In our press release titled "Partial revision of the Articles of Incorporation" on May 12, 2005, Tokyo Electron Limited (the "Company") has officially announced its plan to propose an agenda for the upcoming 42nd annual shareholders' meeting (to be held on 24 June, 2005) revising the articles of incorporation so that the total amount of shares to be issued by the Company ("authorized capital stock") will be increased from the current 300 million shares to 700 million shares which is within the amount allowed under the Commercial Code. The purpose of this revision is mentioned in the "Convocation Notice for the 42nd annual shareholders' meeting" sent to our shareholders on May 31, 2005, and we hereby explain our fundamental policy concerning the takeover defense as far as the expansion of the authorized capital is concerned, given the "Guidelines for Takeover Defense for Securing and/or Enhancing Corporate Value and Shareholders' Common Interests" issued by the Ministry of Economy, Trade and Industry and the Ministry of Justice.

On May 27, 2005, the "Guidelines for Takeover Defense for Securing and/or Enhancing Corporate Value and Shareholders' Common Interests" (the
"Guidelines") were issued by the Ministry of Economy, Trade and Industry and the Ministry of Justice. The Guidelines provide the legal principles for legally justified and reasonable takeover defenses employing the issuance of new shares or share purchase warrants, etc., which would be acceptable to shareholders and investors. Therefore, we would like to hereby announce that the fundamental policy in considering a takeover defense which is related to the expansion of the authorized capital stock in question will be based on the Guidelines.

In addition, we have not acknowledged any phenomenon of a specific raider at this time, and no specific form of takeover defense to be introduced by the Company has been determined. If we decide on a takeover defense in the near future, we will disclose the specific form of such takeover defense immediately and timely.

1. Background information on the necessity to introduce a takeover defense

We believe that it is our responsibility and priority as a listed company to enhance our corporate value and ultimately, our shareholders' common interests (collectively hereinafter referred to as "shareholders' common interests"). Under this conviction, we will strive to build a system that enables us to enhance and increase our international competitive power and profitability as a world-leading manufacturer of semiconductor production equipment through improvement in the capacity of our product and technological development, operation oriented towards profitability, and so forth.

However, recently, there has been a strong increase in social awareness of the threat posed by takeovers that impair shareholders' common interests. The government has issued the Guidelines indicating reasonable defense plans against takeovers that impair shareholders' common interests.

By preparing a reasonable takeover defense, we would not only be able to prevent takeovers that would clearly impair our shareholders' common interests, and but also be able to expect a result that would secure and enhance the shareholders' common interests, such as by ensuring opportunities for making objective judgments on a proposed takeover with sufficient disclosure of information thereof or sufficient time to consider it, or by securing bargaining power for improvement of the terms and conditions of the proposals. Therefore, we have an important responsibility to consider and determine the most appropriate takeover defense, given our company policy of placing greater emphasis on maximizing our shareholders' common interests.

2. Fundamental policies in considering takeover defenses: Compliance with the Guidelines

Although not legally binding, the Guidelines provide the legal principles for legally justified and reasonable takeover defenses employing the issuance of new shares or share purchase warrants, etc., in order that takeover defenses become acceptable to shareholders and investors, etc. Therefore, we believe it would be appropriate for us to comply with the Guidelines in considering a takeover defense which is related to the expansion of the authorized capital in question.

We will cautiously consider the takeover defense, including the issue of whether or not the takeover defense should be introduced, in accordance with the following fundamental policies pursuant to the Guidelines.

(1) Takeover defenses shall be introduced in order to secure and enhance the shareholders' common interests.

Takeover defenses shall be introduced in order to secure and enhance the shareholders' common interests. The fact that the takeover is hostile to the current management of the company will not introduce or invoke any takeover defenses.

As referred to in the Guidelines, examples of takeover defenses which secure and enhance the shareholders' common interests are as follows:

(i)	A takeover defense against a takeover in which the shareholders are forced to sell their shares of the company, despite the price or other conditions in the offer not being sufficient (for example, the so-called "coercive two-tier takeover" where a person undertaking the takeover tries to acquire the target company's shares by takeover bid, etc., offering less favorable conditions in the second step than those in the first step, or without disclosing the conditions of the second step).
(ii)	A takeover defense for making a raider provide the shareholders with more information in cases where the shareholders have difficulties in judging the takeover proposals, because, for example, shareholders do not have enough information to determine whether they should keep or sell their shares to a raider (despite the offer by a raider that might impair the shareholders' common interests), or a takeover defense for the company to secure necessary time and bargaining power, such as by providing the company with a chance to present more favorable terms and conditions than those proposed by a raider, etc.
(iii)	A takeover defense to prevent a takeover clearly impairing the shareholders' common interests. Examples of such takeovers are as follows: - A takeover with the intention of inducing a repurchase of the target company's shares at an inflated price (a takeover conducted by a so-called "greenmailer") - A takeover pursuing speculative gain to the detriment of the target company, for example, after temporarily gaining control over the company, a raider acquires important assets, etc. from the company at a low price (a so-called "bust-up" type takeover). - A takeover in which a raider misappropriates the company's assets to repay the loans or collateral thereof owed to the raider or its affiliates. - A takeover in which a raider, after temporarily gaining control over the company, sells off the company's valuable assets which are not currently in use to make the company pay high dividends using the profit therefrom; and/or sell the company's shares at a price inflated by the temporary high dividends.

(2) Prior disclosure to shareholders

No specific form of takeover defense to be introduced by the Company has yet been determined. When we decide on a takeover defense which is appropriate to the Company in the near future, we will disclose the specific form of such takeover defense immediately and timely.

(3) Takeover defense shall reflect the will of the shareholders.

A takeover defense introduced by the Company is for securing and enhancing the shareholders' common interests as described in 2.(1) above. Therefore, in order to reflect the will of the Company's shareholders, the takeover defense (i) will be introduced by resolution at the shareholders' meeting, or (ii) even in case of its introduction by board resolution, will include measures for its abolishment pursuant to the overall reasonable will of the shareholders.

In this regard, the terms of the directors of the Company are one year and the so-called "staggered board" system is not employed by the Company; thus, the shareholders are assured of the opportunity to reexamine the takeover defense via annual shareholders' meetings. In addition, we will include appropriate measures pursuant to the Guidelines, such as setting a minimal effective period of the defense (including setting the renewal period) or setting measures to abolish the plan pursuant to the will of the shareholders, in accordance with the types of defense plans.

(4) Assurance of necessity and proportionality

We will introduce, invoke or abolish a takeover defense in order to secure and enhance the shareholders' common interests, only to the necessary and proportionate extent. In addition to adopting measures to reflect the will of shareholders as mentioned above in 2.(3), in cases where a takeover defense is introduced by board resolution, we will include measures to prevent the directors from introducing or invoking takeover defenses in order for the current management to maintain their control over the company and abusing their discretion with respect to the judgment by the board.

In order to promote corporate management placing greater emphasis on the enhancement of the shareholders' common interests, we have proactively introduced measures on aspects of corporate governance such as establishing remuneration committee and nomination committee, disclosing the remuneration of the representative director and adopting a system of executive officers (shikko-yakuin) at an early stage; we also have engaged in improving and enhancing the system of internal control with the aim of achieving high corporate ethics and an affirmative attitude toward complying with the law, and securing transparency and efficiency of management. Given these well-organized corporate governance system, we will, in order to prevent the board of directors from abusing their discretion, exercise reasonable measures that convince shareholders and investors pursuant to the Guidelines, such as, reflecting the judgment of independent outside directors or independent outside statutory auditors, etc. of the company regarding judgment towards introduction, invocation and abolishment of the defense measures; or setting objective standards to abolish the defense and shift to a tender offer, in accordance with the types of defense plans.

Further, pursuant to the Guidelines, the takeover defense will be within a range of necessity and a proportional response to a threat to the shareholders' common interests to be impaired by the takeover. Moreover, in employing the issuance of new shares, etc., we will give sufficient consideration to the risk of diluting the rights of existing shareholders.

We will continue to make an effort to secure and enhance the shareholders' common interests, and to examine the takeover defense, including the issue of whether or not it should be introduced, under such fundamental policies as explained above.