(The following is an unofficial English translation of the Report for the 65th
Fiscal Year of Advantest Corporation (the "Company"). The Company provides this
translation for your reference and convenience only and without any warranty as
to its accuracy or otherwise.)
Report for the 65th Fiscal Year
-------------------------------
(April 1, 2006 through March 31, 2007)
--------------------------------------
Advantest Corporation
---------------------
Contents
--------
Message to Shareholders 3
(Attachments to the Convocation Notice of the 65th Ordinary General Meeting of
Shareholders)
Business Report 4
Consolidated Balance Sheets 20
Consolidated Statements of Income 21
Consolidated Statements of Stockholders' Equity 22
Notes to Consolidated Financial Statements 23
Balance Sheets 26
Statements of Income 27
Statements of Changes in Stockholders' Equity 28
Notes to Non-Consolidated Financial Statements 29
Copy of Independent Auditor's Audit Report (Consolidated) 33
Copy of Independent Auditor's Audit Report 34
Copy of Board of Corporate Auditors' Audit Report 35
(Reference) Memorandum to Shareholders 37
2
Message to Shareholders
-----------------------
To Our Shareholders
We are pleased to send you our "Report for the 65th Fiscal Year (from April
1, 2006 to March 31, 2007)."
Although there were some causes for concern in the global economy during
the fiscal year 2006, such as the sharp rise of the oil price, increase in
long-term interest rate and risk of the burst of the bubble in the housing
industry in the United States, Europe enjoyed a steady economic recovery, and
economy in China and other Asian countries over all remained strong.
The semiconductor industry remained mostly steady, supported by an increase
in demand in flat-panel TVs and game devices, even though substantial decline in
the price of flash memory semiconductors led some semiconductor manufacturers to
restrict their capital expenditures. Furthermore, favorable factors for
Advantest included increased investments by semiconductor manufacturers with
respect to 300 mm wafer manufacturing capacity, as well as increased capital
expenditures by DRAM semiconductor manufacturers from the second half of the
fiscal year, in preparation for the launch of sales of computers equipped with a
new operating system.
In light of this environment, Advantest made concentrated efforts to
increase orders received and expand sales with a focus on providing quality
products and services and comprehensive test solutions that meet various kinds
of customer demands. Advantest continued to make efforts to implement a thorough
inventory control based on the just-in-time production system, to improve the
quality of products and to reduce costs.
As a result of the above, as compared to the previous fiscal year, orders
received decreased by 6.4 % to (Y)242.9 billion. Net sales decreased by 7.4 % to
(Y)235.0 billion, income before income taxes for the fiscal year decreased by
9.4 % to (Y)61.1 billion, and net income for the fiscal year decreased by 14.1 %
to (Y)35.6 billion. Overseas sales as a percentage of total sales were 69.0 %,
as compared with 68.0% in the previous fiscal year.
With respect to the dividend distribution to the shareholders, in order to
respond to our shareholders' continued support, Advantest is currently planning
to propose a resolution, at the 65th Ordinary General Meeting of Shareholders,
for shareholders' approval to distribute a year end dividend of (Y)32.50, an
increase of (Y)15 from its previous forecast of (Y)17.50 per share. Since
Advantest has paid an interim dividend of (Y)35 on December 1, 2006, the total
dividend per share for the fiscal year is expected to be (Y)67.50.
While maintaining "Measurements" as our core competence, Advantest intends
to improve its corporate value by establishing an operation and finance
structure that responds timely to changes in the global market, and by aiming to
increase market share by introducing fine products that will inspire the market
demands of the next generation. In October 2005, the Advantest Group launched a
group-wide initiative called "Activate 21" to promote reforms that emphasize
cost and efficiency from a global perspective, which will continue until the end
of FY 2008.
We hope that we may rely on you for your continued support and guidance in
the future.
June, 2007
Toshio Maruyama
President and CEO
3
(Attachments to the Convocation Notice of the 65th Ordinary General Meeting of
Shareholders)
Business Report
---------------
(April 1, 2006 through March 31, 2007)
1. Current Conditions of the Advantest Group
(1) Business conditions during the fiscal year
(i) Operations and Results of Business
Overall
During the fiscal year, the Advantest Group's operating environment
remained mostly steady, supported by an increase in demand in flat-panel TVs and
game devices, even though substantial decline in the price of flash memory
semiconductors led some semiconductor manufacturers to restrict their capital
expenditures. Furthermore, favorable factors for the Advantest Group included
increased investments by semiconductor manufacturers with respect to 300 mm
wafer manufacturing capacity, as well as increased capital expenditures by DRAM
semiconductor manufacturers from the second half of the fiscal year, in
preparation for the launch of sales of computers equipped with a new operating
system.
In light of this environment, the Advantest Group made concentrated efforts
to increase orders received and expand sales with a focus on providing quality
products and services and comprehensive test solutions that meet various kinds
of customer demands. The Advantest Group continued to make efforts to implement
a thorough inventory control based on the just-in-time production system, to
improve the quality of products and to reduce costs.
As a result of the above, as compared to the previous fiscal year, orders
received decreased by 6.4 % to (Y)242.9 billion. Net sales decreased by 7.4 % to
(Y)235.0 billion, income before income taxes for the fiscal year decreased by
9.4 % to (Y)61.1 billion, and net income for the fiscal year decreased by 14.1 %
to (Y)35.6 billion. Overseas sales as a percentage of total sales were 69.0 %,
as compared with 68.0% in the previous fiscal year.
Business conditions by Business Segment
Semiconductor and Component Test System Segment
In this segment, although capital expenditures for non memory
semiconductors, which were positive in the previous fiscal year, stagnated,
capital expenditures for DRAM semiconductors has increased since the second half
of the fiscal year, resulting in an overall steady growth.
In the memory test system market, the price of the DRAM semiconductors
remained mostly stable throughout the fiscal year. Furthermore, investments in
Korea and Taiwan with respect to DDR2-SDRAM semiconductors that are used in
personal computers with a new operating system have rapidly increased since the
second half of the fiscal year. Consequently, sales of test systems for high
speed DRAM semiconductors remained positive. On the other hand, sales of test
systems for flash memory semiconductors decreased from the second half of the
fiscal year, due to the decline in capital expenditures of semiconductor
manufacturers resulting from the substantial decrease in the price of flash
memory semiconductors.
In the market of non-memory semiconductor test system, sales of test
systems for semiconductors for digital consumer devices remained steady.
However, sales of T2000, a test system for micro processing units (MPU), which
was positive in the previous fiscal year, decreased due primarily to a decrease
in capital expenditures of the Advantest Group's major customers. Similarly,
sales of test systems for LCD driver IC, which was positive in the previous
fiscal year, started to decrease as a result of the adjustment of liquid crystal
display panel inventories.
As a result of the above, orders received was (Y)175.1 billion (10.5%
decrease in comparison to the previous fiscal year), sales was (Y)167.8 billion
(12.3% decrease) and operating income was (Y)48.6 billion (15.5% decrease).
4
Mechatronics System Segment
Although sales of non-memory semiconductor test handlers decreased, sales
of memory semiconductor test handlers remained positive throughout the fiscal
year. In addition, sales of device interface products, especially those
targeting memory semiconductors, were positive.
As a result of the above, orders received was (Y)54.9 billion (10.8%
increase in comparison to the previous fiscal year), sales was (Y)52.0 billion
(7.8% increase) and operating income was (Y)13.6 billion (14.0% increase).
Services, Support and Others Segment
In this segment, orders input received was (Y)18.0 billion (6.4 % decrease
in comparison with the previous fiscal year), sales was (Y)18.3 billion (3.9 %
decrease) and operating income was (Y)2.9 billion (25.5 % decrease).
5
Sales Breakdown by Business Segment (consolidated)
------------------------------------------------------------------------------------------------------------------------
Fiscal Year
FY2005 FY2006 Change from the
Segment (the 64th) (the 65th) previous period
------------------------------------------------------------------------------------------------------------------------
Amount Percentage Amount Percentage Amount Percentage
(in: million yen) (%) (in: million yen) (%) (in: million yen) increase
(decrease)
(%)
------------------------------------------------------------------------------------------------------------------------
Semiconductor and 191,415 75.4 167,815 71.4 (23,600) (12.3)
Component Test System
------------------------------------------------------------------------------------------------------------------------
Mechatronics System 48,260 19.0 52,025 22.1 3,765 7.8
------------------------------------------------------------------------------------------------------------------------
Services, Support
and Others 19,062 7.5 18,312 7.8 (750) (3.9)
------------------------------------------------------------------------------------------------------------------------
Elimination and
Corporate (4,815) (1.9) (3,140) (1.3) 1,675 -
------------------------------------------------------------------------------------------------------------------------
Total 253,922 100.0 235,012 100.0 (18,910) (7.4)
------------------------------------------------------------------------------------------------------------------------
Overseas 172,782 68.0 162,178 69.0 (10,604) (6.1)
------------------------------------------------------------------------------------------------------------------------
(ii) Capital Expenditures
The Advantest Group invested a total of (Y)8.3 billion in
capital expenditures in fiscal 2006. Most of the investments were
used to fund new product development, manufacturing streamlining,
power saving, and to expand manufacturing capacity.
(iii) Financing
No significant financing activities took place in FY2006.
6
(2) Conditions of Assets, Profit and Loss
Conditions of Assets, Profit and Loss of the Advantest Group (consolidated)
---------------------------------------------------------------------------------------------------------
FY2003 FY2004 FY2005 FY2006
(the 62nd) (the 63rd) (the 64th) (the 65th)
---------------------------------------------------------------------------------------------------------
Net sales (in: million yen) 174,218 239,439 253,922 235,012
---------------------------------------------------------------------------------------------------------
Net income (in: million yen) 17,329 38,078 41,374 35,556
---------------------------------------------------------------------------------------------------------
Basic net income per share (in yen) 88.18 194.77 223.17 190.01
---------------------------------------------------------------------------------------------------------
Net assets (in: million yen) 221,768 206,749 257,927 294,797
---------------------------------------------------------------------------------------------------------
Total assets (in: million yen) 330,808 296,769 350,776 366,374
---------------------------------------------------------------------------------------------------------
(Notes) 1: Advantest prepared its consolidated financial statements in
accordance with generally accepted accounting principles
(GAAP) in the United States.
2: On October 1, 2006, a one to two stock split was made to shares of
common stock. Each "Basic net income per share" is calculated on the
assumption that this stock split was made at the beginning of each
fiscal year.
3: The calculation of "Basic net income per share" was based on the
average number of shares issued during the relevant fiscal year
reduced by the average number of treasury shares held during the
fiscal year.
[Charts illustrating the information presented in the above table.]
7
(3) Significant Subsidiaries
Significant Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage of
Name of Subsidiary Common Stock Voting Rights Principal Activities
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest Manufacturing, Inc. (Y)80 million 100% Manufacturing of the Company's products
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest DI Corporation (Y)50 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, Inc. 42,000 thousand USD 100% Sales of the Company's products
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest (Europe) GmbH 10,793 thousand Euros 100% Sales of the Company's products
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest Taiwan Inc. 560,000 thousand New 100% Sales of the Company's products
Taiwan Dollars
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest (Singapore) Pte. Ltd. 15,300 thousand Singapore 100% Sales of the Company's products
Dollars
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest Korea Co., Ltd 5,484 million Won 100% Support for sales of the Company's products
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest (Suzhou) Co., Ltd. 2,700 thousand USD 100% Support for sales of the Company's products
- ------------------------------------------------------------------------------------------------------------------------------------
(Note) Percentage of voting rights includes indirectly held shares.
(4) Challenges Ahead
While maintaining "Measurements" as our core competence, the Advantest
Group intends to improve its corporate value by establishing an operation and
finance structure that responds timely to changes in the global market, and by
aiming to increase market share by introducing fine products that will inspire
the market demands of the next generation. To achieve these objectives, the
Advantest Group promotes to further strengthen its product development
operations and improve production efficiency by focusing on certain businesses,
while strengthening its overseas operations and support system in the U.S.,
Europe and Asia.
Furthermore, the Advantest Group seeks to increase the level of customer
satisfaction by maximizing the functions of our test systems and by providing
them with a solution to improve business efficiency for all types of businesses.
In October 2005, the Advantest Group launched a group-wide initiative
called "Activate 21" to promote reforms that emphasize cost and efficiency from
a global perspective, which will continue until the end of FY 2008.
8
(5) Primary Areas of Business
The Advantest Group manufactures and markets semiconductor and component
test systems and products related to mechatronics systems (test handlers,
device interface, etc.). In addition to manufacturing, the Advantest Group
also carries out research and development activities and provides
maintenance services and related services in the business category of
"Services, Support and Others."
(6) Significant Sales Offices and Factories
(i) Japan
- ---------------------------------------------------------------------------------------------------------
Category Name of Office Location
- ---------------------------------------------------------------------------------------------------------
Head Office, Sales Office Head Office Chiyoda-ku, Tokyo
and Service Office
----------------------------------------------------------------------------
Western Japan Office Suita-shi, Osaka
----------------------------------------------------------------------------
Kawasaki Office Kawasaki-shi, Kanagawa
- ---------------------------------------------------------------------------------------------------------
R&D Centers, Laboratories Gunma R&D Center Meiwa-machi, Ora-gun, Gunma
----------------------------------------------------------------------------
Otone R&D Center Otone-machi, Kitasaitama-gun, Saitama
----------------------------------------------------------------------------
Kitakyushu R&D Center Kitakyushu-shi, Fukuoka
----------------------------------------------------------------------------
Advantest Laboratories Sendai-shi, Miyagi
- ---------------------------------------------------------------------------------------------------------
Factories Gunma Factory Ora-machi, Ora-gun, Gunma
----------------------------------------------------------------------------
Kumagaya Factory Kumagaya-shi, Saitama
- ---------------------------------------------------------------------------------------------------------
(ii) Overseas
- ---------------------------------------------------------------------------------------------------------
Category Name of Office Location
- ---------------------------------------------------------------------------------------------------------
Sales Office and Service Advantest America, Inc. U.S.A.
Office
----------------------------------------------------------------------------
Advantest (Europe) GmbH Germany
----------------------------------------------------------------------------
Advantest Taiwan Inc. Taiwan
----------------------------------------------------------------------------
Advantest (Singapore) Pte. Ltd. Singapore
----------------------------------------------------------------------------
Advantest Korea Co., Ltd. Korea
----------------------------------------------------------------------------
Advantest (Suzhou) Co., Ltd. China
- ---------------------------------------------------------------------------------------------------------
(7) Employees
Employees of the Advantest Group (as of March 31, 2007)
-------------------------------------------------------------------------
Number of Employees Change from end of previous fiscal year
-------------------------------------------------------------------------
3,637 (641) 42 (136)
-------------------------------------------------------------------------
(Note) The numbers set forth above indicate the numbers of
employees excluding part-time and non-regular employees.
The numbers in brackets indicate the annual average number
of such part-time and non-regular employees.
(8) Major Lenders
Not applicable.
(9) Other significant matters with respect to the current status of the
Advantest Group
None.
9
2. Company Information
(1) Equity Stock (as of March 31, 2007)
(i) Total number of issuable shares 440,000,000 shares
(ii) Total number of issued shares 199,566,770 shares
(iii) Number of shareholders 38,374
(Note) The Company made a one to two stock split of shares of its
common stock on October 1, 2006. Accordingly, the total number
of issued shares increased 99,783,385 shares, and the number
of issuable shares increased 220,000,000 shares, from
220,000,000 shares to 440,000,000 shares pursuant to the
amendments to its articles of incorporation which were made in
conjunction with the stock split.
(iv) Major Shareholders (Top 10 shareholders)
---------------------------------------------------------------------------------------------------------
Status of Ownership
----------------------------------------
Name of Shareholder Number of Shares Percentage of
(in: thousand shares) Ownership (%)
---------------------------------------------------------------------------------------------------------
Mizuho Trust & Banking Co., Ltd. (retirement benefit trust
(Fujitsu account), re-trust trustees, Trust & Custody Services 20,142 10.73
Bank, Ltd.)
---------------------------------------------------------------------------------------------------------
The Master Trust Bank of Japan, Ltd. (trust account) 15,724 8.37
---------------------------------------------------------------------------------------------------------
Japan Trustee Services Bank, Ltd. (trust account) 13,719 7.31
---------------------------------------------------------------------------------------------------------
BNP Paribas Securities (Japan) Limited 5,801 3.09
---------------------------------------------------------------------------------------------------------
Japan Trustee Services Bank, Ltd. (trust account 4) 5,332 2.84
---------------------------------------------------------------------------------------------------------
CALYON DMA OTC 5,230 2.78
---------------------------------------------------------------------------------------------------------
The Dai-ichi Mutual Life Insurance Company 3,449 1.83
---------------------------------------------------------------------------------------------------------
Mizuho Corporate Bank, Ltd. 3,217 1.71
---------------------------------------------------------------------------------------------------------
Trust & Custody Services Bank, Ltd. (investment trust account) 3,127 1.66
---------------------------------------------------------------------------------------------------------
Fukoku Mutual Life Insurance Company 3,092 1.64
---------------------------------------------------------------------------------------------------------
(Notes) 1. Percentage of Ownership is calculated without treasury
shares (11,916,485 shares).
2. Mizuho Trust & Banking Co., Ltd. (retirement benefit trust
(Fujitsu account), re-trust trustees, Trust & Custody
Services Bank, Ltd.) holds the 20,142 thousand shares of
common stock listed above as the trustee of a retirement
benefit plan of Fujitsu Limited, and exercises its voting
rights pursuant to instructions given by Fujitsu Limited.
3. The Company has acknowledged that the substantial
shareholding reports shall be filed pursuant to the
"Disclosure of Substantial Shareholding" prescribed in the
Securities and Exchange Law, and Nomura Securities Co., Ltd.
and its two affiliates jointly held 10,387 thousand shares
of the Company as of March 30, 2007 according to the
substantial shareholding reports filed on April 6, 2007.
However, the Company has not included the number of shares
held by an unverified number of beneficial owners in the
table above.
(Reference) [INSERT PIE CHART HERE]
Financial Institutions 232 holders, 96,704 thousand shares (48.5%)
and Securities Company
Non-Japanese Holders 515 holders, 66,788 thousand shares (33.5%)
Individuals and Others 37,216 holders, 20,042 thousand shares (10.0%)
Other Entities 411 holders, 16,031 thousand shares (8.0%)
10
(2) Stock Acquisition Rights
(i) Stock acquisition rights held by directors and corporate auditors (as
of March 31, 2007)
- ----------------------------------------------------------------------------------------------------------------------------------
The resolution at the The resolution at the The resolution at the The resolution at the
Board of Directors Board of Directors Board of Directors Board of Directors
held on June 27, held on June 25, held on June 28, held on June 27,
2003 2004 2005 2006
- ----------------------------------------------------------------------------------------------------------------------------------
Date of issuance June 27, 2003 July 1, 2004 July 4, 2005 July 12, 2006
- ----------------------------------------------------------------------------------------------------------------------------------
Issuance Price (Y) 0 (Y) 0 (Y) 0 (Y)295,014 per unit
- ----------------------------------------------------------------------------------------------------------------------------------
Holding status of stock 400 units 1,540 units 1,680 units 1,800 units
acquisition rights by directors
and corporate auditors (3 persons) (8 persons) (11 persons) (13 persons)
--------------------------------------------------------------------------------------------------------------------------
Directors 400 units 1,480 units 1,560 units 1,580 units
(Excluding outside
directors) (3 persons) (6 persons) (7 persons) (7 persons)
--------------------------------------------------------------------------------------------------------------------------
- - 30 units 100 units
Outside directors
(1 person) (2 persons)
--------------------------------------------------------------------------------------------------------------------------
- 60 units 90 units 120 units
Corporate auditors
(2 persons) (3 persons) (4 persons)
- ----------------------------------------------------------------------------------------------------------------------------------
Class and aggregate number of 80,000 shares of 308,000 shares of 336,000 shares of 360,000 shares of
shares to be issued or delivered common stock common stock common stock common stock
upon exercise
(each stock (each stock (each stock (each stock
acquisition acquisition acquisition acquisition
right is exercisable right is exercisable right is exercisable right is exercisable
for 200 shares) for 200 shares) for 200 shares) for 200 shares)
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise price to be paid upon (Y) 2,580 per share (Y) 3,732 per share (Y) 4,300 per share (Y) 5,880 per share
exercise
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise period April 1, 2004 to April 1, 2005 to April 1, 2006 to April 1, 2007 to
March 31, 2008 March 31, 2009 March 31, 2010 March 31, 2011
- ----------------------------------------------------------------------------------------------------------------------------------
Terms of exercise (1) A person who holds the stock acquisition rights (the The stock
"rights holder") may not exercise his/her rights if: acquisition rights
(a) the rights holder becomes a person who does not hold may not be
any position as a director, corporate auditor, executive inherited.
officer, employee, advisor or non-regular employee of the
Company or of any of its domestic or foreign subsidiaries
before the expiration of the exercise period, unless the
Company otherwise deems it appropriate to allow him/her
to exercise his/her stock acquisition rights and notifies
him/her to that effect;
(b) the rights holder dies.
(2) The stock acquisition rights may not be inherited.
- ----------------------------------------------------------------------------------------------------------------------------------
Reason for the Company's (a) The Company may acquire, for no consideration, any The Company shall
acquisition of the stock stock acquisition right in the event that the general automatically acquire
acquisition rights meeting of the shareholders resolves to approve (i) any the stock acquisition
merger agreement pursuant to which the Company shall rights, for no
cease to exist, or (ii) any share exchange agreement or consideration, if:
share transfer pursuant to which the Company shall (a) the general meeting
become a wholly owned subsidiary of another company. of shareholders
resolves to approve
(b) The Company may acquire, for no consideration, all or (if approval by the
part of the stock acquisition rights owned by a rights shareholders'
holder to the extent that such stock acquisition rights meeting is not
are not exercisable due to the rights holder's failure required, then the
to satisfy any of the conditions to exercise stock Board of Directors
acquisition rights. may approve) (i)
any merger agreement
pursuant
- ----------------------------------------------------------------------------------------------------------------------------------
11
- ----------------------------------------------------------------------------------------------------------------------------------
to which the Company
shall dissolve,
(ii) any agreement
or a plan pursuant
to which the Company
shall split all or
part of its business
or (iii) any
stock-for-stock
exchange agreement
or stock-transfer
plan pursuant to
which the Company
shall become a
wholly-owned
subsidiary of
another company;
(b) 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 domestic
or foreign
subsidiaries before
the expiration of
the exercise period,
unless the Company
otherwise deems it
appropriate to allow
him/her to exercise
his/her stock
acquisition rights
and notifies him/her
to that effect;
(c) the rights holder
dies.
- ----------------------------------------------------------------------------------------------------------------------------------
Restriction on the transfer of the Approval by the Board of Directors is required to transfer the stock acquisition
stock acquisition rights rights, except where the Company is the transferee with respect to such transfer.
- ----------------------------------------------------------------------------------------------------------------------------------
12
(ii) Stock acquisition rights granted to employees of the Company and
directors and employees of the Company's subsidiaries during FY2006
- --------------------------------------------------------------------------------------------------------------------------------
The resolution at the Board of The resolution at the Board of Directors
Directors held on June 27, 2006 held on November 29, 2006
- --------------------------------------------------------------------------------------------------------------------------------
Date of issuance July 12, 2006 December 1, 2006
- --------------------------------------------------------------------------------------------------------------------------------
Issuance price (Y)0 (Y)0
- --------------------------------------------------------------------------------------------------------------------------------
Conditions of granting 6,090 units (202 persons) 40 units (3 persons)
-----------------------------------------------------------------------------------------------------------------------
Employees of the Company 4,240 units (97 persons) -
-----------------------------------------------------------------------------------------------------------------------
Directors of the Company's subsidiaries 530 units (16 persons) -
-----------------------------------------------------------------------------------------------------------------------
Employees of the Company's subsidiaries 1,320 units (89 persons) 40 units (3 persons)
- --------------------------------------------------------------------------------------------------------------------------------
Class and aggregate number of shares 1,218,000 shares of common stock 8,000 shares of common stock
to be issued or delivered upon exercise (each stock acquisition right is (each stock acquisition right is
exercisable for 200 shares) exercisable for 200 shares)
- --------------------------------------------------------------------------------------------------------------------------------
Exercise price to be paid upon exercise (Y)5,880 per share (Y)6,218 per share
- --------------------------------------------------------------------------------------------------------------------------------
Exercise period April 1, 2007 to March 31, 2011
- --------------------------------------------------------------------------------------------------------------------------------
Terms of exercise The stock acquisition rights may not be inherited.
- --------------------------------------------------------------------------------------------------------------------------------
Reasons for the Company's The Company shall automatically acquire the stock acquisition rights, for no
acquisition of the stock acquisition consideration, if:
rights (a) the general meeting of shareholders resolves to approve (if approval by
the shareholders' meeting is not legally required, then the Board of
Directors may approve) (i) any merger agreement pursuant to which the
Company shall dissolve, (ii) any agreement or a plan pursuant to which
the Company shall split all or part of its business or (iii) any
stock-for-stock exchange agreement or stock-transfer plan pursuant to
which the Company shall become a wholly-owned subsidiary of another
company;
(b) 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 domestic or foreign
subsidiaries before the expiration of the exercise period, unless the
Company otherwise deems it appropriate to allow him/her to exercise
his/her stock acquisition rights and notifies him/her to that effect;
(c) the rights holder dies.
- --------------------------------------------------------------------------------------------------------------------------------
Restriction on the transfer of the stock Approval by the Board of Directors is required to transfer the stock
acquisition rights acquisition rights, except where the Company is the transferee with respect
to such transfer.
- --------------------------------------------------------------------------------------------------------------------------------
13
(3) Directors and Corporate Auditors
(i) Directors and Corporate Auditors (as of March 31, 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Title Name Assignment in the Company and representatives of
other organizations, etc.
- ------------------------------------------------------------------------------------------------------------------------------------
Chairman of the Board Shimpei Takeshita Chairman of Japan Electric Measuring Instruments Manufacturers'
Association
- ------------------------------------------------------------------------------------------------------------------------------------
Representative Board Director Toshio Maruyama*
- ------------------------------------------------------------------------------------------------------------------------------------
Director and Senior Executive Advisor Hiroshi Oura Director of Fujitsu Limited
Director of Yamato Holdings Co., Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Director Naoyuki Akikusa Representative Board Director and Chairman of Fujitsu Limited
Chairman of Japan Electronics and Information Technology Industries
Association
- ------------------------------------------------------------------------------------------------------------------------------------
Director Yasushige Hagio Attorney-at-Law, Seiwa Patent Office and Law
- ------------------------------------------------------------------------------------------------------------------------------------
Director Junji Nishiura*
- ------------------------------------------------------------------------------------------------------------------------------------
Director Hiroji Agata*
- ------------------------------------------------------------------------------------------------------------------------------------
Director Takashi Tokuno*
- ------------------------------------------------------------------------------------------------------------------------------------
Director Hitoshi Owada*
- ------------------------------------------------------------------------------------------------------------------------------------
Standing Corporate Auditor Noboru Yamaguchi
- ------------------------------------------------------------------------------------------------------------------------------------
Standing Corporate Auditor Tadahiko Hirano
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Auditor Takashi Takaya Standing Corporate Auditor of Fujitsu Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Auditor Megumi Yamamuro Attorney-at-Law, CAST Itoga Law P.C.
Professor, The University of Tokyo Graduate School of Law and Politics
- ------------------------------------------------------------------------------------------------------------------------------------
(Notes) 1: Messrs. Naoyuki Akikusa and Yasushige Hagio are outside directors.
2: Messrs. Takashi Takaya and Megumi Yamamuro are outside corporate auditors.
3: Mr. Takashi Takaya, corporate auditor, has substantial accounting
experience in listed companies and considerable knowledge of
financial and accounting matters.
4: There has been no significant change in assignment in the Company
and representative positions of other organizations, etc. of
directors and corporate auditors after March 31, 2007.
5: The Company has in place an Executive Officers System and * indicates
a director who also serves as an Executive Officer.
6. The positions of Executive Officers are currently held as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Title Name Assignment in the Company and representatives of
other organizations, etc.
- ------------------------------------------------------------------------------------------------------------------------------------
President and CEO Toshio Maruyama
- ------------------------------------------------------------------------------------------------------------------------------------
Senior Executive Officer Junji Nishiura Technology and Production
- ------------------------------------------------------------------------------------------------------------------------------------
Senior Executive Officer Hiroji Agata Sales and Marketing
- ------------------------------------------------------------------------------------------------------------------------------------
Senior Executive Officer Takashi Tokuno Product
- ------------------------------------------------------------------------------------------------------------------------------------
Managing Executive Officer Hitoshi Owada Corporate Affairs
- ------------------------------------------------------------------------------------------------------------------------------------
Managing Executive Officer Yuri Morita Senior Vice President, Corporate Affairs Group
- ------------------------------------------------------------------------------------------------------------------------------------
Managing Executive Officer Jiro Katoh Senior Vice President, Technology Development Group
- ------------------------------------------------------------------------------------------------------------------------------------
Managing Executive Officer Takao Tadokoro Senior Vice President, Sales and Marketing Group
- ------------------------------------------------------------------------------------------------------------------------------------
Managing Executive Officer Hiroyasu Sawai Senior Vice President, SE Group
- ------------------------------------------------------------------------------------------------------------------------------------
Managing Executive Officer Hiroshi Tsukahara Senior Vice President, the 1st Test System Business Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Masao Shimizu Senior Vice President, DI Business Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Masao Araki President and Representative Board Director of Advantest Customer
Support Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Yuichi Kurita Senior Vice President, Corporate Planning Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Yoshiro Yagi Vice President, Sales and Marketing Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Hideaki Imada Senior Vice President, the 2nd Test System Business Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Shinichiro Umeda Senior Vice President, Software Development Group
- ------------------------------------------------------------------------------------------------------------------------------------
14
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Akira Hatakeyama President and Representative Board Director of Advantest
Manufacturing, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Yasuhiro Kawata General Manager, 2nd SoC Tester Business Division, the 1st Test
System Business Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Takashi Sugiura Senior Vice President, FA Business Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Shinichiro Kuroe Vice President, Sales and Marketing Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Takashi Sekino Vice President, Technology Development Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Hiroshi Nakamura Vice President, Corporate Affairs Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Yoshiaki Yoshida Representative Board Director of Advantest Finance Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
7: Changes in assignment in the Company and representative positions
of other organizations, etc. of Executive Officers after March
31, 2007 are as follows:
Effective May 1, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Title Name Assignment in the Company and representatives of
other organizations, etc.
- ------------------------------------------------------------------------------------------------------------------------------------
Managing Executive Officer Jiro Katoh Senior Vice President, Production Support Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Yasuhiro Kawata Senior Vice President, Cost Planning Group
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Officer Takashi Sekino Senior Vice President, Technology Development Group
- ------------------------------------------------------------------------------------------------------------------------------------
(ii) The aggregate amount of compensation paid to directors and corporate
auditors
--------------------------------------------------------------------------
Category Number subject to payment Amount paid
--------------------------------------------------------------------------
Directors 9 (Y)527 million
--------------------------------------------------------------------------
Corporate Auditors 4 (Y)91 million
--------------------------------------------------------------------------
Total 13 (Y)618 million
--------------------------------------------------------------------------
(Notes) 1. Amount paid set forth above includes bonuses to be paid to
directors and corporate auditors pursuant to the resolution at
the 65th ordinary general meeting of shareholders.
2. Of the amount paid set forth above, the aggregate amount of
compensation paid to two outside directors and two outside
auditors is (Y)18 million.
3. Other than the above, an aggregate amount of (Y)531 million,
consisting of (Y)496 million to its nine directors and (Y)35
million to its four corporate auditors, was paid as the Company's
stock option-related compensation (of the (Y)531 million above,
an aggregate amount of (Y)47 million was paid to the two outside
directors and two outside corporate auditors). The aggregate sum
for the "Amount paid" set forth above and the Company's stock
option-related compensation is (Y)1,149 million, which consists
of (Y)1,023 million paid to its nine directors and (Y)126 million
paid to its four corporate auditors (of the (Y)1,149 million, an
aggregate amount of (Y)65 million was paid to the two outside
directors and two outside corporate auditors).
(iii) Matters pertaining to outside directors and outside corporate
auditors
(a) Concurrent Posts held (as operating officers, outside directors
or outside corporate auditors of other companies)
-----------------------------------------------------------------------------------------------------
Name Company name Post
-----------------------------------------------------------------------------------------------------
Naoyuki Akikusa Fujitsu Limited Representative Board Director and Chairman
(Outside director) FANUC LTD Outside corporate auditor
-----------------------------------------------------------------------------------------------------
Takashi Takaya Uchida Yoko Co., Ltd. Outside corporate auditor
(Outside corporate auditor) Tsuzuki Denki Co., Ltd. Outside corporate auditor
-----------------------------------------------------------------------------------------------------
Megumi Yamamuro Fujitsu Limited Outside corporate auditor
(Outside corporate auditor)
-----------------------------------------------------------------------------------------------------
(Note) Mr. Naoyuki Akikusa, director, also serves as the Representative
Board Director and Chairman of Fujitsu Limited with which the
Company engages in business transactions such as purchase and
sale of each other's products.
(b) Principal activities
----------------------------------------------------------------------------------------------------------------
Participation at meetings of
Name Attendance the Board of Directors
----------------------------------------------------------------------------------------------------------------
Naoyuki Akikusa Meetings of Board of Directors: Mr. Akikusa expresses his opinions
(Outside director) 7 out of 10 times mainly from management
perspectives and based on his
knowledge of the industry.
----------------------------------------------------------------------------------------------------------------
15
----------------------------------------------------------------------------------------------------------------
Yasushige Hagio Meetings of Board of Directors: Mr. Hagio expresses his opinions
(Outside director) 9 out of 10 times based mainly on his expertise as an
attorney-at-law.
----------------------------------------------------------------------------------------------------------------
Meetings of Board of Directors:
Takashi Takaya 13 out of 13 times Mr. Takaya expresses his opinions
(Outside corporate auditor) Meetings of Board of Corporate Auditors: mainly based on his knowledge of
13 out of 13 times financial and accounting matters.
----------------------------------------------------------------------------------------------------------------
Meetings of Board of Directors:
Megumi Yamamuro 10 out of 10 times Mr. Yamamuro expresses his
(Outside corporate auditor) Meetings of Board of Corporate Auditors: opinions based mainly on his
10 out of 10 times expertise as an attorney-at-law.
----------------------------------------------------------------------------------------------------------------
(c) Overview of the liability limitation agreement
The Company entered into an agreement limiting liabilities as
defined in Article 423, Item 1 of the Company Law, with each of
Messrs. Naoyuki Akikusa and Yasushige Hagio, outside directors,
and Messrs. Takashi Takaya and Megumi Yamamuro, outside corporate
auditors. The upper limit of liability based on this agreement is
the minimum liability as provided in the relevant laws and
ordinances.
(4) Accounting Auditor
(i) Name of accounting auditor
Ernst & Young ShinNihon
(ii) Remuneration
- --------------------------------------------------------------------------------
Amount
- --------------------------------------------------------------------------------
Remuneration to the accounting auditor for this fiscal year (Y)244 million
- --------------------------------------------------------------------------------
Total amount of cash and other financial benefits payable
by the Company and its subsidiaries to the accounting auditor (Y)246 million
- --------------------------------------------------------------------------------
(Notes) 1. Under the agreement between the Company and the accounting
auditor, as the Company has not drawn any distinction between the
remuneration for the audit services pursuant to the Company Law
and the Securities and Exchange Law of Japan and the remuneration
for the audit services pursuant to the U.S. Securities and
Exchange Act, the amount set forth above represents the aggregate
amount of these audit services.
2. The Company's significant overseas subsidiaries have been audited
by auditors of the Ernst & Young Group.
(iii) Policies on dismissal or non-reappointment of the accounting auditor
In case the accounting auditor falls under any one of the items of
Article 340, Paragraph 1 of the Company Law, the Board of Corporate
Auditors shall dismiss the accounting auditor upon consent of all
corporate auditors. In such case, a corporate auditor who is
appointed by the Board of Corporate Auditors shall report the
dismissal and its reasons at the first general meeting of
shareholders convened after such dismissal.
In addition, other than the above, if it is deemed to be difficult
for the accounting auditor to conduct an appropriate auditing due to
the occurrence of events that impair its qualification or
independence, the Board of Directors shall, upon consent of the Board
of Corporate Auditors or based on a request by the Board of Corporate
Auditors, propose the dismissal or non-reappointment of the
accounting auditor as an agenda at a general meeting of shareholders.
16
(5) System to ensure the appropriateness of business
The Board of Directors resolved a system that ensures the appropriateness
of its business as follows:
Basic Policy for Internal Control System
Holding "Technology Support on the Leading Edge" as our management
philosophy, the Advantest Group promotes the "enhancement of corporate
value" while fulfilling social responsibilities of the Company to all
stakeholders including its customers, shareholders and employees, and
increasing the transparency of its management. To this end, the Company
shall make efforts to prepare a framework as defined in each article below,
implement the establishment, development and management of the internal
control system, and ensure the sound operations of the Company.
1. Framework to ensure the compliance with applicable laws and ordinances
as well as the articles of incorporation by directors and employees in
performing their duties
(i) It is the Company's basic policy to promote corporate activities
based on higher ethical standards, integrity and social justice.
(ii) To assure compliance with laws and ordinances as well as its
articles of incorporation, and to ensure that actions are taken
faithfully and ethically, the Company shall establish the "Code
of Ethics for directors" for directors and executive officers,
and the "Advantest Code of Conduct" for all officers and
employees of the Advantest Group, and notify such directors,
executive officers, officers and employees of these codes.
(iii) As a framework to realize full compliance with laws and
ordinances, the Company shall establish the Corporate Ethics
Committee that monitors the implementation of the Advantest Code
of Conduct. In addition, to handle reports and consultation
regarding questionable matters in light of the Advantest Code of
Conduct, the Company shall establish the "Code of Conduct
Helpline" a system in which a person who reports shall not be
treated disadvantageously.
(iv) The Company shall establish the Corporate Social Responsibility
Committee in order to fulfill its corporate social
responsibilities, and ensure compliance with laws and ordinances
by establishing subcommittees such as the Disclosure Committee,
the Internal Control Committee and the Human Rights Protection
Committee.
2. Framework regarding the retention and management of information in
relation to the performance of duties by directors
(i) The Company shall properly retain and manage the following
information regarding the exercise of duties by directors,
pursuant to the internal rules that stipulate details such as the
period of retention, person in charge of retention and method of
retention.
o Minutes of general meetings of shareholders and reference
materials
o Minutes of meetings of the Board of Directors and reference
materials
o Other important documents regarding the exercise of duties
by directors
(ii) The Company shall establish the Information Security Committee
that is responsible for protecting personal information and
preventing confidential information from leaking.
3. Rules relating management risk of loss and other frameworks
(i) The Company believes risk management to be an important
management issue, and therefore, it shall establish the Risk
Management Group headed by the President as the general manager
and organize a framework to deal with emergency situations.
(ii) With respect to emergency situations such as disasters, the
Company shall create written emergency action guidelines and
prepare by implementing education and training programs in a
timely manner.
(iii) With respect to potential risks behind business activities,
management environment and corporate assets, the Company shall
identify and classify risk factors for each important business
process, analyze the scale of risks, possibility of actual
occurrence and frequency of such occurrence, etc., and create
written policies and procedures regarding the appropriate
17
response to and avoidance/ reduction of the risks, as one of the
internal control activities.
(iv) Material risks shall be controlled by the Internal Control
Committee and be reported to the Board of Directors.
4. Framework to ensure the effective performance of duties by Directors
(i) The Company shall introduce the Executive Officers System to
promote the efficiency of the management by separating the
management decision making function from the function of
exercising duties.
(ii) The Board of Directors, as the management decision making body,
shall formulate the management policies and management strategies
for the Advantest Group, and as a monitoring body of the
management, the Board of Directors, including outside directors
shall monitor and supervise the status of exercise of duties by
executive officers while delegating broad authorities to the
executive officers so that they can fulfill their duties promptly
and efficiently.
(iii) The directors shall approve the Group's management plans and
business plans, receive reports on operation results based on
monthly closing account, financial situation, status of the
performance of duties by each department at the meeting of the
Board of Directors held monthly, and review the appropriateness
of such plans.
(iv) The Internal Control Committee shall report the development and
management of the internal control system, as deemed necessary,
to the Board of Directors.
5. Framework to ensure the appropriateness of operations of the Company,
and the group as a whole, including its parent company and
subsidiaries
(i) The Advantest Group shall establish and operate the same quality
of internal control system for the Company and its group
companies in order to conduct the consolidated group management
placing an emphasis on business evaluation based on consolidated
accounting.
(ii) The internal control system of the Advantest Group is supported
by each department of the Company that is responsible for each
group company, and is established and operated as a unified
system based on the policies of the group created by the Internal
Control Committee. The status of each group company that is
controlled by the Internal Control Committee shall be reported to
the Board of Directors.
(iii) Auditing Group of the Company supervises an internal audit to
each group company.
6. Matters relating to employees that assist the Board of Corporate
Auditors in the event that a request to retain such employees is made
by the Board of Corporate Auditors
(i) In the event that the Board of Corporate Auditors requests the
placement of employees to assist with its duties, employees shall
be placed as necessary.
(ii) In the event that the Board of Corporate Auditors decides that it
is capable of conducting an audit effectively without employees'
assistance, such employees shall not be placed.
7. Matters relating to the independence of employees from directors in
the preceding article
(i) In placing employees to assist the Board of Corporate Auditors,
the prior consent of the Board of Corporate Auditors
acknowledging the independence of the employees from directors
shall be obtained.
8. Framework for reporting by directors and employees to corporate
auditors, and for other reports to the corporate auditors
(i) The Company shall adopt a system that allows Corporate Auditors
to attend important meetings such as the meeting of the Board of
Managing Directors and to keep abreast important matters
regarding the execution of operations.
(ii) In the event that a report or consultation is made to the Code of
Conduct Helpline with respect to corporate accounting, internal
control or auditing, such report or consultation shall be
directly reported to or consulted with corporate auditors.
9. Other frameworks to ensure the effective implementation of audit by
corporate auditors
18
(i) Corporate auditors shall share information held by the Auditing
Group (an internal audit section of the Company) and ensure that
there are opportunities to exchange opinions as deemed necessary.
(6) Policies on the distribution of surplus
Based on the premise that long-term and continued growth in corporate value
is fundamental to the creation of shareholder value, the Company deems the
consistent distribution of profits to be the most important management
priority. Accordingly, the Company engages in active distribution of
profits based on business performance.
With respect to the distribution of the surplus, the Company makes payout
decisions after taking into consideration business performance, financial
conditions, as well as the need for strategic investment for mid- to
long-term business development. While aiming to make consistent
distributions, because of the fluctuation of the market in which it
operates, the Company makes dividend payouts following a target payout
ratio of 20% or more.
Retained earnings are devoted to research and development, streamlining
efforts, overseas expansion, investments in new businesses and resources
for M&A activities, with an aim to strengthen the Company's business
position and enhance its corporate value.
In order to maintain capital strategies responsive to changes in the
operating environment, the Company plans to decide obtaining more treasury
shares by taking into account factors such as stock price trend, capital
efficiency and cash flow.
19
Consolidated Balance Sheets
---------------------------
(As of March 31, 2007)
(unit: million yen)
- ------------------------------------------------------------------------------------------------------------------------
FY2006 FY2005 FY2006 FY2005
(reference) (reference)
- ------------------------------------------------------------------------------------------------------------------------
Assets Liabilities
- ------------------------------------------------------------------------------------------------------------------------
Current assets 294,808 275,633 Current liabilities 60,652 76,745
Cash and cash equivalents 196,395 157,925 Current portion of long-term 10 30
Trade accounts 54,264 69,567 debt
receivable, less allowance Trade accounts payable 29,095 32,584
for doubtful accounts Income taxes payable 9,370 19,970
Inventories 31,976 29,911 Accrued expenses 13,637 12,781
Deferred tax assets 9,215 13,708 Accrued warranty expenses 4,135 4,776
Other current assets 2,958 4,522 Other current liabilities 4,405 6,604
Investment securities 11,370 12,273 Long-term debt, excluding - 10
Property, plant and 49,650 50,793 current portion
equipment, net Accrued pension and severance 8,267 12,292
Deferred tax assets 2,690 7,378 cost
Intangible assets, at cost, 3,101 2,858 Other liabilities 2,658 3,802
less accumulated ---------------------------------------------------------------
amortization Total liabilities 71,577 92,849
---------------------------------------------------------------
Other assets 4,755 1,841 Stockholders' equity
---------------------------------------------------------------
Common stock 32,363 32,363
Capital surplus 39,256 37,147
Retained earnings 273,082 245,090
Accumulated other comprehensive income 3,652 1,344
(loss)
Treasury stock (53,556) (58,017)
---------------------------------------------------------------
Total stockholders' equity 294,797 257,927
- ------------------------------------------------------------------------------------------------------------------------
Total assets 366,374 350,776 Total liabilities and 366,374 350,776
stockholders' equity
- ------------------------------------------------------------------------------------------------------------------------
(Note) Amounts less than one million above are rounded.
20
Consolidated Statements of Income
---------------------------------
(From April 1, 2006 to March 31, 2007)
(unit: million yen)
- --------------------------------------------------------------------------------
FY2006 FY2005
(reference)
- --------------------------------------------------------------------------------
Amount Amount
- --------------------------------------------------------------------------------
Net sales 235,012 253,922
Cost of sales 108,718 121,429
-----------------------------
Gross profit 126,294 132,493
-----------------------------
Research and development expenses 29,509 26,927
Selling, general and administrative expenses 39,993 41,108
-----------------------------
Operating income (loss) 56,792 64,458
-----------------------------
Other income (expense):
Interest and dividend income 3,026 1,760
Interest expense (16) (290)
Other 1,288 1,526
-----------------------------
Income (loss) before income taxes 61,090 67,454
-----------------------------
Income taxes 25,520 26,080
Equity in earnings (loss) of equity method (14) -
affiliates
-----------------------------
Net income (loss) 35,556 41,374
- --------------------------------------------------------------------------------
(Note) Amounts less than one million above are rounded.
21
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
(From April 1, 2006 to March 31, 2007)
(unit: million yen)
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated Total
Common Capital Retained other Treasury stockholders'
stock surplus earnings comprehensive stock equity
income (loss)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance of March 31, 2006 32,363 37,147 245,090 1,344 (58,017) 257,927
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income (loss) 35,556 35,556
Other comprehensive income (loss)
Foreign currency translation 1,123 1,123
adjustments
Net unrealized gains and losses (362) (362)
on securities
Total comprehensive income 36,317
for FY2006
Adjustment to initially apply SFAS 158 1,547 1,547
Cash dividends (7,474) (7,474)
Stock option compensation expense 2,566 2,566
Exercise of stock option (457) 4,520 4,063
Treasury stock purchased (68) (68)
Treasury stock sold (90) 9 (81)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance of March 31, 2007 32,363 39,256 273,082 3,652 (53,556) 294,797
- ----------------------------------------------------------------------------------------------------------------------------------
(Note) Amounts of less than one million above are rounded.
22
Notes to the Consolidated Financial Statements
----------------------------------------------
1. Notes to significant matters based on which the Consolidated Financial
Statements were prepared
(1) Basis of Presentation
The consolidated statutory report including consolidated balance
sheets and consolidated statements of income has been prepared on the
basis of accounting principles generally accepted in the United States
of America ("U.S. GAAP"), pursuant to the provisions of paragraph 1 of
Article 148 of the Company Accounting Regulation (kaisha keisan
kisoku). Pursuant to the provisions of the article, however, certain
disclosures required on the basis of U.S. GAAP are omitted.
(2) Scope of consolidation
Consolidated subsidiaries
(a) The number of consolidated subsidiaries 40
(b) Names of major consolidated subsidiaries are omitted, as they are
described in "1. Current Conditions of the Advantest Group, (3)
Significant Subsidiaries" of the Business Report.
(3) Application of the equity method
The number and name of the equity method affiliate:
one, e-Shuttle, Inc.
(4) Significant accounting policies
(i) Cash equivalents
Cash equivalents consist of deposits and negotiable certificates
of deposit due to mature within 3 months.
(ii) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the average cost method.
(iii) Securities
The Company applies Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investment
in Debt and Equity Securities".
Available-for-sale securities are recorded at fair value.
Unrealized gains and losses on trading securities are included
in earnings. Unrealized gains and losses, net of the related
tax effect, on available-for-sale securities are excluded from
earnings and are reported in accumulated other comprehensive
income (loss) until realized. Realized gain and losses are
determined on the average cost method.
Other securities are accounted for using the acquisition
cost method.
(iv) Depreciation of property, plant, and equipment
For the Company and its domestic subsidiaries, depreciation is
computed principally using the declining-balance method,
except for buildings which is depreciated using the
straight-line method. For foreign subsidiaries, depreciation
is computed using the straight-line method.
(v) Goodwill and other intangible assets
Under SFAS No. 142, "Goodwill and Other Intangible Assets",
goodwill and intangible assets with an indefinite useful life
are not amortized, but instead is tested for impairment at
least annually. Intangible assets with definite useful lives
are amortized over their respective estimated useful lives.
(vi) Impairment of long-lived assets
The Company applies SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", the impairment
of long-lived fixed assets or intangible assets to be subject
to depreciation and amortization when events or changes in
their conditions result in non-recovery of their carrying
amounts. When the carrying amount exceeds the future
recoverable amount, the Company recognizes the difference
between the fair value and the carrying amount as an
impairment loss.
23
(vii) Allowances
Allowances for doubtful accounts
The Company recognizes allowance for doubtful accounts to
ensure that trade accounts receivable are not overstated due
to uncollectibility, which represents the Company's best
estimate of the amount of probable credits losses in the
Company's existing trade accounts receivable.
Accrued warranty expenses
To provide for future repairs during warranty periods,
estimated repair expenses over the warranty period are accrued
based on the historical ratio of actual repair expenses to
corresponding sales.
Accrued pension and severance cost
In accordance with SFAS No. 87, "Employers' Accounting for
Pensions" and SFAS No. 158, "Employers' Accounting for Defined
Benefit and Retirement Plans", in order to prepare for the
employees' severance, severance and pension costs are accrued
based on the projected benefit obligations and the fair value
of plan assets at the balance sheet date. Unrecognized
actuarial loss and unrecognized prior service cost are
amortized by the straight-line method over the average
remaining service periods of employees.
(Changes to accounting policies)
Beginning fiscal year 2006, the Company has adopted SFAS 158.
The actuarial loss and prior service cost which used to be
unrecognized pursuant to SFAS 87 are recognized on the
consolidated balance sheet. With these changes, accrued
severance and pension costs decreased (Y)2,590 million and the
aggregate amount of other accumulated comprehensive income
(loss) after the income tax adjustment increased (Y)1,547
million. There is no impact on the Company's profit and loss.
(viii) Translation of foreign financial statements
In accordance with SFAS 52, "Foreign Currency Translation", in
financial statements of foreign subsidiaries utilizing local
currencies as a functional currency, assets and liabilities
are translated at rates of exchange prevailing at the end of
the fiscal year, profits and expenses are translated at
average rates of exchange in effect during the year, and
foreign currency translation adjustments resulting from the
above translation of items are included as other accumulated
comprehensive income (loss).
2. Notes to Consolidated Balance Sheets
(1) Allowance for doubtful accounts: (Y)205 million
(2) Accumulated depreciation on property, plant and equipment: (Y)75,838
million
(3) Outstanding loan guarantees: (Y)108 million
3. Notes to Consolidated Statements of Stockholders' Equity
(1) Total number of issued shares as of March 31, 2007
Common stock 199,566,770 shares
24
(2) Distribution of the surplus
(i) Amount of distribution
- --------------------------------------------------------------------------------------------------------------------------
Resolution Class of shares Aggregate amount of Amount of Record date Effective date
distribution distribution per
share
- --------------------------------------------------------------------------------------------------------------------------
The resolution at the Common stock (Y)4,200 million (Y)45.0 March 31, June 28,
Ordinary General Meeting 2006 2006
of Shareholders held on
June 27, 2006
- --------------------------------------------------------------------------------------------------------------------------
The resolution at the Common stock (Y)3,274 million (Y)35.0 September 30, December 1,
meeting of the Board of 2006 2006
Directors held on October
27, 2006
- --------------------------------------------------------------------------------------------------------------------------
(ii) Dividend with its record date in fiscal year 2006 and its
effective date in fiscal year 2007
- --------------------------------------------------------------------------------------------------------------------------
Resolution Class of shares Source of Total amount of Amount of Record Effective
dividend distribution distribution date date
per share
- --------------------------------------------------------------------------------------------------------------------------
The resolution at the Common stock Retained (Y)6,099 million (Y)32.5 March 31, June 28,
Ordinary General earnings 2007 2007
Meeting of Shareholders
held on June 27, 2007
- --------------------------------------------------------------------------------------------------------------------------
(3) Stock acquisition rights outstanding as of March 31, 2007
(Excluding stock acquisition rights for which the exercise period has
not begun)
Pursuant to the resolution adopted at the Ordinary General Meeting of
Shareholders of June 27, 2003
Common stock 450,000 shares
Pursuant to the resolution adopted at the Ordinary General Meeting of
Shareholders of June 25, 2004
Common stock 940,000 shares
Pursuant to the resolution adopted at the Ordinary General Meeting of
Shareholders of June 28, 2005
Common stock 1,323,980 shares
4. Notes to per share information
Net assets per share: (Y)1,570.99
Basic net income per share: (Y)190.01
5. Notes to significant subsequent events
The Company resolved at the meeting of its Board of Directors on
April 25, 2007 to repurchase its shares in order to implement capital
policies responsive to the Company's operating environment pursuant to the
Articles of Incorporation in accordance with Article 459, Paragraph 1 of
the Company Law under the terms set forth below.
Resolution at the meeting of Board of Directors regarding the repurchasing
of the Company's shares
(i) Class of shares to be repurchased Common stock
(ii) Aggregate number of shares to be
repurchased Up to 3.6 million shares
(iii) Period for share repurchase From April 26, 2007 to
June 20, 2007
(iv) Aggregate price of shares to be
repurchased Up to 20 billion yen
(v) Method of repurchase Purchase on the market
through the Tokyo Stock
Exchange
6. Other notes
Amounts less than one million yen are rounded.
25
Balance Sheets (Non-Consolidated)
---------------------------------
(As of March 31, 2007)
(Unit: million yen)
- ----------------------------------------------------------------------------------------------------------------------------------
FY2006 FY2005 FY2006 FY2005
(reference) (reference)
- ----------------------------------------------------------------------------------------------------------------------------------
Assets Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Current assets 213,182 199,872 Current liabilities 56,358 68,120
Cash and deposits 112,558 86,669 Trade accounts payable 26,407 30,476
Trade notes receivables 4,505 1,001 Other accounts payable 2,030 2,419
Accounts receivable 56,313 71,892 Accrued expenses 9,992 9,054
Finished goods 5,156 3,571 Income tax payable 8,082 16,315
Raw materials 2,954 4,774 Allowance for product warranty 4,192 4,877
Work in progress 15,997 13,085 Bonus accrual for directors 203 -
Supplies 165 177 Other current liabilities 5,451 4,977
Deferred tax assets 9,017 9,514 Noncurrent liabilities 8,533 9,191
Other current assets 7,497 9,187 Long-term borrowings - 10
Allowance for doubtful accounts (983) - Allowance for retirement benefits 6,255 6,970
Allowance for officers' retirement - 1,681
Noncurrent assets 76,515 74,665 benefits
Property, plant and equipment 37,784 38,781 Other noncurrent liabilities 2,277 529
--------------------------------------------------------------------
Buildings 13,461 14,163 Total liabilities 64,891 77,311
--------------------------------------------------------------------
Structures 770 831 Stockholders' equity
--------------------------------------------------------------------
Machinery and equipment 3,452 3,640 Common stock - 32,362
Vehicles and delivery 16 24 Capital surplus - 32,973
equipment Additional paid-in capital - 32,973
Tools and furniture 2,164 2,171 Retained earnings - 187,229
Land 17,622 17,915 Legal reserve - 3,083
Construction in progress 297 33 Voluntary reserve - 148,942
Intangible fixed assets 1,467 1,233 [Reserve for losses in foreign - [27,062]
Software 940 816 investments]
Others 526 417 [General reserve] - [121,880]
Investments and other assets 37,263 34,650 Unappropriated earnings at end - 35,204
Investment securities 11,336 12,228 of year
Investments in affiliated 16,480 16,470 Net unrealized holding gains on - 2,677
companies other securities
Long-term loans receivable 1,084 1,078 Treasury stock - (58,017)
--------------------------------------------------------------------
Deferred tax assets 4,791 3,482 Total stockholders' equity - 197,226
--------------------------------------------------------------------
Other noncurrent assets 3,570 1,391 Total liabilities and stockholder's equity - 274,538
--------------------------------------------------------------------
Net assets
--------------------------------------------------------------------
Stockholders' equity 220,152 -
Common stock 32,362 -
Capital surplus 32,973 -
Additional paid-in capital 32,973 -
Retained earnings 208,372 -
Legal reserve 3,083 -
Other retained earnings 205,289 -
[Reserve for losses in foreign [27,062] -
investments]
[General reserve] [146,880] -
[Retained earnings brought [31,347] -
forward]
Treasury stock (53,555) -
Difference of appreciation and 2,315 -
conversion
Net unrealized gains on securities 2,315 -
Stock acquisition rights 2,337 -
--------------------------------------------------------------------
Total net assets 224,805 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets 289,697 274,538 Total liabilities and net assets 289,697 -
- ----------------------------------------------------------------------------------------------------------------------------------
(Notes) Amounts less than one million are truncated.
26
Statements of Income (Non-Consolidated)
---------------------------------------
(April 1, 2006 through
March 31, 2007)
(unit: million yen)
- ---------------------------------------------------------------------------
FY2006 FY2005
(reference)
- ---------------------------------------------------------------------------
Net sales 197,753 217,688
Cost of sales 98,195 113,606
- ---------------------------------------------------------------------------
Gross profit 99,558 104,082
- ---------------------------------------------------------------------------
Selling, general, and 58,054 54,335
administrative expenses
- ---------------------------------------------------------------------------
Operating income 41,503 49,746
- ---------------------------------------------------------------------------
Non-operating income
Interest and dividend income 2,964 2,604
Other 2,475 3,828
Non-operating expenses
Interest expenses 22 288
Other 3,283 2,013
- ---------------------------------------------------------------------------
Ordinary income 43,638 53,878
- ---------------------------------------------------------------------------
Net income before income taxes 43,638 53,878
Income taxes - current 14,769 18,364
Income taxes - deferred (567) 239
- ---------------------------------------------------------------------------
Net income 29,436 35,273
- ---------------------------------------------------------------------------
(Notes) Amounts less than one million are truncated.
27
Statements of Changes in Stockholders' Equity
---------------------------------------------
(From April 1, 2006 to March 31, 2007)
(unit: million yen)
- -----------------------------------------------------------------------------------------------------------------------------------
Difference
of
Stockholders' equity appreciation
and
conversion
------------------------------------------------------------------------------------------- Stock
Capital Retained earnings acquisition Total net
surplus rights assets
------------------------------------------------- Net
Common Additional Legal Other retained earnings Treasury Total unrealized
stock paid-in reserve ------------------------------ stock stockholders' gains on
capital Reserve for General Retained equity securities
losses in reserve earnings
foreign brought
investments forward
- -----------------------------------------------------------------------------------------------------------------------------------
Balance of
March 31, 32,362 32,973 3,083 27,062 121,880 35,204 (58,017) 194,548 2,677 - 197,226
2006
- -----------------------------------------------------------------------------------------------------------------------------------
Changes in
the term
Transfer
to
voluntary 25,000 (25,000) - -
reserve
(Note 2)
Bonus of
directors
and
corporate (203) (203) (203)
auditors
(Note 3)
Dividends
from (7,473) (7,473) (7,473)
surplus
(Note 4)
Net income 29,436 29,436 29,436
Purchase
of
treasury (67) (67) (67)
stock
Disposal
of
treasury (617) 4,529 3,912 3,912
stock
Net
changes
of items
other
than
stockholders' (362) 2,337 1,975
equity
- -----------------------------------------------------------------------------------------------------------------------------------
Total changes
in the term - - - - 25,000 (3,857) 4,461 25,604 (362) 2,337 27,579
- -----------------------------------------------------------------------------------------------------------------------------------
Balance of
March 31, 32,362 32,973 3,083 27,062 146,880 31,347 (53,555) 220,152 2,315 2,337 224,805
2007
- -----------------------------------------------------------------------------------------------------------------------------------
(Notes) 1. Amounts less than one million are truncated.
2. Transfer to voluntary reserve was an appropriated earnings item for the ordinary general meeting of
shareholders held in June, 2006.
3. Bonus of directors and corporate auditors was an appropriated earnings item for the ordinary general
meeting of shareholders held in June, 2006.
4. 4,199 million yen out of dividends from surplus was an appropriated earnings item for the ordinary
general meeting of shareholders held in June, 2006.
28
Notes to Non-Consolidated Financial Statements
----------------------------------------------
1. Notes to significant accounting policies
(1) Valuation of securities
(i) Investments in subsidiaries and equity method affiliates: Stated
at cost using the moving average method
(ii) Other securities
(a) Securities with quoted 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
(i) Finished goods
Stated at cost using the periodic average method
(ii) Raw materials
Stated at lower of cost or market using the periodic average
method
(iii)Work in progress
Stated at cost using the periodic average method
(iv) Supplies
Stated at cost using the specific identification method
(3) Depreciation and amortization of noncurrent assets
(i) Depreciation of plant and equipment
Based on the declining balance method
However, buildings (except attached improvements) acquired on or
after April 1, 1998 are depreciated using the straight-line
method.
(ii) 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
(i) 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.
(ii) 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.
(iii)Bonus accrual for directors
In preparation for the payment of bonuses to directors, of the
total amount expected to be paid, an estimated amount for the
fiscal year 2006 is reported.
29
(iv) Allowance for retirement benefits
To provide for employee retirement benefits, an allowance 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.
(v) Allowance for officers' retirement benefits
To provide for officers' retirement benefits, an allowance used
to be provided for the aggregate amount payable at the end of the
period pursuant to the Company's rules on officers' retirement
benefit. This allowance was terminated as of the closing of the
ordinary general meeting of shareholders held on June 27, 2006.
Accordingly, it was resolved at the same meeting that a
termination payment of the retirement benefits would be paid to
officers based on the period of their tenure until that time.
1,460 million yen of the officers' retirement benefits for the
said payment period is included in "Other noncurrent
liabilities".
(5) Accounting for lease transactions
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 to accounting policies)
(1) Accounting standards for officers' bonus (Yakuin Syouyo ni Kansuru
Kaikei Kijyun)
In fiscal year 2006, the Company adopted "Accounting standards for
officers' bonus" (Corporate accounting standards (Kigyou Kaikei
Kijyun) No. 4, November 29, 2005). Accordingly, operating income,
ordinary income, and net income before income taxes decreased 203
million yen, respectively.
(2) Accounting standards for the statement of net assets on balance sheets
(Taisyaku Taisyou Hyou no Junshisan no Bu no Hyouji ni Kansuru Kaikei
Kijyun)
In fiscal year 2006, the Company adopted "Accounting standards for the
statement of net assets on the balance sheet" (Corporate accounting
standards No. 5, December 9, 2005) and "Application guidelines for
accounting standards for the statement of net assets on the balance
sheet" (Application guidelines for corporate accounting standards No.
8, December 9, 2005). The amount equivalent to the total stockholders'
equity to date is 222,468 million yen.
(3) Accounting standards for stock option (Stock Option Tou ni Kansuru
Kaikei Kijyun)
In fiscal year 2006, the Company adopted "Accounting standards for
stock option" (Corporate accounting standards No. 8, December 27,
2005) and "Application guidelines for accounting standards for stock
option" (Stock Option Tou ni Kansuru Kaikei Kijyun no Tekiyou Shishin)
(Application guidelines for corporate accounting standards No. 11, May
31, 2006).
Accordingly, operating income, ordinary income, and net income before
income taxes decreased 2,337 million yen, respectively.
2. Notes to balance sheets
(1) Accumulated depreciation on property, plant and equipment (including
accumulated impairment losses): (Y)57,479 million
(2) Short-term receivables from affiliates: (Y)32,064 million
Long-term receivables from affiliates: (Y)1,050 million
Short-term payables to affiliates: (Y)11,466 million
30
3. Notes to statements of income
Transactions with affiliated companies
Sales: (Y)77,228 million
Purchases: (Y)54,458 million
Non-operating transactions: (Y)5,182 million
4. Notes to Statements of Changes in Stockholders' Equity
Total number of treasury shares as of March 31, 2007
Common stock 11,916,485 shares
5. Notes to accounting for income taxes
Breakdown by major causes of deferred tax assets and deferred tax
liabilities
Deferred tax assets (Unit: million yen)
Appraised value of inventories 2,757
Research and development expenses 1,701
Accrued warranty expenses 1,689
Accrued bonus 1,392
Excess allowance for retirement benefits 2,521
Long-term accounts payable 769
Accrued enterprise taxes 746
Valuation difference in other securities 5
Excess depreciation 1,883
Impairment loss 505
Other 1,740
-------------
Subtotal of deferred tax assets 15,712
Valuation allowance (334)
-------------
Net deferred tax assets 15,377
Deferred tax liabilities
Valuation difference in other securities (1,568)
-------------
Net deferred tax assets 13,809
=============
6. Notes to noncurrent assets used on a lease basis
In addition to property, plant and equipment recognized in the balance
sheet, the Company uses some of its computer equipments under lease
agreements.
7. Notes to transactions with related parties
(1) Parent company and major corporate shareholders
Not applicable.
(2) Officers and major individual investors
Not applicable.
31
(3) Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------
Company Address Common Principal Percentage Description of relationships Details of Amount of Items Balance
name stock Activities of Voting transactions transactions at fiscal
Rights year end
-----------------------------
Position of Business
the Company's relationship
officers in
subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest Chiyoda- (Y)1,000 Leasing of 100.0% Yes Leasing of Sales (Y)3,139 Accounts (Y)1,045
Finance Inc. ku, Tokyo million test the Company's million receivable million
systems, products Short-term
etc. loans (Y)4,984
receivable million
- ------------------------------------------------------------------------------------------------------------------------------------
Advantest Chu-Pei, 560,000 Sale of 100.0% Yes Sale of the Sales (Y)50,837 Accounts (Y)21,726
Taiwan Inc. Hsin-Chu thousand test Company's million receivable million
Hsien, New systems, products
Taiwan Taiwan etc.
Dollars
- ------------------------------------------------------------------------------------------------------------------------------------
Terms and conditions of transactions and determination of policies
thereof
1. With respect to sales, the price is determined by referring to
the market price, among others.
2. With respect to loans, the rate is determined by taking the
market interest rate into consideration.
8. Notes to per share information
Net assets per share: (Y)1,185.55
Net income per share: (Y)157.31
(Note) Pursuant to the resolution of the meeting of the Board of
Directors held on July 26, 2006, the Company made a one to two
stock split of shares of its common stock on October 1, 2006. Net
income per share is calculated on the assumption that the stock
split was made at the beginning of fiscal year 2006.
9. Notes to significant subsequent events
(1) Following the revisions of dividend policies on foreign subsidiaries
made during fiscal year 2006, Advantest (Singapore) Pte. Ltd. resolved
at the meeting of its Board of Directors held on April 3, 2007, that
it will pay $210 million as dividend.
Accordingly, the Company received $210 million as dividend on April 5,
2007, and it will report the approximately (Y)24, 641 million of
dividend received as non-operating income.
(2) The Company resolved at a meeting of its Board of Directors on April
25, 2007 to repurchase its shares in order to implement capital
policies responsive to the Company's operating environment pursuant to
the Articles of Incorporation in accordance with Article 459,
Paragraph 1 of the Company Law under the terms set forth below.
Resolution at the meeting of Board of Directors regarding the
repurchasing of the Company's shares
(i) Class of shares to be Common stock
repurchased
(ii) Aggregate number of shares Up to 3.6 million shares
to be repurchased
(iii)Period for share repurchase From April 26, 2007 to
June 20, 2007
(iv) Aggregate price of shares Up to 20 billion yen
to be repurchased
(v) Method of repurchase Purchase on the market through
the Tokyo Stock Exchange
10. Other notes
Amounts less than one million are truncated.
32
Copy of Independent Auditors' Audit Report (Consolidated)
---------------------------------------------------------
- --------------------------------------------------------------------------------
Independent Auditors' Audit Report
----------------------------------
May 16, 2007
To the Board of Directors of Advantest Corporation:
Ernst & Young ShinNihon
Kiyotada Osada O
--------------
Engagement Partner
Certified Public Accountant
Tetsuya Naito O
-------------
Engagement Partner
Certified Public Accountant
Makoto Usui O
-----------
Engagement Partner
Certified Public Accountant
We have audited the consolidated financial statements of Advantest
Corporation (the "Company") for its 65th fiscal year (April 1, 2006 through
March 31, 2007), including the consolidated balance sheets, consolidated
statements of income, consolidated statements of stockholders' equity, and
notes to consolidated financial statements, for the purpose of reporting
under the provisions of Article 444, Paragraph 4 of the "Company Law." The
management of the Company was responsible for the preparation of these
consolidated financial statements, and our responsibility shall be limited
to the expression of an independent opinion regarding the consolidated
financial statements.
We conducted our audit in accordance with auditing standards generally
accepted in Japan. These auditing standards require reasonable assurance
that the consolidated financial statements do not contain any untrue
statements of material fact. The audit was conducted based on an audit by
testing, and included a review of the consolidated financial statements as
a whole and an evaluation of the accounting policies adopted by the
management, the application thereof, and the estimates prepared by the
management. We believe that we have obtained a reasonable basis to form our
opinion as a result of the audit.
In our opinion, the consolidated financial statements properly present the
financial position and the results of operations during the fiscal year, in
all material respects, of the company group consisting of Advantest
Corporation and its consolidated subsidiaries in conformity with accounting
principles generally accepted in the United States of America (Please refer
to "Notes to Consolidated Financial Statements," "1. Notes to basic
significant matters regarding the preparation of consolidated financial
statements (1)"), pursuant to the provisions of Article 148, Paragraph 1 of
the Company Accounting Regulation.
Additional Information
As described in "Notes to Consolidated Financial Statements," "5. Note
to significant subsequent events," the Company resolved at the meeting
of the Board of Directors held on April 25, 2007 to repurchase its
shares.
We have no specific interest in the Company required to be stated by the
provisions of the Certified Public Accountant Law.
- --------------------------------------------------------------------------------
33
Copy of Independent Auditors' Audit Report
------------------------------------------
- --------------------------------------------------------------------------------
Independent Auditors' Audit Report
----------------------------------
May 16, 2007
To the Board of Directors of Advantest Corporation:
Ernst & Young ShinNihon
Kiyotada Osada O
--------------
Engagement Partner
Certified Public Accountant
Tetsuya Naito O
-------------
Engagement Partner
Certified Public Accountant
Makoto Usui O
-----------
Engagement Partner
Certified Public Accountant
We have audited the financial statements of Advantest Corporation (the
"Company") for its 65th fiscal year (April 1, 2006 through March 31, 2007),
which included the balance sheets, statements of income, statements of
changes in stockholders' equity, notes to non-consolidated financial
statements, and its supporting schedules, for the purpose of reporting
under the provisions of Article 436, Paragraph 2, Section 1 of the "Company
Law." The management of the Company was responsible for the preparation of
these financial statements and its supporting schedules, and our
responsibility shall be limited to the expression of an independent opinion
regarding the financial statements and its supporting schedules.
We conducted our audit in accordance with auditing standards generally
accepted in Japan. The auditing standards require reasonable assurance that
the financial statements and its supporting schedules do not contain any
untrue statements of material fact. The audit was conducted based on an
audit by testing, and included a review of the financial statements and its
supporting schedules as a whole and an evaluation of the accounting
policies adopted by the management, the application thereof, and the
estimates prepared by the management. We believe that we have obtained a
reasonable basis to form our opinion as a result of the audit.
In our opinion, the above financial statements and its supporting schedules
properly present the financial position and the results of operations of
the Company during the fiscal year, in all material respects, in conformity
with accounting principles generally accepted in Japan.
Additional Information
As described in "Notes to Non-Consolidated Financial Statements," "9.
Note to significant subsequent events," the Company resolved at the
meeting of the Board of Directors held on April 25, 2007 to repurchase
its treasury shares.
We have no specific interest in the Company required to be stated by the
provisions of the Certified Public Accountant Law.
- --------------------------------------------------------------------------------
34
Copy of Board of Corporate Auditors' Audit Report
-------------------------------------------------
- --------------------------------------------------------------------------------
Audit Report
This Audit Report was prepared by the Board of Corporate Auditors of
Advantest Corporation (the "Company") after deliberation, based on audit
reports prepared by each Corporate Auditor with respect to the methods and
results of audit concerning the performance of each Director of his/her
respective duties during the 65th fiscal year (April 1, 2006 through
March 31, 2007). We hereby report as follows.
1. Methods of Audit by Corporate Auditors and the Board of Corporate
Auditors, and its contents
In addition to establishing audit policies and audit plans for the fiscal
year, and receiving reports from each Corporate Auditor on the
implementation status and results of the audit, the Board of Corporate
Auditors received reports from Directors and Independent Auditors on the
performance of their duties and requested further explanations as deemed
necessary.
In compliance with the Rules on the Board of Corporate Auditors established
by the Board of Corporate Auditors, pursuant to the audit policies and
audit plans for the fiscal year, each Corporate Auditor communicated with
Directors, the Audit Office and other employees in order to collect
information, attended meetings of the Board of Directors and other
important meetings, received reports from Directors and employees on the
performance of their duties, requested further explanations as deemed
necessary, reviewed important approval-granting documents, and inspected
the state of business operations and assets at the head office and other
important branch offices.
In addition, we monitored and reviewed the contents of resolutions of the
meeting of the Board of Directors with respect to the development of a
system as defined in Article 100, Paragraphs 1 and 3 of the Regulations for
Enforcement of the Company Law, as well as the status of the system
(Internal Control System) that has been developed based on such
resolutions.
With respect to subsidiaries, we communicated with and exchanged
information with Directors and employees of the subsidiaries and received
business reports from subsidiaries as deemed necessary.
Based on the above methods, we reviewed the business report for the fiscal
year and its supporting schedules.
In addition, we monitored and reviewed whether the Independent Auditors
maintained their independent positions and conducted the audit properly,
received reports from the Independent Auditors on the performance of their
duties, and requested further explanations as deemed necessary.
Furthermore, we were informed by the Independent Auditor that they are
establishing a "System to ensure the appropriate performance of duties"
(Syokumu no Suikou ga Tekisetsu ni Okonawareru Koto o Kakuho Suru Tameno
Taisei) (Matters as defined in each Section of Article 159 of the Company
Accounting Regulations) pursuant to "Quality control standards of audit"
(Kansa ni Kansuru Hinshitsu Kanri Kijyun) (the Business Accounting Counsel,
October 28, 2005), and requested their explanations as deemed necessary.
Based on the above methods, we reviewed the consolidated financial
statements for the 65th fiscal year (the consolidated balance sheets,
consolidated statements of income, consolidated statements of stockholders'
equity, and notes to consolidated financial statements) and the financial
statements (the balance sheets, statements of income, statements of changes
in stockholders' equity, notes to non-consolidated financial statements) as
well as its supporting schedules.
2. Results of Audit
(1) Results of audit of the business report and other documents
(i) The business report and its supporting schedules of the Company
accurately present the financial conditions of the Company in
conformity with applicable laws and regulations and the Articles
of Incorporation of the Company.
- --------------------------------------------------------------------------------
35
- --------------------------------------------------------------------------------
(ii) No irregularity or violation of applicable laws or regulations or
the Articles of Incorporation of the Company was found with
respect to the activities of the Directors.
(iii)The contents of the resolutions of the meeting of the Board of
Directors with respect to the internal control system are
appropriate. In addition, there are no matters to be pointed out
regarding the performance of duties of Directors with respect to
the internal control system.
(2) Results of audit of the consolidated financial statements
The methods and results of audit performed by Ernst & Young ShinNihon,
the independent auditor of the Company, are appropriate.
(3) Results of audit of the financial statements and its supporting
schedules.
The methods and results of audit performed by Ernst & Young ShinNihon,
the independent auditor of the Company, are appropriate.
May 23, 2007
Board of Corporate Auditors of Advantest Corporation
Noboru Yamaguchi O
----------------
Corporate Standing Auditor
Tadahiko Hirano O
---------------
Corporate Standing Auditor
Takashi Takaya O
--------------
Outside Corporate Auditor
Megumi Yamamuro O
---------------
Outside Corporate Auditor
- --------------------------------------------------------------------------------
36
Memorandum to Shareholders
--------------------------
Fiscal Year: Starting from April 1 of each year and ending on March 31 of the
following year
Ordinary general meeting of shareholders: June of each year
Date of Decision on shareholders of record qualified to receive dividends:
March 31 of each year and September 30 when interim dividends are paid.
Method for public notice:
Public notice will be posted on the Advantest website
(http://www.advantest.co.jp/investors/). However, in the case of accidents or
other inevitable circumstances that prevent the Company from posting public
notices on such Company's website, public notices are carried in the Nihon
Keizai Shimbun.
Share registration agent: Main Office, Tokyo Securities Transfer Agent Co., Ltd.
Place for share transfer/registration business:
Togin Bld. 3F, 4-2 Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005
Toll free number: (0120)49-7009
Telephone: (03)3212-4611
Agent for share transfer/registration business:
Main Office and Branch Offices in Japan, The Chuo Mitsui Trust and Banking
Company, Limited
Number of shares comprising one unit: 100 shares
(Notice)
Demand for sales of fractional shares and demand for purchase of fractional
sales:
The share transfer agents mentioned above accept demands for sales and purchases
of fractional shares. Any demand for purchase of fractional shares will be
suspended for 12 business days prior to March 31 and 12 business days prior to
September 30. In addition, Tokyo Securities Transfer Agent Co., Ltd. may suspend
the handling of demands for the purchase of fractional shares for a certain
period designated by the Company.
Registration of lost share certificates:
Those who have lost their share certificates may follow the procedure concerning
lost share certificates with the share transfer agents mentioned above. When
such procedure is complete, the symbol and number of lost share certificates are
registered on the lost share certificate registration book, which will be
available for public inspection. Should there be no objection to such
registration of the registered lost share certificates for a period of one year,
those who have lost their share certificates may receive new share certificates.
The fees charged for the registration will be a basic fee of (Y)10,000 and an
additional fee of (Y)500 per lost certificate.
*For details, please contact the above share registration agent.
37