AMKOR TECHNOLOGY INC, S-1, 1998-04-08

AMKOR TECHNOLOGY INC
S-1, 1998-04-08
SEMICONDUCTORS & RELATED DEVICES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1998
REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

AMKOR TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 3674 23-1722724
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

AMKOR TECHNOLOGY, INC.
1345 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
(610) 431-9600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

FRANK J. MARCUCCI
CHIEF FINANCIAL OFFICER
AMKOR TECHNOLOGY, INC.
1345 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
(610) 431-9600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

Copies to:
LARRY W. SONSINI, ESQ.
DONNA M. PETKANICS, ESQ.
BRUCE M. MCNAMARA, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]________________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
===============================================================================================================================
MAXIMUM OFFERING PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SECURITY(2) PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value(1)....... 7,000,000 shares $12.00 $84,000,000 $24,780
===============================================================================================================================
</TABLE>

- ---------------

(1) Comprises shares of Common Stock that may be loaned by James Kim and Agnes
Kim to Smith Barney Inc. from time to time in connection with the
market-making activities described herein.

(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) promulgated under the Securities Act of 1933, as
amended, and based on the proposed maximum offering price per share in the
initial public offering of the Common Stock pursuant to the Registrant's
Registration Statement on Form S-1, File No. 333-37235.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.

SUBJECT TO COMPLETION, DATED APRIL 8, 1998

PROSPECTUS

LOGO

AMKOR TECHNOLOGY, INC.
COMMON STOCK

------------------

This Prospectus relates to shares of common stock, par value $.001 per
share (the "Common Stock"), of Amkor Technology, Inc., a Delaware corporation
("Amkor" or the "Company") which may be offered and sold by Smith Barney Inc.
("Salomon Smith Barney") in connection with market-making activities in the
Company's % Convertible Subordinated Notes due 2003 (the "Convertible
Notes").

Salomon Smith Barney may, subject to certain limitations, from time to time
borrow Common Stock from certain stockholders of the Company to settle short
sales of Common Stock (or to return Common Stock previously borrowed by Salomon
Smith Barney to settle such short sales) entered into by Salomon Smith Barney to
hedge any long position in the Convertible Notes resulting from market-making
activities. Such sales by Salomon Smith Barney will be made on the Nasdaq
National Market or in the over-the-counter market at market prices prevailing at
the time of sale or at prices related to such market prices. Salomon Smith
Barney is obligated to return such borrowed shares of Common Stock, and shares
that have been so returned may be reborrowed and sold. The total number of
shares borrowed at any time may not exceed 7,000,000. See "Plan of
Distribution." Salomon Smith Barney is not under any obligation to engage in any
market-making transactions with respect to the Convertible Notes, and any
market-making in the Convertible Notes actually engaged in by Salomon Smith
Barney may cease at any time.

The Common Stock is listed for trading on the Nasdaq National Market under
the symbol "AMKR." The offering price of the Common Stock in the Company's
initial public offering thereof, which commenced on , 1998, was
per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SHARES OF COMMON STOCK.

------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

, 1998
<PAGE> 3

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules filed as a part thereof, as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock, reference is hereby made to such
Registration Statement, including the exhibits and schedules filed as a part
thereof. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein are not necessarily complete and
where such contract or other document is an exhibit to the Registration
Statement, each such statement is qualified in all respects by the provisions of
such exhibit, to which reference is hereby made for a full statement of the
provisions thereof. The Registration Statement, including the exhibits and
schedules filed as a part thereof, may be inspected without charge at the public
reference facilities maintained by the Commission as set forth in the preceding
paragraph. Copies of these documents may be obtained at prescribed rates from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington. D.C. 20549. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov.

PowerQuad(R) and SuperBGA(R) are registered trademarks of the Company and
ChipArray(TM), fleXBGA(TM) and PowerSOP(TM) are trademarks of the Company.
MicroBGA(TM) is a trademark of Tessera, Inc. This Prospectus includes other
trademarks and trade names of the Company and other entities.

CERTAIN PERSONS PARTICIPATING IN THE INITIAL PUBLIC OFFERING BY THE COMPANY
OF THE COMMON STOCK AND THE CONVERTIBLE NOTES MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OR THE
CONVERTIBLE NOTES, INCLUDING PURCHASES OF SUCH SECURITIES TO STABILIZE THEIR
MARKET PRICE, PURCHASES OF SUCH SECURITIES TO COVER SOME OR ALL OF A SHORT
POSITION IN SUCH SECURITIES MAINTAINED BY THE UNDERWRITERS OF SUCH OFFERING AND
THE IMPOSITION OF PENALTY BIDS.

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<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information found elsewhere in this Prospectus, including under "Risk Factors"
and the Combined Financial Statements and Notes thereto. Certain statements
contained in "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business,"
including statements regarding the anticipated growth in the market for the
Company's products, the Company's anticipated capital expenditures and financing
needs, the Company's expected capacity utilization rates, the belief of the
Company as to its future operating performance, and other statements contained
in this Prospectus that are not historical facts, are "forward-looking"
statements within the meaning of the U.S. federal securities laws. Because such
statements include risks and uncertainties, actual results may differ materially
from those anticipated in such forward-looking statements as a result of certain
factors, including those set forth in "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."
These forward-looking statements are made as of the date of this Prospectus and
the Company assumes no obligation to update such forward-looking statements or
to update the reasons why actual results could differ materially from those
anticipated in such forward-looking statements

THE COMPANY

Amkor is the world's largest independent provider of semiconductor
packaging and test services. The Company believes that it is also one of the
leading developers of advanced semiconductor packaging and test technology in
the industry. The Company offers a complete and integrated set of packaging and
test services including integrated circuit ("IC") package design, leadframe and
substrate design, IC package assembly, final testing, burn-in, reliability
testing, and thermal and electrical characterization. As of December 31, 1997,
the Company had in excess of 150 customers, including many of the largest
semiconductor companies in the world. Such customers include, among others,
Advanced Micro Devices, Inc., International Business Machines Corp., Intel
Corporation, Lucent Technologies, Inc., Motorola, Inc., National Semiconductor
Corp., Philips Electronics N.V., SGS-THOMSON Microelectronics N.V., Siemens AG
and Texas Instruments, Inc. ("TI").

Today, nearly all of the world's major semiconductor companies outsource
some or all of their packaging and test needs. The increasing complexities,
investment requirements and time to market pressures associated with IC design
and production, combined with the growth in the number of ICs being produced and
sold, are driving increasing demand for independent packaging and test services.
According to industry estimates, independent packaging foundry revenues are
expected to grow at a compound annual rate of 16% over a period of five years
from $5.6 billion in 1996 to $11.6 billion in 2002.

The Company provides packaging and test services through its three
factories in the Philippines as well as four factories of Anam Industrial Co.,
Ltd. ("AICL") in Korea pursuant to a supply agreement between the Company and
AICL. The Company and AICL have had a long-standing relationship. In 1996 and
1997, approximately 72% and 68%, respectively, of the Company's revenues were
derived from sales of services performed for the Company by AICL. In addition,
substantially all of the revenues of AICL in 1996 and 1997 were derived from
services sold by the Company. Mr. James Kim, the Company's Chairman and Chief
Executive Officer, is a director of AICL, and he and other members of his family
beneficially own approximately 40.7% of AICL's outstanding common stock. The
Company expects that the businesses of the Company and AICL will continue to
remain highly interdependent by virtue of their supply relationship, overlaps
and family ties between their respective shareholders and management, financial
relationships, coordination of product and operation plans, joint research and
development activities and shared intellectual property rights.

The Company recently began offering wafer fabrication services through
AICL's new deep submicron CMOS foundry capable of producing 15,000 8" wafers per
month. Through a strategic relationship with TI, the Company and AICL have
qualified .25 micron CMOS process technology, and TI has agreed to provide to
AICL .18 micron CMOS process technology during 1998. AICL's foundry will
primarily manufacture DSPs, ASICs and other logic devices. By leveraging the
Company's leading position in semiconductor packaging and

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test services, the new wafer fabrication services have enabled the Company to
become one of the first providers of a fully integrated, turnkey semiconductor
fabrication, packaging and test service solution.

The Company's strategy is to: (i) maintain its product technology
leadership by continuing to design and produce leading-edge packaging
technology; (ii) maintain advanced manufacturing capabilities through continuous
advancement and refinement of its process technology; (iii) leverage the scale
and scope of its packaging and test capabilities to provide Amkor with several
competitive advantages, including procurement of key materials and manufacturing
equipment, the ability to capitalize on economies of scale and the ability to
offer an industry-leading breadth of product offerings; (iv) establish industry
packaging standards to bolster sales of leading-edge, high margin and high
growth product lines; (v) enhance customer and supplier relationships; (vi)
continue to focus on customer support; and (vii) provide an integrated, turnkey
solution comprised of wafer fabrication, packaging and test services.

The Company was organized under the laws of Delaware in September 1997 to
consolidate the ownership of several affiliated entities in the same business
and under common management. See "Reorganization." The Company's principal
executive offices are located at 1345 Enterprise Drive, West Chester, PA 19380
and its telephone number at that address is (610) 431-9600.

THE INITIAL PUBLIC OFFERING

On , 1998, the Company commenced the initial public offering
of 35,000,000 shares of Common Stock (5,000,000 of which are being offered by
certain stockholders of the Company (the "Selling Stockholders")) and
$150,000,000 aggregate principal amount of Convertible Notes (the "Initial
Public Offering"). In connection with the Initial Public Offering, the Company
has granted the underwriters of the Initial Public Offering (the "Underwriters")
30-day options to purchase up to 5,250,000 additional shares of Common Stock and
$22,500,000 additional principal amount of Convertible Notes solely to cover
over-allotments, if any. Salomon Smith Barney is a representative of the
Underwriters.

The net proceeds to the Company from the Initial Public Offering are
estimated to be approximately $449,950,000 (approximately $525,452,500 if the
Underwriters' over-allotment options are exercised in full), assuming an Initial
Public Offering price of $11.00 per share of Common Stock and after deducting
the estimated underwriting discounts and estimated offering expenses. The
Company will not receive any proceeds from the sale of the shares of Common
Stock offered by the Selling Stockholders.

Approximately $154 million of the net proceeds to the Company from the
Initial Public Offering will be used to repay the Non-Compliant Loans (as
defined herein), which, following planned repayments of portions thereof prior
to the Initial Public Offering, will have outstanding balances of $43 million,
$50 million and $61 million. These loans are due May 1998, October 2000 and
April 2001, respectively, and accrue interest annually at rates equal to 7.16%,
6.78% and 6.68%, respectively, at December 31, 1997, which rates represent LIBOR
plus a spread. The $43 million loan was incurred in August 1997 in order to
redeem $40 million of Floating Rate Notes issued by Amkor/Anam Pilipinas, Inc.,
a subsidiary of the Company ("AAP"), and to repay certain short-term debt. The
Company is not in compliance with certain covenants under the above-described
loans and, as a result, the Company's obligation to repay these loans may be
accelerated by the lenders at any time. These loan covenants include
restrictions on the ability of one of the Company's subsidiaries to enter into
transactions with affiliates, requirements that the subsidiary maintain certain
debt-to-equity ratios and requirements that the subsidiary comply with certain
notice requirements. As a result of such non-compliance, these loans have been
classified as current liabilities in the Company's financial statements included
herein, and the report of the Company's independent public accountants with
respect to such financial statements contains a paragraph stating that there is
substantial doubt as to the ability of the Company to continue as a going
concern. Repayment of such loans from the proceeds of the Initial Public
Offering will eliminate these events of non-compliance.

Approximately $63 million of the net proceeds to the Company from the
Initial Public Offering will be used to repay numerous short-term bank loans
incurred primarily to finance capital expenditures for the

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Company's P1 factory in the Philippines and for working capital. All of these
loans are due within 12 months of December 31, 1997 and bear interest at rates
ranging from 8.0% to 12.2%. In addition, approximately $8 million of the net
proceeds will be used to repay two term loans of approximately $3 million and $5
million. These loans are due September 1999 and January 2001, respectively, and
accrue interest annually at rates equal to 9.09% and 11.88%, respectively, at
December 31, 1997, which rates represent LIBOR plus a spread.

An additional approximately $34 million of the net proceeds to the Company
will be used to purchase AICL's 40% interest in AAP. Approximately $106 million
of the net proceeds will be used to repay all of the amounts that will remain
due to Anam USA, Inc., a wholly-owned subsidiary of AICL ("AUSA"), following
planned repayments of portions thereof prior to the Initial Public Offering. The
remaining $85 million of such net proceeds ($160 million if the Underwriters'
over-allotment options are exercised in full) will be used for capital
expenditures and working capital. Pending such uses, the net proceeds to the
Company of the Initial Public Offering will be invested in investment grade,
interest-bearing securities.

USE OF PROCEEDS

This Prospectus relates to the offer and sale of shares of Common Stock
whereby Salomon Smith Barney may, subject to certain limitations, from time to
time borrow from Mr. James Kim and his wife, Mrs. Agnes Kim ("Mr. and Mrs.
Kim"), to settle short sales of Common Stock (or to return Common Stock
previously borrowed by Salomon Smith Barney to settle such short sales) entered
into by Salomon Smith Barney to hedge any long position in the Convertible Notes
resulting from its market-making activities. See "Plan of Distribution." The
Company will not receive any proceeds from the sale of the Common Stock to which
this Prospectus relates.

RISK FACTORS

See "Risk Factors" beginning on page 8 for a discussion of certain factors
that should be considered by potential investors.

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SUMMARY COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1993 1994 1995 1996 1997
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<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............................. $442,101 $572,918 $932,382 $1,171,001 $1,455,761
Gross profit............................. 70,778 58,270 149,047 148,923 213,092
Operating income......................... 26,374 13,843 84,855 71,368 100,841
Net income(1)............................ 17,236 11,574 61,932 32,922 43,281
Pro forma adjustment for income
taxes(2)............................... 2,900 200 10,400 2,900 3,613
Pro forma net income(2).................. 14,336 11,374 51,532 30,022 39,668
Basic and diluted pro forma net income
per common share....................... .17 .14 .62 .36 .48
Shares used in per share calculation..... 82,610 82,610 82,610 82,610 82,610
OTHER DATA:
EBITDA(3)................................ $ 37,437 $ 34,197 $103,434 $ 123,082 $ 175,111
Ratio of earnings to fixed charges(4)
Actual................................. 3.7x 2.0x 4.6x 2.4x 2.5x
Supplemental pro forma................. 3.1x
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------
DECEMBER 31, 1996 ACTUAL PRO FORMA(5) AS ADJUSTED(6)
----------------- --------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 49,644 $ 90,917 $ 63,217 $ 68,191
Working capital (deficit)..................... 36,785 (196,870) (224,570) 52,704
Total assets.................................. 804,864 855,592 827,892 864,197
Short-term borrowings and current portion of
long-term debt.............................. 191,813 325,968 325,968 53,668
% Convertible Subordinated Notes due 2003... -- -- -- 150,000
Due to AUSA (non-current)..................... 234,894 149,776 149,776 --
Other long-term debt.......................... 167,444 38,283 38,283 35,283
Stockholders' equity.......................... 45,812 90,875 61,075 367,838
</TABLE>

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(1) Net income for 1997 reflects a $17.3 million loss related primarily to the
impairment of value of the Company's equity interest in AICL. This
investment was sold in 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 6 of Notes to
Combined Financial Statements.

(2) Prior to the reorganization of the Company, Amkor Electronics, Inc. ("AEI"),
a predecessor of the Company, elected to be taxed as an S Corporation under
the Internal Revenue Code of 1986 and comparable state tax laws.
Accordingly, AEI did not recognize any provision for federal income tax
expense during the periods presented herein. The pro forma adjustment for
income taxes reflects the additional U.S. federal income taxes which would
have been recorded by the Company if AEI had not been an S Corporation
during these periods. See "Reorganization" and Note 1 of Notes to Combined
Financial Statements.

(3) EBITDA is defined as earnings before interest, taxes on income, depreciation
and amortization. EBITDA is presented here to provide additional information
about the Company's ability to meet its future debt service, capital
expenditure, and working capital requirements and should not be construed as
a substitute for or a better indicator of results of operations or liquidity
than net income or cash flow from operating activities computed in
accordance with generally accepted accounting principles.

(4) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income before income taxes less undistributed earnings in less
than 50%-owned subsidiaries, plus fixed charges. Fixed charges consist of
interest expense incurred and one-third of rental expense which amount is
deemed by the Company to be representative of the interest factor of rental
payments under operating leases. The supplemental pro forma ratio of
earnings to fixed charges reflects the effect on the ratio of earnings to
fixed charges if the Initial Public Offering had been completed and the
estimated net proceeds to the Company applied as described in "-- The
Initial Public Offering" at the beginning of the period presented.

(5) Pro forma balance sheet data reflects (i) the termination of AEI's S
Corporation status which resulted in the recording of a deferred tax
liability of $2.1 million and (ii) a distribution by the Company of
undistributed earnings of AEI through December 31, 1997 of $27.7 million to
stockholders of AEI prior to the reorganization of the Company. The amount
actually distributed by the Company to such stockholders of AEI will
increase to reflect any undistributed net income earned by AEI following
December 31, 1997 and prior to such reorganization. See
"Reorganization -- Termination of S Corporation Status and Distributions"
and Notes 1, 16 and 17 of Notes to Combined Financial Statements.

(6) As adjusted to give effect to the application of the estimated net proceeds
to the Company of the Initial Public Offering based on an assumed Initial
Public Offering price of $11.00 per share of Common Stock, including the
purchase from AICL of its 40% interest in AAP for approximately $34 million
and the related elimination of minority interest and recording of goodwill.
The acquisition of the minority interest will result in additional
amortization of approximately $2.5 million per year. Also reflects
repayments made after December 31, 1997 and prior to the Initial Public
Offering of $50.3 million of short-term borrowings and current portion of
long-term debt and $30 million of amounts due to AUSA (non-current), as well
as the assumption by an affiliate of the Company of $13.9 million of amounts
due to AUSA (non-current), in February 1998. See "-- The Initial Public
Offering," "Reorganization" and Notes 1, 6 and 16 of Notes to Combined
Financial Statements.

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Capitalized terms used in this summary have the meanings ascribed to such
terms elsewhere in this Prospectus. Unless the context otherwise requires, all
references in this Prospectus to the "Company" or "Amkor" are to Amkor
Technology, Inc. and its subsidiaries. Prior to the Reorganization (as defined
under "Reorganization"), such subsidiaries were under common management and were
in the same business. As a result, the financial statements presented herein
have been prepared on a combined basis. Unless otherwise indicated, all
information in this Prospectus gives effect to (i) the Reorganization, including
the issuance of 82,610,000 shares of Common Stock in connection therewith, and
(ii) the Initial Public Offering and the application of the net proceeds
therefrom (assuming that the Underwriters have not exercised the over-allotment
options). See "-- The Initial Public Offering," "Reorganization," "Description
of Capital Stock" and Note 1 of Notes to Combined Financial Statements.
References in this Prospectus to "Korea" are to the Republic of Korea, and
references to "won" or "W" are to the currency of the Republic of Korea. The won
has depreciated significantly against the U.S. dollar and other foreign
currencies in recent months. On March 24, 1998, the base rate under the market
average exchange rate system, as announced by the Korea Financial
Telecommunications and Clearings Institute in Seoul, Korea (the "Market Average
Exchange Rate"), was W1,415 to $1.00. No representation is made that the won or
U.S. dollar amounts referred to herein could have been or could be converted
into U.S. dollars or won, as the case may be, at any particular rate or at all.
Financial information for AICL contained in this Prospectus has been prepared on
the basis of Korean generally accepted accounting principles ("GAAP"), which
differ in certain significant respects from U.S. GAAP.

Certain technical terms used throughout this Prospectus are defined in the
Glossary appearing immediately prior to the Combined Financial Statements at the
end of this Prospectus.

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RISK FACTORS

Prospective investors should consider carefully the following risk factors,
in addition to the other information contained in this Prospectus concerning the
Company and its business, before purchasing the shares of Common Stock or the
Convertible Notes offered hereby. Certain statements contained in "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," including statements
regarding the anticipated growth in the market for the Company's products, the
Company's anticipated capital expenditures and financing needs, the Company's
expected capacity utilization rates, the belief of the Company as to its future
operating performance and other statements contained in this Prospectus that are
not historical facts, are "forward-looking" statements within the meaning of the
U.S. federal securities laws. Because such statements include risks and
uncertainties, actual results may differ materially from those anticipated in
such forward-looking statements as a result of certain factors, including those
set forth herein and in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business." These forward-looking
statements are made as of the date of this Prospectus and the Company assumes no
obligation to update such forward-looking statements or to update the reasons
why actual results could differ materially from those anticipated in such
forward-looking statements.

FLUCTUATIONS IN OPERATING RESULTS; DECLINES IN AVERAGE SELLING PRICES

The Company's operating results have varied significantly from period to
period. A variety of factors could materially and adversely affect the Company's
revenues, gross profit and operating income, or lead to significant variability
of quarterly or annual operating results. These factors include, among others,
the cyclical nature of both the semiconductor industry and the markets addressed
by end-users of semiconductors, the short-term nature of its customers'
commitments, timing and volume of orders relative to the Company's production
capacity, changes in capacity utilization, evolutions in the life cycles of
customers' products, rescheduling and cancellation of large orders, rapid
erosion of packaging selling prices, availability of manufacturing capacity,
allocation of production capacity between the Company's facilities and those of
AICL, fluctuations in package and test service charges paid to AICL, changes in
costs, availability and delivery times of labor, raw materials and components,
effectiveness in managing production processes, fluctuations in manufacturing
yields, changes in product mix, product obsolescence, timing of expenditures in
anticipation of future orders, availability of financing for expansion, changes
in interest expense, the ability to develop and implement new technologies on a
timely basis, competitive factors, changes in effective tax rates, the loss of
key personnel or the shortage of available skilled workers, international
political or economic events, currency and interest rate fluctuations,
environmental events, and intellectual property transactions and disputes.
Unfavorable changes in any of the above factors may adversely affect the
Company's business, financial condition and results of operations. In addition,
the Company increases its level of operating expenses and investment in
manufacturing capacity based on anticipated future growth in revenues. If the
Company's revenues do not grow as anticipated and the Company is not able to
decrease its expenses, the Company's business, financial condition and operating
results would be materially and adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

Beginning in the third quarter of 1996, intense competition in the
semiconductor industry worldwide resulted in decreases in the average selling
prices of many of the Company's lead frame packages. The Company expects that
average selling prices for its services will continue to decline in the future,
principally due to intense competitive conditions. A decline in average selling
prices of the Company's services, if not offset by reductions in the cost of
producing those services or by a shift to higher margin products, would decrease
the Company's gross margins and could materially and adversely affect the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DEPENDENCE ON THE HIGHLY CYCLICAL SEMICONDUCTOR AND PERSONAL COMPUTER INDUSTRIES

The Company's business is substantially affected by market conditions in
the semiconductor industry, which is highly cyclical and, at various times, has
been subject to significant economic downturns character-

8
<PAGE> 10

ized by reduced product demand, rapid erosion of average selling prices and
production overcapacity. In addition, the markets for semiconductors are
characterized by rapid technological change, evolving industry standards,
intense competition and fluctuations in end-user demand. Because the Company's
business will be dependent on the requirements of semiconductor companies for
independent packaging, test and wafer fabrication services for the foreseeable
future, any future downturn in the semiconductor industry could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's operating results for 1996 and 1997 were adversely
affected by a downturn in the semiconductor market. In addition, a significant
portion of the Company's net revenues from packaging and test services depends
on the packaging and testing of semiconductors used in personal computer ("PC")
products. The PC industry is subject to intense competition, is highly volatile
and is subject to significant shifts in demand. As a result, any deterioration
of business conditions in the PC industry could have a material adverse effect
on the Company. See "Business -- Industry Background" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

RISKS ASSOCIATED WITH LEVERAGE

The Company has historically operated with significant amounts of debt
relative to its equity. At December 31, 1997, the Company had outstanding $514.0
million in principal amount of indebtedness, including non-current amounts due
to Anam USA, Inc. ("AUSA"), a wholly-owned subsidiary of AICL, and the Company
intends to incur additional bank debt prior to and following the Initial Public
Offering in addition to the Convertible Notes issued as part of the Initial
Public Offering. In 1996 and 1997, the Company's payments under long-term debt
agreements (excluding payments to AUSA as described in Note 11 of Notes to
Combined Financial Statements) were $3.1 million and $43.5 million,
respectively. Following the expected application of the estimated net proceeds
to the Company of the Initial Public Offering and planned repayments of debt
after December 31, 1997 and prior to the Initial Public Offering, the Company
will continue to have at least $239 million in principal amount of indebtedness
outstanding, including $54 million of short-term borrowings and current portions
of long-term debt.

The Company is not in compliance with certain covenants with respect to
certain of its loans, the aggregate outstanding amount of which was $176 million
at December 31, 1997 (the "Non-Compliant Loans"). Such non-compliance in turn
triggered cross-defaults with respect to an additional $10 million of the
Company's loans. These loan covenants include restrictions on the ability of one
of the Company's subsidiaries to enter into transactions with affiliates,
requirements that the subsidiary maintain certain debt-to-equity ratios and
requirements that the subsidiary comply with certain notice requirements. The
Company's obligation to repay these loans (including the cross-defaulted loans)
may be accelerated by the lenders at any time. As a result of such
non-compliance, these loans have been classified as current liabilities in the
Company's financial statements included herein, and the report of the Company's
independent public accountants with respect to such financial statements
contains a paragraph stating that there is substantial doubt as to the ability
of the Company to continue as a going concern. The Company will eliminate such
non-compliance and cross-defaults by repaying such loans using part of the net
proceeds to the Company from the Initial Public Offering, as well as working
capital. See "Prospectus Summary -- The Initial Public Offering."

At December 31, 1997, the Company had also guaranteed borrowing facilities
available to companies affiliated with James Kim and other stockholders of the
Company totalling $55.7 million, of which $38.2 million was outstanding at
December 31, 1997. At December 31, 1997, the Company had $90.9 million of
stockholders' equity and a working capital deficit of $196.9 million (which
amounts were $61.1 million and $224.6 million, respectively, on a pro forma
basis, after giving effect to the termination of AEI's S Corporation status and
the distribution of undistributed net income of AEI through December 31, 1997).
See "Reorganization -- Termination of S Corporation Status and Distributions."

Following the Initial Public Offering, the Company will continue to be
subject to the risks associated with leverage, which risks include (i) principal
and interest repayment obligations which require the expenditure of substantial
amounts of cash, the availability of which will be dependent on the Company's
future performance, (ii) inability to repay principal or interest when due,
which could result in a default on the debt and legal actions against the
Company, (iii) adverse effects of interest expense on the Company's financial
condition and results of operations and (iv) potential violations of loan
covenants which could lead to loans being called

9
<PAGE> 11

by banks. In addition, a significant portion of the debt is owed to banks
located in Korea or branches of such banks located outside Korea. Due to the
deterioration of the Korean economy in recent months and the resulting liquidity
crisis in Korea, banks in Korea and their overseas branches have been
experiencing financial difficulties and are reducing their lending, in
particular to companies which have significant amounts of debt relative to their
equity. See "-- Dependence on International Operations and Sales; Concentration
of Operations in the Philippines and Korea.

DEPENDENCE ON RELATIONSHIP WITH AICL; POTENTIAL CONFLICTS OF INTEREST

AICL was founded in 1956 by Mr. H. S. Kim, who currently serves as the
honorary Chairman and a Representative Director of AICL. AICL is a member of the
Anam group of companies (the "Anam Group"), consisting principally of companies
in Korea in the electronics industries. The management of AICL and the other
companies in the Anam Group are influenced to a significant degree by the family
of H. S. Kim, which, together with the Company, collectively owned approximately
40.7% of the outstanding common stock of AICL as of December 31, 1997. A
significant portion of the shares owned by the Kim family are leveraged and as a
result of this, or for other reasons, the family's ownership could be
substantially reduced. James Kim, the founder of the Company and currently its
Chairman and Chief Executive Officer, is the eldest son of H. S. Kim. Since
January 1992, in addition to his other responsibilities, James Kim has been
serving as acting Chairman of the Anam Group and a director of AICL. Mr. In-Kil
Hwang, the President and a Representative Director of AICL, is the
brother-in-law of James Kim. In addition, four other members of Mr. Kim's family
are on the 13-member Board of Directors of AICL. After the Initial Public
Offering, James Kim and members of his family will beneficially own
approximately 68.9% of the outstanding Common Stock of the Company, and Mr. Kim
and other members of his family will continue to exercise significant control
over the Company. See "-- Benefits of the Initial Public Offering to Existing
Stockholders; Continued Control by Existing Stockholders" and "Principal
Stockholders."

The businesses of the Company and AICL have been interdependent for many
years. In 1996 and 1997, approximately 72% and 68%, respectively, of the
Company's revenues were derived from sales of services performed for the Company
by AICL. In addition, substantially all of the revenues of AICL in 1996 and 1997
were derived from services sold by the Company. The Company expects the
proportion of its revenues derived from sales of services performed for the
Company by AICL and the proportion of AICL's revenues from services sold by the
Company to increase as the Company begins selling the wafer fabrication output
of AICL's new wafer foundry and with the Company's assumption from AICL in
January 1998 of substantially all of the marketing rights for the Japanese
market. In the event the ability of AICL to supply the Company were disrupted
for any reason, the Company's facilities in the Philippines would be able to
fill only a small portion of the resulting shortfall in capacity. In addition,
there are currently no significant third party suppliers of packaging and test
services from which the Company could fill its orders. As a result, the
Company's business, financial condition and operating results will continue to
be significantly dependent on the ability of AICL to effectively provide
contracted services on a cost-efficient and timely basis. The termination of the
Company's relationship with AICL for any reason, or any material adverse change
in AICL's business resulting from underutilization of its capacity, the level of
its debt and its guarantees of affiliate debt, labor disruptions, fluctuations
in foreign exchange rates, changes in governmental policies, economic or
political conditions in Korea or any other change, could have a material adverse
effect on the Company's business, financial condition and results of operations.

The Company has recently entered into new supply agreements with AICL (the
"Supply Agreements"). Under the Supply Agreements, AICL has granted to the
Company a first right to substantially all of the packaging and test services
capacity of AICL and the exclusive right to all of the wafer output of its new
wafer foundry. The Company expects to continue to purchase substantially all of
AICL's packaging and test services, and to purchase all of AICL's wafer output,
under the Supply Agreements. Under the Supply Agreements, pricing arrangements
relating to packaging and test services provided by AICL to the Company are
subject to quarterly review and adjustment, and such arrangements relating to
the wafer output provided by AICL to the Company are subject to annual review
and adjustment, in each case on the basis of factors such as changes in the
semiconductor market, forecasted demand, product mix, capacity utilization and
fluctuations in exchange rates, as well as the mutual long-term strategic
interests of the Company and AICL. There can be no assurance

10
<PAGE> 12

that any new pricing arrangements resulting from such review and adjustment will
be favorable to the Company. Pursuant to long-standing arrangements between AICL
and the Company's operating subsidiaries, sales from AICL to the Company will
continue to be made through AUSA, a wholly-owned financing subsidiary of AICL.
Under the Supply Agreements, the Company will continue to reimburse AUSA for the
financing costs incurred by it in connection with trade financing provided to
the Company. The Supply Agreements also provide that Amkor-Anam, Inc., a
subsidiary of the Company, will continue to provide raw material procurement and
related services to AICL on a fee basis. The Supply Agreements have a five-year
term and may be terminated by any party thereto upon five years' written notice
at any time after the expiration of such initial five-year term. There can be no
assurance that AICL will not terminate either Supply Agreement upon the
expiration of such initial term or, if it does terminate a Supply Agreement,
that the Company will be able to obtain a new agreement with AICL on terms that
are favorable to the Company or at all.

The following is a summary of 1996 and 1997 consolidated financial
information pertaining to AICL prepared in accordance with Korean GAAP which
differs from U.S. GAAP in certain significant respects. See Note 6 of Notes to
Combined Financial Statements.

<TABLE>
<CAPTION>
1996 1997
---------- --------------
(IN MILLIONS)
<S> <C> <C>
SUMMARY INCOME STATEMENT DATA:
Sales.................................................. W1,338,718 W1,786,457
Gross profit........................................... 242,601 279,186
Operating income....................................... 164,846 176,028
Net foreign exchange loss.............................. 29,372 216,697
Net loss............................................... (9,385) (305,414)
========== ==========
SUMMARY BALANCE SHEET DATA:
Cash and bank deposits................................. W 324,139 W 215,024
Accounts and notes receivable, net..................... 368,975 393,261
Inventory.............................................. 214,494 260,302
Other current assets................................... 145,301 490,544
---------- ----------
Total current assets................................ 1,052,909 1,359,131
---------- ----------
Property, plant and equipment, net..................... 994,931 2,159,466
Investments............................................ 83,715 122,366
Other long-term assets................................. 93,733 295,554
---------- ----------
Total long-term assets.............................. 1,172,379 2,577,386
---------- ----------
Total assets................................... W2,225,288 W3,936,517
========== ==========
Short-term borrowings.................................. 935,463 1,591,280
Current maturities of long-term debt................... 85,252 120,913
Other current liabilities.............................. 305,931 412,289
---------- ----------
Total current liabilities........................... 1,326,646 2,124,482
---------- ----------
Long-term debt, net of current maturities.............. 475,045 736,784
Long-term capital lease obligations.................... 106,068 861,813
Other long-term liabilities and minority interest...... 89,272 138,305
---------- ----------
Total long-term liabilities......................... 670,385 1,736,902
---------- ----------
Total liabilities.............................. 1,997,031 3,861,384
---------- ----------
Stockholders' equity................................... 228,257 75,133
---------- ----------
Total liabilities and stockholders' equity..... W2,225,288 W3,936,517
========== ==========
</TABLE>

11
<PAGE> 13

A significant amount of the current and long-term liabilities of AICL are
denominated in U.S. dollars and other foreign currencies. At December 31, 1997,
the amount of U.S. dollar and other foreign currency denominated short-term
borrowings, current maturities of long-term debt, long-term debt (net of current
maturities) and long-term capital lease obligations were W1,092 billion, W59
billion, W159 billion and W834 billion, respectively. Due in part to the
significant depreciation of the won (for example, from a Market Average Exchange
Rate of W884 to $1.00 on December 31, 1996 to W1,415 to $1.00 on December 31,
1997 and W1,415 to $1.00 on March 24, 1998) resulting from the recent economic
crisis in Korea, AICL's liabilities in won terms and its leverage calculated in
won have significantly increased in 1997. The effect of this depreciation on
AICL, however, has been mitigated by the fact that substantial amounts of AICL's
revenues are denominated in U.S. dollars. The increase in AICL's liabilities was
also attributable in part to additional financing obtained in connection with
the construction of its new wafer foundry. See "-- Risks Associated with New
Wafer Fabrication Business" and Note 6 of Notes to Combined Financial
Statements.

The recent economic crisis in Korea has also led to sharply higher interest
rates in Korea and reduced opportunities for refinancing or refunding maturing
debts as financial institutions in Korea, which are experiencing financial
difficulties, are increasingly looking to limit their lending, particularly to
highly leveraged companies, and to increase their reserves and provisions for
non-performing assets. These developments will result in higher interest rates
on loans to AICL and have otherwise made it more difficult for AICL to obtain
new financing. Therefore, there can be no assurance that AICL will be able to
refinance its existing loans or obtain new loans, or continue to make required
interest and principal payments on such loans or otherwise comply with the terms
of its loan agreements. Any inability of AICL to obtain financing or generate
cash flow from operations sufficient to fund its capital expenditure, debt
service and repayment and other working capital and liquidity requirements could
have a material adverse effect on AICL's ability to continue to provide services
and otherwise fulfill its obligations to the Company. See "-- Risks Associated
with Leverage" and "-- Dependence on International Operations and Sales;
Concentration of Operations in the Philippines and Korea."

As of December 31, 1997, AICL and its consolidated subsidiaries were
contingently liable under guarantees in respect of debt of AICL's
non-consolidated subsidiaries and affiliates in the Anam Group in the aggregate
amount of approximately W857 billion. As of such date, AICL had provided
guarantees for all of AUSA's debt of $319 million, the Non-Compliant Loans of
$176 million and the Company's obligations under a receivables sales
arrangement. The Company has met a significant portion of its financing needs
through financing arrangements obtained by AUSA for the benefit of the Company
based on guarantees provided by AICL. There can be no assurance that AUSA will
be able to obtain additional guarantees, if necessary, from AICL. Further, a
deterioration in AICL's financial condition could trigger defaults under AICL's
guarantees, causing acceleration of such loans. In addition, as an overseas
subsidiary of AICL, AUSA was formed with the approval of the Bank of Korea. If
the Bank of Korea were to withdraw such approval, or if AUSA otherwise ceased
operations for any reason, the Company and AICL would be required to meet their
financing needs through alternative arrangements. Although the Company believes
that after the Offerings alternative financing arrangements will be available,
there can be no assurance that the Company or AICL will be able to obtain
alternative financing on acceptable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 11 of Notes to Combined
Financial Statements. In addition, if any relevant subsidiaries or affiliates of
AICL, certain of which may have greater exposure to domestic Korean economic
conditions than AICL, were to fail to make interest or principal payments or
otherwise default under their debt obligations guaranteed by AICL, AICL could be
required under its guarantees to repay such debt, which event could have a
material adverse effect on its financial condition and results of operations.

Historically, AICL has undertaken capacity expansion programs and other
capital expenditures primarily on the basis of forecasts of the Company and
business plans prepared jointly with the Company. The Supply Agreements
generally provide for continued capital investment by AICL based on the
Company's forecasts and operational plans prepared jointly by the Company and
AICL reflecting such forecasts. However, as a result of the recent deterioration
of the Korean economy, there can be no assurance that AICL will be able to

12
<PAGE> 14

fund future capacity expansions and other capital investments required to supply
the Company with necessary packaging and test services and wafer output on a
timely and cost-efficient basis.

The Company and AICL have historically cooperated on the development of new
package designs and packaging and testing processes and technologies. The Supply
Agreements generally provide for continued cooperation between the Company and
AICL in research and development, as well as the cross-licensing of intellectual
property rights between the Company and AICL. If the Company's relationship with
AICL were terminated for any reason, the Company's research and development
capabilities and intellectual property position could be materially and
adversely affected.

After the Initial Public Offering, the Company will continue to be
controlled to a significant degree by James Kim and members of his family, and
Mr. Kim and other members of his family will also continue to exercise
significant influence over the management of AICL and its affiliates. In
addition, the Company and AICL will continue to have certain contractual and
other business relationships, including under the Supply Agreements, and may
engage in transactions from time to time that are material to the Company.
Although any such material agreements and transactions would require approval of
the Company's Board of Directors, such transactions generally will not require
approval of the disinterested members of the Board of Directors and conflicts of
interest may arise in certain circumstances. There can be no assurance that such
conflicts will not from time to time be resolved against the interests of the
Company. The Company currently has four directors, two of whom are
disinterested. Under Delaware corporate law, each director owes a duty of
loyalty and care to the Company, which if breached can result in personal
liability for the directors. In addition, the Company may agree to certain
changes in its contractual and other business relationships with AICL, including
pricing, manufacturing allocation, capacity utilization and capacity expansion,
among others, which in the judgment of the Company's management will result in
reduced short-term profitability for the Company in favor of potential long-term
benefits to the Company and AICL. There can be no assurance that the Company's
business, financial condition or results of operations will not be adversely
affected by any such decision.

DEPENDENCE ON INTERNATIONAL OPERATIONS AND SALES; CONCENTRATION OF OPERATIONS IN
THE PHILIPPINES AND KOREA

All of the production facilities currently used to fill the Company's
orders are located in the Philippines and Korea and many of the Company's
customers' operations are located in countries outside of the United States. A
substantial portion of the Company's revenues are derived from sales to
customers located outside of the United States. In 1996 and 1997, sales to such
customers accounted for 27% and 28%, respectively, of the Company's revenues.
The Company expects sales outside of the United States to continue to represent
a significant portion of its future revenues. As a result, the Company's
business will continue to be subject to certain risks generally associated with
doing business abroad, such as foreign governmental regulations, currency
fluctuations, political unrest, disruptions or delays in shipments, currency
controls and fluctuations, changes in local economic conditions and import and
export controls, as well as changes in tax laws, tariffs and freight rates. The
Company has structured its global operations to take advantage of lower tax
rates in certain countries and tax incentives extended to encourage investment.
The Company's tax returns through 1993 in the Philippines and through 1994 in
the U.S. have been examined by the Philippine and U.S. tax authorities,
respectively. The recorded provisions for subsequent open years are subject to
changes upon examination by tax authorities of tax returns for these years.
Changes in the mix of income from the Company's foreign subsidiaries, expiration
of tax holidays and changes in tax laws and regulations could result in
increased effective tax rates for the Company. See Notes 10 and 15 of Notes to
Combined Financial Statements.

Philippines

The Company's results of operations and growth will be influenced by the
political situation in the Philippines and by the general state of the
Philippine economy. Although the political and economic situation in the
Philippines has stabilized in recent years, it has historically been subject to
significant instability. Most recently, the devaluation of the Philippine peso
relative to the U.S. dollar beginning in July 1997 has led to instability in the
Philippine economy. Any future economic or political disruptions or instability
or low economic growth in the Philippines could have a material adverse effect
on the Company's business, financial

13
<PAGE> 15

condition and results of operations. Because the functional currency of the
Company's Philippine operations is the U.S. dollar, the Company has recently
benefitted from cost reductions relating to peso denominated expenditures,
primarily payroll costs. The Company believes that such devaluation of the
Philippine peso will eventually lead to inflation in the Philippines, which
could offset any savings achieved to date.

Korea

In 1996 and 1997, approximately 72% and 68%, respectively, of the Company's
revenues were derived from sales of services performed for the Company by AICL.
The operations of AICL are subject to certain risks. Relations between Korea and
the Democratic People's Republic of Korea ("North Korea") have been tense over
most of Korea's history. Incidents affecting relations between the two Koreas
continually occur. No assurance can be given that the level of tensions with
North Korea will not increase or change abruptly as a result of current or
future events, which could have a material adverse effect on AICL's, and as a
result the Company's, business, financial condition and results of operations.

Since the beginning of 1997, Korea has experienced a significant increase
in the number and size of companies filing for corporate reorganization and
protection from their creditors. Such failures were caused by, among other
factors, excessive investments, high levels of indebtedness, weak export prices
and the Korean government's greater willingness to allow troubled corporations
to fail. As a result of such corporate failures, Korea's financial institutions
have experienced a sharp increase in non-performing loans. In addition, declines
in domestic stock prices have reduced the value of Korean banks' assets. These
developments have led international credit rating agencies to downgrade the
credit ratings of Korea, as well as various companies (including AICL) and
financial institutions in Korea.

During the same period, the value of the won relative to the U.S. dollar
has depreciated significantly. The Market Average Exchange Rate as of March 24,
1998, was W1,415 to $1.00, or approximately 60% lower than on December 31, 1996,
when the Market Average Exchange Rate was W884 to $1.00. Such depreciation of
the won relative to the U.S. dollar has increased the cost of imported goods and
services, and the value in won of Korea's public and private sector debt
denominated in U.S. dollars and other foreign currencies has also increased
significantly. Korea's foreign currency reserves also have declined
significantly. Such developments have also led to sharply higher domestic
interest rates and reduced opportunities for refinancing or refunding maturing
debts as financial institutions in Korea, which are experiencing financial
difficulties, are increasingly looking to limit their lending, in particular to
highly leveraged companies, and to increase their reserves and provisions for
non-performing assets.

In order to address the liquidity crisis and the deteriorating economic
situation in Korea, the Korean government concluded an agreement with the
International Monetary Fund on December 3, 1997 pursuant to which Korea is
eligible to receive loans and other financial support reported to amount to an
aggregate of approximately $58 billion (the "IMF Financial Aid Package").
Because there are conditions on the availability of loans and other financial
support under the IMF Financial Aid Package, there can be no assurance that such
conditions will be satisfied or that such loans and other financial support will
be available. In connection with the IMF Financial Aid Package, the Korean
government announced a comprehensive policy package (the "Reform Policy")
intended to address the structural weaknesses in the Korean economy and the
financial sector. While the Reform Policy is intended to alleviate the current
economic crisis in Korea and improve the Korean economy over time, the immediate
effects could include, among others, slower economic growth, a reduction in the
availability of credit to Korean companies, an increase in interest rates, an
increase in taxes, an increased rate of inflation due to the depreciation of the
won, an increase in the number of bankruptcies of Korean companies, labor unrest
and labor strikes resulting from a possible increase in unemployment, and
political unrest. These events could have a material adverse effect on the
Korean economy. Moreover, there can be no assurance that either the IMF
Financial Aid Package or the Reform Policy will be successful. In addition,
there can be no assurance that political pressure will not force the Korean
government to retreat from some or all of its announced Reform Policy or that
the Reform Policy will be implemented as currently contemplated.

14
<PAGE> 16

The Korean government has stated that as of December 31, 1997 the total
amount of Korea's private and governmental external liabilities was $154.4
billion under IMF standards. As of December 31, 1997, the total amount of
foreign currency reserves held by Korea was $20.4 billion, of which the usable
portion (the total less amounts on deposit with overseas branches of Korean
financial institutions and swap positions between the Korean central bank and
other central banks) was $8.9 billion. Pursuant to an exchange offer concluded
in March 1998, the Korean government received tenders from international
creditor banks to extend the maturity of up to approximately $21.8 billion of
short-term foreign currency debt incurred by Korean financial institutions. In
addition, the Korean government announced in March 1998 that it intends to raise
approximately $3 billion through an international offering of its debt
securities. Korean financial institutions and the Korean corporate and public
sectors continue to carry substantial amounts of debt denominated in currencies
other than the won, including short-term debt, and there can be no assurance
that there will be sufficient foreign currency reserves to repay this debt or
that this debt can be extended or refinanced.

Such recent and potential future developments relating to Korea, including
the continued deterioration of the Korean economy, could have a material adverse
effect on AICL's and the Company's business, financial condition and results of
operations. See "-- Dependence on Relationship with AICL; Potential Conflicts of
Interest," "Business -- Marketing and Sales" and "-- Facilities and
Manufacturing" and Note 11 of Notes to Combined Financial Statements.

CUSTOMER CONCENTRATION; ABSENCE OF BACKLOG

Due to the concentration of market share in the semiconductor industry, the
Company has been largely dependent on a small group of customers for a
substantial portion of its business. In 1995, 1996 and 1997, 34.1%, 39.2% and
40.1%, respectively, of the Company's net revenues were derived from sales to
the Company's top five customers, with 13.3%, 23.5% and 23.4% of the Company's
net revenues, respectively, derived from sales to Intel Corporation ("Intel").
The ability of the Company to maintain close, satisfactory relationships with
such customers is important to the ongoing success and profitability of its
business. The Company expects that it will continue to be dependent upon a
relatively limited number of customers for a significant portion of its net
revenues in future periods. None of the Company's customers is presently
obligated to purchase any amount of packaging or test services or to provide the
Company with binding forecasts of product purchases for any period. In addition,
the Company's new wafer fabrication business will be significantly dependent
upon TI. The reduction, delay, or cancellation of orders from one of the
Company's significant customers, including Intel for packaging and test services
or TI for wafer fabrication services, could materially and adversely affect the
Company's business, financial condition and results of operations. Although the
Company has received forecasts from TI which indicate that TI will meet its
minimum purchase obligation during the second half of 1998, during the first
quarter of 1998 TI's orders were below such minimum purchase commitment due to
market conditions and issues encountered by TI in the transition of its products
to .18 micron technology. There can be no assurance that such customers will not
reduce, cancel or delay orders. See "-- Dependence on the Highly Cyclical
Semiconductor and Personal Computer Industries" and "-- Risks Associated with
New Wafer Fabrication Business."

All of the Company's customers operate in the cyclical semiconductor
business and may vary order levels significantly from period to period. In
addition, there can be no assurance that such customers or any other customers
will continue to place orders with the Company in the future at the same levels
as in prior periods. From time to time, semiconductor companies have experienced
reduced prices for some products, as well as delays or cancellations in orders.
There can be no assurance that, should these circumstances occur in the future,
they will not adversely affect the Company's business, financial condition and
results of operations. The loss of one or more of the Company's customers, or
reduced orders by any of its key customers, could adversely affect the Company's
business, financial condition and results of operations. The Company's packaging
and test business does not typically operate with any material backlog, and the
Company expects that in the future the Company's packaging and test revenues in
any quarter will continue to be substantially dependent upon orders received in
that quarter. The Company's expense levels are based in part on its expectations
of future revenues and the Company may be unable to adjust costs in a timely
manner to compensate for any revenue shortfall. See "Business -- Marketing and
Sales."

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EXPANSION OF MANUFACTURING CAPACITY; PROFITABILITY AFFECTED BY CAPACITY
UTILIZATION RATES

The Company believes that its competitive position depends substantially on
its ability to expand its manufacturing capacity. Accordingly, although the
Company currently has available manufacturing capacity, the Company expects to
continue to make significant investments to expand such capacity, particularly
through the acquisition of capital equipment and the training of new personnel.
There can be no assurance that the Company will be able to utilize such capacity
or to continue to expand its manufacturing capacity in a timely manner, that the
cost of such expansion will not exceed management's current estimates or that
such capacity will not exceed the demand for the Company's services. In
addition, expansion of the Company's manufacturing capacity will continue to
significantly increase its fixed costs, and the Company expects to continue to
incur substantial additional depreciation and other expenses in connection with
the acquisition of new equipment and the construction of new facilities.
Increases or decreases in capacity utilization rates can have a significant
effect on gross margins since the unit cost of packaging and test services
generally decreases as fixed charges are allocated over a larger number of units
produced. Therefore, the Company's ability to maintain or enhance its gross
margins will continue to be dependent, in part, on its ability to maintain high
capacity utilization rates.

Capacity utilization rates may be affected by a number of factors and
circumstances, including overall industry conditions, operating efficiencies,
the level of customer orders, mechanical failure, disruption of operations due
to expansion of operations or relocation of equipment, fire or natural
disasters, employee strikes or work stoppages or other circumstances. Although
the Company has been able to maintain a high rate of capacity utilization in
recent years as a result of its close association with its customers, its
knowledge of the semiconductor market conditions, and its continued improvements
in operating efficiencies and equipment maintenance, there can be no assurance
that this high utilization rate will be sustained in the future. The Company's
inability to generate the additional orders necessary to fully utilize its
capacity would have a material adverse effect on the Company's business,
financial condition and results of operations. For example, in 1996 the
Company's capacity utilization rates were negatively affected by an unexpected
downturn in the semiconductor industry. There can be no assurance that the
Company's utilization rates will not be adversely affected by future declines in
the semiconductor industry or for any other reason. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business -- Manufacturing and Facilities."

LIQUIDITY AND FUTURE CAPITAL REQUIREMENTS

The Company plans to continue to incur substantial costs to fund its
equipment and facilities expansion plans and its packaging technology
development. The Company believes that following the application of the net
proceeds from the sale of the Common Stock and the Convertible Notes in the
Initial Public Offering, its existing cash balances, cash flow from operations,
available equipment lease financing, bank borrowings and financing obtained
through AUSA, will be sufficient to meet its projected capital expenditures,
working capital and other cash requirements for at least the next twelve months.
There can be no assurance, however, that lower than expected revenues, increased
expenses, increased costs associated with the purchase or maintenance of capital
equipment, decisions to increase planned capacity or other events will not cause
the Company to seek more capital, or capital sooner than currently expected. The
timing and amount of the Company's actual capital requirements cannot be
precisely determined and will depend on a number of factors, including demand
for the Company's services, availability of capital equipment, fluctuations in
foreign currency exchange rates, changes in semiconductor industry conditions
and competitive factors. There can be no assurance that additional financing
will be available when needed or, if available, will be available on
satisfactory terms. Failure to obtain any such financing could have a material
adverse effect on the Company. In addition, if the Company obtains such
financing by selling equity securities of the Company, the Company's
stockholders may experience significant dilution. See "-- Risks Associated with
Leverage" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

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RAPID TECHNOLOGICAL CHANGE; PRODUCT DEVELOPMENT

The semiconductor packaging and test industry is characterized by rapid
increases in the diversity and complexity of semiconductor packaging products.
As a result, the Company expects that it will need to offer, on an ongoing
basis, more advanced package designs in order to respond to competitive industry
conditions and customer requirements. The requirement to develop and maintain
advanced packaging capabilities and equipment could require significant research
and development and capital expenditures in future years. In addition, advances
in technology also typically lead to rapid and significant price erosion and
decreased margins for older package types and may lead to products currently
being offered by the Company becoming less competitive or inventories held by
the Company becoming obsolete. The failure by the Company to achieve advances in
package design or to obtain access to advanced package designs developed by
others could have a material adverse effect on the Company's business, results
of operations and financial condition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

The Company's success is also dependent upon the ability of it and AICL to
develop and implement new manufacturing process and package design technologies.
Semiconductor package design and process methodologies have become increasingly
subject to technological change, requiring large expenditures for research and
development. Converting to new package designs or process methodologies could
result in delays in producing new package types which could adversely affect the
Company's ability to meet customer orders.

MANUFACTURING RISKS; PRODUCTION YIELDS

The semiconductor packaging process is complex and involves a number of
precise steps. Defective packaging can result from a number of factors,
including the level of contaminants in the manufacturing environment, human
error, equipment malfunction, use of defective raw materials, defective plating
services and inadequate sample testing. From time to time, the Company expects
to experience lower than anticipated production yields as a result of such
factors, particularly in connection with any expansion of its capacity or change
in its processing steps. In addition, the Company's yield on new products will
be lower during the period necessary for the Company to develop the requisite
expertise and experience in producing such products and using such processes.
The failure of the Company or AICL to maintain high quality production standards
or acceptable production yields, if significant and sustained, could result in
loss of customers, delays in shipments, increased costs, cancellation of orders
and product returns for rework, any of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Facilities and Manufacturing."

RISKS ASSOCIATED WITH NEW WAFER FABRICATION BUSINESS

The Company recently began providing wafer fabrication services, with
delivery of the first products from AICL's new foundry in January 1998. Neither
the Company nor AICL has significant experience in providing wafer fabrication
services, and there can be no assurance that the Company will not experience
difficulties in marketing and selling these services or that AICL will not
encounter operational difficulties such as lower than expected yields or longer
than anticipated production ramp-up, unexpected costs and other problems in
providing these services. If the Company or AICL encounters these or similar
difficulties, the Company's and AICL's businesses, financial condition and
results of operations could be materially adversely affected. In addition, TI
has transferred certain of its CMOS processes to AICL and AICL is dependent upon
TI's assistance for developing other state-of-the-art wafer manufacturing
processes. If AICL's relationship with TI is disrupted for any reason, AICL's
ability to produce wafers would be adversely affected, thus negatively impacting
the Company's ability to fulfill its customers' orders for fabrication services,
which could materially and adversely affect the Company's business, financial
condition and results of operations. In addition, AICL's technology agreements
with TI (the "TI Technology Agreements") only cover .25 micron and .18 micron
CMOS technology and TI is not under any obligation to transfer any
next-generation technology. If AICL is not able to obtain such technology on
commercially reasonable terms or at all, the Company's ability to market AICL's
wafer fabrication services could be materially and adversely affected which
could have a material adverse effect on the Company's and AICL's business,
results of operations and financial condition.

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<PAGE> 19

The Company's right to the supply of wafers from AICL's foundry is subject
to an agreement (the "TI Manufacturing and Purchasing Agreement") among AICL,
the Company and TI, pursuant to which TI has agreed to purchase from the Company
at least 40% of the capacity of this foundry and under certain circumstances has
the right to purchase up to 70% of this capacity. As a result, the Company's
wafer fabrication business will be significantly dependent upon TI, which may
adversely affect the Company's ability to obtain additional customers. If the
Company is unable to sell substantially all of the output of AICL's wafer
foundry, its business, results of operations and financial condition could be
materially and adversely affected. Although the Company has received forecasts
from TI which indicate that TI will meet its minimum purchase obligation during
the second half of 1998, during the first quarter of 1998 TI's orders were below
such minimum purchase commitment due to market conditions and issues encountered
by TI in the transition of its products to .18 micron technology. Accordingly,
there can be no assurance that TI will place orders representing at least 40% of
the capacity of this foundry during this period or in the future. A failure by
TI to comply with its minimum purchase obligations or the cancellation of a
significant wafer fabrication order by TI or any other customer could have a
material adverse effect on AICL's and the Company's business, financial
condition and results of operations. The TI Manufacturing and Purchasing
Agreement terminates on December 31, 2007, unless terminated sooner. The TI
Manufacturing and Purchasing Agreement may be terminated upon two years' prior
notice by either AICL or TI if AICL and TI are unable to successfully negotiate
prior to June 30, 2000 an amendment to the TI Technology Agreements or a new
agreement with respect to AICL's use of TI's next-generation CMOS technology.
During such two-year period, TI would be obligated to purchase a minimum of only
20% of the capacity of AICL's wafer fabrication facility. In addition, the TI
Manufacturing and Purchasing Agreement may be terminated sooner upon, among
other events, mutual written consent, material breach of the agreement by either
party, the inability of either party to obtain any necessary government
approvals, the failure of AICL to protect TI's intellectual property and a
change of control, bankruptcy, liquidation or dissolution of AICL. See
"Business -- Competition."

DEPENDENCE ON RAW MATERIALS SUPPLIERS AND SUBCONTRACTORS

The Company obtains the direct materials for the packaging and test
services of its factories and for the packaging and test services provided by
AICL to fill the Company's orders directly from vendors. To maintain competitive
manufacturing operations, the Company must obtain from its vendors, in a timely
manner, sufficient quantities of acceptable materials at expected prices. The
Company sources most of its raw materials, including critical materials such as
lead frames and laminate substrates, from a limited group of suppliers. The
Company purchases all of its materials on a purchase order basis and has no
long-term contracts with any of its suppliers. From time to time, vendors have
extended lead times or limited the supply of required materials to the Company
because of vendor capacity constraints and, consequently, the Company has
experienced difficulty in obtaining acceptable raw materials on a timely basis.
In addition, from time to time, the Company may reject materials that do not
meet its specifications, resulting in declines in output or yield. There can be
no assurance that the Company will be able to obtain sufficient quantities of
raw materials and other supplies of an acceptable quality. The Company's
business, financial condition and results of operations could be materially and
adversely affected if its ability to obtain sufficient quantities of raw
materials and other supplies in a timely manner were substantially diminished or
if there were significant increases in the costs of raw materials that the
Company could not pass on to its customers. See "Business -- Facilities and
Manufacturing."

INABILITY TO OBTAIN PACKAGING AND TEST EQUIPMENT IN A TIMELY FASHION

In connection with its future expansion plans, the Company and AICL expect
to purchase a significant amount of new packaging and test equipment. From time
to time, increased demand for some of this equipment causes lead times to extend
beyond those normally met by the equipment vendors. The unavailability of such
equipment or the failure of such equipment, or other equipment acquired by the
Company or AICL, to operate in accordance with the Company's or AICL's
specifications or requirements, or delays in the delivery of such equipment
could delay implementation of the Company's or AICL's expansion plans and impair
the ability of the Company to meet customer orders or otherwise have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Management's

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<PAGE> 20

Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Facilities and Manufacturing."

MANAGEMENT OF GROWTH

The Company has experienced and may continue to experience growth in the
scope and complexity of its operations and in the number of its employees. For
example, the Company is expanding its scope of operations to include wafer
fabrication services and is hiring new personnel in connection with such
expansion. This growth is expected to continue to strain the Company's
managerial, financial, manufacturing and other resources. In addition, although
the Company believes its current controls are adequate, in order to manage its
growth, the Company must continue to implement additional operating and
financial controls and hire and train additional personnel. Although the Company
has been successful in hiring and properly training sufficient numbers of
qualified personnel and in effectively managing its growth in the past, there
can be no assurance that the Company will be able to do so in the future, and
its failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, any
failure to improve the Company's operational, financial and management systems
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "-- Risks Associated with New Wafer
Fabrication Business," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Employees."

COMPETITION

The independent semiconductor packaging and test industry is very
competitive, being comprised of approximately 50 companies with about 15 of
those companies having sales of $100 million per year or more. The Company faces
substantial competition from established packaging companies primarily located
in Asia, such as Advanced Semiconductor Engineering, Inc. (Taiwan), ASE Test
Limited (Taiwan and Malaysia), ASAT, Ltd. (Hong Kong), Hana Microelectronics
Public Co. Ltd. (Hong Kong and Thailand), Astra International (Indonesia),
Carsem Bhd. (Malaysia), ChipPAC Incorporated (Korea), Siliconware Precision
Industries Co., Ltd. (Taiwan), and Shinko Electric Industries Co., Ltd. (Japan).
Each of these companies has significant manufacturing capacity, financial
resources, research and development operations, marketing and other
capabilities, and have been operating for some time. Such companies have also
established relationships with many large semiconductor companies which are
current or potential customers of the Company. The principal elements of
competition in the independent semiconductor packaging market include time to
market, breadth of package offering, technical competence, design services,
quality, production yields, responsiveness and customer service and price. On a
larger scale, the Company also competes with the internal manufacturing
capabilities of many of its largest customers. There can be no assurance that
the Company will be able to compete successfully in the future against existing
or potential competitors or that the Company's operating results will not be
adversely affected by increased price competition.

The independent wafer fabrication business is also highly competitive. The
Company expects its wafer fabrication services to compete primarily with
independent wafer foundries such as Chartered Semiconductor Manufacturing Ltd.,
Taiwan Semiconductor Manufacturing Company Ltd. and United Microelectronics
Corporation, as well as with integrated device manufacturers such as LG Semicon
Co., Ltd., Hitachi, Ltd., Toshiba Corp. and Winbond Electronics Corporation,
which provide foundry services for other semiconductor companies. Each of these
companies has significant manufacturing capacity, financial resources, research
and development operations, marketing and other capabilities and have been
operating for some time. Many of these companies have also established
relationships with many large semiconductor companies which are current or
potential customers of the Company. The principal elements of competition in the
wafer foundry market include technology, delivery cycle times, price, product
performance, quality, production yield, responsiveness and flexibility,
reliability and the ability to design and incorporate product improvements.
There can be no assurance that the Company will be able to compete successfully
in the future against such companies. See "Business -- Competition."

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<PAGE> 21

DEPENDENCE ON KEY PERSONNEL AND AVAILABILITY OF SKILLED WORKFORCE

The Company's success depends to a significant extent upon the continued
service of its key senior management and its technical personnel, each of whom
would be difficult to replace. Competition for qualified employees is intense,
and the loss of the services of any of its existing key personnel without
adequate replacement, or the inability to attract, retain and motivate qualified
new personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, in connection with
its expansion plans, the Company and AICL will be required to increase the
number of qualified engineers and other employees at their respective facilities
in the Philippines and Korea. Competition for such employees in the Philippines
and Korea is intense and the inability to attract new qualified personnel or to
retain such personnel could have a material adverse effect on the Company's
results of operations and financial condition. See "Management."

ENVIRONMENTAL REGULATIONS

The semiconductor packaging process involves a significant amount of
chemicals and gases which are subject to extensive governmental regulations. For
example, liquid waste is produced at the stage at which silicon wafers are diced
into chips with the aid of diamond saws and cooled with running water. In
addition, excess materials on leads and moldings are removed from packaged
semiconductors in the trim and form process. The Company has installed equipment
to collect certain solvents used in connection with its manufacturing process
and has contracted with independent waste disposal companies to remove such
hazardous material.

Federal, state and local regulations in the United States, as well as
environmental regulations in Korea and the Philippines, impose various controls
on the storage, handling, discharge and disposal of chemicals used in the
Company's and AICL's manufacturing process and on the facilities occupied by the
Company and AICL. The Company believes that its activities, as well as those of
AICL, conform to present environmental and land use regulations applicable to
their respective operations and current facilities. Increasing public attention
has, however, been focused on the environmental impact of semiconductor
manufacturing operations and the risk to neighbors of chemical releases from
such operations. There can be no assurance that applicable land use and
environmental regulations will not in the future impose the need for additional
capital equipment or other process requirements upon the Company or AICL or
restrict the Company's or AICL's ability to expand their respective operations.
The adoption of new ordinances or similar measures or any failure by the Company
or AICL to comply with applicable environmental and land use regulations or to
restrict the discharge of hazardous substances could subject the Company or AICL
to future liability or cause their respective manufacturing operations to be
curtailed or suspended.

INTELLECTUAL PROPERTY

The Company currently holds 24 United States patents, five of which are
jointly held with AICL, related to various IC packaging technologies, in
addition to other pending patents. These patents will expire at various dates
from 2012 through 2016. With respect to development work undertaken jointly with
AICL, the Company and AICL share intellectual property rights under the terms of
the Supply Agreements between the Company and AICL. Such Supply Agreements also
provide for the cross-licensing of intellectual property rights between the
Company and AICL. In addition, the Company enters into agreements with other
developers of packaging technology to license or otherwise obtain certain
process or package technologies.

The Company expects to continue to file patent applications when
appropriate to protect its proprietary technologies; however, the Company
believes that its continued success depends primarily on factors such as the
technological skills and innovation of its personnel rather than on its patents.
The process of seeking patent protection can be expensive and time consuming.
There can be no assurance that patents will be issued from pending or future
applications or that, if patents are issued, they will not be challenged,
invalidated or circumvented, or that rights granted thereunder will provide
meaningful protection or other commercial advantage to the Company. Moreover,
there can be no assurance that any patent rights will be upheld in the future or
that the Company will be able to preserve any of its other intellectual property
rights.

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Although the Company is not currently a party to any material litigation,
the semiconductor industry is characterized by frequent claims regarding patent
and other intellectual property rights. As is typical in the semiconductor
industry, the Company may receive communications from third parties asserting
patents on certain of the Company's technologies. In the event any third party
were to make a valid claim against the Company or AICL, the Company or AICL
could be required to discontinue the use of certain processes or cease the
manufacture, use, import and sale of infringing products, to pay substantial
damages and to develop non-infringing technologies or to acquire licenses to the
alleged infringed technology. The Company's business, financial condition and
results of operations could be materially and adversely affected by such
developments. Litigation, which could result in substantial cost to and
diversion of resources of the Company, may also be necessary to enforce patents
or other intellectual property rights of the Company or to defend the Company
against claimed infringement of the rights of others. The failure to obtain
necessary licenses or the occurrence of litigation relating to patent
infringement or other intellectual property matters could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, AICL has obtained intellectual property for wafer
manufacturing primarily from TI. The licenses granted to AICL by TI under the TI
Technology Agreements are very limited. Although TI has granted to AICL a
license under TI's trade secret rights to use TI's technology in connection with
AICL's provision of wafer fabrication services, TI has not granted AICL a
license under its patents, copyrights and mask works to manufacture
semiconductors for third parties. Although TI has agreed that TI will not assert
a claim for patent, copyright or mask work right infringement against AICL or
the Company in connection with AICL's manufacture of semiconductor products for
third parties, TI has reserved the right to bring such infringement claims
against AICL's or the Company's customers with respect to semiconductor products
purchased from AICL or the Company. As a result, AICL's and the Company's
customers could be subject to patent litigation by TI and others, and AICL and
the Company could in turn be subject to litigation by such customers and others,
in connection with the sale of wafers produced by AICL. Any such litigation
could materially and adversely affect AICL's ability to continue to manufacture
wafers and AICL's and the Company's business, financial condition and results of
operations.

NO PRIOR MARKET; LIQUIDITY; STOCK PRICE VOLATILITY

Prior to the Initial Public Offering, there had been no public market for
the Common Stock. Although the Underwriters for the Initial Public Offering have
advised the Company that they intended to make a market in the Common Stock,
they are not obligated to do so and may discontinue such market-making at any
time without notice. There can be no assurance that an active public market for
the Common Stock will develop or be sustained after the Initial Public Offering
or that the market price of the Common Stock will not decline. The trading price
of the Common Stock could be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, announcements of
technological innovations or new products by the Company or its competitors,
general conditions in the semiconductor industry, changes in earnings estimates
or recommendations by analysts, or other events or factors. In addition, the
public stock markets have experienced extreme price and trading volume
volatility in recent months. This volatility has significantly affected the
market prices of securities of many high technology companies for reasons
frequently unrelated to the operating performance of the specific companies.
These broad market fluctuations may adversely affect the market price of the
Common Stock.

BENEFITS OF THE INITIAL PUBLIC OFFERING TO EXISTING STOCKHOLDERS; CONTINUED
CONTROL BY EXISTING STOCKHOLDERS

Immediately after the closing of the Initial Public Offering, based upon
shares outstanding as of the date hereof, James Kim and members of his family
will, in the aggregate, beneficially own 77,610,000 shares of Common Stock,
which shares represent all of the outstanding Common Stock not offered hereby
and approximately 68.9% of the total number of shares of Common Stock
outstanding following the Initial Public Offering. The Initial Public Offering
will create a public market for the resale of shares held by these existing
stockholders. Such stockholders, acting together, will be able to effectively
control substantially all matters requiring approval by the stockholders of the
Company. Such matters could include the election of a majority

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of the members of the Board of Directors, proxy contests, mergers involving the
Company, tender offers, open market purchase programs or other purchases of
Common Stock that could give stockholders of the Company the opportunity to
realize a premium over the then prevailing market price for their shares of
Common Stock. In addition, such continued control could also have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids for the Common Stock at a premium over the market price and may
adversely affect the market price of the Common Stock. See "Principal
Stockholders."

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

The Company's Board of Directors has the authority to issue up to
10,000,000 shares of preferred stock $.001 par value ("Preferred Stock") and to
determine the price, rights, preferences and privileges of those shares without
any further vote or action by the Company's stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. While the Company has no present intention to issue shares of Preferred
Stock, such issuance, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. In addition, the Company is subject to
the anti-takeover provisions of Section 203 of the Delaware General Corporation
Law, which prohibits the Company from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 could have the effect of delaying or preventing a change of control
of the Company. The Company's Certificate of Incorporation (the "Certificate of
Incorporation") does not permit cumulative voting. This provision, and other
provisions of the Certificate of Incorporation, the Company's bylaws (the
"Bylaws") and Delaware corporate law, may have the effect of deterring hostile
takeovers or delaying or preventing changes in control or management of the
Company, including transactions in which stockholders might otherwise receive a
premium for their shares over then current market prices.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock into the public market could
adversely affect the prevailing market price of the Common Stock. In addition to
the up to 7,000,000 shares of Common Stock that may be offered hereby from time
to time, there are an additional 35,000,000 shares of Common Stock which are
expected to be sold to the public in the Initial Public Offering (assuming no
exercise of the Underwriters' over-allotment options), and there will be
shares issuable upon conversion of the Convertible Notes, all of which shares
are freely tradeable. Excluding the shares described above, there will be
approximately 70,610,000 additional shares of Common Stock outstanding, all of
which are "restricted" shares (the "Restricted Shares") under the Securities Act
of 1933, as amended (the "Securities Act"). Beginning one year after the
Reorganization, all such Restricted Shares will first become eligible for sale
in the public market pursuant to Rule 144 promulgated under the Securities Act,
subject to certain volume and other resale restrictions pursuant to Rule 144.
See "Shares Eligible for Future Sale."

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REORGANIZATION

In March 1970, Amkor Electronics, Inc. ("AEI") was incorporated in
Pennsylvania to design semiconductor packages and provide semiconductor
packaging services through a supply relationship with AICL. Since that time, Mr.
James Kim (the founder of AEI) and members of his family have acquired a
majority interest in a number of other companies which support or engage in
various aspects of the semiconductor packaging and test business (the "Amkor
Companies"). Prior to the reorganization described below, the Amkor Companies
consisted of:

- AEI and its subsidiaries Amkor Receivables Corp., which purchases the
Company's accounts receivable under an accounts receivable financing
arrangement, and Amkor Wafer Fabrication Services SARL, which provides
various technical support for CIL's wafer fabrication services customers
in Europe and Asia;

- T.L. Limited ("TLL") and its subsidiary C.I.L. Limited ("CIL"), which
markets the Company's services to semiconductor companies in Europe and
Asia;

- Amkor/Anam EuroServices S.A.R.L. ("AAES"), which provides various
technical and support services for CIL's packaging and test customers;

- Amkor/Anam Advanced Packaging, Inc. ("AAAP"), Amkor/Anam Pilipinas, Inc.
("AAP") and AAP's subsidiary Automated MicroElectronics Inc. ("AMI"),
each of which provides manufacturing services; and

- AK Industries, Inc. ("AKI") and its subsidiary, Amkor-Anam, Inc., which
provides raw material purchasing and inventory management services.

All of the Amkor Companies are substantially wholly owned beneficially by
Mr. and Mrs. Kim or entities beneficially owned by members of Mr. James Kim's
immediate family (the "Founding Stockholders"), except for 40% of AAP owned by
AICL and one-third of AEI and all of AKI which are owned by certain trusts
established for the benefit of other members of Mr. Kim's family (the "Kim
Family Trusts"). The Company (Amkor Technology, Inc.) was formed in September
1997 to consolidate the ownership of the Amkor Companies. Prior to the
reorganization described below, Amkor Technology, Inc. will conduct no business
and hold no assets or liabilities.

Prior to the Initial Public Offering, the following transactions will be
effected to consolidate the operations of the Amkor Companies under the Company,
(such transactions are referred to collectively as the "Reorganization"):

- AEI will be merged into Amkor Technology, Inc.

- Amkor International Holdings ("AIH"), a newly formed Cayman Islands
holding company, will become a wholly-owned subsidiary of Amkor
Technology, Inc. and will hold the following entities:
- First Amkor Cayman Islands, Ltd., a newly formed Cayman Islands
holding company, and its subsidiaries AAAP, AAP and AMI;
- TLL and its subsidiary CIL; and
- AAES.

- In addition, the Company will acquire all of the stock of AKI from the
Kim Family Trusts for $3 million.

Except for the acquisition of AKI which will be accounted for as a purchase
transaction, the accounting for the Reorganization will be similar to the
accounting for a pooling of interests as it represents an exchange of equity
interests among companies under common control. Following the Reorganization,
all of the Amkor Companies will be wholly owned, directly or indirectly, by the
Company (except for AAP, which will be 40% owned by AICL). An aggregate of
82,610,000 shares of Common Stock will be issued by the Company in connection
with the Reorganization. The relative number of shares of Common Stock issued by
the Company in connection with each of the transactions comprising the
Reorganization is based upon relative amounts of stockholders' equity of each of
the Amkor Companies as of December 31, 1997. Accordingly, the Company

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will issue an aggregate of 14,620,149 shares of Common Stock in connection with
the merger of AEI into Amkor Technology, Inc., 9,746,766 of which shares will be
received by Mr. and Mrs. Kim and 4,873,383 shares will be received by the Kim
Family Trusts. In addition, the Company will issue an aggregate of 67,989,851
shares of Common Stock in exchange for all of the outstanding shares of AIH and
its subsidiaries. Of such shares, 19,328,234 shares, 36,376,617 shares and
8,200,000 shares will be gifted to Mr. and Mrs. Kim, the Kim Family Trusts and
other members of Mr. Kim's immediate family, respectively. Following the
Reorganization, the Founding Stockholders and such other members of Mr. Kim's
immediate family will beneficially own a majority of the outstanding shares of
Common Stock. Following the Initial Public Offering, the Founding Stockholders,
such other members of Mr. Kim's immediate family and the Kim Family Trusts will
beneficially own 77,610,000 shares of Common Stock, representing approximately
68.9% of the outstanding shares of Common Stock. See "Certain Transactions" and
"Principal Stockholders."

The Company has entered into an agreement with AICL pursuant to which the
Company will purchase, immediately following the Initial Public Offering, AICL's
40% interest in AAP for approximately $34 million. See "Prospectus
Summary -- The Initial Public Offering."

The Initial Public Offering is conditioned upon, among other things, the
consummation of the Reorganization.

TERMINATION OF S CORPORATION STATUS AND DISTRIBUTIONS

Prior to the consummation of the Reorganization, AEI had elected to be
treated for U.S. federal and certain state tax purposes as an S Corporation
under the Internal Revenue Code of 1986 and comparable state tax laws. As a
result, AEI did not recognize federal corporate income taxes. Instead, up until
the termination of AEI's S Corporation status (the "Termination Date"), Mr. and
Mrs. Kim and the Kim Family Trusts have been obligated to pay U.S. federal and
certain state income taxes on their allocable portion of the income of AEI. The
Company, Mr. and Mrs. Kim and the Kim Family Trusts will enter into tax
indemnification agreements providing that the Company will be indemnified by
such stockholders, with respect to their proportionate share of any U.S. federal
or state corporate income taxes attributable to the failure of AEI to qualify as
an S Corporation for any period or in any jurisdiction for which S Corporation
status was claimed through the Termination Date. The tax indemnification
agreements will also provide that the Company will indemnify Mr. and Mrs. Kim
and the Kim Family Trusts if such stockholders are required to pay additional
taxes or other amounts attributable to taxable years on or before the
Termination Date as to which AEI filed or files tax returns claiming status as
an S Corporation. AEI has made various distributions to such stockholders which
have enabled them to pay their income taxes on their allocable portions of the
income of AEI. Such distributions totaled approximately $19.8 million, $13.0
million and $5.0 million in 1995, 1996 and 1997, respectively. The Company
expects to make additional distributions to such stockholders prior to the
consummation of the Reorganization, which distributions will represent AEI's
cumulative net income in all periods prior to the Termination Date less the
aggregate amount of distributions previously made to such stockholders. These
final distributions are intended to provide such stockholders with the balance
of AEI's net income for which they have already recognized income taxes. Through
December 31, 1997, the amount of such undistributed net earnings was $27.7
million. See Notes 1, 10 and 17 of Notes to Combined Financial Statements.

24
<PAGE> 26

RELATIONSHIP WITH ANAM INDUSTRIAL CO., LTD.

AICL is a Korean company engaged primarily in providing semiconductor
packaging and test services to the Company, which in turn sells such services to
its customers. AICL also currently markets its services directly in Korea. In
addition, AICL manufactures and sells electric wiring devices and watches. AICL
operates four semiconductor packaging and test facilities in Korea, and has
recently qualified a new deep submicron CMOS wafer foundry in Korea which is
currently capable of producing 15,000 8" wafers per month. In March 1998, AICL
changed its name to Anam Semiconductor, Inc.

AICL was founded in 1956 by Mr. H. S. Kim, who currently serves as the
honorary Chairman and a Representative Director of AICL. AICL is a member of the
Anam Group, consisting principally of companies in Korea in the electronics
industries. The businesses of AICL and the other companies in the Anam Group are
influenced to a significant degree by the family of H. S. Kim, which, together
with the Company, collectively owned approximately 40.7% of the outstanding
common stock of AICL as of December 31, 1997. A significant portion of the
shares owned by the Kim family are leveraged and as a result of this, or for
other reasons, the family's ownership could be substantially reduced. James Kim,
the founder of the Company and currently its Chairman and Chief Executive
Officer, is the eldest son of H. S. Kim. Since January 1992, in addition to his
other responsibilities, James Kim has been serving as acting Chairman of the
Anam Group and a director of AICL. Mr. In-Kil Hwang, the President and a
Representative Director of AICL, is the brother-in-law of James Kim. In
addition, four other members of Mr. Kim's family are on the 13 member Board of
Directors of AICL. After the Initial Public Offering, James Kim and members of
his family will beneficially own approximately 68.9% of the outstanding Common
Stock of the Company, and Mr. Kim and other members of his family will continue
to exercise significant control over the Company. See "Risk Factors -- Benefits
of the Initial Public Offering to Existing Stockholders; Continued Control by
Existing Stockholders" and "Principal Stockholders."

The businesses of the Company and AICL have been interdependent for many
years. In 1996 and 1997, approximately 72% and 68%, respectively, of the
Company's revenues were derived from sales of services performed for the Company
by AICL. In addition, substantially all of the revenues of AICL in 1996 and 1997
were derived from services sold by the Company. The Company expects the
proportion of its revenues derived from sales of services performed for the
Company by AICL and the proportion of AICL's revenues from services sold by the
Company to increase as the Company begins selling the wafer fabrication output
of AICL's new wafer foundry and with the Company's assumption from AICL in
January 1998 of substantially all of the marketing rights for the Japanese
market. In the event the ability of AICL to supply the Company were disrupted
for any reason, the Company's facilities in the Philippines would be able to
fill only a small portion of the resulting shortfall in capacity. In addition,
there are currently no significant third party suppliers of packaging and test
services from which the Company could fill its orders. As a result, the
Company's business, financial condition and operating results will continue to
be significantly dependent on the ability of AICL to effectively provide
contracted services on a cost-efficient and timely basis. The Company expects
that the businesses of the Company and AICL will continue to remain highly
interdependent by virtue of their supply relationship, family ties between their
respective shareholders and management, financial relationships, coordination of
product and operation plans, joint research and development activities and
shared intellectual property rights. The termination of the Company's
relationship with AICL for any reason, or any material adverse change in AICL's
business resulting from underutilization of its capacity, the level of its debt
and its guarantees of affiliate debt, labor disruptions, fluctuations in foreign
exchange rates, changes in governmental policies, economic or political
conditions in Korea or any other change, could have a material adverse effect on
the Company's business, financial condition and results of operations.

The Company has recently entered into the Supply Agreements with AICL.
Under the Supply Agreements, AICL has granted to the Company a first right to
substantially all of the packaging and test services of AICL and the exclusive
right to all of the wafer output of its new wafer foundry. The Company expects
to continue to purchase substantially all of AICL's packaging and test services,
and to purchase all of AICL's wafer output, under the Supply Agreements. Under
the Supply Agreements, pricing arrangements relating to packaging and test
services provided by AICL to the Company are subject to quarterly review and
adjustment, and such arrangements relating to the wafer output provided by AICL
to the Company are

25
<PAGE> 27

subject to annual review and adjustment, in each case on the basis of factors
such as changes in the semiconductor market, forecasted demand, product mix and
capacity utilization and fluctuations in exchange rates, as well as the mutual
long-term strategic interests of the Company and AICL. There can be no assurance
that any new pricing arrangements resulting from such review and adjustment will
be favorable to the Company. Pursuant to long-standing arrangements between AICL
and the Company's operating subsidiaries, sales from AICL to the Company will
continue to be made through AUSA, a wholly-owned financing subsidiary of AICL.
Under the Supply Agreements, the Company will continue to reimburse AUSA for the
financing costs incurred by it in connection with trade financing provided to
the Company. The Supply Agreements also provide that Amkor-Anam, Inc., a
subsidiary of the Company, will continue to provide raw material procurement and
related services to AICL on a fee basis. The Supply Agreements have a five-year
term, and may be terminated by any party thereto upon five years' written notice
at any time after the expiration of such initial five-year term. There can be no
assurance that AICL will not terminate either Supply Agreement upon the
expiration of such initial term or that if it does terminate a Supply Agreement,
that the Company will be able to obtain a new agreement with AICL on terms that
are favorable to the Company or at all.

26
<PAGE> 28

The following is a summary of 1996 and 1997 consolidated financial
information pertaining to AICL prepared in accordance with Korean GAAP which
differs from U.S. GAAP. See Note 6 of Notes to Combined Financial Statements.

<TABLE>
<CAPTION>
1996 1997
----------- --------------
(IN MILLIONS)
<S> <C> <C>
SUMMARY INCOME STATEMENT DATA:
Sales................................................. W1,338,718 W1,786,457
Gross profit.......................................... 242,601 279,186
Operating income...................................... 164,846 176,028
Net foreign exchange loss............................. 29,372 216,697
Net loss.............................................. (9,385) (305,414)
SUMMARY BALANCE SHEET DATA:
Cash and bank deposits................................ W 324,139 W 215,024
Accounts and notes receivable, net.................... 368,975 393,261
Inventory............................................. 214,494 260,302
Other current assets.................................. 145,301 490,544
----------- -----------
Total current assets............................... 1,052,909 1,359,131
----------- -----------
Property, plant and equipment, net.................... 994,931 2,159,466
Investments........................................... 83,715 122,366
Other long-term assets................................ 93,733 295,554
----------- -----------
Total long-term assets............................. 1,172,379 2,577,386
----------- -----------
Total assets.................................. W2,225,288 W3,936,517
=========== ===========
Short-term borrowings................................. 935,463 1,591,280
Current maturities of long-term debt.................. 85,252 120,913
Other current liabilities............................. 305,931 412,289
----------- -----------
Total current liabilities.......................... 1,326,646 2,124,482
----------- -----------
Long-term debt, net of current maturities............. 475,045 736,784
Long-term capital lease obligations................... 106,068 861,813
Other long-term liabilities and minority interest..... 89,272 138,305
----------- -----------
Total long-term liabilities................... 670,385 1,736,902
----------- -----------
Total liabilities............................. 1,997,031 3,861,384
----------- -----------
Stockholders' equity.................................. 228,257 75,133
----------- -----------
Total liabilities and stockholders' equity.... W2,225,288 W3,936,517
=========== ===========
</TABLE>

A significant amount of the current and long-term liabilities of AICL are
denominated in U.S. dollars and other foreign currencies. At December 31, 1997,
the amount of U.S. dollar and other foreign currency denominated short-term
borrowings, current maturities of long-term debt, long-term debt (net of current
maturities) and long-term capital lease obligations were W1,092 billion, W59
billion, W159 billion and W834 billion, respectively. Due in part to the
significant depreciation of the won (for example, from a Market Average Exchange
Rate of W884 to $1.00 on December 31, 1996 to W1,415 to $1.00 on December 31,
1997 and W1,415 to $1.00 on March 24, 1998) resulting from the recent economic
crisis in Korea, AICL's liabilities in won terms and its leverage calculated in
won have significantly increased in 1997. The effect of this depreciation on
AICL, however, has been mitigated by the fact that substantial amounts of AICL's
revenues are denominated in U.S. dollars. The increase in AICL's liabilities was
also attributable in part to additional financing obtained in connection with
the constitution of its new wafer foundry. See "-- Risks Associated with New
Wafer Fabrication Business" and Note 6 of Notes to Combined Financial
Statements.

The recent economic crisis in Korea has also led to sharply higher domestic
interest rates in Korea and reduced opportunities for refinancing or refunding
maturing debts as financial institutions in Korea, which are

27
<PAGE> 29

experiencing financial difficulties, are increasingly looking to limit their
lending, particularly to highly leveraged companies, and to increase their
reserves and provisions for non-performing assets. These developments will
result in higher interest rates on loans to AICL and have otherwise made it more
difficult for AICL to obtain new financing. Therefore, there can be no assurance
that AICL will be able to refinance its existing loans or obtain new loans, or
continue to make required interest and principal payments on such loans or
otherwise comply with the terms of its loan agreements. Any inability of AICL to
obtain financing or generate cash flow from operations sufficient to fund its
capital expenditure, debt service and repayment and other working capital and
liquidity requirements could have a material adverse effect on AICL's ability to
continue to provide services and otherwise fulfill its obligations to the
Company. See "Risk Factors -- Risks Associated With Leverage" and
" -- Dependence On International Operations and Sales; Concentration of
Operations in the Philippines and Korea."

As of December 31, 1997, AICL and its consolidated subsidiaries were
contingently liable under guarantees in respect of debt of AICL's
non-consolidated subsidiaries and affiliates in the Anam Group in the aggregate
amount of approximately W857 billion. As of such date, AICL had provided
guarantees for all of AUSA's debt of $319 million, the Non-Compliant Loans of
$176 million and the Company's obligations under a receivables sales
arrangement. The Company has met a significant portion of its financing needs
through financing arrangements obtained by AUSA for the benefit of the Company,
based on guarantees provided by AICL. There can be no assurance that AUSA will
be able to obtain additional guarantees, if necessary, from AICL. Further, a
deterioration in AICL's financial condition could trigger defaults under AICL's
guarantees, causing acceleration of such loans. In addition, as an overseas
subsidiary of AICL, AUSA was formed with the approval of the Bank of Korea. If
the Bank of Korea were to withdraw such approval, or if AUSA otherwise ceased
operations for any reason, the Company and AICL would be required to meet their
financing needs through alternative arrangements. Although the Company believes
that after the Offerings alternative financing arrangements will be available,
there can be no assurance that the Company or AICL will be able to obtain
alternative financing on acceptable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 11 of Notes to Combined
Fianacial Statements. In addition, if any relevant subsidiaries or affiliates of
AICL, certain of which may have greater exposure to domestic Korean economic
conditions than AICL, were to fail to make interest or principal payments or
otherwise default under their debt obligations guaranteed by AICL, AICL could be
required under its guarantees to repay such debt, which event could have a
material adverse effect on its financial condition and results of operations.

28
<PAGE> 30

Agreements, and may engage in transactions from time to time that are material
to the Company. Although any such material agreements and transactions would
require approval of the Company's Board of Directors, such transactions
generally will not require approval of the disinterested members of the Board of
Directors and conflicts of interest may arise in certain circumstances. There
can be no assurance that such conflicts will not from time to time be resolved
against the interests of the Company. The Company currently has four directors,
two of whom are disinterested. Under Delaware corporate law, each director owes
a duty of loyalty and care to the Company, which if breached can result in
personal liability for the directors. In addition, the Company may agree to
certain changes in its contractual and other business relationships with AICL,
including pricing, manufacturing allocation, capacity utilization and capacity
expansion, among others, which in the judgment of the Company's management will
result in reduced short-term profitability for the Company in favor of potential
long-term benefits to the Company and AICL. There can be no assurance that the
Company's business, financial condition or results of operations will not be
adversely affected by any such decision.

USE OF PROCEEDS

This Prospectus relates to the shares of Common Stock which Salomon Smith
Barney may, subject to certain limitations, from time to time, borrow from Mr.
and Mrs. Kim to settle short sales of Common Stock (or to return Common Stock
previously borrowed by Salomon Smith Barney to settle such short sales) entered
into by Salomon Smith Barney to hedge any long position in the Convertible Notes
resulting from its market-making activities. See "Plan of Distribution." The
Company will not receive any proceeds from the sale of the Common Stock to which
this Prospectus relates.

DIVIDEND POLICY

The Company currently anticipates that all future earnings will be retained
for use in the Company's business and that the Company will not pay any cash
dividends on its Common Stock in the foreseeable future. The payment of any
future dividends will be at the discretion of the Company's Board of Directors
and will depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company and general
business conditions. As an S Corporation, AEI made substantial cash
distributions to its stockholders to pay income taxes on their allocable
portions of AEI's net income. The Company plans to make additional distributions
to such stockholders prior to the Termination Date. See "Reorganization."

29
<PAGE> 31

CAPITALIZATION

The following table sets forth as of December 31, 1997 (i) the actual
capitalization of the Company derived from the Combined Financial Statements
after giving effect to the Reorganization, (ii) the pro forma capitalization of
the Company reflecting the termination of AEI's S Corporation status which will
occur in connection with the Reorganization, and (iii) the pro forma
capitalization of the Company as adjusted principally to reflect the sale by the
Company, pursuant to the Initial Public Offering, of 30,000,000 shares of Common
Stock and $150.0 million of the Convertible Notes, and the receipt and
application by the Company of the estimated net proceeds to it therefrom (after
deducting the underwriting discount and estimated offering expenses), as well as
debt repayments by the Company after December 31, 1997 and prior to the Initial
Public Offering. The capitalization information set forth in the table below is
qualified by the more detailed Combined Financial Statements and Notes thereto
included elsewhere in this Prospectus and should be read in conjunction with
such Combined Financial Statements and the Notes thereto.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short term borrowings and current portion of
long-term debt.............................. $325,968 $325,968 $ 53,668
Long-term debt:
% Convertible Subordinated Notes due
2003..................................... -- -- 150,000
Due to AUSA (non-current)(3)................ 149,776 149,776 --
Other long-term debt........................ 38,283 38,283 35,283
-------- -------- --------
Total long-term debt..................... 188,059 188,059 185,283
-------- -------- --------
Stockholders' equity:
Common Stock, $.001 par value; 500,000,000
shares authorized; 82,610,000 shares
issued and outstanding, actual and pro
forma; 112,610,000 shares issued and
outstanding, pro forma as adjusted(4).... 46 46 76
Additional paid-in capital.................. 20,871 20,871 327,604
Retained earnings........................... 70,621 40,821 40,821
Cumulative translation adjustment........... (663) (663) (663)
-------- -------- --------
Total stockholders' equity............... 90,875 61,075 367,838
-------- -------- --------
Total capitalization................ $278,934 $249,134 $553,121
======== ======== ========
</TABLE>

- ---------------
(1) Pro forma balance sheet data reflects (i) the termination of AEI's S
Corporation status which resulted in the recording of a deferred tax
liability of $2.1 million and (ii) a distribution by the Company of
undistributed earnings of AEI through December 31, 1997 of $27.7 million to
stockholders of AEI prior to the Reorganization. The amount actually
distributed by the Company to such stockholders of AEI will increase to
reflect any undistributed net income earned by AEI following December 31,
1997 and prior to the Reorganization. See "Reorganization -- Termination of
S Corporation Status and Distributions" and Notes 1, 16 and 17 of Notes to
Combined Financial Statements.

(2) As adjusted to give effect to the application of the estimated net proceeds
to the Company of the Initial Public Offering based on an assumed Initial
Public Offering price of $11.00 per share of Common Stock, including the
purchase from AICL of its 40% interest in AAP for approximately $34 million
and the related elimination of minority interest and recording of goodwill.
The acquisition of the minority interest will result in additional
amortization of approximately $2.5 million per year. Also reflects
repayments made after December 31, 1997 and prior to the Initial Public
Offering of $50.3 million of short-term borrowings and current portion of
long-term debt and $30 million of amounts due to AUSA (non-current), as well
as the assumption by an affiliate of the Company of $13.9 million of amounts
due to

30
<PAGE> 32

AUSA (non-current) in February 1998. See "Prospectus Summary -- The Initial
Public Offering," "Reorganization" and Notes 1, 6 and 16 of Notes to
Combined Financial Statements.

(3) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."

(4) Excludes 2,730,000 shares of Common Stock issuable upon exercise of options
to be granted immediately prior to the Initial Public Offering under the
Company's 1998 Stock Plan and 1998 Director Option Plan. Also excludes an
aggregate of shares reserved for issuance upon conversion of the
Convertible Notes and an additional 3,570,000 shares reserved for issuance
under the Company's 1998 Stock Plan, 1998 Director Option Plan and 1998
Employee Stock Purchase Plan. See "Management" and "Description of Capital
Stock" and Notes 1 and 16 of Notes to Combined Financial Statements.

31
<PAGE> 33

SELECTED COMBINED FINANCIAL DATA

The selected combined financial data presented below for, and as of the end
of, each of the years in the five-year period ended December 31, 1997 are
derived from the combined financial statements of Amkor. The combined financial
statements as of December 31, 1995, 1996 and 1997 and for each of the years in
the three-year period ended December 31, 1997 have been audited by Arthur
Andersen LLP, independent public accountants, and their report thereon, together
with such combined financial statements, are included elsewhere in this
Prospectus. Reference is made to said report which includes an explanatory
paragraph with respect to the ability of the Company to continue as a going
concern as discussed in Note 1 of the Notes to the Combined Financial
Statements. Reference is made to said reports which include an explanatory
paragraph with respect to the ability of the Company to continue as a going
concern as discussed in Note 1 of Notes to the Combined Financial Statements.
The selected combined financial data presented below as of and for the year
ended December 31, 1994 are derived from audited financial statements which are
not presented herein. The selected combined financial data presented below as of
and for the year ended December 31, 1993 are derived from unaudited combined
financial statements. In the opinion of management, the unaudited combined
financial statements have been prepared on the same basis as the audited
combined financial statements and contain all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the Company's
results of operations for such period and financial condition at such date. The
selected combined financial data set forth below is qualified in its entirety
by, and should be read in conjunction with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Combined
Financial Statements and Notes thereto.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues.............................................. $ 442,101 $ 572,918 $ 932,382 $ 1,171,001 $ 1,455,761
Cost of revenues.......................................... 371,323 514,648 783,335 1,022,078 1,242,669
--------- --------- --------- ----------- -----------
Gross profit....................................... 70,778 58,270 149,047 148,923 213,092
--------- --------- --------- ----------- -----------
Operating expenses:
Selling, general and administrative..................... 42,649 41,337 55,459 66,625 103,726
Research and development................................ 1,755 3,090 8,733 10,930 8,525
--------- --------- --------- ----------- -----------
Total operating expenses........................... 44,404 44,427 64,192 77,555 112,251
--------- --------- --------- ----------- -----------
Operating income.......................................... 26,374 13,843 84,855 71,368 100,841
--------- --------- --------- ----------- -----------
Other (income) expense:
Interest expense, net................................... 5,116 5,752 9,797 22,245 32,241
Foreign currency (gain) loss............................ 2,809 (4,865) 1,512 2,961 (835)
Other (income) expense, net............................. (1,725) (877) 6,523 3,150 8,429
--------- --------- --------- ----------- -----------
Total other expense................................ 6,200 10 17,832 28,356 39,835
--------- --------- --------- ----------- -----------
Income before income taxes, equity in income (loss) of
AICL and minority interest.............................. 20,174 13,833 67,023 43,012 61,006
Provision for income taxes................................ 2,445 2,977 6,384 7,876 7,078
Equity in income (loss) of AICL........................... 1,776 1,762 2,808 (1,266) (17,291)
Minority interest......................................... 2,269 1,044 1,515 948 (6,644)
--------- --------- --------- ----------- -----------
Net income................................................ $ 17,236 $ 11,574 $ 61,932 $ 32,922 $ 43,281
========= ========= ========= =========== ===========
PRO FORMA DATA (UNAUDITED):
Historical income before income taxes, equity in income
(loss) of AICL and minority interest.................... $ 20,174 $ 13,833 $ 67,023 $ 43,012 $ 61,006
Pro forma provision for income taxes(1)................... 5,345 3,177 16,784 10,776 10,691
--------- --------- --------- ----------- -----------
Pro forma income before equity in income (loss) of AICL
and minority interest(1)................................ 14,829 10,656 50,239 32,236 50,315
Historical equity in income (loss) of AICL................ 1,776 1,762 2,808 (1,266) (17,291)
Historical minority interest.............................. 2,269 1,044 1,515 948 (6,644)
--------- --------- --------- ----------- -----------
Pro forma net income (1).................................. $ 14,336 $ 11,374 $ 51,532 $ 30,022 $ 39,668
========= ========= ========= =========== ===========
Basic and diluted pro forma net income per common
share(1)................................................ $ .17 $ .14 $ .62 $ .36 $ .48
========= ========= ========= =========== ===========
Shares used in computing pro forma net income per common
share................................................... 82,610 82,610 82,610 82,610 82,610
========= ========= ========= =========== ===========
OTHER DATA:
EBITDA(2)................................................. $ 37,437 $ 34,197 $ 103,434 $ 123,082 $ 175,111
========= ========= ========= =========== ===========
Ratio of earnings to fixed charges(3):
Actual.................................................. 3.7x 2.0x 4.6x 2.4x 2.5x
Supplemental pro forma.................................. 3.1x
</TABLE>

32
<PAGE> 34

- ---------------
(1) Prior to the Reorganization, AEI, a predecessor of the Company, elected to
be taxed as an S Corporation under the Internal Revenue Code of 1986 and
comparable state tax laws. Accordingly, AEI did not recognize any provision
for federal income tax expense during the periods presented. The pro forma
provision for income taxes reflects the additional U.S. federal income taxes
which would have been recorded if AEI had not been an S Corporation during
these periods. See "Reorganization" and Note 1 of Notes to Combined
Financial Statements.

(2) EBITDA is defined as earnings before interest income, interest expense,
taxes on income, depreciation and amortization. EBITDA is presented here to
provide additional information about the Company's ability to meet its
future debt service, capital expenditure, and working capital requirements
and should not be construed as a substitute for or a better indicator of
results of operations or liquidity than net income or cash flow from
operating activities computed in accordance with generally accepted
accounting principles.

(3) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes less undistributed earnings in less
than 50%-owned subsidiaries, plus fixed charges. Fixed charges consist of
interest expense incurred and one-third of rental expense which amount is
deemed by the Company to be representative of the interest factor of rental
payments under operating leases. The supplemental pro forma ratio of
earnings to fixed charges reflects the effect on the ratio of earnings to
fixed charges if the Initial Public Offering had been completed and the
estimated net proceeds to the Company applied as described in "Prospectus
Summary -- The Initial Public Offering" at the beginning of the period
presented.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, 1997
--------------------------------------- -----------------------------------------
1993 1994 1995 1996 ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- -------- ------- ------- --------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents... $ 8,929 $114,930 $91,151 $49,664 $ 90,917 $ 63,217 $ 68,191
Working capital (deficit)... (13,073) 134,798 111,192 36,785 (196,870) (224,570) 52,704
Total assets................ 191,754 426,522 626,379 804,864 855,592 827,892 864,197
Short-term borrowings and
current portion of
long-term debt............ 76,051 52,526 85,120 191,813 325,968 325,968 53,668
% Convertible
Subordinated Notes due
2003.................... -- -- -- -- -- -- 150,000
Due to AUSA (non-current)... 18,823 211,693 219,037 234,894 149,776 149,776 --
Other long-term debt........ 29,917 62,215 107,385 167,444 38,283 38,283 35,283
Stockholders' equity........ 8,070 9,617 45,289 45,812 90,875 61,075 367,838
</TABLE>

33
<PAGE> 35

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements within the
meaning of the federal securities laws, including statements regarding the
anticipated growth in the market for the Company's products, the Company's
anticipated capital expenditures and financing needs, the Company's expected
capacity utilization rates, the belief of the Company as to its future operating
performance and other statements that are not historical facts. Because such
statements include risks and uncertainties, actual results may differ materially
from those anticipated in such forward-looking statements as a result of certain
factors, including those set forth in the following discussion as well as in
"Risk Factors" and "Business." The following discussion provides information and
analysis of the Company's results of operations from 1995 through 1997 and its
liquidity and capital resources and should be read in conjunction with the
Combined Financial Statements and Notes thereto and the selected combined
financial data included elsewhere in this Prospectus. The operating results for
interim periods are not necessarily indicative of results for any subsequent
period.

OVERVIEW

Background. The Company is the world's largest independent provider of
semiconductor packaging and test services. The Company believes that it is also
one of the leading developers of advanced semiconductor packaging and test
technology in the industry. The Company offers a complete and integrated set of
packaging and test services including IC package design, leadframe and substrate
design, IC package assembly, final testing, burn-in, reliability testing, and
thermal and electrical characterization. The Company recently began offering
wafer fabrication services. The Company provides packaging and test services
through its three factories in the Philippines (P1, P2 and P3) as well as the
four factories of AICL in Korea, and wafer fabrication services through AICL's
new wafer foundry, pursuant to the Supply Agreements between the Company and
AICL. As of December 31, 1997, the Company had in excess of 150 customers,
including many of the largest semiconductor companies in the world.

The Company was formed in September 1997 to consolidate the operations of
the Amkor Companies, including AEI which was incorporated in 1970. These
companies were under common management and in the same business prior to the
Company's formation. As a result of the Reorganization, the financial statements
included in this Prospectus are presented on a combined basis. See
"Reorganization" and "Certain Transactions" and Notes 1 and 16 of Notes to
Combined Financial Statements. Prior to the Reorganization, AEI elected to be
taxed as an S Corporation under the Internal Revenue Code of 1986 and comparable
state tax laws. Accordingly, AEI did not recognize any provision for federal
income tax expense during the periods presented in the Combined Financial
Statements. The Combined Financial Statements include a pro forma provision for
income taxes which reflects the U.S. federal income taxes which would have been
recorded by the Company if AEI had not been an S Corporation during these
periods. See Notes 1, 10 and 17 of Notes to Combined Financial Statements.

General. From 1995 to 1997, the Company's revenues increased from
approximately $932.4 million to $1.456 billion. This increase occurred primarily
as a result of increases in unit volumes, together with the shift in the
Company's product mix from traditional leadframe products to advanced leadframe
and laminate products, which were offset in part by decreasing average selling
prices. See "Business -- Products." In order to meet customer demand, the
Company has invested significant resources to expand its capacity in the
Philippines. In 1996 and the first six months of 1997, the Company incurred and
expensed $15.5 million and $16.6 million, respectively, of pre-operating and
start-up costs and initial operating losses in connection with its newest
factory, P3, in the Philippines. This facility operated at substantially less
than full capacity during these periods while customers were completing
qualification procedures for BGA packages to be produced at the facility. The
Company significantly increased utilization of P3 during the last six months of
1997 and expects to operate the facility with positive gross margins during
1998. See "Risk Factors -- Expansion of Manufacturing Capacity; Profitability
Affected by Capacity Utilization Rates" and "Business -- Facilities and
Manufacturing."

34
<PAGE> 36

The Company's results of operations are generally affected by the
capital-intensive nature of its business. In 1995, 1996 and 1997, the Company
invested $123.6 million, $185.1 million and $179.0 million, respectively, in
property, plant and equipment. Increases or decreases in capacity utilization
rates can have a significant effect on gross margins since the unit cost of
packaging and test services generally decrease as fixed charges, such as
depreciation expense for the equipment, are allocated over a larger number of
units produced. In addition, the Company's gross margin is significantly
affected by fluctuations in service charges paid to AICL pursuant to the Supply
Agreements. Pricing arrangements relating to packaging and test services
provided by AICL to the Company are subject to quarterly review and adjustment,
and pricing arrangements relating to wafer fabrication services provided by AICL
are subject to annual review and adjustment, in each case on the basis of
factors such as changes in the semiconductor market, forecasted demand, product
mix and capacity utilization and fluctuations in exchange rates, as well as the
mutual long-term strategic interest of the Company and AICL. The Company's
results of operations are also affected by declines over time in the average
selling prices for particular products. At times in the past the Company has
been able to offset, at least in part, the effect of such decline on its margins
by successfully developing and marketing new products with higher margins, such
as advanced leadframe and laminate products, and by taking advantage of
economies of scale and higher productivity resulting from volume production.
However, there can be no assurance that the Company will be successful at
offsetting any such declines in the future. See "Risk Factors -- Expansion of
Manufacturing Capacity; Profitability Affected by Capacity Utilization Rates"
and "-- Competition."

Due to the concentration of market share in the semiconductor industry, the
Company has been largely dependent upon a small group of customers for a
substantial portion of its business. In 1995, 1996 and 1997, 34.1%, 39.2% and
40.1%, respectively, of the Company's net revenues were derived from sales to
the Company's top five customers, with 13.3%, 23.5% and 23.4%, respectively,
derived from sales to Intel. See "Risk Factors -- Customer Concentration;
Absence of Backlog."

Relationship with AICL. In 1996 and 1997, approximately 72% and 68%,
respectively, of the Company's revenues were derived from sales of services
performed for the Company by AICL. In addition, substantially all of the
revenues of AICL in 1996 and 1997 were derived from services sold by the
Company. Historically, AICL has directly sold packaging and test services in
Japan and Korea. The Company assumed substantially all of the marketing rights
for services in Japan in January 1998. Also, the Company recently began offering
wafer fabrication services through AICL's new deep submicron CMOS foundry which
is capable of producing up to 15,000 8" wafers per month. See "Risk
Factors -- Risks Associated with New Wafer Fabrication Business." The Company
expects the proportion of its net revenues derived from sales of services
performed for the Company by AICL and the percentage of AICL's revenues from
services sold by the Company to increase as the Company begins selling the wafer
fabrication output of AICL's new wafer foundry and with the Company's assumption
from AICL of substantially all of the marketing rights for Japan. The Company
has a first right to substantially all of the packaging and test service
capacity of AICL and the exclusive right to all of the wafer output of AICL's
new wafer foundry.

The Supply Agreements between the Company and AICL generally provide, among
other things, for periodic price reviews and adjustments and coordination of
research and development efforts regarding package design and packaging and
testing processes and technologies. The Supply Agreements have a five year
initial term and thereafter may be terminated upon five years' notice. There can
be no assurance that AICL will not terminate either Supply Agreement upon the
expiration of such initial term, or that if it does terminate a Supply
Agreement, that the Company will be able to enter into a new agreement with AICL
on terms favorable to the Company or at all. See "Relationship with Anam
Industrial Co., Ltd."

The Company expects that the businesses of the Company and AICL will
continue to remain highly interdependent by virtue of their supply relationship,
overlaps and family ties between their respective shareholders and management,
financial relationships, coordination of product and operation plans, joint
research and development activities and shared intellectual property rights. As
a result, the Company's business, financial condition and operating results will
continue to be significantly dependent on AICL, including without limitation
AICL's ability to effectively provide the contracted services on a
cost-efficient and timely basis as well as AICL's financial condition and
results of operations. The Company will continue to be controlled to a
significant degree by James Kim and members of his family, and Mr. Kim and other

35
<PAGE> 37

members of his family will also continue to exercise significant influence over
the management of AICL and its affiliates. In addition, the Company and AICL
will continue to have certain contractual and other business relationships and
may engage in transactions from time to time that are material to the Company.
Although any such material agreements and transactions would require approval of
the Company's Board of Directors, such transactions will generally not require
approval of the disinterested members of the Board of Directors and conflicts of
interest may arise in certain circumstances. There can be no assurance that such
conflicts will not from time to time be resolved against the interests of the
Company. The Company currently has four directors, two of whom are
disinterested. Under Delaware corporate law, each director owes a duty of
loyalty and care to the Company, which if breached can result in personal
liability for the directors. In addition, the Company may agree to certain
changes in its contractual and other business relationships with AICL, including
pricing, manufacturing allocation, capacity utilization and capacity expansion,
among others, which in the judgment of the Company's management will result in
reduced short-term profitability for the Company in favor of potential long-term
benefits to the Company and AICL. There can be no assurance that the Company's
business, financial condition or results of operations will not be adversely
affected by any such decision. See "-- Liquidity and Capital Resources" and
"Risk Factors -- Dependence on Relationship with AICL; Potential Conflicts of
Interest."

RESULTS OF OPERATIONS

The following table sets forth certain operating data as a percentage of
net revenues for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Net revenues........................................ 100.0% 100.0% 100.0%
Cost of revenues.................................... 84.0 87.3 85.4
----- ----- -----
Gross profit...................................... 16.0 12.7 14.6
Operating expenses:
Selling, general and administrative .............. 6.0 5.7 7.1
Research and development.......................... 0.9 0.9 0.6
----- ----- -----
Total operating expenses....................... 6.9 6.6 7.7
----- ----- -----
Operating income.................................... 9.1 6.1 6.9
----- ----- -----
Other (income) expense:
Interest expense, net............................. 1.0 1.9 2.2
Foreign currency (gain) loss...................... 0.2 0.2 (0.1)
Other expense, net................................ 0.7 0.3 0.6
----- ----- -----
Total other expense............................ 1.9 2.4 2.7
----- ----- -----
Income before income taxes, equity in income (loss)
of AICL and minority interest..................... 7.2 3.7 4.2
Provision for income taxes.......................... 0.7 0.7 0.5
Equity in income (loss) of AICL..................... 0.3 (0.1) (1.2)
Minority interest................................... 0.2 0.1 (0.5)
----- ----- -----
Net income.......................................... 6.6 2.8 3.0
Pro forma provision for income taxes ............... 1.1 0.2 0.3
----- ----- -----
Pro forma net income................................ 5.5% 2.6% 2.7%
===== ===== =====
</TABLE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Net Revenues. The Company's net revenues consist of fees for the packaging
and testing of ICs which are consigned by customers to the Company's or AICL's
factories. Net revenues for 1997 increased 24.3% to $1,455.8 million from
$1,171.0 million for 1996 primarily due to an increase in unit volumes of
semiconductors packaged and tested by the Company, offset in part by declines in
average selling prices for many of the

36
<PAGE> 38

Company's leadframe products. In addition, the opening of P3, the Company's
newest factory, and K4, AICL's newest factory, in September 1996 enabled the
Company to begin to expand sales of BGA packages in 1997.

Gross Profit. Gross profit increased 43.1% to $213.1 million in 1997 from
$148.9 million in 1996, resulting in a gross margin of 14.6% for 1997 as
compared to 12.7% for 1996. Cost of revenues consists principally of packaging
and test service charges from AICL, costs of direct material for both the
Philippine factories and AICL and labor and other costs at the Philippine
factories. Gross margin increased primarily due to improved operating results at
P1 and P2 during the second half of 1997, which more than offset initial
operating losses and start-up costs incurred in connection with P3 during the
first half of 1997. Product mix changes toward more profitable product lines and
decreased labor costs from the devaluation of the Philippine peso were the
primary factors resulting in improved margins at the P1 and P2 factories.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 55.7% to $103.7 million, or 7.1% of net
revenues, in 1997 from $66.6 million, or 5.7% of net revenues, in 1996 primarily
due to increases in personnel in marketing and support to sustain the Company's
growth. The number of employees in the Company's marketing and sales support
groups increased during 1997 by approximately 21% over 1996. Such increase
resulted in an overall increase in personnel-related costs including salaries,
benefits and payroll taxes. The Company also incurred increased costs for office
rental, depreciation and other occupancy-related expenses. The Company does not
expect this level of growth in employees to continue in 1998. In addition to the
increased costs from its marketing and sales support groups, the Company
incurred approximately $8.0 million and $3.6 million in general and
administrative expenses in connection with its P3 operations and wafer
fabrication services group, respectively, during 1997. No similar costs were
incurred in 1996 as these groups represented start-up operations in 1997.

Research and Development Expenses. Research and development expenses
decreased 22.0% to $8.5 million, or 0.6% of net revenues, in 1997, from $10.9
million, or 0.9% of net revenues, in 1996. The decrease in research and
development costs principally reflected the termination in late 1996 of the
Company's efforts to develop its own laminate substrate manufacturing
capability.

Other (Income) Expense. Other (income) expense consists of interest
expense, net, foreign currency (gain) loss and other (income) expense, net.
Other expense increased 40.5% to $39.8 million in 1997 from $28.4 million in
1996 primarily as a result of increased interest expense and increased other
expenses. Interest expense for 1997 increased to $38.6 million from $27.7
million in 1996 as the Company significantly increased its borrowing to finance
capacity expansion. See "-- Liquidity and Capital Resources." Interest expense
in each of the periods was offset in part by interest income of $6.4 million and
$5.5 million, respectively. Other expenses increased primarily due to $2.4
million in costs relating to the Company's trade receivables securitization
transactions. See "-- Liquidity and Capital Resources" and Note 2 of Notes to
Combined Financial Statements.

Income Taxes. The Company's effective tax rate (after giving effect to the
pro forma adjustment for income taxes) for 1997 was 18% as compared to 25% for
1996. The decrease in the Company's effective tax rate in 1997 compared to 1996
was primarily attributable to income not taxed due to a tax holiday and foreign
exchange effects described below. The Company's subsidiary that owns P3 operates
under a tax holiday from Philippine income taxes until the end of 2002. To the
extent P3 is profitable, the Company's effective tax rate related to its
Philippine operations during the tax holiday will be less than the Philippine
statutory rate of 35%. Additionally, the Company recognized deferred tax
benefits for unrealized foreign exchange losses in 1997 which are recognized in
the Philippines for tax reporting purposes and relate to unrecognized net
foreign exchange losses on U.S. dollar denominated monetary assets and
liabilities. See Note 10 of Notes to Combined Financial Statements. These losses
are not recognized for financial reporting purposes as the U.S. dollar is the
functional currency. These losses will be realized for Philippine tax reporting
purposes upon settlement of the related asset or liability. The benefit derived
from unrealized foreign exchange losses was partially offset by an increase in
the valuation allowance as the Company concluded that it was more likely than
not that their tax benefits could be realized in the Philippines within the
three year loss carryforward period. The Company has structured its global
operations to take advantage of lower tax rates in certain

37
<PAGE> 39

countries and tax incentives extended to encourage investment. The recorded
provisions for income taxes are subject to changes upon examination of the
Company's tax returns by tax authorities in the United States, the Philippines
and elsewhere. Changes in the mix of income from the Company's foreign
subsidiaries, expiration of tax holidays and changes in tax laws and regulations
could result in increased effective tax rates for the Company.

Equity in Income (Loss) of AICL. Equity in income (loss) of AICL represents
the Company's ownership interest in AICL during the periods presented. In 1997,
the Company recognized a loss of $17.3 million resulting principally from the
impairment of value in its investment in AICL. In February 1998, the Company
disposed of its investment in AICL's common stock. See "Certain Transactions"
and Note 6 of Notes to Combined Financial Statements.

Minority Interest. Minority interest represents AICL's ownership interest
in the consolidated net income of AAP. During 1997, as a result of a settlement
of an intercompany loan, which otherwise had no effect on the combined pretax
income of the Company, AAP reported a net loss as a separate entity.
Accordingly, the Company recorded a minority interest benefit in its combined
financial statements relating to the minority interest in the net loss.
Following the Offerings, the Company intends to purchase AICL's 40% interest in
AAP and, as a result, the Company will own substantially all of the common stock
of AAP. See "Use of Proceeds." The acquisition of the minority interest will
result in the elimination of the minority interest liability and additional
amortization of approximately $2.5 million per year.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Net Revenues. Net revenues in 1996 increased 25.6% to $1.17 billion from
$932.4 million in 1995. The increase was primarily due to an increase in units
sold together with an increase in sales of newer products, such as advanced
leadframe and laminate packages. This increase in sales of newer products offset
declines in average selling prices for many of the Company's other products.

Gross Profit. Gross profit in 1996 and 1995 was approximately $149 million
representing a decrease in gross margin to 12.7% in 1996 from 16.0% in 1995. The
decrease in gross margin was primarily attributable to increases in cost of
revenues due to $15.5 million in pre-operating and start-up costs associated
with P3, as well as increased packaging and test service charges paid to AICL.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 20.1% to $66.6 million, or 5.7% of net
revenues, in 1996 from $55.5 million, or 6.0% of net revenues, in 1995 as a
result of the addition of personnel and infrastructure to service increases in
customer demand. In addition, the Company continued its investments in new
information systems in order to enhance operating efficiencies and improve
customer service and support.

Research and Development Expenses. Research and development expenses
increased 25.2% to $10.9 million, or 0.9% of net revenues, in 1996 from $8.7
million, or 0.9% of net revenues, in 1995 as a result of increased staffing and
funding for the Company's efforts to develop laminate substrate manufacturing
capabilities, prior to termination of such efforts in late 1996.

Other (Income) Expense. Other expense increased 59.0% to $28.4 million in
1996 from $17.8 million in 1995 primarily as a result of increases in interest
expense, net, offset in part by a decrease in other expense, net. Interest
expense, net in 1996 increased to $22.2 million from $9.8 million in 1995 as the
Company significantly increased its borrowing to finance capacity expansion. See
"-- Liquidity and Capital Resources." As a result of this increase in debt, the
Company's interest expense increased to $27.7 million in 1996 from $17.3 million
in 1995.

Income Taxes. The Company's effective tax rate (after giving effect to the
pro forma provision for income taxes) for 1996 and 1995 was 25%. These rates
were different from the United States statutory rate primarily due to the impact
of lower tax rates, including tax holidays, in certain of the countries in which
the Company's subsidiaries are located. See Note 10 of Notes to Combined
Financial Statements.

38
<PAGE> 40

QUARTERLY RESULTS

The following table sets forth certain unaudited combined financial
information, including as a percentage of net revenues, for the eight fiscal
quarters ended December 31, 1997. The Company disposed of its investment in AICL
common stock in February 1998. Also, the Company has entered into an agreement
with AICL pursuant to which the Company will purchase, immediately following the
Initial Public Offering, AICL's 40% interest in AAP. After the Initial Public
Offering, there will be no equity in income (loss) of AICL and minority interest
related to AAP. Consequently, this information is not presented below. The
amounts of equity in income (loss) of AICL and minority interest have
historically varied significantly by quarter depending on the income (loss) of
AICL and AAP. See "Reorganization" and Note 6 of Notes to Combined Financial
Statements. The Company believes that all necessary adjustments, consisting only
of normal recurring adjustments, have been included in the amounts stated below
to present fairly the selected quarterly information when read in conjunction
with the Combined Financial Statements and the Notes thereto included elsewhere
herein. The Company's results of operations have varied and may continue to vary
significantly from quarter to quarter and are not necessarily indicative of the
results of any future period. In addition, in light of the Company's recent
growth, the Company believes that period-to-period comparisons should not be
relied upon as an indication of future performance.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues.......................... $270,327 $272,262 $285,784 $342,628 $313,019 $350,471 $380,130 $412,141
Cost of revenues...................... 230,387 231,959 250,898 308,834 287,449 299,093 314,246 341,881
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit........................ 39,940 40,303 34,886 33,794 25,570 51,378 65,884 70,260
Operating expenses:
Selling, general and
administrative.................... 13,752 15,948 16,716 20,209 20,608 26,657 26,829 29,632
Research and development............ 2,100 2,757 3,071 3,002 1,485 2,030 2,236 2,774
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses.......... 15,852 18,705 19,787 23,211 22,093 28,687 29,065 32,406
-------- -------- -------- -------- -------- -------- -------- --------
Operating income...................... 24,088 21,598 15,099 10,583 3,477 22,691 36,819 37,854
Total other expense, net.............. 3,316 6,052 9,853 9,135 8,165 9,577 11,242 10,851
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes, equity in
income (loss) of AICL and minority
interest............................ 20,772 15,546 5,246 1,448 (4,688) 13,114 25,577 27,003
Provision for income taxes............ 3,803 2,847 961 265 (1,497) 4,186 842 3,547
-------- -------- -------- -------- -------- -------- -------- --------
Income before equity in income (loss)
of AICL and minority interest....... $ 16,969 $ 12,699 $ 4,285 $ 1,183 $ (3,191) $ 8,928 $ 24,735 $ 23,456
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1996 1996 1996 1996 1997 1997
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................... 85.2 85.2 87.8 90.1 91.8 85.3
----- ----- ----- ----- ----- -----
Gross profit........................ 14.8 14.8 12.2 9.9 8.2 14.7
----- ----- ----- ----- ----- -----
Operating expenses:
Selling, general and
administrative.................... 5.1 5.9 5.8 5.9 6.6 7.6
Research and development............ 0.8 1.0 1.1 0.9 0.5 0.6
----- ----- ----- ----- ----- -----
Total operating expenses.......... 5.9 6.9 6.9 6.8 7.1 8.2
----- ----- ----- ----- ----- -----
Operating income...................... 8.9 7.9 5.3 3.1 1.1 6.5
Total other expense, net.............. 1.2 2.2 3.5 2.7 2.6 2.8
----- ----- ----- ----- ----- -----
Income before income taxes, equity in
income (loss) of AICL and minority
interest............................ 7.7 5.7 1.8 0.4 (1.5) 3.7
Provision for income taxes............ 1.4 1.0 0.3 0.1 (0.5) 1.2
----- ----- ----- ----- ----- -----
Income before equity in income (loss)
of AICL and minority interest....... 6.3% 4.7% 1.5% 0.3% (1.0)% 2.5%
===== ===== ===== ===== ===== =====

<CAPTION>
QUARTER ENDED
------------------------
SEPT. 30, DEC. 31,
1997 1997
----------- ----------
<S> <C> <C>
Net revenues.......................... 100.0% 100.0%
Cost of revenues...................... 82.7 83.0
----- -----
Gross profit........................ 17.3 17.0
----- -----
Operating expenses:
Selling, general and
administrative.................... 7.1 7.2
Research and development............ 0.5 0.6
----- -----
Total operating expenses.......... 7.6 7.8
----- -----
Operating income...................... 9.7 9.2
Total other expense, net.............. 3.0 2.6
----- -----
Income before income taxes, equity in
income (loss) of AICL and minority
interest............................ 6.7 6.6
Provision for income taxes............ 0.2 0.9
----- -----
Income before equity in income (loss)
of AICL and minority interest....... 6.5% 5.7%
===== =====
</TABLE>

39
<PAGE> 41

The Company's revenues, gross profit and operating profit are generally
lower in the first quarter of the year as compared to the fourth quarter of the
preceding year primarily due to the combined effect of holidays in the United
States, the Philippines and Korea. Semiconductor companies in the United States
generally reduce their production during the holidays at the end of December
which results in a significant decrease in orders for packaging and testing
services during the first two weeks of January. In addition, the Company
typically closes its factories in the Philippines for holidays in January, and
AICL closes its factories in Korea for holidays in February. As a result of
these factors, the Company's net revenues are significantly reduced during the
months of January and February. The Company currently anticipates that its
operating results for the first quarter of 1998 will follow its historical
seasonality, with revenues, gross profit and operating profit declining as
compared to the fourth quarter of 1997.

Beginning in the third quarter of 1996, intense competition in the
semiconductor industry worldwide led to decreases in the average selling prices
of many of the Company's leadframe packages. These decreases were partially
offset by increases in sales of advanced leadframe and laminate packages, which
carry higher prices and gross margins. In addition, the Company's cost of
revenues as a percentage of revenues increased significantly during the three
quarters ended March 31, 1997 primarily as a result of initial operating losses
and start-up costs associated with P3. Cost of revenues was also affected in the
two quarters ended June 30, 1997, as the Company recognized a $2.2 million
write-off for custom laminate raw materials which were purchased to meet
customer orders which were subsequently cancelled. The combined effect of these
factors was to decrease the levels of profitability in the third and fourth
quarters of 1996 and the first quarter of 1997.

Selling, general and administrative expenses increased during the second,
third and fourth quarters of 1997 primarily due to increased staffing levels at
the Company's marketing and sales support groups, as well as at its P3 factory
and wafer fabrication services group, which resulted in increased
employee-related costs. See "-- Results of Operations -- Year Ended December 31,
1997 Compared to Year Ended December 31, 1996 -- Selling, General and
Administrative Expenses."

Income tax rates in the third quarter of 1997 were lower compared to prior
periods as the Company recognized deferred tax benefits for unrealized foreign
exchange losses during the quarter, which are recognized for Philippine tax
reporting purposes but are not recognized for financial reporting purposes since
the U.S. dollar is the functional currency. Although similar circumstances
during the fourth quarter of 1997 resulted in the recognition of additional
deferred tax assets, their effect on the overall tax rates were mitigated by a
valuation allowance also recorded during the fourth quarter of approximately $22
million. See "-- Results of Operations -- Year End December 31, 1997 Compared to
Year Ended December 31, 1996 -- Income Taxes." As the majority of these tax
assets relate to fluctuations in the value of the Philippine peso, management is
unable to determine the impact to the effective tax rates which may occur as a
result of future exchange rate fluctuations.

The Company's quarterly operating results may vary significantly due to a
variety of factors including, among others, the cyclical nature of both the
semiconductor industry and the markets addressed by end-users of semiconductors,
the short-term nature of its customers' commitments, timing and volume of orders
relative to the Company's production capacity, changes in capacity utilization,
evolutions in the life cycles of customers' products, rescheduling and
cancellation of large orders, rapid erosion of packaging selling prices,
availability of manufacturing capacity, allocation of production capacity
between the Company's facilities and AICL's facilities, fluctuations in
packaging and test service charges paid to AICL, changes in costs, availability
and delivery times of labor, raw materials and components, effectiveness in
managing production processes, fluctuations in manufacturing yields, changes in
product mix, product obsolescence, timing of expenditures in anticipation of
future orders, availability of financing for expansion, changes in interest
expense, the ability to develop and implement new technologies, competitive
factors, changes in effective tax rates, the loss of key personnel or the
shortage of available skilled workers, international political or economic
events, currency and interest rate fluctuations, environmental events, and
intellectual property transactions and disputes. Unfavorable changes in any of
the above factors may adversely affect the Company's business, financial
condition and results of operations. In addition, the Company increases its
level of operating expenses and investment in manufacturing capacity in
anticipation of future growth in revenues. To the extent the Company's revenues
do not grow as anticipated, the Company's financial condition and operating
results may be materially adversely affected. See "Risk Factors -- Fluctuations
in Operating Results; Declines in Average Selling Price."

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<PAGE> 42

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997, the Company had cash and cash equivalents of $90.9
million and a working capital deficit of $196.9 million ($63.2 and $224.6
million, respectively, on a pro forma basis, after giving effect to the
termination of AEI's S Corporation status and the distribution of undistributed
earnings through December 31, 1997). The Company's working capital deficit
resulted primarily from the significant amount of its short-term debt, primarily
incurred in connection with the expansion of its Philippine operations, together
with approximately $105 million of term loans which have been reclassified as
current liabilities as a result of the non-compliance by the Company with
certain covenants thereunder. The Company's non-compliance with certain
covenants with respect to the Non-Compliant Loans, the aggregate outstanding
amount of which was $176 million as of December 31, 1997, triggered
cross-defaults with respect to an additional $10 million of the Company's loans.
These loan covenants include restrictions on the ability of one of the Company's
subsidiaries to enter into transactions with affiliates, requirements that the
subsidiary maintain certain debt-to-equity ratios and requirements that the
subsidiary comply with certain notice requirements. The Company's obligation to
repay these loans (including the cross-defaulted loans) may be accelerated by
the lenders at any time. As a result of such non-compliance, the report of the
Company's independent public accountants with respect to the Company's financial
statements included herein contains a paragraph stating that there is
substantial doubt as to the ability of the Company to continue as a going
concern. The Company will eliminate such non-compliance and cross-defaults by
repaying such loans using part of the net proceeds to the Company from the
Initial Public Offering as well as working capital. See "Prospectus
Summary -- The Initial Public Offering" and "Risk Factors -- Risks Associated
with Leverage."

The Company will use the net proceeds received from the Initial Public
Offering primarily to repay an aggregate of approximately $331 million of
short-term and long-term debt, including the Non-Compliant Loans (which,
following planned repayments of portions thereof prior to the Initial Public
Offering, will have an aggregate outstanding balance of $154 million), $63
million of short-term loans, $8 million of term loans and $106 million of
amounts due to AUSA. In addition, the Company will use approximately $34 million
of such net proceeds to repurchase AICL's 40% interest in AAP. See "Prospectus
Summary -- The Initial Public Offering." Following the expected application of
the estimated net proceeds of the Initial Public Offering to the Company
together with planned repayments of debt prior to the Initial Public Offering,
the Company will have $54 million of short-term borrowing and current portion of
long-term debt, $185 million of long-term debt and no amounts then due to AUSA.
In addition, the remaining $85 million of such net proceeds will be available
for capital expenditures and working capital.

The Company has been investing significant amounts of capital to increase
its packaging and test services capacity, including the construction of P3, the
addition of capacity in the Company's other Philippine facilities and the
construction of a new manufacturing facility in the United States. Advanced
packaging processes are being developed at the U.S. facility and full scale
operations are expected to begin in 1999. In 1995, 1996, and 1997, the Company
made capital expenditures of $123.6 million, $185.1 million and $179.0 million,
respectively. Because the Company and AICL have added a significant amount of
packaging and test capacity in recent years, the Company intends to decrease its
level of capital expenditures in 1998. The Company currently intends to spend
approximately $60 million in capital expenditures in 1998, including for the new
factory in the U.S. and moderate capacity expansion at the Company's existing
facilities in the Philippines to meet expected demand. The Company believes that
expenditure levels could increase substantially in 1999 to provide the Company
with adequate capacity.

The Company believes that following the application of the net proceeds
from the Initial Public Offering, its existing cash balances, cash flow from
operations, available equipment lease financing, bank borrowings and financing
obtained through AUSA will be sufficient to meet its anticipated cash
requirements including working capital and capital expenditures, for at least
the next 12 months. In addition, the Company intends to seek out strategic
long-term financing arrangements to fund part of its capital expansion plans in
1998. There can be no assurance, however, that lower than expected revenues,
increased expenses, increased costs associated with the purchase or maintenance
of capital equipment, decisions to increase planned capacity or other events
will not cause the Company to seek more capital, or to seek capital sooner than
currently expected. The timing and amount of the Company's actual capital
requirements cannot be precisely

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<PAGE> 43

determined and will depend on a number of factors, including demand for the
Company's services, availability of capital equipment, fluctuations in foreign
currency exchange rates, changes in semiconductor industry conditions and
competitive factors. There can be no assurance that such additional financing
will be available when needed or, if available, will be available on
satisfactory terms. Failure to obtain any such financing could have a material
adverse effect on the Company. In addition, if the Company obtains such
financing by selling equity securities of the Company, the Company's
stockholders may experience significant dilution.

The Company historically has met a significant portion of its cash
requirements for working capital and capital expenditures from a combination of
cash from operating activities, short-term and long-term bank loans and
financing obtained for the benefit of the Company by AUSA, a wholly-owned
financing subsidiary of AICL, as well as financing from a trade receivables
securitization agreement. Cash provided by operating activities in 1995, 1996
and 1997 was $53.3 million, $8.6 million, and $250.1 million, respectively. Cash
provided (used) by financing activities was $71.2 million, $148.0 million and
$(16.0) million for 1995, 1996 and 1997, respectively.

At December 31, 1997, the Company's debt consisted of $326.0 million of
borrowings classified as current liabilities, $38.3 million of long-term debt
and capital lease obligations and $149.8 million of amounts due to AUSA. The
Company plans to repay prior to the Initial Public Offering approximately $50.3
million of its short-term debt and $30 million of amounts due to AUSA. In
addition, $13.9 million of amounts due to AUSA was assumed by AK Investments,
Inc., an affiliate of the Company, in February 1998. As of December 31, 1997,
the Company had extended guarantees in respect of bank debt of affiliates in the
amount of $31 million and in respect of vendor obligations of an affiliate in
the amount of $24.7 million, which amount may vary over time. At December 31,
1997, the Company had $223.9 million in borrowing facilities with a number of
domestic and foreign banks, of which $36.2 million remained unused. Certain of
these agreements require compliance with certain financial covenants and
restrictions, and are collateralized by assets of the Company. These facilities
are typically revolving lines of credit and working capital facilities for
one-year renewable periods and generally bear interest at rates ranging from
7.2% to 13%. Long-term debt and capital lease obligations outstanding at
December 31, 1997 have various expiration dates through April 2004, and accrue
interest at rates ranging from 6.7% to 12.5%. See Note 11 of Notes to Combined
Financial Statements.

The Company has met a significant portion of its financing needs through
financing arrangements obtained by AUSA, AICL's wholly-owned financing
subsidiary. A majority of the amount due to AUSA represents outstanding amounts
under financing obtained by AUSA for the benefit of the Company, with the
balance representing payables to AUSA for packaging and service charges paid to
AICL. Based on guarantees provided by AICL, AUSA obtains for the benefit of the
Company a continuous series of short-term financing arrangements which generally
are less than six months in duration, and typically are less than two months in
duration. Because of the short term nature of these loans, the flows of cash to
and from AUSA under this arrangement are significant. At December 31, 1997, the
Company had fully utilized $149.8 million of the credit facilities available to
the Company through AUSA. These credit facilities are with U.S. branches of a
number of banks located in Korea and have interest rates ranging from
approximately 6.9% to prime plus 8.5% (17% at December 31, 1997). Because of the
recent deterioration of the Korean economy, Korean banks have begun to raise
interest rates applicable to their lending. See "Risk Factors -- Dependence on
International Operations and Sales; Concentration of Operations in the
Philippines and Korea -- Korea." As its credit lines have been renewed, AUSA has
experienced a significant increase in interest rates, and there can be no
assurance that such increases will not continue. The Company reimburses AUSA for
certain of the interest charges incurred by AUSA under these credit facilities.
As an overseas subsidiary of AICL, AUSA was formed with the approval of the Bank
of Korea. If the Bank of Korea were to withdraw such approval, or if AUSA
otherwise ceased operations for any reason, the Company and AICL would be
required to meet their financing needs through alternative arrangements.
Although the Company believes that after the Initial Public Offering alternative
financing arrangements will be available, there can be no assurance that the
Company or AICL will be able to obtain alternative financing on acceptable terms
or at all. AUSA has received commitments from its banks indicating that they
intend to renew the facilities when they expire through at least April 1, 1999.
AUSA has extended similar terms to the Company with respect to amounts due to
AUSA by the Company. Accordingly, amounts

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<PAGE> 44

due to AUSA are classified as non-current liabilities on the Company's balance
sheet at December 31, 1997. See Notes 2 and 6 of Notes to Combined Financial
Statements.

At December 31, 1997, all of AUSA's debt of $319 million, the Non-Compliant
Loans of $176 million and the Company's obligations under the Receivables Sale
(as defined below) were guaranteed by AICL. AICL currently has a significant
amount of debt relative to its equity and is contingently liable under
guarantees in respect of debt of its subsidiaries and affiliates, including
AUSA. As of December 31, 1997, AICL and its consolidated subsidiaries had
guarantees outstanding in respect of debt of its non-consolidated subsidiaries
and affiliates in the Anam Group in the aggregate amount of approximately W857
billion, including the guarantees of the Company's loans. As a result of its
relationship with AICL, the Company's business, financial condition and
operating results are significantly dependent on AICL. There can be no assurance
that AUSA will be able to obtain additional guarantees, if necessary, from AICL.
In addition, a deterioration in AICL's financial condition could trigger
defaults under AICL's guarantees, causing acceleration of such loans. See
"-- Overview -- Relationship with AICL," "Risk Factors -- Dependence on
Relationship with AICL; Potential Conflicts of Interest" and "Relationship with
Anam Industrial Co., Ltd."

In July 1997, the Company entered into a trade receivables securitization
agreement with a commercial financial institution. Under the terms of the
agreement, the financial institution has committed to purchase, with limited
recourse, all right, title and interest in eligible receivables, as defined in
the agreement, up to $100 million (the "Receivables Sale"). Funds received
pursuant to the agreement reflect a discount of LIBOR plus 0.375% from accounts
receivable sold. The Company applied approximately $83.4 million of the initial
Receivables Sale proceeds together with approximately $17 million of working
capital to reduce the Company's indebtedness to AUSA, which amounts were
advanced by AUSA to entities controlled by members of James Kim's family. See
Note 2 of Notes to Combined Financial Statements.

Prior to the consummation of the Reorganization, AEI was treated for U.S.
federal and certain state tax purposes as an S Corporation under the Internal
Revenue Code of 1986 and comparable state tax laws. As a result, AEI did not
recognize U.S. federal corporate income taxes. Instead, up until the Termination
Date, Mr. and Mrs. Kim and the Kim Family Trusts have been obligated to pay U.S.
federal and certain state income taxes on their allocable portion of the income
of AEI. The Company, Mr. and Mrs. Kim and the Kim Family Trusts will enter into
tax indemnification agreements providing that the Company will be indemnified by
such stockholders, with respect to their proportionate share of any U.S. federal
or state corporate income taxes attributable to the failure of AEI to qualify as
an S Corporation for any period or in any jurisdiction for which S Corporation
status was claimed through the Termination Date. The tax indemnification
agreements will also provide that the Company will indemnify Mr. and Mrs. Kim
and the Kim Family Trusts if such stockholders are required to pay additional
taxes or other amounts attributable to taxable years on or before the
Termination Date as to which AEI filed or files tax returns claiming status as
an S Corporation. AEI has made various distributions to Mr. and Mrs. Kim and the
Kim Family Trusts which have enabled them to pay their income taxes on their
allocable portions of the income of AEI. Such distributions totaled
approximately $19.8 million, $13.0 million and $5.0 million in 1995, 1996 and
1997, respectively. The Company expects to make additional distributions to such
stockholders prior to the consummation of the Reorganization, which
distributions will represent AEI's cumulative net income in all periods prior to
the Termination Date less the aggregate amount of distributions previously made
to such stockholders. These final distributions are intended to provide such
stockholders with the balance of AEI's net income for which they have already
recognized income taxes. Through December 31, 1997, the amount of such
undistributed net earnings was $27.7 million. See "Reorganization" and Notes 1,
10 and 17 of Notes to Combined Financial Statements.

FOREIGN CURRENCY TRANSLATION GAINS AND LOSSES

The Company's subsidiaries in the Philippines maintain their accounting
records in U.S. dollars. This is due to the fact that all sales, the majority of
all bank debt and all significant material and fixed asset purchases of such
subsidiaries are denominated in U.S. dollars. As a result, the Philippine
subsidiaries' exposure to changes in the Philippine peso/U.S. dollar exchange
rate relates primarily to certain receivables and advances and other assets
offset by payroll, pension and local liabilities. To minimize its foreign
exchange risk, the Company selectively hedges its net foreign currency exposure
through short-term (generally not more than 30 to 60 days) forward exchange
contracts. To date, the Company's hedging activity has been immaterial.

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<PAGE> 45

BUSINESS

The following discussion contains forward-looking statements within the
meaning of the U.S. federal securities laws, including statements regarding the
anticipated growth in the market for the Company's products, the Company's
anticipated capital expenditures and financing needs, the Company's expected
capacity utilization rates, the belief of the Company as to its future operating
performance and other statements that are not historical facts. Because such
statements include risks and uncertainties, actual results may differ materially
from those anticipated in such forward-looking statements as a result of certain
factors, including those set forth herein, in "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Amkor is the world's largest independent provider of semiconductor
packaging and test services. The Company believes that it is also one of the
leading developers of advanced semiconductor packaging and test technology in
the industry. The Company offers a complete and integrated set of packaging and
test services including IC package design, leadframe and substrate design, IC
package assembly, final testing, burn-in, reliability testing, and thermal and
electrical characterization. As of December 31, 1997, the Company had in excess
of 150 customers, including many of the largest semiconductor companies in the
world. Such customers include, among others, Advanced Micro Devices, Inc.,
International Business Machines Corp., Intel, Lucent Technologies, Inc.,
Motorola, Inc., National Semiconductor Corp., Philips Electronics N.V.,
SGS-THOMSON Microelectronics N.V., Siemens AG and TI.

The Company provides packaging and test services through its three
factories in the Philippines as well as the four factories of AICL in Korea
pursuant to a Supply Agreement between the Company and AICL, under which AICL
provides packaging and test services to the Company. In 1996 and 1997, AICL
provided packaging and test services representing approximately 72% and 68%,
respectively, of the Company's net revenues.

INDUSTRY BACKGROUND

Manufacturing Process

The production of a semiconductor is a complex process that requires
increasingly sophisticated engineering and manufacturing expertise. The
production process can be broadly divided into three primary stages: (i) wafer
fabrication, (ii) assembly of die into finished devices (referred to as
"packaging") and (iii) testing of finished devices and other back-end processes.

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<PAGE> 46

[ORGANIZATIONAL CHART]

The wafer fabrication process begins with the generation of a mask that
defines the circuit patterns for the transistors and interconnect layers that
will be formed on the raw silicon wafer. The transistors and other circuit
elements are formed by repeating a series of process steps wherein a
photosensitive material is first deposited on the wafer, the material is exposed
to light through the mask in a photolithography process, and finally, the
unwanted material is etched away, leaving only the desired circuit pattern on
the wafer. By stacking up the various patterns, the individual elements of the
semiconductor are defined. The final step in the wafer fabrication process is to
electrically test each individual chip in a wafer probe process in order to
identify the good chip for packaging.

The fabricated wafers are then transferred to packaging facilities.
Semiconductor packaging serves to protect the chip, facilitate integration into
electronic systems, and enable the dissipation of heat from the devices. In the
packaging process, the wafer is diced into its individual die which are then
separated from the wafer and attached to a substrate via an epoxy adhesive.
Leads on the substrate are then connected by extremely fine gold wires to the
input/output ("I/O") terminals on the chips through the use of automated
machines known as "wire bonders". Each die is then encapsulated in a plastic
molding compound, thus forming the package, which then goes through several
additional finishing steps to prepare it for testing.

Following packaging, each packaged device is then tested utilizing a
sophisticated test platform and program which tests the many different operating
specifications of the IC, including functionality, voltage, current and timing.
The completed devices are either shipped back to the customer or shipped
directly to their final destination.

Trends Toward Outsourcing

Historically, semiconductor companies manufactured semiconductors primarily
in their own factories. Independent packagers of semiconductors were used solely
to handle the overflow volume requirements of semiconductor companies.
Outsourcing of final testing and wafer fabrication was virtually non-existent in
the

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<PAGE> 47

early days of the industry. Over the past fifteen years, however, the need for
independent semiconductor packaging and test services has grown dramatically for
several reasons.

First, semiconductor companies are facing ever-increasing demands for
miniaturization, higher lead counts and improved thermal and electrical
performance in IC packages. As a result of this trend, semiconductor packaging
is now viewed as an enabling technology requiring sophisticated expertise and
technological innovation. Independent providers of packaging and test services
have developed substantial expertise in packaging and test technology and new
package innovation. Semiconductor companies, having found it difficult to keep
pace using their internal resources, have come to rely increasingly on the
independent packaging and test services providers as a key source for new
technology development and innovation.

Second, semiconductor companies are increasingly seeking to shorten their
time to market for new products. Having the right packaging technology and
capacity in place is a critical factor in reducing time to market. As packaging
solutions are identified for a specific product, semiconductor companies
frequently do not have the equipment or expertise to implement such solutions in
the volumes required, nor sufficient time to develop these capabilities before
introducing a new product into the market. For this reason, semiconductor
companies are increasingly leveraging the resources and capabilities of
independent packaging and test companies to deliver their new products to market
more quickly.

Third, the packaging and testing of ICs has evolved into an increasingly
complex process that requires substantial investment in specialized equipment
and facilities. For example, the investment in facilities and equipment
necessary for a processing line capable of packaging 100 million ball grid array
("BGA") packages per year can be as much as $200 million. As a result of the
substantial cost of this manufacturing equipment, the equipment must be utilized
at a high capacity level for an extended period of time in order to be cost
effective. With semiconductor companies facing increasingly shorter product life
cycles, faster new product introductions and the need to continuously update or
replace packaging equipment to accommodate new products, it has become
increasingly difficult for semiconductor companies to sustain such high levels
of capacity utilization. Independent providers of packaging and test services,
on the other hand, can use existing equipment at high utilization levels over a
longer period of time for a broad range of customers, effectively extending the
life of the equipment.

Fourth, as the cost to build a new wafer fabrication facility has increased
to over $1 billion, semiconductor companies have been forced to concentrate
their capital resources on core wafer manufacturing activities. As a result,
semiconductor companies are increasingly seeking to use independent packaging
and test providers who have the ability to invest the capital to develop new
packaging and test capacity. The Company believes that as the cost to construct
new wafer fabrication facilities continues to increase, semiconductor
manufacturers will increasingly seek to outsource packaging and test services.

Fifth, there has been a recent growth of "fabless" semiconductor companies
whose core competency and focus is entirely on the semiconductor design process.
According to industry estimates, sales by fabless semiconductor companies have
grown from $3.2 billion in 1993 to $6.8 billion in 1996, representing 3.7% and
4.8%, respectively, of the worldwide market for semiconductors. The significant
growth in the number of fabless semiconductor companies has been driven in large
part by the ability of such companies to effectively outsource virtually every
significant step of the semiconductor manufacturing process. This development
has allowed fabless semiconductor companies to introduce new semiconductors very
quickly without committing significant amounts of capital and other resources.
The Company believes that increases in the number of fabless semiconductor
companies will continue to be a significant driver of growth in the independent
semiconductor manufacturing industry.

These trends, combined with the growth in the number of ICs being produced
and sold, are driving increasing demand for independent packaging and test
services. According to industry estimates, independent packaging revenues are
expected to grow at a compound annual rate of approximately 16% over a period of
five years from $5.6 billion in 1997 to $11.6 billion in 2002. Today, nearly all
of the world's major semiconductor companies use independent packaging and test
service providers for at least a portion, if not all, of their packaging and
test needs.

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<PAGE> 48

Many of the same forces that have driven the growth of independent
packaging and test have also been driving increasing demand for independent
wafer fabrication services. Moreover, because the cost of new wafer fabrication
facilities has been rising steadily, many semiconductor companies are seeking to
leverage their capital resources by outsourcing some or all of their wafer
fabrication needs. This is particularly true for newer, smaller geometry
technologies that are necessary for producing the newest, leading edge ICs,
because they cannot be produced in many semiconductor companies' existing wafer
fabrication facilities. As the demand for ICs with smaller geometries increases,
the Company believes semiconductor companies will increasingly utilize
independent wafer manufacturers.

The Need for Turnkey Solutions

The growing demand for independent wafer fabrication, packaging, and test
services has generally been served by separate wafer fabrication, packaging or
test companies. This creates inefficiencies for semiconductor companies which
must manage the delays, complex logistics and uncertainty inherent in utilizing
a different service provider for each step of the semiconductor manufacturing
process. Only a very few, if any, independent service providers have the
capability of providing a combination of wafer fabrication, packaging and test
services.

THE AMKOR SOLUTION

Amkor is the largest independent provider of semiconductor packaging and
test services in the world. With its leading edge process technology and package
design expertise, the Company is able to provide its customers with a broad
range of new packaging solutions that enable faster, smaller and more powerful
ICs. Due to its size and industry-leading position, the Company is capable of
implementing and utilizing the capital equipment necessary for both new and
mature packages, thereby affording its customers an attractive alternative in
their capital allocation decisions. In addition, with AICL's new wafer
fabrication capabilities, the Company is able to offer a fully integrated,
turnkey semiconductor manufacturing solution.

STRATEGY

Principal elements of the Company's strategy include:

Maintain Product Technology Leadership. The Company believes that it is one
of the world's leading designers and developers of new semiconductor packaging
technology. The Company has designed and developed such leading edge leadframe
and laminate products as its PowerQuad(R), SuperBGA(R), fleXBGA(TM) and
ChipArray(TM) BGA packages. The Company is focusing additional design and
development efforts on new generations of the BGA packaging format and on "flip
chip" die attach technologies where the I/O pads on the chip are attached
directly to the package's substrate rather than with wire-bonded connections.
The Company employs a staff of leading semiconductor packaging technologists and
undertakes significant research and development activities in its Chandler,
Arizona and Philippines locations, as well as through joint development
activities with AICL's development staff in Korea. The Company intends to
continue to maintain its leading packaging technology position.

Maintain Advanced Manufacturing Capabilities. The Company believes that its
tradition of manufacturing excellence has been a key factor in its success in
attracting and retaining customers, and it is committed to maintaining that high
level of excellence. Key to this effort is the Company's commitment to
continuous advancement of its process technology. The Company's development
teams work with its customers, suppliers, and others to develop new processing
technologies as well as pursue continuous improvements in the Company's existing
processing capabilities. These efforts have directly resulted in reduced time to
market, increased quality, and lower manufacturing costs.

Leverage Scale and Scope of the Company's Packaging and Test
Capabilities. The Company believes that its scale of operations and its breadth
of product offerings provide it with several competitive advantages. First, the
Company believes that its size and position in the industry allow it certain
advantages in procuring key materials and manufacturing equipment. Second, the
Company is able to capitalize on the substantial economies of scale that result
from high utilization rates of its capital equipment, thereby lowering the

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<PAGE> 49

Company's per unit manufacturing costs and facilitating cost-effective solutions
for its customers. The Company's scale also allows it to offer an
industry-leading breadth of product offerings and to be a single source for many
of its customers' packaging requirements. The Company offers over 450 different
package formats and sizes with a variety of processing and materials options.
The Company added 175 and 139 new packaging options, respectively, in 1996 and
1997. The Company is committed to continued expansion of both its size of
operations and its scope of product and service offerings.

Establish Industry Packaging Standards. The Company believes that by
bringing new package designs to market early, its designs are more likely to
become industry standards, which in turn will allow the Company to obtain higher
margins than its competitors for such new designs. The Company also seeks to
capture substantial market share and to spur the industry-wide adoption of its
new packages by investing aggressively in expanding its manufacturing capacity
for these packages. As a result, it is one of the leading providers of advanced
packaging solutions such as thin package formats and BGA packages. The Company
believes these package types will comprise some of the highest growth and more
profitable segments of the packaging market in coming years.

Enhance Customer and Supplier Relationships. As the world's largest
independent provider of semiconductor packaging and test services, the Company
has developed long-standing strategic relationships with leading semiconductor
and electronics companies, its suppliers, and other developers of new
semiconductor technologies. The Company believes that these relationships have
allowed it to stay ahead of the constantly advancing demand curve for
independent packaging services. The Company has repeatedly developed
leading-edge packaging technologies that have met the requirements of newer IC
devices and that have been quickly accepted in the marketplace. The Company's
alliances with certain of its key equipment and material suppliers have enabled
the Company to achieve packaging and manufacturing process innovation and cost
reduction. Developing and maintaining these relationships within the industry
will continue to be an integral part of the Company's overall strategic
direction.

Focus on Customer Service and Support. The Company believes that its focus
on customer service and support has been crucial in attracting and retaining
leading semiconductor companies as its customers. The Company has a firmly
established customer-oriented culture. To provide a dedicated customer support
infrastructure and to stay abreast of customers' expectations, the Company has
strategically established technical and sales teams near major customer
facilities and in acknowledged technology centers. In addition, the Company has
implemented direct electronic links with its customers to enhance communication
and facilitate real-time engineering data and order information flow.

Provide an Integrated, Turnkey Solution. The Company seeks to provide a
complete turnkey solution comprising wafer fabrication, packaging and test
services. The Company recently began providing wafer fabrication services
through AICL's new deep submicron CMOS foundry. With the addition of wafer
fabrication, the Company is able to provide all stages of IC production for its
customers from the fabrication of wafers through the shipment of finished ICs.
The Company believes this integration will enable customers to improve the cost
and performance of their ICs and achieve faster time to market for both new
product introductions and production lead times.

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PRODUCTS

Packaging

The Company offers a broad range of package formats designed to provide
customers with a full array of packaging solutions for both commodity and
advanced products. The Company's products are divided into three product
families: traditional leadframe, advanced leadframe, and laminate products as
shown in the following tables.

- --------------------------------------------------------------------------------------------------

TRADITIONAL LEADFRAME PRODUCTS
- --------------------------------------------------------------------------------------------------
- ------------------------------------------
PACKAGE TYPE NUMBER OF LEADS APPLICATIONS
- ------------------------------------------ --------------- --------------------------------------
<S> <C> <C>
PDIP (Plastic Dual In-line Packages) 8-48 General purpose plastic IC package for
SPDIP (Shrink DIP) 28-64 consumer electronic products such as
games, telephones, TV, audio equipment
and computer peripherals.
- --------------------------------------------------------------------------------------------------
Hermetic Custom A line of mature, ceramic predominant
packages used especially for
high-reliability applications
(military, space and commercial
aviation).
- --------------------------------------------------------------------------------------------------
PLCC (Plastic Leaded Chip Carrier) 20-84 Used for logic, gate arrays, DAC,
processors and chip sets used in
larger form-factor items (copiers,
printers, scanners, desktop PCs,
electronic games and monitors).
- --------------------------------------------------------------------------------------------------
SOIC (Small Outline Integrated Circuit) 8-44 Designed for needs of lower lead
devices. End uses include consumer
audio/video and entertainment
products, pagers, cordless telephones,
fax machines, copiers, printers, PC
peripherals and automotive parts.
- --------------------------------------------------------------------------------------------------
MQFP (Metric Quad Flat Package) 44-304 Adapted to meet the increasing
challenges of advanced
processors/controllers, DSPs, ASICs,
video-DAC, PC chip sets, gate arrays,
logic devices, multimedia and other
technologies for consumer, commercial,
office, automotive, PC and industrial
products.
- --------------------------------------------------------------------------------------------------
PowerQuad(R) 100-304 Higher performance thermally enhanced
QFP package. Used for DSPs,
programmable logic devices,
microprocessors and micro-controllers,
high-speed and field programmable gate
array logic devices, ASIC and other
technologies requiring more thermal
performance than offered by standard
QFP packages.
- --------------------------------------------------------------------------------------------------
PowerSOP(TM) 8-36 Higher performance thermally enhanced
SOIC package. Used for wireless RF
telecom devices, automotive,
industrial, disk drive, pagers, and
other technologies requiring more
thermal performance than offered by
standard SOIC packages.
</TABLE>

================================================================================

49
<PAGE> 51

<TABLE>
<CAPTION>
- ------------------------------------------
ADVANCED LEADFRAME PRODUCTS
- --------------------------------------------------------------------------------------------------
- ------------------------------------------
PACKAGE TYPE NUMBER OF LEADS APPLICATIONS
- ------------------------------------------ --------------- --------------------------------------
<S> <C> <C>
TQFP (Thin Quad Flat Package) 32-256 Designed for lightweight, portable
electronics requiring broad
performance characteristics, including
notebook computers, desktop PCs,
audio/video and telecommunications
products, cordless/RF devices, office
equipment, disk drives and
communication boards (e.g., Ethernet
and ISDN).
- --------------------------------------------------------------------------------------------------
TSOP (Thin Small Outline Package) 32-48 Primary application is for SRAM, DRAM,
FLASH and FSRAM memory devices. End
uses include PC cards, PCMCIA
form-factor products, cameras
(still/video) and notebook computers.
- --------------------------------------------------------------------------------------------------
TSSOP (Thin Shrink Small Outline Package) 8-80 Designed for gate drivers,
controllers, logic, analog, memory
(SRAM, DRAM, EPROM, E2PROM),
comparators and optoelectronics.
- --------------------------------------------------------------------------------------------------
SSOP (Shrink Small Outline Package) 8-64 Designed to enable end-products such
as pagers, portable audio/video
products, disk drives, and wireless
applications to be reduced in size and
weight.
- --------------------------------------------------------------------------------------------------
</TABLE>

50
<PAGE> 52

<TABLE>
<CAPTION>
- ------------------------------------------
LAMINATE PRODUCTS
- --------------------------------------------------------------------------------------------------
- ------------------------------------------
PACKAGE TYPE NUMBER OF BALLS APPLICATIONS
- ------------------------------------------ --------------- --------------------------------------
<S> <C> <C>
PBGA (Plastic Ball Grid Array) 119-544 Semiconductors for end users which
require the enhanced performance
provided by the integrated design of
PBGA, including microprocessors/
controllers, ASICs, gate arrays,
memory, DSPs and PC chip sets.
Designed for applications where
improved portability, form-factor and
high-performance are necessary,
including wireless products, cellular,
GPS, notebook computers, video cameras
and disk drives.
- --------------------------------------------------------------------------------------------------
SuperBGA(R) 64-600 Designed for high-speed, high-power
semiconductors such as ASICs,
microprocessors, gate arrays, and
DSPs. Applications include wireless
products, notebook computers, PDAs,
video GUI and CPU/BUS boards.
- --------------------------------------------------------------------------------------------------
fleXBGA(TM) 133-412 Higher performance, lower profile
package than PBGA due to size
reduction made possible by denser
substrate. Ideal for high performance
disk drives, cellular phones, pagers,
wireless communications, DSPs and
micro-controller applications.
- --------------------------------------------------------------------------------------------------
MicroBGA(TM) 8-200 Especially suited for memory devices
such as FLASH, SRAM, DRAM and FSRAM
technologies, microprocessors/
controllers and high value ASICs
requiring a low height, weight and
size packaging. End uses include
cellular and other telecommunications
products, disk drives,
notebooks/sub-notebooks, PDAs,
wireless and consumer systems and
memory boards.
- --------------------------------------------------------------------------------------------------
ChipArray(TM) 36-128 Designed for semiconductors such as
memory, analog, ASICs and PLDs
requiring a smaller package than
conventional PBGAs. Applications
include cellular and other
telecommunications, notebooks/sub-
notebooks, PDAs, wireless systems and
GPS.
- --------------------------------------------------------------------------------------------------
FlipChip N/A An enabling interconnect technology
which can be utilized in advanced IC
packages such as PBGA, chip scale and
flex circuit solutions to support
improved electrical requirements and
very high semiconductor density in
very small systems.
</TABLE>

================================================================================

51
<PAGE> 53

Traditional Leadframe Products. Traditional leadframe products are the most
widely recognized package types and are characterized by a chip encapsulated in
a plastic mold compound with metal leads surrounding the perimeter. This package
type has evolved from packages designed to be plugged into the circuit board by
inserting the leads into holes on the circuit board to the more modern
surface-mount design, in which the leads are soldered to the surface of the
circuit board. Specific package customization and evolutionary improvements are
continually being engineered to enable improved electrical performance and
multi-chip capability, as well as smaller printed circuit board footprints. The
Company offers a wide range of lead counts and body sizes within this product
group to satisfy customer die size variations. In addition, the Company offers
power versions of the SOP, PLCC, and MQFP package types which are specially
designed to handle today's high power ICs that need with enhanced heat
dissipation characteristics.

Advanced Leadframe Products. The Company's customers are seeking
increasingly thinner packages, which has led the Company to develop newer, more
advanced leadframe products. The Company's advanced leadframe products are
similar in design to its traditional leadframe products. However, the advanced
leadframe products generally are thinner and smaller, have more leads, and have
advanced thermal and electrical characteristics which are necessary for many of
today's more advanced semiconductor applications. The TSOP, TSSOP and SSOP
packages are significantly smaller than the Company's traditional SOIC products,
while the TQFP package is a smaller version of the MQFP package. The Company
also offers power versions of these package types. The Company plans to continue
to develop increasingly smaller versions of these products to keep pace with
continually shrinking die sizes and increasing demands for miniaturization.

Laminate Products. The laminate product family represents the newest and
fastest growth area for the Company and consists of products employing the BGA
format which utilize a laminate (plastic or tape) substrate rather than a
leadframe substrate. BGA technology was first introduced in the industry as a
solution to problems associated with the increasingly high lead counts required
for advanced semiconductors. As the number of leads surrounding the IC
increased, packagers attempted to maintain the size of the package by increasing
the proximity of the leads to one another. As a result, however, these high lead
count packages experienced significant electrical shorting problems and required
the development of increasingly sophisticated and expensive techniques for
producing circuit boards to accommodate the density of the leads. The BGA
methodology solved this problem by effectively creating leads on the bottom of
the package in the form of small bumps or balls. These balls can be evenly
distributed across the entire bottom surface of the package, allowing greater
distance between the individual leads. The Company's first product in this
family was the plastic BGA. The Company has subsequently designed additional BGA
type packages which include features that enable low cost, high volume
manufacturing methods as well as higher performance packages. These new laminate
products include: SuperBGA(R), which includes a copper heat-sink for heat
dissipation and is designed for very low profile, high power applications;
ChipArray(TM), which allows the package to be as small as 1.5 mm larger than the
chip itself; and MicroBGA(TM), which is designed to be approximately the same
size as the chip and uses a tape substrate rather than a plastic laminate. The
Company is currently designing newer versions of BGA packages to enable further
significant reductions in package size.

Test and Related Services

The Company also provides its customers with semiconductor test services.
The Company has the capability to test digital logic, analog and mixed signal
products. The combination of the Company's test operations together with AICL's
Korean test operations comprises one of the largest independent test operations
in the world. Providing test services requires a high level of communication and
integration between the Company and its customers. In order to enable
semiconductor companies to improve their time to market and to reduce costs,
there has been an increasing trend to put packaging and test operations in the
same location. The Company has capitalized on this trend by supplying its own
testers or by supplementing customer-supplied testers with handlers and other
related equipment.

Although test services accounted for only 3.5% of the Company's total 1997
revenue and 13% of the total units shipped, the Company expects test services to
grow significantly during the next several years as customers seek to reduce the
time to market for their products by using contractors with test services at the

52
<PAGE> 54

packaging site. In addition to final test services, the Company provides a full
range of other related services, such as burn-in test services, "dry pack"
services, "tape and reel" packing, and wafer "probing" or "sorting."

The following table sets forth, for the periods indicated, the amount of
the Company's net revenues and the percentage of total net revenues by product
type:

<TABLE>
<CAPTION>
1994 1995 1996 1997
---------------- ---------------- ---------------- -----------------
REVENUES % REVENUES % REVENUES % REVENUES %
-------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Traditional Leadframe.............. $ 487 85.1% $ 699 75.0% $ 792 67.6% $ 801 55.0%
Advanced Leadframe................. 53 9.2 157 16.8 220 18.8 312 21.5
Laminate........................... 3 0.5 15 1.6 90 7.7 248 17.0
Testing and Other.................. 30 5.2 61 6.6 69 5.9 95 6.5
------- ----- ------- ----- ------- ----- ------- -----
Total.......................... $ 573 100.0% $ 932 100.0% $ 1,171 100.0% $ 1,456 100.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Wafer Fabrication

The Company recently began offering wafer fabrication services through
AICL's new deep submicron CMOS foundry. This foundry is currently capable of
producing up to 15,000 8" wafers per month. Through a strategic relationship
with TI, the Company and AICL have qualified .25 micron CMOS process technology,
and TI has agreed to provide to AICL .18 micron CMOS process technology during
1998. The Company's right to the supply of wafers from the foundry is subject to
the TI Manufacturing and Purchasing Agreement, pursuant to which TI has agreed
to purchase at least 40% of the capacity of the foundry and under certain
circumstances has the right to purchase 70% of the capacity of the foundry.
Although the Company has received forecasts from TI which indicate that TI will
meet its minimum purchase obligation during the second half of 1998, during the
first quarter of 1998 TI's orders were below such minimum purchase commitment
due to market conditions and issues encountered by TI in the transition of its
products to .18 micron technology. There can be no assurance that TI will place
orders representing at least 40% of the capacity of this foundry during this
period or in the future. A failure by TI to comply with its minimum purchase
obligations or the cancellation of a significant wafer fabrication order by TI
or any other customer could have a material adverse effect on AICL's and the
Company's business, financial condition and results of operations. See "Risk
Factors -- Risks Associated with New Wafer Fabrication Business" and
" -- Intellectual Property."

The new foundry's capability is targeted to meet the needs of customers for
DSPs, ASICs and other logic devices. As technological capability and the needs
for CMOS designs in this area change, the Company anticipates the need to add
embedded memory and special analog functionality to its core CMOS technology.
The Company plans to continue to focus its semiconductor technology development
efforts to serve the needs of the high performance digital logic market.

With the addition of the wafer fabrication capability, the Company is able
to offer fully integrated turnkey semiconductor manufacturing services to its
customers. This complete turnkey solution will enable the Company to work with
its customers' IC designers to optimize the integration of IC design with wafer
fabrication, package design, and packaging and test processes. The Company
believes this integration will enable customers to improve the cost and
performance of their ICs and achieve faster time to market in terms of both new
product introductions and production lead times.

53
<PAGE> 55

CUSTOMERS

The Company currently has more than 150 customers, including many of the
largest semiconductor companies in the world. Set forth below is a list of the
Company's top 50 customers in 1997:

<TABLE>
<S> <C> <C>
Actel Corporation Integrated Circuit Systems, Inc. Plessey Semiconductors
Altera Corporation Integrated Device Technology, Inc. Philips Electronics N.V.
Adaptec, Inc. Intel Corporation Robert Bosch GmbH
Advanced Micro Devices, Inc. Lattice Semiconductor Rockwell Corp.
Alcatel Mietec Corporation S3 Incorporated
American Micro Systems, Inc. Level One Communications, Inc. SGS-THOMSON
Analog Devices, Inc. LSI Logic Corporation Microelectronics N.V.
Atmel Corporation Lucent Technologies Inc. Siemens AG
Cirrus Logic Macronix International Co., Ltd. SMC Corporation
Cypress Semiconductor Corp. Matra Harris Semiconductors Silicon Storage
Dallas Semiconductor Maxim Integrated Circuits Technology, Inc.
Delco Electronics Corporation Microchip Technology Inc. Symbios Logic
Digital Equipment Corp. Microlinear TEMIC Semiconductors
Harris Corporation Motorola, Inc. Texas Instruments
Hewlett-Packard Company National Semiconductor Incorporated
International Business Machines Corporation VLSI Technology, Inc.
Corporation NeoMagic Corporation VTC Inc.
IC Works Inc. Northern Telecom Waferscale Integration, Inc.
Xilinx, Inc.
</TABLE>

The Company's five largest customers collectively accounted for approximately
34.1%, 39.2%, and 40.1% of the Company's total revenues in 1995, 1996 and 1997,
respectively. The Company anticipates that this customer concentration will
continue at least for the foreseeable future. See "Risk Factors -- Customer
Concentration; Absence of Backlog."

MARKETING AND SALES

The Company sells to and supports its customers through an international
network of offices located in close proximity to its largest customers and
concentration of customers, including offices in the United States (Austin,
Texas; Boise, Idaho; Chandler, Arizona; Dallas, Texas; Santa Clara, California
and West Chester, Pennsylvania), France, Singapore, Taiwan, and the Philippines.
A substantial majority of the Company's sales have historically been derived
from U.S.-based customers. See Note 15 of Notes to Combined Financial
Statements. The Company assigns each of its customers a sales and customer
support team consisting of an account manager, a technical program manager, and
one or more customer support representatives. The largest multinational
customers are typically supported from multiple offices. The Company's worldwide
force of account managers, customer service representatives and technical
product managers exceeds 200 personnel. In addition, an extended staff of
product management, process and reliability engineering, marketing and
advertising, information systems, and factory personnel supports the direct
account teams. Together, these direct and extended teams deliver an array of
services to the Company's customers including providing information and expert
advice on packaging solutions and trends, managing the start-up of specific
packaging and test programs, providing a continuous flow of information to the
customers regarding products and programs in process, and researching and
helping to resolve technical and logistical issues.

FACILITIES AND MANUFACTURING

Facilities

The Company provides packaging and test services through its factories in
the Philippines as well as its test facility in the U.S. A new packaging factory
is currently being equipped at the Company's Chandler, Arizona site with
expected start-up in 1999. In addition, the Company provides packaging and test
services

54
<PAGE> 56

through AICL's four factories in Korea, which provide such services to the
Company pursuant to a Supply Agreement. In 1996 and 1997, AICL provided
packaging and test services which accounted for approximately 72% and 68%,
respectively, of the Company's revenues. In addition to providing world-class
manufacturing services, these factories provide purchasing, engineering, and
customer service support. The Company recently began offering wafer fabrication
services through AICL's new state-of-the-art .25 micron wafer foundry in Korea
pursuant to a Supply Agreement. The size, location, and manufacturing services
provided by each of the Company's and AICL's primary facilities is set forth in
the table below. See "Risk Factors -- Dependence on Relationship With AICL;
Potential Conflicts of Interest," "-- Expansion of Manufacturing Capacity;
Profitability Affected by Capacity Utilization Rates," "-- Risks Associated with
New Wafer Fabrication Business" and "-- Inability to Obtain Packaging and Test
Equipment in a Timely Fashion."

<TABLE>
<CAPTION>
APPROXIMATE
PLANT SIZE
FACILITY LOCATION (SQUARE FEET) MANUFACTURING SERVICES
-------- -------- ------------- ----------------------
<S> <C> <C> <C>
Company Facilities
P1 Muntilupa, Philippines 579,000 Packaging and test services; packaging
and process development
P2 Muntilupa, Philippines 115,000 Packaging services
P3 Province of Laguna, Philippines 249,000 Packaging and test services
AATS Santa Clara, California 3,000 Final testing services; test program
development; central shipping and
logistics
A1 (1999) Chandler, Arizona 106,000 Packaging services for laminate
products; package and process
development

AICL Facilities
K1 Seoul, Korea 646,000 Packaging services, package and
process development
K2 Buchon, Korea 264,000 Packaging services
K3 Bupyung, Korea 404,000 Packaging and test services
K4 Kwangju, Korea 597,000 Packaging services

Wafer Foundry Buchon, Korea 480,000 Wafer fabrication services
</TABLE>

The Company's operational headquarters is located in Chandler, Arizona
while its administrative headquarters is located in West Chester, Pennsylvania.
In addition to an executive staff, the Chandler, Arizona campus houses sales and
customer service for the southwest region, product management, a technical
design center, planning, marketing and research and development. The West
Chester location houses finance and accounting, legal, personnel administration,
information systems, and serves as a satellite sales office for the Company's
eastern sales region.

Raw Materials and Equipment

The Company's packaging operations depend upon obtaining adequate supplies
of raw materials on a timely basis. The principal raw materials used in the
Company's packaging process are leadframes or laminate substrates, along with
gold wire and molding compound. The Company purchases raw materials based on the
stated demand requirements of its customers and its customers are generally
responsible for any unused materials that result from an overstatement of
demand. The Company works closely with its primary raw material suppliers to
insure the availability and timeliness of raw material supplies. In addition,
the Company negotiates worldwide pricing agreements with its major suppliers to
take advantage of the scale of its operations. The Company is not dependent on
any one supplier for a substantial portion of its raw material requirements.

The Company's packaging operations and expansion plans also depend on
obtaining adequate supplies of manufacturing equipment on a timely basis. To
that end, the Company works closely with its major equipment suppliers to insure
that equipment deliveries are on time and the equipment meets the Company's
stringent performance specifications. In addition, an affiliate of AICL
manufactures semiconductor packaging equipment exclusively for the Company and
AICL at locations in close proximity to the Company's and AICL's

55
<PAGE> 57

packaging facilities in the Philippines and Korea, respectively. See "Risk
Factors -- Dependence on Raw Materials Suppliers and Subcontractors."

Total Quality Management

The Company believes that total quality management is a vital component of
its manufacturing strategy. To that end, the Company has established a
comprehensive Quality Operating System designed to promote continuous
improvement and maximize manufacturing yields at high volume production while
maintaining the highest quality standards. Each of the Company's and AICL's
factories is ISO9002 and QS-9000 certified. ISO9002 is a worldwide manufacturing
quality certification program administered by an independent standards
organization. QS9000 is similarly an independently administered manufacturing
quality certification used by United States automotive manufacturers. The
Company believes that many of its customers prefer to purchase from suppliers
who are ISO9002 and QS9000 certified.

COMPETITION

The independent semiconductor packaging and test industry is very
competitive, being comprised of approximately 50 companies, with about 15 of
those companies having sales of $100 million per year or more. The Company faces
substantial competition from established packaging companies primarily located
in Asia, such as Advanced Semiconductor Engineering, Inc. (Taiwan), ASE Test
Limited (Taiwan and Malaysia), ASAT Ltd. (Hong Kong), Hana Microelectronics
Public Co. Ltd. (Hong Kong and Thailand), Astra International (Indonesia),
Carsem Bhd. (Malaysia), ChipPAC Incorporated (Korea), Siliconware Precision
Industries Co., Ltd. (Taiwan), and Shinko Electric Industries Co., Ltd. (Japan).
Each of these companies has significant manufacturing capacity, financial
resources, research and development operations, marketing and other
capabilities, and have been operating for some time. Such companies have also
established relationships with many large semiconductor companies which are
current or potential customers of the Company. The principal elements of
competition in the independent semiconductor packaging market include time to
market, breadth of package offering, technical competence, design services,
quality, production yields, customer service, and price. The Company believes it
generally competes favorably with respect to these factors. On a larger scale,
the Company also competes with the internal manufacturing capabilities of many
of its largest customers.

The independent wafer fabrication business is also highly competitive. The
Company expects its wafer fabrication services to compete primarily with
independent wafer foundries such as Chartered Semiconductor Manufacturing, Ltd.,
Taiwan Semiconductor Manufacturing Company, Ltd. and United Microelectronics
Corporation, as well as with device manufacturers such as LG Semicon Co., Ltd.,
Hitachi, Ltd., Toshiba Corp. and Winbond Electronics Corporation, which provide
foundry services for other semiconductor companies. Each of these companies has
significant manufacturing capacity, financial resources, research and
development operations, marketing and other capabilities and have been operating
for some time. Many of these companies have also established relationships with
many large semiconductor companies which are current or potential customers of
the Company. The principal elements of competition in the wafer foundry market
include technology, delivery cycle times, price, product performance, quality,
production yield, responsiveness and flexibility, reliability and the ability to
design and incorporate product improvements. See "Risk Factors -- Competition."

RESEARCH AND DEVELOPMENT

The Company's research and development efforts are focused on developing
new package designs and process capabilities, and on improving the efficiency
and capabilities of its existing production processes and materials. The Company
believes that technology development is one of the key success factors in the
packaging market and believes that it has a distinct advantage in this area. In
addition to its internal development work, and its co-development work with
AICL, the Company also works closely with its packaging equipment and raw
material suppliers in developing advanced processing capabilities and materials
for use in the Company's production process. Currently, the Company is focusing
on development programs that extend the capability and applicability of the BGA
packaging format. These include high performance

56
<PAGE> 58

BGAs for microprocessors and other high-end devices, and a chip size package for
memory. In addition, the Company is aggressively developing a flip-chip die
attach and connect process for its laminate packages that has the potential to
reduce packaging size and cost and improve package performance significantly.
The flip-chip packaging process involves attaching the die I/O terminals
directly to the lead circuits on the substrate without the use of gold wires. In
addition to providing a smaller package size, this process is expected to result
in significant improvements in packaging yields by eliminating the delicate wire
bonds from the package.

As of December 31, 1997, the Company employed approximately 95 persons in
research and development activities. In addition, other management and
operational personnel are involved in research and development activities. In
1995, 1996 and 1997, the Company's research and development expenses were
approximately $8.7 million, $10.9 million and $8.5 million, respectively. The
Company expects to continue to invest significant resources in research and
development.

INTELLECTUAL PROPERTY

The Company currently holds 24 U.S. patents, five of which are jointly held
with AICL, related to various IC packaging technologies, in addition to other
pending patents. These patents will expire at various dates from 2012 through
2016. With respect to development work undertaken jointly with AICL, the Company
and AICL share intellectual property rights under the terms of the Supply
Agreements between the Company and AICL. The Supply Agreements also provide for
the cross-licensing of intellectual property rights between the Company and
AICL. In addition, the Company enters into agreements with other developers of
packaging technology to license or otherwise obtain certain process or packaging
technologies.

Although the Company is not currently a party to any material litigation,
the semiconductor industry is characterized by frequent claims regarding patent
and other intellectual property rights. As is typical in the semiconductor
industry, the Company may receive communications from third parties asserting
patents on certain of the Company's technologies. In the event any third party
were to make a valid claim against the Company or AICL, the Company or AICL
could be required to discontinue the use of certain processes or cease the
manufacture, use, import and sale of infringing products to pay substantial
damages and to develop non-infringing technologies or to acquire licenses to the
alleged infringed technology. The Company's business, financial condition and
results of operations could be materially and adversely affected by such
developments. Litigation, which could result in substantial cost to and
diversion of resources of the Company, may also be necessary to enforce patents
or other intellectual property rights of the Company or to defend the Company
against claimed infringement of the rights of others. The failure to obtain
necessary licenses or the occurrence of litigation relating to patent
infringement or other intellectual property matters could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, AICL has obtained intellectual property for wafer
manufacturing primarily from TI. The licenses granted to AICL by TI under the TI
Technology Agreements are very limited. Although TI has granted to AICL a
license under TI's trade secret rights to use TI's technology in connection with
AICL's provision of wafer fabrication services, TI has not granted AICL a
license under its patents, copyrights and mask works to manufacture
semiconductors for third parties. Although TI has agreed that TI will not assert
a claim for patent, copyright or mask work right infringement against AICL or
the Company in connection with AICL's manufacture of semiconductor products for
third parties, TI has reserved the right to bring such infringement claims
against AICL's or the Company's customers with respect to semiconductor products
purchased from AICL or the Company. As a result, AICL's and the Company's
customers could be subject to patent litigation by TI and others, and AICL and
the Company could in turn be subject to litigation by such customers and

57
<PAGE> 59

others, in connection with the sale of wafers produced by AICL. Any such
litigation could materially and adversely affect AICL's ability to continue to
manufacture wafers and AICL's and the Company's business, financial condition
and results of operations.

ENVIRONMENTAL MATTERS

Federal, state and local regulations in the United States, as well as
environmental regulations in Korea and the Philippines, impose various controls
on the storage, handling, discharge and disposal of chemicals used in the
Company's and AICL's manufacturing processes and on the facilities occupied by
the Company and AICL. The Company believes that its activities, as well as those
of AICL, conform to present environmental and land use regulations applicable to
their respective operations and current facilities. Increasing public attention
has, however, been focused on the environmental impact of semiconductor
manufacturing operations and the risk to neighbors of chemical releases from
such operations. There can be no assurance that applicable land use and
environmental regulations will not in the future impose the need for additional
capital equipment or other process requirements upon the Company or AICL or
restrict the Company's or AICL's ability to expand their respective operations.
The adoption of new ordinances or similar measures or any failure by the Company
or AICL to comply with applicable environment and land use regulations or to
restrict the discharge of hazardous substances could subject the Company or AICL
to future liability or cause their respective manufacturing operations to be
curtailed or suspended.

EMPLOYEES

As of December 31, 1997, the Company had approximately 9,100 full-time
employees, 7,450 of whom were engaged in manufacturing, 1,150 in manufacturing
support, 95 in research and development, 210 in marketing and sales, and 195 in
finance, business management, and administration. The Company's employees are
not represented by any collective bargaining agreement, and the Company has
never experienced a work stoppage. The Company believes that its relations with
its employees are good. See "Risk Factors -- Dependence on Key Personnel and
Availability of Skilled Workforce."

58
<PAGE> 60

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company and their ages as of
December 31, 1997 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James J. Kim.............................. 61 Chief Executive Officer and Chairman
John N. Boruch............................ 55 President and Director
Frank J. Marcucci......................... 62 Chief Financial Officer
Eric R. Larson............................ 42 Vice President
Michael D. O'Brien........................ 65 Vice President
Thomas D. George(1)(2).................... 57 Director
Gregory K. Hinckley(1)(2)................. 51 Director
</TABLE>

- ---------------

(1) Member of Compensation Committee.

(2) Member of Audit Committee.

James J. Kim. James Kim has served as the Company's Chief Executive Officer
since September 1997. Mr. Kim founded AEI in 1968 and has served as its Chairman
since 1970. He has also served as the Chairman of the Anam group of companies
and a director of AICL since 1992. Mr. Kim is a director of CFM Technologies,
Inc. Mr. Kim earned B.S. and M.A. degrees in Economics from the University of
Pennsylvania. Mr. Kim is Chairman of The Electronics Boutique, Inc., an
electronics retail chain, and Forte Systems, Inc., an information technology,
consulting and outsourcing company.

John N. Boruch. John Boruch has served as President and a director of the
Company since September 1997. Mr. Boruch has served as President of AEI since
February 1992. From 1991 to 1992 he served as AEI Corporate Vice President in
charge of Sales. Mr. Boruch earned a B.A. in Economics from Cornell University.
Mr. Boruch joined the Company in 1984.

Frank J. Marcucci. Frank Marcucci has served as the Chief Financial Officer
of the Company since September 1997. Mr. Marcucci has served as the Chief
Financial Officer of AEI since joining AEI in 1980. Mr. Marcucci earned a B.S.
in Business Administration from Duquesne University and an MBA from the
University of Pittsburgh. Mr. Marcucci is a Certified Public Accountant.

Eric R. Larson. Eric Larson has served as Vice President of the Wafer
Fabrication business of the Company since September 1997. Mr. Larson has served
as President of Amkor/Anam Semiconductor, a division of AEI, since December
1996. From 1979 to 1996 he worked for the Hewlett-Packard Company ("HP") in
various management capacities, most recently as Worldwide Marketing Manager for
disk products. In addition, Mr. Larson was the worldwide Manager of Sales and
Marketing of the IC Business Division of HP from July 1985 to May 1993. Mr.
Larson earned a B.A. in Political Science from Colorado State University and an
MBA from the University of Denver.

Michael D. O'Brien. Michael O'Brien has served as the Vice President of
Packaging and Testing Operations of the Company since September 1997. Mr.
O'Brien has served as Corporate Vice President of AEI since 1990. Mr. O'Brien
earned a B.S. from Texas A&M University. Mr. O'Brien joined the Company in 1988.

Thomas D. George. Mr. George has been a director of the Company since
November 1997. Mr. George was Executive Vice President, and President and
General Manager, Semiconductor Products Sector ("SPS") of Motorola from April
1993 to May 1997. Prior to that, he held several positions with Motorola,
including Executive Vice President and Assistant General Manager, SPS from
November 1992 to April 1993 and Senior Vice President and Assistant General
Manager, SPS from July 1986 to November 1992. Mr. George is currently retired.

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<PAGE> 61

Gregory K. Hinckley. Mr. Hinckley has been a director of the Company since
November 1997. Mr. Hinckley serves as Executive Vice President, Chief Operating
Officer and Chief Financial Officer of Mentor Graphics Corporation since January
1997. From November 1995 until December 1996 he held the position of Senior Vice
President with VLSI, a manufacturer of complex ASICs. From August 1992 until
December 1996, Mr. Hinckley held the position of Vice President, Finance and
Chief Financial Officer with VLSI. From December 1991 until August 1992, he was
an independent consultant. Mr. Hinckley is a director of OEC Medical Systems,
Inc., a manufacturer of medical imaging equipment.

DIRECTOR COMPENSATION

Directors who are also employees or officers of the Company do not receive
compensation for their services as directors. Non-employee directors are
eligible to receive an annual retainer of $15,000 plus per meeting fees of
$1,000 per board meeting and $1,000 per committee meeting attended. Directors
are reimbursed for travel and related expenses incurred by them in attending
board and committee meetings.

1998 Director Option Plan. The Company's 1998 Director Option Plan (the
"Director Plan") was adopted by the Board of Directors in January 1998 and is
expected to be approved by the Company's stockholders immediately following the
Reorganization. The Director Plan will become effective immediately prior to the
Initial Public Offering. A total of 300,000 shares of Common Stock have been
reserved for issuance under the Director Plan. The option grants under the
Director Plan are automatic and non-discretionary. The Director Plan provides
for an initial grant of options to purchase 15,000 shares of Common Stock to
each new nonemployee director of the Company (an "Outside Director") upon the
later of the effective date of the Director Plan or the date which such
individual first becomes an Outside Director. In addition, each Outside Director
will automatically be granted subsequent options to purchase 5,000 shares of
Common Stock on each date on which such Outside Director is re-elected by the
stockholders of the Company, provided that as of such date such Outside Director
has served on the Board of Directors for at least six months. The exercise price
of the options is 100% of the fair market value of the Common Stock on the grant
date, except that with respect to initial grants to directors on the effective
date of the Director Plan the exercise price will be equal 94% of the Initial
Public Offering price per share of Common Stock in the Initial Public Offering.
The term of each option is ten years. Each option granted to an Outside Director
vests as to 33 1/3% of the optioned stock one year after the date of grant, and
as to an additional 33 1/3% of the optioned stock on each anniversary of the
date of grant, provided that the optionee continues to serve as an Outside
Director on such date so that 100% of the optioned stock may be exercisable
three years after the date of grant. In the event of the sale of all or
substantially all the Company's assets or the merger of the company with or into
another corporation, all outstanding options under the Director Plan may either
be assumed or an equivalent option may be substituted by the surviving entity.
Following such assumption or substitution, if the director is terminated other
than upon a voluntary resignation, such assumed or substituted options will vest
and become exercisable in full. If no assumption or substitution occurs, each
such option will vest and become exercisable in full. The Director Plan will
terminate in January 2008 unless sooner terminated by the Board of Directors.

BOARD COMMITTEES

The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee is comprised of Messrs. George and Hinckley. The
functions of the Compensation Committee are to review and approve annual
salaries, bonuses, and grants of stock options pursuant to the Company's 1998
Stock Plan and to review and approve the terms and conditions of all employee
benefit plans or changes thereto. The Audit Committee is comprised of Messrs.
George and Hinckley. The functions of the Audit Committee are to recommend
annually to the Board of Directors the appointment of the independent auditors
of the Company, discuss and review in advance the scope and the fees of the
annual audit and review the results thereof with the independent auditors,
review and approve non-audit services of the independent auditors, review
compliance with existing major accounting and financial reporting policies of
the Company, review the adequacy of the financial organization of the Company,
and review management's procedures and

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<PAGE> 62

policies relating to the adequacy of the Company's internal accounting controls
and compliance with applicable laws relating to accounting practices.

EXECUTIVE COMPENSATION

Summary Compensation. The following table sets forth compensation earned
during the fiscal year ended December 31, 1997, by the Company's Chief Executive
Officer and the four other most highly compensated executive officers whose
total salary and bonus during such year exceeded $100,000 (collectively, the
"Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION
---------------------------- --------- --------- ------------
<S> <C> <C> <C>
James J. Kim, Chief Executive Officer and
Chairman(2).......................................... $500,000 $ -- $ 6,000
John N. Boruch, President(3)........................... 415,000 375,000 6,000
Frank J. Marcucci, Chief Financial Officer(4).......... 254,000 100,000 245,000
Eric R. Larson, Vice President......................... 220,000 -- --
Michael D. O'Brien, Vice President..................... 249,000 100,000 --
</TABLE>

- ---------------

(1) At the time of the Initial Public Offering, Messrs. Boruch, Marcucci,
Larson and O'Brien will receive option grants of 300,000 shares, 100,000
shares, 85,000 shares and 85,000 shares, respectively, of Common Stock
under the Company's 1998 Stock Plan, in each case with an exercise price
per share equal to the Initial Public Offering price per share.

(2) All other compensation for Mr. Kim represents the amount of insurance
premium paid by the Company on Mr. Kim's behalf for a life insurance
policy. Effective January 1, 1998, Mr. Kim is compensated at an annual
salary of $750,000 and he may earn an annual bonus of up to $500,000 if the
Company achieves its annual operating plan, as approved by the Company's
Board of Directors.

(3) All other compensation for Mr. Boruch represents the amount of insurance
premium paid by the Company on Mr. Boruch's behalf for a life insurance
policy.

(4) All other compensation for Mr. Marcucci represents the amount of insurance
premium paid by the Company on Mr. Marcucci's behalf for a life insurance
policy together with a bonus paid to Mr. Marcucci to cover the income taxes
owed by Mr. Marcucci as a result of the payment of such insurance premium.

STOCK PLANS

1998 Stock Plan. The Company's 1998 Stock Plan (the "1998 Plan") provides
for the grant to employees of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the "Code"), and for the grant
to employees, directors and consultants of nonstatutory stock options and stock
purchase rights. The 1998 Plan was adopted by the Board of Directors in January
1998 and is expected to be approved by the Company's stockholders immediately
following the Reorganization. Unless terminated sooner, the 1998 Plan will
terminate automatically in January 2008. The maximum aggregate number of shares
which may be optioned and sold under the 1998 Plan is 5,000,000, plus an annual
increase to be added on each anniversary date of the adoption of the 1998 Plan
equal to the lesser of (i) the number of shares of Common Stock needed to
restore the maximum aggregate number of shares of Common Stock which may be
optioned and sold under the 1998 to 5,000,000, or (ii) a lesser amount
determined by the Board of Directors.

The 1998 Plan may be administered by the Board of Directors or a committee
appointed by the Board of Directors (the "Committee"), which Committee shall, in
the case of options intended to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code, consist of two or more
"outside directors" within the meaning of Section 162(m) of the Code. The Board
of Directors or the Committee, as applicable, has the power to determine the
terms of options granted, including the exercise price and the fair market
value, to reduce the exercise price of any option to the then current fair
market price if the fair market value of the Common Stock covered by such option
shall have declined since the date the

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<PAGE> 63

option was granted, the number of shares subject to the option or stock purchase
right, and the exercisability thereof and the form of consideration payable upon
such exercise. In addition, the Board of Directors has the authority to amend,
suspend or terminate the 1998 Plan, provided that no such action may affect any
share of Common Stock previously issued and sold or any option previously
granted under the 1998 Plan.

Unless determined otherwise by the administrators, options and stock
purchase rights granted under the 1998 Plan are not transferable by the
optionee, and each option and stock purchase right is generally exercisable
during the lifetime of the optionee only by such optionee. Options granted under
the 1998 Plan must generally be exercised within three months following
termination of an optionee's status as an employee, director or consultant of
the Company, within twelve months after an optionee's termination by disability,
and within twelve months after an optionee's termination by death, but in no
event later than the expiration of the option. In the case of stock purchase
rights, unless the administrator determines otherwise, a restricted stock
purchase agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment with the
Company for any reason (including death or disability). The purchase price for
shares repurchased pursuant to a restricted stock purchase agreement shall be
the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the administrator. The exercise price of all incentive
stock options granted under the 1998 Plan must be at least equal to the fair
market value of the shares on the date of grant. The exercise price of
nonstatutory stock options granted under the 1998 Plan is determined by the
Committee, but with respect to nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the exercise price must be at least equal to the fair market value of the
Common Stock on the date of grant. With respect to any employee who owns stock
possessing more than ten percent of the voting power of all classes of the
Company's, or any parent or subsidiary of the Company's outstanding capital
stock, the exercise price of any incentive stock option granted to such person
must equal at least 110% of the fair market value of the Common Stock on the
date of grant and the term of such incentive stock option must not exceed five
years. The term of all other options granted under the 1998 Plan may not exceed
ten years.

The 1998 Plan provides that in the event of a merger of the Company with or
into another corporation, or a sale of substantially all of the Company's
assets, each outstanding option and stock purchase right will be assumed or
substituted for by the successor corporation. In the event the successor
corporation refuses to assume or substitute for the option or stock purchase
right, the optionee shall have the right to exercise all of the optioned stock,
including shares as to which it would not otherwise be exercisable.

1998 Employee Stock Purchase Plan. The Company's 1998 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
January 1998 and is expected to be approved by the stockholders immediately
following the Reorganization. The Company does not intend to implement the
Purchase Plan until after the Initial Public Offering. A total of 1,000,000
shares of Common Stock have been made available for sale under the Purchase Plan
and an annual increase is to be added on each anniversary date of the adoption
of the Purchase Plan equal to the lesser of (i) the number of shares needed to
restore the maximum aggregate number of shares available for sale under the
Purchase Plan to 1,000,000, or (ii) a lesser amount determined by the Board of
Directors. The Purchase Plan, which is intended to qualify under Section 423 of
the Code is administered by the Board of Directors or by a committee appointed
by the Board. Employees (including officers and employee directors of the
Company but excluding 5% or greater stockholders) are eligible to participate if
they are customarily employed for at least 20 hours per week and for more than
five months in any calendar year. The Purchase Plan permits eligible employees
to purchase Common Stock through payroll deductions, which may not exceed 15% of
the compensation an employee receives on each pay day. The Purchase Plan will be
implemented by consecutive six-month offering periods. The initial offering
period and the date of subsequent offering periods under the Purchase Plan will
be determined by the Board of Directors after the effective date of the Initial
Public Offering. Each participant will be granted an option on the first day of
an offering period, and shares of Common Stock will be automatically purchased
on the last date of each purchase period within the offering period. If the fair
market value of the Common Stock on any purchase date (other than the final
purchase date of the offering period) is lower than such fair market value on
the start date of that offering period, then all participants in that offering

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<PAGE> 64

period will be automatically withdrawn from such offering period and re-enrolled
in the immediately following offering period. The purchase price of the Common
Stock under the Purchase Plan will be equal to 85% of the lesser of the fair
market value per share of Common Stock on the start date of the offering period
or on the purchase date. Employees may end their participation in an offering
period at any time, and participation ends automatically on termination of
employment with the Company. In the event of a proposed dissolution or
liquidation of the Company, the offering periods then in progress will be
shortened by setting a new exercise date that is before the dissolution or
liquidation, and will terminate immediately prior to the consummation of the
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the Company's assets or the merger
of the Company with or into another corporation, each outstanding option will be
assumed or substituted for by the successor corporation. In the event the
successor corporation refuses to assume or substitute for the options, the
offering periods then in progress will be shortened by setting a new exercise
date that is before the sale or merger and the offering periods then in progress
will end on the new exercise date. Each participant will be notified at least
ten business days prior to the new exercise date, and unless such participant
ends his or her participation, the option will be exercised automatically on the
new exercise date. The Purchase Plan will terminate in January 2008, unless
sooner terminated by the Board of Directors.

401(k) PLAN

The Company participates in a tax-qualified employee savings and retirement
plan (the "401(k) Plan") which covers certain of the Company's employees who are
at least 21 years of age. Pursuant to the 401(k) Plan, employees may elect to
reduce their current eligible compensation by up to 13% of eligible compensation
or the statutorily prescribed annual limit, whichever is lower, and have the
amount of such reduction contributed to the 401(k) Plan. After an eligible
employee completes one year of service and has attained age 21, he or she will
become eligible for the Company matching contributions effective as of the
quarterly entry date after meeting these service and age requirements. The
matching contribution amount is a discretionary amount as determined from time
to time by the Company. The 401(k) Plan is intended to qualify under Section 401
of the Internal Revenue Code of 1986, as amended, so that contributions by
employees or by the Company to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made. The trustee under the 401(k) Plan, at the direction of
each participant, invests the assets of the 401(k) Plan in any of a number of
designated investment options.

PHILIPPINE PENSION PLANS

The Company adopted a retirement plan for its eligible Philippine employees
and those eligible employees of designated affiliated companies and subsidiaries
of the Company, the Amkor/Anam Pilipinas, Incorporated Employees' Retirement
Benefit Plan (the "Phillipine Plan"), originally effective January 1, 1988, and
most recently amended on January 1, 1997. Eligible employees are employees with
regular and permanent status that have been employed continuously for one (1)
year by a participating company. Currently, the companies participating in the
Phillipine Plan are AMI, AAAP, and Anam Amkor Precision Machine Company
(Phils.), Incorporated. At normal retirement age (age 60), death, or upon total
and permanent disability, a participant will receive a lump sum benefit payment
based on a percentage of his or her final base monthly salary, as determined by
his or her years of credited service. A participant who retires at age 50 with
at least ten (10) years of service will receive a reduced payment based on the
same formula. Company contributions to the Phillipine Plan are held in trust.
The Phillipine Plan is presently underfunded by $3.8 million. The amount by
which the Phillipine Plan is underfunded decreased from $7.2 million at
September 30, 1997 primarily as a result of payments made by the Company as
required under the plan and the effect of the recent devaluation of the
Phillipine peso to the U.S. dollar. See Note 9 of Notes to Combined Financial
Statements.

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<PAGE> 65

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

The Company has adopted provisions in its Certificate of Incorporation that
eliminate to the fullest extent permissible under Delaware law the liability of
its directors to the Company for monetary damages. Such limitation of liability
does not affect the availability of equitable remedies such as injunctive relief
or rescission. The Bylaws provide that the Company shall indemnify its directors
and officers, and may indemnify its other employees and agents, to the fullest
extent permitted by Delaware law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. The Company has
entered into indemnification agreements with its officers and directors
containing provisions which may require the Company, among other things, to
indemnify the officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.

There is no currently pending litigation or proceeding involving a
director, officer, employee or other agent of the Company in which
indemnification would be required or permitted.

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<PAGE> 66

CERTAIN TRANSACTIONS

AICL was founded in 1956 by Mr. H. S. Kim, who currently serves as the
honorary Chairman and a Representative Director of AICL. AICL is a member of the
Anam Group of companies, consisting principally of companies in Korea in the
electronics industries. The management of AICL and the other companies in the
Anam Group are influenced to a significant degree by the family of H. S. Kim,
which, together with the Company, collectively owned approximately 40.7% of the
outstanding common stock of AICL as of December 31, 1997. A significant portion
of the shares owned by the Kim family are leveraged and as a result of this, or
for other reasons, the family's ownership could be substantially reduced. James
Kim, the founder of the Company and currently its Chairman and Chief Executive
Officer, is the eldest son of H. S. Kim. Since January 1992, in addition to his
other responsibilities, James Kim has been serving as acting Chairman of the
Anam Group and a director of AICL. Mr. In-Kil Hwang, the President and a
Representative Director of AICL, is the brother-in-law of James Kim. In
addition, four other members of Mr. Kim's family are on the 13-member Board of
Directors of AICL. In connection with the Reorganization, Mr. James Kim and
members of his family will exchange their interests in the Amkor Companies in
return for shares of Common Stock. After the Initial Public Offering, James Kim
and members of his family will beneficially own approximately 68.9% of the
outstanding Common Stock, and Mr. Kim and other members of his family will
continue to exercise significant control over the Company. The Company and AICL
have had a long-standing relationship. In 1996 and 1997, approximately 72% and
68%, respectively, of the Company's revenues were derived from sales of services
performed for the Company by AICL. In addition, substantially all of the
revenues of AICL in 1996 and 1997 were derived from services sold by the
Company. The Company expects that the businesses of the Company and AICL will
continue to remain highly interdependent by virtue of their supply relationship,
overlaps and family ties between their respective shareholders and management,
financial relationships, coordination of product and operation plans, joint
research and development activities and shared intellectual property rights. See
"Relationship with Anam Industrial Co., Ltd." and "Reorganization."

The Company has entered into indemnification agreements with its officers
and directors containing provisions which may require the Company, among other
things, to indemnify the officers and directors against certain liabilities that
may arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature), and to
advance to them expenses incurred as a result of any proceeding against them as
to which they could be indemnified.

In connection with the Reorganization, the Company proposes to enter into
tax indemnification agreements with Mr. and Mrs. Kim and the Kim Family Trusts
pursuant to which the Company will be indemnified by such stockholders with
respect to their proportionate share of any U.S. federal or state corporate
income taxes attributable to the failure of AEI to qualify as an S Corporation
for any period or in any jurisdiction for which S Corporation status was claimed
through the Termination Date. The tax indemnification agreements will also
provide that the Company will indemnify Mr. and Mrs. Kim and the Kim Family
Trusts if such stockholders are required to pay additional taxes or other
amounts attributable to taxable years on or before the Termination Date as to
which AEI filed or files tax returns claiming status as an S Corporation. AEI
has made various distributions to such stockholders which have enabled them to
pay their income taxes on their allocable portions of the income of AEI. Such
distributions totaled approximately $13.0 million and $5.0 million in 1996 and
1997, respectively. The Company expects to make additional distributions to such
stockholders prior to the consummation of the Reorganization, which
distributions will represent AEI's cumulative net income in all periods prior to
the Termination Date less the aggregate amount of distributions previously made
to such stockholders. These final distributions are intended to provide such
stockholders with the balance of AEI's net income for which they have already
recognized income taxes. Through December 31, 1997, the amount of such
undistributed net earnings was $27.7 million. See "Reorganization" and Notes 1,
10 and 17 of Notes to Combined Financial Statements.

In February 1998 the Company sold its investment in AICL common stock to AK
Investments, Inc. ("AK Investments"), a company owned by Mr. Kim, for $13.9
million, the market value determined by the closing price of AICL shares on the
Korea Stock Exchange on the date of the sale. In exchange for such shares, AK
Investments assumed $13.9 million of the Company's long-term borrowing from
AUSA. See Note 6 of Notes to Combined Financial Statements.

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<PAGE> 67

Mr. Kim has executed certain guarantees to lenders in connection with
certain debt instruments of the Amkor Companies that remain outstanding. The
total contingent liability under such guarantees equalled approximately $87.0
million as of December 31, 1997. See Note 11 of Notes to Combined Financial
Statements.

The Company and Mr. Kim currently are parties to a loan agreement under
which Mr. Kim may borrow funds from the Company, subject to the Company's
consent. Mr. Kim has recognized compensation in 1996 and 1997 in the amount of
$101,716 and $3,000, respectively of imputed interest for loans under this
agreement. Since the beginning of the 1996 fiscal year, the maximum amount
outstanding under such agreement has been $6.5 million. All amounts due from Mr.
Kim have been repaid in full subsequent to December 31, 1997.

In 1996, Mr. Kim sold his interest in Amkor Anam Test Services, Inc.,
representing half of its outstanding capital stock, to AEI for $910,350. See
Note 14 of Notes to Combined Financial Statements.

AK Investments purchased certain securities held by AEI for $49.7 million,
which consideration was paid by assuming from AEI certain non-current payables
from AUSA. Subsequent to the sale of investments to AK Investments, AEI loaned
AK Investments an additional $12.8 million. The amount outstanding on this loan
as of December 31, 1997 was $4.4 million. See Notes 6 and 11 of Notes to
Combined Financial Statements. AK Investments repaid such amount in full during
March 1998.

In 1996, the Kim Family Trusts borrowed $5.3 million at market interest
rates from AEI to purchase the real estate and develop the facilities that
comprise the Company's Chandler, Arizona plant and offices. In 1997, the Kim
Family Trusts, after making improvements, sold the real estate and facilities
back to AEI for $5.7 million which was used to repay the original loan from AEI.
See Note 11 of Notes to Combined Financial Statements.

Members of the Kim family own all the outstanding shares of Forte Systems,
Inc. ("Forte"). The Company and Forte currently are parties to a loan agreement
under which Forte may borrow funds at market interest rates from the Company,
subject to the Company's consent. Since the beginning of the 1996 fiscal year,
the maximum amount outstanding under such agreement has been $3.8 million. See
Note 11 of Notes to Combined Financial Statements.

Members of the Kim family own all the outstanding shares of The Electronics
Boutique, Inc. (the "Electronics Boutique"). The Company and the Electronics
Boutique currently are parties to a loan agreement under which the Electronics
Boutique may borrow funds at market rates from the Company, subject to the
Company's consent. Since the beginning of the 1996 fiscal year, the maximum
amount outstanding under such agreement in the ordinary course of business of
the Electronics Boutique's business has been $3.0 million. In addition, in 1996,
the Electronics Boutique borrowed $50 million from AEI in connection with a
contemplated acquisition. However, this acquisition was abandoned by the
Electronics Boutique and the $50 million was repaid to AEI within eleven working
days of the date it was borrowed. Finally, the Company has guaranteed certain
vendor obligations and a line of credit of the Electronics Boutique, which total
approximately $24.7 million and $14.3 million, respectively as of December 31,
1997. See Note 11 of Notes to Combined Financial Statements.

In addition, in each of the last three years, various Electronics Boutique
expenses were paid by the Company on behalf of Electronics Boutique and various
Company expenses were paid by Electronics Boutique on behalf of the Company.
These expenses include insurance premiums, employee medical claims, interest,
rent and other miscellaneous expenses. In 1995, 1996 and 1997, the Company made
net advancements on behalf of Electronics Boutique of $604,000, $128,000 and
$147,000. In 1997, Electronics Boutique repaid to the Company $2.4 million of
current and prior year advancements.

The Company has executed a surety and guarantee agreement on behalf of
Electronics Boutique. The Company has unconditionally guaranteed Electronics
Boutique's obligation under a $17 million line of credit and a $9 million term
loan note. As of December 31, 1997, there was $750,000 outstanding under the
line of credit and $9 million outstanding under the term loan note. The Company
has also unconditionally guaranteed obligations of EB Canada, a subsidiary of
Electronics Boutique, under a $4 million term loan agreement and a

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$1 million line of credit. As of December 31, 1997, there was $3.8 million
outstanding under the term loan and no amounts outstanding under the line of
credit.

The Company leases office space in West Chester, Pennsylvania from the Kim
Family Trusts. The lease expires in 2006. The Company has the option to extend
the lease for an additional 10 years. The monthly rent pursuant to such lease is
$92,000. The Company sub-leases a portion of this office space to Forte for
which the monthly rent is $43,000. See Note 11 of Notes to Combined Financial
Statements.

At December 31, 1996 and 1997, the Company had advances and notes
receivable from affiliates other than AICL and AUSA of $23.0 million and $36.5
million, respectively. See Note 11 of Notes to Combined Financial Statements.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock outstanding as of the date of this Prospectus, as
adjusted to reflect the sale of the shares of Common Stock offered pursuant to
the Initial Public Offering, by (i) each person or entity who is known by the
Company to own beneficially 5% or more of the Company's outstanding Common
Stock; (ii) each director of the Company; (iii) each of the Named Executive
Officers; and (iv) all directors and executive officers of the Company as a
group.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AFTER INITIAL PUBLIC
OFFERING(1)
---------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ---------- -------
<S> <C> <C>
James J. and Agnes C. Kim(2)(3)(4).......................... 25,575,000 22.7%
1345 Enterprise Drive
West Chester, PA 19380
David D. Kim Trust of December 31, 1987(3)(5)............... 13,250,000 11.8
1500 E. Lancaster Avenue
Paoli, PA 19301
John T. Kim Trust of December 31, 1987(3)(5)................ 13,250,000 11.8
1500 E. Lancaster Avenue
Paoli, PA 19301
Susan Y. Kim Trust of December 31, 1987(3)(4)(6)............ 13,250,000 11.8
1500 E. Lancaster Avenue
Paoli, PA 19301
Thomas D. George............................................ -- --
Gregory K. Hinckley......................................... -- --
John N. Boruch.............................................. -- --
Eric R. Larson.............................................. -- --
Frank J. Marcucci........................................... -- --
Michael D. O'Brien.......................................... -- --
All directors and executive officers as a group (7
persons).................................................. 25,575,000 22.7
</TABLE>

- ---------------

(1) Assumes no exercise of the Underwriters' over-allotment options. The number
and percentage of shares beneficially owned is determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rule, beneficial
ownership includes any share as to which the individual or entity has voting
power or investment power. Unless otherwise indicated, each person or entity
has sole voting and investment power with respect to shares shown as
beneficially owned.

(2) James J. and Agnes C. Kim are husband and wife. Accordingly, each may be
deemed to beneficially own shares of Common Stock held in the name of the
other.

(3) David D. Kim, John T. Kim and Susan Y. Kim are children of James J. and
Agnes C. Kim. Each of the David D. Kim Trust of December 31, 1987, John T.
Kim Trust of December 31, 1987 and Susan Y. Kim Trust of December 31, 1987
has in common Susan Y. Kim and John F.A. Earley as co-trustees, in addition
to a third trustee (John T. Kim in the case of the Susan Y. Kim Trust and
the John T. Kim Trust and David D. Kim in the case of the David D. Kim
Trust) (the trustees of each trust may be deemed to be the beneficial owners
of the shares held by such trust). In addition, the trust agreement for each
of these trusts encourages the trustees of the trusts to vote the shares of
Common Stock held by them, in their discretion, in concert with James Kim's
family. Accordingly, the trusts, together with their respective trustees and
James J. and Agnes C. Kim, may be considered a "group" under Section 13(d)
of the Exchange Act. This group may be deemed to have beneficial ownership
of 65,325,000 shares or 58.0% of the outstanding shares of Common Stock
after the Initial Public Offering.

(4) Salomon Smith Barney may, subject to certain limitations, from time to time,
borrow shares of Common Stock from Mr. and Mrs. Kim to settle short sales of
Common Stock (or to return Common Stock previously borrowed by Salomon Smith
Barney to settle such short sales) entered into by Salomon Smith

68
<PAGE> 70

Barney to hedge any long position in the Convertible Notes resulting from
its market-making activities; provided that the total number of shares
borrowed at any time may not exceed 7,000,000. See "Plan of Distribution."
If at any time 7,000,000 shares are borrowed from Mr. and Mrs. Kim and sold
and not returned, their beneficial ownership of the Common Stock would be
reduced to 16.5%.

(5) These three trusts together with the trusts described in note (6) below
comprise the Kim Family Trusts.

(6) Includes 8,200,000 shares held by a trust established for the benefit of
Susan Y. Kim's children.

69
<PAGE> 71

DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon the closing of the Initial Public Offering, the Company will be
authorized to issue 500,000,000 shares of Common Stock, $.001 par value, and
10,000,000 shares of Preferred Stock, $.001 par value. Immediately after the
closing of the Initial Public Offering and assuming no exercise of the
Underwriters' over-allotment options, the Company estimates there will be an
aggregate of 112,610,000 shares of Common Stock outstanding, 2,730,000 shares of
Common Stock will be issuable upon exercise of outstanding options, 3,570,000
shares of Common Stock will be reserved for issuance under the Company's 1998
Stock Plan, 1998 Director Option Plan and 1998 Employee Stock Purchase Plan and
shares of Common Stock will be reserved for issuance upon conversion
of the Convertible Notes.

The following description of the Company's capital stock does not purport
to be complete and is subject to and qualified in its entirety by the
Certificate of Incorporation and the Bylaws, which are included as exhibits to
the Registration Statement of which this Prospectus forms a part, and by the
provisions of applicable Delaware law.

The Certificate of Incorporation and the Bylaws contain certain provisions
that are intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and which may have the effect of delaying,
deferring, or preventing a future takeover or change in control of the Company
unless such takeover or change in control is approved by the Board of Directors.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Holders of Common Stock do not have
cumulative voting rights, and, therefore, holders of a majority of the shares
voting for the election of directors can elect all of the directors. In such
event, the holders of the remaining shares will not be able to elect any
directors. See "Risk Factors -- Benefits of the Initial Public Offering to
Existing Stockholders; Continued Control by Existing Stockholders."

Holders of the Common Stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between the Company and its debtholders. The Company has never declared or paid
cash dividends on its capital stock, expects to retain future earnings, if any,
for use in the operation and expansion of its business, and does not anticipate
paying any cash dividends in the foreseeable future. See "Dividend Policy." In
the event of the liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets legally
available for distribution after payment of all debts and other liabilities and
subject to the prior rights of any holders of Preferred Stock then outstanding.

PREFERRED STOCK

The Company's Board of Directors is authorized to issue 10,000,000 shares
of Preferred Stock in one or more series and to fix the price, rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
a series or the designation of such series, without any further vote or action
by the Company's stockholders. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of delaying, deferring or making more
difficult a change in control of the Company and may adversely affect the market
price of, and the voting and other rights of, the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no current plans to issue any
additional shares of Preferred Stock. See "Risk Factors -- Anti-Takeover Effects
of Delaware Law and Certain Charter Provisions."

70
<PAGE> 72

EFFECT OF DELAWARE ANTI-TAKEOVER STATUTE

The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Anti-Takeover Law"), which regulates corporate acquisitions. The
Anti-Takeover Law prevents certain Delaware corporations, including those whose
securities are listed for trading on the Nasdaq National Market Anti-Takeover,
from engaging, under certain circumstances in a "business combination" with any
"interested stockholder" for three years following the date that such
stockholder became an interested stockholder. For purposes of the Anti-Takeover
Law, a "business combination" includes, among other things, a merger or
consolidation involving the Company and the interested shareholder and the sale
of more than 10% of the Company's assets. In general, the Anti-Takeover Law
defines an "interested stockholder" as any entity or person beneficially owning
15% or more the outstanding voting stock of the Company and any entity or person
affiliated with or controlling or controlled by such entity or person. A
Delaware corporation may "opt out" of the Anti-Takeover Law with an express
provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or bylaws resulting from amendments approved
by the holders of at least a majority of the Company's outstanding voting
shares. The Company has not "opted out" of the provisions of the Anti-Takeover
Law. See "Risk Factors -- Anti-Takeover Effects of Delaware Law and Certain
Charter Provisions."

TRANSFER AGENT

The Transfer Agent and Registrar for the Common Stock is First Chicago
Trust Company of New York Shareholder Services, 525 Washington Boulevard, Jersey
City, NJ 07310; telephone (201) 324-0014.

71
<PAGE> 73

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Initial Public Offering, there has been no market for the
Common Stock and there is no assurance that a significant public market for the
Common Stock will develop or be sustained after the Initial Public Offering.
Sales of substantial amounts of Common Stock in the public market could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through the sale of its equity
securities.

Upon the closing of the Initial Public Offering, the Company will have
outstanding 112,610,000 shares of Common Stock. In addition to the 35,000,000
shares of Common Stock offered pursuant to the Initial Public Offering
(40,250,000 if the Underwriters' over-allotment options are exercised in full),
upon the closing of the Initial Public Offering, there will be approximately
shares of Common Stock issuable upon conversion of the Convertible
Notes, all of which will be freely tradeable. In addition, upon effectiveness of
the Registration Statement, Salomon Smith Barney may, subject to certain
limitations, from time to time, borrow shares of Common Stock from Mr. and Mrs.
Kim to settle short sales of Common Stock (or to return Common Stock previously
borrowed by Salomon Smith Barney to settle such short sales) entered into by
Salomon Smith Barney to hedge any long position in the Convertible Notes
resulting from its market-making activities; provided that the total number of
shares borrowed at any time may not exceed 7,000,000. Salomon Smith Barney is
not under any obligation to engage in any market-making transactions with
respect to the Convertible Notes, and any market-making in the Convertible Notes
actually engaged in by Salomon Smith Barney may cease at any time. See "Plan of
Distribution." The shares of Common Stock borrowed and returned to Mr. and Mrs.
Kim (the "Control Shares") may be resold from time to time by Mr. and Mrs. Kim
subject to certain volume, manner of sale and other restrictions described below
under Rule 144 under the Securities Act. Excluding all such freely tradeable
shares and Control Shares, approximately 70,610,000 additional shares of Common
Stock will be outstanding upon the closing of the Initial Public Offering
(excluding 2,730,000 shares issuable upon the exercise of outstanding options),
all of which are "restricted" shares (the "Restricted Shares") under the
Securities Act. Such Restricted Shares may be sold only if registered under the
Securities Act or sold in accordance with an available exemption from such
registration.

Under Rule 144, a person (or persons whose shares are aggregated in
accordance with the Rule) who has beneficially owned his or her Restricted
Shares for at least one year, including persons who are affiliates of the
Company, will be entitled to sell, within any three month period a number of
Restricted Shares that does not exceed the greater of (i) one percent of the
then outstanding number of shares of Common Stock (1,126,100 shares of Common
Stock immediately after the consummation of the Initial Public Offering) or (ii)
the average weekly trading volume of the shares of Common Stock during the four
calendar weeks preceding each such sale. In addition, sales under Rule 144 are
also subject to certain manner of sale provisions and notice requirements and to
the availability of current public information about the Company. After
Restricted Shares are held for two years, a person who is not an affiliate of
the Company is entitled to sell such shares under Rule 144 without regard to
such volume limitations, or manner of sale, notice or public information
requirements under Rule 144. Sales of Restricted Shares by affiliates will
continue to be subject to such volume limitations, and manner of sale, notice
and public information requirements.

In connection with the Initial Public Offering, the Company has agreed with
the Underwriters not to offer, pledge, sell, contract to sell, or otherwise
dispose of (or enter into any transaction which is designed to, or could be
expected to, result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or otherwise) by the
Company or any affiliate of the Company or any person in privity with the
Company or any affiliate of the Company), directly or indirectly, or announce
the offering of, any other shares of Common Stock or any securities or options
convertible into, or exchangeable or exercisable for, shares of Common Stock
(other than the Convertible Notes) for a period of 180 days following the date
hereof without the prior written consent of Salomon Smith Barney, subject to
certain limited exceptions. In addition, each of the Company's officers,
directors and stockholders has agreed with the Underwriters not to offer, sell,
contract to sell, pledge or otherwise dispose of, or file a registration
statement with the Securities and Exchange Commission in respect of, or
establish or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Exchange Act with
respect to, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for

72
<PAGE> 74

shares of Common Stock, or publicly announce an intention to effect any such
transaction, for a period of 180 days after the date hereof other than pursuant
to the Securities Loan Agreement or with the prior written consent of Salomon
Smith Barney, subject to certain limited exceptions.

Beginning one year from the date of the Reorganization, approximately
70,610,000 Restricted Shares subject to the lock-up agreements will become
eligible for sale in the public market pursuant to Rule 144.

The Company has granted options to purchase 2,730,000 shares of Common
Stock under the 1998 Stock Plan and the 1998 Director Option Plan. See
"Management -- Stock Plans." The Company intends to file, within 30 days after
the date of the commencement of the Initial Public Offering, a Form S-8
registration statement under the Securities Act to register shares of Common
Stock reserved for issuance under the 1998 Stock Plan, 1998 Director Option Plan
and 1998 Employee Stock Purchase Plan, and shares of Common Stock issuable upon
exercise of outstanding options. Shares of Common Stock issued upon exercise of
options after the effective date of the Form S-8 will be available for sale in
the public market, subject to Rule 144 volume limitations applicable to
affiliates and to lock-up agreements.

73
<PAGE> 75

PLAN OF DISTRIBUTION

Mr. and Mrs. Kim (referred to herein as the "Lender") and Salomon Smith
Barney have entered into a Securities Loan Agreement (the "Securities Loan
Agreement") which provides that, subject to certain restrictions and with the
agreement of the Lender, Salomon Smith Barney may from time to time borrow,
return and reborrow shares of Common Stock from the Lender (the "Borrowed
Securities"); provided, however, that the number of Borrowed Securities at any
time may not exceed 7,000,000 shares, subject to adjustment to provide
antidilution protection. The Securities Loan Agreement is intended to facilitate
market-making activity in the Convertible Notes by Salomon Smith Barney. Salomon
Smith Barney may, subject to certain limitations, from time to time use Borrowed
Securities to settle short sales of Common Stock (or to return Common Stock
previously borrowed by Salomon Smith Barney to settle such short sales) entered
into by Salomon Smith Barney to hedge any long position in the Convertible Notes
resulting from its market-making activities. Such sales will be made on the
Nasdaq National Market or in the over-the-counter market at market prices
prevailing at the time of sale or at prices related to such market prices.

Market conditions will dictate the extent and timing of Salomon Smith
Barney's market-making transactions in the Convertible Notes and the consequent
need to borrow shares of Common Stock. The availability of shares of Common
Stock under the Securities Loan Agreement, if any, at any time is not assured
and any such availability does not assure market-making activity with respect to
the Convertible Notes. Any market-making actually engaged in by Salomon Smith
Barney may cease at any time. The foregoing description of the Securities Loan
Agreement does not purport to be complete and is qualified in its entirety by
reference to such agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

The Company is paying all expenses incident to the offer and sale of the
shares of Common Stock offered hereby by Salomon Smith Barney to the public,
other than selling commissions and fees.

The Lender and the Company have agreed to indemnify Salomon Smith Barney
against certain liabilities including liabilities under the Securities Act.

In the ordinary course of business, Salomon Smith Barney has engaged in
investment banking transactions with the Company (including as an Underwriter of
the Initial Public Offering), Mr. and Mrs. Kim and their respective affiliates
and may do so in the future.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.

EXPERTS

The combined financial statements and schedule of the Company as of
December 31, 1995, 1996 and 1997, and for each of the years in the three-year
period ended December 31, 1997, included in the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports dated February 3, 1998 (except with respect to the sale of the
investment in AICL's common stock discussed in Note 6 to the Combined Financial
Statements, as to which the date is February 16, 1998) with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports.

Reference is made to said reports which include an explanatory paragraph
with respect to the ability of the Company to continue as a going concern as
discussed in Note 1 of Notes to the Combined Financial Statements.

74
<PAGE> 76

GLOSSARY

ASIC....................... Application Specific Integrated Circuit. A
custom-designed integrated circuit that performs
specific functions which would otherwise require a
number of off-the-shelf integrated circuits to
perform. The use of an ASIC in place of a
conventional integrated circuit reduces product
size and cost and also improves reliability.

BGA........................ Ball grid array.

Bus........................ A common pathway, or channel, between multiple
devices.

CMOS....................... Complementary Metal Oxide Silicon. Currently the
most common integrated circuit fabrication process
technology, CMOS is one of the latest fabrication
techniques to use metal oxide semiconductor
transistors.

DAC........................ Digital Analog Converter. A device that converts
digital pulses into analog signals.

Die........................ A piece of a semiconductor wafer containing the
circuitry of a single chip.

DRAM....................... Dynamic Random Access Memory. A type of volatile
memory product that is used in electronic systems
to store data and program instructions. It is the
most common type of RAM and must be refreshed with
electricity thousands of times per second or else
it will fade away.

DSP........................ Digital Signal Processor. A type of integrated
circuit that processes and manipulates digital
information after it has been converted from an
analog source.

EEPROM..................... Electrically Erasable and Programmable Read-Only
Memory. A form of non-volatile memory that can be
erased electronically before being reprogrammed.

EPROM...................... Erasable Programmable Read-Only Memory. A
programmable and reusable chip that holds its
content until erased under ultraviolet light.

Ethernet................... A type of local area network (LAN). Most widely
used LAN access method.

Flash Memory............... A type of non-volatile memory, similar to an EEPROM
in that it is erasable and reprogrammable.

FlipChip................... Package type where silicon die is attached to the
packaging substrate using solder balls instead of
wires. See "Business -- Products."

GPS........................ Global Positioning System. A system for identifying
earth locations.

GUI........................ Graphical User Interface. A graphics-based user
interface that incorporates icons, pull-down menus
and a mouse.

IC......................... Integrated Circuit. A combination of two or more
transistors on a base material, usually silicon.
All semiconductor chips, including memory chips and
logic chips, are just very complicated ICs with
thousands of transistors.

Input/Output............... A connector which interconnects the chip to the
package or one package level to the next level in
the hierarchy. Also referred to as pin out
connections or terminals.

ISDN....................... Integrated Services Digital Network. An
international telecommunications standard for
transmitting voice, video and data over digital
lines running at 64 Kbps.

Logic Device............... A device that contains digital integrated circuits
that process, rather than store, information.

75
<PAGE> 77

Mask....................... A piece of glass on which an IC's circuitry design
is laid out. Integrated circuits may require up to
20 different layers of design, each with its own
mask. In the IC production process, a light shines
through the mask leaving an image of the design on
the wafer. Also known as a reticle.

MBGA....................... Micro Ball Grid Array. See "Business -- Products."

Micron..................... 1/25,000 of an inch. Circuitry on an IC typically
follows lines that are less than one micron wide.

MOS........................ A device which consists of three layers (metal,
oxide and semiconductors) and operates as a
transistor.

MQFP....................... Metric Quad Flat Package. See
"Business -- Products."

PBGA....................... Plastic Ball Grid Array. See
"Business -- Products."

PC......................... Personal Computer.

PCMCIA..................... Standard for connecting peripherals to computers.

PDA........................ Personal Digital Assistant.

PDIP....................... Plastic Dual In-Line Packages. See
"Business -- Products."

Photolithography........... A lithographic technique used to transfer the
design of the circuit paths and electronic elements
on a chip onto a wafer's surface.

PLCC....................... Plastic Leaded Chip Carrier. See
"Business -- Products."

PLD........................ A logic chip that is programmed at the customer's
site.

PQFP....................... Plastic Quad Flat Packages. See
"Business -- Products."

RF......................... Radio Frequency. The range of electromagnetic
frequencies above the audio range and below visible
light.

SIP........................ Single In-Line Package. See "Business -- Products."

SOIC....................... Small Outline IC Packages. See
"Business -- Products."

SRAM....................... Static Random Access Memory. A type of volatile
memory product that is used in electronic systems
to store data and program instructions. Unlike the
more common DRAM, it does not need to be refreshed.

SSOP....................... Shrink Small Outline Packages. See
"Business -- Products."

Surface Mount Technology... A circuit board packaging technique in which the
leads (pins) on the chips and components are
soldered on top of the board.

TQFP....................... Thin Quad Flat Packages. See
"Business -- Products."

TSOP....................... Thin Small Outline Packages. See
"Business -- Products."

TSSOP...................... Thin Shrink Small Outline Packages. See
"Business -- Products."

Wafer...................... Thin, round, flat piece of silicon that is the base
of most integrated circuits.

Wire Bonding............... The method used to attach very fine wire to
semiconductor components in order to provide
electrical continuity between the semiconductor die
and a terminal.

76
<PAGE> 78

AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

INDEX TO COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Combined Statements of Income -- Years ended December 31,
1995, 1996 and 1997....................................... F-3
Combined Balance Sheets -- December 31, 1996 and 1997....... F-4
Combined Statements of Stockholders' Equity -- Years ended
December 31, 1995, 1996 and 1997.......................... F-5
Combined Statements of Cash Flows -- Years ended December
31, 1995, 1996 and 1997................................... F-6
Notes to Combined Financial Statements...................... F-7
</TABLE>

F-1
<PAGE> 79

After the Reorganization transaction discussed in Note 1 to the Amkor
Technology, Inc. and AK Industries, Inc. Combined Financial Statements is
effected, we expect to be in position to render the following report.

ARTHUR ANDERSEN LLP

February 3, 1998 (except with respect to the sale of the investment in Anam
Industrial Co., Ltd. common stock discussed in Note 6, as to which the date is
February 16, 1998)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Amkor Technology, Inc. and AK Industries, Inc.:

We have audited the accompanying combined balance sheets of Amkor
Technology, Inc. and AK Industries, Inc. and subsidiaries (see Note 1) as of
December 31, 1996 and 1997, and the related combined statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Amkor Technology,
Inc. and AK Industries, Inc. and subsidiaries as of December 31, 1996 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the combined
financial statements, the Company is not in compliance with certain debt
agreements and has a net working capital deficiency at December 31, 1997. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to this matter are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Philadelphia, Pa.

F-2
<PAGE> 80

AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------------
1995 1996 1997
-------- ---------- ----------
<S> <C> <C> <C>
NET REVENUES................................................ $932,382 $1,171,001 $1,455,761
COST OF REVENUES -- including purchases from AICL (Note
11)....................................................... 783,335 1,022,078 1,242,669
-------- ---------- ----------
GROSS PROFIT................................................ 149,047 148,923 213,092
-------- ---------- ----------
OPERATING EXPENSES:
Selling, general and administrative....................... 55,459 66,625 103,726
Research and development.................................. 8,733 10,930 8,525
-------- ---------- ----------
Total operating expenses............................... 64,192 77,555 112,251
-------- ---------- ----------
OPERATING INCOME............................................ 84,855 71,368 100,841
-------- ---------- ----------
OTHER (INCOME) EXPENSE:
Interest expense, net..................................... 9,797 22,245 32,241
Foreign currency (gain) loss.............................. 1,512 2,961 (835)
Other expense, net........................................ 6,523 3,150 8,429
-------- ---------- ----------
Total other expense.................................... 17,832 28,356 39,835
-------- ---------- ----------
INCOME BEFORE INCOME TAXES, EQUITY IN INCOME (LOSS) OF AICL
AND MINORITY INTEREST..................................... 67,023 43,012 61,006
PROVISION FOR INCOME TAXES.................................. 6,384 7,876 7,078
EQUITY IN INCOME (LOSS) OF AICL............................. 2,808 (1,266) (17,291)
MINORITY INTEREST........................................... 1,515 948 (6,644)
-------- ---------- ----------
NET INCOME.................................................. $ 61,932 $ 32,922 $ 43,281
======== ========== ==========
PRO FORMA DATA (UNAUDITED):
Historical income before income taxes, equity in income
(loss) of AICL and minority interest................... $ 67,023 $ 43,012 $ 61,006
Pro forma provision for income taxes...................... 16,784 10,776 10,691
-------- ---------- ----------
Pro forma income before equity in income (loss) of AICL
and minority interest.................................. 50,239 32,236 50,315
Historical equity in income (loss) of AICL................ 2,808 (1,266) (17,291)
Historical minority interest.............................. 1,515 948 (6,644)
-------- ---------- ----------
Pro forma net income...................................... $ 51,532 $ 30,022 $ 39,668
======== ========== ==========
Basic and diluted pro forma net income per common share... $ .62 $ .36 $ .48
======== ========== ==========
Shares used in computing pro forma net income per common
share..................................................... 82,610 82,610 82,610
======== ========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 81

AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1997
1996 ACTUAL PRO FORMA
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................... $ 49,664 $ 90,917 $ 63,217
Short-term investments.................................. 881 2,524 2,524
Accounts receivable --
Trade, net of allowance for doubtful accounts of
$1,179, $4,234 and $4,234.......................... 170,892 102,804 102,804
Due from affiliates.................................. 26,886 14,431 14,431
Other................................................ 6,426 4,879 4,879
Inventories............................................. 101,920 115,870 115,870
Other current assets.................................... 8,618 26,997 26,997
-------- -------- --------
Total current assets............................ 365,287 358,422 330,722
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, net........................ 324,895 427,061 427,061
-------- -------- --------
INVESTMENTS:
AICL at equity.......................................... 31,154 13,863 13,863
Other................................................... 38,090 5,958 5,958
-------- -------- --------
Total investments............................... 69,244 19,821 19,821
-------- -------- --------
OTHER ASSETS:
Due from affiliates..................................... 20,699 29,186 29,186
Other................................................... 24,739 21,102 21,102
-------- -------- --------
45,438 50,288 50,288
-------- -------- --------
Total assets.................................... $804,864 $855,592 $827,892
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term
debt................................................. $191,813 $325,968 $325,968
Trade accounts payable.................................. 45,798 113,037 113,037
Due to affiliates....................................... 33,379 15,581 15,581
Bank overdraft.......................................... 14,518 29,765 29,765
Accrued expenses........................................ 30,156 43,973 43,973
Accrued income taxes.................................... 12,838 26,968 26,968
-------- -------- --------
Total current liabilities....................... 328,502 555,292 555,292
-------- -------- --------
LONG-TERM DEBT............................................ 167,444 38,283 38,283
-------- -------- --------
DUE TO ANAM USA, INC. (Note 11)........................... 234,894 149,776 149,776
-------- -------- --------
OTHER NONCURRENT LIABILITIES.............................. 12,286 12,084 14,184
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 13)
MINORITY INTEREST......................................... 15,926 9,282 9,282
-------- -------- --------
STOCKHOLDERS' EQUITY:
Amkor Technology, Inc. -- common stock.................. 45 45 45
AK Industries, Inc. -- common stock..................... 1 1 1
Additional paid-in capital.............................. 16,770 20,871 20,871
Retained earnings....................................... 32,340 70,621 40,821
Unrealized losses on investments........................ (1,586) -- --
Cumulative translation adjustment....................... (1,758) (663) (663)
-------- -------- --------
Total stockholders' equity...................... 45,812 90,875 61,075
-------- -------- --------
Total liabilities and stockholders' equity...... $804,864 $855,592 $827,892
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 82

AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
AMKOR AK UNREALIZED
TECHNOLOY, INDUSTRIES, GAINS
INC. INC. ADDITIONAL (LOSSES) CUMULATIVE
COMMON COMMON PAID-IN RETAINED ON TRANSLATION
STOCK STOCK CAPITAL EARNINGS INVESTMENTS ADJUSTMENT TOTAL
---------- ----------- ---------- --------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995..... $45 $ 1 $16,494 $ (6,359) $ (35) $ (529) $ 9,617
Net income................... -- -- -- 61,932 -- -- 61,932
Distributions................ -- -- -- (19,922) -- -- (19,922)
Change in division equity
account.................... -- -- -- (4,505) -- -- (4,505)
Unrealized gains (losses) on
investments................ -- -- -- -- (2,015) -- (2,015)
Currency translation
adjustments................ -- -- -- -- -- 182 182
--- --- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1995... 45 1 16,494 31,146 (2,050) (347) 45,289
Net income................... -- -- -- 32,922 -- -- 32,922
Distributions................ -- -- -- (15,123) -- -- (15,123)
Change in division equity
account.................... -- -- -- (16,605) -- -- (16,605)
Unrealized gains (losses) on
investments................ -- -- -- -- 464 -- 464
Currency translation
adjustments................ -- -- -- -- -- (1,411) (1,411)
Acquisition of AATS (Note
14)........................ -- -- 276 -- -- -- 276
--- --- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1996... 45 1 16,770 32,340 (1,586) (1,758) 45,812
Net income................... -- -- -- 43,281 -- -- 43,281
Distributions................ -- -- -- (5,000) -- -- (5,000)
Change in division equity
account.................... -- -- 4,101 -- -- -- 4,101
Unrealized gains (losses) on
investments................ -- -- -- -- 1,586 -- 1,586
Currency translation
adjustments................ -- -- -- -- -- 1,095 1,095
--- --- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997... $45 $ 1 $20,871 $ 70,621 $ 0 $ (663) $ 90,875
=== === ======= ======== ======= ======= ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 83

AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 61,932 $ 32,922 $ 43,281
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization........................... 26,614 57,825 81,864
Provision for accounts receivable....................... 444 1,271 3,490
Provision for excess and obsolete inventory............. 1,000 500 12,659
Deferred income taxes................................... (1,147) (324) (11,715)
Equity (gain) loss of investees......................... (2,713) 605 16,779
(Gain) loss on sale of investments...................... 126 (139) (239)
Minority interest....................................... 1,515 948 (6,644)
Changes in assets and liabilities excluding effects of
acquisitions --
Accounts receivable..................................... (53,264) (36,695) (19,802)
Proceeds from accounts receivable sale.................. -- -- 90,700
Other receivables....................................... (2,565) (925) 1,547
Inventories............................................. (32,668) (16,380) (26,609)
Due to/from affiliates, net............................. (3,001) (8,203) (19,138)
Other current assets.................................... (4,764) 1,694 (7,239)
Other non-current assets................................ (326) (6,108) 3,322
Accounts payable........................................ 35,017 (16,852) 60,939
Accrued expenses........................................ 17,687 (12,658) 13,817
Accrued taxes........................................... 404 7,433 14,130
Other long-term liabilities............................. 9,034 (108) (1,089)
Other, net.............................................. -- 3,750 --
----------- ----------- -----------
Net cash provided by operating activities.......... 53,325 8,556 250,053
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, including
purchase of AATS........................................ (123,645) (185,112) (178,990)
Sale of property, plant and equipment..................... 110 2,228 1,413
Purchases of investments and issuances of notes
receivable.............................................. (25,123) (15,633) (15,187)
Proceeds from sale of investments......................... 351 520 --
----------- ----------- -----------
Net cash used in investing activities.............. (148,307) (197,997) (192,764)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank overdrafts and short-term borrowings... 41,308 64,852 52,393
Proceeds from issuance of Anam USA, Inc. debt............. 1,059,759 1,205,174 1,408,086
Payments of Anam USA, Inc. debt........................... (1,052,415) (1,189,317) (1,443,464)
Proceeds from issuance of long-term debt.................. 50,080 102,193 11,389
Payments of long-term debt................................ (3,021) (3,138) (43,541)
Distributions to stockholders............................. (20,003) (15,205) (5,000)
Change in division equity account......................... (4,505) (16,605) 4,101
----------- ----------- -----------
Net cash provided by (used in) financing
activities....................................... 71,203 147,954 (16,036)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (23,779) (41,487) 41,253
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 114,930 91,151 49,664
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 91,151 $ 49,664 $ 90,917
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................ $ 12,594 $ 24,125 $ 37,070
Income taxes............................................ 495 2,256 3,022
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 84

AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination

The combined financial statements of Amkor Technology, Inc. ("ATI") and its
subsidiaries and AK Industries, Inc. and its subsidiary ("Amkor" or the
"Company") include the accounts of the following (these companies are referred
to as the "Amkor Companies"):

- Amkor Electronics, Inc. ("AEI"), a U.S. S Corporation and its wholly
owned subsidiaries Amkor Receivables Corp and Amkor Wafer Fabrication
Services SARL (a French Limited Company).

- T.L. Limited ("TLL") (a British Cayman Island Corporation) and its
Philippine subsidiaries, Amkor Anam Advanced Packaging, Inc. ("AAAP")
(wholly owned) and Amkor/Anam Pilipinas, Inc. ("AAP") (which is currently
owned 60% by TLL and 40% by Anam Industrial Co., Ltd. ("AICL"-- see Notes
11 and 16) and its wholly-owned subsidiary Automated MicroElectronics,
Inc. ("AMI");

- C.I.L., Limited ("CIL") (a British Cayman Islands Corporation) and its
wholly-owned subsidiary Amkor/Anam Euroservices S.A.R.L. ("AAES") (a
French Corporation);

- Amkor Anam Test Services, Inc. (a U.S. Corporation) (see Note 14); and

- The semiconductor packaging and test business unit of Chamterry
Enterprises, Ltd. ("Chamterry"). During the third quarter of 1997
Chamterry transferred its customers to AEI and CIL and ceased operations
of its semiconductor and test business unit.

- AK Industries, Inc. ("AKI") (a U.S. Corporation) and its wholly-owned
subsidiary, Amkor-Anam, Inc. (a U.S. Corporation);

All of the Amkor Companies are substantially wholly owned by Mr. and Mrs.
James Kim or entities controlled by members of Mr. James Kim's immediate family
(the "Founding Stockholders"), except for AAP which is 40% owned by AICL and one
third of AEI and all of AKI which are owned by trusts established for the
benefit of other members of Mr. James Kim's family ("Kim Family Trusts"). The
Amkor Companies are an interdependent group of companies involved in the same
business under the direction of common management. ATI was formed in September
1997 to facilitate the Reorganization and consolidate the ownership of the Amkor
Companies. In connection with the Reorganization, AEI will be merged into ATI.
Amkor International Holdings ("AIH") a newly formed Cayman Islands holding
company will become a wholly owned subsidiary of ATI. AIH will hold the
following entities: First Amkor Caymans, Inc. ("FACI"), a newly formed holding
company, and its subsidiaries AAAP and AAP and AAP's subsidiary AMI, TLL and its
subsidiary CIL and CIL's subsidiary AAES. The relative number of shares of
common stock issued by the Company in connection with each of the transactions
comprising the Reorganization is based upon the relative amounts of
stockholders' equity at December 31, 1997. In exchange for their interests in
AEI, Mr. and Mrs. James Kim and the Kim Family Trusts will receive 9,746,766
shares and 4,873,383 shares of ATI common stock, respectively. ATI will issue
67,989,851 shares of common stock in exchange for all of the outstanding shares
of AIH and its subsidiaries. Of such shares, 19,328,234 shares, 36,376,617
shares and 8,200,000 shares will be gifted to Mr. and Mrs. James Kim, the Kim
Family Trusts and other members of Mr. Kim's immediate family, respectively.
Following such transactions the Founding Stockholders and such other members of
Mr. Kim's immediate family will beneficially own a majority of the outstanding
shares of ATI common stock. In addition, ATI will acquire all of the stock of
AKI from the Kim Family Trusts for $3,000. The merger of AEI and ATI, the
creation of AIH and FACI, the issuance of ATI common stock for AIH and the
acquisition of AKI are collectively referred to as the Reorganization.

F-7
<PAGE> 85
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Included within the Amkor Companies following the Reorganization are ATI,
AIH and its subsidiaries and AKI and its subsidiary. All of the subsidiaries
will be wholly owned except for 40% of the common stock of AAP which is owned by
AICL (see Note 16), and a small number of shares of each of AAP, AAAP and AMI
which are required to be owned by directors of these companies pursuant to
Philippine law.

Except for the acquisition of the shares of AKI which will be accounted for
as a purchase transaction, the Reorganization described above will be treated
similar to a pooling of interests as it represents an exchange of equity
interests among companies under common control. The purchase price for the AKI
stock, which represents the fair value of these shares, approximates the book
value of AKI. The financial statements are presented on a combined basis as a
result of the common ownership and business operations of all of the Amkor
Companies, including AKI. As a result of the acquisition of AKI, AKI will become
a wholly owned subsidiary of ATI; accordingly, future financial statements will
be presented for ATI and its subsidiaries on a consolidated basis.

The financial statements reflect the elimination of all significant
intercompany accounts and transactions.

The investments in and the operating results of 20%- to 50%-owned companies
are included in the combined financial statements using the equity method of
accounting.

Basis of Presentation

The accompanying financial statements have been prepared on a going concern
basis which contemplates realization of assets and liquidation of liabilities in
the ordinary course of business. At December 31, 1997 the Company was not in
compliance with certain restrictive covenants of its principal long-term debt
agreements and, as a result, amounts due under these agreements are required to
be classified as current liabilities in the combined balance sheet.
Consequently, at December 31, 1997, current liabilities exceeded current assets
by $196,870. To date, the Company has not received any notification that the
Company's repayment obligations with respect to these loans have been
accelerated as a result of such covenant violations. However, there is no
assurance that the Company could generate sufficient cash flow from operations
or other sources to satisfy these liabilities should they become due before
maturity. If the planned public offering of common stock and convertible debt is
successful (see Note 16), the Company will use part of the net proceeds to the
Company to repay these bank loans. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

Nature of Operations

The Company provides semiconductor packaging and test services to
semiconductor and computer manufacturers located in strategic markets throughout
the world. Such services are provided by the Company and by AICL under a
long-standing arrangement. Approximately 79%, 72% and 68% of the Company's
packaging and test revenues in 1995, 1996 and 1997, respectively, relate to the
packaging and test services provided by AICL.

Concentrations of Credit Risk

Financial instruments, for which the Company is subject to credit risk,
consist principally of trade receivables. The Company has mitigated this risk by
selling primarily to well established companies, performing ongoing credit
evaluations and making frequent contact with customers.

At December 31, 1996 and 1997, the Company maintained $34,330 and $53,071,
respectively, in deposits at one U.S. financial institution and $1,861 and
$2,548, respectively, in deposits at U.S. banks which exceeded federally insured
limits.

F-8
<PAGE> 86
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Additionally, at December 31, 1996 and 1997, the Company maintained
deposits and certificates of deposits totaling approximately $14,649 and
$34,622, respectively, at foreign owned banks.

Significant Customers

The Company has a number of major customers in North America, Asia and
Europe. The Company's largest customer, Intel Corporation, accounted for
approximately 13.3%, 23.5% and 23.4% of net revenues in 1995, 1996 and 1997,
respectively. The Company's five largest customers collectively accounted for
34.1%, 39.2% and 40.1% of net revenues in 1995, 1996 and 1997, respectively. The
Company anticipates that significant customer concentration will continue for
the foreseeable future, although the companies which constitute the Company's
largest customers may change.

Risks and Uncertainties

The Company's future results of operations involve a number of risks and
uncertainties. Factors that could affect the Company's future operating results
and cause actual results to vary materially from expectations include, but are
not limited to, dependence on the highly cyclical nature of both the
semiconductor and the personal computer industries, competitive pricing and
declines in average selling prices, risks associated with leverage, dependence
on the Company's relationship with and the financial support provided by AICL
(see Note 11), reliance on a small group of principal customers, timing and
volume of orders relative to the Company's production capacity, availability of
manufacturing capacity and fluctuations in manufacturing yields, availability of
financing, competition, dependence on international operations and sales,
dependence on raw material and equipment suppliers, exchange rate fluctuations,
dependence on key personnel, difficulties in managing growth, enforcement of
intellectual property rights, environmental regulations and fluctuations in
quarterly operating results.

Foreign Currency Translation

Substantially all of the Company's foreign subsidiaries use the U.S. dollar
as their functional currency. Accordingly, monetary assets and liabilities which
were originally denominated in a foreign currency are translated into U.S.
dollars at month-end exchange rates. Non-monetary items which were originally
denominated in foreign currencies are translated at historical rates. Gains and
losses from such transactions and from transactions denominated in foreign
currencies are included in other (income) expense, net. The cumulative
translation adjustment reflected in stockholders' equity in the combined balance
sheets relates primarily to investments in unconsolidated companies which use
the local currency as the functional currency (see Note 6).

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

Accounts Receivable

At December 31, 1997, trade accounts receivable represent the Company's
interest in receivables sold in excess of amounts purchased by banks under an
accounts receivable sale agreement (see Note 2). Of the total net trade accounts
receivable amount at December 31, 1997, $19,905 relates to the trade accounts
receivable of CIL which were not sold under the Agreement.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
principally by using a moving average method.

F-9
<PAGE> 87
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is
calculated by the straight-line method over the estimated useful lives of
depreciable assets. Accelerated methods are used for tax purposes. Depreciable
lives follow:

<TABLE>
<S> <C>
Building and improvements............................. 10 to 30 years
Machinery and equipment............................... 3 to 5 years
Furniture, fixtures, and other equipment.............. 3 to 10 years
</TABLE>

Cost and accumulated depreciation for property retired or disposed of are
removed from the accounts and any resulting gain or loss is included in
earnings. Expenditures for maintenance and repairs are charged to expense as
incurred. Depreciation expense was $27,381, $58,497 and $81,159 for 1995, 1996
and 1997, respectively.

Other Noncurrent Assets

Other noncurrent assets consist principally of security deposits, deferred
income taxes and the cash surrender value of life insurance policies.

Other Noncurrent Liabilities

Other noncurrent liabilities consist primarily of pension obligations and
noncurrent income taxes payable.

Income Taxes

The Company accounts for income taxes following the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires the use of the liability method. If it is more likely than not
that some portion or all of a deferred tax asset will not be realized, a
valuation allowance is provided.

The Company reports certain income and expense items for income tax
purposes on a basis different from that reflected in the accompanying combined
financial statements. The principal differences relate to the timing of the
recognition of accrued expenses which are not deductible for federal income tax
purposes until paid, the use of accelerated methods of depreciation for income
tax purposes and unrecognized foreign exchange gains and losses.

AEI elected to be taxed as an S Corporation under the provisions of the
Internal Revenue Code of 1986 and comparable state tax provisions. As a result,
AEI does not recognize U.S. federal corporate income taxes. Instead, the
stockholders of AEI are taxed on their proportionate share of AEI's taxable
income. Accordingly, no provision for U.S. federal income taxes was recorded for
AEI. Given the pending Offerings (see Note 16), for informational purposes, the
accompanying combined statements of income include an unaudited pro forma
adjustment to reflect income taxes which would have been recorded if AEI had not
been an S Corporation, based on the tax laws in effect during the respective
periods (see Note 17).

Earnings Per Share

The pro forma net income per common share was calculated by dividing the
pro forma net income by the weighted average number of shares outstanding for
the respective periods, adjusted for the effect of the Reorganization (see Note
16).

In the fourth quarter of 1997, the Company adopted SFAS No. 128, "Earnings
Per Share," which requires dual presentation of basic and diluted earnings per
share on the face of the income statement. Basic

F-10
<PAGE> 88
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

EPS is computed using only the weighted average number of common shares
outstanding for the period while diluted EPS is computed assuming conversion of
all dilutive securities, such as options. In accordance with the statement, all
prior period per share amounts have been revised to reflect the new
presentation. The Company's basic and diluted per share amounts are the same for
all periods presented. There have been no changes to historical per share
amounts.

Revenue Recognition and Risk of Loss

The Company records revenues upon shipment of packaged semiconductors to
its customers. The Company does not take ownership of customer-supplied
semiconductors. Title and risk of loss remains with the customer for these
materials at all times. Risk of loss for Amkor packaging costs passes upon
completion of the packaging process and shipment to the customer. Accordingly,
the cost of the customer-supplied materials is not included in the combined
statements of income.

Research and Development Costs

Research and development costs are charged to expense as incurred.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Standards

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement establishes standards
for reporting and display of income and its components in financial statements.
The Company will be required to adopt this statement in 1998.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." Under this statement, reporting
standards were established for the way that public business enterprises report
information about operating segments in annual financial statements and selected
information about operating segments in interim financial reports issued to
shareholders. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments. This statement is effective for financial
statements for periods beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years presented is to be
restated. This statement need not be applied to interim financial statements in
the initial year of its application, but comparative information for interim
periods in the initial year of application is to be reported in financial
statements for interim periods in the second year of application. The Company
will adopt this statement prospectively for the year ended December 31, 1998.

Reclassifications

Certain previously reported amounts have been reclassified to conform with
the current presentation.

2. ACCOUNTS RECEIVABLE SALE AGREEMENT

Effective July 7, 1997, the Company entered into an agreement to sell
receivables (the "Agreement") with certain banks (the "Purchasers"). The
transaction qualifies as a sale under the provisions of SFAS

F-11
<PAGE> 89
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

No. 125 "Accounting For Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." Under the Agreement, the Purchasers have
committed to purchase, with limited recourse, all right, title and interest in
selected accounts receivable of the Company, up to a maximum of $100,000. In
connection with the Agreement, the Company established a wholly owned,
bankruptcy remote subsidiary, Amkor Receivables Corp., to purchase accounts
receivable at a discount from the Company on a continuous basis, subject to
certain limitations as described in the Agreement. Amkor Receivables Corp.
simultaneously sells the accounts receivable at the same discount to the
Purchasers. AICL has guaranteed AEI's obligations under the Agreement (see Note
11). The Agreement is structured as a three year facility subject to annual
renewals based upon the mutual consent of the Company and purchasers. The first
such renewal date is June 18, 1998. The Company and AICL did not comply with
certain financial covenants under the Agreement as of December 31, 1997. The
Purchasers have agreed to waive compliance with these covenants through January
2, 1999. The Company applied approximately $83.4 million of the Receivables Sale
proceeds together with approximately $17 million of working capital to reduce
the Company's indebtedness to AUSA which amounts were advanced by AUSA to
entities controlled by members of James Kim's family.

Proceeds from the sale of receivables were $84,400 in 1997. Losses on
receivables sold under the Agreement were approximately $2,414 in 1997 and are
included in other expense, net. As of December 31, 1997, approximately $6,300 is
included in current liabilities for amounts to be refunded to the Purchasers as
a result of a reduction in selected accounts receivable.

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Land........................................... $ -- $ 2,346
Building and improvements...................... 81,602 109,528
Machinery and equipment........................ 333,188 448,032
Furniture, fixtures and other equipment........ 31,330 33,050
Construction in progress....................... 5,240 31,964
-------- --------
451,360 624,920
Less -- Accumulated depreciation and
amortization................................. 126,465 197,859
-------- --------
$324,895 $427,061
======== ========
</TABLE>

4. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL

The common stock and additional paid-in-capital of the Company are
reflected at the original cost of the Amkor Companies. In connection with the
Reorganization, the Company authorized 500,000,000 shares of $.001 par value
common stock, of which 82,610,000 shares will be issued and outstanding to the
stockholders of the Amkor Companies in exchange for their interests in these
Companies.

In addition, the Company authorized 10,000,000 shares of $.001 par value
preferred stock, designated as Series A.

Changes in the division equity account reflected in the combined statement
of stockholders' equity represent the net cash flows resulting from the
operations of the Chamterry semiconductor packaging and test business for the
periods indicated. Such cash flows have been presented as distributions or
capital contributions since these amounts were retained in Chamterry
Enterprises, Ltd. for the benefit of the owners.

F-12
<PAGE> 90
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

5. INVENTORIES

Inventories consist of raw materials and purchased components which are
used in the semiconductor packaging process. The Company's inventories are
located at its facilities in the Philippines or at AICL on a consignment basis.
Components of inventories follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Raw materials and purchased components......... $ 93,112 $105,748
Work-in-process................................ 8,808 10,122
-------- --------
$101,920 $115,870
======== ========
</TABLE>

6. INVESTMENTS

The Company's investments include investments in affiliated companies which
provide services to the Company (see Note 11) and certain other technology based
companies. Investments are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Equity Investment in AICL (10.2% and 8.1% at
December 31, 1996 and 1997, respectively)...... $31,154 $13,863
------- -------
Other Equity Investments (20%-50% owned)
Anam Semiconductor & Technology Co., Ltd....... 10,700 --
Datacom International, Inc..................... 1,335 --
Sunrise Capital Fund........................... 1,328 --
Other.......................................... 1,373 738
------- -------
Total other equity investments......... 14,736 738
------- -------
Available for Sale (cost based investments)...... 23,354 5,220
------- -------
$69,244 $19,821
======= =======
</TABLE>

The Company had net unamortized investment costs in excess of the
proportionate share of the investee companies' net assets of approximately
$1,284 and $0 at December 31, 1996 and 1997, respectively.

On August 1, 1997, the Company sold its equity investment in Anam
Semiconductor & Technology Co., Ltd. ("Anam S&T") and certain investments and
notes receivable from companies unrelated to the semiconductor packaging and
test business to AK Investments, Inc., an entity owned by James J. Kim, at cost
($49,740) and AK Investments, Inc. assumed $49,740 of the Company's long-term
borrowings from Anam USA, Inc. Management estimates that the fair value of these
investments and notes receivable approximated the carrying value at August 1,
1997. Subsequent to the sale on August 1, 1997 the Company loaned AK
Investments, Inc. $12,800 for the purchase of additional investments. The amount
outstanding on this loan at December 31, 1997 was $4,350.

The Company's investment in AICL is accounted for using the equity method
of accounting. Although the Company does not own in excess of 20% of the
outstanding common stock of AICL, the Company through its common ownership with
the Kim family and entities controlled by the Kim family owns 40.7% of the
outstanding common stock of AICL and may exercise a significant influence over
AICL. Accordingly the Company applies the equity method based on its ownership
interest. A significant portion of the shares owned by the Kim family are
leveraged and as a result of this, or for other reasons, the family's ownership
could be substantially reduced.

F-13
<PAGE> 91
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

In 1997, the Company recognized a loss of $17,291, resulting principally
from the impairment of value of its investment in AICL as well as the current
year equity in income (loss) of AICL. The amount of the loss was determined
based upon the market value of the AICL shares on the Korean Stock Exchange on
February 16, 1998, the date that the Company sold its investment in AICL common
stock to AK Investments, Inc. In exchange for the shares, AK Investments, Inc.
assumed $13,863 of the Company's long-term borrowings from Anam USA, Inc.

The Company is advised that AICL, as a public company in Korea, has
published its most recent consolidated financial statements as of December 31,
1996, and that AICL has prepared preliminary consolidated financial statements
as of December 31, 1997. The Company's auditors do not audit AICL.

The Korean economy is undergoing changes as evidenced by the agreement
between the Korean government and the International Monetary Fund. Among other
things, this agreement includes a restructuring plan of the banking industry as
a whole which will most likely have a material effect on AICL's operations. The
overall impact of these economic changes on AICL is uncertain at this time.

AICL's financial statements are prepared on the basis of Korean GAAP, which
differs from U.S. GAAP in certain significant respects. The Company's equity in
income (loss) of AICL is based upon the Korean GAAP information noted above and
AICL's estimate of significant U.S. GAAP adjustments. These adjustments were not
significant in 1995 and 1996. In 1997, AICL recognized a W305 billion loss
principally as a result of foreign exchange losses on U.S. dollar denominated
liabilities due to the significant depreciation of the won relative to the U.S.
dollar. For purposes of determining the Company's equity in income (loss) of
AICL under U.S. GAAP, losses on remeasuring U.S. dollar denominated liabilities
are not recognized as the U.S. dollar is the functional currency for AICL. Such
U.S. dollar denominated liabilities were W2,144 billion at December 31, 1997.
Also, at December 31, 1997, the carrying value of the investment in AICL,
adjusted for the loss on the 1998 disposition discussed above, is less than the
Company's portion of AICL's net assets after consideration of the estimated U.S.
GAAP adjustments. The most significant such adjustment affecting net assets is
the remeasurement of property, plant and equipment to historical costs as
required as the U.S. dollar is the functional currency.

The following summary of consolidated financial information pertaining to
AICL was derived from the consolidated financial statements referred to above.
All amounts are in millions of Korean Won:

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
SUMMARY INCOME STATEMENT INFORMATION:
Sales........................................ W1,105,273 W1,338,718 W1,786,457
Net income (loss)............................ 18,333 (9,385) (305,414)
SUMMARY BALANCE SHEET INFORMATION:
Total assets................................. 2,225,288 3,936,517
Total liabilities............................ 1,975,431 3,861,384
</TABLE>

7. SHORT-TERM CREDIT FACILITIES

At December 31, 1996 and 1997, short-term borrowings consisted of various
operating lines of credit and working capital facilities maintained by the
Company. These borrowings are secured by receivables, inventories or property.
These facilities, which are typically for one-year renewable terms, generally
bear interest at current market rates appropriate for the country in which the
borrowing is made (ranging from 7.2% to 13.0% at December 31, 1997). For 1996
and 1997, the weighted average interest rate on these borrowings was 7.8% and
8.6%, respectively. Included in cash and cash equivalents is $1,200 of
certificates of deposit pledged as collateral for certain of these lines. The
unused portion of lines of credit total $36,169 at December 31, 1997.

F-14
<PAGE> 92
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

8. DEBT

Following is a summary of the Company's short-term borrowings and long-term
debt:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Short-term borrowings (see Note 7).......................... $ 150,513 $ 187,659
Bank loan, interest at LIBOR plus annual spread (6.78% at
December 31, 1997), due October, 2000..................... 50,000 50,000
Bank loan, interest at LIBOR plus annual spread (6.68% at
December 31, 1997), due in installments beginning March,
1998 through April, 2001.................................. 71,250 71,250
Floating rate notes (FRNs), interest at LIBOR plus annual
spread (7.38% at August 20, 1997, date of redemption)..... 40,000 --
Bank debt, interest at LIBOR plus annual spread (9.37% at
December 31, 1997), due December, 2001.................... 20,000 20,000
Bank debt, interest at LIBOR plus annual spread (12.22% at
December 31, 1997,) due October, 1998..................... 5,000 5,000
Bank debt, interest at LIBOR plus annual spread (9.09% at
December 31, 1997), due in installments with balance due
September, 1999........................................... 4,000 3,500
Bank debt, interest at LIBOR plus annual spread (11.88% at
December 31, 1997), due in equal installments through
January, 2001............................................. 5,926 5,502
Note payable, interest at prime (8.50% at December 31,
1997), due in semiannual installments beginning November
1999 through April, 2004.................................. -- 9,530
Note payable, interest at LIBOR plus annual spread (12.48%
at December 31, 1997), due in installments with balance
due November, 1999........................................ 11,000 9,000
Other, primarily capital lease obligations and other debt... 1,568 2,810
--------- ---------
359,257 364,251
Less -- Short-term borrowings and current portion of
long-term debt............................................ (191,813) (325,968)
--------- ---------
$ 167,444 $ 38,283
========= =========
</TABLE>

The Bank loans were obtained to finance the expansion of the Company's
factories in the Philippines. The Company has the option to prepay all or part
of the loans on any interest payment date. These Bank loans are unconditionally
and irrevocably guaranteed by AICL. The Bank loans contain provisions pertaining
to the maintenance of specified debt-to-equity ratios, restrictions with respect
to corporate reorganization, acquisition of capital stock or substantially all
of the assets of any other corporations and advances and dispositions of all or
a substantial portion of the borrower's assets, except in the ordinary course of
business. AAP has not been in compliance with covenants regarding the
maintenance of certain debt-to-equity ratios and advances to affiliates.
Consequently, amounts due under these agreements and certain other agreements
with cross-default clauses have been classified as current liabilities in the
accompanying combined balance sheet.

Other bank debt instruments have interest rates based on Singapore
interbank rates and LIBOR plus an annual spread. The loans are secured by assets
of the Company and assets acquired through proceeds from the loans.

F-15
<PAGE> 93
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Principal payments required under long-term debt borrowings at December 31,
1997 are as follows:

<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
1998.............................................. $138,309
1999.............................................. 9,153
2000.............................................. 2,360
2001.............................................. 22,003
2002.............................................. 1,905
Thereafter........................................ 2,862
--------
Total............................................. $176,592
========
</TABLE>

9. EMPLOYEE BENEFIT PLANS

U.S. Pension Plans

AEI has a defined contribution benefit plan covering substantially all U.S.
employees under which AEI matches 75% of the employee's contributions of between
6% and 10% of salary, up to a defined maximum on an annual basis. The pension
expense for this plan was $483, $776 and $959 in 1995, 1996 and 1997,
respectively. The pension plan assets are invested primarily in equity and fixed
income securities.

Philippine Pension Plans

AAAP, AAP and AMI sponsor several defined benefit plans that cover
substantially all employees who are not covered by statutory plans. Charges to
expense are based upon costs computed by independent actuaries.

The components of net periodic pension cost for the defined benefit plans
are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Service cost of current period................... $ 974 $1,542 $1,274
Interest cost on projected benefit obligation.... 811 1,228 957
Actual return on plan assets..................... (609) (677) (585)
Net amortization and deferrals................... 100 98 132
------ ------ ------
Total pension expense.................. $1,276 $2,191 $1,778
====== ====== ======
</TABLE>

It is the Company's policy to make contributions sufficient to meet the
minimum contributions required by law and regulation.

F-16
<PAGE> 94
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following table sets forth the funded status and the amounts recognized
in the combined balance sheets for the defined benefit pension plans:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation.............................. $ 1,696 $ 1,546
======= =======
Accumulated benefit obligation......................... $ 2,848 $ 2,669
======= =======
Actuarial present value of projected benefit
obligation............................................. $12,699 10,428
Plan assets at fair value................................ 6,077 6,614
------- -------
Plan assets less than projected benefit obligation....... (6,622) (3,814)
Prior service cost....................................... 1,125 967
Unrecognized net loss.................................... 1,800 953
------- -------
Accrued pension cost..................................... $(3,697) $(1,894)
======= =======
</TABLE>

The weighted average interest rate used in determining the projected
benefit obligation was 12% as of December 31, 1996 and 1997. The rates of
increase in future compensation levels was 11% as of December 31, 1996 and 1997.
The expected long-term rate of return on plan assets was 12% as of December 31,
1996 and 1997.

10. INCOME TAXES

The provision for income taxes includes federal, state and foreign taxes
currently payable and those deferred because of temporary differences between
the financial statement and the tax bases of assets and liabilities. The
components of the provision for income taxes follow:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Current:
Federal....................................... $6,125 $5,880 $16,126
State......................................... 908 60 2,639
Foreign....................................... 498 2,260 28
------ ------ -------
7,531 8,200 18,793
------ ------ -------
Deferred:
Federal....................................... (173) (226) (4,991)
Foreign....................................... (974) (98) (6,724)
------ ------ -------
(1,147) (324) (11,715)
------ ------ -------
Total provision....................... $6,384 $7,876 $ 7,078
====== ====== =======
</TABLE>

F-17
<PAGE> 95
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The reconciliation between the tax payable based upon the U.S. federal
statutory income tax rate and the recorded provision follow:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
-------- ------- --------
<S> <C> <C> <C>
Federal statutory rate...................... $ 23,458 $15,054 $ 21,352
State taxes, net of federal benefit......... 908 60 1,285
S Corp. status of AEI....................... (10,400) (2,900) (3,613)
(Income) losses of foreign subsidiaries
subject to tax holiday.................... -- 4,957 (5,106)
Foreign exchange losses recognized for
income taxes.............................. (1,649) -- (21,147)
Valuation allowance......................... 22,000
Difference in rates on foreign
subsidiaries.............................. (5,933) (9,295) (7,693)
-------- ------- --------
Total............................. $ 6,384 $ 7,876 $ 7,078
======== ======= ========
</TABLE>

The Company has structured its global operations to take advantage of lower
tax rates in certain countries and tax incentives extended to encourage
investment. AAP had a tax holiday in the Philippines which expired in 1995. AAAP
has a tax holiday in the Philippines which expires at the end of 2002. Foreign
exchange losses recognized for income taxes relate to unrecognized net foreign
exchange losses on U.S. dollar denominated monetary assets and liabilities.
These losses, which are not recognized for financial reporting purposes as the
U.S. dollar is the functional currency (see Note 1), result in deferred tax
assets that will be realized, for Philippine tax reporting purposes, upon
settlement of the related asset or liability. The deferred tax asset related to
these losses increased in 1997 as a result of the dramatic devaluation of the
Philippine peso relative to the U.S. dollar. The Company's ability to utilize
these assets depends on the timing of the settlement of the related assets or
liabilities and the amount of taxable income recognized within the Philippine
statutory carryforward limit of three years. Accordingly, a valuation allowance
has been established in 1997 for a portion of the related deferred tax assets.

The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------ --------
<S> <C> <C>
Deferred tax assets (liabilities):
Retirement benefits.................................... $ 888 $ 816
Receivables............................................ 344 227
Inventories............................................ 1,057 6,509
Unrealized foreign exchange losses..................... 398 37,447
Unrealized foreign exchange gains...................... (614) (9,084)
Other.................................................. 225 98
------ --------
Net deferred tax asset................................. 2,298 36,013
Valuation allowance.................................... -- (22,000)
------ --------
Net deferred tax asset................................. $2,298 $ 14,013
====== ========
</TABLE>

Non-U.S. income before taxes and minority interest of the Company was
$23,800, $20,420 and $32,920 in 1995, 1996 and 1997, respectively.

F-18
<PAGE> 96
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

At December 31, 1996 and 1997 current deferred tax assets of $1,919 and
$13,439, respectively, are included in other current assets and noncurrent
deferred tax assets of $379 and $574, respectively, are included in other assets
in the combined balance sheet. The Company's net deferred tax assets include
amounts which management believes are realizable through future taxable income.

The Company's tax returns have been examined through 1993 in the
Philippines and through 1994 in the U.S. The recorded provision for open years
is subject to changes upon final examination of these tax returns. Changes in
the mix of income from the Company's foreign subsidiaries, expiration of tax
holidays and changes in tax laws or regulations could result in increased
effective tax rates for the Company.

At December 31, 1997, the financial reporting basis of AEI's net assets
were greater than the tax basis of the net assets by approximately $5,200. In
connection with the Offerings, the Company and the stockholders of AEI will
enter into a Tax Indemnification Agreement providing that the Company and AEI
will be indemnified by such stockholders, with respect to their proportionate
share of any federal or state corporate income taxes attributable to the failure
of AEI to qualify as an S Corporation for any period or in any jurisdiction for
which S Corporation status was claimed through the date AEI terminates its S
Corporation status. The Tax Indemnification Agreement will also provide that the
Company and AEI will indemnify the stockholders if such stockholders are
required to include in income additional amounts attributable to taxable years
on or before the date AEI terminates its S Corporation status as to which AEI
filed or files tax returns claiming status as an S Corporation.

11. RELATED-PARTY TRANSACTIONS

At December 31, 1997, the Company owned 8.1% of the outstanding stock of
AICL (see Note 6), and AICL owned 40% of AAP. After the Offerings (see Note 16)
the Company intends to purchase AICL's interest in AAP for approximately
$34,000. In 1996 and 1997, approximately 72% and 68%, respectively, of the
Company's net revenues (see Note 1) were derived from services performed for the
Company by AICL, a Korean public company in which the Company and certain of the
Company's principal stockholders hold a minority interest. By the terms of a
long-standing agreement, the Company has been responsible for marketing and
selling AICL's semiconductor packaging and test services, except to customers in
Korea and certain customers in Japan to whom AICL has historically sold such
services directly. The Company has worked closely with AICL in developing new
technologies and products. The Company has recently entered into five-year
supply agreements with AICL giving the Company the first right to market and
sell substantially all of AICL's packaging and test services and the exclusive
right to market and sell all of the wafer output of AICL's new wafer foundry.
The Company's business, financial condition and operating results have been and
will continue to be significantly dependent on the ability of AICL to
effectively provide the contracted services on a cost-efficient and timely
basis. The termination of the Company's relationship with AICL for any reason,
or any material adverse change in AICL's business resulting from
underutilization of its capacity, the level of its debt and its guarantees of
affiliate debt, labor disruptions, fluctuations in foreign exchange rates,
changes in governmental policies, economic or political conditions in Korea or
any other change could have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company has obtained a significant portion of its financing from
financing arrangements provided by Anam USA, Inc. ("AUSA"), AICL's wholly-owned
financing subsidiary. A majority of the amount due to AUSA represents
outstanding amounts under financing obtained by AUSA for the benefit of the
Company with the balance representing payables to AUSA for packaging and service
charges paid to AICL. Based on guarantees provided by AICL, AUSA obtains for the
benefit of the Company a continuous series of short-term financing arrangements
which generally are less than six months in duration, and typically are less
than two months in duration. Because of the short-term nature of these loans,
the flows of cash to and from AUSA under this arrangement are significant.
Purchases from AICL through AUSA were $354,062, $460,282 and

F-19
<PAGE> 97
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

$527,858 for 1995, 1996 and 1997, respectively. Charges from AUSA for interest
and bank charges were $4,484, $7,074 and $6,002 for 1995, 1996 and 1997,
respectively. Amounts payable to AICL and AUSA were $252,221, and $156,350 at
December 31, 1996 and 1997, respectively.

AICL's ability to continue to provide services to the Company will depend
on AICL's financial condition and performance. AICL currently has a significant
amount of debt relative to its equity, which debt the Company expects will
continue to increase in the foreseeable future. The Company is advised that
AICL, as a public company in Korea, has published its most recent annual
consolidated financial statements as of December 31, 1996, and that AICL has
prepared preliminary consolidated financial statements as of December 31, 1997.
These consolidated financial statements are prepared on the basis of Korean
GAAP, which differs from U.S. GAAP. U.S. GAAP financial statements are not
available (See Note 6). As of December 31, 1997, AICL, on a consolidated basis,
had current liabilities of approximately W2,124 billion, including approximately
W1,591 billion of short-term borrowings and approximately W121 billion of
current maturities of long-term debt, and had long-term liabilities of
approximately W1,737 billion, including approximately W737 billion of long-term
debt and approximately W862 billion of long-term capital lease obligations. As
of such date, the total shareholders' equity of AICL amounted to approximately
W75 billion. The deterioration of the Korean economy in recent months and the
resulting liquidity crisis in Korea have led to sharply higher domestic interest
rates and reduced opportunities for refinancing or refunding maturing debts as
financial institutions in Korea, which are experiencing financial difficulties,
are increasingly looking to limit their lending, particularly to highly
leveraged companies, and to increase their reserves and provisions for non-
performing assets. Therefore, there can be no assurance that AICL will be able
to refinance its existing loans or obtain new loans, or continue to make
required interest and principal payments on such loans or otherwise comply with
the terms of its loan agreements. Any inability of AICL to obtain financing or
generate cash flow from operations sufficient to fund its capital expenditure,
debt service and repayment and other working capital and liquidity requirements
could have a material adverse effect on AICL's ability to continue to provide
services and otherwise fulfill its obligations to the Company.

As of December 31, 1997, AICL and its consolidated subsidiaries were
contingently liable under guarantees in respect of debt of its non-consolidated
subsidiaries and affiliates in the aggregate amount of approximately W857
billion. As of December 31, 1997, such guarantees included those in respect of
all of AUSA's debt totaling $319,200, $176,250 of the Company's debt to banks
and the Company's obligations under a receivables sales arrangement (see Note
2). The Company has met a significant portion of its financing needs through
financing arrangements obtained by AUSA for the benefit of the Company based on
guarantees provided by AICL. There can be no assurance that AUSA will be able to
obtain additional guarantees, if necessary, from AICL. Further, a deterioration
in AICL's financial condition could trigger defaults under AICL's guarantees,
causing acceleration of such loans. In addition, as an overseas subsidiary of
AICL, AUSA was formed with the approval of the Bank of Korea. If the Bank of
Korea were to withdraw such approval, or if AUSA otherwise ceased operations for
any reason, the Company and AICL would be required to meet their financing needs
through alternative arrangements. There can be no assurance that the Company or
AICL will be able to obtain alternative financing on acceptable terms or at all.
In addition, if any relevant subsidiaries or affiliates of AICL were to fail to
make interest or principal payments or otherwise default under their debt
obligations guaranteed by AICL, AICL could be required under its guarantees to
repay such debt, which event could have a material adverse effect on its
financial condition and results of operations.

Anam Engineering and Construction, an affiliate of AICL, built the
packaging facility for AAAP in the Philippines. Payments to Anam Engineering and
Construction were $22,167 and $3,844 in 1996 and 1997, respectively. Anam
Precision Equipment and Anam Instruments manufacture certain equipment used by
the Philippine operations. Payments to Anam Precision Equipment and Anam
Instruments were $6,652 and

F-20
<PAGE> 98
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

$4,211 in 1996 and 1997, respectively. The Company purchases direct materials
from Anam S&T. Payments to Anam S&T were approximately $16,400, $27,300 and
$26,000 during 1995, 1996 and 1997, respectively.

During 1996, the Company extended guarantees on behalf of an affiliate to
vendors used by this affiliate. Outstanding guarantees as of December 31, 1996
and 1997 were $25,100 and $24,655 respectively. Amounts guaranteed under this
agreement fluctuate due to the cyclical nature of the affiliate's retail
business. Balances guaranteed at December 31 are generally the largest.

The Company has executed a surety and guarantee agreement on behalf of an
affiliate. The Company has unconditionally guaranteed the affiliate's obligation
under a $17,000 line of credit and a $9,000 term loan note. As of December 31,
1997, there was $750 outstanding under the line of credit and $9,000 outstanding
under the term loan note. The Company has also unconditionally guaranteed
another affiliate's obligation under a $4,000 term loan agreement and a $1,000
line of credit. As of December 31, 1997, there was $3,800 outstanding under the
term loan and no amounts outstanding under the line of credit.

A principal stockholder of the Company has extended guarantees on behalf of
the Company in the amount of $87,000 at December 31, 1997. Also in 1997, a
company controlled by this stockholder purchased investments in the amount of
$49,740 (see Note 6).

The Company leases office space in West Chester, PA from certain
stockholders of the Company. The lease expires in 2006. The Company has the
option to extend the lease for an additional 10 years through 2016. On September
11, 1997, the office previously being leased in Chandler, Arizona was purchased
from certain stockholders of the Company. The total purchase price of the
building ($5,710) represents the carrying value to the stockholders. Amounts
paid for these leases in 1996 and 1997 were $1,343 and $1,458, respectively.

At December 31, 1996 and 1997, the Company had advances and notes
receivable from affiliates other than AICL and AUSA of $22,988 and $36,501,
respectively. Realization of these notes is dependent upon the ability of the
affiliates to repay the notes. In management's opinion, these receivables are
recorded at the net realizable value.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate methodologies;
however, considerable judgment is required in interpreting market data to
develop the estimates for fair value. Accordingly, these estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. Certain of these financial instruments are with major
financial institutions and expose the Company to market and credit risks and may
at times be concentrated with certain counterparties or groups of
counterparties. The creditworthiness of counterparties is continually reviewed,
and full performance is anticipated.

The methods and assumptions used to estimate the fair value of significant
classes of financial instruments is set forth below:

Available for sale investments. The fair value of these financial
instruments was estimated based on market quotes, recent offerings of similar
securities, current and projected financial performance of the company and net
asset positions.

Short-term borrowings. Short-term borrowings have variable rates that
reflect currently available terms and conditions for similar borrowings. The
carrying amount of this debt is a reasonable estimate of fair value.

Long-term debt and due to affiliates. Long-term debt and due to affiliates
have variable rates that reflect currently available terms and conditions for
similar debt. The carrying amount of this debt is a reasonable estimate of fair
value.

F-21
<PAGE> 99
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

13. COMMITMENTS AND CONTINGENCIES

The Company is involved in various claims incidental to the conduct of its
business. Based on consultation with legal counsel, management does not believe
that any claims to which the Company is a party will have a material adverse
effect on the Company's financial condition or results of operations.

Future minimum lease payments under operating leases that have initial or
remaining noncancelable lease terms in excess of one year at December 31, 1997,
are:

<TABLE>
<S> <C>
1998............................................... $ 7,805
1999............................................... 7,230
2000............................................... 6,463
2001............................................... 5,689
2002............................................... 2,338
Thereafter......................................... 36,404
-------
Total.................................... $65,929
=======
</TABLE>

Rent expense amounted to $3,692, $5,520 and $6,709 for 1995, 1996 and 1997,
respectively.

The Company has various purchase commitments for materials, supplies and
capital equipment incidental to the ordinary conduct of business. As of December
31, 1997 the Company had commitments for capital equipment of approximately
$27,000. In the aggregate, such commitments are not at prices in excess of
current market.

14. ACQUISITION OF AMKOR ANAM TEST SERVICES, INC.

On September 30, 1996, AEI and a principal stockholder each acquired 50% of
the outstanding common stock of Amkor Anam Test Services, Inc. (AATS), formerly
Navell Test Consultants, Inc., a provider of test engineering services for the
semiconductor industry located in San Jose, California, for approximately
$2,860. Subsequent to September 30, 1996, AEI purchased the 50% interest owned
by a principal stockholder at the stockholder's original cost. The acquisition
was accounted for using the purchase method of accounting and the results of
AATS' operations are included in the Company's combined statements of income
effective October 1, 1996. Accordingly, the total purchase price has been
allocated to the combined assets and liabilities based upon their estimated
respective fair values. This acquisition resulted in goodwill of approximately
$2,356, which is being amortized over 20 years.

F-22
<PAGE> 100
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

15. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company is primarily engaged in one industry segment, namely, the
packaging and testing of integrated circuits. Financial information, summarized
by geographic area, is as follows:

<TABLE>
<CAPTION>
UNITED
STATES EUROPE PHILIPPINES ELIMINATIONS COMBINED
---------- -------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Net revenues from unaffiliated
customers.................. $1,258,110 $197,651 $ -- $ -- $1,455,761
Net revenues from
affiliates................. -- -- 256,895 (256,895) --
---------- -------- -------- --------- ----------
Total net revenues............ 1,258,110 197,651 256,895 (256,895) 1,455,761
Income before income taxes and
minority interest.......... 28,086 23,522 9,398 -- 61,006
Identifiable assets........... 352,503 21,873 506,397 (176,134) 704,639
Corporate assets.............. 146,299
----------
Total assets.......... $ 850,938
==========
Year ended December 31, 1996:
Net revenues from unaffiliated
customers.................. $1,013,182 $157,819 $ -- $ -- $1,171,001
Net revenues from
affiliates................. -- -- 198,637 (198,637) --
---------- -------- -------- --------- ----------
Total net revenues............ 1,013,182 157,819 198,637 (198,637) 1,171,001
Income before income taxes and
minority interest.......... 22,592 12,473 7,947 -- 43,012
Identifiable assets........... 245,781 19,422 424,653 (91,552) 598,304
Corporate assets.............. 199,309
----------
Total assets.......... $ 797,613
==========
Year ended December 31, 1995:
Net revenues from unaffiliated
customers.................. $ 792,285 $140,097 $ -- $ -- $ 932,382
Net revenues from
affiliates................. -- -- 128,164 (128,164) --
---------- -------- -------- --------- ----------
Total net revenues............ 792,285 140,097 128,164 (128,164) 932,382
Income before income taxes and
minority interest.......... 43,223 13,019 10,781 -- 67,023
Identifiable assets........... 235,707 18,699 270,185 (100,385) 424,206
Corporate assets.............. 211,662
----------
Total assets.......... $ 635,868
==========
</TABLE>

Sales between affiliates are priced at customer selling price less material
costs provided by the segment, less a sales commission. Net revenues from
unaffiliated customers for the United States include $109,532, $160,507 and
$208,062 of revenues from unaffiliated foreign customers for 1995, 1996 and
1997, respectively. Identifiable assets are those assets that can be directly
associated with a particular geographic area. Corporate assets are those assets
which are not directly associated with a particular geographic area and consist
primarily of cash and cash equivalents, investments and advances or loans to
another geographic segment.

F-23
<PAGE> 101
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

16. SUBSEQUENT EVENTS

On , 1998, Mr. and Mrs. James Kim and the Kim Family Trusts
exchanged their interests in AEI for 9,746,766 shares and 4,873,383 shares of
ATI common stock, respectively. ATI issued 67,989,851 shares of common stock in
exchange for all of the outstanding shares of AIH and its subsidiaries. Of such
shares, 19,328,234 shares, 36,376,617 shares and 8,200,000 shares were gifted to
Mr. and Mrs. James Kim, the Kim Family Trusts and other members of Mr. Kim's
immediate family, respectively. In addition, ATI acquired all of the stock of
AKI from the Kim Family Trusts for $3,000.

Except for the acquisition of the shares of AKI which will be accounted for
as a purchase transaction, the Reorganization described above was treated
similar to a pooling of interests as it represents an exchange of equity
interests among companies under common control. The purchase price for the AKI
stock, which represents the fair value of these shares, approximates the book
value of AKI. ATI filed an amended registration statement on , 1998
with the Securities and Exchange Commission as part of a proposed plan to reduce
outstanding borrowings and to increase the stockholders' equity. ATI intends to
raise approximately $449,950 (after deducting the underwriting discount and
estimated offering expenses) from the sale of shares of common stock and
convertible notes (the "Offerings"). The convertible notes will be 1)
convertible into ATI common stock at a premium over the initial public offering
price; 2) callable in certain circumstances after three years; 3) unsecured and
subordinate to senior debt; 4) carry a coupon rate of approximately %; and
5) have a maturity of five years. Approximately $225,000 of the proceeds will be
used to reduce short-term and long-term borrowings. Approximately $105,000 of
the proceeds will be used to reduce amounts due to AUSA. In connection with the
Offerings, certain existing stockholders intend to sell approximately 5,000,000
of their shares.

The Company established stock option plans in 1998 pursuant to which
6,300,000 shares of common stock were reserved for future issuance upon the
exercise of stock options granted to employees, consultants and directors. The
options will be issued at fair value and generally will vest over five years.

After the Offerings, the Company intends to purchase AICL's 40% interest in
AAP for approximately $34,000. The Company will account for this transaction as
a purchase which will result in the elimination of the minority interest
liability reflected on the combined balance sheet and result in additional
amortization of approximately $2,500 per year.

17. PRO FORMA ADJUSTMENTS

Statement of Income

Pro forma adjustments are presented to reflect a provision for income taxes
as if AEI had not been an S Corporation for all of the periods presented. Pro
forma net income per common share is based on the weighted average number of
shares outstanding as if the Exchange had occurred at the beginning of the
period presented.

Balance Sheet

As discussed in Note 1, the Company intends to reorganize prior to the
effective date of the contemplated offering. AEI will terminate its S
Corporation status at which time additional deferred tax liabilities of $2,100
will be recorded for existing temporary differences between the book and tax
bases of assets and liabilities. If the termination of AEI's S Corporation
status would have occurred on December 31, 1997, AEI would have declared a
distribution of $27,700 of previously taxed income. The pro forma balance sheet
is presented to reflect these changes as if they occurred on December 31, 1997.

F-24
<PAGE> 102

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR SALOMON SMITH BARNEY. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATES AS OF WHICH THE INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information................. 2
Prospectus Summary..................... 3
Risk Factors........................... 8
Reorganization......................... 23
Relationship with Anam Industrial Co.,
Ltd.................................. 25
Use of Proceeds........................ 29
Dividend Policy........................ 29
Capitalization......................... 30
Selected Consolidated Financial Data... 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 34
Business............................... 44
Management............................. 59
Certain Transactions................... 65
Principal Stockholders................. 68
Description of Capital Stock........... 70
Shares Eligible for Future Sale........ 72
Plan of Distribution................... 74
Legal Matters.......................... 74
Experts................................ 74
Glossary............................... 75
Index to Combined Financial
Statements........................... F-1
</TABLE>

------------------

UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

======================================================
======================================================

COMMON STOCK
AMKOR
TECHNOLOGY, INC.

LOGO
------------

PROSPECTUS

, 1998

------------
======================================================
<PAGE> 103

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts, commissions and certain accountable expenses, payable by
the Company in connection with the sale of Common Stock being registered. All
amounts are estimates except the SEC registration fee and the Nasdaq listing
fee.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 24,780
Printing Fees and Expenses.................................. 20,000
Legal Fees and Expenses..................................... 50,000
Accounting Fees and Expenses................................ *
Miscellaneous............................................... *
--------
Total............................................. $ *
========
</TABLE>

- ---------------

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.

The Company's Amended and Restated Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permissible under
Delaware law.

The Company's Bylaws provide for the indemnification of officers, directors
and third parties acting on behalf of the Company if such person acted in good
faith and in a manner reasonably believed to be in and not opposed to the best
interest of the Company, and, with respect to any criminal action or proceeding,
the indemnified party had no reason to believe his conduct was unlawful.

The Company has entered into indemnification agreements with its directors
and executive officers, in addition to indemnification provided for in the
Company's Bylaws, and intends to enter into indemnification agreements with any
new directors and executive officers in the future.

The form of Underwriting Agreement entered into in connection with the
Company's Initial Public Offering provides for the indemnification of the
Company's directors and officers in certain circumstances as provided therein.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Prior to the Initial Public Offering, 82,610,000 shares of Common Stock
were issued to Mr. James Kim and members of his family in exchange for their
outstanding interests in the Amkor Companies. Such issuances were made pursuant
to an exemption from registration under Section 4(2) of the Securities Act of
1933, as amended. See "Reorganization" in Part I hereof. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had adequate access,
through their relationships with the Company, to information about the Company.

II-1
<PAGE> 104

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(a) Exhibits

<TABLE>
<C> <S>
2.1 Amendment and Plan of Reorganization dated , 1998
between Amkor Technology, Inc. and Amkor Electronics, Inc.**
2.2 Stock Purchase Agreement dated , 1998 between
Amkor Electronics, Inc. and the shareholders of AK
Industries, Inc.**
3.1 Certificate of Incorporation.**
3.2 Bylaws.**
4.1 Specimen Common Stock Certificate.**
4.2 Form of Indenture dated , 1998.**
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as to the legality of the securities being
registered.*
10.1 Form of Indemnification Agreement for directors and
officers.**
10.2 1998 Stock Plan and form of agreement thereunder.**
10.3 Receivables Purchase Agreement between Amkor Electronics,
Inc. and Amkor Receivables Corp., dated June 20, 1997.**
10.4 Tax Indemnification Agreement dated , 1998
between Amkor Technology, Inc., Amkor Electronics, Inc. and
certain stockholders of Amkor Technology, Inc.**
10.5 Bridge Loan Agreement between Amkor/Anam Pilipinas, Inc.,
Anam Industrial Co., Ltd. and the Korea Development Bank for
$55,000,000, dated July 1997.**
10.6 Loan Agreement between Amkor/Anam Pilipinas, Inc. and the
Korea Development Bank for $71,000,000, dated March 28,
1996.**
10.7 Loan Agreement between Amkor/Anam Pilipinas, Inc. and the
Korea Development Bank for $50,000,000, dated September 7,
1995.**
10.8 Commercial Office Lease between Chandler Corporate Center
Phase II, G.P. and Amkor Electronics, Inc., dated September
6, 1993.**
10.9 Commercial Office Lease between the 12/31/87 Trusts of Susan
Y., David D. and John T. Kim and Amkor Electronics, Inc.,
dated October 1, 1996.**
10.10 Commercial Office Lease between the 12/31/87 Trusts of Susan
Y., David D., and John T. Kim and Amkor Electronics, Inc.,
dated June 14, 1996.**
10.11 Contract of Lease between Corinthian Commercial Corporation
and Amkor/Anam Pilipinas Inc., dated October 1, 1990.**
10.12 Contract of Lease between Salcedo Sunvar Realty Corporation
and Automated Microelectronics, Inc., dated May 6, 1994.**
10.13 Lease Contract between AAP Realty Corporation and Amkor/Anam
Advanced Packaging, Inc., dated November 6, 1996.**
10.14 Immunity Agreement between Amkor Electronics, Inc. and
Motorola, Inc., dated June 30, 1993.+**
10.15 Assembly Agreement between Amkor Electronics, Inc. and Intel
Corporation, dated July 17, 1991.+**
10.16 1998 Director Option Plan and form of agreement
thereunder.**
10.17 1998 Employee Stock Purchase Plan.**
10.18 Performance Undertaking between Amkor Receivables Corp. and
Anam Industrial Co., Ltd., dated June 20, 1997.**
</TABLE>

II-2
<PAGE> 105
<TABLE>
<C> <S>
10.19 Packaging and Test Services Agreement by and among Amkor
Technology, Inc., Amkor Electronics, Inc., C.I.L. Limited,
Anam USA, Inc. and Anam Industrial Co., Ltd. dated January
1, 1998.**
10.20 Foundry Services Agreement by and among Amkor Electronics,
Inc., C.I.L. Limited, Anam Industries Co., Ltd. and Anam USA
dated as of January 1, 1998.**
10.21 Amendment to Technical Assistance Agreement dated as of
September 29, 1997 between Texas Instruments Incorporated
and Anam Industrial Co., Ltd. and related portions of
Technical Assistance Agreement dated as of January 28,
1997.+**
10.22 Registration Rights Agreement between Amkor Technology, Inc.
and Smith Barney Inc. in consideration of the Master
Securities Loan Agreement dated , 1998.**
10.23 Manufacturing and Purchase Agreement between Texas
Instruments Incorporated, Anam Industrial Co., Ltd. and
Amkor Electronics, Inc., dated as of January 1, 1998.+**
10.24 Stock Purchase Agreement dated , 1998 between
Amkor Technology, Inc. and Anam Industrial Co., Ltd.*
12.1 Ratio of Earnings to Fixed Charges.**
21.1 List of Subsidiaries of the Registrant.**
23.1 Consent of Independent Public Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).*
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
99.1 Securities Loan Agreement dated as of , 1998 between
Smith Barney Inc. and James J. Kim and Agnes C. Kim.
99.2 Custodial Undertaking in connection with Securities Loan
Agreement dated , 1998 by and among James J. Kim and
Agnes C. Kim, Smith Barney Inc. and the Chase Manhattan
Bank.
</TABLE>

- ---------------

* To be filed by amendment.

** Incorporated by reference to the Company's Registration Statement on Form S-1
filed October 6, 1997, as amended (File No. 333-37235).

+ Confidential Treatment requested as to certain portions of this exhibit.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, and will be governed by the final adjudication of such
issue.

II-3
<PAGE> 106

The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of the registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared
effective, and (2) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act.

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering; and

(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-4
<PAGE> 107

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of West
Chester, State of Pennsylvania, on the 7th day of April 1998.

AMKOR TECHNOLOGY, INC.

By: /s/ JAMES J. KIM

------------------------------------
James J. Kim
Chief Executive Officer and
Secretary

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints James J. Kim and Frank J. Marcucci
and each one of them, acting individually and without the other, as his or her
attorney-in-fact, each with full power of substitution, for him and her in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to sign any registration
statement for the same Offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ JAMES J. KIM Chief Executive Officer and April 7, 1998
- --------------------------------------------------- Chairman
James J. Kim

/s/ FRANK J. MARCUCCI Chief Financial Officer and April 7, 1998
- --------------------------------------------------- Secretary (Principal
Frank J. Marcucci Financial and Accounting
Officer)

/s/ JOHN N. BORUCH President and Director April 7, 1998
- ---------------------------------------------------
John N. Boruch

/s/ THOMAS D. GEORGE Director April 7, 1998
- ---------------------------------------------------
Thomas D. George

/s/ GREGORY K. HINCKLEY Director April 7, 1998
- ---------------------------------------------------
Gregory K. Hinckley
</TABLE>

II-5
<PAGE> 108

INDEX TO FINANCIAL STATEMENT SCHEDULES*

<TABLE>
<CAPTION>
SEQUENTIALLY
SCHEDULE NUMBERED
NUMBER DESCRIPTION OF SCHEDULES PAGE
- -------- ------------------------ ------------
<C> <S> <C>
Report of Independent Public Accountants.................... S-2
II Valuation and Qualifying Accounts........................... S-3
</TABLE>

- ---------------

* All other schedules are omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.

S-1
<PAGE> 109

ARTHUR ANDERSEN LLP

February 3, 1998 (except with respect to the sale of the investment in Anam
Industrial Co., Ltd. common stock discussed in Note 6 to the Combined Financial
Statements as to which the date is February 16, 1998)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Amkor Technology, Inc.:

We have audited in accordance with generally accepted auditing standards,
the Combined Financial Statements of Amkor Technology, Inc. and AK Investments,
Inc. and subsidiaries (See Note 1 to the Combined Financial Statements) included
in this registration statement and have issued our report thereon dated
, 1997. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. Our report on the
financial statements includes an explanatory paragraph with respect to the
ability of the Company to continue as a going concern as discussed in Note 1 to
the Combined Financial Statements. The schedule listed in the index above is
presented for the purpose of complying with the Securities and Exchange
Commissions rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

S-2
<PAGE> 110

SCHEDULE II
AMKOR TECHNOLOGY, INC.

VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END
OF PERIOD EXPENSE WRITE-OFFS OTHER OF PERIOD
---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for doubtful
accounts................ $ 487 $ 500 $ -- $ 56 $ 1,043
Year ended December 31, 1996:
Allowance for doubtful
accounts................ $ 1,043 $ 660 $ (564) $ 40 $ 1,179
Year ended December 31, 1997:
Allowance for doubtful
accounts................ $ 1,179 $ 3,490 $ (435) -- $ 4,234
</TABLE>

S-3
<PAGE> 111

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ------------------------------------------------------------ ------------
<C> <S> <C>
2.1 Amendment and Plan of Reorganization dated , 1998
between Amkor Technology, Inc. and Amkor Electronics, Inc.**
2.2 Stock Purchase Agreement dated , 1998 between
Amkor Electronics, Inc. and the shareholders of AK
Industries, Inc.**
3.1 Certificate of Incorporation.**
3.2 Bylaws.**
4.1 Specimen Common Stock Certificate.**
4.2 Form of Indenture dated , 1998.**
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as to the legality of the securities being
registered.*
10.1 Form of Indemnification Agreement for directors and
officers.**
10.2 1998 Stock Plan and form of agreement thereunder.**
10.3 Receivables Purchase Agreement between Amkor Electronics,
Inc. and Amkor Receivables Corp., dated June 20, 1997.**
10.4 Tax Indemnification Agreement dated , 1998
between Amkor Technology, Inc., Amkor Electronics, Inc. and
certain stockholders of Amkor Technology, Inc.**
10.5 Bridge Loan Agreement between Amkor/Anam Pilipinas, Inc.,
Anam Industrial Co., Ltd. and the Korea Development Bank for
$55,000,000, dated July 1997.**
10.6 Loan Agreement between Amkor/Anam Pilipinas, Inc. and the
Korea Development Bank for $71,000,000, dated March 28,
1996.**
10.7 Loan Agreement between Amkor/Anam Pilipinas, Inc. and the
Korea Development Bank for $50,000,000, dated September 7,
1995.**
10.8 Commercial Office Lease between Chandler Corporate Center
Phase II, G.P. and Amkor Electronics, Inc., dated September
6, 1993.**
10.9 Commercial Office Lease between the 12/31/87 Trusts of Susan
Y., David D. and John T. Kim and Amkor Electronics, Inc.,
dated October 1, 1996.**
10.10 Commercial Office Lease between the 12/31/87 Trusts of Susan
Y., David D., and John T. Kim and Amkor Electronics, Inc.,
dated June 14, 1996.**
10.11 Contract of Lease between Corinthian Commercial Corporation
and Amkor/Anam Pilipinas Inc., dated October 1, 1990.**
10.12 Contract of Lease between Salcedo Sunvar Realty Corporation
and Automated Microelectronics, Inc., dated May 6, 1994.**
10.13 Lease Contract between AAP Realty Corporation and Amkor/Anam
Advanced Packaging, Inc., dated November 6, 1996.**
10.14 Immunity Agreement between Amkor Electronics, Inc. and
Motorola, Inc., dated June 30, 1993.+**
10.15 Assembly Agreement between Amkor Electronics, Inc. and Intel
Corporation, dated July 17, 1991.+**
10.16 1998 Director Option Plan and form of agreement
thereunder.**
10.17 1998 Employee Stock Purchase Plan.**
</TABLE>
<PAGE> 112

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ------------------------------------------------------------ ------------
<C> <S> <C>
10.18 Performance Undertaking between Amkor Receivables Corp. and
Anam Industrial Co., Ltd., dated June 20, 1997.**
10.19 Packaging and Test Services Agreement by and among Amkor
Technology, Inc., Amkor Electronics, Inc., C.I.L. Limited,
Anam USA, Inc. and Anam Industrial Co., Ltd. dated January
1, 1998.**
10.20 Foundry Services Agreement by and among Amkor Electronics,
Inc., C.I.L. Limited, Anam Industries Co., Ltd. and Anam USA
dated as of January 1, 1998.**
10.21 Amendment to Technical Assistance Agreement dated as of
September 29, 1997 between Texas Instruments Incorporated
and Anam Industrial Co., Ltd. and related portions of
Technical Assistance Agreement dated as of January 28,
1997.+**
10.22 Registration Rights Agreement between Amkor Technology, Inc.
and Smith Barney Inc. in consideration of the Master
Securities Loan Agreement dated , 1998.**
10.23 Manufacturing and Purchase Agreement between Texas
Instruments Incorporated, Anam Industrial Co., Ltd. and
Amkor Electronics, Inc., dated as of January 1, 1998.+**
10.24 Stock Purchase Agreement dated , 1998 between
Amkor Technology, Inc. and Anam Industrial Co., Ltd.*
12.1 Ratio of Earnings to Fixed Charges.**
21.1 List of Subsidiaries of the Registrant.**
23.1 Consent of Independent Public Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).*
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
99.1 Securities Loan Agreement dated as of , 1998 between
Smith Barney Inc. and James J. Kim and Agnes C. Kim.
99.2 Custodial Undertaking in connection with Securities Loan
Agreement dated , 1998 by and among James J. Kim and
Agnes C. Kim, Smith Barney Inc. and the Chase Manhattan
Bank.
</TABLE>

- ---------------

* To be filed by amendment.

** Incorporated by reference to the Company's Registration Statement on Form S-1
filed October 6, 1997, as amended (File No. 333-37235).

+ Confidential Treatment requested as to certain portions of this exhibit.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made part of this registration
statement.

ARTHUR ANDERSEN LLP

Philadelphia, Pa.
April 6, 1998

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 90,917
<SECURITIES> 2,524
<RECEIVABLES> 107,038
<ALLOWANCES> 4,234
<INVENTORY> 102,804
<CURRENT-ASSETS> 358,422
<PP&E> 624,920
<DEPRECIATION> 197,859
<TOTAL-ASSETS> 855,592
<CURRENT-LIABILITIES> 555,292
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 90,829
<TOTAL-LIABILITY-AND-EQUITY> 855,592
<SALES> 1,455,761
<TOTAL-REVENUES> 1,455,761
<CGS> 1,242,669
<TOTAL-COSTS> 1,354,920
<OTHER-EXPENSES> 39,835
<LOSS-PROVISION> 3,490
<INTEREST-EXPENSE> 32,241
<INCOME-PRETAX> 61,006
<INCOME-TAX> 7,078
<INCOME-CONTINUING> 53,928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,281
<EPS-PRIMARY> .48
<EPS-DILUTED> .48

</TABLE>

<PAGE> 1
Exhibit 99.1

[Draft 3/20/98]

SALOMON SMITH BARNEY

Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

SECURITIES LOAN AGREEMENT

Dated as of April __, 1998

Between:

Smith Barney Inc. ("Borrower")

and

James J. Kim and Agnes C. Kim ("Lender")

This Agreement sets forth the terms and conditions under which
Lender may, from time to time, lend to Borrower certain securities against a
pledge of collateral. Capitalized terms not otherwise defined herein shall have
the meanings provided in Section 26, as amended by Schedule B.

The parties hereto agree as follows:

1. Loans of Securities.

1.1 Subject to the terms and conditions of this Agreement and the
Custodial Undertaking in Connection with Securities Loan Agreement dated the
date hereof between Borrower and Lender (a copy of which is attached hereto as
Exhibit A), Borrower or Lender may, from time to time following the
effectiveness of the registration statement provided for in the Registration
Rights Agreement dated the date hereof between Borrower and Amkor Technology,
Inc. (a copy of which is attached hereto as Exhibit B), initiate a transaction
in which Lender will lend securities to Borrower. Borrower shall initiate a Loan
by making a written request therefor to Lender, in a form agreed to by the
parties (a "Request"). Each Request shall state the amount of Loaned Securities
that Borrower wishes to borrow from Lender as a Loan hereunder.

1.2 Notwithstanding any other provision in this Agreement
regarding when a Loan commences, a Loan hereunder shall not occur until the
Loaned Securities and the Collateral therefor have been transferred in
accordance with Section 16.

1.3 WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE

<PAGE> 2

SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT
TO LOANED SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO
LENDER MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS
IN THE EVENT BORROWER FAILS TO RETURN THE LOANED SECURITIES.

2. Transfer of Loaned Securities.

2.1 Unless otherwise agreed, Lender shall transfer Loaned
Securities to Borrower hereunder on or before the Cutoff Time on the date agreed
to by Borrower and Lender for the commencement of the Loan.

2.2 Unless otherwise agreed, Borrower shall provide Lender, in
each Loan in which Lender is a Customer, with a schedule and receipt listing the
Loaned Securities. Such schedule and receipt may consist of (a) a schedule
provided to Borrower by Lender and executed and returned by Borrower when the
Loaned Securities are received, (b) in the case of securities transferred
through a Clearing Organization which provides transferors with a notice
evidencing such transfer, such notice, or (c) a confirmation or other document
provided to Lender by Borrower.

3. Collateral.

3.1 Unless otherwise agreed, Borrower shall, prior to or
concurrently with the transfer of the Loaned Securities to Borrower, but in no
case later than the close of business on the day of such transfer, transfer to
Lender Collateral with a market value at least equal to a percentage of the
market value (as determined in accordance with Section 15) of the Loaned
Securities agreed to by Borrower and Lender (which shall be not less than 100%
of the market value of the Loaned Securities) (the "Margin Percentage").

3.2 The Collateral transferred by Borrower to Lender, as adjusted
pursuant to Section 8, shall be security for Borrower's obligations in respect
of such Loan and for any other obligations of Borrower to Lender. Borrower
hereby pledges with, assigns to, and grants Lender a continuing first security
interest in, and a lien upon, the Collateral, which shall attach upon the
transfer of the Loaned Securities by Lender to Borrower and which shall cease
upon the transfer of the Loaned Securities by Borrower to Lender. In addition to
the rights and remedies given to Lender hereunder, Lender shall have all the
rights and remedies of a secured party under the New York Uniform Commercial
Code. It is understood that Lender may use or invest the Collateral, if such
consists of cash, at its own risk, but that (unless Lender is a Broker-Dealer)
Lender shall, during the term of any Loan hereunder, segregate Collateral from
all securities or other assets in its possession. Lender may pledge, repledge,
hypothecate, rehypothecate, lend, relend, sell or otherwise transfer the
Collateral, or re-register Collateral evidenced by physical certificates in any
name other than Borrower's, only (a) if Lender is Broker-Dealer or (b) in the
event of a Default by Borrower. Segregation of Collateral may be accomplished by
appropriate identification on the books and records of Lender if it is a
"financial intermediary" or a "clearing corporation" within the meaning of the
New York Uniform Commercial Code.

2
<PAGE> 3

3.3 Except as otherwise provided herein, upon transfer to Lender
of the Loaned Securities on the day a Loan is terminated pursuant to Section 5,
Lender shall be obligated to transfer the Collateral (as adjusted pursuant to
Section 8) to Borrower no later than the Cutoff Time on such day or, if such day
is not a day on which a transfer of such Collateral may be effected under
Section 16, the next day on which such a transfer may be effected.

3.4 If Borrower transfers Collateral to Lender, as provided in
Section 3.1, and Lender does not transfer the Loaned Securities to Borrower,
Borrower shall have the absolute right to the return of the Collateral; and if
Lender transfers Loaned Securities to Borrower and Borrower does not transfer
Collateral to Lender as provided in Section 3.1, Lender shall have the absolute
right to the return of the Loaned Securities.

3.5 Borrower may, upon reasonable notice to Lender (taking into
account all relevant factors, including industry practice, the type of
Collateral to be substituted and the applicable method of transfer), substitute
Collateral for Collateral securing any Loan or Loans; provided, however, that
such substituted Collateral shall (a) consist only of cash, securities or other
property that Borrower and Lender agreed would be acceptable Collateral prior to
the Loan or Loans and (b) have a market value such that the aggregate market
value of such substituted Collateral, together with all other Collateral for
Loans in which the party substituting such Collateral is acting as Borrower,
shall equal or exceed the agreed upon Margin Percentage of the market value of
the Loaned Securities. Prior to the expiration of any letter of credit
supporting Borrower's obligations hereunder, Borrower shall, no later than the
Cutoff Time on the date such letter of credit expires, obtain an extension of
the expiration of such letter of credit or replace such letter of credit by
providing Lender with a substitute letter of credit in an amount at least equal
to the amount of the letter of credit for which it is substituted.

3.6 Lender acknowledges that, in connection with Loans of
Government Securities and as otherwise permitted by applicable law, some
securities provided by Borrower as Collateral under this Agreement may not be
guaranteed by the United States.

4. Fees for Loan.

4.1 Unless otherwise agreed, (a) Borrower agrees to pay Lender a
loan fee (a "Loan Fee"), computed daily on each Loan to the extent such Loan is
secured by Collateral other than cash, based on the aggregate par value (in the
case of Loans of Government Securities) or the aggregate market value (in the
case of all other Loans) of the Loaned Securities on the day for which such Loan
Fee is being computed, and (b) Lender agrees to pay Borrower a fee or rebate (a
"Cash Collateral Fee") on Collateral consisting of cash, computed daily based on
the amount of cash held by Lender as Collateral, in the case of each of the Loan
Fee and the Cash Collateral Fee at such rates as Borrower and Lender may agree.
Except as Borrower and Lender may otherwise agree (in the event that cash
Collateral is transferred by clearing house funds or otherwise), Loan Fees shall
accrue from and including the date on which the Loaned Securities are
transferred to Borrower to, but excluding, the date on which such Loaned
Securities are returned to Lender, and Cash Collateral Fees shall accrue from
and including the date on which

3
<PAGE> 4

the cash Collateral is transferred to Lender to, but excluding, the date on
which such cash Collateral is returned to Borrower.

4.2 Unless otherwise agreed, any Loan Fee or Cash Collateral Fee
payable hereunder shall be payable:

(a) in the case of any Loan of securities other than Government
Securities, upon the earlier of (i) the fifteenth day of the
month following the calendar month in which such fee was incurred
or (ii) the termination of all Loans hereunder (or, if a transfer
of cash in accordance with Section 16 may not be effected on such
fifteenth day or the day of such termination, as the case may be,
the next day on which such a transfer may be effected); and

(b) in the case of any Loan of Government Securities, upon the
termination of such Loan.

Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower
immediately in the event of a Default hereunder by Borrower and all Cash
Collateral Fees shall be payable immediately by Lender in the event of a Default
by Lender.

5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may terminate
a Loan on any Business Day by giving notice to Lender and transferring the
Loaned Securities to Lender before the Cutoff Time on such Business Day, and (b)
Lender may terminate a Loan on a termination date established by notice given to
Borrower prior to the close of business on a Business Day. The termination date
established by a termination notice given by Lender to Borrower shall be a date
no earlier than the standard settlement date for trades of the Loaned Securities
entered into on the date of such notice, which date shall, unless Borrower and
Lender agree to the contrary, be (i) in the case of Government Securities, the
next Business Day following such notice and (ii) in the case of all other
securities, the third Business Day following such notice. Unless otherwise
agreed, Borrower shall, on or before the Cutoff Time on the termination date of
a Loan, transfer the Loaned Securities to Lender; provided, however, that upon
such transfer by Borrower, Lender shall transfer the Collateral (as adjusted
pursuant to Section 8) to Borrower in accordance with Section 3.3.

6. Rights of Borrower in Respect of the Loaned Securities. Except as set forth
in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and Lender, until
Loaned Securities are required to be redelivered to Lender upon termination of a
Loan hereunder, Borrower shall have all of the incidents of ownership of the
Loaned Securities, including the right to transfer the Loaned Securities to
others. Lender hereby waives the right to vote, or to provide any consent or to
take any similar action with respect to, the Loaned Securities in the event that
the record date or deadline for such vote, consent or other action falls during
the term of the Loan.

7. Dividends, Distributions, Etc.

7.1 Lender shall be entitled to receive all distributions made on
or in respect of the Loaned Securities which are not otherwise received by
Lender, to the full extent it would be

4
<PAGE> 5

so entitled if the Loaned Securities had not been lent to Borrower, including,
but not limited to: (a) cash and all other property, (b) stock dividends, (c)
securities received as a result of split ups of the Loaned Securities and
distributions in respect thereof, (d) interest payments, and (e) all rights to
purchase additional securities.

7.2 Any cash distributions made on or in respect of the Loaned
Securities, which Lender is entitled to receive pursuant to Section 7.1, shall
be paid by the transfer of cash to Lender by Borrower, on the date any such
distribution is paid, in an amount equal to such cash distribution, so long as
Lender is not in Default at the time of such payment. Non-cash distributions
received by Borrower shall be added to the Loaned Securities on the date of
distribution and shall be considered such for all purposes, except that if the
Loan has terminated, Borrower shall forthwith transfer the same to Lender.

7.3 Borrower shall be entitled to receive all cash distributions
made on or in respect of non-cash Collateral which are not otherwise received by
Borrower, to the full extent it would be so entitled if the Collateral had not
been transferred to Lender. Any distributions of cash made on or in respect of
such Collateral which Borrower is entitled to receive hereunder shall be paid by
the transfer of cash to Borrower by Lender, on the date any such distribution is
paid, in an amount equal to such cash distribution, so long as Borrower is not
in Default at the time of such payment.

7.4 (a) Unless otherwise agreed, if (i) Borrower is required to
make a payment (a "Borrower Payment") with respect to cash distributions on
Loaned Securities under Sections 7.1 and 7.2 ("Securities Distributions"), or
(ii) Lender is required to make a payment (a "Lender Payment") with respect to
cash distributions on Collateral under Section 7.3 ("Collateral Distributions"),
and (iii) Borrower or Lender, as the case may be ("Payor"), shall be required by
law to collect any withholding or other tax, duty, fee, levy or charge required
to be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"),
then Payor shall (subject to subsections (b) and (c) below), pay such additional
amounts as may be necessary in order that the net amount of the Borrower Payment
or Lender Payment received by the Lender or Borrower, as the case may be
("Payee"), after payment of such Tax equals the net amount of the Securities
Distribution or Collateral Distribution that would have been received if such
Securities Distribution or Collateral Distribution had been paid directly to the
Payee.

(b) No additional amounts shall be payable to a Payee under
subsection (a) above to the extent that Tax would have been imposed on a
Securities Distribution or Collateral Distribution paid directly to the Payee.

(c) No additional amounts shall be payable to a Payee under
subsection (a) above to the extent that such Payee is entitled to an exemption
from, or reduction in the rate of, Tax on a Borrower Payment or Lender Payment
subject to the provision of a certificate or other documentation, but has failed
timely to provide such certificate or other documentation.

(d) Each party hereto shall be deemed to represent that, as of
the commencement of any Loan hereunder, no Tax would be imposed on any cash
distribution paid to it with respect to (i) Loaned Securities subject to a Loan
in which it is acting as Lender or (ii)

5
<PAGE> 6

Collateral for any Loan in which it is acting as Borrower, unless such party has
given notice to the contrary to the other party hereto (which notice shall
specify the rate at which such Tax would be imposed). Each party agrees to
notify the other of any change that occurs during the term of a Loan in the rate
of any Tax that would be imposed on any such cash distributions payable to it.

7.5 To the extent that, under the provisions of Sections 7.1
through 7.4 (a) a transfer of cash or other property by Borrower would give rise
to a Margin Excess (as defined in Section 8.3 below) or (b) a transfer of cash
or other property by Lender would give rise to a Margin Deficit (as defined in
Section 8.2 below), Borrower or Lender (as the case may be) shall not be
obligated to make such transfer of cash or other property in accordance with
such Sections, but shall in lieu of such transfer immediately credit the amounts
that would have been transferable under such Sections to the account of Lender
or Borrower (as the case may be).

8. Mark to Market.

8.1 Borrower shall daily mark to market any Loan hereunder and in
the event that at the close of trading on any Business Day the market value of
the Collateral for any Loan to Borrower shall be less than 100% of the market
value of all the outstanding Loaned Securities subject to such Loan, Borrower
shall transfer additional Collateral no later than the close of the next
Business Day so that the market value of such additional Collateral, when added
to the market value of the other Collateral for such Loan, shall equal 100% of
the market value of the Loaned Securities.

8.2 In addition to any rights of Lender under Section 8.1, in the
event that at the close of trading on any Business Day the aggregate market
value of all Collateral for Loans by Lender shall be less than the Margin
Percentage of the market value of all the outstanding Loaned Securities subject
to such Loans (a "Margin Deficit"), Lender may, by notice to Borrower, demand
that Borrower transfer to Lender additional Collateral so that the market value
of such additional Collateral, when added to the market value of all other
Collateral for such Loans, shall equal or exceed the agreed upon Margin
Percentage of the market value of the Loaned Securities. Unless otherwise
agreed, such transfer is to be made no later than the close of the next Business
Day following the day of Lender's notice to Borrower.

8.3 In the event that at the close of trading on any Business Day
the market value of all Collateral for Loans to Borrower shall be greater than
the Margin Percentage of the market value of all the outstanding Loaned
Securities subject to such Loans (a "Margin Excess"), Borrower may, by notice to
Lender, demand that Lender transfer to Borrower such amount of the Collateral
selected by Borrower so that the market value of the Collateral for such Loans,
after deduction of such amounts, shall thereupon not exceed the Margin
Percentage of the market value of the Loaned Securities. Unless otherwise
agreed, such transfer is to be made no later than the close of the next Business
Day following the day of Borrower's notice to Lender.

8.4 Borrower and Lender may agree, with respect to one or more
Loans hereunder, to mark the values to market pursuant to Sections 8.2 and 8.3
by separately valuing the Loaned Securities lent and the Collateral given in
respect thereof on a Loan-by-Loan basis.

6
<PAGE> 7

8.5 Borrower and Lender may agree, with respect to any or all
Loans hereunder, that the respective rights of Lender and Borrower under
Sections 8.2 and 8.3 may be exercised only where a Margin Excess or Margin
Deficit exceeds a specified dollar amount or a specified percentage of the
market value of the Loaned Securities under such Loans (which amount or
percentage shall be agreed to by Borrower and Lender prior to entering into any
such Loans).

9. Representations. Each party to this Agreement hereby makes the following
representations and warranties, which shall continue during the term of any Loan
hereunder:

9.1 Each party hereto represents and warrants that (a) it has the
power to execute and deliver this Agreement, to enter into the Loans
contemplated hereby and to perform its obligations hereunder; (b) it has taken
all necessary action to authorize such execution, delivery and performance; and
(c) this Agreement constitutes a legal, valid and binding obligation enforceable
against it in accordance with its terms, except as the enforceability hereof may
be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance
or transfer, moratorium or other similar laws now or hereafter in effect
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).

9.2 Each party hereto represents and warrants that the execution,
delivery and performance by it of this Agreement and each Loan hereunder will at
all times comply with all applicable laws and regulations including those of
applicable regulatory and self-regulatory organizations.

9.3 Each party hereto represents and warrants that it has not
relied on the other for any tax or accounting advice concerning this Agreement
and that it has made its own determination as to the tax and accounting
treatment of any Loan and any dividends, remuneration or other funds received
hereunder.

9.4 Borrower represents and warrants that it is acting for its
own account. Lender represents and warrants that it is acting for its own
account unless it expressly specifies otherwise in writing and complies with
Section 10.3(b).

9.5 Borrower represents and warrants that (a) it has, or will
have at the time of transfer of any Collateral, the right to grant a first
security interest therein subject to the terms and conditions hereof, and (b) it
(or the person to whom it relends the Loaned Securities) is borrowing or will
borrow the Loaned Securities (except for Loaned Securities that qualify as
"exempted securities" under Regulation T of the Board of Governors of the
Federal Reserve System) for the purpose of making delivery of such securities in
the case of short sales, failure to receive securities required to be delivered,
or as otherwise permitted pursuant to Regulation T as in effect from time to
time.

9.6 Lender represents and warrants that it has, or will have at
the time of transfer of any Loaned Securities, the right to transfer the Loaned
Securities subject to the terms and conditions hereof.

7
<PAGE> 8

10. Covenants.

10.1 Each party hereto agrees and acknowledges that (a) each Loan
hereunder is a "securities contract," as such term is defined in Section 741(7)
of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each and
every transfer of funds, securities and other property under this Agreement and
each Loan hereunder is a "settlement payment" or a "margin payment," as such
terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c)
the rights given to Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities contract and the
right to set off mutual debts and claims in connection with a securities
contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy
Code. Each party hereto further agrees and acknowledges that if a party hereto
is an "insured depository institution," as such term is defined in the Federal
Deposit Insurance Act, as amended ("FDIA"), then each Loan hereunder is a
"securities contract" and "qualified financial contract," as such terms are
defined in the FDIA and any rules, orders or policy statements thereunder.

10.2 Borrower agrees to be liable as principal with respect to
its obligations hereunder.

10.3 Lender agrees either (a) to be liable as principal with
respect to its obligations hereunder or (b) to execute and comply fully with the
provisions of Annex I (the terms and conditions of which Annex are incorporated
herein and made a part hereof).

10.4 Promptly upon (and in any event within seven (7) Business
Days after) demand by Lender, Borrower shall furnish Lender with Borrower's most
recent publicly-available financial statements and any other financial
statements mutually agreed upon by Borrower and Lender. Unless otherwise agreed,
if Borrower is subject to the requirements of Rule 17a-5(c) under the Exchange
Act, it may satisfy the requirements of this Section by furnishing Lender with
its most recent statement required to be furnished to customers pursuant to such
Rule.

10.5 Except to the extent required by applicable law or
regulation or as otherwise agreed, Borrower and Lender agree that Loans
hereunder shall in no event be "exchange contracts" for purposes of the rules of
any securities exchange and that Loans hereunder shall not be governed by the
buy-in or similar rules of any such exchange, registered national securities or
other self-regulatory organization.

11. Events of Default. All Loans hereunder may, at the option of the
non-defaulting party exercised by notice to the defaulting party (which option
shall be deemed to have been exercised, even if no notice is given, immediately
upon the occurrence of an event specified in subsection (e) below), be
terminated immediately upon the occurrence of any one or more of the following
events (individually, a "Default"):

(a) if any Loaned Securities shall not be transferred to Lender upon
termination of the Loan as required by Section 5;

8
<PAGE> 9

(b) if any Collateral shall not be transferred to Borrower upon
termination of the Loan as required by Sections 3.3 and 5;

(d) if either party (i) shall fail to transfer to the other party
amounts in respect of distributions required to be transferred
by Section 7, (ii) shall have received notice of such failure
from the non-defaulting party, and (iii) shall not have cured
such default by the Cutoff Time on the next day after such
notice on which a transfer of cash may be effected in accordance
with Section 16;

(e) if (i) either party shall commence as debtor any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or seek the appointment
of a receiver, conservator, trustee, custodian or similar
official for such party or any substantial part of its property,
(ii) any such case or proceeding shall be commenced against
either party, or another shall seek such an appointment, or any
application shall be filed against either party for a protective
decree under the provisions of the Securities Investor
Protection Act of 1970, which (A) is consented to or not timely
contested by such party, (B) results in the entry of an order
for relief, such an appointment, the issuance of such a
protective decree or the entry of an order having a similar
effect, or (C) is not dismissed within 15 days, (iii) either
party shall make a general assignment for the benefit of
creditors, or (iv) either party shall admit in writing its
inability to pay its debts as they become due;

(f) if Borrower shall have been suspended or expelled from
membership or participation in any national securities exchange
or registered national securities association of which it is a
member or other self-regulatory organization to whose rules it
is subject or if it is suspended from dealing in securities by
any federal or state government agency thereof.

(g) if Borrower shall have its license, charter, or other
authorization necessary to conduct a material portion of its
business withdrawn, suspended or revoked by any applicable
federal or state government or agency thereof;

(h) if any representation made by either party in respect of this
Agreement or any Loan or Loans hereunder shall be incorrect or
untrue in any material respect during the term of any Loan
hereunder;

(i) if either party notifies the other, orally or in writing, of its
inability to or its intention not to perform its obligations
hereunder or otherwise disaffirms, rejects or repudiates any of
its obligations hereunder;

(j) if either party (i) shall fail to perform any material
obligation under this Agreement not specifically set forth in
clauses (a) through (i) above, including but not limited to the
payment of fees as required by Section 4, and the payment of

9
<PAGE> 10

transfer taxes as required by Section 14, (ii) shall have
received notice of such failure from the non-defaulting party
and (iii) shall not have cured such failure by the Cutoff Time
on the next day after such notice on which a transfer of cash
may be effected under Section 16; or

(k) if for any reason any Loan shall violate any existing applicable
law, rule, regulation, judgment, order or decree of any
government, government instrumentality or court having
jurisdiction over activities of Lender.

10
<PAGE> 11

12. Lender's Remedies. Upon the occurrence of a Default under Section 11
entitling Lender to terminate all Loans hereunder, Lender shall have the right
(without further notice to Borrower), in addition to any other remedies provided
herein or under applicable law, (a) to purchase a like amount of Loaned
Securities ("Replacement Securities") in the principal market for such
securities in a commercially reasonable manner (provided however that to the
extent a purchase of Replacement Securities by Lender would violate Section
16(b) of the Exchange Act, Lender may delay such purchase to avoid such
violation), (b) to sell any Collateral in the principal market for such
Collateral in a commercially reasonable manner and (c) to apply and set off the
Collateral and any proceeds thereof (including any amounts drawn under a letter
of credit supporting any Loan) against the payment of the purchase price for
such Replacement Securities and any amounts due to Lender under Sections 4, 7,
14 and 17. In the event Lender shall exercise such rights, Borrower's obligation
to return a like amount of the Loaned Securities shall terminate. Lender may
similarly apply the Collateral and any proceeds thereof to any other obligation
of Borrower under this Agreement, including Borrower's obligations with respect
to distributions paid to Borrower (and not forwarded to Lender) in respect of
Loaned Securities. In the event that (i) the purchase price of Replacement
Securities (plus all other amounts, if any, due to Lender hereunder) exceeds
(ii) the amount of the Collateral, Borrower shall be liable to Lender for the
amount of such excess together with interest thereon at a rate equal to (A) in
the case of purchases of Foreign Securities, LIBOR, (B) in the case of purchases
of any other securities (or other amounts, if any, due to Lender hereunder), the
Federal Funds Rate or (C) such other rate as may be specified in Schedule B, in
each case as such rate fluctuates from day to day, from the date of such
purchase until the date of payment of such excess. As security for Borrower's
obligation to pay such excess, Lender shall have, and Borrower hereby grants, a
security interest in any property of Borrower then held by or for Lender and a
right of setoff with respect to such property and any other amount payable by
Lender to Borrower. The purchase price of Replacement Securities purchased under
this Section 12 shall include, and the proceeds of any sale of Collateral shall
be determined after deduction of, broker's fees and commissions and all other
reasonable costs, fees and expenses related to such purchase or sale (as the
case may be). In the event Lender exercises its rights under this Section 12,
Lender may elect in its sole discretion, in lieu of purchasing all or a portion
of the Replacement Securities or selling all or a portion of the Collateral, to
be deemed to have made, respectively, such purchase of Replacement Securities or
sale of Collateral for an amount equal to the price therefor on the date of such
exercise obtained from a generally recognized source or the most recent closing
bid quotation from such a source. Subject to Section 19, upon the satisfaction
of all obligations hereunder, any remaining Collateral shall be returned to
Borrower.

13. Borrower's Remedies. Upon the occurrence of a Default under Section 11
entitling Borrower to terminate all Loans hereunder, Borrower shall have the
right (without further notice to Lender), in addition to any other remedies
provided herein or under applicable law, (a) to purchase a like amount of
Collateral ("Replacement Collateral") in the principal market for such
Collateral in a commercially reasonable manner, (b) to sell a like amount of the
Loaned Securities in the principal market for such securities in a commercially
reasonable manner (provided however that to the extent Lender notifies Borrower
that such sale of Loaned Securities would cause Lender to be in violation of
Section 16(b) of the Exchange Act, Borrower shall delay such sale to avoid such
violation) and (c) to apply and set off the Loaned Securities

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<PAGE> 12

and any proceeds thereof against (i) the payment of the purchase price for such
Replacement Collateral (ii) Lender's obligation to return any cash or other
Collateral and (iii) any amounts due to Borrower under Sections 4, 7 and 17. In
such event, Borrower may treat the Loaned Securities as its own and Lender's
obligation to return a like amount of the Collateral shall terminate; provided,
however, that Lender shall immediately return any letters of credit supporting
any Loan upon the exercise or deemed exercise by Borrower of its termination
rights under Section 11. Borrower may similarly apply the Loaned Securities and
any proceeds thereof to any other obligation of Lender under this Agreement,
including Lender's obligations with respect to distributions paid to Lender (and
not forwarded to Borrower) in respect of Collateral. In the event that (i) the
sales price received from such Loaned Securities is less than (ii) the purchase
price of Replacement Collateral (plus the amount of any cash or other Collateral
not replaced by Borrower and all other amounts, if any, due to Borrower
hereunder), Lender shall be liable to Borrower for the amount of any such
deficiency, together with interest on such amounts at a rate equal to (A) in the
case of Collateral consisting of Foreign Securities, LIBOR, (B) in the case of
Collateral consisting of any other securities (or other amounts due, if any, to
Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be
specified in Schedule B, in each case as such rate fluctuates from day to day,
from the date of such sale until the date of payment of such deficiency. As
security for Lender's obligation to pay such deficiency, Borrower shall have,
and Lender hereby grants, a security interest in any property of Lender then
held by or for Borrower and a right of setoff with respect to such property and
any other amount payable by Borrower to Lender. The purchase price of any
Replacement Collateral purchased under this Section 13 shall include, and the
proceeds of any sale of Loaned Securities shall be determined after deduction
of, broker's fees and commissions and all other reasonable costs, fees and
expenses related to such purchase or sale (as the case may be). In the event
Borrower exercises its rights under this Section 13, Borrower may elect in its
sole discretion, in lieu of purchasing all or a portion of the Replacement
Collateral or selling all or a portion of the Loaned Securities, to be deemed to
have made, respectively, such purchase of Replacement Collateral or sale of
Loaned Securities for an amount equal to the price therefor on the date of such
exercise obtained from a generally recognized source or the most recent closing
bid quotation from such a source. Subject to Section 19, upon the satisfaction
of all Lender's obligations hereunder, any remaining Loaned Securities (or
remaining cash proceeds thereof) shall be returned to Lender. Without limiting
the foregoing, the parties hereto agree that they intend the Loans hereunder to
be loans of securities. If, however, any Loan is deemed to be a loan of money by
Borrower to Lender, then Borrower shall have, and Lender shall be deemed to have
granted, a security interest in the Loaned Securities and the proceeds thereof.

14. Transfer Taxes. All transfer taxes with respect to the transfer of the
Loaned Securities by Lender to Borrower and by Borrower to Lender upon
termination of the Loan shall be paid by Borrower.

15. Market Value.

15.1 Unless otherwise agreed, if the principal market for the
securities to be valued is a national securities exchange in the United States,
their market value shall be determined by their last sale price on such exchange
on the preceding Business Day or, if there

12
<PAGE> 13

was no sale on that day, by the last sale price on the next preceding Business
Day on which there was a sale on such exchange, all as quoted on the
Consolidated Tape or, if not quoted on the Consolidated Tape, then as quoted by
such exchange.

15.2 Except as provided in Section 15.3 or 15.4 or as otherwise
agreed, if the principal market for the securities to be valued is the
over-the-counter market, their market value shall be determined as follows. If
the securities are quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), their market value shall be the closing
sale price on NASDAQ on the preceding Business Day or, if the securities are
issues for which last sale prices are not quoted on NASDAQ, the closing bid
price on such day. If the securities to be valued are not quoted on NASDAQ,
their market value shall be the highest bid quotation as quoted in any of The
Wall Street Journal, the National Quotation Bureau pink sheets, the Salomon
Brothers quotation sheets, quotations sheets of registered market makers and, if
necessary, dealers' telephone quotations on the preceding Business Day. In each
case, if the relevant quotation did not exist on such day, then the relevant
quotation on the next preceding Business Day in which there was such a quotation
shall be the market value.

15.3 Unless otherwise agreed, if the securities to be valued are
Government Securities, their market value shall be the average of the bid and
ask prices as quoted on Prophesy at 3:30 P.M. New York time on the Business Day
preceding the date on which such determination is made. If the securities are
not so quoted on such day, their market value shall be determined as of the next
preceding Business Day on which they were so quoted. If the securities to be
valued are Government Securities that are not quoted on Prophesy, their market
value shall be determined as of the close of business on the preceding Business
Day in accordance with market practice for such securities.

15.4 Unless otherwise agreed, if the securities to be valued are
Foreign Securities, their market value shall be determined as of the close of
business on the preceding Business Day in accordance with market practice in the
principal market for such securities.

15.5 Unless otherwise agreed, the market value of a letter of
credit shall be the undrawn amount thereof.

15.6 All determinations of market value under Sections 15.1,
15.2, 15.3 and 15.4 shall include, where applicable, accrued interest to the
extent not already included therein (other than any interest transferred to the
other party pursuant to Section 7), unless market practice with respect to the
valuation of such securities in connection with securities loans is to the
contrary. All determinations of market value that are required to be made at the
close of trading on any Business Day pursuant to Section 8 or otherwise
hereunder shall be made as if being determined at the commencement of trading on
the next Business Day. The determinations of market value provided for in this
Section 15 shall apply for all purposes under this Agreement, except for
purposes of Sections 12 and 13.

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<PAGE> 14

16. Transfers.

16.1 All transfers of securities hereunder shall be by (a)
physical delivery of certificates representing such securities together with
duly executed stock and bond transfer powers, as the case may be, with
signatures guaranteed by a bank or a member firm of the New York Stock Exchange,
Inc., (b) transfer on the books of a Clearing Organization, or (c) such other
means as Borrower and Lender may agree. In every transfer of securities
hereunder, the transferor shall take all steps necessary (i) to effect a
"transfer" under Section 8-313 of the New York Uniform Commercial Code or, where
applicable, under any U.S. federal regulation governing transfers of securities
and (ii) to provide the transferee with comparable rights under any applicable
foreign law or regulation.

16.2 All transfers of cash Collateral hereunder shall be by (a)
wire transfer in immediately available, freely transferable funds or (b) such
other means as Borrower and Lender may agree. All other transfers of cash
hereunder shall be made in accordance with the preceding sentence or by delivery
of a certified or official bank check representing next-day New York Clearing
House Funds.

16.3 All transfers of a letter of credit from Borrower to Lender
shall be made by physical delivery to Lender of an irrevocable letter of credit
issued by a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act.
Transfer of a letter of credit from Lender to Borrower shall be made by causing
such letter of credit to be returned or by causing the amount of such letter of
credit to be reduced to the amount required after such transfer.

16.4 A transfer of securities, cash or letters of credit may be
effected under this Section 16 on any day except (a) a day on which the
transferee is closed for business at its address set forth in Schedule A hereto
or (b) a day on which a Clearing Organization or wire transfer system is closed,
if the facilities of such Clearing Organization or wire transfer system are
required to effect such transfer.

17. Contractual Currency.

17.1 Borrower and Lender agree that: (a) any payment in respect
of a distribution under Section 7 shall be made in the currency in which the
underlying distribution of cash was made; (b) any return of cash shall be made
in the currency in which the underlying transfer of cash was made and (c) any
other payment of cash in connection with a Loan under this Agreement shall be in
the currency agreed upon by Borrower and Lender in connection with such Loan
(the currency established under clause (a), (b) or (c) hereinafter referred to
as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any
such payment may, at its option, accept tender thereof in any other currency;
provided, however, that, to the extent permitted by applicable law, the
obligation of the payor to make such payment will be discharged only to the
extent of the amount of Contractual Currency that such payee may, consistent
with normal banking procedures, purchase with such other currency (after
deduction of any premium and costs of exchange) on the banking day next
succeeding its receipt of such currency.

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<PAGE> 15

17.2 If for any reason the amount in the Contractual Currency
received under Section 17.1, including amounts received after conversion of any
recovery under any judgment or order expressed in a currency other than the
Contractual Currency, falls short of the amount in the Contractual Currency due
in respect of this Agreement, the party required to make the payment will
(unless a Default has occurred and such party is the non-defaulting party) as a
separate and independent obligation and to the extent permitted by applicable
law, immediately pay such additional amount in the Contractual Currency as may
be necessary to compensate for the shortfall.

17.3 If for any reason the amount in the Contractual Currency
received under Section 17.1 exceeds the amount in the Contractual Currency due
in respect of this Agreement, then the party receiving the payment will (unless
a Default has occurred and such party is the non-defaulting party) refund
promptly the amount of such excess.

18. ERISA. Lender shall, if any of the securities transferred to the Borrower
hereunder for any Loan have been or shall be obtained, directly or indirectly,
from or using the assets of any Plan, so notify Borrower in writing upon the
execution of the Agreement or upon initiation of such Loan under Section 1.1. If
Lender so notifies Borrower, then Borrower and Lender shall conduct the Loan in
accordance with the terms and conditions of Department of Labor Prohibited
Transaction Exemption 81-6 (46 Fed. Reg. 7527, Jan. 23, 1981; as amended, 52
Fed. Reg. 18754, May 19, 1987), or any successor thereto (unless Borrower and
Lender have agreed prior to entering into a Loan that such Loan will be
conducted in reliance on another exemption, or without relying on any exemption,
from the prohibited transaction provisions of Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, and Section 4975 of the
Internal Revenue Code of 1986, as amended). Without limiting the foregoing and
notwithstanding any other provision of this Agreement, if the Loan will be
conducted in accordance with Prohibited Transaction Exemption 81-6, then:

(a) Borrower represents and warrants to Lender that it is either (i)
a bank subject to federal or state supervision, (ii) a
broker-dealer registered under the Exchange Act or (iii) exempt
from registration under Section 15(a)(1) of the Exchange Act as
a dealer in Government Securities.

(b) Borrower represents and warrants that, during the term of any
Loan hereunder, neither Borrower nor any affiliate of Borrower
has any discretionary authority or control with respect to the
investment of the assets of the Plan involved in the Loan or
renders investment advice (within the meaning of 29 C.F.R.
Section 2510.3-21(c)) with respect to the assets of the Plan
involved in the Loan. Lender agrees that, prior to or at the
commencement of any Loan hereunder, it will communicate to
Borrower information regarding the Plan sufficient to identify
to Borrower any person or persons that have discretionary
authority or control with respect to the investment of the
assets of the Plan involved in the Loan or that render
investment advice (as defined in the preceding sentence) with
respect to the assets of the Plan involved in the Loan. In the
event Lender fails to communicate and keep current during the
term of any Loan such information, Lender rather

15
<PAGE> 16

than Borrower shall be deemed to have made the representation
and warranty in the first sentence of this clause (b).

(i) the term "Collateral" shall mean cash, securities issued
or guaranteed by the United States government or its
agencies or instrumentalities, or irrevocable bank
letters of credit issued by a person other than Borrower
or an affiliate thereof;

(ii) prior to the making of any Loans hereunder, Borrower
shall provide Lender with (A) the most recent available
audited statement of Borrower's financial condition and
(B) the most recent available unaudited statement of
Borrower's financial condition (if more recent than the
most recent audited statement), and each Loan made
hereunder shall be deemed a representation by Borrower
that there has been no material adverse change in
Borrower's financial condition subsequent to the date of
the latest financial statements or information furnished
in accordance herewith;

(iii) the Loan may be terminated by Lender at any time,
whereupon Borrower shall deliver the Loaned Securities
to Lender within the lesser of (A) the customary
delivery period for such securities; (B) five Business
Days and (C) the time negotiated for such delivery
between Borrower and Lender; provided, however, that
Borrower and Lender may agree to a longer period only if
permitted by Prohibited Transaction Exemption 81-6; and

(iv) the Collateral transferred shall be security only for
obligations of Borrower to the Plan with respect to
Loans, and shall not be security for any obligation of
Borrower to any agent or affiliate of the Plan.

19. Single Agreement. Borrower and Lender acknowledge that, and have entered
into this Agreement in reliance on the fact that, all Loans hereunder constitute
a single business and contractual relationship and have been entered into in
consideration of each other. Accordingly, Borrower and Lender hereby agree that
payments, deliveries and other transfers made by either of them in respect of
any Loan shall be deemed to have been made in consideration of payments,
deliveries and other transfers in respect of any other Loan hereunder, and the
obligations to make any such payments, deliveries and other transfers may be
applied against each other and netted. In addition, Borrower and Lender
acknowledge that, and have entered into this Agreement in reliance on the fact
that, all Loans hereunder have been entered into in consideration of each other.
Accordingly, Borrower and Lender hereby agree that (a) each shall perform all of
its obligations in respect of each Loan hereunder, and that a default in the
performance of any such obligation by Borrower or by Lender (the "Defaulting
Party") in any Loan hereunder shall constitute a default by the Defaulting Party
under all such Loans hereunder, and (b) the non-defaulting party shall be
entitled to set off claims and apply property held by it in respect of any Loan
hereunder against obligations owing to it in respect of any other Loan with the
Defaulting Party.

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<PAGE> 17

20. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.

21. Waiver. The failure of a party to this Agreement to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers in
respect of a Default must be in writing.

22. Remedies. All remedies hereunder and all obligations with respect to any
Loan shall survive the termination of the relevant Loan, return of Loaned
Securities or Collateral and termination of this Agreement.

23. Notices and Other Communications. Unless another address is specified in
writing by the respective party to whom any notice or other communication is to
be given hereunder, all such notices or communications shall be in writing or
confirmed in writing and delivered at the respective addresses set forth in
Schedule A attached hereto. All notices shall be effective upon actual receipt,
provided, however, that if any notice shall be received by a party on a day on
which such party is not open for business at its office located at the address
set forth in Schedule A, such notice shall be deemed to have been received by
such party at the opening of business on the next day on which such party is
open for business at such address.

24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

24.1 EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A)
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH
COURT, SOLELY FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO
ENFORCE ITS OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR
ANY LOAN HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO
SO, ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS
PLACE OF RESIDENCE OR DOMICILE.

24.2 EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT
IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

25. Miscellaneous. This Agreement supersedes any other agreement between the
parties hereto concerning loans of securities between Borrower and Lender. This
Agreement shall not be assigned by either party without the prior written
consent of the other party and any attempted assignment without such consent
shall be null and void. Subject to the foregoing, this Agreement shall be
binding upon and shall ensure to the benefit of Borrower and Lender and

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<PAGE> 18

their respective heirs, representatives, successors and assigns. This Agreement
may be terminated by either party upon written notice to the other, subject only
to fulfillment of any obligations then outstanding. This Agreement shall not be
modified, except by an instrument in writing signed by the party against whom
enforcement is sought. The parties hereto acknowledge and agree that, in
connection with this Agreement and each Loan hereunder, time is of the essence.
Each provision and agreement herein shall be treated as separate and independent
from any other provision herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.

26. Definitions. For the purposes hereof:

26.1 "Broker-Dealer" shall mean any person that is a broker
(including a municipal securities broker), dealer, municipal securities dealer,
government securities broker or government securities dealer as defined in the
Exchange Act, regardless of whether the activities of such person are conducted
in the United States or otherwise require such person to register with the
Securities and Exchange Commission or other regulatory body.

26.2 "Business Day" shall mean, with respect to any Loan
hereunder, a day on which regular trading occurs in the principal market for the
Loaned Securities subject to such Loan, provided, however, that for purposes of
Section 15, such term shall mean a day on which regular trading occurs in the
principal market for the securities whose value is being determined.
Notwithstanding the foregoing, (i) for purposes of Section 8, "Business Day"
shall mean any day on which regular trading occurs in the principal market for
any Loaned Securities or for any securities Collateral under any outstanding
Loan hereunder and "next Business Day" shall mean the next day on which a
transfer of Collateral may be effected in accordance with Section 16; and (ii)
in no event shall a Saturday or Sunday be considered a Business Day.

26.3 "Clearing Organization" shall mean The Depository Trust
Company, or, if agreed to by Borrower and Lender, such other clearing agency at
which Borrower (or Borrower's agent) and Lender (or Lender's agent) maintain
accounts, or a book-entry system maintained by a Federal Reserve Bank.

26.4 "Collateral" shall mean, whether now owned or hereafter
acquired and to the extent permitted by applicable law, (a) any property which
Borrower and Lender agree shall be acceptable collateral prior to the Loan and
which is transferred to Lender pursuant to Section 3 or 8 (including as
collateral, for definitional purposes, any letters of credit mutually acceptable
to Lender and Borrower), (b) any property substituted therefor pursuant to
Section 3.5, (c) all accounts in which such property is deposited and all
securities and the like in which any cash collateral is invested or reinvested,
and (d) any proceeds of any of the foregoing. For purposes of return of
Collateral by Lender or purchase or sale of securities pursuant to Section 12 or
13, such term shall include securities of the same issuer, class and quantity as
the Collateral initially transferred by Borrower to Lender.

26.5 "Customer" shall mean any person that is a customer of
Borrower under Rule 15c3-3 under the Exchange Act or any comparable regulation
of the Secretary of the

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<PAGE> 19

Treasury under Section 15C of the Exchange Act (to the extent that Borrower is
subject to such Rule or comparable regulation).

26.6 "Cutoff Time" shall mean a time on a Business Day by which a
transfer of cash, securities or other property must be made by Borrower or
Lender to the other, as shall be agreed by Borrower and Lender in Schedule B or
otherwise orally or in writing or, in the absence of any such agreement, as
shall be determined in accordance with market practice.

26.7 "Default" shall have the meaning assigned in Section 11.

26.8 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

26.9 "Federal Funds Rate" shall mean the rate of interest
(expressed as an annual rate), as published in Federal Reserve Statistical
Release H.15(519) or any publication substituted therefor, charged for federal
funds (dollars in immediately available funds borrowed by banks on an overnight
unsecured basis) on that day or, if that day is not a banking day in New York
City, on the next preceding banking day.

26.10 "Foreign Securities" shall mean, unless otherwise agreed,
securities that are principally cleared and settled outside the United States.

26.11 "Government Securities" shall mean government securities as
defined in Section 3(a)(42)(A)-(C) of the Exchange Act.

26.12 "LIBOR" shall mean for any date, the offered rate for
deposits in U.S. dollars for a period of three months which appears on the
Reuters Screen LIBO page as of 11:00 A.M., London time, on such date (or, if at
least two such rates appear, the arithmetic mean of such rates).

26.13 "Loan" shall mean a loan of securities hereunder.

26.14 "Loaned Security" shall mean any security which is a
security as defined in the Exchange Act, transferred in a Loan hereunder until
such security (or an identical security) is transferred back to Lender
hereunder, except that, if any new or different security shall be exchanged for
any Loaned Security by recapitalization, merger, consolidation or other
corporate action, such new or different security shall, effective upon such
exchange, be deemed to become a Loaned Security in substitution for the former
Loaned Security for which such exchange is made. For purposes of return of
Loaned Securities by Borrower or purchase or sale of securities pursuant to
Section 12 or 13, such term shall include securities of the same issuer, class
and quantity as the Loaned Securities, as adjusted pursuant to the preceding
sentence.

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<PAGE> 20

26.15 "Plan" shall mean (a) any "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
which is subject to Part 4 of Subtitle B of Title I of such Act; (b) any "plan"
as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986; or (c)
any entity the assets of which are deemed to be assets of any such "employee
benefit plan" or "plan" by reason of the Department of Labor's plan asset
regulation, 29 C.F.R. Section 2510.3-101.

SMITH BARNEY INC.

By:
----------------------------------

Title:
-------------------------------

Date:
--------------------------------

JAMES J. KIM AND AGNUS C. KIM

By:
----------------------------------

Title:
-------------------------------

Date:
--------------------------------

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<PAGE> 21

SCHEDULE A

NAMES AND ADDRESSES FOR COMMUNICATIONS

SMITH BARNEY INC.
390 Greenwich Street, 4th Floor
New York, New York 10013

Attention:
Peter Grant / Suzette Dupree / John Lucciola / Nancy Sherman
Telephone: (212) 723-7611
Telefax: (212) 723-8837

JAMES J. KIM AND AGNUS C. KIM
-----------------
Telephone: ____________
Telefax: ____________

With a copy to:
Larry W. Sonsini, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Telephone: (650) 493-9300
Telefax: (650) 493-8311

A-1
<PAGE> 22

SCHEDULE B

DEFINED TERMS AND SUPPLEMENTAL PROVISIONS

1. The Cutoff Times used in this Agreement shall be as determined
in accordance with market practice with respect to the Loaned Securities in the
jurisdiction of Borrower.

2. Unless the parties agree otherwise with respect to a
particular Loan(s) hereunder, the Contractual Currency for the purposes
described in clause (c) of Section 17.1 shall be U.S. Dollars for all Loans.

3. Each party to this Agreement (such party, "Party A") agrees
that, upon the insolvency of Party A or any of its affiliates or the default of
Party A or any of its affiliates under any transaction with the other party
hereto or any of such other party's affiliates (such other party or any of its
affiliates, a "Non-Defaulting Party"), each Non-Defaulting Party may: (a)
liquidate any transaction between Party A and any Non-Defaulting Party, (b)
reduce any amounts due and owing to Party A under any transaction between Party
A and any Non-Defeating Party by setting off against such amounts any amounts
due and owing to a Non-Defaulting Party by Party A, and (c) treat all security
for, and all amounts due and owing to Party A under, any transaction between
Party A and any Non-Defaulting Party as security for all transactions between
Party A and any Non-Defaulting Party. For purposes of the foregoing, the term
"affiliate" shall not include any entity that controls or is under common
control with Salomon Smith Barney Holdings Inc., but in any event such term
shall include Salomon Smith Barney Holdings Inc. and any entity controlled by
it."

4. The maximum amount of securities that Borrower may borrow from
Lender at any point in time shall not exceed 7,000,000 shares of Amkor
Technology, Inc. common stock (subject to adjustment from time to time to
reflect subdivisions, reclassifications, stock dividends and other similar
events affecting such common stock).

5. For purposes of Section 3.1, the "Margin Percentage" shall be
[100]%.

6. Notwithstanding any contrary provision herein, Borrower shall
terminate all Loans under this Agreement not later than the third Business Day
immediately preceding the maturity date or redemption date of the [Notes (as
defined below)] and shall transfer the Loaned Securities to Lender as provided
in Section 5.

7. [The Loan Fee referenced in Section 4.1 shall be calculated at
a rate of 0.0% per annum and the Cash Collateral Fee referenced in Section 4.1
shall be calculated at a rate equal to the rate of return on the Cash Collateral
less 40 basis points; provided, that Lender agrees to invest the Cash Collateral
in accordance with Borrower's reasonable direction.]

8. The second sentence of Section 5 shall be restated as follows:

<PAGE> 23

"The termination date established by a termination notice given
by Lender to Borrower shall be a date no earlier than the
standard settlement date for trades of the Loan Securities
entered into on the date of such notice."

9. The fourth sentence of Section 25 is hereby restated as
follows:

"This Agreement shall terminate, subject to the fulfillment of
any obligations then outstanding, upon the earlier of (i) [the
first business day following the maturity date of the __%
Convertible Subordinated Notes Due 2003 issued by Amkor
Technology, Inc. under the Indenture dated April __, 1998 between
the Amkor Technology, Inc. and State Street Bank and Trust
Company of California, N.A., as trustee (the "Notes")] or (ii)
the termination date established by a written termination notice
delivered by either party to the other."

10. Clause (a) of the first sentence of Section 26.4(a) is hereby
restated as follows:

"(a) (i) cash and (ii) obligations issued or guaranteed directly
or indirectly by the United States government (or any other
property approved by Lender), in each case which are transferred
to Lender pursuant to Section 3 or 8 (including as collateral,
for definitional purposes, any letters of credit mutually
acceptable to Lender and Borrower),"

<PAGE> 1
Exhibit 99.2
[Draft 3/20/98]

CUSTODIAL UNDERTAKING IN CONNECTION
WITH SECURITIES LOAN AGREEMENT

This Custodial Undertaking In Connection With Securities Loan Agreement
(the "Agreement") is made and entered into as of the date set forth below by and
among James J. Kim and Agnes C. Kim (collectively, "Lender"), Smith Barney Inc.
("Borrower") and The Chase Manhattan Bank ("Bank").

WHEREAS, Lender and Borrower have entered into a Securities Loan
Agreement (the "Securities Loan Agreement") dated April __, 1998 which provides
for loans of certain securities ("Borrowed Securities") by Lender to Borrower
(each a "Loan"); and

WHEREAS, Lender and Borrower have requested that Bank undertake certain
agency and custodial functions in connection with certain Loans; and

WHEREAS, Bank has agreed to act as agent and custodian for Borrower and
Lender in order to effect certain Loans on their behalf, all as more
particularly set forth herein;

NOW, THEREFORE, in consideration of the mutual promises set forth herein
and intending to be legally bound hereby, the parties hereto agree as follows:

1. Definitions

(a) Account. Borrower's Account or Lender's Account, as
applicable.

(b) Borrowed Securities. The meaning set forth in the first
Whereas clause of this Agreement.

(d) Business Day. Any day, from Monday through Friday, on which
Bank and Borrower are open to transact business.

(e) Cash Amount. The meaning set forth in Section 3(b) of this
Agreement.

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<PAGE> 2

(f) Clearing Corporation. The meaning set forth in Section 9(h)
of this Agreement.

(g) Collateral. Obligations issued or guaranteed directly or
indirectly by the United States government and such other securities
acceptable to Lender for Tri-Party Loans identified on Schedule 1
attached hereto. In addition, Collateral shall always include cash.

(h) Event of Default. A Default by Borrower or Lender pursuant
to the Securities Loan Agreement.

(i) Income. With respect to any Collateral which is a security,
any principal thereof then payable and all interest, dividends or other
distributions thereon.

(j) Lender's Account. The meaning set forth in Section 2 of this
Agreement.

(k) Loan. The meaning set forth in the first Whereas clause of
this Agreement.

(l) Loan Termination Date. The meaning set forth in Section 3(c)
of this Agreement.

(m) Market Value. The most recently available closing bid price
(usually from the previous Business Day) for the particular Collateral
as made available to Bank by a recognized pricing service which Bank
uses for pricing such Collateral, plus, with respect to debt securities,
any accrued interest on such securities (to the extent not included in
the closing bid price). If no price is available, Bank shall be
authorized to price any security by contacting any dealer designated as
a "primary dealer" by the Federal Reserve Bank of New York and relying
upon any price quoted by such "primary dealer" as if it were quoted by a
recognized pricing service or Bank may price such Collateral using a
formula utilized by Bank for such purpose in the ordinary course of its
business. Notwithstanding the foregoing, banker's acceptances,
commercial paper, certificates of deposit and cash shall be valued at
face value.

(n) Securities Loan Agreement. The meaning set forth in the
first Whereas clause of this Agreement.

(o) Transaction Date. The meaning set forth in Section 3(a) of
this Agreement.

(p) Tri-Party Loans. Any Loan in connection with which Borrower
and Lender utilize Bank's custodial functions pursuant to this
Agreement.

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<PAGE> 3

All references to time shall mean the time in effect in New York, New
York.

All provisions in this Agreement for the transfer, payment or receipt of
funds or cash shall mean transfer of, payment in, or receipt of United States
dollars in immediately available funds.

2. Nature and Maintenance of Accounts.

(a) Borrower and Lender hereby appoint Bank as custodian of all
Collateral and cash at any time delivered to, and accepted by, Bank in
connection with this Agreement and as their agent to effect Tri-Party
Loans as specified in this Agreement. Bank hereby accepts appointment as
custodian and agent and agrees to establish and maintain Lender's
Account (as defined below) as provided hereunder.

(b) Bank maintains a cash account and a securities custody
account for the benefit of Borrower (collectively, "Borrower's
Account"). Borrower and Lender instruct Bank to establish and maintain a
cash custody account and a securities custody account for the benefit of
Lender (collectively, "Lender's Account"), the Collateral therein which
is subject to the security interest separately granted by Borrower to
Lender in the Securities Loan Agreement. Borrower hereby confirms the
aforementioned security interest and agrees that it includes the
Collateral in Lender's Account. Bank hereby acknowledges such security
interest and that Bank will hold all securities, cash or other property
from time to time deposited in Lender's Account, as bailee on Lender's
behalf, subject to this Agreement. Bank shall segregate all securities
and cash in Lender's Account from the assets of Bank or other persons in
its possession by appropriate identification on the books and records of
Bank. Bank hereby waives any security interest, lien or right of setoff
against Lender's Account and the property therein. Bank further
acknowledges that Bank holds any cash or securities received by Bank
from Lender in connection with this Agreement as bailee on Lender's
behalf until credited to Lender's Account, subject to this Agreement.

(c) The parties intend that the receipt and maintenance by Bank
of property in Lender's Account shall constitute a bailment under the
laws of the State of New York and not a debtor-creditor relationship.
The parties intend to create a special deposit account in favor of
Lender. Bank shall not pay any interest on any cash held at any time in
Lender's Account.

(d) Except as specifically provided in this Agreement, Bank shall
follow only Borrower's instructions with respect to Borrower's Account
and shall follow only Lender's instructions with respect to Lender's
Account.

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<PAGE> 4

3. Specific Loan Transactions

(a) On any Business Day on which Borrower and Lender agree to
enter into a Tri-Party Loan (the "Transaction Date"), Lender will
deliver the Borrowed Securities to Borrower against the simultaneous
delivery of cash with a Market Value equal to or greater than [100]% of
the Market Value of the Borrowed Securities delivered by Lender to
Borrower. This interim settlement will be accomplished directly by
Borrower and Lender apart from any action of Bank pursuant to this
Agreement.

(b) The further settlement of the transaction will be undertaken
in the following manner through Bank. On the Transaction Date, (i)
Lender will transfer cash in an equivalent amount to that received from
Borrower (the "Cash Amount") to Bank with instructions to Bank to
deliver the cash to Lender's Account; (ii) Bank will promptly credit
Lender's Account with such cash; (iii) Borrower will cause Borrower's
Account to be credited with Collateral; (iv) Borrower will instruct Bank
to transfer to Borrower's Account the cash held in Lender's Account
against the transfer to Lender's Account of Collateral held in
Borrower's Account with a Market Value equal to or greater than the Cash
Amount and (v) Bank will effectuate Borrower's instructions described in
clause (iv) by the end of Bank's Business Day.

(c) On any Business Day on which Borrower or Lender terminates a
Tri-Party Loan in any manner provided for in the Securities Loan
Agreement (the "Loan Termination Date"), the party initiating such
termination shall notify the other party and Bank of the termination of
the Tri-Party Loan. Alternatively, Borrower may notify Bank of the
termination of the Tri-Party Loan on behalf of Lender. Bank shall have
no duty to inquire into whether or not the termination is permitted by
the Securities Loan Agreement and shall be entitled to rely on Lender's
or Borrower's notice of termination of the Tri-Party Loan. Unless a
substitution as described in Section 4(a) hereof of cash Collateral for
securities Collateral has already occurred, Bank shall on the Loan
Termination Date, without further instructions, transfer from Lender's
Account to Borrower's Account all Collateral contained therein against
the transfer from Borrower's Account to Lender's Account of cash
Collateral having a Market Value of at least 100% of the Market Value of
such Collateral (as determined by Bank on the prior Business Day). After
completion of the transfer, the Collateral returned to Borrower will be
released from all liens of Lender, and Bank shall without further
instruction promptly wire to Lender the cash previously transferred to
Lender's Account. Thereafter, Lender shall wire such cash to Borrower
against the redelivery of Borrowed Securities by Borrower to Lender
apart from any action of Bank pursuant to this Agreement.

(d) If Borrower instructs Bank to identify Collateral on behalf
of Borrower to be transferred to Lender's Account in connection with
this Agreement, Bank may select in its sole discretion Collateral from
Borrower's Account and transfer such Collateral to

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<PAGE> 5

Lender's Account provided such Collateral has the requisite Market Value
specified in this Agreement.

(e) Without incurring any liability, Bank may, but shall not be
obligated to, effectuate (i) any Tri-Party Loan in whole or in part or
(ii) the termination of a Tri-Party Loan in the event that either Lender
fails to cause Lender's Account to be credited with the requisite cash
or Borrower fails to cause Borrower's Account to be credited with the
requisite cash or Collateral. In any such event, Borrower and Lender
shall remain obligated to each other pursuant to the terms of the
Securities Loan Agreement. It is expressly agreed and acknowledged by
Lender and Borrower that Bank is not guaranteeing performance of or
assuming any liability for the obligations of Lender or Borrower
hereunder nor is it assuming any credit risk associated with Tri-Party
Loans, which liabilities and risks are the responsibility of Lender and
Borrower; further, it is expressly agreed that Bank is not undertaking
to make credit available to Borrower or Lender to enable it to complete
Tri-Party Loans; however, in the event that the cash or securities in
Borrower's Account is insufficient to satisfy a required delivery of
cash or securities to Lender or Lender's Account, Bank may at its
option, (i) without further notice to Borrower, advance the amount of
the insufficiency on Borrower's behalf in which case Borrower shall be
obligated to repay such amount to Bank, plus interest at a rate to be
determined from time to time, or (ii) not effectuate the transaction and
promptly notify Lender and Borrower. Notwithstanding the fact that Bank
may from time to time make advances or loans pursuant to this paragraph
or otherwise extend credit to Borrower, whether or not as a regular
pattern, Bank may at any time decline to extend such credit for any
reason, including, but not limited to, if Bank believes Borrower to be
insecure or Bank believes Borrower's ability to perform its obligations
hereunder may be impaired, or if Bank is precluded from extending such
credit as a result of any law, regulation or applicable ruling.
Notwithstanding anything in this Agreement to the contrary, Bank shall
not be obligated to transfer from Borrower's Account to Lender's Account
any cash or securities which it has a right not to transfer pursuant to
any other agreement between Borrower and Bank.

(f) Bank shall be responsible for verifying that all securities
and/or cash transferred to Lender's Account as Collateral fits within
the definition of "Collateral" as specified in this Agreement and that
physical securities are in negotiable form.

(g) Borrower and Lender agree that in effecting Tri-Party Loans,
transfers between Borrower's Account and Lender's Account, including,
without limitation, substitutions, are intended to be, and shall be
deemed to be, simultaneous.

4. Substitutions

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<PAGE> 6

(a) Bank may, on each Business Day at Borrower's request and
without the prior consent of or notification to Lender, transfer from
Lender's Account to Borrower's Account any or all Collateral contained
therein against the transfer from Borrower's Account to Lender's Account
of cash Collateral having a Market Value of at least 100% of the Market
Value of such Collateral (as determined by Bank on the prior Business
Day) ("IntraDay Cash Collateral"). In such case, by the end of the
Business Day, Borrower shall instruct Bank to transfer to Lender's
Account from Borrower's Account Collateral having a Market Value
(determined by Bank on that Business Day) equal to or greater than the
IntraDay Cash Collateral (as such value has been subsequently increased
or decreased that Business Day pursuant to Section 5 hereof) against the
transfer from Lender's Account to Borrower's Account of the IntraDay
Cash Collateral (as such value has been subsequently increased or
decreased that Business Day pursuant to Section 5 hereof).

(b) Lender hereby authorizes Bank, from time to time at
Borrower's request and without the prior consent of or notification to
Lender, to release to Borrower Collateral from Lender's Account against
the transfer to Lender's Account of other Collateral provided that the
Collateral in Lender's Account after the substitution has a Market Value
equal to or greater than the Market Value of the Collateral in Lender's
Account immediately before the substitution. Notwithstanding the
foregoing, the Market Value of the Collateral in Lender's Account after
the substitution need not be any greater than the Intraday Cash
Collateral in Lender's Account on that Business Day (as such value has
been subsequently increased or decreased that Business Day pursuant to
Section 5 hereof).

5. Mark-to-Market. Borrower shall mark-to-market the Borrowed Securities
in the manner provided in the Securities Loan Agreement apart from any action of
Bank. If Borrower is required to furnish additional Collateral to Lender as a
result of the mark-to-market process, Borrower shall satisfy that requirement by
instructing Bank on a Business Day to transfer from Borrower's Account to
Lender's Account Collateral with a Market Value equal to the amount specified in
Borrower's instructions. If Lender is required to return Collateral to Borrower
as a result of the mark-to-market process, Lender hereby authorizes Borrower to
satisfy that requirement by instructing Bank on a Business Day to transfer
Collateral from Lender's Account to Borrower's Account with a Market Value equal
to the amount specified in Borrower's instructions. Bank shall effectuate each
such instruction by no later than the end of the Business Day on which it
received the instruction. Bank shall not be required to make any independent
determination concerning the validity of any mark-to-market instruction and
shall be entitled, without any liability to Bank, to rely on Borrower's
instructions.

6. Income. Bank shall credit to Borrower's Account all Income paid by or
on behalf of issuers in respect of the Collateral in the event that any such
amounts are received by Bank.

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<PAGE> 7

Notwithstanding the foregoing, in the event Bank receives a written notice from
Lender of an Event of Default by Borrower, Bank shall credit such amounts to
Lender's Account.

7. Lender's Account. Until the earlier of the Loan Termination Date or
the date, if any, when Bank shall receive a written notice of an Event of
Default from Lender or Borrower pursuant to Section 12 hereof, Lender hereby
instructs Bank to hold the Collateral in Lender's Account and to refuse to act
upon any instructions of Lender or Borrower to deliver the Collateral other than
as expressly provided in this Agreement. Except as provided in Section 12 hereof
and other sections hereof authorizing Collateral to be transferred into or out
of Lender's Account, Lender further agrees that unless Lender shall receive the
written consent of Borrower and Borrower confirms Borrower's consent to Bank,
Lender shall not sell, transfer, assign, pledge or otherwise utilize or transfer
the Collateral held in Lender's Account.

8. Daily Statement. On each Business Day, Bank shall send to Borrower
and Lender a statement describing the Collateral held in Lender's Account as of
the close of the prior Business Day. Such statement shall include a statement of
the Market Value of such securities and/or cash as of the prior Business Day.
Notwithstanding the foregoing, no statement will be sent if there are no
securities or cash in Lender's Account as of the close of the prior Business
Day. Lender and Borrower shall promptly review all such statements and shall
promptly advise Bank of any error, omission or inaccuracy in the cash or
Collateral positions reported. Bank shall undertake to correct any errors,
failures or omissions that are reported to Bank by Lender or Borrower to the
extent possible. Any such corrections shall be reflected on subsequent
statements.

9. Care of Property; Reliance on Instructions; and Pricing of Securities

(a) Bank shall exercise the same care with respect to property in
Borrower's Account and Lender's Account as Bank exercises with respect
to Bank's own property. Bank assumes responsibility only for loss to any
such property of Lender or Borrower occasioned by the negligence of, or
conversion, misappropriation, theft or other willful misconduct by
Bank's employees. Bank's liability for lost securities shall be limited
to the Market Value thereof at the date of the discovery of such loss.
Notwithstanding anything to the contrary contained in this Agreement, in
no event shall Bank be liable for special, consequential, or indirect
damages even if Bank has been advised as to the possibility thereof and
regardless of the form of action. Bank, at its option, may insure itself
against loss from any cause but shall be under no obligation to obtain
insurance directly for the benefit of either Borrower or Lender. In
matters concerning or relating to this Agreement, Bank shall not be
responsible for compliance with any statute or regulation regarding the
establishment or maintenance of margin credit, including but not limited
to Regulations T or X of the Board of Governors of the Federal Reserve
System, or with any rules or regulations of the Office of the Controller
of the Currency. Bank shall not be liable for any acts or omissions of
the other parties to this Agreement. Bank

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<PAGE> 8

shall not have any duty to require that any cash or securities be
delivered to it or to determine that the amount and form of assets
deposited in the accounts comply with any applicable requirements other
than as specified in this Agreement.

(b) Bank, at any time, without any resulting liability to it, may
act hereunder in reliance upon any instructions or notices Bank
reasonably believes to be genuine; provided, however, that all
instructions and notices to Bank shall be by a signed writing (via
telecopy, or otherwise), by electronic communication or by oral
communication, including the code which may be assigned by Bank to
Lender from time to time. Instructions to Bank from Borrower may also be
given in the manner specified in the Clearance Agreement between Bank
and Borrower. Bank reserves the right to confirm payment orders and/or
institute any other reasonable security procedures to verify payment
orders.

(c) Until written notice to the contrary is given to another
party to this Agreement by Lender and such other party has had a
reasonable time to amend its records, such other party shall be entitled
to act on the belief that the persons listed on Schedule 2 hereto,
whether or not any such person is an officer or employee of Lender, and
any other person who Bank reasonably and in good faith believes is
authorized to act on behalf of Lender, are authorized to act on behalf
of Lender, and that any one of them has authority to transfer
Collateral, hold Collateral, give notices and otherwise act under this
Agreement on behalf of Lender.

(d) Bank may rely upon a recognized pricing service (or its
equivalent as provided in the definition of Market Value) or a
recognized credit rating service in determining the Market Value or
credit ratings of the Collateral, as applicable, and shall in no
circumstances be liable for any errors made by such service.

(e) All credits, debits or transfers shall be deemed to have been
completed at such time as recorded on Bank's books.

(f) All transfers of securities and cash between Bank and Lender
shall be made to the accounts listed on Schedule 2 hereto unless
otherwise agreed between Lender and Bank.

(g) Bank undertakes to perform only such duties as are expressly
set forth in this Agreement.

(h) Transfer of securities to Bank hereunder may be accomplished
by crediting a proprietary or pledgee account of Bank with the Federal
Reserve Bank of New York ("FRBNY"), The Participants Trust Company
("PTC"), The Depository Trust Company ("DTC") or other clearing
corporation or depository legally available to Bank

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<PAGE> 9

(each, a "Clearing Corporation"), as the case may be, or by delivery of
physical certificates to Bank in negotiable form. Borrower and Lender
agree that Bank's use of a Clearing Corporation in connection with
Tri-Party Loans contemplated under this Agreement is authorized and
shall fully comply with all terms and conditions of this Agreement
regarding Bank's transfer and custody of securities and cash. Lender and
Borrower acknowledge and understand that all transfers of securities or
cash by a Clearing Corporation, as the case may be, will be subject to
the then applicable rules and procedures of such Clearing Corporation.
No Clearing Corporation shall be deemed to be an agent of Bank, and Bank
shall have no liability for the acts or omissions of any Clearing
Corporation. Notwithstanding anything to the contrary contained in this
Agreement, Bank shall be authorized, in its reasonable discretion, to
accept a trust receipt as Collateral.

(i) Bank is not a party to the Securities Loan Agreement. Bank's
obligations hereunder shall not be affected by, nor does Bank assume any
liability under, the Securities Loan Agreement.

(j) Bank shall not be deemed to have independent knowledge or
notice of the existence of an Event of Default. Bank shall be entitled
to rely on Lender's or Borrower's written notice (including, without
limitation, facsimile notice) thereof and shall have no duty to inquire
into the nature or validity of an Event of Default.

(k) Bank may, with respect to questions of law, apply for and
obtain the advice and opinion of counsel and shall not be deemed to be
negligent or have engaged in willful misconduct in any action taken or
omitted by Bank in good faith in conformity with such advice or opinion.

(l) Without limiting the generality of the foregoing, Bank shall
be under no obligation to inquire into, and shall not be liable for:

(i) subject to Section 3(f) hereof, the title, validity
or genuineness of any Collateral or document;

(ii) the legality of the lending or borrowing of any
Collateral or the propriety of the amount of a Tri-Party Loan or
the enforceability of any Trust Receipt received by Bank
pursuant to this Agreement;

(iii) the due authority of any person (listed on
Schedule 2 hereto with respect to Lender) to act on behalf of
Lender with respect to cash or Collateral held in Lender's
Account; or

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<PAGE> 10

(iv) the due authority of Lender, Borrower or any
entities for which Lender acts to deliver, transfer, obtain or
hold any particular Collateral pursuant to this Agreement.

10. Compensation. Borrower hereby agrees to pay Bank compensation for
the services to be rendered hereunder, based upon rates which shall be
determined from time to time in a manner agreed upon by Bank and Borrower.

11. Indemnification. Borrower hereby agrees to indemnify Bank for, and
hold it harmless against, any loss, liability or expense in connection with,
arising out of or in any way related to the transactions contemplated and
relationship established by this Agreement or the Securities Loan Agreement, or
any action or omission by Bank in connection with this Agreement, including the
reasonable costs, expenses and attorneys fees of attorneys chosen by Bank
incurred in defending any such claim of liability, except that Borrower shall
not be liable for any loss, liability or expense that is determined to be the
direct result of acts or omissions on the part of Bank constituting negligence
or willful misconduct. These indemnification obligations shall survive the
termination of any Loan, Tri-Party Loan, the Securities Loan Agreement, this
Agreement or all of them. For purposes of this Section, "Bank" shall mean Bank,
any existing or future parent company of Bank, any existing or future direct or
indirect subsidiary of such parent company and any director, officer, employee
or agent of any of the foregoing.

12. Event of Default; Continuing Disputes; Effect of Notice of Levy,
Etc.

(a) If either Lender or Borrower shall declare an Event of
Default, it shall deliver a written notice of an Event of Default to
Bank and to the other party. Such notice shall identify the name of the
defaulting party, the Event of Default and the Tri-Party Loan(s) which
are the subject of such Event of Default. Bank shall notify the
defaulting party of Bank's receipt of a written notice of an Event of
Default.

(b) From and after Bank's receipt of a written notice of an Event
of Default from Lender or Borrower, Bank shall continue to hold all
Collateral in Lender's Account. Bank shall cease performing its normal
duties in connection with the Tri-Party Loan(s) which are the subject of
such Event of Default and shall await instructions as described below.
In the absence of any dispute between, conflicting claims by or
conflicting instructions from Borrower, Lender and any other person with
respect to the Collateral or any other matter covered by this Agreement
and if Bank, in the opinion of its counsel, is permitted by law to do
so, Bank is hereby instructed to follow the instructions of the
non-defaulting party with respect to the non-defaulting party's Account,
and Bank is hereby further instructed to follow the instructions of
Borrower to accept into Lender's Account cash Collateral in substitution
of any Collateral therein as provided in Section 4(a) hereof.

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<PAGE> 11

(c) In the event of any dispute between, conflicting claims by or
conflicting instructions from Borrower, Lender and any other person with
respect to the Collateral, cash or any other matter covered by this
Agreement or if Bank, in the opinion of its counsel, is precluded by law
from acting, Bank may decline to comply with any and all claims, demands
or instructions with respect to such Collateral, cash or any other
matter covered by this Agreement so long as such dispute or conflict or
legal inability to perform shall continue, and Bank shall not be liable
for failure to act or to comply with such claims, demands or
instructions. Bank shall be entitled to refuse to act or comply until
(i) such dispute or conflict shall have been finally determined in a
court of competent jurisdiction or settled by agreement between the
conflicting parties and Bank shall have received evidence satisfactory
to it of the same, (ii) Bank, in the opinion of its counsel, is
permitted by law to perform or (iii) Bank shall have received security
or an indemnity satisfactory to it sufficient to hold it harmless from
and against any and all losses or damages, including reasonable
counsel's fees and expenses that it may incur by reason of taking any
action.

(d) If Bank shall be uncertain as to its duties or rights
hereunder, it shall be entitled to refrain from taking any action until
(i) Bank shall be directed otherwise in writing by Lender and Borrower
or by a final order or judgment of a court of competent jurisdiction or
(ii) Bank shall have received security or an indemnity satisfactory to
it sufficient to hold it harmless from and against any and all losses or
damages, including reasonable counsel's fees and expenses that it may
incur by reason of taking any action.

(e) Bank shall not be required to deliver or transfer cash or
securities in contravention of any order, judgment, levy, restraining
notice, seizure or other similar notice issued or directed by a
governmental agency or court, or officer thereof, asserting jurisdiction
over Bank, any existing or future parent company of Bank, any existing
or future direct or indirect subsidiary of such parent company or any
director, officer, employee or agent of any of the foregoing, which on
its face affects such cash or securities. Bank shall give Lender and
Borrower prompt notice of any such notice or order.

(f) Bank's receipt of a notice of an Event of Default by itself
shall not be considered to be a dispute or conflict for purposes of this
Section 12 of this Agreement.

13. Funds Transfer Name/Identifying Number Inconsistencies. In executing
or paying a payment order, Bank may rely upon the identifying number (e.g.
Fedwire routing number or account number) of any party as instructed in the
payment order. Borrower assumes full responsibility for any inconsistency
between the name and identifying number of any party in payment orders issued to
Bank in Borrower's name. Lender assumes full responsibility for any
inconsistency between the name and identifying number of any party in payment
orders issued to Bank in Lender's name.

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<PAGE> 12

14. Representations and Warranties.

(a) Lender represents and warrants that (i) it has full legal
right, capacity, power and authority to execute and deliver this
Agreement and to perform all of the duties and obligations to be
performed by it hereunder and under the Securities Loan Agreement, (ii)
this Agreement constitutes a valid, legal and binding obligation
enforceable against it in accordance with its terms, except as may be
limited by bankruptcy, insolvency, or similar laws, or by equitable
principles relating to or limiting creditors' rights generally, (iii)
the execution, delivery and performance of this Agreement and the
transactions contemplated hereunder and under the Securities Loan
Agreement will not violate any agreement by which it is bound or by
which any of its assets are affected, or its charter or by-laws, or any
statute, regulation, rule, order or judgment applicable to it, (iv) it
has the unqualified right to have Borrower transfer the Collateral to it
in the manner contemplated herein and in the Securities Loan Agreement;
and (v) all of the Collateral, while held in Lender's Account shall not
at any time be or become, as a result of any action or failure to act by
Lender, subject to any lien, claim, security interest or encumbrance of
any person or entity other than Lender (except as permitted by this
Agreement), and all of such Collateral upon delivery to Borrower, will
be free and clear of any lien, claim or encumbrance (except as may exist
in favor of a Clearing Corporation pursuant to its rules).

(b) Borrower represents and warrants that (i) it is a duly
organized and validly existing Delaware corporation registered as a
broker dealer under the Securities Exchange Act with full power and
authority to execute and deliver this Agreement and to perform all of
the duties and obligations to be performed by it hereunder and under the
Securities Loan Agreement, (ii) this Agreement and performance of all
transactions contemplated hereunder and under the Securities Loan
Agreement have been duly authorized, executed and delivered in
accordance with all requisite corporate action, (iii) the person
executing this Agreement on its behalf has been duly and properly
authorized to do so, (iv) this Agreement constitutes a valid, legal and
binding obligation enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency, or similar laws, or
by equitable principles relating to or limiting creditors' rights
generally, (v) the execution, delivery and performance of this Agreement
and the transactions contemplated hereunder and under the Securities
Loan Agreement will not violate any agreement by which it is bound or by
which any of its assets are affected, or its charter or by-laws, or any
statute, regulation, rule, order or judgment applicable to it, (vi) it
has the unqualified right to sell, transfer, assign and pledge the
Collateral, and all of such Collateral upon delivery to Bank for deposit
into Lender's Account, will be free and clear of any lien, claim
security interest or encumbrance (except as may exist in favor of a
Clearing Corporation pursuant to its rules), and (vii) it is acting as
principal for its own account.

12
<PAGE> 13

(c) Bank represents and warrants that (i) it is duly organized
and validly existing banking corporation under the laws of the State of
New York with full power and authority to execute and deliver this
Agreement and to perform all of the duties and obligations to be
performed by it hereunder, (ii) this Agreement and performance of all
transactions contemplated hereunder have been duly authorized, executed
and delivered in accordance with all requisite corporate action, (iii)
the person executing this Agreement on its behalf has been duly and
properly authorized to do so, (iv) this Agreement constitutes a valid,
legal and binding obligation enforceable against it in accordance with
its terms, except as may be limited by bankruptcy, insolvency, or
similar laws, or by equitable principles relating to or limiting
creditors' rights generally, and (v) the execution, delivery and
performance of this Agreement and the transactions contemplated
hereunder will not violate any agreement by which it is bound or by
which any of its assets are affected, or its charter or by-laws, or any
statute, regulation, rule, order or judgment applicable to it.

These representations and warranties shall be deemed to be repeated on
each day on which a Tri-Party Loan is outstanding.

15. Entire Agreement, Modification or Amendment. This Agreement
constitutes the entire agreement of the parties with respect to its subject
matter and supersedes all prior oral or written agreements in regard thereto. No
modification or amendment of this Agreement shall be binding unless in writing
and executed by the parties. In the event of conflict between this Agreement and
the Securities Loan Agreement, this Agreement shall control.

16. Termination. This Agreement shall terminate forthwith upon
termination of the Securities Loan Agreement and written notice thereof to Bank
from Lender or Borrower or may be terminated by any party hereto on ten Business
Days' prior written notice to the other parties; provided, however, that subject
to the section entitled "Event of Default; Continuing Disputes; Effect of Notice
of Levy, Etc.", any such termination shall not affect any Tri-Party Loan then
outstanding.

17. Severability. If any provision of this Agreement is held to be
unenforceable as a matter of law, the other terms and provisions hereof shall
not be affected thereby and shall remain in full force and effect.

18. Rights and Remedies. The rights and remedies conferred upon the
parties hereto shall be cumulative, and the exercise or waiver of any thereof
shall not preclude or inhibit the exercise of any additional rights and
remedies; provided, however, that nothing in this Section shall be construed as
permitting any party, under any circumstances, to make any claim against Bank
for special, indirect or consequential damages arising under or in connection
with this Agreement.

13
<PAGE> 14

19. Headings. Section headings are for reference purposes only and shall
not be construed as a part of this Agreement.

20. Assignment. This Agreement shall be binding upon the parties'
respective successors and permitted assigns. Neither Lender nor Borrower may
assign its rights and/or obligations hereunder without the prior written consent
of the other parties. Any attempted assignment without such consent shall be
null and void.

21. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.

22. Notices. All notices shall be given to the party entitled to receive
such notices at the following addresses, telephone numbers and facsimile
numbers unless otherwise specified in a notice given pursuant to this Section:

(a) To Borrower. Unless and until Borrower shall give written
notice to Lender and Bank to the contrary, all notices to
Borrower from Lender or Bank shall be sent to it at Smith Barney
Inc., 390 Greenwich Street, New York, New York 10013, attention
of Peter Grant / Suzette Dupree / John Lucciola / Nancy Sherman,
(212) 723-7611, and notices by telecopy to Borrower from Lender
or Bank shall be sent to (212) 723-8837.

(b) To Lender. Unless and until Lender shall give written notice
to Borrower and Bank to the contrary, all written notices to Lender from
Borrower or Bank shall be sent to it at
____________________________________________ attention of
__________________ , all notices by telephone to Lender from Borrower or
Bank shall be made to ________________ , and all notices by telecopy to
Lender from Borrower or Bank shall be made to _____________ .

(c) To Bank. Unless and until Bank shall give written notice to
Borrower and Lender to the contrary, all written notices to Bank from
Borrower or Lender shall be sent to it at 4 New York Plaza, New York,
New York 10004-2477, attention of Brokers and Dealers Clearance
Department, all notices by telephone to Bank from Borrower or Lender
shall be made to Allen B. Clark, Senior Vice President (212)-623-7219,
and all notices by telecopy to Bank from Borrower or Lender shall be
made to (212) 623-5959.

(d) Troubleshooting List. Until written notice to the contrary is
given to the other parties by Lender or Borrower, as applicable, and the
other parties have had a reasonable time to amend their records, the
persons listed on Schedule 3 hereto may be contacted after business
hours as necessary in connection with this Agreement.

All notices and instructions shall be deemed given when received.

14
<PAGE> 15

23. Force Majeure. Bank shall not be liable to the other parties for any
failure or delays arising out of conditions beyond its reasonable control,
including, but not limited to, fire, civil disobedience, riots, rebellions,
storms, acts of God and similar occurrences.

24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF. THE PARTIES HERETO (I) IRREVOCABLY CONSENT
TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY FEDERAL OR STATE COURT IN THE
BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK, IN CONNECTION WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, (II) IRREVOCABLY
WAIVE THE RIGHT TO OBJECT TO THE VENUE OF ANY SUCH COURT ON THE GROUND OF
INCONVENIENT FORUM AND (III) IRREVOCABLY WAIVE ANY AND ALL RIGHTS TO TRIAL BY
JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY SECURITIES LENDING TRANSACTION. TO THE EXTENT THAT, IN ANY
JURISDICTION, ANY PARTY, BY ITSELF OR ON BEHALF OF ITS PRINCIPAL, MAY NOW OR
HEREAFTER BE ENTITLED TO CLAIM, FOR ITSELF OR ITS ASSETS, OR FOR ITS PRINCIPAL
OR SUCH PRINCIPAL'S ASSETS, IMMUNITY FROM SUIT, EXECUTION, ATTACHMENT (BEFORE OR
AFTER JUDGMENT) OR OTHER LEGAL PROCESS, SUCH PARTY IRREVOCABLY AGREES NOT TO
CLAIM, AND IT HEREBY WAIVES, SUCH IMMUNITY.

15
<PAGE> 16

IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the day of April,
1998.

THE CHASE MANHATTAN BANK

By:
--------------------------------
Title:

SMITH BARNEY INC.

By:
--------------------------------
Name:
Title: Managing Director

James J. Kim

Agnes C. Kim

16
<PAGE> 17

SCHEDULE 1

COLLATERAL SCHEDULE

None

17
<PAGE> 18

SCHEDULE 2

Description of Cash Accounts

A. Lender's Account at Bank B. Lender's Delivery Instructions

ABA: 021000021 ABA:
------------------------------------
CHASE NYC/DEPT 4004 Bank Name:
------------------------------

Lender's Name A/C Name:
-------------------------------

FOR SECURITIES LENDING A/C Number:
TRI-PARTY WITH -----------------------------
SMITH BARNEY INC. Branch:
---------------------------------
City:
-----------------------------------
Attention:
------------------------------

C. Authorized Persons for Lender

Name Title

- ---------------------------------- ----------------------------------

18
<PAGE> 19

SCHEDULE 3

AFTER HOURS CONTACT PERSONS

For Lender:

Name Address Office Number After Hours Telephone Number
- ---- ------- ------------- ----------------------------
<S> <C> <C> <C>

</TABLE>

<TABLE>
<CAPTION>
For Borrower:

Name Address Office Number After Hours Telephone Number
<S> <C> <C> <C>

</TABLE>