BUSINESS REPORT 1999

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1 BUSINESS REPORT 1999 SHINKO ELECTRIC INDUSTRIES CO., LTD. 80 OSHIMADA-MACHI, NAGANO-SHI, JAPAN Phone: (81-26) Facsimile: (81-26)

2 Contents Management Review 1. Summary of Business Results Outlook for Fiscal Performance by Product Category Financial Statements 1. Financial Highlights - Nonconsolidated Basis Nonconsolidated Balance Sheets Nonconsolidated Statements of Income Corporate Outline 1. Outline Shareholders Data Board of Directors

3 Management Review 1. Summary of Business Results During the fiscal 1999, ended March 31, 1999, difficult conditions prevailed in the Japanese economy, reflecting growing uncertainties about the direction of the economy due to such factors as instability in Japan s financial system, a worsening credit contraction in Japan and overseas, and an unstable employment situation because of deteriorating business conditions. The situation was further aggravated by continued sluggishness in personal consumption and depressed private-sector capital investment. In the semiconductor industry, despite growth in investments for information systems in the United States where the economy remained buoyant overall conditions were sluggish because of weakness in the memory market resulting from an oversupply of DRAMs and production adjustments for electronic equipment, primarily consumer products. Under these conditions, the Company worked to raise levels of customer satisfaction and vigorously carried out business activities aimed at raising productivity and product quality and reliability. In addition, the Company strived to establish a supply structure that meets the needs of customers and continued to develop new products. Despite these efforts, new orders declined 15.2%, to billion, and net sales were down 9.6%, to billion. These decrease were attributable to a slump in the market for leadframes, due to mainly sluggishness in electronic equipment for consumer products, and lower demand for several products resulting from a switch to different models. At the profit level, although the Company worked to reduce costs through such ongoing efforts as rationalizing its production structure, the decline in net sales together with the strengthening of the yen and other factors resulted in a 32.3% fall in recurring income, to 11.9 billion, and a 30.6% decline in net income, to 5.7 billion. The Company paid year-end cash dividends of 12.0 per share, an increase of 1.0 compared with the previous fiscal year. Cash dividends for the entire fiscal year, including interim dividends, amounted to 24 per share. 2. Outlook for Fiscal 1999 The recession of the Japanese economy appears to be improving amid some signs of brightness in public investment and personal consumption thanks to government measures to stabilize the financial system as well as emergency economic stimulus measures. Nevertheless, the outlook for the Japanese economy remains clouded with uncertainty and a full-fledged recovery is unlikely because of concerns about decreasing capital investment, the employment situation, and deflationary pressure on assets. In the semiconductor industry, the market for DRAMs, which has remained weak, is expected to recover, while an expansion of the entire semiconductor market is expected to be - 2 -

4 underpinned by robust demand for semiconductors used in PCs and the ongoing spread of digital information home appliances. Nevertheless, the outlook is clouded by lingering concern about an oversupply of semiconductors and intensifying competition along with the ongoing global restructuring of the semiconductor industry. Amid this difficult environment, the Company will place top priority on the efficient allocation of its management resources while further strengthening its marketing capabilities and ensuring the timely development of products that respond quickly to the needs of customers. The Company will also continue to rationalize and promote laborsaving operations to enhance its profitability. Also, in line with its goal of offering total solutions in the back end of the semiconductor production process, the Company will accumulate various technologies and cultivate new demand. The Company views the Y2K problem as a vital management issue and began addressing this problem in October 1996, mainly through the System Department. In March 1998, the Company organized its Year 2000 Project Group to focus on various risks related to business activities with customers and suppliers and is implementing surveys and countermeasures that cover information systems, semiconductor manufacturing equipment, and utility facilities throughout the entire Company. Along with these response measures, the Company is making its utmost efforts, including the establishment of preventive and emergency measures based on a contingency plan, to prepare for any unforeseen problems. 3. Performance by Product Category IC Leadframes A slump in the DRAM market eroded demand for lead on chip (LOC) leadframes. In addition, orders for high-pin-count leadframes declined because of a shift toward the use of ball grid array (BGA) packages as replacement packages for chip sets for PCs. Although we have also strived to expand sales of low-pin-count leadframes, conditions in the market worsened overall as a downward trend in prices accelerated amid a sluggish semiconductor market. Demand for plastic IC assembly also declined. As a result, sales in this division amounted to 47.1 billion, a 29.4% decrease from the previous fiscal year. IC Packages In plastic laminated packages (PLP), despite such factors as plunging product prices and the effects of a switch to new models in the second half of the fiscal year, the Company posted an increase in new orders against a background of robust demand for MPUs and PC chip sets. On the other hand, in ceramic packages, demand for packages for surface acoustic wave (SAW) filters used in cellular phones increased. However, the Company discontinued the manufacturing of unprofitable types of products due to plummeting demand along with the - 3 -

5 trend toward the use of plastic as packaging materials. As a result, sales in this division amounted to 59.2 billion, an increase of 11.0% from the previous fiscal year. Hermetic Seal Parts Despite sharply declining product prices caused by the trend toward the use of plastic as packaging materials as well as inventory adjustments in the second half of the fiscal year, the Company recorded increased orders for its glass-to-metal seal parts for laser diodes (LDs), a principal product in this sector, thanks to growth in the market for use of these products in optical device related products, including CD-ROMs and digital video disks (DVDs). The Company also recorded favorable sales of precision contact parts and optical modulator packages for fiber-optic communication. As a result, sales in this division amounted to 13.5 billion, an increase of 19.9%. < Sales per Product Category > Hermetic Seal Parts 11.2% Others 0.9% IC Packages 48.9% IC Leadframes 39.0% The Information Equipment category has been changed to Others, effective from this fiscal year

6 Financial Statements March 1999 The Financial Statements have been prepared in accordance with accounting principles and practices generally accepted in Japan 1. Financial Highlights - Nonconsolidated Basis (In millions of yen and thousands of U.S. dollars, except per share data) Years ended March Yen Yen U.S.dollars Net sales 121, ,048 1,004,682 Net income 5,780 8,324 47,948 Per share Cash dividends paid 1, ,964 Per share Total assets 148, ,679 1,228,081 Stockholders' equity 77,579 72, ,542 Number of employees 4,473 4,375 Net sales by product category IC Leadframes 47,169 66, ,281 IC Packages 59,257 53, ,560 Hermetic Seal Parts 13,576 11, ,617 Others 1,111 2,526 9,223 Total 121, ,048 1,004,682 Net overseas sales 83,982 90, ,658 Notes: 1. U.S. dollar amounts above and elsewhere in this report are converted from yen, for convenience only, at the rate of yen=u.s.$1. 2. The Company's fiscal year runs from April 1 through March

7 2. Nonconsolidated Balance Sheets Yen (millions) U.S.dollars (thousands) As of March Assets Current assets: Cash and time deposits 38,707 13, ,089 Marketable securities ,746 Receivables, trade: Accounts and notes 22,897 31, ,939 Allowance for doubtful receivables (149) (242) (1,236) Inventories 6,787 8,578 56,303 Other current assets 8,489 14,547 70,425 Total current assets 76,943 68, ,267 Property, plant and equipment: Land 6,905 6,905 57,281 Buildings 18,989 16, ,524 Machinery and equipment 30,342 31, ,701 Construction in progress 4,990 4,007 41,394 61,227 59, ,901 Investments and other assets 9,874 7,448 81, , ,679 1,228,

8 Yen (millions) U.S.dollars (thousands) Liabilities Current liabilities: Short-term bank loans, including current portion of long-term debt 9,390 8,689 77,895 Payables, trade 13,883 19, ,168 Accrued expenses 12,684 11, ,220 Accrued income taxes 0 8,709 0 Other curret liabilities 1, ,466 Total current liabilities 37,340 48, ,751 Long-term debt 30,877 10, ,141 Accrued severance indemnities 2,247 2,272 18,645 Stockholders' equity Common stock: Authorized - 124,344,000 shares Issued (50 yen par value) - 45,034,772 shares (1999) 24, ,771-44,999,826 shares (1998) 24,172 Capital surplus 24,130 24, ,170 Legal reserve ,350 Retained earnings 28,600 24, ,249 Total stockholders' equity 77,579 72, , , ,679 1,228,

9 3. Nonconsolidated Statements of Income Yen (millions) U.S.dollars (thousands) Years ended March Net Sales: 121, ,048 1,004,682 Operating costs and expenses: Cost of goods sold 98, , ,195 Selling, general and administrative expenses 11,119 13,230 92, , , ,436 Operating income 11,481 17,806 95,246 Other income (expenses): Interest and dividends received ,805 Interest charges (437) (410) (3,632) Other, net (1,065) (1,028) (8,834) (803) (873) (6,662) Income before income taxes 10,678 16,932 88,584 Income taxes 4,898 8,608 40,636 Net income 5,780 8,324 47,948 Yen U.S.dollars Net income per share Cash dividends per share

10 Corporate Outline 1. Outline (as of March 31, 1999) Name: SHINKO ELECTRIC INDUSTRIES CO., LTD. Date of Establishment: September 12, 1946 Registered Office: 711 Kurita, Nagano-shi, Japan Corporate Office: 80 Oshimada-machi, Nagano-shi, Japan Phone: (81-26) Facsimile: (81-26) Major Business Lines: Manufacturing and sales of leadframe, plastic laminated package glass-to-metal seals, ceramic package, arrester and precision contact parts IC Assembly Development and sales of software (PLP), Number of Employees: 4,473 Plants: Kohoku Plant Kurita Plant Wakaho Plant Takaoka Plant Arai Plant Kyogase Plant Overseas Representative Offices: Manila 9 th Fl., Unit No. 905, Tower One, Ayala Triangle, Ayala Avenue, Makati-city, Metro Manila, Philippines Phone: (63-2) Facsimile: (63-2)

11 Düsseldorf Immermannstraße 45, Düsseldorf, Germany Phone: (49-211) Facsimile: (49-211) Hong Kong 25 th Fl., Sun Hung Kai Centre, 30 Harbour Road, Hong Kong Phone: (852) Facsimile: (852) Subsidiaries: (Japan) SHINKO PRECISION CO., LTD SHINKO PARTS CO., LTD. SHINKO TECHNOSERVE CO., LTD. YOSHIKAWA SHINKO ELECTRIC CO., LTD. (Overseas) SHINKO ELECTORONICS (MALAYSIA) SDN. BHD. Lot Pt717A, Jalan Serendah 26/17, Seksyen 26, Shah Alam, Selangor Darul Ehsan, Malaysia Phone: (60-3) Facsimile: (60-3) KOREA SHINKO MICROELECTRONICS CO., LTD. 35 Sunpyung-ri, Seo-myun, Suncheon-city, Jollanam-do, Republic of Korea Phone: (82-661) Facsimile: (82-661) SHINKO MICROELECTRONICS IRELAND LIMITED Greenhills Centre, Greenhills Road, Tallaght, Dublin 24, Ireland Phone: (353-1) Facsimile: (353-1) SHINKO ELECTRIC AMERICA, INC Scott Blvd., Suite 101, Santa Clara, CA U.S.A. Phone: (1-408) Facsimile: (1-408)

12 KOREA SHINKO TRADING CO., LTD. 17 th Fl., Taewon Bldg., Samsung-dong, Kangnam-ku, Seoul, Republic of Korea Phone: (82-2) Facsimile: (82-2) TAIWAN SHINKO ELECTRONICS CO., LTD. 5 th Fl., Empire Bldg., 87 Sung Chiang Rd., Taipei, Taiwan Phone: (886-2) Facsimile: (886-2) SHINKO ELECTRONICS (SINGAPORE) PTE. LTD. 78 Shenton Way, #13-03, Singapore Phone: (65) Facsimile: (65) Shareholders Data (as of March 31, 1999) Capital: 24,203,025,726 yen Common Stock: Authorized Issued Number of Shareholders 124,344,000 shares 45,034,772 shares 7,237 Principal Shareholders: Name Fujitsu Limited The Mitsubishi Trust & Banking Corporation Trust Account The Sumitomo Trust & Banking Co., Ltd. Trust Account The Yasuda Trust & Banking Co., Ltd. Money Trust The Yasuda Trust & Banking Co., Ltd. Asahi Mutual Life Insurance Company The Toyo Trust & Banking Co., Ltd. Trust Account A The Mitsui Trust & Banking Co., Ltd. Money Trust Account A The Hachijuni Bank, Ltd. The Industrial Bank of Japan, Ltd. The Dai-ichi Kangyo Bank, Ltd. No. of shares held (thousands) 22,529 2,199 1,619 1, Percentage of total shares outstanding

13 3. Board of Directors (as of June 29, 1999) President and Representative Director Executive Managing Directors Managing Directors Directors Standing Auditor Auditors Jun-ichi Mogi Mamoru Kuroiwa Sugio Uchida Tsuneo Ogasawara Akio Imoto Hiroaki Ikuine Kazunari Shirai Makoto Ibi Akiyoshi Nakamura Yasuyuki Uchiyama Sumio Mitsui Shin-ichi Wakabayashi Fumio Kuraishi Akira Fujimoto Norio Honda Takashi Takaya Satoshi Sugimoto

INTERIM FINANCIAL STATEMENTS FOR FIRST HALF OF FISCAL YEAR 2007

INTERIM FINANCIAL STATEMENTS FOR FIRST HALF OF FISCAL YEAR 2007 - from April 1, 2007 to September 30, 2007 - SHINKO ELECTRIC INDUSTRIES CO., LTD. 80, OSHIMADA-MACHI, NAGANO-SHI, 381-2287 JAPAN Phone: (81-26)283-1000