<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR

[ ] 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 0-21321

                                   CYMER, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Nevada                                              33-0175463
-------------------------------                             -------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)




16750 Via Del Campo Court, San Diego, CA                           92127
----------------------------------------                    -------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number including area code: (858) 385-7300

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

Securities registered pursuant to Section 12(g) of the Act:

                                                         Name of each Exchange
     Title of each class                                  on which registered
     -------------------                                  -------------------
Common Stock, $.001 par value                            Nasdaq National Market
Preferred Share Purchase Rights                          Nasdaq National Market


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


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

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of $25 for shares of the
registrant's Common Stock on March 23, 2001 as reported on the Nasdaq
National Market, was approximately $715,636,850. In calculating such
aggregate market value, shares of Common Stock owned of record or
beneficially by officers, directors, and persons known to the registrant to
own more than five percent of the registrant's voting securities (other than
such persons of whom the Company became aware only through the filing of a
Schedule 13G filed with the Securities and Exchange Commission) were excluded
because such persons may be deemed to be affiliates. The registrant disclaims
the existence of control or any admission thereof for any other purpose.

Number of shares of Common Stock outstanding as of March 23, 2001: 29,643,748.

                       DOCUMENTS INCORPORATED BY REFERENCE
         The following document is incorporated by reference in Part III of this
Annual Report on Form 10-K: portions of registrant's proxy statement for its
annual meeting of stockholders to be held on May 17, 2001.

<PAGE>


                                   CYMER, INC.

                         2000 Annual Report on Form 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>     <C>       <C>                                                                                               <C>
PART I...............................................................................................................1
        Item 1.   Business...........................................................................................1
        Item 2.   Properties........................................................................................12
        Item 3.   Legal Proceedings.................................................................................13
        Item 4.   Submission of Matters to a Vote of Security Holders...............................................13

PART II.............................................................................................................14
        Item 5.   Market for Registrant's Common Stock and Related Stockholder Matters..............................14
        Item 6.   Selected Financial Data...........................................................................14
        Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations.............15
        Item 7A.  Quantitative and Qualitative Disclosures About Market Risk........................................31
        Item 8.   Financial Statements and Supplementary Data.......................................................32
        Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............32

PART III............................................................................................................32
        Item 10.  Directors and Executive Officers of the Registrant................................................32
        Item 11.  Executive Compensation............................................................................33
        Item 12.  Security Ownership of Certain Beneficial Owners and Management....................................33
        Item 13.  Certain Relationships and Related Transactions....................................................33

PART IV.............................................................................................................33
        Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................................33

</TABLE>

                 CYMER is a registered trademark of Cymer, Inc.


<PAGE>


         STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K THAT ARE NOT STRICTLY
HISTORICAL IN NATURE ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE,
BUT ARE NOT LIMITED TO, REFERENCES TO MANUFACTURING ACTIVITIES; EXPECTED PRODUCT
SALES AND DEVELOPMENT; SERVICE AND SUPPORT; RESEARCH AND DEVELOPMENT
EXPENDITURES; EXPECTED PRODUCT DEVELOPMENT; EXPECTED INTERNATIONAL PRODUCT
SALES, DEVELOPMENT AND REVENUE; ADEQUACY OF CAPITAL RESOURCES AND INVESTMENTS;
EFFECTS OF THE SEMICONDUCTOR BUSINESS; COMPETITIVE POSITIONING; AND CONTINUING
RELATIONSHIPS WITH THIRD-PARTY MANUFACTURERS FOR PRODUCT MANUFACTURING. THESE
STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS
"BELIEVES," "ANTICIPATES," "EXPECTS," AND WORDS OF SIMILAR IMPORT. THESE
STATEMENTS ARE ONLY PREDICTIONS BASED ON CURRENT INFORMATION AND EXPECTATIONS
AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL EVENTS OR RESULTS MAY
DIFFER MATERIALLY FROM THOSE PROJECTED IN SUCH STATEMENTS DUE TO VARIOUS
FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER THE CAPTIONS
"BUSINESS," "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," AND ELSEWHERE CONTAINED IN THIS
REPORT. CYMER ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS REPORT.


                                     PART I

ITEM 1.  BUSINESS

GENERAL

         Cymer is the world's leading supplier of excimer laser illumination
sources, the essential light source for deep ultraviolet ("DUV")
photolithography systems used in the manufacture of semiconductors. DUV
lithography is a key enabling technology which has allowed the semiconductor
industry to meet the exacting specifications and manufacturing requirements
for volume production of today's most advanced semiconductor chips. Cymer's
lasers are incorporated into step-and-repeat and step-and-scan
photolithography systems for use in the manufacture of semiconductors with
critical feature sizes below 0.35 microns. Cymer believes that its excimer
lasers constitute a substantial majority of all excimer lasers incorporated
in DUV photolithography tools. Cymer's customers include all five
manufacturers of DUV photolithography systems: ASM Lithography, Canon, Nikon,
SVG Lithography and Ultratech Stepper. Photolithography systems incorporating
Cymer's excimer lasers have been purchased by each of the world's 20 largest
semiconductor manufacturers: Advanced Micro Devices ("AMD"), Fujitsu,
Hitachi, Hyundai, IBM, Infineon, Intel, Lucent, Matsushita, Micron,
Mitsubishi, Motorola, NEC, Philips, Samsung, Sharp, Sony, ST
Microelectronics, Texas Instruments, and Toshiba. Cymer is a Nevada
corporation, incorporated on July 12, 1996.

PRODUCTS

         Cymer's products consist of photolithography light sources, replacement
parts and service.

         PHOTOLITHOGRAPHY LASER PRODUCTS

         Cymer's photolithography lasers produce narrow bandwidth pulses of
short wavelength light. The lasers permit very fine feature resolution and high
throughput. Cymer has designed its lasers to be highly reliable, easy to install
and compatible with existing semiconductor manufacturing processes.

         248 nm KrF PRODUCT FAMILY

         6000 SERIES - The 6000 Series lasers represents Cymer's most advanced
light sources within its 248 nanometer ("nm") Krypton Fluoride ("KrF") portfolio
and is designed for the production of semiconductor devices down to 130 nm (0.13
micron) design rules and below.

         ELS-6010 - The newest addition to the 6000 Series, the ELS-6010 is a 20
         watt KrF excimer laser with a repetition rate of 2500 Hertz ("Hz").
         Designed for 200 milometer ("mm") and 300 mm lithography steppers and
         scanners with greater than 0.70 Numerical Aperture ("NA") lens
         designs, the ELS-6010 is designed to be a key enabler in the production
         of semiconductor devices with 130 nm and below design rules. The
         ELS-6010 delivers advanced line-narrowed spectral bandwidth of less
         than 0.5 picometer ("pm") Full Width Half Maximum ("FWHM") and less
         than 1.4 pm (95% energy integral). The

                                       1

<PAGE>

         ELS-6010, which is based on the production proven ELS-6000(TM), also
         incorporates power and chamber module advances for superior dose
         stability improving Critical Dimension ("CD") control and process
         yield.

         ELS-6000 - The production proven ELS-6000 is a 2000 Hz excimer laser
         designed for advanced 200 mm and 300 mm steppers and scanners for the
         production of devices with 180 nm and below geometries. The 20 watt
         ELS-6000 is designed for advanced optical systems with up to 0.70 NA
         lens designs. Incorporating advances in the laser chamber, pulse power
         and optics modules, the ELS-6000 enables significant improvements in
         throughput rates and CD control through its  less than +0.4% energy
         dose stability,  less than 0.6 bandwidth FWHM, and less than 2.0 pm
         bandwidth at 95% energy integral.

         5000 SERIES - With a repetition rate of 1000 Hz, this solid state
pulse power KrF 248 nm excimer laser was engineered using modular
construction. Enabling higher device yields by delivering improved energy
stability, this series is designed specifically for use in manufacturing
semiconductors with 250 nm and smaller design rules. This series includes
three models:

         ELS-5010 - Designed for steppers and scanners with numerical apertures
         as high as 0.7, the ELS-5010 provides 10 watts of output power,
         controls bandwidth to less than 2.0 pm at 95% energy integral, and
         delivers energy dose stability to less than +0.6%.

         ELS-5005 UPGRADE - Designed for the installed base of ELS-5000 lasers,
         the upgrade contains improved, longer lifetime ELS-5010 core modules
         and can lower the laser's cost of consumables (CoC) by up to 63%
         compared to its predecessor, the ELS-5000.

         ELS-5000 - The ELS-5000 delivers 10 watts of output power and is
         designed for stepper and scanner applications with optical designs
         requiring bandwidths of less than 0.8 pm.

         EX-5000 - With 15 watts of output power, this model is used for scanner
         applications with catadioptric lens designs.

         193 nm ArF PRODUCT FAMILY

         Cymer continues to develop, and offer for sale to its customers, its
next generation argon fluoride ("ArF") excimer laser. The 193 nm ArF product
line represents Cymer's most advanced light sources within the product
portfolio and is designed for the production of semiconductor devices with
design rules below 130 nm (0.13 micron).

         NANOLITH(TM)7000 - The NanoLith 7000 is currently being developed and
has been offered to customers. The built-in laser metrology will provide
pulse-to-pulse data acquisition and feedback control to minimize transient
wavelength instabilities, thereby enhancing exposure latitude and CD-control. In
actual tests, the new laser core technology revealed a potential for up to 80%
cost of consumables (CoC) reduction compared to the ELX-5000A predecessor.
Improved thermal management in the discharge chamber and optimized gas flow
allows the NanoLith 7000 to deliver 20 watts. The NanoLith 7000 is built on an
extended version of Cymer's highly reliable ELS-6000 platform.

         ELS-6010A - The ELS-6010A is a highly line-narrowed, high power 193 nm
light source for lithography tools. The ELS-6010A has been designed to meet
resolution image contrast, and wafer throughput requirements in semiconductor
chip production at the less than 130 nm node. The shorter wavelength enables
chip design to shrink, leading to higher processor speed, more memory per
chip, and better yield per wafer. The ELS-6010A, 2kHz 10 watt ArF production
laser for 193 nm step-and-scan tool provides leading edge optical performance.
With a highly line-narrowed bandwidth, the ELS-6010A enables high contrast
imaging from lithography scanners using NA lenses. The ELS-6010A ArF laser
model incorporates new technological solutions in the area of laser discharge
chamber and wavelength stabilization, and enables tighter control of exposure
dose (less than +0.3%).

         ELX-5000A - With a repetition rate of 1000 Hz, this solid-state pulse
power excimer laser series is engineered using modular construction. Enabling
higher device yields by delivering improved energy stability, this series is
designed specifically for use in the manufacture of semiconductors with 250 nm
and smaller design rules. Designed for steppers and scanners with numerical
apertures as high as 0.70,

                                       2
<PAGE>


the ELX-5000A provides 10 watts of output power, controls bandwidth to less
than 2.0 pm at 95% energy integral, and delivers an energy dose stability to
less than +0.6%.

          Cymer's lasers incorporate advanced software control and diagnostic
systems. The control system provides users with on-line monitoring of laser
operating conditions, with diagnostic readings (including flow rate,
temperatures, pressures and light quality), that are automatically monitored by
the photolithography tool's control system. Additionally, configurable
parameters can be adjusted to optimize the laser's performance for each
customer's system. A portable computer attached to the laser logs this data,
automatically providing critical information about performance and reliability.
The lasers are also designed for easy serviceability, with most major modules
and components articulated for easy swing-out or roll-out motion to facilitate
inspection and replacement.

         Revenues generated from laser systems amounted to approximately $145.7
million, $148.9 million, and $255.8 million during 1998, 1999, and 2000,
respectively.

         REPLACEMENT PARTS

         Certain components and subassemblies included in Cymer's lasers require
replacement or refurbishment following continued operation. For example, the
discharge chamber of Cymer's lasers has an expected life of approximately one to
seven billion pulses, depending on the model. Cymer estimates that a laser used
in a semiconductor production environment will require one to two replacement
chambers per year. Similarly, certain optical components of the laser
deteriorate with continued exposure to DUV light and require periodic
replacement. Cymer provides these and other spare and replacement parts for its
photolithography lasers as needed by its customers. On a limited basis, Cymer
also refurbishes and resells complete laser systems.

         Revenues generated from replacement parts amounted to approximately
$34.8 million, $66.6 million, and $101.8 million during 1998, 1999, and 2000,
respectively.

         SERVICE

         As Cymer's installed base of lasers in production at chipmakers exceeds
the original warranty periods, some chipmakers request service contracts from
Cymer. Additionally, Cymer provides service contracts directly to semiconductor
equipment manufacturers. These contracts require Cymer to maintain and/or
service these lasers either on an on-call or regular interval basis or both.

         Revenues generated from service and service contracts amounted to
approximately $1.9 million, $2.9 million, and $7.4 million during 1998, 1999,
and 2000, respectively.

CUSTOMERS AND END USERS

         Cymer sells its photolithography laser products to each of the five
manufacturers of DUV photolithography tools:

             ASM Lithography            Nikon                Ultratech Stepper
             Canon                      SVG Lithography

         Cymer believes that maintaining and strengthening customer
relationships will play an important role in maintaining its leading position in
the photolithography market. Cymer works closely with its customers to integrate
Cymer's products into their photolithography tools. Sales to ASM Lithography,
Canon, and Nikon accounted for 30%, 19% and 28%, respectively, of total revenue
in 2000.

          Revenues generated from customers within the United States amounted
to $21.1 million, $33.0 million and $69.2 million during 1998, 1999 and 2000,
respectively. Revenues generated from customers outside of the United States
amounted to $164.0 million, $187.6 million and $298.2 million during 1998,
1999 and 2000, respectively.

                                       3

<PAGE>


          Revenues generated from customers located in Japan amounted to
$88.6 million, $81.4 million and $156.1 million during 1998, 1999 and 2000,
respectively. Revenues generated from customers located in the Netherlands
amounted to $67.9 million, $76.7 million and $89.7 million during 1998, 1999
and 2000, respectively.

         End users of Cymer's lasers include the world's 20 largest
semiconductor manufacturers. The following semiconductor manufacturers have
purchased one or more DUV photolithography tools incorporating Cymer's lasers:

<TABLE>
<CAPTION>


UNITED STATES                                     JAPAN                           TAIWAN/SOUTHEAST ASIA
-------------                                     -----                           ---------------------
<S>                                               <C>                             <C>
Advanced Micro Devices                            ASET +                          1st Silicon
Atmel                                             Epson                           Chartered Semiconductor
Agilent                                           Fujitsu                         ERSO
Conexant Systems                                  Hitachi                         HNS
Cypress                                           KMT                             Macronix
Dominion Semiconductor                            Matsushita                      Mosel
HP                                                Mitsubishi Electric             Nan-Ya
IBM                                               NEC                             PSC
Integrated Device Technology                      Nippon Foundry                  ProMOS
Intel                                             Oki Electric                    SSMC
LSI Logic Corp.                                   Rohm                            Silicon Manufacturing Partners
Agere (Lucent/Cirent)                             Sanyo                           Silterra
Maxim Integrated Products                         Sharp                           Tech Semiconductor
Micron Technology                                 Sony                            TSMC
Micrus                                            Trecenti Technologies           UMC Group
Motorola                                          ToHoku Semicon                  USC
National Semiconductor                            Toshiba                         Vanguard International
SEMATECH +                                        SELETE +                        Winbond Group
Texas Instruments
VLSI                                              EUROPE
Wafertech                                         ------
White Oak
                                                  Altis Semiconductor
KOREA                                             C-NET
-----                                             Ericsson
                                                  IMEC +
Anam-TI                                           Infineon Technologies
ETRI +                                            Philips
Hyundai                                           ST Microelectronics
Samsung                                           Siemens

</TABLE>

BACKLOG

         Cymer schedules production of lasers based upon order backlog and
informal customer forecasts. Cymer includes in backlog only those orders to
which a purchase order number has been assigned by the customer and for which
delivery has been specified within 12 months. Because customers may cancel or
delay orders with little or no penalty, Cymer's backlog as of any particular
date may not be a reliable indicator of actual sales for any succeeding period.
At December 31, 2000, Cymer had a backlog of approximately $132.7 million
compared with a backlog of $102.7 million at December 31, 1999.

-------------------
+ A semiconductor industry consortium.

                                       4
<PAGE>


MANUFACTURING

         Cymer's manufacturing activities consist of material management,
assembly, integration and testing. These activities are performed in a 124,000
square foot facility in San Diego, California that includes approximately 31,000
square feet of class 1000 clean room manufacturing and test space. In order to
focus its own resources, capitalize on the expertise of its key suppliers and
respond more efficiently to customer demand, Cymer has outsourced the
manufacturing of many of its subassemblies. Cymer's outsourcing strategy is
exemplified by the modular design of Cymer's 5000 and 6000 series lasers, for
which substantially all of the nonproprietary subassemblies have been
outsourced. Cymer believes that the highly outsourced content and manufacturable
design of the 5000 and 6000 series lasers allows for reduced manufacturing cycle
times and increased output per employee.

         To improve current production efficiencies, costs, and manage overall
manufacturing capacity, Cymer intends to continue to provide additional training
to manufacturing personnel, improve its assembly and test processes in order to
reduce cycle time, invest in additional manufacturing tooling and further
develop its supplier management and engineering capabilities. Cymer is also
increasingly relying on outside suppliers for the manufacture of various
components and subassemblies used in its products and is dependent upon these
suppliers to meet Cymer's manufacturing schedules. The failure by one or more of
these suppliers to supply Cymer on a timely basis with sufficient quantities of
components or subassemblies that perform to Cymer's specifications could affect
Cymer's ability to deliver completed lasers to its customers on schedule.

          In addition to the manufacturing capacity at its facilities in San
Diego, California, Cymer has qualified Seiko Instruments, Inc. ("Seiko") of
Japan as a contract manufacturer of its photolithography excimer lasers. In
order to ensure uniformity of product for all customers, Cymer maintains control
of all work flow design, manufacturing processes, engineering changes and
component sourcing decisions. Cymer manufactures and seals all core technology
modules in San Diego. The original contract manufacturing agreement with Seiko
expires in 2001, but will automatically renew every two years thereafter, unless
one year's notice to terminate is given by either party. No notice to terminate
has been received. Seiko began production of lasers for Cymer in the first
quarter of 1997.

         Certain of the components and subassemblies included in Cymer's
products are obtained from a single supplier or a limited group of suppliers. In
particular, there are no alternative sources for certain of the components and
subassemblies, including certain optical components used in Cymer's lasers. In
addition, Cymer is increasingly outsourcing the manufacture of various
subassemblies. To date Cymer has been able to obtain adequate supplies of the
components and subassemblies used in the production of Cymer's laser systems in
a timely manner from existing sources. If in the future Cymer is unable to
obtain sufficient quantities of required materials, components or subassemblies,
or if such items do not meet Cymer's quality standards, delays or reductions in
product shipments could occur which could have a material adverse effect on
Cymer's business, financial condition and results of operations.

SALES AND MARKETING

         Cymer's sales and marketing efforts have been predominately focused on
DUV photolithography tool manufacturers. Cymer markets and sells its products
through its own worldwide direct sales force. Cymer has developed product and
applications engineering teams to support the account managers and Cymer's
customers. Cymer believes that to facilitate the sales process it must work
closely with and understand the requirements of semiconductor manufacturers, the
end users of Cymer's products. Cymer visits major semiconductor manufacturers,
and their representatives attend Company-sponsored seminars on advanced excimer
photolithography. In Japan, Cymer sponsors an annual seminar with Seiko in
conjunction with SEMICON Japan. This seminar has attracted representatives of
semiconductor manufacturers from Japan, Korea, the United States and SEMATECH,
as well as photolithography tool manufacturers and other photolithography
process suppliers.

SERVICE AND SUPPORT

         Cymer believes its success in the semiconductor photolithography market
is highly dependent upon after-sales support of both the customer and the end
user. Cymer supports its customers with field service, technical service
engineers and training programs, and in some cases provides ongoing on-site
technical support at the customer's manufacturing facility. Prior to shipment,
Cymer's support personnel

                                       5
<PAGE>


typically assist the customer in site preparation and inspection and provide
customers with training at Cymer's facilities or at the customer's location.
Customers and end users are also provided with a comprehensive set of manuals,
including operations, maintenance, service, diagnostic and safety manuals.

         Cymer's field engineers and technical support specialists are based
at its San Diego headquarters, and at its four field service offices located
throughout the United States. Support in Europe, Japan, Korea, Singapore and
Southeast Asia are provided by Cymer's subsidiaries located within those
regions. As part of its customer service, Cymer maintains an inventory of
spare parts at each of its service facilities. As Cymer's installed base
grows, replacement parts required to satisfy worldwide support requirements,
as well as Cymer's own logistics support organization, will be subject to the
fluctuating demands of the semiconductor industry. In order to meet these
demands, Cymer must continue to effectively manage its production of
component modules which are required for new systems as well as for support
and warranty requirements.

         Cymer believes that the need to provide fast and responsive service to
the semiconductor manufacturers using its lasers is critical and that it will
not be able to depend solely on its customers to provide this specialized
service. Therefore, Cymer believes it is essential to maintain, through its own
personnel or through trained third party sources, a rapid response capability to
service its customers throughout the world. Accordingly, Cymer has an ongoing
effort to continuously develop its direct support infrastructure in Japan,
Korea, Taiwan and Southeast Asia, Singapore, Europe and the United States. This
task entails recruiting and training qualified field service personnel or
identifying qualified independent firms and maintaining effective and highly
trained organizations that can provide service to customers in various countries
in their assigned regions. There can be no assurance that Cymer will continue to
attract qualified personnel to maintain these operations successfully or that
the costs of such operations will not be excessive. A failure to effectively
continue this worldwide support infrastructure could have a material adverse
effect on Cymer's business, financial condition and results of operations.

         Cymer generally warrants its new laser products against defects in
design, materials and workmanship for the earlier to occur of between 17 and 25
months from the date of shipment or 12 months after acceptance by the end user.
The 6000 series laser products are warranted for the earlier to occur of between
24 and 26 months from the date of shipment or 24 months after acceptance by the
end user.

RESEARCH AND DEVELOPMENT

         The semiconductor industry is subject to rapid technological change and
new product introductions and enhancements. Cymer believes that continued and
timely development and introduction of new and enhanced laser products are
essential for Cymer to maintain its competitive position. Cymer intends to
continue to develop its technology and innovative products to meet customer
demands. Current projects include enhancements to Cymer's KrF and ArF lasers and
the development of the next generation of photolithography lasers. Other
research and development efforts are currently focused on reducing manufacturing
costs, lowering the cost of laser operation, enhancing laser performance,
developing new features for existing lasers, and development of non-laser light
sources.

         Cymer has historically devoted a significant portion of its financial
resources to research and development programs and expects to continue to
allocate significant resources to these efforts. Research and development
expenses for 1998, 1999, and 2000 were approximately $30.2 million, $34.5
million, and $45.4 million, respectively.

         In addition to funding its own research and development projects, Cymer
has pursued a strategy of securing research and development contracts from
customers, government agencies and SEMATECH in order to develop advanced
technology for current and future laser systems based on Cymer's core
technology. Revenues generated from research and development contracts amounted
to approximately $313,000, $399,000, and $1.2 million during 1998, 1999, and
2000, respectively.

         Cymer plans to expand outside the lithography sector of the
semiconductor capital equipment industry by enhancing existing products,
offering new products and developing new semiconductor applications. The
acquisition of Active Control eXperts ("ACX") on February 13, 2001 provides
Cymer with opportunities to enhance and develop new products through ACX's
active structural control

                                       6
<PAGE>


technology that can diagnose, design and implement a motion control solution for
unwanted nano-motions. This technology may be applied to many types of equipment
and enhance the platforms of tools. In addition, Cymer's agreement with Tuilaser
AG ("Tuilaser") provides Cymer with opportunities to enhance existing products
and explore other areas of semiconductor equipment applications.

INTELLECTUAL PROPERTY RIGHTS

         Cymer believes that the success of its business depends more on such
factors as the technical expertise of its employees, as well as their innovative
skills and marketing and customer relations ability, than on patents,
copyrights, trade secrets and other intellectual property rights. Nevertheless,
the success of Cymer may depend in part on patents and as of December 31, 2000,
Cymer owned 95 United States patents covering certain aspects of technology
associated with excimer lasers which expire from January 2008 to September 2019
and had applied for 66 additional patents in the United States, 11 of which had
been allowed. As of December 31, 2000, Cymer also owned 80 foreign patents and
had filed 226 patent applications in various foreign countries. There can be no
assurance that Cymer's pending patent applications or any future applications
will be approved, that any issued patents will provide it with competitive
advantages or will not be challenged by third parties, or that the patents of
others will not have an adverse effect on Cymer's ability to do business. In
this regard, due to cost constraints, Cymer did not begin filing for patents in
Japan or other countries with respect to inventions covered by its United States
patents and patent applications until 1993, and Cymer has therefore lost the
right to seek patent protection in those countries for certain of its
inventions. Additionally, because foreign patents may afford less protection
under foreign law than is available under United States patent law, there can be
no assurance that any such patents issued to Cymer will adequately protect
Cymer's proprietary information. Furthermore, there can be no assurance that
others will not independently develop similar products, duplicate Cymer's
products or, if patents are issued to Cymer, design around the patents issued to
Cymer.

         Others may have filed and in the future may file patent applications
that are similar or identical to those of Cymer. To determine the priority of
inventions, Cymer may have to participate in interference proceedings declared
by the United States Patent and Trademark Office that could result in
substantial cost to Cymer. No assurance can be given that any such patent
application will not have priority over patent applications filed by Cymer.

         Cymer also relies upon trade secret protection, employee and
third-party nondisclosure agreements and other intellectual property protection
methods to protect its confidential and proprietary information. Despite these
efforts, there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to Cymer's trade secrets or disclose such technology or that Cymer
can meaningfully protect its trade secrets.

         Cymer has in the past funded a significant portion of its research and
development expenses from research and development revenues received from
photolithography tool manufacturers and from SEMATECH in connection with the
design and development of specific products. Although Cymer's arrangements with
photolithography tool manufacturers and SEMATECH seek to clarify the ownership
of the intellectual property arising from research and development services
performed by Cymer, there can be no assurance that disputes over the ownership
or rights to use or market such intellectual property will not arise between
Cymer and such parties. Any such dispute could result in restrictions on Cymer's
ability to market its products and could have a material adverse effect on
Cymer's business, financial condition and results of operations.

         Third parties have in the past notified, and may in the future notify,
Cymer that it may be infringing their intellectual property rights. Conversely,
Cymer has in the past notified, and may in the future notify, third parties that
they may be infringing on Cymer's intellectual property rights.

         Specifically, Cymer has engaged in discussions with one of its
competitors, Komatsu, Ltd ("Komatsu") with respect to certain of Komatsu's
Japanese patents, in the course of which Komatsu has also identified to Cymer a
number of additional Japanese patents that Komatsu asserts may be infringed by
Cymer and Cymer's Japanese manufacturing partner, Seiko. Cymer, in consultation
with Japanese patent counsel, has initiated oppositions to certain Komatsu
Japanese patents and patent applications in the Japanese Patent Office. To date,
one of these oppositions has been dismissed. Litigation might ensue with respect
to the Komatsu Japanese patents. Also, Komatsu might assert infringement claims

                                       7

<PAGE>


under additional patents. Komatsu has notified Seiko that Komatsu intends to
enforce its rights under the Komatsu Japanese patents against Seiko if Seiko
engages in manufacturing activities for Cymer. In connection with its
manufacturing agreement with Seiko, Cymer has agreed to indemnify Seiko against
such claims under certain circumstances. Cymer and Seiko might not ultimately
prevail in any such litigation.

         Cymer has also asserted certain of its U.S. patents against Komatsu
when informed that Komatsu lasers might be integrated into steppers intended for
shipment into the U.S. Cymer and Komatsu have been engaged in discussions with
regard to each party's claims. Cymer has also engaged in discussions with
Lambda-Physik regarding each party's patent claims. Those discussions might not
be successful and litigation could result. Attorneys representing Komatsu are
currently challenging one of Cymer's U.S. patents in the U.S. Patent Office.
During 2000, Komatsu's lithography laser business was transferred to Gigaphoton,
Inc., a joint venture of Komatsu and Ushio, Inc.

         Any patent litigation, by or against Cymer, would, at a minimum, be
costly. Litigation could also divert the efforts and attention of Cymer's
management and technical personnel. Both could have a material adverse effect on
Cymer's business, financial condition and results of operations. Furthermore, in
the future other third parties might assert other infringement claims, and
customers and end users of Cymer's products might assert other claims for
indemnification resulting from infringement claims. Such assertions, if proven
to be true, might materially adversely affect Cymer's business, financial
condition and results of operations. If any such claims are asserted against
Cymer, Cymer may seek to obtain a license under the third party's intellectual
property rights. However, such a license might not be available on reasonable
terms or at all. Cymer could decide, in the alternative, to resort to litigation
to challenge such claims or to design around the patented technology. Such
actions could be costly and would divert the efforts and attention of Cymer's
management and technical personnel, which would materially adversely affect
Cymer's business, financial condition and results of operations.

          Effective August 1, 1989 and lasting until the expiration of the
licensed patents, Cymer entered into an agreement for a nonexclusive worldwide
license to use or sell certain patented laser technology with Patlex Corp., a
patent holding company ("Patlex"). Under the terms of the agreement, Cymer is
required to pay royalties ranging from 0.25% to 5.0% of gross sales and leases
of its lasers, subject to an annual cap of $100,000 per year. During 1998, 1999
and 2000, royalty fees totaled $100,000 per year.

         Cymer has granted Seiko the exclusive right in Japan and the
non-exclusive right outside of Japan to manufacture and sell Cymer's
industrial high power laser and subsequent enhancements thereto. Cymer has
also granted Seiko a right of first refusal to fund Cymer's development of,
and receive a license to, new industrial laser technologies not developed
with funding from other parties. In exchange for these rights, Cymer received
up-front license fees of $3.0 million in aggregate during 1992 and 1993.
Cymer was also entitled to royalties of 5% on related product sales through
September 1999, after which the royalty rate is subject to renegotiation.
Through 1999, Cymer earned no royalties under the agreement. The license
agreement also provides that product sales between Cymer and Seiko will be at
a 15% discount from the respective companies' list prices. The agreement
terminates in August 2012. There has been no Seiko production or sales
activity associated with this contract to date.

         Cymer has registered the trademark CYMER in the United States and
certain other countries and is seeking additional registrations of other
trademarks including "Insist on Cymer" in the United States and in certain other
countries. Cymer uses these and a variety of other marks in its advertisements
and other business activities around the world.

COMPETITION


         Cymer believes that the principal elements of competition in Cymer's
markets are the technical performance characteristics of the excimer laser
products and the operating efficiency of the system, which is based on
availability, performance efficiency and rate of quality. Cymer believes that it
competes favorably with respect to these factors.

         Cymer currently has two competitors in the market for excimer laser
systems for photolithography applications, Lambda-Physik ("Lambda-Physik"), a
German-based subsidiary of

                                       8

<PAGE>


Coherent, Inc., and Gigaphoton (a joint venture of Komatsu, Ltd. and Ushio),
located in Japan. Both of these companies are larger than Cymer, have access
to greater financial, technical and other resources and are located in closer
proximity to most of Cymer's customers. Cymer believes that Lambda-Physik and
Gigaphoton are aggressively seeking to gain larger positions in the market.
Cymer believes that its customers have each purchased products offered by
these competitors and that its customers have qualified these competitors'
lasers for use with at least some of their products. As competitors
successfully qualify their lasers for use with chipmakers, Cymer could lose
market share and its growth could slow or even decline. In the future, Cymer
will likely experience competition from post-optical technologies, such as
Extreme Ultra Violet ("EUV") and scalpel processes. To remain competitive,
Cymer believes that it will be required to manufacture and deliver products
to customers on a timely basis and without significant defects and that it
will also be required to maintain a high level of investment in research and
development and sales and marketing. There can be no assurance that Cymer
will have sufficient resources to continue to make the investments necessary
to maintain its competitive position. There can be no assurance that larger
competitors with substantially greater financial resources, including other
manufacturers of industrial lasers, will not attempt to enter the market for
excimer lasers. There can be no assurance that Cymer will remain competitive.

A failure to remain competitive would have a material adverse effect on Cymer's
business, financial condition and results of operations.

EMPLOYEES

         On December 31, 2000, Cymer employed 898 persons worldwide. No
employees are currently covered by collective bargaining agreements or are
members of any labor organization as far as Cymer is aware. Cymer has not
experienced any work stoppages and believes that its employee relations are
good.

EXECUTIVE OFFICERS

         Set forth below is certain information regarding the executive officers
of Cymer and their ages as of December 31, 2000.

<TABLE>
<CAPTION>

                 NAME                    AGE                               POSITION
--------------------------------------- ----- ------------------------------------------------------------
<S>                                     <C>   <C>
Robert P. Akins.........................49    Chairman of the Board and Chief Executive Officer
Pascal Didier...........................42    President and Chief Operating Officer
William A. Angus, III...................54    Senior Vice President, Chief Financial Officer and Secretary
Wallace E. Breitman.....................61    Senior Vice President, Human Resources and Administration
Edward P. Holtaway......................45    Senior Vice President, Operations and Business Process
Brian Klene.............................43    Senior Vice President, Marketing and Business Development
Richard L. Sandstrom....................50    Senior Vice President, Chief Technology Officer
John Shin...............................45    Senior Vice President, Worldwide Customer Operations
Nancy J. Baker..........................38    Vice President, Finance and Treasurer
James Caltrider.........................47    Vice President, Manufacturing Order Fulfillment
Roger Green.............................54    Vice President, Strategic Initiatives
David Knowles...........................40    Vice President, Product Development
David Myers.............................44    Vice President, Technology Development
William Partlo..........................35    Vice President, Research and Development
Motohiko Tahara.........................58    President, Cymer Japan
</TABLE>

         ROBERT P. AKINS, a co-founder of Cymer, has served as its Chief
Executive Officer and Chairman of the Board since its inception in January
1986, and also as President from January 1986 to May, 2000. He currently
serves on the board of directors of the Semiconductor Industry Suppliers
Association (SISA), and on the council of advisors to the Irwin and Joan
Jacobs School of Engineering at the University of California, San Diego. Mr.
Akins received a B.S. in Physics and a B.A. in Literature in 1974, and a
Ph.D. in Applied Physics in 1983, from the University of California, San
Diego.

                                       9
<PAGE>


         PASCAL DIDIER has served as President and Chief Operating Officer since
May 2000. He served as Senior Vice President, Worldwide Customer Operations from
November 1997 until May 2000, and served as Vice President of Sales and
Marketing from July 1997, when he joined Cymer, until November of that year. He
served as Vice President of Worldwide Sales and Field Operations with GaSonics
International, a semiconductor capital equipment manufacturer, from June 1995 to
June 1997, and served in the additional capacity of Vice President of
Asia/Pacific for that company from June 1995 to June 1996. Prior to that, Mr.
Didier served for two years as Vice President of International Operations for
Megatest Corporation, a semiconductor test equipment manufacturer. Mr. Didier
holds a bachelor's degree in business and administration from the College de
Paris VII and a bachelor's degree in electronics from the Institut Universitaire
de Lyon.

         WILLIAM A. ANGUS, III has served as Senior Vice President and Chief
Financial Officer and Secretary since February 1996. From July 1990 to February
1996, Mr. Angus served as Vice President of Finance and Administration.
Previously he was the Executive Vice President and Chief Financial Officer of
Avant Garde Computing Inc., a manufacturer of data communications network
management systems. He received a bachelor's degree in economics from the
Wharton School of the University of Pennsylvania in 1968.

         WALLACE E. ("WALLY") BREITMAN has served as Senior Vice President of
Human Resources and Administration since January 2000. He joined Cymer in March
1999 as Vice President, Human Resources. Mr. Breitman has more than 20 years
experience in the human resources field, and immediately prior to joining Cymer
served as Vice President, Human Resources for Walker, Inc., a software and
systems integration company located in San Francisco. Mr. Breitman has extensive
experience in designing and implementing compensation, incentive, stock, and
performance systems; training, development, and organizational development
programs, international and expatriate programs, and positive employee relations
and retention programs. He holds a bachelor's degree in literature and a
master's degree in American Civilization, both from New York University.

         EDWARD P. ("TED") HOLTAWAY has served as Senior Vice President of
Operations and Business Process since May 2000. He joined Cymer in July 1998 as
Senior Vice President of Process Quality. For the previous 13 years, he
developed processes for San Diego-based Brooktree Corp., a fabless semiconductor
company acquired by Rockwell Semiconductor Systems in September of 1996. During
his tenure there, Mr. Holtaway's executive posts included Director of Rockwell's
San Diego operations from 1997 to 1998, Vice President and Managing Director of
Brooktree's Singapore operations from 1995 to 1996, and Vice President of
Corporate Quality from 1989 to 1995. Mr. Holtaway holds a bachelor's degree in
electrical engineering from the New Jersey Institute of Technology, a master's
degree in electrical engineering from the Polytechnic Institute of New York, and
a master's degree in business administration from San Diego State University.

         BRIAN KLENE joined Cymer as Senior Vice President, Marketing and
Business Development, in June 2000. Prior to joining Cymer, Mr. Klene served for
two years as Vice President, Strategic Planning and Business Development at
Chartered Semiconductor Manufacturing Ltd. in Singapore. From 1995 to 1997, he
served as Executive Vice President, Sales and Marketing at Micron Electronics,
Inc., Nampa, Idaho. Before that, he served as Director of North American Sales
with Micron Technology, Inc., Boise, Idaho, from 1989 to 1994. He also served in
a variety of sales and marketing positions of increasing responsibility with IBM
Corp. in Los Angeles from 1979 to 1988. Mr. Klene holds a master's degree in
business administration from the University of Southern California, and a
bachelor's degree from The Citadel, Charleston, S.C.

         RICHARD L. SANDSTROM, Ph.D., a co-founder of Cymer, has served under
the title of Senior Vice President and Chief Technology Officer since January
1999. Since Cymer's inception, he has served under various titles, such as Vice
President of Advanced Research and Vice President of Technology, and has been
instrumental in driving Cymer's technology forward. Dr. Sandstrom received a
bachelor's degree in physics and a doctorate in engineering physics from the
University of California, San Diego.

         JOHN SHIN has served as Senior Vice President, Worldwide Customer
Operations since June 2000. He served as Vice President, Worldwide Customer
Operations from September 1999 to June 2000, as Vice President of Worldwide
Field Operations from April 1999 to September 1999, and as Vice President,
Asia/Pacific Operations from March of 1998 to April of 1999. He joined Cymer as
President,

                                       10

<PAGE>


Cymer Korea in May 1997. Immediately prior to joining Cymer, Mr. Shin served as
President, Tencor Instruments Korea. From early 1993 to late 1996 he served as
Country Manager, Korea for Watkins-Johnson Company. Before that, he served as a
Sales Account Manager in Korea for Applied Materials, and earlier, served for
six years as a Business Development Manager with Samsung America in Santa Clara,
California. Mr. Shin holds a master's degree in computer science from Indiana
University, and a bachelor's degree in business from Hankuk University of
Foreign Studies, in Seoul, Korea.

         NANCY J. BAKER was appointed Vice President, Finance and Treasurer of
Cymer in 1998. Ms. Baker, whose professional career spans more than fifteen
years, joined Cymer in 1992 as Corporate Controller for its worldwide
operations. In 1996, she was promoted to Director, Corporate Finance and
Treasurer. Prior to joining Cymer, she held a variety of financial management
positions with International Totalizator Systems, Inc., an international
manufacturer of lottery and racetrack wagering systems. Ms. Baker received a
Bachelor's degree in Accounting from the University of Texas at Austin and an
Executive Master's degree in Business Administration from Harvard Business
School.

         JAMES CALTRIDER, Ph.D., has served as Vice President of
Manufacturing and Order Fulfillment since September of 1999, and served as
Vice President of Manufacturing Systems from October of 1998 to September of
1999. Prior to joining Cymer Dr. Caltrider provided consulting services to a
range of clients including Hewlett-Packard, Sprint, Robert Bosch and Andersen
Consulting, while holding a faculty position in the Graduate School of
Business at the University of San Diego and instructing in the Advanced
Manufacturing Systems Program in the UCSD Graduate Engineering School.
Dr.Caltrider also served as Director of Training and Development at Brooktree
Corporation from 1990 to 1992. He holds a doctorate in Operations Research
from the Colorado School of Mines, and a bachelor's degree in business
administration from Michigan State University.

         ROGER L. GREEN has served as Vice President, Strategic Initiatives
since January, 2001. From September, 1997, until December, 2000, he served as
Cymer's Vice President of Knowledge Management and Chief Information Officer.
He joined Cymer in July, 1997, as Director of after Market Operations -
Europe. From August 1991 to June, 1997, Mr. Green served as Director of
Enterprise Systems Management - Europe, as well as Vice President of Network
Systems, with Boole & Babbage, Inc. , a leading supplier of IT enterprise
management solutions. From 1986 to 1990 he served as Vice President of
Customer Support for Avant-Garde Computing Inc., a manufacturer of data
communications network management systems. Mr. Green graduated from
Philadelphia University with a bachelor's degree in business administration
in 1968.

         DAVID KNOWLES, Ph.D., has served as Vice President, Product Development
since March, 2000. Since joining Cymer in 1997, he has held various positions
including Manager of Optics Focus Factory and Program Manager for the ELS-5010,
ELS-5000A and ELS-6010 development programs. Dr. Knowles served as a
Physicist/Program Manager from 1994 to 1997 with Naval Research & Development
(NraD) in San Diego, where he was responsible for developing sensors using
optical and spectroscopic techniques. From 1991 to 1994, he was a Research
Fellow with the Centre for Lasers and Applications in Sydney, Australia, where
he started and directed the mid-infrared solid-state laser laboratory. Dr.
Knowles holds a doctorate in physics from the Massachusetts Institute of
Technology (MIT). He also holds a bachelor's degree in applied engineering &
physics from Cornell University in Ithaca, New York. Dr. Knowles has written 19
articles for various publications and conference proceedings, and has two
patents in the application stage.

         DAVID MYERS has served as Vice President, Technology Development since
September 1999. Previously, he served as Systems Group Director from January
1997 to March 1999. He joined Cymer in 1997 as Product Development Director.
From 1988 to 1997, he served at Lawrence Livermore National Laboratory (LLNL),
in Livermore, California, first as Programmatic Group Leader for laser
diagnostic development, then as instrumentation systems group leader where he
managed a diverse group of engineers and technologists developing a variety of
remote sensing projects. From 1986 to 1988 he served as Engineering Development
Project Manager at Ionscan, a unit of General Signal, in Fremont, California.
Before that, he was a Design Engineer with the LLNL from 1978 to 1986. Mr. Myers
has also been a consultant on electronics system design and problem resolution
for a number of semiconductor equipment manufacturers, including Applied
Materials, ETEC, and Process Diagnostics. He holds a bachelor's degree in
electrical engineering from New Mexico State University at Las Cruces, and has
done graduate work in electrical engineering at Stanford University. Mr. Myers
has authored or co-authored more than 10 publications and holds six U.S.
patents.

         WILLIAM PARTLO, Ph.D., has served as Vice President, Research and
Development, since December, 1999. From March 1999 to December 1999, he
served as Director of EUV Development, and was responsible for the
development of an EUV radiation source for next generation semiconductor
microlithography. From 1996 to March 1999, he served as a senior scientist,
and from 1994 to 1996 as a Program Manager. Dr. Partlo joined Cymer in 1993
as a research scientist. Before that, he served as a staff scientist at
GCA/TROPEL INC., in Rochester, New York. Dr. Partlo holds a doctorate and
master's degrees, both in engineering, from the University of California,
Berkeley, and a bachelor's degree in engineering from the University of
Wisconsin, Madison.

         MOTOHIKO TAHARA, has served as President, Cymer Japan, Inc. since
September 2000. Prior to joining Cymer, Mr. Tahara served for more than nine
years with wholly owned subsidiaries or joint ventures of Applied Materials.
From 1999 until joining Cymer, he served as Vice President and Japan
Representative of AKT Inc., a wholly-owned subsidiary of Applied Materials,
and the successor company to Applied Komatsu Technology, Inc., a joint
venture between Applied Materials and Komatsu, where he served as Vice
President for two years. From 1991 to 1997, he served in positions of
increasing responsibility with Applied Materials Japan, Inc., where he rose
to the position of Vice President. Prior to that, he served for five years as
President of ULVAC-BTU Japan, a supplier of vertical furnaces and other
equipment to the semiconductor industry. During the first 19 years of his
career, he served in a variety of positions with Sumitomo Corporation,
including one year as a Director of Sales and Marketing in a joint venture
with GCA Corporation, and five years as a Director in the semiconductor
manufacturing equipment division at Sumisho Electronics Systems. Mr. Tahara
holds a bachelor's degree in mechanical engineering from Osaka University,
Japan.

         Executive officers serve at the discretion of the Board of Directors.
There are no family relationships between any of the directors and executive
officers of Cymer.

                                       11
<PAGE>

ITEM 2. PROPERTIES

         Cymer's corporate headquarters, manufacturing, engineering and R&D
facilities are located in San Diego, California housed in multiple buildings
totaling approximately 330,000 square feet. Three of the four buildings
currently occupied are leased by Cymer under leases expiring between August 2002
and January 2010. In August 1999, Cymer began construction of a 135,000 square
foot office and laboratory facility on 5.98 acres of land that it purchased in
February 1999 adjacent to its current facilities. Upon completion of this
facility in the fourth quarter of 2000, Cymer consolidated its San Diego
operations into a three building main campus and one local off campus location.
As a result of this consolidation process, Cymer was able to vacate and sublease
its fifth leased building totaling 66,000 square feet. This facility was
subleased to Phogenix, an HP/Kodak joint venture. In addition, Cymer has
purchased a two parcel 5.97 acre undeveloped site adjacent to the existing
campus for future expansion capabilities. Cymer also leases the following
facilities for use as field service offices: a 400 square foot facility near
Boston, Massachusetts under a lease expiring August 2002; a 1,857 square foot
facility in Santa Clara, California under a lease expiring September 2002; a
1,627 square foot facility in Austin, Texas under a lease expiring October 2005,
and a 1,857 square foot facility in Portland, Oregon expiring in April 2006.
Cymer also leases the following for use as internationally located field service
and sales offices: 13,831 square feet of facilities in Ichikawa, Japan under a
renewable two-year lease expiring in June 2002; 807 square feet in Osaka Japan
under a lease expiring in December 2001; 4,184 square feet in Pundang, Korea
under a lease expiring August 2004; 4,821 square feet in Hsin Chu, Taiwan under
a lease expiring June 2004; 1,866 square feet in United Square, Singapore under
a lease expiring in May 2002; and 3,715 square feet in Maarssen, the Netherlands
under a lease expiring in May 2004. Cymer intends to add additional field
service offices as necessary to service and support its customers.

ITEM 3.  LEGAL PROCEEDINGS

         Cymer has been named as a defendant in several putative shareholder
class action lawsuits which were filed in September and October, 1998 in the
U.S. District Court for the Southern District of California. Certain executive
officers and directors of Cymer are also named as defendants. The plaintiffs
purport to represent a class of all persons who purchased Cymer's Common Stock
between April 24, 1997 and September 26, 1997 (the "Class Period"). The
complaints allege claims under the federal securities laws. The plaintiffs
allege that Cymer and the other defendants made various material
misrepresentations and omissions during the Class Period. The complaints do not
specify the amount of damages sought. The complaints have been consolidated into
a single action and a class representative has been appointed by the court. A
consolidated amended complaint was filed in early August 1999. On November 5,
1999, Cymer and the other defendants filed a motion to dismiss the consolidated
amended claim for failure to state a cause of action. On April 1, 2000, the
court granted defendant's motion to dismiss with leave to amend the complaint by
the plaintiffs. The plaintiffs filed their second amended complaint on June 5,
2000. Cymer moved to dismiss the amended complaint on August 4, 2000. On January
22, 2001, the Court heard oral arguments on Cymer's motion to dismiss, but has
not yet decided the motion. Cymer believes it has meritorious defenses to the
claims asserted and intends to defend the action vigorously. Accordingly, no
provision for any liability or loss that may result from adjudication or
settlement thereof has been made in the accompanying consolidated financial
statements.

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

         No matters were submitted to a vote of the security holders of Cymer
during the fourth quarter of the fiscal year ended December 31, 2000.

                                       12
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         Cymer's Common Stock is publicly traded on the Nasdaq National Market
under the symbol "CYMI". The following table sets forth, for the periods
indicated, the high and low closing sales prices of Cymer's Common Stock as
reported by the Nasdaq National Market.

<TABLE>
<CAPTION>

<S>                                                             <C>                    <C>
Year ended December 31, 1999                                          High                    Low
---------------------------------------------                   ------------------     ------------------
   First quarter                                                     $29  3/8               $16    -
   Second quarter                                                    $25    -               $16  3/8
   Third quarter                                                     $38  1/8               $24  9/16
   Fourth quarter                                                    $47  11/16             $30  9/16

Year ended December 31, 2000
---------------------------------------------
   First quarter                                                     $65  1/4               $42  5/8
   Second quarter                                                    $57  3/4               $27  11/16
   Third quarter                                                     $50  7/8               $30  11/16
   Fourth quarter                                                    $30  1/4               $18  1/4

</TABLE>

The closing sales price of Cymer's Common Stock on the Nasdaq National Market
was $25 on March 23, 2001 and there were 308 registered holders of record as
of that date.

Cymer has never declared or paid cash dividends on its Common Stock and
currently does not anticipate paying cash dividends in the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA

         The following selected consolidated financial data should be read in
conjunction with Cymer's consolidated financial statements and notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>


                                                                        YEARS ENDED DECEMBER 31,
                                                     ---------------------------------------------------------------
                                                        1996          1997         1998         1999        2000
                                                     -----------   -----------  -----------  ----------- -----------
                                                                               (IN THOUSANDS)
<S>                                                  <C>           <C>          <C>          <C>         <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues:
   Product sales                                        $62,510      $201,191     $184,828    $220,051     $366,280
   Other                                                  2,485         2,456          313         399        1,180
                                                     -----------   -----------  ----------- -----------  -----------
          Total revenues                                 64,995       203,647      185,141     220,450      367,460
                                                     -----------   -----------  ----------- -----------  -----------

Costs and expenses:
   Cost of product sales                                 35,583       123,654      125,713     143,105      187,579
   Research and development                              11,742        24,971       30,152      34,518       45,433
   Sales and marketing                                    5,516        11,992       14,528      16,742       20,098
   General and administrative                             4,270         8,586        9,487      13,101       22,618
                                                     -----------   -----------  ----------- -----------  -----------
          Total costs and expenses                       57,111       169,203      179,880     207,466      275,728
                                                     -----------   -----------  ----------- -----------  -----------
Operating income                                          7,884        34,444        5,261      12,984       91,732
</TABLE>

                                       13

<PAGE>

<TABLE>
<CAPTION>

                                                                        YEARS ENDED DECEMBER 31,
                                                    -----------------------------------------------------------------
                                                       1996          1997         1998         1999          2000
                                                    ------------  ------------ ------------ ------------  -----------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>           <C>          <C>          <C>           <C>
Other income (expense) - net                              (183)         112         (3,568)      (3,748)      (1,230)
                                                    ------------  ------------ ------------ ------------  -----------
Income before income tax provision (benefit)
   and minority interest                                 7,701       34,556          1,693        9,236       90,502
Income tax provision (benefit)                           1,191        8,639         (1,250)           -       26,246
Minority interest                                            -          141           (420)        (663)        (484)
                                                    ------------  ------------ ------------ ------------  -----------

Net income                                              $6,510      $26,058         $2,523       $8,573      $63,772
                                                    ------------  ------------ ------------ ------------  -----------
Basic earnings per share (1)                             $0.33        $0.92          $0.09        $0.31        $2.19
                                                    ============  ============ ============ ============  ===========
Weighted average common shares
   outstanding (1)                                      19,868       28,212         28,226       27,907       29,113
                                                    ============  ============ ============ ============  ===========
Diluted earnings per share (1)                           $0.29        $0.86          $0.09        $0.29        $2.07
                                                    ============  ============ ============ ============  ===========
Weighted average common and potential
   shares outstanding (1)                               22,420       30,267         29,566       29,640       30,758
                                                    ============  ============ ============ ============  ===========
</TABLE>

<TABLE>
<CAPTION>

                                                                        YEARS ENDED DECEMBER 31,
                                                    ------------------------------------------------------------------
                                                       1996          1997         1998         1999          2000
                                                    ------------  ------------ ------------ ------------  ------------
                                                                             (IN THOUSANDS)
<S>                                                 <C>           <C>          <C>          <C>           <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents                               $55,405       $51,903    $53,130       $75,765      $79,678
Working capital                                          84,743       202,539    198,645       213,121      278,546
Total assets                                            129,467       386,119    364,318       426,531      533,174
Total debt (2)                                            2,217       176,066    175,924       175,771      175,510
Treasury stock                                                -             -    (24,871)      (24,871)     (24,871)
Stockholders' equity                                     98,820       125,779    106,531       126,893      212,968

</TABLE>

(1)  See Note 1 of Notes to Consolidated Financial Statements for an explanation
     of the determination of shares used in computing earnings per share.

(2)  Total debt includes indebtedness for convertible subordinated notes, and
     capital lease obligations.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CYMER, INC. SHOULD BE READ IN CONJUNCTION WITH CYMER'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
ANNUAL REPORT ON FORM 10-K. STATEMENTS IN THIS REPORT THAT ARE NOT STRICTLY
HISTORICAL IN NATURE ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER OF
RISKS AND UNCERTAINTIES. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM
THOSE PROJECTED IN SUCH STATEMENTS DUE TO VARIOUS FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE CONTAINED IN THIS REPORT.

                                       14
<PAGE>


RESULTS OF OPERATIONS

         The following table sets forth certain items in Cymer's consolidated
statements of income as a percentage of total revenues for the periods
indicated:

<TABLE>
<CAPTION>


                                                                              YEARS ENDED DECEMBER 31,
                                                                  -------------------------------------------------
                                                                      1998             1999              2000
                                                                  --------------   --------------    --------------
<S>                                                               <C>              <C>               <C>
Revenues:
    Product sales                                                       99.8  %           99.8  %           99.7  %
    Other                                                                 .2                .2                .3
                                                                  --------------   --------------    --------------
        Total revenues                                                 100.0             100.0             100.0


Cost and expenses:
    Cost of product sales                                               67.9              64.9              51.0
    Research and development                                            16.3              15.7              12.4
    Sales and marketing                                                  7.9               7.6               5.5
    General and administrative                                           5.1               5.9               6.2
                                                                  --------------   --------------    --------------
       Total costs and expenses                                         97.2              94.1              75.1


Operating income                                                         2.8               5.9              24.9
Other (expense) - net                                                   (1.9)             (1.7)              (.3)
                                                                  --------------   --------------    --------------

Income before income tax provision (benefit)
   and minority interest                                                 0.9               4.2              24.6

Income tax provision (benefit)                                          (0.7)                -               7.1

Minority interest                                                       (0.2)             (0.3)             (0.1)
                                                                  --------------   --------------    --------------

Net income                                                               1.4   %           3.9  %           17.4  %
                                                                  ==============   ==============    ==============

Gross margin on product sales                                           32.0   %          35.0  %           48.8  %
                                                                  ==============   ==============    ==============
</TABLE>


     YEARS ENDED DECEMBER 31, 1999 AND 2000

         REVENUES. Cymer's total revenues consist of product sales, which
include sales of laser systems, spare parts, service and training. Other
revenues primarily include revenue from funded development activities performed
for customers and for SEMATECH. Revenue from product sales is generally
recognized at the time of shipment, unless customer agreements contain
inspection, acceptance or other conditions, in which case revenue is recognized
at the time such conditions are satisfied. Funded development contracts are
accounted for on the percentage-of-completion method based on the relationship
of costs incurred to total estimated costs, after giving effect to estimates for
costs to complete the development project.

         Product sales increased 66% from $220.1 million in 1999 to $366.3
million in 2000, due primarily to improved market conditions and increased
customer demand for lithography laser systems and spares. These changes in
conditions accounted for increases in unit sales of DUV photolithography laser
systems as well as increases in sales of spares, replacement parts, and services
due to the higher installed base at chipmakers and increased utilization rates.
A total of 302 laser systems were sold in 1999 compared to 494 laser systems
sold in 2000 with average selling prices ("ASP") of $493,000 versus $518,000,
respectively. These higher ASP's are a direct result of new model introductions
which command higher pricing and their adoption into the market place. Revenues
generated from replacement parts increased from $66.6 million in 1999 to $101.8
million in 2000; and revenues from service and service contracts increased from
$2.9 million in 1999 to $7.4 million in 2000. Funded development revenues
increased from $399,000 for 1999 to $1.2 million for 2000, primarily due to the
timing of the addition and completion of certain programs.

                                       15

<PAGE>


         Cymer's sales are generated primarily by shipments to customers in
Japan, the Netherlands, and the United States. Approximately 85% and 81% of
Cymer's sales in 1999 and 2000, respectively, were derived from customers
outside the United States. Cymer maintains a wholly-owned Japanese subsidiary
which sells to Cymer's Japanese customers. Revenues from Japanese customers,
generated primarily by this subsidiary, accounted for 37% and 42% of revenues in
1999 and 2000, respectively. The activities of Cymer's Japanese subsidiary are
limited to sales and service of products purchased by the subsidiary from the
parent corporation. All costs of development and production of Cymer's products,
including costs of shipment to Japan, are recorded on the books of the parent
company. Cymer anticipates that international sales will continue to account for
a significant portion of its net sales.

         COST OF PRODUCT SALES. Cost of product sales includes direct material
and labor, warranty expenses, license fees, manufacturing and service overhead,
and foreign exchange gains and losses on foreign currency exchange contracts
associated with purchases of Cymer's products by the Japanese subsidiary for
resale under firm third-party sales commitments.

         Cost of product sales rose 31% from $143.1 million in 1999 to $187.6
million in 2000 primarily in response to the increase in product sales. The
gross margin on these sales increased from 35% in 1999 to 49% in 2000 primarily
due to the increased volume of shipments absorbing fixed costs of production and
the ongoing improvements with regards to cycle times and overall manufacturing
and field support services processes. Charges related to obsolete inventory
remained consistent between 1999 and 2000.

         Net gains or losses from foreign currency exchange contracts are
included in cost of product sales in the consolidated statements of income as
the related sales are recognized. Cymer recognized a net loss on such contracts
of $3.0 million for the year ended December 31, 1999 and a $3.2 million net gain
for the year ended December 31, 2000.

          RESEARCH AND DEVELOPMENT. Research and development expenses include
costs of internally-funded and externally-funded projects as well as continuing
research support expenses which primarily include employee and material costs,
depreciation of equipment and other engineering related costs. Research and
development expenses increased 32% from $34.5 million in 1999 to $45.4 million
in 2000, due primarily to the continued product development efforts associated
with its ELS-6000 series laser system as well as ELS-6010 laser and ArF laser
development. In addition, research and development expenses were higher in 2000
as compared to 1999 due to increased staffing levels to support multiple new
product development efforts and allocated costs associated with the move from
the pre-existing research and development facility into a new Cymer-owned
facility, both located in San Diego, California. As a percentage of total
revenues, such expenses fell from 15.7% to 12.4% in the respective periods due
to the increase in Cymer's revenues as well as the increase in development
expenditures throughout 2000. Cymer expects that research and development
expenses will increase as Cymer continues to invest in the development of new
products and product enhancements.

          SALES AND MARKETING. Sales and marketing expenses include the expenses
of the sales, marketing, and customer support staffs and other marketing
expenses. Sales and marketing expenses increased 20% from $16.7 million in 1999
to $20.1 million in 2000, due primarily to increased staffing expenses,
including recruiting costs associated with expanded operations in the areas of
product marketing, new product development, and sales administration. As a
percentage of total revenues, such expenses decreased from 7.6% to 5.5% as
revenues increased from the prior year.

          GENERAL AND ADMINISTRATIVE. General and administrative expenses
consist primarily of management and administrative personnel costs, professional
services and administrative operating costs. General and administrative expenses
increased 73% from $13.1 million in 1999 to $22.6 million in 2000. This was due
to continued process quality development efforts including the implementation
and ongoing support of a new Enterprise Resource Planning ("ERP") which was
completed in 2000 and the required general and administrative support
activities. General and administrative expenses for 2000 also increased from
those in 1999 due to the write-off of computer systems made obsolete by the new
ERP system. Also included in general and administrative expenses for 2000 were
additional allowances for outstanding trade accounts receivable and notes
receivable totaling $1.4 million and

                                       16

<PAGE>


costs associated with the endowment of two professorship chairs for a total of
$750,000. As a percentage of total revenues, such expenses increased from 5.9%
to 6.2% in the respective periods.

          OTHER INCOME (EXPENSE)- NET. Net other expenses decreased from $3.7
million for 1999 to $1.2 million for 2000. This decrease in net expenses was
primarily due to an increase in interest income in 2000 associated with the
investment of excess cash offset by foreign currency exchange losses in 2000 as
compared to gains in 1999. Foreign currency exchange gain totaled $643,000,
interest income totaled $7.3 million, and interest expense totaled $11.7 million
for 1999, compared to a foreign currency exchange loss of $1.4 million, interest
income of $10.8 million, and interest expense of $10.6 million for 2000.

          Cymer's results of operations are subject to fluctuations in the value
of the Japanese yen against the United States dollar. Sales by Cymer to its
Japanese subsidiary are denominated in dollars, and sales by the subsidiary to
customers in Japan are denominated in yen. Cymer's Japanese subsidiary manages
its exposure to such fluctuations by entering into foreign currency exchange
contracts to hedge its purchase commitments to Cymer. The gains or losses from
these contracts are recorded as a component of cost of product sales, while the
remaining foreign currency exposure is recorded as other income (expense) in the
consolidated statements of income. Gains and losses resulting from foreign
currency translation are accumulated as a separate component of consolidated
stockholders' equity.

         PROVISION FOR INCOME TAXES. The tax rate of zero and 29% reported in
1999 and 2000, respectively, reflect the tax benefits received from Cymer's
Foreign Sales Corporation and U.S. tax credits.

     YEARS ENDED DECEMBER 31, 1998 AND 1999

         REVENUES. Product sales increased 19% from $184.8 million in 1998 to
$220.1 million in 1999, due to a 61% increase in the sale of replacement
parts and service for lasers in Cymer's installed chipmaker base as the
semiconductor industry made a major recovery during 1999 and installed lasers
and utilization rates increased. Additionally, higher average selling prices
for new systems and the sale of upgrade packages to the installed base also
contributed to revenue growth. A total of 341 laser systems were sold in 1998
compared to 302 laser systems in 1999. The decrease was primarily
attributable to inventory management by Cymer's direct customers as well as
market share gains of competitors. Revenues generated from replacement parts
increased from $34.8 million in 1998 to $66.6 million in 1999; and revenues
from service and service contracts increased from $1.9 million in 1998 to
$2.9 million in 1999. Funded development revenues increased from $313,000 for
1998 to $399,000 for 1999, primarily due to the timing of the completion of
certain programs.

         Cymer's sales are generated primarily by shipments to customers in
Japan, the Netherlands, and the United States. Approximately 88% and 85% of
Cymer's sales in 1998 and 1999, respectively, were derived from customers
outside the United States. Cymer maintains a wholly-owned Japanese subsidiary
which sells to Cymer's Japanese customers. Revenues from Japanese customers,
generated primarily by this subsidiary, accounted for 48% and 37% of revenues in
1998 and 1999, respectively. The activities of Cymer's Japanese subsidiary are
limited to sales and service of products purchased by the subsidiary from the
parent corporation. All costs of development and production of Cymer's products,
including costs of shipment to Japan, are recorded on the books of the parent
company. Cymer anticipates that international sales will continue to account for
a significant portion of its net sales.

          COST OF PRODUCT SALES. Cost of product sales rose 14% from $125.7
million in 1998 to $143.1 million in 1999 primarily in response to the increase
in product sales. The gross margin on these sales increased from 32.0% in 1998
to 35% in 1999 primarily due to the increased volume of shipments absorbing
fixed costs of production. Charges related to obsolete inventory remained
consistent between 1998 and 1999.

          Net gains or losses from foreign currency exchange contracts are
included in cost of product sales in the consolidated statements of income as
the related sales are recognized. Cymer recognized

                                       17

<PAGE>


a net gain on such contracts of $4.5 million for the year ended December 31,
1998 and a $3.0 million net loss for the year ended December 31, 1999.

           RESEARCH AND DEVELOPMENT. Research and development expenses increased
14% from $30.2 million in 1998 to $34.5 million in 1999, due primarily to
increased product improvement efforts associated with the release of Cymer's
6000 series lasers, and the continued development of new laser products. As a
percentage of total revenues, such expenses fell from 16.3% to 15.7% in the
respective periods due to the increase in Cymer's revenues as well as the
increase in development expenditures throughout 1999. Cymer expects that
research and development expenses will increase in absolute dollars but not as a
percentage of revenue in 2000 as Cymer continues to invest in the development of
new products and product enhancements.

           SALES AND MARKETING. Sales and marketing expenses increased 15% from
$14.5 million in 1998 to $16.7 million in 1999, due primarily to increased
product management and sales support efforts and marketing infrastructure
activities developed over the period. As a percentage of total revenues, such
expenses decreased slightly from 7.9% to 7.6% as revenues increased from the
prior year.

           GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased 38% from $9.5 million in 1998 to $13.1 million in 1999. This was due
to ongoing process quality development efforts and costs, primarily outside
consultant compensation, to support an overall increase in Cymer's business
activities during the current year. As a percentage of total revenues, such
expenses increased from 5.1% to 5.9% in the respective periods.

           OTHER INCOME (EXPENSE)- NET. Net other expenses of $3.6 million in
1998 remained consistent with net other expenses of $3.7 million in 1999 given
comparable investment and debt balance between the years.

           PROVISION FOR INCOME TAXES. The tax benefit of $1.3 million reported
in 1998 was primarily attributed to tax credits and permanent differences
between taxable income and book income which resulted in a negative effective
tax rate for the year. For 1999 the effective tax rate was zero, primarily due
to the tax benefits received from Cymer's foreign sales corporation and U.S. tax
credits.

LIQUIDITY AND CAPITAL RESOURCES

           Since its initial public offering and a second public offering, both
in 1996, Cymer funded its operations primarily through a convertible
subordinated note offering on August 6, 1997, which generated net proceeds of
$167.3 million, bank borrowings, cash flow from operations and the proceeds from
employee stock option exercises.

           Cymer issued $172.5 million in aggregate principal amount in the
subordinated note offering. The notes are due on August 6, 2004, with interest
payable semi-annually on February 6 and August 6, beginning February 6, 1998, at
3 1/2% per annum from August 6, 1997 through August 5, 2000 and 7 1/4% per annum
from August 6, 2000 to maturity or earlier redemption. The notes are convertible
at the holder's option into shares of Cymer Common Stock on or after November 5,
1997, at a conversion rate of 21.2766 shares per $1,000 principal amount. Cymer
may redeem the notes, in whole or in part, at specified redemption prices. As of
December 31, 2000, $172.3 million under the Notes was outstanding. During the
first quarter of 2000, $165,000 of the Notes were converted into 3,510 shares of
common stock.

            As of December 31, 2000, Cymer had approximately $79.7 million in
cash and cash equivalents, $117.0 million in short-term investments, $9.0
million in long-term investments, and $8.7 million in bank debt. As of December
31, 2000, Cymer had $278.5 million in working capital.

             Net cash provided by operating activities was approximately $23.2
million, $46.8 million, and $55.5 million for 1998, 1999, and 2000,
respectively. Cash provided by operations in 1998 was primarily due to increases
in depreciation associated with the prior year's expansion efforts, offset by
decreases in accounts receivable. Cash provided by operations in 1999 resulted
from sustained depreciation, significant reductions in current liabilities, and
an increase in net income offset by increases in accounts receivable. In 2000,
cash provided by operating activities was primarily due to a significant
increase in

                                       18

<PAGE>


net income. Increases in inventory, accounts receivable, and income taxes
payable resulted from the increased revenues and bookings in 2000 and were
offset by increases in accounts payable and accrued and other liabilities during
the year.

           Net cash used for investing activities was approximately $5.7
million, $30.9 million and $54.9 million in 1998, 1999 and 2000, respectively.
Cash used for investing activities during 1998 and 1999 primarily reflects the
purchase of various types of manufacturing and test equipment, research and
development tools, and the addition of tenant improvements for the field support
organizations and manufacturing facility, all in support of business expansion
throughout the periods. For 1998 and 1999, the acquisition of property was
offset by the timing of purchases and sales of investments during the same
period. During 2000, cash used for investing activities continued to increase
significantly from the 1998 and 1999 levels, primarily due to additional
investments in property acquisitions to accommodate the increased business
activities. In addition to equipment purchases, property acquisitions in 2000
included the construction of an additional facility at the San Diego, California
location totaling $27.5 million, as well as the investment in a new ERP system
totaling $6.3 million and the purchase of an additional undeveloped parcel of
land adjacent to the San Diego, California facility for $5.0 million. In
addition, $1.1 million in cash was used during 2000 for the acquisition of the
minority interest in Cymer's Taiwan subsidiary.

           Net cash used for financing activities was approximately $13.5
million in 1998, whereas cash provided by financing activities was $12.9 million
and $3.7 million for 1999 and 2000, respectively. In 1998, Cymer's financing
activities used net cash of approximately $13.5 million primarily due to the
$24.9 million repurchase of treasury stock offset by $10.1 million in bank loans
for the period. In 1999, financing activities generated $12.9 million of net
cash primarily from the exercise of employee stock options totaling $8.5
million, as well as a $4.9 million increase in net borrowings under a revolving
loan and security agreement. For 2000, the $3.7 million net cash provided by
financing activities was primarily due to $12.7 million from the exercise of
employee stock options offset by payments made during the year on the revolving
loan totaling $8.1 million.

           Cymer had forward foreign exchange contracts at December 31, 2000 to
buy $76.9 million for 8.2 billion yen. The total unrecorded deferred gain and
premium on these contracts as of December 31, 2000 was approximately $2.3
million and $1.1 million, respectively.

           On January 29, 1998, Cymer announced a program to repurchase up to
$50.0 million of Cymer's common stock. As of December 31, 1998, Cymer purchased
2 million shares at a total cost of $24.9 million. No stock was repurchased
during 1999 or 2000.

           Cymer requires substantial working capital to fund its business,
particularly to finance inventories and accounts receivable and for capital
expenditures. Cymer's future capital requirements will depend on many factors,
including the rate of Cymer's manufacturing expansion, the timing and extent of
spending to support product development efforts and expansion of sales and
marketing and field service and support, the timing of introductions of new
products and enhancements to existing products, and the market acceptance of
Cymer's products. Cymer believes that it has sufficient working capital and
available banking arrangements to sustain operations and provide for the future
expansion of its business during 2001.

     RECENT ACCOUNTING PRONOUNCEMENTS

           In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. The new standard, as amended, will become effective for Cymer for
the first quarter of 2001. Interim reporting for this standard will be required.
Cymer is in the process of assessing the effect of this standard on Cymer's
current reporting and disclosures.

                                       19

<PAGE>


RISK FACTORS

LIKELY FLUCTUATIONS IN OPERATING RESULTS

         CERTAIN FACTORS CAUSING FLUCTUATIONS

         Cymer's operating results have in the past fluctuated and are likely in
the future to fluctuate significantly. These fluctuations depend on a variety of
factors which may include:

-    the demand for semiconductors in general and, in particular, for leading
     edge devices with smaller circuit geometries;

-    the rate at which semiconductor manufacturers take delivery of
     photolithography tools from Cymer's customers and the rate at which those
     customers take delivery of lightsources from Cymer;

-    cyclicality in the market for semiconductor manufacturing equipment;

-    the timing and size of orders from Cymer's small base of customers;

-    the ability of Cymer to manufacture, test and deliver laser systems in a
     timely and cost effective manner;

-    the mix of laser models, replacement parts and service revenues in Cymer's
     total revenues;

-    decrease in utilization rates of lasers, in addition to decrease in
     installed chipmaker base, decreases sales for replacement parts and
     services;

-    the ability of Cymer's competitors to obtain orders from Cymer's customers;

-    the entry of new competitors into the market for DUV photolithography
     illumination sources;

-    the ability of Cymer to manage its costs as it supplies its products in
     higher volumes and multiple models; and

-    Cymer's ability to effectively manage its exposure to foreign currency
     exchange rate fluctuations, principally with respect to the Japanese yen
     (in which sales by Cymer's Japanese subsidiary are denominated).

In addition, as customers become more efficient at integrating Cymer's lasers
into their photolithography tools, reductions in customer laser inventories may
affect Cymer's operating results.

         TIMING OF REVENUE RECOGNITION

         Cymer has historically derived a substantial portion of its quarterly
and annual revenues from the sale of a relatively small number of systems. As a
result, the precise timing of the recognition of revenue from an order for a
small number of systems can have a significant impact on Cymer's total revenues
and operating results for a particular period. If customers cancel or reschedule
orders for a small number of systems or if Cymer cannot fill orders in time to
recognize revenue during a particular period, this could adversely affect
Cymer's operating results for that period. For example, unanticipated
manufacturing, testing, shipping or product acceptance delays could cause such
cancellations, rescheduling or inability to fill orders promptly.

         FIXED EXPENSES

         Cymer's expense levels are based, in large part, on Cymer's
expectations as to future revenues. Therefore, Cymer's expenses are relatively
fixed in the short term. If revenue levels fall below expectations, this would
disproportionately and adversely affect net income. Cymer cannot forecast the
impact of these and other factors on its revenues and operating results in any
future period with any degree of certainty.

         SEMICONDUCTOR MANUFACTURER DEMAND

         Cymer believes that semiconductor manufacturers are currently
developing capability for production and pilot production of 0.18 um and below
devices. Cymer also believes that the efforts to develop such capability are
driving present demand for its laser systems for DUV photolithography tools.
Once semiconductor manufacturers have acquired such capability, their demand for
Cymer's DUV


                                       20

<PAGE>


photolithography tools will depend on whether they want to expand their capacity
further to manufacture such devices. This will in turn depend on whether their
sales forecasts and manufacturing process yields justify such an investment.
Cymer currently expects that demand for its DUV laser systems will depend on
such demand and process development constraints of the semiconductor
manufacturers.

         INDUSTRY CONDITIONS

         Cymer has sized its operations in response to rapidly changing industry
conditions. Should conditions continue to deteriorate due to decreased capital
spending and lessening of semiconductor demand, current operating levels may
negatively impact profitable operations.

         Due to the foregoing, as well as other unanticipated factors, Cymer's
operating results will likely fall below the expectations of public market
analysts or investors in some future quarter or quarters. Such failure to meet
operating result expectations would materially adversely affect the price of
Cymer's Common Stock.

DEPENDENCE ON SEMICONDUCTOR INDUSTRY

          Cymer derives substantially all of its revenues from photolithography
tool manufacturers. Photolithography tool manufacturers depend in turn on the
demand for their products from semiconductor manufacturers. Semiconductor
manufacturers depend on the demand from manufacturers of end-products or systems
that use semiconductors. The semiconductor industry is highly cyclical and has
historically experienced periodic and significant downturns. These downturns
have often had a severe effect on the demand for semiconductor manufacturing
equipment, including photolithography tools. Cymer believes that downturns in
the semiconductor manufacturing industry will periodically occur, resulting in
periodic decreases in demand for semiconductor manufacturing equipment. In
addition, Cymer believes that in a future downturn Cymer's need to continue
investment in research and development, and to maintain extensive ongoing
customer service and support capability, will constrain its ability to reduce
expenses. Accordingly, downturns in the semiconductor industry would likely have
a material adverse effect on Cymer's business, financial condition and results
of operations.

DEPENDENCE ON SMALL NUMBER OF CUSTOMERS

         A small number of manufacturers of DUV photolithography tools
constitute Cymer's primary customer base. Three large firms, ASM Lithography,
Canon and Nikon dominate the photolithography tool business. Collectively, they
accounted for approximately 88%, 74% and 77% of Cymer's total revenues in 1998,
1999, and 2000, respectively. Individually, sales to ASM Lithography, Canon and
Nikon accounted for approximately 33%, 17% and 24%, respectively, of total
revenues in 1999 and 30%, 19% and 28%, respectively, of total revenues in 2000.
Cymer expects that sales of its systems to these customers will continue to
account for a substantial majority of its revenues in the foreseeable future.
None of Cymer's customers are obligated to purchase a minimum number of Cymer's
products. The loss of any significant business from any one of these customers,
a significant reduction in orders from any one of these customers or production
problems for any one of these customers that cause a slow down in Cymer's
deliveries, would have a material adverse effect on Cymer's business, financial
condition and results of operations. Reductions caused by changes in a
customer's competitive position, a decision to purchase illumination sources
from other suppliers, or economic conditions in the semiconductor and
photolithography tool industries, could all cause such a loss of business or
reduction in orders.

NEED TO MANAGE A CHANGING BUSINESS

         In recent years, in response to business cycles in the semiconductor
industry, Cymer has sharply expanded and contracted the scope of its operations
and the number of employees in most of its functional areas. As of December 31,
2000, Cymer occupied 330,000 square feet of facilities and had 898 employees
worldwide. In a cyclical environment of dramatic growth or contraction, Cymer
will need to:

                                       21

<PAGE>


-    continue close management of these areas, and

-    improve its management, operational and financial systems, including

          - accounting and other internal management systems,

          - quality control,

          - order fulfillment,

          - field service and customer support capabilities, and

          - changing sales and marketing channels.

         Cymer must also effectively manage its inventory levels, including
assessing and managing excess and obsolete inventories associated with the
changing environment and new product introductions. Cymer will need to
attract, train, retain and manage key technical personnel in order to support
Cymer's growth and/or contraction. Cymer will also need to manage effectively
its international operations, including:

     - operations of its subsidiaries in Japan, Korea, Taiwan, Singapore and the
       Netherlands,

     - field service and support presence in Asia and Europe, and

     - the relationship with Seiko as a manufacturer of its photolithography
       lasers.

         Cymer must also effect timely deliveries of its products and
maintain the product quality and reliability required by its customers. Any
failure to effectively manage Cymer's growth or contraction would materially
adversely affect Cymer's business, financial condition and results of
operations.

RAPID TECHNOLOGICAL CHANGE; NEW PRODUCT INTRODUCTIONS

         Semiconductor manufacturing equipment and processes are subject to
rapid technological change. Cymer believes that its future success will depend
in part upon its ability to:

     - continue to enhance its excimer laser products and their process
       capabilities, and

     - develop and manufacture new products with improved capabilities.

         In order to enhance and improve its products and develop new
products, among other things, Cymer must work closely with its customers,
particularly in the product development stage, to integrate its lasers with
its customers' photolithography tools. Future technologies, such as EUV and
scalpel processes, might render Cymer's excimer laser products obsolete.
Further, Cymer might not be able to develop and introduce new products or
enhancements to its existing products and processes in a timely or cost
effective manner that satisfy customer needs or achieve market acceptance.
The failure to do so could materially adversely affect Cymer's business,
financial condition and results of operations.

DEPENDENCE ON KEY SUPPLIERS

           Cymer obtains certain of the components and subassemblies included in
its products from a single supplier or a limited group of suppliers. In
particular, there are no alternative sources for certain of such components and
subassemblies, including certain optical components used in Cymer's lasers. In
addition, Cymer is increasingly outsourcing the manufacture of various
subassemblies. To date Cymer has been able to obtain adequate supplies of the
components and subassemblies in a timely manner from existing sources. However,
due to the nature of Cymer's product development requirements, key suppliers
often need to rapidly advance their own technologies in order to support Cymer's
new product introduction schedule. These suppliers may or may not be able to
satisfy Cymer's schedule requirements in providing new modules and subassemblies
to Cymer. If Cymer cannot obtain sufficient quantities of such materials,
components or subassemblies, or if such items do not meet Cymer's quality
standards, delays or reductions in product shipments could have a material
adverse effect on Cymer's business, financial condition and results of
operations.

                                       22
<PAGE>


COMPETITION

         LAMBDA-PHYSIK AND GIGAPHOTON

         Cymer currently has two significant competitors in the market for
excimer laser systems for photolithography applications:

     - Lambda-Physik and

     - Gigaphoton (Komatsu and Ushio).

On July 10, 2000, Ushio and Komatsu announced the combination of their excimer
laser business into a joint venture to be known as Gigaphoton Inc.

Both of these companies:

     - are larger than Cymer,

     - have access to greater financial, technical and other resources than does
       Cymer, and

     - are located in closer proximity to most of Cymer's customers than Cymer.

Cymer believes that Lambda-Physik and Gigaphoton are aggressively seeking to
gain larger positions in this market. Cymer believes that its customers have
each purchased products offered by these competitors and that its customers have
qualified competitors' lasers for use with their products. Cymer believes that
Gigaphoton in particular has been qualified for production use by chipmakers in
Japan and elsewhere. Cymer also believes that Lambda-Physik has been qualified
for production use by chipmakers in the U.S. and Europe. Cymer could lose market
share and its growth could slow or even decline as competitors gain market
acceptance.

         OTHER TECHNOLOGIES

         In the future, Cymer will likely experience competition from other
technologies, such as EUV and scalpel processes. To remain competitive, Cymer
believes that it will need to:

     - manufacture and deliver products to customers on a timely basis and
       without significant defects, and

     - maintain a high level of investment in research and development and in
       sales and marketing.

Cymer might not have sufficient resources to continue to make the investments
necessary to maintain its competitive position.

         SMALL AND IMMATURE MARKET FOR EXCIMER LASERS

         The market for excimer lasers is still small and immature. Larger
competitors with substantially greater financial resources, including other
manufacturers of industrial lasers, might attempt to enter the market.

         Cymer might not remain competitive. A failure to remain competitive
would have a material adverse effect on Cymer's business, financial condition
and results of operations.

         Any one of these risks could have an adverse effect on Cymer's
business, financial condition and results of operations.

RISK OF EXCESSIVE INVENTORY BUILDUPS BY PHOTOLITHOGRAPHY TOOL MANUFACTURERS

         Photolithography tool manufacturers constitute substantially all of
Cymer's customers. Photolithography tool manufacturers sell their systems in
turn to semiconductor manufacturers. Market conditions in the industry and
production efficiency of the photolithography tool manufacturer can cause
Cymer's customers to expand or reduce their orders for new laser systems as they
try to manage their

                                       23

<PAGE>

inventories to appropriate levels which better reflect their expected sales
forecasts and production requirements. Cymer is working with its customers to
better understand these issues. However, there can be no assurance that Cymer
will be successful in this regard, or that its customers will not build
excessive laser inventories. Excessive customer laser inventories could result
in a material decline in Cymer's revenues and operating results in future
periods as such inventories are brought into balance.

DEPENDENCE ON KEY PERSONNEL

         Cymer is highly dependent on the services of a number of key employees
in various areas, including:

     - engineering,

     - research and development,

     - sales and marketing, and

     - manufacturing.

In particular, there are a limited number of experts in excimer laser
technology. There is intense competition for such personnel, as well as for the
highly-skilled hardware and software engineers that Cymer requires. Cymer has in
the past experienced, and continues to experience, difficulty in hiring
personnel, including experts in excimer laser technology. Cymer believes that,
to a large extent, its future success will depend upon:

     - the continued services of its engineering, research and development,
       sales and marketing and manufacturing and service personnel, and

     - its ability to attract, train and retain highly skilled personnel in each
       of these areas.

Cymer does not have employment agreements with most of its employees, and Cymer
might not be able to retain its key employees. The failure of Cymer to hire,
train and retain such personnel could have a material adverse effect on Cymer's
business, financial condition and results of operations.

DEPENDENCE ON SINGLE PRODUCT LINE

         Cymer's only product line is excimer lasers ("KrF, ArF and F2 laser
systems"). The primary market for excimer lasers is for use in DUV
photolithography equipment for manufacturing deep-submicron semiconductor
devices. Demand for Cymer's products will depend in part on the rate at which
semiconductor manufacturers adopt excimer lasers as the illumination source for
their photolithography tools.

Impediments to such adoption include:

     - instability of photoresists used in advanced DUV photolithography, and

     - potential shortages of specialized materials used in DUV optics.

There can be no assurance that such impediments can or will be overcome. In any
event, such impediments may materially reduce the demand for Cymer's products.
Further, if Cymer's customers experience reduced demand for DUV photolithography
tools, or if Cymer's competitors are successful in obtaining significant orders
from such customers, Cymer's financial condition and results of operations would
be materially adversely affected.

DISRUPTION OF ELECTRIC SERVICE

         California, the location of Cymer's headquarters, primary manufacturing
facility, and a number of Cymer's suppliers, is experiencing significant
problems in the operations of its electric utility infrastructure. This has
caused Cymer and its suppliers' electric utility suppliers to notify companies
that they could be subject to blackouts of electric power. Some of Cymer's
suppliers have experienced disruptions in services. While Cymer has some back up
power capability, any prolonged blackout or series of periodic blackouts could
disrupt Cymer's production schedule. Any material disruption of electric service
would have a material adverse impact upon Cymer's financial performance.

                                       24

<PAGE>


MAINTENANCE OF FIELD SERVICE AND SUPPORT ORGANIZATION

         Cymer believes that the need to provide fast and responsive service to
the semiconductor manufacturers using its lasers is critical. Cymer cannot
depend solely on its direct customers to provide this specialized service.
Therefore, Cymer believes it is essential to maintain through its own personnel
or through trained third party sources, a rapid response capability to service
its lasers throughout the world. Accordingly, Cymer has an ongoing effort to
continuously develop its direct support infrastructure in the United States,
Japan, Europe, Korea, Singapore, Taiwan and Southeast Asia. This task entails
recruiting and training qualified field service personnel or identifying
qualified independent firms and maintaining effective and highly trained
organizations that can provide service to customers in various countries in
their assigned regions. Cymer has historically experienced difficulties in
effectively training field service personnel. Additionally, field service
personnel often experience high turnover. Cymer might not be able to attract and
train qualified personnel to maintain these operations successfully. Further,
the costs of such operations might be excessive. A failure to implement this
plan effectively could have a material adverse effect on Cymer's business,
financial condition and results of operations.

UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY

         CYMER PATENTS

         Cymer believes that the success of its business depends more on such
factors as the technical expertise of its employees, as well as their innovative
skills and marketing and customer relations ability, than on patents,
copyrights, trade secrets and other intellectual property rights. Nevertheless,
the success of Cymer may depend in part on patents. As of December 31, 2000,
Cymer owned 95 United States patents covering certain aspects of technology
associated with excimer lasers. Such patents will expire at various times during
the period from January 2008 to September 2019. As of December 31, 2000, Cymer
had also applied for 66 additional patents in the United States, 11 of which
have been allowed. As of December 31, 2000 Cymer owned 80 foreign patents and
had filed 226 patent applications pending in various foreign countries.

         Cymer's pending patent applications and any future applications might
not be approved. Cymer's patents might not provide Cymer with competitive
advantages. Third parties might challenge Cymer's patents. In addition, third
parties' patents might have an adverse effect on Cymer's ability to do business.
In this regard, due to cost constraints, Cymer did not begin filing for patents
in Japan or other countries with respect to inventions covered by its United
States patents and patent applications until 1993. Therefore, Cymer lost the
right to seek foreign patent protection for certain of its inventions.
Additionally, because foreign patents may afford less protection under foreign
law than is available under United States patent law, any such patents issued to
Cymer might not adequately protect Cymer's technology in a given foreign
jurisdiction. Furthermore, third parties might independently develop similar
products, duplicate Cymer's products or, to the extent patents are issued to
Cymer, design around the patents issued to Cymer.

         COMPETITIVE PATENTS

         Others may have filed and in the future may file patent applications
that are similar or identical to those of Cymer. To determine the priority of
inventions, Cymer may have to participate in interference proceedings declared
by the United States Patent and Trademark Office. Such interference proceedings
could result in substantial cost to Cymer. Such third party patent applications
might have priority over patent applications filed by Cymer.

         OTHER FORMS OF PROTECTION

         Cymer also relies upon:

         -        trade secret protection,

         -        employee nondisclosure agreements,

         -        third-party nondisclosure agreements, and

         -        other intellectual property protection methods

                                       25

<PAGE>


to protect its confidential and proprietary information. Despite these efforts,
third parties might:

     - independently develop substantially equivalent proprietary information
       and techniques,

     - otherwise gain access to Cymer's trade secrets, or

     - disclose such technology.

Cymer might not be able to meaningfully protect its trade secrets.

         POSSIBLE CLAIMS TO OWNERSHIP OF CYMER'S INTELLECTUAL PROPERTY

         Cymer has in the past funded a significant portion of its research and
development expenses from outside research and development revenues. Cymer has
received such revenues from photolithography tool manufacturers and from
SEMATECH, a semiconductor industry consortium, in connection with the design and
development of specific products. Cymer currently funds a small portion of its
development expenses through SEMATECH. Although Cymer's arrangements with
photolithography tool manufacturers and SEMATECH seek to clarify the ownership
of the intellectual property arising from research and development services
performed by Cymer, disputes over the ownership or rights to use or market such
intellectual property might arise between Cymer and such parties. Any such
dispute could result in restrictions on Cymer's ability to market its products
and could have a material adverse effect on Cymer's business, financial
condition and results of operations.

         PATENT INFRINGEMENT

         Third parties have in the past notified, and may in the future notify,
Cymer that it may be infringing intellectual property rights of others.
Conversely, Cymer has in the past notified, and may in the future notify, third
parties that they may be infringing Cymer's intellectual property rights.

         Specifically, Cymer has engaged in discussions with one of its
competitors, Komatsu, with respect to certain of Komatsu's Japanese patents, in
the course of which Komatsu has also identified to Cymer a number of additional
Japanese and U.S. patents that Komatsu asserts may be infringed by Cymer or by
Cymer's Japanese manufacturing partner, Seiko. Komatsu has also notified one of
Cymer's integrator customers, Nikon, of its belief that Cymer's lasers infringe
several of Komatsu's Japanese and U.S. patents. Cymer, in consultation with
Japanese patent counsel, has initiated oppositions to certain Komatsu Japanese
patents and patent applications in the Japanese Patent Office. Some of these
oppositions have been dismissed by the Japanese Patent Office. Litigation might
ensue with respect to the Komatsu Japanese patents or Komatsu U.S. patents.
Also, Komatsu might assert infringement claims under other or additional
patents. Komatsu has notified Seiko that Komatsu intends to enforce its rights
under the Komatsu Japanese patents against Seiko if Seiko engages in
manufacturing activities for Cymer. In connection with its manufacturing
agreement with Seiko, Cymer has agreed to indemnify Seiko against such claims
under certain circumstances. Cymer and Seiko might not ultimately prevail in any
such litigation.

         Cymer has notified its competitors and others of Cymer's United States
patent portfolio. Cymer has specifically asserted certain of its U.S. patents
against Komatsu when informed that Komatsu lasers might be integrated into
steppers intended for shipment into the U.S. Cymer and Komatsu have engaged in
discussions with regard to each party's claims. Those discussions might not be
successful and litigation could result. Attorneys representing Komatsu are
currently challenging one of Cymer's U.S. patents in the U.S. Patent Office.
During 2000, Komatsu's lithography laser business was transferred to Gigaphoton,
Inc., a joint venture of Komatsu and Ushio, Inc. Cymer has also been engaged in
patent discussions with another competitor, Lambda-Physik, concerning
allegations by each party against the other of possible patent infringement.
These discussions also might not be successful and litigation could result.

         Any patent litigation initiated by Cymer, or initiated by Cymer's
competitors against Cymer, would, at a minimum, be costly. Litigation could also
divert the efforts and attention of Cymer's management and technical personnel.
Both could have a material adverse effect on Cymer's business, financial
condition and results of operations. Furthermore, in the future other third
parties might assert

                                       26

<PAGE>


other infringement claims, and customers and end users of Cymer's products might
assert other claims for indemnification resulting from infringement claims. Such
assertions, if proven to be true, might materially adversely affect Cymer's
business, financial condition and results of operations. If any such claims are
asserted against Cymer, Cymer may seek to obtain a license under the third
party's intellectual property rights. However, such a license might not be
available on reasonable terms or at all. Cymer could decide, in the alternative,
to resort to litigation to challenge such claims or to design around the
patented technology. Any of these actions could be costly and would divert the
efforts and attention of Cymer's management and technical personnel, which would
materially adversely affect Cymer's business, financial condition and results of
operations.

         TRADEMARK

         Cymer has registered the trademark CYMER in the United States and
certain other countries and is seeking additional registrations of other
trademarks including "Insist on Cymer" in the United States and in certain other
countries. Cymer uses these and a variety of other marks in its advertisements
and other business activities around the world. Based on the use of these or
other marks, Cymer might be subjected to actions for trademark infringement,
which could be costly to defend. If a challenge to a mark were to be successful,
Cymer might be required to cease use of the mark and, potentially, to pay
damages.

RISKS ASSOCIATED WITH MANUFACTURING IN JAPAN

         Cymer has qualified Seiko of Japan as a contract manufacturer of its
photolithography lasers. Komatsu, a member of the Gigaphoton joint venture and
competitor of Cymer, has advised Seiko that certain aspects of Cymer's lasers
might infringe certain patents that have been issued to Komatsu in Japan.
Komatsu has advised Seiko it intends to enforce its rights under such patents
against Seiko if Seiko engages in manufacturing activities for Cymer. In the
event that, notwithstanding its manufacturing agreement with Cymer, Seiko
determines not to continue manufacturing Cymer's products until resolution of
the matter with Komatsu, Cymer's ability to meet any heavy demand for its
products could be materially adversely affected. See -- "Uncertainty Regarding
Patents and Protection of Proprietary Technology."

RISKS OF INTERNATIONAL SALES AND OPERATIONS

         SIGNIFICANT INTERNATIONAL TRADE

         Cymer derived approximately 88%, 85% and 81% of its revenues in 1998,
1999 and 2000, respectively, from customers located outside the United States.
Because a significant majority of Cymer's principal customers are located in
other countries, particularly Asia, Cymer anticipates that international sales
will continue to account for a significant portion of its revenues. In order to
support its overseas customers, Cymer:

     - maintains subsidiaries in Japan, Korea, Taiwan, Singapore and the
       Netherlands,

     - is further developing its field service and support operations worldwide,
       and

     - will continue to work with Seiko as a manufacturer of its products in
       Japan.

         Cymer might not be able to manage these operations effectively.
Cymer's investment in these activities might not enable it to compete
successfully in international markets or to meet the service and support
needs of its customers. Additionally, a significant portion of Cymer's sales
and operations could be subject to certain risks, including:

     - tariffs and other barriers,

     - difficulties in staffing and managing foreign subsidiary and branch
       operations,

     - currency exchange risks and exchange controls, or potentially adverse
       tax consequences, and

     - the possibility of difficulty in accounts receivable collection.

                                       27
<PAGE>


Because many of Cymer's principal customers, as well as many of the end-users of
Cymer's laser systems, are located in Asia, the recent economic problems and
currency fluctuations affecting that region could intensify Cymer's
international risk. Further, while Cymer has experienced no difficulty to date
in complying with United States export controls, these rules could change in the
future and make it more difficult or impossible for Cymer to export its products
to various countries. These factors could have a material adverse effect on
Cymer's business, financial condition and results of operations.

         CURRENCY FLUCTUATIONS

         Sales by Cymer to its Japanese subsidiary are denominated in dollars,
while sales by the subsidiary to customers in Japan are denominated in yen. This
means that Cymer's results of operations show some fluctuation based on the
value of the Japanese yen against the U.S. dollar. Cymer's Japanese subsidiary
manages its exposure to such fluctuations by entering into foreign currency
exchange contracts to hedge its purchase commitments. Management will continue
to monitor Cymer's exposure to currency fluctuations, and, when appropriate, use
financial hedging techniques to minimize the effect of these fluctuations.
However, exchange rate fluctuations might have a material adverse effect on
Cymer's results of operations or financial condition. In the future, Cymer might
need to sell its products in other currencies, which would make the management
of currency fluctuations more difficult and expose Cymer to greater risks in
this regard.

         FOREIGN REGULATIONS

         Numerous foreign government standards and regulations apply to Cymer's
products. These standards and regulations are continually being amended.
Although Cymer endeavors to meet foreign technical and regulatory standards,
Cymer's products might not continue to comply with foreign government standards
and regulations, or changes thereto. It might not be cost effective for Cymer to
redesign its products to comply with such standards and regulations. The
inability of Cymer to design or redesign products to comply with foreign
standards could have a material adverse effect on Cymer's business, financial
condition and results of operations.

PRODUCTION USE OF EXCIMER LASERS

         Cymer's products might not meet production specifications or cost of
operation requirements over time when subjected to prolonged and intense use in
volume production in semiconductor manufacturing processes. If any semiconductor
manufacturer cannot successfully achieve or sustain volume production using
Cymer's lasers, Cymer's reputation with semiconductor manufacturers or the
limited number of photolithography tool manufacturers could be damaged. This
would have a material adverse effect on Cymer's business, financial condition
and results of operations.

RISKS ASSOCIATED WITH EXPANDING PRODUCT OFFERINGS AND INTEGRATING ACQUIRED
BUSINESSES

         The enhancement of Cymer's excimer laser products and their process
capabilities, as well as the development and manufacture of new products to
serve other semiconductor applications through strategic agreements and
acquisitions of businesses will be required for Cymer to continue to improve its
operational and financial growth. Cymer cannot be certain that it will be able
to manage its growth, the acceleration of the development enhancements for
existing technology and creating new technologies and products, or effectively
integrate new products and applications into Cymer's current operations. Any of
these risks could materially harm Cymer's business, financial condition and
results of operations.

         In addition, the integration of acquired businesses will require
additional management, technical and administrative resources. The risks
involved with an acquisition may include, and are not limited to: diversion of
management's attention, failure to retain key personnel, amortization of
acquired intangible assets, client dissatisfaction or performance problems with
an acquired firm, costs associated with acquisitions and the integration of
acquired operations, and assumption of unknown liabilities, or other
unanticipated events or circumstances. Any of these risks could materially harm
Cymer's business, financial condition and results of operations. There can be no
assurance that any business acquired will achieve anticipated revenues or
operating results.

                                       28

<PAGE>

ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS

         Federal, state and local regulations impose various controls on the
storage, handling, discharge and disposal of substances used in Cymer's
manufacturing process and on the facility leased by Cymer. Cymer believes that
its activities conform to present governmental regulations applicable to its
operations and its current facilities. These regulations include those related
to environmental, land use, public utility utilization and fire code matters.
Such governmental regulations might in the future impose the need for additional
capital equipment or other process requirements upon Cymer. They might also
restrict Cymer's ability to expand its operations. The adoption of such
measures, or the failure by Cymer to comply with applicable environmental and
land use regulations or to restrict the discharge of hazardous substances, could
subject Cymer to future liability or could cause its manufacturing operations to
be curtailed or suspended.

RISKS OF PRODUCT LIABILITY CLAIMS

         Cymer faces a significant risk of exposure to product liability claims
in the event that the use of its products results in personal injury or death.
Cymer might experience material product liability losses in the future. Cymer
maintains insurance against product liability claims. However, such coverage
might not continue to be available on terms acceptable to Cymer. Such coverage
also might not be adequate for liabilities actually incurred. Further, in the
event that any of Cymer's products prove to be defective, Cymer may need to
recall or redesign such products. A successful claim brought against Cymer in
excess of available insurance coverage, or any claim or product recall that
results in significant adverse publicity against Cymer, could have a material
adverse effect on Cymer's business, financial condition and results of
operations.

POSSIBLE PRICE VOLATILITY OF COMMON STOCK

         The following factors may significantly affect the market price of
Cymer's Common Stock:

     - actual or anticipated fluctuations in Cymer's operating results,

     - announcements of technological innovations,

     - new products or new contracts by Cymer or its competitors,

     - developments with respect to patents or proprietary rights,

     - conditions and trends in the laser device and other technology
       industries,

     - changes in financial estimates by securities analysts,

     - general market conditions, and

     - other factors.

In addition, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market price for many high
technology companies. Such fluctuations have in some cases been unrelated to the
operating performance of these companies. Severe price fluctuations in a
company's stock have frequently been followed by securities litigation. Cymer is
currently in the process of defending such an action (see - "Legal Matters").
Such litigation can result in substantial costs and a diversion of management's
attention and resources and therefore could have a material adverse effect on
Cymer's business, financial condition and results of operations.

LEGAL MATTERS

         Cymer has been named as a defendant in several putative shareholder
class action lawsuits which were filed in September and October, 1998 in the
U.S. District Court for the Southern District of California. Certain executive
officers and directors of Cymer are also named as defendants. The plaintiffs
purport to represent a class of all persons who purchased Cymer's Common Stock
between April 24, 1997 and September 26, 1997 (the "Class Period"). The
complaints allege claims under the federal securities laws. The plaintiffs
allege that Cymer and the other defendants made various material
misrepresentations and omissions during the Class Period. The complaints do not
specify the amount of damages sought. The complaints have been consolidated into
a single action and a class representative has been appointed by the court. A
consolidated amended complaint was filed in early August, 1999. On November 5,
1999, Cymer and the other defendants filed a motion to dismiss the

                                       29
<PAGE>

consolidated amended claim for failure to state a cause of action. On April 1,
2000, the court granted defendant's motion to dismiss with leave to amend the
complaint by the plaintiffs. The plaintiffs filed their second amended complaint
on June 5, 2000. Cymer moved to dismiss the amended complaint on August 4, 2000.
On January 22, 2001, the Court heard oral argument on Cymer's motion to dismiss,
but has not yet decided the motion. Cymer believes it has meritorious defenses
to the claims asserted and intends to defend the action vigorously. Accordingly,
no provision for any liability or loss that may result from adjudication or
settlement thereof has been made in the accompanying consolidated financial
statements.

         Even though Cymer believes the claim to be meritless and intends to
vigorously defend the action, there can be no assurances that Cymer will be
successful in ultimately defending and dismissing the action. Such litigation
may result in Cymer being required to pay damages, incur substantial costs and
divert management's attention and resources, and therefore could have a material
adverse effect on Cymer's business, financial condition and results of
operations.

ANTI-TAKEOVER EFFECT OF NEVADA LAW AND CHARTER AND BYLAW PROVISIONS;
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE

         Nevada law as well as Cymer's charter and other documents contain
provisions that could discourage a proxy contest or make more difficult the
acquisition of a substantial block of Cymer's Common Stock, including Cymer's
Articles of Incorporation and Bylaws and Cymer's Preferred Shares Rights
Agreement ("poison pill") dated February 13, 1998. In addition, the Board of
Directors is authorized to issue, without shareholder approval, up to 5,000,000
shares of Preferred Stock. Such shares of Preferred Stock may have voting,
conversion and other rights and preferences that may be superior to those of the
Common Stock and that could adversely affect the voting power or other rights of
the holders of Common Stock. The Board of Directors could use the issuance of
Preferred Stock or of rights to purchase Preferred Stock to discourage an
unsolicited acquisition proposal.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

         Cymer conducts business in several international currencies through its
worldwide operations. Due to the large volume of business Cymer manages in
Japan, the Japanese operation poses the greatest foreign currency risk. Cymer
uses financial instruments, principally forward exchange contracts, in Japan to
manage its foreign currency exposures. Cymer does not enter into forward
exchange contracts for trading purposes.

         Cymer enters into foreign currency exchange contracts in order to
reduce the impact of currency fluctuations related to purchases of Cymer's
inventories by Cymer Japan for resale under firm third-party sales commitments.
Net gains or losses are recorded on the date the inventories are received by
Cymer Japan (the transaction date) and are included in cost of product sales in
the consolidated statements of operations as the related sale is consummated.
Amounts due from/to the bank on contracts not settled as of the transaction date
are recorded as foreign exchange contracts receivable/payable in the
consolidated balance sheets.

         At December 31, 2000, Cymer had outstanding forward foreign exchange
contracts to buy US$76.9 million for 8.2 billion yen under foreign currency
exchange facilities with contract rates ranging from 101.95 yen to 110.60 yen
per US dollar and which contracts expire on various expiration dates through
December 2001.

INVESTMENT AND DEBT RISK

         Cymer maintains an investment portfolio consisting primarily of
government and corporate fixed income securities, certificates of deposit and
commercial paper. While it is Cymer's general intent to hold such securities
until maturity, management will occasionally sell certain securities for cash
flow purposes. Therefore, Cymer's investments are classified as
available-for-sale and are carried on the

                                       30
<PAGE>

balance sheet at fair value. Due to the conservative nature of the investment
portfolio, a sudden change in interest rates would not have a material effect on
the value of the portfolio.


         In August 1997, Cymer issued $172.5 million aggregate principal amount
of Step-Up Convertible Subordinated (Notes) due August 6, 2004, with interest
payable semi-annually on February 6 and August 6, commencing February 6, 1998.
Interest on the notes is stated at 3 1/2% per annum from August 6, 1997 through
August 5, 2000 and at 7 1/4% per annum from August 6, 2000 to maturity or
earlier redemption, representing a yield to maturity accrued at approximately
5.47%. The Notes are convertible at the option of the holder into shares of
Common Stock of Cymer at any time on or after November 5, 1997 and prior to
redemption or maturity, at a conversion rate of 21.2766 shares per $1,000
principal amount of Notes, subject to adjustment under certain conditions. Cymer
could not redeem the Notes prior to August 9, 2000. Thereafter, Cymer can redeem
the Notes from time to time, in whole or in part, at specified redemption
prices. The Notes are unsecured and subordinated to all existing and future
senior indebtedness of Cymer. The indenture governing the Notes does not
restrict the incurrence of senior indebtedness or other indebtedness by Cymer.
These Notes are recorded at face value on the consolidated balance sheets. The
fair value of such debt, based on quoted market prices at December 31, 2000 was
$168.9 million. As of December 31, 1999, $172.5 million in Notes was
outstanding, as compared to $172.3 million outstanding as of December 31, 2000.
As of December 31, 1999 and 2000, $172.5 million and $172.3 million,
respectively, under the Notes was outstanding. During the first quarter of 2000,
$165,000 of the Notes were converted into 3,510 shares of common stock.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information required by this Item is included in Part IV Items
14(a)(1) and (2) of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         On March 31, 2000, Cymer dismissed Deloitte & Touche LLP as its
independent accountants. The decision to dismiss Deloitte & Touche LLP and
engage new auditors was recommended by the Audit Committee of Cymer's Board of
Directors and was approved by Cymer's Board. Cymer believes there were no
disagreements with Deloitte & Touche LLP within the meaning of Instruction 4 of
Item 304 of Regulation S-K on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure in connection
with the audits of the Cymer's financial statements for the years ended December
31, 1998 or 1999, which disagreement if not resolved to their satisfaction would
have caused Deloitte & Touche LLP to issue an adverse opinion or a disclaimer of
opinion, and neither report contained an adverse opinion or disclaimer of
opinion or was qualified or modified as to uncertainty, audit scope or
accounting principles.

         During the two most recent fiscal years, there have no reportable
events (as defined in Item 304 of Regulation S-K) with Deloitte & Touche LLP. A
letter from Deloitte & Touche LLP addressed to the Securities and Exchange
Commission is included as Exhibit 16 to the Current Report on Form 8-K filed
April 5, 2000. This letter states that Deloitte & Touche LLP agrees with the
statements made by Cymer contained on such report on Form 8-K.

         On April 12, 2000, Cymer engaged KPMG LLP as its independent
accountants to audit its consolidated financial statements for the year ending
December 31, 2000.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information regarding the identification and business experience of
Cymer's directors under the caption "Nominees" under the main caption "Proposal
1 - Election of Directors" in Cymer's definitive Proxy Statement for the annual
meeting of stockholders to be held, to be filed with the Securities and Exchange
Commission within 120 days after the end of Cymer's fiscal year ended December
31, 2000,

                                       31

<PAGE>

is incorporated herein by this reference. For information regarding
the identification and business experience of Cymer's executive officers, see
"Executive Officers" at the end of Item 1 in Part I of this Annual Report on
Form 10-K. Information concerning filing requirements applicable to Cymer's
executive officers and directors under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in Cymer's Proxy Statement is incorporated
herein by this reference.

ITEM 11.  EXECUTIVE COMPENSATION

         The information under the captions "Executive Compensation -
Compensation of Directors," and "Executive Compensation - Compensation of
Executive Officers" in Cymer's Proxy Statement is incorporated herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information under the caption "Security Ownership of Certain
Beneficial Owners and Management" in Cymer's Proxy Statement is incorporated
herein by this reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information under the caption "Certain Transactions" in Cymer's
Proxy Statement is incorporated herein by this reference.

         With the exception of the information specifically incorporated by
reference from Cymer's Proxy Statement in Part III of this Annual Report on Form
10-K, Cymer's Proxy Statement shall not be deemed to be filed as part of this
Report. Without limiting the foregoing, the information under the captions
"Report of the Compensation Committee of the Board of Directors on Executive
Compensation" and "Performance Measurement Comparison" in Cymer's Proxy
Statement is not incorporated by reference in this Annual Report on Form 10-K.


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a) The following documents are filed as part of, or incorporated by
reference into, this Annual Report on Form 10-K:

                  (1) FINANCIAL STATEMENTS. The following Consolidated Financial
Statements of Cymer, Inc. and Independent Auditors' Report are included in a
separate section of this Report beginning on page F-1:

<TABLE>
<CAPTION>
Description                                                            Page Number
<S>                                                                    <C>
Independent Auditors' Report - KPMG LLP........................................F-1
Independent Auditors' Report - Deloitte & Touche LLP...........................F-2
Consolidated Balance Sheets as of December 31, 1999 and 2000...................F-3
Consolidated Statements of  Income for the Years Ended
         December 31, 1998, 1999 and 2000......................................F-4
Consolidated Statements of Stockholders' Equity for the Years
         Ended December 31, 1998, 1999 and 2000................................F-5
Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1998, 1999 and 2000......................................F-6
Notes to Consolidated Financial Statements.....................................F-8
</TABLE>

                  (2) FINANCIAL STATEMENT SCHEDULES. All financial statement
schedules have been omitted because the required information is not applicable
or not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or the notes thereto.

                                       32

<PAGE>

                  (3) EXHIBITS. The exhibits listed under Item 14(c) hereof are
filed with, or incorporated by reference into, this Annual Report on Form 10-K.

         (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed by
Registrant during the fourth quarter of the fiscal year ended December 31, 2000.

         (c) EXHIBITS. The following exhibits are filed as part of, or
incorporated by reference into, this Annual Report on Form 10-K:


             3.1   Amended and Restated Articles of Incorporation of Cymer
                   (incorporated herein by reference to Exhibit 3.1 to Cymer's
                   Registration Statement on Form S-1 (as amended), Reg. No.
                   333-08383).

             3.2   Certificate of Designations of Rights, Preferences and
                   Privileges of Series A Participating Preferred Stock of Cymer
                   (incorporated herein by reference to Exhibit 1 to Cymer's
                   Form 8-A, dated February 20, 1998).

             3.3   Bylaws of Cymer, as amended and restated.

             4.1   Preferred Shares Rights Agreement, dated as of February 13,
                   1998 between Cymer and ChaseMellon Shareholder Services,
                   L.L.C. (now Mellon Investor Services L.L.C.) (incorporated
                   herein by reference to Exhibit 1 to Cymer's Form 8-A, dated
                   February 20, 1998).

             4.2   Indenture, dated as of August 6, 1997, by and among Cymer and
                   State Street Bank and Trust Company of California, N.A., as
                   trustee thereunder (incorporated herein by reference to
                   Exhibit 4.1 to Cymer's Form 8-K, dated August 1, 1997).

             10.1  Form of Indemnification Agreement with Directors and Officers
                   (incorporated herein by reference to Exhibit 10.1 to Cymer's
                   Registration Statement on Form S-1 (as amended), Reg. No.
                   333-08383).

             10.2  Standard Industrial Lease - Multi-Tenant, dated August 19,
                   1991, by and between Lepercq Corporate Income Fund L.P. and
                   Cymer (originally between Frankris Corporation and Cymer)
                   (incorporated herein by reference to Exhibit 10.15 to Cymer's
                   Registration Statement on Form S-1 (as amended), Reg. No.
                   333-08383).

             10.3  Single-Tenant Industrial Lease, dated December 19, 1996, by
                   and between AEW/LBA Acquisition Co. II, LLC and Cymer
                   (incorporated herein by reference to Exhibit 10.20 to Cymer's
                   Annual Report on Form 10-K filed for the year ended December
                   31, 1996).

             10.4  Patent License Agreement, dated October 13, 1989, by and
                   between Cymer and Patlex Corporation (incorporated herein by
                   reference to Exhibit 10.13 to Cymer's Registration Statement
                   on Form S-1 (as amended), Reg. No. 333-08383).

             10.5  Contract Manufacturing Agreement -- Lithography Laser, dated
                   August 28, 1992, by and between Cymer and Seiko Instruments
                   Inc. (the "Seiko Agreement") (incorporated herein by
                   reference to Exhibit 10.16 to Cymer's Registration Statement
                   on Form S-1 (as amended), Reg. No. 333-08383).

                   Addendum No. 2 to the Seiko Agreement, dated February 21,
                   2000 (incorporated herein by reference to Exhibit 10.5 to
                   Cymer's Annual Report on Form 10-K for the year ended
                   December 31, 1999).

                                       33

<PAGE>

             10.6  Loan Agreement, dated as of December 8, 1997, by and among
                   Silicon Valley Bank and Bank of Hawaii, as co-lenders, and
                   Cymer and Cymer Japan, Inc., as borrowers (the "Loan
                   Agreement") (incorporated herein by reference to Exhibit
                   10.10 to Cymer's Annual Report on Form 10-K/A filed for the
                   year ended December 31, 1997).

                   Amendment to the Loan Agreement, dated as of February 4, 1999
                   (incorporated herein by reference to Exhibit 10.6 to Cymer's
                   Annual Report on Form 10-K for the year ended December 31,
                   1999).

                   Amendment to the Loan Agreement, dated as of September 22,
                   1999 (incorporated herein by reference to Exhibit 10.6 to
                   Cymer's Annual Report on Form 10-K for the year ended
                   December 31, 1999).

                   Amendment to the Loan Agreement, dated as of February 4, 2000
                   (incorporated herein by reference to Exhibit 10.6 to Cymer's
                   Annual Report on Form 10-K for the year ended December 31,
                   1999).

                   Amendment to Loan Agreement, dated as of February 3, 2001.

                   Corporate Guaranty, dated December 8, 1997, from Cymer to
                   Silicon Valley Bank and Bank of Hawaii, as co-lenders
                   (incorporated herein by reference to Exhibit 10.12 to Cymer's
                   Annual Report on Form 10-K/A filed for the year ended
                   December 31, 1997).

             10.7  1996 Stock Option Plan, as amended and restated (incorporated
                   herein by reference to Exhibit 4.1 to Cymer's Registration
                   Statement on Form S-8, Reg. No. 333-48242).

             10.8  1996 Employee Stock Purchase Plan (incorporated herein by
                   reference to Exhibit 10.4 to Cymer's Registration Statement
                   on Form S-1 (as amended), Reg. No. 333-08383).

             10.9  1996 Director Option Plan (incorporated herein by reference
                   to Exhibit 10.5 to Cymer's Registration Statement on Form S-1
                   (as amended), Reg. No. 333-08383).

             10.10 Employment Agreement, dated October 1, 2000, by and between
                   Robert P. Akins and Cymer.

             10.11 Employment Agreement, dated November 26, 1997, by and between
                   William A. Angus, III and Cymer (incorporated herein by
                   reference to Exhibit 10.17 to Cymer's Annual Report on form
                   10-K/A filed for the year ended December 31, 1997).

             10.12 Employment Agreement, dated October 1, 2000, by and between
                   Pascal Didier and Cymer.

             10.13 Employment Agreement, dated October 21, 1998, by and between
                   Edward P. Holtaway and Cymer (incorporated herein by
                   reference to Exhibit 10.20 to Cymer's Annual Report on form
                   10-K filed for the year ended December 31, 1998).

             10.14 Employment Agreement, dated March 1, 2000, by and between
                   Wallace Breitman and Cymer (incorporated herein by reference
                   to Exhibit 10.14 to Cymer's Annual Report on Form 10-K for
                   the year ended December 31, 1999).

                                       34

<PAGE>

             10.15 Description of Cymer Management Incentive Plan (incorporated
                   herein by reference to Exhibit 10.15 to Cymer's Annual Report
                   on Form 10-K for the year ended December 31, 1999).

             10.16 Cymer Deferred Compensation Plan, as amended and restated
                   (incorporated herein by reference to Exhibit 10.1 to Cymer's
                   Quarterly Report on Form 10-Q for the quarter ended March 31,
                   2000).

             10.17 Employment Agreement, dated May 8, 2000, by and between Brian
                   Klene and Cymer (incorporated herein by reference to Exhibit
                   10.1 to Cymer's Quarterly Report on Form 10-Q for the quarter
                   ended June 30, 2000).

             10.18 2000 Nonstatutory Stock Option Plan (incorporated herein by
                   reference to Exhibit 10.1 to Cymer's Quarterly Report on Form
                   10-Q for the quarter ended September 30, 2000).

             10.19 Employment Agreement, dated June 1, 2000, by and between
                   David Myers and Cymer (incorporated herein by reference to
                   Exhibit 10.2 to Cymer's Quarterly Report on Form 10-Q for the
                   quarter ended September 30, 2000).

             16.1  Letter from Deloitte & Touche LLP to the Securities and
                   Exchange Commission dated April 5, 2000 (incorporated herein
                   by reference to Exhibit 16 to Cymer's current report on Form
                   8-K, dated March 31, 2000).

             21.1  Subsidiaries of Registrant.

             23.1  Independent Auditors' Consent - KPMG LLP.

             23.2  Independent Auditors' Consent - Deloitte & Touche LLP.

         (d) FINANCIAL STATEMENT SCHEDULES. See item 14, paragraph (a) (2),
             above.

                                       35

<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                               CYMER, INC.


Dated: March 23, 2001          By:  /s/ ROBERT P. AKINS
                                    ------------------------------------
                                    Robert P. Akins, Chief Executive Officer,
                                    and Chairman of the Board


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

<TABLE>
<CAPTION>

<S>                                  <C>                                                         <C>

/s/ ROBERT P. AKINS                  Chief Executive Officer,
--------------------                 and Chairman of the Board
    Robert P. Akins                  (PRINCIPAL EXECUTIVE OFFICER)                               March 23, 2001



/s/ WILLIAM A. ANGUS, III            Senior Vice President, Chief
--------------------------           Financial Officer and Secretary
    William A. Angus, III            (PRINCIPAL FINANCIAL OFFICER)                               March 23, 2001



/s/ NANCY J. BAKER                   Vice President, Finance,
----------------------               Treasurer and Chief Accounting
Nancy J. Baker                       Officer
                                     (PRINCIPAL ACCOUNTING OFFICER)                              March 23, 2001


/s/ RICHARD P. ABRAHAM               Director                                                    March 23, 2001
-----------------------
Richard P. Abraham

/s/ KENNETH M. DEEMER                Director                                                    March 23, 2001
----------------------
Kenneth M. Deemer

/s/ MICHAEL R. GAULKE                Director                                                    March 23, 2001
----------------------
Michael R. Gaulke

/s/ WILLIAM G. OLDHAM                Director                                                    March 23, 2001
----------------------
William G. Oldham

/s/ PETER J. SIMONE                  Director                                                    March 23, 2001
---------------------
Peter J. Simone

/s/ JON D. TOMPKINS                  Director                                                    March 23, 2001
----------------------
Jon D. Tompkins

</TABLE>


                                       36
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Cymer, Inc.:

We have audited the accompanying consolidated balance sheet of Cymer, Inc. and
subsidiaries (collectively, the "Company") as of December 31, 2000, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the year then ended. These consolidated 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 audit.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cymer, Inc. and
subsidiaries as of December 31, 2000, and the results of their operations and
their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.


                                    /s/ KPMG LLP

    San Diego, California
    January 30, 2001,
      except as to Note 13
      which is as of February 13, 2001


                                      F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders of Cymer, Inc.:


We have audited the accompanying consolidated balance sheet of Cymer, Inc. and
subsidiaries (collectively, the "Company") as of December 31, 1999 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the two years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with 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 present fairly, in all
material respects, the financial position of the Company as of December 31,
1999, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.


                                       /s/ DELOITTE & TOUCHE LLP

    San Diego, California
    January 28, 2000


                                      F-2
<PAGE>

CYMER, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                    -----------------------------
ASSETS                                                  1999            2000
<S>                                                 <C>             <C>
CURRENT ASSETS:
   Cash and cash equivalents                          $75,765         $79,678
   Short-term investments                              97,564         117,017
   Accounts receivable - net                           68,961          85,569
   Foreign exchange contracts receivable               21,706          34,276
   Inventories                                         51,409          76,887
   Deferred income taxes                               16,360          23,503
   Prepaid expenses and other assets                    3,110           4,571
                                                    -------------   -------------
          Total current asset                         334,875         421,501


PROPERTY AND EQUIPMENT - net                           56,921          91,080
LONG-TERM INVESTMENTS                                  19,760           8,984
DEFERRED INCOME TAXES                                   8,562           6,060
OTHER ASSETS                                            6,413           5,549
                                                    -------------   -------------
TOTAL ASSETS                                         $426,531        $533,174
                                                    =============   =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                   $20,599         $23,471
   Accrued and other liabilities                       52,002          67,853
   Foreign exchange contracts payable                  24,276          31,612
   Income taxes payable                                 6,482          11,274
   Revolving loan                                      18,395           8,745
                                                    -------------   -------------
          Total current liabilities                   121,754         142,955

CONVERTIBLE SUBORDINATED NOTES                        172,500         172,335
OTHER LIABILITIES                                       3,271           3,175
MINORITY INTEREST                                       2,113           1,741
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred Stock - authorized 5,000,000 shares;
     $.001 par value, no shares issued or
     outstanding                                            -               -
   Common stock - authorized 50,000,000 shares;
     $.001 par value, issued and outstanding
     28,435,000 and 29,496,000 shares                      28              29
     at December 31, 1999 and 2000, respectively
   Paid-in capital                                    125,623         145,996
   Treasury stock, at cost (2,000,000 common shares)  (24,871)        (24,871)
   Accumulated other comprehensive loss                (3,620)         (1,691)
   Retained earnings                                   29,733          93,505
                                                    -------------   -------------
          Total stockholders' equity                  126,893         212,968
                                                    -------------   -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $426,531        $533,174
                                                    =============   =============
</TABLE>

See Notes to Consolidated Financial Statements.


                                      F-3
<PAGE>

CYMER, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                 -------------------------------
                                                    1998       1999       2000
<S>                                              <C>        <C>        <C>
REVENUES:
  Product sales                                   $184,828   $220,051   $366,280
  Other                                                313        399      1,180
                                                 ---------  ---------  ---------
           Total revenues                          185,141    220,450    367,460
                                                 ---------  ---------  ---------
COSTS AND EXPENSES:
  Cost of product sales                            125,713    143,105    187,579
  Research and development                          30,152     34,518     45,433
  Sales and marketing                               14,528     16,742     20,098
  General and administrative                         9,487     13,101     22,618
                                                 ---------  ---------  ---------
           Total costs and expenses                179,880    207,466    275,728
                                                 ---------  ---------  ---------
OPERATING INCOME                                     5,261     12,984     91,732
                                                 ---------  ---------  ---------

OTHER INCOME (EXPENSE):
  Foreign currency exchange gain (loss) - net          692        643     (1,379)
  Interest and other income                          7,384      7,327     10,785
  Interest and other expense                       (11,644)   (11,718)   (10,636)
                                                 ---------  ---------  ---------
           Total other expense - net                (3,568)    (3,748)    (1,230)
                                                 ---------  ---------  ---------

INCOME BEFORE INCOME TAX PROVISION (BENEFIT)
   AND MINORITY INTEREST                             1,693      9,236     90,502

INCOME TAX PROVISION (BENEFIT)                      (1,250)         -     26,246
MINORITY INTEREST                                     (420)      (663)      (484)
                                                 ---------  ---------  ---------

NET INCOME                                          $2,523     $8,573    $63,772
                                                 ---------  ---------  ---------
EARNINGS PER SHARE:

  Basic:
    Earnings per share                               $0.09      $0.31      $2.19
                                                 ---------  ---------  ---------
    Weighted average common shares outstanding      28,226     27,907     29,113
                                                 ---------  ---------  ---------
  Diluted:
    Earnings per share                               $0.09      $0.29      $2.07
                                                 ---------  ---------  ---------
    Weighted average common and potential common
      shares outstanding                            29,566     29,640     30,758
                                                 ---------  ---------  ---------
</TABLE>

See Notes to Consolidated Financial Statements.


                                      F-4
<PAGE>


CYMER, INC.
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                                ACCUMULATED
                                          COMMON STOCK                           OTHER                                  TOTAL
                                         --------------  PAID-IN   TREASURY  COMPREHENSIVE  RETAINED  STOCKHOLDERS'  COMPREHENSIVE
                                         SHARES  AMOUNT  CAPITAL    STOCK        LOSS       EARNINGS     EQUITY         INCOME
                                         ------  ------  --------  --------  -------------  --------  -------------  -------------
<S>                                      <C>     <C>     <C>       <C>       <C>            <C>       <C>           <C>
BALANCE, JANUARY 1, 1998                 28,724     $29  $109,367                  ($2,254)  $18,637      $125,779

   Exercise of common stock options and
      warrants                              365               638                                              638
   Issuance of employee stock purchase
      plan shares                            85             1,236                                            1,236
   Stock repurchase of treasury stock    (2,000)     (2)            (24,871)                               (24,873)
   Income tax benefit from stock
      options exercised                                       601                                              601
   Net income                                                                                  2,523         2,523          2,523
   Other comprehensive income:
      Translation adjustment, net of tax                                               441                     441            441
      Net unrealized gain on
         available-for-sale
         investments, net of tax                                                       186                     186            186
                                                                                                                    -------------
    Total comprehensive income                                                                                             $3,150
                                         ------  ------  --------  --------  -------------  --------  ------------  =============
BALANCE, DECEMBER 31, 1998               27,174     $27  $111,842  ($24,871)       ($1,627)  $21,160      $106,531

   Exercise of common stock options and
      warrants                            1,169       1     7,350                                            7,351
   Issuance of employee stock purchase
      plan shares                            92             1,183                                            1,183
   Income tax benefit from stock
      options exercised                                     5,248                                            5,248
   Net income                                                                                  8,573         8,573         $8,573
   Other comprehensive income:
      Translation adjustment, net of tax                                            (1,719)                 (1,719)       (1,719)
      Net unrealized gain on
         available-for-sale investments,
         net of tax                                                                   (274)                   (274)         (274)
                                                                                                                    -------------
    Total comprehensive income                                                                                             $6,580
                                         ------  ------  --------  --------  -------------  --------  ------------  =============
BALANCE, DECEMBER 31, 1999               28,435     $28  $125,623  ($24,871)       ($3,620)  $29,733      $126,893
   Exercise of common stock options and
      warrants                              992       1    11,046                                           11,047
   Issuance of employee stock purchase
      plan shares                            65             1,634                                            1,634
   Conversion of notes to equity              4               165                                              165
   Income tax benefit from stock
      options exercised                                     7,528                                            7,528
   Net income                                                                                 63,772        63,772         63,772
   Other comprehensive income:
      Translation adjustment, net of tax                                             1,784                   1,784          1,784
      Net unrealized loss on
         available-for-sale investments,
         net of tax                                                                    145                     145            145
                                                                                                                    -------------
    Total comprehensive income                                                                                            $65,701
                                         ------  ------  --------  --------  -------------  --------  ------------  =============
BALANCE, DECEMBER 31, 2000               29,496     $29  $145,996  ($24,871)       ($1,691)  $93,505      $212,968
                                         ======  ======  ========  ========  =============  ========  ============
</TABLE>

See Notes to Consolidated Financial Statements.


                                      F-5
<PAGE>

CYMER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                  ---------------------------------
                                                   1998        1999         2000
<S>                                               <C>         <C>          <C>
OPERATING ACTIVITIES:
  Net income                                        $2,523      $8,573      $63,772
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                 16,001      18,463       19,197
      Minority interest                                420         663          484
      Provision for deferred income taxes           (1,683)     (2,899)         493
      Loss on disposal and impairment of
        property and equipment                         436         411        2,192
      Change in assets and liabilities:
        Accounts receivable - net                   12,865     (14,446)     (21,686)
        Foreign exchange contracts receivable       12,022       2,601      (15,791)
        Inventories                                 (2,110)        636      (27,641)
        Prepaid expenses and other assets             (331)        616       (1,057)
        Accounts payable                           (12,815)     11,890        3,059
        Accrued and other liabilities                5,344      19,044       16,792
        Foreign exchange contracts payable          (5,664)     (3,014)      10,532
        Income taxes payable                        (3,789)      4,234        5,130
                                                  ---------   ---------    ---------
           Net cash provided by operating
             activities                             23,219      46,772       55,476
                                                  ---------   ---------    ---------
INVESTING ACTIVITIES:
  Acquisition of property and equipment            (19,621)    (22,195)     (55,269)
  Purchases of investments                         (74,604)   (126,980)    (173,044)
  Proceeds from sold or matured investments         88,571     118,228      174,548
  Acquisition of minority interest                        -           -      (1,104)
                                                  ---------   ---------    ---------
           Net cash used for investing
             activities                             (5,654)    (30,947)     (54,869)
                                                  ---------   ---------    ---------
FINANCING ACTIVITIES:
  Net borrowings (payments) under revolving
    loan and security agreements                    10,083       4,938       (8,146)
  Proceeds from issuance of common stock             1,874       8,534       12,681
  Purchase of treasury stock                       (24,871)
  Dividends paid to minority shareholder of
    foreign subsidiary                                                         (183)
  Payments on capital lease obligations               (579)       (586)        (621)
                                                  ---------   ---------    ---------
           Net cash provided by (used in)
             financing activities                  (13,493)     12,886        3,731
                                                -----------  ----------  -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
  CASH EQUIVALENTS                                  (2,845)     (6,076)        (425)
                                                -----------  ----------  -----------
                                                                         (continued)
</TABLE>


                                       F-6
<PAGE>

CYMER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                               ------------------------------------
                                                     1998        1999        2000
<S>                                               <C>         <C>          <C>
NET INCREASE IN CASH AND CASH EQUIVALENTS            1,227      22,635        3,913
CASH AND CASH EQUIVALENTS AT BEGINNING
  YEAR                                              51,903      53,130       75,765
                                                -----------  ----------  -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR           $53,130     $75,765      $79,678
                                                ===========  ==========  ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
  Interest paid                                     $6,617      $6,744       $6,942
                                                ===========  ==========  ===========
  Income taxes paid                                 $4,205      $2,368      $17,987
                                                ===========  ==========  ===========
SUPPLEMENTAL DISCLOSURE OF NON CASH
  INVESTING AND FINANCING ACTIVITIES:
  Capital lease obligations incurred
    for property and equipment                        $102           -            -
                                                ===========  ==========  ===========
  Conversion of subordinated notes to equity             -           -         $165
                                                ===========  ==========  ===========
</TABLE>

See Notes to Consolidated Financial Statements


                                      F-7
<PAGE>

CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    NATURE OF OPERATIONS - Cymer, Inc., and its wholly-owned and majority-owned
    subsidiaries, (collectively, "Cymer" or the Company) is engaged primarily in
    the development, manufacturing and marketing of excimer lasers for sale to
    manufacturers of photolithography tools in the semiconductor equipment
    industry. Cymer sells its product to customers primarily in Japan, the
    Netherlands and the United States.

    PRINCIPLES  OF  CONSOLIDATION  -  The  consolidated  financial  statements
    include the accounts of Cymer, Inc., its wholly-owned subsidiaries,  Cymer
    Japan,  Inc. "Cymer Japan",  Cymer  Singapore Pte Ltd. "Cymer  Singapore",
    Cymer B.V. in the  Netherlands  "Cymer B.V.",  and Cymer  Southeast  Asia,
    Inc.,  in Taiwan  "Cymer  SEA" and its  majority-owned  subsidiary,  Cymer
    Korea,  Inc. "Cymer Korea".  Cymer,  Inc. owns 70% of Cymer Korea.  During
    the first quarter of 2000,  Cymer, Inc. acquired the 25% minority interest
    in Cymer  SEA for  $1,104,000.  Cymer  sells its  excimer  lasers in Japan
    primarily  through Cymer Japan.  Cymer Korea,  Cymer SEA, Cymer  Singapore
    and Cymer B.V. are field service  offices for customers in those  regions.
    All   significant   intercompany   balances   have  been   eliminated   in
    consolidation.

    ACCOUNTING ESTIMATES - The preparation of financial statements in conformity
    with accounting principles generally accepted in the United States of
    America requires management to make estimates and assumptions that affect
    the reported amounts of assets and liabilities and disclosure of contingent
    assets and liabilities at the date of the financial statements and the
    reported amounts of revenues and expenses during the reporting period.
    Actual results may differ from those estimates.

    CASH EQUIVALENTS - Cash equivalents consist of money market instruments,
    commercial paper and other highly liquid investments purchased with an
    original maturity of three months or less. As of December 31, 1999 and 2000,
    cash equivalents amounted to $75.8 million and $79.7 million, respectively.

    INVESTMENTS - Cymer maintains an investment portfolio consisting primarily
    of government and corporate fixed income securities, certificates of deposit
    and commercial paper. While it is Cymer's general intent to hold such
    securities until maturity, management will occasionally sell certain
    securities for cash flow purposes. Therefore, Cymer's investments are
    classified as available-for-sale and are carried on the balance sheet at
    fair value.

    INVENTORIES - Inventories are carried at the lower of cost (first-in,
    first-out) or market. Cost includes material, labor and manufacturing
    overhead costs.

    PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
    Depreciation is provided using the straight-line method over the estimated
    useful lives of the assets (generally three to five years). The Cymer owned
    building is depreciated over a useful life of twenty years. Leasehold
    improvements are amortized, using the straight-line method, over the shorter
    of the life of the improvement or the remaining lease term. Lasers built for
    internal use are capitalized and depreciated using the straight-line method
    over three years.


                                      F-8
<PAGE>

    IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS FO BE DISPOSED OF -
    Long-lived assets and certain identifiable intangibles are reviewed for
    impairment whenever events or changes in circumstances indicate that the
    carrying amount of an asset may not be recoverable. Recoverability of assets
    to be held and used is measured by a comparison of the carrying amount of
    the assets to future net cash flows (undiscounted and without interest)
    expected to be generated by the asset. If such assets are considered to be
    impaired, the impairment to be recognized is measured by the amount by which
    the carrying amount of the assets exceeds the fair value of the assets.
    Assets to be disposed of are reported at the lower of the carrying amount or
    fair value less costs to sell. No such losses occurred in 1998 and 1999. The
    total amount of impairment losses incurred in 2000 was approximately $2.0
    million and was primarily related to the write-off of certain tenant
    improvements in the Company's existing facilities as the Company moved to a
    new facility in 2000, and the write-off of computer systems made obsolete by
    the Company's new ERP system which was implemented in 2000. The loss of $2.0
    million was reported in the general and administrative expenses in the
    consolidated statements of income.

    FAIR VALUE OF FINANCIAL INSTRUMENTS - The following methods and assumptions
    were used to estimate the fair value of each class of financial instruments
    for which it is practicable to estimate that value:

      Cash and Cash Equivalents, Accounts Receivable, Accounts Payable, and
      Accrued and Other Liabilities - The carrying amount reported in the
      consolidated balance sheets for cash and cash equivalents, accounts
      receivable, accounts payable, and accrued and other liabilities
      approximates fair value because of the short maturity of those
      instruments.

      Investments - Investments are carried at fair value which is based on
      quoted market prices for such securities.

      Foreign Exchange Contracts - The fair value of foreign exchange contracts
      is determined using the quoted exchange rate (see "Foreign Exchange
      Contracts" below in Note 1).

      Convertible Subordinated Notes - Convertible Subordinated Notes are
      recorded at face value of $172.3 million and $172.5 million at December
      31, 1999 and 2000, respectively. The fair value of such debt, based on
      quoted market prices at December 31, 1999 and 2000 was $205.1 million and
      $168.9 million, respectively.

      Revolving Loan - The carrying amount reported for the Company's revolving
      loan approximates its fair value because the underlying instrument bears
      interest at rates comparable to current rates offered to the Company for
      instruments of similar terms and risk.

    COMPREHENSIVE INCOME - Comprehensive income includes such items as foreign
    currency translation adjustments and unrealized holding gains and losses on
    available for sale securities that are currently being presented by Cymer as
    a component of stockholders' equity.

    REVENUE RECOGNITION - Revenue from product sales is generally recognized at
    the time of shipment unless customer agreements contain inspection,
    acceptance or other conditions, in which case revenue is recognized at the
    time such conditions are satisfied. Product sales include sales of lasers,
    replacement parts, and product service contracts. Other revenue primarily
    represents revenue earned from funded development activities and license
    fees. Such revenue is recognized on a basis consistent with the performance
    requirement of the agreements. Payments received in advance of performance
    are recorded as deferred revenue. Long-term contracts are accounted for on
    the percentage-of-completion method based upon the relationship of costs
    incurred to total estimated costs, after giving effect to estimates of costs
    to complete.


                                       F-9
<PAGE>

    In the fourth quarter of 2000, the Company implemented Securities and
    Exchange Commission's Staff Accounting Bulletin No. 101 "Revenue Recognition
    in Financial Statements" ("SAB 101"). Effective as of January 1, 2000, SAB
    101 summarizes certain of the SEC's staff's views in applying generally
    accepted accounting principles to revenue recognition in financial
    statements. Implementation of this bulletin did not have an impact on the
    Company's results of operations.

    Research and development revenues totaled $313,000, $399,000 and $1,180,000
    for the years ended December 31, 1998, 1999 and 2000, respectively.

    WARRANTY EXPENSE - Cymer generally warrants its products against defects for
    the earlier of 17 to 25 months from the date of shipment or 12 months after
    acceptance by the end-user. The 6000 Series laser products are warranted
    for the earlier to occur between 24 and 26 months from the date of
    shipment or 24 months after acceptance by the end user. Cymer accrues a
    provision for warranty expense for all products sold which is included in
    cost of product sales in the consolidated statements of income. The amount
    of the provision is based on actual historical expenses incurred and
    estimated probable future expenses related to current sales. Warranty costs
    incurred are charged against the provision.

    RESEARCH AND DEVELOPMENT COSTS - Research and development costs are expensed
    in the period incurred.

    INCOME TAXES - Income taxes are accounted for under the asset and liability
    method. Deferred tax assets and liabilities are recognized for the future
    tax consequences attributable to differences between the financial statement
    carrying amounts of existing assets and liabilities and their respective tax
    bases. Deferred tax assets and liabilities are measured using enacted tax
    rates expected to be recovered or settled. The effect on deferred tax assets
    and liabilities of a change in tax rates is recognized in income in the
    period that includes the enactment date.

    STOCK-BASED COMPENSATION - Cymer has elected to account for stock-based
    compensation using the intrinsic value method prescribed in Accounting
    Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
    EMPLOYEES, and related Interpretations. Accordingly, compensation cost for
    stock options is measured as the excess, if any, of the quoted market price
    of Cymer's stock at the date of the grant over the amount an employee must
    pay to acquire the stock. Pro forma disclosures required under SFAS No. 123,
    ACCOUNTING FOR STOCK-BASED COMPENSATION, which prescribes the recognition of
    compensation expense based on the fair value of options on the grant date,
    have been provided.

    FOREIGN CURRENCY TRANSLATION - Gains and losses resulting from foreign
    currency translation are accumulated as a separate component of consolidated
    stockholders' equity as accumulated other comprehensive income (loss). Gains
    and losses resulting from foreign currency transactions are included in the
    consolidated statements of income.

    FOREIGN EXCHANGE CONTRACTS - Cymer enters into foreign currency exchange
    contracts in order to reduce the impact of currency fluctuations related to
    purchases of Cymer's inventories by Cymer Japan for resale under firm
    third-party sales commitments. Net gains or losses are recorded on the date
    the inventories are received by Cymer Japan (the transaction date) and are
    included in cost of product sales in the consolidated statements of income
    as the related sale is consummated. Amounts due from/to the bank on
    contracts not settled as of the transaction date are recorded as foreign
    exchange contracts receivable/payable in the consolidated balance sheets.

    Cymer recognized net gains from the above foreign currency exchange
    contracts of $4,547,000 and $3,156,000 for the years ended December 31, 1998
    and December 31, 2000, respectively, and a net loss of $2,991,000 for the
    year ended December 31, 1999.


                                      F-10
<PAGE>

    Cymer had outstanding forward foreign exchange contracts at December 31,
    2000 to buy $76.9 million for 8.2 billion yen under foreign currency
    exchange facilities with banks in Japan and the United States (see Note 4).
    The total unrecorded deferred gain and premium on these contracts as of
    December 31, 2000 was approximately $2.3 million and $1.1 million,
    respectively. Such contracts expire on various dates through December 2001.

    CONCENTRATION OF CREDIT RISK - Cymer invests its excess cash in an effort to
    preserve capital, provide liquidity, maintain diversification and generate
    returns relative to Cymer's corporate investment policy and prevailing
    market conditions. Cymer has not experienced any material losses on its cash
    and investment accounts. Cymer has a small number of significant customers
    and maintains a reserve for potential credit losses and such losses, to
    date, have been minimal (see "Major Customers and Related Parties").

    MAJOR CUSTOMERS AND RELATED PARTIES - Revenues from major customers are
    detailed as follows:

<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31,
                                -----------------------------------
                                   1998        1999         2000
    CUSTOMER                              (IN THOUSANDS)
    <S>                          <C>         <C>         <C>
    A                             $57,900     $53,201     $103,551
    B                              36,916      38,200       67,992
    C                              67,729      72,828      111,288
    D                              10,833      11,794        9,456
</TABLE>


    Receivables from these customers totaled $47,682,000 and $65,111,000 at
    December 31, 1999 and 2000, respectively.

    Revenues from Japanese customers, generated primarily by Cymer Japan,
    accounted for 48%, 37% and 48% of revenues for the years ended December 31,
    1998, 1999 and 2000, respectively. Revenues from a customer in the
    Netherlands accounted for 37%, 33% and 30% of revenues for the years ended
    December 31, 1998, 1999 and 2000, respectively.

    Revenues from stockholders totaled $94,816,000, $91,401,000 for the years
    ended December 31, 1998 and December 31, 1999, respectively. There were no
    revenues from stockholders for the year ended December 31, 2000.

    EARNINGS PER SHARE - Basic earnings per share ("EPS") excludes dilution and
    is computed by dividing net income or loss attributable to common
    stockholders by the weighted-average of common shares outstanding for the
    period. Diluted EPS reflects the potential dilution that could occur if
    securities or other contracts to issue common stock (convertible preferred
    stock, warrants to purchase common stock and common stock options using the
    treasury stock method) were exercised or converted into common stock.
    Potential common shares in the diluted EPS computation are excluded in net
    loss periods as their effect would be anti-dilutive.


                                      F-11
<PAGE>

<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                                            ----------------------------------
                                              1998        1999        2000
                                                  (IN THOUSANDS, EXCEPT
                                                   PER SHARE AMOUNTS)
   <S>                                      <C>         <C>        <C>
   Net income                                  $2,523      $8,573     $63,772
                                            ==========  ==========  ==========
   Basic earnings per share                     $0.09       $0.31       $2.19
                                            ==========  ==========  ==========
   Basic weighted average common shares
     outstanding                               28,226      27,907      29,113
   Effect of dilutive securities:
     Warrants                                     111          36          19
     Options                                    1,229       1,697       1,626
                                            ----------  ----------  ----------
   Diluted weighted average common and
      potential common shares outstanding      29,566      29,640      30,758
                                            ==========  ==========  ==========
   Diluted earnings per share                   $0.09       $0.29       $2.07
                                            ==========  ==========  ==========
</TABLE>

    For the years ended December 31, 1998, 1999 and 2000, weighted average
    options and warrants to purchase 2,364,000, 168,000 and 388,000 shares of
    common stock, respectively, were outstanding but not included in the
    computation of diluted earnings per share as their effect was anti-dilutive.
    In addition, for the years ended December 31, 1998, 1999 and 2000, weighted
    average common shares attributable to Convertible Subordinated Notes of
    3,670,213, 3,670,213 and 3,666,704, and related interest expense of
    $9,732,000, $9,732,000 and $9,721,000, respectively, were not included in
    the calculation of diluted earnings per share as they were also
    anti-dilutive.

    RECLASSIFICATIONS - Certain amounts in the prior years' financial statements
    have been reclassified to conform to current period presentation.


<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                    -----------------------
    2.  BALANCE SHEET DETAILS                         1999          2000
                                                        (IN THOUSANDS)
    <S>                                             <C>           <C>
    ACCOUNTS RECEIVABLE:
      Trade                                          $67,399       $80,210
      Notes and other                                  2,289         7,437
                                                    ----------    ---------
                                                      69,688        87,647
      Less allowance for doubtful accounts and
        notes                                           (727)       (2,078)
                                                    ----------    ---------
      Total                                          $68,961       $85,569

    INVENTORIES:
      Raw materials                                  $16,199       $22,101
      Work-in-progress                                18,661        29,308
      Finished goods                                  28,849        40,478
                                                    ----------    ---------
                                                      63,709        91,887
      Reserve for excess and obsolete                (12,300)      (15,000)
                                                    ----------    ---------
      Total                                          $51,409       $76,887
                                                    =======================
</TABLE>


                                      F-12
<PAGE>

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                    -----------------------
                                                      1999          2000
                                                         (IN THOUSANDS)
    <S>                                             <C>           <C>
    PROPERTY - at cost:
      Land                                             4,123         9,080
      Building and capitalized interest                     -       27,528
      Furniture and equipment                        $46,069       $63,688
      Capitalized lasers                              19,558        24,637
      Leasehold improvements                          24,121        23,418
      Construction in process                          7,657         3,373
                                                    ----------    ---------
                                                     101,528       151,724
      Less accumulated depreciation and
        amortization                                 (44,607)      (60,644)
                                                    ----------    ---------
      Total                                          $56,921       $91,080

    ACCRUED AND OTHER LIABILITIES:
      Warranty and installation reserves             $24,600       $34,050
      Payroll and payroll related                     11,662        14,491
      Interest                                        11,371        15,052
      Other                                            4,369         4,260
                                                    ----------    ---------
      Total                                          $52,002       $67,853
                                                    ==========    =========
</TABLE>

3.  INVESTMENTS

    Investments consist of the following:

<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                 -------------------------
                                                    1999          2000
                                                      (IN THOUSANDS)
<S>                                              <C>           <C>
Short-term:
   Municipal bonds                                  $25,091       $14,605
   Corporate bonds                                   23,204        32,429
   Commercial paper                                  28,005        55,746
   U.S. government agencies                          19,464        14,237
   Other                                              1,800             -
                                                 -----------   -----------

   Total                                            $97,564      $117,017
                                                 ===========   ===========
Long-term:
   Corporate bonds                                   $4,860        $8,984
   Municipal bonds                                   14,900             -
                                                 -----------   -----------

   Total                                            $19,760        $8,984
                                                 ===========   ===========
</TABLE>

    Investments are recorded at fair value. Short-term investments mature within
    one year and long-term investments mature in one year to 18 months. See also
    "Investments" in Note 1.

4.  CREDIT FACILITIES

    REVOLVING LOAN AGREEMENTS - During 1999 and 2000, respectively, Cymer
    maintained a Loan Agreement (the "Agreement") which provided for an
    unsecured optional currency revolving loan


                                      F-13
<PAGE>

    facility with two banks to provide for combined borrowings of up to a
    maximum of $30 million in 1999 and $40 million in 2000. Under the Agreement,
    interest accrues on outstanding borrowings at TIBOR plus 2.00% in 1999 and
    in 2000. As of December 31, 1999 and 2000, there was $18.4 million and $8.7
    million outstanding under this Agreement, at interest rates of 2.11% and
    2.55%, respectively.

    The Agreement requires Cymer to maintain compliance with certain financial
    statement and other covenants, including tangible net worth, quick ratio and
    profitability requirements. As of December 31, 2000, Cymer was in compliance
    with all such covenants. Cymer did not renew this agreement, which expired
    on March 16, 2001, on which date the balance owing was paid in full.

    FOREIGN EXCHANGE FACILITIES - Cymer has foreign exchange facilities with a
    bank in Japan and a bank in the United States. See also "Foreign Exchange
    Contracts" in Note 1.

    The foreign exchange facility provides up to $57.5 million in 1999 and up to
    $100 million in 2000 to be utilized for spot and future foreign exchange
    contracts for periods of up to one year. $56.0 million and $76.9 million was
    being utilized under the foreign exchange facility as of December 31, 1999
    and 2000, respectively. This facility is part of the Revolving Loan
    Agreements discussed above and is subject to the same covenants. This
    facility expired on March 16, 2001. Foreign exchange contracts outstanding
    under this facility as of March 14, 2001 were $62,365,000 with expiration
    dates through December, 2001.

5.  CONVERTIBLE SUBORDINATED NOTES

    In the third quarter of 1997, Cymer issued $172.5 million aggregate
    principal amount of Step-Up Convertible Subordinated Notes (the "Notes") due
    August 6, 2004 with interest payable semi-annually February 6 and August 6,
    commencing February 6, 1998. Interest on the Notes is stated at 3 1/2% per
    annum from August 6, 1997 through August 5, 2000 and at 7 1/4% per annum
    from August 6, 2000 to maturity or earlier redemption, representing a yield
    to maturity accrued at approximately 5.47%. The Notes are convertible at the
    option of the holder into shares of Common Stock of Cymer at any time on or
    after November 5, 1997 and prior to redemption or maturity, at a conversion
    rate of 21.2766 shares per $1,000 principal amount of Notes, subject to
    adjustment under certain conditions. Cymer could not redeem the Notes prior
    to August 9, 2000. Thereafter, Cymer can redeem the Notes from time to time,
    in whole or in part, at specified redemption prices. The Notes are unsecured
    and subordinated to all existing and future senior indebtedness of Cymer.
    The indenture governing the Notes does not restrict the incurrence of senior
    indebtedness or other indebtedness by Cymer. As of December 31, 1999 and
    2000, $172.5 million and $172.3 million, respectively, under the Notes was
    outstanding. During the first quarter of 2000, $165,000 of the Notes were
    converted into 3,510 shares of common stock.

6.  STOCKHOLDERS' EQUITY

    PREFERRED STOCK - Pursuant to Cymer's Articles of Incorporation, the Board
    of Directors has the authority, without further action by the stockholders,
    to issue up to 5,000,000 shares of Preferred Stock in one or more series and
    to fix the designations, powers, preferences, privileges, and relative
    participation, optional or special rights and the qualifications,
    limitations or restrictions thereof, including dividend rights, conversion
    rights, voting rights, terms of redemption and liquidation preferences, any
    or all of which may be greater than the rights of the common stock.


                                      F-14
<PAGE>

    COMMON STOCK WARRANTS - At December 31, 2000, Cymer had warrants outstanding
    to purchase 20,000 shares of its common stock at a weighted average purchase
    price of $1.42 per share. The warrants expire in 2001.

    STOCK OPTION AND PURCHASE PLANS - Cymer has four plans as follows:

<TABLE>
<CAPTION>
                                                  COMMON SHARES
                                                 DESIGNATED FOR
                                                    ISSUANCE
<S>                                              <C>
    (i)    1987 Stock Plan                          3,000,000
    (ii)   1996 Stock Option Plan                   6,900,000
    (iii)  1996 Employee Stock Purchase Plan          500,000
    (iv)   2000 Nonstatutory Stock Option Plan        500,000
                                                ----------------
             Total                                 10,900,000
                                                ================
</TABLE>

    (i) 1987 STOCK OPTION PLAN (THE "1987 PLAN") - The 1987 Plan provides that
    incentive and nonstatutory options to purchase shares of common stock may be
    granted to employees and consultants at prices that are not less than 100%
    (85% for nonstatutory options) of the fair market value of Cymer's common
    stock on the date the options are granted. The 1987 Plan also provides for
    various restrictions regarding option terms, prices, transferability and
    other matters. Options issued under the 1987 Plan expire five to ten years
    after the options are granted and generally become exercisable ratably over
    a four-year period following the date of grant.

    (ii) 1996 STOCK OPTION PLAN (THE "1996 STOCK PLAN") - The 1996 Stock Plan
    provides for the grant of incentive stock options within the meaning of
    Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
    and nonqualified stock options to employees, directors and consultants of
    Cymer. Incentive stock options may be granted only to employees. The 1996
    Stock Plan is administered by the Board of Directors or by a committee
    appointed by the Board of Directors, which determines the terms of options
    granted, including the exercise price and the number of shares subject to
    the option. The exercise price of incentive stock options granted under the
    1996 Stock Plan must be at least equal to the fair market value of Cymer's
    common stock on the date of grant and the exercise price of nonqualified
    stock options must be at least equal to 85% of the fair market value of
    Cymer's common stock on the date of grant. Options issued under the 1996
    Stock Plan expire five to ten years after the options are granted and
    generally become exercisable ratably over a four-year period following the
    date of grant. This plan was amended in 1998 by the shareholders to increase
    the plan shares issuable from 3,000,000 to 4,250,000, again in 1999 to
    increase the shares issuable to 5,500,000, and again in 2000 to increase the
    shares issuable to 6,900,000.

    (iii) 1996 EMPLOYEE STOCK PURCHASE PLAN (THE "ESPP") - The ESPP is intended
    to qualify under Section 423 of the Code. Under the ESPP, an eligible
    employee may purchase shares of common stock from Cymer through payroll
    deductions of up to 10% of his or her base compensation (excluding bonuses,
    overtime and sales commissions), at a price per share equal to 85% of the
    lower of (i) the fair market value of Cymer's common stock as of the first
    day of each offering period under the ESPP or (ii) the fair market value of
    the common stock at the end of the offering period.

    (iv) 2000 NONSTATUTORY STOCK OPTION PLAN ( THE "PLAN" ) - On August 16,
    2000, Cymer adopted the 2000 Nonstatutory Stock Option Plan under which the
    maximum aggregate number of shares which may be sold and issued is 500,000.
    The shares may be authorized, but unissued, or reacquired common stock.
    Options may only be granted to employees or consultants who are neither
    directors nor officers. The Plan will be administered by the Board of
    Directors or a committee appointed by the


                                      F-15
<PAGE>

    Board of Directors, which will determine the terms of the options, including
    the exercise price and the number of options granted. The 2000 Nonstatutory
    Stock Option Plan will be in effect for ten years from the adoption by the
    Board of Directors unless terminated sooner under the terms of the Plan. The
    exercise price of the options granted under the Plan will equal the quoted
    market value of the common stock at the date of grant. Options issued under
    the 2000 Nonstatutory Stock Option Plan generally become exercisable ratably
    over a four year period following the date of grant.

        In 1996, Cymer had adopted a 1996 DIRECTOR OPTION PLAN (THE "DIRECTOR
    OPTION PLAN") whereby 200,000 shares were reserved for Board of Director
    option grants. There were 80,000 options issued under the Director Option
    Plan in 1997. The Director Option Plan was dissolved in October 1997 by the
    Board of Directors.

    Stock option transactions are summarized as follows (in thousands, except
    per share data):

<TABLE>
<CAPTION>
                                                         WEIGHTED AVERAGE
                                              NUMBER OF   EXERCISE PRICE
                                               SHARES       PER SHARE
<S>                                           <C>        <C>
Outstanding, January 1, 1998                    4,047         $ 14.39
  Granted                                       1,731         $ 20.31
  Exercised                                      (359)        $  1.74
  Terminated                                   (1,351)        $ 25.90
                                              ---------

Outstanding,  December 31, 1998                 4,068         $ 14.21
  Granted                                       2,006         $ 27.95
  Exercised                                    (1,089)        $  6.74
  Terminated                                     (216)        $ 18.95
                                              ---------

Outstanding, December 31, 1999                  4,769         $ 21.47
  Granted                                       2,244         $ 38.46
  Exercised                                      (974)        $ 11.26
  Terminated                                     (302)        $ 26.68
                                              ---------

Outstanding, December 31, 2000                  5,737         $ 29.56
                                              =========

Exercisable, December 31, 2000                  2,119         $ 22.81
                                              =========
</TABLE>

    Cymer applies APB Opinion No. 25 and related Interpretations in accounting
    for its employee stock option and stock purchase plans. Accordingly, no
    compensation expense has been recognized for its stock-based compensation
    plan, as the options are granted at the fair market value of Cymer's common
    stock on the date of grant.


                                      F-16
<PAGE>

    The following table summarizes the impact had compensation cost been
    determined based upon the fair value at the grant date for awards under the
    plan consistent with the methodology prescribed under SFAS No. 123:

<TABLE>
<CAPTION>
                                             FOR THE YEAR ENDED DECEMBER 31,
                                           1998           1999           2000
                                      -------------  ------------   -------------
<S>                                   <C>            <C>           <C>
      Impact on net income            ($15,228,000)  ($18,246,000)  ($27,251,000)

      Impact on earnings per share:
         Basic                          ($0.54)        ($0.65)       ($0.94)
         Diluted                        ($0.52)        ($0.62)       ($0.89)

      Estimated weighted average
       fair market value of options
       granted or shares purchased
       using the Black-Scholes
       pricing model:
             Options                    $11.57         $21.71        $27.86
             ESPP                        $9.00           $5.71       $15.40

      Weighted average assumptions:
            dividend yield                None          None           None
            volatility rate                85%           80%           87%
            risk free interest rates    4.07% to      4.56% to      5.10% -
                                          5.66%         6.27%         6.81%
            assumed forfeiture rate        5 %           5%             5%
            expected life - Options      5 years       7 years       7 years
                            ESPP        .5 years      .5 years      .5 years
</TABLE>


    The following table summarizes information as of December 31, 2000
    concerning currently outstanding and exercisable options:

<TABLE>
<CAPTION>
                    OPTIONS OUTSTANDING                       OPTIONS EXERCISABLE
--------------------------------------------------------  --------------------------
                                    WEIGHTED
                                    AVERAGE      WEIGHTED                    WEIGHTED
  RANGE OF                         REMAINING      AVERAGE       NUMBER       AVERAGE
  EXERCISE           NUMBER       CONTRACTUAL    EXERCISE     EXERCISABLE   EXERCISE
   PRICES          OUTSTANDING        LIFE         PRICE                      PRICE
                                    (YEARS)
<S>                <C>            <C>            <C>          <C>           <C>
 $2.00 - $20.19     1,009,957          6.22        $16.40       649,696       $15.32
$20.50 - $21.03     1,012,890          6.35        $20.88       593,207       $20.86
$21.56 - $32.38     1,036,552          7.49        $25.05       507,515       $23.35
$32.63 - $37.00     1,283,245          9.12        $36.66       117,770       $35.41
$37.06 - $44.75       977,204          9.11        $39.39       218,438       $38.78
$45.00 - $60.00       417,435          9.39        $48.76        32,793       $46.77
                  ------------    -----------   ----------   -----------    ----------
                    5,737,283          7.84        $29.56     2,119,419       $22.81
</TABLE>

    COMMON SHARES RESERVED - As of December 31, 2000, Cymer had reserved the
    following number of shares of common stock for issuance (in thousands):

<TABLE>
<S>                                                        <C>
       Issuance under stock option and purchase plans            923
       Exercise of common stock purchase warrants                 20
                                                           ----------
          Total                                                  943
                                                           ==========
</TABLE>


                                      F-17
<PAGE>

    TREASURY STOCK - On January 28, 1998, Cymer's Board of Directors authorized
    Cymer to repurchase up to $50.0 million of Cymer's common stock from time to
    time on the open market or in privately negotiated transactions. During
    1998, Cymer repurchased 2,000,000 shares at a cost of $24.9 million. No
    shares were repurchased during 1999 or 2000.

    OPTION REPRICING - On January 28, 1998, Cymer's Board of Directors
    authorized an incentive stock option repricing effective March 2, 1998 at a
    new option price of $22.56 per share. The repricing took effect on 839,020
    options with original prices ranging from $21.03 to $33.75 per share granted
    from December 1996 through October 1997. The four year vesting period of the
    repriced options also began on March 2, 1998 and the term of such options
    was set at ten years. Cymer did not incur any compensation expense as a
    result of this repricing for the year ended December 31, 1998.

    STOCKHOLDER RIGHTS PLAN - On February 13, 1998, Cymer's Board of Directors
    adopted a Stockholder Rights Plan. Under the terms of the Plan, rights were
    distributed as a dividend at a rate of one preferred share purchase right on
    each outstanding share of Cymer's common stock held by stockholders of
    record as of the close of business on March 2, 1998. All additional shares
    of common stock issued prior to February 13, 2008, the expiration date for
    all rights, are to receive the dividend at the same rate. The exercise price
    for each one-thousandth of a preferred share issuable pursuant to the
    exercise of a right shall initially be $100.00, subject to adjustment under
    the Plan. Such rights are exercisable only upon certain change of ownership
    events as defined in the Plan. The rights are designed to assure that all
    Cymer stockholders receive fair and equal treatment in the event of any
    proposed takeover of Cymer and to guard against partial tender offers and
    other abusive tactics to gain control of Cymer without paying all
    stockholders the fair value of their shares, including a control premium.

7.  INCOME TAXES

    The components of the provision for income taxes are summarized as follows:

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                         ---------------------------------------
                                            1998          1999          2000
                                                     (IN THOUSANDS)
<S>                                       <C>          <C>            <C>
       Current income taxes:
         Federal                            ($751)       $4,961         $19,962
         State                                 10           829           4,457
         Foreign                            1,213         2,404           7,808
                                         -----------   -----------    ----------
       Total                                  472         8,194          32,227
                                         -----------   -----------    ----------

       Deferred income taxes:
         Federal                           (2,029)       (5,979)         (3,071)
         State                               (552)       (2,199)         (2,910)
         Foreign                              859           (16)              -
                                         -----------   -----------    ----------
       Total                               (1,722)       (8,194)         (5,981)
                                         -----------   -----------    ----------
       Income tax provision (benefit)     ($1,250)      $     -         $26,246
                                         ===========   ===========    ==========
</TABLE>


                                      F-18
<PAGE>

    The income tax provision (benefit) is different from that which would be
    obtained by applying the statutory Federal income tax rate (35%) to income
    before income tax expense (benefit). The items causing this difference for
    the period are as follows:

<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                          -------------------------------------
                                           1998           1999            2000
                                                     (IN THOUSANDS)
<S>                                       <C>          <C>            <C>
   Provision at statutory rate              $592         $3,233         $31,739
   Foreign provision in excess of
     Federal statutory rate                2,504            932          (1,434)
   State income taxes, net of Federal
     benefit                                (152)          (891)          1,006
   Foreign sales corporation benefit,
     net of Federal tax                   (3,270)          (709)         (4,469)
   Federal tax credits                      (499)        (2,389)         (1,150)
   Tax exempt interest, net of
     disallowed expenses                    (563)           (66)            (52)
   Miscellaneous/other items                 138           (110)            606
                                         --------        -------        --------

   Provision (benefit) at effective tax
     rate                                ($1,250)        $    -         $26,246
                                         ========        =======        ========
</TABLE>

    Deferred income taxes reflect the net tax effects of temporary differences
    between the carrying amounts of assets and liabilities for financial
    reporting purposes and the amounts used for income tax purposes. Significant
    components of Cymer's net deferred tax assets are as follows:

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                     -------------------------
                                                        1999           2000
                                                          (IN THOUSANDS)
    <S>                                              <C>            <C>
    Reserves and accruals not currently deductible    $17,496        $23,780
    Accrued Japanese enterprise tax                       386            752
    State taxes                                        (1,526)        (2,544)
    Tax credit carryforwards                            4,393          3,829
    Difference between book and tax basis of
       inventory and property and equipment             1,371          1,725
    Tax effect of foreign currency translation
     adjustments                                        2,205            901
    Other                                                 597          1,120
                                                     ------------   ----------
    Net deferred tax assets                            24,922         29,563
    Less: current portion                             (16,360)       (23,503)
                                                     ------------   ----------
    Net non-current deferred tax assets                $8,562         $6,060
                                                     ============   ==========
</TABLE>

8.    COMMITMENTS AND CONTINGENCIES

   LEASES - Cymer leases certain facilities under non-cancelable operating
   leases. The lease terms are through January 1, 2010 and provide for certain
   rent abatements and minimum annual increases and options to extend the terms.
   Cymer also leases certain other facilities and equipment under capital and
   short-term operating lease agreements. The capital leases expire on various
   dates through 2003.

   Under the terms of an operating lease for an office building entered into in
   December 1996, Cymer had deposited approximately $2,224,000 in an escrow
   account in lieu of a security deposit for the


                                      F-19
<PAGE>

   premises. During 1999, the requirement to hold the deposit in escrow
   terminated and the funds were released to the general cash account.

   Rent expense under operating leases is recognized on a straight-line basis
   over the life of the related leases and totaled approximately $4,043,000
   $4,752,000 and $4,788,000 for the years ended December 31, 1998, 1999 and
   2000, respectively.

   The net book value of assets under capital leases at December 31, 1999 and
   2000 was approximately $1,108,000 and $606,000, net of accumulated
   amortization of approximately $1,457,000 and $2,459,000, respectively.

   Total future minimum lease commitments under operating and capital leases are
   as follows (in thousands):

<TABLE>
<CAPTION>
    YEAR ENDING DECEMBER 31,                    OPERATING       CAPITAL

<S>                                             <C>             <C>
    2001                                            3,004           296
    2002                                            2,892            29
    2003                                            2,724             9
    2004                                            2,797             -
    2005                                            2,881             -
    Thereafter                                     12,354             -
                                              ------------  ------------
    Total                                         $26,652           334
                                              ============
    Less amount representing interest                               (11)
                                                            ------------
    Present value of minimum lease payments                         323
    Less current portion                                           (289)
                                                            ------------
    Long term obligations under capital leases                      $34
                                                            ============
</TABLE>

    PATENT LICENSE AGREEMENT - Cymer has a patent license agreement for a
    non-exclusive worldwide license to certain patented laser technology. Under
    the terms of the agreement, Cymer is required to pay royalties ranging from
    0.25% to 5.0% of gross sales and leases as defined depending on the total
    amounts attained. Royalty fees totaled $100,000 in each of the years ended
    December 31, 1998, 1999 and 2000.

    EMPLOYEE SAVINGS PLAN - Cymer has a 401(k) plan that allows participating
    employees to contribute a percentage of their salary, subject to annual
    limits. The Plan is available to substantially all full-time United States
    employees. Effective January 1, 1997 through December 31, 1999, Cymer
    matched 100% of each eligible employee's contributions, up to $500 per year.
    The Plan was amended effective January 1, 2000 to include a Cymer matching
    contribution of up to 4% of each participating employee's contribution, not
    to exceed $4,000 per year. Under the Plan, Cymer contributed $221,000,
    $199,000, and $1,496,000 for the years ended December 31, 1998, 1999, and
    2000, respectively.

    RETIREMENT PLAN - During 1996, Cymer Japan adopted a retirement benefit plan
    for all Cymer Japan employees and Japanese directors. The plan consists of a
    multi-employer retirement plan covering all employees and life insurance
    policies covering all employees and Japanese directors. The multi-employer
    retirement plan was established under the Small and Medium-Size Enterprise
    Retirement Benefits Cooperative Law. In December 1998, Cymer Japan adopted a
    Retirement Allowance and Pension Plan accounted for using the book reserve
    method. Expense under these plans totaled


                                      F-20
<PAGE>

    $379,000, $298,000, and $500,000 for the years ended December 31, 1998, 1999
    and 2000, respectively.

    CONTINGENCY - Cymer's Japanese manufacturing partner and at least one of
    Cymer's Japanese customers have been notified that Cymer's laser systems in
    Japan may infringe certain Japanese patents held by another Japanese
    company. Cymer has agreed to indemnify its Japanese manufacturing partner
    and its customers against patent infringement claims under certain
    circumstances. Cymer believes, based upon the advice of counsel, that
    Cymer's products do not infringe any valid claim of the asserted patents or
    that it is entitled to prior user rights in Japan.

9.  CLASS ACTION LAWSUITS

    Cymer has been named as a defendant in several putative shareholder class
    action lawsuits which were filed in September and October, 1998 in the U.S.
    District Court for the Southern District of California. Certain executive
    officers and directors of Cymer are also named as defendants. The plaintiffs
    purport to represent a class of all persons who purchased Cymer's Common
    Stock between April 24, 1997 and September 26, 1997 (the "Class Period").
    The complaints allege claims under the federal securities laws. The
    plaintiffs allege that Cymer and the other defendants made various material
    misrepresentations and omissions during the Class Period. The complaints do
    not specify the amount of damages sought. The complaints have been
    consolidated into a single action and a class representative has been
    appointed by the court. A consolidated amended complaint was filed in early
    August, 1999. On November 5, 1999, Cymer and the other defendants filed a
    motion to dismiss the consolidated amended claim for failure to state a
    cause of action. On April 1, 2000, the court granted defendant's motion to
    dismiss with leave to amend the complaint by the plaintiffs. The plaintiffs
    filed their second amended complaint on June 5, 2000. Cymer moved to dismiss
    the amended complaint on August 4, 2000. On January 22, 2001, the Court
    heard oral argument on Cymer's motion to dismiss, but has not yet decided
    the motion. Cymer believes it has meritorious defenses to the claims
    asserted and intends to defend the action vigorously. Accordingly, no
    provision for any liability or loss that may result from adjudication or
    settlement thereof has been made in the accompanying consolidated financial
    statements.

10. RELATED PARTY TRANSACTIONS

    COLLABORATIVE ARRANGEMENT - Cymer has a collaborative arrangement with a
    Japanese company that was also a stockholder of Cymer. The arrangement,
    entered into in August 1992, includes a (i) stock purchase agreement, (ii)
    research and development agreement, (iii) product license agreement, and
    (iv) contract manufacturing agreement. The general provisions of these
    agreements are as follows:

        STOCK PURCHASE AGREEMENT - The stockholder purchased 470,590 shares of
        Cymer's Series D Redeemable Convertible Preferred Stock at $4.25 per
        share with net proceeds to Cymer of $1,909,000. Such stock was converted
        to common stock in 1996 and was sold in 2000.

        PRODUCT LICENSE AGREEMENT - Cymer granted to the stockholder the
        exclusive right in Japan and the non-exclusive right outside Japan to
        manufacture and sell one of Cymer's products and subsequent enhancements
        thereto. Cymer also granted the stockholder the right of first refusal
        to license and fund the development of new technologies not developed
        with funding from other parties. In exchange for these rights, Cymer
        received up-front license fees and is also entitled to royalties of 5%
        on related product sales through September 1999, after which the royalty
        rate is subject to renegotiation. The license agreement also provides
        that product sales between Cymer and the stockholder will be at a 15%
        discount from the respective companies' list price.


                                      F-21
<PAGE>

        The agreement terminates in August 2012. There was no activity under
        this agreement in 1998, 1999 and 2000.

        CONTRACT MANUFACTURING AGREEMENT - The stockholder has agreed to
        manufacture for Cymer another of its products. Cymer will be required to
        purchase a specified percentage of its total annual product, as defined,
        from the stockholder. The agreement expires in August 2001, and will
        automatically renew for two-year terms unless one year's notice is given
        by either party. Cymer made $13.9 million, $10.9 million and $10.6
        million in purchases under this agreement in 1998, 1999 and 2000,
        respectively.

11. SEGMENT INFORMATION

    Cymer designs, manufactures and sells excimer laser systems, replacement
    parts, and support services for use in photolithography systems used in the
    manufacture of semiconductors with critical features sizes. In accordance
    with SFAS No. 131, Cymer currently considers its business to consist of one
    reportable operating segment.

    GEOGRAPHIC INFORMATION

    Presented below is information regarding sales, income from operations, and
    identifiable assets, classified by operations located in the United States,
    Japan, Korea, Taiwan, Singapore and the Netherlands. Cymer sells its excimer
    lasers in Japan through Cymer Japan. Intercompany sales to the subsidiaries
    are primarily priced between 90% to 95% of the price of products sold to
    outside customers. All significant intercompany balances are eliminated in
    consolidation. The majority of consolidated costs and expenses are incurred
    in the United States and are reflected in the operating loss from the United
    States operations.

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                           -----------------------------------------
                                               1998          1999           2000
<S>                                        <C>           <C>            <C>
      Sales from:
         United States                       $93,144       $125,297       $173,979
         Japan                                88,571         81,445        156,064
         Korea, Taiwan, Singapore,
           and Netherlands                     3,426         13,708         37,417
                                           ------------  ------------  -------------
             Total                          $185,141       $220,450       $367,460
                                           ============  ============  =============
     Operating income (loss) :
        United States                       ($44,117)      ($30,958)       ($8,774)
        Japan                                 47,359         36,068         81,606
        Korea, Taiwan, Singapore,
           and Netherlands                     2,019          7,874         18,900
                                           ------------  ------------  -------------
             Total                            $5,261        $12,984        $91,732
                                           ============  ============  =============
     Identifiable assets:
        United States                       $287,871       $333,902       $405,388
        Japan                                 67,792         76,235         91,288
        Korea, Taiwan, Singapore,
           and Netherlands                     8,655         16,394         36,498
                                           ------------  ------------  -------------
             Total                          $364,318       $426,531       $533,174
                                           ============  ============  =============
</TABLE>


                                      F-22
<PAGE>

12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                       QUARTERLY RESULTS OF OPERATIONS
                                 (IN THOUSANDS , EXCEPT FOR PER SHARE DATA)

                                         YEAR ENDED DECEMBER 31, 1999
                                 -----------------------------------------
                                     1ST       2ND       3RD      4TH
<S>                                <C>       <C>       <C>      <C>
Revenues                           $40,092   $43,409   $58,934  $78,015
Gross profit                       $11,707   $14,983   $22,031  $28,224
Operating income (loss)            ($1,802)     $514    $4,714   $9,557
Net income (loss)                  ($2,298)  ($1,489)   $3,450   $8,910
Basic earnings (loss) per share     ($0.08)   ($0.05)    $0.12    $0.31
Diluted earnings (loss) per share   ($0.08)   ($0.05)    $0.12    $0.29

<CAPTION>
                                      YEAR ENDED DECEMBER 31, 2000
                                 -----------------------------------------
                                     1ST      2ND       3RD      4TH
<S>                                 <C>      <C>       <C>      <C>
Revenues                            $80,617  $86,251   $98,427  $102,166
Gross profit                        $34,381  $42,157   $47,871   $54,293
Operating income                    $15,330  $22,506   $24,584   $29,312
Net income                          $10,174  $15,275   $18,089   $20,233
Basic earnings per share              $0.35    $0.53     $0.62     $0.69
Diluted earnings per share            $0.33    $0.50     $0.58     $0.68
</TABLE>

13. SUBSEQUENT EVENTS

    On February 13, 2001 - Cymer acquired the Cambridge, Massachusetts based
    company Active Control eXperts ("ACX") for an all-stock transaction totaling
    1,025,000 common shares of Cymer stock. ACX is a leading developer,
    manufacturer and marketer of hardware, software and firmware solutions for
    vibrations and nano-motion control and currently has 38 employees. ACX
    provides active control solutions to original equipment manufacturers of
    precision manufacturing equipment where speed, accuracy and precision
    provide competitive advantage. ACX technology can be physically embedded,
    creating adaptive "smart structures" to intrinsically improve the stability
    and precision of nano-motion control in next-generation semiconductor
    capital equipment. Cymer's marketing strength, industry applications
    capability and worldwide service and support infrastructure will help to
    both fully develop the market potential of ACX's technology, and accelerate
    its penetration into the semiconductor marketplace.


                                      F-23