METRON TECHNOLOGY N V - 10-K Annual Report

Back to GetFilings.com

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------

FORM 10-K

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

FOR THE FISCAL YEAR ENDED MAY 31, 2000
OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________________ TO __________________

COMMISSION FILE NUMBER: 000-27863
------------------------------

METRON TECHNOLOGY N.V.
(Exact name of registrant as specified in its charter)

THE NETHERLANDS 98-0180010
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)

1350 OLD BAYSHORE HIGHWAY
SUITE 360
BURLINGAME, CALIFORNIA 94010
(Address of principal executive offices)

Registrant's telephone number, including area code: (650) 401-4600

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON SHARES, PAR VALUE $0.96 NLG PER SHARE

------------------------------

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

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

The aggregate market value of voting stock held by non-affiliates of the
registrant, based on the last sale price of the Common Shares on July 31, 2000
as reported by the Nasdaq National Market, was approximately $56,139,000. Shares
held by each officer and director of the registrant and by each person who owns
5 percent or more of the outstanding Common Shares have been excluded from this
computation in that such persons may be deemed to be affiliates of the
registrant. This determination of affiliate status for this purpose is not
necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant's Common Shares, $0.96
NLG par value, as of July 31, 2000 was 13,289,361.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2000 Annual General Meeting of
Shareholders (the "Proxy Statement"), to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the
Registrant's fiscal year ended May 31, 2000, are incorporated by reference into
Part III of this report.

Certain Exhibits filed with the registrant's Registration Statement on
Form S-1, No. 333-87665, and Current Report on Form 8-K, filed with the
Commission on March 17, 2000, are incorporated by reference into Part IV of this
report.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART I

ITEM 1. BUSINESS

OVERVIEW

Metron Technology N.V. is a holding company organized under the laws of The
Netherlands in 1975. We are a leading global provider of marketing, sales,
service and support solutions to semiconductor materials and equipment suppliers
and semiconductor manufacturers. On behalf of semiconductor materials and
equipment suppliers, which we refer to as our principals, we provide a broad
range of materials and equipment to leading semiconductor manufacturers such as
Advanced Micro Devices, IBM, Intel, Lucent, Motorola, NEC Electronics, Philips,
Infineon (Siemens) and STMicroelectronics. We also provide semiconductor
manufacturers with the ability to outsource a wide variety of silicon wafer
fabrication, or fab, and equipment support services, such as materials
management, cleanroom services and facility maintenance. Our principals are both
independent companies that have developed emerging technologies and divisions of
larger companies that have other primary products and markets and include Cabot,
Entegris, FSI, Komatsu, Pall, Schumacher, SDI, Seiko Instruments and Zeiss. Our
materials offerings include an extensive array of over 15,000 items, including
wafer carriers and shippers, fluid and gas handling components, high purity
chemicals and cleanroom products. Our offerings include equipment for cleaning;
microlithography, the part of the fabrication process during which an image is
projected on to a wafer by passing light through a photomask, which is a
high-purity quartz or glass plate used as the stencil in semiconductor device
fabrication to create an integrated circuit design pattern on a semiconductor
wafer; metrology, which refers to the measurement and inspection of the wafer
during the fabrication process; photomask inspection and repair, which refers to
the inspection and repair, if necessary, of the glass or quartz photomasks used
during the microlithography process; and inspection and defect characterization,
the process by which silicon wafers are inspected during and after fabrication.

INDUSTRY BACKGROUND

Semiconductor Industry Association, or SIA, data indicates that the
semiconductor industry grew from $21.5 billion in revenue in 1985 to
$149.4 billion in revenue in 1999, representing a compound annual growth rate of
14.9%. Although the industry recently experienced one of its periodic down
cycles, The SIA estimates that semiconductor industry revenue will exceed
$195.0 billion in 2000 and will increase at a compound annual growth rate of
20.2% to $312.0 billion in 2003. The increase in demand for semiconductors is
driven by the communications industry, particularly the Internet, as well as
growth in traditional markets for semiconductors such as computers, automobiles
and other consumer and industrial products.

The manufacture of semiconductors requires a wide array of equipment and
materials. The semiconductor capital equipment industry consists of equipment
for wafer manufacture and processing and equipment for assembly, packaging and
testing of semiconductors. According to Semiconductor Equipment and Materials
International, in 1999, the semiconductor wafer fabrication equipment industry
generated $15.9 billion in revenue. The high cost of equipment development and
the desire of semiconductor manufacturers to buy products from financially and
technically strong suppliers have led to consolidation among equipment
manufacturers. At the same time, the long-term growth prospects of the industry
continue to attract small players with new technologies to fill product niches.
In addition, some suppliers to the industry are divisions of larger companies
which have other primary products and markets.

The semiconductor manufacturing materials industry provides the wide variety
of consumable and manufacturing materials that are required by semiconductor
manufacturers, including wafer carriers and shippers, fluid and gas handling
components, high purity chemicals and cleanroom products. According to Rose
Associates, in 1998, the semiconductor manufacturing materials industry
generated $19.8 billion in revenue. Rapid changes in technology have led to the
creation and emergence of newer semiconductor materials manufacturers offering
innovative products. The materials industry is more fragmented and less cyclical
than the equipment industry, in part because demand for semiconductor materials
is driven more

2

by the volume of semiconductors produced than by industry capacity and
expectations of future revenue growth. The lower barriers to entry in this
industry also attracts new competitors.

As semiconductors continually become smaller and more complex, the number of
manufacturing steps increases, which requires more complex and costly
semiconductor equipment. The complex manufacturing process also entails the use
of a large variety of materials from many sources. In addition, the high capital
cost of semiconductor fabrication plants, called fabs, which can now exceed
$2.0 billion, requires that fabs quickly reach and maintain optimal productivity
levels in order to maximize their return on investment. This also necessitates
around-the-clock manufacturing, which in turn requires that spare parts,
materials and service be delivered quickly and on short notice.

The semiconductor industry has evolved into a global industry as
semiconductor manufacturers are increasingly operating fabs in multiple
locations throughout the world in proximity to their customers. The requirement
for the rapid ramp-up of new facilities and new products has led semiconductor
manufacturers increasingly to standardize all aspects of their operations and to
require that their suppliers do the same. We believe that in order to ensure
standardization, semiconductor manufacturers are increasingly seeking materials
and equipment suppliers that offer a comprehensive and cost-effective global
procurement solution to their materials, equipment and service needs.

Semiconductor equipment and materials suppliers and semiconductor
manufacturers are increasingly focusing on their core competencies and
outsourcing other aspects of their operations to third parties. The increasing
complexity of semiconductors and related capital investment, combined with
long-term pricing pressures, have led semiconductor manufacturers to
increasingly focus on design, development and manufacturing and outsource to
third parties equipment service, materials management, cleanroom services and
facility maintenance, as well as other similar services. We believe that
outsourcing enables these companies to increase fab productivity in a
cost-effective manner. In addition, semiconductor equipment and materials
suppliers often focus on product development and manufacturing and outsource to
third parties the marketing, sale, installation, service and support of their
products. In particular, smaller semiconductor equipment and materials
manufacturers that cannot afford to invest the time or the capital resources
required to build a global infrastructure, and divisions of larger companies
whose main focus is on other products or markets, often benefit from
outsourcing. Outsourcing enables these companies to reduce time to market,
financial risk and marketing investment while maintaining the ability to compete
with often larger companies with established infrastructures.

Providers of outsourcing services to the semiconductor industry are able to
take advantage of operational efficiencies due to their ability to offer
products and services from multiple suppliers and leverage their infrastructure
costs over a larger revenue base. There are a large number of generally smaller
companies that provide outsourcing services, including regional, privately-held
companies that focus on a portion of, or a specific geographic market in, the
semiconductor manufacturing industry. We believe that semiconductor equipment
and materials manufacturers and semiconductor manufacturers are increasingly
seeking an international services and support company that offers a
comprehensive global solution.

THE METRON SOLUTION

We are a leading global provider of marketing, sales, service and support
solutions to semiconductor materials and equipment suppliers and semiconductor
manufacturers. We provide an important link between semiconductor manufacturers
and our principals. We provide semiconductor manufacturers, who otherwise might
be required to purchase materials and equipment from a range of suppliers
worldwide, with the ability to purchase their materials and equipment through a
single supplier and the ability to

3

outsource equipment service, materials management, cleanroom services and
facility maintenance. These services enable our customers to:

- simplify and standardize their materials and equipment purchases in
multiple locations throughout the world;

- focus their resources on product design, development and marketing; and

- increase fab productivity in a cost-effective manner.

We also provide timely and comprehensive marketing, sales, installation, service
and support for materials and equipment manufacturers, enabling our principals
to:

- focus their resources on technology and product development and
manufacturing;

- reduce their time to market, financial risk and marketing investment; and

- enable them to compete more effectively with larger companies with
established infrastructures without investing the time or capital
resources required to build their own infrastructures.

STRATEGY

We believe Metron markets and sells a wider range of materials, equipment,
spare parts, service and support solutions to the semiconductor industry than
any other independent provider of these products and services. Our goal is to be
the leading global provider of marketing, sales, service and support solutions
to semiconductor materials and equipment suppliers and semiconductor
manufacturers. The key elements of our strategy include:

- LEVERAGE OUR GLOBAL INFRASTRUCTURE AND EXPAND OUR LEADERSHIP POSITION. We
believe that our global infrastructure, as well as our 25-year history of
serving the semiconductor industry, provide us a significant competitive
advantage in serving our principals and customers. As of May 31, 2000, we
had over 500 sales and marketing and customer service and support
employees in 36 offices in Asia (except Japan), Europe and the United
States. We plan to continue to leverage our global infrastructure by
offering an increasing variety of products and services.

- CONTINUE TO BROADEN PRODUCT AND SERVICE OFFERINGS. We offer a wide range
of semiconductor manufacturing materials and equipment and plan to
selectively broaden our product lines and territories to meet the needs of
our customers. We believe our competitive advantage is generally greater
in product areas that are not served by one of the large
globally-integrated equipment or materials manufacturers. We will also
seek to enter into additional relationships with non-United States
principals seeking to penetrate the United States market and other markets
outside their home territories. We also plan to expand on-site maintenance
and other support services, including specialized parts cleaning,
inventory management and engineering services. We believe these efforts
will strengthen our long-term relationships with our customers.

- EXPAND MATERIALS BUSINESS. While continuing to expand our equipment
business, we intend to increase the relative size of our materials
business. We believe that the materials business is particularly
well-suited to benefit from the global infrastructure that we have
developed, in part because addressable markets are more fragmented, there
are a large number of individual products and typical transactions are
smaller. Materials products generally offer relatively favorable gross
margins, and the materials business is generally less cyclical than the
equipment business.

- FOSTER LONG-TERM RELATIONSHIPS WITH OUR PRINCIPALS. We seek to continue to
develop long-term relationships with our principals. Generally, within the
territories we serve for a principal, we operate as the exclusive
representative of the principal and do not offer competing product lines.
To foster long-term relationships with our principals, we will continue
the joint training of our sales, service

4

and applications personnel, the investment in inventories and
demonstration equipment, as appropriate, and the joint participation in
trade shows with our principals. In addition, to help us secure longer
term relationships with our principals, we plan to selectively invest in
principals during their later stage financings.

- ACQUIRE COMPLEMENTARY BUSINESSES. To enable us to better serve our
principals and customers, we plan to selectively acquire complementary
businesses. Potential acquisition candidates include independent regional
sales, service and support companies, which currently operate in a highly
fragmented segment of the semiconductor industry. We believe that our
acquisition strategy will allow us to gain access to new principals and
territories, broaden our offerings to existing customers and gain new
customers. As examples of this strategy, our acquisition of T.A. Kyser Co.
in July 1998, established our United States materials and components
business, and with our acquisition of Shieldcare Ltd. in March 2000, we
entered the process tool parts cleaning business.

- EXPAND INTO JAPAN. Japan is the second largest producer of semiconductors
in the world and accounted for approximately 22% of world production in
1999. Although we represent a limited number of Japanese principals, we do
not currently operate an office in Japan. We currently intend to open an
office in Japan in the next 12 - 18 months to foster closer relations with
Japanese materials and equipment suppliers and to explore opportunities to
service the Japanese semiconductor manufacturing industry.

PRODUCTS AND SERVICES

We are organized into two worldwide operating divisions, materials and
equipment. In fiscal 1998, 1999 and 2000, sales by our equipment division
accounted for approximately 55.1%, 55.7% and 50.2% of our revenue, respectively,
and sales by our materials division accounted for approximately 44.9%, 44.3% and
49.8% of our revenue, respectively.

We operate under a series of agreements with our principals. These
agreements generally give us the exclusive right to market, sell and support
particular products in specific geographic regions. Generally, within the
territories we serve for a principal, we operate as the exclusive representative
of the principal and do not offer competing product lines. The agreements with
our principals are typically cancelable without cause with notice periods that
range from 30 days to two years. In addition to maintaining appropriate
inventories of materials and spare parts, we sometimes purchase equipment for
demonstration purposes which may be installed in a customer's fab for evaluation
purposes or at one of our facilities.

Product selection is critical to our success. We evaluate a large number of
product opportunities, relatively few of which we ultimately add to our product
offerings. In our evaluation of new product lines, we thoroughly review numerous
factors, including the product line's current and projected revenue stream and
market share, whether the product line is sufficiently developed for its
targeted market segment, whether distribution arrangements for the product line
are currently in place, the prospective principal's anticipated ability to offer
innovative and advanced products, the history and stability of the prospective
principal and our ability to market, sell and provide a consistent level of
service and support for the product line.

MATERIALS

Our materials business includes the marketing and sale of an extensive array
of over 15,000 items, including wafer carriers and shippers, fluid and gas
handling components, high purity chemicals and cleanroom products, to
semiconductor manufacturers, manufacturers of semiconductor equipment and to a
lesser extent, customers in other industries such as pharmaceuticals and
petroleum. As of May 31, 2000,

5

our materials division represented over 50 principals. The table below lists the
business units in our materials division, the types of products sold and the
largest principals within each business unit:

BUSINESS UNIT TYPES OF PRODUCTS LARGEST PRINCIPALS
- ------------- ----------------- ------------------

Gas and fluid handling Valves, fittings and other components Entegris
for ultrapure applications
High end filtration products and Pall
systems
Stainless steel control valves and
regulators Tescom
Wafer management Wafer transport carriers Entegris
Pellicles MLI
Device handling Semiconductor device transport Entegris
carriers
Vacuum release chip trays Gelpak
Quartz components MGI Products
Cleanroom products Latex gloves Omni Sales
Face masks Tecnol
Wipers and swabs Texwipe
Integrated shipper products Wafer and disc shippers Entegris

We believe the materials business is particularly well-suited to benefit
from our global infrastructure because addressable markets are more fragmented,
there are a large number of individual products and average transaction sizes
are generally smaller than in the equipment business. As a result, we believe
that many companies are often unable to cost-effectively provide materials,
service and support globally in order to meet semiconductor manufacturer
requirements and can benefit from Metron's ability to distribute their products
through our international sales and marketing organization. Similarly, by
working with Metron, a customer can increase sales by improving fab productivity
while reducing inventory, warehousing and other costs. For some fabs of our
customers in the United States, including Motorola and Philips, our materials
division has primary responsibility for the operation of the customer's on-site
warehouse of materials and components we sell. Our experience, infrastructure
and systems in the United States enable us to maintain a highly reliable
materials inventory management and order processing system, which allows us to
increase the speed of order fulfillment and provide other value-added services
to both customers and principals. We plan to expand our activities in this area
to other parts of the world to provide more comprehensive support to more of our
customers.

EQUIPMENT

Our equipment business includes the marketing and sale of equipment,
including products for cleaning, coating, developing and etching; detection,
measurement and quality control tools; equipment used in the manufacture, fault
diagnosis and repair of the masks used to create the complex patterning of
semiconductors; automatic wafer handling, particle counting and cleanroom
monitoring equipment. The equipment division also markets specialized containers
of high purity chemicals which are used in the chemical vapor deposition and
diffusion phases of semiconductor wafer processing. As of May 31, 2000, our
equipment division represented over 40 principals. The table below lists the
largest products by revenue in the equipment division and the principals for
those products:

TYPES OF PRODUCTS PRINCIPALS
- ----------------- ----------

Wafer cleaning tools...................................... FSI
High purity wafer processing chemicals.................... Schumacher
Photo-lithography processing tools........................ FSI
Environmental gas cleaning systems........................ ATMI
Wafer characterization and diagnostic tools............... SDI
Photomask inspection and repair tools..................... Seiko Instruments

6

In July 1999, we signed an agreement with Carl Zeiss to market, sell,
service and support its semiconductor inspection tools in the United States, and
in March 2000 this agreement was expanded to cover all of Europe except Germany
and Holland. In August 1999, we signed an agreement with Komatsu Ltd. to market,
sell, service and support its deep UV excimer lasers in Europe.

Particularly in the equipment business, we believe our competitive advantage
is generally greater in product areas that are not served by one of the large
globally-integrated manufacturers. We have sought, and expect to continue to
seek, relationships with non-United States principals seeking to penetrate the
United States market and other markets outside their home territories.

SERVICE AND SPARE PARTS

We believe that as semiconductor manufacturers become increasingly sensitive
to the costs of system downtime, they direct their purchases to suppliers who
can offer comprehensive local installation, maintenance and repair service and
spare parts. To meet these needs, we provide installation, maintenance, repair
and service for the equipment we sell, and we employ skilled service engineers
in 20 offices located in approximately 14 countries. In some cases, our service
engineers are located on-site at a semiconductor manufacturer's facility. By
continuing to maintain local offices in most major markets and staffing those
offices with nationals fluent in local languages and customs, we are able to
provide our principals and customers with sales, service and support 24 hours a
day, seven days a week where necessary. We also provide our customers with
applications services and help them develop customized solutions to technical
problems. To better serve our customers, during fiscal 1999 Metron formed a
joint venture with WS Atkins Plc. to provide additional services to the
semiconductor industry, including facilities management and comprehensive
technical support of production equipment.

Our service personnel receive extensive initial and follow-up training
internally and/or from the principals whose products they service. Our service
personnel generally receive the same training from our principals as their own
personnel and receive and maintain the same certification. We generally warrant
the products we sell for a period of one year, and our warranty liability is
generally backed by a warranty from the principal. If we install the equipment
in a customer's fab, we are generally responsible for the costs of the labor
component of the warranty, and the principal is responsible for replacing parts
which are under warranty. After the warranty period has expired, we also offer
service contracts or on-call service support for equipment which we have
supplied.

We also provide our customers with the spare parts required to maintain and
repair the equipment we have supplied and to operate other systems in their
fabs. We work with our principals to maintain an inventory of mission-critical
spare parts and materials close to our customers' sites so we can deliver the
required parts in the shortest time possible. In some cases, we are responsible
for maintaining inventories at our customers' sites, and we plan to expand the
service we provide in this area.

SALES AND MARKETING

Our worldwide sales and marketing organization is an essential part of our
strategy of maintaining close relationships with our principals and with our
semiconductor manufacturer customers. We provide timely and comprehensive
marketing, sales, service and support for materials and equipment manufacturers,
enabling these manufacturers to focus their resources on technology and product
development. As of May 31, 2000, we had about 250 sales and marketing employees
in 36 offices in Asia, Europe and the United States. Through these sales and
support offices, we maintain an important link between our principals and
semiconductor manufacturers. Our sales and marketing organization identifies
customer requirements, assists in product selection and monitors each
transaction through final sale, shipment and installation. We also employ
approximately 213 highly-skilled technical and engineering personnel around the
world to support our sales and marketing organization and our customers. In
Europe, we have approximately 124 support personnel in nine countries located in
thirteen offices as well as at several

7

semiconductor manufacturers' facilities. In Asia, we have approximately 74
support personnel in five countries located in six offices as well as at several
semiconductor manufacturers' facilities. In the United States, we have
approximately fifteen support personnel located in two states. Most of our
employees are fully conversant in local languages and familiar with local
business culture and practices.

We offer comprehensive sales and marketing technical support services,
including materials and equipment specification review from the initial sales
effort through on-going product improvement programs; demonstration of materials
and equipment; tool installation, including customer site preparation and final
system acceptance; on-going customer support and process improvement; writing,
editing, and improving operating and maintenance manuals; and customer training
programs including maintenance training and on-site operator training. Our
ability to offer these extensive support services is due in part to extensive
initial and follow-up training of our sales and marketing technical support
personnel both in-house and by the principals whose products we sell. We also
conduct technical seminars, training sessions and user group meetings, and we
own and operate a 720 square foot, Class 100 cleanroom facility in Sunnyvale,
California.

We also employ applications engineers who work closely with our customers to
solve particular customer problems and develop innovative processing solutions
using particular equipment supplied by our principals. In some cases, our
customers' engineers have collaborated with our engineers to produce and publish
technical papers. Application selling and application support is a key part of
our strategy to introduce and sell new technology into the semiconductor
marketplace.

We utilize a number of other marketing techniques that enable our principals
to access new markets and semiconductor manufacturers. We seek to actively
involve our principals in the marketing and sales process and often conduct
joint sales calls on existing and potential customers with representatives from
our principals. We assign product managers to some of our principals to provide
particular attention to the marketing, service and support of specific product
lines. We participate in various trade shows around the world, including Semicon
Europa in Europe, Semicon Korea, Semicon Singapore and Semicon Taiwan in Asia
and Semicon Southwest and Semicon West in the United States.

CUSTOMERS

We market semiconductor materials and equipment to most of the world's
semiconductor manufacturers and to many suppliers to the semiconductor industry,
including semiconductor equipment manufacturers. In fiscal 2000, our 10 largest
customers accounted for approximately 40% of our net revenue. We expect that
sales to relatively few semiconductor manufacturers will always account for a
significant percentage of our revenue, although the relative revenue ranking of
individual customers may change from period to period. The table below lists our
10 largest customers in 2000 based on revenue and the geographic regions where
we support them:

CUSTOMER LOCATIONS
- -------- ---------

STMicroelectronics........................... France, Italy
Intel........................................ Ireland, Israel, United Kingdom, United
States
Atmel........................................ France, Singapore, Taiwan
Philips...................................... France, Germany, Taiwan, The Netherlands,
United Kingdom, United States
Macronix International....................... Taiwan
Motorola..................................... China, France, Hong Kong, United Kingdom,
United States
IBM.......................................... France, Germany
SCP Global Technologies...................... Singapore, Taiwan, United States
Chartered Semiconductor Manufacturing........ Singapore
Applied Materials............................ Israel, United States

8

COMPETITION

The semiconductor industry is highly competitive. We face substantial
competition on two distinct fronts: competition for product lines and
competition for customers.

COMPETITION FOR PRODUCT LINES

For those semiconductor equipment and materials manufacturers who elect to
sell through independent sales and distribution companies, we must compete with
other companies for the right to sell specific product lines. Some of these
independent sales and distribution companies have long-standing collaborative
business relationships with semiconductor equipment and materials manufacturers
which are difficult to overcome. We believe that the most significant
competition on this front comes from regional semiconductor equipment and
materials distribution companies. Furthermore, many equipment and materials
manufacturers choose to sell directly to semiconductor manufacturers in some or
all markets. In Europe and Asia, we compete with equipment and materials
manufacturers who choose to sell their products directly to semiconductor
manufacturers as well as with regional independent distribution companies such
as Macrotron and Teltec in Europe and Hermes in Taiwan. In the United States, we
compete primarily with United States semiconductor equipment and materials
manufacturers who choose to sell their products directly to semiconductor
manufacturers.

We believe that our competitive advantage is greater in product areas that
are not served by one of the large globally-integrated equipment or materials
manufacturers. We believe that to compete effectively we must maintain a high
level of investment in marketing, customer service and support in all of the
markets in which we operate. Although we consider our global operations and
reputation to be significant competitive advantages, we cannot be certain that
we will have sufficient financial resources, technical expertise, or marketing,
services and support capabilities to continue to compete successfully on this
front in the future.

COMPETITION FOR CUSTOMERS

We compete with established semiconductor equipment and materials
manufacturers who sell directly to customers and with other independent sales
and distribution companies for orders from semiconductor manufacturers. Some of
these competitors have greater name recognition in the territories they serve
and have long-standing relationships with semiconductor manufacturers that may
give them a competitive advantage. Other significant competitive factors in the
semiconductor equipment and materials market include product specifications and
quality, product performance, product reliability, process repeatability,
customer service and support, timeliness of product delivery and of new product
introductions, in addition to total cost of ownership and price. We anticipate
that as we expand our product portfolio and expand into new markets, we will
encounter additional competition, and the competitive factors listed above,
among others, might make it difficult for us to establish sales and distribution
capability in new markets such as Japan. This competition, as well as the local
political climate and local business practices, may limit our ability to
successfully expand into new markets. We cannot be certain that we will continue
to compete successfully in the future.

FINANCIAL INFORMATION ABOUT SEGMENTS AND GEOGRAPHIC AREAS

See Note 15 to the Consolidated Financial Statements contained herein.

EMPLOYEES

As of May 31, 2000, we had 754 full-time employees, including 180 in our
materials division, 353 in our equipment division and 221 in general
administrative activities, including finance and accounting, sales
administration, shipping and receiving and corporate management. Of our
full-time employees, 155 are located in the United States, 431 are located in
Europe and 168 are located in Asia. None of our employees is covered by a
collective bargaining arrangement. We consider our relationships with our
employees to be good.

9

RISK FACTORS

OUR BUSINESS FACES SIGNIFICANT RISKS. THESE RISKS INCLUDE THOSE DESCRIBED
BELOW AND MAY INCLUDE ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO
US OR THAT WE CURRENTLY BELIEVE ARE IMMATERIAL. IF ANY OF THE EVENTS OR
CIRCUMSTANCES DESCRIBED IN THE FOLLOWING RISKS OCCURS, OUR BUSINESS, OPERATING
RESULTS OR FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED. THESE
RISKS SHOULD BE READ IN CONJUNCTION WITH THE OTHER INFORMATION SET FORTH IN THIS
REPORT.

RISKS RELATED TO METRON.

WE ARE DEPENDENT ON A FEW KEY PRINCIPALS FOR A MAJORITY OF OUR REVENUE;
THEREFORE, THE LOSS OF ONE OR MORE OF OUR KEY PRINCIPALS COULD SERIOUSLY HARM
OUR BUSINESS.

If, for any reason, any of our key principals were to materially reduce its
business or terminate its relationship with us, the loss of the key principal
would have a material adverse effect on our business. In particular, if our
commercial relationship with FSI or Entegris were to materially change or were
terminated, our business would be significantly adversely affected due to the
large percentage of our revenue generated by sales of these companies' products.
For the fiscal year ended May 31, 2000, 25% of our total revenue was generated
from the sale of products manufactured by FSI and 26% from the sale of products
manufactured by Entegris. For more information about our relationships with FSI
and Entegris, see also the risk titled "We are significantly controlled by FSI
and Entegris, which may limit your ability to influence the outcome of director
elections and other shareholder matters" and "Certain Transactions." In each of
our last three fiscal years, a majority of our revenue came from the sale of
products from five or fewer of the semiconductor materials and equipment
companies we represent, who we refer to as our principals. Although the
principals that comprise our largest sources of revenue may change from period
to period, we expect that revenue from the sale of products of a relatively
small number of principals will continue to account for a substantial portion of
our revenue for at least the next five years.

All of the semiconductor materials, equipment and products we market, sell,
service and support are sold pursuant to agreements with our principals. These
agreements are generally cancelable at will, subject to notification periods
which range from 30 days to two years. We generally do not sell competing
products in the same market, and therefore the number of principals we can
represent at any one time is limited. It is likely that in the future some of
our principals will terminate their relationships with us upon relatively short
notice. If we lose a key principal, we may not be able to find a replacement
quickly, or at all. The loss of a key principal may cause us to lose customers
and incur expenses associated with ending our agreement with that principal. We
may lose principals for various reasons, including:

- mergers and acquisitions involving our principals and other semiconductor
materials and equipment manufacturers that we do not represent;

- a principal's decision to attempt to build a direct sales organization;

- the expansion of a principal's product offerings to compete with the
products of another principal, because we generally do not offer competing
product lines;

- a principal's dissatisfaction with our level or quality of service; and

- the failure of a principal's business.

We have lost principals in the past. For example, after Ontrak was acquired
by Lam Research in August 1997, we ceased marketing and selling Ontrak products
in Europe in September 1998 and in South Korea in June 1998. In March 1999, A.G.
Associates was acquired by Steag. As a result of this acquisition, we ceased
marketing and selling A.G. Associates' products in September 1999. In
July 1999, FSI sold its chemical management division to BOC Edwards. As a result
of this divestiture, we are phasing out our marketing and sale of products of
this division. In October 1999, Applied Materials acquired Obsidian. As a result
of the acquisition, Obsidian terminated its agreement with us.

10

THE SEMICONDUCTOR INDUSTRY IS HIGHLY CYCLICAL, AND THEREFORE, A DOWNTURN MAY
RESULT IN POOR OPERATING RESULTS.

The recent downturn in the semiconductor industry has had a material adverse
effect on our recent operating results. Our business depends in large part on
the procurement expenditures of semiconductor manufacturers, which, in turn,
depend on the current and anticipated demand for semiconductors and products
utilizing semiconductors. The semiconductor industry is highly cyclical and
historically has experienced periodic downturns, which often have resulted in
decreased expenditures by semiconductor manufacturers. These downturns generally
have adversely affected the sales, gross profits and operating results of
semiconductor materials and equipment suppliers. From 1996 through 1998, the
semiconductor industry experienced a downturn, which led semiconductor
manufacturers to delay or cancel capital expenditures. During this downturn,
some of our customers delayed or canceled purchases of semiconductor materials
and equipment, which had a negative impact on our sales, gross profits and
operating results. We cannot predict when downturns will occur and how we will
be affected by future downturns.

IF WE ARE UNABLE TO SUCCESSFULLY IDENTIFY NEW PRODUCTS AND ENTER INTO AND
IMPLEMENT ARRANGEMENTS WITH THE SUPPLIERS OF THESE PRODUCTS, OUR BUSINESS WILL
BE SERIOUSLY HARMED.

Any failure by us to enter into relationships with principals that
anticipate or respond adequately to technological developments or customer
requirements, or any significant delays in product development or introductions
by these principals, could result in a loss of competitiveness and could
materially adversely effect our business. The semiconductor materials and
equipment market is subject to rapid technological change, changing customer
requirements and frequent new product introductions. Because of this, the life
cycle of products that we market and sell is difficult to determine. Our future
success will depend to a significant extent on our principals' ability to keep
pace with changes in the market and on our ability to identify and carry
successful new product lines, particularly because we generally do not carry
competing product lines.

WE FACE INTENSE COMPETITION FROM COMPANIES WITH SIGNIFICANTLY GREATER FINANCIAL,
TECHNICAL AND MARKETING RESOURCES, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO
MAINTAIN OR INCREASE SALES.

We face intense competition on two distinct fronts: competition for product
lines and competition for customers.

IF WE ARE UNABLE TO COMPETE SUCCESSFULLY FOR PRODUCT LINES AGAINST INDEPENDENT
SALES AND DISTRIBUTION COMPANIES THAT HAVE GREATER FINANCIAL RESOURCES, ARE MORE
ESTABLISHED OR HAVE LONG-STANDING RELATIONSHIPS WITH SEMICONDUCTOR MATERIALS AND
EQUIPMENT MANUFACTURERS, WE WILL BE UNABLE TO OFFER COMPETITIVE PRODUCTS, WHICH
WILL NEGATIVELY IMPACT OUR SALES.

We compete with independent sales and distribution companies for the right
to sell specific product lines in specific territories. We believe that our most
formidable competition comes from regionally established semiconductor materials
and equipment distribution companies. Some of these independent sales and
distribution companies have substantially greater financial resources to devote
to a particular region than we do, are better established in particular regions
than we are, have greater name recognition in their chosen markets than we have
and have long-standing collaborative business relationships with semiconductor
materials and equipment manufacturers which are difficult to overcome. If we are
unable to effectively compete with sales and distribution companies to attract
and retain principals, our business will be adversely affected.

11

IF WE ARE UNABLE TO COMPETE FOR CUSTOMERS DUE TO OUR INABILITY TO PROVIDE SALES,
MARKETING AND SUPPORT SERVICES OR PARTICULAR PRODUCT OFFERINGS, IT WILL
ADVERSELY AFFECT OUR ABILITY TO MAINTAIN OR INCREASE SALES.

We compete for orders from semiconductor manufacturers with established
semiconductor materials and equipment manufacturers who sell directly to
customers and with independent sales and distribution companies and sales
representatives. We believe that to compete effectively for customers we must
maintain a high level of investment in marketing, customer service and support
in all of the markets in which we operate, and we may not have sufficient
financial resources, technical expertise or marketing, services and support
capabilities to continue to compete successfully in the future. Some of our
competitors have greater name recognition in the territories they serve and have
long-standing relationships with semiconductor manufacturers that may give them
an advantage in attracting and retaining customers. Furthermore, we believe that
once a semiconductor manufacturer has selected a particular product for a
specific use from a vendor that is not one of our principals, it may be
difficult to achieve significant sales of a competing product to that customer
unless there are compelling reasons for the customer to switch products, such as
significant performance or cost advantages.

We anticipate that as we continue to diversify our product portfolio and
expand into new markets for our principals' products, we will encounter
additional competition for customers. If we cannot continue to compete
successfully for customers in the future, it will have a significant negative
impact on our business.

THE MANAGEMENT INFORMATION SYSTEMS THAT WE CURRENTLY USE IN OUR DAY-TO-DAY
OPERATIONS ARE NOT INTEGRATED ACROSS COUNTRY BORDERS AND NEED TO BE UPGRADED.
UPGRADING THEM WILL BE COSTLY, AND IF THE NEW SYSTEM IS NOT SUCCESSFULLY
IMPLEMENTED, OUR BUSINESS MAY SUFFER MATERIAL ADVERSE CONSEQUENCES.

While our financial reporting management information system is integrated
and operational, our current management information systems that we use to
control our day-to-day operations are not integrated across country borders. To
accommodate growth in the past, we have had to hire additional people to
compensate for the lack of a fully-functional, integrated operations management
information system. We anticipate that we will need to invest in a new
operations management information system in order to maintain our current level
of business and accommodate any future growth. We anticipate that the total
costs associated with the implementation of the new system will be approximately
$4.0 to $5.0 million and that the system will be implemented over the next 24 to
36 months. Any failure to successfully choose and implement a new operations
management information system may result in delayed growth, increased
inefficiency due to a lack of centralized data, higher inventories, increased
expenses associated with employing additional employees, a loss of our
investment in the new operations management information system and may have
additional material adverse effects on our business.

WE NEED TO SUCCESSFULLY MANAGE THE ANTICIPATED EXPANSION IN OUR OPERATIONS OR
OUR BUSINESS MAY SUFFER MATERIAL ADVERSE CONSEQUENCES.

Any failure by us to effectively manage future expansion and the system and
procedural transitions required by expansion could seriously harm our business
and our operating results. We have expanded our operations in the past and
anticipate future expansion of our operations through acquisitions and
otherwise. Our growth has placed and will continue to place significant demands
on our management, operational, financial and technical resources, as well as
our accounting and control systems, as we work to integrate geographically
dispersed offices and administrative personnel, diverse service and maintenance
operations and different accounting and financial systems. Our future operating
results will depend on the ability of our management and other employees to:

- continue to implement and improve our operational, customer support and
financial control systems;

- recruit, train, manage and motivate our employees;

12

- identify companies that are strategic acquisition candidates and
successfully acquire and integrate them with our existing business;

- communicate information efficiently throughout our organization; and

- work effectively with principals and customers.

We cannot predict whether these efforts will be successful or will occur in
a timely or efficient manner. We may not be able to install adequate control
systems in an efficient and timely manner, and our current or planned
operational systems, procedures and controls may not be adequate to support our
future operations. The difficulties associated with installing and implementing
new systems, procedures and controls may place a significant burden on our
management and our internal resources. Delays in the implementation of new
systems or operational disruptions when we transition to new systems would
impair our ability to accurately forecast sales demand, manage our product
inventory and record and report financial and management information on a timely
and accurate basis.

WE MAY NOT BE SUCCESSFUL IN ANY EFFORT TO PENETRATE JAPAN, WHICH COULD LIMIT OUR
FUTURE GROWTH.

We do not market and sell products to semiconductor manufacturers in Japan.
However, approximately 22% of the world's production of semiconductors takes
place in Japan. Accordingly, to reach all of the world's major semiconductor
markets, we will need to establish or acquire sales and marketing capabilities
in Japan. Historically, it has been difficult for non-Japanese companies to
succeed in establishing themselves in Japan, and we believe that expanding our
operations to Japan would be both expensive and time-consuming and would place
additional demands on our management. In addition, FSI and Entegris have
existing arrangements for the sale, service and support of their products in
Japan and have not indicated that they would modify such arrangements in the
event that Metron establishes or acquires sales and marketing capabilities in
Japan. We cannot predict whether any of our efforts to penetrate the Japanese
market will be successful. If we are not successful in our efforts to penetrate
the Japanese market, our future growth may be limited.

WE EXPECT CONTINUED DOWNWARD PRESSURE ON THE GROSS MARGINS OF THE PRODUCTS WE
SELL, AND AS A RESULT, IF WE ARE UNABLE TO CONTINUE TO DECREASE OUR EXPENSES AS
A PERCENTAGE OF SALES, WE WILL BE UNABLE TO INCREASE OR MAINTAIN OUR OPERATING
MARGINS.

Particularly during industry down cycles, pressure on the gross margins of
the products we sell is intense and can adversely impact our financial
performance. We have experienced significant downward pressure on our gross
margins mainly as a result of sales discounts offered by our competitors and
pressure from our customers to reduce prices and from our principals to reduce
the discounts they provide to us. This, in turn, has put significant downward
pressure on our operating margins. To maintain or increase our gross margins, we
must develop and maintain relationships with principals who introduce new
products and product enhancements on a timely basis. As a result of continued
pressure on gross margins, we must find ways to decrease our selling, general,
administrative and other expenses as a percentage of sales to increase or
maintain our operating margins. If our principals cannot continue to innovate,
if we cannot maintain our relationships with the innovating principals, or if we
cannot successfully manage our selling, general, administrative and other
expenses, our operating margins may decrease. If our operating margins decline
as a result of these factors, our business would be harmed.

OUR EMPLOYMENT COSTS IN THE SHORT-TERM ARE TO A LARGE EXTENT FIXED, AND
THEREFORE ANY UNEXPECTED REVENUE SHORTFALL COULD ADVERSELY AFFECT OUR OPERATING
RESULTS.

Our operating expense levels are based in significant part on our head
count, which is generally driven by longer-term revenue goals. For a variety of
reasons, particularly the high cost and disruption of lay-offs and the costs of
recruiting and training, our head count in the short-term is, to a large extent,
fixed. In particular, approximately half of our employees are in Europe, and the
costs associated with the reduction

13

of our labor force in Europe are high. Accordingly, we may be unable to reduce
employment costs in a timely manner to compensate for any unexpected revenue or
gross margin shortfall, which could have a material adverse effect on our
operating results.

WE MAY BEAR INVENTORY RISK DUE TO AN INABILITY TO RETURN PRODUCTS, AND IF WE ARE
UNABLE TO MANAGE OUR INVENTORY EFFECTIVELY, OUR OPERATING RESULTS COULD BE
ADVERSELY AFFECTED.

We bear inventory risk because we generally take title to our products when
we receive them from our principals, and we cannot always return products to the
principal in the event the products are not sold. Our customers do not always
purchase at the time or in the quantities we originally anticipated. For
example, as a result of the industry downturn in 1997 and 1998, we had excess
inventory for which we booked reserves in both the United States and Asia.
Typically, products cannot be returned to principals after they have been in our
inventory for a certain period of time; this time period varies depending on the
product and the principal. In addition, although it is typical when a
relationship with a principal terminates for that principal to repurchase most
of the inventory we have of that principal's products, it is possible under
certain circumstances that a principal may be unable or unwilling to repurchase
our inventory. If we fail to manage our inventory and accumulate substantial
product that cannot be returned, our operating results could be adversely
affected. Furthermore, if a principal cannot provide refunds in cash for the
inventory we desire to return, we may be forced to dispose of inventory below
cost, and this may have a material adverse effect on our financial condition.

OUR REVENUE AND OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS, WHICH COULD
ADVERSELY AFFECT OUR SHARE PRICE.

In the past, we have experienced fluctuations in our quarterly and annual
operating results and anticipate that these fluctuations will continue in the
future due to a variety of factors, many of which are out of our control.
Fluctuations in our results could cause our share price to decline
substantially. We believe that period-to-period comparisons of our results of
operations may not be meaningful, and you should not rely upon them as
indicators of our future performance. Our sales in, and the operating results
for, a particular quarter can vary significantly due to a variety of factors,
including those described elsewhere in this report and the following:

- THE TIMING OF SIGNIFICANT CUSTOMER ORDERS AND CUSTOMER SPENDING PATTERNS.
During industry downturns, our customers may ask us to delay or even
cancel the shipment of previously firm orders. Delays and cancellations
may adversely affect our operating results in any particular quarter if we
are unable to recognize revenue for particular sales in the quarter in
which those sales were expected.

- THE TIMING OF PRODUCT SHIPMENTS BY OUR PRINCIPALS. For the most part, we
recognize sales upon the shipment of goods to our customers. Most of the
equipment and some of the materials we sell are shipped by the principal
directly to our customers, and we do not necessarily have any control over
the timing of a particular shipment. If we are unable to recognize revenue
for a particular sale in the quarter in which that sale was expected, our
operating results in that particular quarter will be negatively affected.

- THE TIMING OF NEW PRODUCT AND SERVICE ANNOUNCEMENTS BY OUR PRINCIPALS AND
THEIR COMPETITORS. New product announcements by our principals and their
competitors could cause our customers to delay a purchase or to decide to
purchase products of one of our principal's competitors which would
adversely affect our revenue and, therefore, our results of operations.
New product announcements by others may make it necessary for us to reduce
prices on our products or offer more service options, which could
adversely impact operating margins and net income.

- THE MIX OF PRODUCTS SOLD AND THE MARKET ACCEPTANCE OF OUR NEW PRODUCT
LINES. The mix of products we sell varies from period to period, and
because margins vary amongst or within different

14

product lines, this can adversely affect our results of operations. If we
fail to sell our products which generate higher margins, our average gross
margins may be lower than expected. If we fail to sell our new product
lines, our revenue may be lower than expected.

- GENERAL GLOBAL ECONOMIC CONDITIONS OR ECONOMIC CONDITIONS IN A PARTICULAR
REGION. When economic conditions in a region or worldwide worsen,
customers may delay or cancel their orders. There may also be an increase
in the time it takes to collect from our customers or even outright
defaults in payments. This can negatively affect our cash flow and our
results.

- COSTS WE MAY INCUR IF WE BECOME INVOLVED IN FUTURE LITIGATION. Litigation
is often costly, and even if we are successful in defending or making any
claim, the expenses incurred may significantly impact our results.

As a result of the factors listed above, our future operating results are
difficult to predict. Further, we base our current and future expense plans in
significant part on our expectations of our longer-term future revenue. As a
result, we expect our expense levels to be relatively fixed in the short-run. An
unanticipated decline in revenue for a particular quarter may disproportionately
affect our net income in that quarter. If our revenue is below our projections,
then our operating results will also be below expectations and, as we have in
the past, we may even have losses in the short-run. Any one of the factors
listed above, or a combination thereof, could adversely affect our quarterly
results of operations, and consequently may cause a decline in our share price.

WE DEPEND ON SALES TO A RELATIVELY SMALL NUMBER OF CUSTOMERS FOR A SIGNIFICANT
PORTION OF OUR REVENUE, AND IF ANY OF OUR LARGE CUSTOMERS WERE TO STOP OR REDUCE
THEIR PURCHASING FROM US, IT WOULD MATERIALLY AND ADVERSELY AFFECT OUR REVENUE.

A loss or a significant reduction or delay in sales to any of our major
customers could materially and adversely affect our revenue. We depend on a
small number of customers for a substantial portion of our revenue. During
fiscal 2000, our top ten customers accounted for an aggregate of 40% of our
sales. Although a ranking by revenue of our largest customers will vary from
period to period, we expect that revenue from a relatively small number of
customers will account for a substantial portion of our revenue in any
accounting period for the foreseeable future. Consolidation in the semiconductor
industry may result in increased customer concentration and the potential loss
of customers as a result of acquisitions. Unless we diversify and expand our
customer base, our future success will significantly depend upon certain factors
which are not within our control, including:

- the timing and size of future purchase orders, if any, from our larger
customers;

- the product requirements of our customers; and

- the financial and operational success of our customers.

If any of our largest customers were to stop or reduce their purchasing from
us, our financial results could be adversely affected. A significant decrease in
sales to a major customer or the deferral or cancellation of any significant
order would have a material adverse effect on our operating results.

OUR SALES CYCLE, PARTICULARLY FOR EQUIPMENT, IS LONG AND UNPREDICTABLE, WHICH
COULD REQUIRE US TO INCUR HIGH SALES AND MARKETING EXPENSES WITH NO ASSURANCE
THAT A SALE WILL RESULT.

Sales cycles for some of our products, particularly equipment, can run as
long as 12 to 18 months. As a result, we may not recognize revenue from efforts
to sell particular products for extended periods of time. We believe that the
length of the sales cycle may increase as some current and potential customers
of our key principals centralize purchasing decisions into one decision-making
entity. We expect this may intensify the evaluation process and require us to
make additional sales and marketing expenditures with no assurance that a sale
will result.

15

WE HAVE NOT YET DEVELOPED A STRATEGY TO SELL TO OUR CUSTOMERS OVER THE INTERNET,
AND IF A COMPETITOR DEVELOPS AND IMPLEMENTS AN EFFECTIVE E-COMMERCE STRATEGY, WE
MAY LOSE SOME OF OUR CUSTOMERS, WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR
RESULTS OF OPERATIONS.

We have not developed a strategy to sell to our customers over the Internet,
but we plan to develop an e-commerce strategy in the future. Because rights to
sell principals' products are granted only for specific territories and sales
conducted over the Internet may occur anywhere around the globe, it is difficult
to adopt e-commerce practices in this industry. If principals decide to directly
distribute their products over the Internet, if our competitors develop a
successful strategy for engaging in e-commerce or if our customers require
e-commerce capability, we may lose customers, which would have a negative impact
on our revenue and on our operating results.

RISKS RELATED TO OUR INTERNATIONAL OPERATIONS.

ECONOMIC DIFFICULTIES IN COUNTRIES IN WHICH WE SELL OUR PRODUCTS CAN LEAD TO A
DECREASE IN DEMAND FOR OUR PRODUCTS AND IMPAIR OUR FINANCIAL RESULTS.

The volatility of general economic conditions and fluctuations in currency
exchange and interest rates can lead to decreased demand in countries in which
we sell product. For example, in 1997 and 1998 many Asian countries experienced
economic and financial difficulties. During this period, we experienced
cancellation or delay of orders for our products from customers in Asia, thus
adversely affecting our results of operations. Moreover, any economic, banking
or currency difficulties experienced by countries in which we have sales may
lead to economic recession in those countries. This in turn may result in the
cancellation or delay of orders for our products from customers in these
countries, thus adversely affecting our results of operations.

MOST OF OUR PRODUCT SALES ARE OUTSIDE THE UNITED STATES, AND CURRENCY
FLUCTUATIONS MAY IMPAIR OUR FINANCIAL RESULTS.

While most of our international sales are denominated in dollars, some are
denominated in various foreign currencies. To the extent that our sales and
operating expenses are denominated in foreign currencies, our operating results
may be adversely affected by changes in exchange rates. For example, in fiscal
1997, we recorded exchange losses of approximately $600,000. Given the number of
currencies involved, the substantial volatility of currency exchange rates, and
our constantly changing currency exposures, we cannot predict the effect of
exchange rate fluctuations on our future operating results. Although we engage
in foreign currency hedging transactions from time to time, these hedging
transactions can be costly, and therefore, we do not attempt to cover all
potential foreign currency exposures. These hedging techniques do not eliminate
all of the effects of foreign currency fluctuations on anticipated revenue.

In addition, the transition period from legacy currencies to the euro
currently is set to expire January 1, 2002. We are assessing our information
technology systems to determine whether they will accommodate the eventual
elimination of the legacy currencies. If our information technology systems are
unable to do so, they would have to be upgraded or replaced.

IF WE OR OUR NON-UNITED STATES SUBSIDIARIES ARE DEEMED SUBJECT TO UNITED STATES
TAXES, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS MAY SUFFER.

Metron and its non-United States subsidiaries conduct most of their
activities in a manner which we believe does not constitute the conduct of a
trade or business in the United States. Accordingly, although we report taxable
income and pay taxes in the countries where we operate, including the United
States, we believe that income earned by Metron and its non-United States
subsidiaries from operations outside the United States is not reportable in the
United States for tax purposes and is not subject to United States income tax.
If income earned by us or our non-United States subsidiaries from operations
outside the

16

United States is determined to be income effectively connected to an United
States trade or business and as a result becomes taxable in the United States,
we could be subject to United States taxes on this income. If we were to be
deemed to be subject to these taxes, our business, financial condition and
results of operations might be materially and adversely affected.

RISKS RELATED TO INVESTING IN OUR COMMON SHARES.

WE ARE SIGNIFICANTLY CONTROLLED BY FSI AND ENTEGRIS, WHICH MAY LIMIT YOUR
ABILITY TO INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER SHAREHOLDER
MATTERS.

As of July 31, 2000, FSI and Entegris each owned 20.2% of our outstanding
shares. By virtue of their share ownership and the fact that each holds one of
the four seats on our supervisory board, FSI and Entegris can exercise
significant voting and management control over Metron. As a result, each of
these shareholders has significant influence over all matters requiring
shareholder or supervisory board approval, including the election of directors
and approval of significant corporate transactions, which may have the effect of
delaying or preventing a third party from acquiring control over us.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL, AND ANY INABILITY TO RAISE REQUIRED
FUNDS COULD HARM OUR BUSINESS.

We expect the net proceeds from our initial public offering, cash from
operations and borrowings under our credit facilities will be sufficient to meet
our working capital and capital expenditure needs for the foreseeable future.
However, we may need to raise additional capital to acquire or invest in
complementary businesses. Further, if we issue additional equity securities, the
ownership stakes of our existing shareholders would be reduced, and the new
equity securities may have rights, preferences or privileges senior to those of
our existing common shares. If we cannot raise funds, if needed, on acceptable
terms, we may not be able to develop our business, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements,
all of which could seriously harm our business and results of operations.

OUR SHARE PRICE IS VOLATILE.

The trading price of our common shares is subject to wide fluctuations in
response to various factors, some of which are beyond our control, including
factors discussed elsewhere in this report and the following:

- failure to meet the published expectations of securities analysts for a
given quarterly period;

- changes in financial estimates by securities analysts;

- changes in market values of comparable companies;

- stock market price and volume fluctuations, which are particularly common
among securities of high technology companies;

- stock market price and volume fluctuations attributable to inconsistent
trading volume levels;

- additions or departures of key personnel; and

- commencement of our involvement in litigation.

In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation may result in substantial costs and divert management's attention and
resources, which may seriously harm our business.

17

WE DO NOT INTEND TO PAY DIVIDENDS.

We have never declared or paid any cash dividends on our capital shares. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.

RISKS RELATED TO BEING A DUTCH COMPANY.

OUR SUPERVISORY BOARD HAS THE AUTHORITY TO ISSUE SHARES WITHOUT SHAREHOLDER
APPROVAL, WHICH MAY MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.

As a Netherlands "NAAMLOZE VENNOOTSCHAP," or N.V., we are subject to
requirements not generally applicable to corporations organized in United States
jurisdictions. Among other things, under Netherlands law the issuance of shares
of a N.V. company must be approved by the shareholders unless the shareholders
have delegated this authority to issue shares to another corporate body. Our
articles of association provide that the shareholders have the authority to
resolve to issue shares, common or preferred, and may designate the Metron board
of supervisory directors as the corporate body with the authority to adopt the
resolution to issue shares, but this designation may not exceed a period of five
years. Our articles also provide that as long as the supervisory board has the
authority to adopt a resolution to issue shares, the shareholders shall not have
the authority to adopt this resolution. Pursuant to the Metron articles, the
supervisory board has the authority to adopt resolutions to issue shares until
five years from the date of the deed of conversion from a B.V. to an N.V. and
the related amendment of the articles. This authorization of the supervisory
board may be renewed by the shareholders from time to time. As a result, our
supervisory board has the authority to issue common and preferred shares without
shareholder approval.

The issuance of preferred shares could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, a majority of the outstanding shares of our share capital.

IT MAY NOT BE POSSIBLE TO ENFORCE UNITED STATES JUDGMENTS AGAINST NETHERLANDS
CORPORATIONS, DIRECTORS AND OTHERS.

Our articles provide that Metron has two separate boards of directors, a
managing board and a supervisory board. One of our managing directors resides
outside of the United States. A significant percentage of our assets are located
outside the United States. As a result, it may not be possible to effect service
of process within the United States upon the managing director who lives outside
the United States. Furthermore, judgments of United States courts, including
judgments against us, our directors or our officers predicated on the civil
liability provisions of the federal securities laws of the United States, are
not directly enforceable in The Netherlands.

PROVISIONS OF OUR CHARTER DOCUMENTS AND DUTCH LAW COULD DISCOURAGE POTENTIAL
ACQUISITION PROPOSALS AND COULD DELAY, DETER OR PREVENT A CHANGE IN CONTROL.

Our articles of association and the applicable law of The Netherlands
contain provisions that may be deemed to have anti-takeover effects. These
provisions may delay, defer or prevent a takeover attempt that a shareholder
might consider in the best interest of our shareholders. For example, our
articles may be amended only pursuant to a proposal of the supervisory board
followed by a resolution of the general meeting of shareholders. To amend our
articles requires that at a general meeting of shareholders, (1) more than half
of the issued share capital is represented and (2) the resolution to amend the
articles is supported by a two-thirds majority of the valid votes cast. This
supermajority voting requirement may have the effect of discouraging a third
party from acquiring a majority of the outstanding Metron shares. In addition,
these provisions could have a negative impact on our stock price. Furthermore,
some United States tax laws may discourage third parties from accumulating
significant blocks of our common shares.

18

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under the captions "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and elsewhere in this report are "forward-looking statements." These
statements involve known and unknown risks, uncertainties, and other factors
that may cause our, or our industry's, actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by the
forward-looking statements. These factors are listed under "Risk Factors" and
elsewhere in this report.

In some cases, you can identify forward-looking statements by terminology
such as "expects," "anticipates," "intends," "may," "should," "plans,"
"believes," "seeks," "estimates," "could," "would" or the negative of such terms
or other comparable terminology.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this report to conform these statements to actual results.

ITEM 2. PROPERTIES

Our corporate headquarters are located in Burlingame, California. The head
of our global materials division is also based in Burlingame, California, and
the head of our global equipment division is based in the United Kingdom. We own
our 30,000 square foot facility in Livingston, Scotland, 18,000 square foot
facility in Aschheim, Germany, 6,500 square foot facility in Almere, The
Netherlands, and 16,300 square foot facility in Glenrothes, Scotland. In
addition, we lease space for marketing and customer service and support purposes
in 36 locations worldwide. We operate a 720 square foot, Class 100 cleanroom in
our leased facility in Sunnyvale, California.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material pending legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.

19

PART II

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

The Company's Common Shares, 0.96 NLG par value, has been traded on the
Nasdaq National Market ("Nasdaq-NMM") under the symbol "MTCH" since our initial
public offering on November 19, 1999. The following table sets forth the high
and low sales prices, as reported by Nasdaq-NMM, for the periods indicated.

FISCAL 2000 HIGH LOW
- ----------- -------- --------

First Quarter......................................... $ -- $ --
Second Quarter........................................ 17.50 15.06
Third Quarter......................................... 25.94 14.88
Fourth Quarter........................................ 36.00 10.75

There were approximately 37 shareholder accounts of record on July 31, 2000,
and the number of beneficial shareholders was estimated to be 1,994.

CERTAIN DUTCH TAX CONSEQUENCES OF HOLDING METRON COMMON SHARES

GENERAL. The following is a summary of the material anticipated Dutch tax
consequences of the holding of common shares in Metron Technology N.V.
("Shares") by non-Dutch resident individuals and corporate entities. This
summary does not purport to be an exhaustive discussion or analysis of all
relevant tax matters related to the holding of Shares. In particular, this
summary does not address the tax consequences under any non-Dutch tax laws, nor
does it address the tax position of a holder of Shares to which a special tax
regime is applicable or any other special circumstances that may apply to any
individual holder. Accordingly, a holder of Shares should consult his, her or
its own tax advisors regarding the tax consequences of the holding of Shares.
This summary is based on the tax laws of the Netherlands as in effect on
August 1, 2000 and is subject to changes in such laws which changes may have
retroactive effect. In this respect reference is made to certain forthcoming
changes to Dutch tax laws which will become effective as of January 1, 2001. See
the paragraph "Dutch taxation in 2001" below. Those changes may affect the Dutch
tax position of a holder of Shares as described below. Metron expressly
disclaims any responsibility to update this summary for changes in facts or laws
occurring subsequent to the date of the filing of this Form 10-K. This summary
represents the views of Metron as to the interpretation of existing Dutch tax
law and, accordingly, no assurance can be given that the tax authorities or
courts in the Netherlands will agree with the summary below. This summary
addresses the Dutch tax consequences to a holder of Shares who or which is not,
nor deemed to be, a resident of the Netherlands for purposes of the relevant tax
laws (a "non-resident shareholder"). Under Dutch tax law, residence is
determined with reference to the facts and circumstances and to several fictions
of law. This summary does not address taxes imposed by the Netherlands and its
political subdivisions, other than dividend withholding tax, income tax,
corporate income tax, net wealth tax and gift and inheritance tax.

DUTCH DIVIDEND WITHHOLDING TAX. To the extent that Metron distributes
dividends, such dividends will, in principle, be subject to Dutch dividend
withholding tax at a rate of 25%. For this purpose, dividends include, among
other things, dividends in cash or in kind, constructive dividends, repayments
of paid-in capital not recognized for Dutch tax purposes and liquidation
proceeds in excess of paid-in capital as recognized for Dutch tax purposes.
Stock dividends are subject to dividend withholding tax unless distributed out
of Metron's paid-in share premium as recognized for Dutch tax purposes. A
non-resident shareholder may be eligible for a reduction or a refund of Dutch
dividend withholding tax pursuant to the EU Parent-Subsidiary Directive or under
a tax convention in effect between the country of residence of the non-resident
shareholder and the Netherlands. The Netherlands has concluded such a convention
with the United States, the Convention between the Kingdom of The Netherlands
and the United States of America for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to Taxes

20

on Income (the "Treaty"), which became effective as of January 1, 1994. A holder
of Shares can only claim the benefits of the Treaty if such holder is a resident
of the United States as defined in the Treaty and if such holder's entitlement
to such benefits is not limited by the limitations on benefits provisions of
Article 26 of the Treaty. Under the Treaty, dividends paid by Metron to a holder
of Shares who or which is entitled to the benefits of the Treaty, are generally
eligible for a reduction of the Netherlands statutory rate of withholding tax of
25%, to 15%, unless the non-resident shareholder (i) has an enterprise or an
interest in an enterprise that is, in whole or in part, carried on through a
permanent establishment or permanent representative in the Netherlands to which
permanent establishment or permanent representative the Shares are attributable,
provided that dividends derived by a corporate holder from Shares attributable
to such a permanent establishment or permanent representative will be exempt
from Dutch corporate income tax if the Dutch participation exemption applies to
such Shares or (ii) performs independent services from a fixed base in the
Netherlands to which fixed base the Shares are attributable.

DUTCH INCOME TAX AND CORPORATE INCOME TAX. A non-resident shareholder will
not be subject to Dutch income tax or corporate income tax with respect to
dividends or capital gains derived from the Shares, provided that (a) the
non-resident shareholder does not have an enterprise or an interest in an
enterprise that is, in whole or in part, carried on through a permanent
establishment or permanent representative in the Netherlands and to which
permanent establishment or permanent representative the Shares are attributable,
provided that dividends and capital gains derived by a corporate shareholder
from Shares attributable to such a permanent establishment or permanent
representative will be exempt from Dutch corporate income tax if the Dutch
participation exemption applies to such Shares and (b) neither the non-resident
shareholder nor his/her spouse, other persons sharing his/her household or
certain other close relatives have a substantial interest or a deemed
substantial interest in the share capital of Metron or, in the event that the
non-resident shareholder or one or more of the other persons referred to does
have such an interest, the substantial interest(s) form(s) part of the assets of
an enterprise; and (c) the non-resident shareholder does not carry out and has
not carried out employment activities with which the holding of the Shares is
connected. In general terms, a substantial interest in the share capital of
Metron does not exist if the non-resident shareholder, his/her spouse, other
persons sharing his/her household or certain other close relatives, do not hold
alone or together, directly or indirectly, the ownership of, or an option to
acquire, shares representing 5% or more of the total issued and outstanding
capital, or the issued and outstanding capital of any class of shares of Metron,
or profit sharing rights representing an entitlement to at least 5% of the
annual profit of Metron or of the proceeds upon the liquidation of Metron. The
substantial interest tax rate for individuals is 25%. The substantial interest
tax rate for corporate shareholders is the Dutch corporate income tax rate of
35%. A holder of Shares entitled to the benefits of the Treaty will be protected
under the Treaty from Dutch taxation on income or capital gains derived from a
substantial interest in the share capital of Metron.

DUTCH NET WEALTH TAX. A non-resident shareholder who is an individual is
not subject to Dutch net wealth tax with respect to the Shares, provided the
non-resident shareholder does not have an enterprise or an interest in an
enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in the Netherlands and to which
enterprise or part of an enterprise the Shares are attributable. The net wealth
tax rate is 0.7%. Corporations are not subject to Dutch net wealth tax.

DUTCH GIFT AND INHERITANCE TAX A gift or inheritance of Shares from a
holder of Shares who is not a resident nor deemed to be a resident of the
Netherlands, will not be subject to Dutch gift and inheritance tax, provided
that the non-resident shareholder does not have an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in the Netherlands to which the
Shares are attributable.

DUTCH TAXATION IN 2001. On May 9, 2000, the Dutch parliament approved the
legislative proposal for a complete overhaul of the Dutch income tax act (the
"Income Tax Act 2001"). The Income Tax Act 2001, which will enter into force on
January 1, 2001, will, among other things, substantially change the taxation of
investment income in the Netherlands. It is expected that further legislation to
be proposed in the course

21

of 2000 will amend certain aspects of the Income Tax Act 2001. The new tax
legislation will in most cases not materially change the above described Dutch
tax consequences to a holder of Shares who is not a resident or a deemed
resident of the Netherlands. The following is a brief and general description of
certain features of the new tax legislation and does not purport to exhaustively
address all aspects of the new tax legislation that could be relevant to a
holder of Shares.

Pursuant to the Income Tax Act 2001, all items of income will be allocated
to one of three "boxes":

- Box I comprises, among other things, business and labor income, and income
from the taxpayer's primary residence. Income in Box I is subject to a
progressive tax rate with a maximum of 52%.

- Box II comprises income derived from a substantial interest. Income in Box
II is subject to a flat tax rate of 25%.

- Box III comprises income from savings and investment, e.g. dividends on
shares not forming part of a substantial interest. Irrespective of actual
income, income in Box III is deemed to amount to 4%, annually, of the
average value of the taxpayer's assets less liabilities. Such deemed
income will be subject to a flat tax rate of 30%.

A non-Dutch resident holder of Shares can in principle be taxed on Box I
income in respect of his Shares, if such Shares are held in connection with
employment activities carried out in the Netherlands or if such holder of Shares
has an enterprise or an interest in an enterprise that is, in whole or in part,
carried on through a permanent establishment or a permanent representative in
the Netherlands and to which enterprise or part of an enterprise the Shares are
attributable. A non-Dutch resident holder of Shares can in principle be taxed on
Box II income in respect of his Shares, if such Shares form part of a
substantial interest. A non-Dutch resident holder of Shares entitled to the
benefits of the Treaty or another applicable tax convention may be protected
from Dutch taxation on Box I and Box II income. A non-Dutch resident holder of
Shares will in principle not be subject to taxation on Box III income in respect
of those Shares.

With the entry into force of the Income Tax Act 2001, a measure will be
introduced in the Dutch Dividend Withholding Tax Act to counter the deemed
improper use of tax conventions to reduce Dutch dividend withholding tax in
respect of dividends derived from shares in a Dutch resident company (dividend
stripping). The Dividend Withholding Tax Act will provide that for the purpose
of a reduction or refund of dividend withholding tax, a holder of shares in
respect of which a dividend is paid will not be considered a beneficial owner of
such shares, by reference to which term most tax conventions allow for a
reduction of dividend withholding tax, if such holder acquired the shares in
respect of which a dividend is paid within ten days prior to the declaration of
such dividend or if such holder disposes of such shares within three months of
the acquisition of such shares.

As of January 1, 2001, the Dutch net wealth tax will be abolished.

HOLDERS OF SHARES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS ABOUT THE DUTCH
TAX CONSEQUENCES TO SUCH SPECIFIC HOLDER OF THE HOLDING OF SHARES.

USE OF PROCEEDS

Information about the Company's use of proceeds from its initial public
offering are incorporated by reference to the Company's Form 10-Q, filed with
the Commission on January 12, 2000, under the caption "Use of Proceeds."

ITEM 6. SELECTED FINANCIAL DATA

The tables that follow present portions of our consolidated financial
statements and are not complete. You should read the following selected
consolidated financial data in conjunction with our Consolidated Financial
Statements and the related Notes and with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Form 10-K report. The consolidated

22

statement of operations data for the years ended May 31, 1998, 1999 and 2000,
and the consolidated balance sheet data as of May 31, 1999 and 2000, are derived
from and are qualified in their entirety by our Consolidated Financial
Statements that have been audited by KPMG LLP, independent auditors, and are
included elsewhere in this Form 10-K report. The consolidated statement of
operations data for the years ended May 31, 1996 and 1997, and the consolidated
balance sheet data as of May 31, 1996, 1997 and 1998 are derived from our
audited consolidated financial statements which do not appear elsewhere in this
report. On March 3, 2000, Metron Technology (United Kingdom) Ltd., a wholly
owned subsidiary of the Company, acquired all the common shares of
Shieldcare Ltd., a company incorporated in Scotland. The acquisition has been
accounted for as a purchase. Accordingly, the Consolidated Statement of
Operations Data includes the results of operations for Shieldcare Ltd. from the
acquisition date. The historical results presented below are not necessarily
indicative of the results to be expected for any future fiscal year.

FISCAL YEAR ENDED MAY 31,
----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Consolidated Statement of Operations Data:
Net revenue............................. $283,325 $298,576 $275,024 $228,618 $337,551
Operating income (loss)................. $ 16,044 $ 7,226 $ 3,118 $ (6,618) $ 12,437
Net income (loss)....................... $ 10,979 $ 4,198 $ 1,102 $ (4,534) $ 7,752
Basic net income (loss) per share....... $ 1.07 $ 0.40 $ 0.11 $ (0.44) $ 0.66
Diluted net income (loss) per share..... $ 1.02 $ 0.37 $ 0.10 $ (0.44) $ 0.60
Shares used to compute basic in per
share calculation..................... 10,289 10,386 10,369 10,325 11,675
Shares used to compute diluted in per
share calculation..................... 10,801 11,195 11,112 10,325 12,896

MAY 31,
----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS)

Consolidated Balance Sheet Data:
Cash and cash equivalents................ $ 13,683 $ 17,034 $ 10,387 $10,601 $ 22,911
Total assets............................. 125,791 110,791 114,161 99,625 181,369
Long-term debt........................... 1,507 1,667 1,379 1,141 1,227
Total shareholders' equity............... 32,908 36,399 36,049 29,955 72,515

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

The information in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, except for the historical information,
contains forward-looking statements. These statements are subject to risks and
uncertainties. You should not place undue reliance on these forward-looking
statements as actual results could differ materially. We do not assume any
obligation to publicly release the results of any revision or updates to these
forward-looking statements to reflect future events or unanticipated
occurrences. This discussion and analysis should be read in conjunction with our
Consolidated Financial Statements and the related Notes, which are included
elsewhere in this report. This discussion of fiscal 1998, 1999 and 2000 refers
to the fiscal years ended on May 31 of each year.

OVERVIEW

Metron Technology N.V. is a holding company organized under the laws of The
Netherlands. Through our various operating subsidiaries, we are a leading global
provider of marketing, sales, service and support solutions to semiconductor
materials and equipment suppliers and semiconductor manufacturers. We operate in
Europe, Asia and the United States. We were founded in Europe in 1975 by our two
corporate

23

shareholders, who each own about 20% of our shares, and certain of our current
and former management. In 1995, we reorganized Metron to combine three Asian
companies as a reorganization under common control, and purchased Transpacific
Technology Corporation ("TTC") and its subsidiaries. TTC was founded in
California in 1982 as a semiconductor equipment manufacturers' representative
company and expanded into the distribution business in 1990. In July 1998, we
acquired T.A. Kyser Co., which we refer to as Kyser, in a transaction accounted
for as a pooling of interests. Founded in 1977, Kyser markets and sells
materials in nine states within the United States, principally to the
semiconductor industry. In March 2000 we acquired Shieldcare Ltd., a company
incorporated in Scotland, in a transaction accounted for as a purchase.
Shieldcare is an authorized supplier of critical parts cleaning services to
major OEM and device manufacturing companies worldwide. The company also
operates as an authorized re-manufacturer of physical vapor deposition ("PVD")
equipment for a well-known supplier of automated systems for chemical vapor
deposition ("CVD").

We derive our revenue from sales of materials, equipment, service and spare
parts to the semiconductor industry, as well as from commissions on sales of
equipment and materials. We recognize revenue for most of an equipment sale and
all other product sales upon the shipment of goods to customers. We defer the
portion of our equipment revenue associated with our estimate of our
installation and warranty obligations. We amortize the deferred revenue over the
applicable installation and warranty periods. We recognize service revenue in
the periods the services are rendered to customers.

In each of our three fiscal years ended May 31, 2000, a majority of our
revenue came from the sale of products from five or fewer of the semiconductor
materials and equipment companies we represent, who we refer to as our
principals. In fiscal 2000, 25.0% of our total revenue was generated from the
sale of products manufactured by FSI and 25.8% from the sale of products
manufactured by Entegris. In addition to representing our two largest sources of
revenue, FSI and Entegris are also our two largest shareholders, and each hold
20.4% of our outstanding shares. Although the principals that comprise our
largest sources of revenue may change from period to period, we expect that
revenue from the sale of products of a relatively small number of principals
will continue to account for a substantial portion of our revenue for at least
the next five years.

We operate in all areas of the world in which there is a significant
semiconductor industry, except Japan. The following tables show our sales in
Europe, Asia and the United States in dollars and as a percentage of net revenue
for each of the three fiscal years ended May 31, 1998, 1999 and 2000:

FISCAL YEAR ENDED MAY 31,
------------------------------
1998 1999 2000
(IN THOUSANDS) -------- -------- --------

Net revenue
Europe...................................... $155,472 $112,090 $164,914
Asia........................................ 53,047 62,243 98,015
United States............................... 66,505 54,285 74,622
-------- -------- --------
Total net revenue......................... $275,024 $228,618 $337,551
======== ======== ========

FISCAL YEAR ENDED MAY 31,
------------------------------
1998 1999 2000
-------- -------- --------
(PERCENTAGE OF NET REVENUE)

Net revenue
Europe...................................... 56.5% 49.0% 48.9%
Asia........................................ 19.3 27.2 29.0
United States............................... 24.2 23.8 22.1
-------- -------- --------
Total net revenue......................... 100.0% 100.0% 100.0%
======== ======== ========

24

Since the beginning of fiscal 1999, we have been organized into two
worldwide operating divisions, equipment and materials. Our equipment division
derives the majority of its revenue from the sale of capital equipment. The
remainder of the division's revenue comes from service, which includes the
installation, maintenance and repair of semiconductor equipment, spare part
sales and commissions. With the acquisition of Shieldcare, we added new revenue
categories to include refurbished equipment sales and revenue from the cleaning
of shields used in the manufacturing of semiconductors. Our equipment sales
represent products that support various production activities for the
manufacture of semiconductors. The sales of the equipment division principally
represent a small number of high-dollar value transactions for which the
products are generally shipped directly to the customer by the manufacturer. As
a result, our equipment sales are significantly affected by the pattern of
capital spending by customers, the timing of customer orders and the timing of
product shipments by the equipment manufacturer.

Our materials division derives the majority of its revenue from sales of
materials and components. The remainder of the division's revenue comes from
commissions. The materials and components we sell are used both in the
production of semiconductors and in the building and maintenance of
semiconductor equipment and manufacturing facilities. Materials include products
such as wafer handling cassettes and accessories, wafer surface preparation
materials, fluid-handling components such as fittings, valves and tubing, and
disposable cleanroom clothing. Sales of these products tend to be less cyclical
than sales of semiconductor equipment and generally offer higher gross margins.

RESULTS OF OPERATIONS

Beginning in the second half of 1996, as the result of excess capacity and
significant price erosion, especially for memory chips, semiconductor industry
growth slowed significantly. This slowdown caused semiconductor manufacturers to
exercise caution in making capital equipment purchasing decisions. Some
semiconductor manufacturers reduced or delayed the expansion or construction of
facilities. This directly affected the sales of semiconductor capital equipment
and, to a lesser extent, the sales of materials. As a result of the slowdown, we
experienced order cancellations, delays in booking new orders and delays in
shipping orders to customers, all of which contributed to the reductions in our
revenue in fiscal 1998 and 1999. We believe that, despite short term slowdowns,
the semiconductor industry has long term growth opportunities. As a result, we
believe we must maintain our infrastructure, even during periodic slowdowns, in
order to continue to serve our customers and to be in a position to take
advantage of long term growth opportunities. Accordingly, we did not reduce our
operating expenses sufficiently to prevent us from recording an operating loss
in fiscal 1999. During the fourth quarter of fiscal 1999 the semiconductor
industry began to recover from the slowdown. The recovery has continued through
fiscal 2000, and as a result, the Company returned to profitable operations.

The following table summarizes our historical results of operations as a
percentage of net revenue for the fiscal years and periods indicated. The
historical financial data for fiscal 1998, 1999 and 2000 were derived from, and
should be read in conjunction with, our audited Consolidated Financial
Statements and the related Notes included elsewhere in this report.

FISCAL YEAR ENDED
MAY 31,
------------------------------
1998 1999 2000
-------- -------- --------

Net revenue............................................ 100.0% 100.0% 100.0%
Cost of revenue........................................ 80.7 82.8 81.8
----- ----- -----
Gross margin........................................... 19.3 17.2 18.2
Selling, general, administrative, and other expenses... 17.8 19.0 14.5
Restructuring and merger costs......................... 0.3 1.1 --
----- ----- -----
Operating margin....................................... 1.2% (2.9)% 3.7%
===== ===== =====

25

The following table shows our materials division and equipment division
revenue as a percent of net revenue, together with the related gross margins:

FISCAL YEAR ENDED
MAY 31,
------------------------------
1998 1999 2000
-------- -------- --------

Net revenue
Equipment division................................... 55.1% 55.7% 50.2%
Materials division................................... 44.9 44.3 49.8
Gross margins
Equipment division................................... 17.4% 14.9% 15.6%
Materials division................................... 21.6 20.1 20.9

NET REVENUE

EQUIPMENT DIVISION. The equipment division's net revenue in fiscal 2000 was
$169.4 million up $42.0 million or 33.0% from fiscal 1999. The equipment
division's net revenue in fiscal 1999 was $127.4 million, down $24.2 million or
16.0% from $151.6 million in fiscal 1998. In the third and fourth quarters of
fiscal 1999, as the industry began to emerge from its prolonged downturn,
revenue grew sequentially by 16.2% and 6.4%, respectively. Equipment division
revenue continued to grow during fiscal 2000 in all geographic regions with
particularly strong growth in Europe. Shieldcare revenues represented
$3.0 million of the $42.0 million increase for fiscal 2000. The revenue declined
in fiscal 1999 was primarily the result of reduced equipment sales in Europe,
our largest geographic segment, and reflected the cyclical slowdown in the
growth of the semiconductor industry.

MATERIALS DIVISION. The materials division's net revenue in fiscal 2000 was
$168.2 million, up $67.0 million or 66.2% from fiscal 1999. The materials
division's net revenue in fiscal 1999 was $101.2 million, down $22.2 million or
18.0% from $123.4 million in fiscal 1998. Revenue grew sequentially from the two
year low in the first quarter of fiscal 1999, when the industry began to emerge
from its prolonged downturn, and continued to grow through fiscal 2000 in all
geographic regions. Materials net revenue increases were particularly strong in
Asia. The decline in net revenue in fiscal 1999 was a result of the reduced and
delayed expansion and construction of semiconductor facilities and lower than
expected increases in the number of wafers processed. In fiscal 1999, materials
revenue was lower in all geographic areas.

GROSS MARGINS

EQUIPMENT DIVISION. The growth in the equipment division's gross margin in
fiscal 2000 was primarily due to the improvement of spare parts margins, and by
the acquisition of Shieldcare for its fourth quarter margins for refurbished
equipment and parts cleaning. The equipment division's gross margin declined in
both fiscal 1999 and fiscal 1998. The decline in gross margin in fiscal 1999 was
due principally to the lower proportion of division revenue represented by
commission sales. This reflected both the closure of our United States
manufacturers' representative sales business in December 1998 and the decline in
equipment sales in South Korea, most of which are structured as commission
sales. The decline in gross margin in fiscal 1998 was due principally to the
fact that we recorded a small loss on service in fiscal 1998.

MATERIALS DIVISION. The improvement in the materials division's gross
margin in fiscal 2000 was principally due to the higher proportion of division
revenue represented by commission sales. Margins for material sales in fiscal
2000 were flat when compared to fiscal 1999. The gross margin of the materials
division declined in fiscal 1999. The decline was due principally to changes in
product mix, increased reserves which we booked for potential inventory
obsolescence and higher period costs. Gross margin was higher in fiscal 1998 as
a result of changes in product mix and higher margins on materials sales in
Asia.

26

SELLING, GENERAL, ADMINISTRATIVE AND OTHER (SG&A) EXPENSES. SG&A expenses
in fiscal 2000 were $49.0 million, up $5.6 million or 12.9% from fiscal 1999.
The acquisition of Shieldcare accounted for $0.5 million of the increase. SG&A
expenses in fiscal 1999 were $43.4 million, down $5.6 million or 11.4% from the
$49.0 million incurred in fiscal 1998. SG&A expenses consist principally of
salaries and other employment-related costs, travel and entertainment,
occupancy, communications and computer-related expense, trade show and
professional services, depreciation and amortization of acquisition goodwill.
Our SG&A expenses are a function principally of our total headcount. Over 60% of
SG&A expenses consist of salaries and other employment-related costs.

The increase in SG&A expenses in fiscal 2000 was primarily due to increases
in headcount, travel and incentive plans. The decrease in SG&A expenses in
fiscal 1999 was primarily the result of the reduction in headcount levels which
we made to match the lower than expected levels of revenue. However, because we
base our headcount levels on longer term revenue goals, we did not reduce
headcount sufficiently to prevent SG&A expense from increasing as a percentage
of net revenue.

RESTRUCTURING AND MERGER COSTS. The following table summarizes the
restructuring and merger costs we incurred in the years indicated.

FISCAL YEAR ENDED
MAY 31,
------------------------------
1998 1999 2000
-------- -------- --------
(IN THOUSANDS)

Restructuring costs.................................... $261 $1,835 $ --
Merger costs........................................... 620 715 --
---- ------ ----
Restructuring and merger costs....................... $881 $2,550 $ --
==== ====== ====

Restructuring costs represent primarily severance costs associated with the
implementation of our new organizational structure and other reductions in
headcount. During fiscal 1998, we began the transition from our organizational
structure based on individual Metron subsidiaries in each country to a global
organization built around our product lines in order to improve our service to
our principals and customers. This organizational change allowed us to eliminate
several positions in fiscal 1998 and fiscal 1999 that had been duplicated under
the previous geographic organization. The restructuring costs incurred during
fiscal 1998 represent termination costs for 13 employees, primarily in finance
and administration. This change did not have a material impact on restructuring
and merger expenses in fiscal 1998, but we incurred approximately $856,000 of
charges in fiscal 1999. This represents the termination costs of 51 employees,
most of whom worked in the equipment division. In February 1999, we entered into
an early retirement agreement with one of our managing directors in connection
with the termination of his employment agreement. To cover the entire cost of
the early retirement agreement, we recorded a pre-tax charge of $979,000 in
fiscal 1999.

All the merger costs we incurred, primarily professional fees, were in
connection with the acquisition of Kyser.

27

OTHER INCOME (EXPENSE). The following table summarizes the components of
other income (expense).

FISCAL YEAR ENDED MAY 31,
------------------------------
1998 1999 2000
-------- -------- --------
(IN THOUSANDS)

Foreign exchange gain.............................. $ 489 $ 211 $ 443
Interest income.................................... 514 438 1,008
Interest expense................................... (1,110) (913) (1,760)
Loss on the sale of joint ventures................. -- (140) --
Miscellaneous income............................... 36 7 574
------- ----- -------
Other income (expense)............................. $ (71) $(397) $ 265
======= ===== =======

We engage in limited hedging activities to reduce our exposure to exchange
risks arising from fluctuations in foreign currency, but because hedging
activities can be costly, we do not attempt to cover all potential foreign
currency exposures. During the three-year period ended May 31, 2000, we entered
into contracts to hedge firm purchase commitments, to hedge the maturities of
foreign currency denominated liabilities with foreign currency denominated
assets and to hedge differences existing between foreign currency assets and
liabilities. The currencies in which we purchase forward exchange contracts have
numerous market makers to provide ample depth and liquidity for our hedging
activities.

Interest income represents primarily earnings on our available cash
balances. The increase in fiscal 2000 represents primarily interest earned from
the investment of our initial public offering net proceeds in short-term
investments. The decrease in our interest income in fiscal 1999 is a result of
lower average cash balances and of declining interest rates. Our interest
expense for fiscal 2000 increased primarily as the result of increased
borrowings to support the increased working capital requirements associated with
higher revenues. In fiscal 1998 and 1999, interest expense decreased year over
year primarily as the result of reduced interest rates, and the reduction in
average borrowings from our various overdraft facilities.

Other income in fiscal 2000 consisted of various miscellaneous income, and
the proceeds from the exercise and sale of stock warrants held in a non-related
principal.

PROVISION FOR INCOME TAXES. In fiscal 2000, our effective income tax rate
was 38.0% on a pretax profit of approximately $12.5 million. The rate was higher
than The Netherlands statutory tax rate of 35% primarily due to an additional
assessment in Germany stemming from the restructuring in fiscal 1997 of our
German subsidiary's Italian branch, and an increase in goodwill amortization, a
non deductible expense, which resulted from our acquisition of Shieldcare. The
effective income tax rate in fiscal 1999 was a benefit of 32.8% on a pretax loss
of approximately $6.7 million.

In July 2000, the German government unexpectedly decreased the income rate
for corporations from 51.9% to 38.2%. The rate reduction will require the
Company to reduce its deferred tax asset associated with temporary differences
and the carryforward of net operating losses for our German subsidiary. In our
first quarter of fiscal 2001 we estimate we will incur an additional deferred
income tax expense of approximately $340,000, for the reduction of the deferred
tax asset. The reduced future cash tax benefits resulting from the reduced
German rate will be largely offset by tax cash savings in the United States
arising from the sales of employee stock option shares.

LIQUIDITY AND CAPITAL RESOURCES

We define liquidity as our ability to generate resources to pay our current
obligations and to finance our growth during periods of business expansion. Our
principal requirement for capital is for working capital to finance receivables
and inventories. Until we completed our initial public offering in late
November 1999, our principal sources of liquidity were cash flow from operations
and bank borrowings.

28

Our working capital, current assets less current liabilities, at May 31, 2000
was $54.4 million as compared to $22.6 million at May 31, 1999. Our current
ratio, current assets divided by current liabilities, was 1.5 at May 31, 2000
and 1.4 at May 31, 1999.

OPERATING ACTIVITIES.

Cash flows used in operating activities in fiscal 2000 were $5.7 million,
primarily as the result of a net increase of $6.3 million of accounts
receivables over accounts payable including accounts payable classified as
amounts due to affiliates. The net total of items which did not affect operating
cash flows increased to $5.7 million in fiscal 2000 compared to $4.8 million in
fiscal 1999. The significant increase in accounts receivable of $39.3 million
reflect our increased revenues for fiscal 2000 particularly in the fourth
quarter when accounts receivable grew by $19.4 million.

Cash flows used for operating activities in fiscal 1999 were $3.0 million,
and were largely due to Metron's net loss of $4.5 million. In fiscal 1999, the
net total of items which did not affect operating cash flows increased to
$4.8 million. The increase was principally due to the fact that we provided
additional reserves against inventory purchased for customers in Asia who
subsequently deferred or canceled their orders, and provided a reserve against a
receivable from a customer in Europe who fil