The proposed resolutions for the 43rd Annual General Meeting of Shareholders of Tokyo Electron Limited are as described in the Notice of the 43rd Annual General Meeting of Shareholders of Tokyo Electron Limited and the Business Report for the 43rd Fiscal Year attached to the notice, both of which were sent on May 31, 2006 to all persons who were shareholders in the Company as of March 31 of this year. Since there have been a number of questions and comments from shareholders, however, we offer the following supplemental information regarding the background of and reasons for the resolutions proposed for the General Meeting of Shareholders.

1. Supplemental Information regarding the Proposed Resolutions for Amendments to the Articles of Incorporation

Due to the contents of the Amendments to the Articles of Incorporation covering a broad range of areas, we will look at their overall structure when explaining them.

The first point is a report about amendments to the Articles of Incorporation dated May 1 of this year which resulted from the provisions of the Law concerning Adjustment and Coordination of Related Laws in Association with the Coming into Effect of the Corporation Law.

These are not matters to be resolved at the General Meeting of Shareholders, but you will find them in the center column of the chart on pages 3 through 16 in the Notice you have received.

These include "new provisions under which the Company establishes a Board of Directors, Auditors, Board of Auditors, and Accounting Auditors," "new provisions of issuing share certificates," and "a change of reference from the Commercial Code to the Corporation Law when the former is quoted in the Articles of Incorporation."

The second point is explanations of proposed resolutions to be brought before the General Meeting of Shareholders.

There are a number of new systems authorized under the new Corporation Law.

We think, however, that in changing the Articles of Incorporation to adopt these new systems it is more appropriate to propose each resolution one by one (Proposal 2 which relates to the granting of authority to the Board of Directors to decide how to distribute surplus earnings; Proposal 3 which relates to limitation of liability contracts with Outside Directors and Outside Auditors; Proposal 4 which relates to the chairperson and the person(s) with the authority to convene General Meetings of Shareholders and meetings of the Board of Directors) instead of lumping them together as one resolution to be voted on as a whole by the shareholders.

With the exception of these, we propose combining the other resolutions for Amendments to the Articles of Incorporation in response to the coming into effect of the Corporation Law (changing the wording of the Articles of Incorporation to match the wording of the Corporation Law; changing methods for giving public notice; introducing a written resolution system into meetings of the Board of Directors; etc.) into one resolution, i.e. Proposal 5.

(1) Proposal 2: Amendments to the Articles of Incorporation concerning the Handling of Distribution of Surplus Earnings

(i) Distribution of surplus earnings according to the decision of the Board of Directors (Proposed Amendments Article 37, 38)

Since the term of office for the Company's Corporate Directors is 1 year, the Board of Directors is now allowed to distribute surplus earnings in a flexible manner by its resolution in accordance with Article 459 Paragraph 1 of the Corporation Law. Following this change, the new Article 37 provides that the Board of Directors can distribute surplus earnings in a flexible manner by its resolution.

Article 38 combines the provisions of year-end and interim dividends included in the current Articles of Incorporation into a single one and stipulates the record date of distributing surplus earnings.

In addition, whereas year-end dividends have traditionally been paid following approval at the Annual General Meetings of Shareholders, the current resolution would allow for the prompt payment of dividends following approval at the meeting of the Board of Directors on final accounts.

It is expected that dividends will be paid twice a year (interim and year-end) as they have always been; however, Paragraph 3 of the proposed Article 38 provides for a swift response should the need for quarterly dividends, etc. arise due to changes in the environment.

The right of shareholders to make proposals relating to the distribution of surplus earnings, however, shall remain unchanged.

(ii) Amendment to allow for the acquisition of the Company's own shares to be treated the same as dividends from surplus earnings (eliminates Article 8 of the current Articles of Incorporation)

The Company is already (according to Article 8 of the current Articles of Incorporation) flexible with the acquisition, by resolution of the Board of Directors, of the Company's own shares. Article 37 being proposed at this General Meeting of Shareholders would create a provision allowing the distribution of surplus earnings, by resolution of the Board of Directors.

While Paragraph 1 of Article 459 of the Corporation Law stipulates "the Board of Directors determines the distribution of surplus earnings," the acquisition of the Company's own shares is also handled the same way as surplus earnings dividends. Thus, according to proposed Article 37, the Board of Directors would be able to distribute surplus earnings and/or buy back the Company's stock. As there would then be overlap with the current Article 8 in regards to the acquisition of the Company's own shares, Article 8 shall be eliminated.

When stock options are exercised, the Company's own shares will be given in lieu of new shares; the Company's own shares are thus being acquired and held to make this possible. Acquiring and holding on to the Company's own shares will also be useful to use as a buyout cost if mergers and acquisitions occur in the future.

(2) Proposal 3: Amendments to the Articles of Incorporation concerning the Conclusion of Liability-Limiting Contracts with Outside Directors and Outside Auditors

(Proposed Amendment Articles 25, 33)

As printed in the Notice you received, according to the Commercial Code only liability-limiting contracts with Outside Directors were permitted. However, Article 427, Paragraph 1 of the Corporation Law now makes it permissible to have liability-limiting contracts with Outside Auditors.

In order to keep the liability of Outside Auditors towards the Company within a reasonable limit so that they can sufficiently fulfill their expected roles, a new provision will be established to enable the Company to conclude liability-limiting contracts with Outside Auditors with the aim of further strengthening the auditing system.

For the same purpose, a new provision will also be established to enable the Company to conclude liability-limiting contracts with Outside Directors.

(3) Proposal 4: Amendments to the Articles of Incorporation concerning Authority to Convene General Meetings of Shareholders and Board of Directors Meetings, and concerning the Chairman of Those Meetings

(Proposed Amendment Article 13 Paragraph 3, 4; Article 14; Article 22 Paragraph 1)

As printed in the Notice you received, according to the current Articles of Incorporation, the person having the authority to convene and preside over General Meetings of Shareholders is the Director & President, and the persons having the authority to convene and preside over meetings of the Board of Directors are the Director & Chairman or the Director & President. Those articles shall be amended to change the limitations on these qualifications, based on the makeup of the Company's Corporate Directors, to allow the Board of Directors to authorize a director or directors to convene and serve as chairman of these meetings.

(4) Proposal 5: Amendments to the Articles of Incorporation concerning Response to the Enforcement of the Corporation Law

(i) Switch from printed notices in a daily newspaper (Nihon Keizai Shimbun) to electronic notices (Proposed Amendment Article 5)

Currently, Article 5 of the Articles of Incorporation establishes the Company's method for making public announcements as being via print advertisements in the Nihon Keizai Shimbun. However, a change is proposed to switch over to electronic announcements as a more flexible means of disseminating information. In addition, a backup method shall be put in place for when server problems, etc. temporarily stop the Company's ability to make announcements electronically.

For the time being, the contents of legal notices shall be posted both electronically and in print form (printed notices being in the Nihon Keizai Shimbun).

(ii) Change to the method of passing resolutions by the Board of Directors (Proposed Amendment Article 23 Paragraph 2)

As a rule, even after this amendment to the Articles of Incorporation is passed, the Board of Directors will continue to meet. However, in accordance with the Corporation Law, when all members of the Board of Directors agree in writing to some resolution, that resolution shall be considered as approved; new provisions shall be established allowing members of the Board of Directors to vote on resolutions in writing, or by electronic mail, etc.

(iii) Establishment of new provisions regarding the term and appointment of Accounting Auditors. (Proposed Amendment Articles 34, 35)

As printed in the Notice you received, according to Article 326 Paragraph 2 and Article 328 Paragraph 1 of the Corporation Law, Accounting Auditors shall be clearly recognized as an arm of the Company. In line with this recognition, a new Chapter 6 shall be created which deals with Accounting Auditors and establishes provisions regarding their appointment and term of office.

In addition to (i) (iii) above, proposals are being put forward to change and update the Articles of Incorporation to bring their wording in line with the terms and wording of the Corporation Law.

2. Supplemental Information for Proposals relating to Stock Options

(1) Proposal 7: Issuance of Share Subscription Rights as Stock Options for Stock Linked Compensation

This resolution, based on Articles 236, 238 and 239 of the Corporation Law, seeks the approval of shareholders for entrusting the Company Board of Directors with decisions on matters relating to the offering of share subscription rights issued to implement "stock options for stock linked compensation."

Firstly, stock options for stock linked compensation are a part of the system that links compensation for executives of the Company and its subsidiaries to consolidated net income. Under the new system, introduced last year, which links executive compensation more closely to consolidated financial results, stock compensation-based stock options are intended as a means of both tying compensation for executives of the Company and its subsidiaries more closely to the share value, consolidated net income, and shareholder value of the Company and to increasing corporate competitiveness and the transparency of business operations.

The Company's new executive compensation system which was begun last year (Ref: April 2005 Press Release "Review of the Dividend Policy and Executive Compensation System" http://www.tel.com/eng/news/2005/0419_001.htm) abolishes the retirement benefit (fixed compensation) system, and works at increasing the linkage between executive compensation and the Company's consolidated financial results and share values by further clarifying numerical standards for the connection between the portion of executive compensation that is linked to business performance and consolidated net income.

This new executive compensation will consist of fixed monthly compensations, cash compensations tied to consolidated financial results (annual bonuses) and stock compensation-based stock options. Through the payment of practically 1/3 of compensations tied to consolidated financial results as stock compensations, executives will share with shareholders not only the benefits of better business performance and higher stock prices but also the risks of worse performance and lower stock prices. They, therefore, have a clearer incentive to work towards increasing the Company's performance and share values. The total value of performance-related compensations is capped at 3% of the consolidated net income.

Next we will explain how stock options for stock linked compensation are used as a means of promoting the competitive strength of overseas subsidiaries of the Company in securing high-quality personnel as executives and senior managers.

The Company has abolished stock options for those management levels that are not covered by the new executive compensation system, and, instead, it offers cash compensations tied to consolidated financial results. For the United States and other countries, where emphasis is placed on stock compensation incentives, the Company's policy is to offer stock options taking into consideration employment characteristics in the markets.

In line with this policy, last year stock options for executives and senior managers of overseas subsidiaries were handled in the traditional manner with an exercise price set at the current market value; however, after fully considering the cost of stock options, the dilution of stocks, etc., the size of the target group and scale of issuance (in the case of fair value calculated on last year's scale compared with this year, it was generally estimated at less than half) have been shrunk, and stock options for stock linked compensation put into effect.

Finally, we will explain about the timeframe for exercising share subscription rights.

The Company has introduced the stock option system as an important means of increasing the desire and will of executives, etc. to participate in and help achieve mid and long-term performance goals, and a two or three year restriction for exercising their stock options has been established as a reflection of this mid to long-term incentive plan.

The timeframe for exercising subscription rights is given on page 23 of the Notice you received as being "a timeframe to be set by the Board of Directors of within 20 years of the date of issue for share subscription rights." But as for the 4th issuance of share subscription rights which was done on August 8 of last year, a three-year restriction was imposed on the period for exercising the rights (details about the 4th issuance of subscription rights can be found on pages 39 to 42 of the "Business Report" attached to the Notice you received.)

The amount to be paid on the share subscription rights issued as stock options for stock linked compensation is nothing. However, the commonly used Black-Scholes model is the basis for calculating the fair value of the rights and reporting it as expenses in financial statements.

(2) Proposal 8: Revision to the Amount of Compensation for Directors

This resolution is proposed in conjunction with Proposal 7: "Issuance of share Subscription Rights as Stock Options for Stock Linked Compensation."

At the 42nd Annual General Meeting of Shareholders held in June of 2005, it was agreed upon to cap the monthly cash compensation for Corporate Directors at 35 million yen and the annual cash compensation at 420 million yen. Compensations tied to consolidated financial results are explained in Proposal 7 above.

After the enforcement of the Corporation Law, meanwhile, Share subscription rights allocated to Corporate Directors as stock options are treated as being a portion of the Corporate Directors' compensations (treated as non-monetary compensation) and recorded as accounting costs. For this reason, in addition to getting the approval of the General Meeting of Shareholders on the interest bearing issuance of share subscription rights, it is necessary that the General Meeting of Shareholders take up the issue of share subscription rights allocated to Corporate Directors as stock options as an issue of compensation for Corporate Directors. Approval is therefore sought to designate up to 120 million yen of stock options for Corporate Directors from stock options for stock linked compensation (submitted to the General Meeting of Shareholders in Proposal 7). The number of subscription rights will be kept to within 160. Details regarding subscription rights are found above in the explanation for Proposal 7.

If Proposal 6, "the appointment of 11 Corporate Directors," is passed as proposed, the number of Corporate Directors will increase to 11. However, as the Company's stock options for stock linked compensation are carried out as compensation tied to the consolidated financial results of the previous term, the 2 persons who were not Corporate Directors during the 43rd fiscal year will not be eligible to receive them. Therefore, the number of Corporate Directors covered by this resolution will be 9.

Note: This document is an addition to the legally valid reference documents for the General Meeting of Shareholders and is intended as a supplemental explanation of proposed resolutions.