Presented by: Saravanan Velrajan Daisy Mae Go Allan Phan Parvathi Natarajan Acc/539 Richie Wong

1. Sarbanes Oxley Compliance Presented by: Saravanan Velrajan Daisy Mae Go Allan Phan Parvathi Natarajan Acc/539 Richie Wong

2. Overview Scope Major provisions of SOA Regulations and authorities in guiding SOA Kla- Tencor in compliance with SOA Methodologies in use to comply with SOA Pain points in compliance with SOA Conclusion

3. Scope To perform a comprehensive examination of the processes and controls used to safeguard assets, conduct business, and report results. To ensure that KLA-Tencor satisfies all of the requirements imposed by US legislation.

4. Major Provisions of SOA Certification of financial reports by CEOs and CFOs Ban on personal loans to any Executive Officer and Director Accelerated reporting of trades by insiders Independent annual audit reports on the existence and condition of internal controls Must have an internal audit function

5. Regulations & authorities in guiding SOA Pre-approval Requirements (Section 202) All auditing services should be pre-approved by audit committee of the issuer Management Assessment of Internal Controls (Section 404) Annual reports should include report by management on company’s internal control over financial reporting

6. Financial Position Unusual Liquidity, Cash Generator Sep ‘04 Dec ‘04 Mar ‘05 Cash/ST Investments Receivables Inventories Other Current Current Assets Plant and Equipment Other Total Assets Debt Equity $1,886 366 373 345 $2,970 $380 239 $3,590 $0 $2,685 $1,925 446 351 343 $3,065 $398 303 $3,766 $0 $2,838 $2,108 445 354 361 $3,268 $393 299 $3,960 $0 $2,975 DSO’s = 77 days Prod. Turns = 3.1 No Long Term Debt

7. Kla-Tencor Business Segments Data Storage Wafer Inspection 2365, 2371, AIT XUV, SP2, eS31, 2430, Klarity Defect/ACE/SSA Wafer, Head, and Media Test Products Photomask SL3UV, TeraStar, TeraScan Metrology SpectraFx 200, eCD-2, SpectraCD 100,MetriX 100, Archer AIM, Quantox XP, RS-100, HRP-240/340, P-15, AS-IQ, PROLITH, ProDATA Service iSupport

8. Kla-Tencor in compliance with SOA Complete extensive documentation of controls Controls are working as documented Maintain required evidence that the controls are being performed

9. Methodologies in use to comply with SOA Mega Process Audit Testing (Two test phases) Internal control

10. Five components of Internal Control

11. KLA-Tencor Internal Controls Requirements Revenue cycle is key control process, anti-fraud assessment target SEC Enforcement Action on Fraud and irregularities Revenue process testing goes beyond Finance function

12. 45% 41% 40% 40% 40% 39% 39% 38% 38% 36% 36% 35% 35% 34% 33% 31% 29% 29% R&D SG&A 3Q03 1Q02 1Q03 2Q03 4Q03 1Q04 2Q04 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 2Q02 3Q02 4Q02 3Q01 4Q01 SAB101 KLA-Tencor Operating Expenses as a Percent of Revenue Percent 50 45 40 34% 35 31% 30.5% 30% 28% 30 25 20 15 10 5 0 1Q05 3Q04 4Q04 2Q05 3Q05

13. KLA- Tencor Gross Margin History as a Percent of Revenue Percent 59.1% 59.0% 58.5% 58.4% 60 57.1% 56.9% 56.4% 56.1% 56.2% 55.3% 53.8% 53.6% 52.2% 50.4% 51.4% 51.1% 50.1% 50.1% 50.1% 49.0% 49.0% 48.9% 48.5% 50 40 30 20 10 0 3Q04 4Q04 2Q05 3Q05 1Q05 4Q03 1Q04 2Q04 3Q03 2Q03 1Q03 4Q02 1Q02 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 3Q02 2Q02 SAB101

14. Pain points in compliance with SOA CEOs and CFOs must certify their financial statements on a quarterly and annual basis under Section 302 of SOA Require to certify the effectiveness of their internal controls on a quarterly and annual basis under Section 404 of SOA Tighter SEC filings deadlines for 10-Ks,10-Qs, and 8-Ks Real-Time Disclosure

15. Conclusion Sarbanes-Oxley was signed into law on July 30, 2002 in response to corporate scandals CEO/CFO Sign-off Internal Controls Accelerated Filings Real-Time Disclosure

16. Questions???