This paper describes the effect of annealing on the characteristics of cycling endurance and charge retention in flash electronically erasable programmable read-only memory (EEPROM) fabricated by self-aligned source (SAS! dry etching process which was used for the shrinkage of cell size. The annealing process was used for the recovery and thickness compensation of the tunnel oxide edge at which severe plasma damage was accumulated during the SAS dry etching process. Through the analysis of cycling endurance, it was clarified that charge traps and structural defects were generated at the tunnel oxide edge during the SAS dry etching process and they induced the degradation of cycling endurance of memory cells. The characteristics of charge retention were improved due to the structural recovery and the thickness compensation of the tunnel oxide edge. An analysis of the results from the measurement of charge retention and the examination of the tunnel oxide edge with high resolution transmission electron microscope, indicates that the thickness compensation of the tunnel oxide edge affected more positively the reduction of tail bits than the structural recovery of the tunnel oxide edge.