(Translation)
June 1, 2004
To Our Shareholders
Toshio Maruyama
President and COO
ADVANTEST CORPORATION
32-1, Asahi-cho 1-chome,
Nerima-ku, Tokyo
CONVOCATION NOTICE OF
THE 62ND ORDINARY GENERAL MEETING OF SHAREHOLDERS
Dear Sirs and Madams:
Notice is hereby given that the 62nd ordinary general meeting of
shareholders of ADVANTEST CORPORATION (the "Company") will be held as set forth
below. Your attendance thereat is respectfully requested.
If you are not able to attend the meeting, you may exercise your voting
rights in one of the following ways after examining the reference documents as
set forth below.
(Exercise of voting rights in writing by submitting the enclosed voting
instruction form)
Please indicate your intention to vote "for" or "against" each agenda item
in the voting instruction form, then affix your seal and send the said form to
us.
(Exercise of voting rights via the Internet)
Please access the website for casting votes on the general meeting of
shareholders (http://www.e-tosyodai.com), indicate your intention to vote "for"
or "against" each agenda item by following the on-screen instructions. For
details, please refer to "Instructions for the Exercise of Voting Rights via the
Internet" as set forth on page 31.
1. Date and time: June 25, 2004 (Friday) at 10:00 a.m.
2. Place: Main Conference Room of Advantest Corporation
32-1, Asahi-cho 1-chome, Nerima-ku, Tokyo
3. Subject matters of the meeting:
Matters to be reported:
Matters concerning the business report, balance sheet and
statement of income for the 62nd Fiscal Year (from April 1, 2003
to March 31, 2004).
Matters to be resolved:
Agenda Item No. 1: Approval of the proposed appropriation of
retained earnings for the 62nd fiscal year
Agenda Item No. 2 Partial amendment of the Articles of
Incorporation
(An outline of this agenda item is set forth
on pages 25 through 26 of the "Reference
Documents with respect to the Exercise of
Voting Rights" below)
1
Agenda Item No. 3: Election of one director
Agenda Item No. 4: Election of two corporate auditors
Agenda Item No. 5: Issuance of stock acquisition rights as
stock options
(An outline of this agenda item is set forth
on pages 27 through 30 of the "Reference
Documents with respect to the Exercise of
Voting Rights" below)
================================================================================
When you arrive at the meeting, please submit the enclosed voting
instruction form to the reception desk at the site of the meeting.
We cordially invite you to attend a reception to be held after the meeting
for shareholders and management members of the Company.
For shareholders who will be unable to attend the meeting on the date it is
held, we expect to provide video streaming of the actual meeting (solely with
respect to the portion concerning matters to be reported) on the Company's
website beginning on the day of the meeting.
2
(Attachment)
Business Report
---------------
(April 1, 2003 through March 31, 2004)
1. Overview of Business
(1) Results of Business
(a) Business Conditions
During the fiscal year, business conditions affecting the Company have been
generally very favorable due to an increased appetite for capital expenditures
in the semiconductor manufacturing industry, as stimulated by the strong
performance of digital consumer products including digital cameras and DVD
recorders, decreased volatility of DRAM prices, and improved demands for
personal computers.
Under this environment, the Company made concentrated efforts to increase
incoming orders and expand sales through the timely introduction of new
products. The Company and its group companies combined forces in a drive towards
improving profitability by shortening production time and improving production
efficiency, in part through a reorganization of its manufacturing operations
implemented on July 1, 2003 to consolidate certain of its manufacturing
subsidiaries under Advantest Manufacturing, Inc., as well as continuing its
efforts from the previous fiscal year to reduce fixed costs.
As a result of the above, the Company returned to profit as incoming orders
increased by 120.4% to (Y)172.4 billion and net sales increased by 96.3% to
(Y)150.5 billion, each as compared with the previous fiscal year, while
achieving net income before income taxes of (Y)21.0 billion and net income of
(Y)11.9 billion. Overseas sales as a percentage of total sales was 64.9%, as
compared to 52.9% in the previous fiscal year.
In the automated test equipment segment, flash memory testers in the memory
tester market performed strongly both domestically and overseas. In addition,
DRAM testers experienced solid sales, particularly with respect to new models
such as the T5593 high-speed memory tester for next generation DDR memory and
general purpose high-speed memory testers, which generated a high level of
purchase inquiries both in and outside of Japan.
In the SoC (System-on-a-chip) and application specific semiconductor
testers market, testers for SoC used in mobile phones and digital consumer
devices and testers for LCD driver ICs continued their robust sales from the
previous fiscal year particularly in Japan and Taiwan. In addition, the Company
has introduced new products aiming at the CCD and in-car device market. The
Company has also launched the T2000 series of new-concept testers based on
OPENSTAR(TM),*1 which recorded strong sales in the North American market.
As a result of the above, incoming orders in the automated test equipment
segment increased by 139.3% to (Y)160.0 billion while net sales of the segment
increased by 113.8% to (Y)138.2 billion, each as compared with the previous
fiscal year. Overseas sales as a percentage of total sales in the automated test
equipment segment was 68.5%, as compared to 57.7% in the previous fiscal year.
In the measuring instrument segment, business conditions continued to be
severe due to delays in the recovery of demand in the communication market in
general, despite certain market, such as the wireless LAN market, performing
well in the wireless communications related market. In this segment, despite
efforts to introduce new products based on the WMT*2 platform, including a
high-performance signal analyzer for next generation mobile communication,
full-fledged recovery was not seen in sales or profits.
- -------------
*1 OPENSTAR(TM) - The name of an open architecture standard published by
the Semiconductor Test Consortium, Inc.
*2 WMT (Wizard of Module Test) is a common platform proprietarily
developed by the Company for measuring instruments.
3
As a result of the above, incoming orders in the measuring instrument
segment increased by 9.0% to (Y)12.3 billion while net sales of the segment
increased by 2.2% to (Y)12.3 billion, each as compared with the previous fiscal
year. Overseas sales as a percentage of total sales in the measuring instrument
segment was 24.6%, as compared to 27.3% in the previous fiscal year.
However, the measuring instrument segment has faced operating deficits in
the two preceding fiscal years and, despite the Company's restructuring efforts,
did not return to profitability in the current fiscal year, with no such
prospects for the foreseeable future. Therefore, the Company has made a
determination to recognize an impairment loss on the fixed assets of this
segment by recording a charge in the aggregate amount of (Y)2.9 billion, which
was included in extraordinary loss of this fiscal year.
For further information on the prospects of the measuring instrument
segment, please refer to the section entitled "(b) Challenges Ahead".
(Sales Breakdown by Segment)
-------------------- ------------------------------ ----------------------------- ----------------------------
Fiscal Year Change from the previous
FY2002 FY2003 period
Segment
-------------------- ----------------- ------------ ---------------- ------------ --------------- ------------
Amount Percentage Amount Percentage Amount Percentage
(in million yen) (%) (in million (%) (in million increase
yen) yen) (%)
-------------------- ----------------- ------------ ---------------- ------------ --------------- ------------
Automated Test 64,656 84.3% 138,258 91.8% 73,602 113.8%
Equipment
-------------------- ----------------- ------------ ---------------- ------------ --------------- ------------
Measuring 12,030 15.7% 12,300 8.2% 270 2.2%
Instrument
-------------------- ----------------- ------------ ---------------- ------------ --------------- ------------
Total 76,686 100.0% 150,558 100.0% 73,872 96.3%
-------------------- ----------------- ------------ ---------------- ------------ --------------- ------------
Export 40,570 52.9% 97,744 64.9% 57,174 140.9%
-------------------- ----------------- ------------ ---------------- ------------ --------------- ------------
4
(b) Challenges Ahead
With respect to business conditions in the upcoming fiscal year, the
Company expects to see a continuing increase in demand for digital consumer
devices as well as a solid increase in semiconductor demand in light of the
recovery of the personal computer market and expansion of the third-generation
mobile phone market. In addition, the Company expects an increase in capital
expenditures by semiconductor manufacturers resulting from investments relating
to 300mm wafers and the transition to a generation of memory devices.
Notwithstanding the existence of certain factors that may have a negative
impact, such as the strengthening of yen and the prospects for economic
recovery, the Company expects the business environment to improve in general.
In order to respond to these expected increases in demand, the Company
plans to implement a number of measures aimed at furthering its profitability,
including plans to increase sales through the timely introduction of new
products that meet market needs, as well as its continued efforts to shorten
time-to-delivery through improvements in manufacturing efficiency and to reduce
costs.
In connection with the regrouping and reorganization, as described below,
of the Company's business in FY2004, the Company plans to reclassify and regroup
its two reportable segments of "Automated Test Equipment" and "Measuring
Instruments" into the following three new segments - "Semiconductor and
Component Test System Business", "Mechatronics System Business" and "Services,
Support and Others".
The measuring instrument segment, which has historically been one of the
Company's reportable segments, has suffered poor results with grim prospects for
recovery. Therefore, the Company has undertaken a fundamental review of this
segment, and made the decision to reorganize the segment by selectively focusing
on certain of its existing businesses, centering on the act of "measurement",
which is the basic pillar of the Company's business.
The first segment of "Semiconductor and Component Test System Business"
focuses on the markets for semiconductors and electronic parts. This segment
combines the Company's product lines of memory testers, SoC testers and
application specific semiconductor testers with certain measuring instrument
product lines, as well as incorporating the constituent technologies,
sophisticated engineering teams and other resources developed in the measuring
instrument business.
The second segment of "Mechatronics System Business" focuses on peripheral
devices used for "measurement", which will include handlers, which are used for
the purpose of factory automation, device interfaces, which serve as interface
with devices to be measured, and nano-techonology related operations.
The last segment of "Services, Support and Others" will consist of
solutions provided in connection with the above businesses, support services,
and the equipment lease business.
The Company is focused on improving operating results through establishing
an operating structure that responds timely to market changes, promoting fast
development of key future technologies and providing timely customer solutions
under the concept of "GETsolution".*3 To achieve these objectives, the Company
is driven to further strengthen its product development operations and improve
production efficiency by selectively focusing on certain businesses, while
strengthening its overseas operations in the U.S., Europe and Asia.
Further, the Company seeks to achieve better transparency and strengthen
its corporate branding by stressing the importance of corporate social
responsibilities, enhancing its disclosure process and compliance system, and
addressing environmental as well as human rights issues.
In October 2001, the Company launched a company-wide initiative called
"Initiative21". This initiative seeks to promote new ideas and improvement
strategies at all levels of the Company, from divisions ranging from sales,
development and manufacturing to maintenance and administration, with an aim
toward strengthening the Company's competitiveness. The Company expects to
achieve further growth and fulfill its social mission by having each employee
take the initiative to tackle new issues. This initiative will continue into
2004, the year of the Company 50th anniversary.
We look forward to your continued support and guidance as shareholders.
- -------------
*3 GETsolution (Globally Enabled Total solution) is the Company's
service business designed to provide a set of comprehensive solutions
to deal with issues ranging from the design to the delivery of
semiconductors.
5
(c) Capital Expenditures
The Company invested a total of (Y)2.3 billion in capital
expenditures in FY2003 that focused on new product development,
manufacturing streamlining, power saving and expansion of
manufacturing capacity.
(d) Financing
No significant financing activity took place in FY2003.
(2) Historical Data on Business Results and Assets
---------------------------------- ---------------- ---------------- ---------------- ----------------
FY2000 FY2001 FY2002 FY2003
---------------------------------- ---------------- ---------------- ---------------- ----------------
Net sales (in million yen) 225,309 72,928 76,686 150,558
---------------------------------- ---------------- ---------------- ---------------- ----------------
Net income (in million yen) 31,820 (19,265) (11,467) 11,957
---------------------------------- ---------------- ---------------- ---------------- ----------------
Net income per share (in yen) 319.08 (193.71) (116.49) 119.97
---------------------------------- ---------------- ---------------- ---------------- ----------------
Net assets (in million yen) 230,988 204,058 178,253 188,891
---------------------------------- ---------------- ---------------- ---------------- ----------------
Total assets (in million yen) 354,357 258,544 235,456 277,047
---------------------------------- ---------------- ---------------- ---------------- ----------------
Note 1: The calculation of "net income per share" was based on the average
number of total shares outstanding during the relevant fiscal year.
Note 2: The calculation of "net income per share" since FY2001 was based on
the average number of issued shares during the relevant fiscal year
reduced by the average number of treasury shares held during the
fiscal year. Beginning in FY2002, the Company has adopted the
"Accounting Standards Regarding Calculations of Earnings Per Share
of current net earnings" (ASB Statement No. 2) and "Guidelines for
Accounting Standards Regarding Calculations of Earnings Per Share
of current net earnings" (ASB Guidelines No. 4).
Note 3: Beginning in FY2003, the Company has adopted the "Accounting
Standards for Impairment Accounting of Fixed Assets" (BADC) and
"Implementation Guidelines for Impairment Accounting of Fixed
Assets" (ASB Implementation Guidelines No. 6).
6
2. Company Information (as of March 31, 2004)
(1) Primary Areas of Business
The Company designs, manufactures and sales automated test equipment
used for the testing of function and performance of various types of
semiconductors, as well as general-purpose and customized measuring
instruments used in the communications, electronic devices and
computer systems industries.
(2) Equity Stock
(a) Total number of authorized shares 220,000,000 shares
(b) Total number of issued shares 99,783,385 shares
(c) Number of shareholders 33,112
(d) Major shareholders
------------------------------------------- -------------------------------- -------------------------------
Name of Shareholder Status of Ownership The Company's Interest in
such Shareholder
------------------------------------------- ---------------- --------------- ---------------- --------------
Number of Percentage in Number of Percentage in
Shares (in Voting Rights Shares (in Voting Rights
thousand shares) (%) thousand shares) (%)
------------------------------------------- ---------------- --------------- ---------------- --------------
Mizuho Trust & Banking Co., Ltd. 16,023 16.33 - -
(retirement benefit trust (Fujitsu
account))
------------------------------------------- ---------------- --------------- ---------------- --------------
The Master Trust Bank of Japan, Ltd. 8,716 8.88 - -
(trust account)
------------------------------------------- ---------------- --------------- ---------------- --------------
Japan Trustee Services Bank, Ltd. (trust 8,042 8.19 - -
account)
------------------------------------------- ---------------- --------------- ---------------- --------------
Fujitsu Limited 4,047 4.12 - -
------------------------------------------- ---------------- --------------- ---------------- --------------
Barclays Bank PLC Sub-Account 2,164 2.20 - -
Barclays Capital Securities Limited
------------------------------------------- ---------------- --------------- ---------------- --------------
The Dai-ichi Mutual Life Insurance Company 1,724 1.75 - -
------------------------------------------- ---------------- --------------- ---------------- --------------
Shinsei Bank, Limited 1,627 1.65 - -
------------------------------------------- ---------------- --------------- ---------------- --------------
BNP Paribas Securities (Japan) Limited 1,584 1.61 - -
------------------------------------------- ---------------- --------------- ---------------- --------------
Fukoku Mutual Life Insurance Company 1,546 1.57 - -
------------------------------------------- ---------------- --------------- ---------------- --------------
Credit Suisse First Boston Securities 1,399 1.42 - -
(Japan) Limited
------------------------------------------- ---------------- --------------- ---------------- --------------
(Notes) 1. Treasury shares held by the Company, in the number of
1,507 thousand shares, have not been included in the table
above.
2. Mizuho Trust & Banking Co., Ltd. holds the 16,023 thousand
shares of common stock referred above as the trustee of a
retirement benefit plan of Fujitsu Limited, and exercises
its voting rights pursuant to instructions given by Fujitsu
Limited.
7
(3) Acquisition, Disposition and Holding of Treasury Stock
(i) Acquisition
Common stock 4,141 shares
Aggregate cost of acquisition (Y)31,548 thousand
(ii) Disposition
Common stock 33,422 shares
Aggregate proceeds from disposition (Y)286,159 thousand
(iii) Lapse
Common stock - shares
(iv) Number of treasury stock as of end of period
Common stock 1,507,745 shares
(4) Employees
------------------------- ------------------------ ----------------------- -----------------------
Number of Employees Change from End of Average Years of
Previous Period Average Age Service
------------------------- ------------------------ ----------------------- -----------------------
1,450 (157) 36.72 11.83
------------------------- ------------------------ ----------------------- -----------------------
(Notes) 1. The employee numbers set forth above do not include
employees seconded to associated companies.
2. The number of employees decreased by 157 as compared to the
end of the previous fiscal year primarily due to a transfer of
manufacturing personnel effected in connection with the
spin-off of the Company's manufacturing division and its
subsequent merger into Advantest Manufacturing, Inc.
8
(5) Business Combinations
(a) Significant Subsidiaries
------------------------------------------ ------------------ ------------- ------------------------------------
Name of Subsidiary Common Stock Percentage Principal Activities
of Ownership
------------------------------------------ ------------------ ------------- ------------------------------------
Advantest Laboratories Ltd. (Y)50 million 100% Research and development of
measuring and testing technologies
------------------------------------------ ------------------ ------------- ------------------------------------
Advantest Customer Support Corporation (Y)300 million 100% Maintenance service for the
Company's products
------------------------------------------ ------------------ ------------- ------------------------------------
Advanmechatec Co., Ltd. (Y)300 million 100% Manufacturing of the Company's
products
------------------------------------------ ------------------ ------------- ------------------------------------
Advanmicrotec Co., Ltd. (Y)50 million 100% Manufacturing of components used
in the Company's products
------------------------------------------ ------------------ ------------- ------------------------------------
Advantest Manufacturing, Inc. (Y)80 million 100% Manufacturing of the Company's
products
------------------------------------------ ------------------ ------------- ------------------------------------
Japan Engineering Co., Ltd. (Y)305 million 100% Development, manufacturing and
sales of the Company's products
------------------------------------------ ------------------ ------------- ------------------------------------
Advantest Finance Inc. (Y)1,000 million 100% Leasing of the Company's products
------------------------------------------ ------------------ ------------- ------------------------------------
Advantest America Corporation (Holding US$43,000 100% Headquarters of North American
Co.) thousand operations
---------------------------------------- ------------------ ------------- ------------------------------------
Advantest America, Inc. US$42,000 100% Manufacturing and sales of the
thousand Company's products
---------------------------------------- ------------------ ------------- ------------------------------------
Advantest (Europe) GmbH 10,792 thousand 100% Headquarters of European
Euros operations; sales of the Company's
products
---------------------------------------- ------------------ ------------- ------------------------------------
Advantest Taiwan Inc. 560,000 thousand 100% Sales of the Company's products
New Taiwan
Dollars
---------------------------------------- ------------------ ------------- ------------------------------------
Advantest (Singapore) Pte. Ltd. 15,300 thousand 100% Headquarters of Asian operations;
Singapore Dollars sales of the Company's products
---------------------------------------- ------------------ ------------- ------------------------------------
(Note) Percentage of ownership includes indirectly held shares.
(b) Business Combination Activities
(i) On April 1, 2003, the Company established Advantest RF Technology
Corporation as a development subsidiary for measuring
instruments.
(ii) On July 1, 2003, the Company separated its information technology
department to establish a spin-off company, Advantest Information
Systems, Inc.
(iii) Advantest Instruments Corporation was merged into Advanelectron
Co., Ltd. on July 1, 2003 as part of the Company's efforts to
consolidate its manufacturing operations. In addition,
Advanelectron Co., Ltd. has been renamed Advantest Manufacturing,
Inc.
(iv) Japan Engineering Co., Ltd. became a wholly-owned subsidiary of
the Company upon the completion of a share subscription on August
5, 2003 and a share acquisition by share exchange on December 16,
2003, both conducted by the Company with respect to Japan
Engineering's shares.
(v) Advantest America Design Center, Inc. terminated operations on
June 30, 2003.
(vi) On October 1, 2003, Advantest (Singapore) Pte. Ltd. was
consolidated with Advantest Asia Pte. Ltd., which is the
Company's subsidiary that oversees Asia operations. In addition,
Advantest Asia Pte. Ltd. has been renamed Advantest (Singapore)
Pte. Ltd. after the consolidation.
9
(vii) On March 19, 2004, Advantest Test Engineering Corporation was
merged into Advantest America R&D Center, Inc. to improve
efficiency.
(c) Results of Business Combination Activities
The Company has 40 consolidated subsidiaries, including the 12
significant subsidiaries set forth above. In FY2003, consolidated net
sales was (Y)174.2 billion (up 78.2% from the previous fiscal year)
and consolidated net income was (Y)17.3 billion.
(6) Significant Sales Offices and Branch Offices
----------------- ----------------------- -------------------------------------------------
Category Name of Office Location
----------------- ----------------------- -------------------------------------------------
Head Office and
Other Offices Head Office Shinjuku-ku, Tokyo
----------------- ----------------------- -------------------------------------------------
Nerima Office Nerima-ku, Tokyo
----------------- ----------------------- -------------------------------------------------
Gyoda Office Gyoda-shi, Saitama
----------------- ----------------------- -------------------------------------------------
Western Japan Office Suita-shi, Osaka
----------------- ----------------------- -------------------------------------------------
R&D Centers Gunma R&D Center Meiwa-machi, Ora-gun, Gunma
----------------- ----------------------- -------------------------------------------------
Otone R&D Center Otone-machi, Kitasaitama-gun, Saitama
----------------- ----------------------- -------------------------------------------------
Kitakyushu R&D Center Yahatahigashi-ku, Kitakyushu-shi, Fukuoka
----------------- ----------------------- -------------------------------------------------
Laboratories Advantest Laboratories Aoba-ku, Sendai-shi, Miyagi
----------------- ----------------------- -------------------------------------------------
Factories Gunma Factory Ora-machi, Ora-gun, Gunma
----------------- ----------------------- -------------------------------------------------
Gunma Factory 2 Ora-machi, Ora-gun, Gunma
----------------- ----------------------- -------------------------------------------------
Menuma Factory Menuma-machi, Osato-gun, Saitama
----------------- ----------------------- -------------------------------------------------
10
(7) Directors and Corporate Auditors
--------------------------------- ------------------------ -----------------------------------------------------
Title Name Area of Responsibility
--------------------------------- ------------------------ -----------------------------------------------------
Chairman of the Board and CEO Hiroshi Oura
--------------------------------- ------------------------ -----------------------------------------------------
Vice Chairman of the Board Shinpei Takeshita
--------------------------------- ------------------------ -----------------------------------------------------
President and COO Toshio Maruyama
--------------------------------- ------------------------ -----------------------------------------------------
Director and Senior Executive Kiyoshi Miyasaka In charge of corporate planning and strategies;
Officer Senior Vice President, Strategic Business
Initiatives
--------------------------------- ------------------------ -----------------------------------------------------
Director and Senior Executive Junji Nishiura In charge of technologies and production
Officer
--------------------------------- ------------------------ -----------------------------------------------------
Director and Senior Executive Hiroji Agata In charge of marketing
Officer
--------------------------------- ------------------------ -----------------------------------------------------
Director and Managing Executive Hitoshi Owada In charge of administration
Officer
--------------------------------- ------------------------ -----------------------------------------------------
Corporate Standing Auditor Noboru Yamaguchi
--------------------------------- ------------------------ -----------------------------------------------------
Corporate Standing Auditor Tadahiko Hirano
--------------------------------- ------------------------ -----------------------------------------------------
Corporate Auditor Keizo Fukagawa Executive Advisor of Fujitsu Limited
--------------------------------- ------------------------ -----------------------------------------------------
Corporate Auditor Takashi Takaya Corporate Standing Auditor of Fujitsu Limited
--------------------------------- ------------------------ -----------------------------------------------------
(Note) 1. Changes in the appointment of directors and corporate
auditors during FY2003 are as follows:
(1) Changes adopted by the 61st ordinary general meeting of
shareholders on June 27, 2003
Retiring:
Senior Managing Director Shigeru Sugamori
Managing Director Isao Kitaoka
Managing Director Kenichi Mitsuoka
Managing Director Takashi Tokuno
Managing Director Masakazu Ando
Director Jiro Katoh
Director Tetsuo Aoki
Director Norihito Kotani
Director Takao Tadokoro
Director Hiroyasu Sawai
Director Yuri Morita
Director Hiroshi Tsukahara
Director Masao Shimizu
Newly elected:
Corporate Auditor Takashi Takaya
(2) Changes adopted by the Meeting of the Board of Directors on
June 27, 2003
Representative Board Director Toshio Maruyama (Previous position: President and COO)
Director Kiyoshi Miyasaka (Previous position: Senior Managing
Director)
Director Junji Nishiura (Previous position: Senior Managing
Director)
Director Hiroji Agata (Previous position: Managing Director)
Director Hitoshi Owada (Previous position: Managing Director)
2. There was no significant change in the area of responsibility
or position of directors after March 31, 2004.
3. Of the corporate auditors set forth above, Keizo Fukagawa and
Takashi Takaya are outside corporate auditors appointed
pursuant to Article 18, Paragraph 1 of the "Law Concerning
Exceptions to the Commercial Code Relating to Audit, etc. of
Stock Corporations."
11
4. Effective June 27, 2003, the Company has introduced the
positions of Executive Officer. The appointments of Executive
Officers are set forth below:
(* Indicates an Executive Officer who also serves on the Board
of Directors)
President and COO Toshio Maruyama*
Senior Executive Officer Kiyoshi Miyasaka*
Senior Executive Officer Junji Nishiura*
Senior Executive Officer Hiroji Agata*
Managing Executive Officer Hitoshi Owada*
Managing Executive Officer Kenichi Mitsuoka
Managing Executive Officer Takashi Tokuno
Managing Executive Officer Norihito Kotani
Managing Executive Officer Yuri Morita
Executive Officer Jiro Katoh
Executive Officer Takao Tadokoro
Executive Officer Hiroyasu Sawai
Executive Officer Hiroshi Tsukahara
Executive Officer Masao Shimizu
Executive Officer Masao Araki
Executive Officer Yoshiaki Furuse
Executive Officer Yuichi Kurita
Executive Officer Yoshiro Yagi
Executive Officer Hideaki Imada
12
(8) Stock Acquisition Rights
(a) Stock acquisition rights currently outstanding
(Stock acquisition rights granted in accordance with the
resolution passed at the ordinary general meeting of shareholders
held on June 27, 2002)
-------------------------------------------------------------- --------------------------------------
Number of stock acquisition rights 7,030
-------------------------------------------------------------- --------------------------------------
Class and total number of shares to be issued or delivered 703,000 shares of common stock
upon exercise
-------------------------------------------------------------- --------------------------------------
Issuance price (Y)0
-------------------------------------------------------------- --------------------------------------
(Stock acquisition rights granted in accordance with the
resolution passed at the ordinary general meeting of shareholders
held on June 27, 2003)
-------------------------------------------------------------- --------------------------------------
Number of stock acquisition rights 7,500
-------------------------------------------------------------- --------------------------------------
Class and total number of shares to be issued or delivered 750,000 shares of common stock
upon exercise
-------------------------------------------------------------- --------------------------------------
Issuance price (Y)0
-------------------------------------------------------------- --------------------------------------
(b) Stock acquisition rights issued during FY2003 under especially
favorable terms to persons who are not shareholders
(Stock acquisition rights granted in accordance with the
resolution passed at the ordinary general meeting of shareholders
held on June 27, 2002)
- Issued on April 25, 2003 -
1. Class and total number of shares to be 14,000 shares of
issued or delivered upon exercise common stock
2. Number of stock acquisition rights 140
(each stock
acquisition right
is exercisable
for 100 shares)
3. Issuance price (Y)0
4. Exercise price to be paid upon exercise (Y)8,148 per share
5. Exercise period May 1, 2003 to
March 31, 2007
6. Terms of exercise
(a) A person to whom stock acquisition rights are allocated
(a "rights holder") may not exercise its rights if:
(i) the rights holder ceases to be a director, corporate
auditor or employee of the Company or of its subsidiary
before the expiration of the exercise period, and is
not appointed or rehired as a director, corporate
auditor, employee, advisor or non-regular employee of
such entities, except where the termination is due to
the completion of his/her term of office or his/her
reaching retirement age;
(ii) the rights holder dies;
(iii) the rights holder notifies the Company of his/her
intention to waive the rights;
(iv) for any reason the rights holder becomes an officer or
employee of a company engaging in a competing business,
and is notified by the Company of the revocation of
his/her rights; or
(v) upon the exercise of the stock acquisition rights, the
rights holder violates any law, Company rule or
agreement governing the granting of such stock
acquisition rights, and is notified by the Company of
the revocation of his/her rights.
(b) The stock acquisition rights may not be inherited.
(c) No stock acquisition right may be exercised in part.
7. Cancellation of stock acquisition rights
(a) The Company may cancel, for no consideration, any stock
acquisition right in the event that the general meeting
of the shareholders resolves to approve (i) any merger
agreement pursuant to which the Company shall cease to
exist, or (ii) any share exchange agreement or share
transfer pursuant to which the Company shall become a
wholly-owned subsidiary of another company.
13
(b) The Company may cancel, for no consideration, all or
part of the stock acquisition rights of a rights
holder to the extent that such stock acquisition rights
are not exercisable due to the rights holder's failure
to satisfy any of the conditions for exercise of stock
acquisition rights.
8. Favorable terms related to the stock acquisition rights
The stock acquisition rights were issued for no consideration
to directors, and employees of the Company's overseas
subsidiaries.
(Stock acquisition rights granted in accordance with the
resolution passed at the ordinary general meeting of shareholders
held on June 27, 2003)
- Issued on June 27, 2003 -
1. Class and total number of shares 734,000 shares of
to be issued or delivered common stock
upon exercise
2. Number of stock acquisition rights 7,340
(each stock
acquisition right
is exercisable for
100 shares)
3. Issuance price (Y)0
4. Exercise price to be paid upon exercise (Y)5,160 per share
5. Exercise period April 1, 2004 to
March 31, 2008
6. Terms of exercise
(a) A person to whom stock acquisition rights are allocated
(a "rights holder") may not exercise its rights if:
(i) the rights holder becomes a person who does not hold
any position as a director, corporate auditor,
executive officer, employee, advisor or non-regular
employee of the Company or of any of its subsidiaries,
except where the Company deems that it is appropriate
to allow him/her to exercise his/her stock acquisition
rights and notifies him/her to that effect;
(ii) the rights holder dies;
(iii) the rights holder notifies the Company of his/her
intention to waive the rights;
(iv) for any reason the rights holder becomes an officer or
employee of a company engaging in a competing business,
and is notified by the Company of the revocation of
his/her rights; or
(v) upon the exercise of the stock acquisition rights, the
rights holder violates any law, Company rule or
agreement governing the granting of such stock
acquisition rights, and is notified by the Company of
the revocation of his/her rights.
(b) The stock acquisition rights may not be inherited.
(c) No stock acquisition right may be exercised in part.
7. Cancellation of stock acquisition rights
Same as the stock acquisition rights issued on April 25,
2003.
8. Favorable terms related to the stock acquisition rights
The stock acquisition rights were issued for no consideration
to directors, corporate auditors, executive officers and
employees of the Company and its domestic and overseas
subsidiaries.
- Issued on August 29, 2003 -
1. Class and total number of shares 6,000 shares of
to be issued or delivered common stock
upon exercise
2. Number of stock acquisition rights 60
(each stock
acquisition right
is exercisable for
100 shares)
3. Issuance price (Y)0
4. Exercise price to be paid upon exercise (Y)8,090 per share
5. Exercise period Same as the stock
acquisition rights
issued on June 27,
2003.
6. Terms of exercise
Same as the stock acquisition rights issued on June 27, 2003.
14
7. Cancellation of stock acquisition rights
Same as the stock acquisition rights issued on April 25,
2003.
8. Favorable terms related to the stock acquisition rights
The stock acquisition rights were issued for no consideration
to employees of the Company's overseas subsidiaries.
- Issued on January 27, 2004 -
1. Class and total number of shares 7,000 shares of
to be issued or delivered common stock
upon exercise
2. Number of stock acquisition rights 70
(each stock
acquisition right
is exercisable for
100 shares)
3. Issuance price (Y)0
4. Exercise price to be paid upon exercise (Y)9,220 per share
5. Exercise period Same as the stock
acquisition rights
issued on June 27,
2003.
6. Terms of exercise
Same as the stock acquisition rights issued on June 27,
2003.
7. Cancellation of stock acquisition rights
Same as the stock acquisition rights issued on April 25,
2003.
8. Favorable terms related to the stock acquisition rights
The stock acquisition rights were issued for no
consideration to directors of the Company's overseas
subsidiaries.
- Issued on March 31, 2004 -
1. Class and total number of shares 3,000 shares of
to be issued or delivered common stock
upon exercise
2. Number of stock acquisition rights 30
(each stock
acquisition right
is exercisable for
100 shares)
3. Issuance price (Y)0
4. Exercise price to be paid upon exercise (Y)8,550 per share
5. Exercise period Same as the stock
acquisition rights
issued on June 27,
2003.
6. Terms of exercise
Same as the stock acquisition rights issued on June 27,
2003.
7. Cancellation of stock acquisition rights
Same as the stock acquisition rights issued on April 25,
2003.
8. Favorable terms related to the stock acquisition rights
Same as the stock acquisition rights issued on August 29,
2003.
(Names of the persons to which stock acquisition rights were
granted and the numbers granted)
(i) Directors of the Company
---------------------------------------- -------------------
Name Number of stock
acquisition rights
---------------------------------------- -------------------
Hiroshi Oura, Shinpei Takeshita, 300 each
Toshio Maruyama
---------------------------------------- -------------------
Kiyoshi Miyasaka, Junji Nishiura, 200 each
Hiroji Agata
---------------------------------------- -------------------
Hitoshi Owada 180
---------------------------------------- -------------------
15
(ii) Corporate Auditors of the Company
---------------------------------------- -------------------
Name Number of stock
acquisition rights
---------------------------------------- -------------------
Noboru Yamaguchi, Tadahiko Hirano, 30 each
Keizo Fukagawa, Takashi Takaya
---------------------------------------- -------------------
(iii) Executive Officers of the Company
---------------------------------------- -------------------
Name Number of stock
acquisition rights
---------------------------------------- -------------------
Kenichi Mitsuoka, Takashi Tokuno, 160 each
Norihito Kotani, Yuri Morita
---------------------------------------- -------------------
Jiro Katoh, Takao Tadokoro, Hiroyasu 120 each
Sawai, Hiroshi Tsukahara, Masao Shimizu,
Masao Araki, Yoshiaki Furuse, Yuichi
Kurita, Yoshiro Yagi, Hideaki Imada
---------------------------------------- -------------------
(iv) Advisors to the Company
---------------------------------------- -------------------
Name Number of stock
acquisition rights
---------------------------------------- -------------------
Tetsuo Aoki, Masakazu Ando, Keishi 30 each
Kaetsu, Mineo Kamiya, Katsusaburo
Kawaguchi, Isao Kitaoka, Shigeru
Sugamori, Michiaki Chamoto, Shoji
Niki, Hiromi Maruyama, Katsuaki Minami
---------------------------------------- -------------------
(v) Employees of the Company; Directors and employees of the
Company's subsidiaries (top 10 persons only)
---------------------------------------- -------------------
Name Number of stock
acquisition rights
---------------------------------------- -------------------
Lin Gang 200
---------------------------------------- -------------------
Kim Young Hwan, Cheng Sui Yoong, 100 each
Nicholas Konidaris, Josef
Schraetzenstaller, Keith Lee
---------------------------------------- -------------------
Robert Sauer 80
---------------------------------------- -------------------
Ping Nieh 50
---------------------------------------- -------------------
Tony Capitanio, Georg Schmederer 40 each
---------------------------------------- -------------------
(Note) The number of stock acquisition rights granted to
Lin Gang, Tony Capitanio and Georg Schmederer
include rights granted on April 25, 2003 and June
27, 2003. The number of stock acquisition rights
granted to Keith Lee include rights granted on June
27, 2003 and January 27, 2004.
(vi) Directors of the Company's subsidiaries who were granted at
least the same number of stock acquisition rights as the
least number granted to Directors or Corporate Auditors of
the Company
---------------------------------------- -------------------
Name Number of stock
acquisition rights
---------------------------------------- -------------------
Ryozo Kobayashi, Takashi Horio 30 each
---------------------------------------- -------------------
(Note) Persons listed above in (v) have been excluded from
this table.
(vii) Breakdown of stock acquisition rights granted to employees
of the Company and directors and employees of the Company's
subsidiaries
------------------------- ----------------- --------------------------- ---------------------
Category Number of stock Class and total number of Total number of
acquisition shares to be issued or persons granted
rights delivered upon exercise stock acquisition
rights
------------------------- ----------------- --------------------------- ---------------------
Employees of the Company 1,540 154,000 shares of common 66
stock
------------------------- ----------------- --------------------------- ---------------------
Directors of the 950 95,000 shares of common 17
Company's subsidiaries stock
------------------------- ----------------- --------------------------- ---------------------
Employees of the 1,180 118,000 shares of common 70
Company's subsidiaries stock
------------------------- ----------------- --------------------------- ---------------------
16
Balance Sheet
(As of March 31, 2004)
(In million yen)
- ------------------------------------------------------ -----------------------------------------------------------
Assets Liabilities
- ----------------------------------------- ------------ ---------------------------------------------- ------------
Current assets 203,388 Current liabilities 56,504
Cash and deposits 64,469 Trade accounts payable 38,444
Trade notes receivable 4,978 Current installments of bonds 4,500
Accounts receivable 67,042 Other accounts payable 1,173
Finished goods 8,154 Accrued expenses 6,647
Raw materials 6,134 Income tax payable 32
Work in progress 21,258 Allowance for product warranty 1,771
Supplies 42 Other 3,935
Deferred tax assets 21,776
Other 9,541 Noncurrent liabilities 31,651
Allowance for doubtful accounts (10) Bonds 20,000
Long-term borrowings 82
Noncurrent assets 73,658 Allowance for retirement benefits 9,386
Property, plant and equipment 40,054 Allowance for officers' retirement 1,261
benefits
Buildings and improvements 16,183 Other 920
---------------------------------------------- ------------
Structures 1,043 Total liabilities 88,155
-----------------------------------------------------------
Machinery and equipment 3,252 Stockholders' equity
---------------------------------------------- ------------
Vehicles and delivery equipment 0 Common stock 32,362
Tools and furniture 1,338 Capital surplus 32,973
Land 18,141 Additional paid-in capital 32,973
Construction in progress 94 Retained earnings 135,672
Intangible fixed assets 1,884 Legal reserve 3,083
Software and other 1,884 Voluntary reserve 119,942
Investments and other assets 31,718 [Reserve for losses in foreign [27,062]
investments]
Investment securities 6,713 [General reserve] [92,880]
Investments in associated companies 16,347 Unappropriated earnings at end of year 12,647
Long-term loans receivable 1,408 Net unrealized holding gains on other 793
securities
Deferred tax assets 5,707 Treasury stock (12,910)
Other 1,542
---------------------------------------------- ------------
Total stockholders' equity 188,891
- ----------------------------------------- ------------ ---------------------------------------------- ------------
Total assets 277,047 Total liabilities and stockholder's equity 277,047
- ----------------------------------------- ------------ ---------------------------------------------- ------------
(Note) All amounts above are truncated after the million.
Beginning this fiscal year, the Company prepares its financial
statements in accordance with the amended Commercial Code Regulations
that included amendments required by the "Ministry of Justice
Ordinance to Amend Certain Parts of the Commercial Code Regulations"
(Ministry of Justice Ordinance No. 7, issued on February 28, 2003)
and "Ministry of Justice Ordinance to Amend Certain Parts of the
Commercial Code Regulations" (Ministry of Justice Ordinance No. 68,
issued on September 22, 2003).
1. Short-term receivables from associated companies (Y)40,381 million
Long-term receivables from associated companies (Y)1,380 million
2. Short-term payables to associated companies (Y)10,271 million
3. Outstanding loan guarantees (Y)26 million
4. Accumulated depreciation on property, plant and equipment
(including accumulated impairment losses)
(Y)56,449 million
5. Assets pledged as collateral
Property, plant and equipment (Y)403 million
6. In addition to the noncurrent assets on the balance sheet, the
Company uses certain computer equipment under lease contracts.
17
7. The amount of outstanding warrants attached to bonds, class of
equity issuable upon exercise of such warrants and their exercise
prices are as set forth below:
Amount outstanding Class of equity issuable upon exercise Exercise price
------------------ -------------------------------------- --------------
Series 3 unsecured bonds with (Y)225 million Common stock (Y)14,018.00
warrants
8. Increase in net assets within the meaning of Article 124, Clause
3 of the Commercial Code Regulations:
(Y)793 million
18
Statement of Income
(April 1, 2003 through
March 31, 2004)
(In million yen)
------------------ ---------------- --------------------------------------- --------------- -------------
Operating income
Net sales 150,558
Operating Operating expenses
profit and loss
Cost of sales 86,008
Selling, general and
Ordinary profit administrative expenses 40,772 126,781
and loss ---------------- --------------------------------------- --------------- -------------
Operating income 23,776
--------------------------------------- --------------- -------------
Non-operating Non-operating income
profit and loss
Interest and dividends income 1,614
Other 2,452 4,067
Non-operating expenses
Interest expenses 466
Other 3,344 3,811
-------------------------------------------------------- --------------- -------------
Ordinary income 24,033
------------------ -------------------------------------------------------- --------------- -------------
Extraordinary Extraordinary loss
profit and loss Impairment loss 2,996 2,996
--------------------------------------------------------------------------- --------------- -------------
Net income before income taxes 21,036
--------------------------------------------------------------------------- --------------- -------------
Income taxes - current 86
--------------------------------------------------------------------------- --------------- -------------
Income taxes - deferred 8,993
--------------------------------------------------------------------------- --------------- -------------
Net income 11,957
--------------------------------------------------------------------------- --------------- -------------
Retained earnings brought forward 2,180
--------------------------------------------------------------------------- --------------- -------------
Interim dividends 1,473
--------------------------------------------------------------------------- --------------- -------------
Loss from disposition of treasury stock 16
--------------------------------------------------------------------------- --------------- -------------
Unappropriated earnings at end of year 12,647
--------------------------------------------------------------------------- --------------- -------------
(Note) All amounts above are truncated after the million.
1. Transactions with associated companies
Sales (Y)71,227 million
Purchases (Y)41,139 million
Non-operating transactions (Y)3,862 million
2. Net income per share (Y)119.97
------------------------------------------------------------------- ---------------------
Net income as reported on statement of income (Y)11,957 million
------------------------------------------------------------------- ---------------------
Net income allocated to common stock (Y)11,787 million
------------------------------------------------------------------- ---------------------
Amount not allocated to common stock (Y)170 million
Bonuses to officers by appropriation of earnings
------------------------------------------------------------------- ---------------------
Average number of common stock outstanding during the fiscal year 98,250,830 shares
------------------------------------------------------------------- ---------------------
19
Significant Accounting Policies
1. Valuation of securities
(1) Investments in subsidiaries
Stated at cost using the moving average method
(2) Other securities
(a) Securities with fair value
Stated at fair value based on market prices at the end of
the relevant period (unrealized holding gains and losses are
accounted for as a component of stockholders' equity; cost of
other securities sold is determined using the moving average
method).
(b) Securities not practicable to estimate fair value
Stated at cost using the moving average method
2. Valuation of inventories
(1) Finished goods
Stated at cost using the periodic average method
(2) Raw materials
Stated at lower of cost or market using the periodic average
method
(3) Work in progress
Stated at cost using the periodic average method
(4) Supplies
Stated at cost using the specific identification method
3. Depreciation and amortization of noncurrent assets
(1) Depreciation of plant, property and equipment
Based on the declining balance method
However, buildings (excluding attached improvements) acquired on
or after April 1, 1998 are depreciated using the straight-line
method.
(2) Amortization of intangible fixed assets
Based on the straight-line method
However, software for internal use is amortized using the
straight-line method over its estimated useful life of 5 years.
4. Allowances
(1) Allowance for doubtful accounts
To prepare for credit losses on accounts receivable and loans,
etc., an allowance equal to the estimated amount of uncollectible
receivables is provided for general receivables based on a
historical write-off ratio, and for bad receivables based on a
case-by-case determination of collectibility.
(2) Allowance for product warranty
To reasonably account for repair costs covered under product
warranty in the respective periods in which they arise, the
allowance for a given year is provided in an amount determined
based on the ratio of repair costs in that year to net sales in
the preceding year.
(3) Allowance for retirement benefits
To provide for employee retirement benefits, an allowance for
retirement benefits is provided in an amount determined based on
the estimated retirement benefit obligations and pension assets at
the end of the fiscal year.
Past service liabilities are amortized on a straight-line basis
over a fixed number of years (17 years) during the average
remaining years of service of employees.
Any actuarial gains and losses are amortized on a straight-line
basis over a fixed number of years (17 years) during the average
remaining years of service of employees, and the amount is
recorded in the fiscal year subsequent to its occurrence.
(4) Allowance for officers' retirement benefits
To provide for officers' retirement benefits, an allowance is
provided for the aggregate amount payable at the end of the period
pursuant to the Company's rules on officers' retirement benefits.
This allowance is stipulated under Article 43 of the Commercial
Code Regulations.
5. Accounting for lease transactions
20
Finance lease transactions not involving a transfer of title to the
lessee are accounted for in the same way as usual operating lease
transactions.
6. Accounting for consumption taxes
Consumption taxes are accounted using the net-of-tax method.
(Changes in Accounting Policies)
From this fiscal year, the Company has adopted the accounting
standard for impairment of fixed assets ("Opinion on Establishing an
Accounting Standard for Impairment of Fixed Assets" (BADC, August 9,
2002)) and "Implementation Guidelines for Impairment Accounting of
Fixed Assets" (ASB Implementation Guidelines no. 6, October 31,
2003), as these standard and guidelines became applicable to
financial statements of fiscal years ending on or after March 31,
2004. The adoption of the above has negatively affected income before
income taxes by (Y)2,996 million.
(Changes in the Method of Presentation)
From this fiscal year, the Company has adopted the "Special
Exception Relating to Associated Companies" under Article 48,
Paragraph 1 of the Commercial Code Regulations. In accordance with
this Exception, certain statements or notes have been presented for
the category "associated companies" rather than for "subsidiaries" as
was previously. In addition, pursuant to Article 197 of the
Commercial Code Regulations, the Company has adopted the terminology
and forms provided in the "Regulations on Financial Statements, etc."
in certain parts of its balance sheet and statement of income, and as
a result has renamed the line item "net unrealized holding gains on
equity shares, etc." to "net unrealized holding gains on other
securities". Neither of the above changes had any effect on the
amounts to be presented.
21
Proposed Appropriation of Retained Earnings
(In yen)
------------------------------------------- ----------------------
Item Amount
------------------------------------------- ----------------------
Unappropriated earnings at end of year 12,647,472,145
Earnings will be appropriated as follows:
Dividends
(Y)25 per share 2,456,891,000
Directors' bonus 150,000,000
Corporate Auditors' bonus 20,000,000
General reserve 7,000,000,000
Earnings to be carried forward 3,020,581,145
------------------------------------------- ----------------------
(Note) On December 10, 2003, the Company paid interim dividends of
(Y)15 per share (or (Y)1,473,669,120 in total) to its
shareholders of record as of September 30, 2003.
22
Copy of Independent Auditor's Report
- --------------------------------------------------------------------------------
Independent Auditor's Report
May 17, 2004
To the Board of Directors of Advantest Corporation:
Shin Nihon & Co.
Shigenori Hanada
---------------------------[ ]
Daihyo Shain and
Kanyo Shain
Certified Public Account
Mitsuo Cho
---------------------------[ ]
Kanyo Shain
Certified Public Account
We have audited the financial statements, which included the balance sheet,
statement of income, the business report (limited to accounting matters), the
proposed appropriation of retained earnings and the supporting schedules
(limited to accounting matters), of Advantest Corporation for its 62nd fiscal
year (April 1, 2003 through March 31, 2004) for the purpose of reporting under
the provisions of Article 2, Paragraph 1 of the "Law Concerning Exceptions to
the Commercial Code Relating to Audit, etc. of Stock Corporations." With respect
to the aforementioned business report and the supporting schedules, our audit
was limited to those matters based on the accounting records of the Company. The
management of the Company was responsible for the preparation of these financial
statements and the supporting schedules, and our responsibility is to express an
opinion on the financial statements and the supporting schedules based on our
audit as independent auditors.
We conducted our audit in accordance with auditing standards generally accepted
in Japan. The auditing standards require us to obtain reasonable assurance that
the financial statements and the supporting schedules are free of material
misstatement. The audit was conducted based on a test basis, and included
assessing the accounting principles used, the method of their application and
estimates made by management as well as evaluating the overall presentation of
the financial statements and the supporting schedules. We believe that our audit
provides a reasonable basis for our opinion. The auditing procedures also
include those considered necessary for its subsidiaries.
As a result of the audit, our opinion is as follows:
(1) the balance sheet and statement of income present properly the financial
position and the results of operations of the Company in conformity with
related laws and regulations and the Articles of Incorporation of the
Company;
As stated in the Significant Accounting Policies, the Company
has adopted the accounting standard for impairment of fixed assets
("Opinion on Establishing an Accounting Standard for Impairment of Fixed
Assets" (BADC, August 9, 2002)) and "Implementation Guidelines for
Impairment Accounting of Fixed Assets" (ASB Implementation Guidelines no.
6, October 31, 2003) from this fiscal year with which we concur as its
purpose was to reduce the carrying amount of the fixed assets of the
measuring instrument segment to their current valuation based on current
conditions as well as the Company is planning to reorganize its measuring
instrument operations.
(2) the business report (limited to accounting matters) presents properly the
current state of the Company in conformity with related laws and
regulations and the Articles of Incorporation of the Company;
(3) the proposed appropriation of retained earnings has been prepared in
conformity with related laws and regulations and the Articles of
Incorporation of the Company;
(4) there is nothing to point out as to the supporting schedules (limited to
accounting matters) in conformity with the provisions of the Commercial
Code.
We have no interest in the Company that is required to be disclosed pursuant to
the provisions of the Certified Public Accountant Law.
- --------------------------------------------------------------------------------
23
Copy of Board of Corporate Auditors' Audit Report
- --------------------------------------------------------------------------------
Audit Report
This Audit Report was prepared by the Board of Corporate Auditors based on
reports from each Corporate Auditor with respect to the method and results of
audit concerning the performance by each Director of his respective duty during
the 62nd fiscal year (April 1, 2003 through March 31, 2004) of Advantest
Corporation. We hereby report as follows.
1. Method of Audit
Pursuant to the audit policies established by the Board of Corporate
Auditors, each Corporate Auditor has attended meetings of the Board of
Directors and other important meetings, posed questions to Directors on the
state of business, reviewed important approval-granting documents,
inspected the state of business and assets at the Head Office and other
important branch offices, and reviewed the financial statements and the
supporting schedules upon report from independent auditors. The Corporate
Auditors have also sought reports from subsidiaries of the Company on their
state of business, and performed on-site inspection of the state of
business and assets of important subsidiaries whenever necessary.
In the case of any engagement in competing transactions by a Director,
transactions involving any conflict of interests between the Company and a
Director, offering of advantage by the Company for no consideration,
transactions at unusual terms with a subsidiary or shareholder, or the
acquisition or disposition of treasury stock, the Corporate Auditors have,
in addition to the method of audit described above, requested reports from
the Directors and inspected such transactions in detail whenever necessary.
2. Result of Audit
(1) The method and result of audit performed by Shin Nihon & Co., the
independent auditor of the Company, are appropriate.
(2) The business report of the Company accurately presents the financial
conditions of the Company in conformity with related laws and
regulations and the Articles of Incorporation of the Company.
(3) In consideration of the financial position of the Company and other
matters, the proposed appropriation of retained earnings plan presents
fairly all matters required to be presented, and no irregularity was
found that need to be pointed out.
(4) The supporting schedules present fairly all matters required to be
presented, and no material irregularity requiring disclosure was found.
(5) No irregularity or violation of related laws or regulations or the
Articles of Incorporation of the Company was found with respect to the
activities of the Board of Directors, including activities related to
subsidiaries of the Company.
In addition, no breach of fiduciary duty by any Directors was found
with respect to engagements in competing transactions by a Director,
transactions involving any conflict of interest between the Company and
a Director, offering of advantage by the Company for no consideration,
transactions at unusual terms with a subsidiary or shareholder, or the
acquisition or disposition of treasury stock.
May 20, 2004
Board of Corporate Auditors of Advantest Corporation
Noboru Yamaguchi
-------------------------------------------[ ]
Corporate Standing Auditor
Tadahiko Hirano
-------------------------------------------[ ]
Corporate Standing Auditor
Keizo Fukagawa
-------------------------------------------[ ]
Corporate Auditor
Takashi Takaya
-------------------------------------------[ ]
Corporate Auditor
(Note) Keizo Fukagawa and Takashi Takaya are outside corporate auditors
appointed pursuant to Article 18, Paragraph 1 of the "Law Concerning
Exceptions to the Commercial Code Relating to Audit, etc. of Stock
Corporations."
- --------------------------------------------------------------------------------
24
Reference Documents with respect to the Exercise of Voting Rights
1. Number of voting rights of all shareholders: 981,144 voting rights
2. Agenda Items and Reference Matters:
Agenda Item No. 1: Approval of the proposed appropriation of retained earnings
for the 62nd fiscal year
The details of the appropriation of retained earnings for this fiscal year
are as described on page 22 of the attached document.
The basic policy of the Company is to continue to provide stable dividends
at a level consistent with its operating results, based on the belief that
shareholder value is premised on the realization of long-term growth in
corporate value.
During this fiscal year, the Company made concentrated efforts to increase
incoming orders and expand sales through the timely introduction of new
products. In addition, the Company continued its efforts from the previous
fiscal year to reduce overheads through a reorganization of its manufacturing
operations to shorten production time and improve manufacturing efficiency. As a
result, net sales of the fiscal year increased significantly to (Y)150.5 billion
as the Company returned to profits after two years of deficits.
In light of the need to provide sufficient reserves to strengthen the
Company's financial position in expectation of future expansions, the Company
proposes to pay a year-end dividend of (Y)25 per share for the fiscal year
(which, together with the interim dividend of (Y)15 per share already paid,
amounts to a fiscal year total of (Y)40 per share, representing an increase of
(Y)10 per share over the previous fiscal year).
Agenda Item No. 2: Partial amendment of the Articles of Incorporation
1. Reason for amendment:
(1) Following the implementation of the "Law to Amend Certain Parts of the
Commercial Code and the Law Concerning Exceptions to the Commercial Code
Relating to Audit, etc. of Stock Corporations" (Law No. 132 of 2003)
effective as of September 25, 2003, a company may acquire treasury shares
by Board resolution if authorized to do so in its Articles of
Incorporation. In order to provide flexibility in the implementation of
capital policies in response to changes in business conditions, we propose
that a new Article 6 (Acquisition of Treasury Shares) be inserted.
(2) The "Law to Amend Certain Parts of the Commercial Code and the Law
Concerning Exceptions to the Commercial Code Relating to Audit, etc. of
Stock Corporations" (Law No. 149 of 2001) effective as of May 1, 2002
provides for the reduction of personal liabilities of directors and
corporate auditors. The Company believes that by limiting liabilities to a
reasonable extent, Directors and Corporate Auditors can more fully perform
the functions expected of them. Therefore, we propose that a new Article 26
(Exemption of Directors' Liabilities) and a new Article 36 (Exemption of
Corporate Auditors' Liabilities) be inserted. The proposal with respect to
the addition of a new Article 26 has been given unanimous consent by the
Board of Corporate Auditors.
(3) In addition to the foregoing, the Company will renumber certain Articles to
accommodate the insertions of new Articles proposed above.
25
2. Details of proposed amendments:
The details of the proposed amendments are as follows:
(Changes are underlined.)
- ---------------------------------------------------------- ----------------------------------------------------------
Present Article Proposed Amendment
- ---------------------------------------------------------- ----------------------------------------------------------
(Newly introduced) Article 6. (Acquisition of Treasury Shares)
The Company may acquire treasury shares by resolution
of the Board of Directors pursuant to Article 211-3,
Paragraph 1, Clause 2 of the Commercial Code.
Article 6. (Denomination of Share Certificates) Article 7. (Denomination of Share Certificates)
~ (omitted) ~ (present provisions maintained)
Article 24. (Remuneration of Directors) Article 25. (Remuneration of Directors)
Article 26. (Exemption of Directors' Liabilities)
(Newly introduced) Pursuant to Article 266, Paragraph 12 of the
Commercial Code and to the extent permitted by law
and regulations, the Company may, by resolution of
the Board of Directors, exempt the liabilities of its
Directors (including persons who have previously
served as the Company's Directors) with respect to
acts described under Paragraph 1, Clause 5 of the
said Article.
Article 25. (Counselors and Advisors) Article 27. (Counselors and Advisors)
~ (omitted) ~ (present provisions maintained)
Article 33. (Remuneration of Corporate Auditors) Article 35. (Remuneration of Corporate Auditors)
Article 36. (Exemption of Corporate Auditors'
(Newly introduced) Liabilities)
Pursuant to Article 280, Paragraph 1 of the
Commercial Code and to the extent permitted by law and
regulations, the Company may, by resolution of the
Board of Directors, exempt the liabilities of its
Corporate Auditors (including persons who have previously
served as the Company's Corporate Auditors).
Article 34. (Business Year) Article 37. (Business Year)
~ (omitted) ~ (present provisions maintained)
Article 37. (Effective Period for Dividend Payment) Article 40. (Effective Period for Dividend Payment)
- ---------------------------------------------------------- -------------------------------------------------------
Agenda Item No. 3: Election of one director
To strengthen the Company's management structure and corporate governance,
we would request that you elect one new director.
The profile of the nominee is set forth below.
26
Pursuant to Article 19, Paragraph 2 of the Articles of Incorporation, the
term of office of the Director to be elected at this Shareholders' Meeting shall
be the same as the remaining term of the other Directors currently in office.
- --------------------------- --------------------------------------------------------------------- -------------------
Name Brief Personal History Number of the
(Date of Birth) (Appointment to other companies, if any) Company's shares
owned
- --------------------------- --------------------------------------------------------------------- -------------------
Takashi Tokuno April 1971 Joined Advantest Corporation 2,636
June 1996 Director
(October 9, 1948) June 2000 Managing Director
June 2003 Managing Executive Officer (present position)
- --------------------------- --------------------------------------------------------------------- -------------------
Note: This nominee does not have any special interest in the Company.
Agenda Item No. 4: Election of two corporate auditors
Because, upon the closing of this ordinary general meeting of
shareholders, Mr. Noboru Yamaguchi and Mr. Keizo Fukagawa will conclude their
terms of office as the corporate auditor, we would like you to elect two
corporate auditors.
The profiles of the nominees are set forth below.
We have obtained consent of the Board of Corporate Auditors with
respect to this Agenda Item.
- --------------------------- ------------------------------------------------------------------------ -------------------
Name Brief Personal History Number of the
(Date of Birth) (Appointment to other companies, if any) Company's shares
owned
- --------------------------- ------------------------------------------------------------------------ -------------------
1 Noboru Yamaguchi April 1965 Joined Fuji Communication Apparatus Mfg. Co., 2,973
Ltd. (currently Fujitsu Limited)
June 1995 Managing Director of Advantest Corporation
June 1997 Senior Managing Director of Advantest
Corporation
(November 12, 1941) June 2001 Corporate Standing Auditor of Advantest
Corporation (present position)
- ------- ------------------------- --------------------------------------------------------------------- ---------------
2 Kuniaki Suzuki July 1969 Joined Fujitsu Limited 0
June 2000 Director of Fujitsu Limited
April 2003 Corporate Executive Vice President of Fujitsu
Limited (present position)
(August 28, 1945) June 2003 Director of Fujitsu Limited (present position)
- ------- ------------------------- --------------------------------------------------------------------- ---------------
Note
1: None of the nominees has any special interest in the Company.
2: Mr. Kuniaki Suzuki is a nominee for outside corporate auditor under Article
18, Paragraph 1 of the "Law Concerning Exceptions to the Commercial Code
Relating to Audit, etc. of Stock Corporations".
Agenda Item No. 5: Issuance of stock acquisition rights as stock options
Pursuant to Articles 280-20 and 280-21 of the Commercial Code, we request
that you approve the issuance of stock acquisition rights on especially
favorable terms as described below.
27
1. Reason for the issuance of stock acquisition rights on especially favorable
terms
The stock acquisition rights will be issued as stock options to directors,
corporate auditors, executive officers and employees of the Company and its
domestic and overseas subsidiaries to provide them an incentive towards
better business performance and to retain and attract talented individuals.
2. Details of stock acquisition rights
(1) Persons to whom stock acquisition rights will be allocated
Directors, corporate auditors, executive officers and employees of the
Company and its domestic and overseas subsidiaries, and overseas
subsidiaries of the Company. The overseas subsidiaries will then allocate
the same rights as the stock acquisition rights pursuant to applicable
local laws to directors, corporate auditors and employees of other overseas
subsidiaries.
(2) Class and total number of shares to be issued or delivered upon exercise of
the stock acquisition rights
Not exceeding 800,000 shares of common stock of the Company.
The number of shares to be issued or delivered upon exercise of each stock
acquisition right shall be 100 shares, provided, however, that when the
subscription price per share is adjusted in accordance with (5) below, the
number of such shares shall be adjusted according to the following formula.
This adjustment is made only with respect to any such stock acquisition
rights that have not yet been exercised as of the time of adjustment. Any
fraction of a share that arises as a result of an adjustment will be
rounded down to the nearest number of shares.
Number of shares to be issued or Total subscription price
delivered upon exercise of each stock = ------------------------------
acquisition right Subscription price per share
When the number of shares to be issued or delivered upon exercise of each
stock acquisition right is adjusted, the total number of shares to be
issued or delivered upon exercise of the stock acquisition rights shall be
adjusted to the number obtained by multiplying (i) the number of shares to
be issued or delivered upon exercise of each stock acquisition right after
adjustment by (ii) the number of stock acquisition rights that have not yet
been exercised as of the time of adjustment, then adding the number of
shares that have been issued or delivered upon exercise of stock
acquisition rights. After the adjustment, the total number of shares to be
issued or delivered upon exercise of the stock acquisition rights may
exceed 800,000 shares.
(3) Total number of stock acquisition rights to be issued
Not exceeding 8,000.
(4) Issue price of the stock acquisition rights
No consideration shall be paid.
(5) Total subscription price to be paid upon exercise of each stock acquisition
right
The total subscription price to be paid upon exercise of each stock
acquisition right shall be determined by multiplying (i) the subscription
price per share as determined in the following paragraph, by (ii) the
number of shares to be issued or delivered upon exercise of each stock
acquisition right as specified in (2) above (100 shares).
The subscription price per share shall be 1.05 times the average closing
price, rounded up to the nearest yen, of the common stock of the Company in
regular trading on the Tokyo Stock Exchange on each day of the month
(excluding any such day on which there was no trade) preceding the first
occasion on which any stock acquisition rights approved by this
Shareholders' Meeting are issued; provided, however, that if such amount is
less than the closing price of the common stock of the Company on such day
of issue (or, if there was no
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trade on such day of issue, the closing price on the immediately preceding
day on which there was any trade), the subscription price per share shall
equal the closing price on such day.
If, subsequent to the issue of the stock acquisition rights, the Company
splits or consolidates its common stock, or issues new shares or disposes
of its treasury shares below market price (other than to issue or deliver
shares upon exercise of stock acquisition rights or warrants, with certain
other exceptions), the subscription price per share shall be adjusted
according to the following formula, rounded up to the nearest yen.
Furthermore, the subscription price per share may, to the extent necessary
and reasonable, be adjusted in a way deemed appropriate by the Company, in
the case of a capital reduction, merger or split of the Company or certain
other events.
(a) Formula for adjustment in the case of share split or consolidation
Subscription price per Subscription price per 1
= x ------------------------------
share after adjustment share before adjustment Ratio of split / consolidation
(b) Formula for adjustment in the case of issue of new shares or
disposition of treasury stock below market price
Number of new x Subscription
Outstanding shares to be price per share
Subscription Subscription number of + issued to be issued
price per = price per x shares ----------------------------------------
share after share before Market price per share
adjustment adjustment --------------------------------------------------------------
Outstanding number of + Number of new shares to be
shares issued
In the above formula, "outstanding number of shares" shall mean the
total number of outstanding shares of the Company after deduction of
shares held by the Company as treasury stock. In the case of
disposition of treasury stock, "number of new shares to be issued" in
the above formula shall be read as "number of treasury shares to be
disposed of."
(6) Exercise period of the stock acquisition rights
Between April 1, 2005 and March 31, 2009 (4 years).
(7) Conditions for exercise of stock acquisition rights
(a) A person to whom stock acquisition rights are allocated (a "rights
holder"), other than overseas subsidiaries of the Company, must be a
director, corporate auditor, executive officer or employee of the
Company or its domestic or overseas subsidiary at the time of
exercise, except where there are reasons deemed reasonable.
(b) The stock acquisition rights may not be inherited.
(c) No stock acquisition right may be exercised in part.
(d) Other terms and conditions will be determined at a meeting of the
Board of Directors subsequent to the Shareholders' Meeting.
(8) Cancellation of stock acquisition rights
(a) The Company may cancel, for no consideration, any stock acquisition
right in the event that the general meeting of the shareholders
resolves to approve (i) any merger agreement pursuant to which the
Company shall cease to exist, or (ii) any share exchange agreement or
share transfer pursuant to which the Company shall become a
wholly-owned subsidiary of another company.
(b) The Company may cancel, for no consideration, all or part of the stock
acquisition rights of a rights holder to the extent that such stock
acquisition rights are not exercisable due to the rights holder's
failure to satisfy any of the conditions for exercise of stock
acquisition rights.
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(9) Restriction on the transfer of stock acquisition rights
Any transfer of stock acquisition rights shall require the approval of the
Board of Directors, except where the transferee is the Company.
(10) Other details of the stock acquisition rights will be determined in a
meeting of the Board of Directors subsequent to the Shareholders' Meeting.
30
(Instructions for the Exercise of Voting Rights via the Internet)
If you choose to exercise your voting rights via the Internet, please read
the following instructions before doing so:
1. Voting rights may be exercised online only by using the following website
designated by the Company (http://www.e-tosyodai.com). It is not possible
to access this site through Internet access on a mobile phone.
(Please note that you will need the voting number and dedicated voting
password as indicated on the enclosed voting instruction form if you want
to exercise your voting rights on the Internet.)
2. If you cast your vote both on the Internet and through the voting
instruction form, only your vote cast on the Internet shall be deemed
valid.
3. If you cast your vote on the Internet more than once, only your last vote
shall be deemed valid.
4. Any connection charges due to Internet service providers and communication
charges due to communication carriers incurred as a result of using the
voting casting website shall be paid by the shareholder.
5. If you choose to cast your vote online, please do so by 5:00 pm of June 24,
2004 (Thursday) to the extent possible in order for us to have time to
count the results.
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Any inquiries relating to the procedures for exercising voting rights online
shall be directed to the following:
Transfer agent: Tokyo Securities Transfer Agent Co., Ltd.
Phone number:0120-49-7009 (toll-free number)
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