ADE CORP, 10-K, 2000-07-28

ADE CORP
10-K, 2000-07-28
MEASURING & CONTROLLING DEVICES, NEC

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

FORM 10-K

(MARK ONE)

<TABLE>
<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE FISCAL YEAR ENDED APRIL 30, 2000
OR

<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 0-26714

ADE CORPORATION

(Exact name of registrant as specified in its charter)

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<S> <C>
MASSACHUSETTS 04-2441829
(State of incorporation) (I.R.S. Employer Identification No.)

80 WILSON WAY 02090
WESTWOOD, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
</TABLE>

(781) 467-3500
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, $0.01 PAR VALUE
(Title of class)

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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. No / /

As of July 24, 2000, there were outstanding 13,490,972 shares of common
stock, $.01 par value per share. The aggregate market value of shares of common
stock held by non-affiliates of the registrant, based upon the last sale price
for such stock on that date as reported by Nasdaq, was approximately
$291,742,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders are incorporated by reference into Part III.

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PART I

ITEM 1. BUSINESS

EXCEPT FOR HISTORICAL INFORMATION, THE FOLLOWING DESCRIPTION OF ADE'S
BUSINESS CONTAINS FORWARD LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE OUTCOME OF THE EVENTS DESCRIBED IN THESE FORWARD LOOKING
STATEMENTS IS SUBJECT TO RISKS AND ACTUAL RESULTS COULD DIFFER MATERIALLY. THE
SECTIONS ENTITLED "RISK FACTORS", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THIS ANNUAL REPORT CONTAIN A DISCUSSION OF SOME OF THE
FACTORS THAT COULD CONTRIBUTE TO THESE DIFFERENCES. ANY FORWARD-LOOKING
STATEMENTS ARE MADE AS OF THE DATE OF THIS REPORT AND WE ASSUME NO OBLIGATION TO
UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS OR TO UPDATE THE REASONS WHY ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING
STATEMENTS.

ADE Corporation is engaged in the design, manufacture, marketing and service
of metrology and inspection systems for the semiconductor wafer manufacturing
industry. In addition, we are a supplier of metrology systems to the
semiconductor device, data storage and optics industries. Our systems analyze
and report product quality at critical manufacturing process steps, sort wafers
and disks and provide manufacturers with quality certification data.
Semiconductor wafer and device and data storage manufacturers use our systems to
improve yield and capital productivity. Our products have evolved from single
instruments used in off-line engineering analysis to multi-function systems for
automated in-line monitoring of process-induced defects throughout the wafer and
disk manufacturing processes. Our systems are designed to deliver the high
throughput, reliability and information and analysis necessary to meet the
demands of increasingly complex and time-sensitive manufacturing processes.

ADE's strategy is to provide our customers with complete metrology solutions
for optimization of their processes, workflow, and engineering. We accomplish
these goals by offering a broad range of plug and play metrology and inspection
units that are combined with modular handling platforms and software analysis
packages. Responsive to the wide range of handling needs that our customers have
required over the past decades, ADE designs focus on a modular approach which
targets the lowest cost of ownership for a system at any given process step. The
software analysis packages maximize information timeliness and availability
while minimizing demands on customers' engineering staff.

PRODUCTS

Our products have evolved from single instruments used in off-line
engineering analysis to full, 100% online automated metrology solutions
throughout the wafer and disk manufacturing processes. Our systems are designed
to deliver the high throughput, reliability and information and analysis
necessary to meet the demands of increasingly complex and time-sensitive
manufacturing processes.

Our principal products in the semiconductor wafer, semiconductor device and
data storage device industries are described below. All metrology and inspection
systems have the capability to record, print and store measurement data locally,
as well as distribute the data via a network for yield and process management,
offline analysis, SEMI standard and Silicon Wafer Order Form (SWOF) quality
certification.

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SEMICONDUCTOR INDUSTRY PRODUCTS

WAFERCHECK 7000 SERIES. The WaferCheck 7000 series of products are
flexible, modular systems capable of automatically characterizing, inspecting
and sorting semiconductor wafers. These systems measure thickness, flatness,
shape, conductivity type, and resistivity on raw and processed wafers and
provide high speed sorting. The products combine an automated transfer belt
module with one or more customer selected measurement modules into a single,
floor mounted system. These systems, typically operate in a class 1000 cleanroom
environment and provide non-destructive in-line sorting and classification
capability on all wafer diameters up through 200mm.

ULTRASCAN 9000 SERIES. The UltraScan 9000 series of products are high
throughput, in-line production systems that perform metrology and sorting at
various stages of the wafer manufacturing and device fabrication processes. The
UltraScan 9000 design supports operation in a class 10 cleanroom environment.
The UltraScan 9000 systems measure wafer thickness, flatness, shape, and other
mission-critical dimensional properties and can be integrated with factory
automation systems. Through three classes of the UltraScan 9000 series systems
the 9300, 9600 and 9800 series support customer requirements at the 0.35um,
0.25um, and the 0.18um design rule technologies. The integrated robotic handling
allows for sorting, and flipping of the wafer prior to placement in the
cassette.

ULTRAGAGE 9000 SERIES. The UltraGage 9000 series of products are automated
benchtop metrology systems containing a single measurement module which is
capable of making any one of several measurements, including flatness, thickness
and stress. The UltraGage 9000 systems are class 10 cleanroom environment
capable. The UltraGage 9500 system is based on our E station measurement
capacitance technology module. The newest system in the 9500 series of
equipment, is the 9530. This system has been optimized to handle ultra thin,
processed wafers used for small cards, for device manufacturers. The UltraGage
9700 system is based on the E-Plus station measurement module. These systems
were designed to operate together with applications software to be used to help
manage the device manufacturing process. The 9900 system provides dimensional
measurement capabilities to an accuracy of 0.18 microns, utilizing our new E
Squared technology. This system now allows ADE customers to meet advanced
industry needs for flat wafers without having to retool their manufacturing
plants.

NANOMAPPER. Introduced in July 1999 in support of advanced CMP
requirements, NanoMapper measures nanotopography, or how well a semiconductor
wafer was polished, on both 200mm and 300mm wafer surfaces with atomic level
resolution. Using proprietary non-contact optical interference techniques for
wafer, semiconductor equipment, and semiconductor device process development
manufacturers, the NanoMapper is currently used to quantify nanotopography in
the wafer manufacturing processes and also measures how well the epitaxial layer
on certain wafers was grown. NanoMapper is capable of characterizing the surface
at the edge of wafers as well, making it possible for device manufacturers to
increase yield per wafer by increasing the wafer usable area.

CR8X SERIES. The CR8X series products are high throughput, in-line
production systems that are used to detect, measure and characterize particles
and other defects on wafer surfaces and provide process analysis and control
information for the wafer manufacturer. These tools rely on ADE's proprietary
flying spot laser scanning technology. Based on our proven CR80 production tool
design, the WIS-CR81 and WIS-CR82, introduced in 1997, detect particles down to
0.1 microns on wafers up to 200 millimeters in diameter. The WIS systems can be
integrated with factory automation systems. We offer a variety of software
packages to tailor the system to specific customer requirements. The CR8X
systems are typically operated in a class 10 cleanroom environment or better.

CONSTELLATION. The Constellation is a fully automated inspection tool
designed to handle the advanced surface inspecting requirements of both 200mm
and 300mm polished and epi wafers. Constellation provides advanced inspection
capabilities for high volume 200 mm production, while offering simple,
recipe-controlled 300 mm pilot and production capability. This system reduces
the need for manual inspection of the wafers. The Constellation is a high volume
inspection tool available with an edge gripping

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wafer handling system and integrated SQM and operates in a class 10 or better
clean room. The system architecture exceeds the 0.13um design rules for high
speed sorting applications.

SURFACE QUALITY MONITOR. The Surface Quality Monitor (SQM) is new feature
on our wafer inspection systems; CR8X and AWIS. This feature adds the
characterization of the variations in nanotopography on the wafer surface to the
CR8X surface defect characterization family. Nanotopography has become a leading
technology requirement yield optimization for design rules at 0.18um and below.
The integration of this inspection for nanotopography into the WIS systems is a
cornerstone in ADE's productivity enhancement program for our customers. This
measurement is being applied to both 200mm and 300mm wafer diameters.

EPISCAN SERIES. The EpiScan series of products are high-speed tools used to
measure and map the thickness of certain film layers, sometimes referred to as
epi layers, that are applied to wafers. The EpiScan 1000 system is based on
advanced FTIR optical technology which is licensed from On-Line Technologies,
Inc. The newest addition to the EpiScan product line, is the EpiScan 3000. This
product builds on our standard 300mm modular metrology automation platforms, and
maps Epitaxial film thickness for 300mm wafers. The EpiScan 3000 resides in the
transport minimizing footprint, to reduce cost of ownership. These systems
operate in a class 10 cleanroom environment.

INFOTOOLS SOFTWARE SUITE. InfoTools is an off-line application suite of
productivity tools for ADE's UltraScan, UltraGage and WaferCheck systems.
InfoTools includes ReportTools for off-line processing of wafer data and
RecipeTools for centralized recipe storage. InfoTools increases machine
availability and leads to a lower cost of ownership of an ADE tool. InfoTools is
modularly priced based on the number of users and applications required.

WAFERANALYZER. This offline software package increases productivity in a
wafer production polishing area by automating the advanced analytical capability
for wafer inspection data. In beta tests this software has proven to
significantly reduce the process engineering man-hours required for process
management and characterization and to add increased flexibility in analysis.
The software is modularly priced based on the number of users and equipment
connections.

DISK INDUSTRY PRODUCTS

PROPRIETARY ADE MAGNETIC TECHNOLOGY

VIBRATING SAMPLE AND TORQUE LABORATORY MAGNETOMETERS. These systems are
used for the magnetic characterization of a broad range of materials (i.e.
disks, tapes, powders, crystals and superconducting materials). Since only a
small piece of a magnetic material can be measured in these laboratory systems,
a magnetic disk must be cut in order to be measured in such systems. These tools
are used on a sampling basis to manage processes so as to minimize process
excursions and optimize yield. Model 1660 is the only magnetometer which
combines Vibrating Sample Magnetometer (VSM) and torque measurements in a single
tool.

ROBOTIC KERR-EFFECT AND MRT MAGNETOMETERS. These are fully automated
in-line robotic systems capable of 100% rapid and accurate mapping of the
important magnetic properties of computer hard disks. The systems have the
capability to record, store, process and print measurement results locally, as
well as to transmit the data to a network for process tune-up, quality control,
certification, and subsequent sorting of the disks.

AUTOMATIC HEAD WAFER TEST SYSTEM. The Automatic Head Wafer Test System
rapidly and automatically creates a map of the magnetic properties of entire
wafers or coupons cut from those head wafers used to fabricate advanced heads
for disk drives. It provides rapid feedback to the fabrication process of these
heads, allowing users to manage process uniformity and excursions in order to
improve overall yield.

MICROSENSE II. Disk drive manufacturers must incorporate motors with ever
lower non-repetitive runout to achieve higher track densities. This requires
improved non-contact dimensional gaging.

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Introduced at Diskcon Japan in April 1999, MicroSense II provides a 100%
improvement in measurement accuracy over our previous products.

PROPRIETARY ADE CAPACITANCE TECHNOLOGY

MOTOR TEST SYSTEMS. Utilizing ADE's non-contact dimensional gaging, the
3700 and MTS series of motor test systems provides disk motor manufacturers with
motor shaft runout measurements in both time and frequency function. Software
allows the user to define pass/fail criteria for production testing.

AUTOGAGER 1500 SERIES. The Autogager 1500 series of products are modular
systems capable of rapidly and automatically characterizing, inspecting and
sorting hard disks for dimensional characteristics. The Autogager 1500, the
first large-scale, automated dimensional metrology system for the hard disk
market, was introduced by ADE to meet the industry's increasing demand for the
manufacture of advanced hard disks. These systems measure thickness and
thickness variation on advanced hard disks and provide high speed sorting. The
products combine an industrial robot with our capacitive dimensional metrology
into a single, floor-mounted system. These systems, which are capable of
operating in a class 1000 cleanroom environment, provide a non-destructive
in-line sorting capability and precise disk characterization.

PROPRIETARY ADE INTERFEROMETER BASED TOOLS

MINIFIZ SERIES OF INTERFEROMETERS. MiniFIZ is a family of laser-based
Fizeau interferometers that test the surface flatness, curvature and other shape
characteristics of polished precision components such as optical mirrors, lenses
and computer disks. The MiniFIZ provides interactive 3D modeling, statistical
reporting, and user-selectable production and research modes. The product can be
combined with full robotic automation to meet the needs of disk media and
substrate process control.

MICROXAM OPTICAL PROFILERS. These 3D optical profilers are interference
microscopes which produce measurements of the shape, density and distribution of
laser bumps in the laser-textured area of hard disks. MicroXAM is the industry
standard for measuring the laser-textured area of hard disk media. Other
configurations of MicroXAM measure disk dub-off. Dub-off is the transition
between the top (usable) surface of the disk, and the rough edge of the disk.
MicroXAM, consequently, is used widely by disk media manufacturers and by hard
drive manufacturers.

OPTIFLAT FLATNESS GAGE. Similar to MiniFIZ, OptiFLAT is an accurate surface
flatness tester primarily utilized to characterize the surface waviness of hard
disks in order to improve and maintain process control in the hard disk
manufacturing process. Waviness is a range of medium to high frequency surface
features which is now an important category of topology that affects disk drive
performance and product yield. OptiFLAT is also uniquely suited to measure the
flatness of uncoated transparent disk substrates.

PRODUCTS IN DEVELOPMENT

In order to maintain our technology leadership, we continue to introduce new
products.

ADVANCED FLATNESS SYSTEM. The AFS takes ADE's established capacitance
technology to the leading edge new diameters. Customers involved with both 300mm
and 400mm wafers are using this measurement platform. The wafer is handled only
by the edges, thereby minimizing the possibility of any surface contamination or
damage due to contact with the polished surface of the wafer.

OPTICAL FLATNESS SYSTEM. The Optical Flatness System is being developed to
aid the silicon manufacturers in their characterization of a side polished wafer
for the future. The interferometer based measurement system is in preliminary
development phase. ADE has worked directly with our customers to define the
product function and features. The edge grip handling provides the optimum
methods for surface measurement.

SURFACE QUALITY MONITOR. The wide industry acceptance for the SQM
supporting nanotopography measurement requirements of 200mm wafer diameters is
now in final development stages for 300mm wafers as well. This feature will be
available on the AWIS platforms.

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INTERNET ENABLED VIRTUAL IQC. The software division of ADE has taken the
combined tool set of InfoTools and Wafer analyzer to the next step in the
process. The Incoming quality groups at device manufacturers can now selectively
review all important data taken during final inspection at the wafer-maker.

MODULAR METROLOGY. The modular metrology and platform design requires
continuos development of new features and capabilities. Fully edge gripped
pre-aligner, Optical Character Readers, and integration of multiple measurements
into a single platform are the key focus for the upcoming year.

TECHNOLOGY

Our metrology and inspection products use our proprietary non-contact
capacitive, optical, eddy-current, interferometric and magnetic technologies to
measure the dimensional, electrical magnetic and surface characteristics of
semiconductor wafers and devices and computer hard disks and disk drives.

DIMENSIONAL TECHNOLOGY

Our non-contact capacitive gaging technology, which is the subject of a
series of patents, is used to measure the dimensional parameters (thickness,
flatness, shape) of semiconductor wafers, computer hard disks and other objects.
This technology is based on the measurement of the capacitance between a
measurement probe and the surface of the object. The capacitance varies as a
precise function of the distance between the probe and the object being
measured. For example, in the measurement of a semiconductor wafer, two probes,
one on each side of the wafer, map both wafer surfaces simultaneously.
Electronic circuitry converts the probe capacitance signal into distance signals
which are translated by our software to produce information concerning the
wafer's thickness, flatness and shape.

SURFACE INSPECTION TECHNOLOGY

We use optical methods to detect microscopic surface defects and
non-uniformity. A finely focused laser beam is scanned over the surface of the
wafer. Surface non-uniformities, particles or defects cause some of the beam's
energy to deflect or scatter. Sensitive detectors quantify the scattering
signals, which are translated by our software to produce information about
particles, micro scratches, haze, nanotopography and other process-induced
defects on the wafer surface. Although the principles of our optical technology
are similar to those used by other manufacturers, we believe our theoretical
modeling and patented optical engineering and proprietary software result in
products having a superior combination of high sensitivity and throughput.

INTERFEROMETRIC TECHNOLOGY

Optical interference is a technique used to produce surface images of
alternating bright and dark images, called fringes, which correspond to
variations in surface height. Using multiple reflection, optical interference
can precisely measure variations in the height of a surface as small as a few
atomic layers. Our software provides the ability to create and analyze these
three-dimensional surface maps, comprised of millions of data points, which are
used by our customers in advanced process development and in production control.

FOURIER TRANSFORM INFRARED SPECTROSCOPY TECHNOLOGY

Fourier Transform InfraRed (FTIR) Spectroscopy Technology has classically
been used in a broad range of laboratory applications for examining various
technical properties of materials and chemicals. On-Line Technologies, Inc., a
Connecticut-based technology company, has licensed its ruggedized, industrial
strength Fourier Transform Infrared Spectroscopy Technology to us for
incorporation into metrology tools for the wafer market. We are integrating this
technology to provide the increasing precision and accuracy needed to support
ever-tightening Epi specifications.

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MAGNETICS CHARACTERIZATION TECHNOLOGY

Our products for characterizing magnetic materials use a variety of
non-contact measurement technologies including lasers (the Kerr effect),
vibrating sample and torque-effect inductive sensing techniques. We believe our
world-class theoretical modeling and magnetics engineering enable us to offer
automated products with superior sensitivity, speed, accuracy and
reproducibility.

PROPRIETARY SOFTWARE

Our proprietary software analyzes and transforms the large amounts of data
generated by our metrology and inspection systems to produce information about
process induced defects that supports real-time process management. The flexible
design of this software permits recipe-driven reconfiguration of these products
to serve new applications with a minimum of hardware or software redesign or
development. Our software is designed to integrate our various metrology
functions with one another while implementing industry standards for integrating
our products with the manufacturing facility's information systems. We currently
have applied for patent protection on unique features of our software.

MARKETING, SALES AND CUSTOMER SUPPORT

We market and sell our semiconductor metrology and inspection products
through our direct sales force, distributors and independent sales
representatives. We market and sell our metrology and inspection products in the
United States, Europe and Malaysia through full-time salespersons located
throughout the United States in Milpitas, Dallas, Portland and Boston as well as
in the United Kingdom, in Germany, and in Malaysia. During the past fiscal year,
approximately 50% of our revenue was derived through our direct sales
organization. Our direct sales force is supported by applications engineers in
selected field offices and in our manufacturing locations.

Sales of dimensional systems in Japan are supported by Japan ADE Limited, a
joint venture between us and Kanematsu Electronics, Ltd. Sales of optical
surface inspection products are provided in Japan by a separate distributor. We
also sell our semiconductor metrology and inspection products in Israel, South
Korea, Singapore, Taiwan, India and the People's Republic of China through
independent sales representatives. We market and sell our non-contact
capacitive, dimensional metrology and magnetic characterization data storage
products in the United States through four full-time salespersons and
internationally through distributors and sales representatives. We market and
sell our interferometric based surface metrology products through three full
time salespersons and internationally through distributors and sales
representatives.

The selling process for our products frequently involves participation by
sales, marketing and customer support personnel. Customers and potential
customers often evaluate our products by sending semiconductor wafers to us for
measurement or by installing demonstration equipment at their facilities. We
maintain demonstration equipment at our manufacturing sites and at some of our
sales offices for this purpose. We plan to continue our investment in
demonstration equipment to accelerate the introduction of products. Our
marketing activities also include participation in international standards
organizations, trade shows, publication of articles in trade journals, in
industry forums and distribution of sales literature.

We believe that our strong commitment to service is essential, based on the
growing complexity of the equipment used in the semiconductor manufacturing
process. This complexity makes it difficult for semiconductor wafer and device
manufacturers to maintain an internal workforce sufficiently skilled and
specialized to support the disparate equipment and technologies used in their
processes. We have customer support centers in Boston, Dallas, Milpitas,
Vancouver, WA, Tucson, Milton Keynes, England, Munich, Germany and Kuala Lumpur,
Malaysia. In addition, our distributors and sales representatives provide
customer support. We also offer training programs and maintenance contracts for
our customers. We offer warranties of up to twelve months covering the
performance and reliability of our products.

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CUSTOMERS

Our customers include all of the leading semiconductor wafer manufacturers
and many of the leading semiconductor device and data storage and disk drive
manufacturers throughout the world. Historically, a relatively limited number of
customers have accounted for a substantial portion of our revenue. In fiscal
years 2000, 1999 and 1998, sales to our top five customers accounted for
approximately 45.8%, 45.1% and 44.7%, respectively, of our revenue. During
fiscal year 2000 one of our customers accounted for 11.9% of our revenue. During
the past fiscal year, approximately 58.3% of our revenue was derived from sales
made to wafer manufacturers, with the remainder derived from sales to
manufacturers of semiconductor devices, data storages and disk drives and
semiconductor equipment. Our principal customers are as follows:

SEMICONDUCTOR WAFER MANUFACTURERS

Komatsu
MEMC Electronic Materials
Mitsubishi International
Okmetic
Posco Huls
Shin-Etsu Handotai
Silicon International
Sumitomo Sitix Silicon
Wacker Siltronic

SEMICONDUCTOR DEVICE MANUFACTURERS

ETEC
IBM
Lucent Technologies
Motorola
Semitool
ST Microelectronics
Teltec

DATA STORAGE AND DISK DRIVE MANUFACTURERS

IBM
Matsubo
MMC Technology
Seagate Technology

RESEARCH AND DEVELOPMENT

The market for semiconductor wafer and device and data storage and disk
drive equipment is characterized by rapid technological changes and product
innovations. Our research and development efforts are designed to enhance our
current products and develop new products to keep pace with technological
developments and constantly evolving customer requirements. We devote
significant resources to programs directed towards developing new and enhanced
products, as well as developing new applications for existing products.

In fiscal years 2000, 1999 and 1998, our research and development
expenditures were $21.9 million, $24.0 million and $27.6 million respectively,
representing 35.0%, 39.5% and 20.3% of revenue. Research and development
expenditures consist primarily of salaries, project materials, consulting fees
and other costs associated with our ongoing research and development efforts.

Industry standards organizations, such as Semiconductor Equipment and
Materials International and American Standards for Testing and Materials are
pivotal in defining the test methods, measurement

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parameters and specifications governing commercial transactions within the
semiconductor industry. We maintain a significant presence on standards
committees of these two organizations and other international standards
organizations. We believe that our involvement with these organizations has
helped to ensure that our new products conform to industry standards.

BACKLOG

Backlog increased to approximately $30.4 million at April 30, 2000 from
approximately $20.6 million at April 30, 1999. This increase in backlog is
primarily attributable to a gradual increase in demand for capital equipment in
the semiconductor and data storage industries during the latter half of calendar
1999 and the first four months of calendar 2000. We schedule production based on
firm customer commitments and anticipated orders during the planning cycle.
Backlog is comprised of written purchase orders from customers which we have
accepted and expect to ship the related product or service within the following
twelve months. Customers may cancel or delay orders with limited or no penalty.
We do not believe that the level of backlog is an accurate indicator of our
performance in future periods.

MANUFACTURING

Our principal manufacturing activities take place at our ISO 9001-registered
facility in Westwood, Massachusetts, where semiconductor dimensional metrology
systems and semiconductor optical surface inspection equipment are manufactured,
in Newton, Massachusetts, where non-contact capacitive, dimensional metrology
for gaging products and magnetic characterization products for the data storage
industry are manufactured, and Tucson, Arizona, where interferometric based
surface metrology products are manufactured. Manufacturing activities consist
primarily of assembling and testing components and subassemblies which are
supplied by third party vendors and then integrated into our finished products.
Many of the components and subassemblies are standard products, although certain
items are made to our specification. We manufacture many of our semiconductor
metrology and inspection systems in a cleanroom environment.

PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS

We rely on a combination of patent, copyright, trademark and trade secret
laws and license agreements to establish and protect our proprietary rights in
our products. We believe, however, that our success depends to a greater extent
upon innovation, technological expertise and distribution strength. We enter
into standard confidentiality agreements with our employees and consultants and
seek to control access to and distribution of our proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our products or technology without authorization or to
develop similar technology independently. In addition, effective patent,
copyright and trade secret protection may be unavailable or limited in certain
foreign countries.

As of July 20, 2000 we hold 30 United States patents and 20 foreign patents
covering existing and potential products and have applied for 7 additional
patents in the United States and 19 additional foreign patents. We have licensed
certain patents and other intellectual property to a number of companies.

EMPLOYEES

As of April 30, 2000, we employed approximately 530 persons at all of our
locations. Management believes that our ongoing success depends on our continued
ability to attract and retain highly skilled employees. There can be no
assurance that we will be successful in attracting or retaining such personnel.
None of our employees are represented by a labor union, and we have experienced
no work stoppages. We consider our employee relations to be good.

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EXECUTIVE OFFICERS

The names, ages and positions held by our executive officers are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- --------------------------------------
<S> <C> <C>
Robert C. Abbe........................ 62 President and Chief Executive Officer
AK Lum................................ 51 Vice President and General Manager of
ADE Semiconductor Systems
Chris L. Koliopoulos.................. 47 Vice President and President of ADE
Phase Shift, Inc.
Noel S. Poduje........................ 55 Vice President of Strategic Technology
Development
</TABLE>

All executive officers are elected by the Board of Directors to serve in
their respective capacities until their successors are elected and qualified or
until their earlier resignations or removal.

Robert C. Abbe founded ADE in 1967. Since that time, he has served as
President, Chief Executive Officer and a Director of ADE. Mr. Abbe received an
AB in Physics from Harvard College.

Chris L. Koliopoulos joined ADE in June, 1998 through the merger with Phase
Shift Technology, Inc., which became a wholly owned subsidiary of ADE.
Dr. Koliopoulos was President and founder of Phase Shift Technology, has served
as a Vice President of ADE and President of ADE Phase Shift since the merger and
is a Director of ADE. Dr. Koliopoulos received a BS from the University of
Rochester and a MS and PhD from the University of Arizona.

AK Lum joined ADE in 1998 and has served as Vice President and General
Manager of ADE Semiconductor Systems Group. From 1997 to 1998, Mr. Lum served as
Vice President of Manufacturing of Epson Portland Inc. From 1974 to 1997,
Mr. Lum served Shin-Etsu Handotai-Group in various senior management positions.
Mr. Lum received a BA in electrical engineering from University of Technology,
Malaysia, and an MBA from City University, State of Washington.

Noel S. Poduje joined ADE in 1972 and has served as Vice President of
Strategic Technology Development since 1985. Mr. Poduje received a BS in
Electrical Engineering from the Massachusetts Institute of Technology.

CYCLICALITY OF OUR BUSINESS

Our business depends in large part upon the capital expenditures of
semiconductor wafer and device and data storage manufacturers, which in turn
depend on the current and anticipated market demand for integrated circuits,
products utilizing integrated circuits and systems requiring data storages,
respectively. The semiconductor and data storage industries are cyclical and
have historically experienced periodic downturns, which have had a severe effect
on the demand for capital equipment. Prior semiconductor and data storage
industry downturns and construction of excess capacity by the industries have
adversely affected our revenue, gross margin and net income and have also
adversely affected the market price of our common stock. In addition, the need
for continued investment in research and development and extensive customer
service and support capability worldwide will continue to limit our ability to
reduce expenses during industry downturns.

COMPETITION

The semiconductor and data storage equipment industries are highly
competitive. Companies with complementary technologies and greater financial
resources may enter these industries and develop products that are superior to
our products or achieve market acceptance. In the market for optical defect
inspection equipment, we compete directly with Hitachi Electronics Engineering
Co., Ltd. and KLA-Tencor Corporation, both of which have significantly greater
total assets and annual revenue than we do. In the metrology area of the device
industry, we have encountered, and expect to encounter in the future,
competition from companies offering similar and competing technologies, some of
which have

9
<PAGE>
significantly greater total assets and annual revenue than we do or have an
existing market presence in the device industry, or both. We also expect to
encounter intense competition in the areas of metrology and inspection for the
data storage industry. Our competitors can be expected to continue to improve
the design and performance of their products and to introduce new products with
competitive price/ performance characteristics. Competitive pressures can
necessitate price reductions or non-revenue generating shipments of new products
to certain strategic customers for evaluation purposes, which can adversely
affect our operating results. In order to remain competitive, we must maintain a
high level of investment in research and development, sales, marketing and
customer service. There can be no assurance that we will have sufficient
resources to continue to make such investment or that we will be able to make
the technological advances necessary to remain competitive.

We expect acquisitions and business combinations by our competitors and
potential competitors in the metrology as well as in the defect inspection
markets. The impact of this activity could:

- Allow them to offer new products without the lengthy time delays typically
associated with internal product development

- Limit our access to commercially significant technologies and/or new or
complementary products

- Permit them to accelerate the development and commercialization of new
competitive products and the marketing of existing competitive products to
their larger installed bases.

Accordingly, such business combinations and acquisitions by these companies
could have an adverse impact on both our market share and the pricing of our
products, which could have a material adverse effect on our business.

CUSTOMER AND INDUSTRY CONCENTRATION

A relatively limited number of customers have historically accounted for a
substantial portion of our revenue in each year. In fiscal years 2000, 1999 and
1998, sales to our top five customers in each period accounted for approximately
45.8%, 45.1% and 44.7%, respectively, of our revenue. The loss of or any
reduction in orders by any of these customers, including reductions due to
market, economic or competitive conditions in the semiconductor industry or in
other industries that manufacture products utilizing semiconductors, could
adversely affect our business, financial condition and results of operations. In
fiscal 2000, 1999 and 1998, we derived 58.3%, 57.7% and 64.7% of our revenue,
respectively, from customers in the semiconductor wafer industry. While we are
increasing our emphasis on expanding the level of our business in the device and
data storage industries, there can be no assurance that our efforts will be
successful. Our ability to maintain or increase our sales levels in the future
will depend in part upon our ability to obtain orders from new customers as well
as the financial condition and success of our existing customers and the general
economy. There can be no assurance that we will be able to increase the level of
our revenue in the future or that we will be able to retain existing customers
or to attract new customers. In addition, given the limited number of customers,
any delay in collecting, or inability to collect, accounts receivable could have
a material adverse effect on our financial results. See Notes 2 and 12 of Notes
to Consolidated Financial Statements.

DEPENDENCE ON SUPPLIERS

Certain of the components and subassemblies, including certain systems
controllers and robotics components, incorporated in our current systems and
those under development are obtained from a single source or a limited group of
suppliers. We have not qualified a second source for these products and the
partial or complete loss of certain of these sources could have an adverse
effect on our results of operations and damage customer relationships. Further,
a significant increase in the price of one or more of these components or
failure to perform up to specification could adversely affect our results of
operations.

10
<PAGE>
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

International sales accounted for 64.2%, 59.3% and 60.6% of our revenue for
fiscal years 2000, 1999 and 1998, respectively. See Note 12 of Notes to
Consolidated Financial Statements. We expect that international sales will
continue to represent a significant percentage of revenue. Our international
business may be affected by changes in demand resulting from:

- Fluctuations in interest and currency exchange rates

- The investment policies of foreign countries

- Changes in trade policies and/or tariff regulations

- Difficulties in obtaining U.S. export licenses.

Given that historically approximately 45%--50% of our revenue has come from
Asia, financial instability in certain Asian countries could materially affect
our competitive position and consequently, financial results.

ACQUISITIONS AND ALLIANCES

ADE has addressed the need to offer new products, in part, through the
acquisition of technology and other businesses. The acquisition of other
businesses involves numerous risks, including:

- Difficulties assimilating the operations, technologies and products of
acquired businesses.

- Diversion of management's attention from other business concerns.

- Entering markets in which we have no or limited direct prior experience
and must compete with competitors having stronger market positions.

- Potential loss of key employees of the acquired business.

Integrating acquired businesses requires, among other things, integration of
product offerings and coordination of sales, marketing, research and development
and management organizations. There can be no assurance that such integration
will be accomplished smoothly or successfully. The difficulties of integration
may be increased by the necessity of coordinating organizations that are
separated geographically. The inability of management to successfully integrate
the operations of any acquired businesses could have a material adverse effect
on our business and results of operations.

ITEM 2. PROPERTIES

Our principal operations are located in an approximately 118,000 square foot
company-owned building in Westwood, Massachusetts. We completed construction of
and occupied a 60,000 square foot building in Tucson, Arizona which was
completed in May 1999. We also own a 46,000 square foot building in Newton,
Massachusetts. In addition, we lease a 14,200 square foot building in Milpitas,
California under a five year lease that expires in December 2001. We also lease
space for sales and service support offices in various other locations.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended April 30, 2000.

11
<PAGE>
PART II

ITEM 4. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE OF COMMON STOCK

Our common stock trades on the Nasdaq National Market System under the
symbol "ADEX." The following table presents the high and low sale prices for
each quarter for the common stock as reported for the periods indicated.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30, 2000 HIGH LOW
-------------------------------- ---------- -----------
<S> <C> <C>
First quarter............................................... 14 1/8 8 7/16
Second quarter.............................................. 17 10 7/8
Third quarter............................................... 22 5/8 14 7/8
Fourth quarter.............................................. 27 14 7/16
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30, 1999 HIGH LOW
-------------------------------- ---------- -----------
<S> <C> <C>
First quarter............................................... 18 1/4 12 1/2
Second quarter.............................................. 14 6 1/2
Third quarter............................................... 14 7/8 8 1/16
Fourth quarter.............................................. 15 3/8 9 1/2
</TABLE>

The last sale price of the common stock on July 24, 2000, as reported by
Nasdaq, was $21 5/8 per share. As of July 24, 2000, there were 94 holders of
record of the common stock (approximately 3,500 beneficial holders).

We have never declared or paid any cash dividends on our common stock and
currently expect to retain future earnings for use in our business.

RECENT ISSUANCE OF UNREGISTERED SECURITIES

In June 1998, in consideration of a merger between ADE and Phase Shift
Technology, Inc., a privately-owned company, ADE issued an aggregate of
2,000,000 shares of common stock to the Phase Shift shareholders. All of the
recipients of shares were "accredited investors" under the definition of that
term in Regulation D under the Securities Act. The issuance of the shares was
privately negotiated in the context of negotiations for the merger with Phase
Shift, and was exempt from the registration requirements of Section 5 of the
Securities Act of 1933 pursuant to Section 4(2) of that Act.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table summarizes the financial data for our business. You
should read the selected financial data in conjunction with our historical
financial statements and related notes and the section of this annual report
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

12
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................... $ 62,506 $ 60,885 $135,700 $111,133 $73,078
Cost of revenue........................................... 35,475 46,489 61,755 49,414 34,125
-------- -------- -------- -------- -------
Gross profit.......................................... 27,031 14,396 73,945 61,719 38,953
-------- -------- -------- -------- -------
Operating expenses:
Research and development.............................. 21,884 24,026 27,580 17,689 8,049
Purchased in-process research and development......... -- -- 6,100 -- --
Marketing and sales................................... 13,002 12,280 15,638 14,501 10,555
General and administrative............................ 12,281 11,153 13,701 8,043 7,208
Restructuring charges................................. -- 2,318 -- -- --
-------- -------- -------- -------- -------
Total operating expenses............................ 47,167 49,777 63,019 40,233 25,812
-------- -------- -------- -------- -------
Income (loss) from operations............................. (20,136) (35,381) 10,926 21,486 13,141
Other income (expense), net............................... 1,280 2,600 2,347 387 348
-------- -------- -------- -------- -------
Income (loss) before provision for (benefit from) income
taxes and equity in net earnings (loss) of affiliated
companies............................................... (18,856) (32,781) 13,273 21,873 13,489
Provision for (benefit from) income taxes................. 102 (9,335) 3,301 6,926 4,615
-------- -------- -------- -------- -------
Income (loss) before equity in net earnings (loss) of
affiliated companies.................................... (18,958) (23,446) 9,972 14,947 8,874
Equity in net earnings (loss) of affiliated companies..... (1,489) (1,082) (1,005) 99 --
-------- -------- -------- -------- -------
Net income (loss)..................................... $(20,447) $(24,528) $ 8,967 $ 15,046 $ 8,874
-------- -------- -------- -------- -------
Basic earnings (loss) per share........................... $ (1.53) $ (1.89) $ 0.73 $ 1.46 $ 0.95
-------- -------- -------- -------- -------
Diluted earnings (loss) per share......................... $ (1.53) $ (1.89) $ 0.70 $ 1.38 $ 0.89
-------- -------- -------- -------- -------
Weighted average common shares--basic................. 13,353 12,989 12,215 10,301 9,302
-------- -------- -------- -------- -------
Weighted average common shares--diluted............... 13,353 12,989 12,822 10,880 9,938
-------- -------- -------- -------- -------
</TABLE>

<TABLE>
<CAPTION>
APRIL 30,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 35,001 $ 61,278 $ 72,711 $22,485 $22,495
Working capital........................................... 65,710 90,654 111,840 49,043 41,245
Total assets.............................................. 132,870 153,430 173,643 94,508 65,139
Long-term debt, less current portion...................... 11,950 12,537 8,613 5,091 677
Total stockholders' equity................................ $101,872 $120,822 $144,186 $64,730 $47,513
</TABLE>

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

THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ TOGETHER WITH THE DESCRIPTION OF BUSINESS, FINANCIAL
STATEMENTS AND THE RELATED NOTES OF ADE WHICH APPEAR ELSEWHERE IN THIS ANNUAL
REPORT. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
REFLECT ADE'S PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED BELOW AND IN THE FORWARD-LOOKING STATEMENTS
APPEARING ELSEWHERE IN THIS ANNUAL REPORT.

OVERVIEW

ADE was founded in 1967 to develop and market certain advanced concepts and
designs in capacitance and other measurement technologies suitable for
industrial applications requiring precise, reliable, damage-free and repeatable
measurements. Our products have evolved from single instruments used in off-line
engineering analysis to multi-function systems for automated in-line monitoring
of process-induced defects throughout the semiconductor wafer, device and data
storage manufacturing processes.

13
<PAGE>
We operate three major business segments, the Semiconductor Systems Group, ADE
Phase Shift and ADE Technologies. The Semiconductor Systems Group manufactures
multifunctional semiconductor metrology and automation systems and optical wafer
defect inspection equipment used to detect particles and other defects on
silicon wafer surfaces. ADE Phase Shift manufactures high performance,
non-contact surface metrology equipment using advanced interferometric
technology that provides enhanced yield management to the data storage,
semiconductor and optics industries. ADE Technologies manufactures high
precision magnetic characterization and non-contact dimensional metrology gaging
systems primarily for the data storage industry.

Revenue from product sales is recorded upon shipment, provided evidence of
an arrangement exists, fees are fixed or determinable and collection of the
related receivable is probable. We accrue for anticipated warranty costs upon
shipment. Service revenue is recognized as the services are performed provided
collection of the related receivable is probable. Service contract revenue is
recognized ratably over the contractual periods the services are provided. We do
not provide the right to return products. Revenue from software licenses is
recognized when an agreement has been executed, software has been delivered,
fees are fixed or determinable and collection of the related receivable is
probable. Revenue from software consulting services provided on a time and
reimbursable expense basis is recognized as the services are provided.

On June 11, 1998, ADE merged with Phase Shift Technology, Inc., an Arizona
corporation. Each outstanding share of Phase Shift's common stock was
exchanged for two shares of the ADE's common stock. A total of 2,000,000 shares
of our common stock were issued in this transaction. This transaction has been
accounted for as a pooling-of-interests. Accordingly, all prior period financial
statements have been restated to reflect the inclusion of Phase Shift
operations.

RESULTS OF OPERATIONS

The following table presents the percentage of total revenue for the
respective line items in ADE's consolidated statements of operations.

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenue............................................ 100.0% 100.0% 100.0%
Cost of revenue.................................... 56.8% 76.3% 45.5%
Gross profit....................................... 43.2% 23.7% 54.5%
Operating expenses:
Research and development........................... 35.0% 39.5% 20.3%
Purchased in-process research and development...... -- -- 4.5%
Marketing and sales................................ 20.8% 20.2% 11.5%
General and administrative......................... 19.6% 18.3% 10.1%
Restructuring charges.............................. -- 3.8% --
Income (loss) from operations...................... (32.2)% (58.1)% 8.1%
Other income, net.................................. 2.0% 4.3% 1.7%
Net income (loss).................................. (32.7)% (40.3)% 6.6%
</TABLE>

RESTRUCTURING

In January 1999, we began the consolidation of our Charlotte, North Carolina
operations and certain of our Milpitas, California operations into our
Massachusetts facilities to better align our cost structure with prevailing
semiconductor and data storage market conditions and to position ourselves with
more efficient operations for expected industry recoveries. Anticipated savings
upon the completion of the consolidation efforts include reduced cost of sales
due to reduced capacity-related expense, reduced payroll and related costs and
reduced travel costs. Expenses associated with these consolidations incurred in
fiscal 2000 and 1999 totaled $3.5 million and $4.5 million, respectively. The
fiscal 1999 consolidation

14
<PAGE>
expenses included a restructuring charge of $2.3 million and $2.2 million in
other non-recurring expenses. The restructuring charges include severance costs
of $1.2 million related to the termination of 71 employees in general and
administrative, marketing and sales, manufacturing, and engineering functions;
$185,000 in lease termination penalties and $931,000 in non-cash fixed asset
impairments related to furniture, fixtures and building improvements on the
terminated leased facilities. Other non-recurring expenses include travel,
consulting, and employee retention bonuses and have been included in general and
administrative expenses. Retention bonus expense related to payments to
employees who had been notified of their termination dates, but whose services
were required through specified dates during the consolidation process. This
expense has been recorded ratably over the respective estimated service periods.
During fiscal 2000 we have incurred recruiting costs and labor redundancy costs
associated with replacing certain personnel in Charlotte who elected not to
relocate to Massachusetts. Moving and related costs have been incurred through
the end of January 2000 and have been included in general and administrative
expenses. Restructuring charge activity during fiscal 1999 and fiscal 2000 and
the related accrual as of April 30, 2000 is as follows:

<TABLE>
<S> <C>
Balance at May 1, 1998...................................... $ --
Restructuring provision..................................... 2,318
Non-cash fixed asset impairments............................ (931)
Lease termination payments.................................. (185)
------
Balance at April 30, 1999................................... 1,202
Severance payments.......................................... (924)
------
Balance at April 30, 2000................................... $ 278
======
</TABLE>

REALIZABILITY OF DEFERRED TAX ASSETS

During the year ended April 30, 2000, we increased our valuation allowance
against deferred tax assets by $7.1 million, as the full value of our net
operating loss carryforwards and temporary differences may not be realized. This
increase was based upon weighing all evidence available to management, including
fiscal 2000 pre-tax losses of $18.9 million, current estimates of future taxable
income, the cyclicality of the semiconductor and data storage industries and the
current uncertainty within those markets. Net operating loss carryforwards
generated in fiscal 1999 and 2000 begin to expire in fiscal 2004 for state
income tax purposes and in fiscal 2019 for federal income tax purposes. We will
need to generate approximately $31.2 million of future taxable income to realize
the benefit of our net deferred tax assets as of April 30, 2000. The amount of
the deferred tax assets considered realizable could materially change in the
near term if estimates of future taxable income change or do not materialize.

FISCAL YEAR ENDED APRIL 30, 2000 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1999

REVENUE. Revenue increased 2.7% to $62.5 million in fiscal 2000 from
$60.9 million in fiscal 1999. The increase was primarily due to increased unit
sales our products. Increased sales of the Company's products were primarily due
to an increase in demand for capital equipment in the semiconductor wafer and
device industries as well as the computer hard disk industry. Capital equipment
utilization at wafer and device manufacturers has improved, resulting in some
capital equipment purchases to adjust capacity on existing lines. Advanced
industry requirements driven by shrinking device dimensions and larger silicon
wafers have resulted in technology purchases to evaluate the Company's next
generation of products.

Revenue from sales to Japan ADE Ltd, our 50% owned affiliate and a
distributor of our products, by the Semiconductor Systems Group and ADE
Technologies are reflected in segment revenue during the period they are shipped
by the respective segment, which can differ from the period the revenue is
recognized for consolidated financial reporting purposes. Consolidated revenue
on sales to Japan ADE Ltd is recognized when the related product or software is
shipped to and accepted by the end user of the product or software. Consolidated
revenue in fiscal 2000 was $1.9 million more than aggregate segment

15
<PAGE>
revenue for this period and reflects the impact of revenue that was recognized
in fiscal 2000 for consolidated reporting purposes but recognized in a prior
period on a segment basis.

GROSS MARGIN. Gross margin increased to 43.2% in fiscal 2000 from 23.6% in
fiscal 1999. The increase in the gross margin resulted primarily from the effect
of increased sales volume and a reduction in material costs due to decreased
excess and obsolete inventory expense during fiscal 2000 compared to fiscal
1999. In order to increase our capacity utilization, ADE has completed the
consolidation of the Semiconductor Systems Group manufacturing operations from
Charlotte, North Carolina into the Westwood, Massachusetts facility.

RESEARCH AND DEVELOPMENT. Research and development expense in fiscal 2000
decreased 8.9% to $21.9 million from $24.0 million in fiscal 1999 and decreased
as a percentage of revenue to 35.0% from 39.5%. The decrease in expense resulted
from cost control measures implemented during fiscal 2000 compared to fiscal
1999. The Company has continued its development efforts to enhance its existing
200mm and advanced 200mm wafer systems as its semiconductor industry customers
seek to improve their yields on 200mm wafers as well as efforts to develop and
enhance bridge tools, which can be used with either 200mm or 300mm wafers. The
Company also continues to develop new products for the computer disk industry,
including those which measure the magnetic properties of materials used in
manufacturing disk drives. The Company is committed to continuing its investment
in research and development to maintain its position as a technological leader,
which may necessitate continued research and development spending at or above
current levels.

MARKETING AND SALES. Marketing and sales expense increased 5.9% to
$13.0 million in fiscal 2000 from $12.3 million in fiscal 1999, and increased as
a percentage of revenue to 20.8% from 20.2%. The increased expense resulted
primarily from increased commissions expense due to increased sales volume
during the third and fourth quarters of fiscal 2000. Also contributing to the
increase was an increase in marketing expense due to an investment by the
Company to enhance device marketing. The mix of sales channels through which the
Company's products are sold may have a significant impact on the Company's
marketing and sales expense and the results in any period may not be indicative
of marketing and sales expense for future periods.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
10.1% to $12.3 million in fiscal 2000 from $11.2 million in fiscal 1999 and
increased as a percentage of revenue to 19.6% from 18.3%. Expenses increased
primarily as a result of expenses related to the final consolidation of the
Charlotte operations into the Westwood, Massachusetts facility.

OTHER INCOME. Other income was $1.3 million in fiscal 2000 versus
$2.6 million in fiscal 1999. Fiscal 2000 interest and other income of
$2.2 million was partially offset by interest expense of $919,000 associated
with the Industrial Development Bonds used to finance the acquisition and
renovation of our corporate headquarters and Semiconductor Systems Group
manufacturing facility in Westwood, Massachusetts, the headquarters and
manufacturing facility of ADE Technologies in Newton, Massachusetts and the
construction of the ADE Phase Shift manufacturing facility in Tucson, Arizona.

PROVISION FOR INCOME TAXES. The provision for income taxes was $102,000 in
2000 versus a benefit of $9.3 million in fiscal 1999. The fiscal 2000 provision
for income taxes consisted of state and foreign income taxes. The increase in
deferred tax assets during fiscal 2000 was offset entirely by an increase in the
valuation allowance of $7.1 million. The effective tax rate for fiscal 1999 was
28.5% and differed from the federal statutory rate primarily because of a
$3 million increase in the valuation allowance against deferred tax assets as of
April 30, 1999, partially offset by alternative minimum tax credit
carryforwards.

FISCAL YEAR ENDED APRIL 30, 1999 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1998

REVENUE. Revenue decreased 55.1% to $60.9 million in fiscal 1999 from
$135.7 million in fiscal 1998. Decreased sales of our products were primarily
due to reduced demand for capital equipment. Semiconductor Systems Group revenue
decreased 60.7%, reflecting the excess capacity for 200mm wafer

16
<PAGE>
production and continued delays in implementing production of 300mm wafers. Our
capital equipment systems are sold primarily at the beginning of the
semiconductor production process, with 57.7% percent of consolidated revenue
coming from semiconductor wafer manufacturers. Within the semiconductor device
market, which accounted for approximately 18.3% of consolidated revenue, there
have been positive statements of an industry recovery by leading device
manufacturers. Most of our wafer-making customers, however, have not been
profitable for more than a year. Consequently, these customers continue to
implement strict controls on capital expenditures, which has adversely impacted
sales of our equipment.

ADE Phase Shift and ADE Technologies revenue decreased 36.3% and 44.5%,
respectively. Decreased sales of these segments were primarily due to excess
capacity and the ongoing consolidation occurring in the data storage industry
creating reduced demand for capital equipment. ADE Phase Shift also experienced
decreased sales of its products to the optics and other industries. While
recognition of the importance of a production metrology strategy within the data
storage industry is increasing, which would create increased demand for
metrology products, we remain cautious as to when capacity-driven purchases of
our equipment will return.

GROSS MARGIN. Gross margin decreased to 23.6% in fiscal 1999 from 54.5% in
fiscal 1998. Semiconductor Systems Group gross margins decreased primarily due
to excess manufacturing capacity and incremental increases in excess and
obsolete inventory expense combined with relatively fixed costs associated with
its customer service organization. ADE Phase Shift gross margins remained
consistent in fiscal 1999 with fiscal 1998, while ADE Technologies gross margins
decreased due to excess manufacturing capacity and significant increases in
excess and obsolete inventory expense compared to that incurred in fiscal 1998.

RESEARCH AND DEVELOPMENT. Research and development expense in fiscal 1999
decreased 12.9% to $24.0 million from $27.6 million in fiscal 1998 and increased
as a percentage of revenue to 39.5% from 20.3%. The increase as a percentage of
revenue despite the decrease in absolute expense occurred due to the 55.1%
decrease in revenue in the current year. Semiconductor Systems Group expense
decreased primarily due to significantly reduced consulting expense. ADE Phase
Shift expense decreased primarily due to strict cost control measures
implemented as a result of the adverse impact on its revenue from the data
storage industry downturn. ADE Technologies expense increased due to payroll and
project materials increase related to the development of next generation
magnetics characterization systems for the data storage industry. We expect
research and development expense to continue to be significant as a percentage
of revenue.

MARKETING AND SALES. Marketing and sales expense decreased 21.5% to
$12.3 million in fiscal 1999 from $15.7 million in fiscal 1998, and increased as
a percentage of revenue to 20.2% from 10.1%. The decrease in expense results
from decreased sales commissions expense to external sales representatives,
primarily in Asia, for the Semiconductor Systems Group and ADE Technologies due
to significantly reduced revenue during the period. The mix of sales channels
through which our products are sold may have a significant impact on our
marketing and sales expense and the results in any period may not be indicative
of expense in future periods.

17
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expense decreased
18.6% to $11.2 million in fiscal 1999 from $13.7 million in fiscal 1998 and
increased as a percentage of revenue to 18.3% from 11.5%. Expense decreased at
each of our reportable segments primarily due to our aggressive cost reduction
strategy implemented throughout fiscal 1999, which included strict controls over
discretionary spending at each of our segments and reductions in workforce at
the Semiconductor Systems Group and ADE Technologies. These decreases were
partially offset by $2.2 million in non-recurring expenses associated with the
restructuring discussed above.

OTHER INCOME. Other income was $2.6 million in fiscal 1999 versus
$2.3 million in fiscal 1998. Fiscal 1999 interest income of $3.2 million was
partially offset by interest expense of $620,000 associated with the Industrial
Development Bonds used to finance the acquisition and renovation of our
corporate headquarters and Semiconductor Systems Group manufacturing facility in
Westwood, Massachusetts and the headquarters and manufacturing facility of ADE
Technologies in Newton, Massachusetts.

PROVISION FOR INCOME TAXES. The effective tax rates for fiscal 1999 and
1998 were 28.5% and 24.9%, respectively. The fiscal 1999 rate differed from the
federal statutory rate primarily because of a $3 million increase in the
valuation allowance against deferred tax assets as of April 30, 1999, partially
offset by alternative minimum tax credit carryforwards. The fiscal 1998 rate
differed from the federal statutory rate primarily because of the benefits from
ADE's foreign sales corporation, state income taxes and various tax credits. The
fiscal 1999 rate was higher than the fiscal 1998 rate due primarily to the
benefit from increased federal and state research and development tax credits
primarily realized in the fourth quarter of fiscal 1998, partially offset by the
impact of increase in the valuation allowance discussed above.

SELECTED CONSOLIDATED QUARTERLY OPERATING RESULTS

The following table presents consolidated statement of operations data for
each of the eight quarters in the period beginning May 1, 1998 and ending
April 30, 2000. This information has been derived from ADE's unaudited
consolidated financial statements. The unaudited financial statements have been
prepared on the same basis as the audited financial statements and include all
normal recurring adjustments considered necessary to present fairly this
information when read in conjunction with ADE's annual audited financial
statements and related notes appearing elsewhere in this annual report. Our
quarterly operating results have varied and may continue to vary significantly.
Our quarterly revenue typically is derived from a relatively small number of
customer orders. These customer orders may consist of multiple systems, each of
which are priced between approximately $100,000 and $750,000. As a result, the
timing of significant orders or a reduction in the number of systems shipped in
a quarter could have a material effect on our revenue and results of operations
for that quarter. The results for a particular quarter may also vary due to a
number of other factors, including:

- Economic conditions in the semiconductor and data storage industries

- Product mix of our sales for the period

- The sales distribution channel of our sales for the period

- Competitive pricing pressures

- Our ability to design, introduce and manufacture new products on a cost
effective and timely basis

- Customer cancellations or rescheduled shipments

- Production difficulties or the inability to obtain critical components
resulting in delayed shipments

- Seasonal factors such as customers' capital budget approval cycles.

These factors could have a material adverse effect on our results of
operations. Significant levels of our expenses are fixed in advance and based in
part on our expectations as to future revenue. As a consequence, any material
shortfall in revenue in a given quarter could have a material adverse effect on
our earnings.

18
<PAGE>

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1998 1998 1999 1999 1999 1999 2000 2000
-------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATONS DATA:
Revenue............................... $24,028 $12,239 $12,432 $12,186 $12,362 $13,625 $16,576 $19,943
Cost of revenue....................... 13,457 12,799 10,209 10,023 7,249 8,904 9,225 10,097
------- ------- ------- ------- ------- ------- ------- -------
Gross profit (loss)................... 10,571 (560) 2,223 2,163 5,113 4,721 7,351 9,846
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and development.......... 6,652 6,463 5,084 5,827 5,556 4,571 5,411 6,346
Marketing and sales............... 3,122 3,240 2,707 3,211 2,717 3,367 3,134 3,784
General and administrative........ 2,878 2,213 2,463 3,598 3,560 2,877 2,964 2,880
Restructuring charges............. -- -- 2,318 -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses...... 12,652 11,916 12,572 12,636 11,833 10,815 11,509 13,010
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.................. (2,081) (12,476) (10,349) (10,473) (6,720) (6,094) (4,158) (3,164)
Other income, net..................... 761 701 653 485 149 374 318 439
------- ------- ------- ------- ------- ------- ------- -------
Loss before provision for (benefit
from) income taxes and equity in net
loss of affiliated companies........ (1,320) (11,775) (9,696) (9,988) (6,571) (5,720) (3,840) (2,725)
Provision for (benefit from) income
taxes............................... (514) (4,201) (3,519) (1,100) -- -- -- 102
------- ------- ------- ------- ------- ------- ------- -------
Loss before equity in net loss of
affiliated companies................ (806) (7,574) (6,177) (8,888) (6,571) (5,720) (3,840) (2,827)
Equity in net loss of affiliated
companies........................... (7) (324) (422) (329) (614) (149) (676) (50)
------- ------- ------- ------- ------- ------- ------- -------
Net loss.............................. $ (813) $(7,898) $(6,599) $(9,217) $(7,185) $(5,869) $(4,516) $(2,877)
======= ======= ======= ======= ======= ======= ======= =======
Basic loss per share.................. $ (0.06) $ (0.61) $ (0.51) $ (0.71) $ (0.54) $ (0.44) $ (0.34) $ (0.21)
Diluted loss per share................ $ (0.06) $ (0.61) $ (0.51) $ (0.71) $ (0.54) $ (0.44) $ (0.34) $ (0.21)
Weighted average shares
outstanding--basic.................. 12,923 12,965 13,001 13,065 13,198 13,360 13,403 13,458
Weighted average shares
outstanding--diluted................ 12,923 12,965 13,001 13,065 13,198 13,360 13,403 13,458
</TABLE>

Our quarterly operating results have varied and may continue to vary
significantly due to a number of factors, including economic conditions in the
semiconductor and data storage industries, the timing of shipments of orders to
major customers, the mix of products sold and competitive pricing. Customers may
cancel or reschedule shipments. Product shipments could be delayed by production
difficulties or critical component inventory shortages. These factors could have
a material adverse effect on our results of operations. As cost of revenue
includes manufacturing overhead, which is relatively constant from quarter to
quarter, gross margin can vary significantly from quarter to quarter due to
varying levels of production and revenue. Marketing and sales expenses can vary
from quarter to quarter based on a number of factors, including mix of sales
channels, geographic mix and the timing of marketing events. There can be no
assurance that we will be profitable in any future period.

19
<PAGE>
FOURTH QUARTER ADJUSTMENTS

At April 30, 1999, we increased our valuation allowance against deferred tax
assets by $3 million, as the full value of our net operating loss carryforwards
and temporary differences may not be realized. This increase was based upon
weighing all evidence available to management. Recording this increase to the
valuation allowance decreased our annual effective tax rate to 28.5%, compared
to the estimated annual effective tax rate of 36.1% utilized during the first
three quarters of fiscal 1999. Also during the fourth quarter of fiscal 1999, we
increased our reserve for excess and obsolete inventory by $1.3 million for ADE
Technologies and $1.0 million for the Semiconductor Systems Group.

We recorded a $2.3 million credit to the provision for income taxes during
the fourth quarter of fiscal 1998, which included a $1.8 million credit
resulting from the difference between our actual effective tax rate for fiscal
1998 of 24.9% and the estimated effective tax rate of 35.0% utilized during the
first three quarters of fiscal 1998. Also in the fourth quarter of 1998, we
reversed accrued bonus expense of $1.3 million, which had been recorded in the
first two quarters of fiscal 1998. The difference between our actual effective
tax rate and the estimated effective tax rate used in the first three quarters
of fiscal 1998 resulted primarily from the effect of a $1.9 million pre-tax loss
for the fourth quarter of fiscal 1998, compared to pre-tax income of
$15.1 million for the first three quarters of fiscal 1998. Also contributing to
the difference in the estimated and actual effective tax rates were larger than
anticipated federal and state research and development tax credits due in part
to expenditures in the fourth quarter The reversal of the accrued bonus expense
reflects our cost reduction measures initiated in the fourth quarter of fiscal
1998. Pro forma net income for the nine months ended January 31, 1998, including
the reversal of the bonus accrual and utilizing the actual effective tax rate of
24.9%, is $12,673,000, compared to reported net income for the nine months ended
January 31, 1998 of $10,152,000

LIQUIDITY AND CAPITAL RESOURCES

At April 30, 2000, we had $35.0 million in cash and cash equivalents and
$65.7 million in working capital. In addition, we had $3.5 million in restricted
cash used as security for a tax-exempt Industrial Development Bond issued
through the Massachusetts Industrial Finance Agency in December 1997. We may
substitute a letter of credit in an amount equal to approximately 105% of the
outstanding principal balance as collateral for our obligations under this bond,
assuming we have the ability to borrow under a credit facility. This
substitution would allow the restricted cash balance to be used for general
corporate purposes. We also had an unsecured revolving line of credit facility
with a bank, with a maximum borrowing amount of $8 million or a specified
percentage of accounts receivable, whichever is less. The credit facility
provided us the option of borrowing at either the bank's prime rate or the
bank's LIBOR rate plus 2%. The credit facility expired and all outstanding
amounts thereunder were due December 21, 1999. There were no borrowings
outstanding on the date that the credit facility expired. The Company does not
intend to renew the credit facility or enter into a new credit facility with
another institution at this time. At April 30, 2000, ADE was in violation of
certain financial covenants related to the standby letter of credit agreements
used as security for a tax-exempt Industrial Development Bonds issued through
the Industrial Development Authority of the County of Pima, Arizona in
April 1999 and the Massachusetts Industrial Finance Agency in June 1996. We
received a waiver of this default as of April 30, 2000.

Cash used in operating activities for the year ended April 30, 2000 was
$17.5 million. This amount resulted from a net loss of $20.4 million, adjusted
for net non-cash charges of $7.3 million and a $4.3 million net increase in
working capital accounts. Non-cash items consisted of $6.0 million of
depreciation and amortization and $1.5 million as our share of the net loss of
affiliated companies, net of cash dividends received from the affiliates,
partially offset by a $207,000 increase in deferred tax assets.

The net increase in working capital total of $4.3 million was comprised of
increased accounts receivable, inventories and prepaid expenses of
$2.7 million, $7.8 million and $174,000, respectively, and a decrease in accrued
expenses and other current liabilities and deferred income on sales to Japan
ADE Ltd.

20
<PAGE>
(JAL), our 50% owned Japanese affiliate, of $1.4 million and $1.5, million
respectively. These amounts were partially offset by increased accounts payable
of $1.8 million and a decrease in the income tax refund receivable of
$7.4 million.

The increase in accounts receivable resulted from the significantly
increased billings and revenue during the last two quarters of fiscal 2000. The
increase in inventory resulted primarily from inventory purchases related to a
ramp up in production to meet the increase in customer orders. The increase in
prepaid expenses results primarily from the timing of payments. The decrease in
accrued liabilities and other current liabilities resulted from the timing of
payments on vendor/supplier invoices related to the construction of our Tucson,
Arizona facility. The decrease in deferred income on sales to Japan ADE Ltd. is
due to the timing of shipments to JAL.

The increase in accounts payable resulted primarily from increased inventory
purchases related to the ramp up in production as well as the timing of the
payables cycle. The decrease in income tax receivable resulted from receipt of
an income tax refund generated by fiscal 1999 operating losses.

Cash used in investing activities was $9.9 million, and consisted of
$7.5 million for purchases of fixed assets, $1.0 million in advances to
affiliated companies and an aggregate increase in other assets and restricted
cash of $1.4 million.

Cash provided by financing activities was $872,000 and consisted of proceeds
from the issuance of common stock from the exercise of stock options and the
purchase of stock under the employee stock purchase plan of $1.4 million. This
amount was partially offset by $564,000 in repayments of long-term debt.

We expect to meet our near-term working capital needs and capital
expenditures primarily through our available cash and cash equivalents.

YEAR 2000 IMPACT

We have not experienced any problems with our computer systems relating to
distinguishing twenty-first century dates from twentieth century dates, which
generally are referred to as year 2000 problems. We are also not aware of any
material year 2000 problems with our customers or vendors. Accordingly, we do
not anticipate incurring material expenses or experiencing any material
operational disruptions as a result of any year 2000 problems. The Company
previously incurred total costs of approximately $157,000 to address year 2000
readiness, which included programming, testing and implementing software for
year 2000 modifications. These costs were funded through operations.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which required adoption in
periods beginning after June 15, 1999. SFAS No. 133 was subsequently amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133" and will
now be effective for fiscal years beginning after June 15, 2000. The Company
does not expect SFAS No. 133 to have a material effect on its financial
condition or results of operations.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues. The Company is
required to adopt SAB 101 in the fourth quarter of fiscal 2001. The impact of
SAB 101 on the Company's financial statements has not yet been determined.

21
<PAGE>
In March 2000, the FASB issued Interpretation ("FIN") No. 44, "Accounting
for Certain Transactions Involving Stock Compensation--an interpretation of APB
Opinion No. 25". FIN No. 44 clarifies the application of APB Opinion No. 25 to
certain issues including: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequence of various modifications to
the terms of previously fixed stock options or awards; and the accounting for
the exchange of stock compensation awards in business combination. FIN No. 44 is
effective July 1, 2000, but certain conclusions in FIN No. 44 are applicable
retroactively to specific events occurring after either December 15, 1998 or
January 12, 2000. ADE Corporation does not expect the application of FIN No. 44
to have a material impact on the Company's financial position or results of
operations.

INFLATION

To date, inflation has not had a significant impact on our operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is contained on pages F-1 through F-22 of
this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

22
<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding directors required by this Item is included in the
definitive Proxy Statement for the Company's 2000 Annual Meeting of
Stockholders, to be filed with the Commission on or about August 16, 2000 under
"Election of Directors" and is incorporated herein by reference. The information
regarding executive officers required by this Item is included in Part I of this
Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is included in the 2000 Proxy
Statement under "Executive Compensation" and is incorporated herein by reference
(excluding, however, the "Report on Executive Compensation" and the Performance
Graph contained in the 2000 Proxy Statement, which shall not be deemed
incorporated herein).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is included in the 2000 Proxy
Statement under "Security Ownership of Certain Beneficial Owners and Management"
and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

23
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements. The Financial Statements required to be filed by
Item 8 of Form 10-K, and filed herewith, are as follows:

<TABLE>
<CAPTION>
PAGE NUMBER IN
THIS FORM 10-K
--------------
<S> <C>
Report of Independent Accountants........................... F-1

Consolidated Balance Sheet as of April 30, 2000 and 1999.... F-2

Consolidated Statement of Operations for the three years
ended April 30, 2000...................................... F-3

Consolidated Statement of Stockholders' Equity for the three
years ended
April 30, 2000............................................ F-4

Consolidated Statement of Cash Flows for the three years
ended April 30, 2000...................................... F-5

Notes to Consolidated Financial Statements.................. F-6
</TABLE>

(a)(2) Financial Statement Schedule:

<TABLE>
<S> <C>
II--Valuation and Qualifying Accounts and Reserves
for the three years ended April 30, 2000........... S-1
</TABLE>

All other schedules are omitted because they are either not applicable or
the required information is included in the financial statements or related
notes.

24
<PAGE>
(a)(3) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of February 27, 1997
by and between ADE Corporation, ADE Technologies, Inc.,
Digital Measurement Systems, Inc., Dennis E. Speliotis,
Elias Speliotis, Evanthia Speliotis, Ismene Speliotis,
Advanced Development Corporation, David C. Bono and Alan
Sliski (filed as Exhibit 10.18 to the Company's Form 10-K
for the fiscal year ended April 30, 1997 and incorporated
herein by reference).

2.2 Agreement and Plan of Merger dated as of May 31, 1998 by and
among ADE Corporation, Theta Acquisition Corp., Phase Shift
Technology, Inc., Chris Koliopoulos and David Basila (filed
as Exhibit 2 to the Company's Form 8-K dated June 25, 1998
and incorporated herein by reference).

2.3 Purchase and Sale Agreement dated as of February 28, 1997 by
and between ADE Corporation and Dennis E. Speliotis,
individually and as Trustee of Thouria Investment Trust
under a Declaration of Trust dated August 18, 1992, Elias
Speliotis, Evanthia Speliotis and Ismene Speliotis (filed as
Exhibit 10.20 to the Company's Form 10-K for the fiscal year
ended April 30, 1997 and incorporated herein by reference).

3.1 Restated Articles of Organization (filed as Exhibit 3.1 to
the Company's Registration Statement on Form S-1 (33-96408)
or amendments thereto and incorporated herein by reference).

3.2 By-laws (filed as Exhibit 3.2 to the Company's Registration
Statement on Form S-1 (33-96408) or amendments thereto and
incorporated herein by reference).

4.1 Registration Rights Agreement dated as of February 28, 1997
by and between ADE Corporation and Dennis E. Speliotis,
individually and as Trustee of Thouria Investment Trust
under a Declaration of Trust dated August 18, 1992 recorded
in the Middlesex South District Registry of Deeds at Book
22305, Page 375 (filed as Exhibit 10.21 to the Company's
Form 10-K for the fiscal year ended April 30, 1997 and
incorporated herein by reference).

4.2 Registration Rights Agreement dated as of February 27, 1997,
by and among ADE Corporation and Advanced Development
Corporation, David C. Bono and Alan Sliski (filed as Exhibit
10.19 to the Company's Form 10-K for the fiscal year ended
April 30, 1997 and incorporated herein by reference).

4.3 Registration Rights Agreement dated as of May 31, 1998 by
and among ADE Corporation, Chris Koliopoulos and David
Basila (filed as Exhibit 4.6 to the Company's Form 8-K dated
June 25, 1998 and incorporated herein by reference).

10.1 Form of Employee Confidentiality Agreement (filed as Exhibit
10.1 to the Company's Registration Statement on Form S-1
(333-96408) or amendments thereto and incorporated herein by
reference).

10.2 1997 Stock Option Plan (filed as Exhibit 4.3 to the
Company's Registration Statement on Form S-8(333-46505) or
amendments thereto and incorporated herein by reference).

10.3 Amendment to 1997 Stock Option Plan dated April 7, 1999
(filed as Exhibit 10.3 to the Company's Form 10-K for the
fiscal year ended April 30, 1999 and incorporated herein by
reference).

10.4 1995 Stock Option Plan (filed as Exhibit 10.4 to the
Company's Registration Statement on Form S-1 (33-96408) or
amendments thereto and incorporated herein by reference).*
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
10.5 1992 Stock Option Plan (filed as Exhibit 10.5 to the
Company's Registration Statement on Form S-1 (33-96408) or
amendments thereto and incorporated herein by reference).*

10.6 Amendment to 1992 Stock Option Plan dated April 7, 1999
(filed as Exhibit 10.6 to the Company's Form 10-K for the
fiscal year ended April 30, 1999 and incorporated herein by
reference).

10.7 1982 Stock Option Plan (filed as Exhibit 4.5 to the
Company's Registration Statement on Form S-8 (333-2280) and
incorporated herein by reference).*

10.8 Employee Stock Purchase Plan (as amended) (filed as Exhibit
10.6 to the Company's Form 10-K for the fiscal year ended
April 30, 1996 and incorporated herein by reference).*

10.9 Lease of ADE Optical Systems' Charlotte, North Carolina
facility, dated June 26, 1984, as assigned and renewed,
between Pine Brook Center Limited Partnership and ADE
Optical Systems Corporation (filed as Exhibit 10.7 to the
Company's Registration Statement on Form S-1 (33-96408) or
amendments thereto and incorporated herein by reference).

10.10 Purchase and Sale Agreement for 80 Wilson Way, Westwood,
Massachusetts, dated January 11, 1996, between Met Path New
England, Inc., and the Company, with Schedules (filed as
Exhibit 10.12 to the Company's Form 10-K for the fiscal year
ended April 30, 1996 and incorporated herein by reference).

10.11 Loan Agreement dated as of June 7, 1996, among GE Capital
Public Finance, Inc., Massachusetts Industrial Finance
Agency and the Company (filed as Exhibit 10.9 to the
Company's Form 10-K for the fiscal year ended April 30, 1996
and incorporated herein by reference).

10.12 Certificate as to Nonarbitrage and Tax Compliance, dated as
of June 7, 1996, from the Company to Massachusetts
Industrial Finance Agency (filed as Exhibit 10.10 to the
Company's Form 10-K for the fiscal year ended April 30, 1996
and incorporated herein by reference).

10.13 Letter of Credit Agreement, dated June 7, 1996, between
Citizens Bank of Massachusetts and the Company (filed as
Exhibit 10.11 to the Company's Form 10-K for the fiscal year
ended April 30, 1996 and incorporated herein by reference).

10.14 Mortgage, Security Agreement, and Assignment, dated June 7,
1996, from the Company to Citizens Bank of Massachusetts
(filed as Exhibit 10.13 to the Company's Form 10-K for the
fiscal year ended April 30, 1996 and incorporated herein by
reference).

10.15 Pledge Agreement, dated June 7, 1996, from the Company to
Citizens Bank of Massachusetts (filed as Exhibit 10.14 to
the Company's Form 10-K for the fiscal year ended April 30,
1996 and incorporated herein by reference).

10.16 Oil and Hazardous Materials Indemnification Agreement, dated
June 7, 1996, between the Company and Citizens Bank of
Massachusetts (filed as Exhibit 10.15 to the Company's Form
10-K for the fiscal year ended April 30, 1996 and
incorporated herein by reference).

10.17 Indemnification Agreement, dated as of February 28, 1996,
among MetPath of New England, Inc., Corning Life Sciences,
Inc. and the Company (filed as Exhibit 10.16 to the
Company's Form 10-K for the fiscal year ended April 30, 1996
and incorporated herein by reference).

10.18 Letter Agreement regarding collateral assignment of
Indemnification from the Company to Citizens Bank of
Massachusetts, with attachment, (filed as Exhibit 10.17 to
the Company's Form 10-K for the fiscal year ended April 30,
1996 and incorporated herein by reference).
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
10.19 Escrow Agreement dated as of May 31, 1998 by and among ADE
Corporation, Chris Koliopoulos, David Basila, and Norman
Fenton as Escrow Agent (as Exhibit 10.20 to the Company's
Form 10-K for the fiscal year ended April 30, 1998, and
incorporated herein by reference.).

10.20 Noncompetition Agreement dated as of May 31, 1998 by and
between ADE Corporation and Chris Koliopoulos (filed as
Exhibit 10.21 to the Company's Form 10-K for the fiscal year
ended April 30, 1998, and incorporated herein by reference).

10.21 Noncompetition Agreement dated as of May 31, 1998 by and
between ADE Corporation and David Basila (filed filed as
Exhibit 10.22 to the Company's Form 10-K for the fiscal year
ended April 30, 1998, and incorporated herein by reference).

10.22 Employment Agreement dated as of May 31, 1998 by and between
Phase Shift Technology, Inc. and Chris Koliopoulos (filed as
Exhibit 10.23 to the Company's Form 10-K for the fiscal year
ended April 30, 1998, and incorporated herein by reference).

10.23 Employment Agreement dated as of May 31, 1998 by and between
Phase Shift Technology, Inc. and David Basila (filed as
Exhibit 10.24 to the Company's Form 10-K for the fiscal year
ended April 30, 1998, and incorporated herein by reference).

21.1 Subsidiaries of the Company (filed as Exhibit 21.1 to the
Company's Form 10-K for the fiscal year ended April 30, 1998
and incorporated herein by reference).

23.1 Consent of PricewaterhouseCoopers LLP (filed as Exhibit 23.1
to the Company's Form 10-K for the fiscal year ended
April 30, 1999 and incorporated herein by reference).

24.1 Power of Attorney (filed herewith as part of the signature
page hereto).

27 Financial Data Schedule (filed herewith).
</TABLE>

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

* Compensatory plan or agreement applicable to management and employees.

27
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS ANNUAL REPORT ON
FORM 10-K TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.

<TABLE>
<S> <C> <C>
ADE CORPORATION

July 28, 2000 By: /s/ ROBERT C. ABBE
-----------------------------------------
Robert C. Abbe
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Each person whose signature appears below constitutes and appoints Robert C.
Abbe, Brian Heath, Eileen Smith Ewing, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
in each of them, for him and in his name, place, and stead, and in any and all
capacities, to sign this annual report on Form 10-K of ADE Corporation and any
amendments thereto, and to file the same, with all exhibits thereto and any
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully and to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them or their or
his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE COMPANY
IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT C. ABBE President, Chief Executive
------------------------------------------- Officer and Director (Principal July 28, 2000
Robert C. Abbe Executive Officer)

/s/ BRIAN J. HEATH Director of Finance (Principal
------------------------------------------- Financial Officer) July 28, 2000
Brian J. Heath

/s/ JOSEPH E. ROVATTI Controller (Principal Accounting
------------------------------------------- Officer) July 28, 2000
Joseph E. Rovatti

/s/ LANDON T. CLAY Chairman of the Board
------------------------------------------- July 28, 2000
Landon T. Clay
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CHRIS L. KOLIOPOULOS Vice President of ADE, President
------------------------------------------- of ADE Phase Shift and Director July 28, 2000
Chris L. Koliopoulos

/s/ FRANCIS B. LOTHROP, JR. Director
------------------------------------------- July 28, 2000
Francis B. Lothrop, Jr.

/s/ H. KIMBALL FAULKNER Director
------------------------------------------- July 28, 2000
H. Kimball Faulkner

/s/ KENDALL WRIGHT Director
------------------------------------------- July 28, 2000
Kendall Wright

/s/ HARRIS CLAY Director
------------------------------------------- July 28, 2000
Harris Clay
</TABLE>

29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of ADE Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a)(1) on page 24 present fairly, in all material
respects, the financial position of ADE Corporation and its subsidiaries at
April 30, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended April 30, 2000, in
conformity with accounting principles generally accepted in the United States.
In addition, in our opinion, the financial statement schedule listed in the
index appearing under Item 14 (a) (2) on page 24 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
June 16, 2000

F-1
<PAGE>
ADE CORPORATION

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 35,001 $ 61,278
Accounts receivable:
Trade, less allowance for doubtful accounts of $629 and
$820, respectively.................................... 13,935 10,192
Affiliate............................................... 614 1,651
Inventories............................................... 29,968 22,178
Income tax refund receivable.............................. -- 7,425
Prepaid expenses and other current assets................. 756 582
Deferred income taxes..................................... 4,484 7,419
-------- --------
Total current assets.................................. 84,758 110,725

Fixed assets, net........................................... 30,724 28,268
Deferred income taxes....................................... 6,106 2,964
Investments................................................. 3,331 3,869
Intangible assets, net...................................... 3,892 3,669
Restricted cash............................................. 3,705 3,533
Other assets................................................ 354 402
-------- --------
$132,870 $153,430
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 598 $ 575
Accounts payable.......................................... 4,017 2,256
Accrued expenses and other current liabilities............ 14,096 15,449
Deferred income on sale to affiliate...................... 337 1,791
-------- --------
Total current liabilities............................. 19,048 20,071

Long-term debt.............................................. 11,950 12,537

STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares
authorized; none issued or outstanding.................. -- --
Common stock, $.01 par value; 25,000,000 shares
authorized; 13,479,066 and 13,276,402 issued and
outstanding at April 30, 2000 and 1999, respectively.... 135 133
Capital in excess of par value............................ 101,580 100,146
Retained earnings......................................... 178 20,625
-------- --------
101,893 120,904
Deferred compensation..................................... (21) (82)
-------- --------
101,872 120,822
-------- --------
Commitments (Note 15)
$132,870 $153,430
======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-2
<PAGE>
ADE CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenue..................................................... $ 53,719 $ 51,631 $117,925
Revenue from affiliate...................................... 8,787 9,254 17,775
-------- -------- --------
Total revenue........................................... 62,506 60,885 135,700
-------- -------- --------
Cost of revenue............................................. 32,190 42,477 54,645
Cost of revenue from affiliate.............................. 3,285 4,012 7,110
-------- -------- --------
Total cost of revenue................................... 35,475 46,489 61,755
-------- -------- --------
Gross profit.......................................... 27,031 14,396 73,945
-------- -------- --------
Operating expenses:
Research and development................................ 21,884 24,026 27,580
Purchased in-process research and development........... -- -- 6,100
Marketing and sales..................................... 13,002 12,280 15,638
General and administrative.............................. 12,281 11,153 13,885
Restructuring charges................................... -- 2,318 --
Amortization of excess of net assets acquired over
cost.................................................... -- -- (184)
-------- -------- --------
Total operating expenses.............................. 47,167 49,777 63,019
-------- -------- --------
Income (loss) from operations............................... (20,136) (35,381) 10,926
Other income (expense):
Interest and other income............................... 2,199 3,220 2,854
Interest expense........................................ (919) (620) (507)
-------- -------- --------
Income (loss) before provision for (benefit from) income
taxes and equity in net loss of affiliated companies...... (18,856) (32,781) 13,273
Provision for (benefit from) income taxes................... 102 (9,335) 3,301
-------- -------- --------
Income (loss) before equity in net loss of affiliated
companies................................................. (18,958) (23,446) 9,972
Equity in net loss of affiliated companies.................. (1,489) (1,082) (1,005)
-------- -------- --------
Net income (loss)........................................... $(20,447) $(24,528) $ 8,967
======== ======== ========

Basic earnings (loss) per share............................. $ (1.53) $ (1.89) $ 0.73
Diluted earnings (loss) per share........................... $ (1.53) $ (1.89) $ 0.70

Weighted average shares outstanding--basic.................. 13,353 12,989 12,215
Weighted average shares outstanding--diluted................ 13,353 12,989 12,822
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE>
ADE CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK
--------------------- CAPITAL IN TOTAL
NUMBER PAR EXCESS OF RETAINED DEFERRED STOCKHOLDERS'
OF SHARES VALUE OF PAR EARNINGS COMPENSATION EQUITY
---------- -------- ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1997............. 10,604,160 $106 $ 28,641 $ 36,186 $(204) $ 64,729

Sale of common stock in connection
with public offering in August 1997,
net of issuance costs of $4,320..... 2,300,000 23 67,820 67,843
Exercise of common stock options...... 183,896 2 834 836
Sale of common stock pursuant to the
Employee Stock Purchase Plan........ 27,279 -- 452 452
Common stock issued in lieu of Board
of Directors fees................... 717 -- 12 12
Amortization of deferred
compensation........................ 61 61
Tax benefit related to exercise of
common stock options................ 1,286 1,286
Net income............................ 8,967 8,967
---------- ---- -------- -------- ----- --------
Balance at April 30, 1998............. 13,116,052 131 99,045 45,153 (143) 144,186

Exercise of common stock options...... 106,820 2 517 519
Sale of common stock pursuant to the
Employee Stock Purchase Plan........ 53,530 -- 469 469
Amortization of deferred
compensation........................ 61 61
Tax benefit related to exercise of
common stock options................ 115 115
Net loss.............................. (24,528) (24,528)
---------- ---- -------- -------- ----- --------
Balance at April 30, 1999............. 13,276,402 133 100,146 20,625 (82) 120,822

Exercise of common stock options...... 157,250 2 957 959
Sale of common stock pursuant to the
Employee Stock Purchase Plan........ 45,414 -- 477 477
Amortization of deferred
compensation........................ 61 61
Net loss.............................. (20,447) (20,447)
---------- ---- -------- -------- ----- --------
Balance at April 30, 2000............. 13,479,066 $135 $101,580 $ 178 $ (21) $101,872
========== ==== ======== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE>
ADE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)......................................... $(20,447) $(24,528) $ 8,967
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization......................... 5,881 5,945 3,436
In-process research and development from business
acquisition......................................... -- -- 6,100
Non-cash portion of restructuring charge.............. -- 931 --
Equity in net loss of affiliated companies, net of
dividends received.................................. 1,544 1,192 1,060
Deferred income taxes................................. (207) (808) (3,702)
Shares issued in lieu of directors' fees.............. -- -- 12
Amortization of deferred compensation................. 61 61 61
Changes in assets and liabilities, net of acquisition:
Accounts receivable, trade........................ (3,743) 5,353 5,495
Accounts receivable, affiliate.................... 1,037 (258) (310)
Inventories....................................... (7,790) 6,614 (5,923)
Income tax refund receivable...................... 7,425 (2,074) (4,954)
Prepaid expenses and other current assets......... (174) 640 (1,189)
Accounts payable.................................. 1,761 (3,438) (232)
Accrued expenses and other current liabilities.... (1,353) 3,244 (3,171)
Deferred income on sales to affiliate............. (1,454) (720) (150)
-------- -------- --------
Net cash provided by (used in) operating
activities.................................. (17,459) (7,846) 5,500
-------- -------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of fixed assets................................. (7,510) (7,759) (13,075)
Change in restricted cash................................. (172) 275 (3,808)
Equity investments and advances........................... (1,006) (1,169) (1,790)
Acquisition of business for cash.......................... -- -- (10,048)
Increase in other assets.................................. (1,002) (102) (27)
-------- -------- --------
Net cash used in investing activities......... (9,690) (8,755) (28,748)
-------- -------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayment of long-term debt............................... (564) (435) (943)
Proceeds from issuance of long-term debt.................. -- 4,500 4,000
Proceeds from issuance of common stock, net of issuance
costs................................................... 1,436 988 69,131
Tax benefit related to the exercise of common stock
options................................................. -- 115 1,286
-------- -------- --------
Net cash provided by financing activities..... 872 5,168 73,474
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ (26,277) (11,433) 50,226
Cash and cash equivalents, beginning of year................ 61,278 72,711 22,485
-------- -------- --------
Cash and cash equivalents, end of year...................... $ 35,001 $ 61,278 $ 72,711
======== ======== ========
</TABLE>

See supplemental disclosures of cash flow information (Note 16)

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

ADE Corporation (the "Company") designs, manufactures, markets and services
highly precise, automated measurement, defect detection and handling equipment
with current applications in the production of semiconductor wafers, integrated
circuits, data storage and optics industries. The predominant markets for the
Company consist of semiconductor wafer and device manufacturing concerns as well
as data storage device and disk drive manufacturers located in the United
States, Japan, Europe and the Far East.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany transactions and
balances have been eliminated.

Investments in companies in which the Company has a majority voting interest
but does not have control due to significant minority stockholder rights and
investments in 50% or less owned companies over which the company has the
ability to exercise significant influence are accounted for using the equity
method. Investments in 20% or less owned companies are accounted for using the
cost method (Note 4).

REVENUE RECOGNITION

Revenue from product sales is recorded upon shipment, provided evidence of
an arrangement exists, fees are fixed or determinable and collection of the
related receivable is probable. We accrue for anticipated warranty costs upon
shipment. Service revenue is recognized as the services are performed, provided
collection of the related receivable is probable. Service contract revenue is
recognized ratably over the contractual periods the services are provided. We do
not provide the right to return products. Revenue from software licenses is
recognized when an agreement has been executed, software has been delivered,
fees are fixed or determinable and collection of the related receivable is
probable. Revenue from software consulting services provided on a time and
reimbursable expense basis is recognized as the services are provided.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company
invests its excess cash in money market accounts. These investments are subject
to minimal credit and market risks. At April 30, 2000 and 1999, the Company has
classified its cash equivalent investments totaling $30,951,000 and $51,914,000,
respectively, as available for sale. The carrying amount of these investments
approximates fair market value.

INVENTORIES

Inventories are stated at the lower of cost or market, cost being determined
on a first-in, first-out basis.

FIXED ASSETS

Fixed assets are stated at cost. Additions and betterments, unless of a
relatively minor amount, are capitalized. Expenditures for normal maintenance
and repairs are charged to expense as incurred. Depreciation is provided by use
of the straight-line method over the estimated useful lives of the assets.

F-6
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leasehold improvements are amortized over the shorter of their useful life or
the remaining life of the lease.

INTANGIBLE ASSETS

Intangible assets consist of capitalized license fees for software included
in the Company's products as well as the estimated fair value of certain assets
obtained through the acquisition of the Semiconductor Solutions Division of LPA
Software, Inc. ("SSD") (Note 3). Goodwill and assembled workforce acquired in
connection with the acquisition of SSD are amortized on a straight-line basis
over ten and six years, respectively. Capitalized software is amortized at the
greater of 1) the ratio that current gross revenue for the related products bear
to the total current and anticipated future gross revenue for those products or
2) on a straightline basis over its estimated useful life.

CONCENTRATIONS

CREDIT RISK

Financial instruments which potentially expose the Company to concentration
of credit risk include cash, cash equivalents and trade accounts receivable. A
significant amount of the Company's cash and cash equivalents are held by three
financial institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured cash balances totaled
approximately $3,214,000 and $8,437,000 at April 30, 2000 and 1999,
respectively. The Company does not believe that such deposits are subject to any
unusual credit risk associated with operating its business.

The Company's customer base primarily consists of semiconductor wafer,
semiconductor device and data storage manufacturers. Accounts receivable from
two customers accounted for approximately 22% and 32% of total accounts
receivable at April 30, 2000 and 1999, respectively. The Company performs
ongoing credit evaluations of customers' financial condition and has used
letters of credit from financial institutions to secure payments, although it
generally does not require collateral. The Company maintains reserves for
potential credit losses.

SUPPLIERS

Certain of the components and subassemblies incorporated into the Company's
systems are obtained from a single source or a limited group of suppliers. The
Company seeks to reduce the impact from its dependence on those sole and limited
source suppliers by considering alternate sources of supply, alternate designs
for its products and by maintaining an adequate supply of the components and
subassemblies. However, the loss of one or more of the sole or limited suppliers
could cause a delay in manufacturing and a potential loss of sales, which could
affect operating results adversely.

FINANCIAL INSTRUMENTS

The carrying amount of the Company's financial instruments, which include
cash, cash equivalents, accounts receivable, accounts payable, accrued expenses,
and long-term debt, approximates their fair value at the balance sheet dates. It
was not practicable to estimate the fair value of the Company's long-term
investments as the stock of the related investees is not publicly traded.

F-7
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION

Stock-based compensation awards to employees under the Company's stock plans
are accounted for using the intrinsic value method prescribed in Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. The Company has adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 123, ("SFAS
No.123") "Accounting for Stock-Based Compensation."

EARNINGS (LOSS) PER SHARE

Earnings (loss) per share are presented in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which
requires the presentation of "basic" earnings per share and "diluted" earnings
per share. Basic earnings (loss) per share is computed by dividing net income
(loss) available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings (loss) per share is computed
using the weighted average number of common shares outstanding and gives effect
to all dilutive potential common shares outstanding during the period. Potential
common shares include shares issuable upon the assumed exercise of dilutive
stock options and shares issued in the PST merger held in escrow. For the years
ended April 30, 2000 and 1999, respectively, 256,976 and 233,582 common shares
issuable upon the exercise of stock options are antidilutive and for the year
ended April 30, 2000, 200,000 shares issued in the PST merger held in escrow are
antidilutive because the Company recorded a net loss for the year and,
therefore, have been excluded from the diluted earnings (loss) per share
computation.

The following is a reconciliation of the shares used in calculating basic
and diluted earnings (loss) per share:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUANDS)
<S> <C> <C> <C>
Shares used in computation:
a. Weighted average common stock outstanding used
in computation of basic earnings (loss) per
share.......................................... 13,353 12,989 12,215
b. Dilutive effect of stock options and
warrants....................................... -- -- 407
c. Dilutive effect of shares held in escrow....... -- -- 200
------ ------ ------
d. Shares used in computation of diluted earnings
(loss) per share............................... 13,353 12,989 12,822
====== ====== ======
</TABLE>

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at April 30, 2000 and 1999, and the reported amounts
of revenue and expenses during the three year period ended April 30, 2000. Areas
particularly subject to estimation include the allowance for doubtful accounts,
the reserve for potential excess and obsolete inventory, the carrying value of
the Company's intangible assets and the valuation allowance on deferred tax
assets. Actual results could differ from those estimates.

F-8
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS

Certain amounts in the 1998 financial statements have been reclassified to
conform with the 2000 and 1999 presentation.

NEW ACCOUNTING PRONOUNCEMENTS

Statement No. 133" and will now be effective for fiscal years beginning
after June 15, 2000. The Company does not expect SFAS No. 133 to have a material
effect on its financial condition or results of operations.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues. The Company is
required to adopt SAB 101 in the fourth quarter of fiscal 2001. The impact of
SAB 101 has not yet been determined on the Company's financial statements.

In March 2000, the FASB issued Interpretation ("FIN") No. 44, "Accounting
for Certain Transactions Involving Stock Compensation--an interpretation of APB
Opinion No. 25". FIN No. 44 clarifies the application of APB Opinion No. 25 to
certain issues including: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequence of various modifications to
the terms of previously fixed stock options or awards; and the accounting for
the exchange of stock compensation awards in business combination. FIN No. 44 is
effective July 1, 2000, but certain conclusions in FIN No. 44 are applicable
retroactively to specific events occurring after either December 15, 1998 or
January 12, 2000. ADE Corporation does not expect the application of FIN No. 44
to have a material impact on the Company's financial position or results of
operations.

3. BUSINESS ACQUISITIONS

On June 11, 1998, the Company merged with Phase Shift Technology, Inc.
("PST"), an Arizona corporation. PST designs, manufactures and markets a broad
line of high-performance, non-contact surface metrology equipment using advanced
optical interoferometric technology. Each outstanding share of PST common stock
was exchanged for two shares of the Company's common stock. A total of 2,000,000
shares of the Company's common stock were issued in this transaction. This
transaction has been accounted for as a pooling-of-interests. Accordingly, all
prior period financial statements have been restated to reflect the inclusion of
PST's operations. There were no material transactions between the Company and
PST prior to the PST Agreement. No material adjustments to net assets or the
results of operations were necessary to conform the accounting practices of PST
to those of the Company.

F-9
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS ACQUISITIONS (CONTINUED)
Separate results of operations for the periods prior to the merger for PST
and the Company were as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1998
--------------------
(IN THOUSANDS)
<S> <C>
Revenue:
ADE Corporation.......................................... $123,265
PST...................................................... 12,435
--------
Combined................................................. $135,700
========
Net income:
ADE Corporation.......................................... $ 6,647
PST...................................................... 2,320
--------
Combined................................................. $ 8,967
========
</TABLE>

On September 17, 1997, ADE Software Corporation, a wholly owned subsidiary
of the Company, acquired substantially all of assets of the Semiconductor
Solutions Division of LPA Software, Inc. ("SSD") in exchange for $10,000,000 in
cash and the assumption of certain liabilities. The Company also incurred
$48,000 in transaction costs related to the acquisition. SSD, which has been
integrated into the Company as ADE Yield Enhancement Solutions, provides yield
management and defect analysis software applications to the semiconductor
industry.

The SSD acquisition has been accounted for under the purchase method.
Accordingly, the results of operations of SSD and the estimated fair market
values of the acquired assets and assumed liabilities have been included in the
Company's financial statements as of the date of the acquisition. Unaudited pro
forma results of operations presenting the acquisition as though it had been
made at the beginning of fiscal 1998, including the write-off of purchased
in-process research and development, amortization of acquired intangible assets
and elimination of intercompany transactions, are as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1998
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
Revenue................................................... $136,293
Net income................................................ $ 8,226
Basic earnings per share.................................. $ 0.67
Diluted earnings per share................................ $ 0.64
</TABLE>

F-10
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS ACQUISITIONS (CONTINUED)
The purchase price has been allocated to the acquired assets and assumed
liabilities as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Property and equipment...................................... $ 354
In-process research and development......................... 6,100
Acquired software........................................... 1,100
Assembled workforce......................................... 450
Goodwill.................................................... 2,403
Current liabilities......................................... (359)
-------
$10,048
=======
</TABLE>

The amount allocated to in-process research and development was determined
by an independent appraiser and represented technology which had not reached
technological feasibility and had no alternative future use. Accordingly, this
amount of $6,100,000 was charged to operations at the acquisition date. There
have not been any released products derived from the purchased in-process
research and development as of April 30, 2000. The $2,403,000 allocated to
goodwill and $450,000 allocated to assembled workforce are being amortized on a
straight line basis over their estimated useful lives of ten and six years,
respectively. Accumulated amortization for the goodwill at April 30, 2000 and
1999 was $618,000 and $383,000, respectively. Accumulated amortization for the
assembled workforce at April 30, 2000 and 1999 was $197,000 and $122,000,
respectively. The $1,100,000 allocated to acquired software has been amortized
at the greater of 1) the ratio that current gross revenue for the related
products bear to the total current and anticipated future gross revenue for
those products or 2) on a straight line basis over its estimated useful life of
2 years. This capitalized software had accumulated amortization at April 30,
1999 of $984,000 and was completely amortized at April 30, 2000.

4. INVESTMENTS

Investments in companies in which the Company has a majority voting interest
but does not have control due to significant minority stockholder rights and
investments in 50% or less owned companies over which the Company has the
ability to exercise significant influence are accounted for using the equity
method. Investments carried on the equity method consist of Japan ADE Ltd.
("JAL"), a Japanese corporation, and Microspec Technologies Ltd. ("Microspec"),
an Israeli corporation.

The Company has a 50% investment in JAL, which has been the exclusive
distributor of ADE dimensional products in Japan since 1986. Sales to JAL which
have not in turn been sold to unrelated third parties at April 30, 2000, 1999
and 1998 have been eliminated, and the related profit on such sales is recorded
as deferred income on sales to affiliate.

In July 1996, the Company acquired a 25.1% interest in Microspec for
$1,250,000. In connection with this investment, the Company also executed an
exclusive five-year agreement to distribute Microspec products, subject to
certain performance criteria. In April 1998, the Company acquired an additional
37.5% of Microspec, bringing the Company's total investment to 62.6%, by
purchasing shares owned by one of the two other stockholders for $1,500,000.
Accordingly, the Company has allocated the cost of its additional investment to
its proportional share of the estimated fair values of the assets and
liabilities of Microspec at the date of acquisition. In-process research and
development, which represented technology that had not reached technological
feasibility and had no alternative future use, was valued at $1,664,000.

F-11
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INVESTMENTS (CONTINUED)
This amount was recorded in the equity in net loss of affiliated companies in
the statement of operations. During fiscal 2000 and 1999, the Company advanced
$1.0 million and $1.2 million, respectively, in short term notes receivable to
Microspec. On May 1, 1999, $1,000,000 of these advances converted into
additional shares of Microspec's common stock, increasing the Company's
ownership to 67.5%. The Company has allocated the cost of its additional
investment to its proportional share of the estimated fair values of the assets
and liabilities of Microspec at the date of acquisition. The Company continues
to account for this investment under the equity method of accounting due to
certain significant contractual minority rights of the remaining stockholder.
There were no material purchases from or sales to Microspec during fiscal 2000,
1999 or 1998.

As of January 2000, the Company entered into an agreement with Microspec's
minority shareholder, which provided ADE an option to purchase the minority
interest in Microspec. The Company has subsequently decided that it will not
exercise the option and has further decided to make no additional investments in
Microspec. ADE is currently in the process of searching for a buyer of the
Company's interest in Microspec.

The financial positions and results of operations of JAL and Microspec were
not significant, individually or in the aggregate, compared to those of the
Company as of and for the years ended April 30, 2000 and 1999. The summarized
unaudited financial information below for fiscal year 1998 represents an
aggregation of the Company's nonsubsidiary affiliates:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
1998
-------------------
(IN THOUSANDS)
<S> <C>
Revenue.................................................... $37,856
Gross profit............................................... 12,852
Net income................................................. 1,791
</TABLE>

<TABLE>
<CAPTION>
APRIL 30
1998
--------------
<S> <C>
Current assets............................................. $27,378
Noncurrent assets.......................................... 1,981
Current liabilities........................................ 24,160
Noncurrent liabilities..................................... 723
</TABLE>

The Company's share of undistributed earnings of one affiliated company was
$1,898,000 at April 30, 2000 and the Company's share of the losses of the other
affiliated company included in consolidated retained earnings was $(2,077,000)
at April 30, 2000. The Company received $55,000 in dividends from JAL during
fiscal year 2000. At April 30, 2000, the Company's investment exceeds the
underlying net assets of affiliated companies by $1,075,000. This excess is
being amortized by decreasing the equity in net earnings of affiliated companies
using the straight-line method over five years. Related amortization expense of
$710,000, $363,000 and $363,000 was recorded in fiscal 2000, 1999 and 1998,
respectively.

The Company also has a less than 20% investment in a company in the amount
of $500,000 that is accounted for using the cost method. The Company has paid
$1,500,000 to license technology for use in its products from this investee
company. This license fee has been capitalized and is being amortized at the
greater of 1) the ratio that current gross revenue for the related products bear
to the total current and anticipated future gross revenue for those products or
2) on a straight line basis over its estimated useful

F-12
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INVESTMENTS (CONTINUED)
life of 5 years. Related amortization expense of $300,000 was recognized in
fiscal 2000. This capitalized license technology had accumulated amortization of
$600,000 at April 30, 2000.

5. RESTRUCTURING CHARGES

In January 1999, the Company implemented a restructuring of operations plan
designed to better align the Company's cost structure with its reduced revenue
resulting from the decline in capital equipment expenditures in the
semiconductor and data storage industries. The plan included workforce
reductions as well as the consolidation of manufacturing and other operational
facilities. The Company recorded restructuring charges of $2,318,000 for the
year ended April 30, 1999, comprised of the following: severance charges of
$1,202,000 related to the termination of 76 employees in general and
administrative, marketing and sales, manufacturing, and engineering functions;
$185,000 in lease termination penalties and $931,000 in non-cash fixed asset
impairments related to furniture, fixtures and building improvements on the
terminated leased facilities. The fair value of the impaired assets was
determined as their estimated salvage value at the time of their eventual
disposition increased by their estimated utility during their related service
period through disposition. These impaired assets were removed from service by
January 31, 2000. Through April 30, 2000, the Company has made lease termination
payments of $185,000. Of the $1,202,000 in accrued severance in accrued expenses
as of May 1, 1999, $924,000 was paid during the fiscal year ended April 30,
2000.

6. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
APRIL 30,
-------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and purchased parts......................... $13,202 $13,190
Work-in-process........................................... 15,437 8,211
Finished goods............................................ 1,329 777
------- -------
$29,968 $22,178
======= =======
</TABLE>

F-13
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
APRIL 30,
USEFUL LIFE -------------------
IN YEARS 2000 1999
------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Land............................................ $ 2,722 $ 2,722
Building and improvements....................... 15-25 22,135 13,198
Machinery and equipment......................... 3-10 12,915 13,997
Office equipment................................ 3-10 5,296 5,329
Leasehold improvements.......................... 5 268 1,569
Construction-in-progress........................ 239 4,998
------- -------
43,575 41,813
Less accumulated depreciation................... 12,851 13,545
------- -------
$30,724 $28,268
======= =======
</TABLE>

Depreciation expense for the years ended April 30, 2000, 1999 and 1998 was
$5,054,000, $4,618,000 and $3,148,000, respectively.

8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

<TABLE>
<CAPTION>
APRIL 30,
-------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accrued salaries, wages, vacation pay and bonuses......... $ 1,844 $ 1,901
Accrued commissions....................................... 647 1,305
Accrued warranty costs.................................... 1,083 1,340
Accrued severance......................................... 278 1,246
Deferred revenue.......................................... 6,436 6,070
Other..................................................... 3,808 3,587
------- -------
$14,096 $15,449
======= =======
</TABLE>

9. BORROWINGS

LONG-TERM DEBT

In April 1999, the Company issued a tax exempt Industrial Development Bond
through the Industrial Development Authority of the County of Pima, Arizona. The
Company also issued tax exempt Industrial Development Bonds through the
Massachusetts Industrial Finance Agency in December 1997 and June 1996. The face
values of the April 1999 bond (the "1999 bond"), the December 1997 bond (the
"1997 bond") and the June 1996 bond (the "1996 bond") were $4,500,000,
$4,000,000 and $5,500,000, respectively. The 1999 bond, 1997 bond and the 1996
bond bear interest at a rate of 5.52%, 5.79% and 5.74%, respectively, and
provide for 50% of the principal to be paid over ten years from the dates of
issuance with the remaining 50% due in March 2009, December 2007 and June 2006,
respectively. Monthly

F-14
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. BORROWINGS (CONTINUED)
payments of principal and accrued interest for the 1999 bond are approximately
$31,000. Monthly payments of principal and accrued interest for the 1997 bond
commence at approximately $36,000 and decrease to approximately $27,000 over the
ten-year payment period. Monthly payments of principal and accrued interest for
the 1996 bond are approximately $43,000. The proceeds of the 1999 bond were used
to fund the construction of a new manufacturing facility in Tucson, Arizona. The
Company secured the issuance of this bond with a standby letter of credit from a
financial institution. The standby letter of credit, bearing a fee of 1.5% of
the outstanding bond balance, is secured by a mortgage on the building and land.
Under the terms of the letter of credit, the Company is required to comply with
certain financial covenants. The proceeds of the 1997 bond were used to fund the
acquisition and renovation of a manufacturing facility. The Company secured the
issuance of this bond with cash, which is classified as restricted cash on the
April 30, 2000 and 1999 balance sheet. The proceeds of the June 1996 bond were
used to fund the acquisition and renovation of the manufacturing facility in the
Company's headquarters site. The Company secured the issuance of this bond with
a standby letter of credit from a financial institution. The standby letter of
credit, bearing a fee of 1.25% of the outstanding bond balance, is secured by a
mortgage on the building and land. At April 30, 2000, the Company was in
violation of certain financial covenants related to the letter of credit
agreements. The Company obtained a waiver of this default as of April 30, 2000.
Future maturities of these bonds are as follows:

<TABLE>
<CAPTION>
YEAR ENDING APRIL 30, (IN THOUSANDS)
--------------------- --------------
<S> <C>
2001........................................................ $ 598
2002........................................................ 621
2003........................................................ 646
2004........................................................ 672
2005........................................................ 699
Thereafter.................................................. 9,312
-------
$12,548
=======
</TABLE>

In December 1997, the Company entered into an unsecured revolving line of
credit facility (the "Credit Facility") with a bank, with a maximum borrowing
amount of $8,000,000 which is limited by certain receivables. The Credit
Facility provides the Company the option of borrowing at either the bank's prime
rate or the bank's LIBOR rate plus 2%. The Credit Facility expired and all
outstanding amounts thereunder were due December 21, 1999. There were no
borrowings outstanding on the date that the Credit Facility expired. The Company
does not intend to renew the Credit Facility or enter into a new credit facility
with another institution at this time.

F-15
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10. EMPLOYEE COMPENSATION PLANS

In April 1992, the Company adopted the 1992 Stock Option Plan (the "1992
Plan"). The 1992 Plan provides for the issuance to employees of options to
purchase 479,000 shares of common stock plus any expired or canceled options
granted pursuant to the Company's expired 1982 Stock Option Plan. In
August 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan").
The 1995 Plan provides for the issuance to employees of stock options or stock
awards to purchase 400,000 shares of common stock. In October 1997, the Company
adopted the 1997 Employee Stock Option Plan (the "1997 Plan"). The 1997 Plan
provides for the issuance to employees of stock options or stock awards to
purchase 500,000 shares plus the number of shares reserved under the 1995 Plan
that have not been issued or have been issued and subsequently cancelled. At
April 30, 2000, 146,265 shares were available for future grants under the
Company's stock option plans. Options are granted under the 1992, 1995 and 1997
Plans as either incentive stock options or non-qualified stock options and at
exercise prices not less than the fair value of the stock on the date of grant
or less than 110% of the fair value in the case of optionees holding more than
10% of the total combined voting power of all classes of stock of the Company.
The terms of the options generally may not exceed ten years or five years in the
case of optionees holding more than 10% of the total combined voting power of
all classes of stock of the Company. The options are exercisable over periods
determined by the compensation committee of the board of directors, generally at
the rate of 20% per year, on a cumulative basis, beginning with the first
anniversary of the date of grant.

In October 1996, the Board of Directors adopted the Employee Stock Purchase
Plan (the "Purchase Plan") effective as of October 1, 1996. The Purchase Plan
provides full-time employees, nearly all of whom are eligible to participate,
the opportunity to purchase common shares, on a quarterly basis, at 85% of the
fair market value of the shares on either the first or last day of the
applicable quarter, whichever is lower. The term of the Purchase Plan is for
five years, and the Company has authorized 1,000,000 shares of the Company's
common stock for issuance under the Purchase Plan. Under the Purchase Plan, the
Company sold 45,414, 53,530 and 27,279 shares to employees in fiscal years 2000,
1999 and 1998, respectively.

In September 1998, the Compensation Committee of the Board of Directors of
the Company granted employees with outstanding stock options the opportunity to
cancel their existing options and receive new options on a one for one basis
with a new five year vesting schedule commencing on the new date of grant. On
October 2, 1998, 298,850 options with exercise prices between $12.94 and $41.25
per share and an average exercise price of $17.72 per share were cancelled and
298,850 new options were granted with an exercise price of $8.66 per share, the
fair market value of the Company's common stock on October 2, 1998. No executive
officer of the Company participated in the stock option repricing.

The Company applies APB No. 25 and related interpretations in accounting for
stock-based compensation. The Company has recognized $61,000 as compensation
expense in each of the fiscal years 2000, 1999 and 1998, respectively, for
stock-based compensation. Had compensation cost for the stock-based compensation
been determined based on the fair value at the grant dates of awards consistent
with

F-16
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. EMPLOYEE COMPENSATION PLANS (CONTINUED)
the provisions of SFAS No. 123, the Company's net income (loss) and earnings
(loss) per share would have been reduced to the pro forma amounts as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss):
As reported................................... $(20,447) $(24,528) $8,967
Pro forma..................................... (22,413) (25,625) 8,102
Basic earnings (loss) per share:
As reported................................... $ (1.53) $ (1.89) $ 0.73
Pro forma..................................... $ (1.68) $ (1.97) $ 0.66
Diluted earnings (loss) per share:
As reported................................... $ (1.53) $ (1.89) $ 0.70
Pro forma..................................... $ (1.68) $ (1.97) $ 0.63
</TABLE>

The fair value of each option and purchase right grant was estimated on the
grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for fiscal years 2000, 1999 and 1998: no dividend
yield; risk free interest rates of 6.6%, 5.2% and 5.7%, respectively; expected
option terms of 6 years, 7 years and 6 years, respectively, and expected
purchase right terms of three months; volatility of 58% for options and purchase
rights granted in fiscal 2000, 70% for options and purchase rights granted in
fiscal year 1999 and 60% for options and purchase rights granted in fiscal 1998.
The weighted average fair value per option for options granted with option
exercise prices equal to the fair value of the underlying common stock in fiscal
years 2000, 1999 and 1998 was $10.31, $7.19 and $14.49, respectively. The
weighted average fair value per option for options granted with exercise prices
above the fair value of the underlying common stock in fiscal 1998 was $10.48.
The weighted average fair value per purchase right for purchase rights granted
in fiscal years 2000, 1999 and 1998 was $3.12, $3.48 and $7.08, respectively.

Because options vest over several years and additional option and purchase
right grants are expected to be made in subsequent years, the pro forma impact
on fiscal years 2000, 1999 and 1998 is not necessarily representative of the pro
forma effects of reported net income and earnings per share for future years.

F-17
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. EMPLOYEE COMPENSATION PLANS (CONTINUED)
Stock option activity is summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- --------
<S> <C> <C>
Options outstanding at April 30, 1997.................... 774,216 $ 8.14
Granted................................................ 170,100 22.52
Exercised.............................................. (183,896) 4.54
Canceled............................................... (44,400) 12.64
--------
Options outstanding at April 30, 1998.................... 716,020 12.20
Granted................................................ 558,850 10.16
Exercised.............................................. (106,820) 4.84
Canceled............................................... (408,300) 17.23
--------
Options outstanding at April 30, 1999.................... 759,750 9.06
Granted................................................ 273,965 16.38
Exercised.............................................. (162,590) 6.33
Canceled............................................... (138,780) 13.71
--------
Options outstanding at April 30, 2000.................... 732,345 $11.53
========
</TABLE>

The number and weighted average exercise price of options exercisable at
April 30, 2000, 1999 and 1998 was 172,660 and $9.43; 198,900 and $7.34; and
198,220 and $8.04; respectively.

The following table summarizes information about stock options outstanding
at April 30, 2000:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
NUMBER LIFE EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING (YEARS) PRICE EXERCISABLE PRICE
------------------------ ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$4.13-$5.88................... 53,400 4.2 $ 4.43 52,600 $4.40
$8.38-$11.78.................. 357,380 7.7 8.88 74,460 9.27
$12.44-$15.06................. 146,600 8.0 13.06 29,800 14.14
$17.06-$21.16................. 174,765 8.9 17.79 15,600 17.77
$41.25........................ 200 7.3 41.25 200 41.25
------- --- ------ ------- -----
732,345 7.8 $11.53 172,660 $9.43
======= === ====== ======= =====
</TABLE>

11. STOCKHOLDERS' EQUITY

RESERVED SHARES

At April 30, 2000, the Company has reserved 1,791,933 shares of common stock
for issuance upon the exercise of outstanding and available common stock options
and for issuance to employees under the Purchase Plan.

F-18
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. STOCKHOLDERS' EQUITY (CONTINUED)
PREFERRED STOCK

The Company has 1,000,000 shares of $1.00 par value preferred stock
authorized. Shares of preferred stock may be issued at the discretion of the
Board of Directors of the Company with such designation, rights and preferences
as the Board may determine from time to time. The preferred stock may have
voting rights, preferences as to dividends and liquidation, conversion and
redemption rights and sinking fund provisions, which are more expansive than
those of the holders of the common stock.

12. SEGMENT, GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION

The Company has three reportable segments: ADE Semiconductor Systems Group
("SSG"), ADE Phase Shift ("PST") and ADE Technologies ("ATI"). SSG manufactures
and markets metrology and inspection systems to the semiconductor wafer and
device manufacturing industries that are used to improve yield and capital
productivity. PST manufactures and markets high performance, non-contact surface
metrology equipment using advanced interferometric technology that provides
enhanced yield management to the data storage, semiconductor and optics
industries. ATI manufactures and markets high precision magnetic
characterization and non-contact dimensional metrology gaging systems primarily
to the data storage industry. Sales of the Company's stand-alone software
products and software consulting services are included in the "other" category.
The Company's reportable segments are determined based upon the nature of the
products, the external customers and customer industries and the sales and
distribution methods used to market the products. The Company evaluates
performance based upon profit or loss from operations. The Company does not
measure the assets allocated to the segments. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies. For the year ended April 30, 2000, certain corporate
expenses, primarily general and administrative costs, have been recorded in the
Company's SSG segment, with an allocation charged to ATI and PST at a percentage
of each segment's revenue. For the years ended April 30, 1999 and 1998, an
allocation was charged to ATI at the rate of 3% of ATI revenue. There were no
corporate allocations to PST for the years ended April 30, 1999 and 1998.
Additionally, other income (expense), the provision for (benefit from) income
taxes and the equity in earnings (losses) of affiliated companies are not
included in segment profitability.

Sales to JAL, ADE's 50% affiliate, are reflected in segment revenue during
the period they are shipped by the respective segment, which can differ from the
period the revenue is recognized for consolidated financial reporting purposes.
For the reportable segments, intercompany sales are recorded at 60% of the
domestic list price of the respective product.

F-19
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. SEGMENT, GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
SSG PST ATI OTHER TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED APRIL 30, 2000
Revenue from external customers............. $ 44,539 $ 6,400 $ 9,235 $ 426 $ 60,600
Intersegment revenue........................ 472 -- 315 607 1,394
Loss from operations........................ (15,476) (1,518) (1,642) (3,065) (21,701)
Depreciation and amortization expense....... 4,658 253 412 557 5,880
Capital expenditures........................ 6,848 354 266 41 7,509

FOR THE YEAR ENDED APRIL 30, 1999
Revenue from external customers............. $ 42,046 $ 7,916 $ 8,594 $1,177 $ 59,733
Intersegment revenue........................ 42 -- 456 590 1,088
Income (loss) from operations............... (29,590) 1,343 (5,107) (2,731) (36,085)
Depreciation and amortization expense....... 4,055 16 411 1,163 5,645
Capital expenditures........................ 7,384 92 75 208 7,759
Restructuring charges....................... 2,318 -- -- -- 2,318

FOR THE YEAR ENDED APRIL 30, 1998
Revenue from external customers............. $107,098 $12,435 $15,206 $ 764 $135,503
Intersegment revenue........................ 161 -- 1,114 102 1,377
Income (loss) from operations............... 13,094 3,683 2,153 (7,861) 11,069
Depreciation and amortization expense....... 2,617 23 255 541 3,436
Capital expenditures........................ 12,178 540 322 35 13,075
Purchased in-process research and
development............................... -- -- -- 6,100 6,100
</TABLE>

The following is a reconciliation for the above items where aggregate
reportable segment amounts differ from amounts contained in the Company's
consolidated financial statements.

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Total external revenue for reportable segments.............. $ 60,600 $ 59,733 $135,503
Net impact of revenue recognition on sales to affiliate..... 1,906 1,152 197
======== ======== ========
Total consolidated revenue.................................. $ 62,506 $ 60,885 $135,700
======== ======== ========

Total operating profit (loss) for reportable segments....... $(21,701) $(36,085) $ 11,069
Net impact of intercompany gross profit eliminations and
deferred profit on sales to affiliate..................... 1,565 704 143
======== ======== ========
Total consolidated operating profit (loss).................. $(20,136) $(35,381) $ 10,926
======== ======== ========
</TABLE>

F-20
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. SEGMENT, GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION (CONTINUED)
Revenue by geographic area is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States................................... $22,372 $24,723 $ 53,415
Japan........................................... 16,256 15,809 30,090
Taiwan.......................................... 4,452 4,451 14,292
Europe.......................................... 10,688 7,953 16,111
Asia............................................ 8,738 7,949 21,792
------- ------- --------
$62,506 $60,885 $135,700
======= ======= ========
</TABLE>

Revenue from JAL in fiscal years 2000, 1999 and 1998 totaled $8,787,000
(14%), $9,254,000 (16%), $17,775,000 (13%), respectively. Revenue from another
customer in fiscal years 2000, 1999 and 1998 totaled $7,418,000 (12%),
$3,315,000 (5%) and $20,988,000 (15%), respectively. Revenue from a third
customer in fiscal 2000 and 1999 totaled $5,635,000 (9%) and $4,046,000 (7%),
respectively. As of April 30, 2000, 1999 and 1998, all of the Company's long
lived assets are located in the United States except for $269,000, $245,000 and
$338,000, respectively.

13. INCOME TAXES

The provision for (benefit from) income taxes consists of:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense (benefit):
Federal............................................ $ -- $(8,997) $6,368
Foreign............................................ 82 66 49
State.............................................. 20 55 826
---- ------- ------
102 (8,876) 7,243
---- ------- ------
Deferred tax expense (benefit):
Federal............................................ -- 445 (3,413)
State.............................................. -- (904) (529)
---- ------- ------
-- (459) (3,942)
---- ------- ------
$102 $(9,335) $3,301
==== ======= ======
</TABLE>

F-21
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. INCOME TAXES (CONTINUED)
The significant components of deferred tax assets and liabilities consist of
the following:

<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventories, due to reserves and additional costs
inventoried for tax purposes.......................... $ 4,417 $ 4,347
Acquired in-process research and development and
intangibles........................................... 2,441 2,533
Accrued expenses........................................ 1,240 1,667
Deferred revenue........................................ 2,445 2,307
Deferred profit on sales to affiliates.................. 128 680
Net operating loss carryforwards........................ 10,238 2,212
Bad debt reserve........................................ 239 312
Other................................................... 76 1
------- -------
Gross deferred tax assets............................. 21,224 14,059
Deferred tax valuation allowance........................ (10,396) (3,336)
------- -------
Net deferred tax assets............................... 10,828 10,723
Deferred tax liabilities:
Depreciation.......................................... (238) (340)
------- -------
Total net deferred tax assets............................. $10,590 $10,383
======= =======
</TABLE>

Deferred income taxes reflect the tax impact of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. Under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", the
benefit associated with future deductible temporary differences is recognized if
it is more likely than not that the benefit will be realized. The measurement of
deferred tax assets is reduced by a valuation allowance if, based upon the
weight of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.

During the year ended April 30, 2000, the Company increased its valuation
allowance against deferred tax assets by $7,060,000, as the full value of its
net operating loss carryforwards and temporary differences may not be realized.
This increase was based upon weighing all evidence available to management,
including fiscal 2000 pre-tax losses of $18,856,000, current estimates of future
taxable income, the cyclicality of the semiconductor and data storage industries
and the uncertainty within those markets. The amount of the deferred tax assets
considered realizable could materially change in the near term if estimates of
future taxable income change or do not materialize. Net operating loss
carryforwards generated in fiscal 1999 and 2000 begin to expire in fiscal 2004
for state purposes and in fiscal 2019 for federal purposes.

Additionally, a valuation allowance of $336,000 has been recorded at
April 30, 2000 and 1999 to reflect net operating carryforwards which will expire
before they can be used due to ownership change limitations. These carryforwards
begin to expire in the Year 2000. Net operating loss carryforwards remaining at
April 30, 2000 and 1999, not limited in their use due to ownership changes,
totaled $8,975,000 and $1,119,000, respectively. Included in the net operating
loss carryforwards for April 30, 2000 and 1999 are $1,698,000 and $865,000,
respectively, of state net operating losses that are only available to offset
taxable state income.

F-22
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. INCOME TAXES (CONTINUED)
The Company does not provide for taxes which would be payable if
undistributed earnings of its foreign affiliates were remitted because the
Company either considers these earnings to be invested for an indefinite period
or anticipates that if such earnings were distributed, the U.S. income taxes
payable would be substantially offset by foreign tax credits.

The following is a reconciliation between the amount of reported income tax
expense (benefit) and the amount computed using the U.S. Federal Statutory rate
of 35% for fiscal 2000, 1999 and 1998:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory federal rate........................... $(6,411) $(11,170) $4,645
State taxes, net of federal benefit.............. (488) (566) 206
Foreign sales corporation benefit................ -- (72) (663)
Research and development tax credits............. -- -- (986)
AMT credit carryforwards......................... -- (634) --
Valuation allowance.............................. 7,060 3,000 --
Other............................................ (59) 107 99
------- -------- ------
$ 102 $ (9,335) $3,301
======= ======== ======
</TABLE>

The income tax benefits related to the exercise and disqualifying
dispositions of certain stock options reduces taxes currently payable and is
credited to additional paid-in capital. Such amount approximated $115,000 and
$1,286,000 for the years ended April 30, 1999 and 1998, respectively.

14. INCENTIVE SAVINGS AND PROFIT SHARING PLAN

The Company has an incentive savings and profit sharing plan covering
substantially all employees who wish to participate and meet minimum age and
service requirements. Annual Company contributions are determined by the Board
of Directors and are limited to the maximum amount deductible under the Internal
Revenue Code. Company contributions for fiscal 2000, 1999 and 1998 were
approximately $596,000, $726,000 and $632,000, respectively.

15. COMMITMENTS

OPERATING LEASES

The Company leases land and certain buildings, machinery and equipment under
operating leases which expire through 2005. Under the terms of the leases, the
Company is responsible for normal maintenance, utility expenses and taxes and
pays a monthly property management fee on certain leases.

Future minimum lease payments under operating leases, including management
fees, are as follows:

<TABLE>
<CAPTION>
YEAR ENDING APRIL 30, (IN THOUSANDS)
--------------------- --------------
<S> <C>
2001........................................................ $ 571
2002........................................................ 342
2003........................................................ 183
2004........................................................ 180
2005........................................................ 64
Thereafter.................................................. --
------
$1,340
======
</TABLE>

F-23
<PAGE>
ADE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. COMMITMENTS (CONTINUED)
Total rent expense under non-cancelable operating leases was approximately
$1,436,000, $1,181,000, and $1,240,000 for the years ended April 30, 2000, 1999
and 1998, respectively.

16. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
CASH PAID DURING THE YEAR
Interest....................................... $ 728 $ 620 $ 506
Income taxes paid (refunds received), net...... $(8,732) $(5,885) $13,058
</TABLE>

17. FOURTH QUARTER ADJUSTMENTS

At April 30, 1999, the Company increased its valuation allowance against
deferred tax assets by $3,000,000, as the full value of its net operating loss
carryforwards and temporary differences may not be realized. This increase was
based upon weighing all evidence available to management. Recording this
increase to the valuation allowance decreased the Company's annual effective tax
rate to 28.5%, compared to the estimated annual effective tax rate of 36.1%
utilized during the first three quarters of fiscal 1999. Unaudited pro forma net
loss for the nine months ended January 31, 1999 utilizing the actual effective
tax rate of 28.5% was $17,050,000, compared to reported net loss for the nine
months ended January 31, 1999 of $15,311,000. Also in the fourth quarter of
fiscal 1999, the Company recorded an increase to its reserve for excess and
obsolete inventory of $2,335,000.

The Company recorded a $2,294,000 credit to the provision for income taxes
during the fourth quarter of fiscal 1998, which included a $1,789,000 credit
resulting from the difference between the Company's actual effective tax rate
for fiscal 1998 of 24.9% and the estimated effective tax rate of 35.0% utilized
during the first three quarters of fiscal 1998. Also in the fourth quarter of
1998, the Company reversed accrued bonus expense of $1,323,000, which had been
recorded in the first two quarters of fiscal 1998. Pro forma net income for the
nine months ended January 31, 1998, including the reversal of the bonus accrual
and utilizing the actual effective tax rate of 24.9%, was $12,673,000, compared
to reported net income for the nine months ended January 31, 1998 of
$10,152,000.

F-24
<PAGE>
FINANCIAL STATEMENT SCHEDULE
(IN THOUSANDS)

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
CHARGED TO CHARGED TO DEDUCTIONS
BALANCE AT COSTS AND OTHER AND BALANCE AT
DESCRIPTION MAY 1, 1997 EXPENSES ACCOUNTS WRITE-OFFS APRIL 30, 1998
----------- ----------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts....... 677 1,140 -- (12) 1,805
Inventory obsolescence................ 2,139 2,867 -- (971) 4,035
Deferred tax asset valuation
allowance........................... 346 6 -- -- 352
</TABLE>

<TABLE>
<CAPTION>
CHARGED TO CHARGED TO DEDUCTIONS
BALANCE AT COSTS AND OTHER AND BALANCE AT
DESCRIPTION MAY 1, 1998 EXPENSES ACCOUNTS WRITE-OFFS APRIL 30, 1999
----------- ----------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts....... 1,805 -- -- (985) 820
Inventory obsolescence................ 4,035 6,167 -- (1,523) 8,679
Deferred tax asset valuation
allowance........................... 352 3,000 -- (16) 3,336
</TABLE>

<TABLE>
<CAPTION>
CHARGED TO CHARGED TO DEDUCTIONS
BALANCE AT COSTS AND OTHER AND BALANCE AT
DESCRIPTION MAY 1, 1999 EXPENSES ACCOUNTS WRITE-OFFS APRIL 30, 2000
----------- ----------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts....... 820 339 -- (530) 629
Inventory obsolescence................ 8,679 -- -- (1,730) 6,949
Deferred tax asset valuation
allowance........................... 3,336 7,060 -- -- 10,396
</TABLE>

S-1