1 <strong>1999</strong> <strong>Annual</strong> <strong>Report</strong> Table of Contents Financial Highlights 2 Message from the Chairman 3 Strategy 5 Major Products 7 Research and Development 9 Manufacturing and Plant Automation 11 Quality Management 13 Logistics and Services 15 Financial Statements 17 Corporate Information 61 Financial Highlights 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Operating Revenues Return on Stockholders' Equity 30 25 20 15 10 5 0 12,620 1995 1996 1997 1998 <strong>1999</strong> 26.0% 16,528 23.9% 20,750 24.9% 26,136 18.0% 39,669 21.7% 1995 1996 1997 1998 <strong>1999</strong> 6 5 4 3 2 1 0 Earnings Per Share 4.34 4,000 3,500 3,000 2,500 2000 1,500 1,000 4.17 500 0 5.19 1,292 4.03 5.12 1995 1996 1997 1998 <strong>1999</strong> Net Profits 1,512 2,306 2,235 3,648 1995 1996 1997 1998 <strong>1999</strong> <strong>1999</strong> <strong>Annual</strong> <strong>Report</strong> 2
3 <strong>1999</strong> <strong>Annual</strong> <strong>Report</strong> Message from the Chairman Dear Shareholder: The earthquake on Sep. 21, <strong>1999</strong>, was a big shakeup for all the Taiwanese, but Taiwan is walking out of the trauma and on the road to recovery. With mixed feelings, we announce that <strong>1999</strong> was a good year for your Company. Revenues rose 52% to NT$ 39.6 billion. Net earnings increased 61% to NT$ 3.6 billion. Earnings per share grew 27% to NT$5.12. Operating margins rose to 9%, up a full point from 8% in 1998. <strong>Delta</strong> has one of the strongest balance sheets in the industry due to years of successful operations and our prudent attitude toward financial leverage. Our sustainable revenues increase can mainly be attributed to strong growth in sales of new-generation principal products and new products. On the other hand, we are always proud of our commitment to product research and development. Our research and development expenditures were a record NT$1.85 billion in <strong>1999</strong>, a 46% increase over 1998, and represented 5% of net revenues. We began the new millennium with a new president, James K.M. Ng, who is a highly regarded international business manager and has been the president of <strong>Delta</strong> Thailand for the last decade with outstanding track record. To strengthen our position in the marketplace, we regrouped our activities for higher efficiency, improved communication, and better performance. Our power related Business Units, i.e., Power Supply, UPS and Telecom Power, and ODM, are now merged into Power System Business Group. Our Components business was also upgraded to Components Business Group. The improved efficiency and added production capacity of the three new Dongguan plants allow us to fill customer orders with more flexibility and customer satisfaction. In addition, we recently decided to further invest in Wujiang (Jiangsu Province) for setting up a new manufacturing base. On the other hand, we came through the Y2K rollover with no significant problems. Our SAP ERP system will complete its worldwide linkage this year. Our goal is to make <strong>Delta</strong> a "best-in-class" company. As to our strategic investments, Cyntec Co., Ltd., a subsidiary that provides highprecision, thin film passive components, reported significant growth in both sales revenues and net profits in <strong>1999</strong>. <strong>Delta</strong> Networks Inc, the networking product subsidiary, for its first year of operation reported NT$4.3 billion net revenues. <strong>Delta</strong> Optoelectronics, Inc. was established in last December for advanced display development using polymer light emission display (PLED) and carbon nano-tube electron emitter (CNT) technologies. Entering the e-Commerce era, <strong>Delta</strong> is also exploring the Internet related business opportunities-such as ICP, broad band and ASP. We move into 2000 with high expectations and great confidence that we have the right initiatives, the right culture and the right leadership to seize the ample opportunities the fast-changing world offers to us. We remain committed to our objectives of 30% revenues growth, positive cash flow, and over 20% return on equity. All in all, we believe that <strong>Delta</strong> is strategically well positioned to address the changing needs of the new century. Finally, I want to thank all our employees for their hard work. Without their dedication, we would not be able to achieve last year's growth rate of 52%. Above all, we are most grateful for your continued support to <strong>Delta</strong>. We are fully aware it is your trust in us that drives the Company forward. Sincerely yours, Bruce C.H.Cheng Chairman & CEO <strong>1999</strong> <strong>Annual</strong> <strong>Report</strong> 4
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