SPI Technologies Inc. Secures New Contracts in US and Europe, Provides Update on Second Quarter

July 2, 1999 PSE CIRCULAR FOR BROKERS NO. 1603-99 July 1, 1999 SPI Technologies Inc . Secures New Contracts in US and Europe, Provides Update on Second Quarter Listed company SPI Technologies Inc. (Philippine Stock Exchange, ticker symbol "SPI"), a leading exporter of information technology services, announced today that it has won its first full production Litigation Support contract with the US Department of Justice, through SPI's US marketing partner, Aspen Systems Corporation. cdt According to SPI's President and CEO, Ernest Cu, "The US Department of Justice is a very important win for us. Although we were accredited last year, this is the first actual project we have been awarded. We expect this project to lead to additional opportunities for federal litigation work, which should serve as a very nice complement to our existing client base in the private sector, and reduce the volatility of our Litigation Support Division's revenues." Hal Macomber, Aspen's Project Representative in Manila, said that, "Following a successful pilot last year, SPI has demonstrated that they have the necessary infrastructure, experience and ability to achieve the extremely high quality standards that the DOJ demands. To date, we have been very pleased with their work on our first live project together." SPI also announced that its new General Conversion marketing office in Germany, has won its first contract, which is to provide bibliographic conversion services for a large German government library, Mr. Cu said, "We are delighted that this new office, which SPI GmbH General Manager Roland Wolf opened only two months ago, has very quickly validated our belief that Continental Europe has a lot of untapped potential for us." Mr. Cu also provided an update on expected second quarter results: "As we discussed when we released our first quarter results, revenues will show an improvement over the first quarter, but the bottom line will remain soft. We will likely register a small loss in the second quarter because of (1) a large unprofitable General Conversion project, (2) the high overhead costs of the Dutch Electronic Pre-Press operations, and (3) the winding down of two high margin AM/FM (Automated Mapping Facilities Mapping, or electronic mapping) contracts." Mr. Cu added. "We expect, however, that we will see a gradual recovery to profitability in the third quarter, and experience a substantial further improvement in the fourth quarter, because of the action program that we have implemented." The large unprofitable General Conversion project was earmarked for processing in SPI's lower cost sub-contractor in China, but initially produced in the higher cost Manila facility because of ramp-up delays overseas. The project was recently transferred to China, and turned profitable in May. LLjur SPI is on schedule with its plan to quadruple this year its sub-contractor capacity for less complex projects, primarily in India and China, and in all cases with SPI personnel onsite, Current capacity is already more than double what it was in March. Mr. Cu said that, "By sub-contracting the simpler work to the most cost-effective locations. SPI can better leverage its core competencies, which are marketing, project management and quality assurance. This will improve the SPI's profitability significantly, without compromising customer satisfaction." In Holland, the Dutch work force voted earlier this month to accept SPI's plan to relocate the Electronic Pre-Press facility from Meppel to Amsterdam and right-size it, as well as transfer most of the work flows to Manila. The restructuring is well under way, and will result in immediate annualized overhead savings of approximately Pesos 80 million, as well as improve turn around times and quality. With regard to replacing the declining AM/FM business, Mr. Cu said, "Our existing pipeline of contracted projects, plus two recent important breakthroughs in the US for our Electronic Pre Press and Software Services divisions, will substantially offset lower AM/FM revenues. Details of the two important new contracts will be announced shortly once they have been finalized." Mr. Cu concluded by saying that, "In 2000, we expect to start seeing the full benefits of the measures I described. Our prospects for next year and beyond are very good." SPI provides information technology services including (1) conversion of news, professional and technical information into electronic form for major Internet and online content providers, (2) conversion of legacy document collections into a standardized electronic form for use on corporate intranets or networks, (3) conversion of evidence related documents into a searchable CD-ROM format for corporations involved in major litigation, (4) electronic mapping and database building for utilities, and (5) software services. SPI is an ISO 9002 certified exporter whose clients are located largely in North America and Europe. Authenticated by: (SGD.) ERNEST L. CU President & CEO