TSUNAGU” Technology

5-1, Kiba 1-chome, Koto-ku, Tokyo 135-8512, Japan Fujikura Ltd. Ltd. Fujikura Tel. +81-3- 5606 -1030 ANNUAL REPORT 2007 Fax. +81-3-5606-1502 URL. http://www.fujikura.co.jp ANNUAL REPORT 2007 REPORT ANNUAL “TSUNAGU” Technology Printed in Japan Management Policies under the New Medium-Term Business Plan Since its establishment in 1885, Fujikura has continuously contributed to the advancement of society by developing cutting-edge technologies and conducting its business on a foundation of trust and dependability. However, in order to not only survive but also win in this market of constant and dramatic change, it is necessary to fundamentally reform our corporate culture. To achieve this objective, FUJIKURA positioned 2005 as a year of rebirth – the beginning of the “Third 60 Years.” With this in mind, we have formulated the “Mission • Vision • Core Values” to be shared by all Fujikura Group employees – a new set of corporate management concepts and principles that will help us successfully navigate a new path to the future. Based on our new corporate philosophy defined in our “Mission • Vision • Core Values,” we have commenced our G-FPS (Global Fujikura Production System) campaign under which we are implementing various strate- gies and plans. In our G-FPS activities, “Quality First” is the core concept that serves as the platform for our production activities, and injects the culture of manufacturing with the spirit of craftsmanship. We must clarify to all that “Quality First” is “an absolute to be implemented from the customers’ perspective,” and are undertaking a reform of our corporate climate to press forward with the “Third 60 Years.” In our G-FPS activities, we use the corporate philosophy “Mission • Vision • Core Values” as a compass to navigate our way to customer value creation, and each individual is an integral contributor in helping us to realize of our goals of reinforcing craftsmanship and eliminating waste wherever possible. These activities will be implemented not only in the Fujikura Group’s Japanese operations, but also overseas, in all areas of operations, at both production plants and support divisions. Policy of the New Mid-Term Business Plan Toward a “Customer Value Creation Business Model” “Deliver value, not just products, to customers” Sustained awareness of “Mission • Vision • Reinforcement of “Monozukuri (manufacturing)” Core Values (MVCV)” and promotion of MVCV culture and to “Eliminate waste (Nothing is organizational cultural reform scared in the quest for zero waste)” Business Strategy Goals through promotion of G-FPS Business Strategy (Companywide & By Sector) Mid-term & Single Year Execution Plan G-FPS Activities Nothing is sacred in Manufacturing Culture of “Change” Sales-oriented the quest for zero waste Quality Improvement Management Quality First Confirm “what MUST be performed and achieved” from the Customer’s perspective and “change” organizational culture to satisfy these requirements. Contents Consolidated Financial Highlights ........................................................... 1 Management’s Analysis of Financial Position and Operating Results... 17 A Message from the President & CEO .................................................... 2 Consolidated Balance Sheets ............................................................... 18 Focusing on fused technology of optics, electronics and wireless ......... 6 Consolidated Statements of Income..................................................... 20 Fujikura at a Glance................................................................................. 8 Consolidated Statements of Changes in Net Assets ............................ 21 Telecommunications ............................................................................... 9 Consolidated Statements of Cash Flows .............................................. 22 Electronics & Auto ................................................................................. 10 Notes to the Consolidated Financial Statements .................................. 23 Metal Cable & Systems ......................................................................... 11 Report of Independent Auditors............................................................ 36 Directors, Corporate Auditors and Executive Offi cers .......................... 12 Main Consolidated Subsidiaries............................................................ 37 Corporate Social Responsibility ............................................................ 13 Investor Information............................................................................... 37 Consolidated Financial Highlights Fujikura Ltd. and its Consolidated Subsidiaries thousands of millions of yen U.S. dollars Years ended March 31, 2003 2004 2005 2006 2007 2007 For the Year Net Sales ¥316,909 ¥331,325 ¥360,752 ¥503,090 ¥645,984 $5,470,272 Income from Operations 8,887 13,359 16,763 39,758 34,508 292,214 Net Income (Loss) (5,630) (2,557) 5,412 24,990 21,484 181,932 Capital Expenditure 23,493 21,046 21,506 24,598 32,412 274,471 Research and Development Expenditure 11,356 11,010 12,128 12,252 12,291 104,085 At Year-End Total Assets 421,633 412,316 411,619 465,358 536,766 4,545,402 Total Shareholders’ Equity 177,474 177,852 181,029 — — — — — — 223,824 254,638 2,156,312 Number of Employees 23,873 23,825 27,553 33,658 43,874 yen U.S. dollars Per Share Data Net Income (Loss) – Primary ¥(14.6) ¥(6.7) ¥14.4 ¥66.2 ¥57.3 $0.485 Net Income – Fully Diluted — — — — — — Cash Dividends 3.0 3.0 6.0 10.0 10.0 0.085 Note 1: All dollar figures herein refer to U.S. currency, which have been translated from yen amounts, for convenience only, at the rate of ¥118.09=US$1.00, the rate of exchange on March 31, 2007. 2: Fujikura Ltd. and its subsidiaries restated their consolidated financial statements for the years ended March 31, 2005 and 2006. The consolidated financial statements for the years ended March 31, 2004 and 2003 were not restated. Net Sales Income from Operations Net Income (Loss) (millions of yen) (millions of yen) (millions of yen) 700,000 40,000 30,000 600,000 30,000 20,000 500,000 400,000 20,000 10,000 300,000 200,000 10,000 0 100,000 0 0 -10,000 2003 2004 2005 2006 2007 20032004 2005 2006 2007 20032004 2005 2006 2007 Total Assets Shareholders’ Equity Shareholders’ Equity to Total Assets (millions of yen) (millions of yen) (%) 600,000 300,000 50 500,000 40 400,000 200,000 30 300,000 20 200,000 100,000 10 100,000 0 0 0 20032004 2005 2006 2007 20032004 2005 2006 2007 20032004 2005 2006 2007 ANNUAL REPORT 2007 1 A Message from the President & CEO Dating from 1885 – the year of our birth as a manufacturer of wire insulated by silk and cotton windings, 2006 marked the 121st year of Fujikura’s existence. Throughout this period, which is the equivalent of two traditional 60-year lifetimes. Fujikura has continued to contribute to the advance of society and earn its trust through the development and manu- facture of cutting-edge technology. Today we are taking our fi rst bold steps into our “Third 60 Years of Leadership”, and we have announced a new mid-term business plan that targets FY2010 for the achievement of our goals. As a “Value Creation for Customer” enterprise, an approach that delivers original value – not just products – to our customers, Fujikura is committed to enriching the society of tomorrow. Looking back on FY2006 The Japanese economy during the last fi scal year (April 1, 2006~March 31, 2007) enjoyed overall growth. Both capital investment and hiring increased in step with the improving corporate profi ts, stimulating a moderate recovery in personal consumption. For Fujikura, this generally favorable climate served as a tailwind for our business activities. On the other hand, factors such as soaring material costs in global mar- kets and increasingly severe price competition produced new hurdles to overcome. As a result, while consolidated sales of Fujikura reached ¥645,984 million – a 28.4% increase over the previous year and the highest in our history, we recorded ordinary profi t of ¥32,772 million for the same period or a 9.0% decrease from the previous year, which was mainly attributed to downward pressures on our supply price of flexible printed circuits (FPC). However, dividends of ¥10 per share were the same as in the previous fi scal year. In the Telecommunications segment, we witnessed the continuing rapid expansion of the broadband market and aggressive investment in Fiber To The Home (FTTH) infra- structure by carriers both in Japan and abroad. Anticipating this demand, our strategy to increase optical fi ber & optical fi ber cable manufacturing capacity proved successful, and Kazuhiko Ohashi, President & CEO we have enjoyed growth in not only sales but also profits 2 Fujikura Ltd. thanks to reduced manufacturing costs. America Fujikura Ltd. fi ne-pitch connectors and dome switches for mobile devices, (AFL) reported strong sales of optical fiber cable and related Fujikura will boost sales and improve profitability. For FY2007, connectivity products, further contributing to favorable results we are targeting FPC sales of ¥100 billion and expect to in this segment. further expand sales to ¥150 billion in FY2010. In the Electronics & Auto segment, the recovery in In order for our Automotive Electronics business to consumer spending has fueled expansion of products respond to the globalization of the automobile industry, we ranging from digital appliances and mobile phones to digital acquired a 60% equity share in Auxiliar de Componentes cameras. On the other

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