Creating the Future

CMK CORPORATION 2006 Business Report
Year ended March 31, 2006

To Our Shareholders
During the fiscal year under review, despite global concerns about the sharply rising price of crude oil and raw
materials, the Japanese economy followed a gentle recovery trend, supported by the growth in private-sector
demand due to improvement of corporate profit, and also
led by growth in capital investment and consumer spending. The global economy also remained strong, supported
by growth in Asian economies such as China, and by the
U.S. economy.
The PWB industry in which the CMK Group operates
faced strong demand for automotive products and digital
AV devices such as flat-screen TVs. Nevertheless, the business environment remained harsh, characterized by intensifying price competition and rising raw material costs.
Under such circumstances, we strengthened our global marketing system, boosted production
capacity in China, and aggressively pursued orders for high-value-added products. While sales
increased, the effects of declines in retail prices due to intensifying competition and the rising costof raw materials reduced ordinary income. At the same time, steps such as impairment of fixed
assets reduced extraordinary losses, increasing net income.
The PWB industry promises growing demand for digital electronics such as mobile phones andflat-screen TVs, as well as further refinements in the use of electronics in automobiles. We consider as our mission given from the shareholders, to work on those growing markets mentioned
above, expand our business spheres and improve our business performance to realize the progressof corporate value.
Although the economic environment remains unclear, we will strive to achieve our management challenges and to improve corporate value. We thank you all for your continuous support.
June 2006

Takahiro Nakayama
Representative Director and President
1Top Interview
Q: Please describe the business results in the fiscal
term under review and the prospects for the subsequent term.

production and sales base in Thailand. The new factory isplanned to start production in April 2007. In both regions, weplan to pursue our strategies aggressively, with the goal ofboosting the profitability of the CMK Group.

Nakayama: During the fiscal year under review, we promoted sales and production activities on a global scale in order tocorrespond to strong orders, focusing on automotive products
and digital AV devices. We also aggressively sought orders
for high-value-added products, restructured our businesses,
and promoted extensive cost reduction efforts. As part of ourbusiness restructuring and to strengthen Group profitability,
we dissolved our domestic single-sided PWB production business, for which demand had been sluggish in Japan. Even
though we achieved increase from previous fiscal year in sales
figure, intensifying global price competition and rapid rise incost of crude-oil and raw materials created heavy burdens on
our business performance.
In the subsequent fiscal term, we expect continuous rise in
the cost of various raw materials and further declines in product selling prices. These factors will create uncertain businessconditions. But we also expect growth in demand, powered by
the use of electronics in automobiles, digital AV devices andmobile phones.
While continuing with strategic order-taking activities, weplan to strive to restructure our business operations, cut-down
fixed expenses, and reduce costs. We also work hard to
improve technological levels for next-generation equipment toachieve high profitability.

Q: Please explain your management policy for the
future.
Nakayama: The CMK Group management policy is to continue to contribute to the society as we seek to become a global leader in the PWB industry. Based on our selection andconcentration strategy, we plan to invest management
resources primarily in operations involving next-generation
PWBs. In this way, we will promote the development andmass-production of new technologies. At the same time, weare striving to gain the capability to respond promptly andflexibly meeting the diverse needs of customers. Also, we will
work hard on promising markets from home and abroad.
Through these efforts, we aim to progress our corporate value
as a global company that customer trust.

Q: Please tell us what’s happening in product development.
Nakayama: For digital equipment, particularly informationand communication products, we are hard at work developing
more precise technologies to realize higher integration density.
Specifically, we have completed development and plan tobegin full-fledged mass production of build-up multilayer
PWBs adaptable to 0.4-mm-pitch CSP. More over, to meet rising demand for thinner products for various devices, we willcontinue to develop and implement PWBs designed to permit
significantly thinner packages and modules, as well as thin
rigid-flex PWBs. And as part of efforts to achieve electronic
components that offer dramatically higher densities, higher
speeds, and more advanced functions, we are also developing
embedded PWBs with built-in resistors, capacitors, and othercomponents.
We have been working with Casio Computer Co., Ltd. todevelop and mass-produce an EWLP with built-in LSIs (active
devices). For core automotive parts with advanced electronic
control functions, we are working hard in the development of
PWBs with high heat radiation and resistance, commercializing newly developed technologies in rapid succession.

Q: Please describe the ongoing strategy for groupcompanies overseas.
Nakayama: In the China region, we enforced capital investment at CMKC (DONG GUAN) LTD., CMK ELECTRONICS (WUXI) CO., LTD., and the equity-method affiliate CMKGLOBAL BRANDS MANUFACTURE, LTD., based on
anticipated demand growth for products revolving around the
double-sided PWBs and multilayer through-hole PWBs usedin automotive and digital AV devices, and also the build-up
multilayer PWBs used in products like mobile phones and digital cameras.
In the ASEAN region, based on our belief that the region
will become large market after China, as the demand for automotive and digital AV devices grow, we established a new
2

Financial Highlights (Consolidated)
CMK CORPORATION and Consolidated Subsidiaries
Years ended March 31, 2006, 2005 and 2004

Yen
(Millions)(except per share amounts)

U.S.Dollars(Thousands)(except per share amounts)

2004

2005

2006

2006

¥ 115,366
5,613
4,612

¥ 116,031
6,809
5,319

¥ 119,192
9,418
5,657

$ 1,014,659
80,17348,156

At year-end
Shareholders’ equity
Total assets¥

51,024
134,263¥

59,701
130,514¥76,186136,272$648,557
1,160,057

Per share
Net income
Basic
DilutedShareholders’ equity

¥

87.12
74.16
975.88

¥

99.63
89.60
1,077.70

¥

92.74
—
1,235.50

$

0.78
—
10.51

Operating Results :For the year
Net sales
Income before income taxes
Net income

Notes: 1. U.S.Dollars amounts have been translated from Yen, for convenience only, at the rate of ¥ 117.47 = $ 1, the Tokyo foreign exchange market rate as of March 31,
2006.
2. All Millions Yen and Thousands U.S. Dollars amounts are rounded to the nearest figure.

Net Sales

Operating Income (loss) and
Net income (loss)

Yen (Millions)

Net Income (Loss) per Share ofCommon StockYen (Millions)
125,000

Yen

14,000120

12,000100

10,00080

120,000

60

8,000

115,000

40

6,000

20

110,000
4,000

0
2,000

105,000

-20

0

-40

-2,000-60

100,000
95,000

2002

2003

2004

2005

2006

-4,000

2002

2003

2004

2005

Operating income
Net income

3

2006

-80

2002

2003

2004
Basic
Diluted

2005

2006

Sales Information (Consolidated)

Sales by Different Applications

Sales by Type of PWB
Yen (Millions)

In terms of application, sales of PWBs for automotive equipment (car electronics) and digital AV devices such as LCD
TVs and plasma displays have steadily increased. In particular, sales of PWBs for automotive equipment rose dramaticallyover the previous year: by 25.2% on a monetary basis. The
CMK Group will continue to carry out aggressive sales efforts
focusing on the automotive, AV, and mobile phone fields.

Multi-Layerd PWBs
58,052 (48.7%)
Double-Sided PWBs
28,631 (24.0%)

2006

Single-Sided PWBs
13,409 (11.3%)
Others
19,098 (16.0%)

Multi-Layerd PWBs
55,453 (47.8%)

Car electronics

32%

2005

Double-Sided PWBs
26,417 (22.8%)
Single-Sided PWBs
17,062 (14.7%)
Others
17,098 (14.7%)

AV equipment

15%
Sales by Region
Yen (Millions)

Mobile communications
Japan
87,262 (73.2%)

15%

China
20,344 (17.1%)

2006

Southeast Asia
8,853 (7.4%)
Europe2,732 (2.3%)

Information devices

6%
Japan
91,882 (79.2%)

Others

2005

32%

China
10,944 (9.4%)
Southeast Asia
10,581 (9.1%)
Europe2,623 (2.3%)

4

Take aVirtual Tour of

CMKC(DONG GUAN) LTD.

CMKC (DONG GUAN) LTD. is located in the city of Dong Guan in South China’s Guangdong
Province. The company currently operates with approximately 1,000 employees and 11 Japanese
staffs. The economy of South China is showing remarkable progress, and especially automotive
industry is growing rapidly recent years. Corresponding to the trend, CMKC (DONG GUAN) beginning last year added a new plant and deployed state-of-the-art equipment to meet its role as a key
facility for producing PWBs for automotive use in the area. Given below is an introduction of the new
CMKC (DONG GUAN).

Company overview
CMKC (DONG GUAN) was established in November 1998 as a joint venture between
Japanese, Taiwanese, and Hong Kong firms. After becoming a member of the CMK Group in
November 2000, CMKC’s facilities have steadily expanded under CMK-led management, as
CMKC plays a role at the forefront of the Group’s plant expansion into China. Its recent
facilities expansion is its largest yet. With this expansion, the company’s total capital reachedUS$21,950,000, monthly production 50,000m2, and monthly sales US$4,250,000.
New plant of CMKC (DONG GUAN) LTD.

Concept of the facilities expansion
With rapid growth of overseas demand centered on China, and steady advances by Japanese
automakers and affiliates into the South China region, meeting customer expectations forboth quantity and quality based on CMKC’s existing production equipment has become

CMK TOPICS
Prachin Buri,
ThailandCMK CORPORATION (THAILAND) CO., LTD. established in Thailand
In anticipation of global expansion in demand for products for use in automotive and digital devices,and with the goals of enhancing its global supply structure and strengthening strategic management in
the ASEAN region, we have established CMK CORPORATION (THAILAND) CO., LTD., in
Thailand. We are currently proceeding with plant construction and equipment deployment. These
efforts are scheduled to be completed within the year.
● Location:

304 Industrial Park, Prachin Buri, Thailand (approximately 140 km from Bangkok)● Established:

April 2006

● Site area:

89,000 m2● Total floor area: 55,000 m2 (two stories)● Products:

Double-sided through-hole PWBs, through-hole multiplayer PWBs, andbuild-up multilayer PWBs (PPBU).
Note: monthly production: 66,000 m2 (first fiscal year)

Conceptual drawing of completed facility

5increasingly difficult. As a result, CMKC (DONG GUAN) has implemented this facilities
expansion plan to meet client needs. The expanded facilities include equipment for producing build-up multilayer PWBs, demand for which is projected to expand rapidly for automotive applications. With rapid growth in China’s economy, growing attention has focused on
environmental issues. The facilities expansion plan highlights environmental protection, witha focus on wastewater treatment facilities that involves adopting the same system used by the
CMK Group in Japan.
Newly-deployed equipment

Scene from June 6 ceremony commemoratingcompletion of construction of the new plant

Future developments
Studies for the facilities expansion began in December 2004. The resulting in-house project
was launched in June of the following year. From construction of the new plant and equipment delivery through the start of operations, the various aspects of the project were completed in approximately 18 months. Having resolved various issues during the course of the
project, CMKC (DONG GUAN) held a ceremony to mark the completion of construction
this past June 6.
While continuing to target growth in orders, the company will work to improve the skillsof its newly hired employees, seeking to bring the new plant to fully operating status as soon
as possible. All members of CMKC (DONG GUAN) management and employees will work
together to help improve the CMK Group’s business performance and its corporate value.
Auditor training session

ENVIRONMENTAL PROTECTION
Establishment of the chemical
substances control system inaccordance with RoHS Directive

Fluorescence X-ray equipment

Compliance with the RoHS Directive (stipulating restrictions on the use of certain hazardous substances in electrical and electronic equipment) implemented in July 2006 and with other regulations
requires manufacturers to avoid using certain restricted substances in their products.
The CMK Group takes great care to prevent the admixture of prohibited substances that are too
small for the visible eye to see, particularly in its purchase of parts and materials. Specifically, together
with the analytical data it has traditionally had suppliers submit to verify the absence of such substances,
we have adopted fluorescence X-ray equipment to verify in-house that the parts we purchase and our
final products do not include substances prohibited under the RoHS Directive, such as cadmium or lead.
The CMK Group also proactively implements efforts such as audits to confirm the control statusof chemical substances at suppliers and trains auditors for this purpose.
6

Consolidated Financial Statements■ Consolidated Balance Sheets
CMK CORPORATION and Consolidated Subsidiaries
March 31, 2006 and 2005
Yen

U.S.Dollars(Thousands)(Millions)
March 31ASSETS

2006

Yen(Millions)

March 312005

Current assets:
Cash and time deposits¥ 14,704¥ 18,142$ 125,172

357

113

3,039

Short-term borrowings
Current portion of long-term debt

Trade receivables:
Accounts and notes
Inventories
Deferred income taxes
Other current assets
Total current assets

¥

5,205

¥ 5,196

9,011

15,093$44,30976,70831,527

306,657

Accounts and notes

14,492

11,466

123,367

(34)

(52)

(289)

Income taxes payables

1,765

1,324

15,025

9,506

8,518

80,922Other current liabilities

10,871

10,371

92,542

692

743

5,890

41,34643,454351,970

2,114

3,380

17,99663,36362,374539,397

Total current liabilities
Long-term liabilities:

11,29020,725

96,109Accrued pension and severance costs

287

290

2,443

Retirement and severance benefits

576

560

4,903

1,078

801

9,176

13,232

22,377

112,641

5,506

4,980

46,871

189,886

Others12,024

12,136102,358

Buildings and structures

57,51456,347

489,605

Machinery, equipment and others

89,722

89,049763,786

844

511

7,184

Less accumulated depreciation

2006

36,023

Property, plant and equipment:

Construction in progress

March 312005

Trade payables:

Long-term debt

Land

2006

Current liabilities:

Marketable securities

Allowance for doubtful accounts

March 31

LIABILITIES ANDSHAREHOLDERS’ EQUITY

2006

U.S.Dollars(Thousands)

Total long-term liabilities
Minority interests in subsidiaries

160,104

158,044

1,362,935

Shareholders’ equity:

106,264

105,037

904,605

Common stock

53,84053,006458,329

Authorized : 227,922,000 Shares
Issued:Investments and other assets:
Investments in securities

March 31, 2006: 63,060,164 Shares

22,306—

March 31, 2005: 56,732,174 Shares—

18,332—

Additional paid-in capital

22,06318,089187,818

Retained earnings

32,727

27,737

278,598

Unrealized gains on securities

3,009

1,149

25,615(1,763)(3,532)(15,008)(18,353)

14,495

10,341

123,393Long-term loans

—

102

—

Deferred income taxes

194

1,523

1,651

Foreign currency translation adjustments
Treasury stock, at cost

OthersAllowance for doubtful accounts

4,449

4,847

37,873

19,13916,814

162,926

March 31, 2006: 1,455,234 Shares(2,156)—(70)(1,681)(595)

March 31, 2005: 1,411,864 Shares—(2,075)—

19,06815,133

162,322

76,18659,701

648,557¥136,272¥130,514$1,160,057¥136,272¥130,514$1,160,057

Total shareholders’ equity

The accompanying notes are an integral part of these statements.

7

■ Consolidated Statements of Operations
CMK CORPORATION and Consolidated Subsidiaries
Years ended March 31, 2006, 2005 and 2004

Yen
(Millions)

U.S.Dollars(Thousands)

Year ended March 31

Year ended March 31

2006

2005

2004

2006

¥ 119,192
99,364
19,827
10,263¥ 116,031
94,99821,032
10,590¥ 115,366
95,491
19,874
10,661$ 1,014,659
845,867
168,783
87,366

Operating income
Other income (expenses)
Interest and dividend income
Interest expenses
Impairment loss
Others, net

9,564

10,442

9,212

81,416

223
(598)
(373)
603

125
(652)
(2,970)
(135)

89
(955)
(1,707)(1,026)

1,898(5,090)(3,175)
5,133

Income before income taxes
Income taxes

9,418
3,454

6,809
1,601

5,613
1,679

80,17329,403

Income before minority interests
Minority interests in subsidiaries

5,964
306

5,208
(110)

3,934
(678)

50,770
2,604

5,657

5,319

4,612

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses

Net income¥

Yen

Per share of common stock:
Net income — Basic— Diluted
Cash dividends, applicable to period

¥

92.74
—
10.00

¥

99.63
89.60
10.00

$

48,156

U.S.Dollars

¥

87.12
74.16
10.00

$

0.78
—
0.08

The accompanying notes are an integral part of these statements.

■ Consolidated Statements of Cash Flows
CMK CORPORATION and Consolidated Subsidiaries
Years ended March 31, 2006, 2005 and 2004

Yen
(Millions)

U.S.Dollars(Thousands)

Year ended March 31

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Increase in cash and cash equivalents from the addition or
exclusion of consolidated company
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The accompanying notes are an integral part of these statements.

8

Year ended March 31

2006

2005

2004

10,805(5,695)(9,127)¥318(3,698)15,192(2,951)(7,234)
¥
(13)
4,992

12,194(810)(26,254)¥(194)(15,064)—
17,951¥ 14,253—
12,959¥ 17,951

45
27,977¥ 12,959

2006$

91,980(48,480)(77,696)
2,707(31,480)—
152,813$ 121,333

Consolidated Financial Statements■ Consolidated Statements of Shareholders’ Equity
CMK CORPORATION and Consolidated Subsidiaries
Years ended March 31,2006, 2005 and 2004

Yen
(Millions)
Commonstock

Additional
paid-in capital

Retainedearnings

Unrealized
gains onsecurities

Foreigncurrencytranslation
adjustment

Treasurystock, at cost

Balance at March 31, 2003
Net income
Cash dividends
Shares issued upon conversion of convertible bond
Increase due to inclusion of consolidated subsidiaries
Bonuses to directors and statutory auditors
Unrealized holding gain arising during the period
Translation adjustment
Purchase of treasury stock¥16,117
—
—
49
—
—
—
—
—

¥15,874
—
—
49
—
—
—
—
—

¥18,059
4,612
(417)
—
639
(2)
—
—
—

¥ (260)
—
—
—
—
—
1,112
—
—

¥(2,087)
—
—
—
—
—
—
(1,115)—¥(1,497)
—
—
—
—
—
—
—
(110)

Balance at March 31, 2004

¥16,167¥15,924¥22,889¥ 852¥(3,202)¥(1,607)

—
—
2,164
—
—
—
—
—

—
—
2,164
—
—
—
—
—

5,319
(524)
—
117
(65)
—
—
—

—
—
—
—
—
297
—
—

—
—
—
—
—
—
(330)
—

—
—
—
—
—
—
—
(468)

¥18,332¥18,089¥27,737¥1,149¥(3,532)¥(2,075)

—
—
3,973
—
—
—
—

—
—
3,973
—
—
—
—

5,657
(584)
—
(82)
—
—
—

—
—
—
—
1,859
—
—

—
—
—
—
—
1,769
—

—
—
—
—
—
—
(81)

¥22,306¥22,063¥32,727¥3,009¥(1,763)¥(2,156)

Net income
Cash dividends
Shares issued upon conversion of convertible bond
Increase due to inclusion of in overseas subsidiaries
Bonuses to directors and statutory auditors
Unrealized holding gain arising during the period
Translation adjustment
Purchase of treasury stock
Balance at March 31, 2005
Net income
Cash dividends
Shares issued upon conversion of convertible bond
Bonuses to directors and statutory auditors
Unrealized holding gain arising during the period
Translation adjustment
Purchase of treasury stock
Balance at March 31, 2006

U.S. Dollars(Thousands)
Commonstock

Additional
paid-in capital

Retainedearnings

Unrealized
gains(losses) on
securities

Foreigncurrencytranslation
adjustment

Treasurystock, at cost

Balance at March 31, 2005
Net income
Cash dividends
Shares issued upon conversion of convertible bond
Bonuses to directors and statutory auditors
Unrealized holding loss arising during the period
Translation adjustment
Purchase of treasury stock$156,056——
33,821————$153,988——
33,821————$236,119
48,156(4,971)
—
(698)
—
—
—

$9,781————
15,825——$(30,067)—————
15,059—$(17,664)
—
—
—
—
—
—
(689)

Balance at March 31, 2006

$189,886$187,818$278,598$25,615$(15,008)$(18,353)

The accompanying notes are an integral part of these statements.

9

Stock Information (As of March 31, 2006)

Corporate Data (As of March 31, 2006)■ Total number of shares authorized
227,922,000■ Name of Listed Company
CMK CORPORATION■ Total number of shares issued and outstanding
63,060,164■ Date of Establishment
February 25, 1961

■ Number of shareholders
4,574■ Capital¥22,306,203,140■ Major Shareholders
Number ofshares held(Thousands)

Percentage(%)

Japan Trustee Services Bank, Ltd.
(Trustee account)

11,76018.6

The Master Trust Bank of Japan, Ltd.
(Trustee account)

5,044

7.9

The Dai-ichi Mutual Life Insurance Company

2,845

4.5

Noboru Nakayama

2,652

4.2

Mizuho Corporate Bank Ltd.

2,576

4.0

The Foundation for Technology Promotionof Electronic Circuit Board

2,500

3.9

Matsushita Electric Works, Ltd.

1,860

2.9

Trust & Custody Services Bank, Ltd.
As trustee for Hitachi Chemical Co., Ltd.
Retirement Benefit Trust Account re-entrusted
by Mizuho Trust and Banking Co., Ltd.

1,822

2.8

Shareholders■ Address of Head Office
5-1 Nishishinjuku 6-chome, Shinjuku-ku, Tokyo■ Number of Employees
1,211■ Managements (As of June 29, 2006)
Directors
Senior Counselor
President and Chief Executive Officer
Director and Executive Managing Officer
Director and Executive Managing Officer
Director and Executive Managing Officer
Director and Executive Officer

Auditors

Trust & Custody Services Bank, Ltd.
As trustee for The Tokyo Tomin Bank, Ltd.
Retirement Benefit Trust Account re-entrusted
by Mizuho Trust and Banking Co., Ltd.

1,745

2.7

Sony Life Insurance Co., Ltd.

1,621

2.5

Standing Auditor
Auditor
AuditorExecutive Managing Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer

Other Firms
Individuals and Others

9,164,401 shares (14.5%)
Foreign Companies
and Individuals

4,889,966 shares (7.8%)

Nobuo Akiyama
Hideaki Takahashi
Noriyuki Takei

Executive Officers■ Status of Stock by Shareholder
9,721,576 shares (15.4%)

Noboru Nakayama
Takahiro Nakayama
Mikihiko Hattori
Kuniaki Kanemoto
Kunio Nishi
Tsutomu Yamaguchi

Total

63,060,164
sharesSecurity Firms

Financial Companies

883,938 shares (1.4%)

38,400,283 shares (60.9%)

10

Takeo Takai
Jyunichi Itsuji
Kazuhiro Ito
Kenichi Urushiyama
Masashi Koike
Munefumi Takano
Akiharu Nakayama
Hiromitsu Nakayama

■ Shareholders’ Information
Fiscal Year:

April 1 until March 31 of the following year
Surplus dividend date of record:

March 31
Basic Date of Mid Term Division:

September 30
Number of Shares per Unit:

100 shares
Charge for Transfer Fee:Free of charge
Notification method:

Electronic notification(Company Website at http://www.cmk-corp.com)
However in the event that notification cannot be madeelectronically, it will be made via the Nihon Keizai Shimbun.
Stock Transfer Agent:JAPAN SECURITIES AGENTS, LTD.
2-4 Kayabacho 1-chome, Nihonbashi,
Chuo-ku, Tokyo
Contact Address:

JAPAN SECURITIES AGENTS, LTD.
8-18 Shiohama 2-chome, Koto-ku,
Tokyo 137-8650
Phone number for requesting address change form, etc.
0120-707-842
Phone number for other inquiries
0120-707-843

http://www.cmk-corp.com

CMK CORPORATION
43F Shinjuku I-LAND TOWER Bldg.
6-5-1, Nishishinjuku, Shinjuku-ku, Tokyo 163-1388, Japan
Tel: +81-3-5323-0231

This annual report is printed with soy ink on paper which isrecycled. Printed in Japan