##### 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, 2002                                                   
|      |  |                                                                                               
|[   ] |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934      
|      |  | For the transition period
from                  
to                  .                        

Commission File Number: 0-13355

|                                                       
|-------------------------------------------------------
|ASM INTERNATIONAL N.V.                                 
|fka ADVANCED SEMICONDUCTOR MATERIALS INTERNATIONAL N.V.
|                                                       
|(Exact name of Registrant as specified in its charter) 

The Netherlands
(Jurisdiction of incorporation or organization)

Jan van Eycklaan 10, 3723 BC Bilthoven, the Netherlands
(Address of principal executive offices)

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

Securities registered or to be registered pursuant to
Section 12(g) of the Act: Common Shares

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: 49,370,308 common shares; no preferred shares.

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 which financial statement item the registrant has elected to follow:

Item [17]               Item 18  [x]





---

TABLE OF CONTENTS



|                                           |                                                                                      |  |  |  |  |  |  | 
|------------------------------------------ | ------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|Part I                                    
|                                           | Item 1. Identity of Directors, Senior Management and Advisors                       
|                                           | Item 2. Offer Statistics and Expected Timetable                                     
|                                           | Item 3. Key Information                                                             
|                                           | Item 4. Information on the Company                                                  
|                                           | Item 5. Operating and Financial Review and Prospects                                
|                                           | Item 6. Directors, Senior Management and Employees                                  
|                                           | Item 7. Major Shareholders and Related Party Transactions                           
|                                           | Item 8. Financial Information                                                       
|                                           | Item 9. The Offer and Listing.                                                      
|                                           | Item 10. Additional Information.                                                    
|                                           | Item 11. Quantitative and Qualitative Disclosures about Market Risk                 
|                                           | Item 12. Description of Securities Other Than Equity Securities                     
|Part II                                   
|                                           | Item 13. Defaults, Dividend Arrearages and Delinquencies                            
|                                           | Item 14. Material Modification to the Rights of Security Holders and Use of Proceeds
|                                           | Item 15. Controls and Procedures                                                    
|SIGNATURES                                
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|EX-4.13                                   
|EX-4.14                                   
|EX-4.15                                   
|EX-4.16                                   
|EX-8.1                                    
|EX-10.1                                   
|EX-10.2                                   
|EX-10.3                                   



---



##### Table of Contents






Part I.




Item 1. Identity of Directors, Senior Management and Advisors

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 in conjunction with
Operating and Financial Review and Prospects and our financial statements and
the notes thereto included elsewhere in this report. The selected consolidated
financial data presented below as of December 31, 2001 and 2002 and for each of
the three years ended December 31, 2002 have been derived from the audited
consolidated financial statements of ASM International included elsewhere
herein. The selected consolidated financial data presented below as of
December 31, 1998, 1999 and 2000 and for each of the two years in the period
ended December 31, 1999 have been derived from the audited consolidated
financial statements of ASM International which are not included herein.

|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |          |          |  
|------------------------------------------------------------------------------ | ----------------------------------- | ------------------------ | -------- | ----------------------------------------------- | ------- | ---- | -------- | ------- | -------- | ---- | -------- | -------- | -------- | - | -------- | -------- | -------- | - | -------- | -------- | -------- | -
|                                                                               |                                     |                          |          | 1998                                            |         | 1999 |          | 2000    |          | 2001 |          | 2002    
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |         
|                                                                               |                                     |                          |          | (Euros
in thousands, except per share data (1))
|Consolidated Statements of Operations Data:                                    |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Net sales                                                                      |                                     |                         | 288,111  |                                                 |         |     | 414,495  |         |          |     | 935,212  |          |          |  | 561,064  |          |          |  | 518,802  |         
|Costs of sales                                                                 |                                     |                          | (179,326 | )                                               |         |      | (244,485 | )       |          |      | (518,027 | )        |          |   | (337,743 | )        |          |   | (328,077 | )       
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Gross profit                                                                   |                                     |                          | 108,785  |                                                 |         |      | 170,010  |         |          |      | 417,185  |          |          |   | 223,321  |          |          |   | 190,725  |         
|Operating expenses:                                                            |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|                                                                               | Selling, general and administrative |                          |          | (59,924                                         | )       |      |          | (83,170 | )        |      |          | (147,318 | )        |   |          | (111,851 | )        |   |          | (108,393 | )       
|                                                                               | Research and development, net       |                          |          | (36,277                                         | )       |      |          | (47,145 | )        |      |          | (73,800  | )        |   |          | (79,661  | )        |   |          | (88,334  | )       
|                                                                               | Amortization of goodwill            |                          |          | (93                                             | )       |      |          | (340    | )        |      |          | (4,295   | )        |   |          | (7,558   | )        |   |          |         |         
|                                                                               |                                     | Total operating expenses |          |                                                 | (96,294 | )    |          |         | (130,655 | )    |          |          | (225,413 | ) |          |          | (199,070 | ) |          |          | (196,727 | )
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Earnings (loss) from operations                                                |                                     |                          | 12,491   |                                                 |         |      | 39,355   |         |          |      | 191,772  |          |          |   | 24,251   |          |          |   | (6,002   | )       
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Net interest and other financial income
(expenses)                             |                                     |                          | (5,350   | )                                               |         |      | (8,608   | )       |          |      | (1,595   | )        |          |   | (984     | )        |          |   | (10,416  | )       
|Income taxes                                                                   |                                     |                          | (648     | )                                               |         |      | (1,274   | )       |          |      | (22,830  | )        |          |   | (4,711   | )        |          |   | 1,165    |         
|Minority interest                                                              |                                     |                          | (6,485   | )                                               |         |      | (18,519  | )       |          |      | (71,107  | )        |          |   | (13,373  | )        |          |   | (15,890  | )       
|Gain on dilution of investment in subsidiary                                   |                                     |                          | 224      |                                                 |         |      | 145      |         |          |      | 1,822    |          |          |   | 915      |          |          |   | 1,281    |         
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Net earnings (loss) before cumulative effect of
change in accounting principle |                                     |                          | 232      |                                                 |         |      | 11,099   |         |          |      | 98,062   |          |          |   | 6,098    |          |          |   | (29,862  | )       
|Cumulative effect of change in accounting
principle, net of tax(2)             |                                     |                          |         |                                                 |         |      |         |         |          |      | (3,790   | )        |          |   |         |          |          |   |         |         
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Net earnings (loss)                                                            |                                     |                         | 232      |                                                 |         |     | 11,099   |         |          |     | 94,272   |          |          |  | 6,098    |          |          |  | (29,862  | )       
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Basic net earnings (loss) per share from
operations                            |                                     |                         | 0.37     |                                                 |         |     | 1.06     |         |          |     | 4.10     |          |          |  | 0.50     |          |          |  | (0.12    | )       
|Diluted net earnings (loss) per share from
operations                          |                                     |                         | 0.36     |                                                 |         |     | 0.98     |         |          |     | 3.95     |          |          |  | 0.49     |          |          |  | (0.12    | )       
|Basic net earnings (loss) per share:                                           |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Before cumulative effect of change in accounting
principle                     |                                     |                         | 0.01     |                                                 |         |     | 0.30     |         |          |     | 2.09     |          |          |  | 0.12     |          |          |  | (0.61    | )       
|Cumulative effect of change in accounting
principle(2)                         |                                     |                          |         |                                                 |         |      |         |         |          |      | (0.08    | )        |          |   |         |          |          |   |         |         
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|After cumulative effect of change in accounting
principle                      |                                     |                         | 0.01     |                                                 |         |     | 0.30     |         |          |     | 2.01     |          |          |  | 0.12     |          |          |  | (0.61    | )       
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Diluted net earnings (loss) per share:                                         |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         
|Before cumulative change of accounting principle                               |                                     |                         | 0.01     |                                                 |         |     | 0.29     |         |          |     | 2.02     |          |          |   | 0.12     |          |          |   | (0.61    | )       
|Cumulative change of accounting principle                                      |                                     |                          |         |                                                 |         |      |         |         |          |      | (0.08    | )        |          |   |         |          |          |   |         |         
|                                                                               |                                     |                          |          |                                                 |         |      |          |         |          |      |          |          |          |   |          |          |          |   |          |         

- 2 -



---



##### Table of Contents



|                                                          |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  
|--------------------------------------------------------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ | -
|After cumulative effect of change in accounting
principle |  |  | 0.01   |  |  |  | 0.29   |  |  |  | 1.94   |  |  |  | 0.12   |  |  |  | (0.61  | )
|                                                          |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  
|Basic weighted average number of shares                   |  |   | 33,794 |  |  |   | 37,301 |  |  |   | 46,810 |  |  |   | 48,944 |  |  |   | 49,170 |  
|Diluted weighted average number of shares                 |  |   | 34,743 |  |  |   | 40,664 |  |  |   | 48,703 |  |  |   | 49,958 |  |  |   | 49,170 |  

|                                                                                    |         |   |      |      |      |   |       |      |      |   |        |      |  |   |       |      |  |   |         |       |  
|----------------------------------------------------------------------------------- | ------- | - | ---- | ---- | ---- | - | ----- | ---- | ---- | - | ------ | ---- |  | - | ----- | ---- |  | - | ------- | ----- | -
|                                                                                    |         |   | 1998 |      | 1999 |   | 2000  |      | 2001 |   | 2002  
|                                                                                    |         |   |      |      |      |   |       |      |      |   |       
|Pro forma amounts assuming the new accounting
principle is applied retroactively(2) |         |   |      |      |      |   |       |      |      |   |        |      |  |   |       |      |  |   |         |      
|Net earnings (loss)                                                                 |         |  | 585  |      |      |  | 8,881 |      |      |  | 98,062 |      |  |  | 6,098 |      |  |  | (29.862 | )    
|Net earnings (loss) per share:                                                      |         |   |      |      |      |   |       |      |      |   |        |      |  |   |       |      |  |   |         |      
|                                                                                    | Basic   |   |     | 0.02 |      |   |      | 0.24 |      |   |       | 2.09 |  |   |      | 0.12 |  |   |        | (0.61 | )
|                                                                                    | Diluted |   |     | 0.02 |      |   |      | 0.23 |      |   |       | 2.02 |  |   |      | 0.12 |  |   |        | (0.61 | )

|                                 |  |                         |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |         | 
|-------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- |  |  |  | ------- | 
|                                 |  | December 31,           
|                                 |  |                        
|                                 |  | 1998                    |         | 1999 |  | 2000 |         | 2001 |  | 2002
|                                 |  |                         |         |      |  |      |         |      |  |     
|                                 |  | (Euros in thousands(1))
|Consolidated Balance Sheet Data: |  |                         |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |         | 
|Cash and cash equivalents        |  |                         | 11,724  |      |  |      | 14,153  |      |  |      | 106,805 |  |  |  | 107,577 |  |  |  | 70,991  | 
|Total assets                     |  |                         | 282,950 |      |  |      | 425,035 |      |  |      | 777,940 |  |  |  | 757,065 |  |  |  | 653,841 | 
|Total debt                       |  |                         | 148,756 |      |  |      | 119,893 |      |  |      | 76,280  |  |  |  | 160,858 |  |  |  | 147,057 | 
|Total shareholders equity       |  |                         | 20,464  |      |  |      | 65,552  |      |  |      | 308,322 |  |  |  | 320,910 |  |  |  | 265,542 | 

(1)         Amounts prior to January 1, 1999 were restated from Netherlands guilders
into euros using the fixed exchange rate as of January 1, 1999 ( 1.00 = NLG
2.20371). The comparative amounts reported in euros depict the same trends as
would have been presented if the Company had continued to present amounts in
Netherlands guilders. Amounts prior to January 1, 1999 are not comparable to
the amounts of other companies that report in euros having restated amounts
from a different currency than Netherlands guilders.

(2)         The cumulative effect of the change in the accounting principle relates to
the effect on prior years of the impact of the adoption of SEC Staff Accounting
Bulletin 101, effective as of January 1, 2001, which sets forth guidelines on
the timing of revenue recognition of sales. The pro forma amounts presented
assume that these accounting principles were applied retroactively.

Exchange Rate Information

The following table sets forth, for each period indicated, the high and
low exchange rates based on the noon buying rate of 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.
On February 18, 2003, the noon buying rate was 1.0708 United States dollar per
euro.

US Dollar Equivalent of Euro
(except where noted)

|     |  |           |       |      |  |       |       |       |  |       |       |      |  |  |        |  |  |  |        |  |  |  |        | 
|---- |  | --------- | ----- | ---- |  | ----- | ----- | ----- |  | ----- | ----- | ---- |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|     |  | Months of
|     |  |          
|     |  | 8/02      |       | 9/02 |  | 10/02 |       | 11/02 |  | 12/02 |       | 1/03
|     |  |           |       |      |  |       |       |       |  |       |       |     
|High |  |           | .9882 |      |  |       | .9959 |       |  |       | .9881 |      |  |  | 1.0139 |  |  |  | 1.0485 |  |  |  | 1.0861 | 
|Low  |  |           | .9640 |      |  |       | .9685 |       |  |       | .9708 |      |  |  | .9895  |  |  |  | .9927  |  |  |  | 1.0361 | 

|                                   |  |                          |        |      |  |      |        |      |  |      |        |  |  |  |        |  |  |  |        | 
|---------------------------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ |  |  |  | ------ | 
|                                   |  | Years Ended December 31,
|                                   |  |                          |       
|                                   |  | 1998                     |        | 1999 |  | 2000 |        | 2001 |  | 2002
|                                   |  |                          |        |      |  |      |        |      |  |     
|Average High/Low
exchange rate (1) |  |                          | 1.1224 | (2)  |  |      | 1.0588 |      |  |      | 0.9207 |  |  |  | 0.8909 |  |  |  | 0.9453 | 

|    |  |                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Average high/low exchange rate calculation is based on the average of the
exchange rates on the last day of each month during the year.
|   
|(2) |  | Exchange rate is given in United States dollar per European Currency Unit
for 1998.                                                    

B. Capitalization and Indebtedness

Not applicable.

- 3 -



---



##### Table of Contents



C. Reasons for the offer and Use of Proceeds

Not applicable.

D. Risk Factors

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 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 and product shipment dates.
These statements may be found under Operating and Financial Review and
Prospects, and elsewhere in this report. Forward-looking statements typically
are identified by use of terms such as believe, anticipate, estimate,
expect, intend, plan, will, may 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 following discussions of risks.

RISKS RELATED TO OUR INDUSTRY

Our business could be adversely affected by the cyclical nature of the semiconductor industry.

We sell our products to the semiconductor industry, which is subject to
sudden, extreme, cyclical variations in product supply and demand. Since late
2000, the semiconductor industry has been in a cyclical downturn characterized
by reduced demand for products, lower average selling prices, reduced
investment in semiconductor capital equipment and other factors all of which
have resulted in lower sales and earnings for our business. The timing, length
and severity of these cycles are difficult to predict. In some cases, these
cycles have lasted more than a year. The current downturn has lasted longer
than past cycles and the market remains volatile and hard to predict.
Semiconductor manufacturers may contribute to the serenity of these cycles by
misinterpreting the conditions in the industry and over-investing or under-investing in
semiconductor manufacturing capacity and equipment. We may not be able to
respond effectively to these industry cycles.

Downturns in the semiconductor industry often occur in connection with, or
anticipation of, maturing product cycles and declines in general economic
conditions. Industry downturns have been characterized by reduced demand for
semiconductor devices and equipment, production over-capacity and accelerated
decline in average selling prices. During a period of
declining demand, we must be able to quickly and effectively reduce expenses
and motivate and retain key employees. Our ability to reduce expenses in
response to any downturn in the semiconductor industry is limited by our need
for continued investment in engineering and research and development and
extensive ongoing customer service and support requirements. In addition, the
long lead time for production and delivery of some of our products creates a
risk that we may incur expenditures or purchase inventories for products,
including subassemblies, which we cannot sell. During periods of extended
downturn, a portion of our inventory may be written down if it is not sold.

Industry upturns have been characterized by 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

- 4 -



---



##### Table of Contents



hire and
assimilate a sufficient number of additional qualified personnel. Our
inability to quickly respond in times of increased demand 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 growth strategy and future success depend upon commercial acceptance
of products incorporating technologies we are developing, such as atomic layer
chemical vapor deposition, rapid thermal processing, low-k dielectrics and
silicon germanium epitaxy. The semiconductor industry and the semiconductor
equipment industry are subject to rapid technological change and frequent
introductions of enhancements to existing products. 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:



| |  |  | successful innovation of processes and equipment;                           
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | accurate technology and product selection;                                  
|
| |  |  | timely and efficient completion of product design and development;          
|
| |  |  | 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. In addition, we may incur substantial unanticipated costs to
ensure the functionality and reliability of our current and future products.
If our products are unreliable or do not meet our customers expectations, then
we may experience reduced orders, higher manufacturing costs, delays in
collecting accounts receivable, and/or additional service and warranty expense.
We have experienced delays from time to time
in the introduction of, and some technical and manufacturing difficulties
with, some of our systems and enhancements. 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, or lose our
relationships with independent research institutes and universities, 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. Because of intense competition in our industry, the
cost of failing to invest in strategic products is high. 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

- 5 -



---



##### Table of Contents



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 and potential competition from companies which have
greater resources than we do, and 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 Applied Materials,
Novellus, Tokyo Electron, and Kokusai. Our primary competitors in the Back-end
business include Kulicke & Soffa, ESEC, Shinkawa, Apic Yamada, BE
Semiconductor, 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;        
| | - |  | --------------------------------------------------------------------------
|
| |  |  | compete more effectively on the basis of price and technology;            
|
| |  |  | 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:



| |  |  | 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 owning 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 of our competitors 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.

- 6 -



---



##### Table of Contents



RISKS RELATED TO OUR BUSINESS

Our quarterly revenues and operating results fluctuate due to a variety of
factors, which may result in volatility or a decrease in the price of our
common shares.

Our quarterly revenues and operating results have varied significantly in
the past and may vary in the future due to a number of factors, including:



| |  |  | 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;                                                  
|
| |  |  | exchange rate fluctuations; 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 initial order and delivery of the product. The timing and recognition
of net sales from customer orders can cause significant fluctuations in our
operating results 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
operating results 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
operating results. 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 earnings and our financial
position.

- 7 -



---



##### Table of Contents



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

Our products 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. The sales cycles
of our products often last for many months or even years. Longer sales cycles
require us to invest significant resources in attempting to make sales and
delay the generation of revenue.

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
operating results.

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 they
reschedule, reduce or cancel orders, 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 13.9% and our ten largest
customers accounted for 39.6%
of our net sales in 2002. 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. Any substantial decrease or delay in sales to one or more of our key
customers could harm our sales and 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 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 severe capital constraints that adversely
affected our operations and ability to compete. We may require substantial
additional capital to finance our future growth and fund our ongoing research
and development activities beyond 2003. Our capital requirements depend on
many factors, including acceptance of and demand for our products, and the
extent to which we invest in new technology and research and development
projects.

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 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.

- 8 -



---



##### Table of Contents



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.

The sale of common stock pursuant to our equity line may dilute the interests
of other security holders.

Under our equity line financing agreement with Canadian Imperial Holdings,
Inc., we may sell up to US$ 65.0 million in the aggregate of our common shares.
We may sell up to US$ 10.0 million of our common shares (but not more than 25%
of the previous weeks trading volume) as often as every five business days.
The purchase price of the shares will be equal to 95.5% of the simple average
of the daily volume weighted average sale price during the five trading days
preceding the date of sale. Because the price of the shares that may be sold
under the equity line is based on the market value of the common shares at the
time of the sale, the number of shares sold will be greater if the price of the
common shares declines, which would cause greater ownership dilution. The
equity line agreement does not limit the price at which common shares may be
sold.

The total number of shares that may be issued under the equity line
depends on the market price of our common shares at the time that the shares
are sold and whether we choose to sell shares, although under no circumstances
can we sell an aggregate number of shares greater than 19.9% of the number of
common shares outstanding at July 2, 2002, or 9,781,250 shares. Our decision
to choose to sell all possible shares under the equity line would be influenced
by, among other things, whether it is in the best interests of the shareholders
to sell at lower market prices. We registered 4,330,446 common shares for sale
with the Securities and Exchange Commission, which represented 8.77% of our
outstanding common shares as of December 31, 2002.

The sale of material amounts of our common shares could reduce the price of our
common stock and encourage short sales.

Sales of our common stock under our equity line may cause the price of our
common shares to decrease due to the additional selling pressure in the market.
In addition, this downward pressure on our stock price could cause some market
participants to engage in short sales of our common shares, which may cause the
price of our stock to decline even further. The equity line agreement does not
impose a minimum price at which our common shares may be sold. If the price of
our common shares declines below the Nasdaq National Market minimum bid
requirement, our continued listing on the Nasdaq National Market could be
jeopardized.

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.

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, 2002, we
owned 54.11% of ASM Pacific Technology through our wholly-owned subsidiary, ASM Netherlands
Antilles N.V., a Netherlands Antilles company, and the remaining 45.89% was
owned by the public.

Although
three of the five directors of ASM Pacific Technology are affiliates of ASM
International, 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 interests.

- 9 -



---



##### Table of Contents



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 can
approve the payment of dividends, but cannot compel their payment or size.
With respect to the payment of dividends, the directors must consider the
financial position of ASM Pacific Technology after the dividend. Since a portion of our cash
flows is derived from the dividends we receive from ASM Pacific Technology, its failure to
declare dividends in any year would negatively impact the cash position
of our Front-end segment for that year and reduce cash available to service
our indebtedness. Cash dividends received from ASM Pacific Technology totaled  15.4 million, 
35.7 million, and  29.5 million in 2000, 2001, and 2002, respectively.

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 three of the affiliates of ASM
International who currently 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 Takeover Code. For example, under the Hong Kong
Takeover Code, we would be excluded from voting if we were directly involved in
a takeover of ASM Pacific Technology in a transaction requiring a shareholder vote.

Our reliance on a primary supplier could result in disruption of our
operations.

We outsource a substantial majority of the manufacturing of our Front-end
business to a single supplier, Philips High Tech Electronics Group (formerly
Philips Machinefabrieken
Nederland B.V.) based in the Netherlands. Purchases from Philips represented
approximately 24.9% of our total cost of sales in the Front-end segment in
fiscal 2002. A limited portion of this amount represents manufacturing for
which Philips is the sole supplier. We are in the process of developing
additional internal and external sources of supply for these manufacturing
processes in the future. If Philips were unable or unwilling to deliver
products to us in the quantities we require for any reason, including 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 financial performance and customer
relationships.

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 new customers 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 currently using another suppliers equipment. Our inability to sell
our products to potential customers who currently use another suppliers
equipment could adversely affect our ability to increase revenue and market
share.

- 10 -



---



##### Table of Contents



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 recent years, there has been substantial litigation regarding patent
and other intellectual property rights in semiconductor-related industries. We
are currently involved in patent litigation proceedings in the United
States with Applied Materials, Inc. involving claims and
counter-claims over certain patent infringement and in April 2003 we
and our subsidiary, ASM America, entered into a binding memorandum of
settlement settling mutual patent infringement claims between ASM
America and Genus, Inc. See Note O of Notes to Consolidated Financial Statements
contained elsewhere in this report. These claims involving
Applied Materials are unrelated to our 1997 settlement with Applied Materials
discussed below. 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 us against claimed infringement of the rights of
others and to determine the scope and validity of the proprietary rights of
others. Patent litigation can result in substantial cost and diversion of
effort by us, which may adversely affect our business, financial condition and
operating results.

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 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:



| |  |  | 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 or use 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.                                                                                                                                                            

- 11 -



---



##### Table of Contents



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, Inc., 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 US$ 80.0 million and
to grant it a worldwide, non-exclusive license to use a number of our patents
that we were enforcing in the litigation. All licenses expire at the end of
the life of the underlying patents. In addition, the settlement agreement
includes covenants for limited periods during which the parties will 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.
The covenants last for different periods of time for different products and
have already expired as to some products. Applied Materials can file new
litigation after these covenants expire. 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 and covenants not to sue included in the agreement.

We
are currently involved in patent infringement litigation with Applied
Materials involving claims that are unrelated to and patents which
are not the subject of our settlement agreement with Applied
Materials. 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.

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. We
have assembly facilities in the Netherlands, the United States, Japan, Hong
Kong and Singapore, and manufacturing facilities in the Peoples Republic of
China and Malaysia. We are subject to risks inherent in doing business
internationally. In particular, the September 11, 2001 attacks in New York and
Washington, D.C. disrupted commerce throughout the United States and other
parts of the world. The continued threat of similar attacks throughout the
world and military action taken and to be taken by the United States and other
nations in Iraq and elsewhere, as well as the threat of military confrontation on the Korean
peninsula, may cause significant disruption to commerce throughout
the world. In addition, the recent outbreak of severe acute respiratory
syndrome (SARS) in the Peoples Republic of China and concerns overs
its spread in Asia and elsewhere could have a similar negative
effect on business activity. Given the importance of our Asia
sales, manufacturing operations and supply relationships, especially
in the Peoples Republic of China, our business may be more
exposed to this risk than the global economy generally. To
the extent that such disruptions further slow the global economy or, more
particularly, result in delays or cancellations of purchase orders, our
business and results of operations could be materially and adversely affected.
We are unable to predict whether these risks or the responses thereto will result in any long-term commercial
disruptions or if such activities or responses will have a long-term material
adverse effect on our business, results of operations or financial condition.

We are subject to other risks related to international business,
including:



| |  |  | unexpected changes in regulatory requirements or changes in one
country in which we do business which are inconsistent with regulations
in another country in which we do business;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | fluctuations in exchange rates and currency controls;                                                                                                                              
|
| |  |  | political conditions and instability, particularly in the countries
in which our manufacturing facilities are located;                                                             
|
| |  |  | economic conditions and instability;                                                                                                                                               
|
| |  |  | tariffs and other trade barriers, including current and future
import and export restrictions, and freight rates;                                                                  

- 12 -



---



##### Table of Contents





| |  |  | 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 cycles in some countries; and                   
|
| |  |  | business interruption and damage from natural disasters.                           

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. 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. We do
not maintain insurance to protect against the loss of key executives or
employees. Further, we have agreements with some, but not all, employees,
restricting their ability to compete with us after their employment terminates.
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.

In response to current market conditions, we have enacted a hiring freeze
and have reduced personnel. Although we are not currently focused on
attracting new key personnel, we have in the past experienced the intense
competition for skilled personnel during market expansions and believe
competition will again be intense when the semiconductor market rebounds.
Consequently, we generally attempt to minimize reductions in skilled personnel
as a reaction to industry downturns, which reduces our ability to lower costs
by payroll reduction. We continue to monitor market and economic developments
and are ready to implement further measures if circumstances warrant.

Our operational results 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, 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 operational results
are exposed to fluctuations of various exchange rates. These net translation
exposures are taken into account in determining shareholders equity.

- 13 -



---



##### Table of Contents



In addition, foreign currency fluctuations may affect the prices of our
products. Prices for our products are currently denominated in United States
dollars, euros and Japanese yen for sales to our customers throughout the
world. 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 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
operating results will be subject to additional foreign exchange rate
fluctuations.

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

If our products are found to be defective, product liability claims may be
asserted against us and we may not have sufficient liability insurance or
resources available to satisfy such claims.

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 that could impose
substantial costs and have a material and adverse effect on our business,
financial condition and results of operations.

Product liability claims may be asserted with respect to our products.
Although we currently have product liability insurance, we cannot assure you
that we have obtained sufficient insurance coverage, that we will have
sufficient insurance coverage in the future or that we will have sufficient
resources to satisfy any product liability claims should our insurance coverage
be unavailable, insufficient or denied.

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. In February 2003, the European Commission published a
directive on waste electrical and electronic equipment
(WEEE). In principal, the directive results 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 Member States adopt
appropriate measures to minimize WEEE disposal and achieve high
levels of collection separation of WEEE by August 13, 2004.
Producers of WEEE will have to provide for the financing of the
collection, treatment, recovery and environmentally sound disposal of
WEEE by August 13, 2005.
A further proposal of the European Commission provides for a ban on the use of lead and some flame retardants in
manufacturing electronic components. 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. Our
customers may require us to conform to the new standards in advance of
their implementation by the European Union Member States.

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.

- 14 -



---



##### Table of Contents



Although we currently are a 54.11%
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; moreover, if we cease to own 50.1% of its shares we would
be in default under our revolving credit facility. Either of these events
would have a significant negative effect on our consolidated net earnings from
operations and liquidity.

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
with our results. 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 with 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. In addition, decrease in our equity ownership
interest in ASM Pacific Technology below 50.1% is an event of default
under our  60.0 million
revolving credit facility. These events would have a significant negative
effect on our consolidated earnings from operations and liquidity, although our
net earnings would be reduced only by an amount that reflects the reduction of
our ownership interest in ASM Pacific Technology.

We
maintain our majority interest in ASM Pacific Technology by purchasing shares from time
to time as necessary. 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 as an incentive. When ASM Pacific Technology issues shares pursuant to this
program, our ownership interest is diluted. If the current maximum amount of
shares are issued under this program, our ownership interest would continue to
be above 50.0%. However, our interest could further be diluted if ASM
Pacific Technology issues
additional equity. Any such decision by ASM Pacific Technology to issue additional shares
requires the approval of a majority of shareholders, which means that, at
present, our approval would be required. Although we intend to continue to
purchase shares of ASM Pacific Technology if necessary to maintain our majority interest, we may
be unable to do so if we do not have sufficient financial resources at that
time.

Our directors and officers control approximately 25% of our voting power which
gives them significant influence over matters voted on by our shareholders,
including the election of directors, and may make it more difficult for a
shareholder group to remove or elect directors not supported by management.

Our directors and officers controlled approximately 25% of our voting
power as of December 31, 2002. Accordingly, in the event they were to vote
together in connection with matters submitted to a shareholder vote, such as
the appointment of our management board by the shareholders, they would have
significant influence on the outcome of those matters and on our direction and
future operations. This makes it more difficult for a group of shareholders to
remove or elect directors not supported by management.

Any investments we may make could disrupt our business and harm our financial
condition.

We intend to consider investments in complementary businesses, products or
technologies. In the

- 15 -



---



##### Table of Contents



third quarter of 2001, we invested US$ 18.0 million ( 20.3 million) in NuTool,
Inc., a semiconductor equipment company that develops copper deposition
technologies. In 2001, we also entered into a strategic technology and
marketing agreement with Genitech, Inc. in which we committed to provide US$
5.0 million over a period of three years for technology development. While we
have no other current agreements or specific investment plans, we may acquire
businesses, products or technologies in the future. In the event of any future
acquisitions, 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 large and immediate accounting write-offs.                              

Our operation of any acquired business will also involve numerous risks, including:



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

We may not be able to successfully integrate any businesses, products or
technologies or personnel that we might acquire in the future and also may not
realize any anticipated benefits from those acquisitions.

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

Our shareholders have granted to Stichting Continuïteit ASM International,
or Stichting, a non-membership organization with a board composed of our
President and Chief Executive Officer, the Chairman of our Supervisory Board
and three independent members, the right to acquire and vote our preferred
shares to maintain the continuity of our company. Toward that objective,
Stichting will evaluate, when called for, whether a takeover offer is in our
best interest, and may, if it determines that such action is appropriate,
acquire preferred shares with voting power equal to 50.0% of the voting power
of the outstanding common shares. This is likely to be sufficient to enable it
to prevent a change of control from occurring. For additional information
regarding Stichting, see Item 7  Major Shareholders and Related Party
Transactions.

These provisions may prevent us from entering into a change of control
transaction that may otherwise offer our shareholders an opportunity to sell
shares at a premium over the market price.

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

Pursuant to our 1997 settlement agreement with Applied Materials, Inc.,
one of our competitors,

- 16 -



---



##### Table of Contents



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 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, 2002 and December 31, 2002, the sales price of our
common shares, as reported on the Nasdaq National Market, ranged from a low of
US$ 6.48 to a high of US$ 28.92. 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.

Furthermore, stock prices for many companies, and high technology
companies in particular, fluctuate widely for reasons that may be unrelated to
their operating results.

Those fluctuations and general economic, political and market conditions,
such as recessions or international currency fluctuations, may adversely affect
the market price of our common shares.

You may have difficulty protecting your rights as an investor and in enforcing
civil liabilities because we are a Netherlands limited liability company.

Our affairs are governed by our articles of association and by the laws
governing limited liability companies formed in the Netherlands. Our executive
offices and the majority of our assets are located outside the United States.
In addition, most of the members of our management board and supervisory board
and executive officers are residents of jurisdictions other than the United
States. As a result, it may be difficult for investors to serve process within
the United States upon us, members of our management board or supervisory board
or our executive officers or to enforce against them in United States courts
judgments of those courts, to enforce outside the United States judgments
obtained against them in United States courts, or to enforce in United States
courts judgments obtained against them in courts in jurisdictions outside the
United States, in any action, including actions that derive from the civil
liability provisions of the United States securities laws. In addition, it may
be difficult for investors to enforce, in original actions brought in courts in
jurisdictions located outside the United States, liabilities that derive from
the United States securities laws.




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.

As used in this report, the terms we, us, our, ASM 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 ().

A. History and Significant Transactions

ASM International N.V. was incorporated on March 4, 1968 as a Netherlands
naamloze vennootschap, or public limited liability company, and was known as
Advanced Semiconductor Materials International N.V. until November 1996. Our
principal executive offices are located at Jan van Eycklaan 10, 3723 BC
Bilthoven, the Netherlands. Our telephone number at that location is (011) (31)
30 229 84

- 17 -



---



##### Table of Contents



11.     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.

Effective in July 1999, we purchased all of the outstanding shares of
Microchemistry, a company located in Finland, for a  3.9 million promissory
note convertible at US$ 10.00 per share into our common shares and renamed the
company ASM Microchemistry. Prior to our purchase, Microchemistry developed the
process to grow or deposit films one layer at a time by means of a process
called Atomic Layer Chemical Vapor Deposition (ALCVD), and marketed ALCVD
processes to manufacturers of flat panel displays and tape magnetic head
products. Following our acquisition, ASM Microchemistry is shifting its focus
to manufacturers of semiconductor devices.

In December 1999, we purchased a 24.0% interest in NanoPhotonics AG, a
German supplier of precision thin film metrology equipment for  407,000. The
technology supplied by NanoPhotonics allows for the integration of
high-resolution, ellipsometric thin film metrology directly in a
wafer-processing tool. This investment has enhanced our ability to equip our
batch and single wafer equipment with integrated thin film metrology.

In
early July 2000, we acquired 4.7% of the outstanding shares of ASM
Pacific Technology,
our Back-end subsidiary, for US$ 67.3 million ( 73.0 million) in cash. The
financing of this acquisition came from our own cash resources and from the
loan facility we received from Canadian Imperial Bank of Commerce (CIBC) of
which we used US$ 69 million.

In October 2001, we entered into a strategic alliance with and made an
equity investment in NuTool, Inc., a privately held semiconductor technology
company located in Milpitas, California. NuTool provides innovative copper
deposition technologies to the semiconductor industry. Its patented
electrochemical mechanical deposition technology offers new process solutions
for copper deposition and planarization, providing significant savings in
integrated circuit manufacturing and enabling new integrated circuit designs
and new process technologies. We made a total equity investment of US$ 18.0
million ( 20.3 million), giving us an equity interest of approximately 15.4%.

B. Business Overview

Introduction

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 manufacturing industry. Front-end equipment performs various
fabrication processes in which multiple thin films, or layers, of
electronically 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 believe that the Front-end and
Back-end react differently to market forces in the highly cyclical
semiconductor industry and that operating in both segments reduces the impact
of business cycles on our operations.

Our Front-end facilities in the Netherlands, the United States and Japan
enable us to interact closely with customers in the worlds major semiconductor
design and wafer processing markets: Europe, North America and Asia. Our
products in the Front-end market segment grow or deposit thin films onto wafers
primarily using a process called chemical vapor deposition, or CVD. CVD
deposits films on the wafers surface through chemical reactions using gases at
high temperatures. Front-end operations accounted for 60.0% of our net sales
in 2001 and 51.4% of our net sales in 2002.

- 18 -



---



##### Table of Contents



Our Back-end business is conducted through our facilities in Hong Kong,
Singapore, the Peoples Republic of China and Malaysia, close to where most
assembly and packaging operations are located. Our products in the Back-end
market assemble and package individual dies into finished semiconductor devices
using stand alone and automated lines of equipment. We also manufacture
leadframes, copper carriers on which dies are mounted as part of the Back-end
assembly process. We are in the process of relocating our leadframe facilities
from Hong Kong to mainland China. Back-end operations accounted for 40.0% of
our net sales in 2001 and 48.6% of our net sales in 2002.

Our Front-end business is conducted through wholly-owned subsidiaries, the
most significant of which are ASM Europe B.V., located in the Netherlands, ASM
America, Inc., located in the United States, and ASM Japan K.K., located in
Japan. Our Back-end business is conducted through a majority-owned subsidiary,
ASM Pacific Technology, with principal operations in Hong Kong, Singapore and the Peoples
Republic of China. As of December 31, 2002, we owned 54.11% of the outstanding
equity of ASM Pacific Technology.

Industry and Products

General

The Semiconductor and Semiconductor Equipment Industries

Semiconductor devices are the key enablers of the electronic age.
Starting with the invention of the transistor, constant advances in design and
manufacture of these devices have made possible the extraordinary variety of
smart products widely available today but unheard of just a few years ago. Two
products in particular were spawned by the evolution in semiconductor
technology: the personal computer and the mobile telephone, which together have
revolutionized communication and information sharing. These products were made
possible by advances in integrated circuits (large numbers of individual
transistors and components designed as a system) that allow increasingly large
numbers of operations to be performed by increasingly small devices in
decreasing fractions of a second. The markets for personal computers and mobile
phones demand increased performance and functionality. This, plus the constant
increase in the number of applications for semiconductor devices, has created
continuing demand for devices that are smaller, faster, more energy efficient
and cheaper. The mobile phone and other wireless communication devices have
accelerated this demand because smaller size and lower power consumption are
particularly important.

In the early stages of the semiconductor industry, semiconductor device
manufacturers developed their own production equipment. However, the diverging
skill sets of increasingly complex electronic circuit design and the physics
and material science aspect of semiconductor manufacturing gave rise to
specialized equipment manufacturers that focus on specific areas of
semiconductor equipment design and production. The semiconductor equipment
industry has grown with the demand for semiconductor devices and developed
specialized expertise to address the technological challenges in the
manufacturing process.

The primary focus in achieving better performing integrated circuits has
been to reduce the size of individual transistors to increase the number of
transistors that can fit within a given size device. Shrinking also reduces
the power needed to activate the transistors and increases speed by reducing
the distance between, and within, transistors. The primary focus in reducing
cost has been to increase the size of the wafer (the silicon substrate upon
which semiconductors are built) so that more devices can be produced in each
production cycle. In order to implement these advances in technology through
shrinking devices or increasing wafer size, device manufacturers must upgrade
their equipment. As a result, semiconductor equipment companies develop tools
along a broadly defined technology roadmap and once tools for each step of the
new production process have been established, semiconductor

- 19 -



---



##### Table of Contents



manufacturers can build new lines to incorporate the latest technology.
Because semiconductor manufacturers are subject to business and consumer
purchase patterns that are driven by demand for new products or applications
and larger macroeconomic factors, they attempt to time the large increase in
supply created by a new fabrication facility with the demand factors for their
end products. The inherent difficulty in matching new supply and the
ever-shortening product life-cycles results in the high volatility associated
with the semiconductor industry.

Semiconductor equipment sales depend significantly upon the level of
capital expenditures by semiconductor manufacturers, which in turn depends
significantly upon the current and anticipated market supply and demand for
semiconductor devices and products using semiconductor devices. Growth in the
semiconductor market is being fueled by expanding end-user demand for smaller,
less-expensive and better-performing electronic products which has led to an
increased concentration of semiconductor devices in electronic products.

Semiconductor Manufacturing Processes

The semiconductor equipment market is composed of two segments: the
Front-end and the Back-end. The Back-end is also referred to as assembly and
packaging. In the Front-end, three subsegments can be considered: wafer
manufacturing, Front-End-of-Line (FEOL) wafer processing and Back-End-of-Line
(BEOL) wafer processing.

In the wafer manufacturing segment 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, either by epitaxy or diffusion/oxidation (see below). Epitaxial wafers
are even flatter and contain less 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 and will be used in the
near future for very advanced microprocessors. The finished wafers, still
without pattern on them, are shipped to the integrated device manufacturers
wafer processing factories or fabs.

During FEOL and BEOL wafer processing, multiple thin films of either
electrically insulating material, also called dielectrics, or conductive
material are grown or deposited on a silicon wafer. First, several material
deposition and processing cycles are used in the FEOL to build the basic
transistor. Second, several deposition and processing cycles are used in the
BEOL to electrically connect the hundreds of millions of transistors.
Patterning of the layers with lithography and etching (see below) creates the
transistors and connecting wires, which together make up the integrated
circuit. Each integrated circuit is a 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 processes are repeated on each layer as the wafer is processed. The
number and precise order of the process steps vary depending upon the
complexity and design of the device. The performance of the device is
determined in part by the various electrical characteristics of the materials
used in the layers of the device and the wafer. The Front-end production phase
is capital intensive, requiring multiple units and a range of different types
of processing equipment in a fabrication line.

In the Back-end, or assembly and packaging, segment wafers are cut into
individual dies or chips. These chips or dies are mounted in a package with
electrical connections to the outside world, while still hermetically sealing
the chip in the package.
- 20 -Table of Contents

The primary steps involved in wafer processing are described below. These
steps are repeated depending on the function of the device which determines its
complexity. Complex microprocessors typically are composed of more than 50
layers of conducting, insulating or semiconducting material.

ASM is mostly active in the deposition processes, i.e. those steps which
involve creation of insulating, conducting and semiconducting layers on the
wafer surface.



| |  |  | Atomic Layer Deposition (ALD)is an advanced technology which
deposits single atomic layers on wafers one at a time at low
temperatures. This process is used to create ultra-thin films of
exceptional quality and flatness.                                                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Chemical Mechanical Polishing (CMP)is a technology which
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 which can be processed without introducing
reliability problems.
|
| |  |  | Chemical Vapor Deposition (CVD)is a technique in which one
or more gaseous reactors are used to form a solid insulating or
conducting layer on the surface of a wafer. Several forms of CVD
exist, each used for a particular application. These different
forms are explained below.                                                                 
|
| |  |  | Cleanremoves undesirable contaminants from the wafers
surface.                                                                                                                                                                                                                                                                                       
|
| |  |  | Diffusion and Oxidationare high-temperature processes that
change the electrical characteristics of layers. Diffusion is used
to make impurities introduced by ion implantation electrically
active. Oxidation forms a silicon oxide layer on the wafers
surface, which acts as an insulative or protective layer over the
wafers surface.          
|
| |  |  | Electro Chemical Mechanical Deposition (ECMD)deposits a
layer of metal through a process called electroplating, while
simultaneously planarizing the surface.                                                                                                                                                                                         
|
| |  |  | Epitaxyinvolves 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 characteristics of the wafer surface, making it suitable
for highly complex microprocessors and memory devices.                                            
|
| |  |  | Etchreproduces the pattern imprinted by lithography by
removing excess material from the uppermost layer of the wafer.                                                                                                                                                                                                                                
|
| |  |  | Ion Implantationis 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.          
|
| |  |  | Lithographyis 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.                                                                                                                                                           
|
| |  |  | Low Pressure Chemical Vapor Deposition (LPCVD)performs CVD
under high temperature, low pressure conditions to deposit
insulating or conductive layers.                                                                                                                                                                                                

- 21 -



---



##### Table of Contents





| |  |  | Metal Organic Chemical Vapor Deposition (MOCVD)is a special
CVD process which employs metal-organic compounds to deposit metal
films. Metal-organic compounds are used to more easily turn the
metals into a metal containing vapor.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Metrologyis 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.                                                      
|
| |  |  | Plasma Enhanced Chemical Vapor Deposition (PECVD)performs
CVD by the use of a vapor containing electrically charged particles
or plasma. The plasma makes the vapor more reactive.                                                  
|
| |  |  | Physical Vapor Deposition (PVD)deposits a thin layer of
metal on the wafer surface for electrical contacts and wires through
a process called sputtering.                                                                         
|
| |  |  | Probingis a process in which electrical and functional tests
are performed on each die and defective ones are marked.                                                                                                               
|
| |  |  | Rapid Thermal Chemical Vapor Deposition (RTCVD)is a
technique similar to LPCVD, but deposits a film on one wafer at a
time.                                                                                                         
|
| |  |  | Rapid Thermal Processing(RTP) is used to expose single
wafers to heat over a short period of time.                                                                                                                                  

The Front-end process is complete when all of the layers have been
deposited and patterned on the wafer. The introduction of even trace levels of
foreign particles can make a device or even an entire wafer unusable. To
reduce the level of foreign particles, Front-end processing is performed in
clean rooms with ultra low contaminant levels. Once the Front-end processing
is complete, the entire wafer is shipped to a Back-end facility where it is
assembled, packaged and tested before final shipment of the semiconductor chip
to the end customer. Back-end processes do not require the same level of
contaminant control and are performed in different facilities than Front-end
processes.

The assembly and packaging or Back-end process consists of sawing or
dicing the processed wafer into individual dies, mounting them on carriers such
as leadframes and connecting them to the appropriate electrical leads. Wire
bonding onto leadframes is the most common interconnection method, although
alternative interconnection techniques and materials, such as ceramic packages,
flip chips and different chip-scale packaging methods, are available. After the
assembly process, the dies are packaged to protect them from environmental
influences and prepare them for use, resulting in completed semiconductor
devices.

The primary processes in the Back-end, or assembly and packaging segment
are described below. ASM is active in providing assembly and packaging
equipment, as well as in the manufacturing of materials such as leadframes.



| |  |  | Die Bondingmounts the dies onto carriers such as leadframes
using a die bonder.             
| | - |  | --------------------------------------------------------------------------------------------
|
| |  |  | Die Inspectioninspects every die or proper performance
before the next steps are undertaken.
|
| |  |  | Die Separationseparates the dies on the wafer into
individual units using wafer saws.       

- 22 -



---



##### Table of Contents





| |  |  | Encapsulation or Moldingencases the dies in a protective
housing, often epoxy, using transfer molds.                                                                                                                                                                                                
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Leadframesare produced by stamping a pattern through a strip
of copper or iron-nickel alloy. For high precision (and fast
turnaround purposes) leadframes are usually produced by an etching
process. This is required when the space between the leads is finer
than the thickness of the material.
|
| |  |  | Leadframe platingdeposits a thin layer of gold or silver on
appropriate places.                                                                                                                                                                                                                     
|
| |  |  | Packagingdeals with the housing of the chip to protect it
from environmental influences and to finalize the product for
industrial use.                                                                                                                                                             
|
| |  |  | Product Testingtests the performance of the completed
semiconductor device.                                                                                                                                                                                                                         
|
| |  |  | Trim and Formcuts away the excess portion of the leadframe
and bends the leads into the desired shape, resulting in the
completed semiconductor device.                                                                                                                                             
|
| |  |  | Unit Inspectioninspects every mounted chip before
encapsulation and inspects each die throughout the assembly process
and prior to packaging.                                                                                                                                                       
|
| |  |  | Wire Bondingattaches extremely thin gold or aluminum wires
between the die and the leadframe for electrical connections using a
wire bonder.                                                                                                                                                        

Industry Trends

The continuous demand for smaller, faster and cheaper semiconductors
drives the technology advances in the material fabrication process. The size
of the transistors is measured by the individual feature sizes, or line widths,
and current leading-edge devices are produced with line widths as small as 130
nanometers (one billionth of a meter). The industry will soon be ramping up
from pilot to high volume production of devices with 90nm feature sizes
and critical process equipment is now being developed and tested for line
widths at or below 65 nm. Today, we support 130nm technology equipment
and are supporting the 90nm technology ramp. In addition, we are working on
developing 65nm and even some 45nm technology in our laboratories.

In developing and piloting these advanced tools, the industry has
encountered new physical barriers that require different solutions. In
lithography, the most advanced light sources are based on 193nm
wavelengths resulting in feature sizes that now are smaller than the wavelength
of the light source. This is similar to painting a thin line with a thick
brush. In order to increase transistor speeds, the focus has shifted to the
interconnection layer between the transistors. This layer historically has
been aluminum, but the superior performance of copper has resulted in a shift
toward copper. Copper is not as easy to work with because it cannot be
deposited using the same processes as aluminum. Instead, it must be
electroplated. Additionally, copper can contaminate and needs to have a
barrier layer placed around it to avoid contamination of the other layers. New
methods of depositing ultra-thin layers, including Atomic Layer Deposition are
being developed to address these challenges.

The move to copper and low-k (high insulating) materials is still in its
infancy, with less than a few percent of semiconductor wafers currently using
copper connections. Most microprocessors with 90nm feature size transistors now
use copper and low-k technology. The trend is toward harder dielectrics and
lower k-values. Harder dielectrics are more resistant to the necessary
polishing step. Still lower forces

- 23 -



---



##### Table of Contents



during the polishing step are desirable. NuTool, in which we have an
equity investment, manufactures low force copper deposition and CMP equipment
to address the need.

Understanding the mechanical forces inherent in packaging processes is a
key consideration in the industrys transition to copper and low-k interconnect
structures. For example, applying force that exceeds the cohesive strength of
the low-k dielectric, or the adhesive strength of one of the interfaces in a
stack, will result in failure. ASM has a team exploring these and other
integration issues.

An optimized holistic approach to wafer processing and assembly-packaging
may become increasingly important in the not too distant future. As the only
company in the industry with both Front-end and Back-end segments, ASM is
uniquely positioned to benefit from further synergies between these segments,
and to provide an ultimate seamless solution that could improve semiconductor
production processes.

The industry seeks to improve transistor performance as well by
introducing new materials and device designs. For example, recently introduced
Silicon-Germanium (SiGe) now is critical to the formation of high-frequency
transistors used in broadband and wireless telecommunications. An even more
advanced form of this process, Silicon Germanium Carbon, further reduces power
consumption of RF chips, while maintaining operating frequency.

The next generation of ultra-thin transistors will require new process
technology such as the use of silicon-on-insulator, or SOI wafers. SOI is an
advanced isolation technology, which will be used in advanced, low power
microprocessors. Either on SOI wafers or on regular silicon wafers, layers of
SiGe and strained Silicon are also deposited to further increase the speed of
transistors. It has been found that electrons move faster through a strained
Silicon layer. Strained Silicon technology also uses the SiGe knowledge
developed for Bipolar Complementary Metal Oxide Semiconductor (BiCMOS)
technology, thus effectively leveraging related research and development
investments.

For
line-widths below 100 nm, new and extremely thin gate
dielectrics are needed. New gate insulators of high-k dielectric materials,
with reduced leakage, require atomic layer deposition. For electronic
manufacturers, the lower power advantages provided by high-k gate insulator
electronics will extend the battery-life of electronic products, which in turn
will accelerate advances in portable electronics.

Semiconductor manufacturers are also seeking to reduce the cost of
producing semiconductor devices by increasing the diameter of the wafers on
which the semiconductor devices are being layered. The maximum diameter of
wafers is increasing from the current industry standard introduced in the early
1990s of 200mm, or eight inches, to 300mm, or twelve inches. The move toward
larger wafer sizes is driven by cost efficiency, since a 300mm wafer holds more
than 2.25 times more dies than a conventional 200mm wafer. Presently, most
large semiconductor companies have committed to 300mm facilities or have teamed
with others to undertake the 300mm transition.

The industry faces the dual challenges of increasingly small line widths
and larger wafer sizes. Historically, once a manufacturer has been designed
into a production line it is very difficult for a new manufacturer to displace
them. In the current environment however, the massive shifts in technology and
size create an opportunity to replace incumbent suppliers. Most of the
equipment for 90 nm technology has now been selected for ramp-up, and ASM is
participating in this ramp with its platforms for vertical furnaces, epitaxy,
and low-k materials. For 65 nm technology, we are fully involved in the
industry leaders development programs. Thus our investments in technology
over the last five years have provided us with a strong technology platform
from which we have and, we believe, will continue to successfully compete for
orders.

- 24 -



---



##### Table of Contents



To achieve improved yield, semiconductor equipment manufacturers have
focused on in-process metrology as a way to isolate and improve specific steps
in the manufacture of devices. The measurements conducted by metrology
equipment are becoming a more integral part of the semiconductor manufacturing
process. Semiconductor manufacturers are requiring equipment that can make
more precise and new kinds of measurements, and provide results of these
measurements faster by integration of the measurement tools into the processing
equipment. We have responded by integrating certain metrology functions in our
A412 vertical furnaces and plan to expand integrated metrology to more
products.

Technological developments in the Front-end process have resulted in the
need for new technology in the Back-end process. The ability to place millions
of transistors onto a thumbnail size device has created the opportunity to
place entire systems on a chip. Instead of many individual components and
simple circuits interconnected on a printed circuit board, these systems can
now be constructed into one integrated circuit. In addition, computer systems
are more interactive with the external environment and therefore require a
greater number of input/output (I/O) pins. The challenge for Back-end
equipment providers is to connect an increasing number of I/O pins on a package
that is constantly decreasing in size. Wire bonding has been at the forefront
of this transition as this process connects each of the I/O pins on the
individual dies to the external package. Wire bonding must not only address
decreasing wire diameters but also increasing throughput to reduce the overall
cost of the device. For integrated circuits with very high I/O counts, the
industry has developed ball grid array (BGA) and flip-chip packaging that use
the entire surface of a die and not just the periphery of the device to attach
I/Os. In addition, semiconductor manufacturers are looking to automation and
integration of Back-end equipment as ways to reduce costs and increase
productivity.

We believe the steady advance of semiconductor technology in Front-end and
Back-end processes will continue and will consequently drive the demand for new
equipment systems.

Products

We design, manufacture and sell products used in both Front-end wafer
processing and Back-end assembly, packaging and materials. The following table
sets forth the main manufacturing processes used in the Front-end and Back-end
market segments and indicates the markets in which we participate.

- 25 -



---



##### Table of Contents



|                                                            |  |                                        |  |            |  |                                |  |                  |  |                
|----------------------------------------------------------- |  | -------------------------------------- |  | ---------- |  | ------------------------------ |  | ---------------- |  | ---------------
|FRONT-END                                                   |  | BACK-END                              
|                                                            |  |                                       
|Deposition                                                  |  | Other Processes                        |  | Testing    |  | Materials                      |  | Assembly         |  | Packaging      
|                                                            |  |                                        |  |            |  |                                |  |                  |  |                
|Epitaxy*                                                    |  | Diffusion and
Oxidation*               |  | Metrology* |  | Leadframe
Manufacture*         |  | Die Separation   |  | Encapsulation* 
|                                                            |  |                                        |  |            |  |                                |  |                  |  |                
|Low Pressure
CVD*
Rapid Thermal CVD,
and
Metal Organic CVD* |  | Ion
Implantation                       |  | Probing    |  | Manufacture
of Other Materials |  | Die Bonding*     |  | Package
Plating
|                                                            |  |                                        |  |            |  |                                |  |                  |  |                
|Plasma Enhanced CVD*                                        |  | Lithography                            |  |            |  |                                |  | Wire Bonding*    |  | Trim and
Form* 
|                                                            |  |                                        |  |            |  |                                |  |                  |  |                
|Atomic
Layer Deposition and
Plasma Enhanced ALD*            |  | Etch                                   |  |            |  |                                |  | Unit*
Inspection |  | Product Testing
|                                                            |  |                                        |  |            |  |                                |  |                  |  |                
|Physical Vapor
Deposition
(PVD)                             |  | Clean**                                |  |            |  |                                |  |                  |  |                
|                                                            |  |                                        |  |            |  |                                |  |                  |  |                
|Rapid Thermal
Processing*
(RTP)                             |  | Chemical
Mechanical
Polishing
(CMP)*** |  |            |  |                                |  |                  |  |                
|                                                            |  |                                        |  |            |  |                                |  |                  |  |                
|Electro Chemical
Mechanical
Deposition
(ECMD)***            |  |                                        |  |            |  |                                |  |                  |  |                

*Indicates markets in which we participate.

**We participate by integrating advanced cleaning technologies into our deposition equipment.

***We participate through our investment in NuTool.

Front-end Products

We combine hardware, software and processes to develop innovative products
for the creation of thin films on silicon wafers. These films, etched in
certain well-defined sub-micron patterns, form transistors and interconnection
circuitry connecting those transistors, see the discussion above under
Semiconductor Manufacturing Processes. Our equipment controls the properties
of such films and assures that they are deposited on atomically clean surfaces.

Films can be formed in several ways. For example, the surface of a wafer
can be exposed to oxygen to form a layer of silicon oxide, an insulator. A film
can also be deposited onto the heated surface of a wafer by introducing gas
compounds, usually at low pressure, in a CVD process. The CVD process can be
used to deposit conductive or insulating films. To deposit films at lower
temperatures other technologies such as PECVD is used. ALD or
ALCVDTM processes grow the films one atomic layer at a

- 26 -



---



##### Table of Contents



time, and is used when extremely high quality and very flat films are
required. We have products which perform all of these deposition processes.

The following table lists our principal Front-end equipment and the years
in which initial production units were first made available to customers.

|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|-------------------------------------------- |  | ------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------
|                                             |  | KEY                                   |  |                                                                                                                                                                                  |  | YEAR                    
|PRODUCT FAMILY                               |  | PROCESSES                             |  | PRODUCTS                                                                                                                                                                         |  | INTRODUCED              
|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|Single Wafer Thermal
CVD Systems             |  |  Epitaxy
 CVD
 RTCVD               |  | Epsilon® One(1) Thermal CVD System
Epsilon® Two(1) Thermal CVD System
Epsilon® 2000 Thermal CVD System
Epsilon® 2500 Thermal CVD System
Epsilon® 3000 (300mm) Thermal CVD
System |  | 1988
1990
1997
1997
1997
|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|Vertical Batch
Processing Systems            |  |  LPCVD
 Diffusion
 Oxidation
 ALD |  | A400 processing system
A600 UHV processing system
A412 processing system (200 and 300mm)
A4ALD processing system                                                             |  | 1994
1996
1998
2002     
|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|Single Wafer Plasma
Enhanced CVD Systems     |  |  PECVD                               |  | Eagle® 10 system (2 chambers)
Eagle® 10 Trident system (3 chambers)
Eagle® 12 Rapid Fire system (300mm)
Dragon 2300 system                                                      |  | 1993
1997
1998
2002     
|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|Single Wafer Atomic
Layer Deposition Systems |  |  ALD                                 |  | F 120(2) reactor
F 450 and F 950(2) reactors
Pulsar® 2000 reactor                                                                                                                |  | 1998
1997
1999          
|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|Single Wafer RTP
Systems                     |  |  Anneal
 Oxidation                  |  | Levitor® 4000 reactor                                                                                                                                                            |  | 2000                    
|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|Single Wafer Cluster
Systems and Modules     |  |  Clean
 RTCVD
 ALD                 |  | HF Vapor Clean Module
Epsilon® 2500 Module (3)
Pulsar® 2000 Module(3)
Pulsar® 3000 Module (300 mm)                                                                               |  | 1999
1997
1999
2001     
|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|Platforms                                    |  |  Clustered
   processes              |  | Polygon
 8200, platform
Polygon
 8300, platform                                                                                                                                |  | 1997
2001               
|                                             |  |                                       |  |                                                                                                                                                                                  |  |                         
|Single Wafer and Batch Process
Chemistries   |  |  RTCVD
 LPCVD                       |  | New Technology                                                                                                                                                                  |  | 2002                    



|(1) |  | This product has been replaced by the Epsilon 2000 and Epsilon 2500.
Although it is no longer sold, it still forms an important part of our
installed base and generates service and spare parts revenue.                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Used for non-wafer applications such as flat panel displays and magnetic
heads.                                                                                                                                                                          
|   
|(3) |  | The Epsilon and Pulsar modules share the same reactor section as the
Epsilon and Pulsar single wafer stand-alone systems.                                                                                                                                
|   
|(4) |  | Epsilon®, Advance®, Dragon, Eagle®, Pulsar®, Levitor®, Aurora, ALCVD,
Atomic Layer CVD, Polygon, Trident, Rapidfile, A400, A412, A4ALD
and New Technology, are used, pending or registered as ASM trademarks in
the US and/or other countries.

Single Wafer Thermal CVD Systems

Our Epsilon® products heat wafers to high temperatures using infrared
lamps, forming a film on the surface of a single wafer by applying CVD. The
main current use of the Epsilon® is for epitaxy of silicon and
silicon-germanium alloys.

The high productivity version of the Epsilon®, the Epsilon® 2500, offers
the highest throughput in the industry for epitaxial silicon applications. Our
Epsilon® 3000 is the first 300 mm SiGe System used for manufacturing of
strained silicon layers. We offer both stand-alone equipment and modules that
can be integrated with our Polygon system.

- 27 -



---



##### Table of Contents



Vertical Batch Processing Systems

The Advance® 400 series vertical batch processing systems process up to
150 wafers at a time to high temperatures. These reactors load wafers into a
carrier, which is pushed into the heated reactor for diffusion, oxidation or
CVD processing. The A400 vertical batch processing system and the A412 300
mm version have demonstrated to be the most productive systems of their kind in
the industry. A special boat was introduced in 2002 that enables the A412 to
operate at very high temperatures for 300 mm SOI wafer production without
introducing defects in the wafers. Moreover, the A4ALD processing system,
enabling ALD technology specifically developed for a batch reactor, is a good
alternative for thicker films to the Pulsar® single wafer
ALCVD products. Thus,
the availability of A4ALD effectively extends the application area of ALD.

Single Wafer Plasma Enhanced CVD Systems

The Eagle® series reactors are single wafer systems that deposit films on
wafers using a plasma. The Eagle® 10 Trident systems are most often utilized
for depositing insulators, such as silicon oxide, silicon nitride, and low-k
dielectric films used in interconnect circuits. The Eagle® 12 Rapidfire
(300mm) has three chambers configured for enhanced productivity. The
simplicity of these systems results in low cost, high reliability and low
maintenance. Our Aurora low-k films are made in the Eagle® PECVD systems and
are now being used in 90nm device manufacturing. The Dragon 2300, introduced
in 2002, demonstrates high wafer throughput, high uptime, low energy
consumption and cost of operating, while offering the smallest footprint of any
high volume manufacturing tool.

Atomic Layer Deposition Systems

Our Pulsar® ALCVD product for atomic layer deposition is already in
commercial production in the markets for flat panel displays and magnetic
heads. It is currently being selected for advanced (<100 nm) device
manufacturing. With the Pulsar® 2000 and the Pulsar® 3000 reactors (300 mm), we
offer both stand-alone equipment and modules that can be integrated with our
Polygon cluster systems.

Single Wafer RTP Systems

In our new RTP product, the Levitor® reactor, the wafer floats on a
cushion of gas and does not require lamps for heating. Compared to existing
lamp-based RTP systems, the Levitor® reactor allows very fast heating and
cooling of the wafers and a more efficient and cost-effective solution. The
product is currently being evaluated by two European research and
development labs and two
end-users. Large numbers of demonstrations have been run in our application
labs, including demonstrations on transparent glass wafers for displays.

Single Wafer Cluster Systems and Modules

At times, several processes must be performed sequentially on the wafer
without allowing them to be contaminated by air. Our Polygon single wafer
cluster systems (Polygon 8200 for 200mm and Polygon 8300 for 300mm) allow the
integration of up to four modules on a single vacuum handler. We currently
have Epsilon®, Pulsar® and vapor clean modules available, the latter to clean
unwanted oxide from the incoming wafer with a patented process.

Process Chemistries

In 2002, ASM introduced an enabling chemical vapor deposition (CVD)
technology, named New Technology that can utilize the hardware of ASMs
Epsilon® reactor, Polygon cluster tools,

- 28 -



---



##### Table of Contents



or A400 series batch processing systems in combination with proprietary
software and chemistry solutions. Based on a new precursor, called Silcore,
New Technology can produce silicon containing layers with better properties,
and at higher rates of deposition.

Back-end or Assembly Packaging Products

The following table lists our principal Back-end products, and the years
in which initial production units were first made available to customers.

|                  |  |                                                                            |  |             |  |            |      | 
|----------------- |  | -------------------------------------------------------------------------- |  | ----------- |  | ---------- | ---- | 
|                  |  | KEY                                                                        |  |             |  | YEAR      
|PRODUCT FAMILY    |  | PROCESSES                                                                  |  | PRODUCTS    |  | INTRODUCED
|                  |  |                                                                            |  |             |  |           
|                  |  |                                                                            |  | AD809       |  |            | 1990 | 
|                  |  |                                                                            |  | AD829A      |  |            | 1999 | 
|                  |  |                                                                            |  | AD819       |  |            | 1998 | 
|                  |  | Die Bonding                                                                |  | AD889A      |  |            | 1999 | 
|                  |  |                                                                            |  | AD898       |  |            | 2000 | 
|Assembly          |  |                                                                            |  | AD8912      |  |            | 2002 | 
|                  |  |                                                                            |  | AD900       |  |            | 2002 | 
|                 
|                 
|                 
|                 
|                  |  |                                                                            |  | AB510       |  |            | 2000 | 
|                  |  |                                                                            |  | AB559A      |  |            | 1997 | 
|                  |  | Wire Bonding                                                               |  | Eagle60     |  |            | 2002 | 
|                  |  |                                                                            |  | AB339 Eagle |  |            | 2000 | 
|                  |  |                                                                            |  | AB339       |  |            | 1997 | 
|                 
|                 
|                 
|                 
|                  |  | Encapsulation and Packaging Processing                                     |  | PMC139      |  |            | 1999 | 
|                  |  |                                                                            |  | IDEALmold  |  |            | 2000 | 
|                 
|                 
|                 
|                 
|                  |  |                                                                            |  | MP209       |  |            | 1996 | 
|                  |  |                                                                            |  | BGA289      |  |            | 1998 | 
|Packaging         |  |                                                                            |  | CS500       |  |            | 1999 | 
|                  |  | Trim and Form                                                              |  | CS8000      |  |            | 2002 | 
|                  |  |                                                                            |  | BPLine      |  |            | 2000 | 
|                  |  |                                                                            |  | DS500       |  |            | 2000 | 
|                 
|                 
|                 
|                 
|Automated Systems |  | Full integration of the above
assembly and packaging steps into one
system |  | IDEALine   |  |            | 1999 | 
|                 
|                 
|                 
|                 
|Materials         |  | Manufacture of carriers on which
dies are mounted                          |  | Leadframes  |  |            | 1980 | 

Eagle®, IDEALmold are used, pending or registered as ASM trademarks in the US and/or other countries.

Die bonding

We manufacture several die bonding models to address various markets
including semiconductor and optoelectronic devices. The AD 8912 epoxy die
bonder for 12 wafers continues the path undertaken by ASM to provide customers
with the highest quality and best cost/performance systems on the market. With
its capability to handle up to 12 wafers, fully automatic operation, epoxy
writer, pre and post bond inspection and wafer mapping, the AD 8912 is able to
provide the customer with exceptional operational results. A new and
innovative system is the AD900, high speed flip chip die bonder for ic
applications. The AD829A and AD898 models address the large market for die
sizes under 30 mils square. A mil is 1/1000 of an inch. In addition to the
semiconductor device market, the small die category includes optoelectronic
devices. The model AD819 is a high precision machine designed for laser diode
optoelectronic devices. Machines may be configured to operate stand-alone or
connected to epoxy curing ovens and wire bonders.

Wire bonding

We introduced our Eagle60® gold wire bonder in 2002. This is the
successor to our acclaimed AB339Eagle generation bonder. The Eagle60® offers
significant output increase over existing models. It has the industry leading
ultra fine pitch capability and favorable price/performance ratio as well as an
ultralight bond head, advanced pattern recognition software and automatic wire
bonder inspection

- 29 -



---



##### Table of Contents



capability. The AB510 and AB559A are ultrasonic wedge bonders used for
aluminum wire bonding at room temperature on printed circuit boards. These
machines address the consumer products market which focuses on cost effective
solutions.

Encapsulation

The IDEALmold, introduced in 2000, specifically designed to be
manufactured in a modular format allowing customers to specify the system
capacity from two to eight leadframes. This product specifically addresses the
in-line market which requires molding systems of varying capacities to allow
for proper line balancing. The IDEALmold can be configured as a very flexible
stand-alone system as well. The PMC139 allows customers to directly transfer
encapsulated semi-conductor devices to a high capacity multi-chamber oven for
continuous automatic post mold curing of epoxy molding compound.

Trim and Form

Our MP209 is a high speed, motorized trim and form equipment catering to
different packages. The modular set-up of the system allows integration of
third party testing marking and inspection functions, which in turn allows more
cost-efficient production for our customers. The CS8000 is an Integrated
Singulation System linked to the customers chosen singulation tool to provide
Pick and Place with Vision Inspection capability for processing of QFN, Chip
Array or CSPBGA packages. It can be configured for package inspection, ball
inspection, market inspection or all.

Automated Systems

The IDEALine integrates Back-end assembly and packaging equipment. 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 and trimming and
forming. In addition, we work with third party suppliers to offer various
additional processes.

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 centralized product development policies and local activities
are directed toward expanding and improving present product lines to
incorporate technology advances and enable timely penetration of new markets
for automated semiconductor processing, assembly and packaging equipment. These
activities require the application of physics, chemistry, process technology,
electrical engineering, precision mechanical engineering and software
development. We are also continuing to develop new applications as well as
software and hardware for our Back-end products.

Our net research and development expenses, as a percentage of net sales,
were 7.9%, 14.2% and 17.0% during 2000, 2001 and 2002, respectively. We expect
to continue investing significant resources in research and development to
enhance our product offerings.

Our research and development activities are 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 or technologies. This approach,
combined

- 30 -



---



##### Table of Contents



with interactions between the individual centers, permits efficient
allocation of technical resources and allows for customer orientation combined
with the necessary product specialization.

|                 |  |                                           |  |                   |     | 
|---------------- |  | ----------------------------------------- |  | ----------------- | --- | 
|                 |  |                                           |  | NUMBER OF R & D  
|                 |  |                                           |  | EMPLOYEES AS OF  
|BUSINESS SEGMENT |  | LOCATION                                  |  | DECEMBER 31, 2002
|                 |  |                                           |  |                  
|                 |  | Bilthoven, the Netherlands                |  |                   | 87  | 
|                 |  | Leuven, Belgium (IMEC)                    |  |                   | 22  | 
|Front-end        |  | Espoo, Finland                            |  |                   | 24  | 
|                 |  | Phoenix, Arizona, United States           |  |                   | 82  | 
|                 |  | Tama, Japan                               |  |                   | 69  | 
|Back-end         |  | Hong Kong, the Peoples Republic of China |  |                   | 321 | 
|                 |  | Singapore                                 |  |                   | 233 | 

As part of our research and development activities, we are engaged in
various formal and informal arrangements with customers and institutes. These
arrangements are made on a development program basis and allow us to develop
products that meet customer requirements and obtain access to new technology
and expertise. We currently are engaged in joint development programs with
several customers for 300mm applications of our Eagle, Polygon and Epsilon
products. In cooperation with NuTool, Inc., a United States supplier of copper
plating and CMP equipment, in which we have an equity investment, we are
developing production solutions for copper applications.

We participate in European programs focusing on developing the production
technology for semiconductor devices with line widths of 90, 65 and 45nm. We
are the project manager in a number of projects that were awarded under the IST
(Information Society Technologies) program, as part of Framework 5 and 6, an
initiative of the European Union. We are a leading partner in several
development programs sponsored by Micro Electronics Development for European
Applications, MEDEA+, a Eureka initiative. In MEDEA+ we are currently working
on the development of contactless RTP processing, integration of metrology in
batch processing systems and on a multitude of process solutions for the 65nm
generation. Mr. Arthur H. del Prado, our President and Chief Executive Officer,
is a member of the board of MEDEA+.

The integration of new product solutions into process modules is done in
ASM Europes application laboratory, which shares the Interuniversity
MicroElectronics Center (IMEC) clean rooms in Leuven, Belgium. This integration
within IMECs facilities gives us access to all the additional process steps
needed to create sub-micron devices, including sub-micron patterning.
Development of customer applications usually occurs with the active
participation of IMEC, suppliers of complementary and non-critical equipment,
and end-users of our products.

In addition to cooperating with third parties such as customers and other
equipment companies in research and development projects, we enter into
projects with technical universities, particularly in the Netherlands, Japan
and Finland. 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 grants or research loans directly. We have received such loans in the
past from the Netherlands government, of which  11.0 million was outstanding
at December 31, 2002. These loans have to be repaid only from the sales
proceeds of the products developed with this assistance at repayment rates of
up to 100% of the amounts of the loans. Our subsidiary, ASM Microchemistry, has
received similar loans from the Finnish government.

- 31 -



---



##### Table of Contents



Manufacturing and Suppliers

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

In the Front-end process, we outsource the manufacture of major subsystems
and subassemblies and some design, assembly and testing functions to
specialized companies. We believe that outsourcing enables us to minimize our
fixed costs and capital expenditures while also providing the ability to
rapidly increase production capacity. We also work closely with our suppliers
to achieve mutual cost reduction through joint design efforts.

Philips High Tech Electronics Group (formerly Philips Machinefabrieken
Nederland B.V.) supplies a substantial part of the major subassemblies used in
the manufacture of our Advance A400and Advance A412vertical batch processing
systems.Although we work with a limited number of suppliers, we seek not to
rely on a sole supplier, and have back-up suppliers for most subsystems and
subassemblies that are outsourced.

In addition, we purchase the metrology equipment that we integrate into
some of our Front-end products from NanoPhotonics. As of February 17, 2003 we
had a 24.0% equity interest in NanoPhotonics and our Chief Executive Officer had
a 44.5% interest. See Item 5. Operating and Financial Review and Prospects
and Item 7. Related Party Transactions.

Our Back-end operations are vertically integrated to insure quality
production of component parts where the quality of subassemblers does not
otherwise meet our standards. 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 sell and market 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 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 with our customers of new applications. We encourage our engineers
to submit technical papers to relevant magazines and to give lectures in
symposia.

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 three to six 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

- 32 -



---



##### Table of Contents



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, 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 direct,
integrated sales force for Front-end products reporting on a geographical basis
to the managers in charge of Europe, North America, Korea, Taiwan, Southeast
Asia and Japan. At the end of 2002, the Front-end units had 96 employees fully
dedicated to sales and marketing, representing 7.8% of total Front-end staff.
Dedicated support and sales forces are maintained for our various geographic
units, enabling us to serve our global customers with an equally global
organization. Each of our geographic Front-end units is responsible for sales
of all of our Front-end products in its region. We believe the integration of
our sales force promotes cross selling of Front-end products.

In addition to the sales activities undertaken at the principal offices of
our various manufacturing units, we have sales offices located in Europe (in
the United Kingdom, France, Italy and Germany), and in the United States (in
California, Texas and Pennsylvania). In Japan, our sales offices are located in
Tokyo and Osaka.

We use independent sales agents in Malaysia and the Peoples Republic of
China for Front-end products and to support our sales efforts for ALCVD
equipment in the non-semiconductor markets, such as flat panel displays and
magnetic heads.

Sales of Back-end equipment and materials are provided by our principal
offices in Hong Kong and Singapore, through direct sales offices in Taiwan, the
Philippines, Malaysia, Thailand, Japan, Europe and North America, and through
sales representatives in Korea and some parts of the United States. At the end
of 2002, there were 181 staff members employed in sales and marketing of
Back-end products, representing 3.4 % 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 leading
semiconductor and wafer manufacturers. Our customers vary from independent
semiconductor manufacturers that sell their products on the open market, to
large electronic system companies that manufacture semiconductor devices for
their own use.
- 33 -Table of ContentsThe following table lists a sample of customers of ours:CUSTOMERS

|                         |  |                               |  |                           
|------------------------ |  | ----------------------------- |  | --------------------------
|Agere Group              |  | IBM                           |  | Philips                   
|                         |  |                               |  |                           
|Agilent                  |  | InfineonTechnologies          |  | Powerchip Semiconductor   
|                         |  |                               |  |                           
|AMD                      |  |                               |  | Promos Technologies       
|                         |  |                               |  |                           
|Amkor Technology         |  | Intel                         |  | Samsung                   
|                         |  |                               |  |                           
|ASE                      |  | Jiangsu Chanjiang Electronics |  | Siliconware Precision Ind.
|                         |  |                               |  |                           
|Carsem                   |  | Matsushita Electronics        |  | Sony                      
|                         |  |                               |  |                           
|Chartered                |  | MEMC                          |  | Seiko Epson               
|                         |  |                               |  |                           
|Chippac                  |  | Micron                        |  | ST Microelectronics       
|                         |  |                               |  |                           
|Fairchild Semiconductors |  | Mitsubishi                    |  | Texas Instruments         
|                         |  |                               |  |                           
|Fujitsu                  |  | Motorola                      |  | Toshiba                   
|                         |  |                               |  |                           
|Hana                     |  | NEC                           |  | TSMC                      
|                         |  |                               |  |                           
|Hitachi                  |  | Nichia Kagaku Chemical        |  | UMC                       

Our largest customer accounted for approximately 14.2%, 7.2% and 13.9% of
our net sales in 2000, 2001 and 2002, respectively. Our ten largest customers
accounted for approximately 45.2%, 35.5% and 39.6% of our net sales in 2000,
2001 and 2002, 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, plans for new fabrication facilities and new product
introductions.

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

|     |  |           |  |              |   |             |                         |                         |           |   |          |      |  
|---- |  | --------- |  | ------------ | - | ----------- | ----------------------- | ----------------------- | --------- | - | -------- | ---- | -
|     |  |           |  | PERCENTAGE   |   | GEOGRAPHIC  |                         |                         |           |   |          |     
|     |  | SEGMENT   |  | OF NET SALES |   | DESTINATION |                         | PERCENTAGE OF NET SALES
|     |  |           |  |              |   |             |                         |                        
|     |  |           |  |              |   |             |                         |                         | Front-end |   | Back-end
|     |  |           |  |              |   |             |                         |                         |           |   |         
|     |  | Front-end |  | 51.4         | % |             | S.E. Asia               |                         | 8.5       | % |          | 41.3 | %
|     |  |           |  |              |   |             | Europe                  |                         | 10.5      | % |          | 1.1  | %
|2002 |  |           |  |              |   |             |                         |                         |           |   |          |      |  
|     |  | Back-end  |  | 48.6         | % |             | North and South America |                         | 25.0      | % |          | 4.4  | %
|     |  |           |  |              |   |             | Japan                   |                         | 7.4       | % |          | 1.8  | %

- 34 -



---



##### Table of Contents



|     |          |           |  |              |      |             |                         |                         |  |           |     |          |  |     |      |  
|---- | -------- | --------- |  | ------------ | ---- | ----------- | ----------------------- | ----------------------- |  | --------- | --- | -------- |  | --- | ---- | -
|     |          |           |  | PERCENTAGE   |      | GEOGRAPHIC  |                         |                         |  |           |     |          |  |    
|     |          | SEGMENT   |  | OF NET SALES |      | DESTINATION |                         | PERCENTAGE OF NET SALES
|     |          |           |  |              |      |             |                         |                        
|     |          |           |  |              |      |             |                         |                         |  | Front-end |     | Back-end
|     |          |           |  |              |      |             |                         |                         |  |           |     |         
|2001 |          | Front-end |  |              | 60.0 | %           |                         | S.E. Asia               |  |           | 8.5 | %        |  |     | 34.0 | %
|     |          |           |  |              |      |             | Europe                  |                         |  | 18.1      | %   |          |  | 2.0 | %   
|     | Back-end |           |  | 40.0         | %    |             | North and South America |                         |  | 18.5      | %   |          |  | 1.5 | %   
|     |          |           |  |              |      |             | Japan                   |                         |  | 14.9      | %   |          |  | 2.5 | %   

|     |          |           |  |              |      |             |                         |                         |  |           |     |          |  |     |      |  
|---- | -------- | --------- |  | ------------ | ---- | ----------- | ----------------------- | ----------------------- |  | --------- | --- | -------- |  | --- | ---- | -
|     |          |           |  | PERCENTAGE   |      | GEOGRAPHIC  |                         |                         |  |           |     |          |  |    
|     |          | SEGMENT   |  | OF NET SALES |      | DESTINATION |                         | PERCENTAGE OF NET SALES
|     |          |           |  |              |      |             |                         |                        
|     |          |           |  |              |      |             |                         |                         |  | Front-end |     | Back-end
|     |          |           |  |              |      |             |                         |                         |  |           |     |         
|2000 |          | Front-end |  |              | 40.6 | %           |                         | S.E. Asia               |  |           | 7.8 | %        |  |     | 54.2 | %
|     |          |           |  |              |      |             | Europe                  |                         |  | 9.3       | %   |          |  | 2.4 | %   
|     | Back-end |           |  | 59.4         | %    |             | North and South America |                         |  | 11.8      | %   |          |  | 1.8 | %   
|     |          |           |  |              |      |             | Japan                   |                         |  | 11.7      | %   |          |  | 1.0 | %   

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 to optimize the use of the equipment for the customers
specific processes. For our Front-end business, where the availability of field
support is particularly important for a sale, there are approximately 398
support staff employees, or 32.5% of our total Front-end employees.

VLSI Research Inc.s 2002 Customer Satisfaction Survey ranked ASM
International the number one Large Supplier of Chip Making Equipment. The
survey ranks the 15 largest semiconductor equipment suppliers as determined by
sales irrespective of the type of equipment produced. The survey respondents
are representatives of chip-making companies around the world who rate their
suppliers in thirteen categories that exemplify a suppliers relationship with
its customers.

Competition

The semiconductor equipment industry is intensely competitive, and is
fragmented among companies of varying size, each with a limited number of
products serving a particular segment of the

- 35 -



---



##### Table of Contents



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 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 business are from the United
States and Japan. Our primary competitors in the Back-end business 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 business include Applied Materials, Novellus,
Tokyo Electron and Kokusai. Our primary competitors in the Back-end business
include Kulicke & Soffa, ESEC, Shinkawa, Apic Yamada, BE Semiconductor, Towa,
Shinko and Mitsui.

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 and the ownership of
our intellectual property rights.

We own and license patents which 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. The following table shows the number of patents for which we
made an initial filing during the indicated period and the number of patents in
force as of the end of the indicated period:

|                       |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     | 
|---------------------- |  | ---- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- |  |  |  | --- |  |  |  | --- | 
|                       |  | Year |     | Year |  | Year |     | Year |  | Year
|                       |  | 1998 |     | 1999 |  | 2000 |     | 2001 |  | 2002
|                       |  |      |     |      |  |      |     |      |  |     
|Initial patent filings |  |      | 34  |      |  |      | 40  |      |  |      | 58  |  |  |  | 49  |  |  |  | 96  | 
|Issued patents         |  |      | N/A |      |  |      | 167 |      |  |      | 215 |  |  |  | 277 |  |  |  | 367 | 

We have entered into worldwide, non-exclusive, non-transferable and
non-assignable licenses with Applied Materials for patents related to epitaxy
and some chemicals used to deposit insulating layers for PECVD. To maintain
these licenses, we pay Applied Materials a royalty on sales of equipment that
use the patented technology. These patents expire at various times between 2003
and 2010. Upon expiration of the patents, the technology may be used
royalty-free by the public, including us.

In the Back-end market segment, companies generally compete on the basis
of their cumulative expertise in applying well known technologies to improve
productivity and cost-efficiency. As a result, we file fewer patents related
to our Back-end business but where possible, we file for protection of
innovations made by our Back-end subsidiary. We also own certain trademarks
and other proprietary information that we consider important to our business.
- 36 -Table of ContentsThere has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. We currently
are involved in two such matters and, 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 us against claimed infringement of the rights
of others and to determine the scope and validity of the proprietary rights of
others. Any such litigation could result in substantial cost and diversion of
effort by us, which could have a material adverse effect on our business,
financial condition and operating results. 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 operating results.At present, we are not involved in any litigation which we believe is
likely to have a materially adverse effect on our financial position. However,
we are involved in two proceedings, the outcome of which cannot be determined
at present.Genus LitigationIn June 2001, our subsidiary, ASM America, filed a lawsuit against Genus,
Inc. in the U.S. District Court for the Northern District of California
alleging infringement of three patents involving sequential chemical vapor
deposition (U.S. Patent No. 5,916,365), methods for growing thin films (U.S.
Patent No. 6,015,590) and ASM Americas showerhead patent (U.S. Patent No.
4,798,165, entitled Apparatus for Chemical Vapor Deposition Using an Axially
Symmetric Gas Flow). Genus responded by denying the allegations and bringing
a counterclaim against ASM America and ASM International alleging antitrust
violations and infringement of U.S. Patent No. 5,294,568 involving selective
etching of native oxide. Genus antitrust claims were stayed until after trial
on the patents at issue. In August 2002, the court ruled that Genus did not
infringe the 365 patent. In January 2003, the court ruled that Genus did not
infringe the 590 patent.In
April 2003, ASM International and ASM America entered into a
binding memorandum of settlement with Genus settling this litigation.
Pursuant to the memorandum:

|  |  |                                                                                                                                                                                                                                                                                                                                                                             | 
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |  | Genus granted to ASM
International and ASM America a nonexclusive, worldwide, fully paid-up
license under the 568 patent and directly related patents;                                                                                                                                                                                                                    
| 
| |  | ASM America granted to Genus a
nonexclusive, worldwide, fully paid-up license under the 165,
365 and 590 patents and directly related patents, provided that
the license for the 365 and 590 patents will be effective
only upon completion of the appeal by ASM America of the lower
courts summary judgment rulings as described below;                            
| 
| |  | ASM America will have the right
to appeal the summary judgment rulings in respect of the 365
and 590 patents and, if the appeals courts vacates either
summary judgment ruling on the basis of a change in the lower
courts claim construction, Genus will pay ASM America the sum
of US$1.0 million in respect of the above
licenses for the 365 and 590 patents; and
| 
| |  | Genus, on the one hand, and ASM
International and ASM America on the other hand, agreed to refrain
for a five year period from litigating patent and antitrust claims,
although each party retains the right to recover damages incurred
during the five year period if a suit is brought after the expiration
of such period.                                             

Applied Materials Litigation

In response to a letter by Applied Materials, Inc. that our Eagle reactors
infringe various Applied Materials patents, ASM International and ASM America
filed a declaratory judgment action against Applied Materials on August 27,
2002 in the U.S. District Court for the District of Arizona. The lawsuit seeks
a declaration of non-infringement or invalidity of six Applied Materials
patents relating to cleaning of reaction chambers and deposition of silicon
nitride. Applied Materials responded on December 16, 2002 by denying the
allegations and counterclaiming for a declaratory judgment of infringement and
validity of two of the patents related to cleaning of reaction chambers and for
damages, a preliminary or permanent injunction and costs. Applied Materials
also moved to dismiss the complaint with respect to four of the patents and for
a more definitive statement with respect to two of ASM Internationals causes
of action. No trial date has been set. Given the stage of the proceedings, it
is not possible to predict the outcome of the claims and counterclaims at this
time, or the range of potential recovery or loss.

- 37 -



---



##### Table of Contents



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 February 17, 2003:

|                                                                      |  |                                             |  |                         |       |  
|--------------------------------------------------------------------- |  | ------------------------------------------- |  | ----------------------- | ----- | -
|                                                                      |  |                                             |  | Percentage Owned by    
|Subsidiary Name and Location                                          |  | Country of Incorporation                    |  | ASM International, N.V.
|                                                                      |  |                                             |  |                        
|ASM Europe, B.V.
Bilthoven, the Netherlands                           |  | The Netherlands                             |  |                         | 100   | %
|                                                                     
|ASM Microchemistry, Ltd.
Espoo, Finland                               |  | Finland                                     |  |                         | 100   | %
|                                                                     
|ASM America, Inc.
Phoenix, Arizona, United States                     |  | State of Delaware, United States of
America |  |                         | 100   | %
|                                                                     
|ASM Japan, K.K.
Tama, Japan                                           |  | Japan                                       |  |                         | 100   | %
|                                                                     
|ASM Pacific Technology Ltd.
Hong Kong, the Peoples Republic of China |  | The Cayman Islands                          |  |                         | 54.11 | %

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 manufacturing facilities are located in Europe, the United States
and Japan 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:

|          |                                      |                                       |                                                                                               |                                                                                                        |  |                |         | 
|--------- | ------------------------------------ | ------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | 
|          |                                      |                                       |                                                                                               |                                                                                                        |  | APPROXIMATE   
|BUSINESS  |                                      |                                       |                                                                                               |                                                                                                        |  | AGGREGATE     
|SEGMENT   |                                      | LOCATION                              |                                                                                               | PRIMARY USES                                                                                           |  | SQUARE FOOTAGE
|          |                                      |                                       |                                                                                               |                                                                                                        |  |               
|Front-end |                                      | Bilthoven, The
Netherlands            |                                                                                               | Wafer processing equipment
manufacturing, marketing, research and
executive offices                    |  |                | 231,000 | 
|          | Tama and Niigata,
Japan              |                                       | Wafer processing equipment manufacturing,
marketing, research and offices                     |                                                                                                        |  | 334,000        |        
|          | Phoenix, Arizona, USA                |                                       | Wafer processing equipment manufacturing,
marketing, research and offices                     |                                                                                                        |  | 179,000        |        
|          | Almere,
The Netherlands              |                                       | Wafer processing equipment manufacturing
and offices                                          |                                                                                                        |  | 80,000         |        
|          | Espoo, Finland                       |                                       | Wafer processing equipment manufacturing,
marketing, research and offices                     |                                                                                                        |  | 33,000         |        
|         
|Back-end  |                                      | Hong Kong, Peoples
Republic of China |                                                                                               | Assembly and
encapsulation equipment manufacturing, leadframe plating,
marketing, research and offices |  |                | 250,000 | 
|          | Shenzhen, Peoples
Republic of China |                                       | Precision metal part and subassembly
fabrication, stamped leadframe
manufacturing and offices |                                                                                                        |  | 935,000        |        
|          | Singapore                            |                                       | Assembly equipment and etched leadframe
manufacturing, marketing, research and
offices        |                                                                                                        |  | 333,000        |        
|          | Johor Bahru,
Malaysia                |                                       | Precision metal part and subassembly
fabrication, and offices                                 |                                                                                                        |  | 38,000         |        

Our principal facilities in the Netherlands, the United States, Finland,
Hong Kong, the Peoples Republic of China, Singapore and Malaysia are subject
to leases expiring at various times from 2003 to 2026. The 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 5. Operating and Financial Review and Prospects

Overview

- 38 -



---



##### Table of Contents



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 51.4% of our
net sales in 2002, through our principal facilities in the Netherlands, the
United States and Japan. We conduct our Back-end business, which accounted for
48.6% of our net sales in 2002, through our principal facilities in Hong Kong,
the Peoples Republic of China, Singapore and Malaysia. Our Back-end operations
are conducted through our 54.11% majority-owned subsidiary, ASM Pacific
Technology Limited (ASMPT).

We sell our products worldwide to the semiconductor industry, which is
subject to sudden and extreme cyclical variations in product supply and demand.
Since late 2000, the semiconductor industry has been impacted by a severe
cyclical downturn characterized by reduced demand for products, lower average
selling prices across certain product lines, reduced investment in
semiconductor capital equipment and other factors, all of which have led to
lower sales and earnings for our business, in particular for capacity-driven
purchases. Despite the decline in capacity-driven demand we have seen a
continued interest and orders for new technology and 300mm equipment in 2002 in
our Front-end operations, due to our firm commitment to research and
development and new design-in wins at top-tier customers. Our established
position as a leading supplier of a full spectrum of innovative products in our
Back-end operations contributed positively.

In the Front-end segment, we are able to reduce manufacturing costs in a
market downturn because we outsource a substantial portion of our manufacturing
requirements and because part of our European and Japanese workforce is
composed of temporary contract employees, the number of which can be reduced as
necessary. In the Back-end segment, where we are highly vertically integrated,
we are able to reduce labor costs quickly in adverse market conditions. Since
we enjoy a cost advantage in our Back-end operations due to the location of our
manufacturing facilities, a tightening market for our Back-end products may
also present opportunities for market penetration.

The current transition in the industry to new processes and materials and
to a larger, 300mm wafer size from the current 200mm wafer requires equipment
providers to develop entirely new sets of tools and presents us with an
opportunity to displace existing suppliers to major semiconductor
manufacturers. We believe that we are well positioned and that our firm
commitment to research and development, our readiness in new technologies,
design-in wins at top-tier customers, as well as our strategic partnerships
provide us with a broad basis for substantial long-term market share gains.

Sales

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 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
ten weeks or more. 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

- 39 -



---



##### Table of Contents



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.

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 2001 and 2002:

|                           |  |                         |       |      |  |  |       |  
|-------------------------- |  | ----------------------- | ----- | ---- |  |  | ----- | -
|                           |  | Year ended December 31,
|                           |  |                        
|Region:                    |  | 2001                    |       | 2002
|                           |  |                         |       |     
|Front-end:                 |  |                         |       |      |  |  |       |  
|United States              |  |                         | 30.9  | %    |  |  | 48.6  | %
|Europe                     |  |                         | 30.2  |      |  |  | 20.5  |  
|Japan                      |  |                         | 24.8  |      |  |  | 14.4  |  
|Southeast Asia             |  |                         | 14.1  |      |  |  | 16.5  |  
|                           |  |                         |       |      |  |  |       |  
|                           |  |                         | 100.0 | %    |  |  | 100.0 | %
|                           |  |                         |       |      |  |  |       |  
|Back-end:                  |  |                         |       |      |  |  |       |  
|Taiwan                     |  |                         | 16.7  | %    |  |  | 22.8  | %
|Malaysia                   |  |                         | 14.9  |      |  |  | 12.0  |  
|Peoples Republic of China |  |                         | 13.2  |      |  |  | 14.5  |  
|Korea                      |  |                         | 5.1   |      |  |  | 8.8   |  
|Singapore                  |  |                         | 10.1  |      |  |  | 7.3   |  
|Hong Kong                  |  |                         | 7.6   |      |  |  | 7.1   |  
|Thailand                   |  |                         | 6.8   |      |  |  | 5.7   |  
|Philippines                |  |                         | 9.0   |      |  |  | 5.2   |  
|Other                      |  |                         | 16.6  |      |  |  | 16.6  |  
|                           |  |                         |       |      |  |  |       |  
|                           |  |                         | 100.0 | %    |  |  | 100.0 | %

A substantial portion of our Front-end sales is for equipping new or
upgraded fabrication plants where device manufacturers are installing a
complete complement of 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 48.6% of Front-end net sales in 2001
and 62.7% in 2002. The composition of our ten largest Front-end customers
changes from year to year. The largest Front-end customer accounted for 12.1%
of Front-end net sales in 2001 and the largest Front-end customer accounted for
27.1% of Front-end net sales in 2002.

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
39.6% of Back-end sales in 2001 and 35.3% in 2002. Because our Back-end
customers 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 10.7% of Back-end net sales in 2001 and 7.1% in
2002.

- 40 -



---



##### Table of Contents



Research and Development

We invested  79.7 million in research and development during 2001 and 
88.3 million in 2002. 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. We expense rather than
capitalize our research and development expenses. We charge to costs of sales
the costs relating to prototype and experimental models, which we may
subsequently sell to customers.

Our reported research and development expenses are net of research and
development credits, which were  5.6 million in 2001 and  3.0 million in
2002. Our Netherlands, Belgium, Finland and Singapore research and development
operations receive research and development grants and credits from various
governmental sources.

Some of the research and development grants we received in the Netherlands
are contingently repayable to the extent we recognize sales of products to
which the credit is related. We do not recognize a liability on our balance
sheet in respect of these credits until we recognize sales of products to which
the credit relates. These repayments vary and range from 1.0% to 4.0% of the
realized sales, depending on the products sold. Our actual and contingent
repayments accrue at interest rates ranging from 5.0% to 8.0% per annum. Our
contingent liability related to possible future repayments was  10.1 million
at December 31, 2001 and  11.0 million at December 31, 2002. In 2000, 2001 and
2002 we made repayments in the amount of  1.5 million,  2.9 million and  0.1
million, respectively.

Acquisitions and Strategic Investments

In October 2001, we entered into a strategic alliance with and made a
15.4% equity investment of $18.0 million
( 20.3 million) in NuTool, Inc. (NuTool), a
privately held semiconductor technology company located in Milpitas,
California. The purchase price of the investment was determined in part by
reference to prices paid by other recent strategic investors. NuTool provides
innovative copper deposition technologies to the semiconductor industry. Its
patented electrochemical mechanical deposition technology offers new process
solutions for copper deposition and planarization, providing significant
savings in integrated circuit manufacturing and enabling new integrated circuit
designs and new process technologies. The strategic alliance with NuTool
provides us with additional competitive solutions to address the industrys
transition to copper metallization.

In 2000, we purchased in various transactions 5.0% of the outstanding
common shares of ASMPT to maintain a majority interest in the shares of ASMPT
of 54.88% after the 5.0% acquisition. The total purchase price of the acquired
shares amounted to  74.8 million. At December 31, 2002, we owned 54.11% of the
outstanding common shares of ASMPT.

Issuance of Shares and Convertible Subordinated Notes

In November and December 2001, we sold US$ 115.0 million in principal
amount of 5.0% Convertible Subordinated Notes due on November 15, 2005 in a
private offering. Interest is payable on May 15 and November 15 of each year.
The notes are subordinated in right of payment to our existing and future
senior indebtedness. The notes are convertible into common shares at any time before
their maturity unless we have previously redeemed or repurchased them at a
conversion rate of 53.0504 shares per each US$ 1,000 principal amount of notes,
subject to adjustment in certain circumstances. This is equivalent to an
initial conversion price of approximately US$ 18.85 per share. The proceeds of
the sale were used to fund our strategic investment in NuTool, to repay
outstanding debt and for general corporate purposes, including working capital
and capital expenditures.

- 41 -



---



##### Table of Contents



In April 2000, we completed a public offering of 4,250,000 common shares
at a price of US$ 29.00 per share. The net proceeds of  119.7 million were
used to repay outstanding loans and fund our working capital needs.

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. The preparation of these Consolidated Financial Statements
requires us to make certain estimates, judgments and assumptions that we
believe are reasonable based upon the information available. These estimates
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 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

Our revenue recognition policy is significant because our revenue is a key
component of our results of operations. We follow very specific and detailed
guidelines in measuring revenue following principles of revenue recognition
described in Staff Accounting Bulletin No. 101 Revenue Recognition in
Financial Statements (SAB 101), issued by the staff of the Securities and
Exchange Commission (the SEC) in December 1999, and adopted by us effective
January 1, 2000. However, certain judgments affect the application of our
revenue policy. Our transactions frequently involve the sale of complex
equipment, which may include customer-specific criteria, transactions to new
customers or transactions with new technology, as well as payment terms, linked
to achieving certain milestones. Management must make the determination whether
such a transaction is recognized as revenue based on the merits of the
contractual agreements with a customer, the experience with a particular
customer, the technology and the number of similarly configured equipment
previously delivered. Revenue results are difficult to predict, and any
shortfall in revenue or delay in recognizing revenue could cause our operating
results to vary significantly from quarter to quarter and could result in
future operating losses.

Our net sales include product revenues derived primarily from sales of
Front-end and Back-end equipment used by both segments of the semiconductor
equipment market. We recognize revenue from equipment sales upon shipment of
our products when it is proven prior to shipment that the equipment has met all
of the customers criteria and specifications. The installation process is not
believed to be essential to the functionality of our products. However, since
under most of our sales contracts the timing of payment of a portion of the
sales price is coincident with installation, such installation is not
considered to be inconsequential or perfunctory under the guidance of SAB 101.
Therefore, at the time of shipment, we defer that portion of the sales price
related to the fair value of installation. We believe we have an enforceable
claim for the portion of the sales price not related to the fair value of the
installation should we not fulfill our installation obligation. If this belief
were changed by industry developments in the future, this portion would be
deferred in future periods until final acceptance by the customer or until
contractual conditions lapse. The fair value of the installation process is
measured based upon the per-hour amounts charged by third parties for similar
installation services. When we can only satisfy the customer acceptance
criteria or specifications at the customers location, revenue is deferred
until final acceptance by the customer or until contractual conditions lapse.
- 42 -Table of ContentsWe provide training and technical support to customers. Revenue related to
such services is recognized when the service is completed. Revenue from the
sale of spare parts and materials is recognized when the goods are shipped.Valuation of GoodwillGoodwill represents the excess of the cost of businesses acquired over the
fair market value of identifiable net assets on the date of acquisition. As
from January 1, 2002 we adopted Statement of Financial Accounting Standard
(SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill and Other
Intangible Assets, issued by the Financial Accounting Standards Board
(FASB), which requires that goodwill and intangible assets with indefinite
lives will not be amortized, but will rather be tested at least annually for
impairment. Any impairment loss incurred is recorded as a charge to current
period earnings. At the adoption of SFAS No. 142 as of January 1, 2002, we have
assessed whether acquired goodwill was impaired and whether an impairment loss

should have been recognized. Based on the tests performed, no impairment loss
was recorded upon adoption of this standard as of January 1, 2002, nor as of
December 31, 2002. Impairment is the condition that exists when the carrying
amount of goodwill exceeds its implied fair value. Determination of the implied
fair value includes certain management judgments and use of valuation
techniques, and 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 result of operations at that
time.Valuation of Long-Lived AssetsIn accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, long-lived assets and certain recognized
intangible assets (except those not being amortized) to be held and used, and
long-lived assets and certain recognized intangible assets (including those not
being amortized) to be disposed of, are required to be reviewed 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 have to estimate the future undiscounted cash flows expected
to result from the use of the asset and its eventual disposition. In 2002, we
reviewed our long-lived assets, including our 15.4% strategic investment in
NuTool, which we acquired for $18.0 million
(20.3 million) in October 2001, for facts or
circumstances, both internal and external, that may suggest impairment,
including performance compared to historical or projected future operating
results, negative industry or economic trends and the technological value as
compared to the market. In 2002, no such impairment was indicated. Our cash
flow estimates used were based on our best estimates and projections at the
time of our review. In future periods, however, we may be required to record an
impairment loss based on the impairment test performed, which may significantly
affect our result of operations at that time.Valuation of InventoryInventories are valued at the lower of cost or market. 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 writedowns for inventory based on the
above factors and take into account worldwide quantities and demand into our
analysis. If circumstances related to our inventories change, our estimates of
the value of inventory could materially change.- 43 -Table of ContentsAccounting for Income TaxesWe currently have significant deferred tax assets, which resulted
primarily from operating losses incurred in prior years as well as other
temporary differences. SFAS No. 109, Accounting for Income Taxes, requires
the establishment of 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
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, 2002, we believe that there is insufficient
evidence to substantiate recognition of substantially all net deferred tax
assets with respect to net operating loss carryforwards, and we have
established a valuation allowance accordingly. 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 positively influence our result of
operations at that time.Results of OperationsYear Ended December 31, 2002 Compared to Year Ended December 31, 2001Net Sales.The semiconductor equipment market is still impacted by the
severe downturn in the industry, which started in late 2000. This has resulted
in low capital spending by semiconductor manufacturers, in particular for
capacity-driven purchases. Our consolidated net sales for 2002 decreased 7.5%
to  518.8 million compared to  561.1 million for the year 2001. Front-end
sales decreased 20.7% from  336.6 million in 2001 to  266.9 million in 2002.
Back-end sales increased 12.2% from  224.5 million in 2001 to  251.9 million
in 2002. Despite a decline in capacity-driven demand, we have seen a continued
interest and orders for new technology and 300mm systems in 2002, in particular
for our Front-end operations, where we were able to gain from design-in wins at
top-tier customers. Sales in our Back-end operations grew primarily due to
increased customer interest in our new generation wire bonders and other
equipment. Overall, the increased order activity and customer demand has
resulted in a growth in sales levels in the second half of 2002 as compared to
the first half of 2002 and the second half of 2001, while sales levels in the
first half of 2001 were still benefiting from our backlog at the end of 2000.Gross Profit.Our consolidated gross profit margin for 2002 amounted to
36.8% of net sales, 3.0 percentage points below the consolidated gross profit
margin of 39.8% for 2001. The Front-end operations gross profit decreased 6.9
percentage points from 39.1% of net sales in 2001 to 32.2% of net sales in
2002, and the Back-end business gross profit increased from 40.8% of net sales
in 2001 to 41.6% of net sales in 2002. The decrease in gross profit margin for
our Front-end operations is the result of lower sales volumes, low margins on
new technology shipments for 300mm systems, which were approximately 52% of our
2002 net sales, and the impact of a lower exchange rate of the US dollar in
2002 as compared to 2001. The increase in gross profit margin for our Back-end
operations is the result of the higher sales volume in 2002 compared to 2001,
the effect of which was partially offset by lower sales prices.Selling, General and Administrative.Our selling, general and
administrative expenses decreased from  111.9 million in 2001 to  108.4
million in 2002. As a percentage of net sales, selling, general and
administrative expenses increased from 19.9% for 2001 to 20.9% for 2002.
Front-end selling, general and administrative expenses decreased from  72.3
million in 2001 to  65.6 million in 2002, while Back-end selling, general and
administrative expenses increased from  39.6 million in 2001 to  42.8 million
in 2002. In our Front-end operations we were able to reduce our expenses from
the high level in the first half of 2001, by reducing headcount and other cost
cutting programs, while in the second half of 2002, increasing demand for our
new products required increased support staff and accompanying higher expenses.
In our Back-end operations, expenses of  2.5 million were recorded related to
the relocation of production facilities from Hong Kong to the mainland of the
Peoples Republic of China.
- 44 -Table of ContentsResearch and Development.Research and development expenses were  88.3
million in 2002, an increase of 10.9%, compared to  79.7 million in 2001.
Front-end research and development expenses increased by 12.5% from  55.8
million in 2001 to  62.8 million in 2002, while Back-end research and
development expenses increased by 6.7% from  23.9 million in 2001 to  25.5
million in 2002. Net research and development expenses increased from 14.2% of
net sales in 2001 to 17.0% of net sales in 2002. The offset of research and
development credits against research and development expenses amounted to  5.6
million in 2001 and  3.0 million in 2002. We continued to keep the research
and development expenses at a high level despite the market circumstances and
concentrated our investments in research and development on equipment and
product solutions for the next generations of semiconductor devices.Amortization of Goodwill.As of January 1, 2002, we adopted SFAS No. 142
Goodwill and Other Intangible Assets. This new accounting standard requires
that goodwill not be amortized, but rather tested at least annually for
impairment. Consequently, we stopped amortizing goodwill as of January 1, 2002.
No impairment loss was recorded upon adoption of SFAS No. 142. We also tested
goodwill for impairment at December 31, 2002, and concluded that goodwill was
not impaired. Amortization of goodwill for the full year 2001 amounted to  7.6
million.Net Interest and Other Financial Income (Expenses).Net interest and
other financial income (expenses) increased from a net expense of  1.0 million
2001 to a net expense of  10.4 million in 2002. The increase in net expense in
2002 was the result of increased borrowings and the full impact of our US$
115.0 million 5% convertible notes issued in November and December 2001,  1.5
million of amortization of debt issuance costs related to these convertible
notes, and a  2.1 million foreign exchange loss as a result of the changes in
foreign exchange rates between the euro, the US dollar, the Hong Kong dollar
and the Japanese yen in 2002, compared to a small foreign exchange gain in
2001.Income
Taxes.We recorded a  1.2 million tax benefit during
2002, compared to a tax expense of
 4.7 million in 2001. The reduced income taxes
reflect our
reduced net earnings. As of December 31, 2002, we have a
 296.6 million
net
operating loss carryforward, which we can apply primarily against future
earnings reported in the United States and the Netherlands. At December 31,
2002, the related deferred tax asset for the net operating loss carryforward
amounted to  100.2 million, for which we provided a valuation allowance of 
91.5 million.Net Earnings (Loss).We realized a net loss of  29.9 million in 2002
compared to net earnings of  6.1 million in 2001, primarily due to the lower
sales volumes. Our Front-end operations reported a net loss of  48.8 million
in 2002 compared to a net loss of  10.0 million in 2001. Our portion of our
Back-end operations net earnings was  18.9 million compared to  16.1 million
in 2001.Year Ended December 31, 2001 Compared to Year Ended December 31, 2000Net Sales.The market for semiconductor equipment weakened substantially
in 2001. Our consolidated net sales for 2001 decreased 40.0% to  561.1 million
compared to  935.2 million for the year 2000. Front-end sales decreased 11.2%
from  379.3 million in 2000 to  336.6 million in 2001. Back-end sales
decreased 59.6% from  555.9 million in 2000 to  224.5 million in 2001. The
decrease in net sales reflects the impact of the extraordinarily severe
downturn in the semiconductor industry, as semiconductor manufacturers delayed
purchases and cut capital spending, thus reducing the demand for semiconductor
equipment during 2001. Our sales in the first half of 2001 were still at high
levels as a result of our backlog at the end of 2000, with a contraction in the
second half of the year. Sales in Front-end were strong in our vertical
furnaces product line, where we were able to gain from design-in wins at first
tier customers for the 300mm vertical furnace, and in our thin film product
line. Sales in other- 45 -Table of Contentsproduct lines declined substantially due to contraction, in particular in
200mm equipment. The decline in Back-end sales was primarily due to a decrease
in sales of wire bonding and die bonding equipment and, to a somewhat lesser
extent, leadframes.Gross Profit.Our consolidated gross profit decreased from 44.6% of net
sales in 2000 to 39.8% of net sales in 2001. The Front-end business gross
profit decreased 1.2 percentage points from 40.3% of net sales in 2000 to 39.1%
of net sales in 2001, and the Back-end business gross profit decreased from
47.6% of net sales in 2000 to 40.8% of net sales in 2001. The decrease in gross
profit for 2001 as a percentage of sales is the result of the significantly
lower sales volumes, in particular in the second half of 2001, which resulted
in underutilization of our manufacturing capacity. We have implemented programs
to reduce fixed costs to respond to the lower sales volumes.Selling, General and Administrative.Our selling, general and
administrative expenses decreased from  147.3 million in 2000 to  111.9
million in 2001. As a percentage of net sales, selling, general and
administrative expenses increased from 15.8% for 2000 to 19.9% for 2001.
Front-end selling, general and administrative expenses increased from  66.2
million in 2000 to  72.3 million in 2001, while Back-end selling, general and
administrative expenses decreased from  81.1 million in 2000 to  39.6 million
in 2001. The increase in Front-end was partly due to the continued high level
of sales in the first half of 2001 and the related growth in supporting staff
functions offset by expense reduction programs in the second half of 2001,
including temporary reduction in management salaries and a hiring freeze. In
our Back-end operations we were able to respond to the market conditions and to
reduce our selling, general and administrative expenses in line with the lower
sales volumes through cost cutting programs resulting in lower bonus and
incentive expenses, lower sales commissions and reduction of staff.Research and Development.Research and development expenses increased by
7.9% from  73.8 million in 2000 to  79.7 million in 2001. Front-end research
and development expenses increased by 16.4% from  47.9 million in 2000 to 
55.8 million in 2001, while Back-end research and development expenses
decreased 7.7% from  25.9 million in 2000 to  23.9 million in 2001. Net
research and development expenses increased from 7.9% of net sales in 2000 to
14.2% of net sales in 2001 due to substantially lower sales. The amounts of
research and development credits offset against research and development
expenses amounted to  2.2 million in 2000 and  5.6 million in 2001. We
focused our investment in research and development on the equipment and
products for the next generations of semiconductor devices. In our Front-end,
these investments were concentrated on Silicon Germanium, high-k dielectrics,
low-k dielectrics, ALCVD, 300mm applications and the Levitor RTP system.
Research and development in the Back-end is concentrated on performance
improvements and new products such as our next generation, high speed
integrated circuit die bonders for 300mm and 200mm wafers and our high
precision, eutectic solder process bonder for flip chip packaging applications.
Despite our lower sales levels, we have kept our research and development
expenditures at a high level in 2001 and continue to invest heavily in the
research and development of new generation technology.Amortization of Goodwill.The amortization of goodwill increased from 
4.3 million in 2000 to  7.6 million in 2001. This increase relates to the
amortization of goodwill resulting from the acquisition of an additional 4.7%
interest in ASMPT in July 2000, resulting in a full year of amortization during
the year 2001.Net Interest and Other Financial Income (Expenses).Net interest and
other financial income (expenses) decreased by 38.3% from a net expense of 
1.6 million in 2000 to a net expense of  1.0 million in 2001 due principally
to the repayment of relatively higher interest rate loans with the proceeds of
the public offering of common shares we completed in April 2000, lower interest
rates on our credit lines and with cash generated from operations. The strength
of the United States dollar and the Hong Kong dollar versus the Euro, our
reporting currency, resulted in transaction exchange gains.
- 46 -Table of ContentsIncome Taxes.We incurred  4.7 million in income taxes during 2001,
compared to  22.8 million in 2000. As of December 31, 2001, we have a  280.0
million net operating loss carryforward, which we can apply primarily against
future earnings reported in the United States and the Netherlands. At
December 31, 2001, the related deferred tax asset for the net operating loss
carryforward amounted to  97.7 million, for which we provided a valuation
allowance of  90.6 millionNet Earnings.Our net earnings in 2001 were  6.1 million compared to 
94.3 million in 2000, primarily due to decreased net sales. The 2000 net
earnings were reduced by a cumulative effect of change in accounting principle
of  3.8 million due to the adoption of new accounting guidelines for revenue
recognition. Our Front-end operations reported a net loss of  10.0 million in
2001 compared to net earnings before the cumulative effect of change in
accounting principle of  18.6 million in 2000. Our portion of our Back-end
operations net earnings before the cumulative effect of change in accounting
principle was  16.1 million compared to  79.5 million in 2000.BacklogNew orders received in the year 2002 increased 52.0% to  529.1 million
from  348.0 million in the year 2001. Overall backlog at December 31, 2002 was
 142.9 million, a 7.8% increase from  132.6 million at December 31, 2001. Of
our backlog at December 31, 2002,  109.9 million relates to our Front-end
operations and  33.0 million to our Back-end operations as compared to  107.2
million and  25.4 million at December 31, 2001, respectively. The largest part
of the backlog in Front-end relates to 300mm equipment. Our backlog consists of
orders of products by purchase orders or letters of intent for future periods,
typically for up to one year. In some markets, such as Japan, it is common
practice for letters of intent to be used instead of firm purchase orders.
Under specific circumstances, customers can cancel or reschedule deliveries. In
addition, purchase orders are subject to price negotiations and changes in
quantities of products ordered as a result of changes in customers
requirements. Depending on the complexity of an order, we generally ship our
products from one to six months after receipt of an order. We include in the
backlog only orders for which a delivery schedule has been specified and to
which the customer has assigned an order number. Rescheduled deliveries are
included in backlog if they have a firm delivery date.Liquidity and Capital ResourcesOur 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. The cyclicality of the industry, the duration of the current
downturn and the uncertain economic environment could result in lower customer
demand and continued fixed costs and, as a result, cash generated by operations
may be lower than forecasted. In such a situation we might need to further
utilize our short-term credit facilities or investigate additional financing.At December 31, 2002, our principal sources of liquidity consisted of 
71.0 million in cash and cash equivalents and  143.2 million in undrawn bank
lines, the utilization of which is subject to satisfaction of certain
financial and other covenants. Approximately  57.1
million of the cash and cash equivalents and  48.7 million of the undrawn bank
lines are restricted to use in our Back-end operations. In addition, we have an
equity line with Canadian Imperial Holdings, Inc. (CIHI), pursuant to which
we may sell up to an aggregate of US$ 65.0 million of newly issued common
shares to CIHI from time to time. We may sell up to US$ 10.0- 47 -Table of Contentsmillion of our common shares (but not more than 25% of the previous weeks
trading volume) as often as every five business days. The purchase price of the
shares is equal to 95.5% of the average of the daily volume weighted average
sale price during the five trading days proceeding the date of sale. Our
initial equity line expired unused on July 6, 2002. Prior to that time, we
entered into a substantially identical agreement, which expires July 6, 2003.
As of December 31, 2002, we had not issued any common shares under the new
equity line. We believe we can renew this facility on terms
acceptable to us.In December 2002, we entered into a multicurrency revolving credit
facility with a consortium of banks in the amount of
 70.0 million
(subsequently reduced to
 60.0 million under
revised conditions more favorable to us) to be utilized solely for our Front-end operations, excluding Japan. The credit
facility consists of one
 30.0 million facility with a term of 18 months and one

 30.0 million facility with a term of 12 months. The utilization of the credit
facility requires us to maintain certain financial covenants with respect to
solvency and for our Front-end operations a minimum level of earnings from
operations plus depreciation plus dividends received from our subsidiary ASMPT.
Our subsidiaries ASM America, Inc., ASM Europe B.V., ASM Microchemistry Oy and
Advanced Semiconductor Materials (Netherlands Antilles) N.V. have issued
guarantees for all obligations in connection with the credit facility. At
December 31, 2002, the amount outstanding under the facility was  10.0 million
at a one-month interest rate of 4.26%. At April 17, 2003, the amount
outstanding under the facility was
 17.8 million at a
one month weighted average interest rate of 4.14%, and we had additional availability
of  42.2 million. The credit facility is
secured by a varying portion of our shareholding in ASMPT. The facility was a
renewal of an existing  45.0 million facility, which expired on December 27,
2002.At December 31, 2002, ASM Japan had 
34.0 million available for borrowing under its bank lines, the proceeds of which are restricted to use in
the ASM Japan business and ASMPT had
48.7 million
of additional availability under its bank lines, the proceeds of
which are restricted to use in our Back-end operations.We
expect to receive the final 2002 dividend from ASM Pacific Technology
of approximately
16.0 million in
late April 2003, which funds will be available for use in our
Front-end segment. We expect to use these funds to repay outstanding
balances on our revolving credit facility. This dividend
has been proposed by ASM Pacific Technology to its shareholders for
approval at its annual general meeting in April 2003 and, as a
majority shareholder, our vote is sufficient to approve the payment.During 2002, we generated net cash flows from operating activities of 
16.4 million, compared to cash flows from operating activities of 
40.4 million for 2001. The decrease was primarily the result of the net loss
due to lower sales, partially offset by a lower net cash outflow of  7.9
million in other assets and liabilities in 2002 compared to a  26.3 million
net cash outflow in 2001. At December 31, 2002 we have entered into purchase
commitments for delivery in 2003 with suppliers in the amount of  70.1
million.During 2002, we invested  33.2 million in capital equipment and
facilities, particularly for new development and demonstration equipment and to
keep our facilities up to standard. Investments in capital equipment and
facilities in 2001 were  71.6 million, when we made investments in our new
300mm A412 assembly and testing facility in the Netherlands, and new clean
rooms in the United States and Japan. We expect capital expenditure in 2003, to
be approximately at the same level as in 2002. Our capital expenditure
commitments at December 31, 2001 were  3.4 million, and at December 31, 2002
were 
3.3 million. In 2001, we also made a strategic equity investment of $18.0 million ( 20.3 million) in NuTool, a privately held semiconductor technology company
located in Milpitas, California.Net cash used in financing activities was  13.5 million in 2002. During
that period, we repaid  3.1 million of long-term debt and received proceeds of
 0.6 million in new long-term loans and received  2.1 million from the
issuance of common shares. We paid  24.5 million dividend to minority
shareholders of our subsidiary ASMPT. In 2001 net cash provided by financing
activities was  47.6 million, mainly resulting from the sale of US$ 115.0
million of convertible subordinated notes and the repayment of  55.4 million
of long term debt and the payment of a  29.8 million dividend to minority
shareholders of our subsidiary ASMPT.In November and December 2001 we sold US$ 115.0 million in principal
amount of 5.0% convertible subordinated notes due on November 15, 2005 in a
private offering. Interest is payable on May 15 and November 15 of each year.
The notes are subordinated in right of payment to our existing and future
senior debt. The notes are convertible into common shares at any time before
their maturity at- 48 -Table of Contentsa conversion rate of 53.0504 shares per each US$ 1,000 principal amount of
notes, subject to adjustment in certain circumstances. This is equivalent to an
initial conversion price of approximately US$ 18.85 per share. The outstanding
principal balance of the convertible subordinated notes amounted to  130.7
million (US$ 115.0 million) at December 31, 2001 and  109.7 million (US$ 115.0
million) at December 31, 2002. The proceeds of the convertible subordinated
notes offering were used to fund our strategic investment in NuTool, to repay
outstanding balances under our multicurrency revolving credit facility and for
general corporate purposes, including working capital and capital expenditures.We finance the operation of our Front-end business from operating cash
flows, from borrowings and equity offerings. We support borrowings of our
Front-end subsidiaries with guarantees. We have also granted security interests
in our land and buildings and our shareholdings in ASMPT to secure Front-end
borrowings.Our Back-end operations, which are conducted through our 54.11%-owned
subsidiary ASMPT, are entirely self-financed by ASMPT. However, the earnings,
cash resources and borrowing capacity of ASMPT are not available to our
Front-end operations due to restrictions imposed by the Hong Kong Stock
Exchange, on which the ASMPT common shares are listed.We rely on dividends from ASMPT for a portion of our cash flow for use in
our Front-end operations. Cash dividends received from ASMPT during 2000, 2001
and 2002 were  15.4 million,  35.7 million and  29.5 million, respectively.
We expect ASMPT to continue its dividend policy.Although several of the directors of ASMPT are affiliates of ASM
International, they are 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 ASMPT at the end of 2002 was
approximately  390.7 million, which is lower than the market value at the end
of 2001, which was approximately  464.2 million.Contractual Obligations, Contingent Liabilities and CommitmentsThe following table summarizes our contractual obligations as at December
31, 2002 aggregated by type of contractual obligation:- 49 -Table of Contents

|                              |                                   |  |                   |       |        |  |           |      |           |  |         |       |  |  |     |     |           |  |      |     | 
|----------------------------- | --------------------------------- |  | ----------------- | ----- | ------ |  | --------- | ---- | --------- |  | ------- | ----- |  |  | --- | --- | --------- |  | ---- | --- | 
|                              |                                   |  | December 31, 2002
|                              |                                   |  |                  
|                              |                                   |  |                   |       |        |  | Less than |      |           |  |         |       |  |  |     |     | More than
|                              |                                   |  | Total             |       | 1 year |  | 1-3 years |      | 3-5 years |  | 5 years
|                              |                                   |  |                   |       |        |  |           |      |           |  |        
|Notes payable to banks        |                                   |  | 26.5              |       |        |  | 16.5      |      |           |  | 10.0    |       |  |  |    |     |           |  |     |    
|Long-term debt:               |                                   |  |                   |       |        |  |           |      |           |  |         |       |  |  |     |     |           |  |      |    
|                              | Long-term debt                    |  |                   | 10.8  |        |  |           | 2.7  |           |  |         | 6.0   |  |  |     | 1.4 |           |  |      | 0.7 | 
|                              | Convertible Subordinated debt     |  |                   | 109.7 |        |  |           |     |           |  |         | 109.7 |  |  |     |    |           |  |      |    | 
|Operating leases              |                                   |  | 40.5              |       |        |  | 9.5       |      |           |  | 11.4    |       |  |  | 6.9 |     |           |  | 12.7 |    
|Purchase Obligations:         |                                   |  |                   |       |        |  |           |      |           |  |         |       |  |  |     |     |           |  |      |    
|                              | Purchase commitments to suppliers |  |                   | 70.1  |        |  |           | 70.1 |           |  |         |      |  |  |     |    |           |  |      |    | 
|                              | Capital expenditure commitments   |  |                   | 3.3   |        |  |           | 3.3  |           |  |         |      |  |  |     |    |           |  |      |    | 
|Total contractual obligations |                                   |  | 260.9             |       |        |  | 102.1     |      |           |  | 137.1   |       |  |  | 8.3 |     |           |  | 13.4 |    

For a discussion of our contractual obligations for notes payable to
banks, long-term debt, convertible subordinated debt and commitments and
contingencies reference is made to Note H, I, J and N to the Consolidated
Financial Statements.

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 up to nine months, and
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 do have flexible delivery schedules depending on
the market conditions, which allow us, to a certain extent, to delay delivery
beyond originally planned delivery schedules.

At December 31, 2002 we had contingent payables of  11.0 million related
to research and development grants received. The grants received are repayable
only to the extent we recognize sales of products to which the grants receive
related.

New Accounting Pronouncements

In June 2001, the FASB issued SFAS 143 Accounting for Asset Retirement
Obligations. SFAS 143 establishes accounting standards for the recognition and
measurement of legal obligations associated with the retirement of tangible
long-lived assets and requires recognition of a liability for an asset
retirement obligation in the period in which it is incurred. The provisions of
this statement are effective for financial statements issued for fiscal years
beginning after June 15, 2002. The adoption of SFAS
No. 143 did not have a material impact on our financial position or results of
operations.

In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with the Exit or Disposal Activities. This statement defines the accounting
and reporting for costs associated with exit or disposal activities and is
effective for exit and disposal activities that are initiated after December
31, 2002. We do not anticipate that the adoption of SFAS No. 146 will have a
material impact on our financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation, Transition and Disclosure. SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. SFAS No. 148
also requires that disclosures of the pro forma effect of using the fair value
method of accounting for stock-based employee compensation be displayed more
prominently and in a tabular

- 50 -



---



##### Table of Contents



format. Additionally, SFAS No. 148 requires disclosure of the pro forma
effect in interim financial statements. The transition and annual disclosure
requirements of SFAS No. 148 are effective for fiscal year 2002. SFAS No. 148
does not have a material effect on our financial position or results of
operations.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. The disclosure provisions of
FIN 45 are effective for financial statements of interim or annual periods that
end after December 15, 2002. The provisions for initial recognition and
measurement are effective on a prospective basis for guarantees that are issued
or modified after December 31, 2002, irrespective of a guarantors year-end.
We are currently evaluating the effect that the adoption of FIN 45 will have on
our financial position or results of operations.

In November 2002, the EITF reached a consensus on Issue 00-21, Revenue
Arrangements with Multiple Deliverables. The provisions of EITF 00-21 will
apply to revenue arrangements entered into in fiscal periods beginning after
June 15, 2003. We are currently evaluating the effect that the adoption of
EITF 00-21 will have on our financial position or results of operations.




Item 6. Directors, Senior Management and Employees

A.         Directors and Senior Management

The names of our directors and senior management and those of our
significant subsidiaries and the years of their birth are as follows:

|                      |  |               |      |          |  |                                                                                                                               
|--------------------- |  | ------------- | ---- | -------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Name                  |  | Year of Birth |      | Position
|                      |  |               |      |         
|Paul C. van den Hoek* |  |               | 1939 |          |  | Chairman of the
Supervisory Board
(Expiring 2005)                                                                             
|Eric A. van Amerongen |  |               | 1953 |          |  | Supervisory Director (Expiring 2006)                                                                                          
|Adri Baan*            |  |               | 1942 |          |  | Supervisory Director (Expiring 2005)                                                                                          
|Johan M.R. Danneels   |  |               | 1949 |          |  | Supervisory Director (Expiring 2004)                                                                                          
|Jacobus den Hoed RA*  |  |               | 1937 |          |  | Supervisory Director (Expiring 2003)                                                                                          
|Arthur H. del Prado   |  |               | 1931 |          |  | Chairman of the Management Board,
President and Chief Executive
Officer                                                       
|Patrick Lam See-Pong  |  |               | 1948 |          |  | Member of the Management Board,
Vice President Back-end Operations
and Managing Director ASM Pacific
Technology Ltd.          
|Robert L. de Bakker   |  |               | 1950 |          |  | Member of the Management Board and
Chief Financial Officer                                                                    
|Daniel G. Queyssac    |  |               | 1940 |          |  | Chief Operating Officer Front-end
Operations(until March 11, 2003)                                                            
|Chuck D. del Prado    |  |               | 1961 |          |  | Regional Manager Front-end
Operations U.S.A., General Manager
ASM America, Inc.(as from February
1, 2003)                     
|Fukumi Tomino         |  |               | 1949 |          |  | Regional Manager Front-end
Operations Asia and Managing
Director ASM Japan K.K.                                               
|Han F.M. Westendorp   |  |               | 1956 |          |  | Chief Operating Officer Front-end
Operations(as from March 11, 2003)
and Regional Manager Front-end
Operations ASM Europe B.V.
|Ivo M.M. Raaijmakers  |  |               | 1957 |          |  | Director of Research and
Development and Chief Technology
Officer of Front-end Operations                                     

- 51 -



---



##### Table of Contents



*     Member of Audit Committee

Paul C. van den Hoekbecame a Supervisory Director in March 1981 and is
now Chairman of the Supervisory Board. Mr. van den Hoek is a partner in the
European law firm of Stibbe, which is our general legal counsel and has been
with Stibbe since 1965. Mr. van den Hoek also serves on the boards of directors
of various European companies. At December 31, 2002, Mr. van den Hoek owned
300,000 of our common shares.

Eric A. van Amerongenwas elected to the Supervisory Board in May 2002.
Mr. van Amerongen serves as Chief Executive Officer of Koninklijke Swets &
Zeitlinger. Before accepting this position, he had been active 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.

Adri Baanwas elected to the Supervisory Board in May 2001. Mr. Baan, who
holds a masters degree in physics from the University of Amsterdam, served as
the Chief Executive Officer of the Business Electronics Division of Philips, N.
V. from 1993 until March 2001, and served as a member of Philips Group
Management Committee from 1996 and Board of Management from 1998 until March
2001. Mr. Baan further serves on the board of directors of various European
Companies and is a director of PSA Corporation Limited, Port Singapore
Authority and Hesse-Noord Natie Antwerpen"(Belgium).

Johan M.R. Danneelswas elected to the Supervisory Board in May 2000. Mr.
Danneels spent most of his career with Alcatel, and served most recently as
Director of Industrial Coordination and Chief Executive Officer of Alcatel
Microelectronics. Mr. Danneels serves as Vice President STMicroelectronics
Belgium N.V.

Jacobus den Hoed RAbecame a Supervisory Director in June 1999. Mr. den
Hoed is a certified accountant. He joined AKZO Nobel N.V., a global chemical
company in 1969, and served in various financial management positions, most
recently as Vice President and Chief Financial Officer from 1996 to 1998 when
he retired. Mr. den Hoed serves on the board of directors of various European
companies.

Arthur H. del Prado,our founder, has served as a Managing Director,
President and Chief Executive Officer since our formation in 1968. Mr. del
Prado is also a founder of ASM Lithography N.V. through a joint venture with
Philips Electronics N.V. He serves as a director of MEDEA+, and previously
served for many years as a director of its predecessor, JESSI. Mr. del Prado
also serves on the board of directors of various European companies and on the
board of the Netherlands-Japanese Trade Federation. Mr. del Prado is Chuck D.
del Prados father.

Patrick Lam See-Pongbecame Vice President of our Asian Operations in
March 1981 and a Managing Director in June 1995. Mr. Lam has been employed in
various capacities with us since 1975. He holds a B.Sc. degree in electrical
engineering from the University of Manitoba in Canada and an MBA from the
Chinese University of Hong Kong.

Robert L. de Bakkerjoined us as Chief Financial Officer in January 2001.
Prior to his joining ASM International, Mr. de Bakker was Chief Financial
Officer of NKF Holding N.V., a Netherlands multinational public company, where
he continued his activities after its merger at the end of 1999 with Draka
Holding N.V., another Dutch multinational public company in the same sector of
activity, industrial cables.

- 52 -



---



##### Table of Contents



Daniel G. Queyssacjoined us as Chief Operating Officer for Front-end
operations and President of ASM America in November 1996. Mr. Queyssac joined
us after a career at Motorola and SGS Thomson, now STMicroelectronics. His
previous positions included Vice President and Assistant General Manager of the
New Venture Group of SGS Thomson Microelectronics from 1993 to 1996, and
President of SGS Thomson Microelectronics in Phoenix, Arizona from 1980 to
1991.

Chuck D. del Pradohas been appointed as General Manager ASM America as of
February 1, 2003. He joined us as Director Marketing, Sales & Service of ASM
Europe in March 2001. Mr. del Prado worked with IBM Nederland N.V. at the
marketing and sales department from 1989 to 1996. He worked in various
management capacities at ASM Lithography from February 1996 to 2001 having
roles in production, sales, manufacturing and logistics. Mr. Del Prado holds a
Master of Science degree from the University of Twente in the Netherlands. Mr.
Chuck D. del Prado is the son of Arthur H. del Prado.

Fukumi Tominobecame Vice President Japanese Operations and Managing
Director of ASM Japan in 1994 after having held roles in sales, marketing,
engineering and process development since the founding of ASM Japan in 1982. He
holds a Bachelors Degree in electro-communication from the University of
Electro-Communication (Tokyo).

Han F. M. Westendorpjoined us as General Manager of ASM Europe in July
1999. Mr. Westendorp worked in various management capacities at Tokyo Electron
Massachusetts from 1991 to mid-1999, most recently as Vice President of Metal
CVD and Administration General Manager. Before joining Tokyo Electron, he
worked with us on the development of our ion implantation technology. Mr.
Westendorp holds a Ph.D. in Physics and Mathematics from the University of
Utrecht in the Netherlands.

Ivo M.M. Raaijmakersbecame Director of Research and Development and
Chief Technology Officer of Front-end Operations in July 1999. He served as
Vice President of Development for ASM America from July 1996 to July 1999. He
previously held various positions of increasing responsibility in technology
development and management at Philips Research Labs, Novellus and Applied
Materials since 1982, most recently with Applied Materials from 1993 to 1996.
Mr. Raaijmakers holds a Ph.D and Masters Degree in Physics from Eindhoven
University of Technology in the Netherlands.

Under Netherlands law, supervisory directors have the duty to supervise
and advise the managing directors. The supervisory directors are appointed by
our shareholders generally for terms of four years. The supervisory directors
can be re-elected twice, but are subject to mandatory retirement under our
Articles of Association.

The managing directors are entrusted with our management under the
supervision of the supervisory board and have the general authority to enter
into binding agreements with third parties. Managing directors are nominated by
the supervisory directors and elected by the common shareholders at the general
meeting of shareholders. The shareholders may reject a binding nomination at
the general meeting of shareholders by a supermajority vote of two-thirds of
the total issued and outstanding shares eligible to vote. The shareholders may
at any time suspend and dismiss managing directors by a super majority vote of
two-thirds of the total issued and outstanding shares eligible to vote. A
managing director can be suspended at any time by the supervisory board. There
is no statutory term of office for managing directors. Compensation of managing
directors is determined by the supervisory board. Currently, our managing
directors are Arthur H. del Prado, Patrick Lam See-Pong and Robert L. de
Bakker. We expect that Mr. Haijo D.J. Pietersma will be
nominated for appointment as a managing director at the
annual general meeting of shareholders in May 2003

Our other officers serve at the discretion and under the direction of the
managing directors.

- 53 -



---



##### Table of Contents



B.       Compensation

The following table sets forth as to all executive officers and directors
information concerning all remuneration from us (including our subsidiaries)
for services in all capacities during the fiscal year ended December 31, 2002:

- 54 -



---



##### Table of Contents



Annual Compensation For The Year Ended December 31, 2002(1)

|                                                           |  |                     |  |              |  |              |     |         |  |  |     |  |  |  |    |              |  |                  |     |           |  |  |   | 
|---------------------------------------------------------- |  | ------------------- |  | ------------ |  | ------------ | --- | ------- |  |  | --- |  |  |  | -- | ------------ |  | ---------------- | --- | --------- |  |  | - | 
|Name and                                                   |  |                     |  |              |  |              |     |         |  |  |     |  |  |  |    |              |  | Long-Term        |     | All Other
|Principal Position                                         |  | Annual Compensation |  | Compensation |  | Compensation
|                                                           |  |                     |  |              |  |             
|                                                           |  |                     |  |              |  |              |     |         |  |  |     |  |  |  |    |              |  | Securities Under |     |           |  | 
|                                                           |  |                     |  |              |  | Base         |     |         |  |  |     |  |  |  |    | Options/SARS |  |                  |     |          
|                                                           |  | Compensation        |  | Bonus        |  | Other        |     | Granted |  |  |     | 
|                                                           |  |                     |  |              |  |              |     |         |  |  |     | 
|Paul C. van den Hoek                                       |  |                     |  |              |  |              | 41  |         |  |  |    |  |  |  |   |              |  |                  |    |           |  |  |  | 
|Eric A. van Amerongen                                      |  |                     |  |              |  |              | 7   |         |  |  |    |  |  |  |   |              |  |                  |    |           |  |  |  | 
|Adri Baan                                                  |  |                     |  |              |  |              | 14  |         |  |  |    |  |  |  |   |              |  |                  |    |           |  |  |  | 
|Johan M.R. Danneels                                        |  |                     |  |              |  |              | 14  |         |  |  |    |  |  |  |   |              |  |                  |    |           |  |  |  | 
|Jacobus den Hoed RA                                        |  |                     |  |              |  |              | 14  |         |  |  |    |  |  |  |   |              |  |                  |    |           |  |  |  | 
|Arthur H. del Prado                                        |  |                     |  |              |  |              | 300 |         |  |  |    |  |  |  | 2  |              |  |                  |    |           |  |  |  | 
|Patrick Lam See-Pong                                       |  |                     |  |              |  |              | 458 |         |  |  | 316 |  |  |  | 91 |              |  |                  | 349 | (3)       |  |  |  | 
|Robert L. de Bakker                                        |  |                     |  |              |  |              | 181 |         |  |  |    |  |  |  | 15 |              |  |                  |    |           |  |  |  | 
|All other officers
and directors as a
group (4 persons)(2) |  |                     |  |              |  |              | 889 |         |  |  | 16  |  |  |  | 47 |              |  |                  |    |           |  |  |  | 

(1)  In thousands of euros unless indicated otherwise.

(2)  Sets forth as to all executive officers and directors, for which
individual disclosure in the Netherlands, our home country, is not required, as
a group, information concerning all remuneration from us (including our
subsidiaries) for services in all capacities during the fiscal year ended
December 31, 2002.

(3)  Represents the value, on the
date of grant, of shares of ASM Pacific Technology common stock
granted to Mr. Lam See-Pong in December 2002 under the
ASM Pacific Technology Employee Share
Incentive Scheme, which shares will vest in December 2003.

We generally contribute to investment funds managed by outside fund
managers on behalf of all of our employees. None of the funds so contributed
are separately earmarked for directors or senior management.

We have granted stock options to certain key employees. For information
regarding such options see Note L to the Consolidated Financial Statements.
Options to purchase an aggregate of 884,500 common shares are held by our
executive officers and directors at December 31, 2002. As of February 17,
2003, options to acquire 884,500 common shares were held by executive officers
and directors at exercise prices ranging from US$ 0.50, with expiration dates
from December 6, 2003 to December 20, 2010.

C. Board Practices

The supervisory directors are elected by the shareholders of common stock
at the annual general meeting of the shareholders and serve for a term of four
years. The supervisory directors may be re-elected twice, but under our
Articles of Association the supervisory director must resign at the end of the
term in which he or she attains the age of 72.

- 55 -



---



##### Table of Contents



A managing director is nominated by the supervisory directors and elected
by the shareholders of common stock at the general meeting of shareholders.
The shareholders may reject a binding nomination at the general meeting of the
shareholders by a supermajority vote of two-thirds of the total issued and
outstanding shares eligible to vote. The shareholders may at any time suspend
and dismiss managing directors by a super majority vote of two-thirds of the
total issued and outstanding shares eligible to vote. A managing director can
be suspended at any time by the supervisory board. There is no statutory term
of office for managing directors.

We have not entered into any service contracts providing for benefits upon
termination of employment with our directors.

We have an audit committee composed of Messrs. van den Hoek, Baan and den
Hoed. The audit committee meets periodically to recommend 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
auditors independence.

D. Employees

As of December 31, 2002, we had 6,554 employees, including 838 employees
primarily involved in research and development activities, 297 in marketing and
sales, 670 in customer service, 337 in finance and administration, and 4,412 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.

|                         |                          |                   |  |                   |  |                   |     |       |       |           |       |          |       |       |       |           |       |          |  |       |  |  |     |     |       |  |       |    |       |  |       |     |       |  |  |  |  |  |     |     |       |  |       |    |       |  |       |     |       | 
|------------------------ | ------------------------ | ----------------- |  | ----------------- |  | ----------------- | --- | ----- | ----- | --------- | ----- | -------- | ----- | ----- | ----- | --------- | ----- | -------- |  | ----- |  |  | --- | --- | ----- |  | ----- | -- | ----- |  | ----- | --- | ----- |  |  |  |  |  | --- | --- | ----- |  | ----- | -- | ----- |  | ----- | --- | ----- | 
|Geographic Location      |                          | December 31, 2000 |  | December 31, 2001 |  | December 31, 2002
|                         |                          |                   |  |                   |  |                  
|                         |                          |                   |  | Front-end         |  | Back-end          |     | Total |       | Front-end |       | Back-end |       | Total |       | Front-end |       | Back-end |  | Total
|                         |                          |                   |  |                   |  |                   |     |       |       |           |       |          |       |       |       |           |       |          |  |      
|Europe                   |                          |                   |  |                   |  |                   |     |       |       |           |       |          |       |       |       |           |       |          |  |       |  |  |     |     |       |  |       |    |       |  |       |     |       |  |  |  |  |  |     |     |       |  |       |    |       |  |       |    
|                         | The Netherlands          |                   |  |                   |  |                   |     | 312   |       |           |       | 8        |       |       |       | 320       |       |          |  |       |  |  |     | 377 |       |  |       | 10 |       |  |       | 387 |       |  |  |  |  |  |     | 341 |       |  |       | 11 |       |  |       | 352 |      
|                         | Other European countries |                   |  |                   |  |                   |     | 133   |       |           |       |         |       |       |       | 133       |       |          |  |       |  |  |     | 124 |       |  |       |   |       |  |       | 124 |       |  |  |  |  |  |     | 128 |       |  |       |   |       |  |       | 128 |      
|United States of America |                          |                   |  |                   |  |                   | 327 |       |       |           | 10    |          |       |       | 337   |           |       |          |  |       |  |  | 327 |     |       |  | 10    |    |       |  | 337   |     |       |  |  |  |  |  | 429 |     |       |  | 10    |    |       |  | 439   |    
|Japan                    |                          |                   |  |                   |  |                   | 217 |       |       |           | 11    |          |       |       | 228   |           |       |          |  |       |  |  | 226 |     |       |  | 17    |    |       |  | 243   |     |       |  |  |  |  |  | 245 |     |       |  | 19    |    |       |  | 264   |    
|Southeast Asia           |                          |                   |  |                   |  |                   | 75  |       |       |           | 5,997 |          |       |       | 6,072 |           |       |          |  |       |  |  | 71  |     |       |  | 4,785 |    |       |  | 4,856 |     |       |  |  |  |  |  | 83  |     |       |  | 5,280 |    |       |  | 5,363 |    
|Other                    |                          |                   |  |                   |  |                   |    |       |       |           | 1     |          |       |       | 1     |           |       |          |  |       |  |  |    |     |       |  | 8     |    |       |  | 8     |     |       |  |  |  |  |  |    |     |       |  | 8     |    |       |  | 8     |    
|                         |                          |                   |  |                   |  |                   |     |       |       |           |       |          |       |       |       |           |       |          |  |       |  |  |     |     |       |  |       |    |       |  |       |     |       |  |  |  |  |  |     |     |       |  |       |    |       |  |       |    
|                         |                          | Total             |  |                   |  |                   |     |       | 1,064 |           |       |          | 6,027 |       |       |           | 7,091 |          |  |       |  |  |     |     | 1,125 |  |       |    | 4,830 |  |       |     | 5,955 |  |  |  |  |  |     |     | 1,226 |  |       |    | 5,328 |  |       |     | 6,554 | 
|                         |                          |                   |  |                   |  |                   |     |       |       |           |       |          |       |       |       |           |       |          |  |       |  |  |     |     |       |  |       |    |       |  |       |     |       |  |  |  |  |  |     |     |       |  |       |    |       |  |       |    

Our Netherlands operation, which employs approximately 352 persons, 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. Because of the

- 56 -



---



##### Table of Contents



current market conditions in the semiconductor industry, we have enacted a
worldwide hiring freeze and reduced our work force. We believe that our
employee relations are good.

E. Share Ownership

The following table presents information regarding the share ownership and
option ownership of our share capital stock as of February 17, 2003 by our
directors and senior management:

|                      |  |              |            |                    |  |                |         |  |  |                      |       |  
|--------------------- |  | ------------ | ---------- | ------------------ |  | -------------- | ------- |  |  | -------------------- | ----- | -
|                      |  |              |            |                    |  |                |         |  |  | Percentage of Shares
|Name                  |  | Shares Owned |            | Options for Shares |  | Outstanding(1)
|                      |  |              |            |                    |  |               
|Paul C. van den Hoek  |  |              | *          |                    |  |                |        |  |  |                      | *     |  
|Eric A. van Amerongen |  |              |           |                    |  |                |        |  |  |                      |      |  
|Adri
Baan             |  |              |           |                    |  |                |        |  |  |                      |      |  
|Johan M.R. Danneels   |  |              |           |                    |  |                |        |  |  |                      |      |  
|Jacobus den Hoed RA   |  |              |           |                    |  |                |        |  |  |                      |      |  
|Arthur H. del Prado   |  |              | 11,454,292 |                    |  |                | 275,000 |  |  |                      | 23.20 | %
|Patrick Lam See-Pong  |  |              | *          |                    |  |                | *       |  |  |                      | *     |  
|Robert L. de Bakker   |  |              | *          |                    |  |                | *       |  |  |                      | *     |  
|Daniel G. Queyssac    |  |              | *          |                    |  |                | *       |  |  |                      | *     |  
|Chuck del Prado       |  |              |           |                    |  |                | *       |  |  |                      |      |  
|Fukumi Tomino         |  |              | *          |                    |  |                | *       |  |  |                      | *     |  
|Han F.M. Westendorp   |  |              |           |                    |  |                | *       |  |  |                      |      |  
|Ivo M.M. Raaijmakers  |  |              | *          |                    |  |                | *       |  |  |                      | *     |  

*     Less than 1%.

(1)  Calculated on the basis of each individuals actual shares held.




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 February 17, 2003 certain information with respect
to the ownership of our outstanding common shares by each beneficial owner of
more than 5% of our common shares and by all of our officers and directors as a
group:

- 57 -



---



##### Table of Contents



|                                                                         |  |  |                  |  |         |  |      |   | 
|------------------------------------------------------------------------ |  |  | ---------------- |  | ------- |  | ---- | - | 
|                                                                         |  |  | Number of Shares |  | Percent
|                                                                         |  |  |                  |  |        
|Stichting
Administratiekantoor ASM
International(1)                      |  |  | 7,692,039        |  |         |  | 15.6 | %
|                                                                         |  |  |                  |  |         |  |      |   | 
|Capital Group International, Inc.
and Capital Guardian Trust
Company.(2) |  |  | 3,530,510        |  |         |  | 7.2  | %
|                                                                         |  |  |                  |  |         |  |      |   | 
|Capital Research and Management Co.
and SMALL CAP World Fund Inc.(2)     |  |  | 2,746,800        |  |         |  | 5.6  | %
|                                                                         |  |  |                  |  |         |  |      |   | 
|All
officers and directors as a group (13 persons)(3)                    |  |  | 12,282,592       |  |         |  | 24.9 | %



---

|(1) |  | Trust controlled by our President, Arthur H. del Prado.                                                                                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Derived from Schedule 13G filings as of February 14, 2003.                                                                                                                                                                                                                        
|   
|(3) |  | Includes the 7,692,039 common shares shown in the table above that are
owned by Stichting Administratiekantoor ASM International, a trust
controlled by our President, Arthur H. del Prado, and 3,762,253 common
shares owned by Mr. del Prado or members of his immediate family.

On May 28, 1997, we entered into an agreement with Stichting Continuïteit
ASM International, or Stichting, pursuant to which Stichting was granted an
option to acquire up to that number of our preferred shares that has a total
par value equal to 50% of the par value of our common shares issued and
outstanding at the date of the exercise. Stichting is a non-membership
organization organized under Netherlands law. The objective of Stichting is to
own and vote our preferred shares in order to maintain our continuity in case
of a takeover attempt. Toward that objective, Stichting will evaluate, when
called for, whether a takeover offer is in our best interests. The Euronext
Amsterdam Market in Amsterdam requires that a majority of the board members of
Stichting be unrelated to us. As of December 31, 2002, the members of the board
of Stichting are:

|                       |  |                                                              
|---------------------- |  | -------------------------------------------------------------
|Arthur H. del Prado    |  | President and Chief Executive Officer, ASM
International N.V.
|                       |  |                                                              
|Paul C. van den Hoek   |  | Chairman of the Supervisory Board, ASM
International N.V.    
|                       |  |                                                              
|Michiel J.C. van Galen |  | Former Managing Director, Breevast N.V.                      
|                       |  |                                                              
|Rinze Veenenga Kingma  |  | President Archeus Consulting B.V.                            
|                       |  |                                                              
|Laurus Traas           |  | Emeritus Professor, Vrije Universiteit Amsterdam             

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 entitle the holder to the
same voting rights.

Of our 49,371,258 outstanding common Shares at February 17, 2003,
9,070,039 are registered with us in the Netherlands, 17,516,322 shares are
registered with a transfer agent in the Netherlands, ABN AMROBANK N. V., and
22,784,897 are registered with a transfer agent in the United States, Citibank,

- 58 -



---



##### Table of Contents



N. A., New York. Our common shares registered with Citibank, N.A., New
York are quoted on the Nasdaq National Market under the symbol ASM
International. As of February 17, 2003 there were approximately 213 record
holders in the United States. The common shares registered with ABN AMRO Bank,
Breda, the Netherlands, are in bearer form and are traded on the Euronext
Amsterdam Market in Amsterdam under the symbol ASM.

B. Related Party Transactions

In December 1999, we acquired 24.0% of the outstanding equity of
NanoPhotonics AG, a German supplier of precision metrology equipment, for  0.4
million, and our Chief Executive Officer also purchased a 44.5% interest in
NanoPhotonics AG. We have a five-year option to purchase the 44.5% interest
from our Chief Executive Officer at the same price he paid for his interest in
the initial transaction. At December 31, 2001 and December 31, 2002, we
provided NanoPhotonics with additional financing of  1.2 million and  2.9
million, respectively. In 2001 and 2002, we purchased equipment from
NanoPhotonics in the amount of  0.7 million and  0.2 million, respectively.

In December 1997, we loaned our Chief Operating Officer Front-end
operations  0.2 million at an average interest rate for 2002 of 2.6%. This
interest-bearing loan is outstanding at December 31, 2002 and is repayable upon
the exercise of stock options or termination of his employment.

In March 2000, we made an interest-bearing loan to our Chief Executive
Officer in connection with the exercise of stock options at an average interest
rate for 2002 of 4.9%. The loan, amounting to  2.2 million, is outstanding at
December 31, 2002 and is secured by the shares received in the stock option
exercise. We have custody of the shares until the loan is repaid.

In October 2001, we entered into a strategic alliance with and made a
15.4% equity investment of $18.0 million
( 20.3 million) in NuTool, Inc., a privately held
semiconductor technology company located in Milpitas, California. The purchase
price of the investment was determined by reference to prices paid by other
recent strategic investors. NuTool provides innovative copper deposition
technologies to the semiconductor industry. Its patented electrochemical
mechanical deposition technology offers new process solutions for copper
deposition and planarization, providing significant savings in integrated
circuit manufacturing and enabling new integrated circuit designs and new
process technologies. The strategic alliance with NuTool provides us with
additional competitive solutions to address the industrys transition to copper
metalization. We have a seat on the board of NuTool, Inc. In 2002, we sold
equipment to NuTool in the amount of  0.7 million.

The Chairman of the Supervisory Board, Mr. van den Hoek, is a partner in
the European law firm of Stibbe. Another partner at Stibbe serves as our
general 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.

- 59 -



---



##### Table of Contents






Item 8. Financial Information

Financial Highlights and Selected Comparative Financial Data

|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |        |  
|----------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------- | ---- | ----- | ------ | ---- | ----- | ----- | ------ | ---- | ----- | ----- | ------ |  | ----- | ----- | ------ | - | ----- | ----- | ------ | - | ----- | ----- | ------ | -
|In Euros and US Dollars(1)                                                          |                                                                                               | Year Ended December 31,
|                                                                                    |                                                                                               |                        
|(millions, except per share data and full-time equivalents)                         |                                                                                               | 1998                    |      | 1999  |        | 2000 |       | 2001  |        | 2002 |       | 2002 
|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |      
|                                                                                    |                                                                                               | EUR                     |      | EUR   |        | EUR  |       | EUR   |        | EUR  |       | US$  
|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        | 
|Operations:                                                                         |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |      
|                                                                                    | Net sales:                                                                                    |                         |      | 288.1 |        |      |       | 414.5 |        |      |       | 935.2 |        |  |       | 561.1 |        |   |       | 518.8 |        |   |       | 544.0 |       
|                                                                                    |                                                                                               | Front-end               |      |       | 132.9  |      |       |       | 181.7  |      |       |       | 379.3  |  |       |       | 336.6  |   |       |       | 266.9  |   |       |       | 279.9  |  
|                                                                                    |                                                                                               | Back-end                |      |       | 155.2  |      |       |       | 232.8  |      |       |       | 555.9  |  |       |       | 224.5  |   |       |       | 251.9  |   |       |       | 264.1  |  
|                                                                                    | Earnings (loss) from operations:                                                              |                         |      | 12.5  |        |      |       | 39.4  |        |      |       | 191.8 |        |  |       | 24.3  |        |   |       | (6.0  | )      |   |       | (6.3  | )     
|                                                                                    |                                                                                               | Front-end               |      |       | (1.6   | )    |       |       | (0.8   | )    |       |       | 34.5   |  |       |       | (3.7   | ) |       |       | (42.7  | ) |       |       | (44.7  | )
|                                                                                    |                                                                                               | Back-end                |      |       | 14.1   |      |       |       | 40.2   |      |       |       | 157.3  |  |       |       | 28.0   |   |       |       | 36.7   |   |       |       | 38.4   |  
|                                                                                    | Net earnings (loss) before cumulative effect of change in
accounting principle                |                         |      | 0.2   |        |      |       | 11.1  |        |      |       | 98.1  |        |  |       | 6.1   |        |   |       | (29.9 | )      |   |       | (31.3 | )     
|                                                                                    | Cumulative effect of change in accounting principle, net
of tax(2)                            |                         |      |      |        |      |       |      |        |      |       | (3.8  | )      |  |       |      |        |   |       |      |        |   |       |      |       
|                                                                                    | Net earnings (loss)                                                                           |                         |      | 0.2   |        |      |       | 11.1  |        |      |       | 94.3  |        |  |       | 6.1   |        |   |       | (29.9 | )      |   |       | (31.3 | )     
|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|Balance sheet:                                                                      |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |      
|                                                                                    | Net working capital(3)                                                                        |                         |      | 103.9 |        |      |       | 116.9 |        |      |       | 212.3 |        |  |       | 214.6 |        |   |       | 199.8 |        |   |       | 209.5 |       
|                                                                                    | Total assets                                                                                  |                         |      | 282.9 |        |      |       | 425.0 |        |      |       | 777.9 |        |  |       | 757.1 |        |   |       | 653.8 |        |   |       | 685.6 |       
|                                                                                    | Net debt(4)                                                                                   |                         |      | 137.0 |        |      |       | 105.7 |        |      |       | (30.5 | )      |  |       | 53.3  |        |   |       | 76.1  |        |   |       | 79.8  |       
|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|Backlog:                                                                            |                                                                                               |                         | 52.8 |       |        |      | 183.7 |       |        |      | 345.6 |       |        |  | 132.6 |       |        |   | 142.9 |       |        |   | 149.8 |      
|                                                                                    |                                                                                               | Front-end               |      |       | 27.0   |      |       |       | 72.5   |      |       |       | 211.6  |  |       |       | 107.2  |   |       |       | 109.9  |   |       |       | 115.2  |  
|                                                                                    |                                                                                               | Back-end                |      |       | 25.8   |      |       |       | 111.2  |      |       |       | 134.0  |  |       |       | 25.4   |   |       |       | 33.0   |   |       |       | 34.6   |  
|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|Number of staff                                                                     |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |      
|                                                                                    | Full-time equivalents:                                                                        |                         |      | 4,436 |        |      |       | 5,426 |        |      |       | 7,091 |        |  |       | 5,955 |        |   |       | 6,554 |        |   |       | 6,554 |       
|                                                                                    |                                                                                               | Front-end               |      |       | 756    |      |       |       | 798    |      |       |       | 1,064  |  |       |       | 1,125  |   |       |       | 1,226  |   |       |       | 1,226  |  
|                                                                                    |                                                                                               | Back-end                |      |       | 3,680  |      |       |       | 4,628  |      |       |       | 6,027  |  |       |       | 4,830  |   |       |       | 5,328  |   |       |       | 5,328  |  
|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|Per share data:                                                                     |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |      
|                                                                                    | Net earnings (loss) per share from operations:                                                |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|                                                                                    |                                                                                               | Basic                   |      |       | 0.37   |      |       |       | 1.06   |      |       |       | 4.10   |  |       |       | 0.50   |   |       |       | (0.12  | ) |       |       | (0.13  | )
|                                                                                    |                                                                                               | Diluted                 |      |       | 0.36   |      |       |       | 0.98   |      |       |       | 3.95   |  |       |       | 0.49   |   |       |       | (0.12  | ) |       |       | (0.13  | )
|                                                                                    | Net earnings (loss) per share before cumulative effect of
change in accounting principle(2) : |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|                                                                                    |                                                                                               | Basic                   |      |       | 0.01   |      |       |       | 0.30   |      |       |       | 2.09   |  |       |       | 0.12   |   |       |       | (0.61  | ) |       |       | (0.64  | )
|                                                                                    |                                                                                               | Diluted                 |      |       | 0.01   |      |       |       | 0.29   |      |       |       | 2.02   |  |       |       | 0.12   |   |       |       | (0.61  | ) |       |       | (0.64  | )
|                                                                                    | Net earnings (loss) per share after cumulative effect of
change in accounting principle(2):   |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|                                                                                    |                                                                                               | Basic                   |      |       | 0.01   |      |       |       | 0.30   |      |       |       | 2.01   |  |       |       | 0.12   |   |       |       | (0.61  | ) |       |       | (0.64  | )
|                                                                                    |                                                                                               | Diluted                 |      |       | 0.01   |      |       |       | 0.29   |      |       |       | 1.94   |  |       |       | 0.12   |   |       |       | (0.61  | ) |       |       | (0.64  | )
|                                                                                    | Weighted average number of shares used in computing per
share amounts (in thousands):         |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|                                                                                    |                                                                                               | Basic                   |      |       | 33,794 |      |       |       | 37,301 |      |       |       | 46,810 |  |       |       | 48,944 |   |       |       | 49,170 |   |       |       | 49,170 |  
|                                                                                    |                                                                                               | Diluted                 |      |       | 34,743 |      |       |       | 40,664 |      |       |       | 48,703 |  |       |       | 49,958 |   |       |       | 49,170 |   |       |       | 49,170 |  
|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|Pro forma amounts assuming the new accounting
principle is applied retroactively(2) |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |      
|                                                                                    | Net earnings (loss)                                                                           |                         |      | 0.6   |        |      |       | 8.9   |        |      |       | 98.1  |        |  |       | 6.1   |        |   |       | (29.9 | )      |   |       | (31.3 | )     
|                                                                                    | Net earnings (loss) per share:                                                                |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       
|                                                                                    |                                                                                               | Basic                   |      |       | 0.02   |      |       |       | 0.24   |      |       |       | 2.09   |  |       |       | 0.12   |   |       |       | (0.61  | ) |       |       | (0.64  | )
|                                                                                    |                                                                                               | Diluted                 |      |       | 0.02   |      |       |       | 0.23   |      |       |       | 2.02   |  |       |       | 0.12   |   |       |       | (0.61  | ) |       |       | (0.64  | )
|                                                                                    |                                                                                               |                         |      |       |        |      |       |       |        |      |       |       |        |  |       |       |        |   |       |       |        |   |       |       |       

- 60 -



---



##### Table of Contents





|   
|---
|(1)
|   
|   
|(2)
|   
|(3)
|   
|(4)

SCHEDULE I
CONDENSED FINANCIAL STATEMENTS
ASM INTERNATIONAL N.V., HOLDING COMPANY

(Thousands of Euro)
Condensed Balance Sheets of ASM International N.V.

|                                   |  |              |         |      |  |      |         |  |  |  |         | 
|---------------------------------- |  | ------------ | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                                   |  | December 31,
|                                   |  | 2000         |         | 2001 |  | 2002
|                                   |  |              |         |      |  |     
|Assets:                            |  |              |         |      |  |      |         |  |  |  |         | 
|Total current assets               |  |              | 98,173  |      |  |      | 186,974 |  |  |  | 117,911 | 
|Investments                        |  |              | 264,970 |      |  |      | 261,303 |  |  |  | 164,137 | 
|Loans due from investments         |  |              | 6,723   |      |  |      | 17,668  |  |  |  | 91,101  | 
|Total noncurrent assets            |  |              | 6,391   |      |  |      | 11,745  |  |  |  | 16,658  | 
|                                   |  |              |         |      |  |      |         |  |  |  |         | 
|                                   |  |              | 376,257 |      |  |      | 477,690 |  |  |  | 389,807 | 
|                                   |  |              |         |      |  |      |         |  |  |  |         | 
|Liabilities & Shareholders Equity |  |              |         |      |  |      |         |  |  |  |         | 
|Total current liabilities          |  |              | 46,467  |      |  |      | 24,675  |  |  |  | 13,919  | 
|Total noncurrent liabilities       |  |              | 21,468  |      |  |      | 132,105 |  |  |  | 110,346 | 
|                                   |  |              |         |      |  |      |         |  |  |  |         | 
|Total liabilities                  |  |              | 67,935  |      |  |      | 156,780 |  |  |  | 124,265 | 
|Shareholders equity               |  |              | 308,322 |      |  |      | 320,910 |  |  |  | 265,542 | 
|                                   |  |              |         |      |  |      |         |  |  |  |         | 
|                                   |  |              | 376,257 |      |  |      | 477,690 |  |  |  | 389,807 | 
|                                   |  |              |         |      |  |      |         |  |  |  |         | 

Condensed Statements of Earnings ASM International N.V.

|                                    |  |                         |        |      |  |      |       |  |  |  |         |  
|----------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ----- |  |  |  | ------- | -
|                                    |  | Year ended December 31,
|                                    |  | 2000                    |        | 2001 |  | 2002
|                                    |  |                         |        |      |  |     
|Earnings (losses) subsidiaries      |  |                         | 97,460 |      |  |      | 5,923 |  |  |  | (26,381 | )
|Earnings (losses) ASM International |  |                         | (3,188 | )    |  |      | 175   |  |  |  | (3,481  | )
|                                    |  |                         |        |      |  |      |       |  |  |  |         |  
|Net earnings (loss)                 |  |                         | 94,272 |      |  |      | 6,098 |  |  |  | (29,862 | )
|                                    |  |                         |        |      |  |      |       |  |  |  |         |  

Condensed Cash Flow Statements ASM International N.V.

|
|
|
|
|
|
|
|
|
|
|
|

Notes to Condensed Financial Statements of ASM International N.V.:

- 61 -



---



##### Table of Contents



Restrictions which limit the availability of retained earnings, net income
for dividend purposes and other funds transfers from subsidiaries to ASM
International N.V.:

ASM Pacific Technology

Subject to the availability of adequate funds, all the retained earnings
of ASM Pacific Technology group can be distributed to its shareholders, including ASM
International, on a basis proportional to shareholdings of each shareholder.
Such retained earnings at December 31, 2002 according to Hong Kong GAAP amounts
to approximately HK$ 913.9 million ( 111.8 million). Other than the above,
ASM Pacific Technology group is prohibited from making loans or advances, other than trade
receivables in the normal course of business, to ASM International under the
Hong Kong Stock Exchange Listing Rules.

- 62 -



---



##### Table of Contents



SCHEDULE II
VALUATION RESERVES

(Thousands of Euro)

|                                |  |              |        |             |  |            |        |        |  |               |        |                |  |  |        |   |  |  |        | 
|------------------------------- |  | ------------ | ------ | ----------- |  | ---------- | ------ | ------ |  | ------------- | ------ | -------------- |  |  | ------ | - |  |  | ------ | 
|                                |  |              |        |             |  | Charged or |        |        |  |               |        |                |  |  |        |   |  | 
|                                |  | Balance at   |        | released
to |  |            |        |        |  | Currency      |        |                |  | 
|                                |  | beginning of |        | cost and    |  |            |        |        |  | translation   |        | Balance at the
|Class of valuation reserve      |  | period       |        | expenses    |  | Deductions |        | effect |  | end of period
|                                |  |              |        |             |  |            |        |        |  |              
|Allowance for doubtful
accounts |  |              |        |             |  |            |        |        |  |               |        |                |  |  |        |   |  |  |        | 
|Year ended 12/31/02             |  |              | 6,952  |             |  |            | 133    |        |  |               | (803   | )              |  |  | (818   | ) |  |  | 5,464  | 
|Year ended 12/31/01             |  |              | 8,734  |             |  |            | (2,055 | )      |  |               | (45    | )              |  |  | 318    |   |  |  | 6,952  | 
|Year ended 12/31/00             |  |              | 1,432  |             |  |            | 7,868  |        |  |               | (428   | )              |  |  | (138   | ) |  |  | 8,734  | 
|Provision for inventory         |  |              |        |             |  |            |        |        |  |               |        |                |  |  |        |   |  |  |        | 
|Year ended 12/31/02             |  |              | 21,012 |             |  |            | 2,321  |        |  |               | (2,157 | )              |  |  | (1,997 | ) |  |  | 19,179 | 
|Year ended 12/31/01             |  |              | 20,275 |             |  |            | 4,416  |        |  |               | (4,337 | )              |  |  | 658    |   |  |  | 21,012 | 
|Year ended 12/31/00             |  |              | 13,079 |             |  |            | 10,295 |        |  |               | (3,814 | )              |  |  | 715    |   |  |  | 20,275 | 




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 National
Market and the high and low closing price as reported on Euronext Amsterdam
Market:

Price Range of Common Shares

|                      |                |  |                       |       |                         |  |      |       |     |  |     |       |  |  |     |       | 
|--------------------- | -------------- |  | --------------------- | ----- | ----------------------- |  | ---- | ----- | --- |  | --- | ----- |  |  | --- | ----- | 
|                      |                |  | Nasdaq Closing Prices |       | Euronext Closing Prices
|                      |                |  |                       |       |                        
|                      |                |  | High                  |       | Low                     |  | High |       | Low
|                      |                |  |                       |       |                         |  |      |       |    
|Annual Information    |                |  |                       |       |                         |  |      |       |     |  |     |       |  |  |     |      
|                      | 1998           |  | $                     | 12.88 |                         |  | $    | 2.50  |     |  | Nlg | 26.90 |  |  | Nlg | 4.90  | 
|                      | 1999           |  |                       | 23.94 |                         |  |      | 3.63  |     |  |    | 23.00 |  |  |    | 3.55  | 
|                      | 2000           |  |                       | 35.63 |                         |  |      | 9.31  |     |  |     | 38.00 |  |  |     | 10.75 | 
|                      | 2001           |  |                       | 26.84 |                         |  |      | 10.40 |     |  |     | 31.45 |  |  |     | 10.10 | 
|                      | 2002           |  |                       | 28.34 |                         |  |      | 6.50  |     |  |     | 31.90 |  |  |     | 7.00  | 
|Quarterly Information |                |  |                       |       |                         |  |      |       |     |  |     |       |  |  |     |      
|                      | 2001:          |  |                       |       |                         |  |      |       |     |  |     |       |  |  |     |       | 
|                      | First Quarter  |  | $                     | 19.88 |                         |  | $    | 9.63  |     |  |    | 20.70 |  |  |    | 10.10 | 
|                      | Second Quarter |  |                       | 26.84 |                         |  |      | 15.31 |     |  |     | 31.45 |  |  |     | 17.35 | 
|                      | Third Quarter  |  |                       | 23.76 |                         |  |      | 10.40 |     |  |     | 26.80 |  |  |     | 10.90 | 
|                      | Fourth Quarter |  |                       | 19.51 |                         |  |      | 14.81 |     |  |     | 21.75 |  |  |     | 11.05 | 
|                      | 2002:          |  |                       |       |                         |  |      |       |     |  |     |       |  |  |     |       | 
|                      | First Quarter  |  | $                     | 26.11 |                         |  | $    | 17.77 |     |  |    | 29.70 |  |  |    | 20.39 | 
|                      | Second Quarter |  |                       | 28.34 |                         |  |      | 14.02 |     |  |     | 31.90 |  |  |     | 14.69 | 
|                      | Third Quarter  |  |                       | 18.30 |                         |  |      | 8.30  |     |  |     | 18.60 |  |  |     | 8.16  | 
|                      | Fourth Quarter |  |                       | 14.99 |                         |  |      | 6.50  |     |  |     | 15.20 |  |  |     | 7.00  | 
|Monthly Information   |                |  |                       |       |                         |  |      |       |     |  |     |       |  |  |     |      
|                      | October 2002   |  | $                     | 12.75 |                         |  | $    | 6.50  |     |  |    | 12.70 |  |  |    | 7.00  | 
|                      | November 2002  |  |                       | 14.99 |                         |  |      | 10.25 |     |  |     | 15.20 |  |  |     | 10.10 | 
|                      | December 2002  |  |                       | 14.79 |                         |  |      | 11.45 |     |  |     | 15.12 |  |  |     | 11.28 | 
|                      | January 2003   |  |                       | 14.31 |                         |  |      | 11.54 |     |  |     | 13.80 |  |  |     | 10.59 | 
|                      | February 2003  |  |                       | 12.81 |                         |  |      | 10.34 |     |  |     | 11.79 |  |  |     | 9.73  | 
|                      | March 2003     |  |                       | 12.24 |                         |  |      | 9.61  |     |  |     | 11.40 |  |  |     | 8.78  | 

- 63 -



---



##### Table of Contents



B. Plan of Distribution

Not applicable.

C. Markets

Our common shares are quoted on The Nasdaq National Market under the
symbol ASMI and listed on the Euronext Amsterdam stock exchange under the
symbol ASM.

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 of Articles of Association

Incorporated by reference to our Registration Statement on Form F-3 filed
with the United States Securities and Exchange Commission on July 3, 2002 and
filed as Exhibit 3.1 to our Form 6-K on November 6, 2001.

C. Material Contracts

For a description of the material contracts we entered into in the last
two fiscal years, please see Item 4. Information on the Company.

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.

- 64 -



---



##### Table of Contents



E. Taxation

Summary of Dutch Tax Provisions Applicable to Nonresident Shareholders with a
particular focus on US Shareholders

The statements below briefly summarize the current Dutch tax laws, based
on the laws as in force at January 1, 2003. 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 25%. The expression dividends
distributed includes, among other things:



| |  |  | 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;                                                                                                                                                                                                                                            
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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 other than the
Netherlands and if a double taxation convention is in effect between the
Netherlands and such other country, such holder of ordinary shares may,
depending on the terms of that double taxation convention, be eligible for a
full 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 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 US Tax Treaty are
generally eligible for a reduction of the 25% Dutch withholding tax to 15% or,
in the case of certain US corporate shareholders owning at least 10% of ASM
International voting power, 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. The US 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

- 65 -



---



##### Table of Contents



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 25%
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
not claim the benefits of the US Tax Treaty unless:



| |  |  | 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 US Tax
Treaty.

Under current Dutch law, 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. 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. A receiver of a dividend is not
considered to be the beneficial owner of a dividend if, 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 in the situation in which a foreign or domestic person (usually,
but not necessarily, the original shareholder) has transferred his shares or
his 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.

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 on 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;                                                                                                                                                                                              

- 66 -



---



##### Table of Contents





| |  |  | 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 an entity resident or deemed resident in the Netherlands,
or, if such holder has a substantial interest or a deemed substantial
interest, 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 dies 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.                                                                         

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

- 67 -



---



##### Table of Contents



on inheritances may be avoided if the inheritance is subject to
Netherlands and/or US inheritance tax and the deceased was a resident of either
the Netherlands or the United States.

Summary of US Federal Tax Provisions Applicable to United States Security
Holders

The following is a general description of the material United States
(U.S.) federal income tax consequences of the ownership and disposition of
the common shares. This summary only applies to U.S. Holders (as defined
below) that hold their shares as capital assets. This discussion does not
purport to deal with all aspects of U.S. federal income taxation that may be
relevant to holders of shares in view of their particular circumstances (for
example, persons subject to the alternative minimum tax provisions of the
Internal Revenue Code), and does not deal with holders subject to special
rules, such as, but not limited 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, 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 of 1986, as amended
to the date hereof, final, temporary and proposed Treasury Department
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, changes to any of which subsequent to the date hereof,
possibly with retroactive effect may affect the tax consequences described
herein. In addition, there can be no assurance that the Internal Revenue
Service will not challenge one or more of the tax consequences described
herein, 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 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
any tax consequences that may arise under the U.S. federal estate or gift tax
and any state, local and foreign tax laws from the ownership and disposition of
the shares.

The following discussion is a summary of the tax rules applicable to U.S.
Holders of shares and does not consider any U.S. federal income tax
consequences to non-U.S. Holders. As used herein, U.S. Holder means a
beneficial owner of shares that is (i) an individual who is a citizen or
resident of the United States, (ii) a corporation (or 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 political subdivision thereof, (iii)
an estate the income of which is subject to U.S. federal income taxation
regardless of its source, (iv) a trust if 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 a trust in existence on August 20, 1996 that was
treated as U.S. persons under the law in effect immediately prior to that date
and that made a valid election to be treated as a U.S. person, or (v) any other
person or entity that would be subject to U.S. federal income tax on a net
income basis in respect of the common shares. A non-U.S. Holder is a
beneficial owner of common shares that is not a U.S. Holder as so defined
herein.

Taxation of Dispositions

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

- 68 -



---



##### Table of Contents



or loss if the shares were held for more than one year. Any such gain will
generally 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 shares, the repurchase generally will be treated as a
sale or exchange of the 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 Dividends. U.S. Holders should consult
their own tax advisors concerning the U.S. federal income tax consequences of a
repurchase of their shares.

Taxation of Dividends

Subject to the passive foreign investment company rules described below,
the gross amount of any distribution paid (including amounts withheld to pay
Netherlands taxes) with respect to the shares, other than certain pro rata
distributions of our shares, will be included in the gross income of a U.S.
Holder as foreign source dividend income to the extent such 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. If
a U.S. Holder receives a dividend in euros, the
amount of the dividend for U.S. federal income tax purposes will 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. Distributions treated as dividends will not be
eligible for the dividends received deduction generally allowed to corporations
under the Internal Revenue Code. To the extent that the amount of any
distribution exceeds our current and accumulated earnings and profits for a
taxable year, 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 shares
(thereby increasing the amount of gain and decreasing the amount of loss to be
recognized on the subsequent disposition of the shares), and to the extent that
such distribution exceeds the U.S. Holders adjusted tax basis in the 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 that a distribution should not be treated as a dividend.

Subject to certain conditions and limitations set forth in Sections 901
and 904 of the Internal Revenue Code, including certain holding period
requirements, foreign tax withheld or 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 such amount of withheld foreign taxes, but only for a year for
which such 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 deduct and retain from the withholding a portion of the amount
that otherwise would be required to be remitted to the taxing authorities in
the Netherlands (see Summary of Dutch Tax Provisions Applicable
to Nonresident Shareholders with a particular focus on
US Shareholders Withholding Tax). This amount generally may not exceed 3% of the total dividend
distributed by us. If we withhold an amount from dividends paid to a U.S.
Holder that we then are not required to remit to any taxing authority in the
Netherlands, the 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 have applied the reduction described above to
dividends paid to U.S. Holders.

The overall limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. For this purpose,
dividends distributed by us generally will be passive

- 69 -



---



##### Table of Contents



income, or, in the case of certain U.S. Holders, financial services
income. To the extent such dividends on common shares are treated as capital
gains, such gain would be U.S. source. Accordingly, a U.S. Holder would not be
able to use the foreign tax credit arising from any Netherlands withholding
taxes imposed on such distribution unless such credit can be applied (subject
to applicable limitations) against U.S. tax due on other foreign source income
in the appropriate category for foreign tax credit purposes.

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, foreign investment
company, foreign personal holding company, personal holding company and
controlled foreign corporation rules. While we do not believe that any of
these rules will likely 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 shares any particular U.S.
Holder will own. Accordingly, we will only briefly summarize those provisions
and then only the rules that we believe would have the greatest likelihood of
applying to us in the future.

Passive Foreign Investment Company

The passive foreign investment company (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; 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 pro rata 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, and the U.S. Holder did not make an election either to treat us as a
qualified electing fund (within the meaning of the Internal Revenue Code) for
the first taxable year in the U.S. Holders holding period that we were a PFIC
or to mark our shares to market, then:



| |  | Excess distributions paid to a U.S. Holder will be taxed in a special
way. Excess distributions are amounts received by a U.S. Holder with
respect to our shares in any taxable year, plus the amount of any income
inclusion as a result of an investment in U.S. property by us during the
taxable year, that exceed 125% of the average distributions received by
the U.S. Holder from us in the three previous years before the current
taxable year (or, if shorter, the U.S. Holders holding period for the
shares). The total excess distributions will equal zero for the taxable
year in which the U.S. Holders holding
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 70 -



---



##### Table of Contents





|  |  | period in such stock begins. The portion of an actual distribution that is
not an excess distribution is not taxed under the excess distribution rules,
but rather is taxed as described above under Taxation of Dividends.
Excess distributions must be allocated ratably to each day that a U.S.
Holder has held our shares, up to and including the date of the
distribution. A U.S. Holder must report amounts allocated to the current
taxable year (and to prior taxable years during which we were not a PFIC) as
ordinary income for the current taxable year. Amounts allocated to each
prior taxable year for which we were a PFIC are subject to the highest rate
of tax for the year to which allocated, and each of the resulting amounts of
tax incurs an interest charge as if it were an underpayment of taxes for the
year to which allocated. Amounts allocated to prior years during which we
were a PFIC are never included in a U.S. Holders taxable income. Rather,
the tax and interest determined under the rules (the Deferred Tax Amount)
described herein is added to the U.S. Holders tax liability and is an
actual tax liability, regardless the U.S. Holders other income or losses.
Thus, even if the U.S. Holder otherwise is not liable for tax (i.e., because
of a net operating loss), the U.S. Holder will still have to pay the
Deferred Tax Amount. Special foreign tax credit rules applicable to excess
distributions may allow a U.S. Holder to offset the amount of tax due on an
excess distribution.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The entire amount of gain that is recognized by a U.S. Holder upon a sale
or other disposition of shares will also be considered an excess
distribution and will be subject to tax as described above regardless of
whether such gain would otherwise be subject to nonrecognition provisions.
For purposes of these rules, a disposition is any transaction that
constitutes an actual or deemed transfer of our stock, except for
transfers made between members of a consolidated group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

If a U.S. Holder makes a qualified electing fund (QEF) election for all
taxable years during which the U.S. Holder owned our shares and we were a PFIC,
the PFIC rules described above will not apply to that U.S. Holder. Instead,
the electing U.S. Holder is required for each taxable year to include in income
a pro rata share of the ordinary earnings of the PFIC as ordinary income and a
pro rata share of the net capital gain of the PFIC as long-term capital gain.
The QEF election is made on a shareholder-by-shareholder basis and can be
revoked only with the consent of the Internal Revenue Service. The QEF
election, however, may only be made if the PFIC agrees to make available the
information necessary to determine inclusions under the QEF rules and to assure
compliance. If we are or become a PFIC, we may be unable or unwilling to
satisfy the record keeping requirements that would enable a U.S. Holder to make
a QEF election. A U.S. Holder that has made a QEF election is permitted, by
election, to defer actual payment of the tax liability arising from a QEF
inclusion. Generally, payment is deferred until the PFIC makes actual
distributions of amounts previously included in the U.S. Holders income
pursuant to the QEF election. A U.S. Holder that elects to defer tax on the
QEF inclusion amount must pay interest on the deferred tax liability until the
liability is actually paid at the normal rate for underpayments of tax. The
deferral election is made on a year-by-year basis with respect to each years
QEF inclusion.

In lieu of making a QEF election, a U.S. Holder of
publicly traded PFIC shares could elect to mark the shares to market annually,
in which case if the fair market value of the U.S. Holders PFIC shares exceeds
the U.S. Holders adjusted tax basis in those shares as of the close of the
U.S. Holders taxable year, the U.S. Holder will recognize the amount of the
excess as ordinary income. Likewise, if the fair market value of the U.S.
Holders PFIC shares is less than the U.S. Holders adjusted tax basis in those
shares as of the close of the U.S. Holders taxable year, the U.S. Holder may
recognize the difference as ordinary loss. Losses may be deducted only to the
extent of net gain previously included in taxable income by the U.S. Holder
under the election for prior taxable years. Provided that if the U.S. Holder
has elected to mark our shares to market for all taxable years during which (i)
the U.S. Holder owned our shares and (ii) we were a PFIC, the PFIC rules
generally will not apply to such U.S. Holder.

If U.S. Holders own shares during any year in which we are a PFIC, the U.S
Holders must file Internal Revenue Service Form 8621.

- 71 -



---



##### Table of Contents



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.

Foreign Personal Holding Company Rules

Special U.S. tax rules apply to a shareholder of a foreign personal
holding company (FPHC). A foreign corporation will be classified as a FPHC
for U.S. federal income tax purposes if the following two tests are satisfied:



| |  | five or fewer individuals who are U.S. citizens or residents (a U.S.
Group) actually or constructively own, under attribution rules, more
than 50% of all classes of the corporations shares measured by voting
power or value at any time during the corporations taxable year; and                                                                                
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the corporation receives at least 60% (50% if the corporation has
qualified as a foreign personal holding corporation in a prior taxable
year) of its gross income regardless of source (foreign or domestic),
as specifically adjusted, from passive sources (e.g., dividends,
interest, gains from the sale or exchange of shares or securities,
rents and royalties).

If we are a FPHC, each U.S. Holder that owned our shares on the last day
of the our taxable year or if earlier, the last day of our taxable year on
which a U.S. Group currently exists with respect to us, must include in gross
income as dividends such U.S. Holders pro rata share the amount the U.S.
Holder would have received if we had distributed a dividend equal to our
undistributed foreign personal holding company income, as defined for U.S.
federal income tax purposes. The imputed income is taxable as a dividend even
if no cash dividend is actually paid.

We believe that we are not a FPHC, and we do not expect to become a FPHC.
However, we can not assure you that we will not qualify as a FPHC in the
future.

Personal Holding Company Rules

A foreign corporation may be classified as a personal holding company for
U.S. federal income tax purposes if the following two tests are satisfied:



| |  | If at any time during the last half of the corporations taxable year,
five or fewer individuals (without regard to their citizenship or
residency) actually or constructively own, under attribution rules, more
than 50% of the shares of the corporation by value; and                           
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 60% or more of the foreign corporations gross income derived from U.S.
sources or effectively connected with a U.S. trade or business, as
specifically adjusted, is from passive sources (e.g., dividends, interest,
gains from the sale or exchange of shares or securities, rents and
royalties).

For tax
year 2003, a personal holding company generally is taxed currently
at a rate of 38.6% on its undistributed personal holding company income, which
is calculated based generally on the corporations taxable income after
deducting dividends paid and making certain other adjustments. The PHC tax on
a foreign corporation is limited to the corporations U.S. source income. Even
if we were to become a PHC, we do not expect to have material undistributed PHC
income. However, we cannot assure you that we will not become a PHC because of
uncertainties regarding the application of the constructive ownership rules and
the possibility of changes in our shareholder base and income or other
circumstances that could change the application of the PHC rules to us. In
addition, if we become a PHC we cannot assure you that the amount of our PHC
income will be immaterial.

- 72 -



---



##### Table of Contents



Controlled Foreign Corporation Rules

If more than 50% of the voting power or total value of all classes of our
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
shares, we could be treated as a controlled foreign corporation (CFC) under
Subpart F of the Internal Revenue Code. This classification would require such
10% or greater shareholders to include in income 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 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
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 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 shares and the proceeds received on the disposition of the
shares paid within the U.S. (and in certain cases, outside the U.S.). Such
amounts may be subject to a 30% U.S. backup withholding tax unless the U.S.
Holder otherwise establishes an exemption. For example, backup withholding
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.

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
to them of the purchase, ownership and disposition of shares including the tax
consequences under state, local and other tax laws and the possible effects of
changes in U.S. 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
one of our previous SEC filings.

- 73 -



---



##### Table of Contents



We file annual and special reports and other information with the SEC. You
may read and copy all or any portion of the registration statement and any
other document we file with the SEC at the SECs public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room.
Commencing with filings made this year, such material may also be obtained at
the Internet site the SEC maintains at http://www.sec.gov which contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC.

I. Subsidiary Information

Not Applicable.




Item 11. Quantitative and Qualitative Disclosures about Market Risk

Market Risk Disclosure

We are exposed to market risk from changes in interest rates and foreign
currency exchange rates, most notably fluctuations of the United States dollar,
the Hong Kong dollar and the Japanese yen against the euro. We report our
operating results and financial position in euros, while foreign affiliates
report their operating results and financial position in their respective
functional currencies. 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
Shareholders Equity and for the year ended December 31, 2002, we recorded an
unfavorable movement of  29.4 million.

Foreign exchange risk management

Our operations are exposed to foreign exchange risk arising from cash
flows and financial instruments that are denominated in currencies other then
the functional currency of ASM International or the respective subsidiary
conducting the business. The purpose of our foreign currency management is to
manage the effect of exchange rate fluctuations on certain foreign currency
denominated revenues, costs and eventual cash flows and on foreign currency
assets and liabilities.

In the first quarter of 2001, we adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and
SFAS No. 138. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and hedging activities, and requires that all
derivatives, including foreign currency exchange contracts, be recognized on
the balance sheet at fair value. 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. All of our derivative financial instruments
are recorded at their fair value in other current assets or accrued expenses.

The terms of currency instruments used for hedging purposes are generally
consistent with the timing of the transactions being hedged. We do not use
derivative financial instruments for trading or speculative purposes. We use
derivative financial instruments, such as forward exchange contracts, to hedge
certain forecasted foreign currency denominated transactions expected to occur
within the next 12 months. As a policy we only hedge anticipated foreign
currency sales and purchase transactions for which we have a firm commitment to
a customer or supplier. In accordance with SFAS No. 133, hedges related to
anticipated 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 other comprehensive income in Shareholders Equity, and is
reclassified into earnings when the hedged transaction affects earnings. An
amount of approximately  1.3 million included in other comprehensive income at
December 31, 2002 will be reclassified to earnings

- 74 -



---



##### Table of Contents



within 12 months upon completion of the underlying transaction. 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 net interest and other financial income (expenses) on the
Statement of Operations.

Furthermore, we continue to manage the currency exposure of certain
receivables and payables using derivative instruments, such as forward exchange
contracts and currency swaps, and nonderivative 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 the foreign currency
receivables and payables. The derivative instruments are recorded at fair value
and changes in fair value are recorded in earnings under net interest and other
financial income (expenses) on the Statement of Operations. Foreign currency
receivables and payables 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 earnings under net interest and other financial income (expenses)
on the Statement of Operations. The operations of our subsidiaries are
generally financed with debt issued in the currency of the country in which
each subsidiary is located in an effort to limit our foreign currency exposure.

As of December 31, 2002, we have entered into forward exchange contracts
with terms less than twelve months to sell in total US$ 28.2 million and to
receive  29.0 million, to sell US$ 10.5 million and to receive Japanese yen
1,263 million, to buy in total US$ 3.0 million for payment of  2.9 million and
to buy in total US$ 2.4 million for payment of Japanese yen 285 million. At
December 31, 2002, the fair market value of these forward exchange contracts
were to receive  37.0 million and to pay  5.1 million. The fair market value
of these contracts are based on external quotes from banks for similar
contracts.

The following analysis sets out 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
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, 2002 with all other variables kept constant. A
favorable 10% change indicates a strengthening of the currency in which our
financial instruments are dominated, primarily the US dollar, against the euro
and an unfavorable change indicates a weakening of the currency in which our
financial instruments are dominated, primarily the US dollar, against the euro.
The selection of 10% favorable or unfavorable change in exchange rates should
not be construed as a prediction by us of future market events, but rather, to
illustrate the potential impact of such 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.

- 75 -



---



##### Table of Contents



|                                                             |                      |     |                 |  |          |       |            |  |                       |      |               |  |             |      |  |  |      |      |                         |  |       |      |  |  | 
|------------------------------------------------------------ | -------------------- | --- | --------------- |  | -------- | ----- | ---------- |  | --------------------- | ---- | ------------- |  | ----------- | ---- |  |  | ---- | ---- | ----------------------- |  | ----- | ---- |  |  | 
|                                                             |                      |     |                 |  |          |       |            |  |                       |      |               |  |             |      |  |  |      |      | As of December 31, 2002
|                                                             |                      |     |                 |  |          |       |            |  |                       |      |               |  |             |      |  |  |      |      |                        
|                                                             |                      |     |                 |  |          |       |            |  |                       |      |               |  |             |      |  |  |      |      | Sensitivity analysis   
|                                                             |                      |     |                 |  |          |       |            |  |                       |      |               |  |             |      |  |  |      |      |                        
|                                                             |                      |     | Currency and    |  | Carrying |       |            |  |                       |      | Favorable     |  | Unfavorable
|                                                             |                      |     | notional amount |  | amount   |       | Fair value |  | change of 10%         |      | change of 10%
|                                                             |                      |     |                 |  |          |       |            |  |                       |      |              
|                                                             |                      |     | (in millions)   |  |          |       |            |  | (in millions of euro) |      |               |  |            
|Notes payable to banks,
due within twelve months             |                      | yen |                 |  | 2,068.5  |       |            |  | 16.5                  |      |               |  | 16.5        |      |  |  | 14.9 |      |                         |  | 18.2  |     
|Long-term debt with maturities:                              |                      |     |                 |  |          |       |            |  |                       |      |               |  |             |      |  |  |      |      |                         |  |       |      |  | 
|                                                             | due from 2003  2010 |     | euro            |  |          | 4.9   |            |  |                       | 4.9  |               |  |             | 5.1  |  |  |      | 4.9  |                         |  |       | 4.9  | 
|                                                             | due from 2004  2006 |     | yen             |  |          | 722.4 |            |  |                       | 5.8  |               |  |             | 5.8  |  |  |      | 5.2  |                         |  |       | 6.4  | 
|                                                             | due from 2003  2005 |     | US$             |  |          | 0.1   |            |  |                       | 0.1  |               |  |             | 0.1  |  |  |      | 0.1  |                         |  |       | 0.1  | 
|Convertible subordinated debt,
due November 15, 2005         |                      | US$ |                 |  | 115.0    |       |            |  | 109.7                 |      |               |  | 105.0       |      |  |  | 98.7 |      |                         |  | 120.6 |     
|Foreign
exchange contracts, settlement within twelve months: |                      |     |                 |  |          |       |            |  |                       |      |               |  |             |      |  |  |      |      |                         |  |       |      |  | 
|                                                             | purchase             |     | US$             |  |          | 5.4   |            |  |                       | 5.2  |               |  |             | 5.1  |  |  |      | 4.6  |                         |  |       | 5.7  | 
|                                                             | sale                 |     | US$             |  |          | 38.7  |            |  |                       | 39.0 |               |  |             | 37.0 |  |  |      | 33.2 |                         |  |       | 40.6 | 
|                                                             |                      |     |                 |  |          |       |            |  |                       |      |               |  |             |      |  |  |      |      |                         |  |      

As our borrowings are primarily in other currencies than the euro a change
in foreign currency exchange rates will have an impact on our net earnings. A
hypothetical change of 10% in foreign currencies against the euro would result
in  0.7 million change in interest expenses at December 31, 2002 borrowing
levels.

Interest risk

At December 31, 2002, we had convertible subordinated debt borrowings
outstanding of  109.7 million at a fixed interest rate, maturing in November
2005,  10.8 million in long-term debt at fixed interest rates, due from
2003-2010, and  26.5 million in other borrowings with variable short-term
interest rates. We are exposed to interest rate risk primarily through our
borrowing activities. We do not enter into financial instrument transactions
for trading or speculative purposes or to manage interest rate exposure. A
hypothetical change in the average interest rate by 10% on the portion of our
debt bearing interest at variable rates would not result in a material change
in interest expense at December 31, 2002 borrowing levels.

Credit risk

Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted and
from movements in interest rates and foreign exchange rates. We do not
anticipate nonperformance by counterparties. 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. Financial instruments on the balance sheet that potentially
subject us to concentrations of credit risk consist primarily of cash and cash
equivalents and accounts receivable. We maintain a policy providing for the
diversification of cash and cash equivalent investments and placement of
investments in

- 76 -



---



##### Table of Contents



high quality financial institutions to limit the amount of credit risk
exposure. A significant percentage of our revenue is derived from a limited
number of large customers. Our largest customer accounted for approximately
13.9% of our net sales in 2002 and our ten largest customers accounted for
approximately 39.6% of our net sales in 2002. Sales to these large customers
also may fluctuate significantly from time to time depending on the timing and
level of purchases from us. Significant orders from such customers may expose
us to a concentration of credit risk and difficulties in collecting amounts
due, which might harm our financial results and financial condition. At
December 31, 2002, one customer accounted for 18.3% of the outstanding balance
in accounts receivable.




Item 12. Description of Securities Other Than Equity Securities.

Not applicable.




Part II




Item 13. Defaults, Dividend Arrearages and Delinquencies.

None.




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

None.




Item 15. Controls and Procedures.

A. Evaluation of disclosure controls and procedures

We have disclosure controls and procedures in place, which are designed to
ensure that material information related to ASM International, including our
consolidated subsidiaries, is made known to our management, including our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO). We review our
disclosure controls and procedures regularly and when necessary and make
changes to ensure they are effective.

Within the 90 day period prior the date of this report, an evaluation was
carried out under the supervision and with the participation of our management,
including the CEO and the CFO, of the effectiveness of our disclosure controls
and procedures. Based upon that evaluation, the CEO and CFO have concluded that
our disclosure controls and procedures are effective in causing material
information to be collected and evaluated by the management of ASM
International on a timely basis and to ensure that the quality and timeliness
of our public disclosures complies with our SEC disclosure obligations.

B. Changes in internal controls

There were no significant changes in our internal controls or in other
factors that could significantly affect those controls after the date of our
most recent evaluation.

- 77 -



---



##### Table of Contents



Part III

Item 17. Financial Statements

Not Applicable.

Item 18.  Financial Statements.

See pages F-1 through F-32, incorporated herein by reference.

Item 19.  Exhibits(*)

|        |  |                                                                                              |  |                                                                     |  |          |  | 
|------- |  | -------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | -------- |  | 
|Exhibit |  |                                                                                              |  |                                                                     |  | Included
|Number  |  | Description                                                                                  |  | Incorporated by Reference to:                                       |  | Herein: 
|        |  |                                                                                              |  |                                                                     |  |         
|1.1     |  | English translation of ASM
International N.V.s Compiled
Articles of Association, as
amended |  | Exhibit 3.1 to Registrants
6-K filed on November 6,
2001          
|        |  |                                                                                              |  |                                                                    
|4.1     |  | 1994 Stock Option Plan                                                                       |  | Exhibit 99.1 to the
Registrants S-8 filed
October 25, 1999        
|        |  |                                                                                              |  |                                                                    
|4.2     |  | Debenture Purchase Agreement Part 1                                                          |  | Exhibit 4.2 to the
Registrants Form F-3 filed
on December 13, 1999
|        |  |                                                                                              |  |                                                                    
|4.3     |  | Debenture Purchase Agreement Part 2                                                          |  | Exhibit 4.2 to the
Registrants Form F-3 filed
on December 13, 1999
|        |  |                                                                                              |  |                                                                    
|4.4     |  | Zero Coupon Debenture                                                                        |  | Exhibit 4.3 to the
Registrants Form F-3 filed
on December 13, 1999
|        |  |                                                                                              |  |                                                                    
|4.5     |  | Common Stock Purchase Warrant                                                                |  | Exhibit 4.4 to the
Registrants Form F-3 filed
on December 13, 1999
|        |  |                                                                                              |  |                                                                    
|4.6     |  | Supplemental Common Stock Purchase
Warrant                                                   |  | Exhibit 4.5 to the
Registrants Form F-3 filed
on December 13, 1999

- 78 -





---



##### Table of Contents



|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | --------
|Exhibit |  |                                                                                                                                                                             |  |                                                                     |  | Included
|Number  |  | Description                                                                                                                                                                 |  | Incorporated by Reference to:                                       |  | Herein: 
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.7     |  | Registration Rights Agreement                                                                                                                                               |  | Exhibit 4.6 to the
Registrants Form F-3 filed
on December 13, 1999 |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.8     |  | Purchase Agreement dated November
14, 2001 between ASM International
N.V. and CIBC World Markets Corp.
for purchase of US$ 100 million of
5% Convertible Subordinated Notes |  | Exhibit 4.16 to the
Registrants Form 20-F/A
filed on May 10, 2002  |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.9     |  | Indenture Agreement dated November
19, 2001 between ASMI
International N.V. and Citibank,
N.A.                                                                              |  | Exhibit 4.17 to the
Registrants Form 20-F/A
filed on May 10, 2002  |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.10    |  | 2001 Stock Option Plan                                                                                                                                                      |  | Exhibit 99.1 to the
Registrants Form S-8 filed
on April 30, 2002   |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.11    |  | Equity Line Financing Agreement
between ASM International N.V. and
Canadian Imperial Holding, Inc.
(CIHI) dated July 2, 2002                                              |  | Exhibit 4.18 to the
Registrants Form F-3 filed
on July 3, 2002     |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.12    |  | Registration Rights Agreement
between ASM International N.V. and
CIHI dated July 2, 2002                                                                                    |  | Exhibit 4.19 to the
Registrants Form F-3 filed
on July 3, 2002     |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.13    |  | English translation of Robert L. de Bakkers Employment
Agreement                                                                                                           |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.14    |  | Trust Deed and Rules
of The ASM Pacific Technology Employee Share Incentive Scheme, dated
March 23, 1990                                                                    |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.15    |  | Deed of Adherence
Relating to Participation in the Employee Share Incentive Scheme of
ASM Pacific Technology Limited, dated April 12, 1999                                  |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.16    |  | Supplemental Deed
Relating to the Employee Share Incentive Scheme of ASM Pacific
Technology Limited                                                                         |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|8.1     |  | Subsidiaries                                                                                                                                                                |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|10.1    |  | Certificate of Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002                             |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|10.2    |  | Certificate of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the                                                        |  |                                                                     |  | X       

- 79 -





---



##### Table of Contents



|        |  |                            |  |                               |  |         
|------- |  | -------------------------- |  | ----------------------------- |  | --------
|Exhibit |  |                            |  |                               |  | Included
|Number  |  | Description                |  | Incorporated by Reference to: |  | Herein: 
|        |  |                            |  |                               |  |         
|        |  | Sarbanes-Oxley Act of 2002 |  |                               |  |         
|        |  |                            |  |                               |  |         
|10.3    |  | Auditors Consent          |  |                               |  | X       

|  |  |                                                                                                                                                                                                                                                                                          
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* |  | Pursuant to Item 19.2(b)(1) of Form 20-F, 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.

- 80 -





---



##### Table of Contents






SIGNATURES

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

|                      |                                                                                          
|--------------------- | -----------------------------------------------------------------------------------------
|                      | ASM INTERNATIONAL N.V.                                                                   
|                      |                                                                                          
|                     
|Date:  April 17, 2003 | /s/ Arthur H. del Prado
Arthur H. del Prado
Managing Director and
Chief Executive Officer
|                     

S-1





---



##### Table of Contents



I, Arthur H. del Prado, certify that:



|1. |  | I have reviewed this annual report on Form 20-F of ASM International
N.V.;                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | (a) |  | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date:
April 17, 2003

/s/ Arthur H. del Prado
Arthur H. del Prado
Chief Executive Officer

S-2





---



##### Table of Contents



I, Robert L. de Bakker, certify that:



|1. |  | I have reviewed this annual report on Form 20-F of ASM International
N.V.;                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | (a) |  | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: April 17, 2003

/s/ Robert L. de Bakker
Robert L. de Bakker
Chief Financial Officer

S-3





---



##### Table of Contents






INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                     |  |      |     | 
|---------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                     |  | Page
|                                                                                                     |  |     
|ASM International N.V                                                                                |  |      |     | 
|Independent Auditors Report of Deloitte & Touche Accountants                                        |  |      | F-2 | 
|Consolidated Balance Sheets as of December 31, 2001 and 2002                                         |  |      | F-3 | 
|Consolidated Statements of Operations for the years ended December
31, 2000, 2001 and 2002           |  |      | F-4 | 
|Consolidated Statements of Comprehensive Income                                                      |  |      | F-5 | 
|Consolidated Statements of Shareholders Equity for the years ended
December 31, 2000, 2001 and 2002 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the years ended December
31, 2000, 2001 and 2002           |  |      | F-6 | 
|Notes to the Consolidated Financial Statements                                                       |  |      | F-7 | 

F-1





---



##### Table of Contents



Independent Auditors Report

Board of Directors and Shareholders
ASM International N.V.
Bilthoven, the Netherlands

We have audited the accompanying consolidated balance sheets of ASM
International N.V. and subsidiaries (collectively, the Company) as of
December 31, 2001 and 2002, and the related consolidated statements of
operations, comprehensive income, shareholders equity, and cash flows for each
of the years ended December 31, 2000, 2001 and 2002. These financial statements
are the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 referred to above
present fairly, in all material respects, the financial position of ASM
International N.V. and subsidiaries as of December 31, 2001 and 2002, and the
results of their operations and their cash flows for each of the years ended
December 31, 2000, 2001 and 2002, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note F to the consolidated financial statements, the
Company changed its method of accounting for goodwill in 2002.

Deloitte & Touche
Accountants

Amsterdam, the Netherlands,
February 17, 2003

F-2





---



##### Table of Contents



Consolidated Balance Sheets

|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |       | 
|--------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---- | - | ---- |  | ---- | ------------ | ----- |  |  | ------- | ----- | 
|                                                                                  |                                                                                                          |      |   |      |  |      | EUR         
|                                                                                  |                                                                                                          |      |   |      |  |      |             
|                                                                                  |                                                                                                          |      |   |      |  |      | December 31,
|                                                                                  |                                                                                                          |      |   |      |  |      |             
|(thousands except share data)                                                     |                                                                                                          | Note |   | 2001 |  | 2002
|                                                                                  |                                                                                                          |      |   |      |  |     
|Assets                                                                            |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Cash and cash equivalents                                                         |                                                                                                          |      | C |      |  |      | 107,577      |       |  |  | 70,991  |      
|Marketable securities                                                             |                                                                                                          |      | C |      |  |      | 5            |       |  |  | 11      |      
|Accounts receivable (less allowance for doubtful accounts
of  6,952 and  5,464) |                                                                                                          |      |   |      |  |      | 136,615      |       |  |  | 132,818 |      
|Inventories                                                                       |                                                                                                          |      | D |      |  |      | 206,027      |       |  |  | 185,752 |      
|Income taxes receivable                                                           |                                                                                                          |      |   |      |  |      | 4,103        |       |  |  | 1,840   |      
|Deferred tax assets                                                               |                                                                                                          |      | S |      |  |      |             |       |  |  | 1,843   |      
|Other current assets                                                              |                                                                                                          |      |   |      |  |      | 21,110       |       |  |  | 18,786  |      
|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Total current assets                                                              |                                                                                                          |      |   |      |  |      | 475,437      |       |  |  | 412,041 |      
|Property, plant and equipment, net                                                |                                                                                                          |      | E |      |  |      | 191,081      |       |  |  | 160,501 |      
|Goodwill, net                                                                     |                                                                                                          |      | F |      |  |      | 64,306       |       |  |  | 54,529  |      
|Deferred tax assets                                                               |                                                                                                          |      | S |      |  |      |             |       |  |  | 2,781   |      
|Other assets                                                                      |                                                                                                          |      | G |      |  |      | 26,241       |       |  |  | 23,989  |      
|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Total Assets                                                                      |                                                                                                          |      |   |      |  |      | 757,065      |       |  |  | 653,841 |      
|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Liabilities and Shareholders Equity                                              |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Notes payable to banks                                                            |                                                                                                          |      | H |      |  |      | 16,231       |       |  |  | 26,548  |      
|Accounts payable                                                                  |                                                                                                          |      |   |      |  |      | 61,737       |       |  |  | 67,029  |      
|Accrued expenses                                                                  |                                                                                                          |      |   |      |  |      | 69,544       |       |  |  | 55,414  |      
|Advance payments from customers                                                   |                                                                                                          |      |   |      |  |      | 6,309        |       |  |  | 6,290   |      
|Deferred revenue                                                                  |                                                                                                          |      |   |      |  |      | 11,562       |       |  |  | 8,851   |      
|Income taxes payable                                                              |                                                                                                          |      |   |      |  |      | 4,227        |       |  |  | 5,560   |      
|Current portion of long-term debt                                                 |                                                                                                          |      | I |      |  |      | 2,179        |       |  |  | 2,669   |      
|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Total current liabilities                                                         |                                                                                                          |      |   |      |  |      | 171,789      |       |  |  | 172,361 |      
|Deferred tax liabilities                                                          |                                                                                                          |      | S |      |  |      | 1,977        |       |  |  | 1,050   |      
|Long-term debt                                                                    |                                                                                                          |      | I |      |  |      | 11,720       |       |  |  | 8,175   |      
|Convertible subordinated debt                                                     |                                                                                                          |      | J |      |  |      | 130,728      |       |  |  | 109,665 |      
|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Total liabilities                                                                 |                                                                                                          |      |   |      |  |      | 316,214      |       |  |  | 291,251 |      
|Minority interest in subsidiary                                                   |                                                                                                          |      |   |      |  |      | 119,941      |       |  |  | 97,048  |      
|Shareholders Equity:                                                             |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Common shares                                                                     |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|                                                                                  | Authorized 110,000,000 shares, par value  0.04,
issued and outstanding 49,070,296 and 49,370,308 shares |      |   |      |  |      |              | 1,963 |  |  |         | 1,975 | 
|Financing preferred shares                                                        |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|                                                                                  | Authorized 8,000 shares, par value  40, none issued                                                     |      |   |      |  |      |              |      |  |  |         |      | 
|Preferred shares                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|                                                                                  | Authorized 118,000 shares, par value  40, none issued                                                   |      |   |      |  |      |              |      |  |  |         |      | 
|Capital in excess of par value                                                    |                                                                                                          |      |   |      |  |      | 252,892      |       |  |  | 254,999 |      
|Retained earnings                                                                 |                                                                                                          |      |   |      |  |      | 64,916       |       |  |  | 35,054  |      
|Accumulated other comprehensive income (loss)                                     |                                                                                                          |      |   |      |  |      | 1,139        |       |  |  | (26,486 | )    
|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Total Shareholders Equity                                                        |                                                                                                          |      | K |      |  |      | 320,910      |       |  |  | 265,542 |      
|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      
|Total Liabilities and Shareholders Equity                                        |                                                                                                          |      |   |      |  |      | 757,065      |       |  |  | 653,841 |      
|                                                                                  |                                                                                                          |      |   |      |  |      |              |       |  |  |         |      

See Notes to Consolidated Financial Statements.

F-3





---



##### Table of Contents



Consolidated Statements of Operations

|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |          |        | 
|-------------------------------------------------------------------------------------------------------------- | ------------------------ | ------- | - | ---- | - | ---- | -------- | ----------------------- | ------ |  | -------- | -------- | ------ |  | -------- | -------- | ------ | 
|                                                                                                               |                          |         |   |      |   |      |          | EUR                    
|                                                                                                               |                          |         |   |      |   |      |          |                        
|                                                                                                               |                          |         |   |      |   |      |          | Year ended December 31,
|                                                                                                               |                          |         |   |      |   |      |          |                        
|(thousands, except per share data)                                                                             |                          | Note    |   | 2000 |   | 2001 |          | 2002                   
|                                                                                                               |                          |         |   |      |   |      |          |                        
|Net sales                                                                                                      |                          |         | T |      |   |      | 935,212  |                         |        |  | 561,064  |          |        |  | 518,802  |         
|Cost of sales                                                                                                  |                          |         |   |      |   |      | (518,027 | )                       |        |  | (337,743 | )        |        |  | (328,077 | )       
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Gross profit                                                                                                   |                          |         | T |      |   |      | 417,185  |                         |        |  | 223,321  |          |        |  | 190,725  |         
|Operating expenses:                                                                                            |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Selling, general and administrative                                                                            |                          |         |   |      |   |      | (147,318 | )                       |        |  | (111,851 | )        |        |  | (108,393 | )       
|Research and development, net                                                                                  |                          |         | Q |      |   |      | (73,800  | )                       |        |  | (79,661  | )        |        |  | (88,334  | )       
|Amortization of goodwill                                                                                       |                          |         | F |      |   |      | (4,295   | )                       |        |  | (7,558   | )        |        |  |         |         
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|                                                                                                               | Total operating expenses |         |   |      |   |      |          | (225,413                | )      |  |          | (199,070 | )      |  |          | (196,727 | )     
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Earnings (loss) from operations                                                                                |                          |         | T |      |   |      | 191,772  |                         |        |  | 24,251   |          |        |  | (6,002   | )       
|Net interest and other financial income (expenses)                                                             |                          |         | R |      |   |      | (1,595   | )                       |        |  | (984     | )        |        |  | (10,416  | )       
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Earnings (loss) before income taxes, minority interest
and cumulative effect of change in accounting principle |                          |         |   |      |   |      | 190,177  |                         |        |  | 23,267   |          |        |  | (16,418  | )       
|Income taxes                                                                                                   |                          |         | S |      |   |      | (22,830  | )                       |        |  | (4,711   | )        |        |  | 1,165    |         
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Earnings (loss) before minority interest and cumulative
effect of change in accounting principle               |                          |         |   |      |   |      | 167,347  |                         |        |  | 18,556   |          |        |  | (15,253  | )       
|Minority interest                                                                                              |                          |         |   |      |   |      | (71,107  | )                       |        |  | (13,373  | )        |        |  | (15,890  | )       
|Gain on dilution of investment in subsidiary                                                                   |                          |         | L |      |   |      | 1,822    |                         |        |  | 915      |          |        |  | 1,281    |         
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Net earnings (loss) before cumulative effect of change in
accounting principle                                 |                          |         | T |      |   |      | 98,062   |                         |        |  | 6,098    |          |        |  | (29,862  | )       
|Cumulative effect of change in accounting principle, net
of tax                                                |                          |         | A |      |   |      | (3,790   | )                       |        |  |         |          |        |  |         |         
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Net earnings (loss)                                                                                            |                          |         |   |      |   |      | 94,272   |                         |        |  | 6,098    |          |        |  | (29,862  | )       
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Basic net earnings (loss) per share:                                                                           |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Net earnings (loss) before cumulative effect of change in
accounting principle                                 |                          |         |   |      |   |      | 2.09     |                         |        |  | 0.12     |          |        |  | (0.61    | )       
|Cumulative effect of change in accounting principle                                                            |                          |         | A |      |   |      | (0.08    | )                       |        |  |         |          |        |  |         |         
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Net earnings (loss)                                                                                            |                          |         |   |      |   |      | 2.01     |                         |        |  | 0.12     |          |        |  | (0.61    | )       
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Diluted net earnings (loss) per share:                                                                         |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Net earnings (loss) before cumulative effect of change in
accounting principle                                 |                          |         |   |      |   |      | 2.02     |                         |        |  | 0.12     |          |        |  | (0.61    | )       
|Cumulative effect of change in accounting principle                                                            |                          |         | A |      |   |      | (0.08    | )                       |        |  |         |          |        |  |         |         
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Net earnings (loss)                                                                                            |                          |         |   |      |   |      | 1.94     |                         |        |  | 0.12     |          |        |  | (0.61    | )       
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|Weighted average number of shares used in computing per
share amounts (in thousands):                          |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         
|                                                                                                               |                          | Basic   |   |      | V |      |          |                         | 46,810 |  |          |          | 48,944 |  |          |          | 49,170 | 
|                                                                                                               |                          | Diluted |   |      | V |      |          |                         | 48,703 |  |          |          | 49,958 |  |          |          | 49,170 | 
|                                                                                                               |                          |         |   |      |   |      |          |                         |        |  |          |          |        |  |          |         

See Notes to Consolidated Financial Statements.

F-4





---



##### Table of Contents



Consolidated Statements of Comprehensive Income

|                                   |                                                                  |      |                         |      |   |      |        |       |   |  |         |         |  
|---------------------------------- | ---------------------------------------------------------------- | ---- | ----------------------- | ---- | - | ---- | ------ | ----- | - |  | ------- | ------- | -
|                                   |                                                                  |      | EUR                    
|                                   |                                                                  |      |                        
|                                   |                                                                  |      | Year ended December 31,
|                                   |                                                                  |      |                        
|(thousands)                        |                                                                  | 2000 |                         | 2001 |   | 2002
|                                   |                                                                  |      |                         |      |   |     
|Net earnings (loss)                |                                                                  |      | 94,272                  |      |   |      | 6,098  |       |   |  | (29,862 | )      
|Other comprehensive income (loss): |                                                                  |      |                         |      |   |      |        |       |   |  |         |        
|                                   | Exchange rate changes for the year                               |      |                         | (882 | ) |      |        | 5,091 |   |  |         | (29,413 | )
|                                   | Realized and unrealized gains (losses) on derivative instruments |      |                         |     |   |      |        | (451  | ) |  |         | 1,788   |  
|                                   |                                                                  |      |                         |      |   |      |        |       |   |  |         |        
|                                   | Total other comprehensive income (loss)                          |      |                         | (882 | ) |      |        | 4,640 |   |  |         | (27,625 | )
|                                   |                                                                  |      |                         |      |   |      |        |       |   |  |         |        
|Comprehensive income (loss)        |                                                                  |      | 93,390                  |      |   |      | 10,738 |       |   |  | (57,487 | )      
|                                   |                                                                  |      |                         |      |   |      |        |       |   |  |         |        

See Notes to Consolidated Financial Statements.

Consolidated Statements of Shareholders Equity

|                                                    |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  |             |   |       |  |         |         | 
|--------------------------------------------------- | -------------------- | ---- | - | ------ |  | ------ | ---------- | --------- | ------ | --------- | --------- | ------------- | ---------- | ------ | ---------- | ------- | ---------- |  | ------- | - |  |  | ----------- | - | ----- |  | ------- | ------- | 
|                                                    |                      |      |   |        |  |        | EUR       
|                                                    |                      |      |   |        |  |        |           
|                                                    |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  | Accumulated |   | Total
|                                                    |                      |      |   |        |  |        | Number of  |           |        |           |           |               | Capital in |        | Retained   |         | other com- |  | Share- 
|                                                    |                      |      |   |        |  |        | common     |           | Common |           | excess of |               | earnings   |        | prehensive |         | holders  
|(thousands, except for number of common shares)     |                      | Note |   | shares |  | shares |            | par value |        | (deficit) |           | income (loss) |            | Equity
|                                                    |                      |      |   |        |  |        |            |           |        |           |           |               |            |       
|Balance December 31, 1999                           |                      |      |   |        |  |        | 40,107,784 |           |        |           | 182       |               |            |        | 103,443    |         |            |  | (35,454 | ) |  |  | (2,619      | ) |       |  | 65,552  |        
|Issuance of common shares:                          |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  |             |   |       |  |         |        
|                                                    | For stock options    |      |   | L      |  |        |            | 901,605   |        |           |           | 4             |            |        |            | 3,123   |            |  |         |  |  |  |             |  |       |  |         | 3,127   | 
|                                                    | Exercise of warrants |      |   | K      |  |        |            | 3,537,957 |        |           |           | 16            |            |        |            | 27,514  |            |  |         |  |  |  |             |  |       |  |         | 27,530  | 
|                                                    | Public offering      |      |   | K      |  |        |            | 4,250,000 |        |           |           | 19            |            |        |            | 119,692 |            |  |         |  |  |  |             |  |       |  |         | 119,711 | 
|Net earnings                                        |                      |      |   |        |  |        |           |           |        |           |          |               |            |        |           |         |            |  | 94,272  |   |  |  |            |   |       |  | 94,272  |        
|Fair value of put option for
structured equity line |                      |      |   |        |  |        |           |           |        |           |          |               |            |        | (988       | )       |            |  |        |   |  |  |            |   |       |  | (988    | )      
|Other comprehensive loss                            |                      |      |   |        |  |        |           |           |        |           |          |               |            |        |           |         |            |  |        |   |  |  | (882        | ) |       |  | (882    | )      
|                                                    |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  |             |   |       |  |         |        
|Balance December 31, 2000                           |                      |      |   |        |  |        | 48,797,346 |           |        |           | 221       |               |            |        | 252,784    |         |            |  | 58,818  |   |  |  | (3,501      | ) |       |  | 308,322 |        
|Issuance of common shares:                          |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  |             |   |       |  |         |        
|                                                    | For stock options    |      |   | L      |  |        |            | 272,950   |        |           |           | 3             |            |        |            | 1,847   |            |  |         |  |  |  |             |  |       |  |         | 1,850   | 
|Change in par value per share                       |                      |      | K |        |  |        |           |           |        |           | 1,739     |               |            |        | (1,739     | )       |            |  |        |   |  |  |            |   |       |  |        |        
|Net earnings                                        |                      |      |   |        |  |        |           |           |        |           |          |               |            |        |           |         |            |  | 6,098   |   |  |  |            |   |       |  | 6,098   |        
|Other comprehensive income                          |                      |      |   |        |  |        |           |           |        |           |          |               |            |        |           |         |            |  |        |   |  |  | 4,640       |   |       |  | 4,640   |        
|                                                    |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  |             |   |       |  |         |        
|Balance December 31, 2001                           |                      |      |   |        |  |        | 49,070,296 |           |        |           | 1,963     |               |            |        | 252,892    |         |            |  | 64,916  |   |  |  | 1,139       |   |       |  | 320,910 |        
|Issuance of common shares:                          |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  |             |   |       |  |         |        
|                                                    | For stock options    |      |   | L      |  |        |            | 300,012   |        |           |           | 12            |            |        |            | 2,107   |            |  |         |  |  |  |             |  |       |  |         | 2,119   | 
|Net loss                                            |                      |      |   |        |  |        |           |           |        |           |          |               |            |        |           |         |            |  | (29,862 | ) |  |  |            |   |       |  | (29,862 | )      
|Other comprehensive loss                            |                      |      |   |        |  |        |           |           |        |           |          |               |            |        |           |         |            |  |        |   |  |  | (27,625     | ) |       |  | (27,625 | )      
|                                                    |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  |             |   |       |  |         |        
|Balance December 31, 2002                           |                      |      |   |        |  |        | 49,370,308 |           |        |           | 1,975     |               |            |        | 254,999    |         |            |  | 35,054  |   |  |  | (26,486     | ) |       |  | 265,542 |        
|                                                    |                      |      |   |        |  |        |            |           |        |           |           |               |            |        |            |         |            |  |         |   |  |  |             |   |       |  |         |        

See Notes to Consolidated Financial Statements.

F-5





---



##### Table of Contents



Consolidated Statements of Cash Flows

|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |         |         |  
|---------------------------------------------------- | ---------------------------------------------------------------------------- | --------------------------------------------------------------- | -------- | ----------------------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                                     |                                                                              |                                                                 |          | EUR                    
|                                                     |                                                                              |                                                                 |          |                        
|                                                     |                                                                              |                                                                 |          | Year ended December 31,
|                                                     |                                                                              |                                                                 |          |                        
|(thousands)                                          |                                                                              | 2000                                                            |          | 2001                    |         | 2002
|                                                     |                                                                              |                                                                 |          |                         |         |     
|Cash flows from operating activities:                |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|                                                     | Net earnings (loss)                                                          |                                                                 |          | 94,272                  |         |      |         | 6,098   |         |   |         | (29,862 | )      
|                                                     | Adjustments to reconcile net earnings to net cash from
operating activities: |                                                                 |          |                         |         |      |         |         |         |   |         |         |        
|                                                     |                                                                              | Depreciation and amortization                                   |          |                         | 52,223  |      |         |         | 42,763  |   |         |         | 40,091  |  
|                                                     |                                                                              | Amortization debt issuance costs                                |          |                         | 1,575   |      |         |         | 173     |   |         |         | 1,448   |  
|                                                     |                                                                              | Cumulative effect of change in accounting principle, net of tax |          |                         | 3,790   |      |         |         |        |   |         |         |        |  
|                                                     |                                                                              | Deferred income taxes                                           |          |                         | (2,652  | )    |         |         | 1,139   |   |         |         | (5,369  | )
|                                                     |                                                                              | Minority interest                                               |          |                         | 71,107  |      |         |         | 13,373  |   |         |         | 15,890  |  
|                                                     |                                                                              | Gain on dilution of investment in subsidiary                    |          |                         | (1,822  | )    |         |         | (915    | ) |         |         | (1,281  | )
|                                                     |                                                                              | Compensation expense Employee Share Incentive Scheme ASMPT      |          |                         | 2,773   |      |         |         | 3,995   |   |         |         | 3,417   |  
|                                                     |                                                                              | Increase (decrease) in allowance for doubtful receivables       |          |                         | 7,302   |      |         |         | (1,782  | ) |         |         | (670    | )
|                                                     | Changes in other assets and liabilities:                                     |                                                                 |          |                         |         |      |         |         |         |   |         |         |        
|                                                     |                                                                              | Accounts receivable                                             |          |                         | (96,807 | )    |         |         | 103,787 |   |         |         | (10,594 | )
|                                                     |                                                                              | Inventories                                                     |          |                         | (73,462 | )    |         |         | (18,026 | ) |         |         | (3,473  | )
|                                                     |                                                                              | Other current assets                                            |          |                         | (7,984  | )    |         |         | 2,718   |   |         |         | 866     |  
|                                                     |                                                                              | Accounts payable and accrued expenses                           |          |                         | 62,901  |      |         |         | (79,424 | ) |         |         | 3,098   |  
|                                                     |                                                                              | Advance payments from customers                                 |          |                         | 9,028   |      |         |         | (7,314  | ) |         |         | 1,077   |  
|                                                     |                                                                              | Deferred revenue                                                |          |                         | 2,664   |      |         |         | (3,351  | ) |         |         | (2,443  | )
|                                                     |                                                                              | Income taxes                                                    |          |                         | 19,101  |      |         |         | (22,864 | ) |         |         | 4,195   |  
|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|Net cash provided by operating activities            |                                                                              |                                                                 | 144,009  |                         |         |      | 40,370  |         |         |   | 16,390  |        
|Cash flows from investing activities:                |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|                                                     | Capital expenditures                                                         |                                                                 |          | (71,366                 | )       |      |         | (71,563 | )       |   |         | (33,246 | )      
|                                                     | Acquisition of shares from minority shareholders                             |                                                                 |          | (75,461                 | )       |      |         |        |         |   |         |        |        
|                                                     | Acquisition of business                                                      |                                                                 |          | (96                     | )       |      |         | (20,278 | )       |   |         |        |        
|                                                     | Proceeds from sale of property, plant and equipment                          |                                                                 |          | 4,332                   |         |      |         | 621     |         |   |         | 1,578   |        
|                                                     | Sale (purchase) of marketable securities                                     |                                                                 |          | 6,214                   |         |      |         |        |         |   |         | (6      | )      
|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|Net cash used in investing activities                |                                                                              |                                                                 | (136,377 | )                       |         |      | (91,220 | )       |         |   | (31,674 | )      
|Cash flows from financing activities:                |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|                                                     | Notes payable to banks, net                                                  |                                                                 |          | (9,531                  | )       |      |         | 3,095   |         |   |         | 11,409  |        
|                                                     | Proceeds from long-term debt and subordinated debt                           |                                                                 |          | 78,466                  |         |      |         | 127,849 |         |   |         | 595     |        
|                                                     | Repayments of long-term debt and subordinated debt                           |                                                                 |          | (96,202                 | )       |      |         | (55,387 | )       |   |         | (3,139  | )      
|                                                     | Proceeds from issuance of common shares                                      |                                                                 |          | 126,813                 |         |      |         | 1,850   |         |   |         | 2,119   |        
|                                                     | Fair value of put option for structured equity line                          |                                                                 |          | (988                    | )       |      |         |        |         |   |         |        |        
|                                                     | Dividends to minority shareholders                                           |                                                                 |          | (14,173                 | )       |      |         | (29,838 | )       |   |         | (24,459 | )      
|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|Net cash provided by (used in) financing activities  |                                                                              |                                                                 | 84,385   |                         |         |      | 47,569  |         |         |   | (13,475 | )      
|Exchange rate effects                                |                                                                              |                                                                 | 635      |                         |         |      | 4,053   |         |         |   | (7,827  | )      
|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|Net increase (decrease) in cash and cash equivalents |                                                                              |                                                                 | 92,652   |                         |         |      | 772     |         |         |   | (36,586 | )      
|Cash and cash equivalents at beginning of year       |                                                                              |                                                                 | 14,153   |                         |         |      | 106,805 |         |         |   | 107,577 |        
|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|Cash and cash equivalents at end of year             |                                                                              |                                                                 | 106,805  |                         |         |      | 107,577 |         |         |   | 70,991  |        
|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|Supplemental disclosures of cash flow information    |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|Cash paid during the year for:                       |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|                                                     | Interest                                                                     |                                                                 |          | 2,257                   |         |      |         | 1,491   |         |   |         | 8,295   |        
|                                                     | Income taxes                                                                 |                                                                 |          | 6,381                   |         |      |         | 26,436  |         |   |         | 8       |        
|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|Non cash financing activities:                       |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        
|                                                     | Exercise of warrants and repayment of subordinated debt                      |                                                                 |          | 23,555                  |         |      |         |        |         |   |         |        |        
|                                                     |                                                                              |                                                                 |          |                         |         |      |         |         |         |   |         |        

See Notes to Consolidated Financial Statements.

F-6





---



##### Table of Contents



Notes to Consolidated Financial Statements

(EUR in thousands, except per share data and unless otherwise stated)

NOTE A     Summary of Significant Accounting Policies

Basis of Presentation

ASM International N.V. (ASMI or the Company) is a corporation
domiciled in the Netherlands with 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.
Effective for 2002 the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill
and Other Intangible Assets, as described in more detail below.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of ASMI and its
subsidiaries (the Company), where ASMI holds a controlling interest. The
minority interest of third parties is disclosed separately in the Consolidated
Financial Statements. All intercompany profits, transactions and balances have
been eliminated in consolidation. Intercompany profits included in inventory
are recognized in the Statement of Operations upon the sale of the respective

inventory to a third party.

Foreign Currency Translation

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 are translated into euros at
exchange rates prevailing at the end of the year. Revenues and costs relating
to the operation of such subsidiaries are translated at average 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 Statement of
Operations.

Derivative Financial Instruments

The Company uses derivative instruments to manage certain exposures to
foreign currency risks. The Companys objectives for holding derivatives are to
minimize these risks using the most effective methods to eliminate or reduce
the impact of such exposure.

The Company adopted SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended by SFAS No. 137 and SFAS No. 138, in the
first quarter of 2001. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and hedging activities, and requires that
all derivatives, including foreign currency exchange contracts, be recognized
on the balance sheet at fair value. 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. All of the Companys derivative
financial instruments are recorded at their fair value in other current assets
or accrued expenses. The transition adjustment upon adoption of SFAS No. 133 in
2001 was not material.

ASMI and its subsidiaries conduct business in a number of foreign
countries, with certain transactions denominated in other currencies than the
functional currency of the respective subsidiary

F-7





---



##### Table of Contents



conducting the business. The purpose of the Companys foreign currency
management is to manage the effect of exchange rate fluctuations on certain
foreign currency denominated revenues, costs and eventual cash flows. The terms
of currency instruments used for hedging purposes are generally consistent with
the timing of the transactions being hedged. The Company does not use
derivative financial instruments for trading or speculative purposes. The
Company uses derivative financial instruments, such as forward exchange
contracts, to hedge certain forecasted foreign currency denominated sales and
purchase transactions expected to occur within the next twelve months. As a
policy the Company only hedges forecasted foreign currency transactions for
which we have a firm commitment from a customer or to a supplier. In accordance
with SFAS No. 133, these 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 other comprehensive
income in Shareholders Equity, and is reclassified into earnings when the
hedged transaction affects earnings. All amounts included in other
comprehensive income at December 31, 2002 will be reclassified to earnings
within twelve months upon completion of the underlying transaction. 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 net interest and other financial income (expenses) in the
Statement of Operations.

Furthermore, the Company continues to manage the currency exposure of
certain receivables and payables using derivative instruments, such as forward
exchange contracts and currency swaps, and nonderivative 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 the foreign currency
receivables and payables. The derivative instruments are recorded at fair value
and changes in fair value are recorded in earnings under net interest and other
financial income (expenses) on the Statement of Operations. Foreign currency
receivables and payables 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 net interest and other financial income (expenses) on the
Statement of Operations.

Gains or losses recognized resulting from the ineffectiveness of cash flow
and fair value hedges were not material for the years ended December 31, 2001
and 2002.

Revenue Recognition

Effective January 1, 2000 the Company adopted new guidance on revenue
recognition as is described in Staff Accounting Bulletin No. 101 Revenue
Recognition in Financial Statements (SAB 101), issued by the staff of the
Securities and Exchange Commission (the SEC) in December 1999.

Net revenues include product revenues derived primarily from sales of
Front-end and Back-end equipment used by both segments of the semiconductor
equipment market. The Company recognizes revenue from equipment sales upon
shipment of its products when it is proven prior to shipment that the equipment
has met all of the customers criteria and specifications. The installation
process is not believed to be essential to the functionality of the products.
However, since under most of the sales contracts, the timing of payment of a
portion of the sales price is coincident with installation, such installation
is not considered to be inconsequential or perfunctory under the guidance of
SAB 101. Therefore, at the time of shipment, the Company defers that portion of
the sales price related to the fair value of installation at the time of
shipment. The Company believes it has an enforceable claim for that portion of
the sales price not related to the fair value of the installation should it not
fulfill its installation obligation. The fair value of the installation process
is measured based upon the per-hour amounts charged by third parties for
similar installation services. When the Company can only satisfy the customer
acceptance criteria or specifications at the customers location, revenue is
deferred until final acceptance by the customer or until contractual conditions
lapse. The Company provides training and technical

F-8





---



##### Table of Contents



support to customers. Revenue related to such services is recognized when
the service is completed. Revenue from the sale of spare parts and materials is
recognized when the goods are shipped.

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.

Marketable Securities

All investments in marketable securities are classified as available for
sale which requires to report these investments at fair market value and record
the unrealized gains and losses, after tax, as a component of Shareholders
Equity. In the accompanying Consolidated Financial Statements the marketable
securities are carried at cost which approximates fair market value. Realized
gains and losses on securities sold are included in net earnings.

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
factory production overhead.

Property, Plant and Equipment

Property, plant and equipment are carried at cost, less accumulated
depreciation. 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 underlying property and the
lease term.

Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 requires that all business combinations
initiated after June 30, 2001 are accounted for under the purchase method and
addresses the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination. SFAS No. 142 addresses
the initial recognition and measurement of intangible assets acquired outside
of a business combination and the accounting for goodwill and other intangible
assets subsequent to their acquisition. SFAS No. 142 provides that intangible
assets with finite useful lives be amortized and that goodwill and intangible
assets with indefinite lives not be amortized, but will rather tested at least
annually for impairment. Goodwill represents the excess of the cost of an
acquired entity over the net of the amounts assigned to assets acquired and
liabilities assumed. The Company adopted SFAS No. 142 as of January 1, 2002,
and as of that date stopped amortizing goodwill that resulted from business
combinations completed prior to the adoption of SFAS No. 141. The Company tests
its recorded goodwill for impairment each year on December 31 or if an event
occurs or circumstances change that would indicate that the carrying amount
exceeds the fair value of the goodwill. Based on the tests performed no
impairment loss was recorded upon adoption of this standard as of January 1,
2002, and as of December 31, 2002.

F-9





---



##### Table of Contents



Strategic Investments

ASMI has certain strategic minority investments in non publicly traded
companies. These investments are included in other assets on the Consolidated
Balance Sheet. Investments with a capital investment of 20% or more are valued
using the equity method of accounting. Investments with a capital investment of
less than 20% are carried at cost. ASMI monitors these investments for
impairment and makes appropriate reductions in carrying values when necessary.

Recoverability of Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, long-lived assets and certain recognized
intangible assets (except those not being amortized) to be held and used by
the Company, and to long-lived assets and certain recognized intangible assets
(including those not being amortized) to be disposed of, are required to be
reviewed 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 and its eventual
disposition. 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. Generally, long-lived assets and certain identifiable
intangibles to be disposed of are reported at the lower of carrying amount or
fair value less cost to sell.

Income Taxes

The Company accounts for income taxes under the provisions of SFAS No.
109, Accounting for Income Taxes. SFAS No. 109 requires recognition of
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 carryforwards. 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 Statement of Operations in the period in which the enacted rate changes.
Deferred tax assets and liabilities are reduced through the establishment of 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.

Stock-Based Compensation

ASMI accounts for its stock option and stock-based compensation plans
using the intrinsic-value method prescribed in Accounting Principles Board
Opinion (APB) No. 25, Accounting for Stock Issued to Employees.
Accordingly, ASMI computes compensation costs for each employee stock option
granted as the amount by which the estimated fair value of the ASMI common
shares on the date of the grant exceeds the amount the employee must pay to
acquire the shares. As required by SFAS No. 123, Accounting for Stock-Based
Compensation, ASMI has included, in Note L, the required SFAS No. 123 pro
forma disclosures of net income (loss) and earnings (loss) per share as if the
fair value-based method of accounting had been applied.

Research and Development Expenses

Research and development costs are expensed as incurred. Costs, which
relate to prototype and experimental models, which 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.
Technical development

F-10





---



##### Table of Contents



credits (Technische Ontwikkelings Kredieten or TOK), received from the
government of the Netherlands, to offset the cost of certain research and
development projects are contingently repayable to the extent sales of
equipment developed in such projects occur. 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 (see Note Q).

Sales 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, and other
qualifying issuances as discussed in the SECs Staff Accounting Bulletin
Accounting for Sales of Stock by a Subsidiary (SAB 51), in the Statement of
Operations as a gain (loss) on dilution of investment in subsidiary.

Change in Presentation of Dividend Payable to Minority Shareholders

In 2002 the Company changed its accounting of the proposed dividend
payable of its 54.11% subsidiary ASMPT, following the adoption of such change
in the principal financial statements of the subsidiary ASMPT. The proposed
dividend to minority shareholders, previously recognized as a liability at the
balance sheet date, is now recorded as part of minority interest in
subsidiary instead of accrued expenses, and is recognized as a liability
when such dividend is declared by the general meeting of shareholders of ASMPT.
The comparative amounts for prior years in the Balance Sheet and the Statement
of Cash Flows have been restated retroactively to reflect a consistent
representation. The change in presentation did not have an impact on the
Companys Shareholders Equity and net earnings.

Cumulative Effect of Change in Accounting Principle

As more fully described under Revenue Recognition, the Company adopted the
guidance outlined in SAB 101. The new method of revenue recognition was adopted
as of January 1, 2000 and has been applied retroactively to revenue earned in
prior years. The adjustment of  3,790 to apply retroactively the new method is
included in the Statement of Operations for the year ended December 31, 2000.

Use of Estimates

The preparation of the Companys Consolidated Financial Statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the balance
sheet dates and the reported amounts of revenue and expense during the reported
periods. Actual results could differ from those estimates.

Reclassifications

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

New Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143 Accounting for Asset
Retirement Obligations. SFAS No. 143 establishes accounting standards for the
recognition and measurement of legal obligations associated with the retirement
of tangible long-lived assets and requires recognition of a liability for an

F-11





---



##### Table of Contents



asset retirement obligation in the period in which it is incurred. The
provisions of this statement are effective for financial statements issued for
fiscal years beginning after June 15, 2002. The adoption of SFAS
No. 143 did
not have a material impact on the Companys financial position or results of
operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement defines the
accounting and reporting for costs associated with exit or disposal activities
and is effective for exit and disposal activities that are initiated after
December 31, 2002. The Company does not anticipate that the adoption of SFAS
No. 146 will have a material impact on the Companys financial position or
results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation, Transition and Disclosure. SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. SFAS No. 148
also requires that disclosures of the pro forma effect of using the fair value
method of accounting for stock-based employee compensation be displayed more
prominently and in a tabular format. Additionally, SFAS No. 148 requires
disclosure of the pro forma effect in interim financial statements. The
transition and annual disclosure requirements of SFAS No. 148 are effective for
fiscal year 2002. SFAS No. 148 does not have a material effect on its financial
position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. The disclosure provisions of
FIN 45 are effective for financial statements of interim or annual periods that
end after December 15, 2002. The provisions for initial recognition and
measurement are effective on a prospective basis for guarantees that are issued
or modified after December 31, 2002, irrespective of a guarantors year-end.
The Company is currently evaluating the effect that the adoption of FIN 45 will
have on its financial position or results of operations.

In November 2002, the EITF reached a consensus on Issue 00-21, Revenue
Arrangements with Multiple Deliverables. The provisions of EITF 00-21 will
apply to revenue arrangements entered into in fiscal periods beginning after
June 15, 2003. The Company is currently evaluating the effect that the adoption
of EITF 00-21 will have on its financial position or results of operations.

F-12





---



##### Table of Contents



NOTE B     List of Significant Subsidiaries and Equity Investees

|                                                               |  |                                                   |  |  |  |                          |        |      |  |  |        |  
|-------------------------------------------------------------- |  | ------------------------------------------------- |  |  |  | ------------------------ | ------ | ---- |  |  | ------ | -
|                                                               |  |                                                   |  |  |  | % Ownership December 31,
|                                                               |  |                                                   |  |  |  |                         
|Name                                                           |  | Location                                          |  |  |  | 2001                     |        | 2002
|                                                               |  |                                                   |  |  |  |                          |        |     
|ASM Europe B.V.(1)                                             |  | Bilthoven, The Netherlands                        |  |  |  |                          | 100.00 | %    |  |  | 100.00 | %
|ASM United Kingdom Sales B.V.
(1)                              |  | Bilthoven, The Netherlands                        |  |  |  |                          | 100.00 | %    |  |  | 100.00 | %
|ASM Germany Sales B.V. (1)                                     |  | Bilthoven, 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                                          |  | Espoo, Finland                                    |  |  |  |                          | 100.00 | %    |  |  | 100.00 | %
|ASM America, Inc.                                              |  | Phoenix, Arizona, USA                             |  |  |  |                          | 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 Hsien, Taiwan                            |  |  |  |                          | 100.00 | %    |  |  | 100.00 | %
|ASM Korea Ltd.                                                 |  | SungNam-City, Korea                               |  |  |  |                          | 100.00 | %    |  |  | 100.00 | %
|NanoPhotonics AG                                               |  | Mainz, Germany                                    |  |  |  |                          | 24.00  | %    |  |  | 24.00  | %
|ASM Pacific Technology Ltd.                                    |  | Kwai Chung, Hong Kong, Peoples
Republic of China |  |  |  |                          | 54.36  | %    |  |  | 54.11  | %
|ASM Assembly Automation Ltd.                                   |  | Kwai Chung, Hong Kong, Peoples
Republic of China |  |  |  |                          | 54.36  | %    |  |  | 54.11  | %
|ASM Assembly Materials Ltd.                                    |  | Kwai Chung, Hong Kong, Peoples
Republic of China |  |  |  |                          | 54.36  | %    |  |  | 54.11  | %
|ASM Technology Singapore Pte Ltd.                              |  | Singapore                                         |  |  |  |                          | 54.36  | %    |  |  | 54.11  | %
|Shenzhen ASM Micro Electronic
Technology Co. Ltd.              |  | Shenzhen, Peoples Republic of
China              |  |  |  |                          | 54.36  | %    |  |  | 54.11  | %

(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.

The names of certain relative insignificant subsidiaries have not been
mentioned. With the exception of the equity investment in NanoPhotonics AG, the
accounts of the above mentioned subsidiaries have been included in the
Consolidated Financial Statements.

NOTE C     Cash and Cash Equivalents, Marketable Securities

At December 31, 2002, cash and cash equivalents and marketable securities
of the Companys subsidiary ASMPT amounting to  57,115 are restricted to use
in the operations of this company only.

F-13





---



##### Table of Contents



NOTE D     Inventories

Inventories consist of the following:

|                             |  |              |         |      |  |  |         | 
|---------------------------- |  | ------------ | ------- | ---- |  |  | ------- | 
|                             |  | December 31,
|                             |  |             
|                             |  | 2001         |         | 2002
|                             |  |              |         |     
|Components and raw materials |  |              | 85,864  |      |  |  | 73,902  | 
|Work in process              |  |              | 83,854  |      |  |  | 72,056  | 
|Finished goods               |  |              | 36,309  |      |  |  | 39,794  | 
|                             |  |              |         |      |  |  |         | 
|Total inventories            |  |              | 206,027 |      |  |  | 185,752 | 
|                             |  |              |         |      |  |  |         | 

NOTE E     Property, Plant and Equipment

|                                    |                           |  |               |        |              |  |         |         |   |  |         |         |  
|----------------------------------- | ------------------------- |  | ------------- | ------ | ------------ |  | ------- | ------- | - |  | ------- | ------- | -
|                                    |                           |  | Land,         |        | Machinery,   |  |         |         |  
|                                    |                           |  | buildings     |        | equipment,   |  |         |         |  
|                                    |                           |  | and leasehold |        | furniture    |  |         |         |  
|                                    |                           |  | improvements  |        | and fixtures |  | Total  
|                                    |                           |  |               |        |              |  |        
|At cost:                            |                           |  |               |        |              |  |         |         |   |  |         |        
|Balance January 1, 2002             |                           |  | 101,483       |        |              |  | 294,851 |         |   |  | 396,334 |        
|                                    | Capital expenditures      |  |               | 4,471  |              |  |         | 28,775  |   |  |         | 33,246  |  
|                                    | Retirements and sales     |  |               | (2,623 | )            |  |         | (13,667 | ) |  |         | (16,290 | )
|                                    | Reclassifications         |  |               | (8,046 | )            |  |         | 8,046   |   |  |         |        |  
|                                    | Translation effect        |  |               | (8,912 | )            |  |         | (41,959 | ) |  |         | (50,871 | )
|                                    |                           |  |               |        |              |  |         |         |   |  |         |        
|Balance December 31, 2002           |                           |  | 86,373        |        |              |  | 276,046 |         |   |  | 362,419 |        
|                                    |                           |  |               |        |              |  |         |         |   |  |         |        
|Accumulated depreciation:           |                           |  |               |        |              |  |         |         |   |  |         |        
|Balance January 1, 2002             |                           |  | 48,044        |        |              |  | 157,209 |         |   |  | 205,253 |        
|                                    | Depreciation for the year |  |               | 6,078  |              |  |         | 34,013  |   |  |         | 40,091  |  
|                                    | Retirements and sales     |  |               | (2,619 | )            |  |         | (12,095 | ) |  |         | (14,714 | )
|                                    | Reclassifications         |  |               | 131    |              |  |         | (131    | ) |  |         |        |  
|                                    | Translation effect        |  |               | (6,425 | )            |  |         | (22,287 | ) |  |         | (28,712 | )
|                                    |                           |  |               |        |              |  |         |         |   |  |         |        
|Balance December 31, 2002           |                           |  | 45,209        |        |              |  | 156,709 |         |   |  | 201,918 |        
|                                    |                           |  |               |        |              |  |         |         |   |  |         |        
|Property, plant and equipment, net: |                           |  |               |        |              |  |         |         |   |  |         |        
|                                    | January 1, 2002           |  |               | 53,439 |              |  |         | 137,642 |   |  |         | 191,081 |  
|                                    | December 31, 2002         |  |               | 41,164 |              |  |         | 119,337 |   |  |         | 160,501 |  
|                                    |                           |  |               |        |              |  |         |         |   |  |         |        

|                       |  |                                        |  |      
|---------------------- |  | -------------------------------------- |  | -----
|Useful lives in years: |  | - Buildings and leasehold improvements |  | 10-25
|                       |  | - Machinery and equipment              |  | 2-10 
|                       |  | - Furniture and fixtures               |  | 2-10 

F-14





---



##### Table of Contents



NOTE F     Goodwill

The changes in the amount of goodwill for the year ended December 31, 2002 are as follows:

|                          |  |      |         |              |  |             |         |          |  |  |        |  
|------------------------- |  | ---- | ------- | ------------ |  | ----------- | ------- | -------- |  |  | ------ | -
|                          |  |      |         |              |  | Accumulated |         | Carrying
|                          |  | Cost |         | amortization |  | amount     
|                          |  |      |         |              |  |            
|Balance January 1, 2001   |  |      | 73,069  |              |  |             | (4,556  | )        |  |  | 68,513 |  
|Amortization              |  |      |        |              |  |             | (7,558  | )        |  |  | (7,558 | )
|Translation effect        |  |      | 3,671   |              |  |             | (320    | )        |  |  | 3,351  |  
|Balance January 1, 2002   |  |      | 76,740  |              |  |             | (12,434 | )        |  |  | 64,306 |  
|Translation effect        |  |      | (11,600 | )            |  |             | 1,823   |          |  |  | (9,777 | )
|                          |  |      |         |              |  |             |         |          |  |  |        |  
|Balance December 31, 2002 |  |      | 65,140  |              |  |             | (10,611 | )        |  |  | 54,529 |  
|                          |  |      |         |              |  |             |         |          |  |  |        |  

The allocation of the carrying amount of goodwill is as follows:

|                            |  |              |        |      |  |  |        | 
|--------------------------- |  | ------------ | ------ | ---- |  |  | ------ | 
|                            |  | December 31,
|                            |  |             
|                            |  | 2001         |        | 2002
|                            |  |              |        |     
|Front-end segment:          |  |              |        |      |  |  |        | 
|ASM Microchemistry Oy       |  |              | 3,560  |      |  |  | 3,560  | 
|NanoPhotonics AG            |  |              | 328    |      |  |  | 328    | 
|Back-end segment:           |  |              |        |      |  |  |        | 
|ASM Pacific Technology Ltd. |  |              | 60,418 |      |  |  | 50,641 | 
|                            |  |              |        |      |  |  |        | 
|Total                       |  |              | 64,306 |      |  |  | 54,529 | 
|                            |  |              |        |      |  |  |        | 

ASM Pacific Technology Ltd. (ASMPT)

In 2000 the Company purchased in various transactions 5.0% of the
outstanding common shares of ASMPT to maintain a majority interest in the
shares of ASMPT of 54.88% after the 5.0% acquisition. The total purchase price
of the acquired shares amounted to  74,757. The acquisition of these shares
was accounted for using the purchase method and the excess of the purchase
price over the fair value of the underlying net assets acquired in the amount
of  64,985 has been recorded as goodwill. The fair value approximated the book
value of such assets and liabilities of ASMPT at the date of purchase. The pro
forma impact on the Statement of Operations for the year ended December 31,
2000, based on the assumption that the Company acquired the total additional
5.0% interest in ASMPT as of January 1, 2000, was a decrease on minority
interest and an increase in net earnings of  3,182. The pro forma impact on
basic and diluted earnings per share for the year ended December 31, 2000 was 
0.07.

ASM Microchemistry Oy

In July 1999, the Company acquired all the outstanding shares of
Microchemistry Oy. The acquisition was accounted for using the purchase method.
Total consideration paid amounted to FIM (Finnish Marks) 23.2 million or 
3,868 and after adding the assets deficiency the recorded goodwill totaled 
4,747.

NanoPhotonics AG

In December 1999, the Company acquired a 24.0% interest in NanoPhotonics
AG, a German supplier of precision thin film metrology equipment, for  407. An
officer of the Company also purchased a 44.5% interest in NanoPhotonics. The
Company has a five-year option to purchase the 44.5% interest from the officer
at the same price he paid for his interest in the initial transaction. In
exchange for this option, the Company granted the officer a five-year option to
purchase 25,000 common shares in ASMI at the fair market value of the shares at
the option grant date.

F-15





---



##### Table of Contents



Upon adoption of SFAS No. 142 as of January 1, 2002, the Company stopped
amortizing goodwill that resulted from business acquisitions. The Company tests
its recorded goodwill for impairment each year on December 31 or if an event
occurs or circumstances change that would indicate that the fair value of the
goodwill exceeds its carrying amount. Based on the tests performed no
impairment loss was recorded upon adoption of this standard as of January 1,
2002, and as of December 31, 2002.

A reconciliation of previously reported net earnings and earnings per
share to the amounts adjusted for the exclusion of goodwill amortization is as
follows:

|                                               |  |                         |        |      |  |      |        |  |  |  |         |  
|---------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  |  | ------- | -
|                                               |  | Year ended December 31,
|                                               |  |                        
|                                               |  | 2000                    |        | 2001 |  | 2002
|                                               |  |                         |        |      |  |     
|Reported net earnings (loss)                   |  |                         | 94,272 |      |  |      | 6,098  |  |  |  | (29,862 | )
|Add back: amortization of goodwill             |  |                         | 4,295  |      |  |      | 7,558  |  |  |  |        |  
|                                               |  |                         |        |      |  |      |        |  |  |  |         |  
|Adjusted net earnings (loss)                   |  |                         | 98,567 |      |  |      | 13,656 |  |  |  | (29,862 | )
|Reported basic net earnings (loss) per share   |  |                         | 2.01   |      |  |      | 0.12   |  |  |  | (0.61   | )
|Amortization of goodwill per share             |  |                         | 0.09   |      |  |      | 0.16   |  |  |  |        |  
|                                               |  |                         |        |      |  |      |        |  |  |  |         |  
|Adjusted basic net earnings (loss) per share   |  |                         | 2.10   |      |  |      | 0.28   |  |  |  | (0.61   | )
|Reported diluted net earnings (loss) per share |  |                         | 1.94   |      |  |      | 0.12   |  |  |  | (0.61   | )
|Amortization of goodwill per share             |  |                         | 0.09   |      |  |      | 0.15   |  |  |  |        |  
|                                               |  |                         |        |      |  |      |        |  |  |  |         |  
|Adjusted diluted net earnings (loss) per share |  |                         | 2.03   |      |  |      | 0.27   |  |  |  | (0.61   | )
|                                               |  |                         |        |      |  |      |        |  |  |  |         |  

NOTE G     Other Assets

Other assets consist of the following:

|                          |  |                    |        |                |  |              |        |   |  |  |        |  
|------------------------- |  | ------------------ | ------ | -------------- |  | ------------ | ------ | - |  |  | ------ | -
|                          |  | Strategic minority |        | Debt           |  | Total       
|                          |  | investments        |        | issuance costs |  | other assets
|                          |  |                    |        |                |  |             
|Balance January 1, 2001   |  |                    |       |                |  |              |       |   |  |  |       |  
|Additions                 |  |                    | 20,278 |                |  |              | 6,150  |   |  |  | 26,428 |  
|Amortization              |  |                    |       |                |  |              | (173   | ) |  |  | (173   | )
|Translation
effect        |  |                    |       |                |  |              | (14    | ) |  |  | (14    | )
|Balance January 1, 2002   |  |                    | 20,278 |                |  |              | 5,963  |   |  |  | 26,241 |  
|Amortization              |  |                    |       |                |  |              | (1,448 | ) |  |  | (1,448 | )
|Translation effect        |  |                    |       |                |  |              | (804   | ) |  |  | (804   | )
|                          |  |                    |        |                |  |              |        |   |  |  |        |  
|Balance December 31, 2002 |  |                    | 20,278 |                |  |              | 3,711  |   |  |  | 23,989 |  
|                          |  |                    |        |                |  |              |        |   |  |  |        |  

In October 2001, the Company entered into a strategic alliance with and
made an equity investment in NuTool, Inc., a privately owned semiconductor
equipment company. The Company made an equity investment of  20,278 in this
California-based company that is a provider of innovative copper deposition
technologies, giving a total equity interest of approximately 15.4%, in NuTool,
Inc.

The debt issuance costs relate to fees incurred for the issuance of US$
115.0 million convertible subordinated notes in November and December 2001 and
are amortized by the interest method as interest cost during the life of the
debt.

F-16





---



##### Table of Contents



NOTE H     Notes Payable to Banks

Information on notes payable to banks is as follows:

Short-term debt outstanding in:

| |                 |      |              |        |  |  |        |        | 
| | --------------- | ---- | ------------ | ------ |  |  | ------ | ------ | 
| |                 |      | December 31,
| |                 |      |             
| |                 | 2001 |              | 2002  
| |                 |      |              |        | 
| | The Netherlands |      |              |       |  |  |        | 10,000 | 
| | Japan           |      |              | 16,231 |  |  |        | 16,548 | 
| |                 |      |              |        |  |  |        |       
| |                 |      | 16,231       |        |  |  | 26,548 |       
| |                 |      |              |        |  |  |        |        | 

Short-term debt outstanding in local currencies:

|                            |  |              |           |      |  |  |           | 
|--------------------------- |  | ------------ | --------- | ---- |  |  | --------- | 
|                            |  | December 31,
|                            |  |             
|                            |  | 2001         |           | 2002
|                            |  |              |           |     
|Euro                        |  |              |          |      |  |  | 10,000    | 
|Japanese yen (in thousands) |  |              | 1,877,516 |      |  |  | 2,068,502 | 
|                            |  |              |           |      |  |  |           | 

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 2.86% at December 31, 2002.

Total short-term lines of credit amounted to  169,737 at
December 31, 2002. The amount outstanding at December 31, 2002 was  26,548 and
the undrawn portion totaled
 143,189, the
utilization of which is subject to satisfaction of certain financial
and other covenants. The undrawn portion includes  48,693
relating to ASMPT, in which the Company holds a 54.11% interest, and such
amount is limited solely for use in the operations of ASMPT.

In December 2002 the Company entered into a multicurrency revolving credit
facility with a
consortium of banks in the amount of  70,000 to be utilized solely for the
Companys Front-end operations, excluding Japan. The credit facility consists
of two facilities of  35,000 each. The term of the first facility is 12 months
and the term of the second facility is 18 months. The
Companys ability to utilize the credit
facility depends on the Companys ability to maintain certain financial covenants with
respect to solvency and for its Front-end operations a minimum level of
earnings from operations plus depreciation plus dividends received from its
subsidiary ASMPT. The subsidiaries ASM America, Inc., ASM Europe B.V., ASM
Microchemistry Oy and Advanced Semiconductor Materials (Netherlands Antilles)
N.V. have issued guarantees for all obligations in connection with the credit
facility. At December 31, 2002 the amount outstanding under the facility was 
10,000 at a one-month interest rate of 4.26%. The credit facility is secured by
a varying portion of the Companys shareholding in ASMPT. The facility was a
renewal of an existing facility of
 45,000, which expired on December 27,
2002. At December 31, 2002, ASM Japan had
 33,950
available for borrowing under
its bank lines, the proceeds of which are restricted to use in the
ASM Japan
business, and ASMPT had
 48,693 of additional availability under its bank lines, the proceeds of which are restricted to use in the Back-end Segment.

At
December 31, 2002 ASMI has guaranteed available short-term
facilities of certain subsidiaries in the amount of
 50,618. The Company does not provide guarantees for borrowings of ASMPT and there are no guarantees from ASMPT to secure indebtedness of the Company. 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 affiliates.

F-17





---



##### Table of Contents



NOTE ILong-term Debt

Long-term debt consists of the following:

|                   |                                           |  |              |       |      |  |        |       | 
|------------------ | ----------------------------------------- |  | ------------ | ----- | ---- |  | ------ | ----- | 
|                   |                                           |  | December 31,
|                   |                                           |  |             
|                   |                                           |  | 2001         |       | 2002
|                   |                                           |  |              |       |     
|Term loans:        |                                           |  |              |       |      |  |        |      
|                   | Japan, 2.2-3.3%, due 2005  2006          |  |              | 2,472 |      |  |        | 1,617 | 
|                   | Finland, 1.0-3.0%, due 2003  2010        |  |              | 3,956 |      |  |        | 4,036 | 
|Mortgage loans:    |                                           |  |              |       |      |  |        |      
|                   | The Netherlands, 5.4%, due 2006           |  |              | 1,625 |      |  |        | 908   | 
|                   | Japan, 1.7-2.6%, due 2005  2006          |  |              | 3,671 |      |  |        | 2,971 | 
|Lease commitments: |                                           |  |              |       |      |  |        |      
|                   | United States, 7.2-14.0%, due 2003  2005 |  |              | 215   |      |  |        | 120   | 
|                   | Japan, 0.3-0.5%, due 2004  2005          |  |              | 1,960 |      |  |        | 1,192 | 
|                   |                                           |  |              |       |      |  |        |      
|                   |                                           |  | 13,899       |       |      |  | 10,844 |      
|Current portion    |                                           |  | (2,179       | )     |      |  | (2,669 | )    
|                   |                                           |  |              |       |      |  |        |      
|                   |                                           |  | 11,720       |       |      |  | 8,175  |      
|                   |                                           |  |              |       |      |  |        |       | 

Long-term debt outstanding in local currencies:

|                           |                                     |  |              |         |      |  |  |         | 
|-------------------------- | ----------------------------------- |  | ------------ | ------- | ---- |  |  | ------- | 
|                           |                                     |  | December 31,
|                           |                                     |  |             
|                           |                                     |  | 2001         |         | 2002
|                           |                                     |  |              |         |     
|Including current portion: |                                     |  |              |         |      |  |  |        
|                           | Euro                                |  |              | 5,581   |      |  |  | 4,944   | 
|                           | United States dollar (in thousands) |  |              | 189     |      |  |  | 126     | 
|                           | Japanese yen (in thousands)         |  |              | 937,877 |      |  |  | 722,375 | 
|                           |                                     |  |              |         |      |  |  |         | 

Aggregate annual principal repayments for years
subsequent to December 31, 2002 are:

|           |  |  |        | 
|---------- |  |  | ------ | 
|2003       |  |  | 2,669  | 
|2004       |  |  | 2,626  | 
|2005       |  |  | 3,348  | 
|2006       |  |  | 1,105  | 
|2007       |  |  | 336    | 
|Thereafter |  |  | 760    | 
|           |  |  |        | 
|           |  |  | 10,844 | 
|           |  |  |        | 

The long-term facilities offered by the Japanese banks to ASM Japan are
collateralized by the real estate and other assets of ASM Japan, with
additional parent guarantees provided by ASMI. In Finland, the long-term loans
are collateralized by machinery and equipment of ASM Microchemistry and
guaranteed by ASMI.

Lease commitments relate to commitments for equipment and machines.

F-18





---



##### Table of Contents



NOTE JConvertible Subordinated Debt

In November and December 2001, ASMI sold US$ 115.0 million in principal
amount of 5.0% convertible subordinated notes due November 15, 2005 in a
private offering. Interest is payable on May 15 and November 15 of each year.
The notes are subordinated in right of payment to our existing and future
senior debt. The notes are convertible into common shares at any time before
their maturity at a conversion rate of 53.0504 shares per each US$ 1,000
principal amount of notes, subject to adjustment in certain circumstances. This
is equivalent to an initial conversion price of US$ 18.85 per share. The
outstanding principal balance of the convertible subordinated notes amounted to
 130,728 (US$ 115.0 million) at December 31, 2001 and  109,665 (US$ 115.0
million) at December 31, 2002.

The Company may redeem, under certain conditions, some or all of the notes
at any time after November 30, 2003 at a redemption price of US$ 1,000 per US$
1,000 principal amount of notes, plus accrued and unpaid interest, if any, to,
but excluding, the redemption date, if the closing price of the Companys
common shares has exceeded 150% of the conversion price then in effect for at
least 20 trading days within a period of 30 consecutive trading days ending on
the trading day before the date of mailing of the redemption notice. ASMI is
required to make an additional payment in cash or, at ASMIs option, in common
shares, or in a combination of cash and common shares, with respect to the
notes called for redemption in an amount equal to US$ 199.44 per US$ 1,000
principal amount of notes, less the amount of any interest actually paid on the
notes before the date of redemption. In the event of a change in control, ASMI
may be required to repurchase the notes.

The notes and the common shares issuable upon conversion of the notes have
not been registered under the Securities Act of 1933. The notes were sold in
the United States of America only to qualified institutional buyers in reliance
on Rule 144A under the Securities Act of 1933.

NOTE KShareholders Equity

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
49,370,308 common shares and no preferred or financing preferred shares were
outstanding as at December 31, 2002. There are currently no preferred or
financing preferred shares issued. All shares have one vote per  0.04 par
value, except for shares the Company and its subsidiaries own, which have no
voting rights.

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 our Supervisory
Board to transfer shares. If the approval is denied, the Supervisory Board will
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 carry the right to a cumulative preferred dividend.
Financing preferred shares are also entitled to a cumulative dividend based on
the par value and share premium paid on such shares. Dividends distributable to
common shareholders are limited to retained earnings of ASMI decreased by legal
reserves of  96,096, which must be maintained. At December 31, 2002, ASMI had
no distributable retained earnings.

F-19





---



##### Table of Contents



Change in Par Value

In October 2001, the Company changed the par value per common share from
Nlg 0.01 to  0.04 par value per common share. The change resulted in an
increase of the outstanding amount of common shares and a decrease of the
capital in excess of par value of  1,739.

Warrants

In December 1998, in conjunction with the restructuring of a subordinated
convertible note with Applied Materials, Inc., the Company issued to Applied Materials,
Inc. warrants to purchase 1,500,000 common shares, at a price of US$ 5.375 per
share. In March 2000, Applied Materials, Inc. exercised the warrants and the
proceeds were used to reduce the outstanding balance of the subordinated note.

In conjunction with US$ 20 million five-year zero-bond debentures issued
on October 1, 1999, the Company issued 2,037,957 non-detachable exercise
warrants and 200,000 supplemental warrants on common shares of the Company at a
price of US$ 9.81 per share, a premium to market at the date of issuance of
20.0%. In February 2000 the 2,037,957 warrants were exercised and the
debentures were cancelled in partial payment of the exercise price of the
warrants. The remaining portion of the exercise price was fulfilled by the
investors contributing  4,903 in cash. At December 31, 2002 the 200,000
supplemental warrants have not been exercised.

Public Offering of Common Shares

In April 2000, the Company completed a public offering of 4,250,000 common
shares at a price of US$ 29.00 per share. The net proceeds amounted to 
119,711, which were used to repay outstanding loans and fund working capital
needs.

Structured Equity Line

On July 6, 2000, the Company entered into a structured equity line (the 
2000 Line) with Canadian Imperial Holdings, Inc. (CIHI). The 2000 Line
expired unused on July 6, 2002. Prior to that time, the Company entered into a
substantially identical US$ 65.0 million structured equity line with CIHI,
which expires July 6, 2003 (the 2002 Line). Under the 2002 Line, the Company
can sell up to an aggregate of US$ 65.0 million of newly issued common shares
to CIHI from time to time. The Company may sell up to US$ 10.0 million of
common shares as often as every five business days, subject to certain
limitations based on weekly trading volume. The investor has committed to
purchase these shares at market price, which is defined as the volume weighted
average trading price for the five trading days immediately preceding the date
of issuance, minus a discount of 4.5%. The investor is not obligated to
purchase shares if the purchase would cause the aggregate number of common
shares of the Company owned by the investor, including those purchased during
the previous 60 days, to exceed 9.9% of all of the issued and outstanding
common shares of the Company. The investor is also under no obligation to
purchase newly issued shares under the 2002 Line in the event that the
Companys SEC registration statement registering the sale and resale of the
shares is not effective and various other conditions precedent are not
satisfied. The Company registered with the SEC 4,330,446 shares for sale under
the 2002 Line. As of December 31, 2002 the Company had not issued any common
shares under the 2002 Line.

F-20





---



##### Table of Contents



NOTE LEmployee Stock Option Plan and Employee Share Incentive Scheme

Employee Stock Option Plan

The Company has adopted various stock option plans and has entered into
stock option agreements with various key management personnel. Under these
plans, key employees may purchase a specific number of shares of the Companys
common stock. Options are priced at market value in euros or US 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, 2002,
options to purchase 933,000 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 2,136,269 options to purchase
common stock were outstanding at December 31, 2002, expiring at various dates
through 2012.

The Company applies the intrinsic value method allowed by APB 25 in
accounting for its stock option plans. Under APB 25, compensation expense
resulting from awards under fixed plans is measured as the difference between
the market price and the exercise price at the grant date. All fixed plan
options were granted at an exercise price equal to market value at the
measurement date. Accordingly, no compensation expense has been recognized in
the Consolidated Statements of Operations pursuant to APB 25.

Following is a summary of changes in options outstanding:

|                          |                   |  |           |          |              |  |                |       |              |  |            |       |              |  |          |          |              |  |       |       |  |  |  |       | 
|------------------------- | ----------------- |  | --------- | -------- | ------------ |  | -------------- | ----- | ------------ |  | ---------- | ----- | ------------ |  | -------- | -------- | ------------ |  | ----- | ----- |  |  |  | ----- | 
|                          |                   |  |           |          |              |  | Weighted       |       | Weighted     |  |            |       |              |  | Weighted |          | Weighted    
|                          |                   |  |           |          |              |  | average        |       | average fair |  |            |       |              |  | average  |          | average fair
|                          |                   |  | Number of |          | exercise     |  | value of       |       | Number of    |  | exercise   |       | value of    
|                          |                   |  | options   |          | price in US$ |  | options in US$ |       | options      |  | price in  |       | options in 
|                          |                   |  |           |          |              |  |                |       |              |  |            |       |             
|Balance December 31, 1999 |                   |  | 2,027,600 |          |              |  | 4.58           |       |              |  |            |       |              |  | 338,800  |          |              |  | 8.72  |       |  |  |  |      
|                          | Options granted   |  |           | 200,783  |              |  |                | 14.11 |              |  |            | 10.91 |              |  |          | 120,000  |              |  |       | 13.37 |  |  |  | 9.70  | 
|                          | Options cancelled |  |           | (107,799 | )            |  |                | 3.96  |              |  |            |       |              |  |          | (1,800   | )            |  |       | 7.67  |  |  |  |       | 
|                          | Options exercised |  |           | (893,205 | )            |  |                | 2.90  |              |  |            |       |              |  |          | (8,400   | )            |  |       | 7.46  |  |  |  |       | 
|                          |                   |  |           |          |              |  |                |       |              |  |            |       |              |  |          |          |              |  |       |       |  |  |  |       | 
|Balance December 31, 2000 |                   |  | 1,227,379 |          |              |  | 7.42           |       |              |  |            |       |              |  | 448,600  |          |              |  | 9.95  |       |  |  |  |      
|                          | Options granted   |  |           | 689,983  |              |  |                | 16.83 |              |  |            | 12.34 |              |  |          | 138,500  |              |  |       | 15.46 |  |  |  | 10.99 | 
|                          | Options cancelled |  |           | (26,999  | )            |  |                | 5.47  |              |  |            |       |              |  |          | (10,650  | )            |  |       | 17.95 |  |  |  |       | 
|                          | Options exercised |  |           | (149,150 | )            |  |                | 5.00  |              |  |            |       |              |  |          | (123,800 | )            |  |       | 8.27  |  |  |  |       | 
|                          |                   |  |           |          |              |  |                |       |              |  |            |       |              |  |          |          |              |  |       |       |  |  |  |       | 
|Balance December 31, 2001 |                   |  | 1,741,213 |          |              |  | 11.38          |       |              |  |            |       |              |  | 452,650  |          |              |  | 11.96 |       |  |  |  |      
|                          | Options granted   |  |           | 155,500  |              |  |                | 14.81 |              |  |            | 10.58 |              |  |          | 180,000  |              |  |       | 14.34 |  |  |  | 9.63  | 
|                          | Options cancelled |  |           | (80,000  | )            |  |                | 10.59 |              |  |            |       |              |  |          | (13,082  | )            |  |       | 20.72 |  |  |  |       | 
|                          | Options exercised |  |           | (286,093 | )            |  |                | 6.86  |              |  |            |       |              |  |          | (13,919  | )            |  |       | 9.69  |  |  |  |       | 
|                          |                   |  |           |          |              |  |                |       |              |  |            |       |              |  |          |          |              |  |       |       |  |  |  |      
|Balance December 31, 2002 |                   |  | 1,530,620 |          |              |  | 12.61          |       |              |  |            |       |              |  | 605,649  |          |              |  | 12.53 |       |  |  |  |      
|                          |                   |  |           |          |              |  |                |       |              |  |            |       |              |  |          |          |              |  |       |       |  |  |  |       | 

F-21





---



##### Table of Contents



Had compensation cost been determined consistent with SFAS No. 123,
Accounting for Stock-Based Compensation pro forma net earnings (loss), basic
and diluted earnings (loss) per share would have been as follows:

|                                   |                                                                                                            |  |                         |        |      |  |        |        |   |  |        |         |  
|---------------------------------- | ---------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ------ | ------ | - |  | ------ | ------- | -
|                                   |                                                                                                            |  | Year ended December 31,
|                                   |                                                                                                            |  |                        
|                                   |                                                                                                            |  | 2000                    |        | 2001 |  | 2002  
|                                   |                                                                                                            |  |                         |        |      |  |       
|Expected life (years)              |                                                                                                            |  | 3 - 10                  |        |      |  | 3 - 10 |        |   |  | 3 - 10 |        
|Risk free interest rate            |                                                                                                            |  | 5.0                     | %      |      |  | 5.0    | %      |   |  | 5.0    | %      
|Dividend yield                     |                                                                                                            |  |                        |        |      |  |       |        |   |  |       |        
|Volatility                         |                                                                                                            |  | 81.0                    | %      |      |  | 88.0   | %      |   |  | 80.0   | %      
|Assumed forfeitures                |                                                                                                            |  |                        |        |      |  |       |        |   |  |       |        
|Net earnings (loss):               |                                                                                                            |  |                         |        |      |  |        |        |   |  |        |        
|                                   | As reported                                                                                                |  |                         | 94,272 |      |  |        | 6,098  |   |  |        | (29,862 | )
|                                   | Total stock-based compensation expense determined
under fair value based method, net of related tax effect |  |                         | (1,351 | )    |  |        | (3,990 | ) |  |        | (4,648  | )
|                                   |                                                                                                            |  |                         |        |      |  |        |        |   |  |        |        
|                                   | Pro forma                                                                                                  |  |                         | 92,921 |      |  |        | 2,108  |   |  |        | (34,510 | )
|Basic earnings (loss) per share:   |                                                                                                            |  |                         |        |      |  |        |        |   |  |        |        
|                                   | As reported                                                                                                |  |                         | 2.01   |      |  |        | 0.12   |   |  |        | (0.61   | )
|                                   | Pro forma                                                                                                  |  |                         | 1.98   |      |  |        | 0.04   |   |  |        | (0.70   | )
|Diluted earnings (loss) per share: |                                                                                                            |  |                         |        |      |  |        |        |   |  |        |        
|                                   | As reported                                                                                                |  |                         | 1.94   |      |  |        | 0.12   |   |  |        | (0.61   | )
|                                   | Pro forma                                                                                                  |  |                         | 1.90   |      |  |        | 0.04   |   |  |        | (0.70   | )
|                                   |                                                                                                            |  |                         |        |      |  |        |        |   |  |        |        

The average remaining contractual life of the outstanding options granted
in 2002 is 6.43 years at December 31, 2002. The number of options exercisable
at December 31, 2000 and 2001 were 773,471 and 1,011,441 respectively. At
December 31, 2002 options outstanding and options exercisable classified by
range of exercise price were:

|                    |  |                     |        |                  |                  |                  |  |                   |  |                  |        |       |  |        |  |         |  |  |  |       | 
|------------------- |  | ------------------- | ------ | ---------------- | ---------------- | ---------------- |  | ----------------- |  | ---------------- | ------ | ----- |  | ------ |  | ------- |  |  |  | ----- | 
|Options outstanding |  | Options exercisable
|                    |  |                    
|                    |  |                     | Number |                  | Weighted average |                  |  |                   |  |                  | Number |       |  |        | 
|Range of exercise   |  | outstanding at      |        | remaining        |                  | Weighted average |  | exercisable at    |  | Weighted average
|prices              |  | December 31, 2002   |        | contractual life |                  | exercise price   |  | December 31, 2002 |  | exercise price  
|                    |  |                     |        |                  |                  |                  |  |                   |  |                 
|In US$              |  |                     |        |                  |                  | In years         |  | In US$            |  |                  |        |       |  | In US$
|                    |  |                     |        |                  |                  |                  |  |                   |  |                 
|0.25 - 3.00         |  |                     |        | 48,000           |                  |                  |  | 0.92              |  |                  |        | 0.50  |  |        |  | 48,000  |  |  |  | 0.50  | 
|3.00 - 6.00         |  |                     |        | 242,338          |                  |                  |  | 4.66              |  |                  |        | 5.19  |  |        |  | 238,338 |  |  |  | 5.21  | 
|6.00 - 9.00         |  |                     |        | 278,000          |                  |                  |  | 3.69              |  |                  |        | 8.05  |  |        |  | 270,800 |  |  |  | 8.07  | 
|9.00 - 14.00        |  |                     |        | 149,000          |                  |                  |  | 8.34              |  |                  |        | 11.13 |  |        |  | 41,000  |  |  |  | 10.39 | 
|14.00 - 20.00       |  |                     |        | 747,282          |                  |                  |  | 3.86              |  |                  |        | 16.77 |  |        |  | 225,696 |  |  |  | 16.29 | 
|20.00 - 30.00       |  |                     |        | 66,000           |                  |                  |  | 8.79              |  |                  |        | 24.18 |  |        |  | 6,000   |  |  |  | 25.83 | 
|                    |  |                     |        |                  |                  |                  |  |                   |  |                  |        |       |  |        |  |         |  |  |  |       | 
|0.25 - 30.00        |  |                     |        | 1,530,620        |                  |                  |  | 4.51              |  |                  |        | 12.61 |  |        |  | 829,834 |  |  |  | 9.29  | 
|                    |  |                     |        |                  |                  |                  |  |                   |  |                  |        |       |  |        |  |         |  |  |  |       | 
|In                 |  |                     |        |                  |                  | In years         |  | In               |  |                  |        |       |  | In   
|                    |  |                     |        |                  |                  |                  |  |                   |  |                 
|6.00 - 10.00        |  |                     |        | 165,900          |                  |                  |  | 2.08              |  |                  |        | 7.53  |  |        |  | 114,900 |  |  |  | 7.57  | 
|10.00 - 15.00       |  |                     |        | 317,000          |                  |                  |  | 3.68              |  |                  |        | 12.67 |  |        |  | 82,800  |  |  |  | 12.48 | 
|15.00 - 20.00       |  |                     |        | 117,749          |                  |                  |  | 3.91              |  |                  |        | 18.60 |  |        |  | 37,933  |  |  |  | 18.87 | 
|20.00 - 30.00       |  |                     |        | 5,000            |                  |                  |  | 2.50              |  |                  |        | 26.45 |  |        |  | 2,000   |  |  |  | 26.45 | 
|                    |  |                     |        |                  |                  |                  |  |                   |  |                  |        |       |  |        |  |         |  |  |  |       | 
|6.00 - 30.00        |  |                     |        | 605,649          |                  |                  |  | 3.28              |  |                  |        | 12.53 |  |        |  | 237,633 |  |  |  | 11.24 | 
|                    |  |                     |        |                  |                  |                  |  |                   |  |                  |        |       |  |        |  |         |  |  |  |       | 

F-22





---



##### Table of Contents



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, 2012. 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 2002, 1,764,000 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 2001 and 2000,
respectively 1,782,500 and 2,828,000 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 0.25% in 2002, 0.26% in
2001, and 0.41% in 2000. The shares issued under the plan in 2002 have diluted
ASMIs ownership in ASMPT to 54.11% as of December 31, 2002. In December 2002
the management of ASMPT has determined that 1,800,000 common shares will be
allocated to employees for their services in the year 2002, which shares will
be issued in the year 2003. Total compensation expense related to the Employee
Share Incentive Scheme of ASMPT of respectively  2,773 in 2000,  3,995 in
2001, and  3,417 in 2002 were charged to the Statement of Operations. The
dilution in ownership has resulted in a gain on the investment in ASMPT of 
1,822 in 2000,  915 in 2001, and  1,281 in 2002, which gain has been
separately included in the Statement of Operations. Due to the participation
exemption in the Netherlands no deferred income taxes have been provided for
these gains.

NOTE M     Pension Plans

The Company has retirement plans covering substantially all employees. The
principal plans are defined contribution plans, except that of the Companys
Japanese operations, which is a defined benefit pension plan. The Company has
no major continuing obligations other than the payment of annual contributions.
Aggregate retirement plan contributions including those for the Japanese
operations were
 5,756 in 2000,  7,215 in 2001 and  7,924 in 2002.

Employees of the Japanese operations terminating their employment are
generally entitled to a lump-sum severance payment or to pension plan benefits
based on years of service and certain other factors. Plan assets are held by a
life insurance company. There are no unrecognized prior service costs.

The Company does not provide any post retirement benefits other than
pensions.

F-23





---



##### Table of Contents



NOTE NCommitments and Contingencies

Capital leases included in property, plant and equipment are as follows:

|                              |  |              |       |      |  |  |        |  
|----------------------------- |  | ------------ | ----- | ---- |  |  | ------ | -
|                              |  | December 31,
|                              |  |             
|                              |  | 2001         |       | 2002
|                              |  |              |       |     
|Machinery and equipment       |  |              | 2,255 |      |  |  | 1,828  |  
|Furniture and fixtures        |  |              | 426   |      |  |  | 230    |  
|                              |  |              |       |      |  |  |        |  
|                              |  |              | 2,681 |      |  |  | 2,058  |  
|Less accumulated depreciation |  |              | (904  | )    |  |  | (1,149 | )
|                              |  |              |       |      |  |  |        |  
|                              |  |              | 1,777 |      |  |  | 909    |  
|                              |  |              |       |      |  |  |        |  

The Company leases certain office and plant facilities and equipment under various operating lease
arrangements. Original non-cancelable lease terms typically are between 1 and 15 years. At December
31, 2002 minimum rental commitments under capital leases and operating leases having initial or
remaining non-cancelable terms in excess of one year are as follows:

|                                            |  |                |       |                  |  |  |        | 
|------------------------------------------- |  | -------------- | ----- | ---------------- |  |  | ------ | 
|                                            |  | Capital leases |       | Operating leases
|                                            |  |                |       |                 
|2003                                        |  |                | 641   |                  |  |  | 9,522  | 
|2004                                        |  |                | 567   |                  |  |  | 6,382  | 
|2005                                        |  |                | 182   |                  |  |  | 5,012  | 
|2006                                        |  |                | 3     |                  |  |  | 3,712  | 
|2007                                        |  |                |      |                  |  |  | 3,183  | 
|Thereafter                                  |  |                |      |                  |  |  | 12,708 | 
|                                            |  |                |       |                  |  |  |        | 
|Total                                       |  |                | 1,393 |                  |  |  | 40,519 | 
|Less amount representing interest           |  |                | (81   | )                |  |  |        | 
|                                            |  |                |       |                  |  |  |        | 
|Present value of net minimum lease payments |  |                | 1,312 |                  |  |  |        | 
|                                            |  |                |       |                  |  |  |        | 

Aggregate rental expense for operating leases in 2000 was  9,847, in 2001
 10,576 and in 2002  10,165. At December 31, 2002 the Company had entered
into purchase commitments with suppliers in the amount of  70,123 for
purchases within the next 12 months. Commitments for capital expenditures at
December 31, 2002 were  3,272.

Change of Control Transaction

If the Company desires to effect a change of control transaction with a
competitor of Applied Materials, Inc., the Company must, pursuant to a
litigation settlement transaction in 1997, first offer the change of control
transaction to Applied Materials, Inc., 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 O     Litigation 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 year.

F-24





---



##### Table of Contents



In June 2001, the Companys subsidiary, ASM America, filed a lawsuit
against Genus, Inc. in the U.S. District Court for the Northern District of
California alleging infringement of three patents involving sequential chemical
vapor deposition (U.S. Patent No. 5,916,365), methods for growing thin films
(U.S. Patent No. 6,015,590) and ASM Americas showerhead patent (U.S. Patent
No. 4,798,165), entitled Apparatus for Chemical Vapor Deposition Using an
Axially Symmetric Gas Flow. Genus responded by denying the allegations and
bringing a counterclaim against ASM America and the Company alleging antitrust
violations and infringement of U.S. Patent No. 5,294,568 involving selective
etching of native oxide. Genus antitrust claims were stayed until after trial
on the patents at issue. In August 2002, the court ruled that Genus did not
infringe the 365 patent. In January 2003, the court ruled that Genus did not
infringe the 590 patent. ASM America is considering an appeal of some elements
of these rulings. The litigation is in the discovery phase and a trial date has
been set for January 2004. The patents at issue are important to ASM America
for the development and marketing of proprietary atomic layer deposition
equipment and processes. If the court should determine that ASM Americas
patents are invalid in whole or in part, ASM Americas atomic layer deposition
program could be materially adversely affected. Given the stage of the
proceedings, it is not possible to predict the outcome of the claims and
counterclaims at this time, or the range of potential recovery or loss.

In response to a letter by Applied Materials, Inc. that the Companys
Eagle reactors infringe various Applied Materials patents, the Company and ASM
America filed a declaratory judgment action against Applied Materials, Inc. on
August 27, 2002 in the U.S. District Court for the District of Arizona. The
lawsuit seeks a declaration of non-infringement or invalidity of six Applied
Materials, Inc. patents relating to cleaning of reaction chambers and
deposition of silicon nitride. Applied Materials, Inc. responded on December
16, 2002 by denying the allegations and counterclaiming for a declaratory
judgment of infringement and validity of two of the patents related to cleaning
of reaction chambers and for damages, a preliminary or permanent injunction and
costs. Applied Materials, Inc. also moved to dismiss the complaint with respect
to four of the patents and for a more definitive statement with respect to two
of ASMIs causes of action. No trial date has been set. Given the stage of the
proceedings, it is not possible to predict the outcome of the claims and
counterclaims at this time, or the range of potential recovery or loss.

NOTE P     Financial Instruments and Risk Management

Derivatives

The Company uses forward exchange contracts to hedge certain operational
cash flow exposures resulting from changes in foreign currency exchange rates
to occur within the next twelve months. The Company enters into these foreign
exchange contracts to hedge anticipated sales or purchase transactions in the
normal course of business for which we have a firm commitment from a customer
or to a supplier. The terms of these contracts are generally consistent with
the timing of the transactions being hedged. The Company does not use such
instruments for trading or speculative purposes. The Company records changes in
the fair value of the forward exchange contracts designated as a cash flow
hedge of forecasted transactions in accumulated other comprehensive income,
until the forecasted transaction occurs. The gain or loss on the related cash
flow hedge will then be reclassified from accumulated other comprehensive
income to net sales or cost of sales in the Statement of Operations. 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 net interest and other financial income (expenses) in the
Statement of Operations.

F-25





---



##### Table of Contents



Furthermore, the Company continue to manage the currency exposure of
certain receivables and payables using derivative instruments, such as forward
exchange contracts and currency swaps, and nonderivative 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 the foreign currency
receivables and payables. The derivative instruments are recorded at fair value
and changes in fair value are recorded in earnings under net interest and other
financial income (expenses) on the Statement of Operations.

The Company estimates that  1,337 of unrealized gains included in
accumulated other comprehensive income as of December 31, 2002 will be
reclassified to net earnings within the next 12 months upon completion of the
underlying transaction. Unrealized losses at December 31, 2001 of  451 were
reclassified to earnings in 2002. Hedge ineffectiveness was insignificant for
the years ended December 31, 2001 and December 31, 2002.

The outstanding currency forward exchange contracts are as follows:

|                   |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |       |   |  | 
|------------------ | -------- |  | --- |  |  | ------- | -------------- |  | -------- | ------- | ---------- |  | -------------- | ------- | ------------- |  | ----------------- | ----- | ----------- |  |  | ----- | - |  | 
|                   |          |  |     |  |  |         | Currency       |  |          |         |            |  |                |         |               |  | Difference        |       | Included in
|                   |          |  |     |  |  |         | and notional   |  | Forward  |         |            |  |                |         | between and   |  | accumulated other
|                   |          |  |     |  |  |         | amount         |  | contract |         |            |  |                |         | forward value |  | comprehensive    
|                   |          |  |     |  |  |         | (in thousands) |  | value    |         | Fair value |  | and fair value |         | income (loss)
|                   |          |  |     |  |  |         |                |  |          |         |            |  |                |         |              
|December 31, 2001: |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |       |   | 
|Cash flow hedges:  |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |       |   | 
|                   | Purchase |  | US$ |  |  | 1,400   |                |  |          | 1,580   |            |  |                | 1,600   |               |  |                   | 20    |             |  |  | 20    |  
|                   | Sale     |  | US$ |  |  | (24,055 | )              |  |          | (26,925 | )          |  |                | (27,396 | )             |  |                   | (471  | )           |  |  | (471  | )
|Fair value hedges: |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |       |   | 
|                   | Purchase |  | US$ |  |  | 10,728  |                |  |          | 11,769  |            |  |                | 12,230  |               |  |                   | 461   |             |  |  |      |  
|                   | Sale     |  | US$ |  |  | (12,171 | )              |  |          | (13,530 | )          |  |                | (13,844 | )             |  |                   | (314  | )           |  |  |      |  
|                   |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |      
|December 31, 2002: |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |       |   | 
|Cash flow hedges:  |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |       |   | 
|                   | Purchase |  | US$ |  |  | 900     |                |  |          | 882     |            |  |                | 858     |               |  |                   | (24   | )           |  |  | (24   | )
|                   | Sale     |  | US$ |  |  | (26,334 | )              |  |          | (26,388 | )          |  |                | (25,174 | )             |  |                   | 1,214 |             |  |  | 1,361 |  
|Fair value hedges: |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |       |   | 
|                   | Purchase |  | US$ |  |  | 4,500   |                |  |          | 4,323   |            |  |                | 4,292   |               |  |                   | (31   | )           |  |  |      |  
|                   | Sale     |  | US$ |  |  | (12,349 | )              |  |          | (12,656 | )          |  |                | (11,800 | )             |  |                   | 856   |             |  |  |      |  
|                   |          |  |     |  |  |         |                |  |          |         |            |  |                |         |               |  |                   |       |             |  |  |      

Long-term Debt and Subordinated Debt

At December 31, 2002 the Company had convertible subordinated debt
borrowings outstanding of  109,665 at a fixed interest rate, maturing in
November 2005,  10,844 in long-term debt at fixed interest rates and  26,548
in other borrowings with variable short-term interest rates. 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.

F-26





---



##### Table of Contents



The fair value amounts of our long-term debt and convertible subordinated debt are as follows:

|                                          |  |          |         |       |  |          |         |       |  |  |         |  |  |  |         | 
|----------------------------------------- |  | -------- | ------- | ----- |  | -------- | ------- | ----- |  |  | ------- |  |  |  | ------- | 
|                                          |  | 2001     |         | 2002 
|                                          |  |          |         |      
|                                          |  | Carrying |         | Fair  |  | Carrying |         | Fair 
|                                          |  | amount   |         | value |  | amount   |         | value
|                                          |  |          |         |       |  |          |         |      
|Long-term debt, including current portion |  |          | 13,899  |       |  |          | 13,708  |       |  |  | 10,844  |  |  |  | 10,955  | 
|Convertible subordinated debt             |  |          | 130,728 |       |  |          | 137,608 |       |  |  | 109,665 |  |  |  | 105,003 | 
|                                          |  |          |         |       |  |          |         |       |  |  |         |  |  |  |         | 

Methods and Assumptions Used in Estimating Fair Value Disclosure for
Financial Instruments

For cash and cash equivalents, marketable securities, accounts receivable,
notes payable to banks, accounts payable and accrued expenses, the carrying
amounts approximate fair value due to their short maturities.

For long-term debt, the estimated fair values of the Companys long-term
debt are based on current interest rates available to the Company for debt
instruments with similar terms and remaining maturities.

For forward exchange contracts market values based on external quotes from
banks have been used to determine the fair value.

Credit Risk

Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted and
from movements in interest rates and foreign exchange rates. The Company does
not anticipate nonperformance by counterparties. 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
their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions. Financial instruments on the Balance
Sheet that potentially subject the Company to concentrations of credit risk
consist primarily of cash and cash equivalents and accounts receivable. The
Company maintains a policy providing for the diversification of cash and cash
equivalent investments and places its investments in high quality financial
institutions to limit the amount of credit risk exposure. The Company derives a
significant percentage of its revenue from a small number of large customers.
Our largest customer accounted for approximately 13.9% of our net sales in 2002
and our ten largest customers accounted for approximately 39.6% of our net
sales in 2002. Sales to these large customers also may fluctuate significantly
from time to time depending on the timing and level of purchases from the
Company. 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, 2002 one customer
accounted for 18.3% of the outstanding balance in accounts receivable.

NOTE Q     Research and Development

The Companys Netherlands, Finnish and Singapore operations receive
research and development grants and credits from various governmental sources.
The amount of research and development credits

F-27





---



##### Table of Contents



offset against research and development expenses amounted to  2,167, 
5,609 and  2,992 in 2000, 2001 and 2002, respectively.

Some of the research and development grants received in the Netherlands
are contingently repayable to the extent the Company recognizes sales of
products to which the credit is related. The Company does not recognize a
liability on its balance sheet in respect of these credits until it recognizes
sales of products to which the credit relates, and is then charged to cost of
sales when such sale is recorded. These repayments vary and range from 1.0% to
4.0% of the realized sales, depending on the products sold. The actual and
contingent repayments accrue at interest rates ranging from 5.0% to 8.0% per
annum. The contingent liability related to possible future repayments was 
10,124 at December 31, 2001 and  10,981 at December 31, 2002. In 2000, 2001
and 2002 the Company made TOK repayments in the amount of  1,505,  2,883 and
 23, respectively.

NOTE R     Net Interest and Other Financial Income (Expenses)

Net interest and other financial income (expenses) consists of the following:

|                                                   |  |                         |        |      |  |      |        |   |  |  |         |  
|-------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  |  | ------- | -
|                                                   |  | Year ended December 31,
|                                                   |  |                        
|                                                   |  | 2000                    |        | 2001 |  | 2002
|                                                   |  |                         |        |      |  |     
|Interest income                                    |  |                         | 4,699  |      |  |      | 3,690  |   |  |  | 1,336   |  
|Interest expenses                                  |  |                         | (8,236 | )    |  |      | (5,031 | ) |  |  | (9,627  | )
|Foreign currency transaction gains                 |  |                         | 1,942  |      |  |      | 357    |   |  |  | (2,125  | )
|                                                   |  |                         |        |      |  |      |        |   |  |  |         |  
|Net interest and other financial income (expenses) |  |                         | (1,595 | )    |  |      | (984   | ) |  |  | (10,416 | )
|                                                   |  |                         |        |      |  |      |        |   |  |  |         |  

NOTE S     Income Taxes

The components of earnings (loss) before income taxes, minority interest and
cumulative effect of change in accounting principle consist of:

|                |  |                         |         |      |  |      |        |  |  |  |         |  
|--------------- |  | ----------------------- | ------- | ---- |  | ---- | ------ |  |  |  | ------- | -
|                |  | Year ended December 31,
|                |  |                        
|                |  | 2000                    |         | 2001 |  | 2002
|                |  |                         |         |      |  |     
|The Netherlands |  |                         | (2,582  | )    |  |      | 3,958  |  |  |  | (24,223 | )
|Other countries |  |                         | 192,759 |      |  |      | 19,309 |  |  |  | 7,805   |  
|                |  |                         |         |      |  |      |        |  |  |  |         |  
|                |  |                         | 190,177 |      |  |      | 23,267 |  |  |  | (16,418 | )
|                |  |                         |         |      |  |      |        |  |  |  |         |  

The provision for income taxes consists of:

|                           |                 |  |                         |         |      |  |        |        |   |  |        |        |  
|-------------------------- | --------------- |  | ----------------------- | ------- | ---- |  | ------ | ------ | - |  | ------ | ------ | -
|                           |                 |  | Year ended December 31,
|                           |                 |  |                        
|                           |                 |  | 2000                    |         | 2001 |  | 2002  
|                           |                 |  |                         |         |      |  |       
|Current:                   |                 |  |                         |         |      |  |        |        |   |  |        |       
|                           | The Netherlands |  |                         |        |      |  |        |       |   |  |        |       |  
|                           | Other countries |  |                         | (25,809 | )    |  |        | (3,760 | ) |  |        | (4,445 | )
|                           |                 |  |                         |         |      |  |        |        |   |  |        |        |  
|                           |                 |  | (25,809                 | )       |      |  | (3,760 | )      |   |  | (4,445 | )     
|Deferred:                  |                 |  |                         |         |      |  |        |        |   |  |        |       
|                           | The Netherlands |  |                         |        |      |  |        |       |   |  |        |       |  
|                           | Other countries |  |                         | 2,979   |      |  |        | (951   | ) |  |        | 5,610  |  
|                           |                 |  |                         |         |      |  |        |        |   |  |        |        |  
|                           |                 |  | 2,979                   |         |      |  | (951   | )      |   |  | 5,610  |       
|                           |                 |  |                         |         |      |  |        |        |   |  |        |        |  
|Provision for income taxes |                 |  | (22,830                 | )       |      |  | (4,711 | )      |   |  | 1,165  |       
|                           |                 |  |                         |         |      |  |        |        |   |  |        |        |  

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

F-28





---



##### Table of Contents



taxes. A reconciliation of the provisions for income taxes and the
amounts that would be computed using the statutory Netherlands income tax rates
is set forth as follows:

|                                                                                                        |  |                         |         |      |  |      |        |   |  |  |         |  
|------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------ | - |  |  | ------- | -
|                                                                                                        |  | Year ended December 31,
|                                                                                                        |  |                        
|                                                                                                        |  | 2000                    |         | 2001 |  | 2002
|                                                                                                        |  |                         |         |      |  |     
|Earnings before income taxes, minority interest and cumulative
effect of change in accounting principle |  |                         | 190,177 |      |  |      | 23,267 |   |  |  | (16,418 | )
|Netherlands statutory tax rate                                                                          |  |                         | 35.0    | %    |  |      | 35.0   | % |  |  | 34.5    | %
|Income tax provision at statutory rate                                                                  |  |                         | (66,562 | )    |  |      | (8,143 | ) |  |  | 5,664   |  
|Non-deductible expenses                                                                                 |  |                         | (1,211  | )    |  |      | (1,391 | ) |  |  | (876    | )
|Foreign taxes at a rate other than the Netherlands
statutory rate                                       |  |                         | 21,313  |      |  |      | 4,199  |   |  |  | 6,990   |  
|Valuation allowance                                                                                     |  |                         | 98      |      |  |      | (2,923 | ) |  |  | (14,662 | )
|Non-taxable income                                                                                      |  |                         | 24,875  |      |  |      | 4,214  |   |  |  | 4,865   |  
|Other                                                                                                   |  |                         | (1,343  | )    |  |      | (667   | ) |  |  | (816    | )
|                                                                                                        |  |                         |         |      |  |      |        |   |  |  |         |  
|Provision for income taxes                                                                              |  |                         | (22,830 | )    |  |      | (4,711 | ) |  |  | 1,165   |  
|                                                                                                        |  |                         |         |      |  |      |        |   |  |  |         |  

Non-taxable income relates primarily to our manufacturing operation in
Singapore where income is non-taxable under a tax incentive scheme granted by
the Singapore tax authority. The original tax exemption applied to income for a
period of 10 years ending on December 31, 2001. In 2001, the Singapore
operation has obtained tax incentives covering certain new products for a term
of ten years as from January 1, 2002.

Deferred income taxes consist of the following:

|                          |                                  |  |              |        |      |  |         |         |  
|------------------------- | -------------------------------- |  | ------------ | ------ | ---- |  | ------- | ------- | -
|                          |                                  |  | December 31,
|                          |                                  |  |             
|                          |                                  |  | 2001         |        | 2002
|                          |                                  |  |              |        |     
|Deferred tax assets:      |                                  |  |              |        |      |  |         |        
|                          | Reserves and allowances          |  |              | 1,504  |      |  |         | 1,458   |  
|                          | Net operating loss carryforwards |  |              | 95,487 |      |  |         | 100,215 |  
|                          | Other                            |  |              | 703    |      |  |         | 239     |  
|                          |                                  |  |              |        |      |  |         |         |  
|Gross deferred tax assets |                                  |  | 97,694       |        |      |  | 101,912 |        
|Less: valuation allowance |                                  |  | (90,596      | )      |      |  | (91,532 | )      
|                          |                                  |  |              |        |      |  |         |         |  
|Net deferred tax assets   |                                  |  | 7,098        |        |      |  | 10,380  |        
|Deferred tax liabilities: |                                  |  |              |        |      |  |         |        
|                          | Depreciation                     |  |              | (5,097 | )    |  |         | (3,109  | )
|                          | Research and development credits |  |              | (3,603 | )    |  |         | (3,692  | )
|                          | Other                            |  |              | (375   | )    |  |         | (5      | )
|                          |                                  |  |              |        |      |  |         |        
|Deferred tax liabilities  |                                  |  | (9,075       | )      |      |  | (6,806  | )      
|                          |                                  |  |              |        |      |  |         |         |  
|Net deferred income taxes |                                  |  | (1,977       | )      |      |  | 3,574   |        
|                          |                                  |  |              |        |      |  |         |         |  

Deferred tax assets (liabilities) are classified in the balance sheet as follows:

|                                       |  |              |        |      |  |  |        |  
|-------------------------------------- |  | ------------ | ------ | ---- |  |  | ------ | -
|                                       |  | December 31,
|                                       |  | 2001         |        | 2002
|                                       |  |              |        |     
|Deferred
tax assets - current          |  |              |       |      |  |  | 1,843  |  
|Deferred
tax assets - non-current      |  |              |       |      |  |  | 2,781  |  
|Deferred tax liabilities - non-current |  |              | (1,977 | )    |  |  | (1,050 | )
|                                       |  |              |        |      |  |  |        |  
|                                       |  |              | (1,977 | )    |  |  | 3,574  |  
|                                       |  |              |        |      |  |  |        |  

F-29





---



##### Table of Contents



Based on tax filings, ASMI and its individual subsidiaries have net
operating losses available at December 31, 2002, of  296,555 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 loss
carryforwards, the Company believes that there is currently insufficient
evidence to substantiate recognition of substantially all net deferred tax
assets with respect to net operating loss carryforwards. Accordingly, a
valuation allowance of  90,596 in 2001 and  91,532 in 2002 has been recorded.

The amounts and expiration dates of net operating loss carryforwards for tax purposes are as follows:

|                                 |  |                   |         | 
|-------------------------------- |  | ----------------- | ------- | 
|Expiration year                  |  | December 31, 2002
|                                 |  |                  
|2003                             |  |                   | 5,186   | 
|2004                             |  |                   | 7,820   | 
|2005                             |  |                   | 538     | 
|2007                             |  |                   | 10,625  | 
|2009                             |  |                   | 1,465   | 
|2017                             |  |                   | 70,519  | 
|2018                             |  |                   | 7,051   | 
|2019                             |  |                   | 1,333   | 
|2020                             |  |                   | 1,922   | 
|2021                             |  |                   | 19,943  | 
|Unlimited                        |  |                   | 170,153 | 
|                                 |  |                   |         | 
|Net operating loss carryforwards |  |                   | 296,555 | 
|                                 |  |                   |         | 

The Company has not provided for deferred foreign withholding taxes, if
any, on undistributed earnings of its foreign subsidiaries. At December 31,
2002 undistributed earnings of subsidiaries, subject to withholding taxes, were
approximately  15,314. 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.

NOTE TDisclosures 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 ASMPT, in which the Company holds a
majority of 54.11% interest, whilst the remaining shares are listed on the
Stock Exchange of Hong Kong. The segments main operations are located in
Singapore, Hong Kong, the Peoples Republic of China and Malaysia.

F-30





---



##### Table of Contents



|                                                                               |  |           |         |          |  |       |         |   |  |  |         |  
|------------------------------------------------------------------------------ |  | --------- | ------- | -------- |  | ----- | ------- | - |  |  | ------- | -
|                                                                               |  | Front-end |         | Back-end |  | Total
|                                                                               |  |           |         |          |  |      
|Year ended December 31, 2000                                                   |  |           |         |          |  |       |         |   |  |  |         |  
|Net sales to unaffiliated customers                                            |  |           | 379,283 |          |  |       | 555,929 |   |  |  | 935,212 |  
|Gross profit                                                                   |  |           | 152,829 |          |  |       | 264,356 |   |  |  | 417,185 |  
|Earnings from operations                                                       |  |           | 34,520  |          |  |       | 157,252 |   |  |  | 191,772 |  
|Net interest and other financial income (expenses)                             |  |           | (5,560  | )        |  |       | 3,965   |   |  |  | (1,595  | )
|Income taxes                                                                   |  |           | (12,176 | )        |  |       | (10,654 | ) |  |  | (22,830 | )
|Gain on dilution of investment in subsidiary                                   |  |           | 1,822   |          |  |       |        |   |  |  | 1,822   |  
|Minority interest                                                              |  |           |        |          |  |       | (71,107 | ) |  |  | (71,107 | )
|Net earnings before cumulative effect of change in
accounting principle        |  |           | 18,606  |          |  |       | 79,456  |   |  |  | 98,062  |  
|Capital expenditures                                                           |  |           | 23,348  |          |  |       | 48,018  |   |  |  | 71,366  |  
|Depreciation and amortization                                                  |  |           | 17,850  |          |  |       | 34,373  |   |  |  | 52,223  |  
|Capitalized goodwill                                                           |  |           | 4,469   |          |  |       | 64,044  |   |  |  | 68,513  |  
|Other identifiable assets                                                      |  |           | 308,339 |          |  |       | 401,088 |   |  |  | 709,427 |  
|Total debt                                                                     |  |           | 76,276  |          |  |       | 4       |   |  |  | 76,280  |  
|                                                                               |  |           |         |          |  |       |         |   |  |  |         |  
|Year ended December 31, 2001                                                   |  |           |         |          |  |       |         |   |  |  |         |  
|Net sales to unaffiliated customers                                            |  |           | 336,625 |          |  |       | 224,439 |   |  |  | 561,064 |  
|Gross profit                                                                   |  |           | 131,788 |          |  |       | 91,533  |   |  |  | 223,321 |  
|Earnings (loss) from operations                                                |  |           | (3,771  | )        |  |       | 28,022  |   |  |  | 24,251  |  
|Net interest and other financial income (expenses)                             |  |           | (4,983  | )        |  |       | 3,999   |   |  |  | (984    | )
|Income taxes                                                                   |  |           | (2,156  | )        |  |       | (2,555  | ) |  |  | (4,711  | )
|Gain on dilution of investment in subsidiary                                   |  |           | 915     |          |  |       |        |   |  |  | 915     |  
|Minority interest                                                              |  |           |        |          |  |       | (13,373 | ) |  |  | (13,373 | )
|Net earnings (loss) before cumulative effect of change in
accounting principle |  |           | (9,995  | )        |  |       | 16,093  |   |  |  | 6,098   |  
|Capital expenditures                                                           |  |           | 49,691  |          |  |       | 21,872  |   |  |  | 71,563  |  
|Depreciation and amortization                                                  |  |           | 20,894  |          |  |       | 21,869  |   |  |  | 42,763  |  
|Capitalized goodwill                                                           |  |           | 3,888   |          |  |       | 60,418  |   |  |  | 64,306  |  
|Other identifiable assets                                                      |  |           | 376,859 |          |  |       | 315,900 |   |  |  | 692,759 |  
|Total debt                                                                     |  |           | 156,707 |          |  |       | 4,151   |   |  |  | 160,858 |  
|                                                                               |  |           |         |          |  |       |         |   |  |  |         |  
|Year ended December 31, 2002                                                   |  |           |         |          |  |       |         |   |  |  |         |  
|Net sales to unaffiliated customers                                            |  |           | 266,915 |          |  |       | 251,887 |   |  |  | 518,802 |  
|Gross profit                                                                   |  |           | 85,819  |          |  |       | 104,906 |   |  |  | 109,725 |  
|Earnings (loss) from operations                                                |  |           | (42,659 | )        |  |       | 36,657  |   |  |  | (6,002  | )
|Net interest and other financial income (expenses)                             |  |           | (10,910 | )        |  |       | 494     |   |  |  | (10,416 | )
|Income taxes                                                                   |  |           | 3,499   |          |  |       | (2,334  | ) |  |  | 1,165   |  
|Gain on dilution of investment in subsidiary                                   |  |           | 1,281   |          |  |       |        |   |  |  | 1,281   |  
|Minority interest                                                              |  |           |        |          |  |       | (15,890 | ) |  |  | (15,890 | )
|Net earnings (loss)                                                            |  |           | (48,789 | )        |  |       | 18,927  |   |  |  | (29,862 | )
|Capital expenditures                                                           |  |           | 19,706  |          |  |       | 13,540  |   |  |  | 33,246  |  
|Depreciation and amortization                                                  |  |           | 18,047  |          |  |       | 22,044  |   |  |  | 40,091  |  
|Capitalized goodwill                                                           |  |           | 3,888   |          |  |       | 50,641  |   |  |  | 54,529  |  
|Other identifiable assets                                                      |  |           | 339,703 |          |  |       | 259,609 |   |  |  | 599,312 |  
|Total debt                                                                     |  |           | 146,631 |          |  |       | 426     |   |  |  | 147,057 |  
|                                                                               |  |           |         |          |  |       |         |   |  |  |         |  

F-31





---



##### Table of Contents



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.

Segmentation of the business by geographic area, in which the Company has operating units, in sales to unaffiliated
customers and long-lived assets is summarized as follows:

|                                    |  |        |         |        |  |          |         |       |  |       |         |              |  |  |         |  |  |  |       |  |  |  |         | 
|----------------------------------- |  | ------ | ------- | ------ |  | -------- | ------- | ----- |  | ----- | ------- | ------------ |  |  | ------- |  |  |  | ----- |  |  |  | ------- | 
|                                    |  |        |         |        |  | United   |         |       |  |       |         |              |  |  |         |  |  |  |       |  |  | 
|                                    |  | Europe |         | States |  | Far East |         | Japan |  | Other |         | Consolidated
|                                    |  |        |         |        |  |          |         |       |  |       |         |             
|Year ended December 31, 2000        |  |        |         |        |  |          |         |       |  |       |         |              |  |  |         |  |  |  |       |  |  |  |         | 
|Net sales to unaffiliated customers |  |        | 91,737  |        |  |          | 126,371 |       |  |       | 554,509 |              |  |  | 162,595 |  |  |  |      |  |  |  | 935,212 | 
|Long-lived assets                   |  |        | 9,988   |        |  |          | 9,821   |       |  |       | 106,715 |              |  |  | 23,657  |  |  |  | 1,987 |  |  |  | 152,168 | 
|                                    |  |        |         |        |  |          |         |       |  |       |         |              |  |  |         |  |  |  |       |  |  |  |         | 
|Year ended December 31, 2001        |  |        |         |        |  |          |         |       |  |       |         |              |  |  |         |  |  |  |       |  |  |  |         | 
|Net sales to unaffiliated customers |  |        | 123,365 |        |  |          | 120,263 |       |  |       | 221,494 |              |  |  | 95,942  |  |  |  |      |  |  |  | 561,064 | 
|Long-lived assets                   |  |        | 21,512  |        |  |          | 49,782  |       |  |       | 110,763 |              |  |  | 27,408  |  |  |  | 1,894 |  |  |  | 211,359 | 
|                                    |  |        |         |        |  |          |         |       |  |       |         |              |  |  |         |  |  |  |       |  |  |  |         | 
|Year ended December 31, 2002        |  |        |         |        |  |          |         |       |  |       |         |              |  |  |         |  |  |  |       |  |  |  |         | 
|Net sales to unaffiliated customers |  |        | 65,611  |        |  |          | 148,732 |       |  |       | 249,615 |              |  |  | 54,844  |  |  |  |      |  |  |  | 518,802 | 
|Long-lived assets                   |  |        | 19,475  |        |  |          | 46,790  |       |  |       | 86,934  |              |  |  | 25,863  |  |  |  | 1,717 |  |  |  | 180,779 | 
|                                    |  |        |         |        |  |          |         |       |  |       |         |              |  |  |         |  |  |  |       |  |  |  |         | 

Long-lived assets includes the Companys assets in property, plant and
equipment and the Companys strategic minority interest in NuTool, Inc.

In 2002 one customer accounted for 13.9% of the total net sales. In 2001
one customer accounted for 7.2% of total net sales. In 2000 one customer
accounted for 14.2% of total net sales.

F-32





---



##### Table of Contents



NOTE USelected Operating Expenses and Additional Information

Personnel expenses for employees were as follows:

|                                   |  |                         |         |      |  |      |         |  |  |  |         | 
|---------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                                   |  | Year ended December 31,
|                                   |  |                        
|                                   |  | 2000                    |         | 2001 |  | 2002
|                                   |  |                         |         |      |  |     
|Wages, salaries and social charges |  |                         | 178,427 |      |  |      | 151,902 |  |  |  | 150,477 | 
|Pensions                           |  |                         | 5,756   |      |  |      | 7,215   |  |  |  | 7,924   | 
|                                   |  |                         |         |      |  |      |         |  |  |  |         | 
|                                   |  |                         | 184,183 |      |  |      | 159,117 |  |  |  | 158,401 | 
|                                   |  |                         |         |      |  |      |         |  |  |  |         | 

The average number of employees, exclusive of temporary workers, by geographic area during
the year was as follows:

|                         |  |                         |       |      |  |      |       |  |  |  |       | 
|------------------------ |  | ----------------------- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                         |  | Year ended December 31,
|                         |  |                        
|                         |  | 2000                    |       | 2001 |  | 2002
|                         |  |                         |       |      |  |     
|The Netherlands          |  |                         | 284   |      |  |      | 355   |  |  |  | 324   | 
|Other European countries |  |                         | 103   |      |  |      | 146   |  |  |  | 123   | 
|United States of America |  |                         | 279   |      |  |      | 343   |  |  |  | 378   | 
|Far East                 |  |                         | 5,622 |      |  |      | 5,558 |  |  |  | 5,042 | 
|Japan                    |  |                         | 203   |      |  |      | 223   |  |  |  | 238   | 
|                         |  |                         |       |      |  |      |       |  |  |  |       | 
|                         |  |                         | 6,491 |      |  |      | 6,625 |  |  |  | 6,105 | 
|                         |  |                         |       |      |  |      |       |  |  |  |       | 

NOTE VEarnings (Loss) 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:

|                                                                                                                                |         |  |                         |      |      |  |        |      |  |  |         |       |  
|------------------------------------------------------------------------------------------------------------------------------- | ------- |  | ----------------------- | ---- | ---- |  | ------ | ---- |  |  | ------- | ----- | -
|                                                                                                                                |         |  | Year ended December 31,
|                                                                                                                                |         |  |                        
|                                                                                                                                |         |  | 2000                    |      | 2001 |  | 2002  
|                                                                                                                                |         |  |                         |      |      |  |       
|Net earnings (loss) used for purpose of computing basic earnings
per share                                                      |         |  | 94,272                  |      |      |  | 6,098  |      |  |  | (29,862 | )    
|After-tax equivalent of interest expense on convertible
notes and exercisable warrants                                          |         |  | 430                     |      |      |  |       |      |  |  |        |      
|                                                                                                                                |         |  |                         |      |      |  |        |      |  |  |         |      
|Net earnings (loss) used for purposes of computing diluted net
earnings (loss) per share                                        |         |  | 94,702                  |      |      |  | 6,098  |      |  |  | (29,862 | )    
|                                                                                                                                |         |  |                         |      |      |  |        |      |  |  |         |      
|Basic weighted average number of shares outstanding at the end of
period used for purpose of computing basic earnings per share |         |  | 46,810                  |      |      |  | 48,944 |      |  |  | 49,170  |      
|Dilutive effect of stock options                                                                                                |         |  | 1,112                   |      |      |  | 922    |      |  |  |        |      
|Dilutive effect of convertible notes and exercisable warrants                                                                   |         |  | 781                     |      |      |  | 92     |      |  |  |        |      
|                                                                                                                                |         |  |                         |      |      |  |        |      |  |  |         |      
|Dilutive weighted average number of shares outstanding                                                                          |         |  | 48,703                  |      |      |  | 49,958 |      |  |  | 49,170  |      
|                                                                                                                                |         |  |                         |      |      |  |        |      |  |  |         |      
|Net earnings (loss) per share:                                                                                                  |         |  |                         |      |      |  |        |      |  |  |         |      
|                                                                                                                                | Basic   |  |                         | 2.01 |      |  |        | 0.12 |  |  |         | (0.61 | )
|                                                                                                                                | Diluted |  |                         | 1.94 |      |  |        | 0.12 |  |  |         | (0.61 | )
|                                                                                                                                |         |  |                         |      |      |  |        |      |  |  |         |      

No adjustments have been reflected in the diluted weighted average number
of shares and net loss for the year ended December 31, 2002 due to the loss
reported for the year. For the year ended December 31, 2002, the effect of 957
stock options, 6,101 conversion rights, and 112 exercisable warrants to acquire
common stock were anti-dilutive.

F-33





---



##### Table of Contents



NOTE WRelated Party Transactions

In December 1999, the Company acquired 24.0% of the outstanding equity of
NanoPhotonics AG, a German supplier of precision metrology equipment, for 
407, and our Chief Executive Officer also purchased a 44.5% interest in
NanoPhotonics AG. The Company has a five-year option to purchase the 44.5%
interest from our Chief Executive Officer at the same price he paid for his
interest in the initial transaction. At December 31, 2001 and December 31,
2002, the Company has provided NanoPhotonics AG with additional financing of 
1,176 and  2,943, respectively. In 2001 and 2002 the Company purchased
equipment from NanoPhotonics AG in the amount of  700 and  209, respectively.

In December 1997, the Company loaned its Chief Operating Officer Front-end
operations  191
(US$ 0.2 million) at an average interest rate for 2002 of 2.6%.
This interest-bearing loan is outstanding at December 31, 2002 and is repayable
upon the exercise of stock options granted to this officer or termination of
his employment.

In March 2000, the Company made an interest-bearing loan to its Chief
Executive Officer in connection with the exercise of stock options at an
average interest rate for 2002 of 4.9%. The loan amounting to  2,173 is
outstanding at December 31, 2002 and is secured by the shares received in the
stock option exercise. The Company has custody of the shares until the loan is
repaid.

In October 2001, the Company entered into a strategic alliance with and
made a 15.4% equity investment of  20,278 in NuTool, Inc., a privately held
semiconductor technology company located in Milpitas, California. The purchase
price of the investment was determined by reference to prices paid by other
recent strategic investors. NuTool, Inc. provides innovative copper deposition
technologies to the semiconductor industry. Its patented electrochemical
mechanical deposition technology offers new process solutions for copper
deposition and planarization, providing significant savings in integrated
circuit manufacturing and enabling new integrated circuit designs and new
process technologies. The strategic alliance with NuTool, Inc. provides us with
more competitive solutions to address the industrys transition to copper
metallization. The Company has a seat on the Board of NuTool, Inc. In 2002 the
Company sold equipment in the amount of  729.

The Chairman of the Supervisory Board, Mr. van den Hoek is a partner in
the European law firm of Stibbe. Another partner at Stibbe serves as the
Companys general 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.

F-34





---



##### Table of Contents



Exhibit Index (*)

|        |  |                                                                                              |  |                                                                     |  |          |  | 
|------- |  | -------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | -------- |  | 
|Exhibit |  |                                                                                              |  |                                                                     |  | Included
|Number  |  | Description                                                                                  |  | Incorporated by Reference to:                                       |  | Herein: 
|        |  |                                                                                              |  |                                                                     |  |         
|1.1     |  | English translation of ASM
International N.V.s Compiled
Articles of Association, as
amended |  | Exhibit 3.1 to Registrants
6-K filed on November 6,
2001          
|        |  |                                                                                              |  |                                                                    
|4.1     |  | 1994 Stock Option Plan                                                                       |  | Exhibit 99.1 to the
Registrants S-8 filed
October 25, 1999        
|        |  |                                                                                              |  |                                                                    
|4.2     |  | Debenture Purchase Agreement Part 1                                                          |  | Exhibit 4.2 to the
Registrants Form F-3 filed
on December 13, 1999
|        |  |                                                                                              |  |                                                                    
|4.3     |  | Debenture Purchase Agreement Part 2                                                          |  | Exhibit 4.2 to the
Registrants Form F-3 filed
on December 13, 1999
|        |  |                                                                                              |  |                                                                    
|4.4     |  | Zero Coupon Debenture                                                                        |  | Exhibit 4.3 to the
Registrants Form F-3 filed
on December 13, 1999
|        |  |                                                                                              |  |                                                                    
|4.5     |  | Common Stock Purchase Warrant                                                                |  | Exhibit 4.4 to the
Registrants Form F-3 filed
on December 13, 1999
|        |  |                                                                                              |  |                                                                    
|4.6     |  | Supplemental Common Stock Purchase
Warrant                                                   |  | Exhibit 4.5 to the
Registrants Form F-3 filed
on December 13, 1999





---



##### Table of Contents



|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | --------
|Exhibit |  |                                                                                                                                                                             |  |                                                                     |  | Included
|Number  |  | Description                                                                                                                                                                 |  | Incorporated by Reference to:                                       |  | Herein: 
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.7     |  | Registration Rights Agreement                                                                                                                                               |  | Exhibit 4.6 to the
Registrants Form F-3 filed
on December 13, 1999 |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.8     |  | Purchase Agreement dated November
14, 2001 between ASM International
N.V. and CIBC World Markets Corp.
for purchase of US$ 100 million of
5% Convertible Subordinated Notes |  | Exhibit 4.16 to the
Registrants Form 20-F/A
filed on May 10, 2002  |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.9     |  | Indenture Agreement dated November
19, 2001 between ASMI
International N.V. and Citibank,
N.A.                                                                              |  | Exhibit 4.17 to the
Registrants Form 20-F/A
filed on May 10, 2002  |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.10    |  | 2001 Stock Option Plan                                                                                                                                                      |  | Exhibit 99.1 to the
Registrants Form S-8 filed
on April 30, 2002   |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.11    |  | Equity Line Financing Agreement
between ASM International N.V. and
Canadian Imperial Holding, Inc.
(CIHI) dated July 2, 2002                                              |  | Exhibit 4.18 to the
Registrants Form F-3 filed
on July 3, 2002     |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.12    |  | Registration Rights Agreement
between ASM International N.V. and
CIHI dated July 2, 2002                                                                                    |  | Exhibit 4.19 to the
Registrants Form F-3 filed
on July 3, 2002     |  |         
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.13    |  | English translation of Robert L. de Bakkers Employment
Agreement                                                                                                           |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.14    |  | Trust Deed and Rules
of The ASM Pacific Technology Employee Share Incentive Scheme, dated
March 23, 1990                                                                    |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.15    |  | Deed of Adherence
Relating to Participation in the Employee Share Incentive Scheme of
ASM Pacific Technology Limited, dated April 12, 1999                                  |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|4.16    |  | Supplemental Deed
Relating to the Employee Share Incentive Scheme of ASM Pacific
Technology Limited                                                                         |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|8.1     |  | Subsidiaries                                                                                                                                                                |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|10.1    |  | Certificate of Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002                             |  |                                                                     |  | X       
|        |  |                                                                                                                                                                             |  |                                                                     |  |         
|10.2    |  | Certificate of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the                                                        |  |                                                                     |  | X       

- 79 -





---



##### Table of Contents



|        |  |                            |  |                               |  |         
|------- |  | -------------------------- |  | ----------------------------- |  | --------
|Exhibit |  |                            |  |                               |  | Included
|Number  |  | Description                |  | Incorporated by Reference to: |  | Herein: 
|        |  |                            |  |                               |  |         
|        |  | Sarbanes-Oxley Act of 2002 |  |                               |  |         
|        |  |                            |  |                               |  |         
|10.3    |  | Auditors Consent          |  |                               |  | X       

|  |  |                                                                                                                                                                                                                                                                                          
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* |  | Pursuant to Item 19.2(b)(1) of Form 20-F, 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.

- 80 -