decrease in cost-per-component has supported (in 2009) an over
US$ 1.4 trillion global electronics industry (VLSI Research, Inc. Electronics Industry Supply Chain, update August 20093), and behind that, a semiconductor industry of approximately US$ 216 billion (ibid.). The semiconductor industry in turn, is
supported by the US$ 21 billion (ibid.) semiconductor capital equipment industry which supplies the needed production systems and services.



The yield, or the fraction of chips on a wafer that operate according to specifications (known good dies), is one of the key variables that influences
the financial performance of the integrated device manufacturers. Large initial investments are needed to build an automated production line in an ultra-clean environment in order to achieve high yield. The capital equipment in this production line
is increasingly becoming an important determinant for the yield of the factory.



|3 | www.vlsiresearch.com, accessed February 1, 2010.
|- | ------------------------------------------------



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Parallel to the above-mentioned trends of transistor scaling and larger wafer size, another trend is
beginning to emerge on the die level: heterogeneous integration. While the components on a chip that perform calculation and storage can undergo scaling, other components, such as inductors, capacitors, sensors, micromechanical, photonic, or
micro-fluidic devices, do not scale as easily as do transistors and some capacitors. Yet, in order to make devices with these components small and cost-effective enough, they will eventually also have to be integrated into the same semiconductor
device. Although several functions can be integrated on a single die, as in a system on a chip (SoC), for economical reasons this is usually limited to the components that scale with Moores law (more Moore), and use the
same base material (silicon). For components that do not scale, or components that use a different base material it is not always practical or economically feasible to place them on the same die. In that case, integration of several dies, sometimes
coming from different supply lines, in a single package to form a system in a package (SiP) is the alternative solution that provides the desired functionality. This trend is sometimes referred to as more than Moore.



The trends outlined above are the drivers of the broad
semiconductor roadmap which semiconductor equipment companies track in developing new production systems and process technologies. These new systems and technologies must be developed well ahead of volume demand for the semiconductor devices they
make. As a result, there is a large lead time between the investment in a new technology, and its commercial success. With the combination of a long lead time and the short product life-cycles comes the inherent difficulty of matching supply and
demand, which results in the high volatility associated with the semiconductor equipment industry. In this highly cyclical industry, the front-end and back-end market segments have historically reacted differently to market forces. We believe,
therefore, that operating in both segments works in our favor to reduce the impact of business cycles on our operations.



Our Strategy



Our strategic objective is to realize profitable, sustainable growth by capitalizing on our technological innovations, manufacturing infrastructure and
sales and support offices located close to our global customers. The key elements of our strategy include:



| |  |  | Streamlining our front-end manufacturing processes to follow the highly successful vertical manufacturing model of our back-end segment, by systematically
reducing manufacturing costs through global sourcing, product platform consolidation, and locating our manufacturing capability in more cost efficient countries.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintaining our global reach through our global operating, sales and customer service organization and its facilities in key parts of the world in order to
establish and maintain long-term customer relationships.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Leveraging our combined strong front-end and back-end technology leadership and manufacturing capabilities through advancements in our products and processes
early in the technology lifecycle.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expanding the scope and depth of our research and development capabilities through strategic alliances with independent research institutes, universities,
customers and suppliers, and expanding our patent portfolio by filing applications for key developments in equipment, processes, materials and software where this is deemed necessary and beneficial.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Background of Semiconductor Manufacturing Processes



Overview



The process of manufacturing an integrated semiconductor, from raw
material to finished device, includes amongst others the segments in which we participate: front-end and back-end.



Front-end Manufacturing Process



The front-end manufacturing process, or wafer processing, can be divided in three distinct parts: wafer manufacturing, transistor formation (known as
front-end of the line (FEOL) processing), and interconnect formation (known as back-end of the line (BEOL) processing). We develop and sell technology, develop, manufacture and sell equipment, and provide services used by
semiconductor device manufacturers in each of these sections of front-end manufacturing.



In the wafer manufacturing process a large single crystal of very pure silicon is grown from molten silicon. The crystal is then sliced into a large number of thin slices, or wafers, of single crystalline silicon.
These slices are polished to an atomic level flatness before the next steps are executed. For advanced applications, some layers are deposited on the wafer for later use, by either epitaxy or diffusion/oxidation (described below). Epitaxial wafers
are even flatter and contain fewer defects at the surface than polished wafers. Some wafers are made with an embedded electrically insulating layer, such as silicon oxide, just below a very thin top layer of pure silicon. These special wafers are
called Silicon-on-Insulator or SOI wafers



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and are used for some of the most advanced microprocessors. The finished wafers, still without pattern on them, are shipped to the integrated device manufacturers and foundries for further
processing.



During FEOL and BEOL wafer processing, multiple
thin films of either electrically insulating material, also called dielectrics, or conductive material are modified, grown, or deposited on a silicon wafer. First, several material processing cycles are used in the FEOL to build the basic transistor
and other components such as capacitors and resistors. Second, several processing cycles are used in the BEOL to electrically connect the large amount of transistors and components, and to build additional passive components such as capacitors,
inductors and resistors. Patterning of deposited layers with lithography and etching (described below) creates the transistors, passive components and connecting wires, which together make up the integrated circuit. Each integrated circuit is on a
single chip or a die on the wafer. A finished wafer may contain a few dozen to several thousand individual dies. Front-end processes are performed either one wafer at a time in single wafer processing systems or many wafers
at a time in batch processing systems. Multiple deposition, and patterning processes are performed on the same wafer.



The number and precise order of the process steps vary depending upon the complexity and design of the integrated circuit. The performance of the
circuit is determined in part by the various electrical characteristics of the materials used in the layers of the circuit and the wafer. Simple circuits may have as few as ten layers, while complex circuits may have more than one hundred layers.
The front-end manufacturing process is capital intensive, requiring multiple units of several different production systems. Many different but complementary methods are used to modify, grow, or deposit materials on the wafers. We are predominantly
active in developing and manufacturing the equipment used by semiconductor device manufacturers in the deposition processes, i.e., those steps that involve the creation of insulating, conducting and semi-conducting layers on the wafer surface.



The front-end manufacturing process is complete when all of
the layers have been deposited and patterned on the wafer. As a last step, the correct electrical functioning of the integrated circuits on each die is confirmed by probing. Non-functioning circuits are marked so they can be eliminated before the
back-end processing. The introduction of even trace levels of foreign particles or material can make a circuit, or even an entire wafer, unusable. To reduce the level of foreign particles or material, front-end processing is performed in clean rooms
with ultra low particle and contamination levels. Once the front-end processing is complete, the entire wafer with multiple, functioning, integrated circuits is shipped to the back-end facility where it is separated into dies, which are then bonded
to a suitable substrate or leadframe, packaged, and tested before final shipment of the semiconductor device to the end customer. Back-end processes do not require the same level of contaminant control. These processes are performed in facilities
that differ from facilities in which front-end processes are performed.



The following is an alphabetical list of the principal front-end process technologies used by semiconductor device manufacturers:



| |  |  | Atomic Layer Deposition (ALD) is an advanced technology that deposits atomic layers one at a time at low temperatures on wafers. This process
is used to create ultra-thin films of exceptional quality and flatness. Plasma is sometimes used to enhance the process further (Plasma Enhanced ALD, PEALD).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Chemical Mechanical Polishing (CMP) is a technology that planarizes, or levels, layers deposited on wafers by polishing them with a chemical
solution called slurry. Planarization reduces the vertical height differences of the various layers. This increases the number of layers that can be processed without introducing reliability problems. Electrochemical Mechanical Polishing
(ECMP) is comparable to CMP aided with an electric current.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Chemical Vapor Deposition (CVD) is a technique in which one or more gaseous reactants are used to form a solid insulating or conducting layer
on the surface of a wafer. Low pressure (Low Pressure CVD, LPCVD) or plasma is sometimes used to enhance the process further (Plasma Enhanced CVD, PECVD).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Clean removes undesirable contaminants from the wafers surface.
| | - |  | ----------------------------------------------------------------



| |  |  | Diffusion and Oxidation are high-temperature processes that change the electrical characteristics of layers. Diffusion is used to move dopants, or
impurities, and make dopants introduced by ion implantation electrically active. Anneal is used as a synonym to diffusion. Oxidation forms a silicon oxide layer on the wafers surface, which acts as an insulating or protective
layer over the wafers surface.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Electroplating or Electrochemical Deposition (ECD)deposits a layer of metal from a complex liquid solution, containing metal salts,
and certain additives, by passing an electrical current through that solution and towards the surface of the wafer. Electrochemical Mechanical Deposition (ECMD) is ECD with concurrent mechanical planarization.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Epitaxy involves the deposition of silicon or silicon compounds on the wafer, continuing and perfecting the crystal structure of the bare wafer
underneath. Epitaxy improves the electrical
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | characteristics of the wafer surface, making it suitable for highly complex microprocessors and memory devices. Selective epitaxyis an epitaxy process that only deposits silicon or a
silicon compound on certain predetermined areas of the wafer.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Etch reproduces the pattern imprinted by lithography by removing excess material from the uppermost layer(s) of the wafer.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Ion Implantation is a process in which wafers are bombarded with ions to introduce dopant atoms, or impurities, into the wafer to improve its electrical
characteristics. Silicon conducts little or no electricity. In order to have electrical current within a layer, it is necessary to place small amounts of impurities into the layer.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lithography is used to print the various layer patterns of the semiconductor device on the uppermost layer of the wafer. These patterns determine the
functions of the semiconductor device. The lithography process determines the smallest pitch with which components can be placed in the circuit.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Metrology is used to measure the width of lines on semiconductor devices, the thickness of layers, the surface profiles of layers, and certain electrical
properties of layers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Probing is a process in which electrical and functional tests are performed on each die and defective ones are marked on the wafer so that they can be
discarded prior to the back-end processing.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Rapid Thermal Processing (RTP) is similar to diffusion/oxidation, except that it exposes a single wafer to heat over a short period of time.
Rapid Thermal Anneal (RTA) is a subset of RTP that is restricted to heat treatments in a non-reactive ambient.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Back-end Manufacturing Process



When the wafer with confirmed working integrated circuits is received in the back-end facility, wafers are first cut (diced) into
individual dies or chips by a dicing saw or sometimes a laser. The dies are then separated and a single die is (or for an advanced device several different dies are) picked and attached to a leadframe or other substrate by a bonding process. The
leadframe or substrate provides the interface between the electrical circuit on the die and the system in which the die is incorporated. Leadframes are produced by stamping or etching out a pattern on a strip of copper or iron-nickel alloy. For high
precision (and fast turnaround purposes) leadframes are produced by an etching process to achieve a shorter time to market. Stamped frames are typically used for very high volumes on mature designs. In order to allow a wire to be easily attached to
its surface, the leadframes are plated with a thin layer of silver or a stacked layer of nickel, palladium, and gold on appropriate places. The electrical connection of the electrical circuit to the leadframe is made by wire bonding. As few as one
or as many a thousand or more separate wires are each connected between a terminal connection point called pad on the die and a lead on the leadframe, through which the device is able to communicate with the printed circuit board.
Leadframes and wire bonding are by far the most common technology in use today.



After this assembly and wire bonding interconnection process, the dies are encapsulated to protect them from environmental influences. The encapsulation process employs high-grade epoxy molding compounds
(EMC), automated molding systems, and tooling to enclose the die and wires. The molding compound forms a hard casing around the die and wires after it is cured. For production efficiency during assembly most leadframes consist of many
parts arranged in rows and columns. Each individual part is moved through the multiple assembly process steps connected to other identical parts. After the molding process is completed, the parts are separated from this array in a series of
processes referred to as trim, form, and singulation. Here too, high precision tooling and automation are employed to precisely cut away portions of the substrate or leadframe so that the packaged unit is freed from the rest. These singulated units
will then move through inspection, electrical test, marking and packing to prepare the tested and finished devices for shipment to the customer.



Another method used for chips with high pin count and speed is flip chip. The flip chip process eliminates the need for die and wire bonding. Instead,
it involves populating the electrical interconnect points on a chip with small solder balls made of low melting point materials, a process called bumping. The substrate is designed such that it has an identical pattern to that of the device. The
device is then flipped onto the substrate with precise alignment and the bonding process is completed by the application of heat, force, ultrasonic vibration, or a combination of the three. Wafer level packaging (WLP) is another emerging
technique that places all the protective layers, interconnections and interconnection points directly on the surface of the wafer, such that completely packaged devices are made at wafer level. After probing and dicing, the die can be separated and
may be directly attached to printed circuit boards.



The
following is an alphabetical list of the principal back-end processes used by semiconductor manufacturers:



| |  |  | Binningassigns tested, packaged devices to defined performance categories.
| | - |  | --------------------------------------------------------------------------



| |  |  | Die Bonding mounts the die onto carriers such as lead-frames using a die bonder.
| | - |  | --------------------------------------------------------------------------------



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| |  |  | Die Separation separates the dies on the wafer into individual units using dicing saws.
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Die Sortingsegregates tested dies into different performance levels.
| | - |  | --------------------------------------------------------------------



| |  |  | Encapsulation or Molding encases the die in a protective housing, often epoxy, using dispensing systems or transfer molds.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Marking puts product identification information on the semiconductor package using stencil printing or laser inscription techniques.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Product Testing tests the performance of the completed, encapsulated, and singulated semiconductor device.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Singulation is the separation of the many individual devices attached to a leadframe.
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Trim and Form cuts away the excess portion of the leadframe and bends the leads into the desired shape, resulting in the completed semiconductor device.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Wire Bonding attaches extremely thin gold, copper, or aluminum wires between the input/output terminals (I/O terminals) known as
pads on the die and the leadframe leads creating electrical connections using a wire bonder. Wedge bonding employs only ultrasonic energy, while thermosonic wire bonding employs both heat and ultrasonic energy.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Important Technology Trends for our Business



Technology Trends



The continuous demand for smaller, faster and cheaper semiconductor
components drives the technology advances in the semiconductor manufacturing process. As the transistors in an integrated circuit become smaller, the cost-per-component decreases. Fortuitously, at the same time the operating speed of the transistor
increases. Thus the minimum size of a single transistor in an integrated circuit is an extremely important parameter. This minimum size can be characterized by the so-called half-pitch, which is about equal to the smallest line width in the device.
Today, our leading-edge high volume production systems support the manufacturing of semiconductor devices having a half-pitch as small as 65 to 32 nanometers (one nanometer is one billionth of a meter). At ASMI, and in close cooperation with our
customers, we are qualifying and testing new critical process equipment for line widths at or below 32 to 22nm. Simultaneously, we are developing new 22 to 15nm technologies in our laboratories. Today, most of the newly installed semiconductor
device fabrication capacity employs 300mm wafers. Accordingly, our system and process development and sales effort is concentrated in 300mm equipment.



In developing faster and smaller devices, our front-end customers major technology requirements are:



| |  |  | new thin film materials and device designs that can reduce the amount of power consumed in the device, increase the speed and reliability of the circuit, and
increase the amount of charge that can be stored;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reliable manufacturing of taller three-dimensional structures in devices;
| | - |  | -------------------------------------------------------------------------



| |  |  | lithography of ever smaller feature sizes, now much smaller than the wavelength of light; and
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | new manufacturing processes that reduce device variability and increase yield.
| | - |  | ------------------------------------------------------------------------------



Technological developments in the front-end process have resulted in new requirements for the back-end manufacturing
process. The ability to place millions of transistors onto a thumbnail-size device with vastly increased functionality has created the first major trend: the need for more input/output terminals in the same or smaller space. The challenge for
back-end equipment suppliers is to connect this increasing number of terminals in a package that sometimes is barely larger than the chip. Wire bonding has been at the forefront of this transition, but for integrated circuits with very high terminal
count, the industry has developed ball grid array (BGA) and flip chip packaging that use the entire surface of a die, and not just the perimeter.



A second major trend in the back-end market segment is driven by the strong growth in demand for hand held devices. There is an ongoing need to build
ever smaller and more complex packages at lower cost for this market. Individual dies must be packaged in areas that are just slightly larger than the individual dies they contain. These chip scale packages minimize the amount of space occupied by
the end product on the circuit board.



A third major trend
relates to the industry demand for a much higher level of integration, but still at lower cost and optimized yield. This has resulted in a requirement to place multiple dies into the same package. The assembly of a combination of known good
dies in a package can lead to higher yield than the combination of the same functionality blocks on a single chip. Such a System-in-Package (SiP) is more



24



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than a simple collection of multiple dies: SiP products are fully functional systems or sub-systems. Moreover, devices from different supply chains, with sometimes entirely different feature
sizes or technologies can be integrated this way. Dies can be placed next to and/or on top of each other, using stacked die bonding techniques and sometimes mixing flip chip and wire bonding techniques in the same package. It appears that in the
near future an increasing fraction of the value of the device will be in the package, at the cost of the fraction that is for the die.



Our Response to Technology Trends



We develop and manufacture wafer processing systems and new thin film materials that enable our customers to produce devices that consume less power,
are faster, show less variability, are more reliable and are able to store more electrical charge. In order to meet our customers needs, we have developed, and are still developing many new materials. For example, in the FEOL, high-k
dielectrics and novel metal electrodes can reduce the power consumption of a device, thereby enhancing battery life. This same class of materials can also lead to larger charge storage in a smaller capacitor, critical for memories and RF circuits.
Whereas in the recent past much focus has been on the development of the high-k dielectric, today as much focus is on new technologies and materials for the metal electrode. Another example of new materials in the FEOL is our silicon-germanium
(SiGe) and silicon-carbon (SiC) epitaxial materials that can increase the switching speed of the transistors and the circuit in which they are embedded by so-called strain engineering. This can be done without negatively
affecting the power these transistors consume. Epitaxial materials are also used in wafer manufacturing to create wafers with improved surface and insulation quality (epitaxial wafers or silicon on insulator (SOI) wafers).



In the BEOL or interconnect process, a continued demand to
improve the speed at which signals travel through thin copper wires has lead to the development of a full suite of low-k materials. These low-k materials can decrease the amount of delay in signal propagation, resulting in, for example, faster
microprocessors. We have been one of the leaders in successfully introducing these low-k materials in the market.



We have also developed and sold new processes and wafer processing equipment to enable the creation of narrow lines having dimensions beyond the
resolution of common lithography, and with low line width variability. For that purpose we have developed low temperature plasma enhanced ALD processes that are compatible with the photoresist processes that are common to lithography tools.



In addition to addressing the technology needs of our
customers, the relentless drive of the industry to reduce cost corresponds to significant spending on development programs that further increase throughput and reliability, and lower the cost of the wafer processing systems.



For our back-end customers, leadframe and wire bond technology continues
to offer the most flexible method of connecting the die to the printed circuit board. Increasing pressure on the number of I/O terminals per unit area of silicon continues to drive down the distance between two adjacent interconnect points or pads,
reducing the bond pad pitch and allowable wire diameter. The increasing I/O requirement has also resulted in the use of several rows of these pads on a single die. Production is now ongoing with a bond pad pitch of 30 microns. Wire bonding must not
only address decreasing wire diameters and pitch, but also address the throughput to reduce the overall cost of the device. Future wire bonding platforms will be able to operate in an environment that requires the bond pad pitch to be at 25 microns.
The increasing row count will require better control of the wire shapes and looping profiles to maintain signal integrity at high communication speeds. All of this must be achieved with the highest possible speed and reliability. In addition,
semiconductor manufacturers are looking to automation and integration of back-end equipment as ways to reduce costs and increase productivity.



Increasing pressure on the level of integration and reduction in size of handheld or mobile devices has given rise to several alternative assembly and
bonding techniques and materials, such as flip chips and several chip-scale packaging methods. Stacked die packages, in which more than one die is stacked on top of another, to form a single device, play a major role in the handheld appliance
market. We are responding to the need of stacked die packages by developing better wire bonding techniques, for example, by controlling the shape of the wire loop. We are currently developing methods of working with insulated wires, which will allow
for more crossed connections in a device.



The newly
developed ASM Die Bonder AD8912SD-A offers a wide range of benefits with the sole target of producing highest speed and quality at lowest cost per die placement. Special handling and operating aspects of stacked and thin die are incorporated in the
revolutionary machine concept. The extremely fast vision system and the ultra light pick and place head with his innovative linear motor technology offer an incredible increase in performance, product quality and yield.



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Products



Market Coverage



The table below indicates the major market segments of the semiconductor equipment industry. The principal market segments in which we participate are
underlined.



|                 |  |                           |  |                                      |  |                                 
|---------------- |  | ------------------------- |  | ------------------------------------ |  | --------------------------------
|                 |  |                           | 
|                 |  |                           |  | Major Market Segment 1               |  |                                 
|Market Segment 1 |  | Test and relatedSystems   |  | IC Fabrication Equipment orFront-end |  | IC AssemblyEquipment or Back-end
|                 |  | Automated Test Systems    |  | MicroLithography and Mask Equipment  |  | Assembly Inspection Equipment   
|                 |  | Material Handling Systems |  | CMP Equipment                        |  | Dicing Equipment                
|                 |  |                           |  | Ion Implanters                       |  | Bonding Equipment               
|                 |  |                           |  | Deposition and Related Tools 2       |  | Packaging Equipment             
|                 |  |                           |  | Etching and Cleaning Tools           |  | Integrated Assembly Systems     
|                 |  |                           |  | Process Diagnostic Equipment         |  | Leadframes 3                    



|(1) | Based on VLSI Research Industry Segmentation (www.vlsiresearch.com, accessed February 1, 2010).
|--- | -----------------------------------------------------------------------------------------------

|(2) | This segment also includes diffusion and oxidation furnaces.
|--- | ------------------------------------------------------------

|(3) | While the materials segment is not included by VLSI Research in the back-end segment, leadframes are a significant component of our revenues.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------



Front-end Segment Products



ASMIs front-end segment products come from a number of product
platforms, with each platform designed to host and enable specified process technologies. The products in each product platform are linked through common technology elements of the platform, for example a common in-system software framework, common
critical components, similar logistics (batch or single wafer processing), or a similar wafer processing environment (wet or dry). The following table lists our principal product platforms for the front-end market, the main process technology that
they enable, and the semiconductor device manufacturing solution for which the products from that platform are used.



|                   |  |                                      |  |                                                                                                      
|------------------ |  | ------------------------------------ |  | -----------------------------------------------------------------------------------------------------
|ProductPlatform 1  |  | ASMI ProcessTechnology 1             |  | Products 1                                                                                           
|Advance 400 Series |  | ALD, CVD, diffusion/oxidation, LPCVD |  | A400, A412, A4ALD, Vertical Furnace Systems                                                          
|Eagle              |  | PECVD                                |  | Eagle 10, Eagle 12(2), Dragon 2300(2)Single Wafer Plasma Processing Systems                          
|Eagle XP(3)        |  | PECVD,PEALD, ALD                     |  | Pulsar 3000 ALD Products, PECVD Products, PEALD
Products                                             
|Epsilon            |  | Epitaxy, LPCVD                       |  | Epsilon 2000 and Epsilon 3200(4)Single Wafer Epitaxy Systems                                         
|Polygon            |  | ALD, PEALD                           |  | Polygon 8200, Polygon 8300(5), Pulsar 3000(5), EmerALD(5)Single Wafer Atomic Layer Deposition Systems



|(1) | Advance, Epsilon, Polygon, PEALD, Eagle, Dragon, A400 and A412, are used, registered or pending ASMI trademarks. For a detailed list of trademarks we own please refer to the
Intellectual Property section.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | It is our plan to merge the functionality of the Dragon and the Eagle 12 with the Eagle XP platform starting in 2010.
|--- | ---------------------------------------------------------------------------------------------------------------------

|(3) | The Eagle XP is our standard single wafer processing platform designed to accommodate multiple process application modules with common platform standards.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | It is our plan to merge the functionality of the Epsilon with the Eagle XP platform starting in 2011.
|--- | -----------------------------------------------------------------------------------------------------

|(5) | The functionality of the Polygon, Pulsar and EmerALD has merged with the Eagle XP platform starting in 2009.
|--- | ------------------------------------------------------------------------------------------------------------



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Description of our Front-end Segments Product Platforms



Advance 400



The Advance 400 is our Vertical Furnace, batch processing platform.
Products built on this product platform are used for diffusion, oxidation, (LP)CVD and ALD. The product platform is used in many manufacturing steps, from the production of silicon wafers to the final anneal in interconnect. The A400 is a system for
150 and 200mm wafers, while the A412 is for 300mm wafers. The A412 systems feature two reactors above a rotating carousel, a dual-boat concept, and a wide range of process applications with variable load sizes from 25 wafers for shortest cycle time
requirements, up to 150 wafers for lowest cost requirements in a single run. In this series, we also offer the A4ALD, for atomic layer deposition of dielectrics and metals, targeted mainly for high volume applications of our memory customers.



Eagle



The Eagle is our single-wafer processing product platform for PECVD
applications. While the Eagle 10 is a system for 150 and 200mm wafers, the Eagle 12 and Dragon 2300 are systems for 300mm wafers. The Eagle 10 and the Dragon 2300 have two PECVD reactors, while the Eagle 12 has three PECVD reactors. Different wafers
are processed in parallel in the reactors to enhance the throughput. The processes available on the Eagle product platform include insulators (such as silicon oxide, silicon nitride, silicon oxi-nitride), Aurora low-k dielectrics for interconnect
applications, as well as hardmask and antireflection layers that aid in the lithography of very fine features.



Eagle XP



First, the Eagle XP is our high productivity sequel to the Eagle product platform, for 300mm. The Eagle XP has four PECVD reactors. Substantially all
processes on the Eagle 12 and Dragon are or will be available on the Eagle XP.



Second, the Eagle XP is transitioning from a dedicated platform for PECVD to a common high volume platform for all 300mm single wafer processing in our addressed markets. The Eagle XP will also enable integration
of sequential process steps on one platform. Starting in 2009, the Eagle XP has become available with PECVD, PEALD, and Pulsar ALD modules. It is our plan to also merge the functionality of the Epsilon with the Eagle XP platform starting in 2011.



The Eagle XP common platform will benefit our customer
through reduced operating costs since multiple ASM products now will use the same parts and consumables and a common control architecture improves ease of use. The Eagle XP common platform enables us to improve the coherency in our product
portfolio.



Epsilon



The Epsilon is our platform for single wafer epitaxy. The Epsilon product
platform offers a wide range of epitaxy products and materials for many applications, ranging from high temperature silicon used in silicon starting material manufacturing, to low temperature, selective or non-selective silicon, silicon germanium
(SiGe), silicon-carbon (SiC) used in CMOS devices and silicon germanium carbon (SiGeC) used in bipolar devices. The Epsilon 2000 is a single wafer, single reactor system for 150mm and 200mm wafers. The Epsilon
3200 is a single wafer, single reactor system for 300mm wafers.



Polygon



The Polygon is a single wafer
atomic layer deposition platform. It features a six-sided central vacuum handler, capable of hosting up to four reactors. The Polygon 8200 is used for 150 and 200mm wafers, and for magnetic head substrates. The Polygon 8300 is used for 300mm wafers.
One or more Pulsar modules with ALD technology or EmerALD modules with PEALD technology can be integrated onto the platform. Products built on this product platform are currently being used in, among others, ALD high-k gate dielectrics for high
performance logic, metal-insulator-metal capacitors for system on a chip applications, and magnetic head gap fill.



Description of our Front-end Segments Process Technology Platforms



Depending on application, a process technology can be used in more than one product platform. Process technologies that
are intended for use across multiple product platforms are called a process



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technology platform. The technologies in a process technology platform share a common knowledge base and patent portfolio. ALCVD, for example, is enabled on both our single wafer and batch
product platforms. This gives us the principal ability to provide a single wafer tool for a certain application early in the lifecycle, when short development cycle times are needed, and later in the lifecycle switch to a batch tool for efficiencies
in high volume production, using the same chemistry and maintaining basic materials properties.



ALCVD: Atomic Layer Deposition and Plasma Enhanced Atomic Layer Deposition



ALCVD is one of the newest technologies to deposit ultra-thin films of exceptional flatness and uniformity. This
technology was brought into ASMI in 1999 with the acquisition of ASM Microchemistry, who first developed the thermal ALD technology. PEALD is an extension of this original ALD technology that uses plasma, which was brought into ASMI in 2001 through
a partnership with Genitech and a subsequent acquisition in 2004. The use of plasma enables us to deposit high quality films at very low temperatures. Collectively ASMI refers to these two technologies as its ALCVD process technology platform. ALCVD
is a very versatile technology platform that can be used to deposit high-k insulating materials, conductors, silicon oxide and silicon nitride. Selected ALCVD processes are released on our Polygon, Eagle, Eagle XP, and Advance 400 product platforms.
We have hundreds of issued patents that relate to this process technology platform. In addition, ALCVD, Atomic Layer CVD, and PEALD are our trademarks. We expect that the trends of continued scaling, and evolution towards three dimensional device
structures plays into the strength of our ALCVD position.



LPCVD: novel chemistries



On our LPCVD
process technology platform we have developed processes with new chemistries (under the trademark Silcore) that enable the deposition of silicon and silicon containing materials at low temperatures. Processes are released on our Epsilon product
platform for selective and non-selective epitaxy, single wafer LPCVD, and on our Advance 400 product platform for thin, smooth polycrystalline Si . Our strategy for the LPCVD process technology platform as a whole is to continue to qualify new
chemistries developed by, and with, our chemical suppliers for all of our product platforms, well in advance of the development of our customers needs. We have about 10 issued patents related to Silcore and other specialized LPCVD process
chemistries.



Back-end Segment Products



The following table lists ASM Pacific Technologies (ASMPT)
principal products for back-end market and the main technologies that they enable.



|                               |  |                                                                          |  |                                                                                                                                                                                                                                            
|------------------------------ |  | ------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ProductPlatform                |  | ASMI ProcessTechnology                                                   |  | Products 1                                                                                                                                                                                                                                 
|Die Attach Equipment           |  | Die Bonding                                                              |  | AD898/8912 epoxy/ eutectic, AD830, MCM12 multi chip, SD890A and SD832D soft solder, IS898 glass
attach Systems                                                                                                                             
|Scanning and Sorting
Equipment |  | Die Sorting                                                              |  | WP808A WLP sorting Systems, WS896 wafer scanning, AS899, MS899 die sorting
Systems                                                                                                                                                         
|Flip Chip Equipment            |  | Flip Chip Bonding                                                        |  | AD900A, AD9012A, AD900TS, AD9012TS, AD9212 dual head flip chip bonding Systems,
AD9012TC                                                                                                                                                   
|Wire Bonding Equipment         |  | Thermosonic Gold Wire Bonding                                            |  | TwinEagleXtreme, HarrierXtreme dual head, EagleXtreme, iHawkXtreme EagleXtreme X2L, Hummingbird
stud bumping Systems                                                                                                                       
|Wire Bonding Equipment         |  | Ultrasonic Aluminum Wedge Bonding                                        |  | Heavy Aluminum Wire Bonder, AB530, AB559A rotating bond head                                                                                                                                                                               
|Encapsulation Equipment        |  | Molding, Dispensing and Jetting system                                   |  | IDEALmold and Osprey transfer molding Systems, IDEALcompress, DS500 dam-and-fill Systems, DS520
Jetting System                                                                                                                             
|Post Encapsulation
Equipment   |  | Ball Placement, Testing and Marking, Trim and Form, Singulation, Binning |  | BP2000 ball placement, CS8000-AP jig saw and sorting, MP209, MP-TAB trim form system, FT2030S,
FT1000, FT2030WF Test and Finishing handler, FV2030 Vision Inspection, SLS230 LED Testing & Sorting, SLT400 LED Taping, IP360 SMD LED Taping



|(1) | Eagle60, Harrier, Hummingbird, IDEALmold, Osprey, and TwinEagle are used, registered, or pending ASMPT trademarks. For a detailed list of trademarks ASMPT owns please refer to
the Intellectual Property section.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Die and Flip Chip Bonding, and Die Sorting Products



ASMPT manufactures several die bonding models as well as die sorting
equipment to address various markets including semiconductors and light emitting diodes (LED). The latest epoxy die bonder platform for 300mm wafers continues the path undertaken by ASMPT to provide customers with the highest quality and best
cost/performance systems on the market. With its capability of handling up to 300mm wafers, fully automatic operation, epoxy writer, pre and post bond inspection and wafer mapping, this platform is able to provide customers with exceptional
operational results. Variations on this platform have been developed to address the requirements of the growing stacked die market. The ability to handle silicon devices down to 25 microns in thickness is a key feature for the future.



Packaged device performance is continually pushed to higher levels. In
critical applications, devices are increasingly utilizing flip chip interconnect methods to provide higher levels of electrical performance. Our flip chip platform provides high speed flip chip die bonding for IC applications. Variations of this
platform have evolved to provide for the use of ultrasonics, heat force or the combination of these to affect the process. There continues to be a very large market in which the die and wafer sizes are relatively small, under 30 mils square. A mil
is 1/1000 of an inch. Many of these devices are attached directly to printed circuit boards (Chip on Board, COB) or very large arrays. Therefore, many different handling methods are required. We have several systems addressing the
various form factors represented in the market.



LEDs
represent a separate but very large category of the small die business. This segment requires both high speed and high precision manipulation of very small devices. Many of these devices are assembled in arrays with a die attach process. In these
arrays brightness and color must match. We have developed several platforms for sorting these devices and segregating them according to the customers requirements. The high power LED market for general purpose illumination continues to grow.
These devices have unique thermal and electrical requirements that must be met by the die attach process. We have a new platform that addresses the use of soft solder in a special atmosphere that facilitates this special process. Machines may be
configured to operate stand-alone or connected to epoxy curing ovens and wire bonders.



Wire Bonding Products



The Eagle Extreme gold wire bonder has successfully completed field trials begun in late 2007 and revenue shipments began during the second half of 2008. This is the successor to our award-winning Eagle60AP generation bonder. The Eagle
Extreme and Eagle60 AP gold wire bonders continue to extend the productivity of the process as well as exceed the industry roadmaps for required bond pad pitch. Additional features on the Eagle Extreme allow it to deal with the complex wire
geometries and extreme height variations that are prevalent in the stacked die packages being built today at higher productivity rates. The productivity envelope was enlarged with the introduction in 2005 of our latest dual head platform, the
TwinEagle. This tool provides all the capabilities of our standard Eagle60AP but with higher output per floor space required. We also extended our product portfolio in the wedge bonder area with newer, faster, more flexible systems to address the
consumer products market that focuses on cost effective solutions. The expansion of the flip chip process has also provided us with opportunities to take advantage of our wire bonder technology to provide platforms capable of applying gold or copper
stud bumps on wafers up to 300mm in diameter.



Encapsulation Products



Our auto molding
product line continues to build on the success of our earlier automated multi-plunger molding systems. The IDEALmold serves the industry segment that requires very high throughput with production flexibility. The recent shift in lot sizes and
package variability also required a new platform. We have met this requirement with our Osprey single strip molding system. With this platform, the emphasis is on quick material and package conversions for low volume, high mix situations. As with
all ASMPT products, it can be configured for stand alone or integrated in the IDEALine (see below) with many of our other back-end products.



Post Encapsulation Products



Ball placement systems have seen strong growth as the ball grid array (BGA) package types continue to expand. These are the mainstream
packages for microprocessors and other high performance chips found in computer systems today. Our early work in this area has allowed us to be the exclusive supplier of ball placement systems to the major provider of such components. As the number
of package variants continues to increase along with the leadframe unit density, our post encapsulation products (PEP) have also evolved. The variation requires systems that are more flexible and faster to convert. The increased density
has reduced the need for press speed but increased the emphasis on precision. The decrease in



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package thickness has dictated a change in the tooling methodology to provide more support throughout the trim, form, and singulation processes. Significant changes have been made in design to
migrate to turret handling and offloading for small packages. These changes allow the incorporation of faster handling across more processes in a smaller footprint than the conventional linear approach. Significant inroads have been made in the
incorporation of test heads into these lines so that units emerge ready to ship.



Automated Systems



The IDEALine integrates back-end assembly, packaging, and test handling equipment. Such lines can be fully controlled by computers minimizing operator intervention and providing better quality through more stringent process recipe control.
We believe we are the only manufacturer of back-end equipment capable of offering such an extensive integrated line using our own equipment. These lines integrate serial process steps with mechanical and software linkages. Offered in a modular
format, customers may integrate some or all of the following processes that we supply: die bonding and inspection, epoxy curing, wire bonding and inspection, encapsulation, post mold curing, package singulation, test handling, inspection, laser
marking, packing, and finishing.



Intellectual Property and Trademarks



Intellectual Property



Because of the rapid technological advances in the microelectronics
field, we believe that our products will be subject to continuing change and enhancement. Accordingly, we believe that our success will depend upon the technical competence and creative ability of our personnel as well as the ownership of and the
ability to enforce our intellectual property rights.



We own
and license patents that cover some of the key technologies, features and operations of our major front-end products and are registered in the principal countries where semiconductor devices or equipment are manufactured or sold. The following table
shows the number of patents for which we made an initial filing during the indicated year and the number of patents in force by us at the end of the indicated year. As part of a program to reduce cost, the patent portfolio was critically reviewed
against the current business strategy in 2009. This review resulted in a decision to drop coverage on certain granted patents that did not align with current strategy.



|          |  |                              |  |      |  |        |  |      |  |      |  |     
|--------- |  | ---------------------------- |  | ---- |  | ------ |  | ---- |  | ---- |  | ----
|Segment   |  | For year:                    |  | 2005 |  | 2006 1 |  | 2007 |  | 2008 |  | 2009
|Front-end |  | Initial patent filings       |  | 107  |  | 94     |  | 93   |  | 79   |  | 47  
|          |  | Patents in force at year end |  | 768  |  | 722    |  | 793  |  | 872  |  | 830 
|Back-end  |  | Initial patent filings       |  | 18   |  | 25     |  | 26   |  | 18   |  | 19  
|          |  | Patents on force at year end |  | 112  |  | 186    |  | 256  |  | 332  |  | 399 



|(1) | In December 2006 we divested the ASM NuTool patents. The numbers from 2006 on exclude the ASM NuTool patents that were sold in December 2006. Included in this sale were 6 initial
patent filings and 133 issued patents.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We
have entered into worldwide, non-exclusive, non-transferable and non-assignable licenses with Applied Materials for patents related to epitaxy and certain chemicals used to deposit insulating layers for PECVD. We pay Applied Materials a royalty on
sales of equipment that use the patented technology. A number of the licensed patents have already expired. The remaining royalty bearing patents expire at various times through 2012. Upon expiration of the patents, the technology may be used
royalty-free by the public, including us. For further information, see Item 3.D, Risk factorsAs of December 18, 2007, we ceased paying royalties under certain Applied Materials patent licenses in respect of patents that we
no longer practice. If it is determined that we still practice these patents, we will owe royalty payments to Applied Materials on our sales of covered products since that time.



We have licensed out intellectual property in our ALCVD process technology platform through non-exclusive, restricted
field of use license agreements to a limited number of companies. Effective January 1, 2009, we entered into a non-exclusive, restricted field of use license agreement with Tokyo Electron. In addition to generating revenue, licensing is
expected to accelerate market acceptance of our ALCVD technology.



We have licensed our RTP portfolio of 50 issued patents and 23 pending patents to Levitech BV.



In the back-end market, companies generally compete based on their cumulative expertise in applying well known technologies to improve productivity and
cost-efficiency. As a result, we have historically filed fewer patents related to our back-end operations. Due to increasing pressure on new technology



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development in the back-end market, and the increasing fractional value of the package in the device, we expect the back-end patent intensity to increase over the following years. Wherever deemed
necessary, ASM Pacific Technology will file for protection of its innovations.



Trademarks



ASM, the ASM International logo, Advance, Aurora, Dragon, Eagle, EmerALD, Epsilon, Polygon, Pulsar, SiGePLUS, Silcore and Stellar are our registered trademarks. A400, A412, A4ALD, ALCVD, Atomic Layer CVD, CarbonPLUS, Eagle TRIDENT,
NCP, PEALD, Pore Builder, SmartBatch, and Superfill CVD are our trademarks. The Process of Innovation and The Switch Is On are our service marks.



AB500B, DreamPAK, DRYLUB, EQUIPMANAGER, EQUIPMGR, IDEALine, IDEALsystem, IDEALab, IDEALNet, PGS, SMARTWALK, SOFTEC, SmartSurf, and
Ultravac are registered trademarks of ASM Pacific Technology Ltd. Cheetah, Eagle60, Harrier, Hummingbird, IDEALCompress, IDEALmold, Osprey, TwinEagle, FAB Farming and SolarCSI are trademarks of ASM Pacific Technology.



Litigation



There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Although we have been involved in significant litigation in the past, we are at present not involved in any litigation which we believe is likely to have a material adverse effect on
our financial position. In the future, additional litigation may be necessary to enforce patents issued to us, to protect trade secrets or know-how owned by us or to defend ASMI 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 could have a material adverse effect on our business, financial condition, and earnings from
operations. 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 and earnings from operations.



Research and Development



We believe that our future success depends to a large extent upon our ability to develop new products and add improved features to existing products.
Accordingly, our global product development policies and local activities are for the most part directed toward expanding and improving present product lines to incorporate technology advances and reduce product cost, while simultaneously developing
new products that can penetrate new markets. These activities require the application of physics, chemistry, materials science, electrical engineering, precision mechanical engineering, software engineering, and system engineering.



Our net research and development expenses were  83.5 million, 
75.0 million and  62.8 million in 2007, 2008 and 2009, respectively. We expect to continue investing significant resources
in research and development in order to enhance our product offerings. Our research and development activities are chiefly conducted in the principal semiconductor markets of the world, which enables us to draw on innovative and technical
capabilities on an international basis. Each geographic center provides expertise for specific products and/or technologies. This approach, combined with the interactions between the individual centers, permits efficient allocation of technical
resources and customer interaction during development.



|          |                                 |                                           |    |                                                                           
|--------- | ------------------------------- | ----------------------------------------- | -- | --------------------------------------------------------------------------
|Segment   |                                 | Location                                  |    | Number of R&Demployees as ofDecember 31, 2009,exclusive oftemporaryworkers
|Front-end |                                 | Almere, the Netherlands                   |    | 46                                                                        
|          | Leuven, Belgium                 |                                           | 19
|          | Helsinki, Finland               |                                           | 9 
|          | Phoenix, Arizona, United States |                                           | 71
|          | Cheonan, South Korea            |                                           | 33
|          | Tama, Japan                     |                                           | 78
|Back-end  |                                 | Hong Kong, the Peoples Republic of China |    | 399                                                                       
|          |                                 | Singapore                                 |    | 256                                                                       
|          |                                 | Chengdu, the Peoples Republic of China   |    | 45                                                                        
|Total     |                                 |                                           |    | 956                                                                       





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As part of our research and development activities, we are engaged in various formal and informal
arrangements with customers and institutes. At December 31, 2009, our front-end segment was engaged in several formal joint development programs with customers for 300mm applications of our products. As part of these efforts, we may sell new
products to customers at a significantly reduced margin, and invest significant resources in the joint development and subsequent product qualification. We sometimes also cooperate with other semiconductor capital equipment suppliers in
complementary fields, in order to gain knowledge on the performance of our own processes, in cooperation with other processes. In addition to cooperating with customers and other capital equipment suppliers, we also enter into research projects with
technical universities.



We participate also in publicly
funded programs, mainly in Europe, to develop the production technology for semiconductor devices with line widths of 32, 22 and 15nm and below. Among our current cooperative efforts are projects awarded under the Information Society Technologies
(IST) seventh framework program. We are also a partner in several development programs in the Eureka initiative by MEDEA+ (Micro Electronics Development for European Applications) and its successor CATRENE (Cluster for Application and Technology
Research in Europe on Nano-Electronics). In one of the MEDEA+/CATRENE projects, MaxCaps, we are the project leader. In addition, we are an active participant in the Catrene organisation at several levels, member of AENEAS (Association for European
Nano-Electronics Activities) and the Dutch Point-one (Pole of Innovation in Advanced Technologies) organisation. In both organisations ASM participates actively in roadmap and program discussions. We are partner in projects under ENIAC (European
Nano-electronics Initiative Advisory Council), in one ENIAC project, EEMI450 to be started in 2010, ASM is project coordinator. We also participate in Dutch national programs such as those funded by STW (Stichting Technologie en Wetenschap:
Foundation for Technology and Science) and in the FES (Fonds Economische Structuurversterking  Fund Structural Enhancement of the Economy) program.



As part of these projects, we may sell our equipment to customers who will use grants or research loans to acquire these products or we may receive
research and development grants or credits directly.



In
October 2004, we commenced a strategic partnership with the Interuniversity MicroElectronics Center (IMEC) in Belgium for their 300mm FEOL technology development program. Our Epsilon, Advance 400 Series, and Polygon based products are involved in
this partnership. In September 2005 we complemented this FEOL partnership with a partnership in BEOL for advanced on-chip interconnect which will utilize our Eagle based products. This gives us the opportunity to investigate, both jointly and
independently, the integration of individual process steps in process modules and electrically active devices. The partnerships are now extended to include 22nm, to the end of 2010 for FEOL and to the middle of 2010 for BEOL. These partnerships may
be further extended, and their scope may be changed, continuously adjusting the project portfolio to emerging market needs. We have been partnering with IMEC since 1990.



In December 2003, we commenced a five-year partnership with University of Helsinki that aims at further development of atomic layer
deposition processes and chemistries. This partnership was extended for a second quinquennial in December 2008.



Manufacturing and Suppliers



Our manufacturing operations consist of the fabrication and assembly of various critical components, product assembly, quality control and testing.



In the second half of 2004, in order to reduce
manufacturing costs in our front-end operations we established FEMS, a manufacturing facility in Singapore, to manufacture certain generic subsystems and subassemblies for our Vertical Furnaces that we previously outsourced. At the end of 2008,
generic subassemblies for Vertical Furnaces, Epitaxy and Eagle systems are manufactured in this facility. In 2009 we have started the transition of manufacturing of all ASM products to be final assembled in Singapore. We closed down our
manufacturing operations in Almere and in the course of 2010 we will also close down the Manufacturing in Phoenix (US) and Nagaoka (Japan). At the end of 2010 we will have central manufacturing of our mainstream products out of Singapore. With this
transition we also implement a more global organisation for the procurement activities. Further we will move to a global quality system instead of the more regional oriented quality system we had in the past.



Our back-end operations are vertically integrated. The manufacturing
activities in Hong Kong and Singapore consist primarily of assembling and testing components and subassemblies manufactured at our main manufacturing facilities in the Peoples Republic of China and Malaysia.



Marketing and Sales



We market and sell our products with the objective of developing and
maintaining an ongoing, highly interactive service and support relationship with our customers. Our marketing strategy includes advertising



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and participating in various industry trade shows. We provide prospective customers with extensive process and product data, provide opportunities for tests on demonstration equipment and, if
required, install evaluation equipment at the customers site. Once equipment has been installed, we support our customers with, among other things, extensive training, on-site service, spare parts and process support. All of this is further
supported by in-house development to enhance the productive life of existing equipment. We make hardware improvements available in the form of retrofit kits as well as joint development of new applications with our customers.



Because of the significant investment required to purchase our systems and
their highly technical nature, the sales process is complex, requiring interaction with several levels of a customers organization and extensive technical exchanges, product demonstrations and commercial negotiations. As a result, the full
sales cycle can be as long as 12 to 18 months for sales of front-end equipment and 2 to 4 months for sales of back-end equipment. Purchase decisions are generally made at a high level within a customers organization, and the sales process
involves broad participation across our organization, from senior executive management to the engineers who designed the product.



Our sales process usually starts with high-level introduction meetings. Early in the process we also meet with operational personnel to discuss the
intended uses of our equipment, technical requirements, solutions, and the overall production process of the customer. Demonstrations and evaluation of test results take time. Once we agree upon the technology elements of the sale, the process
continues with price and delivery negotiations and, when completed successfully, with the issuance by the customer of a letter of intent to secure a slot in the manufacturing and assembly planning schedule, followed by a purchase order.



To market our products, we operate demonstration and training centers
where customers can examine our equipment in operation and can, if desired, process their wafers or individual dies for further in-house evaluation. Customers are also trained to properly use purchased equipment.



Each of our major product lines has a dedicated product manager,
responsible for positioning the product in the market, its market share, developing it over time and evaluating its relative performance compared to the competition. Each product manager sets priorities in terms of technical development and sales
support.



To execute the sales and service functions, we
have established a global sales force, in which all regional units report directly into the global sales organization. We have sales offices located in Europe (in France, Ireland, and Germany), Israel, Taiwan, the Peoples Republic of China,
Singapore and Japan (in Tokyo and Osaka). Until December 31, 2009 we used an independent sales agent in Taiwan for front-end products. At the end of 2009, 120 employees were employed in sales and marketing of front-end products, representing 9% of
total front-end segment staff.



Sales of back-end equipment
and materials are provided by our principal offices in Hong Kong and Singapore, through direct sales offices in the Peoples Republic of China, Taiwan, the Philippines, Malaysia, Thailand, Japan, Europe and North America, and through sales
representatives in South Korea and some parts of the United States. At the end of 2009, 309 employees were employed in sales and marketing of back-end products, representing 3% of total back-end staff.



Customers



We sell our products predominantly to manufacturers of semiconductor devices and manufacturers of silicon wafers. Our
customers include most of the leading semiconductor and wafer manufacturers. Our customers vary from independent semiconductor manufacturers that design, manufacture, and sell their products on the open market, to large electronic systems companies
that design and manufacture semiconductor devices for their own use, to semiconductor manufacturers, known as foundries, that manufacture devices on assignment of other companies, including fabless companies that design chips but do not
have wafer processing factories.



Our largest customer
accounted for approximately 9.6%, 13.8% and 9.1% of our net sales in 2007, 2008 and 2009, respectively. Our ten largest customers accounted for approximately 32.4%, 32.0% and 32.9% of our net sales in 2007, 2008 and 2009, respectively. Historically,
a significant percentage of our net sales in each year has been attributable to a limited number of customers; however, the largest customers for our products may vary from year to year depending upon, among other things, a customers budget
for capital expenditures, timing of new fabrication facilities and new product introductions.



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The following table shows the distribution of net sales, by segment and geographic destination of the
product:



|     |          |           |       |                        |  |        |               |                        |      |                         |     |     |          |  
|---- | -------- | --------- | ----- | ---------------------- |  | ------ | ------------- | ---------------------- | ---- | ----------------------- | --- | --- | -------- | -
|     |          |           |       |                        | 
|     |          | SEGMENT   |       | PERCENTAGEOF NET SALES |  |        |               | GEOGRAPHIC DESTINATION |      | PERCENTAGE OF NET SALES |    
|     |          |           |       |                        |  |        |               |                        |      | Front-end               |     |     | Back-end |  
|2009 |          | Front-end |       | 27.1%                  |  |        |               | S.E. Asia              |      | 6.5                     | %   |     | 68.8     | %
|     |          |           |       |                        |  |        | Europe        |                        | 6.2  | %                       |     | 0.6 | %       
|     | Back-end |           | 72.9% |                        |  |        | United States |                        | 8.8  | %                       |     | 2.5 | %       
|     |          |           |       |                        |  | Japan  |               | 5.6                    | %    |                         | 1.0 | %  
|     |          |           |       |                        |  |        |               |                        |      |                         |     |     |          |  
|     |          |           |       |                        | 
|     |          | SEGMENT   |       | PERCENTAGEOF NET SALES |  |        |               | GEOGRAPHIC DESTINATION |      | PERCENTAGE OF NET SALES |    
|     |          |           |       |                        |  |        |               |                        |      | Front-end               |     |     | Back-end |  
|2008 |          | Front-end |       | 39.7%                  |  |        |               | S.E. Asia              |      | 9.7                     | %   |     | 55.3     | %
|     |          |           |       |                        |  | Europe |               | 9.8                    | %    |                         | 0.9 | %  
|     | Back-end |           | 60.3% |                        |  |        | United States |                        | 13.0 | %                       |     | 1.8 | %       
|     |          |           |       |                        |  | Japan  |               | 7.2                    | %    |                         | 2.3 | %  
|     |          |           |       |                        |  |        |               |                        |      |                         |     |     |          |  
|     |          |           |       |                        | 
|     |          | SEGMENT   |       | PERCENTAGEOF NET SALES |  |        |               | GEOGRAPHIC DESTINATION |      | PERCENTAGE OF NET SALES |    
|     |          |           |       |                        |  |        |               |                        |      | Front-end               |     |     | Back-end |  
|2007 |          | Front-end |       | 47.2%                  |  |        |               | S.E. Asia              |      | 18.7                    | %   |     | 49.5     | %
|     |          |           |       |                        |  | Europe |               | 8.5                    | %    |                         | 0.8 | %  
|     | Back-end |           | 52.8% |                        |  |        | United States |                        | 11.8 | %                       |     | 1.6 | %       
|     |          |           |       |                        |  | Japan  |               | 8.2                    | %    |                         | 0.9 | %  



Customer Service



We provide responsive customer technical assistance to support our
marketing and sales. Technical assistance is becoming an increasingly important factor in our business as most of our equipment is used in critical phases of semiconductor manufacturing. Field engineers install the systems, perform preventive
maintenance and repair services, and are available for assistance in solving customer problems. Our global presence permits us to provide these functions in proximity to our customers. We also maintain local spare part supply centers to facilitate
quick support.



We provide maintenance during the product
warranty period, usually one to two years, and thereafter perform maintenance pursuant to individual orders issued by the customer. In addition to providing ongoing service, our customer service operations are responsible for customer training
programs, spare parts sales and technical publications. In appropriate circumstances, we will send technical personnel to customer locations to support the customer for extended periods of time in order to optimize the use of the equipment for the
customers specific processes. For our front-end operations, where the availability of field support is particularly important for a sale, 435 employees were employed in customer service at the end of 2009, representing 34% of total front-end
segment staff.



Competition



The semiconductor equipment industry is intensely competitive, and is
fragmented among companies of varying size, each with a limited number of products serving particular segments of the semiconductor process. Technical specifications of the individual products are an important competitive factor, especially
concerning capabilities for manufacturing of new generations of semiconductor devices. As each product category encompasses a specific blend of different technologies, our competitive position from a technology standpoint may vary within each
category. Customers are evaluating manufacturing equipment based on a mixture of technical performance and cost of ownership over the life of the product. Main competitive factors include overall product performance, yield, reliability,
maintainability, service, support and price. We believe that we are competitive with respect to each of these factors, and that our products are cost effective.



As the variety and complexity of available machinery increases, some semiconductor manufacturers are attempting to limit their suppliers. In
addition, semiconductor manufacturers are located throughout the



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world, and expect their equipment suppliers to have offices worldwide to meet their supply and service needs. Semiconductor equipment manufacturers with a more limited local presence are finding
it increasingly difficult to compete in an increasingly global industry.



Our primary competitors in the front-end market are from the United States, Japan and Korea. Our primary competitors in the back-end market are from the United States, Europe and Japan. In each of our product
lines, we compete primarily with two or three companies which vary from small to large firms in terms of the size of their net sales and range of products. Our primary competitors in the front-end market include Applied Materials, Novellus Systems,
Tokyo Electron, Kokusai, and Jusung. Our primary competitors in the back-end market include Kulicke & Soffa, ESEC, Shinkawa, Apic Yamada, BE Semiconductor Industries, Towa, Shinko and Mitsui.



C. Organizational structure.



The following chart presents the jurisdiction of incorporation of our
significant subsidiaries and our percentage of ownership interest in those subsidiaries as of March 5, 2010:



|                                                                      |  |                         |  |                                           
|--------------------------------------------------------------------- |  | ----------------------- |  | ------------------------------------------
|Subsidiary Name and Location                                          |  | Country ofIncorporation |  | Percentage Owned by ASM International N.V.
|                                                                      |  |                        
|ASM Europe B.V. Almere, the Netherlands                               |  | The Netherlands         |  | 100%                                      
|                                                                      |  |                        
|ASM America,
Inc. Phoenix, Arizona, United States                     |  | United States           |  | 100%                                      
|                                                                      |  |                        
|ASM Japan K.K. Tama, Japan                                            |  | Japan                   |  | 100%                                      
|                                                                      |  |                        
|ASM Front-End Manufacturing Singapore Pte. Ltd.,
Singapore            |  | Singapore               |  | 100%                                      
|                                                                      |  |                        
|ASM Pacific
Technology Ltd. Hong Kong, the Peoples Republic of China |  | Cayman Islands          |  | 52.59%                                    



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D. Property, plants and equipment.



To develop and manufacture products to local specifications and to market and service products more effectively in the
worldwide semiconductor market, our front-end facilities are located in the Netherlands, the United States, Japan and Singapore and our back-end facilities are located in Hong Kong, the Peoples Republic of China, Singapore and Malaysia. Our
principal facilities are summarized below:



|          |  |                                       |  |                                                                                                              |  |                                     
|--------- |  | ------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ------------------------------------
|SEGMENT   |  | LOCATION                              |  | PRIMARY USES                                                                                                 |  | APPROXIMATE AGGREGATE SQUARE FOOTAGE
|          |  | Almere, the Netherlands               |  | Executive offices of ASMI Marketing, research and offices                                                    |  | 154,000                             
|          |  | Tama and Nagaoka, Japan               |  | Wafer processing equipment manufacturing, marketing, research and offices                                    |  | 427,000                             
|Front-end |  | Phoenix, Arizona, United States       |  | Wafer processing equipment manufacturing, marketing, research and offices                                    |  | 176,000                             
|          |  | Singapore                             |  | Wafer processing equipment manufacturing and offices                                                         |  | 169,000                             
|          |  | Cheonan, South Korea                  |  | Wafer processing equipment manufacturing, marketing, research and offices                                    |  | 32,000                              
|          |  | Helsinki, Finland                     |  | Wafer processing equipment research and offices                                                              |  | 6,000                               
|          |  | Hong Kong, Peoples Republic of China |  | Semiconductor assembly and encapsulation equipment manufacturing, marketing, research and offices            |  | 250,000                             
|          |  | Shenzhen, Peoples Republic of China  |  | Semiconductor assembly equipment parts and modules manufacturing, leadframe manufacturing and offices        |  | 1,296,000                           
|Back-end  |  | Chengdu, Peoples Republic of China   |  | Semiconductor assembly equipment research and offices                                                        |  | 20,000                              
|          |  | Singapore                             |  | Semiconductor assembly equipment and etched leadframe manufacturing, marketing, research and offices         |  | 333,000                             
|          |  | Johor Bahru, Malaysia                 |  | Semiconductor assembly equipment parts and modules manufacturing, etched leadframe manufacturing and offices |  | 312,000                             



Our principal facilities in the Netherlands, the United States, Korea, Finland, Hong Kong, the Peoples Republic of
China, Singapore and Malaysia are subject to leases expiring at various times from 2010 to 2026. Some facilities we own are subject to mortgages. We believe that our facilities are maintained in good operating condition and are adequate for our
present level of operations.



Item 4A.
Unresolved Staff Comments



None.



Item 5. Operating and Financial Review and Prospects



Managements Discussion and Analysis of Financial Condition and
Results of Operations



Overview



We design, manufacture and sell equipment and systems used to produce
semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor market. Front-end equipment performs various fabrication processes in which multiple thin
films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a
single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 27.1% of our net sales in 2009, through our principal facilities in the
Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 72.9% of our net sales in 2009, through our principal facilities in Hong Kong, the Peoples Republic of China, Singapore and



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Malaysia. Our back-end operations are conducted through our 52.59% majority-owned subsidiary, ASM Pacific Technology.



We sell our products to the semiconductor manufacturing industry, which is subject to sudden, extreme, cyclical variations in product
supply and demand. Starting late in 2008 and continuing in 2009, this industry is experiencing a dramatic and unprecedented decline in demand for semiconductor devices due to the worldwide economic downturn, which has led to the announcement of
significant layoffs, plant closings, reduced capital expenditures and other cost reduction measures by semiconductor manufacturers. These conditions caused a substantial diminution in the demand for our products, which represent capital expenditures
for our customers although a pick up in demand was evident in the second half of 2009. In addition, these conditions may lead to consolidation in the semiconductor manufacturing industry, which could further reduce demand for our products in the
future. As with all such cycles, the timing, length and continued severity of this cycle cannot be predicted. The unprecedented nature of the current global financial crisis and economic downturn may result in changes in the semiconductor
manufacturing industry and the manner in which we must conduct our business, in ways that cannot now be predicted.



We are currently implementing major restructuring plans. In particular, our PERFORM! program is designed to streamline our front-end global operations
and reduce our cost base, and includes a focused effort on lowering our working capital requirements. This program involves the material restructuring of our significant front-end operating, manufacturing and administrative units. These efforts and
other initiatives will continue through 2010 and beyond as we transition to a more global sales organization, a more centralized and cost efficient R&D function, the implementation of a global Enterprise Reporting Process (ERP) system, and the
sharing of platforms among products. For a discussion of our restructuring and the related current and expected impairment charges, see Note 23 of the Notes to our Consolidated Financial Statements included elsewhere in this report.



In late 2004, we established FEMS in Singapore as a low-cost manufacturing
hub for front-end production. We established FEMS to manufacture generic subsystems and parts for our front-end products that we previously outsourced, in order to improve cost-effectiveness and strengthen our gross profit margin in our front-end
segment. During 2009, we restructured our ASM Europe (ASME) operations by transferring all manufacturing in our Almere facility in the Netherlands to our FEMS operation in Singapore. This restructuring was completed and the Almere manufacturing
facility was closed by the end of 2009. We are in the process of transferring manufacturing responsibility to FEMS for all Single Wafer Products. Our plans are to complete these transfers in 2010. As part of this process, our production facilities
in Nagaoka, Japan and Phoenix, Arizona will be closed.



In
April 2008, we announced our plan to dispose of our rapid thermal processing line. This disposition was completed in August 2009.



The global downturn started to negatively impact our back-end operations in the second half of 2008. Accordingly, in the fourth quarter of 2008, and in
2009, we implemented significant cost reduction measures in our back-end segment, including a hiring freeze, elimination of overtime and plant shutdowns. In the second half of 2009 our back-end revenue had recovered, and these measures have mostly
been reversed.



We face increased payment and performance
risk in economic downturns from our customers. If any of our customers become insolvent or commence bankruptcy or similar proceedings, our receivables from such customers may become uncollectible. In order to promote sales, we may be required to
provide extended payment terms, financing arrangements or other modified sale terms for some customers, which will increase our sales expenses and further increase our exposure to customer credit risk, all in an environment of downward pressure on
average selling prices. Even though we may be a secured creditor in these arrangements with rights in the underlying equipment, the equipment may have only limited value upon a customer default, especially if activity in our markets remains at low
levels, which may result in substantial write-downs upon any such default. To manage these challenges, we are monitoring our sales activities closely and taking a disciplined approach to evaluating and addressing customer credit risks. Where we deem
it appropriate, we are bearing increased customer credit risk.



In this difficult economic environment, we also are subject to increased risk of performance failures of our suppliers, which could disrupt our manufacturing and/or increase our costs.



As a result of the current prolonged contraction in the market and
strategic focus of certain of our product configurations a write down of inventories has been recorded of  24.2 million.



Despite the difficult industry market, we must maintain our research and
development at a high level to remain competitive in the future. The decrease of research and development costs in the front-end segment



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is the result of the prioritization of research and development projects. In the fourth quarter research and development activities increased focus on enabling technologies and platforms based on
strategic prioritization.



On November 6, 2009 we
issued  150 million senior unsecured convertible bonds due November 2014. The Bonds will be convertible into new and/or existing
shares of the Company and will carry a quarterly coupon of 6.5% per annum and a conversion price of  17.09. The issue was done to
extend our debt maturity profile. We intend to use part of the proceeds of the offering for general corporate purposes. In addition, we intend to partially use the proceeds to buy back our outstanding convertible bonds due 2010 and 2011 on an
ongoing basis. In December 2009 US$ 4 million of our convertible bonds due 2010 and US$ 26 million of the convertible bonds due 2011 were repurchased. During January 2010, a further US$ 39 million of the outstanding convertible bonds
due 2011 were repurchased.



We also negotiated a new standby
revolving credit facility of  65 million. This secured credit facility replaced our former secured credit facility provided by Rabobank
and has a term of 3 years. The facility was increased to  90 million on January 11, 2010.



At December 31, 2009, our principal sources of liquidity consisted of
 293.9 million in cash and cash equivalents and  92.9 million in useable undrawn bank lines. Approximately  112.2 million of the
cash and cash equivalents and  26.7 million of the undrawn bank lines are restricted to use in the Companys back-end
operations and  29.8 million of the cash and cash equivalents and  1.2 million in undrawn bank lines are restricted to use in the Companys front-end operations in Japan.



In the past, industry downturns have been followed by robust market upturns. It is important for us to retain sufficient
production capacity to be able effectively to respond to such a market upturn, which limits our ability to reduce costs by reducing our manufacturing capacity and our commitments to our suppliers. If we are unable to retain adequate production
capacity and supplier production capacity, whether due to cost reduction measures or otherwise, we may be unable to respond timely to a subsequent increase in demand, which would negatively affect our customer relationships and financial
performance.



Sales



Our front-end sales are concentrated in the United States, Europe, Japan
and Southeast Asia and our back-end sales are concentrated in Southeast Asia.



The following table shows the geographic distribution of our front-end and back-end sales for the years 2007, 2008 and 2009:



|                           |  |                         |       |  |      |   |  |      |       |  |      |   |  |   |       |  |      |  
|-------------------------- |  | ----------------------- | ----- |  | ---- | - |  | ---- | ----- |  | ---- | - |  | - | ----- |  | ---- | -
|                           |  | Year ended December 31, |      
|(amounts in millions)      |  | 2007                    |       |  | 2008 |   |  | 2009 |      
|Front-end:                 |  |                         |       |  |      |   |  |      |       |  |      |   |  |   |       |  |      |  
|Taiwan                     |  |                        | 122.3 |  | 27.1 | % |  |     | 54.4  |  | 18.3 | % |  |  | 17.3  |  | 10.8 | %
|United States              |  |                         | 113.1 |  | 25.1 |   |  |      | 96.7  |  | 32.6 |   |  |   | 51.9  |  | 32.4 |  
|Europe                     |  |                         | 81.2  |  | 18.0 |   |  |      | 73.4  |  | 24.7 |   |  |   | 36.8  |  | 22.9 |  
|Japan                      |  |                         | 78.2  |  | 17.3 |   |  |      | 54.0  |  | 18.2 |   |  |   | 33.1  |  | 20.7 |  
|Other                      |  |                         | 56.1  |  | 12.5 |   |  |      | 18.3  |  | 6.2  |   |  |   | 21.3  |  | 13.2 |  
|                           |  |                         |       |  |      |   |  |      |       |  |      |   |  |   |       |  |      |  
|                           |  |                        | 450.9 |  | 100  | % |  |     | 296.8 |  | 100  | % |  |  | 160.4 |  | 100  | %
|Back-end:                  |  |                         |       |  |      |   |  |      |       |  |      |   |  |   |       |  |      |  
|Peoples Republic of China |  |                        | 161.9 |  | 32.1 | % |  |     | 159.4 |  | 35.4 | % |  |  | 144.6 |  | 33.6 | %
|Taiwan                     |  |                         | 112.9 |  | 22.4 |   |  |      | 76.2  |  | 16.9 |   |  |   | 86.2  |  | 20.0 |  
|Malaysia                   |  |                         | 65.8  |  | 13.0 |   |  |      | 60.6  |  | 13.4 |   |  |   | 42.4  |  | 9.8  |  
|South Korea                |  |                         | 37.3  |  | 7.4  |   |  |      | 26.4  |  | 5.9  |   |  |   | 63.9  |  | 14.9 |  
|Hong Kong                  |  |                         | 34.7  |  | 6.9  |   |  |      | 30.5  |  | 6.8  |   |  |   | 16.1  |  | 3.7  |  
|Thailand                   |  |                         | 24.4  |  | 4.8  |   |  |      | 23.7  |  | 5.3  |   |  |   | 24.4  |  | 5.7  |  
|Singapore                  |  |                         | 11.0  |  | 2.2  |   |  |      | 12.4  |  | 2.8  |   |  |   | 5.1   |  | 1.2  |  
|Philippines                |  |                         | 21.1  |  | 4.2  |   |  |      | 20.5  |  | 4.5  |   |  |   | 21.6  |  | 5.0  |  
|United States              |  |                         | 14.9  |  | 3.0  |   |  |      | 13.6  |  | 3.0  |   |  |   | 15.0  |  | 3.5  |  
|Other                      |  |                         | 20.3  |  | 4.0  |   |  |      | 27.3  |  | 6.0  |   |  |   | 11.1  |  | 2.6  |  
|                           |  |                         |       |  |      |   |  |      |       |  |      |   |  |   |       |  |      |  
|                           |  |                        | 504.3 |  | 100  | % |  |     | 450.6 |  | 100  | % |  |  | 430.4 |  | 100  | %
|                           |  |                         |       |  |      |   |  |      |       |  |      |   |  |   |       |  |      |  



The sales cycle from quotation to shipment
for our front-end equipment generally takes several months, depending on capacity utilization and the urgency of the order. The acceptance period after installation may



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be as short as four to five weeks. However, if customers are unfamiliar with our equipment or are receiving new product models, the acceptance period may take as long as several months. The sales
cycle is longer for equipment which is installed at the customers site for evaluation prior to sale. The typical trial period ranges from six months to one year after installation.



The sales cycle for back-end products is typically shorter than for front-end products. Generally, the majority of our
back-end equipment is built in standard configurations. We build back-end products that are approximately 85% complete in anticipation of customer orders. Upon receipt of a customers order and specifications, the remaining 15% of the
manufacturing is completed. This allows us to complete the assembly of our equipment in a short period of time. We therefore require between two to six weeks for final manufacturing, testing, crating, and shipment of our back-end equipment. Our
back-end customers acceptance periods generally are shorter than those for front-end equipment. We provide installation, training and technical support to our customers with local staff in all of our major markets.



A substantial portion of our front-end sales is for equipping new or
upgraded fabrication plants where device manufacturers are installing complete fabrication equipment. As a result our front-end sales tend to be uneven across customers and financial periods. Sales to our ten largest front-end customers accounted
for 59.7%, 60.4% and 61.4% of front-end net sales in 2007, 2008 and 2009, respectively. The composition of our ten largest front-end customers changes from year to year. The largest front-end customer accounted for 19.7%, 31.7% and 30.6% of
front-end net sales in 2007, 2008 and 2009, respectively.



Back-end sales per customer tend to be more level over time than front-end sales, because back-end operations can be scaled up in smaller increments at existing facilities. Sales to our ten largest back-end customers accounted for 29.4%,
26.3% and 32.7% of back-end net sales in 2007, 2008 and 2009, respectively. Because our back-end customers needs are more level over time, the composition of our ten largest customers is more stable from year to year than in the front-end. Our
largest back-end customer accounted for 5.3%, 4.4% and 6.0% of back-end net sales in 2007, 2008 and 2009, respectively.



Research and Development



We continue to invest in research and development at a high level. As part of our research and development activities, we are engaged in various
development programs with customers and research institutes that allow us to develop products that meet customer requirements and to obtain access to new technology and expertise. Research and development costs are expensed as incurred. The costs
relating to prototypes and experimental models, which we may subsequently sell to customers are charged to the cost of sales.



For a further discussion of research and development expenses see Item 4.B., Business OverviewResearch and Development and
Item 5 Results of Operations, below.



Our
research and development operations in the Netherlands and the United States receive research and development grants and credits from various sources. The research and development grants and credits received from governmental sources in the
Netherlands include a credit which is contingently repayable to the extent we recognize sales of products to which the credit is related within an agreed upon time period. We do not recognize a liability on our Consolidated Balance Sheet in respect
of this credit until we recognize sales of products to which the credit is related, within the agreed upon time period and is then charged to cost of sales when such sales are recorded. The repayment amounts to 4.0% of the realized sales of these
products. In 2007 and 2008 we accounted for repayments with respect to these credits of  0.1 million and  0.1 million respectively. Interest on the contingent repayments is accrued at an interest rate of 6.05% per annum. The
contingent repayment, including accrued interest, was  3.1 million at December 31, 2008. This amount has not been
recognized as a liability in the Consolidated Balance Sheet. As a result of the management buy-out of our RTP business in 2009 this contingent liability conveyed to Levitech B.V.



Critical Accounting Policies



Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been
prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). We apply the going concern basis in preparing our Consolidated Financial Statements. Historical cost is used as the
measurement basis unless otherwise indicated. The preparation of these Consolidated Financial Statements requires us to make estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates,
judgments and assumptions affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses



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during the periods presented. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the
following:



Revenue Recognition.We recognize revenue
when all four revenue recognition criteria have been met:



| |  |  | persuasive evidence of an arrangement exists;
| | - |  | ---------------------------------------------



| |  |  | delivery has occurred or services have been rendered;
| | - |  | -----------------------------------------------------



| |  |  | sellers price to buyer is fixed or determinable; and
| | - |  | -----------------------------------------------------



| |  |  | collectibility is reasonably assured.
| | - |  | -------------------------------------



In general, we recognize revenue from sales of equipment upon shipment of equipment, only if testing at the factory has proven that the equipment has
met substantially all of the customers criteria and specifications. The outcome of the test is signed-off by the customer (factory acceptance). Instead of signing-off, the customer may choose to provide a waiver, e.g. with respect
to repeat orders.



Our revenue includes revenue from
contractual arrangements consisting of multiple deliverables, such as equipment and installation. The revenue from the undelivered element of the arrangement is deferred at fair value until delivery of the element.



We recognize revenue from installation of equipment upon completion of
installation at the customers site. At the time of shipment, we defer that portion of the sales price related to the fair value of installation. The fair value of the installation process is measured based upon the per-hour amounts charged by
third parties for similar installation services. Installation is completed when testing at the customers site has proven that the equipment has met all of the customers criteria and specifications. The completion of installation is
signed-off by the customer (final acceptance). At December 31, 2008 and December 31, 2009 we have deferred revenues from fair value of installations in the amount of  5.0 million and  2.5 million respectively.



Our front-end sales frequently involve complex equipment, which may
include customer-specific criteria, sales to new customers or equipment with new technology. For each sale, the decision whether to recognize revenue is, in addition to shipment and factory acceptance, based on:



| |  |  | the contractual agreement with a customer;
| | - |  | ------------------------------------------



| |  |  | the experience with a particular customer;
| | - |  | ------------------------------------------



| |  |  | the technology and
| | - |  | ------------------



| |  |  | the number of similarly configured equipment previously delivered.
| | - |  | ------------------------------------------------------------------



Based on these criteria we may decide to defer revenue recognition until completion of installation at the
customers site and obtaining final acceptance from the customer.



At December 31, 2008 we had no deferred revenues from sales of equipment. At December 31, 2009 we had  0.7 million deferred revenue from sales of equipment.



We provide training and technical support service to customers. Revenue related to such services is recognized when the service is rendered. Revenue from the sale of spare parts and materials is recognized when the
goods are shipped.



Valuation of Goodwill.Goodwill
is tested for impairment annually on December 31 and whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. Our front-end impairment test and the determination of the fair value is
based on a discounted future cash flow approach that uses our estimates of future revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates. These estimates are consistent with the plans and estimated costs
we use to manage the underlying business. Our back-end impairment test is based on the market value of the listed shares of AMPT. The annual impairment test performed per December 31, 2009 was based on the following assumptions and data:



| |  |  | A pre-tax WACC of 13%.
| | - |  | ----------------------



| |  |  | For Front-end external market segment data, historical data and strategic plans to estimate cash flow growth per product line have been used
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cash flow calculations are limited to five years of cash flow; after these five years perpetuity growth rates are set based on market maturity of the products.
For maturing product the perpetuity growth rates used are 1% or less and for enabling technology products the rate used is 3% or less.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For Back-end the market value of the listed shares of ASMPT on the Hong Kong Stock exchange has been used in our analysis.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



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Management believes that the fair value calculated reflects the amount a market participant would be willing to pay.
Based on this analysis management believes that the fair value of the reporting units substantially exceeded its carrying value and that, there fore, goodwill was not impaired as of December 31, 2009. For the year ended December 31, 2007,
we did not record an impairment charge to goodwill as a result of our tests performed. For the year ended December 31, 2008 we recorded impairment charges of  1.4 million with respect to goodwill resulting from the acquisition of NanoPhotonics.



The calculation of the fair value involves certain management judgments and was based on our best estimates and projections at the time of our review,
and the value may be different if other assumptions are used. In future periods we may be required to record an impairment loss based on the impairment test performed, which may significantly affect our results of operations at that time. At
December 31, 2009, a decrease in estimated cash flows of 10% and an increase of 10% of the discount rate used in calculating the fair value would not result in an impairment of the carrying value of goodwill.



Valuation of Long-Lived Assets.Long-lived assets and certain
recognized intangible assets (except those not being amortized) are reviewed by us for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for
recoverability, we estimate the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. In 2007 we did not record an impairment charge to long-lived assets. In 2008 we recorded an impairment charge
of  7.1 million related to the restructuring of ASM Europe. In 2009 we recorded impairment charges mainly related to certain demo
tools which were as a result of the strategic reorientation determined end of life. Our cash flow estimates used include certain management judgments and were based on our best estimates and projections at the time of our review, and may be
different if other assumptions are used. In future periods, however, we may be required to record impairment losses, which may significantly affect our results of operations at that time. At December 31, 2009, a decrease in estimated cash flows
of 10% would not result in an impairment of the carrying value of long-lived assets.



Valuation of Inventory.Inventories are valued at the lower of cost or market value. We regularly evaluate the value of our inventory of components and raw materials, work in progress and finished goods,
based on a combination of factors including the following: forecasted sales, historical usage, product end of life cycle, estimated current and future market values, service inventory requirements and new product introductions, as well as other
factors. Purchasing requirements and alternative uses for the inventory are explored within these processes to mitigate inventory exposure. We record write downs for inventory based on the above factors and take into account worldwide quantities and
demand into our analysis. In the year ended December 31, 2009 we have charged  27.2 million to cost of sales as a result of our
analysis of the value of inventory. Of this charge  24.2 million was recognized as a result of the current prolonged contraction in
the market and strategic refocusing of certain of our product configurations. At December 31, 2009 our allowance for inventory obsolescence amounted to  46.9 million, which is 23.8% of our total inventory. If circumstances related to our inventories change, our estimate of the values of inventories could materially change. At December 31, 2009, an
increase of our overall estimate for obsolescence and lower market value by 10% of our total inventory balance would result in an additional charge to cost of sales of  20.0 million.



Warranty.We provide maintenance on our systems during the warranty period, usually one to two years. Costs of warranty include the cost of labor, material and related overhead necessary to repair a product during the warranty
period. We accrue for the estimated cost of the warranty on products shipped in a provision for warranty, upon recognition of the sale of the product. The costs are estimated based on actual historical expenses incurred and on estimated future
expenses related to current sales, and are updated periodically. Actual warranty costs are charged against the provision for warranty. The actual warranty costs may differ from estimated warranty costs, as a result of which we adjust our provision
for warranty accordingly. Future warranty costs may exceed our estimates, which could result in an increase of our cost of sales.



Convertible bonds and conversion option.As per 1 January 2009, ASMI applies ASC 815 Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entitys Own Stock.



All our convertible bonds due 2010, 2011 and 2014, include a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into common shares of the
Company (conversion option). ASC 815 requires separate recognition of these components.



For the conversion options of the convertible bonds due 2010 and 2011 the accounting is different from that for the conversion option of the
convertible bonds due 2014. As the convertible bonds due 2010 and 2011 are denominated in USD and the ASM International common shares in which they can be converted to



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are denominated in Euro, these conversion options are recognized as a liability measured at fair value. The conversion option is measured at fair value through the income statement, for 2009 this
revaluation at fair value resulted in a loss of  24.4 million. For the conversion options of the convertible bonds due 2014 the
fixedfor-fixed principle is met as both the debt instrument (the bond) and the entitys equity shares in which they can be converted to are denominated in the functional currency (Euro). Based on the before mentioned criteria the
conversion option qualifies as permanent equity.



The fair
value of the liability component is estimated using the prevailing market interest rate at the date of issue, for similar non-convertible debt. Subsequently, the liability is measured at amortized cost. The interest expense on the liability
component is calculated by applying the market interest rate for similar non-convertible debt at the date of issue to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount
of the convertible subordinated notes, thus creating a non-cash interest expense. For 2009 this accretion interest was  4.3 million.



Income Taxes. We currently have significant deferred
tax assets, which resulted primarily from operating losses incurred in prior years as well as other temporary differences. We have established a valuation allowance to reflect the likelihood of the realization of deferred tax assets. Based on
available evidence, we regularly evaluate whether it is more likely than not that the deferred tax assets will not be realized. This evaluation includes our judgment on the future profitability and our ability to generate taxable income, changes in
market conditions and other factors. At December 31, 2009, we believe that there is insufficient evidence to substantiate recognition of substantially all net deferred tax assets with respect to net operating loss carry forwards, and we have
established a valuation allowance in the amount of  140.8 million. Future changes in facts and circumstances, if any, may result in a
change of the valuation allowance to these deferred tax asset balances which may significantly influence our results of operations at that time. If our evaluation of the realization of deferred tax assets would indicate that an additional 10% of the
net deferred tax assets as of December 31, 2009 is not realizable, this would result in an additional valuation allowance and an income tax expense of  1.5 million.



Until December 31, 2006, we accounted for income tax contingencies in accordance with Statement of Financial Accounting Standard, Accounting for Contingencies. We provided for these tax contingencies for the duration of the
statute of limitation which differs per tax jurisdiction.



On January 1, 2007, we adopted Interpretation 48, Accounting for Uncertainty in Income Taxes (ASC 740). This Interpretation clarifies the accounting for income taxes, by prescribing a minimum recognition
threshold a tax position is required to meet, before being recognized in the financial statements. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods and disclosure
regarding income taxes. Our net operating losses for tax purposes decreased by  5.4 million as a result of the adoption of ASC 740.
Since a valuation allowance was recorded against the net deferred tax assets with respect to these net operating losses, the adoption of ASC 740 did not impact our financial position and results of operations.



A reconciliation of the beginning balance at January 1, 2009 and the
ending balance at December 31, 2009 of the liability for unrecognized tax benefits is as follows:



|                                              |  |      |  
|--------------------------------------------- |  | ---- | -
|(euro millions)                               |  |      |  
|Balance January 1, 2009                       |  | 14.8 |  
|Gross increasestax positions in current year |  | 1.4  |  
|Foreign currency translation effect           |  | (0.6 | )
|                                              |  |      |  
|Balance December 31, 2009                     |  | 15.7 |  
|                                              |  |      |  



Unrecognized tax benefits mainly relate to
transfer pricing positions, operational activities in countries where we are not tax registered and tax deductible costs.



We estimate that no interest and penalties are related to these unrecognized tax benefits.



Unrecognized tax benefits of  15.7 million would, if recognized, impact the Companys effective tax rate. We estimate that the liability for unrecognized tax benefits will change with  15.7 million within the next 12 months, following the expected outcome of investigations by local tax authorities.



The calculation of our tax positions involves dealing with uncertainties
in the application of complex tax laws. Our estimate for the potential outcome of any uncertain tax position is highly judgmental. Settlement of uncertain tax positions in a manner inconsistent with our estimates could have a material impact on the
Companys earnings, financial position and cash flows.



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Restructuring expenses. In 2009 significant restructuring expenses incurred. Distinction is
made in one-time employee termination expenses, contract termination expenses and other associated expenses. For the accounting on the distinguished elements of restructuring expenses we apply to the policy as mentioned below. The expenses have been
charged to restructuring expenses.



One-time
termination expenses represent the payments provided to employees that have become redundant and are terminated under the terms and conditions of a restructuring plan.



A restructuring plan exists at the date the plan meets all of the following criteria and has been communicated to employees:



| |  |  | Management commits to the plan.
| | - |  | -------------------------------



| |  |  | The plan identifies the number of employees that become redundant and the expected completion date.
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | The plan sets out the terms and conditions of the arrangement in sufficient detail to enable employees to determine the type and amount of benefits they will
receive.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



The timing of the recognition and
measurement of a liability for one-time termination expenses depends on whether employees will be retained to render service beyond a minimum retention period.



Contract termination expenses are related to the termination of an operating lease or another contract. These expenses are distinguished in:



| |  |  | Expenses related to the termination of the contract before the end of its term. These expenses are recognized when the contract is terminated .The liability is
measured at its fair value in accordance with the contract terms.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expenses related to contracts that will last for its remaining term without economic benefit to the entity. This is the case when a lease contract for premises
is not terminated while the premises are not (completely) in use anymore. The liability is accrued for at the cease-use date, the date the company determined that it would no longer occupy the premises, which is conveyed to it under the contractual
operating lease. The liability is measured at its fair value in accordance with the contract terms.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other costs related to restructuring include costs to consolidate or close facilities and relocate employees. A liability for other expenses related to
a restructuring such as transition costs is recognized and measured in the period in which the liability is incurred. The costs incurred have are directly related to the restructuring activity. The definition of exit costs excludes expected future
operating losses.



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Results of Operations



The following table shows certain Consolidated Statement of Operations data as a percentage of net sales for our front-end and back-end segments for
the years 2007, 2008 and 2009:



|                                                           |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   
|---------------------------------------------------------- |  | ----------------------- | -- |  | -------- | -- |  | ----- | -- |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | --
|                                                           |  | Year ended December 31, |   
|                                                           |  | Front-end               |    |  | Back-end |    |  | Total |   
|                                                           |  | 2007                    |    |  | 2008     |    |  | 2009  |    |  | 2007  |   |  | 2008  |   |  | 2009  |   |  | 2007  |   |  | 2008  |   |  | 2009  |   
|Net sales                                                  |  | 100.0                   | %  |  | 100.0    | %  |  | 100.0 | %  |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % 
|Cost of sales                                              |  | (67.8                   | )  |  | (68.4    | )  |  | (94.6 | )  |  | (57.2 | ) |  | (60.9 | ) |  | (59.8 | ) |  | (62.2 | ) |  | (63.8 | ) |  | (69.3 | ) 
|Gross profit                                               |  | 32.2                    |    |  | 31.6     |    |  | 5.4   |    |  | 42.8  |   |  | 39.1  |   |  | 40.2  |   |  | 37.8  |   |  | 36.2  |   |  | 30.7  |   
|Selling, general and administrative expenses               |  | (16.8                   | )  |  | (24.1    | )  |  | (36.5 | )  |  | (10.8 | ) |  | (12.2 | ) |  | (11.5 | ) |  | (13.5 | ) |  | (16.9 | ) |  | (18.2 | ) 
|Research and development expenses                          |  | (11.9                   | )  |  | (14.8    | )  |  | (21.5 | )  |  | (5.9  | ) |  | (6.9  | ) |  | (6.6  | ) |  | (8.7  | ) |  | (10.0 | ) |  | (10.6 | ) 
|Amortization of other intangible assets                    |  | (0.1                    | )  |  | (0.1     | )  |  | (0.2  | )  |  |      |   |  |      |   |  |      |   |  | (0.1  | ) |  | (0.1  | ) |  | (0.1  | ) 
|Impairment of goodwill                                     |  |                        |    |  | (0.5     | )  |  |      |    |  |      |   |  |      |   |  |      |   |  |      |   |  | (0.2  | ) |  |      |   
|Restructuring expenses                                     |  |                        |    |  | (2.4     | )  |  | (22.3 | )  |  |      |   |  |      |   |  |      |   |  |      |   |  | (1.0  | ) |  | (6.0  | ) 
|                                                           |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   
|Earnings (loss) from operations                            |  | 3.4                     |    |  | (10.3    | )  |  | (75.0 | )  |  | 26.1  |   |  | 20.0  |   |  | 22.1  |   |  | 15.5  |   |  | 8.0   |   |  | (4.3  | ) 
|Net interest income (expense)                              |  | (1.4                    | )  |  | (1.6     | )  |  | (5.0  | )  |  | 0.5   |   |  | 0.2   |   |  | 0.1   |   |  | (0.4  | ) |  | (0.6  | ) |  | (1.3  | ) 
|Accretion of interest convertible                          |  |                        |    |  |         |    |  | (2.7  | )  |  |      |   |  |      |   |  |      |   |  |      |   |  |      |   |  | (0.7  | ) 
|Revaluation conversion option                              |  |                        |    |  |         |    |  | (15.2 | )  |  |      |   |  |      |   |  |      |   |  |      |   |  |      |   |  | (4.1  | ) 
|Gain (expense) resulting from early extinguishment of debt |  | (2.2                    | )  |  | 2.7      |    |  | (1.1  | )  |  |      |   |  |      |   |  |      |   |  | (1.1  | ) |  | 1.1   |   |  | (0.3  | ) 
|Foreign currency exchange gains (losses)                   |  | (0.4                    | )  |  | (0.2     | )  |  | (0.4  | )  |  | 0.2   |   |  | 0.3   |   |  | (0.1  | ) |  | (0.1  | ) |  | 0.1   |   |  | (0.2  | ) 
|                                                           |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   
|Earnings (loss) before income taxes and dilution           |  | (0.6                    | )  |  | (9.4     | )  |  | (99.4 | )  |  | 26.8  |   |  | 20.5  |   |  | 22.1  |   |  | 13.9  |   |  | 8.6   |   |  | (10.9 | ) 
|Income tax expense                                         |  | (0.6                    | )  |  | (0.5     | )  |  | 4.9   |    |  | (3.3  | ) |  | (2.3  | ) |  | (2.7  | ) |  | (2.0  | ) |  | (1.6  | ) |  | (0.6  | ) 
|                                                           |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   
|Earnings (loss) before dilution                            |  | (1.2                    | )  |  | (9.9     | )  |  | (94.5 | )  |  | 23.5  |   |  | 18.2  |   |  | 19.4  |   |  | 11.9  |   |  | 7.0   |   |  | (11.6 | ) 
|Gain on dilution of investment in subsidiary               |  |                        |    |  |         |    |  |      |    |  |      |   |  |      |   |  |      |   |  | 0.3   |   |  | 0.6   |   |  | 0.2   |   
|                                                           |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   
|Net earnings (loss)                                        |  | (1.2                    | )% |  | (9.9     | )% |  | (94.5 | )% |  | 12.5  | % |  | 9.7   | % |  | 19.4  | % |  | 12.2  | % |  | 7.6   | % |  | (11.4 | )%
|                                                           |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   
|                                                           |  |                         |    |  |          |    |  |       |   
|Allocation of net earnings (loss)                          |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   
|Shareholders of the parent                                 |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  | 6.4   | % |  | 2.5   | % |  | (18.1 | )%
|Minority interest                                          |  |                         |    |  |          |    |  |       |    |  |       |   |  |       |   |  |       |   |  | 5.8   | % |  | 5.1   | % |  | 6.7   | % 



Year Ended December 31, 2009 Compared to Year Ended December 31, 2008



Net Sales. The following table shows net sales of our front-end and back-end segments and the percentage change for the full years 2009 and
2008:



|                |  |       |  |       |  |          |   
|--------------- |  | ----- |  | ----- |  | -------- | --
|(EUR millions)  |  | 2008  |  | 2009  |  | % Change |   
|Front-end       |  | 296.8 |  | 160.4 |  | (46      | )%
|Back-end        |  | 450.6 |  | 430.4 |  | (4       | )%
|                |  |       |  |       |  |          |   
|Total net sales |  | 747.4 |  | 590.7 |  | (21      | )%
|                |  |       |  |       |  |          |   



In 2009 net sales of wafer processing
equipment (front-end segment) represented 27% of total net sales and sales of assembly and packaging equipment and materials (back-end segment) represented 73% of total net sales.



The market conditions in the semiconductor industry impacted the sales levels for the full year 2009 compared to 2008.
Lower sales levels of 46% in our front-end segment and 4% in our back-end segment were recorded.



In our front-end segment the decrease continued in the first two quarters, but recovered from the third quarter onwards. This pattern is noticed in all
product lines.



In the back-end segment 2009 started with
weak sales levels which rebounded after the first quarter of 2009 as market conditions improved significantly in the assembly and packaging equipment industry due to



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the stimulus packages implemented by especially the Chinese government and the right product mix. The improvement in the second half year is more broad-based from a geographical perspective.



The strengthening of the Yen, U.S. dollar and U.S. dollar
related currencies against the Euro in 2009 as compared to the same period of 2008 impacted total net sales by 5%.



Gross Profit Margin.The following table shows the gross profit margin of our front-end and back-end segments for the full years 2009 and 2008.
In order to improve comparability impairment charges have been disclosed separately in the table below.



|                                                   |  |              |   |  |                    |   |  |                                       |    |  |       |    |  |       |    
|-------------------------------------------------- |  | ------------ | - |  | ------------------ | - |  | ------------------------------------- | -- |  | ----- | -- |  | ----- | ---
|(EUR millions)                                     |  | Gross profit |   |  | Gross profitmargin |   |  | Increase or(decrease)percentagepoints |   
|                                                   |  | 2008         |   |  | 2009               |   |  | 2008                                  |    |  | 2009  |    | 
|Gross profit before impairment of inventory charge |  | 97.8         |   |  | 32.9               |   |  | 33.0                                  | %  |  | 20.5  | %  |  | (12.5 | )pt
|Impairment of inventory charge                     |  | (3.9         | ) |  | (24.2              | ) |  | (1.4                                  | )% |  | (15.1 | )% |  | (13.7 | )pt
|                                                   |  |              |   |  |                    |   |  |                                       |    |  |       |    |  |       |    
|Gross profit front-end                             |  | 93.9         |   |  | 8.7                |   |  | 31.6                                  | %  |  | 5.4   | %  |  | (26.2 | )pt
|                                                   |  |              |   |  |                    |   |  |                                       |    |  |       |    |  |       |    
|Gross profit back-end                              |  | 176.4        |   |  | 172.8              |   |  | 39.1                                  | %  |  | 40.1  | %  |  | 1.0   | pt 
|                                                   |  |              |   |  |                    |   |  |                                       |    |  |       |    |  |       |    
|Total gross profit                                 |  | 270.3        |   |  | 181.5              |   |  | 36.7                                  | %  |  | 34.8  | %  |  | (1.9  | )pt
|                                                   |  |              |   |  |                    |   |  |                                       |    |  |       |    |  |       |    



The decrease in the gross profit margin
before the impairment of inventories of our front-end segment is the result of the low sales level, the mix of products sold and the absorption of our manufacturing overhead. As a result of the current prolonged contraction in the market and
strategic focus of certain of our product configurations a write down of inventories has been recorded of  24.2 million. In 2008 an
impairment charge of  3.9 million on RTP inventory was charged to the cost of sales. In our back-end segment gross margins decreased
in the first quarter, but due to the industry dynamics rebounded in the remaining three quarters of 2009.



Selling, General and Administrative Expenses.The following table shows selling, general and administrative expenses for our front-end and
back-end segments for the full year 2009 and the full year 2008:



|                                                   |  |       |  |       |  |          |   
|-------------------------------------------------- |  | ----- |  | ----- |  | -------- | --
|(EUR millions)                                     |  | 2008  |  | 2009  |  | % Change |   
|Front-end                                          |  | 71.6  |  | 58.5  |  | (18      | )%
|Back-end                                           |  | 55.0  |  | 49.3  |  | (10      | )%
|                                                   |  |       |  |       |  |          |   
|Total selling, general and administrative expenses |  | 126.6 |  | 107.8 |  | (15      | )%
|                                                   |  |       |  |       |  |          |   



As a percentage of net sales, selling,
general and administrative expenses were 18% for the full year of 2009 and 17% in the same period of 2008.



Selling, general and administrative expenses of our front-end segment decreased for the full year 2009 as a result of our focus to reduce our expenses
given the current market circumstances, including the reduction of headcount of the front-end segment.



The decrease in the back-end segment compared with the same period in 2008 is the result of the implementation of costs reduction programs.



Headcount of the front-end segment was reduced by 24% in 2009 while the
headcount of the back-end segment increased with 7% in 2009.



Research and Development Expenses. The following table shows research and development expenses for our front-end and back-end segments for the full year 2009 and the full year 2008:



|                                        |  |      |  |      |  |          |   
|--------------------------------------- |  | ---- |  | ---- |  | -------- | --
|(EUR millions)                          |  | 2008 |  | 2009 |  | % Change |   
|Front-end                               |  | 43.8 |  | 34.4 |  | (21      | )%
|Back-end                                |  | 31.2 |  | 28.4 |  | (9       | )%
|                                        |  |      |  |      |  |          |   
|Total research and development expenses |  | 75.0 |  | 62.8 |  | (16      | )%
|                                        |  |      |  |      |  |          |   



As a percentage of net sales, research and
development expenses were 11% in 2009 and 10% in 2008.



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The decrease in the front-end segment is the result of the prioritization of research and development
projects. The reduction in the back-end segment is result of cost reduction efforts.



Restructuring Expenses.In 2009 ASMI started the implementation of a major restructuring in the front-end segment as announced on January 9, 2009 and on July 20, 2009. The main components of the
Companys accelerated execution plans are:



| |  |  | The consolidation of our global front-end manufacturing operations from Europe, the United States and Japan, into our front-end manufacturing operations in
Singapore by the end of 2010. This will be achieved by completing the previously announced transfer from Almere, the Netherlands, which was finalized during 2009; the phasing out the manufacturing operation in Phoenix, Arizona, in the first half of
2010; and by transferring manufacturing from Nagaoka, Japan, no later than the fourth quarter of 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The reduction of selling, general and administration expenses by making fundamental changes in our global support infrastructure. This includes a significant
simplification and streamlining of our warehousing operations and the further strengthening of the global sales & service organization which was created last year.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The leveraging of research and development and our product portfolio by reprioritization of strategic programs in order to maximize their potential.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



Related to these execution plans, an
amount of  35.7 million restructuring expenses was recorded for the full year of 2009. These charges include:



| |  |  | Employee related expenses of  19.4 million.
Included are unconditional one-time termination benefits of  15.8 million, conditional one-time termination benefits subject to the
final termination date of  1.7 million and other employee related expenses of  1.9 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Contract termination related expenses of  2.8
million. These expenses mainly relate to operational lease contracts and include both the valuating of the onerous contracts at fair value, the decommissioning expenses and impairments of leasehold improvements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Impairment charges of  4.6 million mainly
related to machinery and equipment. We impaired certain demo tools which were as a result of the strategic reorientation determined end of life. The impairment charges were determined based on the difference between the assets estimated fair
value and their carrying amount.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expenses of  4.4 million resulting from the
transition of our global front-end manufacturing operations from Europe, the United States and Japan, into our front-end manufacturing operations in Singapore.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expenses of  3.9 million related to the
management buy-out of our RTP.
| | - |  | -----------------------------------------------------------------------



| |  |  | Other expenses of  0.6 million
| | - |  | -------------------------------



Net Interest Expense. Net interest
expense amounted to  7.5 million in 2009 compared to the net interest expense of  3.7 million in 2008. This increase in net interest expenses mainly results from decreased interest income.



Accretion interest expense convertible notes. As per 1 January 2009, ASMI applies EITF 07-05
Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock.



Both our convertible bonds due 2010, 2011 and 2014, include a component that creates a financial liability to the Company and a component that grants
an option to the holder of the convertible note to convert it into common shares of the Company (conversion option). ASC 815 requires separate recognition of these components.



The fair value of the liability component is estimated using the prevailing market interest rate at the date of issue,
for similar non-convertible debt. Subsequently, the liability is measured at amortized cost. The interest expense on the liability component is calculated by applying the market interest rate for similar non-convertible debt at the date of issue to
the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible subordinated notes, thus creating a non-cash interest expense. For 2009 this accretion interest
was  4.3 million.



Revaluation conversion option. As per 1 January 2009, ASMI applies ASC 815 Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock.



Both our
convertible bonds due 2010, 2011 and 2014, include a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into common shares of the Company
(conversion option). EITF 07-05 requires separate recognition of these components.



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##### Table of Contents

For the conversion options of the convertible bonds due 2010 and 2011 the accounting is different from
that for the conversion option of the convertible bonds due 2014. As the convertible bonds due 2010 and 2011 are denominated in USD and the ASM International common shares in which they can be converted to are denominated in Euro, these conversion
options are recognized as a liability measured at fair value. The conversion option is measured at fair value through the income statement, for 2009 this revaluation at fair value resulted in a loss of  24.4 million. For the conversion options of the convertible bonds due 2014 the fixedfor-fixed principle is met as both the debt instrument (the bond) and the entitys
equity shares in which they can be converted to are denominated in the functional currency (Euro). Based on the before mentioned criteria the conversion option qualifies as permanent equity.



Gain (expense) resulting from early extinguishment of debt.In 2009
US$ 4.0 million 5.25% convertible subordinated notes due 2010 and US$ 26.3 million 4.25% convertible subordinated notes due 2011 have been repurchased for a market value of US$ 38.9 million. The loss from the early extinguishment of the
notes of  1.8 million, which includes the difference between the nominal value and the higher market value and the write-off of
unamortized issuance costs, has been recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2009.



In 2008, we repurchased US$ 48.3 million in convertible debt at a lower market value than the nominal value of the outstanding convertible debt.
The difference between the market value and the nominal value and the write off of unamortized issuance costs amounted to a gain of  8.0
million.



Income Tax Expense. Income tax expense
declined from  12.1 million in 2008 to  3.8 million in 2009, principally due to the reduction in operating income in 2009.



Earnings (Loss) from Operations.The following table shows earnings (loss) from operations for our front-end and back-end segments for the full
year 2009 compared to the same period in 2008. In order to improve comparability, impairment and restructuring charges have been disclosed separately in the table below.



|                                             |  |       |   |  |        |   |  |        |  
|-------------------------------------------- |  | ----- | - |  | ------ | - |  | ------ | -
|(EUR millions)                               |  | 2008  |   |  | 2009   |   |  | Change |  
|Front-end:                                   |  |       |   |  |        |   |  |        |  
|Before impairments and restructuring charges |  | (19.5 | ) |  | (60.4  | ) |  | (40.9  | )
|Impairments and restructuring charges        |  | (11.0 | ) |  | (59.9  | ) |  | (48.9  | )
|                                             |  |       |   |  |        |   |  |        |  
|After impairments and restructuring charges  |  | (30.5 | ) |  | (120.3 | ) |  | (89.8  | )
|                                             |  |       |   |  |        |   |  |        |  
|Back-end                                     |  | 90.2  |   |  | 95.1   |   |  | 4.9    |  
|                                             |  |       |   |  |        |   |  |        |  
|Total earnings (loss) from operations        |  | 59.7  |   |  | (25.2  | ) |  | (84.9  | )
|                                             |  |       |   |  |        |   |  |        |  



Net Earnings (Loss) allocated to the
shareholders of the parent.The following table shows net earnings (loss) for our front-end and back-end segments for the full year 2009 compared to the same period in 2008. In order to improve comparability, impairment and restructuring
charges, results on early extinguishment of debt, accretion of interest on the convertible bonds and the fair value changes of the conversion option have been disclosed separately in the table below.



|                                                                                                                           |  |       |   |  |        |   |  |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ----- | - |  | ------ | - |  | ------ | -
|(EUR millions)                                                                                                             |  | 2008  |   |  | 2009   |   |  | Change |  
|Front-end:                                                                                                                 |  |       |   |  |        |   |  |        |  
|Before impairments, restructuring, result early extinguishment, accretion interest and fair value change conversion option |  | (26.2 | ) |  | (61.1  | ) |  | (34.9  | )
|Impairments and restructuring                                                                                              |  | (11.0 | ) |  | (59.9  | ) |  | (48.9  | )
|Gain / (loss) on early extinguishment of debt                                                                              |  | 8.0   |   |  | (1.8   | ) |  | (9.8   | )
|Non cash accretion interest convertible bonds                                                                              |  |      |   |  | (4.3   | ) |  | (4.3   | )
|Fair value change conversion option                                                                                        |  |      |   |  | (24.4  | ) |  | (24.4  | )
|                                                                                                                           |  |       |   |  |        |   |  |        |  
|Uncomparable items                                                                                                         |  | (3.0  | ) |  | (90.4  | ) |  | (87.4  | )
|                                                                                                                           |  |       |   |  |        |   |  |        |  
|After impairments, restructuring and fair value change conversion option                                                   |  | (29.2 | ) |  | (151.5 | ) |  | (122.3 | )
|Back-end                                                                                                                   |  | 43.5  |   |  | 44.0   |   |  | (0.4   | )
|Gain on dilution of investment in ASMPT (back-end)                                                                         |  | 4.1   |   |  | 1.0    |   |  | (3.1   | )
|                                                                                                                           |  |       |   |  |        |   |  |        |  
|Total net earnings (loss)1)                                                                                                |  | 18.4  |   |  | (106.6 | ) |  | (125.8 | )
|                                                                                                                           |  |       |   |  |        |   |  |        |  



|1) | allocated to the shareholders of the parent
|-- | -------------------------------------------



Net earnings for the back-end segment reflect our 52.59% ownership of ASM Pacific Technology (2008; 52.87%).



47



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##### Table of Contents

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007



Net Sales.The following table shows net sales for the front-end
and back-end segments and the percentage change for 2008 and 2007:



|                |  |       |  |       |  |          |   
|--------------- |  | ----- |  | ----- |  | -------- | --
|(EUR millions)  |  | 2007  |  | 2008  |  | % Change |   
|Front-end       |  | 450.9 |  | 296.8 |  | (34      | )%
|Back-end        |  | 504.3 |  | 450.6 |  | (11      | )%
|                |  |       |  |       |  |          |   
|Total net sales |  | 955.2 |  | 747.4 |  | (22      | )%
|                |  |       |  |       |  |          |   



In 2008, net sales of wafer processing
equipment (front-end segment) represented 40% of total net sales. Net sales of assembly and packaging equipment and materials (back-end segment) represented 60% of total net sales.



The decline in front-end and back-end sales in 2008 compared to 2007 reflects the general decline in market demand in
2008.



The movements of the yen, U.S. dollar and U.S. dollar
related currencies against the euro in 2008 as compared to 2007 impacted net sales negatively by 6%. The impact on front-end and back-end net sales were respectively 2% and 9%.



Gross Profit Margin.The following table shows the gross profit margin for front-end and back-end segments and the
percentage point change for 2008 compared to 2007:



|                   |  |             |  |             |  |                   |   |  |                   |   |  |                          |  
|------------------ |  | ----------- |  | ----------- |  | ----------------- | - |  | ----------------- | - |  | ------------------------ | -
|                   |  | Grossprofit |  | Grossprofit |  | Grossprofitmargin |   |  | Grossprofitmargin |   |  | Decreasepercentagepoints |  
|(EUR millions)     |  | 2007        |  | 2008        |  | 2007              |   |  | 2008              |   | 
|Front-end          |  | 145.0       |  | 93.9        |  | 32.2              | % |  | 31.6              | % |  | (0.6                     | )
|Back-end           |  | 216.1       |  | 176.4       |  | 42.8              | % |  | 39.1              | % |  | (3.7                     | )
|                   |  |             |  |             |  |                   |   |  |                   |   |  |                          |  
|Total gross profit |  | 361.1       |  | 270.3       |  | 37.8              | % |  | 36.2              | % |  | (1.6                     | )
|                   |  |             |  |             |  |                   |   |  |                   |   |  |                          |  



The gross profit margin of our front-end
segment decreased due to the write-off in 2008 of  3.9 million on RTP inventory. Without the write-off the gross margin would have
increased by 0.7% percentage points to 32.9%, even though the sales in 2008 decreased by 34% compared to 2007. The gross profit margin was positively impacted by the sales mix and higher gross profit margins in three of our four established
front-end product lines.



The gross profit margin of our
back-end segment decreased mainly as a result of the lower utilization.



Selling, General and Administrative Expenses.The following table shows selling, general and administrative expenses for front-end and back-end segments and the percentage change for 2008 and 2007:



|                                                   |  |       |  |       |  |          |   
|-------------------------------------------------- |  | ----- |  | ----- |  | -------- | --
|(EUR millions)                                     |  | 2007  |  | 2008  |  | % Change |   
|Front-end                                          |  | 75.4  |  | 71.6  |  | (5       | )%
|Back-end                                           |  | 54.3  |  | 55.0  |  | 1        | % 
|                                                   |  |       |  |       |  |          |   
|Total selling, general and administrative expenses |  | 129.7 |  | 126.6 |  | (2       | )%
|                                                   |  |       |  |       |  |          |   



As a percentage of net sales, selling,
general and administrative expenses were 17% in 2008 and 14% in 2007.



The decrease in the front-end segment would have been higher without the write-off on accounts receivable of  2.9 million in 2008.



Research and
Development Expenses.The following table shows research and development expenses for front-end and back-end segments and the percentage change for 2008 and 2007:



|                                        |  |      |  |      |  |          |   
|--------------------------------------- |  | ---- |  | ---- |  | -------- | --
|(EUR millions)                          |  | 2007 |  | 2008 |  | % Change |   
|Front-end                               |  | 53.6 |  | 43.8 |  | (18      | )%
|Back-end                                |  | 29.8 |  | 31.2 |  | 5        | % 
|                                        |  |      |  |      |  |          |   
|Total research and development expenses |  | 83.4 |  | 75.0 |  | (10      | )%
|                                        |  |      |  |      |  |          |   



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As a percentage of net sales, research and development expenses increased from 9% in 2007 to 10% in
2008.



The decrease in the front-end segment was the result
of increased focus on efficiency and prioritization of research and development projects.



Impairment of goodwill.The Company recorded an impairment charge of  1.4 million related
to goodwill of our investment in NanoPhotonics



Restructuring expenses.The Company recorded an impairment charge related to the manufacturing plant at ASM Europe in the Netherlands of  7,068. The impairment was the consequence of the announcement in January 2009 of the restructuring of the ASM Europe operations including the transfer of the manufacturing operations to the Companys subsidiary ASM
Front-End Manufacturing Singapore. ASM Europe will cease using the manufacturing plant upon completion of the transfer. The impairment charges are included in the Consolidated Statements of Operations as restructuring expenses.



Earnings (Loss) from Operations.The following table shows earnings
from operations for the front-end and back-end segments and the percentage change between the year 2007 and 2008:



|                                      |  |       |  |       |   |  |          |   
|------------------------------------- |  | ----- |  | ----- | - |  | -------- | --
|(EUR millions)                        |  | 2007  |  | 2008  |   |  | % Change |   
|Front-end                             |  | 15.5  |  | (30.5 | ) |  | nm       |   
|Back-end                              |  | 131.9 |  | 90.2  |   |  | (32      | )%
|                                      |  |       |  |       |   |  |          |   
|Consolidated earnings from operations |  | 147.4 |  | 59.7  |   |  | (59      | )%
|                                      |  |       |  |       |   |  |          |   



Net Interest Expense. Net interest
expense amounted to  3.7 million in 2008 compared to the net interest expense of  3.8 million in 2007.



Gain (expense) resulting from early extinguishment of debt.In 2008, we repurchased US$ 48.3 million in convertible debt at a lower market
value than the nominal value of the outstanding convertible debt. The difference between the market value and the nominal value and the write off of unamortized issuance costs amounted to a gain of  8.0 million. In 2007, we repurchased US$ 35.4 million in convertible debt at a market value higher than the nominal value of the outstanding convertible debt. The difference
between the market value and the nominal value and the write off of unamortized issuance costs amounted to an expense of  10.0 million.



Income Tax Expense. Income tax expense declined from
 19.2 million in 2007 to  12.1 million in 2008, principally due to the reduction in operating income in 2008.



Net Earnings.The following table shows net earnings for the front-end and back-end segments and the percentage change for 2008 and 2007:



|                                                                    |  |      |   |  |       |   |  |          |   
|------------------------------------------------------------------- |  | ---- | - |  | ----- | - |  | -------- | --
|(EUR millions)                                                      |  | 2007 |   |  | 2008  |   |  | % Change |   
|Front-end                                                           |  | (5.3 | ) |  | (29.2 | ) |  | nm       |   
|Back-end                                                            |  | 63.3 |   |  | 43.5  |   |  | (31      | )%
|Gain on dilution of investment in ASM Pacific Technology / Back-end |  | 3.0  |   |  | 4.1   |   |  | 37       | % 
|                                                                    |  |      |   |  |       |   |  |          |   
|Consolidated net earnings                                           |  | 61.0 |   |  | 18.4  |   |  | (70      | )%
|                                                                    |  |      |   |  |       |   |  |          |   



Net earnings of our front-end segment for
2008 include impairment charges of  1.4 million related to goodwill of our investment in NanoPhotonics, charges of  7.1 million relating to impairment on fixed assets of ASM Europe in the Netherlands related to our restructuring; a  3.9 million write-off on RTP inventory; and a  8.0 million gain on the early extinguishment of debt. Excluding these charges and gain, the net loss of our front-end segment was  24.8 million.



The gain on dilution of investment in ASM Pacific Technology / Back-end is shown as a separate line item.



Backlog



Our backlog includes orders for which purchase orders or letters of intent have been accepted, typically for up to one year. Historically, orders have
been subject to cancellation or rescheduling by customers. In addition, orders have been subject to price negotiations and changes in specifications as a result of changes in customers requirements. Due to possible customer
changes in delivery schedules and



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requirements and to cancellation of orders, our backlog at any particular date is not necessarily indicative of actual sales for any succeeding period.



The following table shows the level of new orders during 2008 and 2009 and the backlog at
December 31, 2008 and 2009 and the percentage change:



|                                                     |  |           |  |       |  |          |   
|---------------------------------------------------- |  | --------- |  | ----- |  | -------- | --
|(EUR millions, except book-to-bill ratio)            |  | Full year | 
|                                                     |  | 2008      |  | 2009  |  | % Change |   
|Front-end:                                           |  |           |  |       |  |          |   
|New orders                                           |  | 250.6     |  | 157.7 |  | (37      | )%
|Backlog at December 31                               |  | 53.0      |  | 50.3  |  | (5       | )%
|Book-to-bill ratio (new orders divided by net sales) |  | 0.84      |  | 0.98  |  |          |   
|Back-end:                                            |  |           |  |       |  |          |   
|New orders                                           |  | 387.1     |  | 539.1 |  | 39       | % 
|Backlog at December 30                               |  | 37.7      |  | 146.4 |  | 288      | % 
|Book-to-bill ratio (new orders divided by net sales) |  | 0.86      |  | 1.25  |  |          |   
|Total                                                |  |           |  |       |  |          |   
|New orders                                           |  | 637.7     |  | 696.8 |  | 9        | % 
|Backlog at December 30                               |  | 90.7      |  | 196.7 |  | 117      | % 
|Book-to-bill ratio (new orders divided by net sales) |  | 0.85      |  | 1.18  |  |          |   



Liquidity and Capital Resources



Our liquidity is affected by many factors, some of
which are related to our ongoing operations and others of which are related to the semiconductor and semiconductor equipment industries and to the economies of the countries in which we operate. Although our cash requirements fluctuate based on the
timing and extent of these factors, we believe that cash generated by operations, together with the liquidity provided by our existing cash resources and our financing arrangements, will be sufficient to fund working capital, capital expenditures
and other ongoing business requirements for at least the next twelve months.



Net cash provided by operations in 2009 was  62.7 million as compared to  137.4 million for 2008. This decrease results mainly from the decreased earnings partly offset by cash inflows from lower working
capital.



Net cash used in investing activities in 2009 was
 15.5 million compared to  33.0 million for 2008. The decrease results from lower capital expenditures.



We issued  150 million senior
unsecured convertible bonds due 6 November 2014. The Bonds will be convertible into new and/or existing shares of the Company and will carry a quarterly coupon of 6.5% per annum and a conversion price of  17.09.



The issue was done to extend our debt maturity profile and we intend to use part of the proceeds of the offering for general corporate purposes. In
addition, we intend to partially use the proceeds to buy back our outstanding convertible bonds due 2010 and 2011 on an ongoing basis. In December 2009 US$ 4 million of our convertible bonds due 2010 and US$ 26 million of the convertible
bonds due 2011 were repurchased. During January 2010 a further US$ 39 million of the outstanding convertible bonds due 2011 were repurchased.



We also negotiated a new standby revolving credit facility of  65 million with an interest rate based on EURIBOR. This secured credit facility replaced our former secured credit facility provided by Rabobank and has a term of 3 years. The facility was increased to
 90 million on January 11, 2010.



Net cash from financing activities for 2009 was  90.9 million, in 2008 net cash used in financing activities was  121.5 million. In the fourth quarter of 2009, we
received the net proceeds of the newly issued convertible bond ( 144.5 million) and repurchased a part of the outstanding convertibles
( 26.8 million). In 2008,  38.0 million was spent on the repurchase of the convertible bond and  36.5 million on the repurchase of treasury
shares.



Net working capital, consisting of accounts
receivable, inventories, other current assets, accounts payable, accrued expenses, advance payments from customers and deferred revenue, decreased from  253.9 million at December 31, 2008 (adjusted for evaluation tools at customers which as per January 1, 2009 are reported under non-current) to  181.3 million at December 31, 2009. The decrease includes the (non-cash) impairment in 2009 of  24.2 million in inventories and the balance of lower manufacturing and sales levels in the front-end segment and the higher manufacturing and sales levels in the back-end



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segment. The number of outstanding days of working capital, measured based on quarterly sales, decreased from 155 days at December 31, 2008 to 83 days at December 31, 2009. For the same
period, as a result of the focus on reduction of working capital, our front-end segment working capital ratio decreased from 173 days to 100 days. Our back-end segment decreased from 138 days to 77 days.



At December 31, 2009, our principal sources of liquidity consisted of
 293.9 million in cash and cash equivalents and  92.9 million in useable undrawn bank lines. Approximately  112.2 million of the
cash and cash equivalents and  26.7 million of the undrawn bank lines are restricted to use in the Companys back-end
operations and  29.8 million of the cash and cash equivalents and  1.2 million in undrawn bank lines are restricted to use in the Companys front-end operations in Japan.



For the most part, our cash and cash equivalents are not guaranteed by any governmental agency. We place our cash and
cash equivalents with high quality financial institutions to limit our credit risk exposure.



The net debt of ASMI, excluding back-end, at December 31, 2009 was  83.7 million. This net
debt is the balance of  181.7 million cash and  265.4 million debt. The debt of  265.4 million consists of  226.1 million convertible debt and  39.4 million other debt. Furthermore, ASMI, excluding back-end, has useable undrawn credit lines of  66.2
million.



See notes 3, 12, 15, 16 and 21 to our consolidated
financial statements for discussion of our funding, treasury policies and our long-term debt.



We are obligated to fund defined benefit pension plans for our employees in Japan. We expect that the amount of this funding in 2010 will be approximately  501,000. Our employees in the Netherlands participate in a multi-employer plan. The plan monitors the risks of the entire investment portfolio, not by individual company or employee, and is
subject to regulation by Dutch governmental authorities. By Dutch law, a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of its assets to its obligations. This ratio includes a minimum coverage
ratio of 105%. At December 31, 2009 the coverage ratio of the multi-employer plan was 100% (December 31, 2008: 90%) as a result of the economic crisis. Consequently, the Board of the multi-employer plan decided that existing pension obligations
will not be indexed for the year 2010. For a discussion of our pension obligations, see Note 18 of the Notes to our Consolidated Financial Statements included elsewhere in this report.



Our back-end segment, which is conducted through ASM Pacific Technology, our 52.59%-owned subsidiary, is entirely
self-financed and at December 31, 2009 had no long-term debt. The cash resources and borrowing capacity of ASM Pacific Technology are not available to our front-end segment due to restrictions imposed by the Hong Kong Stock Exchange, on which
the ASM Pacific Technology common shares are listed.



We
historically relied on dividends from ASM Pacific Technology for a portion of our cash flow for use in our front-end operations. Cash dividends received from ASM Pacific Technology during 2007, 2008 and 2009 were  49.1 million,  49.1 million and  21.4 million, respectively. In November 2006, we announced our commitment that for at
least the next three years we would not use these cash dividends to support our front-end business, but instead would use such dividends to retire outstanding convertible debt, repurchase our common shares, pay dividends on our common shares or, in
the event of dilution resulting from the exercise of employee stock options in ASM Pacific Technology, purchase shares of ASM Pacific Technology to maintain our percentage ownership at its current level. We are currently evaluating whether or not to
modify or continue this policy regarding the use of such cash dividends for 2010 and beyond and expect to discuss the matter at our upcoming Annual General Meeting of Shareholders in May 2010.



Although certain directors of ASM Pacific Technology are affiliates of ASM
International, ASM Pacific Technology is under no obligation to declare dividends to shareholders or enter into transactions that are beneficial to us. As a majority shareholder, we can approve the payment of dividends, but cannot compel their
payment or size.



The market value of our investment in ASM
Pacific Technology at the end of 2009 was approximately  1,371 million. At the end of 2008 this was approximately  488 million.



Outlook



We have developed forecasts and projections of cash flows and liquidity needs for the upcoming year taking into account the current market conditions,
reasonably possible changes in trading performance based on such conditions, and our ability to modify our cost structure as a result of changing economic conditions and sales levels and the fact that we have already started with the implementation
of the



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restructuring program. We have also considered in the forecasts the total cash balances amounting to  293.9 million as of December 31, 2009, available borrowings, the ability to renew debt arrangements and to access additional indebtedness and whether or not we will maintain compliance with
our financial covenants. Based on this, we believe that our cash on hand at the end of 2009 is adequate to fund our operations, our investments in capital expenditures and to fulfill our existing contractual obligations for the next twelve months.



Contractual Obligations, Contingent Liabilities and Commitments



We have contractual obligations, some of which are
required to be recorded as liabilities in our consolidated financial statements, including long- and short-term debt. Other contractual arrangements, such as operating lease commitments and purchase obligations, are not generally required to be
recognized as liabilities on our consolidated balance sheet, but are required to be disclosed.



The following table summarizes our contractual obligations as of December 31, 2009 aggregated by type of contractual obligation:



|                                   |  |         |  |                 |  |          |  |          |  |                 
|---------------------------------- |  | ------- |  | --------------- |  | -------- |  | -------- |  | ----------------
|Contractual obligations            |  | Total   |  | Less than1 year |  | 1-3years |  | 3-5years |  | More than5 years
|Notes payable to banks1            |  | 14,840  |  | 14,840          |  |         |  |         |  |                
|Bank overdraft                     |  | 2,500   |  | 2,500           |  |         |  |         |  |                
|Long-term debt1,
2                 |  | 23,018  |  | 6,181           |  | 16,574   |  | 263      |  |                
|Convertible subordinated debt1     |  | 285,824 |  | 25,075          |  | 92,874   |  | 167,875  |  |                
|Operating leases                   |  | 31,823  |  | 8,601           |  | 12,705   |  | 5,829    |  | 4,688           
|Purchase obligations:              |  |         |  |                 |  |          |  |          |  |                 
|Purchase commitments to suppliers  |  | 62,983  |  | 62,841          |  | 142      |  |         |  |                
|Capital expenditure commitments    |  | 9,675   |  | 9,374           |  | 301      |  |         |  |                
|Unrecognized tax benefits (FIN 48) |  | 15,663  |  | 15,663          |  |         |  |         |  |                
|                                   |  |         |  |                 |  |          |  |          |  |                 
|Total contractual obligations      |  | 446,326 |  | 145,075         |  | 122,596  |  | 173,967  |  | 4,688           
|                                   |  |         |  |                 |  |          |  |          |  |                 



|(1) | Including interest expense based on the percentages at the reporting date.
|--- | --------------------------------------------------------------------------

|(2) | Capital lease obligations of  1.0 million are included in
long-term debt.
|--- | --------------------------------------------------------------------------



For a further discussion of
our contractual obligations see Notes 9, 15, 16, 19, 21 and 24 to our Consolidated Financial Statements, which are incorporated herein by reference.



We outsource a substantial portion of the manufacturing of our front-end operations to certain suppliers. As our products are technologically complex,
the leadtimes for purchases from our suppliers can vary and can be as long as nine months. Generally contractual commitments are made for multiple modules or systems in order to reduce our purchase prices per module or system. For the majority of
our purchase commitments, we have flexible delivery schedules depending on the market conditions, which allow us, to a certain extent, to delay delivery beyond originally planned delivery schedules.



Subsequent to the management buy-out of our RTP business, contingent
payables of  3.1 million, including accrued interest, related to a research and development credit received, were conveyed to
Levitech B.V.



New Accounting Pronouncements



For information regarding new accounting pronouncements, see Note 1 to
our Consolidated Financial Statements, which is incorporated herein by reference.



Safe Harbor



Please refer to Forward
Looking and Safe Harbor Statement on page 3 which is incorporated herein.



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Item 6. Directors, Senior Management and Employees



A. Directors and senior management.



The names of the current members of our Supervisory Board and Management
Board and the years of their birth are as follows:



|                             |  |                                                                                                          |  |               |  |            
|---------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | ------------- |  | -----------
|Name                         |  | Position                                                                                                 |  | Year of Birth |  | TermExpires
|Gert-Jan Kramer2             |  | Chairman of the Supervisory Board                                                                        |  | 1942          |  | 2013       
|Eric A. van Amerongen1, 2    |  | Member of the Supervisory Board                                                                          |  | 1953          |  | 2010       
|Johan M.R. Danneels2         |  | Member of the Supervisory Board                                                                          |  | 1949          |  | 2012       
|Heinrich W. Kreutzer1        |  | Member of the Supervisory Board                                                                          |  | 1949          |  | 2010       
|Jan C. Lobbezoo1             |  | Member of the Supervisory Board                                                                          |  | 1946          |  | 2013       
|Ulrich H.R. Schumacher       |  | Member of the Supervisory Board                                                                          |  | 1958          |  | 2012       
|Charles D. (Chuck) del Prado |  | Chairman of the Management Board, President and Chief Executive Officer                                  |  | 1961          |  | 2010       
|W.K. Lee                     |  | Member of the Management Board of the Company and Chief Executive Officer of ASM Pacific Technology Ltd. |  | 1954          |  | 2010       
|J. (Han) F.M. Westendorp     |  | Member of the Management Board and Vice President Front-end Strategy                                     |  | 1956          |  | 2010       
|Robert A. Ruijter            |  | Interim Chief Financial Officer                                                                          |  | 1951          |  | N/A        



|(1) | Member of Audit Committee
|--- | -------------------------

|(2) | Member of Nomination, Selection and Remuneration Committee
|--- | ----------------------------------------------------------



Gert-Jan Kramerwas elected to the Supervisory Board in May 2009 and is currently Chairman of the Supervisory Board. Mr. Kramer served as
President and Chief Executive Officer of Fugro N.V. for more than 20 years until his retirement in 2005. Mr. Kramer currently serves on the supervisory boards of Scheuten Solar (Chairman), Damen Shipyards Group (Vice-Chairman), ABN AMRO
N.V. (member of the Audit Committee), Trajectum B.V., (Mammoet), Fugro N.V., Bronwaterleiding Doorn and Energie Beheer Nederland B.V., and IRO (Chairman). He is also Chairman of the Supervisory Board of Delft Technical University. Furthermore,
Mr. Kramer serves on advisory boards of many cultural organisations such as the Royal Concertgebouw Orchestra, several museums (Nieuwe Kerk/Hermitage, Frans Hals Museum, Museum Beelden aan Zee) and the Pieterskerk in Leiden.



Eric A. van Amerongen was elected a member of the Supervisory Board
in May 2002 and is currently Vice-Chairman of the Supervisory Board.Mr. van Amerongen served as Chief Executive Officer of Koninklijke Swets & Zeitlinger and later as member of its Supervisory Board. Prior to that, he was
active for over 10 years in the position of Group Director of Thomson-CSF (France), Chief Executive Officer of Hollandse Signaal Apparaten B.V. and President and Chief Executive Officer Europe, Middle East and Africa for Lucent Technologies.
Mr. van Amerongen also serves on the boards of directors of various European companies.



Johan M.R. Danneels was elected a member of the Supervisory Board in May 2000. Currently Mr. Danneels serves as Chief Executive Officer at Essensium. In January 2005 Mr. Danneels founded Essensium
N.V., a spin-off from the research institute IMEC of which he was chairman since 2000. Mr. Danneels served recently as Groups Vice President of STMicroelectronics. Prior to that, he was Corporate Executive Vice President of Alcatel NV and Chief
Executive Officer of Alcatel Microelectronics. He spent 25 years in Alcatel in different management functions of all major product lines. Mr. Danneels holds a Ph.D. degree in engineering from the KULeuven, Belgium and a MBA degree from
Boston University.



Heinrich W. Kreutzer was elected
a member of the Supervisory Board in November 2006. Mr. Kreutzer is currently chairman of the Board of Directors of Micronas Semiconductor AG in Zurich, Switzerland, chairman of the Supervisory Board of Micronas Semiconductor GmbH in Freiburg,
Germany and chairman of the Supervisory Board of BKtel communications GmbH, Germany. He worked at several companies, including General Telephone & Electronics in Waltham, USA, and Alcatel in Stuttgart, Germany. From 2004 to April
2006, he was Managing Director of Kabel Deutschland GmbH in Munich, Germany. From 1999 to 2003, Mr. Kreutzer was a member of the Management Board, and was the Chief Operating Officer and Chief Technology Officer of Alcatel SEL AG.
Mr. Kreutzer is Diplom-Ingenieur and Diplom-Ökonom. He studied at the Technical University of Berlin and the University of Hagen.



Jan C. Lobbezoowas elected a member of the Supervisory Board in May 2009. Mr. Lobbezoo served as Executive
Vice-President and Chief Financial Officer of Royal Philips Electronics semiconductor division



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from 1994 until 2005. He was a member of the board of Taiwan Semiconductor Manufacturing Company (TSMC) for 12 years until 2007, and remains its advisor, specifically in the areas of US corporate
governance, international reporting and financial review. He is on the board of FEI, a US-based nano-technology equipment company and on the supervisory boards of TMC Group N.V.(Chairman), Smartrac N.V., Mapper Lithography (Chairman), ALSI, Signet
Solar and Point One Innovation Fund. Mr. Lobbezoo holds a master degree in Business economics from the Erasmus University Rotterdam, the Netherlands and the accountancy degree Register Accountant. He is also on the Board of NIVRA.



Ulrich H.R. Schumacherwas elected a member of the
Supervisory Board in May 2008. Dr. Schumacher currently is the CEO & President and member of the Board of Grace Semiconductor Manufacturing Corporation in Shanghai. From 2004 until September 2007, Dr. Schumacher was a partner of
Francisco Partners, a private equity investment company based in the U.S. From 1986 through 1999, Dr. Schumacher served in various engineering and management roles at Siemens AG and was CEO and President of Siemens Semiconductor Group from 1996
until it was spun off in 1999 by Siemens as Infineon Technologies AG. He served as President and CEO of Infineon Technologies AG until 2004. Mr. Schumacher studied Electrical Engineering and Business Administration at the University of Aachen,
Germany, and was awarded a Doctorate of Engineering.



Charles D. (Chuck) del Prado became a member of the Management Board in May 2006 and the President and Chief Executive Officer on March 1, 2008. From January 1, 2008 until February 29, 2008, he was the Executive Vice
President Front-end Operations. He was President and General Manager of ASM America from February 2003 until August 2007. In March 2001, he was appointed Director Marketing, Sales & Service of ASM Europe. From February 1996
to 2001, he held various management positions at ASM Lithography in manufacturing and sales in Taiwan and in the Netherlands. Mr. del Prado worked at IBM Nederland N.V. from 1989 to 1996 in several marketing and sales positions. Mr. del
Prado received a Master of Science degree in Industrial Engineering and Technology Management from the University of Twente, the Netherlands.



W.K. Lee became a member of the Management Board of the Company and Chief Executive Officer of ASM Pacific Technology Ltd. effective
January 1, 2007 and has been General Manager Southern Region of ASM Pacific Technology since 1990. He has been employed by ASM Pacific Technology for over 25 years. Prior to becoming in 1990 General Manager of ASM Pacific Technologys
activities in Singapore, Mr. W.K. Lee was involved in product development. Mr. W.K. Lee studied at the Chinese University of Hong Kong (Bachelor of Science and Master of Philosophy in Electronics) and has a Master Degree in
Business Administration from the National University of Singapore.



J. (Han) F.M. Westendorpbecame a member of the Management Board in May 2006. He is Vice President Front-end Strategy since April 1, 2009. Before that he was Vice President Front-end Products since January 1, 2008. He was
Chief Operating Officer Front-end operations of ASM International since February 2003 until January 1, 2008. He was appointed General Manager of ASM Europe in July 1999. Mr. Westendorp held various management positions at Tokyo
Electron Massachusetts from 1991 to mid-1999, most recently as General Manager. Prior to that, he worked on developing ion implant technology at ASM International. Mr. Westendorp has a doctorate in physics and mathematics from the University of
Utrecht, the Netherlands.



Robert A. Ruijterbecame
interim Chief Financial Officer on May 15, 2009. Mr. Ruijter recently retired as CFO of The Nielsen Company, the US-based global information and media group. He is a former CFO of international businesses including VNU, the media
information and publishing group, and KLM, the Dutch national airline. He holds non-executive board positions at Wavin, Unit 4 Agresso and ASMPT. Mr Ruijter is officially not a member of the Management Board, as his appointment is for a limited
period only. However, he works closely with the members of the Management Board and other senior management team members.



B. Compensation.



For information regarding remuneration of members of our Management Board and Supervisory Board, see Note 28 to our Consolidated Financial Statements,
which is incorporated herein by reference.



For further
information regarding remuneration of members of our Management Board, see our Remuneration Policy and Remuneration Report 2008, which are posted on our website (www.asm.com). Our Remuneration Report 2009 will be posted on our website in
accordance with applicable requirements under local law.



We
have granted stock options to certain key employees. For information regarding such options see Note 18 to our Consolidated Financial Statements, which is incorporated herein by reference.



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C. Board practices.



Under Netherlands law, Supervisory Board members have the duty to supervise and advise the Management Board members. Persons nominated by the
Supervisory Board to be appointed by the shareholders to the Supervisory Board are elected if they receive a majority of the votes cast at a meeting of shareholders. Nominees to the Supervisory Board who are not proposed by the Supervisory
Board are appointed if they receive the affirmative vote of a majority of the votes cast at a meeting, which affirmative votes represent more than half our issued capital. A resolution to remove a member of the Supervisory Board, other than in
accordance with a proposal of the Supervisory Board, shall require the affirmative vote of a majority of the votes cast, which affirmative votes represent more than half our issued capital. A proposal to amend the Articles of
Association, whereby this threshold will be set at one third of our issued capital, will be submitted for approval to the Annual General Meeting of Shareholders in May 2010. The Supervisory Board members serve a four year term and may be
re-elected after each term. The Supervisory Board members may be re-elected twice.



The Management Board is entrusted with our management under the supervision of the Supervisory Board and has the general authority to enter into binding agreements with third parties. Persons nominated by the
Supervisory Board to be appointed by the shareholders to the Management Board are elected if they receive a majority of the votes cast at a meeting of shareholders. Nominees to the Management Board who are not proposed by the Supervisory Board
are appointed if they receive the affirmative vote of a majority of the votes cast at a meeting, if such affirmative votes represent more than half our issued capital. A Management Board member may at any time be suspended by the Supervisory Board.
A Management Board member may, in accordance with a proposal of the Supervisory Board, be dismissed by the General Meeting of Shareholders with a majority of the votes cast. A resolution to suspend or to dismiss a member of the Management Board,
other than in accordance with a proposal of the Supervisory Board, shall require the affirmative vote of a majority of the votes cast at a meeting, which affirmative votes represent more than half our issued capital. A proposal to amend the Articles
of Association, whereby this threshold will be set at one third of our issued capital, will be submitted for approval to the Annual General Meeting of Shareholders in May 2010.



The Audit Committee of the Supervisory Board has a supervisory task with regard to monitoring the integrity of our
financial reports and risk management. The Audit Committee consists of Mr. Lobbezoo (Chairman), Mr. Kreutzer and Mr. van Amerongen. The Audit Committee supervises the activities of the Management Board with respect but not
limited to:



| |  |  | the operation of the internal risk management and control systems, including supervision of the enforcement of the relevant legislation and regulations, and
supervising the operation of codes of conduct;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our release of financial information;
| | - |  | -------------------------------------



| |  |  | compliance with recommendations and observations of external auditors;
| | - |  | ----------------------------------------------------------------------



| |  |  | our policy on tax planning;
| | - |  | ---------------------------



| |  |  | relations with the external auditor, including, in particular, its independence, remuneration and any non-audit services performed for us;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our financing and financial position; and
| | - |  | -----------------------------------------



| |  |  | the applications of information and communication technology (ICT).
| | - |  | -------------------------------------------------------------------



The Audit Committee meets periodically to nominate a firm to be appointed as independent auditors to audit the financial
statements and to perform services related to the audit, review the scope and results of the audit with the independent auditors, review with management and the independent auditors our annual operating results and consider the adequacy of the
internal accounting procedures and the effect of the procedures relating to the auditors independence.



The Nomination, Selection and Remuneration committee of the Supervisory Board advises the Supervisory Board on matters relating to the selection and
nomination of the members of the Management Board and Supervisory Board. The committee further monitors and evaluates the remuneration policy for the Management Board. This committee consists of Mr. van Amerongen (Chairman), Mr. Danneels
and Mr. Kramer.



We have entered into indemnity
agreements with each of our Supervisory Board and Management Board members in which we agree to hold each of them harmless, to the extent permitted by law, from damage resulting from a failure to perform or a breach of duties by our board members,
and to indemnify each of them for serving in any capacity for the benefit of the Company, except in the case of willful misconduct or gross negligence in certain circumstances.



55



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D. Employees.



As of December 31, 2009, we had 12,067 employees, including 951 employees primarily involved in research and development activities, 429 in
marketing and sales, 1,012 in customer service, 596 in finance and administration, and 9,079 in manufacturing.



The following table lists the total number of our employees and the number of our employees in our front-end and back-end business at the dates
indicated, exclusive of temporary workers:



|                    |           |                   |          |                   |       |                   |           |       |          |        |       |        |           |       |          |        |       |       
|------------------- | --------- | ----------------- | -------- | ----------------- | ----- | ----------------- | --------- | ----- | -------- | ------ | ----- | ------ | --------- | ----- | -------- | ------ | ----- | ------
|Geographic Location |           | December 31, 2007 |          | December 31, 2008 |       | December 31, 2009
|                    | Front-end |                   | Back-end |                   | Total |                   | Front-end |       | Back-end |        | Total |        | Front-end |       | Back-end |        | Total
|Europe              |           |                   |          |                   |       |                   |           |       |          |        |       |        |           |       |          |        |       |       
|The Netherlands     |           | 338               |          | 10                |       | 348               |           | 341   |          | 8      |       | 349    |           | 193   |          | 8      |       | 201   
|EMEA                |           | 204               |          | 11                |       | 215               |           | 168   |          | 10     |       | 178    |           | 132   |          | 5      |       | 137   
|United States       |           | 515               |          | 10                |       | 525               |           | 455   |          | 14     |       | 469    |           | 353   |          | 11     |       | 364   
|Japan               |           | 294               |          | 24                |       | 318               |           | 289   |          | 23     |       | 312    |           | 206   |          | 22     |       | 228   
|Southeast Asia      |           | 492               |          | 9,934             |       | 10,426            |           | 414   |          | 9,992  |       | 10,406 |           | 410   |          | 10,727 |       | 11,137
|                    |           |                   |          |                   |       |                   |           |       |          |        |       |        |           |       |          |        |       |       
|Total               |           | 1,843             |          | 9,989             |       | 11,832            |           | 1,667 |          | 10,047 |       | 11,714 |           | 1,294 |          | 10,773 |       | 12,067
|                    |           |                   |          |                   |       |                   |           |       |          |        |       |        |           |       |          |        |       |       



Our Netherlands operations, which employed 194 persons as of March 5, 2010, is subject to standardized industry bargaining under Netherlands law, and is required to pay wages and meet conditions established as
a result of negotiations between all Netherlands employers in their industry and unions representing employees of those employers. Additionally, management personnel in the Netherlands facilities meet as required by Netherlands law with a works
council consisting of elected representatives of the employees to discuss working conditions and personnel policies as well as to explain major corporate decisions and to solicit their advice on major issues.



Many of our employees are highly skilled, and our continued success will
depend in part upon our ability to continue to attract and retain these employees, who are in great demand. We believe that our employee relations are good.



E. Share ownership.



Information with respect to shares and options held by members of our Supervisory Board and Management Board is included in Item 7, Major
Shareholders and Related Party Transactions and Notes 28 and 29 to our Consolidated Financial Statements, which are incorporated herein by reference. With the exception of Chuck del Prado, as of March 5, 2010, none of the members of our
Supervisory Board or Management Board owned beneficially more than 1% of our outstanding common shares.



We maintain various stock option plans for the benefit of our employees. For information about our stock option plans, see Note 18 to our Consolidated
Financial Statements, which is incorporated herein by reference.



Item 7. Major Shareholders and Related Party Transactions



A. Major shareholders.



The following table sets forth information with respect to the ownership
of our common shares as of March 5, 2010 by each beneficial owner known to us of more than 5% of our common shares:



|                                   |  |                 |  |         
|---------------------------------- |  | --------------- |  | --------
|                                   |  | Number ofShares |  | Percent1
|Arthur H. del Prado2               |  | 11,417,878      |  | 22.1    
|                                   |  |                
|Hermes Focus Asset Management Ltd3 |  | 2,569,169       |  | 5.0     
|                                   |  |                
|FMR LLC4                           |  | 2,838,263       |  | 5.5     



|(1) | Calculated on the basis of 51,773,530 Common Shares outstanding as of March 5, 2010, and without regard to options.
|--- | -------------------------------------------------------------------------------------------------------------------

|(2) | Includes 3,039 common shares owned by Stichting Administratiekantoor ASMI, a trust controlled by Arthur H. del Prado, and 713,000 common shares beneficially owned by Chuck D. del
Prado, Arthur H. del Prados son.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Derived from the register of notifications on substantial holdings in issuing institutions filed October 2, 2009 with the Netherlands Authority for the
Financial Markets. Hermes Focus Asset Management Ltd. owned 5.29% of our common shares on January 27, 2006, 9.91% on November 1, 2006, 15.04% on
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | April 18, 2008 and 15.1% on May 14, 2008, based on its reports filed with the Netherlands Authority for the Financial Market.
| | -----------------------------------------------------------------------------------------------------------------------------

|(4) | Derived from the register of notifications on substantial holdings in issuing institutions filed February 16, 2010 with the US Securities and Exchange Commission (SEC).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A beneficial owner of a security
includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares (i) voting power which includes the power to vote, or to direct the voting of, such security and/or
(ii) investment power which includes the power to dispose, or to direct the disposition, of such security. In addition, a person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial
ownership of such security, as defined above, within 60 days, including but not limited to any right to acquire: (i) through the exercise of any option, warrant or right; (ii) through the conversion of a security; or (iii) pursuant to
the power to revoke, or pursuant to the automatic termination of, a trust, discretionary account, or similar arrangement.



On May 28, 1997, we entered into an agreement with Stichting Continuïteit ASM International (Stichting), pursuant to which Stichting was
granted an option to acquire up to a number of our preferred shares corresponding with a total par value equal to 50% of the par value of our common shares issued and outstanding at the date of the exercise of the option. Stichting is a
non-membership organization organized under Netherlands law. The objective of Stichting is to serve the interests of the Company. To that objective Stichting may, amongst others, acquire, own and vote our preferred shares in order to maintain our
independence and/or continuity and/or identity. The members of the board of Stichting are:



|                                  |  |                                                 
|--------------------------------- |  | ------------------------------------------------
|Michael J.C. van Galen (chairman) |  | Retired Managing Director, Breevast N.V.        
|                                  | 
|Rinze Veenenga Kingma             |  | President Archeus Consulting B.V.               
|                                  | 
|Jan Klaassen                      |  | Emeritus Professor, Vrije Universiteit Amsterdam



On May 14, 2008, Stichting exercised its right to acquire preferred shares in the Company and acquired 21,985 preferred shares representing
21,985,000 votes, which constituted 29.9% of the total voting power of our outstanding capital stock as of May 14, 2008. Stichting paid  219,850, which constituted one-fourth of the nominal value of the preferred shares acquired, in accordance with the option agreement. This amount was paid by Stichting using an existing credit line. On May 14, 2009 the Annual
Meeting of Shareholders resolved to cancel the outstanding preferred shares and to reissue an option to Stichting Continuïteit to acquire preferred shares.



The issuance of preferred shares to Stichting has since been the subject of litigation in the Enterprise Chamber of the Amsterdam court of
appeal. This litigation was initiated by shareholders Hermes Focus Asset Management Ltd. and Fursa Alternative Investment Strategies LLC. In August 2009 the Enterprise Court ordered an inquiry in respect of the affairs of the Company. The Court also
ruled that there are no reasons for any immediate measures and it therefore denied the appointment of a supervisory director with extensive powers as well as all other immediate measures requested by such shareholders. The inquiry will concern the
period from January 1, 1996 to January 1, 1998 (inclusive) as far as it relates to the granting of the option to Stichting to subscribe for preferred shares in the Company and the period since January 1, 2006. The inquiry is currently
ongoing.



Except as described above regarding Stichting, we
are unaware of any arrangement which we anticipate will result in a change in control of ASM International. All shares of our common stock (including shares held by major shareholders) entitle the holder to the same voting rights. Our preferred
shares entitle the holder to 1,000 votes per share.



Of our
51,773,530 outstanding common shares at March 5, 2010, 2,142,039 are registered with us in the Netherlands, 40,487,708 are registered with our transfer agent in the Netherlands, ABN AMRO Bank N.V., and 9,143,783 are registered with our transfer
agent in the United States, Citibank, N.A., New York. Our common shares registered with Citibank, N.A., New York are listed on the NASDAQ Global Select Market under the symbol ASMI. As of March 5, 2010 there were approximately 160
record holders of our common shares registered with Citibank. The common shares registered with ABN AMRO Bank N.V., are in bearer form and are traded on Euronext Amsterdam under the symbol ASM.



B. Related party transactions.



For information regarding related party transactions, see Note 29 to our
Consolidated Financial Statements, which is incorporated herein by reference.



C. Interest of Experts & Counsel.



Not applicable.



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Item 8. Financial Information



A. Consolidated statements and other financial information



Consolidated financial statements



See Item 18, Financial Statements.



Legal proceedings



See Item 4.B., Business Overview and Note 20 to our
Consolidated Financial Statements, which is incorporated herein by reference. See also Item 3.D, Risk FactorsWe are subject to various legal proceedings and claims, the outcomes of which are uncertain. If we fail to accurately
evaluate the probability of loss or the amount of possible losses, an adverse outcome may materially and adversely affect our financial condition and results of operations.



Dividend policy



In 2007, we paid an interim dividend of  0.10 per common share. We have not paid dividends in 2008 and in any year prior to 2007. We do not expect to pay dividends on our common shares in 2010.



B. Significant changes



No significant changes have occurred since the date of our Consolidated Financial Statements.



Item 9. The Offer and Listing



A. Offer and listing details.



The following table sets forth, for the periods indicated, the high and
low closing prices of our common shares as reported on the NASDAQ Global Select Market and the high and low closing prices as reported on Euronext Amsterdam:



Price Range of Common Shares



|                      |  |                      |       |                        |   |       |  |     |       |  |   |      
|--------------------- |  | -------------------- | ----- | ---------------------- | - | ----- |  | --- | ----- |  | - | -----
|                      |  | NASDAQClosing Prices |       | EuronextClosing Prices
|                      |  | High                 |       | Low                    |   | High  |  | Low
|Annual Information    |  |                      |       |                        |   |       |  |     |       |  |   |      
|2005                  |  | $                    | 19.15 |                        | $ | 12.83 |  |    | 14.50 |  |  | 10.37
|2006                  |  |                      | 21.34 |                        |   | 13.72 |  |     | 16.97 |  |   | 10.95
|2007                  |  |                      | 30.32 |                        |   | 20.94 |  |     | 21.08 |  |   | 15.08
|2008                  |  |                      | 32.66 |                        |   | 6.60  |  |     | 20.96 |  |   | 5.00 
|2009                  |  |                      | 25.75 |                        |   | 6.30  |  |     | 17.80 |  |   | 4.92 
|                      |  |                      |       |                       
|Quarterly Information |  |                      |       |                        |   |       |  |     |       |  |   |      
|2008:                 |  |                      |       |                        |   |       |  |     |       |  |   |      
|First Quarter         |  | $                    | 24.30 |                        | $ | 17.60 |  |    | 16.56 |  |  | 11.20
|Second Quarter        |  |                      | 32.66 |                        |   | 19.12 |  |     | 20.96 |  |   | 12.14
|Third Quarter         |  |                      | 30.88 |                        |   | 17.43 |  |     | 19.13 |  |   | 12.52
|Fourth Quarter        |  |                      | 19.47 |                        |   | 6.60  |  |     | 14.01 |  |   | 5.00 
|                      |  |                      |       |                       
|2009:                 |  |                      |       |                        |   |       |  |     |       |  |   |      
|First Quarter         |  | $                    | 10.47 |                        | $ | 6.30  |  |    | 7.55  |  |  | 4.92 
|Second Quarter        |  |                      | 16.64 |                        |   | 8.52  |  |     | 11.93 |  |   | 6.45 
|Third Quarter         |  |                      | 19.38 |                        |   | 13.88 |  |     | 13.49 |  |   | 9.80 
|Fourth Quarter        |  |                      | 25.75 |                        |   | 17.29 |  |     | 17.80 |  |   | 11.80
|                      |  |                      |       |                       
|Monthly Information   |  |                      |       |                        |   |       |  |     |       |  |   |      
|September 2009        |  | $                    | 19.38 |                        | $ | 17.46 |  |    | 13.49 |  |  | 12.27
|October 2009          |  |                      | 21.85 |                        |   | 17.29 |  |     | 14.74 |  |   | 11.80
|November 2009         |  |                      | 24.40 |                        |   | 19.53 |  |     | 16.24 |  |   | 13.14
|December 2009         |  |                      | 25.75 |                        |   | 23.34 |  |     | 17.80 |  |   | 15.37
|January 2010          |  |                      | 26.43 |                        |   | 22.96 |  |     | 18.52 |  |   | 16.69
|February 2010         |  |                      | 24.05 |                        |   | 20.98 |  |     | 17.25 |  |   | 15.33
|March 20101           |  |                      | 24.98 |                        |   | 23.92 |  |     | 18.38 |  |   | 17.72



|(1) | Through March 5, 2010.
|--- | ----------------------



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B. Plan of distribution.



Not applicable.



C. Markets.



Our common shares are listed on the NASDAQ Global Select Market under the symbol ASMI and listed on Euronext Amsterdam under the symbol
ASM. See item 9.A. Offer and listing Details.



D.
Selling shareholders.



Not applicable.



E. Dilution.



Not applicable.



F. Expenses of the issue.



Not applicable.



Item 10. Additional Information



A. Share capital.



Not applicable.



B. Memorandum and articles of association.



The information required by Item 10.B. is incorporated by reference to Exhibit 1.1 in our Form 20-F filed with the United States Securities and
Exchange Commission on March 16, 2007 and the Form 6-K filed on April 30, 2007.



C. Material contracts.



We entered into a trust deed on November 6, 2009 with Citicorp Trustee Company Limited as trustee, under which we issued 
150 million aggregate principal amount of 6.5% senior unsecured convertible bonds due 6 November 2014. The terms of the bonds issued under the trust deed are summarized in Note 16 to our consolidated financial statements, which summary is
incorporated herein by reference. A copy of the trust deed is filed as Exhibit 2.3 hereto.



D. Exchange controls.



There are no foreign exchange controls or other governmental laws, decrees or regulations in the Netherlands restricting the import or export of capital or affecting the remittance of dividends, interest or other payments to non-resident
shareholders. Neither the laws of the Netherlands nor the Articles of Association of ASM International restrict remittances to non-resident shareholders or the right to hold or vote such securities.



E. Taxation.



Summary of Dutch Tax Provisions Applicable to Nonresident Shareholders with a particular focus on U.S. Shareholders



The statements below briefly summarize the current
Dutch tax laws, based on the laws as in force at January 1, 2009. The description is limited to the tax implications for shareholders who neither are nor are deemed to be a resident of the Netherlands for purposes of the relevant tax codes. The
description does not address special rules that may apply to holders of special classes of shares and should not be interpreted as extending by implication to matters not specifically referred to in this document. As to individual tax consequences,
shareholders are advised to consult their own tax advisors.



Withholding Tax



Dividends
distributed by us generally are subject to a withholding tax imposed by the Netherlands at a rate of 15%. The expression dividends distributed includes, among other things:



| |  |  | direct and indirect distributions in cash or in kind, deemed and constructive distributions and repayments of paid-in capital which is not recognized as such for
Dutch dividend withholding tax purposes;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | liquidation proceeds, proceeds of redemption of ordinary shares or consideration for the repurchase of ordinary shares by us, or one of our subsidiaries, to the
extent that such consideration exceeds the average paid-in capital which is recognized as such for Dutch dividend withholding tax purposes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the par value of ordinary shares issued to a holder of ordinary shares or an increase in the par value of ordinary shares, as the case may be, to the extent that
it does not appear that a contribution, which is recognized as such for Dutch dividend withholding tax purposes, has been made or will be made; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | partial repayments of paid-in capital, which is recognized as such for Dutch dividend withholding tax purposes, if and insofar as there are net profits
(zuivere winst) unless the general meeting of our shareholders has resolved in advance to make such repayment and provided that the par value of the ordinary shares concerned has been reduced by an equal amount by way of an amendment to the
articles of association.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If a holder of
ordinary shares resides in a country that signed a double taxation convention with the Netherlands and such convention is in effect, such holder of ordinary shares may, depending on the terms of that double taxation convention, be eligible for a
full or partial exemption from, reduction or refund of Dutch dividend withholding tax. The Netherlands has concluded such a convention with the United States, among other countries.



Under the Convention between the United States of America and the Kingdom of the Netherlands for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the US Tax Treaty) currently in effect, dividends we pay to a corporate holder of our common shares who is not, or is not deemed to be, a resident of the
Netherlands for Dutch tax purposes but who is a resident of the United States as defined in the U.S. Tax Treaty may be eligible for a reduction of the 15% Netherlands withholding tax. In the case of certain U.S. corporate shareholders owning at
least 10% of ASM International voting power, the Netherlands withholding tax may be reduced to 5%, provided that such shareholder does not have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a
permanent establishment or permanent representative in the Netherlands to which the dividends are attributable. A full exemption of Netherlands withholding tax is applicable for a U.S. corporate shareholder owning at least 80% of voting power in the
Company for a period of at least twelve months prior to the distribution, provided that this shareholder meets specific tests of the limitation of benefits clause of the U.S. Tax Treaty. The U.S. Tax Treaty provides for complete exemption from tax
on dividends received by exempt pension trusts and exempt organizations, as defined therein. Except in the case of exempt organizations, the reduced dividend withholding rate can be applied at the source upon payment of the dividends, provided that
the proper forms have been filed prior to the payment. Exempt organizations remain subject to the statutory withholding rate of 15% and are required to file an application for a refund of such withholding.



A holder who is not, or is not deemed to be, a resident of the Netherlands
may only claim the benefits of the U.S. Tax Treaty if:



| |  |  | the holder is a resident of the United States as defined therein; and
| | - |  | ---------------------------------------------------------------------



| |  |  | the holders entitlement to such benefits is not limited by the provisions of Article 26 (limitation on benefits) of the U.S. Tax Treaty.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



Under current Dutch law, in situations
where we distribute dividends which we received ourselves (flow through dividends) from subsidiaries established in countries with which the Netherlands has concluded a tax treaty, we may be permitted under limited circumstances to deduct and retain
from the withholding a portion of the amount that otherwise would be required to be remitted to the Dutch Tax Authorities. That portion generally may not exceed 3% of the total dividend distributed by us during the calendar year and the two
preceding calendar years. If we retain a portion of the amount withheld from the dividends paid, the portion (which is not remitted to the tax authorities) might not be creditable against your domestic income tax or corporate income tax liability.
We will endeavor to provide you with information concerning the extent to which we have applied the reduction described above to dividends paid to you and advise you to check the consequences thereof with your local tax advisor.



A refund, reduction, exemption or credit of Dutch dividend withholding tax
on the basis of Dutch tax law or on the basis of a tax treaty between the Netherlands and another state, will be granted only if the dividends are paid to the beneficial owner of the dividends. The Dutch Supreme Court has defined that a person is a
beneficial owner if: (i) that person is the legal owner of the dividend coupons and (ii) is in the position to freely dispose of the dividends so received and (iii), not acting in the capacity of an agent or fiduciary for someone else. A
receiver of a dividend is not considered to be the beneficial owner of a dividend in an event of dividend stripping in which he has paid a consideration related to the receipt of such dividend. In general terms, dividend
stripping can be described as the situation in which a foreign or domestic person (usually, but not necessarily, the original shareholder) has transferred his shares or his



60



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entitlement to the dividend distributions to a party that has a more favorable right to a refund or reduction of Dutch dividend withholding tax than the foreign or domestic person. In these
situations, the foreign or domestic person (usually the original shareholder), by transferring his shares or his entitlement to the dividend distributions, avoids Dutch dividend withholding tax while retaining his beneficial interest in
the shares and the dividend distributions. This regime may also apply to the transfer of shares or the entitlement to dividend distributions as described above, if the avoidance of dividend withholding tax is not the main purpose of the transfer.



Income Tax and Corporate Income Tax on Dividends



A nonresident individual or corporate shareholder
will not be subject to Dutch income tax with respect to dividends distributed by us or with respect to capital gains derived from the sale, disposal or deemed disposal of our common shares, provided that:



| |  |  | such holder is neither resident nor deemed to be resident in the Netherlands nor has made an election for the application of the rules of the Dutch 2001 Income
Tax Act as they apply to residents of the Netherlands; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | such holder does not have, and is not deemed to have, an enterprise or an interest in an enterprise which is, in whole or in part, carried on through a permanent
establishment, a deemed permanent establishment, or a permanent representative in the Netherlands and to which enterprise or part of an enterprise the shares are attributable, nor does such holder carry out any other activities in the Netherlands
that exceed regular asset management;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | such holder does not have a profit share in, or any other entitlement to the assets or income of an enterprise, other than by way of securities, which enterprise
is effectively managed in the Netherlands and to which enterprise the shares are attributable;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | such holder does not carry out and has not carried out employment activities with which the holding of the shares is connected directly or indirectly; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | such holder, individuals relating to such holder and some of their relations by blood or marriage in the direct line (including foster children) do not have a
substantial interest or deemed substantial interest in us, or, if such holder has a substantial interest or a deemed substantial interest in us, it forms part of the assets of an enterprise.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Generally, a nonresident holder will have a substantial interest if he,
his partner, certain other relatives (including foster children) or certain persons sharing his household, alone or together, directly or indirectly:



| |  |  | hold shares representing 5% or more of our total issued and outstanding capital (or the issued and outstanding capital of any class of our shares),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | hold or have rights to acquire shares (including the right to convert notes or stock options into shares), whether or not already issued, that at any time (and
from time to time) represent 5% or more of our total issued and outstanding capital (or the issued and outstanding capital of any class of our shares); or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | hold or own certain profit-participating rights that relate to 5% or more of our annual profit and/or to 5% or more of our liquidation proceeds.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



The same criteria apply to a nonresident
entity, save for the extension to partners, certain other relatives, and certain persons sharing the holders household.



Gift and Inheritance Tax



In principle, liability for Dutch gift tax or inheritance tax arises in respect of any gifts of common shares by or inheritance of common shares from
any person who resides in the Netherlands at the time of the gift or death.



A gift or inheritance of common shares from a nonresident shareholder will not be subject to Dutch gift and inheritance tax, provided that:



| |  |  | the nonresident shareholder does not have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in the Netherlands to which or to whom the common shares are attributable;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the nonresident shareholder is not entitled to a share in the profits of an enterprise that is effectively managed in the Netherlands other than by way of
securities or through an employment contract, the common shares being attributable to that enterprise; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the nonresident shareholder makes a gift of shares and does not die within 180 days after the date of the gift, while being resident or deemed to be resident in
the Netherlands at the time of his death.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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For the purposes of Dutch gift and inheritance tax, a Dutch national is deemed to be a resident of the
Netherlands if he resided in that country at any time during a period of ten years preceding the date of the gift or death, as the case may be. In addition, for the purposes of Dutch gift tax, a person not possessing Dutch nationality is also deemed
to be a Dutch resident, irrespective of his nationality, if he was a Dutch resident at any time during a period of twelve months preceding the time at which the gift was made. The Netherlands has concluded a treaty with the United States, based on
which double taxation on inheritances may be avoided if the inheritance is subject to Netherlands and/or U.S. inheritance tax and the deceased was a resident of either the Netherlands or the United States.



United States Federal Income Taxation



The following is a general description of select U.S. federal income tax
consequences of the ownership and disposition of our common shares by a U.S. Holder (as defined below). This summary only applies to U.S. Holders (as defined below) that hold their shares as capital assets. This discussion does not
purport to be a comprehensive description of all U.S. federal income taxation considerations that may be relevant to holders of shares in view of their particular circumstances, and does not deal with holders subject to special rules, such as, but
not limited to, the alternative minimum tax provisions of the Internal Revenue Code of 1986 (Internal Revenue Code) or the Internal Revenue Codes provisions applicable to dealers in securities or foreign currencies, traders in
securities that elect to use a mark-to-market method of accounting, certain financial institutions, tax-exempt organizations, tax-qualified employer plans and other tax-qualified accounts, insurance companies, persons that actually or constructively
own 10% or more of our voting stock, persons holding common shares as part of a straddle, hedging, conversion or constructive sale transaction or holders of common shares whose functional currency is not the U.S. dollar.



This discussion is based on the Internal Revenue Code, as amended to the
date hereof, final, temporary and proposed U.S. Treasury Department regulations promulgated thereunder, and administrative and judicial interpretations thereof, any or all of which could be changed subsequent to the date of this summary, possibly
with retroactive effect. Any such change could affect the tax consequences described in this summary. We will not update this summary to reflect any such changes after the date of this annual report. In addition, there can be no assurance that the
Internal Revenue Service will not challenge any tax treatment that is based upon or consistent with any discussion of tax consequences described in this summary, and we have not obtained, nor do we intend to obtain, a ruling from the Internal
Revenue Service or an opinion of counsel with respect to the U.S. federal income tax consequences of acquiring or holding common shares. Prospective holders of shares should consult their own tax advisors as to the application of the U.S. federal
income tax laws to their particular situation, as well as to any tax consequences that may arise under the U.S. federal estate or gift tax laws or under any state, local or foreign tax laws with respect to the ownership and disposition of our common
shares.



The following discussion is a summary of the tax
rules applicable to U.S. Holders of common shares and does not consider any U.S. federal income tax consequences to non-U.S. Holders. As used in this summary, U.S. Holder means a beneficial owner of common shares that is (i) an
individual citizen or resident alien of the United States (as defined for U.S. federal income tax purposes), (ii) a corporation (or any other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under
the laws of the United States or any State, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if either (a) a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) a valid election is in place to treat the trust as a U.S. person. A
non-U.S. Holder is a beneficial owner of common shares that is not a U.S. Holder as so defined herein.



If a partnership (or other entity treated as a partnership for US federal income tax purposes) holds common shares, the tax treatment of a partner
generally will depend upon the status and tax residency of the partner and the activities of the partnership. Partners in a partnership that holds common shares are urged to consult their own tax advisor regarding the specific tax consequences of
the owning and disposing of such common shares by the partnership.



Taxation of Dispositions



A U.S.
Holder will recognize gain or loss for U.S. federal income tax purposes upon a taxable sale or other disposition of common shares. The amount of such gain or loss will equal the difference between the amount realized by the U.S. Holder and the U.S.
Holders adjusted tax basis in the common shares. For these purposes, a U.S. Holders adjusted tax basis in the common shares generally will equal the U.S. dollar cost of the common shares to the U.S. Holder. Subject to the passive foreign
investment company rules described below, gain or loss realized by a U.S. Holder on a sale or other disposition of common shares



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generally will be treated as capital gain or loss, and will be long-term capital gain or loss if the common shares were held for more than one year as of the date of the sale or other
disposition. Any such gain generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Net long-term capital gain recognized by a U.S. Holder who is an individual generally is subject to reduced rates of taxation. The
deduction of capital losses is subject to certain limitations. Prospective investors should consult their own tax advisors in this regard.



If we repurchase our common shares, the repurchase generally will be treated as a sale or exchange of the common shares subject to the rules discussed
above. However, under certain circumstances as provided in Section 302 of the Internal Revenue Code, the repurchase may be treated fully or partially as a dividend taxable as described below under Taxation of Distributions. U.S.
Holders should consult their own tax advisors concerning the U.S. federal income tax consequences of our repurchase of their common shares.



Taxation of Distributions



Subject to the anti-deferral tax rules described below, the gross amount (before reduction for Netherlands withholding taxes) of any distribution
actually or constructively paid with respect to common shares will be included in the gross income of the U.S. Holder as foreign source dividend income to the extent the distributions are paid out of our current or accumulated earnings and profits,
as determined under U.S. federal income tax principles. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution. To the extent that the amount of any distribution exceeds
our current and accumulated earnings and profits, the distribution will first be treated as a tax-free return of capital to the extent of the U.S. Holders adjusted tax basis in the common shares (thereby increasing the amount of gain or
decreasing the amount of loss to be recognized on the subsequent disposition of the common shares), and to the extent that such distribution exceeds the U.S. Holders adjusted tax basis in the common shares such excess will be taxed as capital
gain. We do not maintain calculations of our earnings and profits under U.S. federal income tax principles, and therefore it may not be possible to determine whether or to what extent a distribution should be treated as a dividend. Distributions
treated as dividends generally will not be eligible for the dividends received deduction allowed to corporations under the Internal Revenue Code. The availability of this deduction is subject to several complex limitations which are beyond the scope
of this summary.



If a U.S. Holder receives a dividend in
euros, the amount of the dividend for U.S. federal income tax purposes should be the U.S. dollar value of the dividend, determined at the spot rate in effect on the date of such payment, regardless of whether the payment is later converted into U.S.
dollars. In the case of such later conversion, the U.S. Holder may recognize U.S. source ordinary income or loss as a result of currency fluctuations between the date on which the dividend is paid and the date the dividend amount is converted to
U.S. dollars.



Dividends received by a U.S. Holder generally
will be taxed at ordinary income rates. However, certain dividends received by individuals through taxable years beginning on or before December 31, 2010, may qualify to be taxed at capital gain rates (15% or less), provided (i) the
recipient has held the underlying stock for more than 60 days during the 121 day period beginning 60 days before the ex-dividend date and (ii) the dividends are received from a qualified foreign corporation. A non-U.S. corporation
(other than a passive foreign investment company) generally will be considered to be a qualified foreign corporation if (i) the shares of the non-U.S. corporation are readily tradable on an established securities market in the
United States or (ii) the non-U.S. corporation is eligible with respect to substantially all of its income for the benefits of a comprehensive income tax treaty with the United States which contains an exchange of information program. We
believe that we are, and will continue to be, a qualified foreign corporation. Individual U.S. Holders should consult their tax advisors regarding the impact of distributions paid with respect to their common shares in light of their
particular situations.



Foreign Tax Credit



Dividends distributed by us generally are subject to a
withholding tax imposed by the Netherlands at a rate of 15% (see Summary of Dutch Tax Provisions Applicable to Nonresident Shareholders with a particular focus on U.S. Shareholders  Withholding Tax). Subject to certain conditions
and limitations set forth in the Internal Revenue Code, foreign withholding tax paid with respect to dividends on common shares generally will be eligible for credit against a U.S. Holders U.S. federal income tax liability. Alternatively, a
U.S. Holder may claim a deduction for the amount of foreign withholding taxes, but only for a year for which the U.S. Holder elects to do so with respect to all foreign income taxes. Under current Dutch law, we may be permitted, under limited
circumstances, to retain a portion of Netherlands taxes we withhold



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from dividends paid to our shareholders, rather than pay that portion of the withheld taxes to the taxing authorities in the Netherlands (see Summary of Dutch Tax Provisions Applicable to
Nonresident Shareholders with a particular focus on U.S. Shareholders  Withholding Tax). This amount generally may not exceed 3% of the total dividend distributed by us during the calendar year and the two preceding calendar years. If we
retain a portion of the Netherlands withholding taxes, the retained amount in all likelihood will not qualify as a creditable tax for U.S. federal income tax purposes. We will endeavor to provide U.S. Holders with information concerning the extent
to which we retain any Netherlands taxes on dividends paid to U.S. Holders.



Effective for tax years beginning after December 31, 2006, there will be two specific classes (passive and general) of income for purposes of calculating foreign tax credit limitations. Dividends will
generally constitute passive category income but could, in the case of certain U.S. Holders, constitute general category income. Gain from a sale, exchange or other disposition of our common shares will be treated as U.S.
source income for foreign tax credit purposes unless the U.S. Holder makes an election under the Internal Revenue Code to treat any such gain as foreign source. The rules relating to the determination of the U.S. foreign tax credit are complex. U.S.
Holders should consult their own tax advisors with respect to the availability of a foreign tax credit or deduction for foreign, including Netherlands, taxes withheld.



Anti-Deferral Tax Rules



The Internal Revenue Code contains various provisions that impose current U.S. federal income tax on certain foreign corporations or their U.S.
shareholders if such corporations derive certain types of passive income and fail to make adequate distribution of profits to their U.S. shareholders. These provisions include the passive foreign investment company and controlled foreign corporation
rules. While we do not believe that any of these rules should apply to us, we are not certain that we can avoid these tax rules because we cannot predict with any degree of certainty the amount and character of our future income or the amount of our
common shares any particular U.S. Holder will own. Accordingly, we will only briefly summarize those provisions and then only the rules that we believe may have the greatest likelihood of applying to us in the future.



Passive Foreign Investment Company. As a foreign corporation with
U.S. Holders, we could potentially be treated as a passive foreign investment company (PFIC) as defined in the Internal Revenue Code.



The PFIC provisions of the Internal Revenue Code can have significant tax effects on U.S. Holders. In general, a foreign corporation will be a PFIC in
a particular tax year and for all succeeding tax years if:



| |  |  | 75% or more of its gross income (including the foreign corporations pro rata share of the gross income of any U.S. or foreign company in which the
corporation owns or is considered to own 25% or more of the shares by value) in a taxable year is passive income (which generally includes interest, dividends and certain rents and royalties); or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | at least 50% of the average value of the corporations gross assets in a taxable year (average determined as of the end of each quarter of the
corporations taxable year and ordinarily determined based on gross fair market value, including the proportionate share of the assets of any U.S. or foreign company in which the corporation owns or is considered to own 25% or more of the
shares by value) produce, or are held for the production of, passive income.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If we were a PFIC for a taxable year during which a U.S. Holder owned our shares, then a U.S. Holder would likely incur increased tax liabilities (possibly including an interest charge) upon the sale or other
disposition of our common shares or upon receipt of excess distributions. In other words, gain recognized by a U.S. Holder on a sale or other disposition of our common shares would be allocated ratably over the U.S. Holders holding
period for the common shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to
tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on the amount allocated to that taxable year. Further, any distribution in excess of 125 percent of the average of the annual
distributions on common shares received by the U.S. Holder during the preceding three years or the U.S. Holders holding period, whichever is shorter, would be subject to taxation as described above. Certain elections may be available
(including a qualified electing fund election and a mark to market election) to U.S. Holders that may mitigate the adverse consequences resulting from PFIC status. In addition, if we were a PFIC in a taxable year in which we pay a dividend or the
prior year, the 15% dividend rate discussed above with respect to dividends paid to certain U.S. Holders would not apply.



We believe that we are not a PFIC, and we do not expect to become a PFIC. However, we cannot assure that we will not qualify as a PFIC in the future.
The PFIC rules are very complex and U.S. Holders should consult their own tax advisors on this issue.



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Controlled Foreign Corporation Rules. If more than 50% of the voting power or total value of
all classes of our common shares is owned, directly or indirectly, by U.S. Holders, each of which owns 10% or more of the total combined voting power of all classes of our common shares, we could be treated as a controlled foreign corporation
(CFC) under Subpart F of the Internal Revenue Code. This classification would result in many complex consequences, including the required inclusion into income by such 10% or greater shareholders of their pro rata shares of our
Subpart F Income, as defined in the Internal Revenue Code. In addition, under Section 1248 of the Internal Revenue Code, gain from the sale or exchange of common shares by any U.S. Holder who is or was a 10% or greater shareholder
at any time during the five-year period ending with the sale or exchange will be dividend income to the extent of our earnings and profits attributable to the common shares sold or exchanged and accumulated during the periods that we were a CFC.
Under certain circumstances, a U.S. Holder that directly owns 10% or more of our voting common shares and is a corporation may be entitled to an indirect foreign tax credit for amounts characterized as dividends under Section 1248 of the
Internal Revenue Code. We believe that we are not a CFC and we will not become a CFC, however, we can not assure you that we will not become a CFC in the future.



United States Backup Withholding Tax and Information Reporting



Under certain circumstances, a U.S. Holder may be subject to information
reporting and backup withholding with respect to certain payments made in respect of the common shares and the proceeds received on the disposition of the common shares paid within the U.S. (and in certain cases, outside the U.S.). Such amounts may
be subject to a 28% U.S. backup withholding tax unless the U.S. Holder otherwise establishes an exemption. For example, backup withholding generally will not apply to a U.S. Holder who (1) is a corporation or comes within certain other exempt
categories and, when required, demonstrates that fact, or (2) furnishes a correct taxpayer identification number and makes certain other required certifications as provided by the backup withholding rules.



Backup withholding is not an additional tax. The amount of any backup
withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holders U.S. federal income tax liability and may entitle a U.S. Holder to a refund, provided that the required information is furnished to the Internal
Revenue Service.



The discussion set forth above is included
for general information only and may not be applicable depending upon a holders particular situation. Holders should consult their tax advisors with respect to the tax consequences of the purchase, ownership and disposition of common shares
including the tax consequences under state, local and other laws and the possible effects of changes in United States federal and other tax laws.



F. Dividends and paying agents.



Not Applicable.



G. Statement by experts.



Not Applicable.



H. Documents on display.



Whenever a reference is made in this Form 20-F to any contract, agreement or other document, the reference may not be complete and you should refer to
the copy of that contract, agreement or other document filed as an exhibit to this 20-F or to one of our previous SEC filings.



We file annual and special reports and other information with the SEC. You may read and copy any document we file with the SEC at the SECs public
reference room at 100 F Street N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC maintains an Internet site at http://www.sec.gov that contains reports,
registration statements and other information regarding issuers that file electronically with the SEC, including ASM International.



I. Subsidiary information.



See Item 4.C. Organizational Structure.



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Item 11. Quantitative and Qualitative Disclosures about Market Risk



We are exposed to market risks (including foreign exchange rate risk
and interest rate risk), credit risk and liquidity risk. We use forward exchange contracts to hedge foreign exchange risk. We do not enter into financial instrument transactions for trading or speculative purposes.



Foreign exchange rate risk management



We conduct business in a number of foreign countries, with certain
transactions denominated in currencies other than the functional currency of ASM International (euro) or one of our subsidiaries conducting the business. The purpose of the Companys foreign currency management is to manage the effect of
exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in selected foreign currencies, in particular denominated in U.S. dollars.



Our front-end segment uses forward exchange contracts to hedge its foreign exchange risk of anticipated sales or purchase
transactions in the normal course of business, which occur within the next twelve months, for which it has a firm commitment from a customer or to a supplier. The terms of these contracts are consistent with the timing of the transactions being
hedged. The hedges related to forecasted transactions are designated and documented at the inception of the hedge as cash flow hedges, and are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is
reported as a component of accumulated other comprehensive income in Shareholders Equity, and is reclassified into earnings when the hedged transaction affects earnings.



The majority of revenues and costs of our back-end segment are denominated in Hong Kong dollars, Chinese Yuan and U.S.
dollars. The functional currency of our back-end segment (Hong Kong dollar) is linked to the U.S. dollar. Since foreign currency exposure is not significant, no forward exchange contracts are used. The effect of exchange rate fluctuations on
revenues, costs and cash flows and assets and liabilities denominated in foreign currencies is periodically reviewed.



Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in
earnings. We record all derivatives, including forward exchange contracts, on the balance sheet at fair value in other current assets or accrued expenses.



We expect that substantially all of the  123,000 unrealized losses included in accumulated other comprehensive income as of December 31, 2009 will be reclassified to net earnings within the next twelve months, upon completion of the underlying transactions. If the
underlying transaction being hedged fails to occur, or if a portion of any derivative is ineffective, the gain or loss is immediately recognized in earnings under foreign currency exchange gains (losses) in the Consolidated Statement of Operations.
Hedge ineffectiveness was insignificant for the years ended December 31, 2008 and December 31, 2009.



Furthermore, we manage the currency exposure of certain receivables and payables using derivative instruments, such as forward exchange contracts (fair
value hedges) and currency swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains or losses on these instruments provide an offset to the gains or losses recorded on receivables and payables denominated in
foreign currencies. The derivative instruments are recorded at fair value and changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the Consolidated Statement of Operations. Receivables and payables
denominated in foreign currencies are recorded at the exchange rate at the balance sheet date and gains and losses as a result of changes in exchange rates are recorded in earnings under foreign currency exchange gains (losses) in the Consolidated
Statement of Operations.



We do not use forward exchange
contracts for trading or speculative purposes.



To the
extent that foreign currency fluctuations affect the value of our investments in our foreign affiliates, they are not hedged. The cumulative effect of these fluctuations is separately reported in Consolidated Shareholders Equity. For the year
ended December 31, 2008, we recorded a favorable movement of  10.0 million. For the year ended December 31, 2009, we
recorded a unfavorable movement of  1.9 million. See Note 17 to our Consolidated Financial Statements, which is incorporated herein
by reference.



The following table summarizes our financial
instruments as of December 31, 2009 and analyzes the sensitivity of the fair value of our financial instruments to an immediate change in foreign currency rates. Fair values represent the present value of forecasted future cash flows at market
foreign currency exchange rates. The sensitivity analysis assumes an immediate 10% favorable or unfavorable change in all foreign currency exchange rates against the euro from their levels as of December 31 with all other variables kept
constant. A favorable 10% change indicates a strengthening of the currency in which our financial instruments are denominated, primarily the U.S. dollar, against the euro and an unfavorable change



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indicates a weakening of the currency in which our financial instruments are denominated, primarily the U.S. dollar, against the euro. The selection of 10% favorable or unfavorable change in
foreign currency exchange rates should not be construed as a prediction by us of future market events, but rather, to illustrate the potential impact of such an event. The modeling technique used to calculate the exposure does not take into account
correlation among foreign currency exchange rates, or correlation among various markets (i.e., the foreign exchange, equity and fixed-income markets). Even though we believe it to be possible that all of the foreign currency exchange rates to which
we are exposed would simultaneously change by more than 10%, we find it meaningful to stress test our exposure under this 10% fluctuation scenario and other hypothetical adverse market scenarios. Our actual experience may differ from the
results in the table below due to the correlation assumptions utilized, or if events occur that were not included in the methodology, such as significant liquidity or market events.



|                                                                   |  |                            |  |                |                        |            |                          |                      |  |                      |  |      
|------------------------------------------------------------------ |  | -------------------------- |  | -------------- | ---------------------- | ---------- | ------------------------ | -------------------- |  | -------------------- |  | -----
|                                                                   |  | Currency andnotionalamount |  | Carryingamount |                        | Fair value |                          | Sensitivity analysis
|                                                                   |  |                            |  |                | Favorablechange of 10% |            | Unfavorablechange of 10%
|                                                                   |  |                            |  | (in millions)  |                        |            |                          |                      |  | (in millions of EUR)
|As of December 31, 2009:                                           |  |                            |  |                |                        |            |                          |                      |  |                      |  |      
|Notes payable to banks, due within twelve months                   |  | yen                        |  | 1,800.0        |                        | 13.5       |                          | 13.5                 |  | 12.2                 |  | 14.9 
|                                                                   |  | SG$                        |  | 2.0            |                        | 1.0        |                          | 1.0                  |  | 0.9                  |  | 1.1  
|                                                                   |  |                            |  |                |                        |           
|Long-term debt with maturities:                                    |  |                            |  |                |                        |            |                          |                      |  |                      |  |      
|due from 20092012                                                 |  | yen                        |  | 2,833.5        |                        | 21.3       |                          | 21.3                 |  | 19.2                 |  | 23.4 
|due from 2010                                                      |  | euro                       |  | 0.2            |                        | 0.2        |                          | 0.2                  |  | 0.2                  |  | 0.2  
|due from 2011                                                      |  | SG$                        |  | 1.7            |                        | 0.9        |                          | 0.9                  |  | 0.8                  |  | 0.9  
|                                                                   |  |                            |  |                |                        |           
|Convertible subordinated debt:                                     |  |                            |  |                |                        |            |                          |                      |  |                      |  |      
|due May 15, 2010                                                   |  | US$                        |  | 16.9           |                        | 11.7       |                          | 15.5                 |  | 10.5                 |  | 12.9 
|due December 6, 2011                                               |  | US$                        |  | 101.4          |                        | 70.4       |                          | 88.8                 |  | 63.3                 |  | 77.4 
|due November 6, 2014                                               |  | euro                       |  | 150.0          |                        | 150.0      |                          | 186.5                |  | 150.0                |  | 150.0
|                                                                   |  |                            |  |                |                        |           
|Foreign exchange contracts:                                        |  |                            |  |                |                        |            |                          |                      |  |                      |  |      
|purchase of currency contracts to be settled within twelve months: |  | US$                        |  | 0.6            |                        | 0.4        |                          | 0.4                  |  | 0.4                  |  | 0.5  
|                                                                   |  |                            |  |                |                        |           
|sale of currency contracts to be settled within twelve months:     |  | US$                        |  | 20.9           |                        | 14.5       |                          | 14.5                 |  | 13.1                 |  | 16.0 



For long-term debt, the estimated fair values of our long-term debt are based on current interest rates available to us for debt instruments with similar terms and remaining maturities. The fair values of our
convertible subordinated debt borrowings are based on our estimates. For forward exchange contracts, market values based on external quotes from banks have been used to determine the fair value.



The following tables analyze our sensitivity to a hypothetical 10%
strengthening and 10% weakening of the U.S. dollar, Hong Kong dollar or Japanese yen against the euro as of December 31, 2009. This analysis includes foreign currency denominated monetary items and adjusts their translation at year end for a
10% increase and 10% decrease of the U.S. dollar, Hong Kong dollar or Japanese yen against the euro.



A positive amount indicates an increase in equity. Recognized in equity is the revaluation effect of subsidiaries denominated in U.S. dollars, Hong
Kong dollars and Japanese yen.



|                                             |  |                 |   |  |                 |  
|-------------------------------------------- |  | --------------- | - |  | --------------- | -
|                                             |  | 2008            |   |  | 2009            |  
|                                             |  | Impact onequity |   |  | Impact onequity |  
|10% increase of U.S. dollar versus euro      |  | (3,566          | ) |  | (79             | )
|10% decrease of U.S. dollar versus euro      |  | 3,566           |   |  | 79              |  
|10% increase of Hong Kong dollar versus euro |  | 17,851          |   |  | 19,736          |  
|10% decrease of Hong Kong dollar versus euro |  | (17,851         | ) |  | (19,736         | )
|10% increase of Japanese yen versus euro     |  | 4,214           |   |  | 3,585           |  
|10% decrease of Japanese yen versus euro     |  | (4,214          | ) |  | (3,585          | )
|                                             |  |                 |   |  |                 |  



A positive amount indicates a gain in net
earnings.



A hypothetical 10% strengthening or 10% weakening
of any currency other than the U.S. dollar, Hong Kong dollar or Japanese yen against the euro as of December 31, 2008 and December 31, 2009 would not result in a material impact on equity.



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The following table analyzes our sensitivity to a hypothetical 10% strengthening and 10% weakening of
the U.S. dollar and Hong Kong dollar against the euro at average exchange rates for the years 2008 and 2009. A positive amount indicates an increase in net earnings.



|                                             |  |                       |   |  |                       |  
|-------------------------------------------- |  | --------------------- | - |  | --------------------- | -
|                                             |  | 2008                  |   |  | 2009                  |  
|                                             |  | Impact onnet earnings |   |  | Impact onNet earnings |  
|10% increase of Japanese yen versus euro     |  | not material          |   |  | (1,212                | )
|10% decrease of Japanese yen versus euro     |  | not material          |   |  | 1,212                 |  
|10% increase of U.S. dollar versus euro      |  | 451                   |   |  | (7,456                | )
|10% decrease of U.S. dollar versus euro      |  | (451                  | ) |  | 7,456                 |  
|10% increase of Hong Kong dollar versus euro |  | 4,819                 |   |  | 4,570                 |  
|10% decrease of Hong Kong dollar versus euro |  | (4,819                | ) |  | (4,570                | )
|                                             |  |                       |   |  |                       |  



A hypothetical 10% strengthening or 10%
weakening of any currency other than the U.S. dollar and the Hong Kong dollar against the euro at average exchange rates for the years 2008 and 2009 would not result in a material impact on net earnings.



Interest risk



We are exposed to interest rate risk primarily through its borrowing activities. The Company does not enter into
financial instrument transactions for trading or speculative purposes or to manage interest rate exposure. At December 31, 2009 the Company had convertible subordinated debt borrowings outstanding of  11,718 (US$ 16,880) at a fixed interest rate, maturing in May 2010,  70,383 (US$ 101,387) at a fixed interest rate, maturing in December 2011 and  150,000 at a fixed rate, maturing in
November 2014,  22,349 in long-term debt at fixed interest rates and  14,508 in other borrowings with variable short-term interest rates. A hypothetical change in the average interest rate by 10% on the portion of the Companys debt bearing
interest at variable rates would not result in a material change in interest expense at December 31, 2008 and December 31, 2009 borrowing levels.



Credit risk



Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable
and derivative instruments. These instruments contain a risk of counterparties failing to discharge their obligations. We monitor credit risk and manage credit risk exposure by type of financial instrument by assessing the creditworthiness of
counterparties. We do not anticipate nonperformance by counterparties given their high creditworthiness.



Our customers are semiconductor device manufacturers located throughout the world. We generally do not require collateral or other security to support
financial instruments with credit risk.



Concentrations of
credit risk (whether on or off-balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be
similarly affected by changes in economic or other conditions.



A significant percentage of our revenue is derived from a small number of large customers. Our largest customer accounted for approximately 9.1% of net sales in 2009 (2008: 13.8%; 2007: 9.6%) and the ten largest customers accounted for
approximately 32.9% of net sales in 2009 (2008: 32.0%; 2007: 32.4%). Sales to these large customers also may fluctuate significantly from time to time depending on the timing and level of purchases by these customers. Significant orders from such
customers may expose us to a concentration of credit risk and difficulties in collecting amounts due, which could harm our financial results. At December 31, 2009 one customer accounted for 7.8% of the outstanding balance in accounts receivable
(2008: 12.3%; 2007: 7.8%).



We place our cash and cash
equivalent and derivative instruments with high quality financial institutions to limit the amount of credit risk exposure.



The maximum credit exposure is equal to the carrying values of cash and cash equivalent and accounts receivable.



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Item 12. Description of Securities Other Than Equity Securities



Not applicable.



Item 13. Defaults, Dividend Arrearages and Delinquencies



None.



Item 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds



On May 14, 2008,
Stichting Continuïteit ASM International (Stichting) exercised an option under a 1997 agreement with us and acquired 21,985 preferred shares representing 21,985,000 votes on matters to be acted on by our shareholders. All such
preferred shares were cancelled in 2009 and an option was reissued to Stichting to acquire preferred shares. See the discussion of Stichting under Item 7.A., Major Shareholders and Related Party TransactionsMajor shareholders,
above.



Item 15. Controls and Procedures



(a) Disclosure Controls and Procedures: Our CEO and
CFO, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 20-F, have concluded that as of December 31, 2009 our disclosure
controls and procedures were effective.



(b)
Managements Annual Report on Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial
reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with applicable generally accepted accounting principles. Internal control over financial reporting
includes policies and procedures for maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial
statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets
that could have a material effect on our financial statements would be prevented or detected on a timely basis. Management, including our CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
evaluation, management concluded that the Companys internal control over financial reporting was effective as of December 31, 2009. Deloitte Accountants B.V., an independent registered public accounting firm, has audited the Consolidated
Financial Statements included in this annual report on Form 20-F and, as part of the audit, has issued an attestation report, included herein, on managements assessment of ASMIs internal control over financial reporting.



(c) Attestation Report of the Registered Public Accounting Firm: The
attestation report of Deloitte Accountants B.V. is included in this annual report on Form 20-F and is incorporated by reference herein.



(d) Changes in Internal Control Over Financial Reporting: There were no changes to our internal control over financial reporting that occurred during
the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



Inherent Limitations on Effectiveness of Controls



All internal control systems no matter how well designed and implemented have inherent limitations. Even systems
determined to be effective may not prevent or detect misstatements or fraud and can only provide reasonable assurance with respect to disclosure and financial statement presentation and reporting. Additionally, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changed conditions and the degree of compliance with the policies or procedures may deteriorate.



Item 16A. Audit Committee Financial Expert



The Supervisory Board has determined that
Mr. Lobbezoo, an independent member of the Supervisory Board, qualifies as the Audit Committee Financial Expert. For Mr. Lobbezoos experience see Item 6 Directors, Senior Management and Employees.



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Item 16B. Code of Ethics



Our code of ethics applies to all of our employees worldwide, as well as
our Supervisory Board and Management Board. The code of ethics is designed to promote honest and ethical conduct and timely and accurate disclosure in our periodic financial reports.



For further information, see the Code of Ethics and other related policies including our Rules Concerning Insider
Trading, which are posted on our website (www.asm.com).



Item 16C. Principal Accountant Fees and Services



Audit fees.



Deloitte Accountants B.V., its affiliates, and its member firms (Deloitte) billed us an aggregate  2,512,596 and  2,073,646 for the audit of our Consolidated
Financial Statements for the years ended December 31, 2008 and 2009, respectively, and certain agreed upon procedures regarding our quarterly financial results. These amounts accounted for 80% and 82% of the total fees billed to us by Deloitte
in 2008 and 2009, respectively.



Audit-related fees.



Deloitte billed us an aggregate of  10,550 and  5,150 for fees for
audit related services for the years ended December 31, 2008 and 2009, respectively. These amounts accounted for 1% and 0% of the total fees billed to us by Deloitte in 2008 and 2009, respectively.



Tax fees.



Deloitte billed us an aggregate of  533,144 and  425,694 in 2008 and 2009, respectively, for tax services relating to tax
compliance, tax planning and advice. These amounts accounted for 17% and 17% of the total fees billed to us by Deloitte in 2008 and 2009, respectively.



All other fees.



Deloitte billed us an aggregate of 
57,907 and  36,147 in 2008 and 2009, respectively, for all other services. These amounts accounted for 2% and 1% of the total fees billed
to us by Deloitte in 2008 and 2009, respectively.



Audit Committee
pre-approval policies.



The Audit Committee has
determined that the provision of services by Deloitte described in the preceding paragraphs is compatible with maintaining Deloittes independence. All audit and permitted non-audit services provided by Deloitte during 2009 were pre-approved by
the Audit Committee.



The Audit Committee has adopted the
following policies and procedures for pre-approval of all audit and permitted non-audit services provided by our independent registered public accounting firm:



Audit Services. Management submits to the Audit Committee for pre-approval the scope and estimated fees for specific services directly
related to performing the independent audit of our Consolidated Financial Statements for the current year.



Audit-Related Services.The Audit Committee may pre-approve expenditures up to a specified amount for services included in identified service
categories that are related extensions of audit services and are logically performed by the auditors. Additional services exceeding the specified pre-approved limits require specific Audit Committee approval.



Tax Services. The Audit Committee may pre-approve expenditures up
to a specified amount per engagement and in total for identified services related to tax matters. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific
Audit Committee approval.



Other Services. In the
case of specified services for which utilizing our independent registered public accounting firm creates efficiencies, minimizes disruption, or preserves confidentiality, or for which management has determined that our independent registered public
accounting firm possesses unique or superior qualifications to provide such services, the Audit Committee may pre-approve expenditures up to a specified amount per engagement and in total. Additional services exceeding the specified pre-approved
limits, or involving service types not included in the pre-approved list, require specific Audit Committee approval.



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Item 16D. Exemptions from the Listing Standards for Audit Committees



Not applicable.



Item 16E. Purchases of Equity Securities by the Issuer
and Affiliated Purchasers



On May 14, 2009, the
General Meeting of Shareholders authorized, for an 18-month period, to be calculated from the date of the General Meeting to cause the Company to repurchase its own shares up to the statutory maximum, at a price at least equal to the shares
nominal value and at most a price equal to 110% of the shares average closing price according to the listing on the Euronext Amsterdam stock exchange during the five trading days preceding the acquisition date.



No shares were repurchased during 2009 under the authorization of
May 14, 2009.



The maximum number of shares that may
yet be purchased under the program takes into account treasury shares held by the Company (at December 31, 2009 there are no treasury shares held by the Company) and the maximum number of common shares which the Company can hold according to
its Articles of Association. This maximum is 10% of the number of common shares issued.



Of our treasury shares, 2,552,071 shares were held in a custody account with Lehman Brothers International (Europe), which was placed into administration on September 15, 2008. These shares were cancelled in
2009 with shareholders approval at the 2009 Annual General Meeting of Shareholders.



Item 16F. Change in Registrants Certifying Accountant.



Not applicable.



Item 16G. Corporate Governance



Because we are a Netherlands public limited liability company, with principal executive offices outside of the U.S., some of our corporate practices
vary from those required by the NASDAQ Listing Rules, as follows:



(i)
Listing Rule 5620(c): Quorum



Pursuant to Dutch
corporate law (section 2:120 sub 2 Dutch Civil Code) the validity of a resolution by the general meeting of shareholders does not depend on the proportion of the capital or shareholders represented at the meeting (i.e. quorum), unless the law or
articles of association of a company otherwise provide. It is the generally accepted business practice for Dutch companies not to provide for a quorum requirement in their articles, and there is no contrary requirement in the Dutch securities laws
or under the rules of Euronext Amsterdam. Accordingly, our Articles of Association provide that a resolution of the general or any extraordinary meeting of shareholders will be adopted upon the favorable vote of a majority of the
votes cast at the meeting. With the exception as outlined below, our Articles of Association do not provide for a quorum other than for resolutions in relation to the limitation of pre-emptive rights of existing shareholders and the
cancellation of outstanding shares, which quorum requirements correspond with mandatory Dutch law. Furthermore, our Articles of Association provide that in the case of a shareholder appointment of persons to, or dismissal of
persons from, our Supervisory Board and Management Board not proposed by our Supervisory Board, such resolution requires the affirmative vote of a majority of the votes cast at an annual or extraordinary shareholders meeting, which
affirmative votes represent more than half our issued capital. To this extent, our practice varies from the requirement of Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a quorum, and that such quorum may not be less
than one-third of the outstanding voting stock.



(ii) Listing Rule
5620(b): Proxies



The solicitation of proxies and the
distribution of proxy statements for meetings of shareholders are not required under Dutch law or by the rules of Euronext Amsterdam. It is still business practice for Dutch companies not to solicit proxies or distribute proxy statements in respect
of European shareholders. In part this is because a substantial portion of shares held by these shareholders are held in bearer form. This is the case for our common shares traded on Euronext Amsterdam and, accordingly, it is impractical to solicit
proxies as to these shares. As a result, our practice in respect of the holders of shares other than our common shares listed on the NASDAQ Global Select Market varies from that required by Listing Rule 5620(b), which provides that issuers shall
solicit proxies and provide proxy statements for all meetings of shareholders.



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As to our common shares listed on the NASDAQ Global Select Market, which we refer to as New York
registry shares, we prepare a proxy statement and solicit proxies from the holders of such shares since there are procedures in place under the Securities Exchange Act of 1934, as amended, for soliciting proxies from beneficial owners. Our practice
in this regard, however, differs from the typical practice of U.S. corporate issuers in that the advance record date for determining the holders of record entitled to attend and vote at our shareholder meetings may not be more than 30 days prior to
the meeting under applicable Dutch corporate law (section 2:119 sub 2 of Dutch Civil Code). As an administrative necessity, we establish a mailing record date in advance of each meeting of shareholders for purposes of determining the shareholders to
which the proxy statement and form of proxy, or the notice of Internet availability, will be sent. However, only shareholders of record on the specified record date are entitled to attend and vote, directly or by proxy, at the meeting.



Item 17. Financial Statements



Not Applicable.



Item 18. Financial Statements



See pages F-1 through F-47, which are incorporated herein by reference.



Item 19. Exhibits (*)



|              |  |                                                                                                                                            |  |                                                                     |  |                
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------- |  | ---------------
|ExhibitNumber |  | Description                                                                                                                                |  | Incorporated by Reference to:                                       |  | IncludedHerein:
|1.1           |  | English Informal Translation of ASM International N.V.s Articles of Association, as amended                                               |  | Exhibit 1.1 to the Registrants Form 20-F filed on March 16, 2007   |  |                
|              |  |                                                                                                                                            | 
|2.1           |  | Indenture Agreement dated May 6, 2003 between ASM International N.V. and Citibank N.A.                                                     |  | Exhibit 4.18 to the Registrants Form F-3 filed on July 25, 2003    |  |                
|              |  |                                                                                                                                            | 
|2.2           |  | Indenture Agreement dated December 6, 2004 for the 4.25 % Convertible Subordinated Notes.                                                  |  | Exhibit 99.1 to the Registrants Form 6-K filed on December 9, 2004 |  |                
|              |  |                                                                                                                                            | 
|2.3           |  | Trust Deed dated November 6, 2009 for the 6.5 % Senior Unsecured Convertible Bonds                                                         |  |                                                                     |  | X              
|              |  |                                                                                                                                            | 
|4.1           |  | 2001 Stock Option Plan                                                                                                                     |  | Exhibit 99.1 to the Registrants Form S-8 filed on April 30, 2002   |  |                
|              |  |                                                                                                                                            | 
|4.2           |  | 1994 Stock Option Plan                                                                                                                     |  | Exhibit 99.1 to the Registrants S-8 filed October 25, 1999         |  |                
|              |  |                                                                                                                                            | 
|4.3           |  | Trust Deed and Rules of The ASM Pacific Technology Employee Share Incentive Scheme, dated March 23, 1990                                   |  | Exhibit 4.14 to the Registrants Form 20-F filed on April 17, 2003  |  |                
|              |  |                                                                                                                                            | 
|4.4           |  | Deed of Adherence Relating to Participation in the Employee Share Incentive Scheme of ASM Pacific Technology Limited, dated April 12, 1999 |  | Exhibit 4.15 to the Registrants Form 20-F filed on April 17, 2003  |  |                
|              |  |                                                                                                                                            | 
|4.5           |  | Supplemental Deed Relating to the Employee Share Incentive Scheme of ASM Pacific Technology Limited                                        |  | Exhibit 4.16 to the Registrants Form 20-F filed on April 17, 2003  |  |                
|              |  |                                                                                                                                            | 
|4.6           |  | Overview of Remuneration of Members of the Management Board, appointed May 18, 2006                                                        |  | Exhibit 4.23 to the Registrants Form 20-F filed on March 16, 2007  |  |                
|              |  |                                                                                                                                            | 
|4.7           |  | Overview of Remuneration of Mr. W.K. Lee, appointed Member of the Management Board effective January 1, 2007                               |  | Exhibit 4.24 to the Registrants Form 20-F filed on March 16, 2007  |  |                
|              |  |                                                                                                                                            | 
|4.8           |  | Form of Supervisory Board Member Indemnification Agreement                                                                                 |  | Exhibit 10.1 to the Registrants Form 20-F filed on March 16, 2007  |  |                
|              |  |                                                                                                                                            | 
|4.9           |  | Form of Management Board Member Indemnification Agreement                                                                                  |  | Exhibit 10.2 to the Registrants Form 20-F filed on March 16, 2007  |  |                



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|              |  |                                                                                                                                                               |  |                                                                    |  |                
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------ |  | ---------------
|ExhibitNumber |  | Description                                                                                                                                                   |  | Incorporated by Reference to:                                      |  | IncludedHerein:
|              |  |                                                                                                                                                               | 
|4.10          |  | Amended and Restated Settlement Agreement dated as of December 16, 1998 by and among ASM International N.V., ASM America, Inc. and Applied Materials, Inc. ** |  | Exhibit 10.3 to the Registrants Form 20-F filed on March 16, 2007 |  |                
|              |  |                                                                                                                                                               | 
|4.11          |  | Summary of the material elements of employment contract with Mr. C.D. del Prado (effective as of March 1, 2008)                                               |  | Exhibit 99.9 to the Registrants Form 6-K filed on May 20, 2008    |  |                
|              |  |                                                                                                                                                               | 
|8.1           |  | Subsidiaries                                                                                                                                                  |  |                                                                    |  | X              
|              |  |                                                                                                                                                               | 
|12.1          |  | Certification of CEO pursuant to Rule 13a-14(a)                                                                                                               |  |                                                                    |  | X              
|              |  |                                                                                                                                                               | 
|12.2          |  | Certification of CFO pursuant to Rule 13a-14(a)                                                                                                               |  |                                                                    |  | X              
|              |  |                                                                                                                                                               | 
|13.1          |  | Certification of CEO and CFO pursuant to Rule 13a-14(b) and 18 U.S.C. 1350                                                                                    |  |                                                                    |  | X              
|              |  |                                                                                                                                                               | 
|15.1          |  | Consent of Independent Registered Public Accounting Firm                                                                                                      |  |                                                                    |  | X              



|* | Pursuant to Instruction 2(b)(ii), the Registrant has omitted certain agreements with respect to long-term debt not exceeding 10% of consolidated total assets. The Registrant
agrees to furnish a copy of any such agreements to the Securities Exchange Commission upon request.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Redacted version, originally filed as an exhibit to Registrants Form 6-K filed February 11, 1999. Portions of the Agreement have been omitted pursuant to a request for
confidential treatment.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



|                     |  |                         
|-------------------- |  | ------------------------
|                     |  | ASM INTERNATIONAL N.V.  
|                     | 
|Date: March 26, 2010 |  | /s/ CHARLES D. DEL PRADO
|                     |  | Charles D. del Prado    
|                     |  | Chief Executive Officer 



S-1



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##### Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                     |  |        
|---------------------------------------------------------------------------------------------------- |  | -------
|Report of Independent Registered Public Accounting Firm                                              |  | F-2, F3
|Consolidated Balance Sheets as of December 31, 2008 and 2009                                         |  | F-4    
|Consolidated Statements of Operations for the years ended December 31, 2007, 2008 and 2009           |  | F-5    
|Consolidated Statements of Comprehensive Income for the years ended December 31, 2007, 2008 and
2009 |  | F-6    
|Consolidated Statements of Total Equity for the years ended December 31, 2007, 2008 and 2009         |  | F-7    
|Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2008 and 2009           |  | F-8    
|Notes to the Consolidated Financial Statements                                                       |  | F-9    



F-1



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm



To the Supervisory Board and Shareholders of

ASM International N.V.

Almere, the Netherlands



We have audited
the accompanying consolidated balance sheets of ASM International N.V. and subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, total equity, and cash flows for each of
the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ASM International NV and subsidiaries at
December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of
America.



As discussed in Note 1 to the financial statements, in 2009 the
Company changed its method of accounting for Non-controlling Interests in Consolidated Financial Statements to conform to ASC 810 Non-controlling Interests in Consolidated Financial Statements and, retrospectively, adjusted the 2008 and
2007 financial statements for the change. As discussed in Note 1 to the financial statements, the Company changed its method of accounting for Determining Whether an Instrument for an Embedded Feature Is Indexed to an Entitys Own Stock in
2009.



We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 26, 2010 expressed an unqualified opinion on the Companys internal control over financial reporting.



Deloitte Accountants B.V.

Amsterdam, the Netherlands,



March 26, 2010



F-2



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm



To the Supervisory Board and Shareholders of

ASM International N.V.

Almere, the Netherlands



We have audited
the internal control over financial reporting of ASM International NV and subsidiaries (the Company) as of December 31, 2009, based on criteria established in Internal Control  Integrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on
our audit.



We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



A companys internal control over financial reporting is a process designed by, or
under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material
effect on the financial statements.



Because of the inherent limitations of
internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of
any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.



In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission.



We have also audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2009 of the Company and our report dated March 26, 2010
expressed an unqualified opinion on those financial statements and included an explanatory paragraph related to the adoption of ASC 810 Non-controlling Interests in Consolidated Financial Statements and ASC 815 Determining Whether
an Instrument for an Embedded Feature Is Indexed to an Entitys Own Stock.



Deloitte Accountants B.V.

Amsterdam, the Netherlands,



March 26, 2010



F-3



---

##### Table of Contents

Consolidated Balance Sheets



|                                                                                                         |  |       |  |              |   |  |         |  
|-------------------------------------------------------------------------------------------------------- |  | ----- |  | ------------ | - |  | ------- | -
|                                                                                                         |  |       |  | December 31, |  
|(EUR thousands except share data)                                                                        |  | Note  |  | 2008         |   |  | 2009    |  
|Assets                                                                                                   |  |       |  |              |   |  |         |  
|Cash and cash equivalents                                                                                |  | 3     |  | 157,277      |   |  | 293,902 |  
|Accounts receivable (less allowance for doubtful accounts of  7,300and  8,968)                         |  | 4     |  | 172,603      |   |  | 165,754 |  
|Inventories, net                                                                                         |  | 5     |  | 197,700      |   |  | 150,645 |  
|Income taxes receivable                                                                                  |  |       |  | 108          |   |  | 43      |  
|Deferred tax assets                                                                                      |  | 24    |  | 4,685        |   |  | 6,893   |  
|Other current assets                                                                                     |  |       |  | 27,323       |   |  | 31,129  |  
|                                                                                                         |  |       |  |              |   |  |         |  
|Total current assets                                                                                     |  |       |  | 559,696      |   |  | 648,367 |  
|                                                                                                         |  |       | 
|Debt issuance costs                                                                                      |  | 16    |  | 1,353        |   |  | 6,978   |  
|Deferred tax assets                                                                                      |  | 24    |  | 2,285        |   |  | 8,545   |  
|Other intangible assets, net                                                                             |  | 6     |  | 7,918        |   |  | 8,936   |  
|Goodwill, net                                                                                            |  | 7     |  | 47,989       |   |  | 47,223  |  
|Evaluation tools at customers                                                                            |  | 10    |  |             |   |  | 11,282  |  
|Investments                                                                                              |  | 11    |  |             |   |  | 50      |  
|Property, plant and equipment, net                                                                       |  | 8     |  | 148,557      |   |  | 114,811 |  
|Assets held for sale                                                                                     |  | 9     |  |             |   |  | 5,508   |  
|                                                                                                         |  |       |  |              |   |  |         |  
|Total assets                                                                                             |  |       |  | 767,798      |   |  | 851,700 |  
|                                                                                                         |  |       |  |              |   |  |         |  
|Liabilities and Shareholders Equity                                                                     |  |       |  |              |   |  |         |  
|Notes payable to banks                                                                                   |  | 12    |  | 16,858       |   |  | 17,008  |  
|Accounts payable                                                                                         |  |       |  | 69,718       |   |  | 93,117  |  
|Provision for warranty                                                                                   |  | 13    |  | 9,913        |   |  | 5,650   |  
|Accrued expenses and other                                                                               |  | 14    |  | 57,451       |   |  | 78,061  |  
|Income taxes payable                                                                                     |  |       |  | 26,964       |   |  | 17,658  |  
|Current portion convertible subordinated debt                                                            |  | 16    |  |             |   |  | 11,542  |  
|Current portion of long-term debt                                                                        |  | 15    |  | 6,763        |   |  | 5,795   |  
|                                                                                                         |  |       |  |              |   |  |         |  
|Total current liabilities                                                                                |  |       |  | 187,667      |   |  | 228,832 |  
|                                                                                                         |  |       | 
|Pension liabilities                                                                                      |  | 18    |  | 6,490        |   |  | 5,556   |  
|Deferred tax liabilities                                                                                 |  | 24    |  | 539          |   |  | 314     |  
|Long-term debt                                                                                           |  | 15    |  | 23,268       |   |  | 16,554  |  
|Convertible subordinated debt                                                                            |  | 16    |  | 106,793      |   |  | 192,350 |  
|Conversion option                                                                                        |  | 16    |  |             |   |  | 22,181  |  
|                                                                                                         |  |       |  |              |   |  |         |  
|Total liabilities                                                                                        |  |       |  | 324,757      |   |  | 465,787 |  
|                                                                                                         |  |       | 
|Commitments and contingencies                                                                            |  | 19,20 |  |              |   |  |         |  
|                                                                                                         |  |       | 
|Common shares:                                                                                           |  |       |  |              |   |  |         |  
|Authorized 110,000,000 shares, par value  0.04, issued and outstanding 54,275,131 and 51,745,140 shares |  |       |  | 2,171        |   |  | 2,070   |  
|Financing preferred shares:                                                                              |  |       |  |              |   |  |         |  
|Authorized 8,000 shares, par value  40, non issued                                                      |  |       |  |             |   |  |        |  
|Preferred shares:                                                                                        |  |       |  |              |   |  |         |  
|Authorized 118,000 shares, par value  40, issued and outstanding 21,985 and 0 shares                    |  |       |  | 220          |   |  |        |  
|Capital in excess of par value                                                                           |  |       |  | 324,707      |   |  | 287,768 |  
|Treasury shares at cost                                                                                  |  |       |  | (37,215      | ) |  |        |  
|Retained earnings                                                                                        |  |       |  | 92,111       |   |  | 16,145  |  
|Accumulated other comprehensive loss                                                                     |  |       |  | (64,092      | ) |  | (64,754 | )
|                                                                                                         |  |       |  |              |   |  |         |  
|Total shareholders equity                                                                               |  | 17    |  | 317,902      |   |  | 241,229 |  
|Non-controlling interest                                                                                 |  |       |  | 125,139      |   |  | 144,684 |  
|                                                                                                         |  |       |  |              |   |  |         |  
|Total equity                                                                                             |  |       |  | 443,041      |   |  | 385,913 |  
|                                                                                                         |  |       |  |              |   |  |         |  
|Total liabilities and shareholders equity                                                               |  |       |  | 767,798      |   |  | 851,700 |  
|                                                                                                         |  |       |  |              |   |  |         |  





See Notes to Consolidated Financial Statements.



F-4



---

##### Table of Contents

Consolidated Statements of Operations



|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|-------------------------------------------------------------------------------------------------- |  | ---- |  | ----------------------- | - |  | -------- | - |  | -------- | -
|                                                                                                   |  |      |  | Year ended December 31, |  
|(EUR thousands, except per share data)                                                             |  | Note |  | 2007                    |   |  | 2008     |   |  | 2009     |  
|Net sales                                                                                          |  | 25   |  | 955,239                 |   |  | 747,362  |   |  | 590,739  |  
|Cost of sales                                                                                      |  |      |  | (594,163                | ) |  | (477,100 | ) |  | (409,224 | )
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|Gross profit                                                                                       |  | 25   |  | 361,076                 |   |  | 270,262  |   |  | 181,515  |  
|Operating expenses:                                                                                |  |      |  |                         |   |  |          |   |  |          |  
|Selling, general and administrative                                                                |  |      |  | (129,676                | ) |  | (126,591 | ) |  | (107,777 | )
|Research and development, net                                                                      |  | 22   |  | (83,468                 | ) |  | (75,011  | ) |  | (62,806  | )
|Amortization of other intangible assets                                                            |  | 6    |  | (553                    | ) |  | (475     | ) |  | (401     | )
|Impairment of goodwill                                                                             |  | 7    |  |                        |   |  | (1,395   | ) |  |         |  
|Restructuring expenses                                                                             |  | 23   |  |                        |   |  | (7,068   | ) |  | (35,687  | )
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|Total operating expenses                                                                           |  |      |  | (213,697                | ) |  | (210,540 | ) |  | (206,671 | )
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|Earnings (loss) from operations                                                                    |  | 25   |  | 147,379                 |   |  | 59,722   |   |  | (25,156  | )
|Interest income                                                                                    |  |      |  | 6,113                   |   |  | 4,047    |   |  | 1,018    |  
|Interest expense                                                                                   |  |      |  | (9,866                  | ) |  | (7,745   | ) |  | (8,556   | )
|Gain (loss) resulting from early extinguishment of debt                                            |  | 16   |  | (10,049                 | ) |  | 7,956    |   |  | (1,759   | )
|Accretion interest expense convertible notes                                                       |  | 16   |  |                        |   |  |         |   |  | (4,286   | )
|Revaluation conversion option                                                                      |  | 16   |  |                        |   |  |         |   |  | (24,364  | )
|Foreign currency exchange gains (losses), net                                                      |  |      |  | (1,020                  | ) |  | 785      |   |  | (1,384   | )
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|Earnings (loss) before income taxes                                                                |  |      |  | 132,557                 |   |  | 64,765   |   |  | (64,487  | )
|Income tax expense                                                                                 |  | 24   |  | (19,245                 | ) |  | (12,144  | ) |  | (3,786   | )
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|Earnings (loss) before dilution on investment in subsidiary                                        |  |      |  | 113,312                 |   |  | 52,621   |   |  | (68,273  | )
|Gain on dilution of investment in subsidiary                                                       |  | 18   |  | 3,010                   |   |  | 4,088    |   |  | 956      |  
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|Net earnings (loss)                                                                                |  |      |  | 116,322                 |   |  | 56,709   |   |  | (67,317  | )
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|Net earnings (loss) for allocation between shareholders of the parent and non-controlling interest |  |      |  |                         |   |  |          |   |  |          |  
|Allocation of net earnings (loss)                                                                  |  |      |  |                         |   |  |          |   |  |          |  
|Shareholders of the parent                                                                         |  |      |  | 60,977                  |   |  | 18,411   |   |  | (106,561 | )
|Non-controlling interest                                                                           |  |      |  | 55,345                  |   |  | 38,298   |   |  | 39,244   |  
|Net earnings (loss) per share:                                                                     |  | 27   |  |                         |   |  |          |   |  |          |  
|Basic net earnings (loss) from continuing operations                                               |  |      |  | 1.13                    |   |  | 0.35     |   |  | (2.06    | )
|Diluted net earnings (loss) from continuing operations                                             |  |      |  | 1.07                    |   |  | 0.35     |   |  | (2.06    | )
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  
|Weighted average number of shares used in computing per share amounts (in thousands):              |  |      |  |                         |   |  |          |   |  |          |  
|Basic                                                                                              |  |      |  | 53,968                  |   |  | 52,259   |   |  | 51,627   |  
|Diluted                                                                                            |  |      |  | 65,076                  |   |  | 52,389   |   |  | 51,627   |  
|                                                                                                   |  |      |  |                         |   |  |          |   |  |          |  





See Notes to Consolidated Financial Statements.



F-5



---

##### Table of Contents

Consolidated Statements of Comprehensive Income



|                                                                      |  |      |  |                         |   |  |        |   |  |          |  
|--------------------------------------------------------------------- |  | ---- |  | ----------------------- | - |  | ------ | - |  | -------- | -
|                                                                      |  |      |  | Year ended December 31, |  
|(EUR thousands)                                                       |  | Note |  | 2007                    |   |  | 2008   |   |  | 2009     |  
|Net earnings (loss)                                                   |  |      |  | 116,322                 |   |  | 56,709 |   |  | (67,317  | )
|Other comprehensive income (loss):                                    |  |      |  |                         |   |  |        |   |  |          |  
|Foreign currency translation effect                                   |  |      |  | (24,658                 | ) |  | 14,681 |   |  | (4,939   | )
|Unrealized gains (losses) on derivative instruments, net of tax       |  |      |  | 270                     |   |  | (99    | ) |  | (170     | )
|Reclassification transition obligation into retained earnings         |  |      |  |                        |   |  |       |   |  | 877      |  
|Amortization unrecognized actuarial results                           |  |      |  |                        |   |  |       |   |  | 26       |  
|Result on curtailment and settlement unrecognized pension obligations |  |      |  |                        |   |  |       |   |  | 852      |  
|Actuarial loss                                                        |  |      |  |                        |   |  | (936   | ) |  | (370     | )
|Amortization of transition obligation related to pensions(ASC 715)    |  |      |  | 22                      |   |  | 67     |   |  |         |  
|                                                                      |  |      |  |                         |   |  |        |   |  |          |  
|Total other comprehensive income (loss)                               |  | 17   |  | (24,366                 | ) |  | 13,713 |   |  | (3,724   | )
|                                                                      |  |      |  |                         |   |  |        |   |  |          |  
|Comprehensive income (loss)                                           |  |      |  | 91,956                  |   |  | 70,422 |   |  | (71,041  | )
|Allocation of comprehensive income (loss):                            |  |      |  |                         |   |  |        |   |  |          |  
|Common shareholders                                                   |  |      |  | 49,246                  |   |  | 27,228 |   |  | (107,228 | )
|Preferent shareholders                                                |  |      |  |                        |   |  | 10     |   |  | 5        |  
|Non-controlling interest                                              |  | 17   |  | 42,710                  |   |  | 43,184 |   |  | 36,182   |  
|                                                                      |  |      |  |                         |   |  |        |   |  |          |  







See Notes to Consolidated Financial Statements.



F-6



---

##### Table of Contents

Consolidated Statements of Total Equity



|                                                                                         |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  
|---------------------------------------------------------------------------------------- |  | ------ |  | -------------------- | - |  | ----------------------- | - |  | ------------ | - |  | --------------- | - |  | -------------------------- | - |  | --------------------- | - |  | ---------------- | - |  | ------------------------------------------- | - |  | ------------------------- | - |  | ----------------------- | - |  | ----------- | -
|                                                                                         |  |        |  |                      |   |  |                         |   |  | EUR          |  
|(thousands, except for share data)                                                       |  | Note   |  | Numberofcommonshares |   |  | Numberofpreferredshares |   |  | Commonshares |   |  | Preferredshares |   |  | Capitalinexcessof parvalue |   |  | Treasurysharesat cost |   |  | Retainedearnings |   |  | Accumulatedothercomprehens-ive income(loss) |   |  | Totalshare-holdersequity |   |  | Non-controllinginterest |   |  | Totalequity |  
|Balance January 1, 2007                                                                  |  |        |  | 53,828,745           |   |  |                        |   |  | 2,153        |   |  |                 |   |  | 316,745                    |   |  |                      |   |  | 18,748           |   |  | (61,188                                     | ) |  | 276,458                   |   |  | 114,916                 |   |  | 391,374     |  
|Issuance of common shares:                                                               |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  
|For stock options                                                                        |  | 18     |  | 176,469              |   |  |                        |   |  | 7            |   |  |                 |   |  | 2,319                      |   |  |                      |   |  |                 |   |  |                                            |   |  | 2,326                     |   |  |                        |   |  | 2,326       |  
|Compensation expense stock options                                                       |  | 18     |  |                     |   |  |                        |   |  |             |   |  |                 |   |  | 1,718                      |   |  |                      |   |  |                 |   |  |                                            |   |  | 1,718                     |   |  |                        |   |  | 1,718       |  
|Purchase of common shares                                                                |  | 17     |  |                     |   |  |                        |   |  |             |   |  |                 |   |  |                           |   |  | (8,162                | ) |  |                 |   |  |                                            |   |  | (8,162                    | ) |  |                        |   |  | (8,162      | )
|Exercise of stock options out of treasury shares                                         |  | 17     |  |                     |   |  |                        |   |  |             |   |  |                 |   |  | (1,125                     | ) |  | 4,177                 |   |  | (363             | ) |  |                                            |   |  | 2,689                     |   |  |                        |   |  | 2,689       |  
|Dividend                                                                                 |  |        |  |                     |   |  |                        |   |  |             |   |  |                 |   |  |                           |   |  |                      |   |  | (5,397           | ) |  |                                            |   |  | (5,397                    | ) |  |                        |   |  | (5,397      | )
|Net earnings to common shareholders                                                      |  |        |  |                     |   |  |                        |   |  |             |   |  |                 |   |  |                           |   |  |                      |   |  | 60,977           |   |  |                                            |   |  | 60,977                    |   |  | 55,345                  |   |  | 116,322     |  
|Other comprehensive loss                                                                 |  | 17     |  |                     |   |  |                        |   |  |             |   |  |                 |   |  |                           |   |  |                      |   |  |                 |   |  | (11,731                                     | ) |  | (11,731                   | ) |  | (12,635                 | ) |  | (24,366     | )
|Other movements in non-controlling interest:                                             |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  
|Dividend paid                                                                            |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  |                          |   |  | (42,900                 | ) |  | (42,900     | )
|Dilution                                                                                 |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  |                          |   |  | 4,150                   |   |  | 4,150       |  
|Financial restructuring                                                                  |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  |                          |   |  | 1,748                   |   |  | 1,748       |  
|                                                                                         |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  
|Balance December 31, 2007                                                                |  |        |  | 54,005,214           |   |  |                        |   |  | 2,160        |   |  |                |   |  | 319,657                    |   |  | (3,985                | ) |  | 73,965           |   |  | (72,919                                     | ) |  | 318,878                   |   |  | 120,624                 |   |  | 439,502     |  
|Compensation expense stock options                                                       |  | 18     |  |                     |   |  |                        |   |  |             |   |  |                |   |  | 2,024                      |   |  |                      |   |  |                 |   |  |                                            |   |  | 2,024                     |   |  |                        |   |  | 2,024       |  
|Purchase of common shares                                                                |  | 17     |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  | (36,453               | ) |  |                 |   |  |                                            |   |  | (36,453                   | ) |  |                        |   |  | (36,453     | )
|Issuance of preferred shares                                                             |  | 17     |  |                     |   |  | 21,985                  |   |  |             |   |  | 220             |   |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  | 220                       |   |  |                        |   |  | 220         |  
|Conversion of debt into common shares                                                    |  | 16     |  | 269,917              |   |  |                        |   |  | 11           |   |  |                |   |  | 3,582                      |   |  |                      |   |  |                  |   |  |                                            |   |  | 3,593                     |   |  |                        |   |  | 3,593       |  
|Conversion of debt into common shares out of treasury shares                             |  | 16, 17 |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  | 1,373                 |   |  |                 |   |  |                                            |   |  | 1,373                     |   |  |                        |   |  | 1,373       |  
|Exercise of stock options outof treasury shares                                          |  | 16, 17 |  |                     |   |  |                        |   |  |             |   |  |                |   |  | (556                       | ) |  | 1,850                 |   |  | (255             | ) |  |                                            |   |  | 1,039                     |   |  |                        |   |  | 1,039       |  
|Net earnings to common shareholders                                                      |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  | 18,401           |   |  |                                            |   |  | 18,401                    |   |  | 38,298                  |   |  | 56,699      |  
|Other comprehensive income                                                               |  | 17     |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  | 8,827                                       |   |  | 8,827                     |   |  | 4,886                   |   |  | 13,713      |  
|Other movements in non-controlling interest:                                             |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  
|Dividend paid                                                                            |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  |                          |   |  | (43,398                 | ) |  | (43,398     | )
|Dilution                                                                                 |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  |                          |   |  | 4,729                   |   |  | 4,729       |  
|                                                                                         |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  
|Balance December 31, 2008                                                                |  |        |  | 54,275,131           |   |  | 21,985                  |   |  | 2,171        |   |  | 220             |   |  | 324,707                    |   |  | (37,215               | ) |  | 92,111           |   |  | (64,092                                     | ) |  | 317,902                   |   |  | 125,139                 |   |  | 443,041     |  
|Compensation expense stock options                                                       |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  | 2,127                      |   |  |                      |   |  |                 |   |  |                                            |   |  | 2,127                     |   |  |                        |   |  | 2,127       |  
|Withdrawal of common shares                                                              |  | 17     |  | (2,553,000           | ) |  |                        |   |  | (102         | ) |  |                |   |  | (35,529                    | ) |  | 35,631                |   |  |                 |   |  |                                            |   |  |                          |   |  |                        |   |  |            |  
|Dividend tax paid on withdrawal of common shares                                         |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  | (3,399                     | ) |  |                      |   |  |                 |   |  |                                            |   |  | (3,399                    | ) |  |                        |   |  | (3,399      | )
|Withdrawal of preferred shares                                                           |  | 17     |  |                     |   |  | (21,985                 | ) |  |             |   |  | (220            | ) |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  | (220                      | ) |  |                        |   |  | (220        | )
|Exercise of stock options out of treasury shares                                         |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  | (323                       | ) |  | 1,584                 |   |  | (25              | ) |  |                                            |   |  | 1,236                     |   |  |                        |   |  | 1,236       |  
|Exercise stock options by issue of common shares                                         |  | 17     |  | 23,009               |   |  |                        |   |  | 1            |   |  |                |   |  | 185                        |   |  |                      |   |  |                 |   |  |                                            |   |  | 186                       |   |  |                        |   |  | 186         |  
|Reclassification transition obligation related to pensions (ASC 715)                     |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  | (877             | ) |  |                                            |   |  |                          |   |  |                        |   |  | (877        | )
|Impact of initial adoption of ASC 815 regarding the accounting for the convertible notes |  | 16     |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  | 7,902            |   |  |                                            |   |  | 7,902                     |   |  |                        |   |  | 7,902       |  
|Recognition conversion option subsequent to issuance of convertible notes                |  | 16     |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  | 23,601           |   |  |                                            |   |  | 23,601                    |   |  |                        |   |  | 23,601      |  
|Net earnings to common shareholders                                                      |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  | (106,566         | ) |  |                                            |   |  | (106,566                  | ) |  | 39,244                  |   |  | (67,323     | )
|Other comprehensive income                                                               |  | 17     |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  | (662                                        | ) |  | (662                      | ) |  | (3,062                  | ) |  | (3,724      | )
|Other movements in non-controlling interest:                                             |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  
|Dividend paid                                                                            |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  |                          |   |  | (19,099                 | ) |  | (19,099     | )
|Dilution                                                                                 |  |        |  |                     |   |  |                        |   |  |             |   |  |                |   |  |                           |   |  |                      |   |  |                 |   |  |                                            |   |  |                          |   |  | 2,462                   |   |  | 2,462       |  
|                                                                                         |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  
|Balance December 31, 2009                                                                |  |        |  | 51,745,140           |   |  |                        |   |  | 2,070        |   |  |                |   |  | 287,768                    |   |  |                      |   |  | 16,145           |   |  | (64,754                                     | ) |  | 241,229                   |   |  | 144,684                 |   |  | 385,913     |  
|                                                                                         |  |        |  |                      |   |  |                         |   |  |              |   |  |                 |   |  |                            |   |  |                       |   |  |                  |   |  |                                             |   |  |                           |   |  |                         |   |  |             |  



See Notes to Consolidated Financial
Statements.



F-7



---

##### Table of Contents

Consolidated Statements of Cash Flows



|                                                                             |  |      |      |                         |   |      |          |   |      |         |  
|---------------------------------------------------------------------------- |  | ---- | ---- | ----------------------- | - | ---- | -------- | - | ---- | ------- | -
|                                                                             |  | Note |      | Year ended December 31, |  
|(EURO thousands)                                                             |  |      | 2007 |                         |   | 2008 |          |   | 2009 |        
|Cash flows from operating activities:                                        |  |      |      |                         |   |      |          |   |      |         |  
|Net earnings (loss)                                                          |  |      |      | 116,322                 |   |      | 56,709   |   |      | (67,317 | )
|Adjustments to reconcile net earnings to net cash from operating activities: |  |      |      |                         |   |      |          |   |      |         |  
|Depreciation                                                                 |  | 8    |      | 33,250                  |   |      | 33,176   |   |      | 32,054  |  
|Amortization of other intangible assets                                      |  | 6    |      | 1,391                   |   |      | 1,484    |   |      | 2,335   |  
|Impairment of property, plant and equipment                                  |  | 8    |      | (788                    | ) |      | 7,068    |   |      | 4,628   |  
|Impairment of goodwill                                                       |  | 7    |      |                        |   |      | 1,395    |   |      |        |  
|Amortization of debt issuance costs                                          |  | 16   |      | 825                     |   |      | 742      |   |      | 902     |  
|Accruals for restructuring expenses and onerous contracts                    |  |      |      |                        |   |      |         |   |      | 26,657  |  
|Compensation expense employee share incentive scheme ASMPT                   |  | 18   |      | 7,685                   |   |      | 7,524    |   |      | 3,685   |  
|Compensation expense employee stock option plan                              |  | 18   |      | 1,718                   |   |      | 2,024    |   |      | 2,127   |  
|Accretion interest convertible bonds                                         |  | 16   |      |                        |   |      |         |   |      | 4,286   |  
|Change in fair value conversion option                                       |  | 16   |      |                        |   |      |         |   |      | 24,364  |  
|Deferred income taxes                                                        |  |      |      | (913                    | ) |      | (514     | ) |      | (9,081  | )
|(Gain) loss resulting from early extinguishment of debt                      |  | 16   |      | 10,049                  |   |      | (7,956   | ) |      | 1,759   |  
|Gain on dilution of investment in subsidiary                                 |  | 18   |      | (3,010                  | ) |      | (4,088   | ) |      | (956    | )
|Increase (decrease) in allowance for doubtful receivables                    |  | 4    |      | (260                    | ) |      | 1,927    |   |      | 1,667   |  
|Changes in assets and liabilities:                                           |  |      |      |                         |   |      |          |   |      |         |  
|Accounts receivable                                                          |  |      |      | (47,599                 | ) |      | 73,159   |   |      | 1,338   |  
|Inventories                                                                  |  |      |      | (26,613                 | ) |      | 23,980   |   |      | 32,076  |  
|Other current assets                                                         |  |      |      | (5,184                  | ) |      | 1,699    |   |      | (5,449  | )
|Accounts payable and accrued expenses                                        |  |      |      | 9,872                   |   |      | (54,471  | ) |      | 23,171  |  
|Advance payments from customers                                              |  |      |      | 3,044                   |   |      | (4,339   | ) |      | 11,052  |  
|Deferred revenue                                                             |  |      |      | (741                    | ) |      | (7,680   | ) |      | (1,674  | )
|Payments from provision restructuring expenses                               |  |      |      |                        |   |      |         |   |      | (16,105 | )
|Pension liabilities                                                          |  |      |      | 775                     |   |      | 743      |   |      | (280    | )
|Income taxes                                                                 |  |      |      | 5,781                   |   |      | 4,820    |   |      | (8,586  | )
|                                                                             |  |      |      |                         |   |      |          |   |      |         |  
|Net cash provided by operating activities                                    |  |      |      | 105,605                 |   |      | 137,402  |   |      | 62,652  |  
|Cash flows from investing activities:                                        |  |      |      |                         |   |      |          |   |      |         |  
|Capital expenditures                                                         |  | 8    |      | (47,206                 | ) |      | (31,450  | ) |      | (12,718 | )
|Purchase of intangible assets                                                |  | 6    |      | (695                    | ) |      | (5,362   | ) |      | (3,294  | )
|Acquisition of business                                                      |  | 7    |      | (281                    | ) |      | (176     | ) |      | (50     | )
|Proceeds from sale of business                                               |  | 7    |      |                        |   |      | 410      |   |      |        |  
|Proceeds from sale of property, plant and equipment                          |  | 8    |      | 3,652                   |   |      | 3,569    |   |      | 570     |  
|                                                                             |  |      |      |                         |   |      |          |   |      |         |  
|Net cash used in investing activities                                        |  |      |      | (44,530                 | ) |      | (33,009  | ) |      | (15,493 | )
|Cash flows from financing activities:                                        |  |      |      |                         |   |      |          |   |      |         |  
|Notes payable to banks, net                                                  |  |      |      | (2,013                  | ) |      | (5,172   | ) |      | 966     |  
|Debt issuance costs for stand-by facility paid                               |  |      |      |                        |   |      |         |   |      | (1,075  | )
|Net-proceeds from long-term debt and subordinated debt                       |  |      |      | 14,496                  |   |      | 7,980    |   |      | 144,516 |  
|Repayments of long-term debt and subordinated debt                           |  |      |      | (42,344                 | ) |      | (45,754  | ) |      | (32,246 | )
|Purchase of treasury shares                                                  |  | 17   |      | (8,162                  | ) |      | (36,453  | ) |      |        |  
|Proceeds from issuance of common shares and exercise of stock options        |  |      |      | 5,015                   |   |      | 1,039    |   |      | 1,447   |  
|Dividend tax paid on withdrawal of common shares                             |  |      |      |                        |   |      |         |   |      | (3,399  | )
|Proceeds from issuance of preferred shares                                   |  | 17   |      |                        |   |      | 220      |   |      | (220    | )
|Dividends to minority shareholders ASMPT                                     |  |      |      | (42,900                 | ) |      | (43,398  | ) |      | (19,099 | )
|Dividend to shareholders ASMI                                                |  |      |      | (5,397                  | ) |      |         |   |      |        |  
|                                                                             |  |      |      |                         |   |      |          |   |      |         |  
|Net cash provided by / (used in) financing activities                        |  |      |      | (81,305                 | ) |      | (121,538 | ) |      | 90,890  |  
|Foreign currency translation effect                                          |  |      |      | (5,719                  | ) |      | 6,499    |   |      | (1,427  | )
|                                                                             |  |      |      |                         |   |      |          |   |      |         |  
|Net (decrease) increase in cash and cash equivalents                         |  |      |      | (25,949                 | ) |      | (10,646  | ) |      | 136,623 |  
|Cash and cash equivalents at beginning of year                               |  | 3    |      | 193,872                 |   |      | 167,923  |   |      | 157,277 |  
|                                                                             |  |      |      |                         |   |      |          |   |      |         |  
|Cash and cash equivalents at end of year                                     |  | 3    |      | 167,923                 |   |      | 157,277  |   |      | 293,902 |  
|                                                                             |  |      |      |                         |   |      |          |   |      |         |  
|Supplemental disclosures of cash flow information                            |  |      |      |                         |   |      |          |   |      |         |  
|Cash paid during the year for:                                               |  |      |      |                         |   |      |          |   |      |         |  
|Interest                                                                     |  |      |      | 3,890                   |   |      | 3,843    |   |      | 5,918   |  
|Income taxes                                                                 |  |      |      | 14,329                  |   |      | 8,438    |   |      | 21,144  |  
|                                                                             |  |      |      |                         |   |      |          |   |      |         |  
|Non cash investing and financing activities:                                 |  |      |      |                         |   |      |          |   |      |         |  
|Subordinated debt converted                                                  |  | 16   |      |                        |   |      | 4,966    |   |      |        |  
|Subordinated debt converted into number of shares                            |  | 16   |      |                        |   |      | 372,946  |   |      |        |  
|                                                                             |  |      |      |                         |   |      |          |   |      |         |  



See Notes to Consolidated Financial
Statements.



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Notes to Consolidated Financial Statements



Amounts in euro thousands, except per share data and unless otherwise stated. All
amounts in these financial statements are rounded to the nearest thousand Euro; therefore amounts may not equal (sub) totals due to rounding.



NOTE 1Summary of Significant Accounting Policies



Basis of PresentationASM International N.V. (ASMI or the Company) is a Netherlands public liability company domiciled in the
Netherlands with its principal operations in Europe, the United States, Southeast Asia and Japan. The Company dedicates its resources to the research, development, manufacturing, marketing and servicing of equipment and materials used to produce
semiconductor devices. The Company provides production solutions for the main areas of semiconductor production: wafer processing (Front-end), assembly and packaging (Back-end). The Company follows accounting principles generally accepted in the
United States of America (U.S. GAAP) and applies the going concern basis in preparing its Consolidated Financial Statements. Historical cost is used as the measurement basis unless otherwise indicated.



As per 1 January 2009, ASMI applies ASC 815 Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entitys Own Stock.



All
our convertible bonds due 2010, 2011 and 2014, include a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into common shares of the Company
(conversion option). ASC 815 requires separate recognition of these components.



For the conversion options of the convertible bonds due 2010 and 2011 the accounting is different from that for the conversion option of the convertible bonds due 2014. As the convertible bonds due 2010 and 2011
are denominated in USD and the ASM International common shares in which they can be converted to are denominated in Euro, these conversion options are recognized as a liability measured at market value. The conversion option is measured at market
value through the income statement, for 2009 this revaluation at fair value resulted in a loss of  24.4 million. For the conversion
options of the convertible bonds due 2014 the fixedfor-fixed principle is met as both the debt instrument (the bond) and the entitys equity shares in which they can be converted to are denominated in the functional currency (Euro). Based
on the before mentioned criteria the conversion option qualifies as permanent equity.



The fair value of the liability component is estimated using the prevailing market interest rate at the date of issue, for similar non-convertible debt. Subsequently, the liability is measured at amortized cost.
The interest expense on the liability component is calculated by applying the market interest rate for similar non-convertible debt at the date of issue to the liability component of the instrument. The difference between this amount and the
interest paid is added to the carrying amount of the convertible subordinated notes, thus creating a non-cash interest expense. For 2009 this accretion interest was  4.3 million.



As per
January 1, 2009, ASMI applies ASC 810 Non-controlling Interests in Consolidated Financial Statements. This Statement changes the reporting format of both the consolidated income statement, the consolidated statement of comprehensive
income and the segment information. It requires consolidated net income and comprehensive income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest (minority interest). It
also requires disclosure, on the face of the consolidated statement of income and the consolidated statement of comprehensive income, of the amounts of consolidated net income and consolidated comprehensive income attributable to the parent and to
the non-controlling interest. Previously, net income attributable to the non-controlling interest generally was reported as an expense in arriving at consolidated net income.



Principles of ConsolidationThe Consolidated Financial Statements include the accounts of ASMI and its subsidiaries
(the Company), where ASMI holds a controlling interest. The non-controlling interest is disclosed separately in the Consolidated Financial Statements. All intercompany profits, transactions and balances have been eliminated in
consolidation.



Foreign Currency TranslationThe functional and
reporting currency of ASMI is the euro (EUR). The financial information for subsidiaries outside the Netherlands is measured using local currencies as the functional currency of that subsidiary. Assets and liabilities of foreign
subsidiaries, of which the functional currency is not the euro, are translated into euros at foreign currency exchange rates prevailing at the end of the year. Revenues and costs relating to the operation of such subsidiaries are translated at
weighted average foreign currency exchange rates during the year. Resulting translation adjustments are directly recorded in Shareholders Equity. Exchange rate differences on translations of other transactions in foreign currencies are
reflected in the Consolidated Statement of Operations.



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ReclassificationsCertain reclassifications have been made to the prior year Consolidated Financial
Statements to conform to the current year presentation.



Derivative
Financial InstrumentsASMI and its subsidiaries conduct business in a number of foreign countries, with certain transactions denominated in currencies other than the functional currency of the Company (euro) or one of its subsidiaries
conducting the business. The purpose of the Companys foreign currency management is to manage the effect of exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in selected foreign currencies, in
particular denominated in U.S. dollar.



The Companys front-end segment
uses forward exchange contracts to hedge its foreign exchange risk of anticipated sales or purchase transactions in the normal course of business, which occur within the next twelve months, for which the Company has a firm commitment from a customer
or to a supplier. The terms of these contracts are consistent with the timing of the transactions being hedged. The hedges related to forecasted transactions are designated and documented at the inception of the hedge as cash flow hedges, and are
evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income (loss) net of taxes in Shareholders Equity, and is reclassified into earnings
when the hedged transaction affects earnings.



Changes in the fair value of
derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in earnings. The Company records all derivatives, including forward exchange contracts, on the balance sheet at fair value in other
current assets or accrued expenses and other.



Substantially all amounts
included in accumulated other comprehensive loss at December 31, 2009 will be reclassified to net earnings within the next twelve months, upon completion of the underlying transactions. If the underlying transaction being hedged fails to occur,
or if a portion of any derivative is ineffective, the gain or loss is immediately recognized in earnings under foreign currency exchange gains (losses) in the Consolidated Statement of Operations.



Furthermore, the Company manages the currency exposure of certain receivables and payables
using derivative instruments, such as forward exchange contracts (fair value hedges) and currency swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains or losses on these instruments provide an offset to the
gains or losses recorded on receivables and payables denominated in foreign currencies. The derivative instruments are recorded at fair value and changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the
Consolidated Statement of Operations. Receivables and payables denominated in foreign currencies are recorded at the exchange rate at the balance sheet date and gains and losses as a result of changes in exchange rates are recorded in earnings under
foreign currency exchange gains (losses) in the Consolidated Statement of Operations.



The Company does not use forward exchange contracts for trading or speculative purposes.



Cash and Cash EquivalentsCash and cash equivalents include cash on hand, current accounts with banks, and short-term deposits with a maturity of three
months or less at the date of purchase.



Accounts
ReceivableAccounts receivable are stated at nominal value less an allowance for doubtful accounts.



InventoriesInventories are stated at the lower of cost (first-in, first-out method) or market value. Costs include net prices paid for materials purchased, charges for freight and custom duties, direct
wages of employees and charges for material handling.



Property, Plant
and EquipmentProperty, plant and equipment are carried at cost, less accumulated depreciation and impairment losses. Capital leased assets are recorded at the present value of future lease obligations. Depreciation is calculated using the
straight-line method over the estimated useful lives. Leasehold improvements are depreciated over the lesser of the estimated useful life of the leasehold improvement or the term of the underlying lease.



Evaluation tools at customersEvaluation tools at customers (evaluation
tools) are systems generally delivered to customers under evaluation or a conditional purchase order and include substantial customization by ASM engineers and ASM-R&D staff in the field. Evaluation tools are recorded at cost and
depreciated over their useful life (5 years). The depreciation period may be shorter, depending on circumstances. The depreciation expenses are reported as Cost of sales. Until December 31, 2008 evaluation tools were reported under inventories.
As per January 1, 2009 based on their useful life, these evaluation tools are reported separately on the face of the consolidated balance sheet as non-current assets.



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Goodwill and Other Intangible AssetsBusiness combinations are accounted for under the purchase accounting
method. As from January 1, 2002, goodwill and other intangible assets with indefinite lives are no longer amortized. Instead, the Company tests its recorded goodwill and other intangible assets with indefinite lives for impairment each year on
December 31 or if events or changes in circumstances indicate that the carrying amount exceeds the fair value of the goodwill and other intangible assets with indefinite lives. Other intangible assets with finite lives are amortized over the
estimated useful lives using the straight-line method. Goodwill is allocated to reporting units for purpose of impairment testing. and tested for impairment based on the two step approach. First the recoverability is tested by comparing the carrying
amount of the goodwill with the fair value being the sum of the discounted future cash flows. If the carrying amount of the goodwill at reporting unit level is higher than the fair value of the goodwill, the second step should be performed. The
goodwill impairment is measured as the excess of the carrying amount of the goodwill over its fair value.



Recoverability of Long-Lived AssetsLong-lived assets and other intangible assets (except those not being amortized) to be held and used by the Company are reviewed by the Company for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use
of the asset. If the undiscounted future cash flow is less than the carrying amount of the asset, the asset is deemed impaired. The amount of the impairment is measured as the difference between the carrying value and the fair value of the asset.
Long-lived assets and other intangibles (except those not being amortized) to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.



Revenue RecognitionThe Company recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; sellers price to buyer is fixed or determinable; and collectability is reasonably assured. The Companys revenue includes revenue from contractual arrangements
consisting of multiple deliverables, such as equipment and installation. The revenue from the undelivered element of the arrangement is deferred at fair value until delivery of the element.



In general, the Company recognizes revenue from sales of equipment upon shipment of
equipment, only if testing at the factory has proven that the equipment has met substantially all of the customers criteria and specifications. The outcome of the test is signed-off by the customer (factory acceptance). Instead of
signing-off, the customer may choose to provide a waiver, e.g. with respect to repeat orders.



The Company recognizes revenue from installation of equipment upon completion of installation at the customers site. At the time of shipment, the Company defers that portion of the sales price related to the
fair value of installation. The fair value of the installation process is measured based upon the per-hour amounts charged by third parties for similar installation services. Installation is completed when testing at the customers site has
proven that the equipment has met all of the customers criteria and specifications. The completion of installation is signed-off by the customer (final acceptance).



The Companys sales frequently involve complex equipment, which may include customer-specific criteria, sales to new customers or
equipment with new technology. For each sale, the decision whether to recognize revenue is, in addition to shipment and factory acceptance, based on the contractual agreement with a customer, the experience with a particular customer, the technology
and the number of similarly configured equipment previously delivered. Instead of recognizing revenue, the Company could decide to defer revenue recognition until completion of installation at the customers site and obtaining final acceptance
from the customer.



Revenue related to training and technical support
service is recognized when the service is rendered. Revenue from the sale of spare parts and materials is recognized when the goods are shipped.



Cost of SalesCost of sales includes direct costs such as materials, labor and related overhead. Cost of sales also includes cost of warranty, third party
commission, depreciation expenses of evaluation tools at customers and royalty payments and costs relating to prototype and experimental products, which the Company may subsequently sell to customers. Costs of warranty include the cost of labor,
material and related overhead necessary to repair a product during the warranty period. The warranty period is usually one to two years. The Company accrues for the estimated cost of the warranty on its products shipped in a provision for warranty,
upon recognition of the sale of the product. The costs are estimated based on actual historical expenses incurred and on estimated future expenses related to current sales, and are updated periodically. Actual warranty costs are charged against the
provision for warranty.



Restructuring expensesRestructuring
expenses are recognized for exit or disposal activities when the liability arising from restructuring plans is incurred. In 2008 and 2009 restructuring expenses incurred, reference is made to note 23.



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Distinction is made in one-time employee termination expenses, contract termination expenses and other associated
expenses. For the accounting on the distinguished elements of restructuring expenses we apply to the policy as mentioned below. The expenses have been charged to restructuring expenses.



One-time termination expenses represent the payments provided to employees that have
become redundant and are terminated under the terms and conditions of a restructuring plan. A restructuring plan exists at the date the plan meets all of the following criteria and has been communicated to employees:



| |  |  | Management commits to the plan.
| | - |  | -------------------------------



| |  |  | The plan identifies the number of employees that become redundant and the expected completion date.
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | The plan sets out the terms and conditions of the arrangement in sufficient detail to enable employees to determine the type and amount of benefits they will
receive.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



The timing of the recognition and measurement of a
liability for one-time termination expenses depends on whether employees will be retained to render service beyond a minimum retention period.



Contract termination expenses are related to the termination of an operating lease or another contract. These expenses are distinguished in:



| |  |  | Expenses related to the termination of the contract before the end of its term. These expenses are recognized when the contract is terminated .The liability is
measured at its fair value in accordance with the contract terms.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expenses related to contracts that will last for its remaining term without economic benefit to the entity. This is the case when a lease contract for premises
is not terminated while the premises are not (completely) in use anymore. The liability is accrued for at the cease-use date, the date the company determined that it would no longer occupy the premises, which is conveyed to it under the contractual
operating lease. The liability is measured at its fair value in accordance with the contract terms.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other costs related to restructuring include costs to consolidate or close facilities and relocate employees. A liability for other expenses related to a restructuring
such as transition costs is recognized and measured in the period in which the liability is incurred. The costs incurred are directly related to the restructuring activity. The definition of exit costs excludes expected future operating losses.



Research and Development ExpensesResearch and development
costs are expensed as incurred. Costs, which relate to prototype and experimental models and are sold to customers, are charged to cost of sales. Subsidies and other governmental credits to cover research and development costs relating to approved
projects are recorded as research and development credits in the period when such project costs occur. The research and development expenses are presented net of the development credits. Technical development credits received from the government of
the Netherlands, to offset the costs of certain research and development projects, are contingently repayable to the extent sales of products developed in such projects occur within the agreed upon period. Such repayments are calculated as a
percentage of sales and are charged to cost of sales. No such repayments are required if such sales do not occur within the agreed upon period. Reference is made to Note 22.



Income TaxesThe Company recognizes deferred tax assets and liabilities for the estimated future tax consequences of events
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using
currently enacted tax rates. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the Consolidated Statement of Operations in the period in which the enacted rate changes. Deferred tax assets are reduced through
a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.



On January 1, 2007 the Company adopted Interpretation 48, Accounting for Uncertainty in Income Taxes (ASC 740). ASC 740 clarifies the
accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with Statement of Financial Accounting Standard ASC 740, Accounting for Income Taxes. ASC 740 prescribes a two step approach
for recognizing and measuring tax positions taken or expected to be taken in a tax return. Prior to recognizing the benefit of a tax position in the financial statements, the tax position must be more-likely-than-not of being sustained based solely
on its technical merits. Once this recognition threshold has been met, tax positions are recognized at the largest amount



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that is more-likely-than-not to be sustained. ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and
transition.



PensionsThe Company has retirement plans covering
substantially all employees. The principal plans are defined contribution plans, except for the plans of the Companys operations in the Netherlands and Japan. The Companys employees in the Netherlands participate in a multi-employer
plan. Payment to defined contribution plans and the multi-employer plan are recognized as an expense in the Consolidated Statement of Operations as they fall due.



The Companys employees in Japan participate in a defined benefit plan. Pension costs in respect of this defined benefit plan are
determined using the projected unit credit method. These costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in
respect of employee service in previous years, net of the expected return on plan assets.



Actuarial gains and losses are recognized in income, spread over the average remaining service lives of employees, using the corridor approach. In accordance with ASC 715, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans the Company recognizes in its Consolidated Balance Sheet an asset or a liability for the plans overfunded status or underfunded status respectively. Reference is made to Note 18.



Stock-Based CompensationOn January 1, 2006 ASMI adopted
ASC 715 Share-Based Payment (ASC 715), using the modified prospective transition method. ASC 715 requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in
the financial statements based on the estimated fair value of the awards. The cost is recognized in the Consolidated Statement of Operations over the requisite service period. The cost relating to employee stock options is measured at fair value on
the grant date, by using the Black-Scholes option pricing model. For the recognition of the expenses, vesting is assumed at 100%. For further information on ASMIs employee stock option plans reference is made to Note 18.



Issuance of Shares by a SubsidiaryAs further described in the Notes to
Consolidated Financial Statements herein, from time to time, the consolidated subsidiary ASM Pacific Technology Ltd. (ASMPT) will issue common shares pursuant to their Employee Share Incentive Scheme. The effect of these issuances is a
dilution of the ownership in ASMPT. The Company recognizes the impact of these issuances in the Consolidated Statement of Operations as a gain on dilution of investment in subsidiary.



Net Earnings per ShareBasic net earnings per share is computed by dividing net earnings per share by the weighted average
common shares outstanding for the year. Diluted net earnings per share reflects the potential dilution that could occur if options issued under the Companys stock option plan were exercised and if the Companys convertible subordinated
debt borrowings were converted, unless the conversion would have an anti-dilutive effect.



Comprehensive IncomeComprehensive income consists of net earnings and other comprehensive income. Other comprehensive income includes gains and losses that are not included in net earnings, but are
recorded directly in Shareholders Equity.



Use of
EstimatesThe preparation of the Companys Consolidated Financial Statements 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 balance sheet dates and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.



New Accounting Pronouncements



In June 2009, the FASB issued ASC 105 Generally Accepted Accounting Principles. ASC 105 establishes the FASB Accounting Standards Codification (the
Codification) as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. The Codification does not
change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods
ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. The Codification is effective for the Company on 2009, and accordingly, its Annual Report on Form 20-F for the
year ending December 31, 2009 and all subsequent public filings will reference the Codification as the sole source of authoritative literature. The adoption of ASC 105 did not have any impact on our consolidated financial statements, but
resulted in the update of all references to accounting guidance in this Form 20-F to refer to the new Codification.



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In May 2009, the FASB issued ASC 855, Subsequent Events. This ASC provides guidance to
establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The ASC also requires entities to disclose the date
through which subsequent events were evaluated as well as the rationale for why that date was selected. ASC 855 is effective for interim and annual periods ending after June 15, 2009, and accordingly, the Company adopted this standard in
2009. The implementation of this standard did not have any impact on the financial statements of the Company.



In 2009 the Company has adopted ASC 820, Fair Value Measurements. The ASC defines fair value, provides guidance on how to measure assets and liabilities
using fair value and expands disclosures about fair value measurements. The adoption of ASC 820 did not have any impact on the Companys consolidated financial statements but resulted in additional disclosure in those financial statements.



In April 2009, the FASB issued ASC 820-10-65-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This ASC provides guidance for making fair value measurements more consistent with the
principles presented in ASC 820, Fair Value Measurements. This ASC relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms the objective of fair
value measurementto reflect how much an asset would be sold for in an orderly transaction at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly
active market has become inactive and in determining fair values when markets have become inactive. The ASC is effective for financial statements issued for fiscal years and interim periods beginning after June 15, 2009 and should be applied
prospectively. We are currently assessing the impact that this ASC may have on our consolidated financial statements.



In June 2009, the FASB issued ASC 810 (Statement 167, Amendments to FASB Interpretation No. 46(R)). This ASC changes the way in which a company
determines whether or not an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among
other things, an entitys purpose and design and its ability to direct the activities of the entity that most significantly impact the entitys economic performance. This ASC is effective for fiscal years and interim periods beginning
after November 15, 2009. The Company is currently assessing the impact that this ASC may have on the its consolidated financial statements.



In September 2009, the EITF reached final consensus on ASU 2009-13, Revenue Arrangements with Multiple Deliverables. ASU 2009-13 amends the current
guidance on arrangements with multiple deliverables (ASC 605-25) to (1) eliminate the separation criterion that requires entities to establish objective and reliable evidence of fair value for undelivered elements, (2) establish a selling
price hierarchy to help entities allocate arrangement consideration to the separate units of account (i.e. separate elements of the sales agreement), (3) require the relative selling price allocation method for all arrangements (i.e., eliminate
the residual method), and (4) significantly expand required disclosures. The final consensus is effective for financial years beginning after June 15, 2010. We are currently assessing the impact that ASU 2009-13 may have on our
consolidated financial statements.



In September 2009, the EITF reached
final consensus on ASU 2009-14, Certain Revenue Arrangements that include Software elements. ASU 2009-14 amends the scoping guidance for software arrangements (ASC 985-605) to exclude tangible products that contain software elements and non-software
elements that function together to interdependently deliver the products essential functionality. ASU 2009-14 also provides considerations and examples for entities applying this guidance. This issue will be effective prospectively for new or
materially modified agreements entered into in financial years beginning on or after June 15, 2010. We are currently assessing the impact that ASU 2009-14 may have on our consolidated financial statements.



F-14



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##### Table of Contents

NOTE 2 List of Significant Subsidiaries



|                                                             |  |                                                   |  |                         |      |  |        |  
|------------------------------------------------------------ |  | ------------------------------------------------- |  | ----------------------- | ---- |  | ------ | -
|Name                                                         |  | Location                                          |  | % OwnershipDecember 31, |     
|                                                             |  | 2008                                              |  |                         | 2009 | 
|ASM Europe B.V.1                                             |  | Almere, the Netherlands                           |  | 100.00                  | %    |  | 100.00 | %
|ASM United Kingdom Sales B.V.1                               |  | Almere, the Netherlands                           |  | 100.00                  | %    |  | 100.00 | %
|ASM Germany Sales B.V.1                                      |  | Almere, the Netherlands                           |  | 100.00                  | %    |  | 100.00 | %
|ASM Pacific Holding B.V.3                                    |  | Almere, the Netherlands                           |  | 100.00                  | %    |  | 100.00 | %
|Advanced Semiconductor Materials (Netherlands Antilles) N.V. |  | Willemstad, Curacao, Netherlands Antilles         |  | 100.00                  | %    |  | 100.00 | %
|ASM France S.A.R.L.                                          |  | Montpellier, France                               |  | 100.00                  | %    |  | 100.00 | %
|ASM Belgium N.V.                                             |  | Leuven, Belgium                                   |  | 100.00                  | %    |  | 100.00 | %
|ASM Italia S.r.l.                                            |  | Agrate, Italy                                     |  | 100.00                  | %    |  | 100.00 | %
|ASM Microchemistry Oy                                        |  | Helsinki, Finland                                 |  | 100.00                  | %    |  | 100.00 | %
|ASM Services and Support Ireland Ltd.                        |  | Dublin, Ireland                                   |  | 100.00                  | %    |  | 100.00 | %
|ASM Services and Support Israel Ltd                          |  | Tel Aviv, Israel                                  |  | 100.00                  | %    |  | 100.00 | %
|ASM America, Inc.                                            |  | Phoenix, Arizona, United States                   |  | 100.00                  | %    |  | 100.00 | %
|ASM Japan K.K.                                               |  | Tokyo, Japan                                      |  | 100.00                  | %    |  | 100.00 | %
|ASM Wafer Process Equipment Ltd.                             |  | Quarry Bay, Hong Kong, Peoples Republic of China |  | 100.00                  | %    |  | 100.00 | %
|ASM China Ltd.                                               |  | Shanghai, Peoples Republic of China              |  | 100.00                  | %    |  | 100.00 | %
|ASM Wafer Process Equipment Singapore Pte Ltd.               |  | Singapore                                         |  | 100.00                  | %    |  | 100.00 | %
|ASM Far East Marketing Ltd.                                  |  | Hsin-Chu, Taiwan                                  |  | 100.00                  | %    |  | 100.00 | %
|ASM Front-End Sales & Services Taiwan Co., Ltd.              |  | Hsin-Chu, Taiwan                                  |  | 100.00                  | %    |  | 100.00 | %
|ASM Front-End Manufacturing Singapore Pte Ltd.               |  | Singapore                                         |  | 100.00                  | %    |  | 100.00 | %
|ASM NuTool, Inc.                                             |  | Phoenix, Arizona, United States                   |  | 100.00                  | %    |  | 100.00 | %
|ASM Genitech Korea Ltd.                                      |  | Cheonan, South Korea                              |  | 100.00                  | %    |  | 100.00 | %
|ASM Pacific Technology Ltd.                                  |  | Kwai Chung, Hong Kong, Peoples Republic of China |  | 52.87                   | %    |  | 52.59  | %
|ASM Assembly Automation Ltd.2                                |  | Kwai Chung, Hong Kong, Peoples Republic of China |  | 52.87                   | %    |  | 52.59  | %
|ASM Assembly Materials Ltd.2                                 |  | Kwai Chung, Hong Kong, Peoples Republic of China |  | 52.87                   | %    |  | 52.59  | %
|ASM Technology Singapore Pte Ltd.2                           |  | Singapore                                         |  | 52.87                   | %    |  | 52.59  | %
|ASM Technology (M) Sdn. Bhd.2                                |  | Johor Bahru, Malaysia                             |  | 52.87                   | %    |  | 52.59  | %
|ASM Semiconductor Materials (Shenzhen) Co. Ltd.2             |  | Shenzhen, Peoples Republic of China              |  | 52.87                   | %    |  | 52.59  | %
|ASM Pacific Investments Ltd.2                                |  | Kwai Chung, Hong Kong, Peoples Republic of China |  | 52.87                   | %    |  | 52.59  | %
|Edgeward Development Ltd.2                                   |  | Guernsey, Channel Islands                         |  | 52.87                   | %    |  | 52.59  | %
|Edgeward USA L.L.C.2                                         |  | Wilmington, Delaware, United States               |  | 52.87                   | %    |  | 52.59  | %
|Shenzhen ASM Micro Electronic Technology Co. Ltd.2           |  | Shenzhen, Peoples Republic of China              |  | 52.87                   | %    |  | 52.59  | %



|(1) | For these subsidiaries ASM International N.V. has filed statements at the Dutch Chamber of Commerce assuming joint and several liability in accordance with Article 403 of Book 2,
Part 9 of the Netherlands Civil Code.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 100% subsidiaries of ASM Pacific Technology Ltd.
|--- | ------------------------------------------------

|(3) | Established in 2008, ASM Pacific Holding B.V. is holding 52.59% of the shares in ASM Pacific Technology Ltd.
|--- | ------------------------------------------------------------------------------------------------------------



The accounts of the above mentioned entities and of certain insignificant subsidiaries not
mentioned above have been consolidated in the Consolidated Financial Statements.



NOTE 3 Cash and Cash Equivalents



At December 31, 2009, cash and cash equivalents of the Companys subsidiaries ASMPT and ASM Japan amounted to  112,221 and  29,753
respectively, which are restricted to be used only in the operations of ASMPT and ASM Japan respectively.



F-15



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##### Table of Contents

NOTE 4 Accounts receivable



The carrying amount of accounts receivable is as follows:



|                  |  |         |  |                  |  |                     |  |                      |  |                   |  |        
|----------------- |  | ------- |  | ---------------- |  | ------------------- |  | -------------------- |  | ----------------- |  | -------
|                  |  | Current |  | Overdue< 30 days |  | Overdue31  60 days |  | Overdue61  120 days |  | Overdue> 120 days |  | Total  
|December 31, 2008 |  | 138,430 |  | 15,982           |  | 8,236               |  | 8,468                |  | 1,487             |  | 172,603
|December 31, 2009 |  | 127,409 |  | 19,712           |  | 11,195              |  | 4,627                |  | 2,811             |  | 165,754



The changes in the allowance for doubtful accounts receivable are as follows:



|                                                        |  |        |  
|------------------------------------------------------- |  | ------ | -
|Balance January 1, 2007                                 |  | (5,926 | )
|Charged to selling, general and administrative expenses |  | (137   | )
|Utilization                                             |  | 397    |  
|Foreign currency translation effect                     |  | 591    |  
|                                                        |  |        |  
|Balance December 31, 2007                               |  | (5,075 | )
|Charged to selling, general and administrative expenses |  | (2,859 | )
|Utilization                                             |  | 932    |  
|Foreign currency translation effect                     |  | (298   | )
|                                                        |  |        |  
|Balance December 31, 2008                               |  | (7,300 | )
|Charged to selling, general and administrative expenses |  | (2,812 | )
|Utilization                                             |  | 1,145  |  
|Foreign currency translation effect                     |  | (1     | )
|                                                        |  |        |  
|Balance December 31, 2009                               |  | (8,968 | )
|                                                        |  |        |  



NOTE 5 Inventories



Inventories consist of the following:



|                             |  |              |   |  |         |  
|---------------------------- |  | ------------ | - |  | ------- | -
|                             |  | December 31, |  
|                             |  | 2008         |   |  | 2009    |  
|Components and raw materials |  | 97,824       |   |  | 92,352  |  
|Work in process              |  | 82,341       |   |  | 64,516  |  
|Finished goods               |  | 50,150       |   |  | 40,716  |  
|                             |  |              |   |  |         |  
|Total inventories, gross     |  | 230,315      |   |  | 197,584 |  
|Allowance for obsolescence   |  | (32,615      | ) |  | (46,939 | )
|                             |  |              |   |  |         |  
|Total inventories, net       |  | 197,700      |   |  | 150,645 |  
|                             |  |              |   |  |         |  



The changes in the allowance for obsolescence are as
follows:



|                                    |  |         |  
|----------------------------------- |  | ------- | -
|Balance January 1, 2007             |  | (28,062 | )
|Charged to cost of sales            |  | (6,268  | )
|Utilization                         |  | 4,320   |  
|Foreign currency translation effect |  | 2,517   |  
|                                    |  |         |  
|Balance December 31, 2007           |  | (27,493 | )
|Charged to cost of sales            |  | (11,711 | )
|Utilization                         |  | 8,299   |  
|Foreign currency translation effect |  | (1,710  | )
|                                    |  |         |  
|Balance December 31, 2008           |  | (32,615 | )
|Charged to cost of sales            |  | (27,236 | )
|Utilization                         |  | 11,818  |  
|Foreign currency translation effect |  | 1,094   |  
|                                    |  |         |  
|Balance December 31, 2009           |  | (46,939 | )
|                                    |  |         |  



During 2009 EUR 27,236 was charged to cost of sales as a
result of the current prolonged contraction in the market and strategic focus of certain of our product configurations in 2009.



F-16



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##### Table of Contents

NOTE 6Other Intangible Assets



Other intangible assets include purchased technology from third parties and software
developed or purchased for internal use. The changes in the amount of other intangible assets are as follows:



|                                    |  |          |   |  |                                              |   |  |        |  
|----------------------------------- |  | -------- | - |  | -------------------------------------------- | - |  | ------ | -
|                                    |  | Software |   |  | Purchasedtechnologyand otherintangibleassets |   |  | Total  |  
|At cost:                            |  |          |   |  |                                              |   |  |        |  
|Balance January 1, 2008             |  | 4,740    |   |  | 3,316                                        |   |  | 8,056  |  
|Additions                           |  | 5,362    |   |  |                                             |   |  | 5,362  |  
|Sale of NanoPhotonics AG            |  | (146     | ) |  |                                             |   |  | (146   | )
|Foreign currency translation effect |  | 155      |   |  | (562                                         | ) |  | (407   | )
|                                    |  |          |   |  |                                              |   |  |        |  
|Balance December 31, 2008           |  | 10,111   |   |  | 2,754                                        |   |  | 12,865 |  
|Additions                           |  | 3,294    |   |  |                                             |   |  | 3,294  |  
|Foreign currency translation effect |  | (81      | ) |  | 166                                          |   |  | 85     |  
|                                    |  |          |   |  |                                              |   |  |        |  
|Balance December 31, 2009           |  | 13,324   |   |  | 2,920                                        |   |  | 16,244 |  
|                                    |  |          |   |  |                                              |   |  |        |  
|Accumulated amortization:           |  |          |   |  |                                              |   |  |        |  
|Balance January 1, 2008             |  | 2,056    |   |  | 1,749                                        |   |  | 3,805  |  
|Amortization for the year           |  | 1,009    |   |  | 475                                          |   |  | 1,484  |  
|Sale of NanoPhotonics AG            |  | (138     | ) |  |                                             |   |  | (138   | )
|Foreign currency translation effect |  | 115      |   |  | (319                                         | ) |  | (204   | )
|                                    |  |          |   |  |                                              |   |  |        |  
|Balance December 31, 2008           |  | 3,042    |   |  | 1,905                                        |   |  | 4,947  |  
|Amortization for the year           |  | 1,934    |   |  | 401                                          |   |  | 2,335  |  
|Foreign currency translation effect |  | (89      | ) |  | 114                                          |   |  | 25     |  
|                                    |  |          |   |  |                                              |   |  |        |  
|Balance December 31, 2009           |  | 4,887    |   |  | 2,420                                        |   |  | 7,307  |  
|                                    |  |          |   |  |                                              |   |  |        |  
|                                    |  |          |  
|Other intangible assets, net:       |  |          |   |  |                                              |   |  |        |  
|December 31, 2008                   |  | 7,069    |   |  | 849                                          |   |  | 7,918  |  
|December 31, 2009                   |  | 8,437    |   |  | 500                                          |   |  | 8,936  |  
|                                    |  |          |   |  |                                              |   |  |        |  



Other intangible assets are amortized over useful lives of
3 to 7 years. Estimated amortization expenses relating to other intangible assets are as follows:



|     |  |      
|---- |  | -----
|2010 |  | 2,653
|2011 |  | 2,239
|2012 |  | 1,849
|2013 |  | 1,522
|2014 |  | 673  
|2015 |  |     
|     |  |      
|     |  | 8,936
|     |  |      



NOTE 7Goodwill



The
changes in the carrying amount of goodwill are as follows:



|                                    |  |           |   |  |          |   |  |        |  
|----------------------------------- |  | --------- | - |  | -------- | - |  | ------ | -
|                                    |  | Front-end |   |  | Back-end |   |  | Total  |  
|Balance January 1, 2008             |  | 13,546    |   |  | 36,075   |   |  | 49,621 |  
|Addition:                           |  |           |   |  |          |   |  |        |  
|ASM Genitech Korea Ltd              |  | 176       |   |  |         |   |  | 176    |  
|Impairment charge:                  |  |           |   |  |          |   |  |        |  
|NanoPhotonics AG                    |  | (1,395    | ) |  |         |   |  | (1,395 | )
|Deductions:                         |  |           |   |  |          |   |  |        |  
|Sale of NanoPhotonics AG            |  | (334      | ) |  |         |   |  | (334   | )
|Foreign currency translation effect |  | (2,148    | ) |  | 2,069    |   |  | (79    | )
|                                    |  |           |   |  |          |   |  |        |  
|Balance December 31, 2008           |  | 9,845     |   |  | 38,144   |   |  | 47,989 |  
|Foreign currency translation effect |  | 550       |   |  | (1,316   | ) |  | (766   | )
|                                    |  |           |   |  |          |   |  |        |  
|Balance December 31, 2009           |  | 10,395    |   |  | 36,828   |   |  | 47,223 |  
|                                    |  |           |   |  |          |   |  |        |  



F-17



---

##### Table of Contents

The allocation of the carrying amount of goodwill is as follows:



|                           |  |              |  |       
|-------------------------- |  | ------------ |  | ------
|                           |  | December 31,
|                           |  | 2008         |  | 2009  
|Front-end segment:         |  |              |  |       
|ASM Microchemistry Oy      |  | 3,560        |  | 3,560 
|NanoPhotonics AG           |  |             |  |      
|ASM Genitech Korea Ltd     |  | 6,285        |  | 6,835 
|                           |  |             
|Back-end segment:          |  |              |  |       
|ASM Pacific Technology Ltd |  | 38,144       |  | 36,828
|                           |  |              |  |       
|Total                      |  | 47,989       |  | 47,223
|                           |  |              |  |       



NanoPhotonics AGIn September 2008, the Company sold its entire 72.86% interest in NanoPhotonics AG. The Company recorded an impairment charge of  1,395 related to goodwill of its investment in NanoPhotonics AG in June 2008.



The proceeds from the sale of NanoPhotonics AG and the impairment charge can be summarized as follows:



|                                            |  |       |  
|------------------------------------------- |  | ----- | -
|Carrying value of assets and liabilities:   |  |       |  
|Intangible assets:                          |  | 8     |  
|Goodwill                                    |  | 1,729 |  
|Property, plant & equipment                 |  | 346   |  
|Other assets and liabilities                |  | (278  | )
|                                            |  |       |  
|                                            |  | 1,805 |  
|Cash proceeds from sale of NanoPhotonics AG |  | (410  | )
|                                            |  |       |  
|Impairment charge                           |  | 1,395 |  
|                                            |  |       |  



ASM Genitech Korea Ltd.In 2004, the Company
acquired 100% of the common shares in Genitech in exchange for 247,638 common shares of the Company,  4,640 in cash and possible future
variable cash payments of up to US$ 9,200 if certain financial performance targets are satisfied at various times from the acquisition date in 2004 through the year ended December 31, 2008. The total consideration at the date of the acquisition
in 2004, including expenses, amounted to  7,939, excluding variable cash payments that may be payable in the future based on certain
financial performance targets.



The excess of the purchase price over the
fair value of the identifiable net assets has been recorded as goodwill in the amount of  6,917 in 2004. In 2006, 2007 and 2008 the
Company recorded  862, 
281 and  176 respectively as additional purchase consideration as certain financial performance targets were satisfied.



We perform an annual impairment test at December 31 of each year or if events or
changes in circumstances indicate that the carrying amount of goodwill exceeds its fair value. Our front-end impairment test and the determination of the fair value is based on a discounted future cash flow approach that uses our estimates of future
revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates. Our back-end impairment test is based on the market value of the listed shares of ASMPT.



The material assumptions used for the fair value calculation of the reporting unit are:



| |  |  | A pre-tax WACC of 13%.
| | - |  | ----------------------



| |  |  | For Front- end external market segment data, historical data and strategic plans to estimate cash flow growth per product line have been used
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cash flow calculations are limited to five years of cash flow; after these five years perpetuity growth rates are set based on market maturity of the products.
For maturing product the perpetuity growth rates used are 1% or less and for enabling technology products the rate used is 3% or less.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For Back-end the market value of the listed shares of ASMPT on the Hong Kong Stock exchange has been used in our analysis.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



These estimates are consistent with the plans and estimated costs we use to manage the
underlying business. Based on this analysis management believes that as per December 31, 2009 the fair value of the reporting units exceeded the carrying value.



F-18



---

##### Table of Contents

NOTE 8Property, Plant and Equipment



The changes in the amount of property, plant and equipment are as follows:



|                                    |  |                                         |   |  |                                          |   |  |         |  
|----------------------------------- |  | --------------------------------------- | - |  | ---------------------------------------- | - |  | ------- | -
|                                    |  | Land,buildings andleaseholdimprovements |   |  | Machinery,equipment,furnitureandfixtures |   |  | Total   |  
|At cost:                            |  |                                         |   |  |                                          |   |  |         |  
|Balance January 1, 2008             |  | 102,965                                 |   |  | 281,764                                  |   |  | 384,729 |  
|Capital expenditures                |  | 6,406                                   |   |  | 25,044                                   |   |  | 31,450  |  
|Reclassification                    |  | 766                                     |   |  | (766                                     | ) |  |        |  
|Impairment charges                  |  | (7,068                                  | ) |  |                                         |   |  | (7,068  | )
|Sale of NanoPhotonics AG            |  |                                        |   |  | (1,043                                   | ) |  | (1,043  | )
|Retirements and sales               |  | (6,838                                  | ) |  | (4,535                                   | ) |  | (11,373 | )
|Foreign currency translation effect |  | 8,629                                   |   |  | 27,319                                   |   |  | 35,948  |  
|                                    |  |                                         |   |  |                                          |   |  |         |  
|Balance December 31, 2008           |  | 104,860                                 |   |  | 327,783                                  |   |  | 432,643 |  
|Capital expenditures                |  | 1,849                                   |   |  | 10,869                                   |   |  | 12,718  |  
|Reclassification as held for sale   |  | (6,634                                  | ) |  |                                         |   |  | (6,634  | )
|Impairment charges                  |  | (132                                    | ) |  | (4,496                                   | ) |  | (4,628  | )
|Retirements and sales               |  | (217                                    | ) |  | (6,240                                   | ) |  | (6,457  | )
|Foreign currency translation effect |  | (3,251                                  | ) |  | (10,981                                  | ) |  | (14,232 | )
|                                    |  |                                         |   |  |                                          |   |  |         |  
|Balance December 31, 2009           |  | 96,475                                  |   |  | 316,935                                  |   |  | 413,410 |  
|                                    |  |                                         |  
|Accumulated depreciation:           |  |                                         |   |  |                                          |   |  |         |  
|Balance January 1, 2008             |  | 51,705                                  |   |  | 183,382                                  |   |  | 235,087 |  
|Depreciation for the year           |  | 7,332                                   |   |  | 25,844                                   |   |  | 33,176  |  
|Sale of NanoPhotonics AG            |  |                                        |   |  | (697                                     | ) |  | (697    | )
|Retirements and sales               |  | (4,149                                  | ) |  | (3,655                                   | ) |  | (7,804  | )
|Foreign currency translation effect |  | 4,268                                   |   |  | 20,056                                   |   |  | 24,324  |  
|                                    |  |                                         |   |  |                                          |   |  |         |  
|Balance December 31, 2008           |  | 59,156                                  |   |  | 224,930                                  |   |  | 284,086 |  
|Depreciation for the year           |  | 6,778                                   |   |  | 25,276                                   |   |  | 32,054  |  
|Reclassification as held for sale   |  | (1,126                                  | ) |  |                                         |   |  | (1,126  | )
|Retirements and sales               |  | (213                                    | ) |  | (5,427                                   | ) |  | (5,640  | )
|Foreign currency translation effect |  | (2,012                                  | ) |  | (8,764                                   | ) |  | (10,776 | )
|                                    |  |                                         |   |  |                                          |   |  |         |  
|Balance December 31, 2009           |  | 62,583                                  |   |  | 236,016                                  |   |  | 298,599 |  
|                                    |  |                                         |  
|Property, plant and equipment, net: |  |                                         |   |  |                                          |   |  |         |  
|December 31, 2008                   |  | 45,704                                  |   |  | 102,853                                  |   |  | 148,557 |  
|December 31, 2009                   |  | 33,893                                  |   |  | 80,919                                   |   |  | 114,811 |  



|                       |  |                                        |  |      
|---------------------- |  | -------------------------------------- |  | -----
|Useful lives in years: |  | - Buildings and leasehold improvements |  | 10-25
|                       |  | - Machinery and equipment              |  | 2-10 
|                       |  | - Furniture and fixtures               |  | 2-10 



ASM Japan and ASM Front-End Manufacturing Singapore have pledged real estate with a carrying value of 
22,526 to secure loan facilities outstanding in Japan and Singapore.



In
2009 the Company recorded impairment charges of  4,628 mainly related to machinery and equipment. The Company impaired certain demo
tools which were as a result of the strategic reorientation determined end of life. Valuations of these assets are classified as Level 3 in the fair value hierarchy since their fair values were determined based on unobservable inputs. The impairment
charges were determined based on the difference between the assets estimated fair value and their carrying amount.



In 2008 the Company recorded an impairment charge related to the manufacturing plant at ASM Europe in the Netherlands of  7,068. The impairment is the consequence of the announcement in January 2009 of the restructuring of the ASM Europe operations including the transfer of the manufacturing
operations to the Companys subsidiary ASM Front-End Manufacturing Singapore. ASM Europe will cease using the manufacturing plant upon completion of the transfer. The impairment charges are included in the Consolidated Statements of Operations
as restructuring expenses.



In 2009 the decision was made to dispose certain
items of property, plant and equipment. These assets are reported as held for sale.



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NOTE 9Assets held for sale



In 2009 the decision was made to dispose certain items of property, plant and equipment. These assets represent a carrying value as per
December 31, 2009 of  5,508. The assets held for sale are located in Japan and The Netherlands. In Japan (Tama) a building that was
used for research and development activities was ceased to be used in December 2009. The carrying value of  4.6 million is below the
expected selling price.



Also in Japan a piece of land that was purchased to
build a research and development center has now been regarded as held for sale. The carrying value of  0.7 million is below the
expected selling price. In the Netherlands the former ASMI head office located in Bilthoven has been regarded as held for sale. The carrying value of  0.3 million is below the expected selling price. The expected selling prices were determined, based on various inputs and considerations, including an appraisal from an outside firm performed during 2009.



NOTE 10Evaluation tools at customers



The changes in the amount of evaluation tools are as follows:



|                                                         |  |        |  
|-------------------------------------------------------- |  | ------ | -
|Reclassification from inventories as per January 1, 2009 |  | 6,693  |  
|Evaluation tools shipped                                 |  | 8,588  |  
|Depreciation                                             |  | (2,032 | )
|Evaluation tools sold                                    |  | (1,776 | )
|Foreign currency translation effect                      |  | (191   | )
|                                                         |  |        |  
|Balance December 31, 2009                                |  | 11,282 |  
|                                                         |  |        |  
|Useful lives in years:                                   |  | 5      |  



Evaluation tools are systems delivered to customers under evaluation agreements. Evaluation tools are recorded at cost and depreciated over their useful life (5
years). The depreciation period may be shorter, depending on circumstances. The depreciation expenses are reported as Cost of sales.



NOTE 11Investments



The investment of  50 as per December 31, 2009
reflects the interest in Levitech B.V. Resulting from the management buy-out of the RTP business, ASM International N.V. obtained a 20% interest in Levitech B.V.



NOTE 12Notes Payable to Banks



Information on notes payable to banks is as follows:



|                                |  |              |  |       
|------------------------------- |  | ------------ |  | ------
|                                |  | December 31,
|                                |  | 2008         |  | 2009  
|Short-term debt outstanding in: |  |              |  |       
|Japan                           |  | 15,860       |  | 13,518
|Singapore                       |  | 998          |  | 990   
|Overdraft in:                   |  |              |  |       
|The Netherlands                 |  |             |  | 2,500 
|                                |  |              |  |       
|Total                           |  | 16,858       |  | 17,008
|                                |  |              |  |       



Short-term debt outstanding in local currencies is as follows (in thousands):



|                 |  |              |  |          
|---------------- |  | ------------ |  | ---------
|                 |  | December 31,
|                 |  | 2008         |  | 2009     
|Japanese yen     |  | 2,000,000    |  | 1,800,000
|Singapore dollar |  | 2,000        |  | 2,000    



Short-term debt outstanding in Japan in the amount of  5,257 is collateralized by real estate with a
carrying value of  7,420 of ASM Japan.



ASMI and its individual subsidiaries borrow under separate short-term lines of credit with banks in the countries where they are located. The lines contain general
provisions concerning renewal and continuance at the option of the banks. The weighted average interest rate of the outstanding notes payable was 2.3% at December 31, 2009.



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Total short-term lines of credit amounted to  107,396 at December 31, 2009. The amount outstanding at December 31, 2009 was  14,508 and the undrawn portion totaled  92,888. The undrawn portion includes the Companys newly negotiated
standby revolving credit facility of  65,000 with a consortium of banks. The facility, available through November 6, 2012, is
secured by a portion of the Companys shareholding in ASMPT. The undrawn portion further includes  26,686 for ASMPT, which amount is
restricted to be used only in the operations of ASMPT. The undrawn portion further includes  1,202 for ASM Japan, which amount is
restricted to be used only in the operations of ASM Japan.



The credit
facility of  65,000 bank includes two financial covenants: a minimum long-term committed capital and a total net debt/equity ratio. These
financial covenants are measured twice each year, at June 30 and December 31. The Company is in compliance with these financial covenants as of December 31, 2009. Short-term line of credits of ASM Japan of  5,257 include financial covenants, of which the most important covenants, measured at December 31 of each year are as follows:



| |  |  | no two loss making years in a row ;
| | - |  | -----------------------------------

| |  |  | no annual loss in excess of a certain percentage of the equity of ASM Japan.
| | - |  | ----------------------------------------------------------------------------



ASM Japan is in compliance with these financial covenants as of December 31, 2009.



ASMI is guarantor with respect to all short-term debt outstanding of ASM Front-End
Manufacturing Singapore. ASMI is guarantor with respect to a credit line of  14,720, with  13,518 outstanding, of ASM Japan. ASMI does not provide guarantees for borrowings of ASMPT and there are no guarantees from ASMPT to secure indebtedness of ASMI. Under the rules
of the Stock Exchange of Hong Kong, ASMPT is precluded from providing loans and advances other than trade receivables in the normal course of business, to ASMI or its non ASMPT subsidiaries.



NOTE 13Provision for Warranty



The changes in the amount of provision for warranty are as follows:



|                                    |  |         |  
|----------------------------------- |  | ------- | -
|Balance January 1, 2008             |  | 17,039  |  
|Charged to cost of sales            |  | 6,610   |  
|Deductions                          |  | (14,882 | )
|Foreign currency translation effect |  | 1,146   |  
|                                    |  |         |  
|Balance December 31, 2008           |  | 9,913   |  
|Charged to cost of sales            |  | 2,082   |  
|Deductions                          |  | (6,153  | )
|Foreign currency translation effect |  | (192    | )
|                                    |  |         |  
|Balance December 31, 2009           |  | 5,650   |  
|                                    |  |         |  



NOTE 14Accrued Expenses and Other



Accrued expenses and other consist of the following:



|                                                   |  |              |  |       
|-------------------------------------------------- |  | ------------ |  | ------
|                                                   |  | December 31,
|                                                   |  | 2008         |  | 2009  
|Advance payments from customers                    |  | 5,728        |  | 16,731
|Accrual for employee contract termination benefits |  |             |  | 9,236 
|Accrual for onerous contracts                      |  |             |  | 1,396 
|Deferred revenue                                   |  | 4,979        |  | 3,254 
|Personnel related items                            |  | 24,284       |  | 22,115
|Other                                              |  | 22,460       |  | 25,329
|                                                   |  |              |  |       
|                                                   |  | 57,451       |  | 78,061
|                                                   |  |              |  |       



In
2009 ASMI started the implementation of a major restructuring in the Front-end segment as announced on January 9, 2009 and on July 20, 2009. The restructuring costs consisted among others of employee contract termination benefits and lease
contract termination costs (onerous contracts).



The accrual for employee
termination benefits relates to the benefits payable to employees that have become redundant and are terminated under the terms and conditions of a restructuring plan. The accrual for employee termination benefits will be fully spent in 2010.



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The accrual for onerous contracts relates to operating lease contracts for buildings for which no economic benefits
are expected. The accrual for onerous contracts is expected to be utilized by 2012.



NOTE 15Long-term Debt



Long-term debt
consists of the following:



|                                 |  |              |   |  |        |  
|-------------------------------- |  | ------------ | - |  | ------ | -
|                                 |  | December 31, |  
|                                 |  | 2008         |   |  | 2009   |  
|Term loans:                      |  |              |   |  |        |  
|Japan, 1.3-2.4%, due 2010  2012 |  | 21,585       |   |  | 16,898 |  
|Finland, 1.8%, due 2010          |  | 427          |   |  | 214    |  
|Singapore, 3.8%, due 2011        |  | 1,436        |   |  | 855    |  
|Mortgage loans:                  |  |              |   |  |        |  
|Japan, 2.1-2.2%, due 2012        |  | 4,718        |   |  | 3,417  |  
|Capital lease commitments:       |  |              |   |  |        |  
|Japan, 1.8%, due 2010  2012     |  | 1,865        |   |  | 965    |  
|                                 |  |              |   |  |        |  
|                                 |  | 30,031       |   |  | 22,349 |  
|Current portion                  |  | (6,763       | ) |  | (5,795 | )
|                                 |  |              |   |  |        |  
|                                 |  | 23,268       |   |  | 16,554 |  
|                                 |  |              |   |  |        |  



Long-term debt, including current portion, in local
currencies is as follows (in thousands):



|                  |  |              |  |          
|----------------- |  | ------------ |  | ---------
|                  |  | December 31,
|                  |  | 2008         |  | 2009     
|Euro              |  | 427          |  | 214      
|Japanese yen      |  | 3,552,162    |  | 2,833,514
|Singapore dollars |  | 2,876        |  | 1,727    



Aggregate annual principal repayments for years subsequent to December 31, 2009 are:



|     |  |       
|---- |  | ------
|2010 |  | 5,795 
|2011 |  | 4,019 
|2012 |  | 12,272
|2013 |  | 263   
|     |  |       
|     |  | 22,349
|     |  |       



Long-term debt outstanding in Japan in the amount of  12,429 is collateralized by real estate with a carrying value of  4,641 of ASM Japan.



Long-term debt outstanding in Singapore in the amount of  855 is collateralized by real estate with a carrying value of  10,464 and other assets with a carrying value of
 29,955 of ASM Front-End Manufacturing Singapore.



Long-term debt of ASM Japan of  9,012 include financial covenants, of which the most important covenants, measured at December 31 of each year are as follows:



| |  |  | no two loss making years in a row;
| | - |  | ----------------------------------



| |  |  | no annual loss in excess of a certain percentage of the equity of ASM Japan.
| | - |  | ----------------------------------------------------------------------------



ASM Japan is in compliance with these financial covenants as of December 31, 2009



ASMI is guarantor with respect to all long-term debt outstanding of ASM Front-End
Manufacturing Singapore and is guarantor with respect to  6,308 long-term debt outstanding of ASM Japan.



Capital lease commitments relate to commitments for equipment and machinery.



NOTE 16Convertible Subordinated Debt



As per 1 January 2009, ASMI applies ASC 815 Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock.



All our convertible bonds due 2010, 2011 and 2014, include a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into



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common shares of the Company (conversion option). ASC 815 requires separate recognition of these components.



For the conversion options of the convertible bonds due 2010 and 2011 the accounting is different from that for the conversion option of
the convertible bonds due 2014. As the convertible bonds due 2010 and 2011 are denominated in USD and the ASM International common shares in which they can be converted to are denominated in Euro, these conversion options are recognized as a
liability measured at fair value. The conversion option is measured at fair value through the income statement, for 2009 this revaluation at fair value resulted in a loss of  24.4 million including loss from early extinguishments. For the conversion options of the convertible bonds due 2014 the fixedfor-fixed principle is met as both the debt instrument (the bond) and
the Companys equity shares, in which they can be converted to, are denominated in the same currency (Euro). Based on this criterion the conversion option qualifies as permanent equity.



The fair value of the liability component is estimated using the prevailing market
interest rate at the date of issue, for similar non-convertible debt. Subsequently, the liability is measured at amortized cost. The interest expense on the liability component is calculated by applying the market interest rate for similar
non-convertible debt at the date of issue to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible subordinated notes, thus creating a non-cash interest
expense. For 2009 this accretion interest expense was  4.3 million.



The changes in the outstanding amounts of convertible subordinated debt are as follows:



|                                                                   |  |                                            |   |  |                                            |   |  |                                         |  
|------------------------------------------------------------------ |  | ------------------------------------------ | - |  | ------------------------------------------ | - |  | --------------------------------------- | -
|                                                                   |  | 5.25%convertiblesubordinatednotes, due2010 |   |  | 4.25%convertiblesubordinatednotes, due2011 |   |  | 6.50%convertibleunsecurednotes, due2014 |  
|Liability at redemption value at date of issuance                  |  | 79,267                                     |   |  | 111,682                                    |   |  | 150,000                                 |  
|Conversion component at date of issuance                           |  | (13,653                                    | ) |  | (18,329                                    | ) |  | (23,601                                 | )
|                                                                   |  |                                            |   |  |                                            |   |  |                                         |  
|Liability component at date of issuance                            |  | 65,614                                     |   |  | 93,353                                     |   |  | 126,399                                 |  
|                                                                   |  |                                            |   |  |                                            |   |  |                                         |  
|Balance January 1, 2008                                            |  | 47,016                                     |   |  | 91,977                                     |   |  |                                        |  
|Repurchasing of notes                                              |  | (37,868                                    | ) |  |                                           |   |  |                                        |  
|Conversion of notes into common shares                             |  | (7                                         | ) |  | (4,959                                     | ) |  |                                        |  
|Foreign currency translation effect                                |  | 5,896                                      |   |  | 4,738                                      |   |  |                                        |  
|                                                                   |  |                                            |   |  |                                            |   |  |                                         |  
|Balance December 31, 2008                                          |  | 15,037                                     |   |  | 91,756                                     |   |  |                                        |  
|Separation conversion option subsequent to the adoption of ASC 815 |  | (825                                       | ) |  | (9,684                                     | ) |  |                                        |  
|Issue of notes                                                     |  |                                           |   |  |                                           |   |  | 126,399                                 |  
|Accrual of interest                                                |  | 595                                        |   |  | 3,135                                      |   |  | 556                                     |  
|Repurchasing of notes                                              |  | (2,647                                     | ) |  | (16,208                                    | ) |  |                                        |  
|Foreign currency translation effect                                |  | (619                                       | ) |  | (3,605                                     | ) |  |                                        |  
|                                                                   |  |                                            |   |  |                                            |   |  |                                         |  
|Balance December 31, 2009                                          |  | 11,542                                     |   |  | 65,394                                     |   |  | 126,955                                 |  
|                                                                   |  |                                            |   |  |                                            |   |  |                                         |  



|                      |  |                                            |  |                                            |  |                                           
|--------------------- |  | ------------------------------------------ |  | ------------------------------------------ |  | ------------------------------------------
|                      |  | 5.25%convertiblesubordinatednotes, due2010 |  | 4.25%convertiblesubordinatednotes, due2011 |  | 6.50%convertiblesubordinatednotes, due2014
|Nominal value in US$: |  |                                            |  |                                            |  |                                           
|December 31, 2008     |  | 20,925                                     |  | 127,687                                    |  |                                          
|December 31, 2009     |  | 16,880                                     |  | 101,387                                    |  |                                          
|                      |  |                                            |  |                                            |  |                                           
|Nominal value in :   |  |                                            |  |                                            |  |                                           
|December 31, 2008     |  | 15,037                                     |  | 91,756                                     |  |                                          
|December 31, 2009     |  | 11,718                                     |  | 70,383                                     |  | 150,000                                   
|                      |  |                                            |  |                                            |  |                                           



5.25% convertible subordinated notes, due 2010



In May
2003, ASMI issued US$ 90.0 million in principal amount of 5.25% convertible subordinated notes due in May 2010 in a private offering. Interest on the notes is payable on May 15 and November 15 of each year. The notes are subordinated
in right of payment to all of the Companys existing and future senior indebtedness. The notes are convertible, at the option of the holder, into shares of the Companys common stock initially at a conversion rate of 52.0237 shares of
common stock for each US$ 1,000 principal amount of notes, subject to adjustment in certain circumstances. This is equivalent to an initial conversion price of US$ 19.22 per share. On or after May 20, 2006, the Company may redeem any of
the notes at a redemption



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price equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest, if the closing price of the Companys common shares has exceeded 150% of the
conversion price for at least 20 trading days in any period of 30 consecutive trading days and if certain other conditions are satisfied. In the event of a change in control, the Company may be required to repurchase the notes.



In 2007, US$ 20.8 million of the US$ 90.0 million convertible subordinated notes
has been repurchased. The US$ 20.8 million has been repurchased for a market value of US$ 29.0 million. The loss for the early extinguishment of the notes of  6,309, which includes the premium paid above par and the write-off of unamortized issuance costs, has been recorded as expense from early extinguishment of debt in the Consolidated Statement of
Operations for the year 2007.



In 2008, US$ 48.3 million convertible
subordinated notes has been repurchased. The US$ 48.3 million has been repurchased for a market value of US$ 37.7 million. The gain from the early extinguishment of the notes of  7,957, which includes the difference between the nominal value and the lower market value and the write-off of unamortized issuance costs, has been recorded as a gain from
early extinguishment of debt in the Consolidated Statement of Operations for the year 2008.



In 2008 US$ 0.01 million in convertible subordinated notes were converted into 520 common shares out of the treasury shares, previously purchased by the Company.



In 2009 US$ 4.0 million convertible subordinated notes has been repurchased for a
market value of US$ 5.2 million. The loss from the early extinguishment of the notes of  211, which includes the
difference between the nominal value and the higher market value and the write-off of unamortized issuance costs, has been recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2009.



4.25% convertible subordinated notes, due 2011



In December 2004, ASMI issued US$ 150.0 million in principal amount of 4.25%
convertible subordinated notes due in December 2011 in a private offering. Interest on the notes is payable on June 6 and December 6 of each year. The notes are subordinated in right of payment to all of the Companys existing and
future senior indebtedness. The notes are convertible, at the option of the holder, into shares of the Companys common stock initially at a conversion rate of 48.0307 shares of common stock for each US$ 1,000 principal amount of notes,
subject to adjustment in certain circumstances. This is equivalent to an initial conversion price of US$ 20.82 per share. Effective December 6, 2007, the conversion price is adjusted for the cash dividend paid in September 2007 to US$
20.71 per share. On or after December 6, 2007, the Company may redeem any of the notes at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest, if the closing price of the
Companys common shares has exceeded 130% of the conversion price for at least 20 trading days in any period of 30 consecutive trading days. In the event of a change in control, the Company may be required to repurchase the notes.



In 2007, US$ 14.6 million of the US$ 150.0 million convertible subordinated
notes has been repurchased. The US$ 14.6 million has been repurchased for a market value of US$ 19.4 million. The loss for the early extinguishment of the notes of  3,740, which includes the premium paid above par and the write-off of unamortized issuance costs, has been recorded as expense from early extinguishment of debt in the Consolidated Statement of
Operations for the year 2007.



In 2008 US$ 7.7 million in convertible
subordinated notes were converted into 372,426 common shares of which 102,509 out of the treasury shares previously purchased by the Company and 269,917 newly issued common shares.



In 2009 US$ 26.3 million convertible subordinated notes has been repurchased for a market value of US$ 33.7 million. The loss
from the early extinguishment of the notes of  1,548, which includes the difference between the nominal value and the higher market
value and the write-off of unamortized issuance costs, has been recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2009.



The 4.25% convertible subordinated notes rank pari passu with the 5.25% convertible subordinated notes.



6.50% convertible subordinated notes, due 2014



In November 2009, ASMI issued  150.0 million in principal amount of 6.50% convertible unsecured notes due in November 2014 in a private offering. Interest on the notes is payable on February 6, May 6,
August 6



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and November 6 of each year. The notes are subordinated in right of payment to all of the Companys existing and future senior indebtedness. The notes are convertible into shares of the
Companys common stock only, initially at a conversion rate of 58.5851 shares of common stock for each  1,000 principal amount of
notes, subject to adjustment in certain circumstances. This is equivalent to an initial conversion price of  17.09 per share. On or
after November 27, 2012, the Company may redeem any of the notes at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest, if the closing price of the Companys common shares
has exceeded 130% of the conversion price for at least 20 trading days in any period of 30 consecutive trading days. In the event of a change in control, the Company may be required to repurchase the notes.



The 6.50% convertible subordinated notes rank pari passu amongst themselves and equally
with all other unsecured and unsubordinated obligations of the Company.



Conversion option



The conversion component of the
subordinated notes qualifying as a liability is measured at fair value. The fair values for these options were determined using the Black-Scholes option valuation model with the following market data:



|                                               |  |                                                  |        |   |                                                       |     |        |  
|---------------------------------------------- |  | ------------------------------------------------ | ------ | - | ----------------------------------------------------- | --- | ------ | -
|Valuation in US$ per note of nominal US$ 1,000 |  | 5.25% Convertiblesubordinated notes,due May 2010 |        |   | 4.25% Convertiblesubordinated notes,due December 2011 |    
|Valuation per 31 December 2007:                |  |                                                  |        |   |                                                       |     |        |  
|Implied volatility                             |  |                                                  | 28.3   | % |                                                       |     | 106.9  | %
|USD interest average                           |  |                                                  | 4.25   | % |                                                       |     | 4.25   | %
|Stock price                                    |  |                                                 | 16.75  |   |                                                       |    | 16.75  |  
|Conversion price                               |  | US$                                              | 19.22  |   |                                                       | US$ | 20.71  |  
|Value of the option                            |  | US$                                              | 251.60 |   |                                                       | US$ | 149.96 |  
|                                               |  |                                                  |        |   |                                                       |     |        |  
|Valuation per 31 December 2008:                |  |                                                  |        |   |                                                       |     |        |  
|Implied volatility                             |  |                                                  | 17.4   | % |                                                       |     | 10.0   | %
|USD interest average                           |  |                                                  | 1.86   | % |                                                       |     | 1.86   | %
|Stock price                                    |  |                                                 | 6.16   |   |                                                       |    | 6.16   |  
|Conversion price                               |  | US$                                              | 19.22  |   |                                                       | US$ | 20.71  |  
|Value of the option                            |  | US$                                              | 13.32  |   |                                                       | US$ | 29.99  |  
|                                               |  |                                                  |        |   |                                                       |     |        |  
|Valuation per 31 December 2009:                |  |                                                  |        |   |                                                       |     |        |  
|Implied volatility                             |  |                                                  | 32.0   | % |                                                       |     | 32.0   | %
|USD interest average                           |  |                                                  | 0.37   | % |                                                       |     | 1.27   | %
|Stock price                                    |  |                                                 | 17.76  |   |                                                       |    | 17.76  |  
|Conversion price                               |  | US$                                              | 19.22  |   |                                                       | US$ | 20.71  |  
|Value of the option                            |  | US$                                              | 312.97 |   |                                                       | US$ | 263.04 |  
|                                               |  |                                                  |        |   |                                                       |     |        |  



Debt issuance costs



The fees incurred for the issuance of the convertible subordinated notes are included as
debt issuance costs in the Consolidated Balance Sheet and amortized by the effective interest method as interest expense during the economic life of the debts. Debt issuance costs of  1,326 are expected to be amortized in 2010.



NOTE 17Shareholders Equity



Common shares, preferred and financing preferred shares



The authorized capital of the Company amounts to 110,000,000 shares of  0.04 par value common shares, 118,000 shares of  40 par value preferred shares and 8,000
shares of  40 par value financing preferred shares, of which 51,745,140 common shares, no preferred and no financing preferred shares
were outstanding as at December 31, 2009. All shares have one vote per  0.04 par value. Treasury shares held by the Company cannot
be voted on.



Financing preferred shares are designed to allow ASMI to
finance equity with an instrument paying a preferred dividend, linked to EURIBOR loans and government loans, without the dilutive effects of issuing additional common shares.



Preferred and financing preferred shares are issued in registered form only and are subject to transfer restrictions. Essentially, a
preferred or financing preferred shareholder must obtain the approval of the Companys Supervisory Board to transfer shares. If the approval is denied, the Supervisory Board will



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provide a list of acceptable prospective buyers who are willing to purchase the shares at a cash price to be fixed by consent of the Supervisory Board and seller within two months after the
approval is denied. If the transfer is approved, the shareholder must complete the transfer within three months, at which time the approval expires.



Preferred shares are entitled to a cumulative preferred dividend based on the amount paid-up on such shares. Financing preferred shares are entitled to a
cumulative dividend based on the par value and share premium paid on such shares. The preferred dividend on the amount paid-up was  5 for the year 2009.



In the event preferred shares
are issued, the Management Board must, within two years after such preferred shares were issued, submit to the general meeting a proposal to annul the preferred shares. On May 14, 2008, 21,985 preferred shares were issued to Stichting
Continuïteit ASM International (Stichting). The amount paid-up by Stichting was  220, which is the equivalent of
one/fourth of the nominal value of the preferred shares. On May 14, 2009 the Annual Meeting of Shareholders resolved to cancel the outstanding preferred shares and to reissue an option to Stichting Continuïteit to acquire preferred shares.



Treasury shares at cost



The changes in the number and amount of treasury shares at cost is as follows:



|                                                                              |  |                         |   |  |         |   |  |                
|----------------------------------------------------------------------------- |  | ----------------------- | - |  | ------- | - |  | ---------------
|                                                                              |  | Number oftreasuryshares |   |  | Amount  |   |  | Amountper share
|Balance January 1,2008                                                        |  | 213,787                 |   |  | 3,985   |   |  | 18.64          
|Purchase of common shares                                                     |  | 2,655,100               |   |  | 36,453  |   |  | 13.73          
|Issuance of treasury shares upon exercise of options                          |  | (99,367                 | ) |  | (1,850  | ) |  | 18.63          
|Issuance of treasury shares upon conversion of convertible subordinated notes |  | (103,029                | ) |  | (1,373  | ) |  | 13.32          
|                                                                              |  |                         |   |  |         |   |  |                
|Balance December 31, 2008                                                     |  | 2,666,491               |   |  | 37,215  |   |  | 13.96          
|Withdrawal of common shares                                                   |  | (2,553,000              | ) |  | (35,631 | ) |  | 13.96          
|Issuance of treasury shares upon exercise of options                          |  | (113,491                | ) |  | (1,584  | ) |  | 13.96          
|                                                                              |  |                         |   |  |         |   |  |                
|Balance December 31, 2009                                                     |  |                        |   |  |        |   |  |               
|                                                                              |  |                         |   |  |         |   |  |                



From
the treasury shares outstanding on December 31, 2008 2,552,071 shares were held in custody with Lehman Brothers Europe International. These shares were withdrawn in the year 2009.



Retained earnings



Distributions to common shareholders are limited to the extent the total amount of shareholders equity exceeds the amounts of nominal paid-in share capital
(exclusive any share premium) and any reserves to be formed pursuant to law or the Companys articles of association. The amounts are derived from the Statutory Financial Statements of ASM International N.V.



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##### Table of Contents

Accumulated other comprehensive loss



The changes in the amount of accumulated other comprehensive loss are as follows:



|                                                                                       |  |                                   |   |  |                                                             |   |  |                                           |   |  |         |  
|-------------------------------------------------------------------------------------- |  | --------------------------------- | - |  | ----------------------------------------------------------- | - |  | ----------------------------------------- | - |  | ------- | -
|                                                                                       |  | Foreigncurrencytranslationeffects |   |  | Unrealized gains(losses) onderivativeinstruments, netof tax |   |  | Unrecognizedpensionobligations,net of tax |   |  | Total   |  
|Balance January 1, 2008                                                                |  | (72,318                           | ) |  | 146                                                         |   |  | (747                                      | ) |  | (72,919 | )
|Foreign currency translation effect on translation of foreign operations               |  | 10,017                            |   |  |                                                            |   |  | (222                                      | ) |  | 9,795   |  
|Increase in fair value of derivative instruments, net of tax                           |  |                                  |   |  | 799                                                         |   |  |                                          |   |  | 799     |  
|Transfer to Consolidated Statement of Operations of derivative instruments, net of tax |  |                                  |   |  | (898                                                        | ) |  |                                          |   |  | (898    | )
|Actuarial loss                                                                         |  |                                  |   |  |                                                            |   |  | (936                                      | ) |  | (936    | )
|Amortization of transition obligation transition obligation (ASC 715)                  |  |                                  |   |  |                                                            |   |  | 67                                        |   |  | 67      |  
|                                                                                       |  |                                   |   |  |                                                             |   |  |                                           |   |  |         |  
|Total change in accumulated other comprehensive loss                                   |  | 10,017                            |   |  | (99                                                         | ) |  | (1,091                                    | ) |  | 8,827   |  
|                                                                                       |  |                                   |   |  |                                                             |   |  |                                           |   |  |         |  
|Balance December 31, 2008                                                              |  | (62,301                           | ) |  | 47                                                          |   |  | (1,838                                    | ) |  | (64,092 | )
|Foreign currency translation effect on translation of foreign operations               |  | (1,939                            | ) |  |                                                            |   |  | 62                                        |   |  | (1,877  | )
|Increase in fair value of derivative instruments, net of tax                           |  |                                  |   |  | 81                                                          |   |  |                                          |   |  | 81      |  
|Transfer to Consolidated Statement of Operations of derivative instruments, net of tax |  |                                  |   |  | (251                                                        | ) |  |                                          |   |  | (251    | )
|Reclassification transition obligation into retained earnings                          |  |                                  |   |  |                                                            |   |  | 877                                       |   |  | 877     |  
|Result on curtailment and settlement unrecognized pension obligations                  |  |                                  |   |  |                                                            |   |  | 852                                       |   |  | 852     |  
|Actuarial loss                                                                         |  |                                  |   |  |                                                            |   |  | (370                                      | ) |  | (370    | )
|Amortization of unrecognized actuarial results                                         |  |                                  |   |  |                                                            |   |  | 26                                        |   |  | 26      |  
|                                                                                       |  |                                   |   |  |                                                             |   |  |                                           |   |  |         |  
|Total change in accumulated other comprehensive loss                                   |  | (1,939                            | ) |  | (170                                                        | ) |  | 1,447                                     |   |  | (662    | )
|                                                                                       |  |                                   |   |  |                                                             |   |  |                                           |   |  |         |  
|Balance December 31, 2009                                                              |  | (64,240                           | ) |  | (123                                                        | ) |  | (391                                      | ) |  | (64,754 | )
|                                                                                       |  |                                   |   |  |                                                             |   |  |                                           |   |  |         |  



Purchases of Equity Securities by the Issuer and
Affiliated Purchasers



On May 22, 2007, the General Meeting of
Shareholders authorized the Company, for an 18-month period, to be calculated from the date of the General Meeting, to repurchase its own shares up to the statutory maximum, at a price at least equal to the shares nominal value and at most a
price equal to 110% of the shares average closing price according to the listing on the Euronext Amsterdam stock exchange during the five trading days preceding the purchase date.



The number of shares bought back under the authorization of May 22, 2007 was 2,655,100. Of this number, 249,071 were sold upon the
exercise of options by employees of ASMI, under the Employee Stock Option Plan, 103,029 were issued upon conversion of convertible subordinated debt and 2,553,000 were withdrawn in July 2009.



The following table summarizes shares repurchased under the authorization of May 22,
2007:



|                     |  |                                 |  |                                                                                |  |                             |       |                                                                    |  
|-------------------- |  | ------------------------------- |  | ------------------------------------------------------------------------------ |  | --------------------------- | ----- | ------------------------------------------------------------------ | -
|Period               |  | Total Number ofShares Purchased |  | Total Number of SharesPurchased as Part of PubliclyAnnounced Plans or Programs |  | Average PricePaid per Share |       | Maximum Number ofShares that May Yet bePurchased
underthe Programs
|August 2007          |  | 250,000                         |  | 250,000                                                                        |  |                            | 18.67 |                                                                    | 
|March and April 2008 |  | 2,405,100                       |  | 2,405,100                                                                      |  |                            | 13.31 |                                                                    | 



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##### Table of Contents

On May 21, 2008, the General Meeting of Shareholders authorized the Company, for an 18-month period, to be
calculated from the date of the General Meeting, to repurchase its own shares up to the statutory maximum, at a price at least equal to the shares nominal value and at most a price equal to 110% of the shares average closing price
according to the listing on the Euronext Amsterdam stock exchange during the five trading days preceding the purchase date.



The number of shares bought back under the authorization of May 21, 2008 was 250,000.



The following table summarizes shares repurchased under the authorization of May 21, 2008:



|               |  |                                 |  |                                                                                |  |                             |       |                                                                    |          
|-------------- |  | ------------------------------- |  | ------------------------------------------------------------------------------ |  | --------------------------- | ----- | ------------------------------------------------------------------ | ---------
|Period         |  | Total Number ofShares Purchased |  | Total Number of SharesPurchased as Part of PubliclyAnnounced Plans or Programs |  | Average PricePaid per Share |       | Maximum Number ofShares that May Yet bePurchased
underthe Programs
|September 2008 |  | 250,000                         |  | 250,000                                                                        |  |                            | 17.74 |                                                                    | 2,758,656



The maximum of shares that may yet be purchased under the program takes into account the treasury shares held by the Company (at December 31, 2009 there were no treasury shares held) and the maximum number of
common shares which the Company can hold according to its Articles of Association. This maximum is 10% of the number of common shares issued.



NOTE 18Employee Benefits



Pension plans



The Company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the Companys operations in the Netherlands and Japan.



The Companys employees in the Netherlands participate in a
multi-employer plan (Bedrijfstakpensioenfonds Metalektro). The plan monitors the risks of the entire investment portfolio, not by individual company or employee, and is subject to regulation by Dutch governmental authorities.
By Dutch law, a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of its assets to its obligations. This ratio includes a minimum coverage ratio of 105%. Each company participating in the plan
contributes a percentage of its total pensionable salaries and each company contributes the same percentage. The pension rights of individual employees are based on the employees average salary during employment. The Companys net
periodic pension cost for the multi-employer plan for a fiscal period is equal to the required contribution for that period. At December 31, 2009 the coverage ratio of the multi-employer plan was 100% (December 31, 2008: 90%) as a result of the
economic crisis in 2008 and 2009. Consequently the Board of the multi-employer plan decided that existing pension obligations will not be indexed for the years 2009 and 2010.



The Companys employees in Japan participate in a defined benefit plan. The funded status of the plan and the amounts not yet
recognized in the Consolidated Statement of Operations and the amounts recognized in the Consolidated Balance Sheet are as follows:



|                               |  |              |   |  |        |  
|------------------------------ |  | ------------ | - |  | ------ | -
|                               |  | December 31, |  
|                               |  | 2008         |   |  | 2009   |  
|Defined benefit obligations    |  | (10,046      | ) |  | (6,560 | )
|Fair value of plan assets      |  | 4,973        |   |  | 2,119  |  
|                               |  |              |   |  |        |  
|Funded status deficit          |  | (5,073       | ) |  | (4,441 | )
|Unrecognized actuarial loss    |  | 1,586        |   |  | 662    |  
|Unrecognized transition amount |  | 1,530        |   |  |       |  
|                               |  |              |   |  |        |  
|Net liabilities                |  | (1,957       | ) |  | (3,779 | )
|                               |  |              |   |  |        |  



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##### Table of Contents

The changes in defined benefit obligations and fair value of plan assets are as follows:



|                                    |  |              |   |  |        |  
|----------------------------------- |  | ------------ | - |  | ------ | -
|                                    |  | December 31, |  
|                                    |  | 2008         |   |  | 2009   |  
|Defined benefit obligations         |  |              |   |  |        |  
|Balance January 1                   |  | 7,401        |   |  | 10,046 |  
|Current service cost                |  | 739          |   |  | 675    |  
|Interest on obligation              |  | 160          |   |  | 154    |  
|Actuarial losses (gains)            |  | (159         | ) |  | 605    |  
|Benefits paid                       |  | (439         | ) |  | (365   | )
|Curtailment and settlement          |  |             |   |  | (4,095 | )
|Foreign currency translation effect |  | 2,344        |   |  | (461   | )
|                                    |  |              |   |  |        |  
|Balance December 31                 |  | 10,046       |   |  | 6,560  |  
|                                    |  |             
|Fair value of plan assets           |  |              |   |  |        |  
|Balance January 1                   |  | 4,831        |   |  | 4,973  |  
|Expected return on plan assets      |  | 193          |   |  | 98     |  
|Actuarial losses                    |  | (1,485       | ) |  | (20    | )
|Company contribution                |  | 610          |   |  | 629    |  
|Benefits paid                       |  | (439         | ) |  | (365   | )
|Settlement                          |  |             |   |  | (2,996 | )
|Foreign currency translation effect |  | 1,263        |   |  | (201   | )
|                                    |  |              |   |  |        |  
|Balance December 31                 |  | 4,973        |   |  | 2,119  |  
|                                    |  |              |   |  |        |  



The net periodic benefit cost consists of the following:



|                                     |  |              |   |  |      |   |  |      |  
|------------------------------------ |  | ------------ | - |  | ---- | - |  | ---- | -
|                                     |  | December 31, |  
|                                     |  | 2007         |   |  | 2008 |   |  | 2009 |  
|Current service cost                 |  | 650          |   |  | 739  |   |  | 675  |  
|Interest on obligation               |  | 135          |   |  | 160  |   |  | 154  |  
|Expected return on plan assets       |  | (156         | ) |  | (193 | ) |  | (98  | )
|Amortization deferred actuarial loss |  |             |   |  |     |   |  | 44   |  
|Amortization of transition amount    |  | 106          |   |  | 113  |   |  |     |  
|                                     |  |              |   |  |      |   |  |      |  
|Net periodic pension benefit cost    |  | 735          |   |  | 819  |   |  | 775  |  
|                                     |  |              |   |  |      |   |  |      |  



The actual return on plan assets was  219,  (1,293), and  78 for the years ended December 31, 2007, 2008 and 2009 respectively.



The assumptions in calculating the actuarial present value of benefit obligations and net periodic benefit cost are as follows:



|                               |  |              |   |  |      |   |  |      |  
|------------------------------ |  | ------------ | - |  | ---- | - |  | ---- | -
|                               |  | December 31, |  
|                               |  | 2007         |   |  | 2008 |   |  | 2009 |  
|Discount rate for obligations  |  | 2.00         | % |  | 2.00 | % |  | 1.70 | %
|Expected return on plan assets |  | 3.50         | % |  | 3.00 | % |  | 3.00 | %
|Future salary increases        |  | 2.94         | % |  | 2.94 | % |  | 2.93 | %



The allocation of plan assets is as follows:



|            |  |              |  |       |      |  |       |  |       |  
|----------- |  | ------------ |  | ----- | ---- |  | ----- |  | ----- | -
|            |  | December 31, | 
|            |  | 2008         |  |       | 2009 | 
|Shares      |  | 2,229        |  | 44.8  | %    |  | 868   |  | 41.0  | %
|Bonds       |  | 2,150        |  | 43.2  | %    |  | 1,010 |  | 47.6  | %
|Loans       |  | 267          |  | 5.4   | %    |  | 126   |  | 5.9   | %
|Real estate |  | 54           |  | 1.1   | %    |  | 25    |  | 1.2   | %
|Other       |  | 273          |  | 5.5   | %    |  | 91    |  | 4.3   | %
|            |  |              |  |       |      |  |       |  |       |  
|            |  | 4,973        |  | 100.0 | %    |  | 2,119 |  | 100.0 | %
|            |  |              |  |       |      |  |       |  |       |  



The plan assets do not include any of the Companys
shares.



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##### Table of Contents

The Company expects to contribute  501 to the defined benefit plan in 2010. The Company expects to pay benefits for years subsequent to December 31, 2009 as follows:



|                                  |  |      
|--------------------------------- |  | -----
|2010                              |  | 266  
|2011                              |  | 271  
|2012                              |  | 309  
|2013                              |  | 313  
|2014                              |  | 377  
|Aggregate for the years 2015-2019 |  | 2,105
|                                  |  |      
|Total                             |  | 3,641
|                                  |  |      



Retirement plan costs consist of the following:



|                            |  |              |  |        |  |      
|--------------------------- |  | ------------ |  | ------ |  | -----
|                            |  | December 31,
|                            |  | 2007         |  | 2008   |  | 2009 
|Defined contribution plans  |  | 7,813        |  | 7,863  |  | 6,875
|Multi-employer plans        |  | 2,586        |  | 2,792  |  | 2,089
|Defined benefit plans       |  | 735          |  | 819    |  | 775  
|                            |  |              |  |        |  |      
|Total retirement plan costs |  | 11,134       |  | 11,474 |  | 9,739
|                            |  |              |  |        |  |      



The
Company does not provide for any significant post retirement benefits other than pensions.



Employee Stock Option Plan



The
Company has adopted various stock option plans and has entered into stock option agreements with various employees. Under these plans, employees may purchase a specific number of shares of the Companys common stock. Options are priced at
market value in euros or U.S. dollars on the date of grant, are generally vesting in equal parts over a period of five years and generally expire after five or ten years. Under the 2001 Stock Option Plan the Company is authorized to issue 4,000,000
shares. At December 31, 2009, options to purchase 3,723,345 shares have been issued under the 2001 Stock Option Plan. Under previous plans no more options to purchase shares can be issued. Under the various stock option plans a total of
1,750,158 options to purchase common stock were outstanding at December 31, 2009, expiring at various dates through 2019. The number of options outstanding at December 31, 2007 and 2008 were 1,189,797 and 1,460,730 respectively.



The following is a summary of changes in options outstanding:



|                          |  |                  |   |  |                                    |  |                 |   |  |                                  
|------------------------- |  | ---------------- | - |  | ---------------------------------- |  | --------------- | - |  | ---------------------------------
|                          |  | Number ofoptions |   |  | Weightedaverageexerciseprice inUS$ |  | Numberofoptions |   |  | Weightedaverageexerciseprice in 
|Balance January 1, 2007   |  | 645,528          |   |  | 15.69                              |  | 754,183         |   |  | 14.26                            
|Options granted           |  | 72,000           |   |  | 24.35                              |  | 217,868         |   |  | 18.46                            
|Options forfeited         |  | (18,594          | ) |  | 16.80                              |  | (89,800         | ) |  | 18.07                            
|Options exercised         |  | (256,137         | ) |  | 16.76                              |  | (135,251        | ) |  | 13.80                            
|                          |  |                  |   |  |                                    |  |                 |   |  |                                  
|Balance December 31, 2007 |  | 442,797          |   |  | 16.43                              |  | 747,000         |   |  | 15.10                            
|Options granted           |  | 276,000          |   |  | 20.49                              |  | 148,000         |   |  | 12.36                            
|Options forfeited         |  | (36,500          | ) |  | 16.43                              |  | (17,200         | ) |  | 17.55                            
|Options exercised         |  | (79,357          | ) |  | 15.07                              |  | (20,010         | ) |  | 13.85                            
|                          |  |                  |   |  |                                    |  |                 |   |  |                                  
|Balance December 31, 2008 |  | 602,940          |   |  | 18.47                              |  | 857,790         |   |  | 14.61                            
|Options granted           |  | 358,400          |   |  | 17.83                              |  | 381,600         |   |  | 14.76                            
|Options forfeited         |  | (68,740          | ) |  | 14.27                              |  | (245,332        | ) |  | 14.43                            
|Options exercised         |  | (69,700          | ) |  | 12.99                              |  | (66,800         | ) |  | 12.20                            
|                          |  |                  |   |  |                                    |  |                 |   |  |                                  
|Balance December 31, 2009 |  | 822,900          |   |  | 19.00                              |  | 927,258         |   |  | 14.89                            
|                          |  |                  |   |  |                                    |  |                 |   |  |                                  



The
weighted average fair value of employee stock options granted in U.S. dollars were US$ 13.85 in 2007, US$ 11.01 in 2008 and US$ 9.31 in 2009. The weighted average fair values of employee stock option granted in Euro were  7.27 in 2007,  5.55 in 2008
and  7.26 in 2009.



The weighted average remaining contractual life of the outstanding options granted in 2009 is 6.58 years at December 31, 2009.



F-30



---

##### Table of Contents

The total intrinsic value of options exercised was  2,320,  818, and  684 for the years ended December 31, 2007, 2008 and 2009 respectively. New shares have been issued for the exercise of 176,469 options in 2007. No new shares have been
issued for the exercise of options in 2008. In 2009 new shares have been issued for the exercise of 23,009 options.



At December 31, 2009 options outstanding and options exercisable classified by range of exercise prices are:



|                       |  |                     |  |                                           |  |                               |  |                   |  |                              
|---------------------- |  | ------------------- |  | ----------------------------------------- |  | ----------------------------- |  | ----------------- |  | -----------------------------
|                       |  | Options outstanding |  | Options exercisable                      
|Range ofexerciseprices |  | Numberoutstanding   |  | Weighted averageremainingcontractual life |  | Weightedaverageexercise price |  | Numberexercisable |  | Weightedaverageexercise price
|In US$                 |  |                     |  | In years                                  |  | In US$                        |  |                   |  | In US$                       
|1.00-10.00             |  | 80,000              |  | 9.13                                      |  | 7.55                          |  | 0                 |  | 0                            
|10.00-15.00            |  | 205,400             |  | 4.78                                      |  | 13.10                         |  | 82,400            |  | 13.46                        
|15.00-20.00            |  | 107,500             |  | 7.09                                      |  | 17.99                         |  | 34,500            |  | 17.26                        
|20.00-30.00            |  | 430,000             |  | 6.71                                      |  | 24.21                         |  | 66,800            |  | 25.17                        
|                       |  |                     |  |                                           |  |                               |  |                   |  |                              
|1.00-30.00             |  | 822,900             |  | 6.51                                      |  | 19.00                         |  | 183,700           |  | 18.43                        
|                       |  |                     |  |                                           | 
|In                    |  |                     |  | In years                                  |  | In                           |  |                   |  | In                          
|1.00-10.00             |  | 24,600              |  | 3.90                                      |  | 7.91                          |  | 4,000             |  | 7.79                         
|10.00-15.00            |  | 280,790             |  | 3.57                                      |  | 12.42                         |  | 117,391           |  | 12.73                        
|15.00-20.00            |  | 621,868             |  | 5.22                                      |  | 16.28                         |  | 64,560            |  | 16.18                        
|                       |  |                     |  |                                           |  |                               |  |                   |  |                              
|1.00-20.00             |  | 927,258             |  | 4.68                                      |  | 14.89                         |  | 185,951           |  | 13.82                        
|                       |  |                     |  |                                           |  |                               |  |                   |  |                              



At
December 31, 2009, the aggregate intrinsic value of all options outstanding and all options exercisable is  6,509 and  1,664 respectively.



The cost relating to employee stock options is measured at fair value on the grant date. The fair value was determined using the Black-Scholes option valuation model
with the following weighted average assumptions:



|                        |  |              |  |       
|----------------------- |  | ------------ |  | ------
|                        |  | December 31,
|                        |  | 2008         |  | 2009  
|Expected life (years)   |  | 5  10       |  | 5  10
|Risk free interest rate |  | 4.0%         |  | 3.0%  
|Dividend yield          |  | 0.85         |  |      
|Expected volatility     |  | 72.5%        |  | 52.1% 



When establishing the expected life assumption the Company takes into account the contractual terms of the option. We recorded in 2008 compensation expenses of  2,024 and in 2009 compensation expenses of  2,127.



Employee Share Incentive Scheme ASMPT



In 1989, the shareholders of ASMPT approved a plan to issue up to 5.0 percent of the
total issued shares of ASMPT to directors and employees. This plan has been extended in 1999 for a term up to March 23, 2010. The directors annually may approve an amount of supplemental compensation to the designated directors and officers,
which will be used to issue or purchase ASMPTs common shares for the designees at current market value. In December 2009, 2,035,400 common shares of ASMPT were issued, for cash at par value of HK$ 0.10 per share, pursuant to the Employee
Share Incentive Scheme of ASMPT. In 2008 and 2007, respectively 1,728,700 and 1,789,000 ASMPT shares were issued to certain directors and employees under the plan. The effect of this transaction on ASMI was a dilution of its ownership interest in
ASMPT of 0.28% in 2009, 0.23% in 2008 and 0.25% in 2007. The shares issued under the plan in 2009 have diluted ASMIs ownership in ASMPT to 52.59% as of December 31, 2009. Total compensation expenses related to the Employee Share Incentive
Scheme of respectively  7,685 in 2007,  7,524 in 2008, and  3,685 in 2009 were charged to the Consolidated Statement of Operations.



The dilution in ownership has resulted in a gain on the investment in ASMPT of  3,010 in 2007,  4,088 in 2008, and  956 in 2009, which gain has been separately included in the Consolidated Statement of
Operations. Due to the participation exemption in the Netherlands no deferred income taxes have been provided for these gains.



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##### Table of Contents

NOTE 19Commitments and Contingencies



Capital leases included in property, plant and equipment are as follows:



|                              |  |              |   |  |        |  
|----------------------------- |  | ------------ | - |  | ------ | -
|                              |  | December 31, |  
|                              |  | 2008         |   |  | 2009   |  
|Machinery and equipment       |  | 6,530        |   |  | 4,305  |  
|Furniture and fixtures        |  | 780          |   |  | 739    |  
|                              |  |              |   |  |        |  
|                              |  | 7,310        |   |  | 5,044  |  
|Less accumulated depreciation |  | (5,418       | ) |  | (3,939 | )
|                              |  |              |   |  |        |  
|                              |  | 1,892        |   |  | 1,105  |  
|                              |  |              |   |  |        |  



At December 31, 2009 minimum rental commitments under
capital leases and operating leases having initial or remaining non-cancelable terms in excess of one year are as follows:



|                                            |  |               |   |  |                
|------------------------------------------- |  | ------------- | - |  | ---------------
|                                            |  | Capitalleases |   |  | Operatingleases
|2010                                        |  | 630           |   |  | 8,601          
|2011                                        |  | 244           |   |  | 7,319          
|2012                                        |  | 107           |   |  | 5,386          
|2013                                        |  |              |   |  | 3,767          
|2014                                        |  |              |   |  | 2,062          
|Years thereafter                            |  |              |   |  | 4,688          
|                                            |  |               |   |  |                
|Total                                       |  | 981           |   |  | 31,823         
|Less amount representing interest           |  | (16           | ) |  |                
|                                            |  |               |   |  |                
|Present value of net minimum lease payments |  | 965           |   |  |                
|                                            |  |               |   |  |                



Aggregate rental expense for operating leases
was  7,873 in 2007, 
9,748 in 2008 and  10,719 in 2009. At December 31, 2009 the Company had entered into purchase commitments with suppliers in the
amount of  62,983 for purchases, of which  62,841 for purchases within the next 12 months. Commitments for capital expenditures at December 31, 2009 were  9,675.



Change of Control
Transaction



If the Company desires to effect a change of control
transaction with a competitor of Applied Materials, Inc., (Applied Materials) the Company must, pursuant to a litigation settlement agreement in 1997, as amended and restated in 1998, first offer the change of control transaction to
Applied Materials on the same terms as the Company would be willing to accept from that competitor pursuant to a bona fide arms-length offer by that competitor.



NOTE 20Litigation and Environmental Matters



The Company is party to various legal proceedings generally incidental to its business and is subject to a variety of environmental and
pollution control laws and regulations. As is the case with other companies in similar industries, the Company faces exposure from actual or potential claims and legal proceedings. Although the ultimate disposition of legal proceedings cannot be
predicted with certainty, it is the opinion of the Companys management that the outcome of any claim which is pending or threatened, either individually or on a combined basis, will not have a materially adverse effect on the financial
position of the Company, but could materially affect the Companys results of operations in a given reporting period.



Under our license agreement with Applied Materials, we pay royalties based upon our sales of equipment that employs technology covered by the licensed patents. We
believe that we no longer practice patents applicable to certain equipment and ceased paying royalties on the sale of such equipment as of December 18, 2007 and gave written notice to Applied Materials in December 2007. The agreement provides a
process to address royalty issues in a prescribed manner: the first step is written notice of a royalty matter to a party; the second step is amicable resolution with the participation of an expert if desired by Applied Materials; and the final step
if not resolved by the parties is through binding arbitration. Initiation of this process is not considered a default event and the remedy is the payment of any unpaid royalties for equipment shipped after the written notice that are ultimately
agreed to by the parties or determined by arbitration. Applied Materials is verifying our position through the review by an independent expert. While we consider the matter closed, Applied Materials notified us in late 2009 that they are continuing
to evaluate the matter and will contact us if they require additional information. Although we believe our position is correct,



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the outcome of any possible arbitration is uncertain and, if we are not successful, we could be required to pay up to approximately US$ 4.2 million ( 2.9 million) for royalties as of December 31, 2009.



NOTE 21Financial Instruments and Risk Management



Categories of Financial Instruments



Financial instruments include:



Financial assets:



|                                                       |  |              |  |        
|------------------------------------------------------ |  | ------------ |  | -------
|                                                       |  | December 31,
|                                                       |  | 2008         |  | 2009   
|Cash and cash equivalents                              |  | 157,277      |  | 293,902
|Accounts receivable                                    |  | 172,603      |  | 165,754
|Derivative instruments designated in cash flow hedges  |  | 172          |  | 0      
|Derivative instruments designated in fair value hedges |  | 613          |  | 94     
|                                                       |  |              |  |        



Financial liabilities:



|                                                       |  |              |  |        
|------------------------------------------------------ |  | ------------ |  | -------
|                                                       |  | December 31,
|                                                       |  | 2008         |  | 2009   
|Notes payable to banks                                 |  | 16,858       |  | 17,008 
|Accounts payable                                       |  | 69,718       |  | 93,117 
|Current portion of long-term debt                      |  | 6,763        |  | 5,795  
|Current portion of convertible subordinated debt       |  |             |  | 11,542 
|Long-term debt                                         |  | 23,268       |  | 16,554 
|Convertible subordinated debt                          |  | 106,793      |  | 192,350
|Conversion option                                      |  |             |  | 22,181 
|Derivative instruments designated in cash flow hedges  |  | 55           |  | 167    
|Derivative instruments designated in fair value hedges |  | 360          |  | 28     
|                                                       |  |              |  |        



Gains or losses related to financial instruments are as follows:



|                                                                |  |                        |   |  |         |  
|--------------------------------------------------------------- |  | ---------------------- | - |  | ------- | -
|                                                                |  | Year endedDecember 31, |  
|                                                                |  | 2008                   |   |  | 2009    |  
|Interest income                                                 |  | 4,047                  |   |  | 1,018   |  
|Interest expense                                                |  | (7,745                 | ) |  | (8,556  | )
|Accretion interest expense convertible notes at amortized value |  |                       |   |  | (4,286  | )
|Gain (loss) resulting from early extinguishment of debt         |  | 7,956                  |   |  | (1,759  | )
|Revaluation conversion option                                   |  |                       |   |  | (24,364 | )
|Foreign currency exchange gains (losses), net                   |  | 785                    |   |  | (1,384  | )
|Addition to allowance for doubtful accounts receivable          |  | (2,859                 | ) |  | (2,812  | )
|                                                                |  |                        |   |  |         |  



We adopted ASC 820, Fair Value Measurements, on
January 1, 2008, for financial assets and liabilities and for nonfinancial assets and liabilities that are remeasured at least annually. ASC 820 defines fair value as the price that would be received for an asset or paid to transfer a liability
in an orderly transaction between market participants on the measurement date. ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels.



|         |  |                                                                                                                                                                                         
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | 
|Level 1. |  | Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
|         | 
|Level 2. |  | Observable inputs other than quoted prices in active markets.                                                                                                                           
|         | 
|Level 3. |  | Unobservable inputs for which there is little or no market data available. The fair value hierarchy gives the lowest priority to Level 3 inputs.                                        



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The following table presents the Companys financial assets and financial liabilities that are measured at fair
value on a recurring basis.



|                                 |  |         |  |         |  |         |  |       
|-------------------------------- |  | ------- |  | ------- |  | ------- |  | ------
|                                 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total 
|December 31, 2008                |  |         |  |         |  |         |  |       
|                                 |  |         |  |        
|Assets:                          |  |         |  |         |  |         |  |       
|Derivative financial instruments |  |        |  | 16,974  |  |        |  | 16,974
|                                 |  |         |  |         |  |         |  |       
|Total                            |  |        |  | 16,974  |  |        |  | 16,974
|                                 |  |         |  |        
|Liabilities:                     |  |         |  |         |  |         |  |       
|Derivative financial instruments |  |        |  | 3,072   |  |        |  | 3,072 
|                                 |  |         |  |         |  |         |  |       
|Total                            |  |        |  | 3,072   |  |        |  | 3,072 
|                                 |  |         |  |        
|December 31,2009                 |  |         |  |         |  |         |  |       
|                                 |  |         |  |        
|Assets:                          |  |         |  |         |  |         |  |       
|Derivative financial instruments |  |        |  | 14,500  |  |        |  | 14,500
|                                 |  |         |  |         |  |         |  |       
|Total                            |  |        |  | 14,500  |  |        |  | 14,500
|                                 |  |         |  |        
|Liabilities:                     |  |         |  |         |  |         |  |       
|Conversion options               |  |        |  | 22,181  |  |        |  | 22,181
|Derivative financial instruments |  |        |  | 421     |  |        |  | 421   
|                                 |  |         |  |         |  |         |  |       
|Total                            |  |        |  | 22,602  |  |        |  | 22,602
|                                 |  |         |  |         |  |         |  |       



Financial Risk Factors



ASMI is exposed to a number of risk
factors: market risks (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Company uses forward exchange contracts to hedge its foreign exchange risk. The Company does not enter into financial instrument
transactions for trading or speculative purposes.



Foreign Exchange Risk



ASMI and its subsidiaries conduct business in a number of foreign
countries, with certain transactions denominated in currencies other than the functional currency of the Company (euro) or one of its subsidiaries conducting the business. The purpose of the Companys foreign currency management is to manage
the effect of exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in selected foreign currencies, in particular denominated in U.S. dollar.



The Companys front-end segment uses forward exchange contracts to hedge its foreign exchange risk of anticipated sales or purchase
transactions in the normal course of business, which occur within the next twelve months, for which the Company has a firm commitment from a customer or to a supplier. The terms of these contracts are consistent with the timing of the transactions
being hedged. The hedges related to forecasted transactions are designated and documented at the inception of the hedge as cash flow hedges, and are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is
reported as a component of accumulated other comprehensive loss in Shareholders Equity, and is reclassified into earnings when the hedged transaction affects earnings.



The majority of revenues and costs of the Companys back-end segment are denominated in Hong Kong dollars, Chinese Yuan and U.S.
dollars. Since foreign currency exposure is not significant, no forward exchange contracts are used. The effect of exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in foreign currencies is
periodically reviewed.



Changes in the fair value of derivatives that do not
qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in earnings. The Company records all derivatives, including forward exchange contracts, on the balance sheet at fair value in other current assets or
accrued expenses.



The Company expects that substantially all of the  123 unrealized losses included in accumulated other comprehensive loss as of December 31, 2009 will be reclassified to net earnings
within the next twelve months, upon completion of the underlying transactions. If the underlying transaction being hedged fails to occur, or if a portion of any derivative is ineffective, the gain or loss is immediately recognized in earnings under
foreign currency exchange gains (losses) in the Consolidated Statement of Operations. Unrealized gains included in accumulated other comprehensive loss as of December 31, 2008 of  47 were reclassified to earnings in 2009. Hedge ineffectiveness was insignificant for the years ended December 31, 2008 and December 31, 2009.



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Furthermore, the Company manages the currency exposure of certain receivables and payables using derivative
instruments, such as forward exchange contracts (fair value hedges) and currency swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains or losses on these instruments provide an offset to the gains or losses
recorded on receivables and payables denominated in foreign currencies. The derivative instruments are recorded at fair value and changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the Consolidated
Statement of Operations. Receivables and payables denominated in foreign currencies are recorded at the exchange rate at the balance sheet date and gains and losses as a result of changes in exchange rates are recorded in earnings under foreign
currency exchange gains (losses) in the Consolidated Statement of Operations.



To the extent that exchange rate fluctuations impact the value of the Companys investments in its foreign subsidiaries, they are not hedged. The cumulative effect of these fluctuations is separately reported in Consolidated
Shareholders Equity. Reference is made to Note 17.



The outstanding
forward exchange contracts are as follows:



|                            |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|--------------------------- |  | -------- |  | -------------- | - |  | -------------------- | - |  | --------- | - |  | ------------------------------------------- | - |  | ----------------------------------------------------- | -
|                            |  | Currency |  | Notionalamount |   |  | Forwardcontractvalue |   |  | Fairvalue |   |  | Differencebetweenforwardvalue andfair value |   |  | Included inaccumulatedothercomprehensiveincome (loss) |  
|                            |  |          |  |                |   |  | Euro                 |   |  | Euro      |   |  | Euro                                        |   |  | Euro                                                  |  
|December 31, 2008:          |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|                            |  |          |  |                |   | 
|Assets:                     |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|                            |  |          |  |                |   | 
|Cash flow hedge contracts:  |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|Short position              |  | US$      |  | (3,892         | ) |  | (2,988               | ) |  | (2,789    | ) |  | 199                                         |   |  | 128                                                   |  
|Fair value hedge contracts: |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|Short position              |  | US$      |  | (19,724        | ) |  | (14,531              | ) |  | (14,185   | ) |  | 346                                         |   |  |                                                      |  
|                            |  |          |  |                |   | 
|Liabilities:                |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|                            |  |          |  |                |   | 
|Cash flow hedge contracts   |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|Long position               |  | US$      |  | 2,228          |   |  | 1,687                |   |  | 1,606     |   |  | (81                                         | ) |  | (81                                                   | )
|Fair value hedge contracts: |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|Long position               |  | US$      |  | 2,038          |   |  | 1,560                |   |  | 1,466     |   |  | (94                                         | ) |  |                                                      |  
|                            |  |          |  |                |   | 
|December 31, 2009:          |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|                            |  |          |  |                |   | 
|Assets:                     |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|                            |  |          |  |                |   | 
|Cash flow hedge contracts:  |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|Short position              |  | US$      |  | (10,767        | ) |  | (7,293               | ) |  | (7,460    | ) |  | (167                                        | ) |  | (123                                                  | )
|Fair value hedge contracts: |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|Short position              |  | US$      |  | (10,135        | ) |  | (7,134               | ) |  | (7,040    | ) |  | 94                                          |   |  |                                                      |  
|                            |  |          |  |                |   | 
|Liabilities:                |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|                            |  |          |  |                |   | 
|Cash flow hedge contracts   |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|Long position               |  |         |  |               |   |  |                     |   |  |          |   |  |                                            |   |  |                                                      |  
|Fair value hedge contracts: |  |          |  |                |   |  |                      |   |  |           |   |  |                                             |   |  |                                                       |  
|Long position               |  | US$      |  | 607            |   |  | 449                  |   |  | 421       |   |  | (28                                         | ) |  |                                                      |  



For forward exchange contracts, market values based on external quotes from banks have been used to determine the fair value.



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The following table analyzes the Companys sensitivity to a hypothetical 10% strengthening and 10% weakening of
the U.S. dollar, Hong Kong dollar and Japanese yen against the euro as of December 31, 2008 and December 31, 2009. This analysis includes foreign currency denominated monetary items and adjusts their translation at year end for a 10%
increase and 10% decrease of the U.S. dollar, Hong Kong dollar or Japanese yen against the euro. A positive amount indicates an increase in equity. Recognized in equity is the revaluation effect of subsidiaries denominated in U.S. dollar, Hong Kong
dollar and Japanese yen.



|                                             |  |                  |   |  |         |  
|-------------------------------------------- |  | ---------------- | - |  | ------- | -
|                                             |  | Impact on equity |  
|                                             |  | 2008             |   |  | 2009    |  
|10% increase of U.S. dollar versus euro      |  | (3,566           | ) |  | (79     | )
|10% decrease of U.S. dollar versus euro      |  | 3,566            |   |  | 79      |  
|10% increase of Hong Kong dollar versus euro |  | 17,851           |   |  | 19,736  |  
|10% decrease of Hong Kong dollar versus euro |  | (17,851          | ) |  | (19,736 | )
|10% increase of Japanese yen versus euro     |  | 4,214            |   |  | 3,585   |  
|10% decrease of Japanese yen versus euro     |  | (4,214           | ) |  | (3,585  | )
|                                             |  |                  |   |  |         |  



A hypothetical 10% strengthening or 10% weakening of any
currency other than the U.S. dollar, Hong Kong dollar and Japanese yen against the euro as of December 31, 2008 and December 31, 2009 would not result in a material impact on equity.



The following table analyzes the Companys sensitivity to a hypothetical 10%
strengthening and 10% weakening of the U.S. dollar and Hong Kong dollar against the euro at average exchange rates for the years 2008 and 2009. A positive amount indicates an increase in net earnings.



|                                             |  |                        |   |  |        |  
|-------------------------------------------- |  | ---------------------- | - |  | ------ | -
|                                             |  | Impact on net earnings |  
|                                             |  | 2008                   |   |  | 2009   |  
|10% increase of Japanese yen versus euro     |  | not material           |   |  | (1,212 | )
|10% decrease of Japanese yen versus euro     |  | not material           |   |  | 1,212  |  
|10% increase of U.S. dollar versus euro      |  | 451                    |   |  | (7,456 | )
|10% decrease of U.S. dollar versus euro      |  | (451                   | ) |  | 7,456  |  
|10% increase of Hong Kong dollar versus euro |  | 4,819                  |   |  | 4,570  |  
|10% decrease of Hong Kong dollar versus euro |  | (4,819                 | ) |  | (4,570 | )
|                                             |  |                        |   |  |        |  



A hypothetical 10% strengthening or 10% weakening of any
currency other than the U.S. dollar and Hong Kong dollar against the euro at average exchange rates for the years 2008 and 2009 would not result in a material impact on net earnings.



Interest Risk



The Company is exposed to interest rate risk primarily through its borrowing activities. The Company does not enter into financial instrument transactions for trading
or speculative purposes or to manage interest rate exposure. At December 31, 2009 the Company had convertible subordinated debt borrowings outstanding of  11,718 (US$ 16,880) at a fixed interest rate, maturing in May 2010,  70,383 (US$ 101,387) at a
fixed interest rate, maturing in December 2011 and  150,000 at a fixed rate, maturing in November 2014,  22,349 in long-term debt at fixed interest rates and  14,508 in other borrowings with variable short-term interest rates. A hypothetical change in the average interest rate by 10% on the portion of the Companys debt bearing interest at variable rates
would not result in a material change in interest expense at December 31, 2008 and December 31, 2009 borrowing levels.



Credit Risk



Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and derivative instruments. These instruments contain
a risk of counterparties failing to discharge their obligations. The Company monitors credit risk and manages credit risk exposure by type of financial instrument by assessing the creditworthiness of counterparties. The Company does not anticipate
nonperformance by counterparties given their high creditworthiness.



The
Companys customers are semiconductor device manufacturers located throughout the world. The Company generally does not require collateral or other security to support financial instruments with credit risk.



Concentrations of credit risk (whether on or off-balance sheet) that arise from financial
instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause



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their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.



The Company derives a significant percentage of its revenue from a small number of large customers. The Companys largest customer accounted for
approximately 9.1% of net sales in 2009 (2008: 13.8%; 2007: 9.6%) and the ten largest customers accounted for approximately 32.9% of net sales in 2009 (2008: 32.0%; 2007: 32.4%). Sales to these large customers also may fluctuate significantly from
time to time depending on the timing and level of purchases by these customers. Significant orders from such customers may expose the Company to a concentration of credit risk and difficulties in collecting amounts due, which could harm the
Companys financial results. At December 31, 2009 one customer accounted for 7.8% of the outstanding balance in accounts receivable (2008: 12.3%; 2007: 7.8%).



The Company places its cash and cash equivalent and derivative instruments with high quality financial institutions to limit the amount of credit risk
exposure.



The maximum credit exposure is equal to the carrying values of
cash and cash equivalent and accounts receivable.



Liquidity Risk



The following table summarizes the Companys contractual obligations
as at December 31, 2009 aggregated by type of contractual obligation:



|                                    |  |         |  |                 |  |          |  |          |  |                 
|----------------------------------- |  | ------- |  | --------------- |  | -------- |  | -------- |  | ----------------
|Contractual obligations             |  | Total   |  | Less than1 year |  | 1-3years |  | 3-5years |  | More than5 years
|Notes payable to banks1             |  | 14,840  |  | 14,840          |  |         |  |         |  |                
|Bank overdraft                      |  | 2,500   |  | 2,500           |  |         |  |         |  |                
|Long-term debt1,
2                  |  | 23,018  |  | 6,181           |  | 16,574   |  | 263      |  |                
|Convertible subordinated debt1      |  | 285,824 |  | 25,075          |  | 92,874   |  | 167,875  |  |                
|Operating leases                    |  | 31,823  |  | 8,601           |  | 12,705   |  | 5,829    |  | 4,688           
|Purchase obligations:               |  |         |  |                 |  |          |  |          |  |                 
|Purchase commitments to suppliers   |  | 62,983  |  | 62,841          |  | 142      |  |         |  |                
|Capital expenditure commitments     |  | 9,675   |  | 9,374           |  | 301      |  |         |  |                
|Unrecognized tax benefits (ASC 740) |  | 15,663  |  | 15,663          |  |         |  |         |  |                
|                                    |  |         |  |                 |  |          |  |          |  |                 
|Total contractual obligations       |  | 446,326 |  | 145,075         |  | 122,596  |  | 173,967  |  | 4,688           
|                                    |  |         |  |                 |  |          |  |          |  |                 



|(1) | Including interest expense based on the percentages at the reporting date.
|--- | --------------------------------------------------------------------------



|(2) | Capital lease obligations of  956 are included in long-term debt.
|--- | ------------------------------------------------------------------



Total short-term lines of credit amounted to  107,396 at December 31, 2009. The amount outstanding at December 31, 2009 was  14,508 and the undrawn portion totaled  92,888. The undrawn
portion includes the Companys newly negotiated standby revolving credit facility of  65,000 with a consortium of banks. The
facility, available through November 6, 2012, is secured by a portion of the Companys shareholding in ASMPT. The undrawn portion includes  26,686 for ASMPT, which amount is restricted to be used only in the operations of ASMPT. The undrawn portion includes 
1,202 for ASM Japan, which amount is restricted to be used only in the operations of ASM Japan.



The Company uses notes payable to banks to manage short term liquidity and uses long-term debt and convertible subordinated debt to manage long term liquidity.



For the majority of purchase commitments, the Company has flexible delivery schedules
depending on the market conditions, which allows the Company, to a certain extent, to delay delivery beyond originally planned delivery schedules.



NOTE 22Research and Development



Research and Development consists of the following:



|                                                             |  |                         |   |  |        |   |  |        |  
|------------------------------------------------------------ |  | ----------------------- | - |  | ------ | - |  | ------ | -
|                                                             |  | Year ended December 31, |  
|                                                             |  | 2007                    |   |  | 2008   |   |  | 2009   |  
|Research and development expenses from continuing operations |  | 84,340                  |   |  | 75,650 |   |  | 63,934 |  
|Research and development grants and credits                  |  | (872                    | ) |  | (639   | ) |  | (1,128 | )
|                                                             |  |                         |   |  |        |   |  |        |  
|Total research and development                               |  | 83,468                  |   |  | 75,011 |   |  | 62,806 |  
|                                                             |  |                         |   |  |        |   |  |        |  



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The Companys operations in the Netherlands, Germany and the United States receive research and development
grants and credits from various sources. The research and development grants and credits received from governmental sources in the Netherlands include a credit which is contingently repayable to the extent the Company recognizes sales of products to
which the credit is related within an agreed upon period. The Company does not recognize a liability on the Consolidated Balance Sheet in respect of this credit until it recognizes sales of products to which the credit is related, within the agreed
upon period and is then charged to cost of sales when such sales are recorded. The repayment amounts to 4.0% of the realized sales of these products. In 2007, 2008 and 2009 the Company accounted for repayments with respect to such credits of  114,  86 and  0 respectively. Interest on the contingent repayments is accrued at an interest rate of 6.05% per annum. The contingent repayment,
including accrued interest, was  3,162 at December 31, 2008. This amount has not been recognized as a liability in the Consolidated
Balance Sheet since the Company has not recognized sales of products to which the credit is related. With the disposal of our RTP business the liability has been transferred to Levitech B.V., the vehicle in which the management buy-out has been
constructed. ASM International N.V. participates for 20% in Levitech B.V. With the disposal of our RTP business we have licensed our RTP portfolio of 50 issued patents and 23 pending patents to Levitech BV.



NOTE 23Restructuring expenses



In 2009 ASMI started the implementation of a major restructuring in the front-end segment
as announced on January 9, 2009 and on July 20, 2009. The main components of the Companys accelerated execution plans are:



| |  |  | The consolidation of our global front-end manufacturing operations from Europe, the United States and Japan, into our front-end manufacturing operations in
Singapore by the end of 2010. This will be achieved by completing the previously announced transfer from Almere, the Netherlands, which was finalized during 2009; the phasing out the manufacturing operation in Phoenix, Arizona, in the first half of
2010; and by transferring manufacturing from Nagaoka, Japan, no later than the fourth quarter of 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The reduction of selling, general and administration expenses by making fundamental changes in our global support infrastructure. This includes a significant
simplification and streamlining of our warehousing operations and the further strengthening of the global sales & service organization which was created last year.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The leveraging of research and development and our product portfolio by reprioritization of strategic programs in order to maximize their potential.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



Related to these execution plans, an amount of  35.7 million restructuring expenses was recorded for the full year of 2009. These charges include:



| |  |  | Employee related expenses of  19.4 million.
Included are unconditional one-time termination benefits of  15.8 million, conditional one-time termination benefits subject to the
final termination date of  1.7 million and other employee related expenses of  1.9 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Contract termination related expenses of  2.8
million. These expenses mainly relate to operational lease contracts and include both the valuating of the onerous contracts at fair value, the decommissioning expenses and impairments of leasehold improvements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Impairment charges of  4.6 million mainly
related to machinery and equipment. We impaired certain demo tools which were as a result of the strategic reorientation determined end of life. The impairment charges were determined based on the difference between the assets estimated fair
value and their carrying amount.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expenses of  4.4 million resulting from the
transition of our global front-end manufacturing operations from Europe, the United States and Japan, into our front-end manufacturing operations in Singapore.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expenses of  3.9 million related to the
management buy-out of our RTP.
| | - |  | -----------------------------------------------------------------------



| |  |  | Other expenses of  0.6 million
| | - |  | -------------------------------



In 2008 the Company recorded an impairment charge related
to the manufacturing plant at ASM Europe in the Netherlands of  7,1 million. The impairment was the consequence of the announcement
in January 2009 of the restructuring of the ASM Europe operations including the transfer of the manufacturing operations to the Companys subsidiary ASM Front-End Manufacturing Singapore. ASM Europe will cease using the manufacturing plant upon
completion of the transfer. The impairment charges are included in the Consolidated Statements of Operations as restructuring expenses.



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NOTE 24Income Taxes



The components of earnings (loss) before income taxes and Non-controlling interest
consist of:



|                                                          |  |                         |  |         |   |  |         |  
|--------------------------------------------------------- |  | ----------------------- |  | ------- | - |  | ------- | -
|                                                          |  | Year ended December 31, | 
|                                                          |  | 2007                    |  | 2008    |   |  | 2009    |  
|The Netherlands                                           |  | 9,155                   |  | (32,287 | ) |  | (92,945 | )
|Other countries                                           |  | 123,402                 |  | 97,052  |   |  | 28,458  |  
|                                                          |  |                         |  |         |   |  |         |  
|Earnings before income taxes and Non-controlling interest |  | 132,557                 |  | 64,765  |   |  | (64,487 | )
|                                                          |  |                         |  |         |   |  |         |  



The income tax expense
consists of:



|                   |  |                         |   |  |         |   |  |         |  
|------------------ |  | ----------------------- | - |  | ------- | - |  | ------- | -
|                   |  | Year ended December 31, |  
|                   |  | 2007                    |   |  | 2008    |   |  | 2009    |  
|Current:           |  |                         |   |  |         |   |  |         |  
|The Netherlands    |  | (320                    | ) |  | (64     | ) |  | (297    | )
|Other countries    |  | (19,838                 | ) |  | (12,594 | ) |  | (12,570 | )
|                   |  |                         |   |  |         |   |  |         |  
|                   |  | (20,158                 | ) |  | (12,658 | ) |  | (12,867 | )
|Deferred:          |  |                         |   |  |         |   |  |         |  
|The Netherlands    |  |                        |   |  |        |   |  |        |  
|Other countries    |  | 913                     |   |  | 514     |   |  | 9,081   |  
|                   |  |                         |   |  |         |   |  |         |  
|Income tax expense |  | (19,245                 | ) |  | (12,144 | ) |  | (3,786  | )
|                   |  |                         |   |  |         |   |  |         |  



The provisions for income taxes as shown in the
Consolidated Statements of Operations differ from the amounts computed by applying the Netherlands statutory income tax rates to earnings before taxes. A reconciliation of the provisions for income taxes and the amounts that would be computed using
the Netherlands statutory income tax rates is set forth as follows:



|                                                                  |  |                         |   |  |         |   |  |         |  
|----------------------------------------------------------------- |  | ----------------------- | - |  | ------- | - |  | ------- | -
|                                                                  |  | Year ended December 31, |  
|                                                                  |  | 2007                    |   |  | 2008    |   |  | 2009    |  
|Earnings before income taxes and Non-controlling interest         |  | 132,557                 |   |  | 64,765  |   |  | (64,487 | )
|Netherlands statutory income tax rate                             |  | 25.5                    | % |  | 25.5    | % |  | 25.5    | %
|Income tax provision at statutory rate                            |  | (33,802                 | ) |  | (16,515 | ) |  | 16,444  |  
|Non-deductible expenses                                           |  | (8,811                  | ) |  | (653    | ) |  | (8,376  | )
|Foreign taxes at a rate other than the Netherlands statutory rate |  | 16,390                  |   |  | 11,017  |   |  | 16,100  |  
|Valuation allowance                                               |  | 994                     |   |  | (10,604 | ) |  | (32,087 | )
|Non-taxable income                                                |  | 11,776                  |   |  | 4,608   |   |  | 4,870   |  
|Other                                                             |  | (5,792                  | ) |  | 3       |   |  | (737    | )
|                                                                  |  |                         |   |  |         |   |  |         |  
|Income tax expense                                                |  | (19,245                 | ) |  | (12,144 | ) |  | (3,786  | )
|                                                                  |  |                         |   |  |         |   |  |         |  



Included in non-taxable income is  3,239 regarding the Companys manufacturing operations in Singapore and other countries where income covering certain products is
non-taxable under tax incentive schemes granted by the local tax authority. The majority of these tax exemption schemes have terms ending in 2010.



The Netherlands statutory tax rate amounted to 25.5% in 2007, 2008 and 2009. Taxations for other jurisdictions is calculated at the rates prevailing in the relevant
jurisdictions. The Companys deferred tax assets and liabilities have been determined in accordance with these statutory income tax rates.



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##### Table of Contents

Deferred income taxes consist of the following:



|                                 |  |              |   |  |          |  
|-------------------------------- |  | ------------ | - |  | -------- | -
|                                 |  | December 31, |  
|                                 |  | 2008         |   |  | 2009     |  
|Deferred tax assets:             |  |              |   |  |          |  
|Reserves and allowances          |  | 4,010        |   |  | 5,673    |  
|Net operating losses             |  | 110,525      |   |  | 147,551  |  
|Depreciation                     |  | 506          |   |  | 1,801    |  
|Other                            |  | 1,711        |   |  | 924      |  
|                                 |  |              |   |  |          |  
|Gross deferred tax assets        |  | 116,752      |   |  | 155,949  |  
|Less: valuation allowance        |  | (109,515     | ) |  | (140,825 | )
|                                 |  |              |   |  |          |  
|Net deferred tax assets          |  | 7,237        |   |  | 15,124   |  
|Deferred tax liabilities:        |  |              |   |  |          |  
|Research and development credits |  | (806         | ) |  |         |  
|                                 |  |              |   |  |          |  
|Deferred tax liabilities         |  | (806         | ) |  |         |  
|                                 |  |              |   |  |          |  
|Net deferred income taxes        |  | 6,431        |   |  | 15,124   |  
|                                 |  |              |   |  |          |  



Deferred tax assets and liabilities are classified in the
balance sheet as follows:



|                                     |  |              |   |  |        |  
|------------------------------------ |  | ------------ | - |  | ------ | -
|                                     |  | December 31, |  
|                                     |  | 2008         |   |  | 2009   |  
|Deferred tax assetscurrent          |  | 4,685        |   |  | 6,893  |  
|Deferred tax assetsnon-current      |  | 2,285        |   |  | 8,545  |  
|Deferred tax liabilitiesnon-current |  | (539         | ) |  | (314   | )
|                                     |  |              |   |  |        |  
|                                     |  | 6,431        |   |  | 15,124 |  
|                                     |  |              |   |  |        |  



Based on tax filings, ASMI and its individual subsidiaries
have net operating losses available at December 31, 2009 of  521,218 for tax return purposes to reduce future income taxes, mainly
in Europe and the United States. The Company believes that realization of its net deferred tax assets is dependent on the ability of the Company to generate taxable income in the future. Given the volatile nature of the semiconductor equipment
industry, past experience, and the tax jurisdictions where the Company has net operating losses, the Company believes that there is currently insufficient evidence to substantiate recognition of substantially all net deferred tax assets with respect
to net operating losses. Accordingly, a valuation allowance of  109,515 in 2008 and  140,825 in 2009 has been recorded.



The amounts and expiration dates of net operating losses for tax purposes are as follows:



|                     |  |        
|-------------------- |  | -------
|Expiration year      |  |        
|2010                 |  | 2,511  
|2011                 |  | 144,075
|2012                 |  | 60,526 
|2013                 |  | 21,665 
|2014                 |  | 41,335 
|2015                 |  | 11     
|2016                 |  | 6,193  
|2017                 |  | 85,723 
|2018                 |  | 66,364 
|2019                 |  | 75     
|2022                 |  | 9,421  
|2023                 |  | 3,624  
|2024                 |  | 392    
|2025                 |  | 4,401  
|2026                 |  | 1,518  
|2027                 |  | 4,203  
|2028                 |  | 25,676 
|Unlimited            |  | 45,503 
|                     |  |        
|Net operating losses |  | 521,218
|                     |  |        



The
Company has not provided for deferred foreign withholding taxes, if any, on undistributed earnings of its foreign subsidiaries. At December 31, 2009 undistributed earnings of subsidiaries, subject to withholding



F-40



---

##### Table of Contents

taxes, were approximately  12,183. These earnings could become subject to
foreign withholding taxes if they were remitted as dividends or if the Company should sell its interest in the subsidiaries. However, the Company believes that Netherlands tax credits would largely eliminate any foreign withholding tax that might
otherwise be due.



On January 1, 2007 the Company adopted ASC 740
Accounting for Uncertainty in Income Taxes. The Companys net operating losses for tax purposes decreased by  5,369 as a
result of the adoption of ASC 740. Since a valuation allowance was recorded against the net deferred tax assets with respect to these net operating losses, the adoption of ASC 740 did not impact the Companys financial position and net
earnings.



A reconciliation of the beginning and ending balance of the
liability for unrecognized tax benefits is as follows:



|                                              |  |        |  
|--------------------------------------------- |  | ------ | -
|Balance January 1, 2008                       |  | 12,908 |  
|Gross increasestax positions in current year |  | 1,044  |  
|Foreign currency translation effect           |  | 889    |  
|                                              |  |        |  
|Balance December 31, 2008                     |  | 14,841 |  
|Gross increasestax positions in current year |  | 1,381  |  
|Foreign currency translation effect           |  | (560   | )
|                                              |  |        |  
|Balance December 31, 2009                     |  | 15,663 |  
|                                              |  |        |  



Unrecognized tax benefits mainly relate to transfer
pricing positions, operational activities in countries where the Company is not tax registered and tax deductible costs.



The Company estimates that no interest and penalties are related to these unrecognized tax benefits.



In the year ended December 31, 2009, no settlement with tax authorities and no reduction as a result of a lapse of statute of
limitations occurred.



Unrecognized tax benefits of  15,663 would, if recognized, impact the Companys effective tax rate. The Company estimates that the liability for unrecognized tax
benefits will change with  15,663 within the next 12 months, following the expected outcome of investigations by local tax authorities.



A summary of open tax years by major jurisdiction is as follows:



|                |  |          
|--------------- |  | ---------
|Jurisdiction    |  |          
|Japan           |  | 2009     
|Hong Kong       |  | 20002009
|The Netherlands |  | 20072009
|Singapore       |  | 20062009
|United States   |  | 19972009



The calculation of the Companys tax liabilities involves dealing with uncertainties in the application of complex tax laws. The Companys estimate for the potential outcome of any unrecognized tax
benefits is highly judgmental. Settlement of unrecognized tax benefits in a manner inconsistent with the Companys expectations could have a material impact on the Companys financial position, net earnings and cash flows.



NOTE 25Disclosures about Segments and Related Information



The Company organizes its activities in two operating segments, front-end
and back-end.



The front-end segment manufactures and sells equipment used
in wafer processing, encompassing the fabrication steps in which silicon wafers are layered with semiconductor devices. The segment is a product driven organizational unit comprised of manufacturing, service, and sales operations in Europe, the
United States, Japan and Southeast Asia.



The back-end segment manufactures
and sells equipment and materials used in assembly and packaging, encompassing the processes in which silicon wafers are separated into individual circuits and subsequently assembled, packaged and tested. The segment is organized in ASM Pacific
Technology Ltd., in which the Company holds a majority of 52.59% interest, whilst the remaining shares are listed on the Stock Exchange of Hong Kong. The segments main operations are located in Hong Kong, the Peoples Republic of China,
Singapore and Malaysia.



F-41



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|                                                                        |  |           |   |  |          |   |  |         |  
|----------------------------------------------------------------------- |  | --------- | - |  | -------- | - |  | ------- | -
|(euro thousands, except for headcount)                                  |  | Front-end |   |  | Back-end |   |  | Total   |  
|Year ended December 31, 2007                                            |  |           |   |  |          |   |  |         |  
|                                                                        |  |           |  
|Net sales to unaffiliated customers                                     |  | 450,899   |   |  | 504,340  |   |  | 955,239 |  
|Gross profit                                                            |  | 145,036   |   |  | 216,040  |   |  | 361,076 |  
|Earnings from operations                                                |  | 15,525    |   |  | 131,854  |   |  | 147,379 |  
|Interest income                                                         |  | 3,588     |   |  | 2,525    |   |  | 6,113   |  
|Interest expense                                                        |  | (9,866    | ) |  |         |   |  | (9,866  | )
|Expense resulting from early extinguishment of debt                     |  | (10,049   | ) |  |         |   |  | (10,049 | )
|Foreign currency exchange gains (losses), net                           |  | (1,902    | ) |  | 882      |   |  | (1,020  | )
|Income tax expense                                                      |  | (2,612    | ) |  | (16,633  | ) |  | (19,245 | )
|Net earnings (loss) before gain on dilution of investment in subsidiary |  | (5,316    | ) |  | 118,628  |   |  | 113,312 |  
|Gain on dilution of investment in subsidiary                            |  |           |   |  |          |   |  | 3,010   |  
|                                                                        |  |           |  
|Allocation of net earnings:                                             |  |           |   |  |          |   |  |         |  
|Shareholders of the parent                                              |  |           |   |  |          |   |  | 60,977  |  
|Non-controlling interest                                                |  |           |   |  |          |   |  | 55,345  |  
|                                                                        |  |           |  
|Capital expenditures                                                    |  | 17,411    |   |  | 29,795   |   |  | 47,206  |  
|Purchase of other intangibles                                           |  | 253       |   |  | 442      |   |  | 695     |  
|Depreciation                                                            |  | 14,997    |   |  | 18,253   |   |  | 33,250  |  
|Amortization of other intangible assets                                 |  | 1,087     |   |  | 304      |   |  | 1,391   |  
|Impairment of property, plant and equipment                             |  | (788      | ) |  |         |   |  | (788    | )
|Cash and cash equivalents                                               |  | 100,143   |   |  | 67,780   |   |  | 167,923 |  
|Capitalized goodwill                                                    |  | 13,546    |   |  | 36,075   |   |  | 49,621  |  
|Other intangible assets                                                 |  | 3,576     |   |  | 675      |   |  | 4,251   |  
|Other identifiable assets                                               |  | 333,013   |   |  | 285,525  |   |  | 618,538 |  
|Total assets                                                            |  | 450,278   |   |  | 390,055  |   |  | 840,333 |  
|Total debt                                                              |  | 186,936   |   |  |         |   |  | 186,936 |  
|Headcount in full-time equivalents1                                     |  | 1,843     |   |  | 9,989    |   |  | 11,832  |  
|                                                                        |  |           |   |  |          |   |  |         |  



|                                                                        |  |           |   |  |          |   |  |         |  
|----------------------------------------------------------------------- |  | --------- | - |  | -------- | - |  | ------- | -
|(euro thousands, except for headcount)                                  |  | Front-end |   |  | Back-end |   |  | Total   |  
|Year ended December 31, 2008                                            |  |           |   |  |          |   |  |         |  
|                                                                        |  |           |  
|Net sales to unaffiliated customers                                     |  | 296,737   |   |  | 450,625  |   |  | 747,362 |  
|Gross profit                                                            |  | 93,898    |   |  | 176,364  |   |  | 270,262 |  
|Earnings (loss) from operations                                         |  | (30,445   | ) |  | 90,167   |   |  | 59,722  |  
|Interest income                                                         |  | 3,002     |   |  | 1,045    |   |  | 4,047   |  
|Interest expense                                                        |  | (7,745    | ) |  |         |   |  | (7,745  | )
|Gain resulting from early extinguishment of debt                        |  | 7,956     |   |  |         |   |  | 7,956   |  
|Foreign currency exchange gains (losses), net                           |  | (566      | ) |  | 1,351    |   |  | 785     |  
|Income tax expense                                                      |  | (1,486    | ) |  | (10,658  | ) |  | (12,144 | )
|Net earnings (loss) before gain on dilution of investment in subsidiary |  | (29,284   | ) |  | 81,905   |   |  | 52,621  |  
|Gain on dilution of investment in subsidiary                            |  |           |   |  |          |   |  | 4,088   |  
|                                                                        |  |           |  
|Allocation of net earnings:                                             |  |           |   |  |          |   |  |         |  
|Shareholders of the parent                                              |  |           |   |  |          |   |  | 18,411  |  
|Non-controlling interest                                                |  |           |   |  |          |   |  | 38,298  |  
|                                                                        |  |           |  
|Capital expenditures                                                    |  | 11,173    |   |  | 20,277   |   |  | 31,450  |  
|Purchase of other intangibles                                           |  | 4,994     |   |  | 368      |   |  | 5,362   |  
|Depreciation                                                            |  | 14,440    |   |  | 18,736   |   |  | 33,176  |  
|Amortization of other intangible assets                                 |  | 985       |   |  | 499      |   |  | 1,484   |  
|Impairment of goodwill                                                  |  | 1,395     |   |  |         |   |  | 1,395   |  
|Impairment of property, plant and equipment                             |  | 7,068     |   |  |         |   |  | 7,068   |  
|Cash and cash equivalents                                               |  | 78,897    |   |  | 78,380   |   |  | 157,277 |  
|Capitalized goodwill                                                    |  | 9,844     |   |  | 38,145   |   |  | 47,989  |  
|Other intangible assets                                                 |  | 7,335     |   |  | 583      |   |  | 7,918   |  
|Other identifiable assets                                               |  | 282,340   |   |  | 272,274  |   |  | 554,614 |  
|Total assets                                                            |  | 378,416   |   |  | 389,382  |   |  | 767,798 |  
|Total debt                                                              |  | 153,682   |   |  |         |   |  | 153,682 |  
|Headcount in full-time equivalents1                                     |  | 1,667     |   |  | 10,047   |   |  | 11,714  |  
|                                                                        |  |           |   |  |          |   |  |         |  



|(1) | Headcount includes those employees with a fixed contract, and is exclusive of temporary workers.
|--- | ------------------------------------------------------------------------------------------------



F-42



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##### Table of Contents

|                                                                        |  |           |   |  |          |   |  |          |  
|----------------------------------------------------------------------- |  | --------- | - |  | -------- | - |  | -------- | -
|(euro thousands, except for headcount)                                  |  | Front-end |   |  | Back-end |   |  | Total    |  
|Year ended December 31, 2009                                            |  |           |   |  |          |   |  |          |  
|                                                                        |  |           |  
|Net sales to unaffiliated customers                                     |  | 160,378   |   |  | 430,361  |   |  | 590,739  |  
|Gross profit                                                            |  | 8,726     |   |  | 172,789  |   |  | 181,515  |  
|Earnings (loss) from operations                                         |  | (120,269  | ) |  | 95,113   |   |  | (25,156  | )
|Interest income                                                         |  | 541       |   |  | 477      |   |  | 1,018    |  
|Interest expense                                                        |  | (8,556    | ) |  |         |   |  | (8,556   | )
|Loss resulting from early extinguishment of debt                        |  | (1,759    | ) |  |         |   |  | (1,759   | )
|Accretion interest expense convertible notes                            |  | (4,286    | ) |  |         |   |  | (4,286   | )
|Revaluation conversion option                                           |  | (24,364   | ) |  |         |   |  | (24,364  | )
|Foreign currency exchange gains (losses), net                           |  | (733      | ) |  | (651     | ) |  | (1,384   | )
|Income tax expense                                                      |  | 7,890     |   |  | (11,676  | ) |  | (3,786   | )
|Net earnings (loss) before gain on dilution of investment in subsidiary |  | (151,535  | ) |  | 83,262   |   |  | (68,273  | )
|Gain on dilution of investment in subsidiary                            |  |           |   |  |          |   |  | 956      |  
|                                                                        |  |           |  
|Allocation of net earnings:                                             |  |           |   |  |          |   |  |          |  
|Shareholders of the parent                                              |  |           |   |  |          |   |  | (106,561 | )
|Non-controlling interest                                                |  |           |   |  |          |   |  | 39,244   |  
|                                                                        |  |           |  
|Capital expenditures                                                    |  | 3,269     |   |  | 9,450    |   |  | 12,718   |  
|Purchase of other intangibles                                           |  | 2,934     |   |  | 360      |   |  | 3,294    |  
|Depreciation                                                            |  | 11,436    |   |  | 20,619   |   |  | 32,054   |  
|Amortization of other intangible assets                                 |  | 1,884     |   |  | 451      |   |  | 2,335    |  
|Impairment of property, plant and equipment                             |  | 4,628     |   |  |         |   |  | 4,628    |  
|Cash and cash equivalents                                               |  | 181,681   |   |  | 112,222  |   |  | 293,902  |  
|Capitalized goodwill                                                    |  | 10,395    |   |  | 36,828   |   |  | 47,223   |  
|Other intangible assets                                                 |  | 8,440     |   |  | 497      |   |  | 8,936    |  
|Other identifiable assets                                               |  | 187,194   |   |  | 314,445  |   |  | 501,638  |  
|Total assets                                                            |  | 387,709   |   |  | 463,991  |   |  | 851,700  |  
|Total debt                                                              |  | 265,430   |   |  |         |   |  | 265,430  |  
|Headcount in full-time equivalents1                                     |  | 1,294     |   |  | 10,773   |   |  | 12,067   |  
|                                                                        |  |           |   |  |          |   |  |          |  



|(1) | Headcount includes those employees with a fixed contract, and is exclusive of temporary workers.
|--- | ------------------------------------------------------------------------------------------------



There are no inter-segment transactions, other than charges for management services, which are based on actual cost. The accounting
policies used to measure the net earnings and total assets in each segment are identical to those used in the Consolidated Financial Statements. The measurement methods used to determine reported segment earnings are consistently applied for all
periods presented. There were no asymmetrical allocations to segments.



Geographical information is summarized as follows:



|                                    |  |         |  |                        |  |         |  |               |  |           |  |             
|----------------------------------- |  | ------- |  | ---------------------- |  | ------- |  | ------------- |  | --------- |  | ------------
|                                    |  | Europe  |  | UnitedStates ofAmerica |  | Japan   |  | SoutheastAsia |  | Corporate |  | Consolidated
|Year ended December 31, 2007        |  |         |  |                        |  |         |  |               |  |           |  |             
|                                    |  |         |  |                        |  |        
|Net sales to unaffiliated customers |  | 89,306  |  | 128,002                |  | 87,162  |  | 650,769       |  |          |  | 955,239     
|Long-lived assets                   |  | 11,115  |  | 12,153                 |  | 21,947  |  | 101,599       |  | 2,828     |  | 149,642     
|Total assets                        |  | 119,251 |  | 89,957                 |  | 110,739 |  | 441,186       |  | 79,200    |  | 840,333     
|Capital expenditures                |  | 3,700   |  | 1,179                  |  | 8,718   |  | 33,586        |  | 23        |  | 47,206      
|Purchase of intangible assets       |  | 7       |  | 13                     |  |        |  | 489           |  | 186       |  | 695         
|                                    |  |         |  |                        |  |        
|Year ended December 31, 2008        |  |         |  |                        |  |         |  |               |  |           |  |             
|                                    |  |         |  |                        |  |        
|Net sales to unaffiliated customers |  | 80,237  |  | 110,264                |  | 70,948  |  | 485,913       |  |          |  | 747,362     
|Long-lived assets                   |  | 5,809   |  | 9,679                  |  | 26,050  |  | 106,763       |  | 256       |  | 148,557     
|Total assets                        |  | 73,877  |  | 83,876                 |  | 115,103 |  | 436,325       |  | 58,617    |  | 767,798     
|Capital expenditures                |  | 5,655   |  | 1,909                  |  | 2,383   |  | 21,400        |  | 103       |  | 31,450      
|Purchase of intangible assets       |  |        |  | 142                    |  |        |  | 386           |  | 4,834     |  | 5,362       
|                                    |  |         |  |                        |  |        
|Year ended December 31, 2009        |  |         |  |                        |  |         |  |               |  |           |  |             
|                                    |  |         |  |                        |  |        
|Net sales to unaffiliated customers |  | 40,236  |  | 66,955                 |  | 38,834  |  | 444,714       |  |          |  | 590,739     
|Long-lived assets                   |  | 2,799   |  | 4,119                  |  | 20,372  |  | 92,762        |  | 267       |  | 120,319     
|Total assets                        |  | 36,073  |  | 49,350                 |  | 95,350  |  | 518,344       |  | 152,583   |  | 851,700     
|Capital expenditures                |  | 49      |  | 401                    |  | 953     |  | 11,309        |  | 6         |  | 12,718      
|Purchase of intangible assets       |  |        |  | 1                      |  |        |  | 383           |  | 2,910     |  | 3,294       
|                                    |  |         |  |                        |  |         |  |               |  |           |  |             



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##### Table of Contents

Long-lived assets for the years ended December 31, 2007, 2008 and 2009 consist of the Companys property,
plant and equipment.



NOTE 26Selected Operating Expenses and
Additional Information



Personnel expenses for employees were
as follows:



|                   |  |              |  |         |  |        
|------------------ |  | ------------ |  | ------- |  | -------
|                   |  | December 31,
|                   |  | 2007         |  | 2008    |  | 2009   
|Wages and salaries |  | 194,047      |  | 184,371 |  | 157,789
|Social security    |  | 18,578       |  | 18,050  |  | 14,314 
|Pension expenses   |  | 11,134       |  | 11,474  |  | 9,849  
|                   |  |              |  |         |  |        
|                   |  | 223,759      |  | 213,895 |  | 181,952
|                   |  |              |  |         |  |        



The
average number of employees, exclusive of temporary workers, by geographic area during the year was as follows:



|                         |  |              |  |        |  |       
|------------------------ |  | ------------ |  | ------ |  | ------
|                         |  | December 31,
|                         |  | 2007         |  | 2008   |  | 2009  
|The Netherlands          |  | 352          |  | 352    |  | 288   
|Other European countries |  | 209          |  | 197    |  | 154   
|United States of America |  | 593          |  | 494    |  | 418   
|Southeast Asia           |  | 9,993        |  | 10,687 |  | 10,136
|Japan                    |  | 293          |  | 292    |  | 246   
|                         |  |              |  |        |  |       
|                         |  | 11,440       |  | 12,022 |  | 11,242
|                         |  |              |  |        |  |       



NOTE 27Earnings per Share



The following represents a reconciliation of net earnings (loss) and weighted average number of shares outstanding (in thousands) for purposes of calculating basic and diluted net earnings (loss) per share:



|                                                                                                                                       |  |              |  |        |  |          |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------ |  | -------- | -
|                                                                                                                                       |  | December 31, | 
|                                                                                                                                       |  | 2007         |  | 2008   |  | 2009     |  
|Net earnings used for purpose of computing basic earnings per common share                                                             |  | 60,977       |  | 18,401 |  | (106,566 | )
|After-tax equivalent of interest expense on convertible subordinated notes                                                             |  | 8,425        |  |       |  |         |  
|                                                                                                                                       |  |              |  |        |  |          |  
|Net earnings used for purposes of computing diluted net earnings per common share                                                      |  | 69,402       |  | 18,401 |  | (106,566 | )
|                                                                                                                                       |  |              | 
|Basic weighted average number of shares outstanding during the year used for purpose of computing basic earnings per share
(thousands) |  | 53,968       |  | 52,259 |  | 51,627   |  
|Dilutive effect of stock options                                                                                                       |  | 94           |  | 130    |  |         |  
|Dilutive effect of convertible subordinated notes                                                                                      |  | 11,014       |  |       |  |         |  
|                                                                                                                                       |  |              |  |        |  |          |  
|Dilutive weighted average number of shares outstanding                                                                                 |  | 65,076       |  | 52,389 |  | 51,627   |  
|                                                                                                                                       |  |              | 
|Net earnings per share:                                                                                                                |  |              |  |        |  |          |  
|Basic net earnings from continuing operations                                                                                          |  | 1.13         |  | 0.35   |  | (2.06    | )
|Diluted net earnings from continuing operations                                                                                        |  | 1.07         |  | 0.35   |  | (2.06    | )
|                                                                                                                                       |  |              |  |        |  |          |  



For the year ended December 31, 2009, the effect of
14,550,780 conversion rights and 80,777 option rights to acquire common stock was anti-dilutive.



For the year ended December 31, 2008, the effect of 9,661 conversion rights to acquire common stock was anti-dilutive.



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##### Table of Contents

NOTE 28Board Remuneration



The following table sets forth as to all current and former members of the Management Board and Supervisory Board of the Company
information concerning all remuneration from the Company (including its subsidiaries) for services in all capacities:



|                         |  |                  |  |            |       |          |       |                        |  |      
|------------------------ |  | ---------------- |  | ---------- | ----- | -------- | ----- | ---------------------- |  | -----
|                         |  | Basecompensation |  | Bonuses 10 |       | Pensions |       | Year endedDecember 31,
|                         |  |                  |  |            | 2009  |          | 2008 
|                         |  |                  |  |            | Total |          | Total
|Management Board:        |  |                  |  |            |       |          |       |                        |  |      
|C.D. del Prado           |  | 478              |  |           |       | 19       |       | 497                    |  | 548  
|W.K. Lee1                |  | 307              |  | 188        |       | 18       |       | 513                    |  | 573  
|R.A. Ruijter2            |  | 314              |  |           |       |         |       | 314                    |  |     
|J.F.M. Westendorp        |  | 310              |  |           |       | 23       |       | 333                    |  | 423  
|A.J.M. van der Ven3      |  | 288              |  |           |       | 18       |       | 306                    |  | 354  
|A.H. del Prado4          |  |                 |  |           |       |         |       |                       |  | 97   
|                         |  |                  |  |            |       |          |       |                        |  |      
|                         |  | 1,697            |  | 188        |       | 78       |       | 1,963                  |  | 1,995
|                         |  |                  |  |            |      
|Supervisory Board:       |  |                  |  |            |       |          |       |                        |  |      
|G.J. Kramer2             |  | 31               |  |           |       |         |       | 31                     |  |     
|E.A. van Amerongen       |  | 35               |  |           |       |         |       | 35                     |  | 33   
|J.M.R. Danneels          |  | 29               |  |           |       |         |       | 29                     |  | 29   
|H.W. Kreutzer            |  | 31               |  |           |       |         |       | 31                     |  | 30   
|J.C. Lobbezoo2           |  | 21               |  |           |       |         |       | 21                     |  |     
|U.H.R. Schumacher5       |  | 25               |  |           |       |         |       | 25                     |  | 15   
|P.C. van den Hoek6       |  | 23               |  |           |       |         |       | 23                     |  | 54   
|L.P.E.M. van den Boom7,8 |  | 5                |  |           |       |         |       | 5                      |  | 131  
|B.C. Brix9               |  |                 |  |           |       |         |       |                       |  | 15   
|                         |  |                  |  |            |       |          |       |                        |  |      
|                         |  | 200              |  |           |       |         |       | 200                    |  | 307  
|                         |  |                  |  |            |       |          |       |                        |  |      



|(1) | All remuneration relates to the compensation Mr. W.K. Lee received in his capacity as member of the Board of ASMPT.
|--- | -------------------------------------------------------------------------------------------------------------------



|(2) | For the period May 15, 2009 through December 31, 2009.
|--- | ------------------------------------------------------



|(3) | For the period January 1, 2009 through December 31, 2009. Mr van der Ven resigned from the Management board as per May 14, 2009. Per December 31, 2009 Mr van
der Ven resigned from the Company and subsequently received a termination benefit of  141.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | For the period January 1, 2008 through February 29, 2008.
|--- | ---------------------------------------------------------



|(5) | For the period May 21, 2008 through December 31, 2008.
|--- | ------------------------------------------------------



|(6) | For the period January 1, 2009 through May 14, 2009.
|--- | ----------------------------------------------------



|(7) | For the period January 1, 2009 through March 9,2009.
|--- | ----------------------------------------------------



|(8) | The remuneration of 2008 for Mr. L.P.E.M. van den Boom includes the compensation of  99 for additional services performed as the Supervisory Boards designee on the Companys Transaction Committee.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | For the period January 1, 2008 through May 21, 2008.
|--- | ----------------------------------------------------



|(10) | All bonuses paid in 2009 were calculated and paid in respect of performance in 2008.
|---- | ------------------------------------------------------------------------------------



The remuneration of members of the Management Board has been determined by the Supervisory Board, with the exception of Mr. W.K. Lee. His
compensation has been determined by the Board of ASM Pacific Technology. The remuneration of members of the Supervisory Board has been determined by the General Meeting of Shareholders.



F-45



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##### Table of Contents

No stock options have been issued to members of the Supervisory Board. The following table shows the outstanding
options to purchase ASM International N.V. common shares held by current and former members of the Management Board, and changes in such holdings during 2009:



|                      |  |             |  |                           |  |                |  |                                      |   |  |                  |  |                             |  |               |       |                        |  
|--------------------- |  | ----------- |  | ------------------------- |  | -------------- |  | ------------------------------------ | - |  | ---------------- |  | --------------------------- |  | ------------- | ----- | ---------------------- | -
|                      |  | Yearofgrant |  | OutstandingJanuary 1,2009 |  | Grantedin 2009 |  | Adjustmentfromvestingcondition2009 6 |   |  | Exercisedin 2009 |  | OutstandingDecember 31,2009 |  | Exerciseprice |       | Remainingterm, inyears
|A.H. del Prado1       |  | 2006        |  | 100,856                   |  |               |  | (100,856                             | ) |  |                 |  |                            |  |              | 14.08 |                        | 
|A.H. del Prado1       |  | 2007        |  | 60,441                    |  |               |  |                                     |   |  |                 |  | 60,441                      |  |              | 19.47 |                        | 2
|C.D. del Prado2       |  | 2003        |  | 20,000                    |  |               |  |                                     |   |  |                 |  | 20,000                      |  | US$           | 11.35 |                        | 4
|C.D. del Prado1       |  | 2006        |  | 35,680                    |  |               |  | (35,680                              | ) |  |                 |  |                            |  |              | 14.08 |                        | 
|C.D. del Prado1       |  | 2007        |  | 22,451                    |  |               |  |                                     |   |  |                 |  | 22,451                      |  |              | 19.47 |                        | 6
|C.D. del Prado1       |  | 2008        |  | 100,000                   |  |               |  |                                     |   |  |                 |  | 100,000                     |  |              | 12.71 |                        | 7
|C.D. del Prado1       |  | 2009        |  |                          |  | 50,000         |  |                                     |   |  |                 |  | 50,000                      |  |              | 15.09 |                        | 8
|A.J.M. van der Ven3,5 |  | 2005        |  | 30,000                    |  |               |  |                                     |   |  |                 |  | 30,000                      |  |              | 11.18 |                        | 0
|A.J.M. van der Ven1,5 |  | 2006        |  | 20,000                    |  |               |  | (2,500                               | ) |  |                 |  | 17,500                      |  |              | 14.13 |                        | 0
|A.J.M. van der Ven1,5 |  | 2006        |  | 15,680                    |  |               |  | (15,680                              | ) |  |                 |  |                            |  |              | 14.08 |                        | 
|A.J.M. van der Ven1,5 |  | 2007        |  | 21,917                    |  |               |  |                                     |   |  |                 |  | 21,917                      |  |              | 19.47 |                        | 0
|J.F.M. Westendorp4    |  | 2006        |  | 56,000                    |  |               |  |                                     |   |  |                 |  | 56,000                      |  |              | 15.40 |                        | 2
|J.F.M. Westendorp1    |  | 2006        |  | 42,816                    |  |               |  | (42,816                              | ) |  |                 |  |                            |  |              | 14.08 |                        | 
|J.F.M. Westendorp1    |  | 2007        |  | 25,659                    |  |               |  |                                     |   |  |                 |  | 25,659                      |  |              | 19.47 |                        | 6
|J.F.M. Westendorp4    |  | 2009        |  |                          |  | 40,000         |  |                                     |   |  |                 |  | 40,000                      |  |              | 15.09 |                        | 8
|                      |  |             |  |                           |  |                |  |                                      |   |  |                  |  |                             |  |               |       |                        |  
|                      |  |             |  | 551,500                   |  | 90,000         |  | (197,532                             | ) |  |                 |  | 443,968                     |  |               |       |                        |  
|                      |  |             |  |                           |  |                |  |                                      |   |  |                  |  |                             |  |               |       |                        |  



The fair value per option of options granted to
current and former members of the Management Board was  5.82 in 2008 and  8.98 in 2009. The compensation expense recorded in the Consolidated Statements of Operations related to options held by current and former members of the Management Board
was  868 in 2008 and  737
in 2009.



As in 2009 no options to purchase ASM International N.V. common
shares have been exercised no new shares have been issued for the exercise of options.



The stock option grants to members of the Management Board have been determined by the Supervisory Board.



|(1) | These options are conditional. A percentagenot exceeding 150%of the options which have been granted conditionally will become unconditional after three years, based
on the total return of the Companys shares for the three years after the options are granted compared to the average total return of the shares of a relevant number of companies which are similar to the Company during the same three-year
period. The options are granted for a term of eight years. Upon the retirement of Mr. A.H. del Prado in 2008, the remaining term of his options has been shortened.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | These options are granted for a term of ten years, and become exercisable in equal parts over a five year period.
|--- | -----------------------------------------------------------------------------------------------------------------



|(3) | These options are granted for a term of eight years, and become exercisable in equal parts over a three year period, starting 2008.
|--- | -----------------------------------------------------------------------------------------------------------------------------------



|(4) | These options are granted for a term of five years, and become exercisable in equal parts over a five year period.
|--- | ------------------------------------------------------------------------------------------------------------------



|(5) | As a result of his resignation the options granted to Mr. A.J.M. van der Ven will expire per the end of March, 2010.
|--- | --------------------------------------------------------------------------------------------------------------------



|(6) | As a result of the final ranking of ASM International in a predefined peer group the options granted in January 2006 to Mr. A.J.M. van der Ven have vested at 87.5% and the
options granted in May 2006 to all members of the Management Board have vested at 0%.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In March 2009, Mr. W.K. Lee in his capacity of member of the Board of Directors of ASMPT was granted 110,000 shares in the share capital of ASMPT under the Employee Share Incentive Scheme of ASMPT. The shares
were issued in December 2009. The fair value of the shares granted amounted to  199. In February 2008, Mr. W.K. Lee in his
capacity of member of the Board of Directors of ASMPT was granted 110,000 shares in the share capital of ASMPT under the Employee Share Incentive Scheme of ASMPT. The shares were issued in December 2008. The fair value of the shares granted amounted
to  479.



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##### Table of Contents

NOTE 29Share Ownership and Related Party Transactions



The ownership or controlling interest of outstanding common shares of ASM International
N.V. by members of the Management Board and Supervisory Board or members of their immediate family are as follows:



|                                    |  |                   |  |                                       |                   |  |             |  |                                       |  
|----------------------------------- |  | ----------------- |  | ------------------------------------- | ----------------- |  | ----------- |  | ------------------------------------- | -
|                                    |  | December 31, 2008 |  |                                       | December 31, 2009 | 
|                                    |  | Sharesowned       |  | Percentage ofCommon sharesoutstanding |                   |  | Sharesowned |  | Percentage ofCommon sharesoutstanding |  
|Management Board:                   |  |                   |  |                                       |                   |  |             |  |                                       |  
|A.H. del Prado                      |  | 6,684,839         |  | 12.32                                 | %                 |  | 9,275,839   |  | 17.93                                 | %
|C.D. del Prado                      |  | 132,945           |  | 0.24                                  | %                 |  | 132,945     |  | 0.26                                  | %
|J.F.M. Westendorp                   |  | 6,000             |  | 0.01                                  | %                 |  | 6,000       |  | 0.01                                  | %
|                                    |  |                   |  |                                      
|Stichting Administratiekantoor ASMI |  | 4,792,039         |  | 8.83                                  | %                 |  | 2,142,039   |  | 4.14                                  | %
|                                    |  |                   |  |                                       |                   |  |             |  |                                       |  



Stichting Administratiekantoor ASMI is a trust controlled
by Mr. A.H. del Prado. The number of shares owned by Stichting Administratiekantoor ASMI includes 713,000 common shares which are beneficially owned by Mr. C.D. del Prado.



NanoPhotonics AGIn 1999, the Company acquired a 24.0% interest in NanoPhotonics, a German supplier of precision thin film
metrology equipment, for  407. In 1999, the Companys then Chief Executive Officer also purchased a 44.5% interest in NanoPhotonics.
Due to the issuance of new shares by NanoPhotonics to third parties in 2003, the Companys interest diluted to 23.61% and the then Chief Executive Officers interest diluted to 43.77%. In 2004 the then Chief Executive Officer purchased an
additional 1.72% interest in NanoPhotonics from another shareholder. For all the shares purchased by the then Chief Executive Officer, the Company and the then Chief Executive Officer agreed that the Company could purchase such shares at the same
price the officer paid to acquire the shares. The Company exercised this option in December 2005, for a total consideration of  1,101. In
2006 the Company acquired an additional 2% interest in NanoPhotonics for a consideration of  300. In September 2008, the Company
finalized the sale of its interest for a total consideration of  410. Related to this sale, the Company recorded an impairment charge of
 1,395. At December 31, 2007 the Company has provided NanoPhotonics with intercompany loans of  300. In 2007 and 2008 the Company purchased no equipment from NanoPhotonics.



The former Chairman of the Supervisory Board, Mr. P.C. van den Hoek who resigned on May 14, 2009, was a partner in the European
law firm of Stibbe until March 2009, and is now Of Counsel to Stibbe. Another partner at Stibbe serves as the Companys general outside legal counsel. Mr. van den Hoek has been with Stibbe since 1965. Mr. van den Hoek also serves on
the boards of directors of various European companies. Fees for services to Stibbe amounted to  1,415 and  1,115 in 2008 and 2009, respectively.



F-47